UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<Table>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
</Table>
Weatherford 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.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
(WEATHERFORD LOGO)
WEATHERFORD INTERNATIONAL, INC.
515 POST OAK BOULEVARD, SUITE 600
HOUSTON, TEXAS 77027
May 22, 2002
Dear Weatherford Stockholder:
You are cordially invited to join us at a Special Meeting of Stockholders
of Weatherford International, Inc. to be held at 10:00 a.m. (Houston time) on
Wednesday, June 26, 2002. The special meeting will be held at The St. Regis
Hotel located at 1919 Briar Oaks Lane in Houston, Texas.
We are pleased to present for your approval a proposed merger for the
purpose of reorganizing your company. As a result of the merger, Weatherford
International, Inc. will become an indirect subsidiary of a new Bermuda holding
company, and you will become a shareholder of the new Bermuda holding company.
The proposal is explained in the attached proxy statement/prospectus, which we
encourage you to read.
If the merger is completed, Weatherford International Ltd., a Bermuda
exempted company that we recently formed (which we refer to as Weatherford
Bermuda), and its subsidiaries will continue to conduct the business now
conducted by Weatherford International, Inc. (which we refer to as Weatherford
Delaware) and its subsidiaries. We believe this merger will facilitate the
growth of your company by enabling it to gain business, financial and strategic
advantages that are not available under our current corporate structure. The
merger should enhance our access to international capital markets and our
competitiveness regarding international opportunities. It should also increase
our operational flexibility and improve our global tax position and cash flow.
Additionally, the company should be a more attractive investment alternative to
a wider range of investors.
The shares you own of Weatherford Delaware will automatically be converted
into the right to receive common shares of Weatherford Bermuda on completion of
the merger. The number of Weatherford Bermuda shares you will own will be the
same as the number of Weatherford Delaware shares you own immediately prior to
the completion of the merger, and your relative economic ownership in the
company will remain unchanged. The shares of Weatherford Bermuda will have
substantially the same attributes as your existing Weatherford Delaware shares,
and will be listed on The New York Stock Exchange under the symbol "WFT", which
is the same symbol under which your existing Weatherford Delaware shares are
currently listed.
Generally, for U.S. federal income tax purposes, stockholders of
Weatherford Delaware who are U.S. persons will recognize gain, if any, but not
loss, on the receipt of Weatherford Bermuda common shares in exchange for
Weatherford Delaware shares pursuant to the merger. Further, although not free
from doubt, the holding period for any Weatherford Bermuda common shares
received by a U.S. holder recognizing gain with respect to the merger should
begin the day after the effective date of the merger.
WE STRONGLY URGE YOU TO CONSULT YOUR OWN TAX ADVISORS REGARDING YOUR
PARTICULAR TAX CONSEQUENCES OF THE MERGER.
This proxy statement/prospectus provides you with detailed information
regarding the merger. We encourage you to read this entire document carefully.
PLEASE CONSIDER THE RISK FACTORS BEGINNING ON PAGE 8.
The merger cannot be completed unless the holders of a majority of our
outstanding shares of common stock entitled to vote on May 15, 2002 approve it.
A newly formed acquisition company will be merged with and into Weatherford
Delaware. Weatherford Delaware will be the surviving company and will continue
to exist. Weatherford Bermuda will become the indirect parent holding company of
Weatherford Delaware.
YOUR BOARD OF DIRECTORS HAS APPROVED THE AGREEMENT AND PLAN OF MERGER AND
RECOMMENDS THAT YOU VOTE "FOR" ITS ADOPTION.
Whether or not you plan on attending the special meeting in person, it is
important that your shares be represented and voted. After reading the enclosed
notice of special meeting and proxy statement/ prospectus, please sign, date and
return the enclosed proxy card. We urge you to join us in supporting this
important opportunity.
Please note that our annual meeting of stockholders is being held on June
26, 2002 at 9:00 a.m. You should have already received a proxy statement and a
proxy card for the annual meeting. IN ORDER FOR YOUR SHARES TO BE VOTED AT BOTH
THE ANNUAL MEETING AND THE SPECIAL MEETING, YOU MUST COMPLETE AND RETURN BOTH
PROXY CARDS. We urge you to return both proxy cards for the annual meeting and
the special meeting.
Sincerely yours,
/s/ BERNARD J. DUROC-DANNER
--------------------------------------
Bernard J. Duroc-Danner
Chairman of the Board
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated May 22, 2002 and is first being
mailed to stockholders on or about May 24, 2002.
[WEATHERFORD LOGO]
WEATHERFORD INTERNATIONAL, INC.
----------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 26, 2002
----------
To the Stockholders of Weatherford International, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders of
Weatherford International, Inc. will be held at The St. Regis Hotel, 1919 Briar
Oaks Lane, Houston, Texas on Wednesday, June 26, 2002 at 10:00 a.m. (Houston
time) for the following purposes:
1. To adopt the Agreement and Plan of Merger, substantially in the
form attached to the accompanying proxy statement/prospectus as Annex I,
among Weatherford International, Inc., Weatherford Merger, Inc.,
Weatherford International Ltd., a Bermuda exempted company, and Weatherford
U.S. Holdings, L.L.C., whereby Weatherford International, Inc. will become
an indirect subsidiary of Weatherford International Ltd., and you will
become a shareholder of Weatherford International Ltd. Weatherford Merger,
Inc. will be merged with and into Weatherford International, Inc.
Weatherford International, Inc. will be the surviving entity and become an
indirect subsidiary of Weatherford International Ltd.; and
2. To transact any other business as may properly come before the
special meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE MERGER.
The board of directors has fixed the close of business on May 15, 2002 as
the record date for determination of stockholders entitled to notice of, and to
vote at, the special meeting and any adjournments or postponements thereof.
YOUR VOTE IS VERY IMPORTANT. TO ENSURE THAT YOUR SHARES ARE REPRESENTED,
YOU SHOULD VOTE YOUR PROXY BY COMPLETING, SIGNING AND DATING THE ENCLOSED PROXY
CARD AND RETURNING IT PROMPTLY IN THE ENCLOSED ENVELOPE OR BY FOLLOWING THE
INTERNET OR TELEPHONE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, WHETHER OR
NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY AND VOTE
IN PERSON IF YOU DECIDE TO ATTEND THE MEETING.
By order of the Board of Directors,
/s/ BURT M. MARTIN
--------------------------------------
Burt M. Martin
Corporate Secretary
Houston, Texas
May 22, 2002
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
-----
ADDITIONAL INFORMATION...................................... iv
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... iv
QUESTIONS AND ANSWERS....................................... vi
SUMMARY..................................................... 1
The Merger................................................ 1
Parties to the Merger.................................. 1
The Merger............................................. 2
Background and Reasons for the Merger.................. 3
Material U.S. Federal Income Tax Consequences to
Stockholders.......................................... 3
Conditions to Consummation of the Merger............... 3
Credit Facilities...................................... 4
Rights of Stockholders................................. 4
Stock Exchange Listing; Recent Stock Prices............ 4
No Rights of Dissenting Stockholders................... 4
Accounting Treatment of the Merger..................... 4
Recommendation of the Board of Directors............... 4
Vote Required.......................................... 4
General Provisions........................................ 5
Special Meeting........................................ 5
Proxies................................................ 5
Selected Historical Consolidated Financial Data........... 6
Summary Pro Forma Financial Information................... 7
RISK FACTORS................................................ 8
THE MERGER.................................................. 11
Structure of the Merger................................... 11
Background and Reasons for the Merger..................... 11
The Merger Agreement...................................... 13
Conditions to Consummation of the Merger.................. 13
Effective Time............................................ 13
Amendment or Termination.................................. 14
Share Conversion; Exchange of Shares...................... 14
Management of Weatherford Bermuda......................... 15
Required Vote for the Merger.............................. 15
No Rights of Dissenting Stockholders...................... 15
Dividends................................................. 15
Stock Compensation Plans and Employment Agreements........ 15
Stock Exchange Listing.................................... 16
Accounting Treatment of the Merger........................ 16
Credit Facilities......................................... 16
THE SPECIAL MEETING......................................... 18
When and Where the Special Meeting Will Be Held........... 18
What Will Be Voted Upon................................... 18
</Table>
<Table>
<Caption>
PAGE
-----
Only Weatherford Delaware Stockholders of Record as of May
15, 2002 Are Entitled to Vote.......................... 18
Majority of Outstanding Shares Must Be Represented for a
Vote to Be Taken....................................... 18
Vote Required for Approval................................ 18
Voting Your Shares and Changing Your Vote................. 19
How Proxies Are Counted................................... 19
Cost of Solicitation...................................... 20
DESCRIPTION OF AUTHORIZED SHARES OF WEATHERFORD
INTERNATIONAL LTD......................................... 21
Authorized Share Capital.................................. 21
Meetings, Quorums and Voting.............................. 22
Dividend Rights........................................... 22
Preemptive, Redemption, Sinking Fund and Conversion
Rights................................................. 22
Stock Exchange Listing.................................... 23
Capitalization of Profits and Reserves.................... 23
Untraced Shareholders..................................... 23
Changes to Rights of a Class.............................. 23
Rights upon Liquidation................................... 23
Liability for Further Calls or Assessments................ 23
Transfer of Shares........................................ 23
Repurchase Rights......................................... 24
Access to Books and Records and Dissemination of
Information............................................ 24
Compulsory Acquisition of Shares Held by Minority
Holders................................................ 24
Registrar or Transfer Agent............................... 25
Preferred Shares.......................................... 25
Anti-takeover Provisions.................................. 25
Election and Removal of Directors......................... 26
Proceedings of Board of Directors......................... 27
Certain Provisions of Bermuda Law......................... 27
ENFORCEMENT OF CIVIL LIABILITIES............................ 28
COMPARISON OF RIGHTS OF STOCKHOLDERS........................ 29
Comparison of Corporate Governance Provisions............. 29
INCOME TAX CONSEQUENCES OF THE MERGER....................... 38
U.S. Income Tax Consequences of the Merger................ 38
Bermuda Income Tax Consequences of the Merger............. 42
Barbados Income Tax Consequences of the Merger............ 43
OTHER INFORMATION........................................... 44
Independent Public Accountants............................ 44
Stockholder Proposals and Nominations..................... 45
</Table>
ii
<Table>
<Caption>
PAGE
-----
EXPERTS..................................................... 45
LEGAL MATTERS............................................... 46
WHERE YOU CAN FIND MORE INFORMATION......................... 46
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 46
ANNEX I AGREEMENT AND PLAN OF MERGER........................ I-1
ANNEX II MEMORANDUM OF ASSOCIATION.......................... II-1
ANNEX III BYE-LAWS.......................................... III-1
</Table>
iii
ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates documents by reference that
are not included in or delivered with this document. Copies of the incorporated
documents (other than exhibits to these documents, unless the exhibits are
specifically incorporated by reference in those documents) will be furnished
upon written or oral request without charge to each person to whom this proxy
statement/ prospectus is delivered. Requests should be made by June 19, 2002 and
should be directed to Weatherford International, Inc., 515 Post Oak Boulevard,
Suite 600, Houston, Texas 77027, Attention: Investor Relations, or you may
telephone (713) 693-4000 or visit our website at "http://www.weatherford.com".
Website materials are not part of this proxy statement/prospectus.
Please read "Where You Can Find More Information" on page 46.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus as well as other filings made by us with
the Securities and Exchange Commission, or SEC, and our releases issued to the
public contain various statements relating to future results, including certain
projections and business trends. We believe these statements constitute
"Forward-Looking Statements" as defined in the Private Securities Litigation
Reform Act of 1995.
The following sets forth the various assumptions we use in our
forward-looking statements as well as risks and uncertainties relating to those
statements. Certain of the risks and uncertainties may cause actual results to
be materially different from projected results contained in forward-looking
statements in this proxy statement/prospectus and in our other disclosures.
These risks and uncertainties include, but are not limited to, those described
in "Risk Factors" beginning on page 8 and the following:
- Unanticipated costs or nonrealization of expected benefits could affect
our projected results. An inability to realize expected benefits of the
merger within the anticipated time frame, or at all, would likely affect
the forward-looking information provided by us. Similarly, any cost or
difficulty related to the merger and related transactions, which could be
greater than expected or thought, would also affect the forward-looking
information provided by us.
- Unanticipated changes in tax laws could have an adverse effect on our
financial condition. Any change in tax laws, tax treaties or tax
regulations or the interpretation or enforcement thereof or differing
interpretation or enforcement of applicable law by the U.S. Internal
Revenue Service or other taxing authorities would likely affect the
forward-looking information provided by us.
- A downturn in market conditions could affect our projected results. Any
material changes in oil and gas supply and demand balance, oil and gas
prices, rig count or other market trends would affect our results and
would likely affect the forward-looking information provided by us. The
oil and gas industry is extremely volatile and subject to change based on
political and economic factors outside our control. Through the beginning
of 2002, there was a general decrease in prices for oil and natural gas,
reflecting diminished demand attributable to political and economic
issues. In the last few months, there has been a modest increase and
stabilization of prices for oil and natural gas. In addition, the United
States economy and most foreign economies appear to have stabilized in
the last few months despite their weakening in the prior periods. If an
extended regional and/or worldwide recession would occur, it would result
in even lower demand and lower prices for oil and gas, which would
adversely affect our revenues and income. At this time, we have assumed
that material declines during 2002 will be limited to North and Latin
America. Furthermore, our forward-looking statements regarding our
drilling and completion products and services assume a modest improvement
in the international rig count during 2002 and that no extended material
declines in the North American rig count will occur.
- Our results are dependent upon our ability to react to the current market
environment. During the fourth quarter of 2001 and 2002 to date, we have
implemented a number of programs intended to reduce costs and align our
cost structure with the current market environment. Our forward-looking
iv
statements assume these measures will generate the savings expected and,
if the markets continue to decline, that any additional actions we pursue
will be adequate to achieve the desired savings.
- A material disruption in our manufacturing could adversely affect some
divisions of our business. Our forward-looking statements assume that any
manufacturing expansion and consolidation will be completed without any
further material disruptions. If there are any additional disruptions or
excess costs associated with the manufacturing changes, our results could
be adversely affected.
- Our success is dependent upon the integration of acquisitions. During
2001, we consummated acquisitions of several product lines and
businesses, including the acquisition of Johnson Screens. The success of
our acquisitions will be dependent on our ability to integrate the
product lines and businesses with our existing businesses and eliminate
duplicative costs. We incur various duplicative costs during the
integration of the operations of acquired businesses into our operations.
Our forward-looking statements assume the successful integration of the
operations of the acquired businesses and their contribution to our
results during 2002; however, there can be no assurance that the expected
benefits of these acquisitions will materialize. Integration of
acquisitions is something that cannot occur in the short-term and that
requires constant effort at the local level to be successful.
Accordingly, there can be no assurance as to the ultimate success of
these integration efforts.
- Our long-term growth strategy is dependent upon technological
advances. Our ability to succeed with our long-term growth strategy is
dependent in part on the technological competitiveness of our products
and services. A central aspect of our growth strategy is to enhance the
technology of our current products and services, to obtain new
technologically-advanced value-added products through internal research
and development and/or acquisitions and to then expand the markets for
the technology through the leverage of our worldwide infrastructure.
These technological advances include our underbalanced drilling
technology, expandable technology, rotary expansion systems and recently
added production optimization and fiber optic sensor technology. Our
forward-looking statements have assumed above-average growth from these
new products and services in 2002.
- Currency fluctuations could have a material adverse financial impact on
our business. A material decline in currency rates in our markets could
affect our future results as well as affect the carrying values of our
assets. World currencies have been subject to much volatility. Our
forward-looking statements assume no material impact from future changes
in currencies.
- Political disturbances, war, or terrorist attacks and changes in global
trade policies could adversely impact our operations. Political
disturbances, war, terrorist attacks and changes in global trade policies
could impact our operations in these markets. We have assumed that there
will be no material political disturbances, war, or terrorist attacks and
that there will be no material changes in global trade policies.
- Unexpected litigation and legal disputes could have a material adverse
financial impact. If we experience unexpected litigation or unexpected
results in our existing litigation that have a material effect on our
financial results, the accuracy of the forward-looking statements would
be affected. Our forward-looking statements assume that there will be no
material unexpected litigation or results.
Finally, our future results will depend upon various other risks and
uncertainties, including, but not limited to, those detailed in Weatherford
Delaware's other filings with the SEC. For additional information regarding
risks and uncertainties, please read Weatherford Delaware's other current
filings with the SEC under the Exchange Act and the Securities Act, particularly
under "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Weatherford Delaware's Quarterly Report on Form 10-Q
for our quarter ended March 31, 2002 and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Weatherford
Delaware's Annual Report on Form 10-K for our year ended December 31, 2001.
These filings are available free of charge at the SEC's website at www.sec.gov.
v
Actual results may differ materially from those expressed or implied by
forward-looking statements. As you make your decision how to vote, please take
into account that forward-looking statements speak only as of the date of this
document or, in the case of documents incorporated by reference, the date of any
such document. We will generally update our assumptions in our filings as
circumstances require.
QUESTIONS AND ANSWERS
WHEN AND WHERE WILL THE SPECIAL MEETING BE HELD?
The special meeting will be held on Wednesday, June 26, 2002 at 10:00 a.m.
(Houston time) at The St. Regis Hotel, located at 1919 Briar Oaks Lane in
Houston, Texas.
WHAT AM I BEING ASKED TO VOTE ON AT THE SPECIAL MEETING?
You are being asked to vote on a proposed merger for the purpose of
reorganizing your company. As a result of the merger, Weatherford Delaware will
become an indirect subsidiary of Weatherford Bermuda, and you will become a
shareholder of Weatherford Bermuda. The board of directors recommends you vote
FOR this proposal.
HOW WILL THE MERGER BE ACCOMPLISHED?
A new Delaware company, Weatherford Merger, Inc., which has been formed
specifically for the merger and is owned by Weatherford Bermuda, will merge with
and into Weatherford Delaware. Weatherford Delaware will be the surviving
company in the merger and will become an indirect subsidiary of Weatherford
Bermuda. Each share of Weatherford Delaware common stock outstanding immediately
prior to the effective time of the merger will automatically convert into the
right to receive a common share of Weatherford Bermuda. Weatherford Bermuda will
be the new Bermuda parent company of the entire Weatherford International group
of companies, which will continue to be engaged in the same business that
Weatherford Delaware and its subsidiaries were engaged in before the merger. The
additional steps in the merger are more fully described in "The
Merger -- Structure of the Merger" on page 11.
WHAT ARE THE BENEFITS TO THE COMPANY OF COMPLETING THIS MERGER?
A significant portion of our business is currently generated from non-U.S.
markets. We believe the merger will allow us to take advantage of financial and
other business opportunities that are not available under our current corporate
structure, including:
- maximization of our potential business growth and cash flow;
- expansion of our international businesses as a result of greater
flexibility in financing arrangements, transaction structuring and access
to global capital;
- increased competitiveness regarding domestic and international
acquisition opportunities;
- potential improvement of our global tax position and global cash
management;
- use of the greater cash flow to invest for further earnings growth; and
- expansion of our investor base as our company's shares may become more
attractive to non-U.S. investors.
We believe these benefits should enhance stockholder value. However, we
cannot predict what impact, if any, the merger will have in the long term
because the achievement of our objectives depends on many things, including our
ability to react to any changes in the tax laws and treaties of the various
jurisdictions in which we operate or where we are incorporated or are resident.
Please read "The Merger -- Background and Reasons for the Merger" beginning on
page 11.
vi
It is important to note that currently proposed legislation, if enacted,
would have the effect of eliminating or reducing the anticipated tax benefits of
the transaction.
WHAT WILL HAPPEN TO MY EXISTING SHARES OF COMMON STOCK OF WEATHERFORD DELAWARE
IN THE MERGER?
Your Weatherford Delaware shares will automatically be converted into the
right to receive Weatherford Bermuda shares. The number of Weatherford Bermuda
shares you will own as a result of the merger will be the same as the number of
Weatherford Delaware shares you own immediately prior to the completion of the
merger, and your relative economic ownership in the company will remain
unchanged. The shares of Weatherford Bermuda will have substantially the same
attributes as your existing shares of common stock of Weatherford Delaware and
will be listed on The New York Stock Exchange under the symbol "WFT", which is
the same symbol under which your existing shares of common stock of Weatherford
Delaware are currently listed.
WILL THE MERGER DILUTE MY OWNERSHIP INTEREST?
No. The merger will not dilute your ownership interest. Immediately after
the merger is consummated you will own the same percentage of Weatherford
Bermuda common shares as you own of Weatherford Delaware common stock
immediately prior to the completion of the merger.
WILL I BE TAXED AS A RESULT OF THE MERGER?
Generally, for U.S. federal income tax purposes, stockholders who are U.S.
persons will recognize gain, if any, but not loss, on the receipt of Weatherford
Bermuda common shares in exchange for Weatherford Delaware common stock in
connection with the merger. A U.S. holder will generally recognize gain equal to
the excess, if any, of the fair market value of the Weatherford Bermuda common
shares received in the merger over the holder's adjusted tax basis in the shares
of Weatherford Delaware common stock. Generally, this gain will be capital gain.
Further, although not free from doubt, the holding period for any Weatherford
Bermuda common shares received by a U.S. holder recognizing gain with respect to
the merger should begin the day after the effective date of the merger.
Stockholders will not be permitted to recognize any loss realized on the
exchange of their shares of Weatherford Delaware common stock in the merger. In
the case of a loss, the adjusted tax basis in each Weatherford Bermuda common
share received would equal the adjusted tax basis of each share of Weatherford
Delaware common stock surrendered in exchange therefor, and the holding period
relative to the Weatherford Delaware common stock would carry over to the
Weatherford Bermuda common shares. Thus, subject to any subsequent changes in
the fair market value of the Weatherford Bermuda common shares, any loss would
be preserved.
WE STRONGLY URGE YOU TO CONSULT YOUR TAX ADVISORS REGARDING YOUR PARTICULAR
TAX CONSEQUENCES OF THE MERGER.
WILL WEATHERFORD DELAWARE OR WEATHERFORD BERMUDA BE TAXED AS A RESULT OF THE
MERGER?
We believe that Weatherford Delaware and Weatherford Bermuda should not
incur any significant taxes in connection with consummation of the merger.
However, changes in tax laws, treaties or regulations or the interpretation or
enforcement of these tax laws, treaties or regulations, could adversely affect
the tax consequences of the merger to Weatherford Bermuda, its subsidiaries and
the shareholders of Weatherford Bermuda and its subsidiaries. In addition, if
the U.S. Internal Revenue Service or other taxing authorities do not agree with
our assessment of the effects or interpretation of these laws, treaties and
regulations, this could have a material adverse effect on the tax consequences
of the merger.
It is important to note that several members of the United States Congress
have introduced legislation that, if enacted, would have the effect of
eliminating or reducing the anticipated tax benefits of the transaction. In
addition, several other members of the United States Congress and the Treasury
Department have recently announced the intent to investigate transactions such
as the merger. As a result of the increased scrutiny of these transactions,
changes in the tax laws, tax treaties or tax regulations may
vii
occur, with prospective or retroactive effect, which could have an adverse
effect on the expected benefits of the merger. If in response to any of these
changes Weatherford Bermuda or its subsidiaries undertake a corporate
restructuring, such restructuring could result in additional adverse tax
consequences to Weatherford Bermuda, its subsidiaries or its shareholders.
WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
We intend to complete the merger promptly after the stockholders of
Weatherford Delaware approve the merger agreement at the special meeting,
although the board of directors may delay completion of the merger for some
period of time after stockholder approval pending receipt of third party
consents or for other business reasons.
WHY WAS BERMUDA SELECTED AS THE PLACE OF INCORPORATION OF THE NEW PARENT
COMPANY?
We chose Bermuda for its political stability, legal framework and business
friendly environment. The first international (i.e., not locally owned) company
was incorporated in Bermuda in the 1930s, and there are currently many companies
incorporated there that are publicly traded on U.S. and European markets. We
also chose Bermuda because of our familiarity with Bermuda and its corporate
legal system through our experience with a subsidiary of Weatherford Delaware
that has been incorporated in Bermuda since 1983. Under current Bermuda law, a
Bermuda company is not required to pay taxes in Bermuda on either income or
capital gains. In addition, despite some differences, the corporate legal
system, based on English law, is such that your rights as a Weatherford Bermuda
shareholder will be substantially similar to your rights as a stockholder in
Weatherford Delaware. We encourage you to read the section "Comparison of Rights
of Stockholders" beginning on page 29 for a more detailed description of the
differences between your rights under Delaware law and under Bermuda law.
WILL THE PROPOSAL AFFECT CURRENT OPERATIONS? WHAT ABOUT THE FUTURE?
The merger will have no immediate major impact on how we conduct day-to-day
operations. The location of future operations will depend on the needs of our
business, independent of our place of incorporation.
Although Weatherford Bermuda will be incorporated under Bermuda law,
Weatherford Bermuda will be legally managed and controlled through an executive
office located in Barbados and consequently will become resident in Barbados.
Weatherford Bermuda will be registered as an external company in Barbados under
the Barbados Companies Act, Cap. 308 of the laws of Barbados, and licensed to
operate as an "International Business Company" or "IBC." As a resident of
Barbados, Weatherford Bermuda should be entitled to the benefits under the
income tax treaty entered into between the United States and Barbados. Under
current Barbados law, an IBC will be required to pay a maximum rate of 2.5%
income tax, which is gradually reduced to a minimum of 1% as income increases,
on its non-Barbados source income.
WHAT VOTE IS REQUIRED TO APPROVE THE TRANSACTION?
In order for us to effect the merger, we need affirmative votes from
holders of a majority of the shares of Weatherford Delaware common stock
outstanding and entitled to vote on May 15, 2002. SHARES FOR WHICH NO VOTES ARE
CAST EFFECTIVELY WILL BE TREATED AS THOUGH THEY WERE VOTED AGAINST THE AGREEMENT
AND PLAN OF MERGER, SO IT IS VERY IMPORTANT FOR ALL STOCKHOLDERS TO
VOTE. Please read "The Special Meeting -- Vote Required for Approval" on page
18.
WILL I BE ABLE TO TRADE MY SHARES DURING THE TIME IT TAKES TO COMPLETE THE
MERGER?
Yes.
DO I HAVE TO CHANGE MY STOCK CERTIFICATES?
Yes. At the effective time of the merger, a subsidiary of Weatherford
Bermuda who is a party to the Agreement and Plan of Merger, Weatherford U.S.
Holdings, L.L.C., will cause certificates representing a
viii
sufficient number of Weatherford Bermuda common shares to be deposited with an
exchange agent for the purpose of enabling stockholders to exchange their
Weatherford Delaware common stock for an equal number of Weatherford Bermuda
common shares. After the merger occurs, American Stock Transfer & Trust Company,
the exchange agent appointed by Weatherford U.S. Holdings in connection with the
merger, will send a letter of transmittal to stockholders of Weatherford
Delaware that will provide instructions on these exchange procedures. PLEASE DO
NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.
For further information, please read "The Merger -- Share Conversion;
Exchange of Shares" beginning on page 14.
WHO CAN VOTE AT THE SPECIAL MEETING?
All holders of record of Weatherford Delaware common stock as of the close
of business on May 15, 2002 are entitled to vote, or to grant proxies to vote,
at the special meeting. Each share of Weatherford Delaware common stock is
entitled to cast one vote.
WHO IS SOLICITING THESE PROXIES?
Your vote and proxy is being solicited by Weatherford Delaware's board of
directors for use at the special meeting. This proxy statement/prospectus and
enclosed proxy card are being sent to stockholders beginning on or about May 24,
2002.
In addition, Weatherford Delaware has retained Georgeson Shareholder
Communications Inc. to solicit proxies at an estimated fee of $6,500, plus
expenses. This fee does not include the costs of preparing, printing,
assembling, delivering and mailing the proxy materials. Some of our directors,
officers and employees may also solicit proxies personally, without any
additional compensation, by telephone or mail. Proxy materials also will be
furnished without cost to brokers and other nominees to forward to the
beneficial owners of shares held in their names.
HOW DO I VOTE IF MY SHARES ARE REGISTERED IN MY NAME?
By completing, signing and returning your proxy card in the enclosed
postage-prepaid envelope, you will authorize the persons named on the proxy card
to vote your shares according to your instructions. You may also vote by
following the Internet or telephone voting instructions on the enclosed proxy
card.
Please vote as soon as possible even if you currently plan to attend the
meeting in person, so that your shares may be represented and voted at the
special meeting.
HOW DO I VOTE IF MY BROKER HOLDS MY SHARES IN "STREET NAME"?
You should follow the voting instructions provided by your broker.
IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES FOR
ME?
If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them for or
against the merger. You should complete and return the enclosed form of proxy or
be sure to provide your broker with instructions on how to vote your shares.
WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
There are three ways in which you may revoke your proxy and change your
vote:
- First, you may send a written notice to our proxy solicitor, Georgeson
Shareholder Communications Inc., stating that you would like to revoke
your proxy. This notice must be received prior to the special meeting.
ix
- Second, you may complete and submit a new, later-dated proxy either by
Internet, by telephone or in writing. The latest dated proxy actually
received by Weatherford Delaware prior to the special meeting will be the
one that is counted, and all earlier proxies will be revoked.
- Third, you may attend the special meeting and vote in person. Simply
attending the meeting, however, will not revoke your proxy. At the
special meeting, the chairman of the meeting will announce instructions
for you to follow if you wish to revoke your proxy and vote in person at
the meeting.
If you have instructed a broker to vote your shares, you must follow the
directions received from your broker to change or revoke your proxy.
WHAT DO I DO IF I RECEIVE MULTIPLE PROXY CARDS?
If you receive multiple proxy cards, this indicates that your shares are
held in more than one account, such as two brokerage accounts, and are
registered in different names. You should vote each of the proxy cards to ensure
that all of your shares are voted.
HOW WILL MY SHARES BE VOTED IF I DO NOT INDICATE HOW I WISH TO VOTE?
If you sign the proxy card but do not indicate how you wish to vote for the
merger, the persons named on the proxy card will vote FOR the merger. If you
"withhold" your vote for the merger, this will be counted as a vote AGAINST the
merger.
HOW MANY SHARES CONSTITUTE A QUORUM?
As of May 15, 2002, there were 120,436,996 shares of Weatherford Delaware
common stock issued and outstanding. The holders of the common stock have the
right to cast a total of 119,481,433 votes. The presence, in person or by proxy,
of stockholders entitled to cast at least 59,740,717 votes will constitute a
quorum at the special meeting. If you have followed the Internet or telephone
voting instructions on the enclosed proxy card, or properly signed and returned
your proxy card by mail, you will be considered part of the quorum. If a broker
holding your shares in "street name" indicates to us on a proxy card that the
broker lacks discretionary authority to vote your shares, we will not consider
your shares as present or entitled to vote for any purpose.
WHO DO I CONTACT WITH FURTHER QUESTIONS?
You should contact:
Weatherford Delaware: Weatherford International, Inc.
515 Post Oak Boulevard, Suite 600
Houston, Texas 77027
Attention: Investor Relations
(713) 693-4000
the Proxy Solicitor: Georgeson Shareholder Communications Inc.
17 State Street
New York, New York 10004
1-866-219-9786
x
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger and related transactions more fully and for a more complete description
of the legal terms of the merger, you should read carefully this entire
document, including the annexes, and the other documents to which we have
referred you. Please read "Where You Can Find More Information" on page 46. The
Agreement and Plan of Merger is attached as Annex I to this document. The
Memorandum of Association and Bye-laws that will govern Weatherford Bermuda, the
company of which you will own common shares if the merger is approved, are
attached as Annexes II and III.
THE MERGER
PARTIES TO THE MERGER
WEATHERFORD INTERNATIONAL, INC.
Weatherford Delaware is one of the world's leading providers of equipment
and services used for the drilling, completion and production of oil and natural
gas wells. Weatherford Delaware, as we know it today, was formed in connection
with the May 1998 merger of Weatherford Enterra, Inc. into EVI, Inc. We were
incorporated under the laws of Delaware in 1972. Many of our businesses,
including those of Weatherford Enterra, have been conducted for more than 50
years.
We conduct operations in approximately 100 countries and have approximately
485 service and sales locations, which are located in nearly all of the oil and
natural gas producing regions in the world. We are among the leaders in each of
our primary markets, and our distribution and service network is one of the most
extensive in the industry.
Our business is divided into three principal operating divisions:
- Drilling and Intervention Services -- This division provides (1) drilling
systems, (2) well installation services, (3) cementing products and (4)
underbalanced drilling. It is a leader in each of these markets, and this
division offers its products and services worldwide. Currently, this
division generates approximately 64% of its revenues outside the United
States.
- Completion Systems -- This division provides a full range of completion
products and services. It maintains a growing share of the world's
completion market and offers leading proprietary and patented
technologies, such as our expandable systems, aimed at minimizing
formation damage and maximizing production. Currently, this division
generates approximately 67% of its revenues outside the United States.
- Artificial Lift Systems -- This division is the only organization in the
world that is able to provide all forms of artificial lift used primarily
for the production of oil. It also provides production optimization
services and automation and monitoring of well head production. The
current geographical mix of this division's revenues is 31% United States
and 69% international.
In addition to the above operations, historically we operated a Compression
Services Division and a Drilling Products Division. In February 2001, we
completed the merger of essentially all of our Compression Services Division
into a subsidiary of Universal Compression Holdings, Inc. in exchange for 13.75
million shares of Universal, or approximately 48% of Universal's then
outstanding common stock. In April 2000, we completed the spin-off to our
stockholders of our Drilling Products Division through a distribution of the
stock of our Grant Prideco, Inc. subsidiary. Grant Prideco's operations have
been classified as discontinued in our financial statements.
1
WEATHERFORD INTERNATIONAL LTD.
Weatherford Bermuda is a newly formed Bermuda exempted company and is
currently wholly owned by Weatherford Delaware. Weatherford Bermuda has no
significant assets or capitalization and has not engaged in any business or
other activities other than in connection with its formation and the merger and
related transactions. As a result of the merger, it will become the indirect
parent holding company of Weatherford Delaware.
WEATHERFORD U.S. HOLDINGS, L.L.C.
Weatherford U.S. Holdings, L.L.C. is a newly formed Delaware limited
liability company and a wholly-owned, indirect subsidiary of Weatherford
Bermuda. Weatherford U.S. Holdings was formed to accomplish the proposed merger
and to hold directly all of the stock of Weatherford Delaware immediately
subsequent to the merger. It has no significant assets or capitalization
unrelated to the merger and has not engaged in any business or other activities
except in connection with its formation and the merger and related transactions.
WEATHERFORD MERGER, INC.
Weatherford Merger, Inc. (which we refer to as Merger Sub) is a newly
formed Delaware corporation and a wholly-owned, direct subsidiary of Weatherford
U.S. Holdings. Merger Sub will merge with and into Weatherford Delaware. Please
read "The Merger -- Structure of the Merger" on page 11. It has no significant
assets or capitalization unrelated to the merger and has not engaged in any
business or other activities except in connection with its formation and the
merger and related transactions.
The principal executive offices of Weatherford Delaware, Weatherford U.S.
Holdings and Merger Sub are located at 515 Post Oak Boulevard, Suite 600,
Houston, Texas 77027. The telephone number of each party at that address is
(713) 693-4000. The registered office of Weatherford Bermuda is located at
Clarendon House, 2 Church Street, Hamilton HM CX, Bermuda. The principal
executive offices of Weatherford Bermuda are currently located at c/o Corporate
Managers (Barbados) Ltd., First Floor, Trident House, Lower Broad Street,
Bridgetown, Barbados and its telephone number at that address is (246) 427-3174.
THE MERGER (Please read page 11)
Weatherford Delaware's board of directors has approved and recommends that
you adopt the Agreement and Plan of Merger. The terms of the merger are set
forth in the Agreement and Plan of Merger attached as Annex I to this proxy
statement/prospectus. As a result of the merger, you will own shares in a
Bermuda company rather than a Delaware corporation. For a more detailed
description of the differences between your rights under Delaware law and under
Bermuda law, please read "Comparison of Rights of Stockholders" beginning on
page 29. After completion of the merger, Weatherford Bermuda and its
subsidiaries will continue to conduct the same business that Weatherford
Delaware and its subsidiaries now conduct.
The merger involves the following steps:
1. Merger Sub will merge with and into Weatherford Delaware.
Weatherford Delaware will be the surviving entity and become an indirect
subsidiary of Weatherford Bermuda.
2. In the merger, each outstanding share of common stock of
Weatherford Delaware will automatically convert by operation of law into
the right to receive one common share of Weatherford Bermuda. Stockholders
of Weatherford Delaware will own exactly the same number of Weatherford
Bermuda common shares immediately after the merger as they owned in
Weatherford Delaware immediately before the merger. For a description of
the terms of the Weatherford Bermuda common shares, please read the
discussion under "Description of Authorized Shares of Weatherford
International Ltd." beginning on page 21.
2
Stockholders will be required to exchange their stock certificate(s) as a
result of the merger. Each outstanding certificate representing shares of
Weatherford Delaware shall automatically represent the right to receive the same
number of Weatherford Bermuda common shares. Following the merger, certificates
for common shares of Weatherford Bermuda will be issued upon surrender of
certificates for existing shares of common stock of Weatherford Delaware to an
exchange agent appointed by Weatherford U.S. Holdings. PLEASE DO NOT SEND ANY
STOCK CERTIFICATES AT THIS TIME.
BACKGROUND AND REASONS FOR THE MERGER (Please read page 11)
International activities are an important part of our current business, and
we believe that international operations will account for a greater percentage
of our total revenues in the future. For the quarter ended March 31, 2002,
non-U.S. revenues accounted for 65% of our revenues. Expansion of our
international business is an important part of our current business strategy,
and we believe that significant growth opportunities exist in the international
marketplace. We believe that the merger will allow us to implement our business
strategy more effectively.
We believe that the merger should increase our access to international
capital markets and acquisition opportunities, increase our attractiveness to
non-U.S. investors, improve global cash management, improve our global tax
position and result in a more favorable corporate structure for expansion of our
current business. We anticipate that the merger may result in significant global
tax savings. However, we cannot give any assurance as to what our global tax
savings will be after the merger. In addition, a number of our competitors are
incorporated outside of the United States and already have these competitive
advantages. We believe the merger will allow us to compete more effectively on a
global scale.
For a discussion of the risk factors associated with the merger, please
read the discussion under "Risk Factors" beginning on page 8.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO STOCKHOLDERS (Please read page
38)
Generally, for U.S. federal income tax purposes, stockholders who are U.S.
persons will recognize gain, if any, but not loss, on the receipt of Weatherford
Bermuda common shares in exchange for Weatherford Delaware common stock in
connection with the merger. A U.S. holder will generally recognize gain equal to
the excess, if any, of the fair market value of the Weatherford Bermuda common
shares received in the merger over the holder's adjusted tax basis in the shares
of Weatherford Delaware common stock. Generally, this gain will be capital gain.
Further, although not free from doubt, the holding period for any Weatherford
Bermuda common shares received by a U.S. holder recognizing gain with respect to
the merger should begin the day after the effective date of the merger.
Stockholders will not be permitted to recognize any loss realized on the
exchange of their shares of Weatherford Delaware common stock in the merger. In
the case of a loss, the adjusted tax basis in each Weatherford Bermuda common
share received would equal the adjusted tax basis of each share of Weatherford
Delaware common stock surrendered, and the holding period relative to the
Weatherford Delaware common stock would carry over to the Weatherford Bermuda
common shares. Thus, subject to any subsequent changes in the fair market value
of Weatherford Bermuda common shares, any loss would be preserved.
WE STRONGLY URGE YOU TO CONSULT YOUR TAX ADVISORS REGARDING YOUR
PARTICULAR TAX CONSEQUENCES OF THE MERGER.
CONDITIONS TO CONSUMMATION OF THE MERGER (Please read page 13)
The consummation of the merger is conditioned on several factors, including
the affirmative vote of the holders of a majority of the outstanding shares of
common stock of Weatherford Delaware entitled to vote at the special meeting and
that none of the parties to the Agreement and Plan of Merger is subject to any
governmental authority that in the discretion of the board of directors of
Weatherford Delaware would make the consummation of the merger inadvisable.
3
CREDIT FACILITIES (Please read page 16)
As a result of the merger, Weatherford Delaware may fail to comply with
certain covenants contained in its credit agreements and other debt instruments.
In addition, the merger may be deemed a "change of control" or constitute a
"termination event" under these facilities. A change of control, termination
event or failure to comply with covenants could
- require mandatory prepayment of all amounts borrowed under these debt
instruments,
- result in a default under certain debt instruments, or
- terminate Weatherford Delaware's ability to sell receivables under its
receivables facility.
Weatherford Delaware has obtained several waivers in connection with
potential violations, change of control or termination events that require
mandatory prepayments or trigger defaults and is seeking other waivers, although
we cannot assure you that Weatherford Delaware will be able to obtain these
other waivers. If waivers are not obtained, Weatherford Delaware will need to
refinance amounts under the relevant agreements. Weatherford Delaware does not
believe the mandatory prepayments, defaults or termination events will adversely
affect it, its operations or its stockholders or Weatherford Bermuda or its
shareholders if the merger is completed.
RIGHTS OF STOCKHOLDERS (Please read page 29)
The principal attributes of the existing Weatherford Delaware common stock
and the Weatherford Bermuda common shares will be substantially similar. There
are differences, however, between the rights of stockholders under Delaware law
and shareholders under Bermuda law. In addition, there are differences between
Weatherford Delaware's certificate of incorporation and by-laws and Weatherford
Bermuda's memorandum of association and bye-laws. We encourage you to read the
section titled "Comparison of Rights of Stockholders" beginning on page 29 for a
more detailed discussion of these differences.
STOCK EXCHANGE LISTING; RECENT STOCK PRICES (Please read page 16)
Immediately following the merger, Weatherford Bermuda's common shares will
be listed on The New York Stock Exchange under the symbol "WFT", the same symbol
under which Weatherford Delaware's common stock is currently listed.
The closing price per share of Weatherford Delaware's common stock on The
New York Stock Exchange was $44.99 on April 4, 2002. The high and low sales
prices of Weatherford Delaware's common stock on The New York Stock Exchange
were $47.16 and $44.55 on April 4, 2002, the last trading day before the public
announcement of the merger.
NO RIGHTS OF DISSENTING STOCKHOLDERS (Please read page 15)
Under the Delaware General Corporation Law, you will not have "dissenters"
or appraisal rights in connection with the merger.
ACCOUNTING TREATMENT OF THE MERGER (Please read page 16)
The merger will be accounted for as a merger of entities under common
control that will not result in changes in our historical consolidated carrying
amounts of assets, liabilities and stockholders' equity.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF WEATHERFORD DELAWARE APPROVED THE AGREEMENT AND
PLAN OF MERGER AND DECLARED ITS ADVISABILITY AND RECOMMENDS THAT YOU VOTE "FOR"
ITS ADOPTION.
VOTE REQUIRED (Please read page 18)
ADOPTION OF THE AGREEMENT AND PLAN OF MERGER REQUIRES THE AFFIRMATIVE VOTE
OF HOLDERS OF A MAJORITY OF THE SHARES OF WEATHERFORD DELAWARE COMMON STOCK
OUTSTANDING AND ENTITLED TO VOTE ON MAY 15, 2002. ABSTENTIONS AND BROKER
NON-VOTES WILL THEREFORE EFFECTIVELY BE COUNTED AS VOTES AGAINST ADOPTION OF THE
MERGER AGREEMENT. As of the May 15, 2002 record date, there were 119,481,433
Weatherford Delaware shares outstanding and entitled to vote.
4
GENERAL PROVISIONS
SPECIAL MEETING (Please read page 18)
TIME, DATE, PLACE
The special meeting of stockholders will be held at 10:00 a.m. (Houston
time) on Wednesday, June 26, 2002 at The St. Regis Hotel, located at 1919 Briar
Oaks Lane in Houston, Texas.
RECORD DATE
Only stockholders of record at the close of business on May 15, 2002, as
shown in our records, will be entitled to vote, or to grant proxies to vote, at
the special meeting.
QUORUM
The presence, in person or by proxy, of stockholders holding a majority of
the shares of Weatherford Delaware entitled to vote will constitute a quorum.
PROXIES (Please read page 19)
GENERAL
Stockholders of record may vote by marking, signing and mailing their proxy
card in the enclosed postage-prepaid envelope or by following the Internet or
telephone voting instructions on the enclosed proxy card.
If you hold your Weatherford Delaware shares in the name of a bank, broker
or other nominee, you should follow the instructions provided by such bank,
broker or nominee when voting your shares. To be effective, a form of proxy must
be received by us prior to the beginning of voting at the special meeting.
REVOCATION
There are three ways in which you may revoke your proxy and change your
vote:
- First, you may send a written notice to our proxy solicitor, Georgeson
Shareholder Communications Inc., stating that you would like to revoke
your proxy. This notice must be received prior to the special meeting.
- Second, you may complete and submit a new later-dated proxy either by
Internet, by telephone or in writing. The latest dated proxy actually
received by Weatherford Delaware prior to the special meeting will be the
one that is counted, and all earlier proxies will be revoked.
- Third, you may attend the special meeting and vote in person. Simply
attending the meeting, however, will not revoke your proxy. At the
special meeting, the chairman of the meeting will announce instructions
for you to follow if you wish to revoke your proxy and vote in person at
the meeting.
If you have instructed a broker to vote your shares, you must follow the
directions received from your broker to change or revoke your proxy.
5
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data of Weatherford Delaware
in the table below were derived from Weatherford Delaware's audited consolidated
financial statements as of and for the five years ended December 31, 2001 and
Weatherford Delaware's unaudited consolidated condensed financial statements as
of and for the quarters ended March 31, 2002 and March 31, 2001. This data
should be read in conjunction with the audited consolidated financial statements
and unaudited consolidated condensed financial statements of Weatherford
Delaware, including the notes to the financial statements, incorporated by
reference into this proxy statement/prospectus.
We have not included data for Weatherford Bermuda, Merger Sub or
Weatherford U.S. Holdings because they did not conduct business during any of
the periods discussed below.
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenues................... $ 568,249 $ 526,158 $2,328,715 $1,814,261 $1,240,200 $1,363,849 $1,357,374
Operating Income........... 90,236 82,546 409,474 120,328(a) 66,818 36,171(b) 216,082
Income (Loss) from
Continuing Operations.... 45,219 43,510 214,651 (38,892)(a)(c) 16,206 (883)(b) 129,745
Basic Earnings (Loss) Per
Share from Continuing
Operations............... 0.38 0.39 1.88 (0.36)(a)(c) 0.16 (0.01)(b) 1.35
Diluted Earnings (Loss) Per
Share from Continuing
Operations............... 0.36 0.37 1.76 (0.36)(a)(c) 0.16 (0.01)(b) 1.33
Total Assets............... 4,470,648 3,349,387 4,296,362 3,461,579 3,513,789 2,638,612 2,508,034
Long-term Debt............. 1,093,999(d) 730,454 1,097,294(d) 730,176(e) 226,603 220,398 224,935
5% Convertible Subordinated
Preferred Equivalent
Debentures............... 402,500 402,500 402,500 402,500 402,500 402,500 402,500
Stockholders' Equity....... 1,949,355 1,369,070 1,838,240 1,338,458(f) 1,843,684 1,500,090 1,462,409
Cash Dividends Per Share... -- -- -- -- -- -- --
</Table>
- ---------------
(a) Reflects $56.3 million, $43.0 million net of taxes, of impairment charges
related to the merger of essentially all of our Compression Services
Division into Universal.
(b) Reflects $160.0 million, $104.0 million net of taxes, of merger and other
charges relating to the merger between EVI and Weatherford Enterra and a
reorganization and rationalization of our business in light of industry
conditions.
(c) Includes $76.5 million of deferred tax provision associated with the
deconsolidation of our Compression Services Division.
(d) Includes $347.1 million of our 6 5/8% Senior Notes due 2011, issued
November 2001.
(e) Includes $910.0 million face amount of our Zero Coupon Convertible Senior
Debentures, at the accreted discount amount of $509.2 million as of
December 31, 2000, issued June 2000.
(f) Reflects the distribution of our Grant Prideco, Inc. subsidiary to our
stockholders.
6
SUMMARY PRO FORMA FINANCIAL INFORMATION
A pro forma condensed consolidated balance sheet for Weatherford Bermuda is
not presented in this proxy statement/prospectus because there would be no
significant pro forma adjustments required to be made to Weatherford Delaware's
historical consolidated condensed balance sheet as of March 31, 2002 and
historical consolidated balance sheet as of December 31, 2001. The balance
sheets are included in Weatherford Delaware's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2002 and Annual Report on Form 10-K for the year
ended December 31, 2001.
A pro forma condensed consolidated income statement for Weatherford Bermuda
is not presented in this proxy statement/prospectus because there would be no
significant pro forma adjustments required to be made to Weatherford Delaware's
income from operations in the unaudited historical consolidated condensed income
statement for the quarter ended March 31, 2002 and the audited historical
consolidated income statement for the year ended December 31, 2001. The income
statements are included in Weatherford Delaware's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2002 and Annual Report on Form 10-K for the
fiscal year ended December 31, 2001.
Costs incurred in connection with the merger are not expected to be
material and are expensed as incurred.
7
RISK FACTORS
SOME WEATHERFORD DELAWARE STOCKHOLDERS WILL RECOGNIZE A TAXABLE GAIN AS A RESULT
OF THE MERGER AND WILL NOT BE ABLE TO RECOGNIZE ANY LOSSES REALIZED.
Generally, for U.S. federal income tax purposes, stockholders who are U.S.
persons will recognize gain, if any, but not loss, on the receipt of Weatherford
Bermuda common shares in exchange for Weatherford Delaware common stock in
connection with the merger. A U.S. holder will generally recognize gain equal to
the excess, if any, of the fair market value of the Weatherford Bermuda common
shares received in the merger over the holder's adjusted tax basis in the shares
of Weatherford Delaware common stock. Generally, this gain will be capital gain.
Further, although not free from doubt, the holding period for any Weatherford
Bermuda common shares received by a U.S. holder recognizing gain with respect to
the merger should begin the day after the effective date of the merger.
Stockholders will not be permitted to recognize any loss realized on the
exchange of their shares of Weatherford Delaware common stock in the merger. In
the case of a loss, the adjusted tax basis in each Weatherford Bermuda common
share received would equal the adjusted tax basis of each share of Weatherford
Delaware common stock surrendered, and the holding period relative to the
Weatherford Delaware common stock would carry over to the Weatherford Bermuda
common shares. Thus, subject to any subsequent changes in the fair market value
of Weatherford Bermuda common shares, any loss would be preserved.
WE STRONGLY URGE YOU TO CONSULT YOUR TAX ADVISORS REGARDING YOUR PARTICULAR
TAX CONSEQUENCES OF THE MERGER.
WEATHERFORD DELAWARE AND WEATHERFORD BERMUDA MAY INCUR SIGNIFICANT TAXES IF THE
U.S. INTERNAL REVENUE SERVICE AND OTHER NON-U.S. TAXING AUTHORITIES DO NOT AGREE
WITH OUR TAX TREATMENT OF VARIOUS ITEMS.
Changes in tax laws, treaties or regulations or the interpretation or
enforcement of these tax laws, treaties or regulations, could adversely affect
the tax consequences of the merger to Weatherford Bermuda, its subsidiaries and
the shareholders of Weatherford Bermuda and its subsidiaries. In addition, if
the U.S. Internal Revenue Service or other taxing authorities do not agree with
our assessment of the effects or interpretation of these laws, treaties and
regulations, Weatherford Delaware could incur a material amount of U.S. federal
income tax as a result of the merger.
WEATHERFORD BERMUDA'S NET INCOME AND CASH FLOW WOULD BE REDUCED IF WEATHERFORD
BERMUDA BECOMES SUBJECT TO U.S. CORPORATE INCOME TAX.
Weatherford Bermuda and other non-U.S. Weatherford affiliates will conduct
their operations in a manner intended to ensure that Weatherford Bermuda and its
non-U.S. affiliates do not engage in the conduct of a U.S. trade or business.
However, if the IRS successfully contends that Weatherford Bermuda or any of its
non-U.S. affiliates are engaged in a trade or business in the United States,
Weatherford Bermuda or such non-U.S. affiliate would be required to pay U.S.
corporate income tax on income that is subject to the taxing jurisdiction of the
United States, and possibly the U.S. branch profits tax. Additionally, after the
merger, Weatherford Delaware and its then-existing U.S. subsidiaries will
continue to be subject to U.S. corporate income tax on their worldwide income,
and Weatherford Delaware's then existing foreign subsidiaries will continue to
be subject to U.S. corporate income tax on their U.S. operations.
LEGISLATION HAS BEEN PROPOSED THAT WOULD TREAT WEATHERFORD BERMUDA AS A U.S.
CORPORATION FOR TAX PURPOSES AFTER THE MERGER AND SUBJECT IT TO MORE BURDENSOME
U.S. CORPORATE INCOME TAX.
Several members of the United States Congress have introduced legislation
that, if enacted, may cause Weatherford Bermuda to be treated as a U.S.
corporation for U.S. tax purposes, which would cause Weatherford Bermuda to be
subject to U.S. corporate income tax on its worldwide income. Such members
believe that the type of merger contemplated by Weatherford Delaware,
Weatherford Bermuda,
8
U.S. Holdings and Merger Sub (collectively, the "Weatherford Group") results in
an improper or unpatriotic reduction in U.S. federal income taxes. Specifically,
since some of the Weatherford Group's foreign operations may not be subject to
U.S. federal income taxation after the merger, it is anticipated that the
Weatherford Group will pay less U.S. federal income tax. If the merger is
completed, it is possible that legislation may be enacted thereafter with
retroactive effect, which could treat Weatherford Bermuda as a U.S. corporation
for tax purposes or reduce certain other benefits of the merger. In this event,
under certain circumstances, Weatherford Bermuda might be subjected to more
burdensome U.S. taxes than an ordinary U.S. corporation. Moreover, if
Weatherford Bermuda, for this or any other reason, decided to redomesticate to
the United States, the shareholders would possibly incur a tax on any
incremental post-merger gain or possibly on their share of the earnings and
profits, as determined for tax purposes, of Weatherford Bermuda. At this time,
it is impossible to predict what legislation, if any, may be enacted, and if
such legislation is enacted, its effect on a restructuring that occurs prior to
the date the legislation is passed. While the passage of legislation may impose
additional U.S. federal income tax liability over that which would be imposed in
the absence of such legislation, a number of significant non-tax benefits of the
merger likely would be unaffected by the legislation as currently introduced.
The legislation currently introduced is generally focused on corporations that
enter into a merger such as the one contemplated by the Weatherford Group in
which the shareholders of the domestic merging corporation (i.e., the
shareholders of Weatherford Delaware) own a controlling interest in the new
foreign holding company (i.e., Weatherford Bermuda) after the merger. One of the
intended bills would apply beginning in 2003 to corporations regardless of when
such corporations effectuated their restructuring. Two bills would apply
immediately to any corporation restructuring after September 11, 2001 and would
apply beginning in 2004 to corporations restructuring on or before September 11,
2001. A fourth bill would apply to corporations restructuring on or after
January 1, 2002. In addition, the Chairman of the Senate Finance Committee and
the ranking Republican member introduced a bill that would treat foreign
corporations as U.S. corporations if such corporations effectuated this
restructuring after March 20, 2002. Furthermore, one member of Congress recently
introduced a bill that would impose a moratorium on certain restructurings
completed after September 11, 2001, and commenced on or before December 31,
2003. In a separate initiative, the United States Treasury Department has
commenced a study of restructurings such as the one contemplated by the
Weatherford Group and recently released a preliminary report that (1) addresses
the current U.S. federal income tax treatment of both restructuring transactions
and the post-restructuring operations of companies effectuating such
transactions, (2) examines the features of the U.S. federal income tax law that
either promote or compel companies to restructure, and (3) calls for further
analysis. Weatherford Delaware will review all legislative developments prior to
completing the merger to determine whether it is advisable to proceed.
WEATHERFORD BERMUDA IS A BERMUDA EXEMPTED COMPANY, AND IT MAY BE DIFFICULT FOR
YOU TO ENFORCE JUDGMENTS AGAINST WEATHERFORD BERMUDA OR ITS DIRECTORS AND
EXECUTIVE OFFICERS.
Weatherford Bermuda is a Bermuda exempted company. As a result, the rights
of holders of Weatherford Bermuda common shares will be governed by Bermuda law
and Weatherford Bermuda's memorandum of association and bye-laws. Under these
laws, it may be difficult for investors to effect service of process in the
United States or to enforce in the United States judgments obtained in U.S.
courts against Weatherford Bermuda (a substantial portion of whose assets will
be located outside the United States), any non-U.S. directors of Weatherford
Bermuda or some of the named experts referred to in this proxy
statement/prospectus based on the civil liability provisions of the U.S.
securities laws. We have been advised by our Bermuda counsel, Conyers Dill &
Pearman, that uncertainty exists as to whether courts in Bermuda will enforce
judgments obtained in other jurisdictions, including the United States, against
Weatherford Bermuda or its directors or officers under the securities laws of
those jurisdictions or entertain actions in Bermuda against Weatherford Bermuda
or its directors or officers under the securities laws of other jurisdictions.
9
IT WILL BE DIFFICULT FOR SHAREHOLDERS TO BRING LEGAL ACTION AGAINST WEATHERFORD
BERMUDA'S OFFICERS AND DIRECTORS.
Weatherford Bermuda's bye-laws contain a broad waiver that limits the
rights of shareholders to assert claims against Weatherford Bermuda's officers
and directors unless the act or failure to act involves fraud or dishonesty.
Under Weatherford Bermuda's bye-laws, Weatherford Bermuda's shareholders waive
any claim or right of action, both individually and on Weatherford Bermuda's
behalf, against any of Weatherford Bermuda's officers or directors. The waiver
applies to any action taken by an officer or director, or the failure of an
officer or director to take any action, in the performance of his or her duties,
except with respect to any matter involving any fraud or dishonesty on the part
of the officer or director.
WEATHERFORD BERMUDA'S BYE-LAWS HAVE ANTI-TAKEOVER PROVISIONS THAT MAY DISCOURAGE
A CHANGE OF CONTROL. THESE ANTI-TAKEOVER PROVISIONS COULD RESULT IN A LOWER
MARKET PRICE FOR WEATHERFORD BERMUDA SHARES AND MAY LIMIT A SHAREHOLDER'S
ABILITY TO OBTAIN A PREMIUM FOR WEATHERFORD BERMUDA SHARES.
Weatherford Bermuda's bye-laws contain provisions that could make it more
difficult for a third party to acquire us without the consent of our board of
directors. These provisions could make it more difficult for a third party to
acquire Weatherford Bermuda, even if the third party's offer may be considered
beneficial by many shareholders. As a result, shareholders may be limited in
their ability to obtain a premium for their shares and this may cause the market
price of Weatherford Bermuda shares to decrease significantly. These provisions
provide for:
- directors only to be removed for cause;
- restrictions on the time period in which directors may be nominated; and
- the board of directors to determine the powers, preferences and rights of
Weatherford Bermuda's preference shares and to issue the preference
shares without shareholder approval.
Similar to the current authority of Weatherford Delaware's board of
directors, the board of directors of Weatherford Bermuda may issue preferred
shares and determine their rights and qualifications. The issuance of preferred
shares may delay, defer or prevent a merger, amalgamation, tender offer or proxy
contest involving Weatherford Bermuda.
YOUR RIGHTS AS A STOCKHOLDER MAY BE ADVERSELY AFFECTED AS A RESULT OF THE
MERGER.
Because of differences in Bermuda law and Delaware law and differences in
the governing documents of Weatherford Bermuda and Weatherford Delaware, your
rights as a stockholder will change if the merger is completed. For a
description of these differences, please read "Comparison of Rights of
Stockholders -- Comparison of Corporate Governance Provisions" beginning on page
29.
NEGATIVE PUBLICITY RESULTING FROM OUR PROPOSED REORGANIZATION COULD ADVERSELY
AFFECT OUR BUSINESS AND OUR STOCK PRICE.
Foreign reincorporations like our proposed reorganization that have
recently been undertaken by other companies have generated significant press
coverage, much of which has been negative. Negative publicity generated by our
proposed reorganization could cause some of our customers or suppliers to be
more reluctant to do business with us. This could have an adverse impact on our
business. Negative publicity could also cause some of our stockholders to sell
our stock or decrease the demand for new investors to purchase our stock, which
could have an adverse impact on our stock price.
10
THE MERGER
STRUCTURE OF THE MERGER
The board of directors of Weatherford Delaware has approved and recommends
that you adopt the Agreement and Plan of Merger. Under the Agreement and Plan of
Merger, Merger Sub will merge with and into Weatherford Delaware. Weatherford
Delaware will be the surviving company in the merger and become an indirect
subsidiary of Weatherford Bermuda. The terms of the merger are set forth in the
Agreement and Plan of Merger attached as Annex I to this proxy
statement/prospectus. As a result of the merger, your shares of Weatherford
Delaware common stock will automatically convert into the right to receive the
same number of Weatherford Bermuda common shares.
After completion of the merger, you will own an interest in a Bermuda
holding company which, through Weatherford Delaware and its other subsidiaries,
will be engaged in the same business that Weatherford Delaware and its
subsidiaries were engaged in prior to the merger.
The merger involves the following steps:
1. Merger Sub will merge with and into Weatherford Delaware.
Weatherford Delaware will be the surviving entity and become an indirect
subsidiary of Weatherford Bermuda.
2. In the merger, each outstanding share of common stock of
Weatherford Delaware will automatically convert by operation of law into
the right to receive one common share of Weatherford Bermuda. Stockholders
of Weatherford Delaware will own exactly the same number of Weatherford
Bermuda common shares immediately after the merger as they owned in
Weatherford Delaware immediately before the merger. For a description of
the terms of the Weatherford Bermuda common shares, please read the
discussion under "Description of Authorized Shares of Weatherford
International Ltd." beginning on page 21.
Although Weatherford Bermuda will be incorporated under Bermuda law,
Weatherford Bermuda will be legally managed and controlled through an executive
office located in Barbados. Weatherford Bermuda will be registered as an
external company in Barbados under the Barbados Companies Act, Cap. 308 of the
laws of Barbados, and licensed to operate as an "International Business Company"
or "IBC."
BACKGROUND AND REASONS FOR THE MERGER
INTERNATIONAL EXPANSION
International activities are an important part of our current business.
Internationally, operating revenues were approximately $1,020 million in 2000,
$1,379 million in 2001 and $372 million in the first quarter of 2002, accounting
for approximately 56%, 59% and 65%, respectively, of our total operating
revenues in these periods. We believe that a substantial portion of future
opportunities for our services will be outside of the United States and
accordingly, we believe international operations will account for a greater
percentage of our total revenues in the future. We believe the merger will give
us competitive advantages not available to a U.S. company. As a Bermuda company,
we believe we will have greater access to international capital markets and
international acquisition opportunities, which will allow us to implement our
international expansion strategy more effectively. In addition, a number of our
competitors are incorporated outside of the United States and already have these
competitive advantages. We believe the merger will allow us to compete more
effectively on a global scale.
GLOBAL TAX POSITION
The board of Weatherford Delaware is recommending the merger in part
because it believes that the merger will improve our global tax position and
should maximize potential growth and cash flow. We anticipate that the
reorganized structure may enhance our ability to realize significant tax
savings. However, we cannot give any assurance as to what our tax savings will
be after the merger. After the merger, our tax rate will depend on, among other
things, profitability and the relative mix of our operations
11
worldwide and our ability to react to any changes in tax laws, treaties and
policies and the interpretation of these laws, treaties and policies in the
jurisdictions where we operate or are incorporated or are resident. Our actual
effective tax rate may vary materially from our expectations.
As a result of the expected improvement in cash flow, we believe we will be
able to:
- maximize growth of existing businesses; and
- commit additional capital to international expansion.
Weatherford Bermuda will be indirectly subject to U.S. tax on income earned
from its U.S. business much as we are now. However, we believe the merger may:
- improve our global tax position;
- facilitate foreign tax savings through a more flexible corporate
structure; and
- provide future U.S. tax savings to the extent that new foreign businesses
may be held by Weatherford Bermuda without any intervening U.S. owners.
Thus, the new corporate structure should give us greater flexibility in seeking
to lower our worldwide tax liability and effective tax rate.
In addition, Weatherford Delaware's board believes that the merger will
result in a more favorable corporate structure for expansion of our current
business because it will facilitate the cost effective acquisition and operation
of non-U.S. businesses.
It is important to note that several members of the United States Congress
have introduced legislation that, if enacted, would have the effect of
eliminating or reducing the anticipated tax benefits of the transaction. In
addition, several other members of the United States Congress and the Treasury
Department have recently announced the intent to investigate transactions such
as the merger. As a result of the increased scrutiny of these transactions,
changes in the tax laws, tax treaties or tax regulations may occur, with
prospective or retroactive effect, which could have an adverse effect on the
expected benefits of the merger. If in response to any of these changes
Weatherford Bermuda or its subsidiaries undertake a corporate restructuring,
such restructuring could result in additional adverse tax consequences to
Weatherford Bermuda, its subsidiaries or its shareholders.
POTENTIAL EXPANSION OF INVESTOR BASE
The board of Weatherford Delaware also believes that the merger may
increase Weatherford Bermuda's attractiveness to non-U.S. investors. Estate
taxes are payable in some cases in respect of the value of shares in a U.S.
corporation owned by a non-U.S. investor. Although Weatherford Delaware has not
paid any cash dividends on its common stock, distributions with respect to stock
in a U.S. corporation to nonresident aliens could be subject to withholding
taxes under the Internal Revenue Code of 1986, as amended, or the Code. As you
will own common shares of a non-U.S. corporation following the merger, these
taxes will generally no longer be applicable to non-U.S. investors. Under
existing Bermuda law, there will be no Bermuda income or withholding tax on
dividends, if any, paid by Weatherford Bermuda to its shareholders. Furthermore,
no Bermuda tax or other levy is payable on the sale or other transfer (including
by gift or on the death of the shareholder) of Weatherford Bermuda common
shares. Likewise, under existing Barbados law, there will be no Barbados income
or withholding tax on dividends, if any, paid by Weatherford Bermuda to its
shareholders. Furthermore, U.S. shareholders will not be subject to any Barbados
taxation on the sale or other transfer (including by gift or on the death of the
shareholder) of Weatherford Bermuda common shares. Weatherford Bermuda is not
aware of any other taxes that non-U.S. residents might incur that could
discourage an investment in Weatherford Bermuda as compared to an investment in
Weatherford Delaware. As a result, non-U.S. investors may be more receptive to
an investment in Weatherford Bermuda common shares.
In addition to the potential benefits described above, the merger will
expose you to some risks. Please read the discussion under "Risk Factors"
beginning on page 8. There are also differences between
12
Delaware and Bermuda corporate law and the organizational documents of
Weatherford Delaware and Weatherford Bermuda. For a discussion of these
differences, please read "Comparison of Rights of Stockholders" beginning on
page 29. The board of directors of Weatherford Delaware has determined that the
potential advantages of the merger substantially outweigh these risks and
differences.
Accordingly, the board of directors of Weatherford Delaware has approved
the Agreement and Plan of Merger and declared its advisability and recommends
that stockholders vote "FOR" its adoption. However, no assurances can be given
that the anticipated benefits of the merger will be realized.
THE MERGER AGREEMENT
Weatherford Delaware, Weatherford Bermuda, Merger Sub and Weatherford U.S.
Holdings have entered into the Agreement and Plan of Merger, which is the legal
document that governs the merger. We recommend that you read carefully the
complete merger agreement for the precise legal terms of the merger and other
information that may be important to you. The merger agreement is included in
this proxy statement/prospectus as Annex I and is incorporated in this document
by reference.
CONDITIONS TO CONSUMMATION OF THE MERGER
The merger will not be completed unless, among other things, the following
conditions are satisfied or, if allowed by law, waived:
- the Agreement and Plan of Merger is adopted by the affirmative vote of
holders of a majority of the shares of Weatherford Delaware common stock
outstanding and entitled to vote on the record date;
- none of the parties to the Agreement and Plan of Merger is subject to any
governmental decree, order or injunction that in the discretion of the
board of directors of Weatherford Delaware would make the consummation of
any of the steps in the merger inadvisable;
- the registration statement of which this proxy statement/prospectus is a
part is declared effective by the Securities and Exchange Commission, and
no stop order is in effect;
- the Weatherford Bermuda common shares to be issued in connection with the
merger have been approved for listing on The New York Stock Exchange,
subject to official notice of issuance, for at least 10 trading days
prior to the effective time of the merger;
- all filings required by any governmental or regulatory agency are made;
and
- all consents and approvals required by any governmental or regulatory
agency and all other material third-party consents are received.
We are parties to agreements that require the consent of third parties
prior to the implementation of the merger. We believe that we will obtain all
material consents required prior to the completion of the merger and that the
failure to obtain any other consents will not have a material impact on our
business or our ability to consummate the merger.
EFFECTIVE TIME
If the Agreement and Plan of Merger is adopted by the requisite vote of
Weatherford Delaware stockholders, the merger will become effective upon the
filing of a certificate of merger with the Secretary of State of the State of
Delaware in accordance with Delaware law. If the merger agreement is adopted,
Weatherford Delaware expects to file the certificate of merger and have the
merger become effective promptly following the special meeting, although the
board of directors may delay completion of the merger for some period of time
after stockholder approval pending receipt of third-party consents or for other
business reasons.
In the event the conditions to the merger are not satisfied, the merger may
be abandoned or delayed even after the Agreement and Plan of Merger has been
adopted by our stockholders. In addition, the
13
merger may be abandoned or delayed for any reason by the board of directors of
Weatherford Delaware at any time prior to its becoming effective, even though
the Agreement and Plan of Merger has been adopted by our stockholders and all
conditions to the merger have been satisfied.
AMENDMENT OR TERMINATION
The Agreement and Plan of Merger may be amended, modified or supplemented
at any time before or after its adoption by Weatherford Delaware stockholders.
However, after adoption, no amendment, modification or supplement may be made or
effected that does any of the following:
- alters or changes the amount or kind of shares to be received by
Weatherford Delaware stockholders in the merger;
- alters or changes any term of the certificate of incorporation of the
surviving corporation; or
- alters or changes any other terms and conditions of the Agreement and
Plan of Merger if any of the alterations or changes would adversely
affect the holders of Weatherford Delaware common stock.
Weatherford Delaware's board of directors may terminate the Agreement and
Plan of Merger and abandon the merger at any time prior to its effectiveness.
SHARE CONVERSION; EXCHANGE OF SHARES
Each share of Weatherford Delaware common stock will automatically convert
by operation of law into the right to receive one common share of Weatherford
Bermuda upon the consummation of the merger. If you desire to sell some or all
of your Weatherford Bermuda common shares after the effective date of the
merger, delivery to the exchange agent of the stock certificate(s) that
previously represented shares of Weatherford Delaware common stock will be
sufficient. Our exchange agent is American Stock Transfer and Trust Company,
whose address is 59 Maiden Lane, Plaza Level, New York, N.Y. 10038.
Although not free from doubt, the holding period for any Weatherford
Bermuda common shares received by a U.S. holder recognizing a gain, for U.S.
federal income tax purposes, with respect to the merger should begin the day
after the effective date of the merger. The holding period for any Weatherford
Bermuda common shares received by U.S. holders with a loss, for U.S. federal
income tax purposes, on their Weatherford Delaware common stock will include the
holding period of the Weatherford Delaware common stock exchanged therefor. Your
right to sell shares of Weatherford Delaware common stock before the effective
date of the merger will not be affected.
Weatherford U.S. Holdings will appoint American Stock Transfer & Trust
Company as exchange agent to handle the exchange of Weatherford Delaware stock
certificates for Weatherford Bermuda common share certificates.
Prior to or at the time of the merger, Weatherford U.S. Holdings will cause
certificates representing a sufficient number of Weatherford Bermuda common
shares to be deposited with the exchange agent for the purpose of enabling
stockholders to exchange their Weatherford Delaware common stock for an equal
number of Weatherford Bermuda common shares. Soon after the closing of the
merger, the exchange agent will send a letter of transmittal, which is to be
used to exchange Weatherford Delaware stock certificates for Weatherford Bermuda
share certificates, to each former Weatherford Delaware stockholder. The letter
of transmittal will contain instructions explaining the procedure for
surrendering Weatherford Delaware stock certificates. YOU SHOULD NOT RETURN
STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
Weatherford Delaware stockholders who surrender their stock certificates,
together with a properly completed letter of transmittal, will receive share
certificates representing the common shares of Weatherford Bermuda. After the
merger, each certificate that previously represented shares of Weatherford
Delaware common stock will represent only the right to receive the common shares
of Weatherford Bermuda.
14
Although Weatherford Bermuda anticipates that it will not pay any cash
dividends on its common shares for the foreseeable future, if it does pay any
dividends it will not pay dividends to holders of Weatherford Delaware stock
certificates in respect of the common shares of Weatherford Bermuda into which
the Weatherford Delaware shares represented by those certificates have been
converted until the Weatherford Delaware stock certificates are surrendered to
the exchange agent.
After the merger becomes effective, Weatherford Delaware will not register
any further transfers of shares of the Weatherford Delaware common stock that
were outstanding prior to the merger. Any certificates for Weatherford Delaware
shares that you present for registration after the effective time of the merger
will be exchanged for certificates for Weatherford Bermuda common shares.
If you surrender a Weatherford Delaware stock certificate and request the
new Weatherford Bermuda certificate to be issued in a name other than the one
appearing on the surrendered certificate, you must endorse the stock certificate
or otherwise prepare it to be in proper form for transfer.
MANAGEMENT OF WEATHERFORD BERMUDA
When the merger is completed, all of the directors and all of the executive
officers of Weatherford Delaware will also be the directors and executive
officers of Weatherford Bermuda. The current directors of Weatherford Delaware
will also continue as directors of Weatherford Delaware.
REQUIRED VOTE FOR THE MERGER
In order to complete the merger, the merger agreement must be adopted by
the affirmative vote of holders of a majority of the shares of Weatherford
Delaware common stock outstanding and entitled to vote on May 15, 2002. Because
of this vote requirement, ABSTENTIONS WILL HAVE THE SAME EFFECT AS VOTES AGAINST
THE PROPOSAL TO ADOPT THE AGREEMENT AND PLAN OF MERGER. THE FAILURE OF A
STOCKHOLDER TO SUBMIT A FORM OF PROXY OR TO VOTE IN PERSON AT THE MEETING WILL
ALSO HAVE THE EFFECT OF A VOTE AGAINST THE ADOPTION OF THE AGREEMENT AND PLAN OF
MERGER. Under the rules of The New York Stock Exchange, brokers who hold shares
in "street name" for customers have the authority to vote on many "routine"
proposals when they have not received instructions from beneficial owners. Under
these rules, brokers are precluded from exercising their voting discretion with
respect to proposals for non-routine matters like the merger. THUS, ABSENT
SPECIFIC INSTRUCTIONS FROM YOU, YOUR BROKER IS NOT EMPOWERED TO VOTE YOUR SHARES
WITH RESPECT TO THE ADOPTION OF THE AGREEMENT AND PLAN OF MERGER (I.E., "BROKER
NON-VOTES"). Because the affirmative vote of holders of a majority of the shares
of Weatherford Delaware common stock is required for adoption of the Agreement
and Plan of Merger, A BROKER NON-VOTE WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST ADOPTION OF THE AGREEMENT AND PLAN OF MERGER.
NO RIGHTS OF DISSENTING STOCKHOLDERS
Weatherford Delaware common stock is listed on The New York Stock Exchange
and Weatherford Bermuda common shares will be listed on The New York Stock
Exchange following the effective time of the merger. Accordingly, under Delaware
law, you will not have "dissenters" or appraisal rights in connection with the
merger.
DIVIDENDS
Weatherford Delaware has not declared or paid any cash dividends on its
common stock. We do not intend to pay any cash dividends on our common stock for
the foreseeable future. If the Agreement and Plan of Merger is adopted and the
merger is completed, Weatherford Bermuda anticipates that it will not pay any
cash dividends on its common shares for the foreseeable future.
STOCK COMPENSATION PLANS AND EMPLOYMENT AGREEMENTS
If the merger is completed, Weatherford Delaware will amend and revise its
employee and director stock option and other stock-based plans and arrangements
to:
15
- provide that Weatherford Delaware will continue to sponsor the employee
plans and Weatherford Bermuda will assume sponsorship of certain director
plans;
- provide that common shares of Weatherford Bermuda will be issued upon the
exercise of any options or the payment of any other stock-based awards
under the plans and arrangements; and
- otherwise appropriately reflect the substitution of common shares of
Weatherford Bermuda for common stock of Weatherford Delaware under the
plans and arrangements and related agreements.
Your approval of the merger will also constitute approval of those amendments
and revisions to our stock option and other stock-based plans and arrangements
providing for future use of Weatherford Bermuda common shares in lieu of common
stock of Weatherford Delaware after the merger.
STOCK EXCHANGE LISTING
Our common stock is currently listed on The New York Stock Exchange. There
is currently no established public trading market for the common shares of
Weatherford Bermuda. We will make an application so that, immediately following
the merger, the common shares of Weatherford Bermuda will be listed on The New
York Stock Exchange under the symbol "WFT", the same symbol under which
Weatherford Delaware common stock is currently listed.
ACCOUNTING TREATMENT OF THE MERGER
The merger will be accounted for as a merger of entities under common
control that will not result in changes in Weatherford Delaware's historical
consolidated carrying amounts of assets, liabilities and stockholders' equity.
CREDIT FACILITIES
As a result of the merger, a "change of control" of Weatherford Delaware
may be deemed to have occurred under:
- our credit agreement, dated as of May 27, 1998, as amended, among
Weatherford Delaware, one of its subsidiaries, Chase Bank of Texas, N.A.,
The Bank of Nova Scotia, and ABN AMRO Bank NV, which we refer to as the
Chase credit agreement;
- our credit agreement, dated as of April 26, 2001, as amended, among
Weatherford Delaware, two of its subsidiaries, Bank One, NA, The Royal
Bank of Scotland, Royal Bank of Canada, ABN AMRO Bank NV and Banc One
Capital Markets, Inc., which we refer to as the Bank One credit
agreement;
- our credit agreement, dated as of June 18, 2001, as amended, among
several subsidiaries of Weatherford Delaware and The Royal Bank of
Scotland, which we refer to as the Royal Bank of Scotland credit
agreement; and
- the agreements dated as of July 2, 2001 among Weatherford Delaware,
several of its subsidiaries, and several financial institutions relating
to the sale of U.S. accounts receivable by Weatherford Delaware's
subsidiaries, which we refer to collectively as the U.S. receivables
facility.
A change of control of Weatherford Delaware under the Chase credit
agreement and the Bank One credit agreement would require a mandatory prepayment
of all amounts borrowed under these facilities within 15 days after the change
of control, and would constitute an event of default under the Royal Bank of
Scotland credit agreement. A change of control of Weatherford Delaware would
constitute a "termination event" under the U.S. receivables facility, which
would terminate our ability to sell any additional receivables under this
facility and would require that all receipts on previously sold receivables be
applied to repay investments made by the purchasers under this facility until
they had received a specified return on their investment. As of April 30, 2002,
borrowings under the Chase credit agreement totaled $135.0 million, under the
Bank One credit agreement totaled $60.9 million, and under the Royal
16
Bank of Scotland credit agreement totaled $35.7 million. As of that date, we
also had $34.2 million of letters of credit outstanding under the Chase credit
agreement. Also as of that date, purchasers under the U.S. receivables facility
would be entitled to receive approximately $107.3 million from the collection of
our receivables upon a termination event. Weatherford Delaware has obtained
waivers in connection with any such change of control and any resulting
mandatory prepayments, default, or termination event under the Chase credit
agreement and the Bank One credit agreement, and is seeking similar waivers
under the Royal Bank of Scotland credit agreement and the U.S. receivables
facility, although we cannot assure you that Weatherford Delaware will be able
to obtain these waivers. If waivers are not obtained, we will need to refinance
amounts under the relevant agreements. Weatherford Delaware does not believe
such mandatory prepayments, default or termination event will adversely affect
it, its operations or its stockholders or Weatherford Bermuda or its
shareholders if the merger is completed.
17
THE SPECIAL MEETING
This proxy statement/prospectus is being furnished in connection with the
solicitation of proxies from the holders of Weatherford Delaware common stock by
the Weatherford Delaware board of directors relating to the merger and other
matters to be voted upon at the special meeting and at any adjournment or
postponement of the meeting. This proxy statement/prospectus is also a
prospectus for Weatherford Bermuda common shares to be issued in connection with
the merger. Weatherford Delaware mailed this proxy statement/prospectus to
stockholders beginning on or about May 24, 2002. You should read this proxy
statement/prospectus carefully before voting your shares.
WHEN AND WHERE THE SPECIAL MEETING WILL BE HELD
The special meeting of stockholders will be held at 10:00 a.m. (Houston
time) on Wednesday, June 26, 2002, at The St. Regis Hotel, located at 1919 Briar
Oaks Lane in Houston, Texas.
Please note that our annual meeting of stockholders is being held on June
26, 2002, at 9:00 a.m. You should have already received a proxy statement and a
proxy card for the annual meeting. IN ORDER FOR YOUR SHARES TO BE VOTED AT BOTH
THE ANNUAL MEETING AND THE SPECIAL MEETING, YOU MUST COMPLETE AND RETURN BOTH
PROXY CARDS. We urge you to return both proxy cards for the annual meeting and
the special meeting.
WHAT WILL BE VOTED UPON
At the special meeting, you will be asked to consider and vote upon the
following items:
- To adopt the Agreement and Plan of Merger, substantially in the form
attached to this proxy statement/prospectus as Annex I, among Weatherford
Delaware, Merger Sub, Weatherford Bermuda and Weatherford U.S. Holdings
whereby Weatherford Delaware will become an indirect subsidiary of
Weatherford Bermuda and you will become a shareholder of Weatherford
Bermuda. The merger will be accomplished by merging Merger Sub with and
into Weatherford Delaware. Weatherford Delaware will be the surviving
entity and become an indirect subsidiary of Weatherford Bermuda;
- To transact any other business as may properly come before the special
meeting.
ONLY WEATHERFORD DELAWARE STOCKHOLDERS OF RECORD AS OF MAY 15, 2002 ARE ENTITLED
TO VOTE
Only stockholders of record at the close of business on May 15, 2002, as
shown in our records, will be entitled to vote, or to grant proxies to vote, at
the special meeting. On the record date, there were 119,481,433 shares of
Weatherford Delaware common stock outstanding and entitled to vote at the
special meeting.
MAJORITY OF OUTSTANDING SHARES MUST BE REPRESENTED FOR A VOTE TO BE TAKEN
In order to have a quorum, the holders of a majority of the shares of
Weatherford Delaware common stock outstanding and entitled to vote on the record
date must be represented in person or by proxy at the special meeting.
VOTE REQUIRED FOR APPROVAL
The Agreement and Plan of Merger must be adopted by the affirmative vote of
holders of a majority of the shares of Weatherford Delaware common stock
outstanding and entitled to vote on May 15, 2002. Each share of Weatherford
Delaware common stock is entitled to cast one vote.
18
VOTING YOUR SHARES AND CHANGING YOUR VOTE
VOTING YOUR SHARES
The Weatherford Delaware board of directors is soliciting proxies from the
Weatherford Delaware stockholders. This will give you the opportunity to vote at
the special meeting. When you deliver a valid proxy, the shares represented by
that proxy will be voted in accordance with your instructions. IF YOU DO NOT
VOTE BY MARKING, SIGNING AND MAILING YOUR PROXY CARD OR BY ATTENDING THE SPECIAL
MEETING AND VOTING IN PERSON, IT WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE
ADOPTION OF THE AGREEMENT AND PLAN OF MERGER.
Stockholders of record may vote by marking, signing and mailing their proxy
card in the enclosed postage-prepaid envelope or by following the Internet or
telephone voting instructions on the enclosed proxy card.
If you hold your Weatherford Delaware shares in the name of a bank, broker
or other nominee, you should follow the instructions provided by your bank,
broker or nominee when voting your shares. To be effective, a form of proxy must
be received by us prior to the beginning of voting at the special meeting.
CHANGING YOUR VOTE BY REVOKING YOUR PROXY
There are three ways in which you may revoke your proxy and change your
vote:
- First, you may send a written notice to our proxy solicitor, Georgeson
Shareholder Communications Inc., 17 State Street, New York, New York
10004, stating that you would like to revoke your proxy. This notice must
be received prior to the special meeting.
- Second, you may complete and submit a new later-dated proxy either by
Internet, by phone, or by marking, signing and mailing a new proxy card.
The latest dated proxy actually received by Weatherford Delaware prior to
the special meeting will be the one that is counted, and all earlier
proxies will be revoked.
- Third, you may attend the special meeting and vote in person. Simply
attending the meeting, however, will not revoke your proxy. At the
special meeting, the chairman of the meeting will announce instructions
for you to follow if you wish to revoke your proxy and vote in person at
the meeting.
If you have instructed a broker to vote your shares, you must follow the
directions you receive from your broker to change or revoke your proxy.
HOW PROXIES ARE COUNTED
If you return a signed and dated proxy card but do not indicate how the
shares are to be voted, those shares represented by your proxy card will be
voted for the merger. A valid proxy also gives the individuals named as proxies
authority to vote in their discretion when voting the shares on any other
matters that are properly presented for action at the special meeting. A
properly executed proxy marked "ABSTAIN" will not be voted. However, it will be
counted to determine whether there is a quorum present at the special meeting.
Accordingly, because the affirmative vote of holders of a majority of the shares
of Weatherford Delaware common stock entitled to vote at the special meeting is
required to adopt the Agreement and Plan of Merger, A PROXY MARKED "ABSTAIN"
WILL HAVE THE EFFECT OF A VOTE AGAINST THIS PROPOSAL. Broker non-votes (i.e.,
shares held by brokers or nominees which are represented at a meeting but with
respect to which the broker or nominee is not empowered to vote on a particular
proposal) will also be counted for purposes of determining whether there is a
quorum at the special meeting. The New York Stock Exchange rules do not permit
brokers and nominees to vote the shares that they hold beneficially either for
or against the adoption of the Agreement and Plan of Merger without specific
instructions from the person who beneficially owns those shares. THEREFORE, IF
YOUR SHARES ARE HELD BY A BROKER OR OTHER NOMINEE AND YOU DO NOT GIVE THEM
INSTRUCTIONS ON HOW TO VOTE YOUR SHARES, THIS WILL HAVE THE SAME EFFECT AS
VOTING AGAINST THE MERGER.
19
COST OF SOLICITATION
Weatherford Delaware will pay the cost of soliciting proxies. In addition
to solicitation by mail, telephone or other means, Weatherford Delaware will
make arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send proxy materials to beneficial owners. Weatherford Delaware
will, upon request, reimburse these institutions for their reasonable expenses.
Weatherford Delaware has retained Georgeson Shareholder Communications Inc. to
aid in the solicitation of proxies. Weatherford Delaware will pay Georgeson
Shareholder Communications Inc. a fee of $6,500 and reimburse Georgeson
Shareholder Communications Inc. for its expenses in connection with its
services.
WEATHERFORD DELAWARE STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK
CERTIFICATES WITH THEIR PROXY CARDS.
20
DESCRIPTION OF AUTHORIZED SHARES
OF WEATHERFORD INTERNATIONAL LTD.
Weatherford Bermuda is an exempted company incorporated under the laws of
Bermuda and is registered with the Registrar of Companies in Bermuda under
registration number 31953. Weatherford Bermuda was incorporated on April 2, 2002
under the name Weatherford International Ltd. Weatherford Bermuda's registered
office is located at 2 Church Street, Hamilton, Bermuda. Weatherford Bermuda's
agent for service of process in the United States is Weatherford International,
Inc., 515 Post Oak Boulevard, Suite 600 Houston, Texas 77027-3415, USA.
The memorandum of association and bye-laws of Weatherford Bermuda and the
Companies Act 1981 (Bermuda), as amended, govern the terms of the share capital
of Weatherford Bermuda. The memorandum of association of Weatherford Bermuda is
attached to this proxy statement/prospectus as Annex II. The bye-laws of
Weatherford Bermuda are attached to this proxy statement/prospectus as Annex
III.
Since April 2, 2002, there have been no (i) material changes to Weatherford
Bermuda's share capital except as described below, (ii) mergers, amalgamations
or consolidations of Weatherford Bermuda or any of its subsidiaries, (iii)
material changes in the mode of conducting Weatherford Bermuda's business, (iv)
material changes in the types of products produced or services rendered and (v)
name changes. There have been no bankruptcy, insolvency, receivership or similar
proceedings with respect to Weatherford Bermuda or its subsidiaries. There have
been no public takeover offers by third parties for Weatherford Bermuda's shares
nor any public takeover offers by Weatherford Bermuda for the shares of another
company that have occurred during the last or current financial years.
The following discussion is a summary of the terms of the share capital of
Weatherford Bermuda that will be in effect immediately following the merger.
This summary is not complete and is subject to the complete text of Weatherford
Bermuda's memorandum of association and bye-laws that are attached as Annex II
and Annex III, respectively, and incorporated by reference. We encourage you to
read those documents carefully.
AUTHORIZED SHARE CAPITAL
Weatherford Bermuda's memorandum of association as initially filed with the
Registrar of Companies in Bermuda provided for an authorized share capital of
12,000 common shares. However, Weatherford Bermuda has adopted shareholder
resolutions and filed a memorandum of increase of share capital with the
Registrar of Companies to increase Weatherford Bermuda's authorized share
capital to 500,000,000 common shares, par value US$1.00 per share and 10,000,000
undesignated preference shares, par value US$1.00 per share. The memorandum of
increase of share capital is also attached to this proxy statement/ prospectus
as Annex II. Upon completion of the merger, there will be 120,436,996 common
shares issued and outstanding, assuming no share issuances by Weatherford
Delaware after the date of this proxy statement/prospectus prior to completion
of the merger, and no preference shares issued and outstanding. Included in this
number of issued and outstanding common shares will be 15,768 common shares that
Weatherford Delaware is committed to transfer to third parties in connection
with certain prior acquisitions of businesses. This number of issued and
outstanding common shares does not include: 20,829,239 common shares issuable
upon exercise of stock options or in connection with certain other stock based
benefit plans, of which options to acquire 4,547,823 common shares were
exercisable as of May 15, 2002; 19,875,423 common shares issuable upon
conversion or exercise of outstanding convertible securities and warrants; and
22,415 common shares that Weatherford Delaware is committed to transfer to third
parties in connection with certain other prior acquisitions of businesses. All
of Weatherford Bermuda's issued and outstanding common shares prior to the
merger will be fully paid, and all of Weatherford Bermuda's shares to be
received by Weatherford Delaware's stockholders in the merger will be fully
paid.
Pursuant to Weatherford Bermuda's bye-laws, and subject to the requirements
of any stock exchange on which Weatherford Bermuda's shares will be listed and
to any resolution of the shareholders to the contrary, Weatherford Bermuda's
board of directors is authorized to issue any of Weatherford Bermuda's
21
authorized but unissued shares. There are no limitations on the right of
non-Bermudians or non-residents of Bermuda to hold or vote Weatherford Bermuda's
shares.
MEETINGS, QUORUMS AND VOTING
Under Bermuda law, a company is required to convene at least one general
meeting of shareholders each calendar year. Bermuda law provides that a special
general meeting of shareholders may be called by the board of directors of a
company and must be called upon the request of shareholders holding not less
than 10% of the paid-up capital of the company carrying the right to vote.
Bermuda law also requires that shareholders be given at least five days' advance
notice (unless shorter notice is agreed, as described below) of a general
meeting, but the accidental omission to give notice to any person does not
invalidate the proceedings at a meeting. Weatherford Bermuda's bye-laws provide
that the chairman or Weatherford Bermuda's board of directors may convene an
annual general meeting or a special general meeting. Under Weatherford Bermuda's
bye-laws, at least 10 days' notice of an annual general meeting or a special
general meeting must be given to each shareholder entitled to vote at such
meeting. This notice requirement is subject to the ability to hold such meetings
on shorter notice if such notice is agreed: (i) in the case of an annual general
meeting, by all of the shareholders entitled to attend and vote at such meeting;
or (ii) in the case of a special general meeting, by a majority of the
shareholders entitled to attend and vote at the meeting holding not less than
95% of the shares entitled to vote at such meeting. The quorum required for a
general meeting of shareholders is two or more persons present in person and
representing in person or by proxy a majority of the shares entitled to vote at
such meeting.
The holders of Weatherford Bermuda common shares will be entitled to one
vote per share on all matters submitted to a vote of the holders of common
shares of Weatherford Bermuda. Weatherford Bermuda's bye-laws do not provide for
cumulative voting. Except as specifically provided in Weatherford Bermuda's
bye-laws or in the Companies Act, any action to be taken by the shareholders at
any meeting at which a quorum is in attendance shall be decided by a majority of
the issued shares present in person or represented by proxy and voting at such
meeting. There are no limitations imposed by Bermuda law or Weatherford
Bermuda's bye-laws on the right of shareholders who are not Bermuda residents to
hold or vote their Weatherford Bermuda common shares.
DIVIDEND RIGHTS
Under Bermuda law, a company's board of directors may declare and pay
dividends from time to time unless there are reasonable grounds for believing
that the company is, or would after the payment be, unable to pay its
liabilities as they become due or that the realizable value of its assets would
thereby be less than the aggregate of its liabilities and issued share capital
and share premium accounts. Each Weatherford Bermuda common share is entitled to
dividends if, as and when dividends are declared by its board of directors,
subject to any preferred dividend right of the holders of any preference shares.
There are no restrictions on Weatherford Bermuda's ability to transfer funds
(other than funds denominated in Bermuda dollars) in and out of Bermuda or to
pay dividends to U.S. residents who are holders of Weatherford Bermuda's common
shares.
Any cash dividends payable to shareholders of Weatherford Bermuda at any
time when the corresponding shares are quoted on The New York Stock Exchange
will be paid to American Stock Transfer & Trust Company, Weatherford Bermuda's
transfer agent in the United States, for disbursement to those holders.
Weatherford Bermuda does not anticipate that it will pay any cash dividends on
its common shares for the foreseeable future.
PREEMPTIVE, REDEMPTION, SINKING FUND AND CONVERSION RIGHTS
Holders of Weatherford Bermuda's common shares have no preemptive,
redemption, conversion or sinking fund rights.
22
STOCK EXCHANGE LISTING
Immediately following the merger, Weatherford Bermuda's common shares will
be listed on The New York Stock Exchange under the symbol "WFT", the same symbol
under which Weatherford Delaware's common stock is currently listed.
CAPITALIZATION OF PROFITS AND RESERVES
Pursuant to Weatherford Bermuda's bye-laws, its board of directors may (i)
capitalize any part of the amount of Weatherford Bermuda's share premium or
other reserve accounts or any amount credited to its profit and loss account or
otherwise available for distribution by applying such sum in paying up unissued
shares to be allotted as fully paid bonus shares pro-rata (except in connection
with the conversion of shares) to the shareholders; or (ii) capitalize any sum
standing to the credit of a reserve account or sums otherwise available for
dividend or distribution by paying up in full partly paid shares of those
shareholders who would have been entitled to such sums if they were distributed
by way of dividend or distribution.
UNTRACED SHAREHOLDERS
Weatherford Bermuda's bye-laws provide that its board of directors may
forfeit any dividend or other monies payable in respect of any shares that
remain unclaimed for 12 years from the date when such monies became due for
payment. In addition, Weatherford Bermuda is entitled to cease sending dividend
warrants and checks by post or otherwise to a shareholder if such instruments
have been returned undelivered to, or left uncashed by, such shareholder on at
least two consecutive occasions or, following one such occasion, reasonable
inquiries have failed to establish the shareholder's new address. This
entitlement ceases if the shareholder claims a dividend or cashes a dividend
check or a warrant.
CHANGES TO RIGHTS OF A CLASS
If at any time Weatherford Bermuda has more than one class of shares, the
rights attached to any class, unless otherwise provided for by the terms of
issue of the relevant class, may be varied either: (i) with the consent in
writing of the holders of 75% in nominal value of the issued shares of that
class; or (ii) with the sanction of a majority of votes cast at a general
meeting of the relevant class of shareholders at which a quorum, consisting of
two or more persons holding or representing by proxy one-third of the issued
shares of the class, is present. Weatherford Bermuda's bye-laws specify that the
creation or issue of shares ranking equally with existing shares will not,
unless expressly provided by the terms of issue of those shares, vary the rights
attached to existing shares. In addition, the creation or issue of preferred
shares ranking prior to common shares will not be deemed to vary the rights
attached to common shares.
RIGHTS UPON LIQUIDATION
In the event of Weatherford Bermuda's liquidation, dissolution or winding
up, the holders of its common shares are entitled to share equally and ratably
in Weatherford Bermuda's assets, if any, remaining after the payment of all of
Weatherford Bermuda's debts and liabilities, subject to any liquidation
preference on any outstanding preference shares.
LIABILITY FOR FURTHER CALLS OR ASSESSMENTS
Weatherford Bermuda's common shares to be acquired by Weatherford
Delaware's stockholders in the merger will be duly and validly issued, fully
paid and nonassessable.
TRANSFER OF SHARES
Weatherford Bermuda's board of directors may in its absolute discretion and
without assigning any reason refuse to register the transfer of a share that is
not fully paid. Weatherford Bermuda's board of directors may also refuse to
recognize an instrument of transfer of a share unless it is accompanied by the
relevant share certificate and such other evidence of the transferor's right to
make the transfer as
23
Weatherford Bermuda's board of directors shall reasonably require. Subject to
these restrictions, a holder of common shares may transfer the title to all or
any of its common shares by completing a form of transfer in the form set out as
Form "C" in the Schedule to Weatherford Bermuda's bye-laws (or as near thereto
as circumstances admit) or in such other common form as the board of directors
may accept. The instrument of transfer must be signed by the transferor and
transferee, although in the case of a fully paid share Weatherford Bermuda's
board of directors may accept the instrument signed only by the transferor.
REPURCHASE RIGHTS
The board of directors may, at its discretion, authorize the purchase by
Weatherford Bermuda of its own shares of any class, at any price (whether at par
or above or below par), as long as the purchase is made in accordance with the
provisions of the Companies Act.
ACCESS TO BOOKS AND RECORDS AND DISSEMINATION OF INFORMATION
Under Bermuda law, members of the general public have the right to inspect
the public documents of a company available at the office of the Registrar of
Companies in Bermuda. These documents include the company's memorandum of
association, including its objects and powers, and certain alterations to its
memorandum of association. The shareholders have the additional right to inspect
the bye-laws of the company, minutes of general meetings and the company's
audited financial statements, which must be presented at the annual general
meeting. The register of shareholders of a company is also open to inspection by
shareholders without charge and by members of the general public on the payment
of a fee. The register of shareholders is required to be open for inspection for
not less than two hours in any business day (subject to the ability of a company
to close the register of shareholders for not more than 30 days in a year). A
company is required to maintain its share register in Bermuda but may, subject
to the provisions of the Companies Act, establish a branch register outside
Bermuda. A company is required to keep at its registered office a register of
directors and officers that is open for inspection for not less than two hours
in any business day by members of the public without charge. Bermuda law does
not, however, provide a general right of shareholders to inspect or obtain
copies of any other corporate records.
COMPULSORY ACQUISITION OF SHARES HELD BY MINORITY HOLDERS
An acquiring party is generally able to acquire compulsorily the common
shares of minority holders in the following ways:
- By a procedure under the Companies Act known as a "scheme of
arrangement". A scheme of arrangement could be effected by obtaining the
agreement of Weatherford Bermuda and of holders of common shares,
representing in the aggregate a majority in number and at least 75% in
value of the common shareholders present and voting at a court ordered
meeting held to consider the scheme of arrangement. The scheme of
arrangement must then be sanctioned by the Bermuda Supreme Court. If a
scheme of arrangement receives all necessary agreements and sanctions,
upon the filing of the court order with the Registrar of Companies in
Bermuda, all holders of common shares could be compelled to sell their
shares under the terms of the scheme of arrangement.
- If the acquiring party is a company, by acquiring pursuant to a tender
offer 90% of the shares or class of shares not already owned by, or by a
nominee for, the acquiring party (the offeror), or any of its
subsidiaries. If an offeror has, within four months after the making of
an offer for all the shares or class of shares not owned by, or by a
nominee for, the offeror, or any of its subsidiaries, obtained the
approval of the holders of 90% or more of all the shares to which the
offer relates, the offeror may, at any time within two months beginning
with the date on which the approval was obtained, require by notice any
nontendering shareholder to transfer its shares on the same terms as the
original offer. In those circumstances, nontendering shareholders will be
compelled to sell their shares unless the Bermuda Supreme Court (on
application made within a one-month period from the date of the offeror's
notice of its intention to acquire such shares) orders otherwise.
24
- Where the acquiring party or parties hold not less than 95% of the shares
or a class of shares of the company, by acquiring, pursuant to a notice
given to the remaining shareholders or class of shareholders, the shares
of such remaining shareholders or class of shareholders. When this notice
is given, the acquiring party is entitled and bound to acquire the shares
of the remaining shareholders on the terms set out in the notice, unless
a remaining shareholder, within one month of receiving such notice,
applies to the Bermuda Supreme Court for an appraisal of the value of
their shares. This provision only applies where the acquiring party
offers the same terms to all holders of shares whose shares are being
acquired.
REGISTRAR OR TRANSFER AGENT
A register of holders of the Weatherford Bermuda common shares will be
maintained by Codan Services Limited in Bermuda, and a branch register will be
maintained in the United States by American Stock Transfer & Trust Company, who
will serve as branch registrar and transfer agent.
PREFERRED SHARES
Pursuant to Bermuda law and Weatherford Bermuda's bye-laws, its board of
directors by resolution may establish one or more series of preference shares
having such number of shares, designations, dividend rates, relative voting
rights, conversion or exchange rights, redemption rights, liquidation rights and
other relative participation, optional or other special rights, qualifications,
limitations or restrictions as may be fixed by the board of directors without
any further shareholder approval. Such rights, preferences, powers and
limitations as may be established could also have the effect of discouraging an
attempt to obtain control of the Company.
ANTI-TAKEOVER PROVISIONS
Weatherford Bermuda's bye-laws have provisions that could have an
anti-takeover effect. Generally, these provisions are intended to substantively
replicate provisions currently in Weatherford Delaware's restated certificate of
incorporation and by-laws. In addition, Weatherford Bermuda's bye-laws include
an "advance notice" provision that places time limitations on shareholders'
nominations of directors and submission of proposals for consideration at an
annual general meeting. These provisions are intended to enhance the likelihood
of continuity and stability in the composition of the board of directors and in
the policies formulated by the board of directors and to encourage negotiations
with the board of directors in transactions that may involve an actual or
potential change of control of Weatherford Bermuda.
Directors can be removed from office at a special general meeting of
shareholders only for cause by the affirmative vote of the holders of a majority
of the voting power of Weatherford Bermuda on the relevant record date. The
board of directors does not have the power to remove directors. These provisions
can delay a shareholder from obtaining majority representation on the board of
directors.
The bye-laws also provide that the board of directors will consist of not
less than three nor more than 18 persons, the exact number to be set from time
to time by the affirmative vote of a majority of the directors then in office.
Accordingly, the board of directors, and not the shareholders, has the authority
to determine the number of directors and could delay any shareholder from
obtaining majority representation on the board of directors by enlarging the
board of directors and filling the new vacancies with its own nominees.
The bye-laws of Weatherford Bermuda provide that at any annual general
meeting, only such business shall be conducted as shall have been brought before
the meeting by or at the direction of the board of directors, by any shareholder
who complies with certain procedures set forth in the bye-laws or by any
shareholder pursuant to the valid exercise of the power granted under the
Companies Act. For business to be properly brought before an annual general
meeting by a shareholder in accordance with the terms of the bye-laws, the
shareholder must have given timely notice thereof in proper written form to the
Secretary of Weatherford Bermuda and satisfied all requirements under applicable
rules promulgated by the Securities and Exchange Commission or by The New York
Stock Exchange or any other exchange on
25
which Weatherford Bermuda's securities are traded. To be timely for
consideration at the annual general meeting, such shareholder's notice must be
received by the Secretary at Weatherford Bermuda's principal executive offices
and its registered office in Bermuda not less than 60 days nor more than 90 days
prior to the anniversary date of the immediately preceding annual general
meeting, provided that in the event that the annual general meeting is called
for a date that is not within 60 days before or after such anniversary date, not
later than the 7th day following the day on which such notice of the date of the
annual general meeting was mailed or such public disclosure of the date of the
annual general meeting was made, whichever occurs first. In order for a
shareholder to nominate directors in connection with an annual general meeting
of shareholders, a shareholder's notice of his intention to make such
nominations must be received in proper written form as specified in the bye-laws
of Weatherford Bermuda by the Secretary of Weatherford Bermuda within the time
limits described above. In addition, the Companies Act provides for a mechanism
by which not less than 100 shareholders or shareholders holding at least 5% of
the voting power of a Bermuda company may require the company to give notice of
a resolution that may properly be moved at an annual general meeting of the
company, or to circulate to members entitled to notice of any general meeting a
statement with respect to any proposed resolution or business to be dealt with
at that meeting. Please read "Comparison of Rights of Stockholders -- Advance
Notice Requirements for Matters to be Considered at a General Meeting" beginning
on page 32.
Subject to the terms of any other class of shares in issue, any action
required or permitted to be taken by the holders of Weatherford Bermuda's common
shares must be taken at a duly called special or annual general meeting of
shareholders unless taken by written resolution signed by or on behalf of all
holders of common shares. Under the bye-laws, special general meetings may be
called at any time by the chairman, the board of directors or when requisitioned
by shareholders pursuant to the provisions of the Companies Act. The Companies
Act permits shareholders holding at least 10% of the paid-up capital of a
company entitled to vote at general meeting to requisition a special general
meeting.
The board of directors is authorized to issue, from time to time, without
obtaining any vote or consent of the holders of any class or series of shares
unless expressly provided by the terms of issue of a class or series, any
authorized and unissued shares on such terms and conditions as it may determine.
For example, the board of directors could authorize the issuance of preferred
shares with rights that could discourage a takeover or other transaction that
holders of some or a majority of the Weatherford Bermuda common shares might
believe to be in their best interests or in which holders might receive a
premium for their shares over the then market price of the shares.
ELECTION AND REMOVAL OF DIRECTORS
Weatherford Bermuda's bye-laws provide that its board of directors shall
consist of between three and 18 directors. Weatherford Bermuda's board of
directors will initially consist of 8 directors. Each director is elected for a
one-year term of office, expiring at each annual general meeting.
Any shareholder wishing to propose for election as a director someone who
is not an existing director or is not proposed by Weatherford Bermuda's board of
directors must give notice of the intention to propose the person for election.
Such notice must be given not later than 60 days and not more than 90 days prior
to the anniversary date of the immediately preceding annual general meeting,
provided that in the event that the annual general meeting is called for a date
that is not within 60 days before or after such anniversary date, not later than
the 7th day following the day on which such notice of the date of the annual
general meeting was mailed or such public disclosure of the date of the annual
general meeting was made, whichever occurs first.
A director may be removed, with cause, by the shareholders, provided notice
is given to the director of the shareholders' meeting convened for the purpose
of removing the director. The notice must contain a statement of the intention
to remove the director and a summary of the facts justifying the removal and
must be served on the director not less than 14 days before the meeting. The
director is entitled to attend the meeting and be heard on the motion for his
removal.
26
PROCEEDINGS OF BOARD OF DIRECTORS
Weatherford Bermuda's bye-laws provide that its business is to be managed
and conducted by its board of directors. Bermuda law requires that Weatherford
Bermuda's directors be individuals, but there is no requirement in its bye-laws
or Bermuda law that directors hold any of its shares. There is also no
requirement in Weatherford Bermuda's bye-laws or Bermuda law that its directors
must retire at a certain age.
The remuneration of Weatherford Bermuda's directors is determined by its
board of directors, and there is no requirement that a specified number or
percentage of "independent" directors must approve any such
determination. Weatherford Bermuda's directors may also be reimbursed for all
travel, hotel and other expenses properly incurred by them in connection with
Weatherford Bermuda's business or their duties as directors.
Provided a director discloses a direct or indirect interest in any contract
or arrangement with Weatherford Bermuda as required by Bermuda law, such
director is entitled to vote in respect of any such contract or arrangement in
which he or she is interested unless he or she is disqualified from voting by
the chairman of the relevant board of directors meeting. A director (including
the spouse or children of the director or any company of which such director,
spouse or children own or control more than 20% of the capital or loan debt) can
not borrow from Weatherford Bermuda, (except loans made to directors who are
bona fide employees or former employees pursuant to an employees' share scheme)
unless shareholders holding 90% of the total voting rights have consented to the
loan.
CERTAIN PROVISIONS OF BERMUDA LAW
Weatherford Bermuda has been designated by the Bermuda Monetary Authority
as a non-resident for Bermuda exchange control purposes. This designation allows
Weatherford Bermuda to engage in transactions in currencies other than the
Bermuda dollar, and there are no restrictions on Weatherford Bermuda's ability
to transfer funds (other than funds denominated in Bermuda dollars) in and out
of Bermuda or to pay dividends to United States residents who are holders of
Weatherford Bermuda's common shares.
Weatherford Bermuda has obtained the consent of the Bermuda Monetary
Authority for the issue and free transferability of all of the common shares
that are to be issued in connection with the merger to and between non-residents
of Bermuda for exchange control purposes, provided Weatherford Bermuda's shares
remain listed on an appointed stock exchange, which includes The New York Stock
Exchange. Approvals or permissions given by the Bermuda Monetary Authority do
not constitute a guarantee by the Bermuda Monetary Authority as to Weatherford
Bermuda's performance or its creditworthiness. Accordingly, in giving such
consent or permissions, the Bermuda Monetary Authority shall not be liable for
the financial soundness, performance or default of Weatherford Bermuda's
business or for the correctness of any opinions or statements expressed in this
proxy statement/prospectus. Certain issues and transfers of common shares
involving persons deemed a resident of Bermuda for exchange control purposes
require the specific consent of the Bermuda Monetary Authority.
This proxy statement/prospectus will be filed with the Registrar of
Companies in Bermuda pursuant to Part III of the Companies Act 1981 of Bermuda.
In accepting this proxy statement/prospectus for filing, the Registrar of
Companies in Bermuda shall not be liable for the financial soundness,
performance or default of Weatherford Bermuda's business or for the correctness
of any opinions or statements expressed in this proxy statement/prospectus.
In accordance with Bermuda law, share certificates are only issued in the
names of companies, partnerships or individuals. In the case of a shareholder
acting in a special capacity (for example, as a trustee), certificates may, at
the request of the shareholder, record the capacity in which the shareholder is
acting. Notwithstanding such recording of any special capacity, Weatherford
Bermuda is not bound to investigate or see to the execution of any such trust.
Weatherford Bermuda will take no notice of any trust applicable to any of its
shares, whether or not it has been notified of such trust.
27
ENFORCEMENT OF CIVIL LIABILITIES
Weatherford Bermuda is a Bermuda exempted company. As a result, the rights
of holders of its common shares will be governed by Bermuda law and its
memorandum of association and bye-laws. The rights of shareholders under Bermuda
law may differ from the rights of shareholders of companies incorporated in
other jurisdictions. One of the persons who will be a director of Weatherford
Bermuda after the merger and some of the named experts referred to in this proxy
statement/prospectus are not residents of the United States, and a substantial
portion of Weatherford Bermuda's assets will be located outside the United
States. As a result, it may be difficult for investors to effect service of
process on those persons in the United States or to enforce in the United States
judgments obtained in U.S. courts against Weatherford Bermuda or those persons
based on the civil liability provisions of the U.S. securities laws. However,
Weatherford Bermuda will irrevocably agree that it may be served with process
with respect to actions based on offers and sales of securities made in the
United States and other violations of U.S. securities laws by having Weatherford
Delaware, located at 515 Post Oak Boulevard, Suite 600, Houston, Texas 77027, be
its United States agent appointed for that purpose. Weatherford Bermuda has been
advised by its Bermuda counsel, Conyers Dill & Pearman, that uncertainty exists
as to whether courts in Bermuda will enforce judgments obtained in other
jurisdictions (including the United States) against Weatherford Bermuda or its
directors or officers under the securities laws of those jurisdictions or
entertain actions in Bermuda against Weatherford Bermuda or its directors or
officers under the securities laws of other jurisdictions.
28
COMPARISON OF RIGHTS OF STOCKHOLDERS
Your current rights as a stockholder of Weatherford Delaware are governed
by Delaware law and Weatherford Delaware's restated certificate of incorporation
and by-laws. After the merger, you will become a holder of Weatherford Bermuda
common shares and your rights will be governed by the Companies Act and
Weatherford Bermuda's memorandum of association and bye-laws.
The principal attributes of the existing common stock of Weatherford
Delaware and the Weatherford Bermuda common shares will be substantially
similar; however, there are certain differences between your rights as a
stockholder under Delaware law and as a shareholder under Bermuda law, which is
largely modeled after the law of England. In addition, there are certain
differences between Weatherford Delaware's restated certificate of incorporation
and by-laws and Weatherford Bermuda's memorandum of association and bye-laws.
Other than the addition of the advance notice provision in the bye-laws, it is
our intention that your rights as a shareholder of Weatherford Bermuda be
substantially the same as your rights as a stockholder of Weatherford Delaware
before the merger and, accordingly, any differences that may arise would be as a
consequence of the difference between Bermuda and Delaware law. In addition,
actions that constitute violations of U.S. federal securities laws would not
necessarily constitute violations of Bermuda law. Under Bermuda law, criminal
liability may arise where any person makes or authorizes the making of an untrue
statement in a prospectus unless that statement is immaterial or the person
making the statement had reasonable grounds to believe that it was true at the
time that he made the statement. In addition, under the Companies Act, civil
liability for loss or damage sustained by persons purchasing shares from a
company as a result of any untrue statement included in the company's prospectus
may arise in respect of promoters of the company, persons who are or are named
as officers of the company, and persons who have authorized the issue to the
public of the prospectus. Civil liability on the part of the company may also
arise as a result of untrue or misleading statements included in a prospectus.
The memorandum of association and the bye-laws of Weatherford Bermuda that
will be in effect upon consummation of the merger are included in this proxy
statement/prospectus as Annexes II and III, respectively, and are incorporated
by reference herein. The amended and restated certificate of incorporation of
Weatherford Delaware is included as Exhibit 3.1 to Weatherford Delaware's Annual
Report on Form 10-K for the year ended December 31, 1998 filed March 31, 1999.
The amended and restated by-laws of Weatherford Delaware are included as Exhibit
3.2 to Weatherford Delaware's Current Report on Form 8-K filed June 2, 1998. The
amended and restated certificate of incorporation and the amended and restated
by-laws of Weatherford Delaware are incorporated by reference in this proxy
statement/prospectus. Please read "Where You Can Find More Information" on page
46.
The following is a comparison of the material rights of holders of existing
common stock of Weatherford Delaware and common shares of Weatherford Bermuda.
COMPARISON OF CORPORATE GOVERNANCE PROVISIONS
<Table>
<Caption>
PROVISION WEATHERFORD BERMUDA WEATHERFORD DELAWARE
- --------- ------------------- --------------------
BOARD OF DIRECTORS
Size of Board Weatherford Bermuda's bye-laws Weatherford Delaware's organiza-
provide that the board will tional documents provide that the
consist of not less than three number of directors shall be
nor more than 18 directors, as determined by the board of
determined by the board pursuant directors.
to a resolution adopted by the
affirmative vote of a majority of
the directors in office.
Term of Office The term of office of each Weatherford Delaware's organiza-
director shall be until the next tional documents state that
annual meeting following his or directors hold office until their
her election and until the successors are elected and
election of his or her successor. qualified or until their
</Table>
29
<Table>
<Caption>
PROVISION WEATHERFORD BERMUDA WEATHERFORD DELAWARE
- --------- ------------------- --------------------
resignation or removal, which
ever comes first.
Vacancies Any vacancy arising from the Weatherford Delaware's organiza-
removal of a director for cause tional documents state that any
may be filled by the shareholders vacancy on the board of directors
at the meeting at which such may be filled by any vote of the
director was removed. If the remaining directors or by the
shareholders do not fill such vote of the stockholders.
vacancy, it may be filled by the
board of directors. Any other
vacancy among directors,
including a vacancy that results
from an increase in the number of
directors, may be filled for the
unexpired term by the remaining
directors, provided that a quorum
remains in office. During any
vacancy the remaining directors
shall have full power to act as
the board of directors of
Weatherford Bermuda.
Removal of Directors Directors can be removed from Under Weatherford Delaware's
office at a special general organizational documents, a
meeting only for cause by the director may be removed from
affirmative vote of the holders office (a) with or without cause
of a majority of the voting power by a vote of the majority of
of Weatherford Bermuda on the shares of stock entitled to vote
relevant record date. in the election of directors or
(b) to the extent permitted by
law, for cause by the vote of the
majority of the directors then in
office. However, a director may
be removed for cause only after
reasonable notice and op-
portunity to be heard.
Indemnification of Directors and Weatherford Bermuda shall indem- Weatherford Delaware's organiza-
Officers nify any current or former tional documents state that
director, officer, resident Weatherford shall indemnify
representative, or any person directors and officers to the
serving or who has served at the fullest extent that the General
request of the company as a Corporation Law of the State of
director, officer, employee or Delaware allows against expenses
agent of another corporation, (including attorney's fees),
partnership, joint venture, trust judgments, fines and amounts paid
or other enterprise, against in settlement actually and
expenses actually and reason- reasonably incurred in connection
ably incurred in connection with with any suit or proceeding to
any threatened, pending or which such director or officer is
completed action, suit or made a party by reason of holding
proceeding. such office. The organizational
documents further state that no
Under the Companies Act, no director of the corporation shall
indemnification may be provided be personally liable to the
if the individual is fraudulent corporation or its stockholders
or dishonest in the performance for monetary damages for breach
of his or her duties to of fiduciary duty as a director,
Weatherford Bermuda (unless a except for liability (a) for any
court determines otherwise). breach of the director's duty of
loyalty to the corporation or its
Under Weatherford Bermuda's bye- stockholders, (b) for acts or
laws, each shareholder waives any omissions not in good faith or
claim whether on his behalf or on which involved intentional
behalf of the company, against misconduct or a knowing viola-
any director or officer for any tion of law, (c) for unlawful
action taken by the director or payment of dividends or unlawful
officer, or the failure of the stock purchase or redemption, or
director or officer to take any (d) for any transaction from
action in the performance of his which the director derived an
duties, provided that this waiver improper personal benefit. In
does not extend to any matter addition, Weatherford
involv-
</Table>
30
<Table>
<Caption>
PROVISION WEATHERFORD BERMUDA WEATHERFORD DELAWARE
- --------- ------------------- --------------------
ing any fraud or dishonesty on Delaware may purchase and
the part of the director or maintain indemnification
officer. insurance on behalf of its
directors and officers.
The indemnification provided for
in the bye-laws is not exclusive Delaware law generally permits a
of other rights to which a corporation to indemnify its
director or officer may be directors and officers against
entitled, including rights pro- expenses, judgments, fines and
vided pursuant to the memorandum amounts paid in settlement
of association, bye-laws, any actually and reasonably in-
agreement, any insurance curred in connection with a
purchased by Weatherford Bermuda, third- party action, other than a
vote of shareholders or derivative action, and against
disinterested directors, or expenses actually and reasonably
otherwise, provided that incurred in the defense or
indemnification does not extend settlement of a derivative
to fraud and dishonesty. action, provided that there is a
determination that the individual
acted in good faith and in a
manner reasonably believed to be
in or not opposed to the best
interests of the corporation.
That determination must be made,
in the case of an individual who
is a director or officer at the
time of the determination:
- by a majority of the
disinterested directors, even
though less than a quorum;
- by a committee of disinterested
directors, designated by a
majority vote of disinterested
directors, even though less
than a quorum;
- by independent legal counsel,
regardless of whether a quorum of
disinterested directors exists;
quorum of disinterested
directors exists; or
- by a majority vote of the
stockholders, at a meeting at
which a quorum is present.
Without court approval, however,
no indemnification may be made in
respect of any derivative action
in which an individual is
adjudged liable to the
corporation.
Delaware law requires
indemnification of directors and
officers for expenses relating to
a successful defense on the
merits or otherwise of a
derivative or third-party action.
Delaware law permits a
corporation to advance expenses
relating to the defense of any
proceeding to directors and
officers contingent upon those
individuals' commitment to repay
any advances, unless it is
determined ultimately that those
individuals are entitled to be
indemnified.
</Table>
31
<Table>
<Caption>
PROVISION WEATHERFORD BERMUDA WEATHERFORD DELAWARE
- --------- ------------------- --------------------
SHAREHOLDERS MEETINGS
Calling a Special Meeting A special general meeting may be Weatherford Delaware's organiza-
called by the Chairman of the tional documents do not address
board, the board of directors or who can call a special meeting,
by the shareholders when thus Delaware's General
requisitioned by the holders of Corporation Law determines this
at least 10% of the paid up issue. Under Delaware law, a
voting share capital of Wea- special meeting may be called by
therford Bermuda as provided by the board of directors or by any
the Companies Act. person or persons that the
certificate of incorporation or
by the by-laws authorizes.
Quorum Requirements; Adjournment Holders of shares entitling them Weatherford Delaware's organiza-
to exercise a majority of the tional documents define a quorum
voting power of Weatherford as the holders of a majority in
Bermuda on the relevant date interest of all stock issued,
constitutes a quorum. At any outstanding and entitled to vote
meeting duly called, holders of a at a meeting. Any meeting may be
majority of the voting shares adjourned by a majority of the
represented at the meeting may votes cast for adjournment,
adjourn the meeting if a quorum irrespective of whether a quorum
is present, and if not present, is present.
the meeting must be adjourned and
Weatherford Bermuda must provide
notice to shareholders in the
event the meeting is to be
reconvened.
Action by Written Consent The Companies Act provides that Weatherford Delaware's organiza-
shareholders may take action by tional documents provide that any
written consent with 100% action to be taken at an annual
shareholder consent required. or special meeting of
stockholders may be taken without
a meeting, without prior notice
and without a vote, if a consent
in writing is signed by the
holders of outstanding stock
having at least the number of
votes that would be necessary to
take any such action at a meeting
at which all of the shares that
were entitled to vote were
present and voted.
Advance Notice Requirements for The Companies Act provides that Weatherford Delaware's organiza-
Matters to be Considered at a shareholders may, as set forth tional documents do not address
General Meeting below and at their own expense when or how a stockholder may
(unless a company otherwise bring a resolution to the vote of
resolves), require a company to stockholders.
give notice of any resolution
that the shareholders can Weatherford Delaware's by-laws
properly propose at the next provide that any vacancy
annual general meeting and/or to occurring in the board of
circulate a statement prepared by directors may be filled by any
the requesting shareholders in vote or other occurrence of the
respect of any matter referred to remaining directors or by vote of
in a proposed resolution or any the stockholders.
business to be conducted at a
general meeting. The number of Weatherford Delaware is subject
shareholders necessary for such a to the Securities Exchange Act of
requisition is either that number 1934, as amended, which provides
of shareholders representing at that a shareholder who
least 5% of the total voting continuously holds at least
rights of all shareholders having US$2,000 in market value or 1% of
a right to vote at the meeting to a company's voting securities for
which the requisition relates or at least one year prior to the
not less than 100 shareholders. submission of a proposal and
through the meeting date may,
subject to certain conditions,
include the proposal in the
</Table>
32
<Table>
<Caption>
PROVISION WEATHERFORD BERMUDA WEATHERFORD DELAWARE
- --------- ------------------- --------------------
Weatherford Bermuda's bye-laws company's proxy materials sent to
provide that all nominations for shareholders.
election to the board of
directors must be made following
written notice to the secretary
of Weatherford Bermuda
accompanied by certain background
and other information specified
in the bye-laws. In connection
with any annual general meeting,
written notice of a shareholder's
intention to make such
nominations must be given to the
secretary of Weatherford Ber-
muda not less than 60 days nor
more than 90 days prior to the
anniversary date of the
immediately preceding annual
general meeting, provided that in
the event the annual general
meeting is called for a date that
is not within 60 days before or
after such anniversary date, not
later than the 7th day following
the day on which such notice of
the date of the annual general
meeting was mailed or such public
disclosure of the date of the
annual general meeting was made,
whichever occurs first. In
addition to shareholders' rights
under the Companies Act referred
to above, a shareholder may bring
other business before a
shareholder meeting, provided
timely notice is received by the
secretary of Weatherford Bermuda
within the time limits described
above. The notice must include a
description of the proposed item,
the reasons the shareholder
believes support its position
concerning the item, and other
specified matters.
Weatherford Bermuda will be
subject to the Securities
Exchange Act of 1934, as amended,
which provides that a shareholder
who continuously holds at least
US$2,000 in market value or 1% of
a company's voting securities for
at least one year prior to the
submission of a proposal and
through the meeting date may,
subject to certain conditions,
include the proposal in the
company's proxy materials sent to
shareholders.
AMENDMENTS TO ORGANIZATIONAL
DOCUMENTS
Memorandum of Association/ Bermuda law provides that the Weatherford Delaware's
Certificate of Incorporation memorandum of association of a certificate of incorporation may
company may be amended by a be amended as prescribed by the
resolution passed at a general Delaware General Corporation Law.
meeting of shareholders of which Delaware law requires that the
due notice has been given. An board of directors adopt a
amendment to the memorandum of resolution setting forth the
association that alters the amendment proposed, declaring its
company's business objects may advisability, and either calling
re- a spe-
</Table>
33
<Table>
<Caption>
PROVISION WEATHERFORD BERMUDA WEATHERFORD DELAWARE
- --------- ------------------- --------------------
quire approval of the Bermuda cial meeting of the stockholders
Minster of Finance, who may grant entitled to vote on the proposed
or withhold approval at his or amendment or directing that the
her discretion. proposed amendment be considered
at the next annual meeting of the
Under Bermuda law, the holders of stockholders. Notice of such
an aggregate of not less than 20% meeting must describe such
in par value of the company's proposed amendment in full or
issued share capital have the briefly summarize the changes to
right to apply to the Bermuda be effected by the proposed
courts for an annulment of any amendment. If a majority of the
amendment of the memorandum of outstanding stock entitled to
association adopted by vote on the proposed amendment
shareholders at any general and a majority of the outstanding
meeting, other than an amendment stock of each class entitled to
which alters or reduces a vote on the proposed amendment as
company's share capital as a class have been voted in favor
provided in the Companies Act. of the proposed amendment, the
Where such an application is amendment is adopted.
made, the amendment becomes
effective only to the extent that
it is confirmed by the Bermuda
court. An application for an
annulment of an amendment of the
memorandum of association must be
made within twenty-one days after
the date on which the resolution
altering the company's memorandum
of association is passed and may
be made on behalf of persons
entitled to make the application
by one or more of their number as
they may appoint in writing for
the purpose. No application may
be made by shareholders voting in
favor of the amendment.
Bye-laws/By-laws Weatherford Bermuda's bye-laws Weatherford Delaware's by-laws
provide that no bye-law shall be may be amended by the board of
rescinded, altered or amended, directors, provided that (a) the
and no new bye-law shall be made, board of directors may not amend
unless it shall have been or repeal any section of the
approved by a resolution of by-laws which by law, by the
Weatherford Bermuda's board of certificate of incorporation or
directors and by a resolution of by the by-laws requires action by
the shareholders. In the case of the stockholders, and (b) any
the bye-law setting out the amendment or repeal of the
voting majority necessary to by-laws by the board of directors
approve a business combination may be amended or repealed by the
(including an amalgamation), any stockholders. The board of
rescission, alteration or directors may amend or repeal any
amendment must be approved by a provision of the by-laws by the
resolution of the shareholders vote of a majority of the entire
holding a majority of the shares board of directors. The
entitled to vote on such business affirmative vote of the holders
combination. of 80% or more of the combined
voting power of the then
outstanding shares of stock of
all classes or series of stock
the holders of which are entitle
to vote generally in the election
of directors, voting together as
a single class, shall be required
to adopt, amend, alter or repeal
any provision of the by-laws.
VOTING REQUIREMENT FOR Except as otherwise specifically Weatherford Delaware's organiza-
STOCKHOLDER ACTION provided in the bye-laws or the tional documents provide that
Companies Act, any action to be when a quorum is present, any
taken by the shareholders may be matter shall be decided by vote
taken by the of the holders of a
</Table>
34
<Table>
<Caption>
PROVISION WEATHERFORD BERMUDA WEATHERFORD DELAWARE
- --------- ------------------- --------------------
affirmative vote of a simple majority of the shares of stock
majority of the shares voting at entitled to vote on the matter
a general meeting of Weatherford except where a larger vote is
Bermuda. required by law, by the
certificate of incorporation or
by the by-laws. The corporation
shall not directly or indirectly
vote any share of its own stock
unless it is voting shares that
it holds in a fiduciary capacity
to the extent permitted by law.
PURCHASE OF SHARES Any issued shares may be Under Delaware law, Weatherford
purchased by Weatherford Bermuda, Delaware's board may, to the
to the extent not prohibited by extent not prohibited by
applicable law, by action of the applicable law, purchase any
board. Upon purchase by issued shares of Weatherford
Weatherford Bermuda, such shares Delaware stock.
will be cancelled.
OPTIONS AND WARRANTS Directors may, in their Under Delaware law, Weatherford
discretion, grant options for any Delaware's board may, in their
class or series of class, to any discretion, grant options for any
persons for any period and upon class or series of class, to any
such terms as the board may deem persons for any period and upon
advisable, and cause ap- such terms as the board of
propriate instruments evidencing directors may deem advisable, and
such options to be issued. cause appropriate instruments
evidencing such options to be
issued.
ISSUANCE OF PREFERENCE The bye-laws provide that the Weatherford Delaware's organiza-
SHARES/STOCK board of directors of Weatherford tional documents allows the board
Bermuda may from time to time of directors to establish or
authorize by means of a board change the number of shares of
resolution the issuance of preferred stock and to fix the
preference shares in one or more designation and relative powers,
series of preference shares, and preferences and rights and the
in the resolution or resolutions qualifications or limitations or
providing for the issue of such restrictions of such preferred
shares, the board of directors is stock.
expressly authorized to fix for
each such series the number of
shares that shall constitute such
series, voting power, designa-
tions, preferences and relative,
participating, optional or other
special rights and
qualifications, limitations or
restrictions thereof. Such a
"blank check" preference share
provision could have certain
"anti-takeover" effects. Please
read "Description of Authorized
Shares of Weatherford
International
Ltd. -- Anti-Takeover Provisions"
beginning on page 25.
APPROVAL OF MERGER/SALE OF ASSETS The Companies Act permits an In general, under the Delaware
amalgamation between two or more General Corporation Law, a plan
Bermuda companies, or between one of merger or consolidation must
or more Bermuda "exempted be approved by the affirmative
companies' and one or more vote of holders of a majority of
foreign companies. As permitted shares of each such corporation
by Bermuda law, Weatherford entitled to vote thereon.
Bermuda's bye-laws provide that However, no vote of stock-
an amalgamation (other than with holders of a constituent
a wholly-owned subsidiary) shall corporation surviving a merger
be approved by the board of shall be necessary to authorize a
directors and by shareholders merger if certain conditions are
holding a majority of the shares met.
entitled to vote
</Table>
35
<Table>
<Caption>
PROVISION WEATHERFORD BERMUDA WEATHERFORD DELAWARE
- --------- ------------------- --------------------
thereon. Similarly, a sale of all or
substantially all of such
Under Bermuda law, Weatherford corporation's assets other than
Bermuda is an "exempted company" in the ordinary course of busi-
since it will be owned ness, or a voluntary dissolution
predominantly by non-Bermudians. of such corporation, requires the
approval of such corporations'
Please read "Description of board of directors and the
Authorized Shares of Weatherford affirmative vote of holders of a
International Ltd. -- Compulsory majority of the shares entitled
Acquisition of Shares Held by to vote therein.
Minority Holders" on page 24.
Dissenters' Rights Under Bermuda law, in the event Delaware General Corporation Law
of an amalgamation of a Bermuda provides that a stockholder shall
company with another company or not have a right of appraisal of
corporation, a shareholder of the the fair value of the
Bermuda company who is not stockholder's shares of its
satisfied that fair value has company's stock if such stock, on
been offered for such share- the record date, is (i) listed on
holder's shares may apply to a a national securities exchange or
Bermuda court within one month of designated as a national market
notice of the shareholders system security on an interdealer
meeting to appraise the fair quotation system by the National
value of those shares. The Association of Securities
amalgamation of a Bermuda company Dealers, Inc. or (ii) held of
with another company or record by more than 2,000
corporation (other than certain holders. Weatherford Delaware's
affiliated companies) requires common stock has been, and will
the amalgamation agreement to be be on the record date, listed on
approved by the company's board The New York Stock Exchange under
of directors and by a meeting of the symbol "WFT", thus stock-
its shareholders. Such holders of Weatherford Delaware
shareholder approval, unless the do not have rights of appraisal.
bye-laws otherwise provide,
requires 75% of the share-
holders voting at such meeting in
respect of which the quorum shall
be two persons holding or
representing at least one third
of the issued shares of the
company. The bye-laws provide
that an amalgamation (other than
with a wholly-owned subsidiary)
shall be approved by the board of
directors and by shareholders
holding a majority of shares
entitled to vote thereon.
SHAREHOLDER DERIVATIVE SUITS Class actions and derivative Delaware General Corporation Law
actions are generally not requires that a stockholder
available to shareholders under bringing a derivative suit
Bermuda law. The Bermuda courts, against a Delaware corporation
however, would ordinarily be have been a stockholder at the
expected to permit a shareholder time of the disputed transac-
to commence an action in the name tion, or its shares thereafter
of a company to remedy a wrong to passed to the stockholder by
the company where the act operation of law from a person
complained of is alleged to be who was a holder at that time.
beyond the corporate power of the
company or is illegal or would Under Delaware law, a complaint
result in the violation of the in a derivative suit must:
company's memorandum of
association or bye-laws. Fur- - state the plaintiff was a
thermore, consideration would be stockholder at the time of the
given by a Bermuda court to acts transaction with respect to
that are alleged to constitute a which the plaintiff complains
fraud against the minority or that the plaintiff's shares
shareholders or, for instance, thereafter became the
where an act requires the plaintiff's by operation of
approval of a greater percentage law; and
</Table>
36
<Table>
<Caption>
PROVISION WEATHERFORD BERMUDA WEATHERFORD DELAWARE
- --------- ------------------- --------------------
of the company's shareholders
than that which actually approved - (1) allege with particularity
it. the efforts plaintiff has made to
obtain the action the plaintiff
When the affairs of a company are desires from the directors of
being conducted in a manner which the corporation or (2) state
is oppressive or prejudicial to the reasons for the plain-
the interests of some part of the tiff's failure to obtain the
shareholders, one or more action or for not making the
shareholders may apply to a effort to obtain the action.
Bermuda court, which may make
such order as it sees fit,
including an order regulating the
conduct of the company's affairs
in the future or ordering the
purchase of the shares of any
shareholders by other sharehold-
ers or by the company.
ALTERATION OF CAPITAL Weatherford Bermuda may, by reso- Under the Delaware General Corpo-
lution of the shareholders and, ration Law, Weatherford Delaware
where required, of a separate may amend its certificate of
class of shareholders: incorporation to:
- increase its authorized share - increase, decrease or
capital; reclassify its authorized capital
stock;
- divide its shares into several
classes and attach thereto - change the number, par value,
respectively any preferential, designations, preferences or
deferred, qualified or special relative, participating,
rights, privileges or optional or other special
conditions; rights of the shares;
- consolidate and divide all or - change shares with par value
any of its share capital into into shares without par value, or
shares of larger par value; shares without par value into
shares with par value;
- subdivide its shares, or any of
them, into shares of smaller - subdivide or combine the
par value than is fixed by the outstanding shares of any class
memorandum of association; or series of a class of shares
into a greater or lesser number
- make provision for the issue of outstanding shares; or
and allotment of shares that do
not carry any voting rights; - create new classes of stock
having rights and preferences
- cancel shares which, at the either prior and superior or
date of the passing of the subordinate and inferior to the
resolution in that behalf, have stock of any class then
not been taken or agreed to be authorized.
taken by any person, and
diminish the amount of its
share capital by the amount of
the shares cancelled; and
- change the currency
denomination of its share
capital.
</Table>
37
INCOME TAX CONSEQUENCES OF THE MERGER
U.S. INCOME TAX CONSEQUENCES OF THE MERGER
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO STOCKHOLDERS
Scope of Discussion
In the opinion of Baker & McKenzie, the following general discussion
constitutes, in all material respects, a fair and accurate summary under current
law of the anticipated U.S. federal income tax consequences applicable to
holders of Weatherford Delaware common stock as a result of the merger, and of
the post-merger ownership and disposition of Weatherford Bermuda common shares.
This discussion does not address all of the U.S. federal income tax consequences
that may be relevant to Weatherford Delaware shareholders in light of their
individual circumstances or to particular Weatherford Delaware shareholders who,
for U.S. federal income tax purposes, are subject to special rules, such as:
- dealers or traders in securities, commodities or currencies;
- tax-exempt entities;
- banks, financial institutions, or insurance companies;
- grantor trusts;
- real estate investment trusts or regulated investment companies;
- holders who hold Weatherford Delaware common stock as part of a hedge,
straddle, wash sale, synthetic security, conversion transaction, or other
integrated investment comprised of Weatherford Delaware common stock and
one or more other investments;
- holders who have been, but are no longer, citizens or residents of the
United States;
- holders whose functional currency is not the U.S. dollar;
- holders who acquired their Weatherford Delaware common stock in
compensatory transactions;
- non-U.S. holders, as hereinafter defined, that are or previously have
been engaged in the conduct of a trade or business, or that have or
previously had a permanent establishment, in the United States; and
- holders who own, or are deemed to own, 10% or more, determined by voting
power or value, of Weatherford Delaware common stock or Weatherford
Bermuda common shares.
Further, this discussion does not address any U.S. federal estate and gift
or alternative minimum tax consequences or any state, local, or foreign tax
consequences relating to the merger or the ownership and disposition of
Weatherford Delaware common stock or Weatherford Bermuda common shares.
This discussion is based on the U.S. Internal Revenue Code of 1986, as
amended (the Code), the U.S. Treasury regulations promulgated thereunder, and
judicial and administrative interpretations thereof, in each case as in effect
and available on the date of this proxy statement/prospectus. All of the
foregoing are subject to change, which change could apply with retroactive
effect and could affect the tax consequences described below. Neither
Weatherford Delaware nor Weatherford Bermuda will request any ruling from the
Internal Revenue Service (the Service) as to the U.S. federal income tax
consequences relating to the merger or the ownership and disposition of
Weatherford Delaware common stock or Weatherford Bermuda common shares.
For purposes of this discussion, a "U.S. holder" is a beneficial owner of
Weatherford Delaware common stock that, for U.S. federal income tax purposes, is
(1) an individual citizen or resident of the United States, (2) a corporation or
any other entity taxable as a corporation created or organized in or under the
laws of the United States or of a state of the United States or the District of
Columbia, (3) an estate, the income of which is subject to U.S. federal income
taxation regardless of its source, or (4) a trust, if such trust validly has
elected to be treated as a U.S. person for U.S. federal income tax purposes
38
or if (a) a U.S. court can exercise primary supervision over its administration
and (b) one or more U.S. persons have the authority to control all of the
substantial decisions of such trust. A "non-U.S. holder" is any beneficial owner
of Weatherford Delaware common stock other than a U.S. holder. In the case of a
holder that is a partnership, determinations as to material tax consequences are
generally made at the partner level, but special considerations not set forth
herein may apply.
This discussion assumes that Weatherford Delaware stockholders hold their
Weatherford Delaware common stock and Weatherford Bermuda common shares as
capital assets. In addition, this discussion is based on certain customary
assumptions and representations made or to be made by Weatherford Delaware and
Weatherford Bermuda, including (1) that the facts set forth in this registration
statement are true, accurate, and complete, and (2) that the merger will be
consummated as described in this registration statement. Any change in the
truth, accuracy or completeness of any of the facts, assumptions or
representations on which this discussion is based could affect the tax
consequences described below.
THIS SUMMARY IS NOT A SUBSTITUTE FOR AN INDIVIDUAL ANALYSIS OF THE TAX
CONSEQUENCES OF THE MERGER TO A WEATHERFORD DELAWARE STOCKHOLDER. EACH
WEATHERFORD DELAWARE STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX
ADVISER REGARDING THE PARTICULAR FEDERAL, STATE, LOCAL AND NON-U.S. TAX
CONSEQUENCES OF THE MERGER AND THE OWNERSHIP AND DISPOSITION OF WEATHERFORD
BERMUDA COMMON SHARES IN LIGHT OF SUCH STOCKHOLDER'S OWN SITUATION.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO U.S. HOLDERS
Receipt of Weatherford Bermuda Common Shares
The merger should qualify as a "reorganization" within the meaning of
section 368(a) of the Code. However, pursuant to special rules contained in
section 367(a) of the Code and the Treasury Regulations promulgated thereunder,
U.S. holders exchanging their Weatherford Delaware common stock for Weatherford
Bermuda common shares pursuant to the merger will recognize gain, if any, but
not loss. In general, for U.S. federal income tax purposes, a U.S. holder will
recognize gain equal to the excess of the fair market value of the Weatherford
Bermuda common shares received by the U.S. holder pursuant to the merger over
such holder's adjusted basis in the Weatherford Delaware common stock exchanged
therefor. Any such gain will be capital gain, and will be long-term capital gain
if the Weatherford Delaware common stock has been held for more than one year at
the effective time of the merger. A U.S. holder that recognizes gain pursuant to
the merger will have an adjusted tax basis in its Weatherford Bermuda common
shares received equal to the adjusted tax basis of the Weatherford Delaware
common stock exchanged therefor, increased by the amount of gain recognized. A
U.S. holder will not be permitted to recognize any loss realized on the exchange
of its Weatherford Delaware common stock in the merger. In such case, the
adjusted tax basis of the Weatherford Bermuda common shares received by a U.S.
holder with a loss on its Weatherford Delaware common stock will be equal to
such U.S. holder's adjusted tax basis in its Weatherford Delaware common stock
surrendered in exchange therefor. Thus, subject to any subsequent changes in the
fair market value of the Weatherford Bermuda common shares, any loss will be
preserved. In determining the amount of gain recognized, each of the Weatherford
Delaware shares transferred is treated as the subject of a separate exchange.
Thus, if a U.S. holder transfers some Weatherford Delaware common stock on which
gains are realized and other Weatherford Delaware common stock on which losses
are realized, the U.S. holder may not net the losses against the gains to
determine the amount of gain recognized.
Although not free from doubt, the holding period for any Weatherford
Bermuda common shares received by a U.S. holder recognizing gain with respect to
the merger should begin the day after the effective time of the merger. The
holding period for any Weatherford Bermuda common shares received by U.S.
holders with a loss on their Weatherford Delaware common stock will include the
holding period of the Weatherford Delaware common stock exchanged therefor.
39
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS OF OWNING AND
DISPOSING OF WEATHERFORD BERMUDA COMMON SHARES
Distributions on Weatherford Bermuda Common Shares
Weatherford Bermuda does not anticipate that it will pay any cash dividends
on its common shares for the foreseeable future. Subject to this and the
discussion below under "-- Passive Foreign Investment Company Provisions," in
general, U.S. holders will be required to include in gross income as ordinary
income the gross amount of any distribution on the Weatherford Bermuda common
shares to the extent that the distribution is paid out of Weatherford Bermuda's
current or accumulated earnings and profits as determined for U.S. federal
income tax purposes (a "dividend"). These dividends will not be eligible for the
dividends-received deduction, which is generally allowed to U.S. corporate
shareholders on dividends received from certain domestic and foreign
corporations. Distributions in excess of the current and accumulated earnings
and profits will be applied first to reduce the U.S. holder's tax basis in its
Weatherford Bermuda common shares, and thereafter will constitute gain from the
sale or other taxable disposition of such stock. Weatherford Bermuda will
calculate its earnings and profits under U.S. federal income tax principles.
For foreign tax credit purposes, dividends paid by a foreign corporation
generally constitute foreign source income. However, under section 904(g) of the
Code, dividends paid by a foreign corporation that is more than 50% owned by
U.S. persons may be treated as U.S. source income for foreign tax credit
purposes to the extent that the foreign corporation itself has more than an
insignificant amount of U.S. source income. It is expected that a portion of any
dividends paid by Weatherford Bermuda will be treated as U.S. source income
under section 904(g) of the Code. To the extent that any dividends distributed
by Weatherford Bermuda are treated as foreign source income, however, such
dividends generally will constitute passive income or, in the case of certain
U.S. holders, financial services income for foreign tax credit purposes.
Sale of Weatherford Bermuda Common Shares
Subject to the discussion below under "-- Passive Foreign Investment
Company Provisions," a U.S. holder of Weatherford Bermuda common shares
generally will recognize gain or loss for U.S. federal income tax purposes upon
the sale or other taxable disposition of such shares in an amount equal to the
difference between the amount realized from such sale or other taxable
disposition and the U.S. holder's adjusted tax basis in such shares. The gain or
loss will generally be capital in nature. In the case of a noncorporate U.S.
holder, the maximum marginal U.S. federal income tax rate applicable to such
gain will be lower than the maximum marginal U.S. federal income tax rate
applicable to ordinary income if such U.S. holder's holding period for such
Weatherford Bermuda common shares exceeds twelve months. The gain or loss
generally will be U.S. source gain or loss for foreign tax credit purposes. The
deductibility of capital losses is subject to limitations.
Passive Foreign Investment Company Provisions
A foreign corporation is a passive foreign investment company, PFIC, if
either (1) at least 75% or more of its gross income for the taxable year is
passive income, or (2) the average percentage of assets held by such corporation
during the taxable year which produces passive income or which is held for the
production of passive income is at least 50%. For purposes of applying the tests
in the preceding sentence, the foreign corporation is deemed to own its
proportionate share of the assets, and to receive directly its proportionate
share of the income, of any other corporation of which the foreign corporation
owns, directly or indirectly, at least 25% by value of the stock. In addition,
special rules provide that for purposes of determining whether a foreign
corporation is a PFIC, "qualified stock" held by certain domestic corporate
subsidiaries of the foreign corporation is treated as an asset which does not
produce passive income (and is not held for the production of passive income),
and any amount included in gross income with respect to such stock is treated as
active income. It is anticipated that the stock of certain indirect, domestic
subsidiaries of Weatherford Bermuda may constitute qualified stock after the
merger.
40
Based upon estimates with respect to its income, assets and operations,
Weatherford Bermuda believes that it will not be a PFIC immediately following
the merger, and it does not anticipate becoming a PFIC in the foreseeable
future. However, because the determination of PFIC status must be made on an
annual basis, and will depend on the composition of the income and assets, as
well as the nature of the activities, of Weatherford Bermuda and its
subsidiaries, from time to time, there can be no assurance that Weatherford
Bermuda will not be considered a PFIC for any taxable year. Moreover, neither an
opinion from counsel nor a ruling from the Service will be obtained regarding
whether Weatherford Bermuda is or will be a PFIC.
The highly complex rules which apply to PFIC's are generally intended to
end the ability under prior law of all direct and indirect U.S. holders of PFIC
stock to defer federal income tax with respect to the earnings of the PFIC until
distributions are received from the PFIC or the shares of the PFIC are sold.
Classification of a foreign corporation as a PFIC can have various adverse U.S.
tax consequences to U.S. holders. These include taxation of gain on a sale or
other disposition of the shares of the corporation (possibly including a
disposition by way of gift or exchange in a corporate reorganization, or the
grant of the stock as security for a loan) at ordinary income rates and
imposition of an interest charge on gain or on distributions with respect to the
shares. Accordingly, if Weatherford Bermuda is classified as a PFIC, such
classification could change the tax consequences of the distributions and sales
or exchanges described above. Moreover, a step-up in the tax basis of the stock
of a PFIC may not be available upon the death of an individual U.S. holder.
If Weatherford Bermuda should determine in the future that it is a PFIC, it
will endeavor to so notify U.S. holders, although there can be no assurance that
it will be able to do so in a timely and complete manner. U.S. holders are urged
to consult their own tax advisors about the PFIC rules, including the
availability of certain elections.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
Currently, any distributions with respect to Weatherford Delaware common
stock and proceeds from the sale or redemption of Weatherford Delaware common
stock would be subject to U.S. backup withholding tax and information reporting
rules. After the merger, it is anticipated that the same rules would apply to
distributions with respect to Weatherford Bermuda common shares and to proceeds
from the sale or redemption of Weatherford Bermuda common shares.
U.S. backup withholding tax and information reporting requirements
generally apply to certain payments to certain noncorporate holders of stock.
Information reporting generally will apply to payments of dividends on, and to
proceeds from the sale or redemption of, Weatherford Bermuda common shares made
within the United States to a holder of Weatherford Bermuda common shares (other
than an "exempt recipient," including a corporation, a payee that is not a U.S.
person that provides an appropriate certification and certain other persons). A
payor will be required to withhold at the then applicable rate on any payments
of dividends on, or proceeds from the sale or redemption of Weatherford Bermuda
common shares within the United States to a holder (other than an "exempt
recipient") if such holder fails to furnish its correct taxpayer identification
number or otherwise fails to comply with, or establish an exemption from, such
backup withholding tax requirements. In the case of such payments by a payor or
any person who receives or collects such payments on behalf of, or for the
benefit of, a payee (a "middleman") within the United States to certain foreign
trusts or foreign partnerships, the beneficiaries of such trusts or the partners
of such partnerships, as the case may be, normally will be required to provide
the certification discussed above in order to establish an exemption from backup
withholding tax and information reporting requirements. Holders of Weatherford
Bermuda common shares that are foreign trusts or foreign partnerships should
consult with their own tax advisors regarding the correct person or persons to
provide the certification discussed above. Moreover, a payor or middleman may
rely on a certification provided by a payee that is not a U.S. person only if
such payor or middleman does not have actual knowledge or a reason to know that
any information or certification stated in such certificate is incorrect.
41
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF THE MERGER
AND OF OWNING AND DISPOSING OF WEATHERFORD BERMUDA COMMON SHARES
Receipt of Weatherford Bermuda Common Shares
Non-U.S. holders will generally be subject to U.S. federal income or
withholding tax on gain realized, if any, on the exchange of Weatherford
Delaware common stock for Weatherford Bermuda common shares only if:
- Such gain is effectively connected with the conduct by the non-U.S.
holder of a trade or business within the United States or, if a tax
treaty applies, is attributable to a permanent establishment or fixed
base maintained by the non-U.S. holder in the United States;
- In the case of certain capital gains, the non-U.S. holder is an
individual who is present in the United States for 183 days or more
during the taxable year in which the capital gain is recognized and
certain other conditions apply;
- The non-U.S. holder does not qualify for an exemption from backup
withholding; or
- Either Weatherford Delaware is or has been a "U.S. real property holding
corporation" within the meaning of section 897(c)(2) of the Code at any
time within the shorter of the five-year period preceding the merger or
such non-U.S. holder's holding period, and the non-U.S. holder holds, or
has held at any time during such shorter period, more than 5% of the
Weatherford Delaware common stock.
Weatherford Delaware does not believe that it is or has been within the
last five years a U.S. real property holding corporation.
Owning and Disposing of Weatherford Bermuda Common Shares
A non-U.S. holder generally will not be subject to U.S. federal income or
withholding tax on distributions made by Weatherford Bermuda on the Weatherford
Bermuda common shares. In addition, a non-U.S. holder generally would not be
subject to U.S. federal income or withholding tax on any gain recognized on the
sale, exchange or other disposition of Weatherford Bermuda common shares
provided:
- such gain is not effectively connected with the conduct by the non-U.S.
holder of a trade or business within the United States or, if a tax
treaty applies, is not attributable to a permanent establishment or fixed
base maintained by the non-U.S. holder in the United States;
- in the case of certain capital gains recognized by a non-U.S. holder that
is an individual, such individual is either not present in the United
States for 183 days or more during the taxable year in which the capital
gain is recognized or otherwise qualifies for an exemption; and
- the non-U.S. holder qualifies for an exemption from U.S. federal backup
withholding.
In order to qualify for an exemption from backup withholding tax on certain
dividends on, and proceeds from the sale, exchange, or disposition of,
Weatherford Bermuda common shares paid within the United States, a non-U.S.
holder may be required to certify such holder's foreign status or otherwise
establish an exemption.
THE U.S. FEDERAL INCOME TAX CONSEQUENCES SUMMARIZED ABOVE ARE FOR GENERAL
INFORMATION ONLY. EACH WEATHERFORD DELAWARE STOCKHOLDER SHOULD CONSULT HIS OR
HER TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF THE MERGER THAT MAY APPLY
TO SUCH STOCKHOLDER, INCLUDING THE APPLICATION OF STATE, LOCAL, NON-U.S. AND
OTHER FEDERAL TAX LAWS.
BERMUDA INCOME TAX CONSEQUENCES OF THE MERGER
At the present time, there is no Bermuda income or profits tax, withholding
tax, capital gains tax, capital transfer tax, estate duty or inheritance tax
payable by Weatherford Bermuda or by Weatherford Bermuda shareholders in respect
of its shares. Weatherford Bermuda has obtained an assurance from the
42
Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection
Act 1966 that, in the event that any legislation is enacted in Bermuda imposing
any tax computed on profits or income, or computed on any capital asset, gain or
appreciation or any tax in the nature of estate duty or inheritance tax, such
tax shall not, until March 28, 2016, be applicable to Weatherford Bermuda or to
any of its operations or to its shares or other obligations except insofar as
such tax applies to persons ordinarily resident in Bermuda or to any taxes
payable by Weatherford Bermuda in respect of real property or leasehold
interests in Bermuda held by it.
BARBADOS INCOME TAX CONSEQUENCES OF THE MERGER
Weatherford Bermuda will be registered to operate as an IBC for Barbados
tax purposes and Weatherford Bermuda will be legally managed and controlled
through an executive office located in Barbados. Under current Barbados law, an
IBC is subject to tax on its international business profits generated outside of
Barbados at a maximum rate of 2.5%. This tax rate gradually decreases to 1% as
taxable income increases. The benefits of these lower tax rates for companies
registered as IBCs can be guaranteed by the Minister for up to 15 years.
Barbados imposes no income tax on capital gains. In addition to Barbados income
tax, Weatherford Bermuda will be subject to Barbados property transfer tax to
the extent that it transfers real property owned in Barbados and certain other
taxes to the extent that it employs persons in Barbados.
Under existing Barbados law, there will be no Barbados income or
withholding tax imposed on any dividends, interest, royalties or other amounts
paid by Weatherford Bermuda to any person resident outside of Barbados.
Furthermore, U.S. shareholders will not be subject to any Barbados taxation on
the sale or other transfer (including by gift or on the death of the
shareholder) of Weatherford Bermuda common shares.
43
OTHER INFORMATION
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Ernst & Young LLP ("Ernst & Young"), independent public
accountants, served as our auditors for the fiscal year ended December 31, 2001
and has been selected as auditors for Weatherford Delaware and Weatherford
Bermuda for the fiscal year ending December 31, 2002. Ernst & Young replaced
Arthur Andersen LLP ("Arthur Andersen") who had served as Weatherford Delaware's
auditors from 1972 to 2000.
On August 13, 2001, Weatherford Delaware dismissed Arthur Andersen as its
independent public accountants and engaged Ernst & Young as its new independent
public accountants. The decision to change the Company's independent public
accountants was recommended by Weatherford Delaware's Audit Committee.
Arthur Andersen's reports on Weatherford Delaware's consolidated financial
statements for the years ended December 31, 2000 and 1999 did not contain an
adverse opinion or disclaimer of opinion, nor were such reports qualified or
modified as to uncertainty, audit scope, or accounting principles.
During the two years ended December 31, 2000, and the subsequent interim
period preceding the decision to change independent public accountants, there
were no disagreements with Arthur Andersen on any matters of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreement(s), if not resolved to the satisfaction of Arthur
Andersen, would have caused Arthur Andersen to make a reference to the subject
matter of the disagreement(s) in connection with its reports covering such
periods.
During the two years ended December 31, 2000, and the subsequent interim
period preceding the decision to change independent public accountants, there
were no "reportable events" (hereinafter defined) requiring disclosure pursuant
to Item 304(a)(1)(v)(A)-(D) of Item 304 of Regulation S-K.
During the two years ended December 31, 2000, and the subsequent interim
period preceding the decision to change independent public accountants, neither
Weatherford Delaware nor anyone on its behalf consulted Ernst & Young regarding
either the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on Weatherford Delaware's financial statements, nor has Ernst & Young
provided to Weatherford Delaware a written report or oral advice regarding such
principles or audit opinion.
In addition to audit services, Ernst &Young also provided certain non-audit
services to the Company in 2001. The Audit Committee has considered whether the
provision of these additional services is compatible with maintaining the
independence of Ernst & Young.
Following is a summary of Ernst & Young's fees for (i) services rendered
for the audit of Weatherford Delaware's 2001 annual financial statements and
reviews of its 2001 quarterly financial statements, (ii) financial information
and systems design and implementation services rendered in 2001 and (iii) all
other services rendered in 2001.
<Table>
Audit Fees, excluding audit related......................... $615,000
========
Financial Information Systems Design and Implementation
Fees...................................................... $ 0
========
All Other Fees
Audit related fees(1)..................................... $635,000
Other non-audit services.................................. 190,000
--------
Total all other fees........................................ $825,000
========
</Table>
- ---------------
(1) Audit related fees consisted principally of review of registration
statements and performance of statutory audits.
44
STOCKHOLDER PROPOSALS AND NOMINATIONS
The board of directors of Weatherford Delaware is not aware of any matters
that are expected to come before the special meeting other than those referred
to in this proxy statement/prospectus. If other matters should properly come
before the meeting, the persons named in the proxy intend to vote the proxies in
accordance with their best judgment.
The deadline for submitting stockholder proposals pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended, to be considered for
inclusion in Weatherford Delaware's proxy statement and form of proxy for the
2003 annual meeting is December 31, 2002. These proposals must otherwise comply
with the rules promulgated by the Securities and Exchange Commission to be
considered for inclusion in our proxy statement for that year. If a stockholder
desires to bring business before the meeting that is not the subject of a
proposal meeting the Securities and Exchange Commission proxy rule requirements
for inclusion in the proxy statement, the proposal must be received by us by
March 21, 2003.
Any stockholder proposal, whether or not to be included in our proxy
materials, must be sent to our Corporate Secretary at 515 Post Oak Boulevard,
Suite 600, Houston, Texas 77027.
Weatherford Bermuda's bye-laws provide that all shareholder nominations for
nominees for election to the board of directors must be made following written
notice to the Secretary of Weatherford Bermuda accompanied by certain background
and other information specified in the bye-laws. In connection with any annual
general meeting, written notice of a shareholder's intention to make such
nominations must be received by the Secretary at Weatherford Bermuda's principal
executive offices and its registered office in Bermuda not less than 60 days nor
more than 90 days prior to the anniversary date of the immediately preceding
annual general meeting, provided that in the event that the annual general
meeting is called for a date that is not within 60 days before or after such
anniversary date, not later than the 7th day following the day on which such
notice of the date of the annual general meeting was mailed or such public
disclosure of the date of the annual general meeting was made, whichever occurs
first.
In order for a shareholder to bring other business before a general meeting
of shareholders, timely notice must be received by the secretary of Weatherford
Bermuda within the time limits described above. The notice must include a
description of the proposed item and other specified matters. These requirements
are separate from and in addition to the requirements you must meet to have a
proposal included in Weatherford Bermuda's proxy statement. The foregoing time
limits also apply in determining whether notice is timely for purposes of rules
adopted by the Securities Exchange Commission relating to the exercise of
discretionary voting authority. These time limits are separate from those which
apply to the shareholder requisition rights under the Companies Act.
EXPERTS
The consolidated financial statements (including the related financial
statement schedule) of Weatherford International, Inc. appearing in Weatherford
International, Inc.'s Annual Report (Form 10-K) for the year ended December 31,
2001, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements and financial statement schedule are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Weatherford International, Inc.
and the related consolidated financial statement schedule incorporated by
reference in this proxy statement/prospectus, to the extent and for the periods
indicated in their report, have been audited by Arthur Andersen LLP, independent
public accountants, and are incorporated by reference in reliance upon the
authority of said firm as experts in giving said reports.
45
LEGAL MATTERS
Certain legal matters in connection with the Weatherford Bermuda common
shares have been passed upon for Weatherford Bermuda by its special Bermuda
counsel, Conyers Dill & Pearman. Conyers Dill & Pearman has also rendered an
opinion to Weatherford Bermuda regarding Bermuda tax consequences of the merger
described in "Income Tax Consequences of the Merger -- Bermuda Income Tax
Consequences of the Merger." Baker & McKenzie has rendered an opinion to
Weatherford Bermuda regarding U.S. federal income tax consequences of the merger
to stockholders of Weatherford Delaware described in "Income Tax Consequences of
the Merger -- U.S. Income Tax Consequences of the Merger." David King & Co. has
rendered an opinion to Weatherford Bermuda regarding Barbados income tax
consequences of the merger described in "Income Tax Consequences of the
Merger -- Barbados Income Tax Consequences of the Merger."
WHERE YOU CAN FIND MORE INFORMATION
Weatherford Bermuda has filed with the Securities and Exchange Commission
(the Commission) a registration statement on Form S-4 (together with all
amendments and exhibits, referred to as the "Registration Statement") under the
Securities Act of 1933, as amended (the Securities Act). This proxy
statement/prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted as permitted by the rules and regulations of
the Commission. For further information, reference is hereby made to the
Registration Statement. Statements made in this proxy statement/prospectus as to
the contents of any contract, agreement or other document are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission, reference is made to the copy so filed, and each such statement
shall be deemed qualified in its entirety by such reference.
Weatherford Delaware is, and after the merger Weatherford Bermuda as
successor issuer will be, subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the Exchange Act), and in
accordance therewith files and will file reports, proxy and information
statements, and other information with the Commission. Such reports, proxy and
information statements, and other information filed with the Commission, can be
inspected and copied at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the Commission at 1-800-SEC-0330. Copies of
reports, proxy and information statements and other information regarding
registrants that file electronically (including Weatherford International, Inc.)
are available on the Commission's website at http://www.sec.gov.
Upon completion of the merger, Weatherford Bermuda common shares will be
traded on The New York Stock Exchange. At the time of commencement of such
trading, the existing common stock of Weatherford Delaware will be delisted and
will no longer be registered pursuant to Section 12 of the Exchange Act. At such
time, your shares will have automatically converted into the right to receive
shares of Weatherford Bermuda and Weatherford Bermuda will be registered
pursuant to Section 12 of the Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Weatherford Delaware with the Commission
pursuant to the Exchange Act are hereby incorporated by reference in this proxy
statement/prospectus:
- Annual Report on Form 10-K for the fiscal year ended December 31, 2001
(File No. 1-13086);
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 (File
No. 1-13086); and
- Current Reports on Form 8-K filed February 1, 2002, March 4, 2002, April
5, 2002 and April 24, 2002 (File No. 1-13086).
46
Each document filed by Weatherford Delaware pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this proxy
statement/prospectus and prior to the date of the special meeting shall be
deemed to be incorporated by reference in this proxy statement/prospectus and to
be a part of this proxy statement/prospectus from the date of filing of such
document. Any statement contained in this proxy statement/prospectus or in a
document incorporated or deemed to be incorporated by reference in this proxy
statement/prospectus shall be deemed to be modified or superseded for purposes
of the Registration Statement and this proxy statement/prospectus to the extent
that a statement contained in this proxy statement/prospectus or in any
subsequently filed document that also is or is deemed to be incorporated by
reference in this proxy statement/prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this proxy statement/prospectus.
This proxy statement/prospectus incorporates documents by reference which
are not included in or delivered with this document. Copies of the incorporated
documents (other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference therein) will be furnished upon written
or oral request without charge to each person to whom this proxy
statement/prospectus is delivered. Requests should be made by June 19, 2002 and
should be directed to Weatherford International, Inc., 515 Post Oak Boulevard,
Suite 600, Houston, Texas 77027, Attention: Investor Relations, or you may
telephone (713) 693-4000, or visit our website "http://www.weatherford.com".
Website materials are not part of this proxy statement/prospectus.
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained or incorporated by
reference in this proxy statement/prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized.
This proxy statement/prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any of the securities offered hereby in any
jurisdiction in which it is unlawful to make such an offer or solicitation.
47
ANNEX I
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 8, 2002,
among Weatherford International Ltd., a Bermuda exempted company ("Weatherford
Bermuda"), Weatherford International, Inc., a Delaware corporation ("Weatherford
Delaware"), Weatherford U.S. Holdings, L.L.C., a Delaware limited liability
company ("U.S. Holdings") and Weatherford Merger Inc., a Delaware corporation
("Merger Sub") and a newly formed, indirect wholly-owned subsidiary of
Weatherford Bermuda and a direct wholly-owned subsidiary of U.S. Holdings.
WHEREAS, the respective Boards of Directors of Weatherford Bermuda,
Weatherford Delaware, U.S. Holdings and Merger Sub deem it advisable and in the
best interests of their respective stockholders to reorganize such that
Weatherford Bermuda will become the ultimate parent of the Weatherford group
through the merger of Merger Sub with and into Weatherford Delaware;
WHEREAS, subject to the approval of the stockholders of Weatherford
Delaware, the respective Boards of Directors of Weatherford Bermuda, Weatherford
Delaware, U.S. Holdings and Merger Sub (and the stockholders of Weatherford
Bermuda, U.S. Holdings and Merger Sub) have each approved the merger of Merger
Sub with and into Weatherford Delaware, pursuant to which Weatherford Delaware
will be the surviving company in the merger and become a wholly-owned, indirect
subsidiary of Weatherford Bermuda (and a wholly-owned, direct subsidiary of U.S.
Holdings), upon the terms and subject to the conditions set forth in this
Agreement (the "Merger"), and whereby each issued share of common stock, par
value US$1.00 per share, of Weatherford Delaware ("Weatherford Delaware Common
Stock"), including those shares of Weatherford Delaware Common Stock held by
Weatherford Delaware or any direct or indirect wholly-owned subsidiary of
Weatherford Delaware, shall be automatically converted into the right to receive
one common share, par value US$1.00 per share, of Weatherford Bermuda
("Weatherford Bermuda Common Shares");
WHEREAS, Weatherford Bermuda, Weatherford Delaware, U.S. Holdings and
Merger Sub intend, by approving resolutions authorizing this Agreement, to adopt
this Agreement as a plan of reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder and that the transactions contemplated by this Agreement
be undertaken pursuant to such plan; and
WHEREAS, the consummation of the Merger requires, among other things, the
adoption of this Agreement by the affirmative vote of the holders of a majority
of the outstanding Weatherford Delaware Common Stock entitled to vote on such
adoption (the "Weatherford Delaware Stockholder Approval");
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
MERGER
1.01 Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Merger Sub shall be merged with and into Weatherford Delaware at the
Effective Time of the Merger. Following the Effective Time of the Merger, the
separate corporate existence of Merger Sub shall cease and Weatherford Delaware
shall continue as the surviving corporation (the "Surviving Corporation"),
becoming a wholly-owned, indirect subsidiary of Weatherford Bermuda (and a
wholly-owned, direct subsidiary of U.S. Holdings), and shall succeed to and
assume all the rights and obligations of Merger Sub in accordance with the DGCL.
1.02 Effective Time. Subject to the provisions of this Agreement, as soon
as practicable following the satisfaction or waiver of the conditions set forth
in Section 5.01, the parties shall duly prepare, execute and file a certificate
of merger (the "Certificate of Merger") in accordance with Section 251 of the
DGCL with the Secretary of State of the State of Delaware. The Merger shall
become effective upon the
I-1
filing of the Certificate of Merger (or at such later time reflected in such
Certificate of Merger as shall be agreed to by Weatherford Bermuda, U.S.
Holdings, Weatherford Delaware and Merger Sub). The date and time when the
Merger shall become effective is referred to as the "Effective Time."
1.03 Effects of the Merger. The Merger shall have the effects as provided
in the DGCL. The Surviving Corporation specifically assumes any obligation of
Merger Sub which requires that such obligation is specifically assumed by the
Surviving Corporation.
ARTICLE II
NAME, CERTIFICATE OF INCORPORATION,
DIRECTORS AND OFFICERS
2.01 Name of Surviving Corporation. The name of the Surviving Corporation
shall be "Weatherford International, Inc."
2.02 Certificate of Incorporation; By-laws.
(a) The Certificate of Incorporation of the Surviving Corporation
shall be amended as of the Effective Time pursuant to the Certificate of
Merger to contain the provisions in the Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time, except that
Article FIRST of such Certificate shall provide that the name of the
Surviving Corporation shall be "Weatherford International, Inc."
(b) The By-laws of Merger Sub in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation until
amended in accordance with applicable law.
2.03 Directors. The directors of Weatherford Delaware immediately prior
to the Effective Time shall be the directors of the Surviving Corporation, until
his or her successor shall be elected and qualify, subject to prior death,
resignation or removal in accordance with the Certificate of Incorporation and
By-laws of the Surviving Corporation, or as otherwise provided by applicable
law.
2.04 Officers. Each officer of Weatherford Delaware immediately prior to
the Effective Time shall be an officer of the Surviving Corporation, until his
or her successor shall be elected and qualify, subject to prior death,
resignation or removal in accordance with the Certificate of Incorporation and
By-laws of the Surviving Corporation, or as otherwise provided by applicable
law.
ARTICLE III
CONVERSION AND EXCHANGE OF STOCK
3.01 Weatherford Delaware Common Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares:
(a) Each issued and outstanding share of Weatherford Delaware Common
Stock shall be converted into and become the right to receive one fully
paid and nonassessable Weatherford Bermuda Common Share.
(b) Each issued share of Weatherford Delaware Common Stock that is
owned by Weatherford Delaware or by any direct or indirect wholly-owned
subsidiary of Weatherford Delaware prior to the Effective Time shall be
converted into and become the right to receive one fully paid and
nonassessable Weatherford Bermuda Common Share.
3.02 Merger Sub Common Stock. Each issued and outstanding share of common
stock, par value US$1.00 per share, of Merger Sub, shall be converted into and
become one share of common stock of the Surviving Corporation with the same
rights, power and privileges as the shares so converted and shall constitute the
only outstanding shares of capital stock of the Surviving Corporation.
I-2
3.03 Stock Option and Award Plans. Weatherford Delaware currently
maintains and sponsors the Weatherford International Incorporated 1987 Stock
Option Plan, as amended and restated, the Weatherford Enterra, Inc. 1991 Stock
Option Plan, as amended and restated, the Weatherford Enterra, Inc. Amended and
Restated Employee Stock Purchase Plan, the Weatherford Enterra, Inc. Restricted
Stock Incentive Plan, as amended and restated, the Weatherford International,
Inc. Executive Deferred Compensation Stock Ownership Plan and Related Trust
Agreement, the Energy Ventures, Inc. Employee Stock Option Plan, the Weatherford
International, Inc. 1998 Employee Stock Option Plan, the Amendment to Stock
Option Programs, and certain other plans and agreements providing for the grant
or award to its officers and employees of options or other rights to purchase or
receive Weatherford Delaware Common Stock (the "Employee Stock Plans").
Weatherford Delaware also maintains and sponsors the Weatherford International,
Inc. Non-Employee Director Deferred Compensation Plan and the Amended and
Restated Non-Employee Director Stock Option Plan, and certain other plans and
agreements providing for the grant or award to its directors of options or other
rights to purchase or receive Weatherford Delaware Common Stock (the "Director
Stock Plans"). Weatherford Delaware shall continue to maintain and sponsor the
Employee Stock Plans and Weatherford Bermuda shall assume the rights and
obligations of Weatherford Delaware under the Employee Stock Plans and the
Director Stock Plans. The outstanding options and other awards under the
Employee Stock Plans and Director Stock Plans shall be exercisable or issuable
upon the same terms and conditions as under such plans and the agreements
relating thereto immediately prior to the Effective Time of the Merger, except
that upon the exercise or issuance of such options or awards, Weatherford
Bermuda Common Shares shall be issuable in lieu of shares of Weatherford
Delaware Common Stock. The number of Weatherford Bermuda Common Shares issuable
upon the exercise or issuance of such an option or award immediately after the
Effective Time and the option price of each such option or award shall be the
number of shares and option price in effect immediately prior to the Effective
Time. All options or awards issued under the Employee Stock Plans and Director
Stock Plans after the Effective Time shall entitle the holder thereof to
purchase Weatherford Bermuda Common Shares in accordance with the terms of the
Employee Stock Plans and Director Stock Plans.
3.04 Exchange Agent; Exchange of Shares.
(a) Exchange Agent. As soon as reasonably practicable, U.S. Holdings
shall designate a bank or trust company reasonably acceptable to
Weatherford Delaware (the "Exchange Agent") for the purpose of exchanging
certificates representing shares of Weatherford Bermuda Common Shares (the
"Bermuda Certificates") upon surrender of certificates representing shares
of Weatherford Delaware Common Stock (the "Delaware Certificates"). Not
later than the Effective Time, U.S. Holdings will cause to be deposited
with the Exchange Agent, for the benefit of the holders of shares of
Weatherford Delaware Common Stock, certificates representing Weatherford
Bermuda Common Shares to be provided in exchange for Weatherford Delaware
Common Stock upon consummation of the Merger as set forth in Section 3.01
(the "Exchange Fund").
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Delaware Certificate(s) that immediately prior to the Effective Time
represented shares of Weatherford Delaware Common Stock whose shares were
converted into and became the right to receive Weatherford Bermuda Common
Shares pursuant to Section 3.01, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Delaware Certificates shall pass, only upon delivery of the Delaware
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Weatherford Bermuda may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Delaware
Certificates in exchange for Bermuda Certificates. Upon surrender of a
Delaware Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, properly completed and duly executed, and such
other documents as may be reasonably required by the Exchange Agent, the
holder of such Delaware Certificate shall be entitled to receive in
exchange therefor a Bermuda Certificate or Bermuda Certificates
representing the number of Weatherford Bermuda Common Shares which such
holder has the right to receive pursuant to the provisions of this Article
III, and the Delaware Certificate so surrendered shall be canceled. In the
event of a
I-3
transfer of ownership of a Delaware Certificate after the Effective Time,
exchange may be made to a person other than the person in whose name the
Delaware Certificate so surrendered is registered, if such Delaware
Certificate shall be properly endorsed or otherwise in proper form for
transfer and shall be accompanied by evidence satisfactory to the Exchange
Agent that any transfer or other taxes required by reason of such exchange
in the name other than that of the registered holder of such Delaware
Certificate or instrument either has been paid or is not payable. Until
surrendered as contemplated by this Section 3.04, each Delaware Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender Weatherford Bermuda Common Shares in
accordance with Section 3.01.
(c) No Further Ownership Rights in Weatherford Delaware Common
Stock. All Weatherford Bermuda Common Shares issued upon the Merger,
including any Bermuda Certificates issued upon the surrender for exchange
of Delaware Certificates in accordance with the terms of this Article III,
shall be deemed to have been issued (and paid) in full satisfaction of all
rights pertaining to the shares of Weatherford Delaware Common Stock
theretofore represented by such certificates, subject, however, to the
Surviving Corporation's obligation (if any) to pay any dividends or make
any other distributions with a record date prior to the Effective Time
which may have been declared or made by Weatherford Delaware on such shares
of Weatherford Delaware Common Stock in accordance with the terms of this
Agreement or prior to the date of this Agreement and which remain unpaid at
the Effective Time, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the shares of
Weatherford Delaware Common Stock which were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Delaware Certificates
are presented to the Surviving Corporation or Exchange Agent they shall be
canceled and exchanged as provided in this Article III, except as otherwise
provided by law.
(d) Termination of Exchange Fund; No Liability. At any time following
the first anniversary of the Effective Time, U.S. Holdings shall be
entitled to require the Exchange Agent to deliver to it any remaining
portion of the Exchange Fund, and holders shall be entitled to look only to
U.S. Holdings (subject to abandoned property, escheat or other similar
laws) with respect to the Weatherford Bermuda Common Shares and any
dividends or other distributions with respect thereto payable upon due
surrender of their Delaware Certificates, without any interest thereon.
Notwithstanding the foregoing, neither U.S. Holdings nor the Exchange Agent
shall be liable to any holder of a Delaware Certificate for Weatherford
Bermuda Common Shares (or dividends or distributions with respect thereto)
from the Exchange Fund in each case delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(e) Lost, Stolen or Destroyed Certificates. In the event any Delaware
Certificates shall have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such Delaware
Certificate(s) to be lost, stolen or destroyed and, if required by
Weatherford Bermuda, the posting by such person of a bond in such sum as
Weatherford Bermuda may reasonably direct as indemnity against any claim
that may be made against it or U.S. Holdings with respect to such Delaware
Certificate(s), the Exchange Agent will issue the Bermuda Certificates
pursuant to Section 3.01(a) deliverable in respect of the shares of
Weatherford Delaware Common Stock represented by such lost, stolen or
destroyed Delaware Certificates.
(f) Dividends; Distributions. No dividends or other distributions
with respect to Weatherford Bermuda Common Shares with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Delaware Certificate with respect to the Weatherford Bermuda Common Shares
represented thereby, and all such dividends, other distributions, if any,
shall be paid by Weatherford Bermuda to the Exchange Agent and shall be
included in the Exchange Fund, in each case until the surrender of such
Delaware Certificate in accordance with this Article III. Subject to the
effect of applicable abandoned property, escheat or similar laws, following
surrender of any such Delaware Certificate there shall be paid to the
holder of a Delaware Certificate representing the right to receive
Weatherford Bermuda Common Shares 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 Effective
I-4
Time theretofore paid with respect to such Weatherford Bermuda Common
Shares and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior
to such surrender and with a payment date subsequent to such surrender
payable with respect to such Weatherford Bermuda Common Shares. Weatherford
Bermuda shall make available to the Exchange Agent cash for these purposes,
if necessary.
3.05 Warrants. Effective at the Effective Time, the outstanding warrants
of Weatherford Delaware to acquire Weatherford Delaware Common Stock shall be
thereafter exercisable, in accordance with their terms, for the number of
Weatherford Bermuda Common Shares to which a holder of the shares of Weatherford
Delaware Common Stock issuable at the time of the Merger upon the exercise of
such warrants would have been entitled to receive as a result of the Merger, in
accordance with this Article III, if such exercise had taken place immediately
prior to the Merger.
3.06 Convertible Debt. Effective at the Effective Time, the Zero Coupon
Convertible Senior Debentures and the 5% Convertible Subordinated Preferred
Equivalent Debentures of Weatherford Delaware shall be thereafter convertible,
in accordance with their terms, for the number of Weatherford Bermuda Common
Shares to which a holder of the shares of Weatherford Delaware Common Stock
issuable at the time of the Merger upon the conversion of such debentures would
have been entitled to receive as a result of the Merger, in accordance with this
Article III, if such conversion had taken place immediately prior to the Merger.
3.07 Withholding Taxes. U.S. Holdings shall be entitled to deduct and
withhold, or cause the Exchange Agent to deduct and withhold, from the
consideration otherwise payable to any person pursuant to this Article III any
such amounts as are required under the Internal Revenue Code of 1986, as
amended, or any applicable provision of state, local or foreign tax law;
provided, however, that if such withholding may be eliminated or reduced through
the delivery of any certificate or other documentation, U.S. Holdings shall
provide each holder of Weatherford Delaware Common Stock with a reasonable
opportunity to deliver such certificate or other documentation. To the extent
that amounts are so withheld by U.S. Holdings, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
shares of Weatherford Delaware Common Stock in respect of which such deduction
and withholding was made by U.S. Holdings.
ARTICLE IV
BENEFIT AND COMPENSATION PLANS
4.01 At the Effective Time, (i) Weatherford Delaware shall continue to
sponsor and maintain each employee benefit and program to which Weatherford
Delaware is then a party (the "Employee Benefit Plans"), and (ii) Weatherford
Bermuda shall assume the rights and obligations of Weatherford Delaware under
each director benefit plan and program to which Weatherford Delaware is then a
party (the "Director Benefit Plans"). To the extent any Employee Benefit Plan or
Director Benefit Plan provides for the issuance or purchase of, or otherwise
relates to, Weatherford Delaware Common Stock, after the Effective Time, such
plan shall be deemed to provide for the issuance or purchase of, or otherwise
relate to, Weatherford Bermuda Common Shares.
ARTICLE V
CONDITIONS PRECEDENT
5.01 The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver of the following conditions:
(a) Stockholder Approval. The Weatherford Delaware Stockholder
Approval shall have been obtained.
I-5
(b) Form S-4. The registration statement on Form S-4 filed with the
Securities and Exchange Commission by Weatherford Bermuda in connection
with the issuance of the Weatherford Bermuda Common Shares in the Merger
shall have become effective under the Securities Act of 1933, as amended,
and shall not be the subject of any stop order or proceedings seeking a
stop order.
(c) NYSE Approval. The New York Stock Exchange (the "NYSE") shall
have confirmed that the Weatherford Bermuda Common Shares have been
approved for listing on the NYSE for at least ten trading days prior to the
Effective Time, subject to notice of issuance, and may trade on the NYSE
and succeed to the ticker symbol "WFT."
(d) Governmental, Regulatory and Other Material Third-Party
Consents. All filings required to be made prior to the Effective Time of
the Merger with, and all material consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time from,
any court or governmental or regulatory authority or agency, domestic or
foreign, or other person in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
will have been made or obtained (as the case may be).
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or restriction that, in the
discretion of the board of directors of Weatherford Delaware, would make
the consummation of the Merger or any of the other transactions
contemplated hereby inadvisable shall be in effect.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.01 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the Weatherford Delaware Stockholder
Approval, by action of the Board of Directors of Weatherford Bermuda,
Weatherford Delaware, U.S. Holdings or Merger Sub.
6.02 Effect of Termination. In the event of termination of this Agreement
as provided in Section 6.01, this Agreement shall forthwith become void and have
no effect, without any liability or obligation on the part of Weatherford
Delaware, U.S. Holdings, Merger Sub or Weatherford Bermuda, other than the
provisions of this Article VI and Article VII.
6.03 Amendment. This Agreement may be amended by the parties at any time
before or after the Weatherford Delaware Stockholder Approval; provided,
however, that after any such approval, there shall not be made any amendment
that alters or changes the amount or kind of shares to be received by
stockholders in the Merger; alters or changes any term of the certificate of
incorporation of the Surviving Corporation; or alters or changes any other terms
and conditions of this Agreement if any of the alterations or changes, alone or
in the aggregate, would adversely affect the holders of shares of Weatherford
Delaware Common Stock. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
6.04 Waiver. At any time prior to the Effective Time, the parties may
waive compliance by the other parties with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
6.05 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 6.01, an amendment of this
Agreement pursuant to Section 6.03 or a waiver pursuant to Section 6.04 shall,
in order to be effective, require action by the Board of Directors of
Weatherford Delaware, Weatherford Bermuda, U.S. Holdings and Merger Sub.
I-6
ARTICLE VII
GENERAL PROVISIONS
7.01 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Weatherford Bermuda:
Weatherford International Ltd.
c/o Corporate Managers (Barbados)Ltd.
First Floor, Trident House
Lower Broad Street
Bridgetown, Barbados
Attention: Office of the Secretary
(b) if to Weatherford Delaware:
Weatherford International, Inc.
515 Post Oak Boulevard, Suite 600
Houston, Texas 77027
Attention: Burt Martin
(c) if to Merger Sub:
Weatherford Merger, Inc.
c/o Weatherford U.S. Holdings, L.L.C.
515 Post Oak Boulevard, Suite 600
Houston, Texas 77027
Attention: Burt Martin
(d) if to U.S. Holdings:
Weatherford U.S. Holdings, L.L.C.
515 Post Oak Boulevard, Suite 600
Houston, Texas 77027
Attention: Burt Martin
7.02 Entire Agreement; No Third-party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (a) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of this
Agreement and (b) except for the provisions of Article III, is not intended to
confer upon any person other than the parties any rights or remedies.
7.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
I-7
IN WITNESS WHEREOF, Weatherford Delaware, Weatherford Bermuda, U.S.
Holdings and Merger Sub have caused this Agreement to be signed by their
respective officers thereunto duly authorized, all as of the date first written
above.
WEATHERFORD INTERNATIONAL LTD.
By: /s/ Burt M. Martin
------------------------------------
Name: Burt M. Martin
Title: Director
WEATHERFORD INTERNATIONAL, INC.
By: /s/ Burt M. Martin
------------------------------------
Name: Burt M. Martin
Title: Senior Vice President
WEATHERFORD MERGER, INC.
By: /s/ Burt M. Martin
------------------------------------
Name: Burt M. Martin
Title: President
WEATHERFORD U.S. HOLDINGS, L.L.C.
By: Weatherford Bermuda Holdings Ltd.,
Managing Member
By: /s/ Burt M. Martin
----------------------------------
Name: Burt M. Martin
Title: Director
I-8
ANNEX II
MEMORANDUM OF ASSOCIATION
FORM NO. 2
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF
COMPANY LIMITED BY SHARES
(SECTION 7(1) AND (2))
MEMORANDUM OF ASSOCIATION
OF
WEATHERFORD INTERNATIONAL LTD.
(HEREINAFTER REFERRED TO AS "THE COMPANY")
1. THE LIABILITY OF THE MEMBERS OF THE COMPANY IS LIMITED TO THE AMOUNT (IF ANY)
FOR THE TIME BEING UNPAID ON THE SHARES RESPECTIVELY HELD BY THEM.
2. WE, THE UNDERSIGNED, NAMELY,
<Table>
<Caption>
BERMUDIAN NUMBER OF
STATUS SHARES
NAME ADDRESS (YES/NO) NATIONALITY SUBSCRIBED
- ---- -------------- --------- ----------- ----------
David W.P. Cooke Clarendon Yes British One
House 2 Church
Street
Hamilton HM 11
Bermuda
James M. Macdonald " Yes British One
Graham B.R. Collis " Yes British One
</Table>
DO HEREBY RESPECTIVELY AGREE TO TAKE SUCH NUMBER OF SHARES OF THE COMPANY AS MAY
BE ALLOTTED TO US RESPECTIVELY BY THE PROVISIONAL DIRECTORS OF THE COMPANY, NOT
EXCEEDING THE NUMBER OF SHARES FOR WHICH WE HAVE RESPECTIVELY SUBSCRIBED, AND TO
SATISFY SUCH CALLS AS MAY BE MADE BY THE DIRECTORS, PROVISIONAL DIRECTORS OR
PROMOTERS OF THE COMPANY IN RESPECT OF THE SHARES ALLOTTED TO US RESPECTIVELY.
3. THE COMPANY IS TO BE AN EXEMPTED COMPANY AS DEFINED BY THE COMPANIES ACT
1981.
4. THE COMPANY, WITH THE CONSENT OF THE MINISTER OF FINANCE, HAS POWER TO HOLD
LAND SITUATE IN BERMUDA NOT EXCEEDING IN ALL, INCLUDING THE
FOLLOWING PARCELS:
N/A
5. THE AUTHORISED SHARE CAPITAL OF THE COMPANY IS US$12,000 DIVIDED INTO SHARES
OF US$1.00 EACH. THE MINIMUM SUBSCRIBED SHARE CAPITAL OF THE COMPANY IS
US$12,000.
II-1
6. THE OBJECTS FOR WHICH THE COMPANY IS FORMED AND INCORPORATED ARE:
(i) To act and or to perform all the functions of a holding company in
all its branches and to coordinate the policy and administration of
(i) any entity or entities wherever incorporated, established or
carrying on business which are in any manner directly or indirectly
owned or controlled by the Company or by the same entity in any
manner directly or indirectly owning or controlling the Company or
(ii) any group of which the Company or any such entity owned or
controlled by, or under common ownership or control with, the
Company is a member;
(ii) To provide and or procure financing and financial investment,
management and advisory services and administrative services to any
entity in which the Company owns, directly or indirectly an equity
interest (regardless of whether the same carries any voting rights
or preferred rights or restrictions); and, in connection with any of
the foregoing, to provide and or procure credit, credit enhancement,
financial accommodation, guarantees, loans and or advances with or
without interest or benefit to the Company to any such entity and to
lend to, deposit with and or charge or otherwise encumber in favour
of any financial institution, fund and or trust, all or any property
of the Company and or any interest therein to provide security or
collateral for any financing provided to any such entity;
(iii) To act as an investment company and for that purpose to acquire,
hold upon any terms, either in the name of the Company or that of
any nominee, personal property of all kinds, including without
limitation, shares, stock, debentures, debenture stock, ownership
interests, swaps, hedging securities (including put and call
options) annuities, notes, mortgages, bonds, obligations and other
securities, foreign exchange, foreign currency deposits and
commodities, issued or guaranteed by any company, partnership or
other entity wherever incorporated, established or carrying on
business, or by any government, sovereign, ruler, commissioners,
public body or authority, supreme, municipal, local or otherwise, by
original subscription, tender, purchase, exchange, underwriting,
participation in syndicates or in any other manner and whether or
not fully paid up, and to make payments thereon as called up or in
advance of calls or otherwise and to subscribe for the same, whether
conditionally or absolutely, and to hold the same with a view to
investment, but with the power to vary any investments, and to
exercise and enforce all rights and powers conferred by or incident
to the ownership thereof, and to invest and deal with the moneys of
the Company upon such securities and in such manner as may be from
time to time determined (including , without limitation, entering
into, investing in and reinvesting in futures and forward contracts,
derivative financial investments, foreign exchange contracts and
related options thereon).
(iv) packaging of goods of all kinds;
(v) buying, selling and dealing in goods of all kinds;
(vi) designing and manufacturing of goods of all kinds;
(vii) mining and quarrying and exploration for metals, minerals, fossil
fuel and precious stones of all kinds and their preparation for sale
or use;
(viii) exploring for, the drilling for, the moving, transporting and
refining petroleum and hydro carbon products including oil and oil
products;
(ix) scientific research including the improvement discovery and
development of processes, inventions, patents and designs and the
construction, maintenance and operation of laboratories and research
centres;
(x) land, sea and air undertakings including the land, ship and air
carriage of passengers, mails and goods of all kinds;
(xi) ships and aircraft owners, managers, operators, agents, builders and
repairers;
(xii) acquiring, owning, selling, chartering, repairing or dealing in
ships and aircraft;
II-2
(xiii) travel agents, freight contractors and forwarding agents;
(xiv) dock owners, wharfingers, warehousemen;
(xv) ship chandlers and dealing in rope, canvas oil and ship stores
of all kinds;
(xvi) all forms of engineering;
(xvii) farmers, livestock breeders and keepers, graziers, butchers, tanners
and processors of and dealers in all kinds of live and dead stock,
wool, hides, tallow, grain, vegetables and other produce;
(xviii) acquiring by purchase or otherwise and holding as an investment
inventions, patents, trade marks, trade names, trade secrets,
designs and the like;
(xix) buying, selling, hiring, letting and dealing in conveyances of
any sort;
(xx) employing, providing, hiring out and acting as agent for artists,
actors, entertainers of all sorts, authors, composers, producers,
directors, engineers and experts or specialists of any kind;
(xxi) to acquire by purchase or otherwise and hold, sell, dispose of and
deal in real property situated outside Bermuda and in personal
property of all kinds wheresoever situated; and
(xxii) to enter into any guarantee, contract of indemnity or suretyship and
to assure, support or secure with or without consideration or
benefit the performance of any obligations of any person or persons
and to guarantee the fidelity of individuals filling or about to
fill situations of trust or confidence.
7. POWERS OF THE COMPANY
1. The Company shall, pursuant to the Section 42 of the Companies Act 1981,
have the power to issue preference shares which are, at the option of the
holder, liable to be redeemed.
2. The Company shall, pursuant to Section 42A of the Companies Act 1981, have
the power to purchase its own shares.
SIGNED BY EACH SUBSCRIBER IN THE PRESENCE OF AT LEAST ONE WITNESS ATTESTING THE
SIGNATURE THEREOF.
/s/ David W. P. Cooke
- ------------------------------------------------------
/s/ James M. Macdonald
- ------------------------------------------------------
/s/ Graham B. R. Collis
- ------------------------------------------------------
(Subscribers)
/s/ Karen O'Connor
- ------------------------------------------------------
/s/ Karen O'Connor
- ------------------------------------------------------
/s/ Karen O'Connor
- ------------------------------------------------------
(Witnesses)
SUBSCRIBED this 1st day of April, 2002.
II-3
FORM NO. 7
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF INCREASE OF SHARE CAPITAL
OF
WEATHERFORD INTERNATIONAL LTD.
---------------------
(hereinafter referred to as "the Company")
DEPOSITED in the office of the Registrar of Companies on the 14th day of May,
2002, in accordance with the provisions of section 45(3) of the Companies Act
1981.
<Table>
Minimum Share Capital of the Company $12,000
Authorised Share Capital of the Company $12,000
Increase of Share Capital as authorised by a resolution
passed by unanimous written resolution of the sole member
of the Company on the 10th day of May, 2002 $509,988,000
------------
Authorised Share Capital as Increased: $510,000,000
</Table>
DULY STAMPED in the amount of BD$ being the stamp duty payable on the amount of
increase of Share Capital of the Company in accordance with the provisions of
The Stamp Duties Act, 1976.
/s/ DAWNA FERGUSON
------------------------------
Secretary
DATED THIS 14th day of May, 2002
II-4
FORM NO. 7a REGISTRATION NO. 31953
[GRAPHIC]
BERMUDA
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF INCREASE OF SHARE CAPITAL
THIS IS TO CERTIFY that a Memorandum of Increase of Share Capital
of
WEATHERFORD INTERNATIONAL LTD.
was delivered to the Registrar of Companies on the 14TH day of MAY, 2002 in
accordance with section 45(3) of THE COMPANIES ACT 1981 ("the Act").
<Table>
Given under my hand and Seal of the
REGISTRAR OF COMPANIES this 15TH
day of MAY, 2002
/s/ TINA TUCKER
---------------------------------
ACTING REGISTRAR OF COMPANIES
</Table>
<Table>
Capital prior to increase: US$ 12,000.00
Amount of increase: US$ 509,988,000.00
Present Capital: US$ 510,000,000.00
</Table>
II-5
ANNEX III
B Y E - L A W S
OF
WEATHERFORD INTERNATIONAL LTD.
III-1
TABLE OF CONTENTS
<Table>
<Caption>
BYE-LAW PAGE
- ------- ------
1 Interpretation.............................................. III-5
2 Board of Directors.......................................... III-6
3 Management of the Company................................... III-6
4 Power to appoint managing director or chief executive
officer................................................... III-6
5 Power to appoint manager.................................... III-7
6 Power to authorise specific actions......................... III-7
7 Power to appoint attorney................................... III-7
8 Power to delegate to a committee, including Executive
Committee................................................. III-7
9 Power to appoint and dismiss employees...................... III-8
10 Power to borrow and charge property......................... III-8
11 Exercise of power to purchase shares of or discontinue the
Company................................................... III-8
12 Election of Directors....................................... III-8
13 Defects in appointment of Directors......................... III-10
14 Alternate Directors......................................... III-10
15 Removal of Directors........................................ III-10
16 Vacancies on the Board...................................... III-11
17 Notice of meetings of the Board............................. III-11
18 Quorum at meetings of the Board............................. III-11
19 Meetings of the Board....................................... III-11
20 Unanimous written resolutions............................... III-11
21 Contracts and disclosure of Directors' interests............ III-12
22 Remuneration of Directors................................... III-12
23 Officers of the Company..................................... III-12
24 Appointment of Officers..................................... III-12
25 Remuneration of Officers.................................... III-12
26 Duties of Officers.......................................... III-13
27 Chairman of meetings........................................ III-13
28 Register of Directors and Officers.......................... III-13
29 Obligations of Board to keep minutes........................ III-13
30 Indemnification of Directors and Officers of the Company,
advancement of expenses................................... III-13
31 Waiver of claim by Shareholder.............................. III-14
32 Notice of annual general meeting............................ III-14
33 Notice of special general meeting........................... III-14
34 Accidental omission of notice of general meeting............ III-14
35 Meeting called on requisition of Shareholders and any other
business proposed by Shareholders......................... III-14
36 Short notice................................................ III-15
37 Postponement and cancellation of meetings................... III-15
38 Quorum for general meeting.................................. III-16
39 Adjournment of meetings..................................... III-16
40 Attendance and security at meetings......................... III-16
41 Written resolutions......................................... III-16
42 Attendance of Directors..................................... III-16
</Table>
III-2
<Table>
<Caption>
BYE-LAW PAGE
- ------- ------
43 Voting at meetings.......................................... III-17
44 Decision of chairman........................................ III-17
45 Voting on a poll............................................ III-17
46 Procedure for a poll........................................ III-17
47 Seniority of joint holders voting........................... III-18
48 Instrument of proxy......................................... III-18
49 Representation of corporations at meetings.................. III-18
50 Rights of shares............................................ III-19
51 Power to issue shares....................................... III-20
52 Variation of rights, alteration of share capital and
purchase of shares of the Company......................... III-21
53 Registered holder of shares................................. III-21
54 Death of a joint holder..................................... III-21
55 Share certificates.......................................... III-21
56 Calls on shares............................................. III-22
57 Forfeiture of Shares........................................ III-22
58 Contents of Register of Shareholders........................ III-23
59 Inspection of Register of Shareholders...................... III-23
60 Determination of record dates............................... III-23
61 Instrument of transfer...................................... III-23
62 Restriction on Transfer..................................... III-23
63 Transfers by joint holders.................................. III-23
64 Representative of deceased Shareholder...................... III-24
65 Registration on death or bankruptcy......................... III-24
66 Declaration of dividends by Board........................... III-24
67 Other distributions......................................... III-24
68 Reserve fund................................................ III-24
69 Payment of Dividends and Deduction of amounts due to the
Company................................................... III-24
70 Issue of bonus shares....................................... III-25
71 Records of account.......................................... III-25
72 Financial year end.......................................... III-26
73 Financial statements........................................ III-26
74 Appointment of Auditor...................................... III-26
75 Remuneration of Auditor..................................... III-26
76 Vacation of office of Auditor............................... III-26
77 Access to books of the Company.............................. III-26
78 Report of the Auditor....................................... III-26
79 Notices to Shareholders of the Company...................... III-26
80 Notices to joint Shareholders............................... III-27
81 Service and delivery of notice.............................. III-27
82 The seal.................................................... III-27
83 Manner in which seal is to be affixed....................... III-27
84 Winding-up/distribution by liquidator....................... III-27
85 Business Combinations....................................... III-28
</Table>
III-3
<Table>
<Caption>
BYE-LAW PAGE
- ------- ------
86 Alteration of Bye-laws...................................... III-28
Schedule -- Form A (Bye-law 48)...................................... III-29
Schedule -- Form B (Bye-law 57)...................................... III-30
Schedule -- Form C (Bye-law 61)...................................... III-31
Schedule -- Form D (Bye-law 65)...................................... III-32
</Table>
III-4
INTERPRETATION
1. INTERPRETATION
(1) In these Bye-laws the following words and expressions shall, where not
inconsistent with the context, have the following meanings respectively:
"Act" means the Companies Act 1981 as amended from time to time;
"Alternate Director" means an alternate Director appointed in accordance
with these Bye-laws;
"Auditor" includes any individual or partnership;
"Board" means the Board of Directors appointed or elected pursuant to
these Bye-laws and acting by resolution in accordance with the Act and
these Bye-laws or the Directors present at a meeting of Directors at
which there is a quorum;
"Company" means the company for which these Bye-laws are approved and
confirmed;
"Director" means a director of the Company and shall include an
Alternate Director;
"Executive Committee" means the executive committee appointed by the
Board pursuant to these Bye-laws;
"Group" means the Company and every company and other entity which is
for the time being controlled by or under common control with the
Company (for these purposes, "control" means the power to direct the
management or policies of the person in question, whether by means of an
ownership interest or otherwise);
"notice" means written notice as further defined in these Bye-laws
unless otherwise specifically stated;
"Officer" means any person appointed by the Board to hold an office in
the Company;
"Register of Directors and Officers" means the Register of Directors and
Officers referred to in these Bye-laws;
"Register of Shareholders" means the Register of Shareholders referred
to in these Bye-laws;
"Resident Representative" means any person appointed to act as resident
representative and includes any deputy or assistant resident
representative;
"Secretary" means the person appointed to perform any or all the duties
of secretary of the Company and includes any deputy or assistant
secretary; and
"Shareholder" means the person registered in the Register of
Shareholders as the holder of shares in the Company and, when two or
more persons are so registered as joint holders of shares, means the
person whose name stands first in the Register of Shareholders as one of
such joint holders or all of such persons as the context so requires;
(2) In these Bye-laws, where not inconsistent with the context:
(a) words denoting the plural number include the singular number and
vice versa;
(b) words denoting the masculine gender include the feminine gender;
(c) words importing persons include companies, associations or bodies
of persons whether corporate or not;
(d) the word:
(i) "may" shall be construed as permissive;
(ii) "shall" shall be construed as imperative; and
III-5
(e) unless otherwise provided herein words or expressions defined in
the Act shall bear the same meaning in these Bye-laws.
(3) In these Bye-laws, expressions referring to writing or written shall,
unless the contrary intention appears, include facsimile, printing,
lithography, photography and other modes of representing words in a
visible form.
(4) In these Bye-laws, headings are used for convenience only and are not to
be used or relied upon in the construction hereof.
(5) In these Bye-laws, (a) powers of delegation shall not be restrictively
construed but the widest interpretation shall be given thereto; (b) the
word "Board" in the context of the exercise of any power contained in
these Bye-laws includes any committee appointed pursuant to Bye-law 8
and any manager or agent of the Company to which or, as the case may be,
to whom the power in question has been delegated; (c) no power of
delegation shall be limited by the existence or, except where expressly
provided by the terms of delegation, the exercise of any other power of
delegation; and (d) except where expressly provided by the terms of
delegation, the delegation of a power shall not exclude the concurrent
exercise of that power by any other body or person who is for the time
being authorised to exercise it under these Bye-laws or under another
delegation of power.
BOARD OF DIRECTORS
2. BOARD OF DIRECTORS
The business of the Company shall be managed and conducted by the Board.
3. MANAGEMENT OF THE COMPANY
(1) In managing the business of the Company, the Board may exercise all such
powers of the Company as are not, by statute or by these Bye-laws,
required to be exercised by the Company in general meeting subject,
nevertheless, to these Bye-laws, the provisions of any statute and to
such directions as may be prescribed by the Company in general meeting.
The Board may also present any petition and make any application in
connection with the liquidation or reorganisation of the Company.
(2) Subject to these Bye-laws, the Board may from time to time and at any
time delegate to any company, firm, person or body of persons any power
of the Board (including the power to sub-delegate).
(3) No regulation or alteration to these Bye-laws made by the Company in
general meeting shall invalidate any prior act of the Board which would
have been valid if that regulation or alteration had not been made.
(4) The Board may procure that the Company pays all expenses incurred in
promoting and incorporating the Company.
4. POWER TO APPOINT MANAGING DIRECTOR OR CHIEF EXECUTIVE OFFICER
The Board may from time to time appoint one or more Directors to the office
of managing director or chief executive officer of the Company who shall,
subject to the control of the Board, supervise and administer all of the
general business and affairs of the Company.
III-6
5. POWER TO APPOINT MANAGER
The Board may appoint a person to act as manager of the Company's day to day
business and may entrust to and confer upon such manager such powers and
duties as it deems appropriate for the transaction or conduct of such
business.
6. POWER TO AUTHORISE SPECIFIC ACTIONS
The Board may from time to time and at any time authorise any company, firm,
person or body of persons to act on behalf of the Company for any specific
purpose and in connection therewith to execute any agreement, document or
instrument on behalf of the Company.
7. POWER TO APPOINT ATTORNEY
The Board may from time to time and at any time by power of attorney appoint
any company, firm, person or body of persons, whether nominated directly or
indirectly by the Board, to be an attorney of the Company for such purposes
and with such powers, authorities and discretions (not exceeding those
vested in or exercisable by the Board) and for such period and subject to
such conditions as it may think fit and any such power of attorney may
contain such provisions for the protection and convenience of persons
dealing with any such attorney as the Board may think fit and may also
authorise any such attorney to sub-delegate all or any of the powers,
authorities and discretions so vested in the attorney. Such attorney may, if
so authorised under the seal of the Company, execute any deed or instrument
under such attorney's personal seal with the same effect as the affixation
of the seal of the Company.
8. POWER TO DELEGATE TO A COMMITTEE, INCLUDING EXECUTIVE COMMITTEE
(1) The Board may delegate any of its powers to one or more committees
appointed by the Board which may consist partly or entirely of
non-Directors and every such committee shall conform to such directions
as the Board shall impose on them. Subject to Bye-law 8(4), the meetings
and proceedings of any such committee shall be governed by the
provisions of these Bye-laws regulating the meetings and proceedings of
the Board, so far as the same are applicable, are not inconsistent with
the following provisions of this Bye-law and are not superseded by
directions imposed by the Board.
(2) Without limiting the generality of Bye-law 8(1) above, the Board may
appoint an Executive Committee consisting of one or more Directors, one
of whom shall be designated as chairman of the Executive Committee. Each
member of the Executive Committee shall continue as a member thereof
until the expiration of his or her term as a Director or his or her
earlier resignation or removal as a member of the Executive Committee or
as a Director or until he or she otherwise vacates the office of
Director.
(3) The Executive Committee shall have and may exercise all the powers and
authority of the Board, except that the Executive Committee shall not
have power or authority in relation to the following matters: (i)
approving or adopting, or recommending to the Shareholders, any action
or matter expressly required by applicable law or these Bye-laws to be
submitted to the Shareholders for approval; or (ii) rescinding, altering
or amending these Bye-laws or any provision hereof.
(4) The Executive Committee shall fix its own rules of procedure and shall
meet at such times and at such place or places as may be provided by
such rules or as the s of the Executive Committee shall determine. The
Executive Committee shall keep minutes of its meetings, which it shall
deliver to the Board from time to time. The chairman of the Executive
Committee or, in his or her absence, a member of the Executive Committee
chosen by a majority of the members present shall preside at meetings of
the Executive Committee.
III-7
(5) A majority of the Executive Committee shall constitute a quorum for the
transaction of business, and the affirmative vote of a majority of the
members present at any meeting at which there is a quorum shall be
required for any action of the Executive Committee; provided, however,
that if the Executive Committee shall consist of only one member, that
one member shall constitute a quorum.
(6) Unless otherwise provided by the Board, a majority of the members of
each committee other than the Executive Committee shall constitute a
quorum, and the acts of a majority of the members present at a meeting
at which a quorum is present shall be required for any action of such
committee.
(7) In the absence of a member of any committee, member or members thereof
present at any meeting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board to act at the
meeting in the place of any such absent or disqualified member. The
Board shall have the power at any time to fill vacancies in, to change
the membership of, and to discharge, any committee or any member of any
committee.
(8) Members of any committee shall be entitled to such compensation for
their services as members of the committee and to such reimbursement for
any reasonable expenses incurred in attending committee meetings as may
from time to time be fixed by the Board. Any committee member may waive
compensation for any meeting. Subject to Bye-law 21(1), any committee
member receiving compensation under these provisions shall not be barred
from serving the Company in any other capacity and from receiving
compensation and reimbursement of reasonable expenses for such other
services.
9. POWER TO APPOINT AND DISMISS EMPLOYEES
The Board may appoint, suspend or remove any manager, secretary, clerk,
agent or employee of the Company and may fix their remuneration and
determine their duties.
10. POWER TO BORROW AND CHARGE PROPERTY
The Board may exercise all the powers of the Company to borrow money and to
mortgage or charge its undertaking, property and uncalled capital, or any
part thereof, and may issue debentures, debenture stock and other securities
whether outright or as security for any debt, liability or obligation of the
Company or any third party.
11. EXERCISE OF POWER TO PURCHASE SHARES OF OR DISCONTINUE THE COMPANY
(1) The Board may exercise all the powers of the Company to purchase all or
any part of its own shares pursuant to Section 42A of the Act.
(2) The Board may exercise all the powers of the Company to discontinue the
Company to a named country or jurisdiction outside Bermuda pursuant to
Section 132G of the Act.
12. ELECTION OF DIRECTORS
(1) The Board shall consist of not less than three (3) nor more than
eighteen (18) Directors, the exact number to be such as the Directors
may from time to time determine, who shall be elected or appointed in
the first place at the statutory meeting of the Company and thereafter,
except as provided in these Bye-laws, at the annual general meeting or
at any special general meeting called for the purpose and who shall hold
office for such term as the Shareholders may determine or, in the
absence of such determination, until the next annual general meeting or
until their successors are elected or appointed or their office is
otherwise vacated.
(2) Any vacancy on the Board left unfilled at a general meeting may be
filled by the Board.
III-8
(3) Only persons who are nominated in accordance with the following
procedures shall be eligible for election as Directors. Nominations of
persons for election as Directors may be made at any annual general
meeting of Shareholders, or at any special general meeting of
Shareholders called for the purpose of electing Directors, (a) by or at
the direction of the Board (or any duly authorized committee thereof) or
(b) by any person who: (i) is a Shareholder of record or beneficial
owner of shares of the Company on the date of the giving of the notice
provided for in this Bye-law and on the record date for the
determination of Shareholders entitled to receive notice of and vote at
such meeting; and (ii) complies with the notice procedures set forth in
this Bye-law.
(4) In addition to any other applicable requirements, for a nomination to be
made by a Shareholder or beneficial owner pursuant to paragraph (3)(b)
of this Bye-law, such Shareholder or beneficial owner must have given
timely notice thereof in proper written form to the Secretary.
(5) To be timely, a notice given to the Secretary pursuant to paragraph (4)
of this Bye-law must be delivered to or mailed and received at the
registered office and the principal executive offices of the Company as
set forth in the Company's filings with the U.S. Securities and Exchange
Commission: (a) in the case of an annual general meeting, not less than
sixty (60) days nor more than ninety (90) days prior to the anniversary
date of the immediately preceding annual general meeting; provided,
however, that in the event that the annual general meeting is called for
a date that is not within sixty (60) days before or after such
anniversary date, in order to be timely notice must be so received not
later than the close of business on the seventh (7th) day following the
day on which notice of the annual general meeting was mailed or public
disclosure of the date of the annual general meeting was made, whichever
first occurs; and (b) in the case of a special general meeting called
for the purpose of electing Directors, not later than the close of
business on the seventh (7th) day following the day on which notice of
the special general meeting was mailed or public disclosure of the date
of the special general meeting was made, whichever first occurs.
(6) To be in proper written form, a notice given to the Secretary pursuant
to paragraph (4) of this Bye-law must set forth: (a) as to each person
whom the Shareholder or beneficial owner proposes to nominate for
election as a Director (i) the name, age, business address and
residential address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and number of shares
which are owned beneficially or registered in the name of the person,
and (iv) any other information relating to the person that would be
required to be disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the U.S. Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder; and (b) as to the Shareholder or beneficial
owner giving the notice (i) the name and record address of such
Shareholder or beneficial owner, (ii) the class or series and number of
shares which are owned beneficially or registered in the name of such
Shareholder or beneficial owner, (iii) a description of all arrangements
or understandings between such Shareholder or beneficial owner and each
proposed nominee and any other person or persons (including their names)
pursuant to which the nomination(s) are to be made by such Shareholder
or beneficial owner, (iv) a representation that such Shareholder intends
to appear in person or by proxy, or such beneficial owner intends to
appear as proxy holder or corporate representative of the registered
Shareholder, at the meeting to nominate the persons named in its notice,
and (v) any other information relating to such Shareholder or beneficial
owner that would be required to be disclosed in a proxy statement or
other filings required to be made in connection with solicitations of
proxies for election of directors pursuant to Section 14 of the Exchange
Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to
being named as a nominee and to serve as a Director if elected.
III-9
(7) No person shall be eligible for election as a Director unless nominated
in accordance with the procedures set forth in this Bye-law. If the
chairman of the meeting determines that a nomination was not made in
accordance with the foregoing procedures, the chairman shall declare to
the meeting that the nomination was defective and such defective
nomination shall be disregarded.
(8) Where the number of persons validly proposed for re-election or election
as a Director is greater than the number of Directors to be elected, the
persons receiving the most votes (up to the number of Directors to be
elected) shall be elected as Directors, and an absolute majority of the
votes cast shall not be a prerequisite to the election of such
Directors.
13. DEFECTS IN APPOINTMENT OF DIRECTORS
All acts done bona fide by any meeting of the Board or by a committee of the
Board or by any person acting as a Director shall, notwithstanding that it
be afterwards discovered that there was some defect in the appointment of
any Director or person acting as aforesaid, or that they or any of them were
disqualified, be as valid as if every such person had been duly appointed
and was qualified to be a Director.
14. ALTERNATE DIRECTORS
(1) Any general meeting of the Company may elect a person or persons to act
as a Director in the alternative to any one or more of the Directors of
the Company or may authorise the Board to appoint such Alternate
Directors. Unless the Shareholders otherwise resolve, any Director may
appoint a person or persons to act as a Director in the alternative to
himself or herself by notice in writing deposited with the Secretary.
Any person so elected or appointed shall have all the rights and powers
of the Director or Directors for whom such person is appointed in the
alternative provided that such person shall not be counted more than
once in determining whether or not a quorum is present.
(2) An Alternate Director shall be entitled to receive notice of all
meetings of the Board and to attend and vote at any such meeting at
which a Director for whom such Alternate Director was appointed in the
alternative is not personally present and generally to perform at such
meeting all the functions of such Director for whom such Alternate
Director was appointed.
(3) An Alternate Director shall cease to be such if the Director for whom
such Alternate Director was appointed ceases for any reason to be a
Director but may be re-appointed by the Board as alternate to the person
appointed to fill the vacancy in accordance with these Bye-laws.
15. REMOVAL OF DIRECTORS
(1) Subject to any provision to the contrary in these Bye-laws, the
Shareholders entitled to vote for the election of Directors may, at any
special general meeting convened and held in accordance with these
Bye-laws, remove a Director, only with cause, provided that the notice
of any such meeting convened for the purpose of removing a Director
shall contain a statement of the intention so to do and be served on
such Director not less than 14 days before the meeting and at such
meeting such Director shall be entitled to be heard on the motion for
such Director's removal.
(2) A vacancy on the Board created by the removal of a Director under the
provisions of subparagraph (1) of this Bye-law may be filled by the
Shareholders at the meeting at which such Director is removed and, in
the absence of such election or appointment, the Board may fill the
vacancy.
III-10
16. VACANCIES ON THE BOARD
(1) The Board shall have the power from time to time and at any time to
appoint any person as a Director to fill a vacancy on the Board
occurring as the result of the death, disability, disqualification or
resignation of any Director, or as a result of an increase in the number
of Directors determined by the Board from time to time, and to appoint
an Alternate Director to any Director so appointed.
(2) The Board may act notwithstanding any vacancy in its number but, if and
so long as its number is reduced below the number fixed by these
Bye-laws as the quorum necessary for the transaction of business at
meetings of the Board, the continuing Directors or Director may act for
the purpose of (i) summoning a general meeting of the Company or (ii)
preserving the assets of the Company.
(3) The office of Director shall be vacated if the Director:
(a) is removed from office pursuant to these Bye-laws or is prohibited
from being a Director by law;
(b) is or becomes bankrupt or makes any arrangement or composition with
his creditors generally;
(c) is or becomes of unsound mind or dies;
(d) resigns his or her office by notice in writing to the Company.
17. NOTICE OF MEETINGS OF THE BOARD
(1) The Chairman or any two Directors may, and the Secretary on the
requisition of the Chairman or any two Directors shall, at any time
summon a meeting of the Board.
(2) Notice of a meeting of the Board shall be deemed to be duly given to a
Director if it is given to such Director verbally in person or by
telephone or otherwise communicated or sent to such Director by post,
cable, telex, telecopier, facsimile, electronic mail or other mode of
representing words in a legible and non-transitory form at such
Director's last known address or any other address given by such
Director to the Company for this purpose.
18. QUORUM AT MEETINGS OF THE BOARD
The quorum necessary for the transaction of business at a meeting of the
Board shall be the greater of two Directors, and not less than one third of
the total number of Directors (excluding Alternate Directors) then in
office.
19. MEETINGS OF THE BOARD
(1) The Board may meet for the transaction of business, adjourn and
otherwise regulate its meetings as it sees fit.
(2) Directors may participate in any meeting of the Board by means of such
telephone, electronic or other communication facilities as permit all
persons participating in the meeting to communicate with each other
simultaneously and instantaneously, and participation in such a meeting
shall constitute presence in person at such meeting.
(3) A resolution put to the vote at a meeting of the Board shall be carried
by the affirmative votes of a majority of the votes cast and in the case
of an equality of votes the resolution shall fail.
20. UNANIMOUS WRITTEN RESOLUTIONS
A resolution in writing signed by all the Directors which may be in
counterparts, shall be as valid as if it had been passed at a meeting of the
Board duly called and constituted, such resolution to be
III-11
effective on the date on which the last Director signs the resolution. For
the purposes of this Bye-law only, "Director" shall not include an Alternate
Director.
21. CONTRACTS AND DISCLOSURE OF DIRECTORS' INTERESTS
(1) Any Director, or any Director's firm, partner or any company with whom
any Director is associated, may act in a professional capacity for the
Company and such Director or such Director's firm, partner or such
company shall be entitled to remuneration for professional services as
if such Director were not a Director, provided that nothing herein
contained shall authorise a Director or Director's firm, partner or such
company to act as Auditor of the Company.
(2) A Director who is directly or indirectly interested in a contract or
proposed contract or arrangement with the Company shall declare the
nature of such interest as required by the Act.
(3) Following a declaration being made pursuant to this Bye-law, and unless
disqualified by the chairman of the relevant Board meeting, a Director
may vote in respect of any contract or proposed contract or arrangement
in which such Director is interested and may be counted in the quorum at
such meeting.
22. REMUNERATION OF DIRECTORS
(1) Directors shall be entitled to such compensation for their services as
Directors as may from time to time be fixed by the Board. The
compensation may be on such basis as is determined by the Board. Any
Director may waive compensation for any meeting. The Directors may also
be paid all travel, hotel and other expenses properly incurred by them
in attending and returning from meetings of the Board, any committee
appointed by the Board, general meetings of the Company, or in
connection with the business of the Company or their duties as Directors
generally.
(2) Subject to Bye-law 21(1), any Director receiving compensation and
reimbursement under these provisions shall not be barred from serving
the Company in any other capacity and receiving compensation and
reimbursement for reasonable expenses for such other services.
OFFICERS
23. OFFICERS OF THE COMPANY
The Officers of the Company shall consist of a President and a Vice
President or a Chairman and a Deputy Chairman, a Secretary and such
additional Officers as the Board may from time to time determine all of whom
shall be deemed to be Officers for the purposes of these Bye-laws.
24. APPOINTMENT OF OFFICERS
(1) The Board shall, as soon as possible after the statutory meeting of
Shareholders and after each annual general meeting, appoint a President
and a Vice President or a Chairman and a Deputy Chairman who shall be
Directors.
(2) The Secretary and additional Officers, if any, shall be appointed by the
Board from time to time.
25. REMUNERATION OF OFFICERS
The Chairman shall receive such remuneration as the Board may from time to
time determine. The Officers other than the Chairman shall receive such
remuneration as the Chairman may from time to time determine.
III-12
26. DUTIES OF OFFICERS
The Officers shall have such powers and perform such duties in the
management, business and affairs of the Company as may be delegated to them
by the Board from time to time.
27. CHAIRMAN OF MEETINGS
Unless otherwise agreed by a majority of those attending and entitled to
attend and vote thereat, the Chairman, if there be one, and if not the
President shall act as chairman at all meetings of the Shareholders and of
the Board at which such person is present. In their absence the Deputy
Chairman or Vice President, if present, shall act as chairman and in the
absence of all of them a chairman shall be appointed or elected by those
present at the meeting and entitled to vote.
28. REGISTER OF DIRECTORS AND OFFICERS
The Board shall cause to be kept in one or more books at the registered
office of the Company a Register of Directors and Officers and shall enter
therein the particulars required by the Act.
MINUTES
29. OBLIGATIONS OF BOARD TO KEEP MINUTES
(1) The Board shall cause minutes to be duly entered in books provided for
the purpose:
(a) of all elections and appointments of Officers;
(b) of the names of the Directors present at each meeting of the Board
and of any committee appointed by the Board; and
(c) of all resolutions and proceedings of general meetings of the
Shareholders, meetings of the Board and meetings of committees
appointed by the Board.
(2) Minutes prepared in accordance with the Act and these Bye-laws shall be
kept by the Secretary at the registered office of the Company.
INDEMNITY
30. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY, ADVANCEMENT OF
EXPENSES
(1) The Directors, Secretary and other Officers (such term to include, for
the purposes of Bye-laws 30 and 31, any person appointed to any
committee by the Board) for the time being acting in relation to any of
the affairs of the Company and the liquidator or trustees (if any) for
the time being acting in relation to any of the affairs of the Company
and every one of them, and their heirs, executors and administrators,
shall be indemnified and secured harmless out of the assets of the
Company from and against all actions, costs, charges, losses, damages
and expenses which they or any of them, their heirs, executors or
administrators, shall or may incur or sustain by or by reason of any act
done, concurred in or omitted in or about the execution of their duty,
or supposed duty, or in their respective offices or trusts, and none of
them shall be answerable for the acts, receipts, neglects or defaults of
the others of them or for joining in any receipts for the sake of
conformity, or for any bankers or other persons with whom any moneys or
effects belonging to the Company shall or may be lodged or deposited for
safe custody, or for insufficiency or deficiency of any security upon
which any moneys of or belonging to the Company shall be placed out on
or invested, or for any other loss, misfortune or damage which may
happen in the execution of their respective offices or trusts, or in
relation thereto, PROVIDED THAT this indemnity shall not extend to any
matter in respect of any fraud or dishonesty which may attach to any of
said persons.
III-13
(2) Subject to the Act and these Bye-laws, expenses incurred in defending
any civil or criminal action or proceeding for which indemnification is
required pursuant to this Bye-law 30 shall be paid by the Company in
advance of the final disposition of such action or proceeding upon
receipt of an undertaking by or on behalf of the indemnified party to
repay such amount if it shall ultimately be determined that the
indemnified party is not entitled to be indemnified pursuant to this
Bye-law 30. The Company shall accept any such undertaking of any such
person without regard to the financial condition of such person.
Notwithstanding the foregoing, this paragraph (2) will not require the
Company to advance expenses with respect to any matter initiated by or
on behalf of any such person against the Company or any of its
subsidiaries, whether as an initial action or by counter or similar
claim, without the prior approval of the Board. The provisions of this
paragraph (2) shall inure to the benefit of the heirs, executors and
administrators of any person entitled to the benefits hereof. No
amendment to this paragraph (2), directly or by amendment to any other
provision of these Bye-laws, shall have any retroactive effect with
respect to any matter arising from or based on any act or omission to
act by any person which occurs prior to the effectiveness of that
amendment.
31. WAIVER OF CLAIM BY SHAREHOLDER
Each Shareholder agrees to waive any claim or right of action such
Shareholder might have, whether individually or by or in the right of the
Company, against any Director or Officer on account of any action taken by
such Director or Officer, or the failure of such Director or Officer to take
any action in the performance of his duties with or for the Company,
PROVIDED THAT such waiver shall not extend to any matter in respect of any
fraud or dishonesty which may attach to such Director or Officer.
MEETINGS
32. NOTICE OF ANNUAL GENERAL MEETING
The annual general meeting of the Company shall be held in each year other
than the year of incorporation at such time and place as the Chairman or the
Board shall appoint. At least 10 days notice of such meeting shall be given
to each Shareholder stating the date, place and time at which the meeting is
to be held, that the election of Directors will take place thereat, and as
far as practicable, the other business to be conducted at the meeting.
33. NOTICE OF SPECIAL GENERAL MEETING
The Chairman or the Board may convene a special general meeting of the
Company whenever in their judgment such a meeting is necessary, upon not
less than 10 days' notice which shall state the date, time, place and the
general nature of the business to be considered at the meeting.
34. ACCIDENTAL OMISSION OF NOTICE OF GENERAL MEETING
The accidental omission to give notice of a general meeting to, or the
non-receipt of notice of a general meeting by, any person entitled to
receive notice shall not invalidate the proceedings at that meeting.
35. MEETING CALLED ON REQUISITION OF SHAREHOLDERS AND OTHER BUSINESS PROPOSED BY
SHAREHOLDERS
(1) Notwithstanding anything herein, the Board shall, on the requisition of
Shareholders holding at the date of the deposit of the requisition not
less than one-tenth of such of the paid-up share capital of the Company
as at the date of the deposit carries the right to vote at general
meetings of the Company, forthwith proceed to convene a special general
meeting of the Company and the provisions of Section 74 of the Act shall
apply.
III-14
(2) In addition to any rights of Shareholders under the Act, other business
may be proposed to be brought before any annual general meeting of the
Company, or any special general meeting of the Company by any person
who: (i) is a Shareholder of record or beneficial owner of shares of the
Company on the date of the giving of the notice provided for in this
Bye-law and on the record date for the determination of Shareholders
entitled to receive notice of and vote at such meeting; and (ii)
complies with the notice procedures set forth in this Bye-law.
(3) In addition to any other applicable requirements, for other business to
be proposed by a Shareholder or beneficial owner pursuant to paragraph
(2) of this Bye-law, such Shareholder or beneficial owner must have
given timely notice thereof in proper written form to the Secretary.
(4) To be timely, a notice given to the Secretary pursuant to paragraph (3)
of this Bye-law must be delivered to or mailed and received at the
registered office and the principal executive offices of the Company as
set forth in the Company's filings with the U.S. Securities and Exchange
Commission: (a) in the case of an annual general meeting, not less than
sixty (60) days nor more than ninety (90) days prior to the anniversary
date of the immediately preceding annual general meeting; provided,
however, that in the event that the annual general meeting is called for
a date that is not within sixty (60) days before or after such
anniversary date, in order to be timely notice must be so received not
later than the close of business on the seventh (7th) day following the
day on which notice of the annual general meeting was mailed or public
disclosure of the date of the annual general meeting was made, whichever
first occurs; and (b) in the case of a special general meeting called
for the purpose of electing Directors, not later than the close of
business on the seventh (7th) day following the day on which notice of
the special general meeting was mailed or public disclosure of the date
of the special general meeting was made, whichever first occurs.
(5) To be in proper written form, a notice given to the Secretary pursuant
to paragraph (3) of this Bye-law must set forth as to each matter such
Shareholder or beneficial owner proposes to bring before the general
meeting: (i) a brief description of the business desired to be brought
before the general meeting and the reasons for conducting such business
at the general meeting, (ii) the name and record address of such
Shareholder or beneficial owner, (iii) the class or series and number of
shares of the Company which are owned beneficially or registered in the
name of such Shareholder or beneficial owner, (iv) a description of all
arrangements or understandings between such Shareholder or beneficial
owner and any other person or persons (including their names) in
connection with the proposal of such business by such Shareholder or
beneficial owner and any material interest of such Shareholder or
beneficial owner in such business, and (v) a representation that such
Shareholder intends to appear in person or by proxy, or such beneficial
owner intends to appear as proxy holder or corporate representative of
the registered Shareholder, at the General Meeting to bring such
business before the general meeting.
36. SHORT NOTICE
A general meeting of the Company shall, notwithstanding that it is called by
shorter notice than that specified in these Bye-laws, be deemed to have been
properly called if it is so agreed by (i) all the Shareholders entitled to
attend and vote thereat in the case of an annual general meeting; and (ii)
by a majority in number of the Shareholders having the right to attend and
vote at the meeting, being a majority together holding not less than 95% in
nominal value of the shares giving a right to attend and vote thereat in the
case of a special general meeting.
37. POSTPONEMENT AND CANCELLATION OF MEETINGS
The Chairman or the President may, and the Secretary on instruction from the
Chairman or the President shall, postpone or cancel any general meeting
called in accordance with the provisions of these Bye-laws (other than a
meeting requisitioned under these Bye-laws) provided that notice of
postponement or cancellation is given to each Shareholder before the time
for such meeting. Fresh
III-15
notice of the date, time and place for a postponed meeting shall be given to
the Shareholders in accordance with the provisions of these Bye-laws.
38. QUORUM FOR GENERAL MEETING
At any general meeting of the Company two persons or more present in person
at the start of the meeting and representing in person or by proxy in excess
of 50% of the total issued voting shares in the Company throughout the
meeting shall form a quorum for the transaction of business. If within half
an hour from the time appointed for the meeting a quorum is not present, the
meeting shall stand adjourned to the same day one week later, at the same
time and place or to such other day, time or place as the Secretary may
determine.
39. ADJOURNMENT OF MEETINGS
(1) The chairman of any general meeting at which a quorum is present may
with the consent of a majority in number of those present (and shall if
so directed by a majority in number of those present) adjourn the
meeting. In addition, the chairman may adjourn the meeting to another
time and place without such consent or direction if it appears to him
that:
(a) it is likely to be impracticable to hold or continue that meeting
because of the number of Shareholders wishing to attend who are not
present; or
(b) the unruly conduct of persons attending the meeting prevents, or is
likely to prevent, the orderly continuation of the business of the
meeting; or
(c) an adjournment is otherwise necessary so that the business of the
meeting may be properly conducted.
(2) Unless the meeting is adjourned to a specific date and time, fresh
notice of the date, time and place for the resumption of the adjourned
meeting shall be given to each Shareholder in accordance with the
provisions of these Bye-laws.
40. ATTENDANCE AND SECURITY AT MEETINGS
(1) Shareholders may participate in any general meeting by means of such
telephone, electronic or other communication facilities as permit all
persons participating in the meeting to communicate with each other
simultaneously and instantaneously, and participation in such a meeting
shall constitute presence in person at such meeting.
(2) The Board and, at any general meeting, the chairman of such meeting may
make any arrangement and impose any requirement or restriction it or he
considers appropriate to ensure the security of a general meeting
including, without limitation, requirements for evidence of identity to
be produced by those attending the meeting, the searching of their
personal property and the restriction of items that may be taken into
the meeting place. The Board and, at any general meeting, the chairman
of such meeting are entitled to refuse entry to a person who refuses to
comply with any such arrangements, requirements or restrictions.
41. WRITTEN RESOLUTIONS
(1) Subject to subparagraph (6), anything which may be done by resolution of
the Company in general meeting or by resolution of a meeting of any
class of the Shareholders of the Company, may, without a meeting and
without any previous notice being required, be done by resolution in
writing signed by, or, in the case of a Shareholder that is a
corporation whether or not a company within the meaning of the Act, on
behalf of, all the Shareholders who at the date of the resolution would
be entitled to attend the meeting and vote on the resolution.
III-16
(2) A resolution in writing may be signed by, or, in the case of a
Shareholder that is a corporation whether or not a company within the
meaning of the Act, on behalf of, all the Shareholders, or any class
thereof, in as many counterparts as may be necessary.
(3) For the purposes of this Bye-law, the date of the resolution is the date
when the resolution is signed by, or, in the case of a Shareholder that
is a corporation whether or not a company within the meaning of the Act,
on behalf of, the last Shareholder to sign and any reference in any Bye-
law to the date of passing of a resolution is, in relation to a
resolution made in accordance with this Bye-law, a reference to such
date.
(4) A resolution in writing made in accordance with this Bye-law is as valid
as if it had been passed by the Company in general meeting or by a
meeting of the relevant class of Shareholders, as the case may be, and
any reference in any Bye-law to a meeting at which a resolution is
passed or to Shareholders voting in favour of a resolution shall be
construed accordingly.
(5) A resolution in writing made in accordance with this Bye-law shall
constitute minutes for the purposes of Sections 81 and 82 of the Act.
(6) This Bye-law shall not apply to:
(a) a resolution passed pursuant to Section 89(5) of the Act; or
(b) a resolution passed for the purpose of removing a Director before
the expiration of his term of office under these Bye-laws.
42. ATTENDANCE OF DIRECTORS
The Directors of the Company shall be entitled to receive notice of and to
attend and be heard at any general meeting.
43. VOTING AT MEETINGS
(1) Subject to the provisions of the Act and these Bye-laws, any question
proposed for the consideration of the Shareholders at any general
meeting shall be decided by the affirmative votes of a majority of the
votes cast in accordance with the provisions of these Bye-laws and in
the case of an equality of votes the resolution shall fail.
(2) No Shareholder shall be entitled to vote at any general meeting unless
such Shareholder has paid all the calls on all shares held by such
Shareholder.
44. DECISION OF CHAIRMAN
At any general meeting if an amendment shall be proposed to any resolution
under consideration and the chairman of the meeting shall rule on whether
the proposed amendment is out of order, the proceedings on the substantive
resolution shall not be invalidated by any error in such ruling.
45. VOTING ON A POLL
At any general meeting a resolution put to the vote of the meeting shall be
voted upon by a poll.
46. PROCEDURE FOR A POLL
(1) Where, in accordance with the provisions of Bye-law 45, a resolution is
put to the vote of any general meeting, subject to any rights or
restrictions for the time being lawfully attached to any class of
shares, every person present at such meeting shall have one vote for
each share of which such person is the holder or for which such person
holds a proxy and such vote shall be counted in the manner set out in
subparagraph (3) of this Bye-Law or in the case of a general meeting at
which one or more Shareholders are present by telephone in such manner
as the chairman of the meeting may direct and the result of such poll
shall be deemed to be the resolution of the
III-17
meeting at which the poll was demanded and shall replace any previous
resolution upon the same matter which has been the subject of a show of
hands. A person entitled to more than one vote need not use all his
votes or cast all the votes he uses in the same way.
(2) A poll to be taken in accordance with the provisions of Bye-law 45, for
the purpose of electing a chairman of the meeting or on a question of
adjournment, shall be taken forthwith and a poll on any other question
shall be taken in such manner and at such time at such meeting as the
chairman (or acting chairman) may direct and any business other than
that in respect of which a poll will be taken may be proceeded with
pending the taking of the poll.
(3) On a poll, each person present and entitled to vote shall be furnished
with a ballot paper on which such person shall record his or her vote in
such manner as shall be determined at the meeting having regard to the
nature of the question on which the vote is taken, and each ballot paper
shall be signed or initialled or otherwise marked so as to identify the
voter and the registered holder in the case of a proxy. At the
conclusion of the poll, the ballot papers shall be examined and counted
by a committee of not less than two persons appointed by the chairman
for the purpose and the result of the poll shall be declared by the
chairman.
47. SENIORITY OF JOINT HOLDERS VOTING
In the case of joint holders the vote of the senior who tenders a vote,
whether in person or by proxy, shall be accepted to the exclusion of the
votes of the other joint holders, and for this purpose seniority shall be
determined by the order in which the names stand in the Register of
Shareholders.
48. INSTRUMENT OF PROXY
(1) A Shareholder may appoint a proxy by (a) instrument in writing in the
form, or as near thereto as circumstances admit, of Form "A" in the
Schedule hereto or in such other form as the Board may determine from
time to time, under the hand of the appointor or of the appointor's
attorney duly authorised in writing, or if the appointor is a
corporation, either under its seal, or under the hand of a duly
authorised officer or attorney, or (b) such telephonic, electronic or
other means as may be approved by the Board from time to time.
(2) The appointment of a proxy must be received by the Company at the
registered office or at such other place or in such manner as is
specified in the notice convening the meeting or in any instrument of
proxy sent out by the Company in relation to the meeting at which the
person named in the appointment proposes to vote, and an appointment of
proxy which is not received in the manner so permitted shall be invalid.
(3) A member who is the holder of two or more shares may appoint more than
one proxy to represent him and vote on his behalf.
(4) The decision of the chairman of any general meeting as to the validity
of any appointment of a proxy shall be final.
49. REPRESENTATION OF CORPORATIONS AT MEETINGS
A corporation which is a Shareholder may, by written instrument, authorise
such person as it thinks fit to act as its representative at any meeting of
the Shareholders and the person so authorised shall be entitled to exercise
the same powers on behalf of the corporation which such person represents as
that corporation could exercise if it were an individual Shareholder, and
that Shareholder shall be deemed to be present in person at any such meeting
attended by its authorised representative. Notwithstanding the foregoing,
the chairman of the meeting may accept such assurances as he or she thinks
fit as to the right of any person to attend and vote at general meetings on
behalf of a corporation which is a Shareholder.
III-18
SHARE CAPITAL AND SHARES
50. RIGHTS OF SHARES
(1) At the date these Bye-laws are adopted, the share capital of the Company
shall be divided into two classes: (i) 500,000,000 common shares of par
value US$1.00 each (the "Common Shares") and (ii) 10,000,000 preference
shares of par value US$1.00 each (the "Preference Shares").
(2) The holders of Common Shares shall, subject to the provisions of these
Bye-laws (including, without limitation, the rights attaching to the
Preference Shares):
(a) be entitled to one vote per share;
(b) be entitled to such dividends as the Board may from time to time
declare;
(c) in the event of a winding-up or dissolution of the Company, whether
voluntary or involuntary or for the purpose of a reorganisation or
otherwise or upon any distribution of capital, be entitled to the
surplus assets of the Company; and
(d) generally be entitled to enjoy all of the rights attaching to
shares.
(3) Subject to these Bye-laws and to any resolution of the Shareholders to
the contrary and without prejudice to any special rights previously
conferred on the holders of any existing shares or class of shares, the
Board shall have the full power to issue any unissued shares of the
Company on such terms and conditions as it may, in its absolute
discretion, determine.
(4) The Board is authorized to provide for the issuance of the Preference
Shares in one or more series, and to establish from time to time the
number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof (and,
for the avoidance of doubt, such matters and the issuance of such
Preference Shares shall not be deemed to vary the rights attached to the
Common Shares). The authority of the Board with respect to each series
shall include, but not be limited to, determination of the following:
(a) the number of shares constituting that series and the distinctive
designation of that series;
(b) the dividend rate 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;
(c) 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;
(d) whether that series shall have conversion or exchange privileges
(including, without limitation, conversion into Common Shares),
and, if so, the terms and conditions of such conversion or
exchange, including provision for adjustment of the conversion or
exchange rate in such events as the Board shall determine;
(e) whether or not the shares of that series shall be redeemable or
repurchaseable, and, if so, the terms and conditions of such
redemption or repurchase, including the manner of selecting shares
for redemption or repurchase if less than all shares are to be
redeemed or repurchased, the date or dates upon or after which they
shall be redeemable or repurchaseable, and the amount per share
payable in case of redemption or repurchase, which amount may vary
under different conditions and at different redemption or
repurchase dates;
(f) whether that series shall have a sinking fund for the redemption or
repurchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
III-19
(g) the right of the shares of that series to the benefit of conditions
and restrictions upon the creation of indebtedness of the Company
or any subsidiary, upon the issue of any additional shares
(including additional shares of such series or any other series)
and upon the payment of dividends or the making of other
distributions on, and the purchase, redemption or other acquisition
by the Company or any subsidiary of any outstanding shares of the
Company;
(h) the rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the
Company, and the relative rights of priority, if any, of payment of
shares of that series; and
(i) any other relative participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
51. POWER TO ISSUE SHARES
(1) Any Preference Shares of any series which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if
convertible or exchangeable, have been converted into or exchanged for
shares of any other class or classes shall have the status of authorized
and unissued Preference Shares of the same series and may be reissued as
a part of the series of which they were originally a part or may be
reclassified and reissued as part of a new series of Preference Shares
to be created by resolution or resolutions of the Board or as part of
any other series of Preference Shares, all subject to the conditions and
the restrictions on issuance set forth in the resolution or resolutions
adopted by the Board providing for the issue of any series of Preference
Shares.
(2) At the discretion of the Board, whether or not in connection with the
issuance and sale of any of its shares or other securities, the Company
may issue securities, contracts, warrants or other instruments
evidencing any shares, option rights, securities having conversion or
option rights, or obligations on such terms, conditions and other
provisions as are fixed by the Board, including, without limiting the
generality of this authority, conditions that preclude or limit any
person or persons owning or offering to acquire a specified number or
percentage of the outstanding Common Shares, other shares, option
rights, securities having conversion or option rights, or obligations of
the company or transferee of the person or persons from exercising,
converting, transferring or receiving the shares, option rights,
securities having conversion or option rights, or obligations.
(3) The Board shall, in connection with the issue of any share, have the
power to pay such commission and brokerage as may be permitted by law.
(4) The Company shall not give, whether directly or indirectly, whether by
means of loan, guarantee, provision of security or otherwise, any
financial assistance for the purpose of a purchase or subscription made
or to be made by any person of or for any shares in the Company, except
as permitted by the Act.
(5) The Company may from time to time do any one or more of the following
things:
(a) make arrangements on the issue of shares for a difference between
the Shareholders in the amounts and times of payments of calls on
their shares;
(b) accept from any Shareholder the whole or a part of the amount
remaining unpaid on any shares held by such Shareholder, although
no part of that amount has been called up;
(c) pay dividends in proportion to the amount paid up on each share
where a larger amount is paid up on some shares than on others; and
(d) issue its shares in fractional denominations and deal with such
fractions to the same extent as its whole shares and shares in
fractional denominations shall have in proportion to the respective
fractions represented thereby all of the rights of whole shares
including (but
III-20
without limiting the generality of the foregoing) the right to
vote, to receive dividends and distributions and to participate in
a winding up.
52. VARIATION OF RIGHTS, ALTERATION OF SHARE CAPITAL AND PURCHASE OF SHARES OF
THE COMPANY
(1) Without prejudice to the generality of Bye-law 50, subject to the
provisions of Sections 42 and 43 of the Act any preference shares may be
issued or converted into shares that, at a determinable date or at the
option of the Company, are liable to be redeemed on such terms and in
such manner as the Company before the issue or conversion may by
resolution of the Shareholders determine.
(2) If at any time the share capital is divided into different classes of
shares, the rights attached to any class (unless otherwise provided by
the terms of issue of the shares of that class) may, whether or not the
Company is being wound-up, be varied with the consent in writing of the
holders of three-fourths of the issued shares of that class or with the
sanction of a resolution passed by a majority of the votes cast at a
separate general meeting of the holders of the shares of the class in
accordance with Section 47 (7) of the Act. The rights conferred upon the
holders of the shares of any class issued with preferred or other rights
shall not, unless otherwise expressly provided by the terms of issue of
the shares of that class, be deemed to be varied by the creation or
issue of further shares ranking pari passu therewith.
(3) The Company may from time to time if authorised by resolution of the
Shareholders change the currency denomination of, increase, alter or
reduce its share capital in accordance with the provisions of Sections
45 and 46 of the Act. Where, on any alteration of share capital,
fractions of shares or some other difficulty would arise, the Board may
deal with or resolve the same in such manner as it thinks fit including,
without limiting the generality of the foregoing, the issue to
Shareholders, as appropriate, of fractions of shares and/or arranging
for the sale or transfer of the fractions of shares of Shareholders.
(4) The Company may from time to time purchase its own shares in accordance
with the provisions of Section 42A of the Act.
53. REGISTERED HOLDER OF SHARES
(1) The Company shall be entitled to treat the registered holder of any
share as the absolute owner thereof and accordingly shall not be bound
to recognise any equitable or other claim to, or interest in, such share
on the part of any other person.
(2) Any dividend, interest or other moneys payable in cash in respect of
shares may be paid by cheque or draft sent through the post directed to
the Shareholder at such Shareholder's address in the Register of
Shareholders or, in the case of joint holders, to such address of the
holder first named in the Register of Shareholders, or to such person
and to such address as the holder or joint holders may in writing
direct. If two or more persons are registered as joint holders of any
shares any one can give an effectual receipt for any dividend paid in
respect of such shares.
54. DEATH OF A JOINT HOLDER
Where two or more persons are registered as joint holders of a share or
shares then in the event of the death of any joint holder or holders the
remaining joint holder or holders shall be absolutely entitled to the said
share or shares and the Company shall recognise no claim in respect of the
estate of any joint holder except in the case of the last survivor of such
joint holders.
55. SHARE CERTIFICATES
(1) Every Shareholder shall be entitled to a certificate under the seal of
the Company (or a facsimile thereof) specifying the number and, where
appropriate, the class of shares held by such Shareholder and whether
the same are fully paid up and, if not, how much has been paid
III-21
thereon. The Board may by resolution determine, either generally or in a
particular case, that any or all signatures on certificates may be
printed thereon or affixed by mechanical means.
(2) The Company shall be under no obligation to complete and deliver a share
certificate unless specifically called upon to do so by the person to
whom such shares have been allotted.
(3) If any such certificate shall be proved to the satisfaction of the Board
to have been worn out, lost, mislaid or destroyed the Board may cause a
new certificate to be issued and request an indemnity for the lost
certificate if it sees fit.
56. CALLS ON SHARES
(1) The Board may from time to time make such calls as it thinks fit upon
the Shareholders in respect of any monies (whether in respect of nominal
value or premium) unpaid on the shares allotted to or held by such
Shareholders (and not made payable at fixed times by the terms and
conditions of issue) and, if a call is not paid on or before the day
appointed for payment thereof, the Shareholder may at the discretion of
the Board be liable to pay the Company interest on the amount of such
call at such rate as the Board may determine, from the date when such
call was payable up to the actual date of payment. The joint holders of
a share shall be jointly and severally liable to pay all calls in
respect thereof.
(2) Any sum which by the terms of allotment of a share becomes payable upon
issue or at any fixed date, whether on account of the nominal value of
the share or by way of premium, shall for all the purposes of these
Bye-laws be deemed to be a call duly made and payable, on the date on
which, by the terms of issue, the same becomes payable, and in case of
non-payment all the relevant provisions of these Bye-laws as to payment
of interest, costs, charges and expenses, forfeiture or otherwise shall
apply as if such sum had become payable by virtue of a call duly made
and notified.
(3) The Board may, on the issue of shares, differentiate between the holders
as to the amount of calls to be paid and the times of payment of such
calls.
57. FORFEITURE OF SHARES
(1) If any Shareholder fails to pay, on the day appointed for payment
thereof, any call in respect of any share allotted to or held by such
Shareholder, the Board may, at any time thereafter during such time as
the call remains unpaid, direct the Secretary to forward to such
Shareholder a notice in the form, or as near thereto as circumstances
admit, of Form "B" in the Schedule hereto.
(2) If the requirements of such notice are not complied with, any such share
may at any time thereafter before the payment of such call and the
interest due in respect thereof be forfeited by a resolution of the
Board to that effect, and such share shall thereupon become the property
of the Company and may be disposed of as the Board shall determine.
(3) A Shareholder whose share or shares have been forfeited as aforesaid
shall, notwithstanding such forfeiture, be liable to pay to the Company
all calls owing on such share or shares at the time of the forfeiture
and all interest due thereon.
(4) The Board may accept the surrender of any share which it is in a
position to forfeit on such terms and conditions as may be agreed.
Subject to those terms and conditions, a surrendered share shall be
treated as if it had been forfeited.
III-22
REGISTER OF MEMBERS
58. CONTENTS OF REGISTER OF SHAREHOLDERS
The Board shall cause to be kept in one or more books a Register of
Shareholders and shall enter therein the particulars required by the Act.
59. INSPECTION OF REGISTER OF SHAREHOLDERS
The Register of Shareholders shall be open to inspection at the registered
office of the Company on every business day, subject to such reasonable
restrictions as the Board may impose, so that not less than two hours in
each business day be allowed for inspection. The Register of Shareholders
may, after notice has been given in accordance with the Act, be closed for
any time or times not exceeding in the whole thirty days in each year.
60. DETERMINATION OF RECORD DATES
Notwithstanding any other provision of these Bye-laws, the Board may fix any
date as the record date for:
(a) determining the Shareholders entitled to receive any dividend; and
(b) determining the Shareholders entitled to receive notice of and to vote
at any general meeting of the Company.
TRANSFER OF SHARES
61. INSTRUMENT OF TRANSFER
(1) An instrument of transfer shall be in the form or as near thereto as
circumstances admit of Form "C" in the Schedule hereto or in such other
form as the Board may accept. Such instrument of transfer shall be
signed by or on behalf of the transferor and transferee provided that,
in the case of a fully paid share, the Board may accept the instrument
signed by or on behalf of the transferor alone. The transferor shall be
deemed to remain the holder of such share until the same has been
transferred to the transferee in the Register of Shareholders.
(2) The Board may refuse to recognise any instrument of transfer unless it
is accompanied by the certificate in respect of the shares to which it
relates and by such other evidence as the Board may reasonably require
to show the right of the transferor to make the transfer.
(3) Shares may be transferred without a written instrument if transferred by
an appointed agent or otherwise in accordance with the Act.
62. RESTRICTION ON TRANSFER
(1) The Board may in its absolute discretion and without assigning any
reason therefor refuse to register the transfer of a share which is not
fully paid. The Board shall refuse to register a transfer unless all
applicable consents, authorisations and permissions of any governmental
body or agency in Bermuda have been obtained.
(2) If the Board refuses to register a transfer of any share the Secretary
shall, within three months after the date on which the transfer was
lodged with the Company, send to the transferor and transferee notice of
the refusal.
63. TRANSFERS BY JOINT HOLDERS
The joint holders of any share or shares may transfer such share or shares
to one or more of such joint holders, and the surviving holder or holders of
any share or shares previously held by them jointly with
III-23
a deceased Shareholder may transfer any such share to the executors or
administrators of such deceased Shareholder.
TRANSMISSION OF SHARES
64. REPRESENTATIVE OF DECEASED SHAREHOLDER
In the case of the death of a Shareholder, the survivor or survivors where
the deceased Shareholder was a joint holder, and the legal personal
representatives of the deceased Shareholder where the deceased Shareholder
was a sole holder, shall be the only persons recognised by the Company as
having any title to the deceased Shareholder's interest in the shares.
Nothing herein contained shall release the estate of a deceased joint holder
from any liability in respect of any share which had been jointly held by
such deceased Shareholder with other persons. Subject to the provisions of
Section 52 of the Act, for the purpose of this Bye-law, legal personal
representative means the executor or administrator of a deceased Shareholder
or such other person as the Board may in its absolute discretion decide as
being properly authorised to deal with the shares of a deceased Shareholder.
65. REGISTRATION ON DEATH OR BANKRUPTCY
Any person becoming entitled to a share in consequence of the death or
bankruptcy of any Shareholder may be registered as a Shareholder upon such
evidence as the Board may deem sufficient or may elect to nominate some
person to be registered as a transferee of such share, and in such case the
person becoming entitled shall execute in favour of such nominee an
instrument of transfer in the form, or as near thereto as circumstances
admit, of Form "D" in the Schedule hereto. On the presentation thereof to
the Board, accompanied by such evidence as the Board may require to prove
the title of the transferor, the transferee shall be registered as a
Shareholder but the Board shall, in either case, have the same right to
decline or suspend registration as it would have had in the case of a
transfer of the share by that Shareholder before such Shareholder's death or
bankruptcy, as the case may be.
DIVIDENDS AND OTHER DISTRIBUTIONS
66. DECLARATION OF DIVIDENDS BY THE BOARD
The Board may, subject to these Bye-laws and in accordance with Section 54
of the Act, declare a dividend to be paid to the Shareholders, in proportion
to the number of shares held by them, and such dividend may be paid in cash
or wholly or partly in specie in which case the Board may fix the value for
distribution in specie of any assets. No unpaid dividend shall bear interest
as against the Company.
67. OTHER DISTRIBUTIONS
The Board may declare and make such other distributions (in cash or in
specie) to the Shareholders as may be lawfully made out of the assets of the
Company. No unpaid distribution shall bear interest as against the Company.
68. RESERVE FUND
The Board may from time to time before declaring a dividend set aside, out
of the surplus or profits of the Company, such sum as it thinks proper as a
reserve to be used to meet contingencies or for equalising dividends or for
any other special purpose.
69. PAYMENT OF DIVIDENDS AND DEDUCTION OF AMOUNTS DUE TO THE COMPANY
(1) Any dividend or other monies payable in respect of a share may be paid
by cheque or warrant sent through the post to the registered address of
the Shareholders (in the case of joint
III-24
Shareholders, the senior joint holder, seniority being determined by the
order in which the names stand in the Register of Shareholders) or
person entitled thereto, or by direct bank transfer to such bank account
as such Shareholder or person entitled thereto may direct. Every such
cheque shall be made payable to the order of the person to whom it is
sent or to such persons as the Shareholder may direct, and payment of
the cheque or warrant shall be a good discharge to the Company. Every
such cheque or warrant shall be sent at the risk of the person entitled
to the money represented thereby.
(2) The Board may deduct from the dividends or distributions payable to any
Shareholder all monies due from such Shareholder to the Company on
account of calls or otherwise.
(3) Any dividend or other monies payable in respect of a share which has
remained unclaimed for 12 years from the date when it became due for
payment shall, if the Board so resolves, be forfeited and cease to
remain owing by the Company. The payment of any unclaimed dividend or
other moneys payable in respect of a share may (but need not) be paid by
the Company into an account separate from the Company's own account.
Such payment shall not constitute the Company a trustee in respect
thereof.
(4) The Company shall be entitled to cease sending dividend warrants and
cheques by post or otherwise to a Shareholder if those instruments have
been returned undelivered to, or left uncashed by, that Shareholder on
at least two consecutive occasions, or, following one such occasion,
reasonable enquiries have failed to establish the Shareholder's new
address. The entitlement conferred on the Company by this Bye-law 69(4)
in respect of any Shareholder shall cease if the Shareholder claims a
dividend or cashes a dividend warrant or cheque.
CAPITALISATION
70. ISSUE OF BONUS SHARES
(1) The Board may resolve to capitalise any part of the amount for the time
being standing to the credit of any of the Company's share premium or
other reserve accounts or to the credit of the profit and loss account
or otherwise available for distribution by applying such sum in paying
up unissued shares to be allotted as fully paid bonus shares pro-rata
(except in connection with the conversion of shares of one class to
shares of another class) to the Shareholders.
(2) The Board may capitalise any sum standing to the credit of a reserve
account or sums otherwise available for dividend or distribution by
applying such amounts in paying up in full partly paid shares of those
Shareholders who would have been entitled to such sums if they were
distributed by way of dividend or distribution.
ACCOUNTS AND FINANCIAL STATEMENTS
71. RECORDS OF ACCOUNT
The Board shall cause to be kept proper records of account with respect to
all transactions of the Company and in particular with respect to:
(a) all sums of money received and expended by the Company and the matters
in respect of which the receipt and expenditure relates;
(b) all sales and purchases of goods by the Company; and
(c) the assets and liabilities of the Company.
Such records of account shall be kept at the registered office of the
Company or, subject to Section 83 (2) of the Act, at such other place as the
Board thinks fit and shall be available for inspection by the Directors
during normal business hours.
III-25
72. FINANCIAL YEAR END
The financial year end of the Company may be determined by resolution of the
Board and failing such resolution shall be 31st December in each year.
73. FINANCIAL STATEMENTS
Subject to any rights to waive laying of accounts pursuant to Section 88 of
the Act, financial statements as required by the Act shall be laid before
the Shareholders in general meeting.
AUDIT
74. APPOINTMENT OF AUDITOR
Subject to Section 88 of the Act, at the annual general meeting or at a
subsequent special general meeting in each year, an independent
representative of the Shareholders shall be appointed by them as Auditor of
the accounts of the Company. Such Auditor may be a Shareholder but no
Director, Officer or employee of the Company shall, during his or her
continuance in office, be eligible to act as an Auditor of the Company.
75. REMUNERATION OF AUDITOR
The remuneration of the Auditor shall be fixed by the Company in general
meeting or in such manner as the Shareholders may determine.
76. VACATION OF OFFICE OF AUDITOR
If the office of Auditor becomes vacant by the resignation or death of the
Auditor, or by the Auditor becoming incapable of acting by reason of illness
or other disability at a time when the Auditor's services are required, the
vacancy thereby created shall be filled in accordance with the Act.
77. ACCESS TO BOOKS OF THE COMPANY
The Auditor shall at all reasonable times have access to all books kept by
the Company and to all accounts and vouchers relating thereto, and the
Auditor may call on the Directors or Officers of the Company for any
information in their possession relating to the books or affairs of the
Company.
78. REPORT OF THE AUDITOR
(1) Subject to any rights to waive laying of accounts or appointment of an
Auditor pursuant to Section 88 of the Act, the accounts of the Company
shall be audited at least once in every year.
(2) The financial statements provided for by these Bye-laws shall be audited
by the Auditor in accordance with generally accepted auditing standards.
The Auditor shall make a written report thereon in accordance with
generally accepted auditing standards and the report of the Auditor
shall be submitted to the Shareholders in general meeting.
(3) The generally accepted auditing standards referred to in subparagraph
(2) of this Bye-law may be those of a country or jurisdiction other than
Bermuda. If so, the financial statements and the report of the Auditor
must disclose this fact and name such country or jurisdiction.
III-26
NOTICES
79. NOTICES TO SHAREHOLDERS OF THE COMPANY
(1) A notice may be given by the Company to any Shareholder either by
delivering it to such Shareholder in person or by sending it to such
Shareholder's address in the Register of Shareholders or to such other
address given for the purpose. For the purposes of this Bye-law, a
notice may be sent by mail, courier service, cable, telex, telecopier,
facsimile, electronic mail or other mode of representing words in a
legible and non-transitory form.
(2) The Company shall be under no obligation to send a notice or other
document to the address shown for any particular Shareholder in the
Register of Shareholders if the Board considers that the legal or
practical problems under the laws of, or the requirements of any
regulatory body or stock exchange in, the territory in which that
address is situated are such that it is necessary or expedient not to
send the notice or document concerned to such Shareholder at such
address and may require a Shareholder with such an address to provide
the Company with an alternative acceptable address for delivery of
notices by the Company.
80. NOTICES TO JOINT SHAREHOLDERS
Any notice required to be given to a Shareholder shall, with respect to any
shares held jointly by two or more persons, be given to whichever of such
persons is named first in the Register of Shareholders and notice so given
shall be sufficient notice to all the holders of such shares.
81. SERVICE AND DELIVERY OF NOTICE
(1) Save as otherwise provided in Bye-law 81(2), any notice shall be deemed
to have been served at the time when the same would be delivered in the
ordinary course of transmission and, in proving such service, it shall
be sufficient to prove that the notice was properly addressed and
prepaid, if posted, and the time when it was posted, delivered to the
courier or to the cable company or transmitted by telex, facsimile or
other method as the case may be.
(2) Mail notice shall be deemed to have been served seven days after the
date on which it is deposited, with postage prepaid, in the mail of any
member state of the European Union, the United States or Bermuda.
SEAL OF THE COMPANY
82. THE SEAL
The seal of the Company shall be in such form as the Board may from time to
time determine. The Board may adopt one or more duplicate seals for use
outside Bermuda.
83. MANNER IN WHICH SEAL IS TO BE AFFIXED
The seal of the Company shall not be affixed to any instrument except
attested by the signature of a Director and the Secretary or any two
Directors, or any person appointed by the Board for the purpose, provided
that any Director, Officer or Resident Representative, may affix the seal of
the Company attested by such Director, Officer or Resident Representative's
signature to any authenticated copies of these Bye-laws, the incorporating
documents of the Company, the minutes of any meetings or any other documents
required to be authenticated by such Director, Officer or Resident
Representative.
III-27
WINDING-UP
84. WINDING-UP/DISTRIBUTION BY LIQUIDATOR
If the Company shall be wound up the liquidator may, with the sanction of a
resolution of the Shareholders, divide amongst the Shareholders in specie or
in kind the whole or any part of the assets of the Company (whether they
shall consist of property of the same kind or not) and may, for such
purpose, set such value as he or she deems fair upon any property to be
divided as aforesaid and may determine how such division shall be carried
out as between the Shareholders or different classes of Shareholders. The
liquidator may, with the like sanction, vest the whole or any part of such
assets in trustees upon such trusts for the benefit of the Shareholders as
the liquidator shall think fit, but so that no Shareholder shall be
compelled to accept any shares or other securities or assets whereon there
is any liability.
BUSINESS COMBINATIONS
85. BUSINESS COMBINATIONS
(1) The Company shall not engage in any Business Combination unless such
Business Combination has been approved by a resolution of the Board and
by a resolution of the Shareholders holding a majority of the shares
entitled to vote thereon.
(2) In this Bye-law and Bye-law 86, "Business Combination" means any
amalgamation, merger, consolidation or similar transaction involving the
Company.
ALTERATION OF BYE-LAWS
86. (1) Subject to paragraph (2), no Bye-law shall be rescinded, altered or
amended and no new Bye-law shall be made until the same has been
approved by a resolution of the Board and by a resolution of the
Shareholders:
(2) Bye-law 85 shall not be rescinded, altered or amended, and no new
Bye-law shall be made which would have the effect of rescinding,
altering or amending the provisions of such Bye-law, until the same has
been approved by a resolution of the Board and by a resolution of the
Members holding a majority of the shares entitled to vote on a Business
Combination pursuant to Bye-law 85.
III-28
SCHEDULE -- FORM A (BYE-LAW 48)
Weatherford International Ltd.
(the "Company")
P R O X Y
I/We
of
- --------------------------------------------------------------------------------
the holder(s) of ____ share(s) in the Company hereby appoint
____________________ or failing him/her ____________________ or failing him/her
____________________ as my/our proxy to vote on my/our behalf at the general
meeting of the Company to be held on the ___ day of ________, 20__, and at any
adjournment thereof.
Dated this ___ day of ________, 20__
*GIVEN under the seal of the above-named
*Signed by the above-named
- ------------------------------------------------------
- ------------------------------------------------------
Witness
*Delete as applicable.
III-29
SCHEDULE -- FORM B (BYE-LAW 57)
NOTICE OF LIABILITY TO FORFEITURE FOR NON PAYMENT OF CALL
You have failed to pay the call of [amount of call] made on the
- ----------- day of --------------, 20-------- last, in respect of the [number]
share(s) [numbers in figures] standing in your name in the Register of
Shareholders of the Company, on the ------ day of ------------, 20--- last, the
day appointed for payment of such call. You are hereby notified that unless you
pay such call together with interest thereon at the rate of ---------per annum
computed from the said ------ day of ------------, 20--- last, on or before the
- ------ day of ------------, 20--- next at the place of business of the Company
the share(s) will be liable to be forfeited.
Dated this ----------- day of -----------------, 20--------
[Signature of Secretary]
By order of the Board
III-30
SCHEDULE -- FORM C (BYE-LAW 61)
TRANSFER OF A SHARE OR SHARES
FOR VALUE RECEIVED
- --------------------------------------------------------------
- ------------------ [transferor]
hereby sells assigns and transfers unto
- ------------------------------------------------------ [transferee] of --------
- ---------------------------------- of ---------------------------------
- --------- [address] ------------------------------------------ [number of
shares] shares of Weatherford International Ltd.
Dated
- ----------------------------------
- ------------------------------------------
(Transferor)
In the presence of:
- ------------------------------------------
(Witness)
- ------------------------------------------
(Transferee)
In the presence of:
- ------------------------------------------
(Witness)
III-31
SCHEDULE -- FORM D (BYE-LAW 65)
TRANSFER BY A PERSON BECOMING ENTITLED ON DEATH/BANKRUPTCY OF A MEMBER
I/We having become entitled in consequence of the [death/bankruptcy] of [name of
the deceased Shareholder] to [number] share(s) standing in the register of
members of Weatherford International Ltd. in the name of the said [name of
deceased Shareholder] instead of being registered myself/ourselves elect to have
[name of transferee] (the "Transferee") registered as a transferee of such
share(s) and I/we do hereby accordingly transfer the said share(s) to the
Transferee to hold the same unto the Transferee his or her executors
administrators and assigns subject to the conditions on which the same were held
at the time of the execution thereof; and the Transferee does hereby agree to
take the said share(s) subject to the same conditions.
WITNESS our hands this ----------- day of -----------------, 200--------
Signed by the above-named
[person or persons entitled]
in the presence of:
Signed by the above-named
[transferee]
in the presence of:
III-32
WEATHERFORD INTERNATIONAL, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
JUNE 26, 2002
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Weatherford International, Inc.
("Weatherford") hereby appoints Bernard J. Duroc-Danner and Burt M. Martin, or
either of them, proxies, with full power of substitution, to vote all shares of
common stock of Weatherford held of record in the name of the undersigned at the
Special Meeting of Stockholders to be held at The St. Regis Hotel, 1919 Briar
Oaks Lane, Houston, Texas at 10:00 a.m. (Houston time) on June 26, 2002, and any
adjournments or postponements thereof, with all powers the stockholder would
possess if present. The stockholder hereby revokes any proxies previously given
with respect to such meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE, BUT IF NO
SPECIFICATION IS MADE, IT WILL BE VOTED TO APPROVE THE PROPOSAL LISTED ON THE
REVERSE SIDE, AND IN THE DISCRETION OF THE PROXIES ON OTHER MATTERS AS MAY COME
BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
TO VOTE BY MAIL
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
TO VOTE BY INTERNET
Please access the web page at "www.voteproxy.com" and follow the on-screen
instructions. Have your control number available when you access the web page.
YOUR CONTROL NUMBER IS 4
(Please date and sign on the reverse side)
- FOLD AND DETACH HERE -
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1
<Table>
<Caption>
FOR AGAINST ABSTAIN
--- ------- -------
ITEM 1. To adopt the Agreement and Plan of Merger among [ ] [ ] [ ]
Weatherford International, Inc., Weatherford Merger, Inc.,
Weatherford International Ltd., a Bermuda exempted company,
and Weatherford U.S. Holdings, L.L.C. whereby Weatherford
International, Inc. will become an indirect subsidiary of
Weatherford International Ltd., and you will become a
shareholder of Weatherford International Ltd. Weatherford
Merger, Inc. will be merged with and into Weatherford
International, Inc. Weatherford International, Inc. will be
the surviving entity and become an indirect subsidiary of
Weatherford International Ltd.
I plan to attend the meeting. [ ]
Please sign exactly as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such.
</Table>
- ------------------------------------
- ------------------------------------
SIGNATURE(S) DATE
- FOLD AND DETACH HERE -
THIS IS YOUR PROXY,
YOUR VOTE IS IMPORTANT
Mark, sign and date your proxy card and
return it in the postage-paid
envelope.