AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 2002.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ENSCO INTERNATIONAL INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1381 76-0232579
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
Incorporation or Organization)
2700 FOUNTAIN PLACE
1445 ROSS AVENUE
DALLAS, TEXAS 75202-2792
(214) 922-1500
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
CARY A. MOOMJIAN, JR.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
2700 FOUNTAIN PLACE
1445 ROSS AVENUE
DALLAS, TEXAS 75202-2792
(214) 922-1500
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code of
Agent for Service)
COPIES TO:
DANIEL W. RABUN DAVID E. ZELTNER
BAKER & MCKENZIE WEIL, GOTSHAL & MANGES LLP
2300 TRAMMELL CROW CENTER 767 FIFTH AVENUE
2001 ROSS AVENUE NEW YORK, NEW YORK 10153
DALLAS, TEXAS 75201 (212) 310-8000
(214) 978-3000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the merger contemplated by the Merger Agreement described in the
enclosed proxy statement/prospectus have been satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act of 1933 registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED TO BE REGISTERED(2) PER UNIT(3) OFFERING PRICE(3) FEE(1)(4)
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Common Stock, par value $.10 per
share(1).............................. 13,834,552 $24.13 $333,827,740 $-0-
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(1) Includes shares of Preferred Share Purchase Rights (the "Rights"). The
Rights are associated and will trade with the shares of common stock of
ENSCO International Incorporated (the "Common Stock"). No additional
registration fee is required with respect to the Rights.
(2) Based on the maximum number of shares of Common Stock that may be required
to be issued in the acquisition of Chiles Offshore Inc. described herein and
the number of shares of common stock of Chiles Offshore Inc. issuable under
stock options as of June 6, 2002 and through the date the acquisition is
expected to be completed. This Registration Statement also covers any
additional shares of Common Stock that may become issuable by reason of any
stock dividend, stock-split, recapitalization or any other similar
transaction without receipt of consideration that results in an increase in
the number of outstanding shares of Common Stock.
(3) Estimated solely for purposes of calculating the registration fee pursuant
to Rules 457(f)(1) and (3) and 457(c) of the Securities Act of 1933, based
on the average high and low per share prices of the common stock of Chiles
Offshore Inc. as reported by the American Stock Exchange on June 5, 2002.
(4) Pursuant to Rule 457(p) of the Securities Act of 1933, the amount of the
registration fee for this Registration Statement is being offset by $30,712
of the registration fee paid in connection with the registration statement
no. 333-37897 of ENSCO International Incorporated filed with the Securities
and Exchange Commission on October 15, 1997.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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THE INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL
THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROXY STATEMENT/PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 6, 2002
[CHILES OFFSHORE LOGO]
PROXY STATEMENT
[ENSCO LOGO]
PROSPECTUS
PROPOSED MERGER -- YOUR VOTE IS VERY IMPORTANT
The board of directors of Chiles Offshore Inc. has unanimously approved the
merger of Chiles and ENSCO International Incorporated. Chiles believes that the
merger will create a stronger and more competitive offshore drilling company and
offer the best opportunity for you to maximize your investment in Chiles common
stock through ownership in the combined company.
In the merger, you will receive 0.6575 shares of ENSCO common stock and
$5.25 in cash for each share of Chiles common stock that you own. ENSCO
stockholders will continue to own their existing ENSCO shares. ENSCO will issue
approximately 13.3 million shares of common stock in the merger. Immediately
after the merger, former Chiles stockholders will own approximately 9% of the
outstanding shares of ENSCO common stock. ENSCO common stock trades on the New
York Stock Exchange under the symbol "ESV."
In order to complete the merger, Chiles stockholders must vote to approve
and adopt the merger agreement. Chiles has scheduled a special meeting of its
stockholders to be held at 10:00 a.m., local time on , 2002, at
the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, 25th Floor, New
York, New York 10153 to consider the approval and adoption of the merger
agreement. Only Chiles stockholders of record on the close of business on
, 2002 will be entitled to notice of, and to vote at, the special
meeting. The affirmative vote of the holders of at least 66 2/3% of the
outstanding shares of Chiles common stock entitled to vote at the special
meeting is required to approve and adopt the merger agreement. The merger does
not require the vote by the ENSCO stockholders.
The Chiles board of directors has determined that the merger is in the best
interests of its stockholders, and it unanimously recommends that the Chiles
stockholders vote "FOR" approval and adoption of the merger agreement.
This proxy statement/prospectus provides detailed information about the
proposed merger. We encourage you to carefully read this entire document and the
documents incorporated by reference.
SEE "RISK FACTORS" ON PAGE 17 FOR A DISCUSSION OF RISKS YOU SHOULD CONSIDER
BEFORE VOTING AT THE SPECIAL MEETING.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SHARES OF ENSCO COMMON STOCK TO BE
ISSUED IN THE MERGER OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROXY STATEMENT/PROSPECTUS IS DATED , 2002, AND IS
FIRST BEING MAILED TO CHILES STOCKHOLDERS ON OR ABOUT , 2002.
CHILES OFFSHORE LOGO
CHILES OFFSHORE INC.
11200 RICHMOND AVENUE, SUITE 490
HOUSTON, TEXAS 77082-2618
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON , 2002
------------------------
, 2002
To Our Stockholders:
A special meeting of stockholders of Chiles Offshore Inc. will be held on
, , 2002, at 10:00 a.m., local time, at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, 25th Floor, New York, New York 10153,
for the following purpose:
To consider and vote upon a proposal to approve and adopt the merger
agreement, dated as of May 14, 2002, attached to the accompanying proxy
statement/prospectus as Annex A, among ENSCO International Incorporated,
Chore Acquisition, Inc. and Chiles Offshore Inc., whereby Chiles Offshore
Inc. will merge with and into Chore Acquisition, Inc., with Chore
Acquisition, Inc. being the surviving company and continuing to exist as a
direct subsidiary of ENSCO. Pursuant to the merger agreement, each share of
Chiles Offshore Inc. common stock (other than shares for which appraisal
rights are asserted in strict accordance with Delaware law) will be
converted into the right to receive 0.6575 shares of ENSCO International
Incorporated common stock and $5.25 in cash, conditional upon the
completion of the merger.
Only stockholders of record of shares of Chiles common stock at the close
of business on , 2002 will be entitled to notice of, and to vote at,
the meeting. The affirmative vote of the holders of at least 66 2/3% of the
outstanding shares of Chiles common stock entitled to vote at the meeting is
required to approve and adopt the merger agreement. YOUR VOTE IS VERY IMPORTANT!
THE FAILURE TO CAST YOUR VOTE WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. Please complete, sign, date and
return the enclosed proxy, whether or not you expect to attend the meeting, so
that your shares may be represented at the meeting if you are unable to attend
and vote in person. If you attend the meeting, you may revoke your proxy and
vote your shares in person.
For the Board of Directors,
[DICK FAGERSTAL SIG]
Dick Fagerstal
Senior Vice President, Chief Financial
Officer and Secretary
TABLE OF CONTENTS
PAGE
----
ADDITIONAL INFORMATION...................................... iv
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 5
The Companies............................................. 5
The Special Meeting....................................... 6
The Merger................................................ 6
Opinion of Financial Advisor.............................. 6
Recommendation of the Chiles Board of Directors........... 6
Chiles Stockholders Entitled to Vote; Vote Required....... 6
Voting Agreements......................................... 6
Interests of Certain Persons; Possible Conflicts of
Interest of Certain Persons in the Merger.............. 7
Share Ownership of Directors and Executive Officers of
Chiles................................................. 7
Ownership of ENSCO by Chiles Stockholders After the
Merger................................................. 7
Management of ENSCO After the Merger...................... 7
Listing of ENSCO Common Stock and Delisting of Chiles
Common Stock........................................... 8
Appraisal Rights.......................................... 8
Conditions to Completion of the Merger.................... 8
Termination of the Merger Agreement....................... 9
No Solicitation by Chiles................................. 9
Termination Fee and Expenses.............................. 9
Chiles Stock Options...................................... 10
Material United States Federal Income Tax Consequences of
the Merger............................................. 10
Accounting Treatment...................................... 10
Regulatory Approvals...................................... 10
Other Chiles Special Meeting Proposals.................... 10
Selected Historical Consolidated Financial Data........... 11
Selected Unaudited Pro Forma Combined Financial Data...... 13
Unaudited Comparative Per Share Data...................... 14
Comparative Per Share Market Price Data................... 15
RISK FACTORS................................................ 17
Risks Relating to the Merger.............................. 17
Risks Relating to ENSCO's Business Following the Merger... 18
Risks Related to Owning Shares of ENSCO Common Stock...... 22
Risk Relating to Arthur Andersen LLP's Lack of Consent.... 23
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS................................................ 24
THE SPECIAL MEETING......................................... 26
Date, Time, Place and Purpose of the Meeting.............. 26
Recommendation of the Board of Directors.................. 26
Voting Power.............................................. 26
Quorum.................................................... 26
Required Voting........................................... 26
Proxies................................................... 27
i
PAGE
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Abstentions and Broker Non-Votes.......................... 27
Solicitation.............................................. 27
Other Proposals........................................... 27
Assistance................................................ 28
THE MERGER.................................................. 29
General................................................... 29
Background of the Merger.................................. 29
Reasons for the Merger.................................... 32
Factors Considered by, and Recommendation of, the Chiles
Board.................................................. 33
Opinion of Financial Advisor.............................. 34
Regulatory Approvals Required for the Merger.............. 42
Material United States Federal Income Tax Consequences.... 42
Accounting Treatment...................................... 45
Listing of ENSCO Common Stock............................. 45
Delisting and Deregistration of Chiles Common Stock....... 46
Restrictions on Sales of Shares of ENSCO Common Stock
Received in the Merger................................. 46
Interests of Certain Persons; Possible Conflicts of
Interest of Certain Persons in the Merger.............. 46
Share Ownership of Directors and Executive Officers of
Chiles................................................. 50
Ownership of ENSCO by Chiles Stockholders After the
Merger................................................. 50
Management and Operations Following the Merger............ 51
Dividends................................................. 51
THE MERGER AGREEMENT........................................ 52
Structure of the Merger................................... 52
Completion and Effectiveness of the Merger................ 52
Merger Consideration...................................... 52
Exchange of Chiles Stock Certificates for ENSCO Stock
Certificates........................................... 53
Stock Options............................................. 53
Distributions with Respect to Unexchanged Shares.......... 53
Lost Stock Certificates................................... 53
Conditions to Completion of the Merger.................... 53
Representations and Warranties............................ 55
Chiles Special Meeting.................................... 56
Chiles is Prohibited from Soliciting Other Offers......... 57
Conduct of Business Before Completion of the Merger....... 58
Consents; Regulatory Approvals............................ 61
Employee Benefit Matters.................................. 62
Indemnification and Insurance............................. 63
Termination of the Merger Agreement....................... 64
Termination Fee........................................... 65
Expenses.................................................. 66
Amendments, Extensions and Waivers........................ 66
VOTING AGREEMENTS........................................... 68
General................................................... 68
Irrevocable Proxy......................................... 68
ii
PAGE
----
Representations and Warranties............................ 68
No Solicitation........................................... 68
Restrictions on Transfer.................................. 69
Related Party Agreements.................................. 69
Termination of the Voting Agreements...................... 69
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL
STATEMENTS................................................ 70
Sources of Information.................................... 70
How We Prepared the Unaudited Condensed Pro Forma Combined
Financial Statements................................... 70
Transaction-Related Expenses.............................. 70
ENSCO Unaudited Condensed Pro Forma Combined Balance Sheet
as of March 31, 2002................................... 71
ENSCO Unaudited Condensed Pro Forma Combined Statement of
Operations for the Three Months Ended March 31, 2002... 72
ENSCO Unaudited Condensed Pro Forma Combined Statement of
Operations for the Year Ended December 31, 2001........ 73
ENSCO Notes to Unaudited Condensed Pro Forma Combined
Financial Statements................................... 74
DESCRIPTION OF ENSCO CAPITAL STOCK.......................... 76
General................................................... 76
Common Stock.............................................. 76
Preferred Stock........................................... 76
Exchange Agent............................................ 77
COMPARISON OF STOCKHOLDER RIGHTS AND CORPORATE GOVERNANCE
MATTERS................................................... 78
APPRAISAL RIGHTS............................................ 86
LEGAL MATTERS............................................... 88
EXPERTS..................................................... 88
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING............... 88
WHERE YOU CAN FIND MORE INFORMATION......................... 89
Annex A Merger Agreement.................................... A-1
Annex B Voting Agreement with Luis Alvarez Morphy........... B-1
Annex C Voting Agreement with Javier Alvarez Morphy......... C-1
Annex D Voting Agreement with Patricio Alvarez Morphy....... D-1
Annex E Voting Agreement with SEACOR SMIT Inc............... E-1
Annex F Opinion of Credit Suisse First Boston Corporation... F-1
Annex G Appraisal Rights.................................... G-1
iii
ADDITIONAL INFORMATION
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES FROM OTHER DOCUMENTS IMPORTANT
BUSINESS AND FINANCIAL INFORMATION ABOUT ENSCO AND CHILES THAT IS NOT INCLUDED
IN OR DELIVERED WITH THIS PROXY STATEMENT/PROSPECTUS. SEE "WHERE YOU CAN FIND
MORE INFORMATION" ON PAGE 89 FOR A LISTING OF DOCUMENTS INCORPORATED BY
REFERENCE. THESE DOCUMENTS ARE AVAILABLE TO YOU WITHOUT CHARGE UPON YOUR WRITTEN
OR ORAL REQUEST. YOU CAN OBTAIN THE DOCUMENTS INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT/ PROSPECTUS BY REQUESTING THEM IN WRITING OR BY TELEPHONE FROM
THE APPROPRIATE COMPANY AT THE FOLLOWING ADDRESSES:
ENSCO International Incorporated Chiles Offshore Inc.
2700 Fountain Place 11200 Richmond Avenue, Suite 490
1445 Ross Avenue Houston, Texas 77082-2618
Dallas, Texas 75202-2792 (713) 339-3777
(214) 922-1500 Attn: Dick Fagerstal, Senior
Attn: Richard A. LeBlanc, Vice President -- Vice President, Chief Financial
Corporate Finance, Investor Relations and Officer and Secretary
Treasurer
IF YOU WOULD LIKE TO REQUEST ANY DOCUMENTS, YOUR REQUEST MUST BE RECEIVED
BY , 2002 IN ORDER TO RECEIVE THEM BEFORE THE DATE OF THE CHILES
SPECIAL MEETING. THE EXHIBITS TO THESE DOCUMENTS WILL GENERALLY NOT BE MADE
AVAILABLE UNLESS THEY ARE SPECIFICALLY INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS.
iv
QUESTIONS AND ANSWERS ABOUT THE MERGER
WHY AM I RECEIVING THIS PROXY STATEMENT/PROSPECTUS?
The Chiles board of directors has agreed to the acquisition of Chiles by
ENSCO under the terms of a merger agreement that is described in this proxy
statement/prospectus. A copy of the merger agreement is attached to this proxy
statement/prospectus as Annex A. After the merger, stockholders of Chiles will
become stockholders of ENSCO.
You are receiving this proxy statement/prospectus because Chiles
stockholders must vote to approve and adopt the merger agreement in order to
complete the merger. Chiles will hold a special meeting of its stockholders to
vote on the approval and adoption of the merger agreement. This proxy statement/
prospectus contains important information about the merger and the special
meeting of the Chiles stockholders, and you should read it carefully. The
enclosed voting materials allow you to vote your shares of Chiles common stock
without attending the Chiles special meeting.
YOUR VOTE IS IMPORTANT! THE CHILES BOARD OF DIRECTORS ENCOURAGES YOU TO
VOTE AS SOON AS POSSIBLE.
WHY IS CHILES PROPOSING THE MERGER?
The Chiles board of directors has unanimously determined that the terms of
the proposed merger and related transactions are in the best interests of Chiles
and its stockholders. The Chiles board of directors is proposing the merger
because it believes that the merger will create a stronger and more competitive
offshore drilling company and offer the best opportunity for you to maximize
your investment in Chiles common stock through ownership in the combined
company. The Chiles board of directors believes that merging with ENSCO will,
among other things:
- position Chiles to compete more effectively in the consolidating offshore
drilling industry by making Chiles part of a much larger and more
diversified company able to compete in markets in which Chiles could not
effectively compete given its smaller asset base. The Chiles board of
directors believes that the merger will provide the combined company with
opportunities to achieve greater economies of scale, access to capital
markets and operating efficiencies;
- provide the opportunity for Chiles stockholders to benefit from greater
liquidity of their investment by owning ENSCO common stock because the
average trading volume of ENSCO common stock far exceeds that of Chiles
common stock; and
- provide Chiles stockholders with a substantial premium to Chiles'
historical stock price in a transaction that will be at least partly
tax-free to Chiles stockholders. In the merger, Chiles stockholders will
receive cash and ENSCO common stock with an aggregate value representing
a premium of approximately 18.8%, based upon Chiles and ENSCO common
stock closing price, on the day before the merger was first publicly
announced. The Chiles board of directors believes that the merger
represents the most favorable terms available.
To review the reasons for the merger in greater detail, see "The
Merger -- Reasons for the Merger" on page 32.
WHAT WILL HAPPEN IN THE MERGER?
Chiles will merge into a new subsidiary of ENSCO. Only this new subsidiary
will exist after the merger and will continue as a 100% owned subsidiary of
ENSCO. After completion of the merger, ENSCO will operate the combined
businesses of ENSCO and Chiles. You will receive 0.6575 shares of ENSCO common
stock and $5.25 in cash for each share of Chiles common stock that you own
(unless you validly assert your appraisal rights in strict accordance with
Delaware law). ENSCO will not issue fractional shares in the merger. Instead,
ENSCO will pay cash in lieu of fractional shares. We sometimes refer to the
ENSCO shares and cash to be received by the Chiles stockholders as the merger
consideration. Based on the number of shares of ENSCO and Chiles common stock
outstanding on
1
, 2002, the record date for the Chiles special meeting, ENSCO will issue
approximately 13.3 million shares of ENSCO common stock in the merger.
Immediately after the merger, the former Chiles stockholders will own
approximately 9% of the then-outstanding shares of ENSCO common stock.
Example: If you currently own 100 shares of Chiles common stock, as a
result of the merger you will receive 65 shares of ENSCO common stock, $525
in cash, and cash in lieu of 0.75 ENSCO shares calculated on the basis of
the closing price of ENSCO common stock on the effective date of the
merger.
WHERE WILL MY SHARES BE LISTED AFTER THE MERGER?
The shares of ENSCO common stock issued in the merger will be listed on the
New York Stock Exchange and will trade under ENSCO's ticker symbol "ESV."
WHO WILL SERVE ON THE BOARD OF DIRECTORS OF ENSCO AFTER THE MERGER?
The current board of directors of ENSCO will continue to serve on the board
of directors of ENSCO after the merger. The current board of directors consists
of the following persons: Carl F. Thorne (Chairman of the Board), David M.
Carmichael, Gerald W. Haddock, Thomas L. Kelly II, Morton H. Meyerson, Paul E.
Rowsey, III and Joel V. Staff. No current member of the board of directors of
Chiles will serve on the board of directors of ENSCO after the merger.
WHO WILL BE THE EXECUTIVE OFFICERS OF ENSCO AFTER THE MERGER?
The current executive officers of ENSCO will continue to serve as executive
officers of ENSCO after the merger. William E. Chiles, the President, Chief
Executive Officer and a director of Chiles, has been offered the position of
Vice President of ENSCO at the effective time of the merger. Mr. Chiles has
indicated that he intends to accept the offer. Other than Mr. Chiles, no current
executive officer of Chiles will be offered a position as an executive officer
of ENSCO after the merger; however, certain of these individuals may accept
employment with ENSCO other than as executive officers.
ARE THERE ANY U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO CHILES
STOCKHOLDERS?
You will generally recognize gain, but not loss, equal to the lesser of:
- the amount of cash you receive in the merger; or
- the amount equal to the excess, if any, of the sum of the amount of cash
and the fair market value of ENSCO common stock you receive in the merger
over the adjusted tax basis of your Chiles common stock.
THE CHILES BOARD OF DIRECTORS ENCOURAGES YOU TO CONSULT YOUR TAX ADVISOR FOR A
FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
WHERE AND WHEN IS THE SPECIAL MEETING?
The special meeting of the Chiles stockholders will take place at the
offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, 25th Floor, New York,
New York, on , , 2002, at 10:00 a.m., local time.
WHAT VOTE OF STOCKHOLDERS IS REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT?
The affirmative vote of the holders of at least 66 2/3% of the outstanding
shares of Chiles common stock entitled to vote at the special meeting is
required to approve and adopt the merger agreement. YOUR VOTE IS IMPORTANT! If
you do not vote, this will have the same affect as a vote against the approval
and adoption of the merger agreement.
No vote of ENSCO stockholders is required under applicable law.
2
HOW DOES THE CHILES BOARD OF DIRECTORS RECOMMEND THAT I VOTE?
The Chiles board of directors unanimously recommends that you vote "FOR"
the proposal to approve and adopt the merger agreement.
HOW DO I CAST MY VOTE?
If you are a Chiles stockholder of record, you may vote in person at the
special meeting or by submitting a proxy for the special meeting. You can submit
your proxy by completing, signing, dating and returning the enclosed proxy card
in the accompanying pre-addressed postage paid envelope.
If you hold your shares in "street name," which means your shares are held
of record by a broker, bank or nominee, you must provide the record holder of
your shares with instructions on how to vote your shares. Your broker, bank, or
nominee will not be able to vote your shares unless the broker, bank or nominee
receives specific instructions from you.
THE FAILURE TO CAST YOUR VOTE WILL HAVE THE SAME EFFECT AS VOTING AGAINST
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
CAN I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY?
Yes. If you are a Chiles stockholder of record, you can change your vote at
any time before your proxy is voted at the special meeting by:
- delivering to the Secretary of Chiles a signed notice of revocation;
- granting a new, later-dated proxy, signed and delivered to the Secretary
of Chiles; or
- attending the special meeting and voting in person; however, your
attendance alone will not revoke your proxy.
If your shares are held in "street name," you must contact your broker,
bank or other nominee to change your vote.
SHOULD I SEND IN MY CHILES STOCK CERTIFICATES NOW?
No. After the merger is completed, you will receive written instructions
from the exchange agent on how to exchange your Chiles stock certificates for
the merger consideration. Please do not send in your Chiles stock certificates
with your proxy.
WHAT SHOULD I DO IF I RECEIVE MORE THAN ONE SET OF VOTING MATERIALS?
You may receive more than one set of voting materials, including multiple
copies of this proxy statement/prospectus and multiple proxy cards or voting
instruction cards. For example, if you hold your shares in more than one
brokerage account, you will receive a separate voting instruction card for each
brokerage account in which you hold shares. If you are a Chiles stockholder of
record and your shares are registered in more than one name, you will receive
more than one proxy card. Please complete, sign, date and return each proxy card
and voting instruction card that you receive.
WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
We are working to complete the merger as quickly as practicable. We
currently expect that the merger will be completed during the third calendar
quarter of 2002.
WHAT RIGHTS DO I HAVE TO SEEK A VALUATION OF MY SHARES OF CHILES COMMON STOCK?
You may assert appraisal rights under Delaware law and receive a cash
payment for the fair value of your shares instead of the cash and shares of
ENSCO common stock to be received in the merger. You can assert these rights
only if you comply with all of the requirements of Delaware law provided in
3
Annex G of this proxy statement/prospectus. If you elect to assert your
appraisal rights under Delaware law, a Delaware court will determine the fair
value of your shares. The fair value determined by the court may be more than,
less than or equal to the value of the merger consideration. For a more complete
description of your appraisal rights, see "Appraisal Rights" on page 86.
ENSCO is not obligated to complete the merger if appraisal rights are
properly demanded, and such demands are not withdrawn as of the date the merger
is to be completed, for more than 10% of the issued and outstanding shares of
Chiles common stock.
WHO CAN HELP ANSWER MY QUESTIONS?
If you have any questions about the merger or how to submit your proxy, or
if you need additional copies of this proxy statement/prospectus or the enclosed
proxy card or voting instructions, you should contact either:
Chiles Offshore Inc.
11200 Richmond Avenue, Suite 490
Houston, Texas 77082-2618
(713) 339-3777
Attn: Dick Fagerstal, Senior Vice President, Chief Financial Officer and
Secretary
or the proxy solicitor retained by Chiles:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
(212) 269-5550 (banks and brokers call collect)
(800) 290-6431 (all others call toll free)
4
SUMMARY
This summary highlights certain information from this proxy
statement/prospectus. This summary may not contain all of the information about
the merger that is important to you. For a more complete description of the
merger, we encourage you to read carefully this entire proxy
statement/prospectus, including the attached annexes. In addition, we encourage
you to read the information incorporated by reference into this proxy
statement/prospectus, which includes important business and financial
information about ENSCO and Chiles that has been filed with the Securities and
Exchange Commission (which we refer to as the SEC). You may obtain the
information incorporated by reference into this proxy statement/prospectus
without charge by following the instructions in the section entitled "Where You
Can Find More Information" on page 89. We have included page references
parenthetically to direct you to a more complete description of the topics
presented in this summary.
THE COMPANIES
ENSCO INTERNATIONAL INCORPORATED
ENSCO is an international offshore contract drilling company that also
provides marine transportation services. ENSCO's complement of offshore drilling
rigs is comprised of 38 premium jackup rigs (including a 25% owned rig for which
ENSCO has a purchase option on the remaining 75%), seven barge rigs, five
platform rigs and one deepwater semisubmersible rig. ENSCO's marine
transportation fleet consists of 28 vessels. ENSCO's offshore contract drilling
and marine transportation operations are integral to the exploration,
development and production of oil and natural gas.
The principal executive offices for ENSCO are located at:
2700 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202-2792
(214) 922-1500
CHILES OFFSHORE INC.
Chiles is an international offshore contract drilling company that owns and
operates premium jackup rigs, which Chiles sometimes refers to as ultra-premium
jackup drilling rigs, a niche in the offshore drilling industry that is
positioned between traditional jackup rigs and more costly harsh environment
jackup rigs. Chiles' current rig fleet is comprised of four premium jackup rigs
and a premium jackup rig currently under construction.
The principal executive offices for Chiles are located at:
11200 Richmond Avenue, Suite 490
Houston, Texas 77082-2618
(713) 339-3777
CHORE ACQUISITION, INC.
Chore Acquisition, Inc. is a new subsidiary of ENSCO that has not
previously engaged in any business except in connection with the merger.
The principal executive offices for Chore Acquisition, Inc. are located at:
2700 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202-2792
(214) 922-1500
5
THE SPECIAL MEETING (SEE PAGE 26)
Chiles will hold a special meeting of its stockholders to vote on the
merger agreement. The special meeting of the Chiles stockholders will take place
at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, 25th Floor, New
York, New York, on , , 2002, at 10:00 a.m., local
time.
THE MERGER (SEE PAGE 29)
The Chiles board of directors has agreed to the acquisition of Chiles by
ENSCO under the terms of the merger agreement that is described in this proxy
statement/prospectus and is attached as Annex A. We encourage you to read the
merger agreement in its entirety.
Pursuant to the merger agreement, Chiles will merge into a new subsidiary
of ENSCO. This new subsidiary will own all of the assets and business of Chiles
after the merger and will continue to exist as a 100% owned subsidiary of ENSCO.
After completion of the merger, ENSCO will operate the combined businesses of
ENSCO and Chiles. Upon completion of the merger, you will receive 0.6575 shares
of ENSCO common stock and $5.25 in cash for each share of Chiles common stock
owned by you, unless you elect to assert your appraisal rights. ENSCO will not
deliver fractional shares in the merger. Instead, ENSCO will pay cash for any
fractional shares. We sometimes refer to the ENSCO shares and cash to be
received by the Chiles stockholders as the merger consideration.
ENSCO stockholders will continue to own their existing shares of ENSCO
common stock.
OPINION OF FINANCIAL ADVISOR (SEE PAGE 34)
Credit Suisse First Boston Corporation, Chiles' financial advisor, has
delivered a written opinion to the Chiles board of directors as to the fairness,
from a financial point of view, of the merger consideration provided for in the
merger. The full text of Credit Suisse First Boston Corporation's written
opinion, dated May 14, 2002, is attached to this proxy statement/prospectus as
Annex F. We encourage you to read this opinion carefully in its entirety for a
description of the procedures followed, assumptions made, matters considered and
limitations on the review undertaken. CREDIT SUISSE FIRST BOSTON CORPORATION'S
OPINION IS ADDRESSED TO THE CHILES BOARD OF DIRECTORS AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER AS TO ANY MATTER RELATING TO THE MERGER.
RECOMMENDATION OF THE CHILES BOARD OF DIRECTORS (SEE PAGE 33)
The Chiles board of directors believes that the merger agreement and the
related transactions, including the merger, are advisable and fair to, and in
the best interests of, Chiles and its stockholders, and unanimously recommends
that Chiles stockholders vote "FOR" the proposal to approve and adopt the merger
agreement.
CHILES STOCKHOLDERS ENTITLED TO VOTE; VOTE REQUIRED (SEE PAGE 26)
You can vote at the Chiles special meeting if you owned Chiles common stock
at the close of business on , 2002, the record date for the
Chiles special meeting. On that date, there were shares of Chiles
common stock outstanding and entitled to vote. You can cast one vote for each
share of Chiles common stock that you owned on that date. Approval and adoption
of the merger agreement requires the affirmative vote of the holders of at least
66 2/3% (or shares) of the outstanding shares of Chiles common stock
entitled to vote.
VOTING AGREEMENTS (SEE PAGE 68)
ENSCO has entered into separate voting agreements with each of Luis Alvarez
Morphy, Javier Alvarez Morphy, Patricio Alvarez Morphy and SEACOR SMIT Inc.
(which we refer to as SEACOR) pursuant to which these persons agreed, among
other things, to vote all of the shares of Chiles common stock owned by them in
favor of the approval and adoption of the merger agreement. These persons also
6
granted to certain executive officers of ENSCO an irrevocable proxy to vote
their shares of Chiles in favor of the approval and adoption of the merger
agreement and the related transactions as directed by ENSCO. As of the record
date, these persons owned 7,511,071 shares of Chiles common stock, representing
approximately 37.0% of the outstanding shares of Chiles common stock on that
date. See "The Merger -- Interests of Certain Persons; Possible Conflicts of
Interest of Certain Persons in the Merger" on page 46.
INTERESTS OF CERTAIN PERSONS; POSSIBLE CONFLICTS OF INTEREST OF CERTAIN PERSONS
IN THE MERGER (SEE PAGE 46)
When considering the Chiles board of directors' recommendation that you
vote in favor of the approval and adoption of the merger agreement, you should
be aware that certain members of the board of directors and executive officers
of Chiles have interests in the merger that may be different from, or in
addition to, their interests as Chiles stockholders. These conflicts include the
following:
- Affiliates of certain directors and executive officers of Chiles have
various agreements with Chiles that will be terminated at the effective
time of the merger. Certain of these affiliates of directors and
executive officers of Chiles will receive payments from ENSCO at the
effective time of the merger or shortly thereafter to terminate these
agreements.
- Certain executive officers of Chiles will receive bonuses, severance
and/or other employment benefits under existing agreements with Chiles
and other benefits adopted in connection with the merger agreement.
- Certain directors and executive officers of Chiles hold options to
purchase shares of Chiles common stock pursuant to the Chiles 2000 Stock
Option Plan. Under the terms of this plan, the vesting of all Chiles
options will accelerate and become immediately vested as a result of the
merger.
The board of directors of Chiles was aware of these arrangements during its
deliberations on the merits of the merger and in deciding to recommend that you
vote for the approval and adoption of the merger agreement.
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF CHILES (SEE PAGE 50)
At the close of business on , 2002, directors and executive
officers of Chiles and their affiliates owned and were entitled to vote
7,403,033 shares of Chiles common stock, collectively representing approximately
36.5% of the outstanding shares of Chiles common stock on that date.
OWNERSHIP OF ENSCO BY CHILES STOCKHOLDERS AFTER THE MERGER (SEE PAGE 50)
ENSCO expects to issue approximately 13.3 million shares of ENSCO common
stock in the merger. Based on the number of shares of ENSCO and Chiles common
stock outstanding on the record date, after completion of the merger, former
Chiles stockholders will own approximately 9% of the then-outstanding shares of
ENSCO common stock.
MANAGEMENT OF ENSCO AFTER THE MERGER (SEE PAGE 51)
Upon completion of the merger, the current board of directors and executive
officers of ENSCO will continue to manage the business of ENSCO, including the
business now conducted by Chiles and its subsidiaries. None of the current
directors of Chiles will be a director of ENSCO after the merger. William E.
Chiles, the President and Chief Executive Officer and a director of Chiles, has
been offered a position as Vice President of ENSCO effective at the time of the
merger. Mr. Chiles has indicated that he intends to accept the offer. Other than
Mr. Chiles, no current executive officer of Chiles will be offered a position as
an executive officer of ENSCO after the merger; however, certain of these
individuals may accept employment with ENSCO other than as executive officers.
7
LISTING OF ENSCO COMMON STOCK AND DELISTING OF CHILES COMMON STOCK (SEE PAGE 45)
The ENSCO common stock issued in the merger will be listed on the New York
Stock Exchange, where ENSCO common stock is traded under the symbol "ESV." If
the merger is completed, Chiles common stock will no longer be listed on the
American Stock Exchange and will be deregistered under the Securities Exchange
Act of 1934, and Chiles will no longer file periodic reports with the SEC.
APPRAISAL RIGHTS (SEE PAGE 86)
You have the right under Delaware law to dissent from the merger and to
receive payment in cash for the appraised fair value of your shares of Chiles
common stock instead of the merger consideration. You can assert these rights
only if you comply with all of the requirements of Delaware law provided in
Annex G of this proxy statement/prospectus. If you elect to assert your
appraisal rights under Delaware law, a Delaware court will determine the fair
value of your shares. The appraised value of your shares of Chiles common stock
may be more than, less than or equal to the value of the merger consideration.
If you desire to assert your statutory appraisal rights you must:
- deliver to Chiles before the special meeting written notice of your
intent to exercise appraisal rights with respect to your shares of Chiles
common stock if the merger is completed;
- not vote your shares in favor of approval and adoption of the merger
agreement; and
- follow the statutory procedures for asserting appraisal rights under
Delaware law, which are described in the section entitled "Appraisal
Rights" on page 86.
Merely voting against the approval and adoption of the merger agreement
will not preserve your appraisal rights. Section 262 of the Delaware General
Corporation Law (which we refer to as the DGCL) is reprinted in its entirety and
attached to this proxy statement/prospectus as Annex G. Failure to strictly
comply with all procedures required by the DGCL may result in the loss of your
appraisal rights.
ENSCO is not obligated to complete the merger if appraisal rights are
properly demanded, and such demands are not withdrawn as of the date the merger
is to be completed, for more than 10% of the issued and outstanding shares of
Chiles common stock.
CONDITIONS TO COMPLETION OF THE MERGER (SEE PAGE 53)
Completion of the merger depends on a number of conditions being met or
waived, including:
- approval and adoption of the merger agreement by the Chiles stockholders;
- absence of breaches of the representations and warranties in the merger
agreement that result in a material adverse effect;
- material performance of each party's obligations and covenants under the
merger agreement;
- absence of certain types of governmental orders or proceedings;
- receipt of opinions by ENSCO and Chiles from their respective tax counsel
that the merger will qualify as a reorganization under Section 368(a) the
Internal Revenue Code;
- the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976;
- absence of any event or occurrence that has or is reasonably expected to
have, individually or in the aggregate, a material adverse effect (which,
in the case of Chiles, includes the loss or total destruction of any of
Chiles' drilling rigs); and
- approval for listing on the New York Stock Exchange the shares of ENSCO
common stock to be issued in the merger.
8
In addition, ENSCO is not obligated to complete the merger if appraisal
rights are properly demanded, and such demands are not withdrawn as of the date
the merger is to be completed, for more than 10% of the issued and outstanding
shares of Chiles common stock.
A party may elect to waive a condition to its obligation to complete the
merger even though that condition has not been satisfied.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 64)
The merger agreement may be terminated in the following ways:
- by mutual written consent;
- by ENSCO if:
- the Chiles board of directors withdraws or modifies its approval of the
merger in any manner adverse to ENSCO;
- the Chiles board of directors recommends the acquisition proposal of a
person other than ENSCO; or
- another person makes a tender or exchange offer for Chiles and the
Chiles board of directors fails to recommend to the Chiles stockholders
that they reject the tender or exchange offer; and
- by Chiles, if the Chiles board of directors accepts an acquisition
proposal from a third party that is more favorable to Chiles
stockholders, from a financial point of view, than the terms of the
merger and complies with certain procedures contained in the merger
agreement.
In addition, either Chiles or ENSCO could decide, without the consent of
the other, to terminate the merger agreement in a number of situations
including, if:
- the merger is not completed by December 15, 2002;
- a court or governmental authority permanently prohibits completion of the
merger;
- the Chiles stockholders do not approve and adopt the merger agreement at
the special meeting;
- the representations and warranties of the other become inaccurate after
the date of the merger agreement, the inaccuracy has not been cured
within a specified time and such breaches have a material adverse effect;
or
- since the date of the merger agreement, an event has had or is reasonably
likely to have, alone or together with all other events, a material
adverse effect on either party (which, in the case of Chiles, includes
the loss or total destruction of any of Chiles' drilling rigs existing or
under construction).
NO SOLICITATION BY CHILES (SEE PAGE 57)
The merger agreement restricts the ability of Chiles to solicit or engage
in discussions or negotiations with a third party regarding a proposal to
acquire a significant interest in Chiles. However, the merger agreement provides
that, if Chiles receives an acquisition proposal from a third party that is more
favorable to Chiles stockholders, from a financial point of view, than the terms
of the merger and Chiles complies with certain procedures contained in the
merger agreement, Chiles may furnish nonpublic information to that third party
and engage in negotiations regarding an acquisition proposal with that third
party, subject to certain conditions.
TERMINATION FEE AND EXPENSES (SEE PAGES 65 AND 66)
If the merger agreement is terminated, Chiles, in specified circumstances,
may be required to pay a termination fee of $22.5 million to ENSCO or to
reimburse up to $1 million of ENSCO's expenses.
9
CHILES STOCK OPTIONS (SEE PAGE 53)
Upon completion of the merger, each option issued by Chiles to purchase
shares of Chiles common stock will be assumed by ENSCO and converted into an
option exercisable for the merger consideration. The vesting of Chiles options
will accelerate and all of such options will generally become immediately vested
as a result of the merger.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE
42)
We expect that the merger will qualify as a reorganization under Section
368(a) of the Internal Revenue Code. It is a condition to the merger that ENSCO
and Chiles receive opinions from their respective tax counsel to the effect that
the merger will qualify for this tax treatment. If the merger qualifies as a
reorganization under Section 368(a) of the Internal Revenue Code, then you will
generally recognize gain, but not loss, equal to the lesser of:
- the amount of cash you receive in the merger; or
- the amount equal to the excess, if any, of the sum of the amount of cash
and the fair market value of ENSCO common stock you receive in the merger
over the adjusted tax basis of your Chiles common stock.
No gain or loss will be recognized by ENSCO, Chore Acquisition, Inc. or
Chiles as a result of the merger.
The tax consequences of the merger to you may depend on the facts of your
own situation. THE CHILES BOARD OF DIRECTORS ENCOURAGES YOU TO CONSULT YOUR TAX
ADVISOR FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
ACCOUNTING TREATMENT (SEE PAGE 45)
ENSCO will account for the merger under the purchase method of accounting
for business combinations under generally accepted accounting principles in the
United States.
REGULATORY APPROVALS (SEE PAGE 42)
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, we cannot
complete the merger until we have notified the Antitrust Division of the U.S.
Department of Justice and the U.S. Federal Trade Commission of the merger and
filed the necessary report forms and until the required waiting period has
ended. ENSCO and Chiles submitted the required filings on May 23 and 24, 2002,
respectively.
OTHER CHILES SPECIAL MEETING PROPOSALS (SEE PAGE 27)
Under the laws of Delaware, no business may be raised at the Chiles special
meeting except as indicated in this proxy statement/prospectus.
10
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA FOR ENSCO
ENSCO prepared the selected historical consolidated financial data in the
table below using the consolidated financial statements of ENSCO. ENSCO derived
the consolidated statement of operations data for the year ended December 31,
2001 and the consolidated balance sheet data as of December 31, 2001 from its
consolidated financial statements audited by Arthur Andersen LLP, independent
accountants. ENSCO derived the consolidated statement of operations data for
each of the four years in the period ended December 31, 2000, and the
consolidated balance sheet data as of December 31 of each year from 1997 to
2000, from its consolidated financial statements audited by
PricewaterhouseCoopers LLP, independent accountants. ENSCO derived the
consolidated statement of operations data for the three months ended March 31,
2002 and 2001 and the consolidated balance sheet data as of March 31, 2002 and
2001 from its unaudited consolidated financial statements. In the opinion of
management, the unaudited interim financial statements for the three months
ended March 31, 2002 and 2001 include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the three months ended March 31, 2002 are not necessarily indicative of the
results that may be expected for the entire year ending December 31, 2002. The
historical consolidated financial data are only a summary and should be read in
conjunction with the consolidated financial statements and related notes for the
applicable periods. The audited consolidated financial statements as of December
31, 2001 and 2000 and for each of the three years in the period ended December
31, 2001, and the unaudited consolidated financial statements as of March 31,
2002 and for the three month period then ended, are incorporated by reference in
this proxy statement/prospectus. See "Where You Can Find More Information" on
page 89.
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Operating revenue................ $ 142.3 $ 195.3 $ 817.4 $ 533.8 $ 363.7 $ 813.2 $ 815.1
Income before extraordinary
item........................... 16.2 46.9 207.3 85.4 0.3 253.9 234.9
Net income....................... 16.2 46.9 207.3 85.4 0.3 253.9 233.9(1)
Income per share before
extraordinary item:
Basic.......................... 0.12 0.34 1.51 0.62 0.00 1.82 1.67
Diluted........................ 0.12 0.34 1.50 0.61 0.00 1.81 1.64
Net income per share:
Basic.......................... 0.12 0.34 1.51 0.62 0.00 1.82 1.66
Diluted........................ 0.12 0.34 1.50 0.61 0.00 1.81 1.64
Cash dividends per common
share.......................... 0.025 0.025 0.10 0.10 0.10 0.10 0.05
CONSOLIDATED BALANCE SHEET DATA
(at end of period):
Total assets..................... $2,342.4 $2,190.9 $2,323.8 $2,108.0 $1,983.7 $1,992.8 $1,772.0
Long-term debt, net of current
portion........................ 462.4 474.9 462.4 422.2 371.2 375.5 400.8
Stockholders' equity............. 1,456.3 1,370.0 1,440.2 1,328.9 1,234.6 1,245.0 1,076.7
---------------
(1) In November 1997, ENSCO retired a revolving credit facility and recorded a
$1.0 million extraordinary charge, net of tax, relating to the unamortized
deferred financing costs associated with the revolving credit facility.
11
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA FOR CHILES
Chiles prepared the selected historical consolidated financial data in the
table below using the consolidated financial statements of Chiles. Chiles
derived the consolidated statement of operations data for each of the four years
in the period ended December 31, 2001 and the period from August 5, 1997 (date
of inception) to December 31, 1997, and the consolidated balance sheet data as
of December 31 of each year from 1997 to 2001, from its consolidated financial
statements audited by Arthur Andersen LLP, independent accountants. Chiles
derived the consolidated statement of operations data for the three months ended
March 31, 2002 and 2001 and the consolidated balance sheet data as of March 31,
2002 and 2001 from its unaudited consolidated financial statements. In the
opinion of management, the unaudited interim financial statements for the three
months ended March 31, 2002 and 2001 include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the three months ended March 31, 2002 are not necessarily indicative of the
results that may be expected for the entire year ending December 31, 2002. The
historical consolidated financial data are only a summary and should be read in
conjunction with the consolidated financial statements and related notes
incorporated by reference in this proxy statement/prospectus. See "Where You Can
Find More Information" on page 89.
FROM AUGUST 5,
THREE MONTHS 1997 (DATE OF
ENDED MARCH 31, YEAR ENDED DECEMBER 31, INCEPTION) TO
----------------- ------------------------------------- DECEMBER 31,
2002 2001 2001 2000 1999 1998 1997
------ ------ ------ ------ ------ ------ --------------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Operating revenue................ $ 19.8 $ 19.2 $ 74.2 $ 56.0 $ 8.6 $ -- $ --
Income (loss) before
extraordinary item............. 4.4 5.3 22.5 (15.9) (3.5) 0.2 (0.3)
Net income....................... 4.1(2) 5.3 22.5 (17.7)(3) (4.0)(4) 0.2 (0.3)
Income (loss) per share before
extraordinary item(1):
Basic.......................... 0.22 0.30 1.20 (1.55) (0.68) 0.03 (0.09)
Diluted........................ 0.22 0.30 1.20 (1.55) (0.68) 0.03 (0.09)
Net income (loss) per share(1):
Basic.......................... 0.20 0.30 1.20 (1.73) (0.77) 0.03 (0.09)
Diluted........................ 0.20 0.30 1.20 (1.73) (0.77) 0.03 (0.09)
CONSOLIDATED BALANCE SHEET DATA
(at end of period):
Total assets..................... $544.7 $300.8 $492.6 $300.1 $203.2 $178.4 $ 67.4
Long-term debt, net of current
portion........................ 134.6 -- 84.2 -- 117.0 110.0 --
Stockholders' equity............. 329.8 253.1 325.5 247.8 74.6 63.6 63.4
---------------
(1) Income (loss) per share before extraordinary item and net income (loss) per
share have been calculated for years prior to 2000 by converting the
membership interests of the members of Chiles Offshore LLC, the predecessor
to Chiles Offshore Inc., at the rate of approximately 87,172 shares of
common stock for each 1% membership interest then outstanding.
(2) In the three months ended March 31, 2002, Chiles recorded a $300,000
extraordinary charge, net of tax, associated with unamortized debt issuance
costs and a cancellation fee relating to a cancelled $82.0 million credit
facility for the construction of the Chiles Discovery drilling rig.
(3) In 2000, Chiles repaid and retired approximately $95.0 million principal
amount of senior notes and in connection therewith recorded a $1.8 million
extraordinary charge, net of tax, associated with unamortized debt issuance
costs.
(4) In 1999, Chiles repaid $15.0 million principal amount of senior notes and in
connection therewith recorded a $500,000 extraordinary charge, net of tax,
associated with unamortized debt issuance costs.
12
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
We have included the following selected unaudited pro forma combined
financial data only for the purposes of illustration. The unaudited pro forma
combined statement of operations data assumes that the merger between ENSCO and
Chiles was completed on January 1, 2001 and the unaudited pro forma combined
balance sheet data assumes that the merger was completed on March 31, 2002. The
pro forma financial data do not necessarily indicate what the operating results
or financial position would have been if the merger had been completed at the
dates indicated. Furthermore, this data does not necessarily indicate what the
future operating results or financial position of the combined company will be.
This unaudited pro forma combined statement of operations data does not include
adjustments to reflect any cost savings or other operational efficiencies that
may be realized as a result of the merger of ENSCO and Chiles, or any future
merger-related restructuring or integration expenses.
You should read this selected unaudited pro forma combined financial data
in conjunction with the "Unaudited Condensed Pro Forma Combined Financial
Statements" and the related notes beginning on page 70.
THREE
MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
2002 2001
--------- ------------
(IN MILLIONS, EXCEPT PER
SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Operating revenue........................................... $161.8 $894.6
Operating income............................................ 28.2 351.5
Income before extraordinary item............................ 20.3 230.6
Earnings per share, before extraordinary item:
Basic..................................................... 0.14 1.54
Diluted................................................... 0.14 1.52
MARCH 31,
2002
-------------
(IN MILLIONS)
BALANCE SHEET DATA:
Total assets................................................ $3,030.7
Long-term debt, net of current portion...................... 597.0
Stockholders' equity........................................ 1,916.8
13
UNAUDITED COMPARATIVE PER SHARE DATA
The following table compares the earnings per share, cash dividends per
common share and book value per share data for ENSCO and Chiles on a historical,
pro forma combined and per share equivalent basis.
You should read the data below together with the historical financial
statements and related notes incorporated by reference in this document. See
"Where You Can Find More Information" on page 89. The unaudited pro forma data
is for informational purposes only. The combined pro forma data does not
necessarily indicate what the operating results or financial position would have
been if the merger had been completed at the dates indicated. Furthermore, this
data does not necessarily indicate what the future operating results or
financial position of the combined company will be.
EQUIVALENT
ENSCO UNAUDITED
UNAUDITED PRO FORMA
ENSCO CHILES PRO FORMA PER CHILES
PER SHARE PER SHARE PER SHARE COMMON SHARE
DATA DATA DATA(1) DATA(2)
--------- --------- --------- ------------
THREE MONTHS ENDED MARCH 31, 2002
(UNAUDITED)
Earnings per share:
Basic.................................. $ 0.12 $ 0.20 $ 0.14 $ 0.09
Diluted................................ 0.12 0.20 0.14 0.09
Cash dividends per common share(3)....... 0.025 --
Book value per share (at March 31,
2002).................................. 10.81 16.27 12.95 8.51
Weighted average shares outstanding (in
millions).............................. 134.7 20.3 148.0 225.1
YEAR ENDED DECEMBER 31, 2001
Earnings per share:
Basic.................................. $ 1.51 $ 1.20 $ 1.54 $ 1.01
Diluted................................ 1.50 1.20 1.52 1.00
Cash dividends per common share(3)....... 0.10 --
Weighted average shares outstanding (in
millions).............................. 136.9 18.8 150.2 228.4
---------------
(1) See "Unaudited Condensed Pro Forma Combined Financial Statements" on page
70.
(2) Equivalent per share data represents the ENSCO pro forma per share data
multiplied by the merger ratio of 0.6575.
(3) ENSCO has paid cash dividends of $.025 per share on a quarterly basis since
the third quarter of 1997. Any future declaration and payment of dividends
by ENSCO will be dependent on, among other things, ENSCO's profitability,
liquidity, financial condition and capital requirements. Final determination
of the timing, amount and payment of dividends on ENSCO common stock is at
the discretion of its board of directors.
14
COMPARATIVE PER SHARE MARKET PRICE DATA
ENSCO common stock trades on the New York Stock Exchange under the symbol
"ESV." Chiles common stock trades on the American Stock Exchange under the
symbol "COD." The table below shows, for the calendar quarters indicated, the
range of high and low per share sales prices for ENSCO common stock as reported
on the New York Stock Exchange and Chiles common stock as reported on the
American Stock Exchange.
ENSCO CHILES
COMMON STOCK COMMON STOCK(1)
--------------- ---------------
HIGH LOW HIGH LOW
------ ------ ------ ------
FISCAL YEAR 2000
First Quarter.................................... $36.88 $20.25 -- --
Second Quarter................................... 38.69 27.56 -- --
Third Quarter.................................... 43.13 30.88 -- --
Fourth Quarter................................... 41.13 22.00 25.13 15.19
FISCAL YEAR 2001
First Quarter.................................... $44.49 $30.19 $25.06 $19.75
Second Quarter................................... 40.44 22.88 28.65 17.75
Third Quarter.................................... 23.68 12.81 23.08 15.70
Fourth Quarter................................... 26.23 13.91 20.48 16.93
FISCAL YEAR 2002
First Quarter.................................... $30.70 $20.87 $23.00 $17.20
Second Quarter(2)................................ 35.50 26.95 26.12 21.10
---------------
(1) The prices of Chiles common stock are reported beginning at the first full
quarter after the initial listing of such stock on the American Stock
Exchange.
(2) The prices of ENSCO and Chiles common stock are reported through May 14,
2002, the date preceding the public announcement of the merger.
On May 14, 2002, the last trading day before we announced the merger, the
closing price of ENSCO common stock on the New York Stock Exchange was $35.36
per share and the closing price of Chiles common stock on the American Stock
Exchange was $23.99 per share. Based on the exchange ratio 0.6575 of a share of
ENSCO common stock for each outstanding share of Chiles common stock, the
closing price of ENSCO common stock on May 14, 2002, and the cash consideration
of $5.25 per share, the pro forma equivalent per share value of Chiles common
stock on May 14, 2002 was approximately $28.50 per share. Based on the exchange
ratio 0.6575 of a share of ENSCO common stock for each outstanding share of
Chiles common stock, the closing price of ENSCO common stock on ,
2002, and the cash consideration of $5.25 per share, the pro forma equivalent
per share value of Chiles common stock on , 2002 was approximately
$ per share.
The market value of the shares of ENSCO common stock that will be issued in
exchange for shares of Chiles common stock upon the completion of the merger
will not be known at the time Chiles stockholders vote on the approval and
adoption of the merger agreement because the merger will not yet be completed at
that time. The above table shows only historical comparisons. Because the market
prices of ENSCO common stock and Chiles common stock will likely fluctuate prior
to the merger, these comparisons may not provide meaningful information to you
in determining whether to approve and adopt the merger agreement. You should
obtain current market quotations for ENSCO and Chiles common stock and review
carefully the other information contained in this proxy statement/prospectus or
incorporated by reference into this proxy statement/prospectus in considering
whether to approve and adopt the merger agreement. See "Where You Can Find More
Information" on page 89.
15
ENSCO initiated the payment of a $.025 per share quarterly cash dividend on
its common stock during the third quarter of 1997 and has continued to pay such
quarterly dividends through March 31, 2002. Cash dividends totaling $.10 per
share were paid in both 2001 and 2000. On May 14, 2002, ENSCO's board of
directors declared a regular quarterly dividend of $.025 per share payable on
June 18, 2002 to stockholders of record on June 4, 2002. ENSCO currently does
not plan to change its dividend policy after the merger (including the amount of
the per share dividend payments). However, the final determination of the
timing, amount and payment of dividends on the common stock is at the discretion
of the ENSCO board of directors. Such decisions on payment of dividends will
depend on, among other things, ENSCO's profitability, liquidity, financial
condition and capital requirements. Since its inception in 1997, Chiles has not
paid any dividends to Chiles stockholders (or, prior to becoming a corporation
in September 2000, any distributions to Chiles members) and its current
intention is to retain all cash generated from operations. In addition, certain
covenants in Chiles' credit facilities as well as the merger agreement restrict
Chiles' ability to pay dividends. Chiles does not anticipate paying any cash
dividends on its common stock prior to the effective time of the merger.
16
RISK FACTORS
In addition to the other information included in this proxy
statement/prospectus, including the matters addressed in "Cautionary Statement
Concerning Forward -- Looking Statement" on page 24, you should carefully
consider the following risks before deciding whether to vote for approval and
adoption of the merger agreement. In addition, you should read and consider the
risks associated with each of the businesses of ENSCO and Chiles because these
risks will also affect the combined company. You can find descriptions of these
risks in ENSCO's and Chiles' annual reports on Form 10-K for the year ended
December 31, 2001 and the other reports filed with the SEC and incorporated by
reference into this proxy statement/prospectus. Additional risks and
uncertainties not presently known to ENSCO and Chiles or that are not currently
believed to be important to you also may adversely affect the merger and ENSCO
following the merger.
RISKS RELATING TO THE MERGER
THE VALUE OF ENSCO COMMON STOCK TO BE RECEIVED BY YOU IN THE MERGER WILL
FLUCTUATE.
In the merger, you will receive 0.6575 shares of ENSCO common stock and
$5.25 in cash for each share of Chiles common stock you own. Because part of the
merger consideration you will receive consists of ENSCO common stock, the value
of this merger consideration will depend on the market price of ENSCO common
stock at the time the merger is completed. The market price of ENSCO common
stock at the time the merger is completed will vary from its market prices at
the date of this proxy statement/prospectus and at the date of the Chiles
special meeting. These variations may be caused by a number of factors,
including:
- general industry market conditions;
- changes in the business or results of operations of ENSCO or Chiles;
- the timing of the merger and the prospects for the post-merger operations
of ENSCO;
- the worldwide supply/demand balance for oil and natural gas and the
prevailing commodity price environment;
- the level of drilling activity of ENSCO's and Chiles' customers;
- competition in the drilling industry;
- regulatory considerations;
- risks associated with ENSCO's construction of new rigs, including the
Chiles drilling rig under construction;
- escalation or additional outbreak of armed hostilities or other crisis in
the Middle East or other geographic areas in which ENSCO or Chiles
operate or further acts of terrorism in the United States or elsewhere;
- general stock market and economic conditions; and
- other factors beyond the control of ENSCO and Chiles, including those
described elsewhere in this "Risk Factors" section.
The merger consideration will not be adjusted for any increase or decrease
in the market price of ENSCO common stock or Chiles common stock. Accordingly,
if the market value of ENSCO common stock declines prior to the time the merger
is completed, the value of the merger consideration to be received by you will
decline. In addition, because the date that the merger is completed will be
later than the date of the special meeting, you will not know the exact value of
the ENSCO common stock that will be issued in the merger at the time they vote
on the merger agreement. WE ENCOURAGE YOU TO OBTAIN CURRENT MARKET QUOTATIONS
FOR ENSCO AND CHILES SHARES.
17
THE PRICE OF ENSCO COMMON STOCK MAY DECLINE AS A RESULT OF THE MERGER.
Assuming the merger agreement is approved and adopted by the Chiles
stockholders and the merger is completed, the number of outstanding shares of
ENSCO common stock will be increased by approximately 9% from the number of
outstanding shares of ENSCO common stock immediately prior to the completion of
the merger. As a result of the issuance of these additional shares, the market
price of shares of ENSCO common stock prior to the completion of the merger or
the shares of ENSCO common stock following completion of the merger may
experience volatility or declines unrelated to the financial performance of
ENSCO.
ENSCO MAY NOT REALIZE ALL OF THE ANTICIPATED BENEFITS OF THE MERGER.
The success of the merger will depend, in part, on the ability of ENSCO to
realize cost savings and growth opportunities from integrating the business of
Chiles with the business of ENSCO. Any success by ENSCO in realizing these
benefits and the timing of this realization, if any, depend upon the successful
integration of the operations of Chiles into ENSCO. The integration of two
independent companies is a complex, costly and time-consuming process. The
difficulties of combining the operations of the companies include, among others:
- retaining key employees;
- transitioning and preserving Chiles' customer, contractor, supplier and
other important third party relationships;
- integrating corporate and administrative infrastructures;
- coordinating sales and marketing functions;
- minimizing the diversion of management's attention from ongoing business
concerns; and
- coordinating geographically separate organizations.
RISKS RELATING TO ENSCO'S BUSINESS FOLLOWING THE MERGER
The following risks relate to ENSCO's business after the merger taking into
account the combined businesses of Chiles and ENSCO.
RECENT TERRORIST ATTACKS AND UNITED STATES MILITARY ACTION COULD RESULT IN A
MATERIAL ADVERSE EFFECT ON THE BUSINESS OF ENSCO.
Terrorist acts or acts of war may cause damage to or disruption of ENSCO's
United States or international operations, its employees, its property and
equipment, or its customers, suppliers and subcontractors, which could
significantly impact ENSCO's financial position, results of operations and cash
flows. The terrorist attacks that occurred in the United States on September 11,
2001 were unprecedented events that have created many economic and political
uncertainties. The long-term effects on ENSCO's operations of the September 11,
2001 attacks are unknown. The potential for future terrorist attacks, the
national and international responses to terrorist attacks, and other acts of war
or hostility could create many economic and political uncertainties, including
an impact upon oil and gas exploration and development, which could adversely
affect ENSCO's business in ways that cannot be readily determined.
THE SUCCESS OF ENSCO'S BUSINESS WILL DEPEND ON THE LEVEL OF ACTIVITY IN THE OIL
AND NATURAL GAS INDUSTRY, WHICH IS SIGNIFICANTLY AFFECTED BY THE LEVEL AND
VOLATILITY OF OIL AND NATURAL GAS PRICES.
The success of ENSCO's business will depend on the level of activity in
offshore and onshore oil and natural gas exploration, development and production
in markets worldwide. Oil and natural gas prices, and market expectations of
potential changes in these prices, significantly affect this level of activity.
ENSCO's business and operations depend upon exploration and development spending
by oil and gas companies. An actual decline, or the perceived risk of a decline,
in oil or natural gas prices could cause oil and gas
18
companies to reduce their overall level of spending, in which case demand for
ENSCO's equipment and services may decrease and revenues may be adversely
affected through lower offshore rig and marine transportation utilization and
lower average day rates. Worldwide military, political and economic events have
also contributed to oil and natural gas price volatility and are likely to
continue to do so in the future. Numerous factors may affect oil and natural gas
prices and the level of demand for ENSCO's services, including:
- worldwide demand for oil and natural gas;
- the ability of the Organization of Petroleum Exporting Countries (which
we refer to as OPEC) to set and maintain production levels and pricing;
- the level of production by non-OPEC countries;
- domestic and foreign tax policy;
- laws and governmental regulations that restrict exploration and
development of oil and natural gas in various jurisdictions;
- advances in exploration and development technology; and
- the worldwide military or political environment, including uncertainty or
instability resulting from an escalation or additional outbreak of armed
hostilities or other crises in oil or natural gas producing areas of the
Middle East or geographic areas in which ENSCO or Chiles operate, or
further acts of terrorism in the United States or elsewhere.
ENSCO'S BUSINESS IS AND WILL BE HIGHLY PRICE COMPETITIVE AND CYCLICAL, WITH
PERIODS OF LOW DEMAND AND EXCESS RIG AND VESSEL AVAILABILITY THAT COULD RESULT
IN ADVERSE EFFECTS ON ENSCO'S BUSINESS.
The offshore drilling and marine transportation businesses are highly
competitive with numerous industry participants. The industry has experienced
consolidation in recent years and may experience additional consolidation.
Furthermore, recent mergers among oil and natural gas exploration and production
companies have reduced the number of available customers.
Drilling and marine transportation contracts are, for the most part,
awarded on a competitive bid basis. Price competition is often the primary
factor in determining which qualified contractor is awarded a contract, although
rig and vessel availability and the quality and technical capability of service
and equipment are also factors. ENSCO will compete with numerous offshore
drilling and marine transportation contractors, several of which are larger and
have greater resources than ENSCO.
ENSCO conducts its business primarily in the U.S. Gulf of Mexico, the North
Sea, Asia Pacific and Venezuela. ENSCO's industry historically has been cyclical
and may be impacted by oil and natural gas price levels and volatility. There
have been periods of high demand, short rig supply and high day rates, followed
by periods of lower demand, excess rig supply and low day rates. Changes in
commodity prices can have a dramatic effect on the demand for rigs and vessels,
and periods of excess rig and vessel supply intensify the competition in the
industry and often result in rigs and vessels being idled. Decreases in U.S.
natural gas prices since the beginning of the second quarter of 2001 have
decreased the demand for rigs, vessels and day rates in the Gulf of Mexico, a
predominantly natural gas province in which ENSCO has significant operations, as
operators have reduced their level of spending activity. Further declines in oil
or natural gas prices could reduce demand for ENSCO's drilling services and
adversely affect both utilization and day rates in one or more of the regions in
which it will operate. ENSCO may be required to idle rigs and vessels or to
enter into lower rate contracts in response to market conditions in the future.
There can be no assurance that the active rig count, vessel utilization or
drilling activity in the areas in which ENSCO operates will not decline in 2002
or in other periods, nor can there be any assurance concerning any adverse
effect resulting from such decrease in activity.
19
FAILURE TO OBTAIN AND RETAIN KEY PERSONNEL COULD IMPEDE ENSCO'S OPERATIONS.
ENSCO requires highly skilled personnel to operate and provide technical
services and support for its business. Competition for the skilled and other
labor required for drilling operations has intensified as the number of rigs
activated or added to worldwide fleets or under construction has increased in
the last few years. Although competition for skilled and other labor has not
materially affected ENSCO or Chiles to date, both companies have recently found
it more difficult to find qualified individuals, and the possibility exists that
competition for skilled and other labor for operations could limit ENSCO's
results of operations in the future.
ENSCO MAY SUFFER LOSSES IF ITS CUSTOMERS TERMINATE OR SEEK TO RENEGOTIATE THEIR
CONTRACTS.
ENSCO's contracts with customers may be cancelled upon specified notice at
the option of the customer. Some drilling contracts require the customer to pay
a specified early termination payment upon cancellation, which payments may not
fully compensate ENSCO for the loss of the contract. Contracts customarily
provide for either automatic termination or termination at the option of the
customer in the event of total loss of the drilling rig or if drilling
operations are suspended for extended periods of time by reason of acts of God
or excessive rig downtime for repairs, or other specified conditions. Early
termination of a contract may result in a rig being idle for an extended period
of time. ENSCO's revenues may be adversely affected by customers' early
termination of contracts, especially if ENSCO is unable to recontract the
affected rig within a short period of time. Further, in times of depressed
market conditions, ENSCO's customers (and, historically, Chiles' customers) have
on occasion sought to renegotiate firm drilling contracts to reduce their
obligations.
ENSCO'S DRILLING RIG FLEET WILL BE HEAVILY CONCENTRATED IN PREMIUM JACKUP RIGS,
WHICH LEAVES ENSCO VULNERABLE TO RISKS RELATED TO LACK OF DIVERSIFICATION.
The international offshore drilling fleet is generally divided into four
rig type market segments -- platform, jackup and semisubmersible drilling rigs
and drill ships. Each of the segments also is divided into smaller sub-markets.
While these market segments are affected by common characteristics, they each
have separate market conditions that affect the demand and rates for drilling
equipment in that segment. ENSCO's current complement of offshore drilling rigs
is comprised of 38 premium jackup rigs, seven barge rigs, five platform rigs and
one deepwater semisubmersible rig. Chiles' current rig fleet is comprised of
four premium jackup rigs and an premium jackup rig currently under construction.
Following the merger, ENSCO will have 43 premium jackup rigs (including the
Chiles rig under construction and a 25% owned rig for which ENSCO has a purchase
option on the remaining 75%) in its offshore rig fleet and will thus have a
heavy concentration of its fleet in the premium jack up rig market. If the
market for premium jackup rigs should decline relative to the markets for other
drilling rig types, ENSCO's results of operations could be more adversely
affected relative to its competitors which may have drilling fleets that are not
concentrated in premium jackup rigs.
SOME OF OUR CONTRACTS REQUIRE US TO TAKE A HIGHER DEGREE OF BUSINESS RISKS.
During good industry market cycles ENSCO experiences higher utilization,
receives relatively high average day rates, and also generally is able to
negotiate more favorable contract terms. During adverse industry market cycles,
ENSCO competes more aggressively for contracts and may have to accept
contractual liability and indemnity provisions that do not offer the same level
of protection against potential losses as can be obtained during good industry
market cycles. Increased contractual liabilities may have an adverse effect on
results of operations, especially in respect of risks for which ENSCO is
uninsured or underinsured.
20
BECAUSE ENSCO RELIES HEAVILY ON A DECREASING NUMBER OF CUSTOMERS, OUR BUSINESS
MAY BE MATERIALLY ADVERSELY AFFECTED IF CERTAIN CUSTOMERS CEASE TO DO BUSINESS
WITH ENSCO.
ENSCO provides its services to major international oil and gas companies,
government-owned oil and gas companies and independent oil and gas companies.
However, the number of customers served by ENSCO has decreased in recent years
as a result of mergers among the major international oil companies. In addition,
while ENSCO has not experienced a significant impact as a result of industry
consolidation to date, the long-term impact on ENSCO's operations, if any, is
not determinable at this time. In the years ended December 31, 2001, 2000 and
1999, 26%, 29% and 25%, respectively, of ENSCO's consolidated revenue was
derived from two customers, ChevronTexaco Corporation (and its predecessor
entity) and ExxonMobil Corporation (and its predecessor entity). ENSCO's results
of operations may be materially adversely affected if either of those two
customers, terminates its contracts with ENSCO, fails to renew its existing
contracts with ENSCO or declines to award new contracts to ENSCO.
ENSCO'S BUSINESS INVOLVES NUMEROUS OPERATING HAZARDS AND IT WILL NOT BE FULLY
INSURED AGAINST ALL OF THESE HAZARDS.
ENSCO's operations are subject to the usual hazards incident to the
drilling of oil and natural gas wells, including blowouts, explosions, oil
spills and fires. Our operations are also subject to hazards peculiar to marine
activities, such as collision, grounding, and damage or loss from severe
weather. All of these hazards can cause personal injury and loss of life, severe
damage to and destruction of property and equipment, well loss or damage,
uncontrolled wells, reservoir damage, pollution or environmental damage,
suspension of operations and wreck removal liabilities. We attempt to insure
against, or receive indemnification from customers for, some, but not all, of
these risks. Furthermore, our insurance contains various limitations on coverage
and deductibles.
The occurrence of significant events, including a terrorist act, war, civil
disturbance, drilling rig or vessel loss, blowout, well loss or damage,
uncontrolled well, reservoir damage, pollution or environmental damage, not
fully insured or indemnified against or the failure of a customer to meet its
indemnification obligations, could materially and adversely affect ENSCO's
operations and financial condition. Additionally, we are subjected to changes in
the insurance market. Consequently, no assurance can be made that ENSCO will
maintain its current insurance coverages in the future because of uncertainties
regarding future availability and/or cost of such insurance.
COMPLIANCE WITH OR BREACH OF ENVIRONMENTAL LAWS CAN BE COSTLY AND COULD LIMIT
OUR OPERATIONS.
Our operations are subject to numerous laws and regulations controlling the
discharge of materials into the environment, requiring removal and clean-up of,
or otherwise relating to, the protection of the environment. As a result, the
application of these laws could materially adversely affect our results of
operations by increasing our cost of doing business, discouraging our customers
from drilling for hydrocarbons or subjecting us to liability. As an operator of
mobile offshore drilling units and vessels in navigable United States waters and
some offshore areas, including the Outer Continental Shelf, we may be liable for
fines, damages and for the cost of removing oil spills for which we may be held
responsible. In addition, we may use or handle materials that may be classified
as environmentally hazardous substances in its operations. Laws and regulations
protecting the environment have generally become more stringent and, may in some
cases, impose "strict liability" for environmental damage. Strict liability
means that we may be held liable for damage without regard to whether it was
negligent or otherwise at fault. Environmental laws and regulations may expose
ENSCO to liability for the conduct of or conditions caused by others or for acts
that were in compliance with all applicable laws at the time they were
performed.
The United States Oil Pollution Act of 1990 (which we refer to as OPA '90)
and similar legislation enacted in Texas, Louisiana and other coastal states
address oil spill prevention and control and significantly expand liability
exposure across all segments of the oil and gas industry. OPA '90, such similar
legislation and related regulations impose a variety of obligations on ENSCO
related to the
21
prevention of oil spills and liability for damages resulting from these spills.
OPA '90 imposes strict and, with limited exceptions, joint and several liability
upon each responsible party for oil removal costs and a variety of public and
private damages. OPA '90 also imposes ongoing financial responsibility
requirements on a responsible party. A failure to comply with ongoing
requirements or inadequate cooperation in a spill may subject a responsible
party, including in some cases ENSCO, to civil or criminal enforcement action.
ENSCO'S INTERNATIONAL OPERATIONS INVOLVE ADDITIONAL RISKS NOT ASSOCIATED WITH
DOMESTIC OPERATIONS.
Risks associated with ENSCO's international operations, any of which could
limit or disrupt our markets or operations, include risks of:
- foreign terrorist acts, war and civil disturbances;
- expropriation or nationalization of assets;
- assaults on property or personnel;
- foreign exchange restrictions;
- foreign currency fluctuations;
- foreign taxation;
- limitations on the ability to repatriate income or capital to the United
States;
- changing local and international political conditions; and
- foreign and domestic monetary policies.
Additionally, our ability to compete in international drilling markets may
be adversely affected by foreign government regulations favoring or requiring
the award of drilling contracts to local contractors or requiring foreign
contractors to employ citizens of, or purchase supplies from, a particular
jurisdiction. Furthermore, foreign government regulations that may become
applicable to the oil and natural gas industry in the future, could reduce
demand for ENSCO's services or could directly affect ENSCO's ability to compete
for customers.
LAWS AND GOVERNMENTAL REGULATIONS MAY ADD TO COSTS OR LIMIT ENSCO'S DRILLING OR
MARINE TRANSPORTATION ACTIVITY.
ENSCO's business will be affected by changes in public policy and by
federal, state, foreign and local laws and regulations relating to the energy
industry. The drilling and marine transportation industries are dependent on
demand for services from the oil and natural gas exploration industry and,
accordingly, we will be directly affected by the approval and adoption of laws
and regulations curtailing exploration and development drilling for oil and
natural gas for economic, environmental and other policy reasons. Furthermore,
we may be required to make significant capital expenditures to comply with
governmental laws and regulations. It is also possible that these laws and
regulations may in the future add significantly to our operating costs or may
significantly limit drilling activity.
Some foreign governments have become increasingly active in regulating and
controlling the ownership of concessions, companies holding concessions, the
exploration of oil and natural gas and other aspects of the oil and natural gas
companies operating in these countries. In some areas of the world, this
governmental activity has adversely affected the amount of exploration and
development work done by major oil companies and may continue to do so.
RISKS RELATED TO OWNING SHARES OF ENSCO COMMON STOCK
THERE ARE LIMITATIONS ON YOUR OWNERSHIP OF ENSCO COMMON STOCK IF YOU ARE A
NON-U.S. CITIZEN.
ENSCO, as owner of certain United States flag vessels, is subject to the
Merchant Marine Act, 1920, as amended, which requires that at least seventy-five
percent of ENSCO's stock be owned by U.S. citizens
22
if ENSCO is to continue to own these vessels and operate them in coastwise
trade. Therefore, ownership and control of ENSCO common stock by non-U.S.
citizens is limited by the terms of the ENSCO certificate of incorporation.
Under certain circumstances, transfers of ENSCO common stock to non-U.S.
citizens may be void and certain ENSCO common stock owned by non-U.S. citizens
may not be permitted to vote or receive dividends. See "Comparisons of
Stockholder Rights and Corporate Governance Matters -- Restrictions on Ownership
by Non-U.S. Citizens" on page 85.
AS HOLDERS OF SHARES OF ENSCO COMMON STOCK, YOU WILL BE SUBJECT TO CERTAIN
ANTI-TAKEOVER PROVISIONS.
ENSCO has approved and adopted a rights agreement, which may make an
unsolicited acquisition of ENSCO more difficult or expensive. ENSCO is also
subject to Section 203 of the DGCL which prohibits certain "business
combinations" with an interested stockholder that beneficially owns 15% or more
of a corporation's voting stock, within three years after the person becomes an
interested stockholder, subject to certain exceptions. See "Comparisons of
Stockholder Rights and Corporate Governance Matters -- Stockholder Rights Plan"
on page 84 and "-- Certain Business Combination Restrictions" on page 84.
In addition, the ENSCO board of directors is divided into three classes of
directors, with each class serving a staggered three-year term. This
classification is intended to enhance the likelihood of continuity and stability
in the composition of the ENSCO board of directors and in the policies
formulated by it, and may have the effect of discouraging actual or threatened
changes of control of ENSCO. See "Comparison of Stockholder Rights and Corporate
Governance Matters -- Classification of Board of Directors" on page 79.
RISK RELATING TO ARTHUR ANDERSEN LLP'S LACK OF CONSENT
REPRESENTATIVES OF ARTHUR ANDERSEN LLP ARE NOT AVAILABLE TO CONSENT TO THE
INCLUSION OF THEIR REPORTS ON THE FINANCIAL STATEMENTS OF ENSCO AND CHILES
INCORPORATED IN THIS PROXY STATEMENT/PROSPECTUS, AND YOU WILL NOT BE ABLE TO
RECOVER AGAINST ARTHUR ANDERSEN LLP UNDER SECTION 11 OF THE SECURITIES ACT OF
1933.
Arthur Andersen LLP is currently the independent accountant for Chiles and
was previously the independent accountant for ENSCO. Representatives for Arthur
Andersen LLP are not available to provide the consents required for the
inclusion of their reports on the financial statements of ENSCO and Chiles
incorporated in this proxy statement/prospectus, and we have dispensed with the
requirement to file their consent in reliance upon Rule 437a of the Securities
Act of 1933. Because Arthur Andersen LLP has not consented to the inclusion of
their reports in this proxy statement/prospectus, you will not be able to
recover against Arthur Andersen LLP under Section 11 of the Securities Act of
1933 for any untrue statements of a material fact contained in the financial
statements audited by Arthur Andersen LLP that are incorporated by reference or
any omissions to state a material fact required to be stated therein.
23
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and the other documents incorporated by
reference into this proxy statement/prospectus may contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 with respect to the following subjects, among others: the possible or
assumed future results of operations of ENSCO and/or Chiles; completion or
expected completion date of the merger; benefits, effects or results of the
merger; cost reductions, operating efficiencies or synergies of the merger;
operations and results after the merger; integration of operations; business
strategies; conditions in the offshore contract drilling or marine
transportation industry, including day rates and utilization; growth
opportunities; competitive position; market outlook; expected financial
position; expected results of operations; future cash flows; future dividends;
financing plans; budgets for capital and other expenditures; timing and cost of
completion of capital projects; construction of new drilling rigs and the
ability to obtain contracts for those rigs; plans and objectives of management;
timing of the merger; tax treatment of the merger; accounting treatment of the
merger; transaction-related expenses; outcomes of legal proceedings; adequacy or
availability of insurance; and any other statements that are not historical
facts. Statements in this proxy statement/prospectus and the other documents
incorporated by reference that are not historical facts are hereby identified as
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Securities Exchange Act of 1934 and Section 27A of the
Securities Act of 1933. These forward-looking statements, including, without
limitation, those relating to future business prospects, revenues and income, in
each case relating to ENSCO or Chiles, respectively, wherever they occur in this
proxy statement/prospectus or the other documents incorporated by reference, are
necessarily estimates reflecting the best judgment of the respective management
of ENSCO and Chiles and involve a number of risks and uncertainties that could
cause actual results to differ materially from those suggested by the
forward-looking statements. These forward-looking statements should, therefore,
be considered in light of various important factors, including those set forth
in this proxy statement/prospectus and incorporated by reference into this proxy
statement/prospectus. In addition to the risk factors identified elsewhere in
this proxy statement/prospectus and from time to time in ENSCO's and Chiles'
reports to the SEC, important factors that could cause actual results to differ
materially from estimates or projections contained in the forward-looking
statements include without limitation:
- the ability to integrate the operations of ENSCO and Chiles;
- the ability to achieve anticipated cost savings;
- competition in the offshore drilling industries and in the specific
markets in which ENSCO and Chiles, respectively, operate;
- fluctuations in the price of oil or natural gas;
- regional and worldwide expenditures for oil and gas drilling;
- demand for oil and gas;
- industry conditions and competition;
- unanticipated operations disruptions, delays in regulatory approvals of
new operations or facilities or the inability to meet demand for products
and services;
- fluctuations in operating results;
- operational risks and insurance;
- risks associated with operating in foreign jurisdictions;
- environmental or well-related liabilities that may arise in the future
that are not covered by insurance or indemnity;
- the impact of current and future laws and government regulation, as well
as repeal or modification of same, affecting the oil and gas industry,
the environment, taxes and ENSCO's or Chiles' operations in particular;
24
- changes in costs associated with rig construction or enhancement, as well
as changes in dates rigs being constructed or undergoing enhancement will
enter service;
- renegotiations, nullification, or breaches of contracts with customers,
vendors, subcontractors or other parties;
- unionization or similar collective actions by ENSCO's or Chiles'
employees;
- consolidation among ENSCO's or Chiles' competitors or customers; and
- terrorist activities and the effects of such activities.
Words such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "project," "should" and similar expressions are
intended to identify forward-looking statements. These forward-looking
statements are found at various places throughout this proxy
statement/prospectus and the other documents incorporated by reference. You are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this proxy statement/prospectus or, in the case of
documents incorporated by reference, as of the date of those documents. Neither
ENSCO nor Chiles undertakes any obligation to publicly update or release any
revisions to these forward-looking statements to reflect events or circumstances
after the date of this proxy statement/prospectus or to reflect the occurrence
of unanticipated events, except as required by law.
25
THE SPECIAL MEETING
DATE, TIME, PLACE AND PURPOSE OF THE MEETING
The special meeting of Chiles stockholders will be held on ,
, 2002, at 10:00 a.m., local time, at the offices of Weil,
Gotshal & Manges LLP, 767 Fifth Avenue, 25th Floor, New York, New York 10153,
for the following purpose:
To consider and vote upon a proposal to approve and adopt the Merger
Agreement, dated as of May 14, 2002, attached as Annex A, among ENSCO,
Chore Acquisition, Inc. and Chiles, whereby Chiles will merge with and into
Chore Acquisition, Inc., with Chore Acquisition, Inc. being the surviving
company and continuing to exist as a direct subsidiary of ENSCO. Pursuant
to the Merger Agreement each share of Chiles Offshore, Inc. common stock
(other than shares for which appraisal rights are validly asserted in
accordance with Delaware law) will be converted into the right to receive
0.6575 shares of ENSCO International Incorporated common stock and $5.25 in
cash, conditional upon the completion of the merger.
The Chiles board of directors has fixed the close of business on
, 2002 as the record date for the determination of stockholders
entitled to notice of and to vote at the special meeting. YOUR VOTE IS VERY
IMPORTANT! Please complete, sign, date and return the enclosed proxy, whether or
not you expect to attend the meeting, so that your shares may be represented at
the meeting if you are unable to attend and vote in person. If you attend the
meeting, you may revoke your proxy and vote your shares in person.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Chiles board of directors believes that the merger agreement and the
related transactions, including the merger, are advisable and fair to, and in
the best interests of, Chiles and its stockholders, and unanimously recommends
that Chiles stockholders vote "FOR" the proposal to approve and adopt the merger
agreement.
VOTING POWER
As of the record date, there were 100,000,000 shares of Chiles common stock
authorized, of which were outstanding and entitled to vote. Chiles has
no other voting securities issued or outstanding. Each stockholder as of the
record date will be entitled to one vote for each share of common stock held by
them on the proposal to approve and adopt the merger agreement at the special
meeting, and may vote in person or by proxy authorized in writing.
A list of Chiles stockholders as of the record date for the special meeting
will be available for examination by any stockholder, for purposes germane to
the special meeting, during ordinary business hours, for 10 days prior to the
date of the special meeting, at 11200 Richmond Avenue, Suite 490, Houston, Texas
77082-2618.
QUORUM
Attendance at the special meeting, in person or represented by proxy, by
the holders of a majority of all shares of Chiles common stock issued,
outstanding and entitled to vote constitutes a quorum.
REQUIRED VOTING
The affirmative vote of the holders of at least 66 2/3% of the outstanding
shares of Chiles common stock entitled to vote at the special meeting
( shares) is required to approve and adopt the merger agreement.
26
PROXIES
Stockholders of record are requested to complete, date, sign and promptly
return the accompanying proxy in the enclosed postage-paid, self-addressed
envelope provided for such purpose. Common stock represented by properly
executed proxies that are received by Chiles and not subsequently revoked will
be voted at the special meeting in accordance with the instructions contained
therein. If instructions are not given, signed and submitted proxies will be
voted "FOR" the proposal set forth in this proxy statement/ prospectus and
listed on the enclosed proxy.
A stockholder of record who so desires, may revoke such stockholder's proxy
at any time before it is exercised by (a) providing written notice to such
effect to the Secretary of Chiles, (b) duly executing a proxy bearing a date
subsequent to that of a previously furnished proxy, or (c) attending the special
meeting and voting in person. Attendance at the special meeting will not in
itself constitute a revocation of a previously furnished proxy. Stockholders who
attend the special meeting in person need not revoke their proxy (if previously
furnished) and vote in person.
If you hold your shares in "street name," which means your shares are held
of record by a broker, bank or nominee, you must provide the record holder of
your shares with instructions on how to vote your shares. Your broker, bank, or
nominee will not be able to vote your shares unless the broker, bank or nominee
receives specific instructions from you. If your shares are held in a street
name account, you must contact your broker, bank or other nominee to change your
vote.
ABSTENTIONS AND BROKER NON-VOTES
Abstentions and broker non-votes will be counted as votes "Against" a
proposal, but will count towards the determination of a quorum at the special
meeting.
SOLICITATION
Pursuant to the merger agreement, ENSCO and Chiles will share equally the
costs of solicitation of proxies for the special meeting. In addition to
solicitation by mail, directors, officers and regular employees of Chiles may
solicit proxies from stockholders by telephone, telegram, e-mail, personal
interview or other means. ENSCO and Chiles currently expect not to incur any
costs beyond those customarily expended for a solicitation of proxies in
connection with a merger agreement. Directors, officers and employees will not
receive additional compensation for their solicitation activities, but may be
reimbursed for reasonable out of pocket expenses incurred by them in connection
therewith. Brokers, dealers, commercial banks, trust companies, fiduciaries,
custodians and other nominees have been requested to forward proxy solicitation
materials to their customers and such nominees will be reimbursed for their
reasonable out of pocket expenses. Chiles has engaged D.F. King & Co., Inc. to
solicit proxies and to distribute proxy materials to various nominees who are
stockholders of record of Chiles common stock. For such services, D.F. King &
Co., Inc. will receive a fee of approximately $7,000, reimbursement for certain
out of pocket expenses and indemnification by ENSCO and Chiles against certain
losses.
OTHER PROPOSALS
Under the laws of Delaware, no business may be raised at the Chiles special
meeting except as indicated in this proxy statement/prospectus.
27
ASSISTANCE
If you have any questions about the merger, the Chiles special meeting or
how to submit your proxy, need assistance in completing your proxy card, or need
additional copies of this proxy statement/prospectus or the enclosed proxy card
or voting instructions, please contact either:
Chiles Offshore Inc.
11200 Richmond Avenue, Suite 490
Houston, Texas 77082-2618
(713) 339-3777
Attn: Dick Fagerstal, Senior Vice President, Chief Financial Officer and
Secretary
or the proxy solicitor retained by Chiles:
D. F. King & Co., Inc.
77 Water Street
New York, New York 10005
(212) 269-5550 (banks and brokers call collect)
(800) 290-6431 (all others call toll free)
28
THE MERGER
The following is a description of the material aspects of the merger. While
we believe that the following description covers the material terms of the
merger, the description may not contain all of the information important to you.
We encourage you to read carefully this entire proxy statement/prospectus,
including the merger agreement attached to this proxy statement/prospectus as
Annex A, for a more complete understanding of the merger.
GENERAL
The Chiles board of directors has unanimously approved the merger
agreement. At the effective time of the merger, Chiles will merge with Chore
Acquisition, Inc., a new subsidiary of ENSCO. Only Chore Acquisition, Inc. will
exist after the merger and will continue to exist as a 100% owned subsidiary of
ENSCO under the name Chiles Offshore Inc. In the merger, Chiles stockholders
will receive 0.6575 shares of ENSCO common stock and $5.25 in cash for each
share of Chiles common stock they own, with cash paid instead of fractional
shares (other than stockholders who validly perfect appraisal rights in
accordance with Delaware law). The cash portion of the merger consideration is
expected to be paid out of ENSCO's existing funds or cash provided by operating
activities or a combination of these sources. ENSCO may issue an additional
shares of common stock as of the date of this proxy
statement/prospectus and pay cash upon the exercise of outstanding Chiles stock
options.
BACKGROUND OF THE MERGER
The offshore drilling industry has undergone increasing consolidation over
the last several years. The competitive advantages that could result from
combining drilling operators has contributed to this trend. These include
efficiencies as a consequence of combined operations, an ability to better serve
existing customers and an ability to serve additional markets. The managements
of ENSCO and Chiles have from time to time reviewed their respective business
strategies and considered possible alternatives with the principal objectives of
increasing their competitive positions, enhancing stockholder value and meeting
the global needs of their customers. In this regard, ENSCO was particularly
interested in a combination which would enhance its drilling rig fleet with
premium equipment. Chiles, in turn, was prepared to consider strategic
consolidation opportunities with other offshore drilling contractors,
particularly larger contractors operating premium equipment and maintaining high
safety and performance standards, with a view toward achieving economies of
scale, the benefits of a larger global rig fleet, greater financial strength and
increased liquidity for its stockholders.
As Chiles' presence in the industry became more established, its principals
began to receive indications of possible interest in business combinations from
certain of its competitors and suggestions with respect to potential business
combinations from representatives of investment banking firms. In this regard,
Charles Fabrikant, Chiles' Chairman, and William E. Chiles, Chiles' Chief
Executive Officer, engaged in general discussions over the past year with
representatives of several of Chiles' competitors (in addition to ENSCO)
concerning possible merger opportunities. Discussions with representatives of
one such competitor continued until the first week of May 2002 when it appeared
that no firm proposal from this competitor would be forthcoming and, as
discussed below, it appeared that Chiles and ENSCO might agree upon acceptable
terms for a merger. A chronology of the principal contacts, discussions and
negotiations between Chiles and ENSCO is summarized below.
During a regular ENSCO board of directors meeting on January 29, 2002, the
ENSCO directors reviewed various potential business combinations including a
possible combination with Chiles. ENSCO's Chairman and Chief Executive Officer,
Carl F. Thorne, met with Chiles' Chairman, Charles Fabrikant, on March 18, 2002,
while they were both attending an industry meeting in Washington, D.C. At that
time Messrs. Thorne and Fabrikant discussed generally the mutual benefits that
could be derived from a combination of ENSCO and Chiles and, while no proposal
for an acquisition was then made, they agreed to continue the dialogue.
29
On April 17, 2002, Messrs. Thorne and Fabrikant met in Dallas, Texas, to
further discuss a potential combination. During this meeting they reviewed
publicly available earnings data, discussed valuations, valuation methodologies,
the status of their respective rig fleets, Chiles' outstanding debt, and the
strategic, financial and operational advantages of a potential combination. They
preliminarily discussed the bases upon which Chiles could merge into ENSCO with
the merger consideration for Chiles stockholders consisting solely of ENSCO
shares or a combination of ENSCO shares and cash. During this meeting, Mr.
Fabrikant suggested a combination of cash and ENSCO stock having a value
approaching $30 for each share of Chiles common stock might be acceptable, and
Mr. Thorne suggested merger consideration with a value in the $26-$27 range for
each share of Chiles common stock would be more appropriate.
On April 22, 2000, a telephone conversation was held between ENSCO and
Chiles representatives. Mr. Thorne and C. Christopher Gaut, ENSCO's Senior Vice
President and Chief Financial Officer, engaged in a discussion with Messrs.
Fabrikant and Dick Fagerstal, Chiles' Senior Vice President, Chief Financial
Officer and Secretary. During this telephone conversation the representatives of
the parties discussed the desirability of merging Chiles into ENSCO, reviewed
historical stock prices and market capitalization of the companies and further
considered various financial and structural bases upon which a combination could
be achieved for the benefit of the stockholders of both companies.
On the morning of April 29, 2002, the same parties that participated in the
April 22 discussion, joined by Mr. Richard LeBlanc, then ENSCO's Treasurer and
Director of Investor Relations, participated in a telephone conversation during
which the parties discussed various potential common stock exchange ratios and
cash consideration which could serve as a basis for a combination of the two
companies. That afternoon, Messrs. Thorne, Gaut and LeBlanc engaged in a
telephone conversation with Messrs. Fabrikant and Fagerstal to further discuss
the potential combination. During the discussions, Mr. Fabrikant advised other
participants in the telephone conversation that he would contact ENSCO on or
before May 6, 2002, and advised that he also intended to contact another party
that had expressed interest in a combination with Chiles.
Between April 29 and May 3, 2002, Mr. Thorne briefed ENSCO directors
concerning the status and substance of ENSCO's discussions with Chiles and
received support for continued negotiation of a potential combination.
On May 3, 2002, Messrs. Thorne and Gaut engaged in a telephone conversation
with Messrs. Fabrikant and Fagerstal to further discuss the potential
combination of ENSCO and Chiles. They discussed, among other things, the
potential economic bases of the combination and a schedule for preparation of
the requisite documentation and presentation of the matter to their companies'
respective boards of directors. During this discussion, Mr. Thorne proposed
merger consideration of approximately $27.25 to be paid in cash and shares of
ENSCO common stock for each share of Chiles common stock.
On May 5, 2002, Messrs. Thorne and Fabrikant had several telephone
conversations during which they discussed the principal terms to be addressed in
a definitive merger agreement and reached agreement on terms of a transaction
that they were prepared to present to their respective boards of directors
involving merger consideration for the Chiles stockholders consisting of 0.6575
share of ENSCO common stock and $5.25 in cash for each share of Chiles common
stock. They agreed to proceed promptly with due diligence and commence
negotiations directed towards reaching agreement on a definitive merger
agreement.
On May 6, 2002, Messrs. Thorne, Gaut and LeBlanc further discussed the
potential combination with Messrs. Fabrikant and Fagerstal, including their
understandings with respect to the form and amount of merger consideration and
other issues that would be addressed in a merger agreement. On the same day, a
telephonic meeting of the Chiles board of directors was convened for the purpose
of apprising the Chiles directors of the proposal received from ENSCO, the
possibility of a merger and related matters.
During the May 6, 2002 Chiles board of directors meeting, Mr. Fabrikant
described the proposed terms of the merger and presented his view that, based on
his discussions with other possible merger partners and after considering the
value of Chiles' assets and market prices of Chiles' and ENSCO's stock,
30
a merger with ENSCO on the proposed terms could be in the best interests of the
Chiles stockholders. The Chiles board also discussed past contacts and
exploratory discussions with parties other than ENSCO, none of which resulted in
a proposed transaction. Attorneys from Weil, Gotshal & Manges LLP ("Weil
Gotshal"), Chiles' legal counsel, discussed the board's fiduciary obligations,
the desirability of obtaining an opinion from a financial advisor prior to
authorizing execution of definitive merger documentation and the anticipated
timing of the transaction. Following discussion, the Chiles board authorized and
directed the members of Chiles' Executive Committee, Messrs. Fabrikant, Chiles
and Fagerstal, to negotiate the terms of a merger agreement subject to approval
of the Chiles board of directors, engage a financial advisor and take such other
action as they deem appropriate in furtherance of the potential transaction.
Following the Chiles board of directors' meeting on May 6, 2002, Chiles and
ENSCO entered into a confidentiality agreement and commenced an exchange of data
to supplement the reviews that they had been conducting through examination of
publicly available materials concerning the respective companies. On May 7,
2002, a draft merger agreement was provided by Baker & McKenzie, legal counsel
to ENSCO, to Chiles and Weil Gotshal.
Meetings were held in Houston, Texas during May 8 through May 11, 2002.
Participating were representatives of ENSCO led by Mr. Gaut, H. E. Malone, then
Vice President -- Finance, and Cary A. Moomjian, Jr., Vice President, General
Counsel and Secretary, and participating representatives of Chiles led by
William E. Chiles, President and Chief Executive Officer, Mr. Fagerstal and Don
Gregg, Senior Vice President Operations & Engineering. Also participating were
attorneys from Baker & McKenzie, attorneys from Weil Gotshal, legal counsel to
Chiles, and representatives of Credit Suisse First Boston Corporation, which had
been retained by Chiles as its financial advisor. The meetings were held for
purposes of engaging in mutual due diligence and negotiating and drafting the
terms of a merger agreement between ENSCO and Chiles and the voting agreements
ENSCO proposed to enter into with Chiles' principal stockholders, SEACOR,
Patricio Alvarez Morphy, Luis Alvarez Morphy and Javier Alvarez Morphy. The
negotiation of the merger and voting agreement terms continued telephonically
from May 12 through May 14, 2002.
On May 10, 2002, a telephonic meeting of the Chiles board of directors was
convened for the purpose of informing directors of the status of negotiations of
the terms of the proposed merger with ENSCO. Mr. Fabrikant and a representative
of Weil Gotshal explained that the primary open issues under negotiation were
employee compensation arrangements, the size of the termination or "break-up"
fee payable to ENSCO under certain circumstances, including if Chiles were to
accept a superior proposal and terminate the merger agreement, and the related
"no-solicitation" provisions of the merger agreement, which would prohibit
Chiles from soliciting third party offers and could limit Chiles' ability to
furnish information to or negotiate with any third party bidders who made
unsolicited acquisition proposals for Chiles. Representatives of Credit Suisse
First Boston Corporation discussed with the Chiles board the types of financial
analyses they were performing and the status of their financial due diligence.
Following the Chiles board of directors meeting on May 10, representatives
of Chiles, ENSCO and their respective counsel continued negotiations. During the
period from May 10 through May 14, 2002, representatives of ENSCO, among other
things, agreed to a reduction in the amount of the initially proposed
termination or "break-up" fee, negotiated certain modifications to ENSCO's
proposed "no solicitation" provisions, and agreed upon the ability of all Chiles
option holders to receive completely vested options upon consummation of a
transaction and various employee "stay" bonus and severance arrangements. Chiles
also agreed upon provisions proposed by ENSCO that would allow either party to
terminate the merger agreement in the event that, prior to consummation of the
merger, any of the drilling rigs owned by Chiles is actually or constructively
lost.
On May 14, 2002, the ENSCO board of directors conducted a meeting in
Dallas, Texas, to consider the proposed transaction. During this meeting, Mr.
Thorne and other management personnel reviewed the proposed merger transaction
with ENSCO's board. The review included the strategic reasons for the proposed
transaction, a financial review, a review of Chiles' rig fleet, business
operations and financial condition, and a report describing the results of
ENSCO's due diligence review. During the board meeting,
31
ENSCO's counsel from Baker & McKenzie delivered a presentation concerning the
proposed transaction, including a review of the principal terms of the merger
agreement. Following deliberation, in which it was determined that the merger
and merger agreement are advisable and in the best interest of ENSCO's
stockholders, and, on motion unanimously approved, the ENSCO board of directors
adopted resolutions approving the proposed merger and authorizing ENSCO to enter
into the merger agreement and other matters ancillary to consummation of the
transaction subject to approval by regulatory authorities and the Chiles
stockholders.
Also on May 14, 2002, the Chiles board of directors met in New York, New
York, to consider the proposed merger transaction. Chiles management and legal
counsel made presentations concerning the terms of the merger agreement and
related documentation and the proposed transaction. In addition, Credit Suisse
First Boston Corporation reviewed with the Chiles board its financial analyses
of the proposed merger consideration and rendered to the Chiles board its
opinion, described in "-- Opinion of Financial Advisor." After full discussion
and consideration, the Chiles board unanimously approved the merger agreement
and the merger and adopted resolutions authorizing and directing certain
officers of Chiles to execute and deliver the merger agreement with such changes
as may be deemed advisable by such officers. The Chiles board also resolved to
recommend that the Chiles stockholders approve and adopt the merger agreement
and the related transactions. For a description of the reasons for the decision
and recommendation, see "-- Reasons for the Merger."
After negotiation of the final terms of the merger agreement and related
documents, ENSCO and Chiles executed the agreements on the evening of May 14,
2002. At that time, each of SEACOR, Patricio Alvarez Morphy, Luis Alvarez Morphy
and Javier Alvarez Morphy also executed voting agreements with ENSCO.
On Wednesday, May 15, 2002, before the opening of trading on the American
Stock Exchange and the New York Stock Exchange, ENSCO and Chiles issued a joint
press release announcing the proposed transaction.
REASONS FOR THE MERGER
Chiles determined to pursue the merger for the following reasons:
- THE MERGER WILL POSITION CHILES TO COMPETE MORE EFFECTIVELY. As the
offshore drilling industry continues to consolidate, local and regional
offshore drilling companies suffer the disadvantages of smaller economies
of scale and less diversification of risk than their larger global
competitors. A combination of ENSCO and Chiles would make Chiles a part
of a much larger and more globally diversified drilling rig operator able
due to its larger asset base, for instance, to effectively compete in
markets that are profitable, but less stable economically or politically.
The merger also is expected to provide the combined company opportunities
to achieve greater economies of scale, access to capital markets and
operating efficiencies.
- THE MERGER CONSIDERATION REPRESENTED A SUBSTANTIAL PREMIUM TO CHILES'
HISTORICAL STOCK PRICE. In the merger, Chiles stockholders will receive
cash and ENSCO common stock with an aggregate value of $28.50 per share
of Chiles common stock based on the closing market price of ENSCO's
common stock on May 14, 2002, the date the merger agreement was signed.
This represented a premium of approximately 18.8% based upon Chiles and
ENSCO common stock closing prices on May 14, 2002, the day before the
execution of the merger agreement was publicly announced.
- THE MERGER REPRESENTS THE BEST TRANSACTION THAT THE CHILES BOARD BELIEVES
IT COULD OBTAIN. Chiles was not the subject of an "auction" or other
sales process pursuant to which all potential buyers were given an
opportunity to make acquisition proposals prior to the signing of the
merger agreement. However, informal discussions concerning possible
business combinations were conducted over the past twelve months with a
number of Chiles' competitors and such discussions did not lead to any
firm offer or firm indication of interest on terms more favorable than
those offered by ENSCO. In addition, the terms of the merger agreement
permit Chiles to enter into
32
discussions or negotiations with, furnish information to, or (subject to
the payment of a termination fee to ENSCO) enter into an acquisition
agreement with any other potential acquiror that makes a proposal on
terms that the Chiles board of directors determines to be more favorable
to Chiles' stockholders from a financial point of view than the terms of
the merger with ENSCO. Notwithstanding the public dissemination of these
merger agreement terms through press releases and filings by Chiles and
ENSCO with the Securities and Exchange Commission, no third party has
approached Chiles with any such proposal.
- THE MERGER WILL PROVIDE CHILES STOCKHOLDERS THE OPPORTUNITY TO BENEFIT
FROM GREATER LIQUIDITY OF THEIR INVESTMENT THAN AN INVESTMENT OF CHILES
COMMON STOCK. Because the average trading volume of ENSCO common stock
far exceeds that of Chiles common stock, the merger will provide Chiles
stockholders the opportunity to benefit from greater liquidity of their
investment.
FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE CHILES BOARD
At a meeting of the Chiles board held on May 14, 2002, after due
consideration, the Chiles board unanimously:
- determined that the terms of the merger agreement are advisable and fair
to and in the best interests of Chiles and its stockholders;
- voted to adopt resolutions that approved the merger and the merger
agreement and related matters; and
- determined to recommend that the Chiles stockholders adopt the merger
agreement.
In reaching its decision to approve the merger agreement and the merger,
and to recommend that Chiles stockholders approve the merger agreement, the
Chiles board of directors consulted with Chiles' management and its financial
and legal advisors and considered certain factors, including the following:
- the reasons described under "-- Reasons for the Merger";
- the terms of the merger agreement, including the form of consideration
consisting of both ENSCO shares and cash, the fixed exchange ratio for
ENSCO shares and Chiles' ability, under certain circumstances, to
terminate the merger agreement to accept an acquisition proposal deemed
by the Chiles directors to be more favorable to Chiles stockholders from
a financial point of view than the terms of the merger agreement upon
payment of a termination fee to ENSCO;
- information concerning the business, earnings, operations, financial
condition and prospects of Chiles and ENSCO, both individually and on a
combined basis, including information with respect to the past earnings
and stock performance of each of Chiles and ENSCO;
- the ability to complete the merger, including, in particular, the fact
that ENSCO does not require a stockholder vote or third party financing
to complete the merger;
- the anticipated expiration or termination of the HSR waiting period;
- the familiarity of the Chiles board of directors with the business,
properties and prospects of Chiles, including the opportunities and
alternatives available to Chiles if the merger were not to be undertaken;
- Credit Suisse First Boston Corporation's opinion, dated May 14, 2002, and
related financial analyses reviewed with the Chiles board of directors
and described under "-- Opinion of Financial Advisor";
- the fact that a substantial portion of the consideration to be received
by Chiles stockholders in the merger will be tax-free to Chiles
stockholders for U.S. federal income tax purposes;
- the fact that SEACOR, Patricio Alvarez Morphy, Luis Alvarez Morphy and
Javier Alvarez Morphy agreed to vote their shares of Chiles common stock
(which shares represented
33
approximately 37.0% of the outstanding common stock of Chiles as of the
date of the merger agreement) for the approval of the merger agreement;
- the interests of the directors and executive officers in the merger as
described in "-- Interests of Certain Persons; Possible Conflicts of
Interest of Certain Persons in the Merger."
The Chiles board of directors also was aware of certain potential risks
relating to the merger, including the following:
- the terms and conditions of the merger agreement, including but not
limited to:
- the obligation of Chiles to pay a termination fee of $22.5 million to
ENSCO under certain circumstances upon termination of the merger
agreement;
- the prohibition against solicitation of alternative transactions and
certain restrictions on furnishing information to or engaging in
negotiations with third parties regarding alternative acquisition
proposals;
- the limitations upon the interim business operations of Chiles imposed
by the merger agreement and the risks to Chiles' continuing business if
the merger is not consummated;
- the risks in consummating the merger;
- the risk that the Chiles stockholders could receive a combination of cash
and ENSCO common stock with a market value that is less than the market
value of Chiles common stock on the date the merger agreement was signed;
- the impact of the merger on Chiles' customers and employees and the
potential negative impact on the ability of Chiles to retain key
employees if the merger is not consummated;
- the risk associated with integrating the businesses of the combined
company and the achievement of the intended advantages of the merger; and
- the other risks described under "Risk Factors" on page 17.
The foregoing discussion of the information and factors considered and
given weight by the Chiles board of directors is not intended to be exhaustive,
but includes the material factors considered by the Chiles board of directors.
In reaching its decision to approve the merger agreement and the merger and to
recommend approval of the merger agreement to the Chiles stockholders, the
Chiles board did not assign any relative or specific weights to the various
factors considered. Instead, the Chiles board of directors conducted an overall
analysis of the factors described above, including by participating in
discussions with and asking questions of Chiles' management and its legal and
financial advisors. In considering the factors above, individual directors may
have given different weight to different factors.
For the reasons discussed above, the Chiles board of directors unanimously
approved and deemed advisable and fair to, and in the best interests of Chiles
and its stockholders the merger agreement and the merger, and recommends that
Chiles stockholders vote "FOR" approval of the merger agreement.
OPINION OF FINANCIAL ADVISOR
Credit Suisse First Boston Corporation has acted as Chiles' exclusive
financial advisor in connection with the merger. Credit Suisse First Boston
Corporation is an internationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, leveraged buyouts, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. Chiles
selected Credit Suisse First Boston Corporation based on Credit Suisse First
Boston Corporation's experience, expertise and reputation, and its familiarity
with Chiles and its business.
In connection with Credit Suisse First Boston Corporation's engagement,
Chiles requested that Credit Suisse First Boston Corporation evaluate the
fairness, from a financial point of view, to the holders of
34
Chiles common stock, other than SEACOR, Patricio Alvarez Morphy, Luis Alvarez
Morphy, Javier Alvarez Morphy and their respective affiliates, of the merger
consideration provided for in the merger. On May 14, 2002, at a meeting of the
Chiles board of directors held to evaluate the merger, Credit Suisse First
Boston Corporation delivered to the Chiles board of directors a written opinion
dated May 14, 2002, to the effect that, as of that date and based on and subject
to the matters described in its opinion, the merger consideration was fair, from
a financial point of view, to the holders of Chiles common stock, other than
SEACOR, Patricio Alvarez Morphy, Luis Alvarez Morphy, Javier Alvarez Morphy and
their respective affiliates.
THE FULL TEXT OF CREDIT SUISSE FIRST BOSTON CORPORATION'S WRITTEN OPINION,
DATED MAY 14, 2002, TO THE CHILES BOARD OF DIRECTORS, WHICH SETS FORTH THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX F AND IS INCORPORATED INTO THIS PROXY
STATEMENT/PROSPECTUS BY REFERENCE. CHILES STOCKHOLDERS ARE ENCOURAGED TO READ
THIS OPINION CAREFULLY AND IN ITS ENTIRETY. CREDIT SUISSE FIRST BOSTON
CORPORATION'S OPINION IS ADDRESSED TO THE CHILES BOARD OF DIRECTORS AND RELATES
ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE MERGER
CONSIDERATION, DOES NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY
RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
AS TO ANY MATTER RELATING TO THE MERGER. THE SUMMARY OF CREDIT SUISSE FIRST
BOSTON CORPORATION'S OPINION IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
In arriving at its opinion, Credit Suisse First Boston Corporation reviewed
the merger agreement and related documents, as well as publicly available
business and financial information relating to Chiles and ENSCO. Credit Suisse
First Boston Corporation also reviewed other information relating to Chiles and
ENSCO, including financial forecasts, provided to or discussed with Credit
Suisse First Boston Corporation by Chiles and ENSCO and met with the managements
of Chiles and ENSCO to discuss the businesses and prospects of Chiles and ENSCO.
Credit Suisse First Boston Corporation considered financial and stock market
data of Chiles and ENSCO, and compared those data with similar data for publicly
held companies in businesses similar to Chiles and ENSCO, and considered, to the
extent publicly available, the financial terms of other business combinations
and other transactions announced or effected. Credit Suisse First Boston
Corporation also considered other information, financial studies, analyses and
investigations and financial, economic and market criteria that it deemed
relevant.
In connection with its review, Credit Suisse First Boston Corporation did
not assume any responsibility for independent verification of any of the
information that it reviewed or considered and relied on that information being
complete and accurate in all material respects. With respect to the financial
forecasts, Credit Suisse First Boston Corporation was advised, and assumed, that
the forecasts were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of Chiles and ENSCO as to
the future financial performance of Chiles and ENSCO and the strategic benefits
and potential synergies (including the amount, timing and achievability thereof)
anticipated to result from the merger. Credit Suisse First Boston Corporation
also assumed, with Chiles' consent, that the merger would be consummated in
accordance with the terms of the merger agreement, without amendment,
modification or waiver of any material term, condition or agreement and that in
the course of obtaining any necessary regulatory and third party approvals and
consents relating to the merger, no modification, condition, restriction,
limitation or delay would be imposed that would have an adverse effect on Chiles
or ENSCO or the contemplated benefits of the merger. Credit Suisse First Boston
Corporation also assumed, with Chiles' consent, that the merger would be treated
as a tax-free reorganization for federal income tax purposes. Credit Suisse
First Boston Corporation was not requested to, and did not, make an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Chiles or ENSCO, and Credit Suisse First Boston Corporation was not furnished
with any evaluations or appraisals.
Credit Suisse First Boston Corporation's opinion was necessarily based on
information available to it, and financial, economic, market and other
conditions as they existed and could be evaluated, on the date of Credit Suisse
First Boston Corporation's opinion. Credit Suisse First Boston Corporation did
not express any opinion as to what the value of ENSCO common stock actually
would be when issued in the merger
35
or the prices at which ENSCO common stock would trade at any time. Although
Credit Suisse First Boston Corporation evaluated the merger consideration from a
financial point of view, Credit Suisse First Boston Corporation was not
requested to, and did not, recommend the specific consideration payable in the
merger, which consideration was determined between Chiles and ENSCO. Credit
Suisse First Boston Corporation's opinion did not address the relative merits of
the merger as compared to other business strategies that might have been
available to Chiles, and also did not address the underlying business decision
of Chiles to proceed with the merger. Except as described above, Chiles imposed
no other limitations on Credit Suisse First Boston Corporation with respect to
the investigations made or procedures followed in rendering its opinion.
In preparing its opinion to the Chiles board of directors, Credit Suisse
First Boston Corporation performed a variety of financial and comparative
analyses, including those described below. The summary of Credit Suisse First
Boston Corporation's analyses described below is not a complete description of
the analyses underlying its opinion. The preparation of a fairness opinion is a
complex process involving various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances and, therefore, a fairness opinion is not readily
susceptible to partial analysis or summary description. In arriving at its
opinion, Credit Suisse First Boston Corporation made qualitative judgments as to
the significance and relevance of each analysis and factor that it considered.
Accordingly, Credit Suisse First Boston Corporation believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
factors or focusing on information presented in tabular format, without
considering all analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the processes
underlying its analyses and opinion.
In its analyses, Credit Suisse First Boston Corporation considered industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Chiles and ENSCO. No
company, transaction or business used in Credit Suisse First Boston
Corporation's analyses as a comparison is identical to Chiles, ENSCO or the
proposed merger, and an evaluation of the results of those analyses is not
entirely mathematical. Rather, the analyses involve complex considerations and
judgments concerning financial and operating characteristics and other factors
that could affect the acquisition, public trading or other values of the
companies, business segments or transactions analyzed. The estimates contained
in Credit Suisse First Boston Corporation's analyses and the ranges of
valuations resulting from any particular analysis are not necessarily indicative
of actual values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by the analyses. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, Credit Suisse First Boston
Corporation's analyses and estimates are inherently subject to substantial
uncertainty.
Credit Suisse First Boston Corporation's opinion and financial analyses
were only one of many factors considered by the Chiles board of directors in its
evaluation of the proposed merger and should not be viewed as determinative of
the views of the Chiles board of directors or management with respect to the
merger or the merger consideration.
The following is a summary of the material financial analyses underlying
Credit Suisse First Boston Corporation's opinion dated May 14, 2002 delivered to
the Chiles board of directors in connection with the merger. THE FINANCIAL
ANALYSES SUMMARIZED BELOW INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT. IN
ORDER TO UNDERSTAND FULLY CREDIT SUISSE FIRST BOSTON CORPORATION'S FINANCIAL
ANALYSES, THE TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY. THE
TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES.
CONSIDERING THE DATA IN THE TABLES BELOW WITHOUT CONSIDERING THE FULL NARRATIVE
DESCRIPTION OF THE FINANCIAL ANALYSES, INCLUDING THE METHODOLOGIES AND
ASSUMPTIONS UNDERLYING THE ANALYSES, COULD CREATE A MISLEADING OR INCOMPLETE
VIEW OF CREDIT SUISSE FIRST BOSTON CORPORATION'S FINANCIAL ANALYSES.
36
CHILES
Introduction. Credit Suisse First Boston Corporation performed a
"Discounted Cash Flow Analysis," "Selected Companies Analysis" and "Selected
Transactions Analysis" for Chiles. Based on these analyses, Credit Suisse First
Boston Corporation derived the following aggregate per share equity reference
range for Chiles, as compared to the implied merger consideration in the merger
based on the closing price of ENSCO common stock on May 13, 2002 of $35.28:
AGGREGATE IMPLIED PER SHARE IMPLIED MERGER CONSIDERATION BASED ON ENSCO
EQUITY REFERENCE RANGE COMMON STOCK AS OF MAY 13, 2002
--------------------------- -------------------------------------------
$20.97 to $28.27 $28.45
Discounted Cash Flow Analysis. Credit Suisse First Boston Corporation
estimated the present value of the stand-alone, unlevered, after-tax free cash
flows that Chiles could generate for the fiscal years 2002 to 2006, based on
internal estimates of Chiles management, as adjusted in consultation with Chiles
management. Credit Suisse First Boston Corporation calculated a range of
estimated terminal values for Chiles by applying a range of selected earnings
before interest, taxes, depreciation and amortization, commonly referred to as
EBITDA, terminal value multiples of 8.5x to 10.5x to Chiles' calendar year 2006
estimated EBITDA. The estimated free cash flows and terminal values were then
discounted to present value using selected discount rates ranging from 12.5% to
14.0%. This analysis indicated the following implied per share equity reference
range for Chiles, as compared to the implied merger consideration in the merger
based on the closing price of ENSCO common stock on May 13, 2002 of $35.28:
IMPLIED PER SHARE IMPLIED MERGER CONSIDERATION
EQUITY REFERENCE RANGE BASED ON THE ENSCO COMMON STOCK AS OF MAY 13, 2002
---------------------- --------------------------------------------------
$20.50 to $26.06 $28.45
Selected Companies Analysis. Credit Suisse First Boston Corporation
compared financial, operating and stock market data of Chiles to corresponding
data for the following eight publicly traded companies, including Chiles, in the
offshore drilling industry:
- Atwood Oceanics, Inc.
- Chiles
- Diamond Offshore Drilling, Inc.
- ENSCO
- GlobalSantaFe Corporation
- Noble Drilling Corporation
- Rowan Companies, Inc.
- Transocean Sedco Forex Inc.
Credit Suisse First Boston Corporation reviewed enterprise values,
calculated as equity value plus net debt, as multiples of estimated replacement
cost and calendar years 2002 and 2003 estimated EBITDA. Credit Suisse First
Boston Corporation also reviewed market values as multiples of calendar years
2002 and 2003 estimated net income plus depreciation, commonly referred to as
after tax cash flow. Credit Suisse First Boston Corporation then applied a range
of selected multiples derived from the selected companies of estimated
replacement cost, calendar years 2002 and 2003 estimated EBITDA and calendar
years 2002 and 2003 estimated after tax cash flow to corresponding financial
data of Chiles. All multiples were based on closing stock prices on May 13,
2002. Estimated financial data for Chiles were based on internal estimates of
Chiles management, as adjusted in consultation with Chiles management, except
the estimated replacement cost, which was based on Credit Suisse First Boston
Corporation equity research estimates adjusted in consultation with Chiles
management, and estimated financial data for the selected companies were based
on publicly available research estimates. This analysis indicated the following
37
implied per share equity reference range for Chiles, as compared to the implied
merger consideration in the merger based on the closing price of ENSCO common
stock on May 13, 2002 of $35.28:
IMPLIED PER SHARE IMPLIED MERGER CONSIDERATION
EQUITY REFERENCE RANGE BASED ON THE ENSCO COMMON STOCK AS OF MAY 13, 2002
---------------------- --------------------------------------------------
$23.40 to $28.27 $28.45
Selected Transactions Analysis. Credit Suisse First Boston Corporation
reviewed the implied transaction multiples in the following 13 selected merger
and acquisition transactions in the drilling industry:
ACQUIROR TARGET
Santa Fe International Corporation Global Marine Inc.
Pride International, Inc. Marine Drilling Companies, Inc.
Patterson Energy, Inc. UTI Energy, Inc.
Transocean Sedco Forex Inc. R&B Falcon Corporation
Transocean Offshore Inc. Sedco Forex Holdings Limited
R&B Falcon Corporation Cliffs Drilling Company
Falcon Drilling Company, Inc. Reading & Bates Corporation
Sonat Offshore Drilling Inc. Transocean ASA
Noble Drilling Corporation Royal Nedlloyd N.V. (Neddrill Drilling Division)
ENSCO Dual Drilling Company
Diamond Offshore Drilling, Inc. Arethusa (Offshore) Limited
Transocean ASA Wilrig AS
ENSCO Penrod Holding Corporation
Credit Suisse First Boston Corporation compared enterprise values in the
selected transactions as multiples of latest 12 months revenue, EBITDA and
earnings before interest and taxes, commonly referred to as EBIT. Credit Suisse
First Boston Corporation then applied a range of selected multiples derived from
the selected transactions of latest 12 months revenue, EBITDA and EBIT to
corresponding financial data of Chiles. All multiples for the selected
transactions were based on publicly available information at the time of
announcement of the relevant transaction. Historical financial data for Chiles
were based on publicly available filings of Chiles. This analysis indicated the
following implied per share equity reference range for Chiles, as compared to
the implied merger consideration in the merger based on the closing price of
ENSCO common stock on May 13, 2002 of $35.28:
IMPLIED PER SHARE IMPLIED MERGER CONSIDERATION
EQUITY REFERENCE RANGE BASED ON THE ENSCO COMMON STOCK AS OF MAY 13, 2002
---------------------- --------------------------------------------------
$22.19 to $29.48 $28.45
ENSCO
Introduction. Credit Suisse First Boston Corporation performed a
"Discounted Cash Flow Analysis," "Selected Companies Analysis" and "Selected
Transactions Analysis" for ENSCO. Based on these analyses, Credit Suisse First
Boston Corporation derived the following aggregate per share equity reference
range for ENSCO, as compared to the closing price of ENSCO common stock on May
13, 2002:
AGGREGATE IMPLIED PER SHARE PER SHARE PRICE OF ENSCO
EQUITY REFERENCE RANGE COMMON STOCK AS OF MAY 13, 2002
--------------------------- -------------------------------
$32.77 to $41.58 $35.28
Discounted Cash Flow Analysis. Credit Suisse First Boston Corporation
estimated the present value of the stand-alone, unlevered, after-tax free cash
flows that ENSCO could generate for the fiscal years 2002 to 2006, based on
internal estimates of ENSCO management, as adjusted in consultation with ENSCO
management. Credit Suisse First Boston Corporation calculated a range of
estimated terminal
38
values for ENSCO by applying a range of selected EBITDA terminal value multiples
of 8.5x to 10.5x to ENSCO's calendar year 2006 estimated EBITDA. The estimated
free cash flows and terminal values were then discounted to present value using
selected discount rates ranging from 11.5% to 13.0%. This analysis indicated the
following implied per share equity reference range for ENSCO, as compared to the
closing price of ENSCO common stock on May 13, 2002:
IMPLIED PER SHARE PER SHARE PRICE OF ENSCO
EQUITY REFERENCE RANGE COMMON STOCK AS OF MAY 13, 2002
---------------------- -------------------------------
$32.27 to $40.42 $35.28
Selected Companies Analysis. Credit Suisse First Boston Corporation
compared financial, operating and stock market data of ENSCO to corresponding
data for the eight publicly traded companies described in "-- Opinion of
Financial Advisor -- Chiles -- Selected Companies Analysis," including ENSCO.
Credit Suisse First Boston Corporation reviewed enterprise values as
multiples of estimated replacement cost and calendar years 2002 and 2003
estimated EBITDA. Credit Suisse First Boston Corporation also reviewed market
values as multiples of calendar years 2002 and 2003 estimated after tax cash
flow. Credit Suisse First Boston Corporation then applied a range of selected
multiples derived from the selected companies of estimated replacement cost,
calendar years 2002 and 2003 estimated EBITDA and calendar years 2002 and 2003
estimated after tax cash flow to corresponding financial data of ENSCO. All
multiples were based on closing stock prices on May 13, 2002. Estimated
financial data for ENSCO were based on internal estimates of ENSCO management,
as adjusted in consultation with ENSCO management, except the estimated
replacement cost, which was based on publicly available research estimates, and
estimated financial data for the selected companies were based on publicly
available research estimates. This analysis indicated the following implied per
share equity reference range for ENSCO, as compared to the closing price of
ENSCO common stock on May 13, 2002:
AGGREGATE IMPLIED PER SHARE PER SHARE PRICE OF ENSCO
EQUITY REFERENCE RANGE COMMON STOCK AS OF MAY 13, 2002
--------------------------- -------------------------------
$32.04 to $37.18 $35.28
Selected Transactions Analysis. Credit Suisse First Boston Corporation
reviewed the implied transaction multiples in the 13 selected merger and
acquisition transactions described in "-- Opinion of Financial
Advisor -- Chiles -- Selected Transaction Analysis."
Credit Suisse First Boston Corporation compared enterprise values in the
selected transactions as multiples of latest 12 months revenue, EBITDA and EBIT.
Credit Suisse First Boston Corporation then applied a range of selected
multiples derived from the selected transactions of latest 12 months revenue,
EBITDA and EBIT to corresponding financial data of ENSCO. All multiples for the
selected transactions were based on publicly available information at the time
of announcement of the relevant transaction. Historical financial data for ENSCO
were based on publicly available filings of ENSCO. This analysis indicated the
following implied per share equity reference range for ENSCO, as compared to the
closing price of ENSCO common stock on May 13, 2002:
AGGREGATE IMPLIED PER SHARE PER SHARE PRICE OF ENSCO
EQUITY REFERENCE RANGE COMMON STOCK AS OF MAY 13, 2002
--------------------------- -------------------------------
$34.24 to $43.05 $35.28
EXCHANGE RATIO ANALYSIS.
Relative Exchange Ratio Analysis. Credit Suisse First Boston Corporation
compared the implied per share equity reference ranges for Chiles and ENSCO
derived from the "Discounted Cash Flow Analysis," "Selected Companies Analysis"
and "Selected Transactions Analysis" for Chiles and ENSCO described above in
order to derive the following implied exchange ratio reference ranges, including
an aggregate implied reference range derived from these analyses, as compared to
the implied exchange ratio in the
39
merger of 0.8063x, assuming an all-stock transaction of 0.6575 of a share of
ENSCO common stock, plus 0.1488 of a share of ENSCO common stock in lieu of
$5.25 cash per share, based on the closing stock price of ENSCO common stock on
May 13, 2002 of $35.28:
IMPLIED IMPLIED EXCHANGE RATIO
EXCHANGE RATIO IN THE MERGER ASSUMING
REFERENCE RANGE ALL-STOCK TRANSACTION
--------------- ----------------------
Discounted Cash Flow Analysis...................... 0.51x to 0.81x
Selected Companies Analysis........................ 0.63x to 0.88x 0.8063x
Selected Transactions Analysis..................... 0.52x to 0.86x
Aggregate Implied Exchange Ratio Reference Range... 0.50x to 0.86x
Contribution Analysis. Credit Suisse First Boston Corporation reviewed the
relative contributions of Chiles and ENSCO to estimated replacement cost and
calendar years 2002 and 2003 estimated EBITDA and after tax cash flow. Estimated
financial data were based on the internal estimates of Chiles and ENSCO
managements, as adjusted in consultation with Chiles and ENSCO managements,
respectively, except that the estimated replacement cost was based on, in the
case of Chiles, Credit Suisse First Boston Corporation equity research estimates
adjusted in consultation with Chiles management and, in the case of ENSCO,
publicly available research estimates. Credit Suisse First Boston Corporation
then computed implied exchange ratios, assuming an all-stock transaction, based
on the diluted ownership percentages of the Chiles stockholders in the combined
company implied by Chiles' relative contribution for each metric observed.
This analysis indicated the following implied exchange ratio reference
range, as compared to the exchange ratio in the merger, assuming an all-stock
transaction based on the assumptions described in "-- Opinion of Financial
Advisor -- Exchange Ratio Analysis -- Relative Exchange Ratio Analysis":
IMPLIED EXCHANGE RATIO IN THE
IMPLIED EXCHANGE RATIO MERGER ASSUMING
REFERENCE RANGE ALL-STOCK TRANSACTION
---------------------- -----------------------------
0.68x to 1.23x 0.8063x
Historical Exchange Ratio Analysis. Credit Suisse First Boston Corporation
reviewed the ratio of the closing price of Chiles common stock to the closing
price of ENSCO common stock on May 13, 2002 and the average of these daily
ratios calculated over the one-week, one-month, three-month, six-month and
one-year periods ending May 13, 2002, and since Chiles' initial public offering
date of September 22, 2000. Credit Suisse First Boston Corporation then computed
the premium/(discount) implied by the exchange ratio in the merger of 0.8063x,
assuming an all-stock transaction based on the assumptions described in
"-- Opinion of Financial Advisor -- Exchange Ratio Analysis -- Relative Exchange
Ratio Analysis," relative to the implied average exchange ratios for the periods
observed, as indicated in the following table:
IMPLIED
EXCHANGE IMPLIED MERGER
PERIOD RATIO PREMIUM/(DISCOUNT)
------ -------- ------------------
May 13, 2002........................................ 0.68x 19.1%
One-week average.................................... 0.71 13.1
One-month average................................... 0.73 10.5
Three-month average................................. 0.74 9.4
Six-month average................................... 0.78 3.0
One-year average.................................... 0.88 (8.5)
Since 9/22/00 (IPO Date)............................ 0.76 5.6
40
This analysis indicated the following implied exchange ratio reference
range, as compared to the exchange ratio in the merger, assuming an all-stock
transaction based on the assumptions described in "-- Opinion of Financial
Advisor -- Exchange Ratio Analysis -- Relative Exchange Ratio Analysis":
IMPLIED EXCHANGE RATIO IN THE
IMPLIED EXCHANGE RATIO MERGER ASSUMING
REFERENCE RANGE ALL-STOCK TRANSACTION
---------------------- -----------------------------
0.68x to 0.88x 0.8063x
PRO FORMA TRANSACTION CONSEQUENCES
Credit Suisse First Boston Corporation analyzed the potential pro forma
effect of the merger on ENSCO's calendar years 2002 and 2003 estimated earnings
per share, commonly referred to as EPS, and estimated after tax cash flow per
share, giving effect to potential costs savings and other synergies estimated by
the management of ENSCO to result from the merger and other merger related
adjustments. Estimated financial data were based on publicly available research
estimates. Based on the merger consideration in the merger, this analysis
suggested that the merger could be accretive to ENSCO's estimated EPS and
estimated after tax cash flow per share for each of the periods reviewed.
The actual results achieved by the combined company may vary from projected
results and the variations may be material.
OTHER FACTORS
In the course of preparing its opinion, Credit Suisse First Boston
Corporation also reviewed and considered other information and data, including:
- the average cost and replacement cost per rig, as compared to the
enterprise value of Chiles, taking into account Chiles' management's data
and estimates of rig completion costs and Credit Suisse First Boston
Corporation equity research estimates of replacement costs, implied by
the merger consideration in the merger based on the closing price of
ENSCO common stock on May 13, 2002 of $35.28;
- the historical price performance and trading characteristics of Chiles
common stock and ENSCO common stock and the relationship between
movements in Chiles common stock, ENSCO common stock and the S&P Drilling
Index; and
- selected credit statistics of ENSCO on a stand-alone basis and pro forma
for the merger.
MISCELLANEOUS
The engagement letter between Chiles and Credit Suisse First Boston
Corporation provides for the payment of $750,000 upon delivery of the opinion
and an additional $2,250,000 upon consummation of the merger. Chiles also has
agreed to reimburse Credit Suisse First Boston Corporation for its reasonable
out-of-pocket expenses, including reasonable fees and expenses of legal counsel
and any other advisor retained by Credit Suisse First Boston Corporation, and to
indemnify Credit Suisse First Boston Corporation and related parties against
liabilities, including liabilities under the federal securities laws, arising
out of its engagement.
Credit Suisse First Boston Corporation and its affiliates have in the past
provided, and may in the future provide, investment banking and financial
services to Chiles and ENSCO and their affiliates, including SEACOR, unrelated
to the proposed merger, for which services Credit Suisse First Boston
Corporation and its affiliates have received, and expect to receive,
compensation. In the ordinary course of business, Credit Suisse First Boston
Corporation and its affiliates may actively trade the debt and equity securities
of Chiles and ENSCO and their affiliates, including SEACOR, for their own
accounts and for the accounts of customers and, accordingly, may at any time
hold long or short positions in those securities.
41
REGULATORY APPROVALS REQUIRED FOR THE MERGER
The merger is subject to review by the Antitrust Division of the U.S.
Department of Justice and the U.S. Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. Under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, ENSCO and Chiles are
required to make pre-merger notification filings and to await the expiration or
early termination of the statutory waiting period prior to completing the
merger. On May 23 and 24, 2002, ENSCO and Chiles, respectively, filed a
Premerger Notification and Report Form with the Antitrust Division of the U.S.
Department of Justice and the U.S. Federal Trade Commission.
There can be no assurance that the governmental reviewing authorities will
terminate the applicable statutory waiting period or clear the merger at all or
without restrictions or conditions that would have a materially adverse effect
on the combined company if the merger is completed. These restrictions and
conditions could include the grant of a complete or partial license,
divestiture, spin-off or the holding separate of assets or businesses. Under the
terms of the merger agreement, ENSCO has no obligation, if requested or required
by governmental authorities, to (a) dispose or transfer or cause Chiles or any
of its subsidiaries to dispose of or transfer any assets, or to commit to cause
Chiles or any of its subsidiaries to dispose of any assets, (b) discontinue or
cause Chiles or any of its subsidiaries to discontinue offering any product or
service, or to commit to cause Chiles or any of its subsidiaries to discontinue
offering any product or service, (c) hold separate or cause Chiles or any of its
subsidiaries to hold separate any assets or operations (either before or after
the closing of the merger), or to commit to cause Chiles or any of its
subsidiaries to hold separate any assets or operations, (d) make or cause Chiles
or any of its subsidiaries to make any commitment (to any governmental entity or
otherwise) regarding its future operations or the future operations of Chiles or
any of its subsidiaries, or (e) contest any proceeding relating to the merger if
ENSCO determines in good faith that contesting such proceeding might not be
advisable.
In addition, during or after the statutory waiting period and clearance of
the merger, and even after completion of the merger, either the Antitrust
Division of the U.S. Department of Justice or the U.S. Federal Trade Commission
could challenge, seek to block or block the merger under the antitrust laws, as
it deems necessary or desirable in the public interest. Other competition
agencies with jurisdiction over the merger could also initiate action to
challenge or block the merger. In addition, in some jurisdictions, a competitor,
customer or other third party could initiate a private action under the
antitrust laws challenging or seeking to enjoin the merger, before or after it
is completed. ENSCO and Chiles cannot be sure that a challenge to the merger
will not be made or that, if a challenge is made, ENSCO and Chiles will prevail.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes the material United States
federal income tax consequences of the merger to Chiles and to United States
holders of Chiles common stock who hold their Chiles common stock as a capital
asset. It does not address all of the United States federal income tax
consequences that may be relevant to particular stockholders in light of their
individual circumstances or to stockholders who are subject to special rules,
including, without limitation:
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- dealers in securities or foreign currencies;
- foreign holders;
42
- persons who hold such shares as a hedge against currency risk, or as part
of a constructive sale or conversion transaction; or
- holders who acquired their shares upon the exercise of employee stock
options or otherwise as compensation.
No ruling has been or will be sought from the Internal Revenue Service as
to the United States federal income tax consequences of the merger, and the
following summary is not binding on the Internal Revenue Service or the courts.
It is based upon the Internal Revenue Code, laws, regulations, rulings and
decisions in effect as of the date of this proxy statement/prospectus, all of
which are subject to change, possibly with retroactive effect. This summary does
not address tax consequences under state, local and foreign laws.
For purposes of this discussion, we use the term "United States holder" to
mean:
- a citizen or resident of the United States;
- a corporation, partnership, and, with respect to a partnership, any
partnership treated as a domestic partnership for U.S. federal income tax
purposes, or other entity created or organized under the laws of the
United States or any of its political subdivisions;
- a trust that (a) is subject to the supervision of a court within the
United States and the control of one or more United States persons or (b)
has a valid election in effect under applicable United States Treasury
regulations to be treated as a United States person; or
- an estate that is subject to United States federal income tax on its
income regardless of its source.
CHILES STOCKHOLDERS ARE STRONGLY ENCOURAGED TO CONSULT THEIR TAX ADVISORS
AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER
TAX LAWS.
EXCHANGE OF CHILES COMMON STOCK FOR A COMBINATION OF ENSCO COMMON STOCK AND
CASH.
The consummation of the merger is conditioned on (a) the receipt by ENSCO
of an opinion from Baker & McKenzie, counsel to ENSCO, dated the date of the
effective time of the merger, to the effect that the merger will be treated as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
and (b) the receipt by Chiles of an opinion from Weil, Gotshal & Manges LLP,
counsel to Chiles, dated the date of the effective time of the merger, to the
effect that the merger will be treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. The opinions will be based on
representations contained in representation letters provided by ENSCO and
Chiles, all of which must continue to be true and accurate in all respects as of
the effective time of the merger, and on certain customary factual assumptions.
The opinions will not be binding on the Internal Revenue Service or the courts.
Assuming that the merger is treated as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code:
- a Chiles stockholder will recognize gain equal to the lesser of (a) the
cash received by the stockholder in the merger or (b) an amount equal to
the excess, if any, of (i) the sum of the amount of cash and the fair
market value of the ENSCO common stock received by the stockholder in the
merger over (ii) the stockholder's adjusted tax basis in the Chiles
common stock exchanged by the stockholder in the merger; for this
purpose, a Chiles stockholder must calculate gain or loss separately for
each identifiable block of Chiles common stock exchanged by the
stockholder in the merger and cannot utilize a loss realized on one block
of Chiles common stock to offset a gain realized on another block of
Chiles common stock;
- except as discussed below under "-- Tax Character of Cash Consideration,"
the gain recognized by a Chiles stockholder in the merger will be treated
as capital gain;
43
- a Chiles stockholder will not recognize any loss in the merger (except,
possibly, in connection with cash received instead of a fractional share,
as discussed below);
- the aggregate tax basis of the shares of ENSCO common stock received by a
Chiles stockholder (before reduction for the basis in any fractional
share of ENSCO common stock for which cash is received) in exchange for
Chiles common stock in the merger will be the same as the aggregate tax
basis of the stockholder's Chiles common stock, decreased by the amount
of cash received by the stockholder in the merger (excluding any cash
received instead of a fractional share) and increased by the amount of
gain recognized by the stockholder in the merger (including any portion
of the gain that is treated as a dividend but excluding any gain
recognized as a result of cash received instead of a fractional share);
- a Chiles stockholder's holding period with respect to the shares of ENSCO
common stock received in the merger will include the holding period of
the Chiles common stock exchanged for ENSCO common stock;
- ENSCO will not recognize gain or loss in the merger; and
- ENSCO stockholders will not recognize gain or loss in the merger.
TAX CHARACTER OF CASH CONSIDERATION
In the case of most Chiles stockholders having no direct or indirect
control over ENSCO's corporate affairs, any gain will be treated as capital gain
for United States federal income tax purposes. However, there are circumstances
under which all or a part of any gain that a Chiles stockholder recognizes in
the merger could be treated as a distribution of a dividend instead of capital
gain to the extent of the stockholder's ratable share of the undistributed
accumulated earnings and profits of the corporation. Due to the inherently
factual nature of this determination, Chiles stockholders are encouraged to
consult their tax advisors to determine whether any cash received in exchange
for their Chiles stock in the merger will be treated as a distribution of a
dividend.
CASH RECEIVED INSTEAD OF A FRACTIONAL SHARE
ENSCO will not issue any fractional shares of ENSCO common stock in the
merger. Instead, each holder of Chiles common stock exchanged in the merger who
would otherwise be entitled to receive a fraction of a share of ENSCO common
stock will receive cash, without interest, in lieu of a fractional share. A
Chiles stockholder who receives cash instead of a fractional share of ENSCO
common stock will generally recognize capital gain or loss based on the
difference between the amount of the cash received instead of a fractional share
and the stockholder's tax basis in such fractional share.
TAX CONSEQUENCES OF APPRAISAL RIGHTS
A Chiles stockholder who dissents to the merger will generally recognize
capital gain or loss in an aggregate amount equal to the difference between the
amount of cash received and the stockholder's tax basis in the dissenting
shares. To the extent ENSCO is required to file information returns with respect
to amounts paid to a Chiles stockholder who dissents to the merger, ENSCO
intends to report such payments when paid to the holder. However, it is possible
that a stockholder will be required to recognize gain or loss at the effective
time of the merger, and in advance of the receipt of any cash payment, in an
amount generally equal to the trading price of Chiles common stock at the
effective time of the merger. ANY CHILES STOCKHOLDER ASSERTING APPRAISAL RIGHTS
SHOULD CONSULT WITH THEIR TAX ADVISOR AS TO THE TIMING, AMOUNT AND CHARACTER OF
SUCH PAYMENT.
CAPITAL GAIN
Any capital gain recognized by an individual holder of Chiles common stock
in connection with the transfer of his or her Chiles common stock in the merger
will be subject to a maximum United States
44
federal income tax rate of 20% if the individual's holding period for his or her
Chiles common stock is more than 12 months at the effective time of the merger.
BACKUP WITHHOLDING
Noncorporate holders of Chiles common stock may be subject to backup
withholding on any cash payments received in the merger. A Chiles stockholder
will not be subject to backup withholding; however, if the holder (a) furnishes
a correct taxpayer identification number and certifies that such holder is not
subject to backup withholding on the substitute Internal Revenue Service Form
W-9 or successor form included in the letter of transmittal to be delivered to
such holder following the completion of the merger; (b) provides a certification
of foreign status on Internal Revenue Service Form W-8BEN or a successor form;
or (c) is otherwise exempt from backup withholding.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or credit against a holder's United States federal income tax
liability, provided the holder furnishes the required information to the
Internal Revenue Service.
Tax matters are very complicated, and the tax consequences of the merger to
a Chiles stockholder will depend on such holder's particular tax situation.
CHILES STOCKHOLDERS ARE STRONGLY ENCOURAGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING TAX RETURN
REPORTING REQUIREMENTS, THE APPLICABILITY OF FEDERAL, STATE, LOCAL AND FOREIGN
TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGE IN THE TAX LAWS.
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase business combination in
accordance with accounting principles generally accepted in the United States,
with ENSCO treated as the acquirer. Accordingly, the assets and liabilities of
ENSCO are recorded at historical amounts, without restatement to fair values.
The assets and liabilities of Chiles will be revalued to estimated fair value at
the date of the merger, with the excess of the purchase price over the sum of
such fair values recorded as goodwill. The estimated fair values are preliminary
and subject to change.
The $567.9 million purchase price is calculated using the number of ENSCO
common shares expected to be issued in the merger (determined as the number of
Chiles common shares expected to be outstanding immediately prior to the merger
multiplied by the merger ratio of 0.6575) and a $33.65 per share average trading
price of ENSCO common stock for a period of time immediately before and after
the merger was announced, plus cash consideration of $5.25 per share of Chiles
common stock outstanding immediately prior to the merger, estimated direct
merger fees and expenses and the estimated fair value of Chiles employee stock
options, which will be assumed by ENSCO. The $567.9 million purchase price is
based on preliminary estimates and actual amounts may differ from these
estimates.
The calculated purchase price is for accounting purposes only and is not
indicative of the price at which shares of Chiles common stock will trade
immediately before the completion of the merger or the value of shares of ENSCO
common stock to be received by Chiles stockholders in connection with the
merger.
LISTING OF ENSCO COMMON STOCK
ENSCO common stock currently is traded on the New York Stock Exchange under
the symbol "ESV." Application has been made and ENSCO will use reasonable
efforts to:
- cause the shares of ENSCO common stock to be issued in the merger to be
approved for listing on the New York Stock Exchange upon the completion
of the merger; and
- cause the shares of ENSCO common stock to be issued upon the exercise of
converted Chiles stock options to be approved for listing on the New York
Stock Exchange.
45
The listing of these shares of ENSCO common stock is a condition to ENSCO's
and Chiles' obligation to complete the merger.
DELISTING AND DEREGISTRATION OF CHILES COMMON STOCK
If the merger is completed, Chiles common stock will be delisted from the
American Stock Exchange and deregistered under the Securities Exchange Act of
1934, and Chiles will no longer file periodic reports with the SEC.
RESTRICTIONS ON SALES OF SHARES OF ENSCO COMMON STOCK RECEIVED IN THE MERGER
The shares of ENSCO common stock to be issued in the merger will be
registered under the Securities Act of 1933 and will be freely transferable,
except for shares of ENSCO common stock issued to any person who is deemed to be
an "affiliate" of Chiles under the Securities Act of 1933 prior to the merger.
Persons who may be deemed to be "affiliates" of Chiles prior to the merger
include individuals or entities that control, are controlled by, or are under
common control with Chiles prior to the merger, and may include officers and
directors, as well as significant Chiles stockholders prior to the merger. The
merger agreement contains a list that identifies all persons whom Chiles
believes may be deemed to be affiliates of Chiles for purposes of Rule 145.
Chiles is required, pursuant to the merger agreement, to use its reasonable
efforts to cause each person it identifies on the list as a potential affiliate
to deliver to ENSCO, at or prior to the date of the mailing of the proxy
statement to Chiles stockholders, a written agreement that the affiliate will
not sell, transfer or otherwise dispose of any of the shares of ENSCO common
stock issued to the affiliate pursuant to the merger unless the sale, transfer
or other disposition:
- has been registered under the Securities Act of 1933;
- is made in conformity with Rule 145; or
- is otherwise exempt from registration under the Securities Act of 1933 in
the opinion of counsel.
ENSCO's registration statement on Form S-4, of which this proxy
statement/prospectus is a part, does not cover the resale of shares of ENSCO
common stock to be received by affiliates of Chiles in the merger.
INTERESTS OF CERTAIN PERSONS; POSSIBLE CONFLICTS OF INTEREST OF CERTAIN PERSONS
IN THE MERGER
In considering the recommendation of the Chiles board of directors with
respect to the approval and adoption of the merger agreement and the related
transactions, stockholders should be aware that certain members of the
management of Chiles (including the executive officers identified below who
comprise Chiles' chief executive officer and its four other most highly
compensated officers)and of its board of directors have certain interests in the
merger that are in addition to the interests of the Chiles stockholders
generally (including, without limitation, the potential receipt of bonus,
severance and/or other employment benefits and compensation for stock options).
PERFORMANCE AND STAY BONUSES; DEFERRED BONUSES
Pursuant to the merger agreement, each of Chiles' executive officers
identified in the table below will, upon consummation of the merger, be eligible
to receive performance bonuses and to participate in stay bonuses (other than
Donald B. Gregg). All of the performance bonuses payable to the executive
officers (other than Donald B. Gregg, who may defer a portion of his performance
bonus as described below) will be payable at the effective time of the merger.
If any executive officer of Chiles (other than William E. Chiles) accepts
employment with ENSCO, one-half of his stay bonus will be payable at the first
anniversary of his employment with ENSCO, and the remaining one-half will be
payable at the second anniversary of his employment with ENSCO, in each case if
such executive is employed with ENSCO on such anniversary date. If an executive
officer (other than William E. Chiles) is not offered employment or is offered a
position that does not have comparable pay and benefits (irrespective of title
or location of employment) and such offer is not accepted, 15% of the stay bonus
for that executive officer shall be
46
payable at the effective time of the merger. If an executive officer (other than
William E. Chiles) is offered and accepts employment with ENSCO, the balance of
any unpaid stay bonus will become payable in the event such executive officer is
terminated without cause (as defined in the Severance Benefits Agreement
covering such executive officer described below) within two years of his
commencement of employment with ENSCO. An additional $350,000 of performance and
stay bonuses may be paid to certain Chiles non-executive officers. A pool also
will be created and funded with $500,000 to be allocated among the non-officer
employees of Chiles, as determined by William E. Chiles and Donald B. Gregg, for
such employees' efforts in completing the merger and to assist Chiles in
retaining critical employees. Each employee who receives an allocation under
such bonus pool shall be paid such amount on the effective date of the merger.
In addition, under Chiles' executive bonus plan, the annual executive bonus
is fully earned and vested at the time of the award. However, sixty percent of
the annual executive bonus is paid at the time of the award while the remaining
forty percent is paid (with interest) in two equal annual installments one and
two years after the date of the award. Any outstanding deferred bonus balance is
payable upon the death, disability, or termination without cause of the
executive or upon a change in control of Chiles. Accordingly, all executive
bonuses that have been deferred will become due and payable at the effective
time of the merger unless an executive terminates his employment prior to such
time.
The following executive officers of Chiles will be entitled to receive the
performance bonus (other than Donald B. Gregg who may defer a portion of the
performance bonus as described below) at the effective time of the merger and
may be eligible to receive the stay bonus, and the deferred portion of his bonus
that will be payable in the amounts described below:
PERFORMANCE STAY DEFERRED
NAME TITLE BONUS $ BONUS $ BONUS $
---- ---------------------- ----------- --------- --------
William E. Chiles................... President, Chief 800,000 1,200,000 100,000
Executive Officer and
a Director
Donald B. Gregg..................... Senior Vice 600,000 0 41,000
President --
Operations and
Engineering
George Bruce Brumley................ Vice President -- 150,000 150,000 35,500
Operations
William H. Hopkins.................. Vice 150,000 150,000 33,500
President -- Human
Resources
Gabe Padilla........................ Vice President -- 150,000 150,000 33,500
Engineering
WILLIAM E. CHILES
William E. Chiles, the President and Chief Executive Officer of Chiles, is
currently employed pursuant to an employment agreement. Subject to certain
conditions and amendments further described below, ENSCO will continue Mr.
Chiles' current employment agreement and offer Mr. Chiles a position as a Vice
President of ENSCO after the closing of the merger. Mr. Chiles has indicated
that he intends to accept the offer. If Mr. Chiles accepts the position with
ENSCO, he will continue to receive the $280,000 annual base salary he was paid
under his employment agreement with Chiles. The base salary will be payable in
accordance with ENSCO's standard payroll practices for management employees and
Mr. Chiles will have full eligibility for all medical and other benefits and
profit sharing programs for Vice Presidents of ENSCO, including stock and option
grants as may be approved by the board of directors of ENSCO. Mr. Chiles'
performance bonus (described above) will be payable at the effective time of the
merger, and his stay bonus (described above) will vest pro rata on a monthly
basis during the first two years of his employment with ENSCO following the
effective time of the merger and be payable on an annual basis during his
employment with ENSCO. If Mr. Chiles accepts a position with ENSCO, the balance
of any unpaid stay bonus (vested and unvested) will be payable if he is
subsequently terminated
47
or constructively terminated by ENSCO without cause (as defined in his current
employment agreement) within two years of commencement of employment with ENSCO.
If Mr. Chiles does not accept ENSCO's offer of employment, he will not receive a
stay bonus, but he will receive his performance bonus at the effective time of
the merger, up to $810,000 in severance payments described in his existing
employment agreement with Chiles in 36 equal monthly payments commencing with
the month following the effective time of the merger, and his accrued incentive
bonus for 2002, which is being accrued at the rate of $16,667 per month (subject
to certain terms in his existing agreement that could reduce the amount of these
payments if any of such payments would constitute an excess parachute payment
and result in the imposition of an excise tax under Section 280G of the Internal
Revenue Code).
Under the terms of the merger agreement, the severance payments payable
under Mr. Chiles' current employment agreement will be payable in full if Mr.
Chiles' employment is terminated within one year from commencement of his
employment with ENSCO. If, however, Mr. Chiles remains employed with ENSCO for
more than one year but less than three years, he will be entitled to the pro
rata portion of his severance payments. As provided in his current employment
agreement, Mr. Chiles may terminate the non-compete provisions of his employment
agreement at any time by waiving his right to receive any further severance
payments. From and after the third anniversary of his employment with ENSCO, he
will not be entitled to any severance payments other than what might otherwise
be provided to him as an employee of ENSCO.
DONALD B. GREGG
Subject to certain conditions described further below, ENSCO will offer
Donald B. Gregg, Senior Vice President -- Operations and Engineering of Chiles,
a position with ENSCO following the merger. If Mr. Gregg enters into employment
with ENSCO, he will receive his current salary of $170,000 and comparable
medical and similar benefits as he currently receives with Chiles and he may, at
his option, defer receipt of up to $300,000 of his performance bonus to be paid
at such future date as is determined by Mr. Gregg. In addition, if Mr. Gregg
accepts employment with ENSCO, he will be entitled to a pro rata portion of his
severance payments payable under the Severance Benefits Agreement as described
below if his employment ceases for any reason during the first year of his
employment with ENSCO, and any deferred portion of his performance bonus will be
paid to him. If Mr. Gregg does not accept employment with ENSCO, he will be paid
one year of severance under the Severance Benefits Agreement described below and
his performance bonus.
SEVERANCE BENEFITS AGREEMENTS
Under the terms of one or more Severance Benefits Agreements, each of the
executive officers of Chiles identified below will be entitled to an amount
equal to one year of his base salary in the event that such executive officer is
terminated by Chiles without cause including, without limitation, termination
without cause in connection with a change in control of Chiles. The merger will
be a change in control under the terms of the Severance Benefits Agreements.
These severance payments are payable within thirty days after the date of
termination. The executive officers that are parties to the Severance Benefits
Agreements and their current base salary are as follows: Donald B. Gregg, Senior
Vice President -- Operations and Engineering ($170,000), George Bruce Brumley,
Vice President -- Operations ($136,500), William H. Hopkins, Vice
President -- Human Resources ($136,500), and Gabriel Padilla, Vice
President -- Engineering ($136,500). Any such executive officer who accepts
employment with ENSCO will not be entitled to any severance payment under the
Severance Benefits Agreements as a result of the merger.
STOCK OPTIONS AND RESTRICTED STOCK
Certain directors and executive officers of Chiles hold options to purchase
shares of Chiles common stock pursuant to the Chiles 2000 Stock Option Plan.
Pursuant to the merger agreement, and except as described below, each
outstanding Chiles option will vest immediately and convert automatically into
an
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option obligating ENSCO to pay the merger consideration upon its exercise. See
"The Merger Agreement -- Employee Benefit Matters" on page 62. If Mr. Chiles
agrees to accept employment with ENSCO prior to the effective time of the
merger, he may agree to modify the vesting schedule of his unvested options and
restricted stock prior to the merger. Mr. Chiles has indicated his intention to
elect such modification prior to the effective time of the merger. If Mr. Chiles
is terminated or constructively terminated without cause, all of his unvested
options and restricted stock will immediately vest. If Mr. Chiles or Mr. Gregg
does not accept a position with ENSCO, he will have two years from the effective
time of the merger to exercise any and all options. If Mr. Chiles or Mr. Gregg
accepts employment with ENSCO, he will have the remaining term of his options
within which to exercise his options. If either Mr. Chiles or Mr. Gregg is
terminated by ENSCO without cause, he will have two years following such
termination within which to exercise his options, such period not to exceed the
remaining term of the applicable option period. If Mr. Chiles or Mr. Gregg is
terminated by ENSCO with cause or voluntarily terminates (other than by reason
of death or disability) his employment with ENSCO, he will have a minimum of one
year after the effective time of the merger to exercise his options and, if any
such termination occurs more than nine months after the effective time of the
merger, three months after the termination of his employment with ENSCO to
exercise his options (but in no event beyond the term of the option).
If any of the other executive officers of Chiles is not offered employment
with ENSCO or does not accept an offer of employment with ENSCO, he will have
one year from the effective time of the merger to exercise his options. If any
such executive officer accepts employment with ENSCO, he will have the remaining
term of his options within which to exercise such options. If any such executive
officer is terminated without cause, he will have one year following such
termination within which to exercise his options, such period not to exceed the
remaining term of the option period. If any such executive officer is terminated
with cause or voluntarily terminates (other than by reason of death or
disability) his employment, he will have a minimum of one year after the
effective time of the merger to exercise his options, and if any such
termination occurs more than nine months after the effective time of the merger,
three months after the termination of his employment with ENSCO, to exercise his
options (but in no event beyond the term of the option).
Chiles has previously granted 14,000 and 3,000 shares, respectively, of
restricted stock to William E. Chiles and George Bruce Brumley. None of these
shares were vested as of May 14, 2002. Subject to William E. Chiles' right to
elect to modify the vesting schedule of his restricted stock, the restricted
stock will vest as of the effective date of the merger.
INDEMNIFICATION AND INSURANCE
For six years from the effective time of the merger, ENSCO has agreed to
maintain for the benefit of the current directors and officers of Chiles all
existing rights to indemnification. These rights shall be observed by the
surviving company to the fullest extent permitted by Delaware law for a period
of six years from the effective time of the merger and ENSCO has agreed to
guarantee the performance of these obligations.
From the effective time of the merger until September 18, 2006, the
surviving company shall maintain in effect, for the benefit of the current
directors and officers of Chiles with respect to acts or omissions occurring
prior to the effective time of the merger, the existing policy of directors' and
officers' liability insurance maintained by Chiles as of the date of the merger
agreement in the form disclosed by Chiles to ENSCO prior to the date of the
merger agreement; provided that (a) the surviving company may substitute for
such existing policy a policy or policies of comparable coverage and (b) the
surviving company shall not be required to pay annual premiums for such existing
policy (or for any substitute policies) in excess of $200,000 in the aggregate.
In the event any future annual premiums for such existing policy (or any
substitute policies) exceed $200,000 in the aggregate, the surviving company
shall be entitled to reduce the amount of coverage of the existing policy (or
any substitute policies) to the amount of coverage that can be obtained for an
aggregate annual premium of $200,000.
49
SEACOR SMIT INC. AGREEMENTS
Chiles has previously entered into a commission agreement with Bassoe
Offshore (USA), Inc. ("Bassoe") and SEACOR, and an amended and restated
management and administrative services agreement with SEACOR. Bassoe is an
affiliate of Chiles because Jonathan Fairbanks, a director of Chiles, is also an
officer of Bassoe. SEACOR is an affiliate of Chiles because it beneficially owns
approximately 24% of the issued and outstanding Chiles common stock, and because
Charles Fabrikant, the chairman of Chiles, is also chairman and chief executive
officer of SEACOR and Randall Blank, Dick Fagerstal and Tim McKeand, each an
officer of SEACOR, are directors of Chiles. In connection with the merger,
SEACOR has signed a voting agreement providing that, among other things, SEACOR
will terminate all of the agreements with Chiles to which it is a party, with
such termination to be effective at the effective time of the merger. SEACOR has
waived any provisions in the agreements requiring prior notice of termination,
and SEACOR has agreed that neither Chiles nor any of its subsidiaries will incur
any liability to SEACOR as a result of such termination. In lieu of any other
payment due to SEACOR under the above mentioned agreements, ENSCO will pay to
SEACOR $1,000,000 within 60 days after delivery to Chiles of a new drilling rig
currently under construction pursuant to the commission agreement referenced
above.
BASSOE AGREEMENTS
In addition to the commission agreement with Bassoe and SEACOR described
above, Chiles has previously entered into another commission agreement with
Bassoe, a brokerage arrangement with Bassoe Rig Partners Ltd. ("Bassoe Rig"),
and a brokerage and commission agreement with Bassoe. Bassoe Rig is also an
affiliate of Chiles because Jonathan Fairbanks, a director of Chiles, is also an
officer of Bassoe Rig and Bassoe Rig is an affiliate of Bassoe. In connection
with the merger, Bassoe and Bassoe Rig have signed a letter agreement dated May
16, 2002 providing that, among other things, Bassoe and Bassoe Rig will
terminate all of the agreements with Chiles to which each of them is a party,
with such termination to be effective at the effective time of the merger.
Bassoe and Bassoe Rig have waived any provisions in the agreements requiring
prior notice of termination, and they have agreed that neither Chiles nor any of
its subsidiaries will incur any liability to Bassoe or Bassoe Rig as a result of
such termination. In lieu of any other payment due to Bassoe and/or Bassoe Rig
under the above mentioned agreements, ENSCO will pay Bassoe $437,500 at the
effective time of the merger. ENSCO will also pay $250,000 to Bassoe within 60
days after delivery to Chiles of a new drilling rig currently being constructed
pursuant to the commission agreement referenced above. Bassoe and Bassoe Rig
have agreed that, except as expressly set forth in the letter agreement, neither
ENSCO nor Chiles or any of its subsidiaries will have any liability to Bassoe,
Bassoe Rig or any of their respective affiliates at or following the effective
time of the merger.
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS OF CHILES
At the close of business on , 2002, directors and executive
officers of Chiles and their affiliates owned and were entitled to vote
7,403,033 shares of Chiles common stock, collectively representing approximately
36.5% of the outstanding shares of Chiles common stock on that date.
OWNERSHIP OF ENSCO BY CHILES STOCKHOLDERS AFTER THE MERGER
ENSCO expects to issue approximately 13.3 million shares of ENSCO common
stock in the merger. Based on the number of shares of ENSCO and Chiles common
stock outstanding on the record date, after completion of the merger, former
Chiles stockholders will own approximately 9% of the then-outstanding shares of
ENSCO common stock.
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MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
ENSCO intends to undertake a comprehensive review of the business,
operations, capitalization and management of Chiles with a view to optimizing
development of its potential in conjunction with ENSCO's business.
In this regard, ENSCO plans an orderly transition and post-merger
integration of the Chiles assets, personnel and operations with particular
emphasis upon continuity of Chiles' high standards of safety and operational
performance and resulting customer acceptance. Following completion of the
merger, ENSCO anticipates that Chiles' drilling rigs will have substantial rig
crew and support personnel continuity. Although it is anticipated that the
combination of the two companies will result in synergistic general and
administrative personnel reductions, ENSCO expects to offer employment to many
of Chiles' administrative office employees.
The officers and directors of Chore Acquisition, Inc. immediately prior to
the effective time of the merger will be the initial officers of the surviving
company, none of which are currently officers or directors of Chiles. The
current executive officers of ENSCO will continue to serve as executive officers
of ENSCO after the merger. William E. Chiles, the President and Chief Executive
Officer, and a director, of Chiles has been offered the position of Vice
President of ENSCO effective at the time of the merger. Mr. Chiles has indicated
that he intends to accept the offer. Other than Mr. Chiles, no current executive
officer of Chiles will serve as an executive officer of ENSCO after the merger;
however, certain of these individuals may accept employment with ENSCO other
than as executive officers.
DIVIDENDS
The ENSCO board of directors has historically made a determination each
quarter as to the payment of dividends. ENSCO initiated the payment of a $.025
per share quarterly cash dividend on its common stock during the third quarter
of 1997 and has continued to pay such quarterly dividends through March 31,
2002. Cash dividends totaling $.10 per share were paid in both 2001 and 2000. On
May 16, 2002, ENSCO's board of directors declared a regular quarterly dividend
of $.025 per share payable on June 18, 2002 to stockholders of record on June 4,
2002. ENSCO does not currently plan to change its dividend policy after the
merger (including the amount of the per share dividend by ENSCO after the
merger). Any future declaration and payment of dividends by ENSCO will be made
at the discretion of its board of directors and will be dependent upon a variety
of factors, including ENSCO's results of operations, financial condition, cash
requirements, restrictions, if any, contained in its agreements with creditors
and other relevant factors.
51
THE MERGER AGREEMENT
The following summary describes certain material provisions of the merger
agreement, which is included in this proxy statement/prospectus as Annex A and
is incorporated by reference into this proxy statement/prospectus. This summary
may not contain all of the information about the merger agreement that is
important to you. We encourage you to read the merger agreement carefully in its
entirety.
STRUCTURE OF THE MERGER
Under the terms of the merger agreement, Chiles will merge with and into
Chore Acquisition, Inc., a new subsidiary of ENSCO, which subsidiary will be the
surviving company and will continue to exist as a 100% owned subsidiary of
ENSCO. After the merger Chore Acquisition, Inc. will change its name to Chiles
Offshore Inc.
COMPLETION AND EFFECTIVENESS OF THE MERGER
The closing of the merger will occur no later than the third business day
after all of the conditions to completion of the merger contained in the merger
agreement are satisfied or waived (see the section entitled "-- Conditions to
Completion of the Merger" below). The merger will become effective upon the
later of the date and time of the filing of a certificate of merger with the
Secretary of State of the State of Delaware or upon any later date and time as
specified in the certificate of merger.
We are working to complete the merger as quickly as practicable. We
currently expect that the merger will be completed in the third calendar quarter
of 2002. However, because completion of the merger is subject to regulatory
approvals and other conditions, we cannot predict the actual timing.
MERGER CONSIDERATION
Upon completion of the merger, each share of Chiles common stock
outstanding immediately prior to the effective time of the merger will be
automatically converted into the right to receive 0.6575 shares of ENSCO common
stock and $5.25 in cash upon surrender of the certificate representing that
share of Chiles common stock in the manner provided in the merger agreement,
with cash paid for fractional shares (other than shares for which appraisal
rights are validly perfected in accordance with Delaware law). However, shares
held by Chiles stockholders who validly perfect appraisal rights will be subject
to appraisal in accordance with Delaware law. ENSCO is not obligated to complete
the merger if appraisal rights are properly demanded, and such demands are not
withdrawn as of the date the merger is completed, for more than 10% of the
issued and outstanding shares of Chiles common stock.
In addition, any shares of Chiles common stock held by ENSCO or any direct
or indirect wholly-owned subsidiaries of ENSCO immediately prior to the merger
will be automatically cancelled and extinguished, and none of ENSCO or any of
its direct or indirect subsidiaries will receive any securities of ENSCO or
other consideration in exchange for those shares. Likewise, any shares of Chiles
common stock held by Chiles or any direct or indirect wholly-owned subsidiaries
of Chiles immediately prior to the merger will be automatically cancelled and
extinguished, and none of Chiles or any of its direct or indirect subsidiaries
will receive any securities of ENSCO or cash or other consideration in exchange
for those shares.
ENSCO will not issue any fractional shares of ENSCO common stock in the
merger. Instead, each holder of Chiles common stock exchanged in the merger who
would otherwise be entitled to receive a fraction of a share of ENSCO common
stock will receive cash, without interest, in lieu of a fractional share.
The exchange ratio in the merger of 0.6575 of a share of ENSCO common stock
for each share of Chiles common stock and the cash consideration will be
adjusted to reflect the effect of any stock split, stock dividend, reverse stock
split, combination, reclassification, recapitalization or other similar
transaction with respect to ENSCO common stock or Chiles common stock,
respectively, having a record date on or after the date of the merger agreement
and prior to completion of the merger.
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EXCHANGE OF CHILES STOCK CERTIFICATES FOR ENSCO STOCK CERTIFICATES
Promptly following completion of the merger, American Stock Transfer and
Trust Company, the exchange agent for the merger, will mail to each record
holder of Chiles common stock a letter of transmittal and instructions for
surrendering the record holder's stock certificates in exchange for cash and a
certificate representing ENSCO common stock. Only those holders of Chiles common
stock who properly surrender their Chiles stock certificates in accordance with
the exchange agent's instructions will receive (a) a certificate representing
ENSCO common stock, (b) the cash consideration, (c) cash in lieu of any
fractional share of ENSCO common stock, and (d) dividends or other
distributions, if any, on ENSCO common stock to which they are entitled under
the terms of the merger agreement. After the effective time of the merger, each
certificate representing shares of Chiles common stock that has not been
surrendered will represent only the right to receive upon surrender of that
certificate each of the items listed in the preceding sentence in accordance
with the terms of the merger agreement. Following completion of the merger,
Chiles will not register any transfers of Chiles common stock outstanding on its
stock transfer books prior to the merger. No merger consideration will be paid
in exchange for any shares of Chiles common stock owned by any person who is
deemed to be an "affiliate" of Chiles under the Securities Act of 1933 until
such person has executed an "affiliate agreement" pursuant to the terms of the
merger agreement.
Holders of Chiles common stock should not send in their Chiles stock
certificates until they receive a letter of transmittal from the exchange agent,
with instructions for the surrender of Chiles stock certificates.
STOCK OPTIONS
Upon completion of the merger, each outstanding option to purchase Chiles
common stock issued by Chiles will be converted into an option exercisable for
the merger consideration, as described further in the section entitled
"-- Employee Benefit Matters -- Chiles Stock Options."
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES
Holders of Chiles common stock are not entitled to receive any dividends or
other distributions on ENSCO common stock until the merger is completed. After
the merger is completed, holders of Chiles common stock certificates will be
entitled to dividends and other distributions declared or made after completion
of the merger with respect to the number of whole shares of ENSCO common stock
which they are entitled to receive upon exchange of their Chiles stock
certificates, but they will not be paid any dividends or other distributions on
the ENSCO common stock until they surrender their Chiles stock certificates to
the exchange agent in accordance with the exchange agent instructions.
LOST STOCK CERTIFICATES
If a Chiles stock certificate is lost, stolen or destroyed, the holder of
such certificate may need to execute an affidavit and post a bond prior to
receiving each of the items listed above under "-- Exchange of Chiles Stock
Certificates for ENSCO Stock Certificates."
CONDITIONS TO COMPLETION OF THE MERGER
CONDITIONS TO ENSCO'S AND CHILES' OBLIGATIONS TO COMPLETE THE MERGER
The obligations of ENSCO and Chiles to complete the merger are subject to
the satisfaction or waiver, if legally permissible, of the following conditions:
- the registration statement of which this proxy statement/prospectus is a
part must be declared effective by the SEC and no stop order suspending
its effectiveness has been issued by the SEC and no proceedings for that
purpose have been initiated or threatened by the SEC, and all
53
necessary approvals under state securities laws or federal securities
laws relating to the issuance of ENSCO common stock have been received;
- the approval and adoption of the merger agreement by Chiles stockholders;
- the expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and any similar
waiting period under any applicable antitrust law, the absence on the
date the merger is completed of any agreement between ENSCO and the
federal agencies to not consummate the merger for a period of time and
the receipt of any consent required under any applicable antitrust law;
- the approval for listing on the New York Stock Exchange of the shares of
ENSCO common stock to be issued in the merger;
- the absence of any temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the merger
issued by any court of competent jurisdiction or any other governmental
entity, and there has not been any law enacted, adopted or deemed
applicable to the merger that makes consummation of the merger illegal;
- the representations and warranties of the other party, disregarding any
qualifications and exceptions relating to materiality or material adverse
effect, being true and correct on the date the merger is completed as if
they were made on that date (except to the extent that the
representations and warranties speak as of another date), except where
the breaches of such representations and warranties do not have, and are
not reasonably expected to have, individually or in the aggregate, a
material adverse effect on the representing party;
- the other party has performed or complied with all of its covenants and
agreements in the merger agreement in all material respects on or prior
to the date the merger is completed;
- the absence of any event or occurrence that has or is reasonably likely
to have, individually or in the aggregate with all other events or
occurrences since the date of the merger agreement, a material adverse
effect on either party;
- the receipt by each party of a certificate from the other party stating
that certain of these enumerated conditions have been satisfied; and
- the receipt by each party of an opinion from the other party's counsel
that the merger will qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
A "material adverse effect," when used in reference to Chiles, means an
event, violation, inaccuracy, circumstance or other matter (considered together
with all other matters that would constitute exceptions to the representations
and warranties set forth in the merger agreement but for the presence of
material adverse effect or other materiality qualifications, or any similar
qualifications, in such representations and warranties) that has had or would
reasonably be expected to have a material adverse effect on (a) the business,
condition, capitalization, assets, liabilities, operations or financial
performance of Chiles and its subsidiaries taken as a whole, (b) the ability of
Chiles to consummate any of the transactions contemplated by the merger
agreement or to perform any of its obligations under the merger agreement, or
(c) ENSCO's ability to vote, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the surviving company;
provided, however, that the following shall not be deemed to constitute, create
or cause a material adverse effect:
- any changes, circumstances or effects that affect generally the drilling
services industry, and do not disproportionately affect such persons, and
that result from national, regional, state or local economic conditions,
from general developments or conditions in the industry in which Chiles
conducts business, from acts of war or terrorism, from changes in laws,
rules or regulations applicable to such party or its subsidiaries or from
other general economic conditions, facts or circumstances that are not
subject to the control of such party; or
54
- any changes, circumstances or effects that result from the transactions
contemplated by the merger agreement and public announcement thereof.
A Chiles material adverse effect will also be deemed to have occurred in
the event that prior to the effective time of the merger any of Chiles' drilling
rigs are lost (including, without limitation, as a result of any condemnation,
confiscation, requisition or other taking of title, seizure or forfeiture),
totally destroyed or damaged to such an extent that the cost of repairs and/or
reconstruction constitutes a constructive, arranged or total loss regardless of
the amount of any insurance coverage.
A "material adverse effect," when used in reference to ENSCO, means an
event, violation, inaccuracy, circumstance or other matter (considered together
with all other matters that would constitute exceptions to the representations
and warranties set forth in the merger agreement but for the presence of
material adverse effect or other materiality qualifications, or any similar
qualifications, in such representations and warranties) that has had or would
reasonably be expected to have a material adverse effect on (a) the business,
condition, capitalization, assets, liabilities, operations or financial
performance of ENSCO and its subsidiaries taken as a whole, provided that a
decline in ENSCO's stock price will not, in and of itself, be deemed to
constitute a material adverse effect, or (b) the ability of ENSCO to consummate
the transactions contemplated by the merger agreement or to perform any of its
obligations under the merger agreement.
There are no other conditions to Chiles' obligation to complete the merger
other than as set forth in this section.
CONDITIONS TO ENSCO'S OBLIGATION TO COMPLETE THE MERGER
The obligation of ENSCO to complete the merger is also subject to the
satisfaction or waiver, of the following conditions:
- the governmental and regulatory consents, approvals and authorizations
listed in the merger agreement have been obtained and must be in full
force and effect except where the failure to do so would not be
reasonably likely to have a material adverse effect;
- ENSCO has received all "affiliate agreements" from each holder of Chiles
common stock listed in the merger agreement as an "affiliate" of Chiles
under the Securities Act of 1933; and
- the number of shares with respect to which the holders of Chiles common
stock have properly demanded appraisal rights in accordance with the
DGCL, and have not withdrawn such demand as of the date the merger is
completed, has not exceeded 10% of the issued and outstanding shares of
Chiles common stock.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties of
ENSCO and Chiles relating to, among other things:
- corporate organization and good standing;
- enforceability and absence of conflicts and required filings and
consents;
- capitalization;
- SEC filings and the financial statements contained in those filings;
- absence of events or circumstances that would reasonably be expected to
have a material adverse effect;
- absence of certain changes or events since December 31, 2001;
- taxes;
- compliance with laws;
55
- governmental authorizations;
- disclosure;
- insurance;
- legal proceedings; and
- brokers and finders.
The merger agreement also contains additional representations and
warranties of Chiles with respect to, among others, the following:
- corporate books and records;
- accounts receivable;
- absence of undisclosed liabilities;
- properties;
- intellectual property;
- validity and absence of breaches of material contracts;
- insurance;
- employee benefits;
- labor relations and compliance with employment law;
- environmental, health and safety matters;
- stockholder vote required to complete the merger;
- opinion of financial advisors;
- certain business practices;
- related party transactions;
- change in control provisions;
- status of Chiles' drilling rigs; and
- financial and commodity hedging transactions.
The merger agreement also contains additional representations and
warranties of ENSCO with respect to, among others, the following:
- valid issuance;
- cash consideration; and
- no prior activities of Chore Acquisition, Inc.;
The representations and warranties contained in the merger agreement are
subject to materiality and knowledge qualifications in many respects and expire
at the completion of the merger.
CHILES SPECIAL MEETING
Chiles has agreed to call, give notice of and hold a meeting of the holders
of its common stock, as promptly as practicable after the registration statement
of which this proxy statement/prospectus forms a part is declared effective by
the SEC, to vote on a proposal to approve and adopt the merger agreement. The
Chiles board of directors unanimously agreed to recommend the approval and
adoption of the merger agreement to its stockholders.
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At any time prior to the approval and adoption of the merger agreement by
the Chiles stockholders, the Chiles board of directors may, in a manner adverse
to ENSCO, withdraw or modify its recommendation to the Chiles stockholders if:
- a proposal to acquire all of the outstanding shares of Chiles is made to
Chiles and is not withdrawn;
- Chiles provides ENSCO with at least three business days prior notice of
any meeting of the Chiles board of directors at which the board will
consider and determine whether the offer is a superior proposal;
- the Chiles board of directors determines in good faith that the offer
constitutes a superior proposal;
- the Chiles board of directors determines in good faith, after taking into
account the advice of outside legal counsel, that in light of the
superior proposal the withdrawal or modification of the recommendation to
approve and adopt the merger agreement is required in order to comply
with its fiduciary obligations to the Chiles stockholders under
applicable law; and
- none of Chiles and its subsidiaries nor any of their representatives has
violated no-solicitation provisions of the merger agreement.
Regardless of whether Chiles has received a superior proposal or an
acquisition proposal or changed its recommendation, Chiles is obligated under
the terms of the merger agreement to call, give notice of, and hold a meeting of
its stockholders to consider and vote upon the merger agreement.
CHILES IS PROHIBITED FROM SOLICITING OTHER OFFERS
Under the terms of the merger agreement, subject to specific exceptions
described below, Chiles has agreed that neither it nor any of its subsidiaries
will, and that it will not authorize or permit its and their representatives to,
directly or indirectly:
- solicit, initiate, encourage, induce or facilitate the making, submission
or announcement of, any acquisition proposal or take any action that
could reasonably be expected to lead to an acquisition proposal;
- furnish any information regarding Chiles or any of its subsidiaries in
connection with or in response to an acquisition proposal;
- engage in discussions or negotiations with any person with respect to any
acquisition proposal;
- approve, endorse or recommend any acquisition proposal; or
- enter into any letter of intent or similar document or any agreement,
commitment or understanding contemplating or otherwise relating to any
acquisition proposal.
Under the merger agreement, Chiles agreed to cease all existing discussions
as of the date of the merger agreement with any person with respect to any
acquisition proposal.
Chiles is obligated to notify ENSCO promptly, orally and in writing, upon
receipt of any acquisition proposal or any inquiry or indication of interest
that is reasonably likely to lead to an acquisition proposal that is made or
submitted by any person prior to completion of the merger. The notice must
include the terms of the acquisition proposal, inquiry or indication of interest
and the identity of the person or group making the acquisition proposal. Chiles
must keep ENSCO informed with respect to the status of any acquisition proposal,
inquiry or indication of interest.
Under the merger agreement, Chiles agreed not to release or permit the
release of any person from, or to waive or permit the waiver of any provision
of, any confidentiality or similar agreement to which Chiles or any of its
subsidiaries is a party, and to use its reasonable efforts to enforce or cause
to be enforced each such agreement at ENSCO's request.
Notwithstanding the prohibitions contained in the merger agreement, if
Chiles receives a superior proposal, prior to the approval and adoption of the
merger agreement by the Chiles stockholders, Chiles
57
may furnish information regarding Chiles or any of its subsidiaries to, or enter
into discussions or negotiations with, any person in response to such proposal
if the following conditions are satisfied, among others:
- neither Chiles, its subsidiaries nor any of their representatives has
violated the provisions regarding non-solicitation in the merger
agreement;
- the Chiles board of directors concludes in good faith, after taking into
account the advice of outside legal counsel, that such action is required
to comply with the fiduciary obligations of the board to the Chiles
stockholders under applicable law;
- within two business days after the furnishing of information to, or
entering into discussions or negotiations with, such person, ENSCO is
given written notice of the identity of the person making the acquisition
proposal and the fact that Chiles furnished information to, or entered
into discussions or negotiations with, such person; and
- Chiles receives from the person making the acquisition proposal a
confidentiality agreement containing customary limitations on the use and
disclosure of all information furnished to the person on behalf of
Chiles.
An "acquisition proposal" means any offer, proposal, inquiry or indication
of interest made by a person other than ENSCO contemplating or otherwise
relating to any "acquisition transaction."
An "acquisition transaction" means any transaction or series of
transactions involving:
- any merger, consolidation, share exchange, business combination, issuance
of securities, acquisition of securities, tender offer, exchange offer or
other similar transaction (a) in which Chiles or any of its subsidiaries
is a constituent corporation, (b) in which a person or "group" (as
defined in the Securities Exchange Act of 1934) of persons directly or
indirectly acquires beneficial or record ownership of securities
representing more than 15% of the outstanding securities of any class of
voting securities of Chiles or any of its subsidiaries, or (c) in which
Chiles or any of its subsidiaries issues or sells securities representing
more than 20% of the outstanding securities of any class of voting
securities of Chiles or any of its subsidiaries; or
- any sale (other than sales of inventory in the ordinary course of
business), lease (other than in the ordinary course of business),
exchange, transfer (other than sales of inventory in the ordinary course
of business), license (other than nonexclusive licenses in the ordinary
course of business), acquisition or disposition of any business or
businesses or assets that constitute or account for 20% or more of the
consolidated net revenues, net income or assets of Chiles and of its
subsidiaries.
A "superior proposal" means an unsolicited, bona fide written offer made by
a third party to purchase all of the outstanding Chiles common stock on terms
that the Chiles board of directors determines, in its reasonable judgment, (a)
after consultation with an independent financial advisor of nationally
recognized reputation, to be more favorable from a financial point of view to
the Chiles stockholders than the terms of the merger and (b) is reasonably
capable of being consummated; provided that any such offer shall not be deemed
to be a "superior proposal" if any financing required to consummate the
transactions contemplated by such offer is not committed and is not reasonably
capable of being obtained by such third party.
CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER
RESTRICTIONS ON OPERATIONS OF ENSCO AND CHILES AND OTHER OBLIGATIONS
ENSCO and Chiles have agreed to restrictions on their respective activities
until either the completion of the merger or the termination of the merger
agreement. In general, ENSCO and Chiles are required to conduct their businesses
and operations in the ordinary course of business and use their reasonable
efforts to preserve intact their current business organizations. In addition,
Chiles is required to (a) ensure that it and each of its subsidiaries conduct
their businesses and operations in the ordinary course of business and in
material compliance with all applicable laws and the requirements of all Chiles
58
material contracts and (b) use its reasonable efforts to ensure that each of its
subsidiaries preserve intact their current business organization and keep
available the services of the current officers and employees and maintain its
relations and goodwill with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other persons having business relationships
with Chiles or any of its subsidiaries.
Prior to completion of the merger, ENSCO and Chiles have agreed to promptly
notify the other in writing of:
- the discovery by a party of any event, condition, fact or circumstance
that occurred or existed on or prior to the date of the merger agreement
and that caused or constitutes a material inaccuracy or breach in any
representation or warranty made by that party in the merger agreement;
- any event, condition, fact or circumstance that occurs, arises or exists
after the date of the merger agreement and that causes or constitutes a
material inaccuracy or breach in any representation or warranty made by
that party in the merger agreement if:
- such representation or warranty had been made as of the time of the
occurrence, existence or discovery of such event, condition, fact or
circumstance; or
- such event, condition, fact or circumstance had occurred, arisen or
existed on or prior to the date of the merger agreement;
- any material breach of any covenant or obligation of that party (and, in
the case of Chiles, any of its subsidiaries); and
- any event, condition, fact or circumstance that would make the timely
satisfaction of any of the conditions to the obligations of the parties
to complete the merger impossible or unlikely or that has had or could
reasonably be expected to have a material adverse affect.
ADDITIONAL RESTRICTIONS ON THE OPERATIONS OF CHILES
Chiles has also agreed that, without the written consent of ENSCO, it will
and will cause its subsidiaries to:
- keep in full force and effect, without any modification or amendment or
any lapse of coverage under, all insurance policies specified in the
merger agreement;
- promptly notify ENSCO of:
- any written notice or other communication in writing from any person
alleging that the consent of such person is or may be required in
connection with the transactions contemplated by the merger agreement;
and
- any proceeding commenced or, to the best of its knowledge, threatened
against, relating to or involving or otherwise affecting Chiles or any
of its subsidiaries that relates to the consummation of the transactions
contemplated by the merger agreement;
- not enter into any contract providing for a hedging or derivative
transaction of a nature described in Financial Accounting Standards Board
Release No. 133; and
- not grant any options or restricted stock awards under Chiles' stock
option plan.
In addition, Chiles has agreed that, without the written consent of ENSCO,
between the date of the merger agreement and the effective time of the merger,
it will not and will not permit any of its subsidiaries to take any affirmative
action, or fail to take any reasonable action within its control, which action
or failure to act is reasonably likely to result in any of the following changes
or events:
- except for grants of stock options or restricted stock under the Chiles
stock option plan, (a) change in the authorized or issued shares or
membership interests, as applicable, of Chiles or any of its
subsidiaries, grant of any equity option or right to purchase shares or
membership interests, as applicable, of Chiles or any of its
subsidiaries; issuance of any security convertible into such equity;
59
(b) grant of any registration rights; purchase, redemption, retirement or
other acquisition by Chiles or any of its subsidiaries of any shares or
membership interests, as applicable, or securities or obligations
convertible into or exchangeable or exercisable for such capital stock or
membership interests; declaration or payment of any dividend or other
distribution or payment with respect to any shares or membership
interests, as applicable (other than to Chiles from its subsidiaries); or
(c) sale, pledge, disposal, encumbrance, or the authorization of the
sale, pledge, disposal or encumbrance by Chiles or any of its
subsidiaries of any shares of their capital stock of any class or any
membership interests;
- any reclassification, combination, split or division by Chiles or any of
its subsidiaries of their capital stock or membership interests;
- amendment or other modification to the charter or bylaws of Chiles or any
of its subsidiaries;
- except in the ordinary course of business, any payment or increase by
Chiles or any of its subsidiaries of any bonuses, salaries or other
compensation to any stockholder, member, director or officer, or entry
into any employment, severance or similar contract with any stockholder,
member, director, officer, employee, consultant or advisor;
- adoption of or amendment to any benefit plan or other material benefit
obligation of Chiles or any of its subsidiaries;
- damage to or destruction or loss with an aggregate value in excess of
$500,000 of any asset or property of Chiles or any of its subsidiaries,
whether or not covered by insurance (other than resulting from inaction);
- entry into, material modification, cancellation or termination of or
receipt of notice of termination of (a) any material license,
distributorship, dealer, sales representative, joint venture, credit,
guaranty or similar Chiles contract, or (b) any contract or transaction
involving a total remaining commitment by or to Chiles or any of its
subsidiaries of at least $500,000;
- mobilization of, or any agreement entered into by Chiles or any of its
subsidiaries which provides for the mobilization of, any Chiles drilling
rig to any area of the world other than such area in which such Chiles
drilling rig was located on December 31, 2001;
- contract that provides for contract drilling services entered into by
Chiles or any of its subsidiaries or any material amendment or
modification thereto;
- sale, lease or other disposition of any asset or property of Chiles or
any of its subsidiaries with an aggregate value in excess of $2,500,000,
or the creation of any material encumbrance on any material asset of
Chiles or any of its subsidiaries;
- settlement, cancellation or waiver of any claims or rights in excess of
$500,000, or which relate to any of the transactions contemplated by the
merger agreement;
- material acceleration or delay in the payment of accounts payable or in
the collection of accounts receivable;
- material change in the accounting methods, principles or practices used
by Chiles or any of its subsidiaries; or
- entry into a contract by Chiles or any of its subsidiaries to do any of
the foregoing.
ADDITIONAL RESTRICTIONS ON ENSCO'S OPERATIONS
In addition, ENSCO has also agreed that:
- without the written consent of Chiles, it will not and will not permit
any of its subsidiaries to take any affirmative action, or fail to take
any reasonable action within its control, which action or failure to act
is reasonably likely to result in any:
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- material change in the authorized or issued shares of ENSCO, other than
grants of stock options under any ENSCO option plan or ENSCO other
benefit obligation, grant of any right to purchase shares of ENSCO;
issuance of any security convertible into such equity; grant of any
registration rights; purchase, redemption, retirement or other
acquisition by ENSCO of any shares or securities or obligations
convertible into or exchangeable or exercisable for such capital stock,
except pursuant to any ENSCO plan; declaration or payment of any
dividend or other distribution or payment with respect to any shares;
other than in the ordinary course of business.
- any reclassification, combination, split or division of ENSCO common
stock;
- amendment or other modification to the governing documents of ENSCO;
- material change in the accounting methods, principles or practices used
by ENSCO; or
- contract by ENSCO to do any of the foregoing.
- it will not acquire or enter into any contract to acquire (by means of
acquisition of capital stock, assets, merger, other business combination
or otherwise) any businesses or assets, if the aggregate amount of
consideration (whether comprised of cash, securities or other property)
paid or payable by ENSCO or its subsidiaries in respect of any and all
such acquisitions would exceed, in the aggregate, $400 million (with any
ENSCO common stock issued or to be issued as consideration to be valued
based upon the closing price of ENSCO common stock on the date of the
merger agreement); and
- it will promptly notify Chiles of:
- any written notice or other communication in writing from any person
alleging that the consent of such person is or may be required in
connection with the transactions contemplated by the merger agreement;
and
- any proceeding commenced or, to the best of its knowledge, threatened
against, relating to or involving or otherwise affecting ENSCO that
relates to the consummation of the transactions contemplated by the
merger agreement.
CONSENTS; REGULATORY APPROVALS
ENSCO and Chiles have agreed to:
- use their reasonable efforts to take, or cause to be taken, all action
necessary to consummate the merger and make effective the other
transactions contemplated by the merger agreement;
- make all filings and give all notices required to be made in connection
with the merger and the transactions contemplated by the merger agreement
and submit promptly any additional information requested in connection
with such filings and notices;
- use their reasonable efforts to obtain each consent required to be
obtained pursuant to any applicable law or contract in connection with
the transactions contemplated by the merger agreement;
- use their reasonable efforts to lift any restraint, injunction or other
legal bar to the merger; and
- promptly after the date of the merger agreement prepare and file the
notifications required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and antitrust and competition laws of any other applicable
jurisdiction, and use reasonable efforts to take or cause to be taken all
other actions reasonably necessary to cause the expiration or termination
of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 as soon as practicable.
61
Notwithstanding anything to the contrary in the merger agreement, ENSCO has
no obligation under the merger agreement to:
- dispose or transfer or cause Chiles or any of its subsidiaries to dispose
of or transfer any assets, or to commit to cause Chiles or any of its
subsidiaries to dispose of any assets;
- discontinue or cause Chiles or any of its subsidiaries to discontinue
offering any product or service, or to commit to cause Chiles or any of
its subsidiaries to discontinue offering any product or service;
- hold separate or cause Chiles or any of its subsidiaries to hold separate
any assets or operations (either before or after the completion of the
merger), or to commit to cause Chiles or any of its subsidiaries to hold
separate any assets or operations;
- make or cause Chiles or any of its subsidiaries to make any commitment
(to any governmental entities or otherwise) regarding its future
operations or the future operations of Chiles or any of its subsidiaries;
or
- contest any proceeding relating to the merger if ENSCO determines in good
faith that contesting such proceeding might not be advisable.
EMPLOYEE BENEFIT MATTERS
CHILES STOCK OPTIONS
Subject to the provisions of Section 16 of the Securities Exchange Act of
1934, as of the effective time of the merger each option to purchase Chiles
common stock pursuant to the Chiles stock option plan that is then outstanding
will be assumed by ENSCO and converted into an option exercisable for the merger
consideration that would have been received in respect of Chiles common stock
subject to the Chiles stock option plan had such Chiles stock option been
exercised in full immediately prior to the effective time of the merger, such
that, immediately after the effective time of the merger, (a) a Chiles stock
option for one share of Chiles common stock shall be converted into a stock
option exercisable for the merger consideration at the exercise price in effect
immediately prior to the effective time of the merger and (b) any restriction on
the exercise of any such Chiles stock option and other provisions of such Chiles
stock option in effect at the effective time of the merger (after taking into
account any vesting that may result from the approval or consummation of the
merger) shall otherwise remain unchanged; provided that each Chiles stock option
assumed by ENSCO shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, stock dividend, reverse
stock split, reclassification, recapitalization or other similar transaction.
ENSCO has agreed to take such actions as are reasonably necessary for the
assumption of the Chiles stock option plan including the reservation, issuance
and use of reasonable efforts to provide for the listing of ENSCO common stock
as is necessary to effectuate the transactions contemplated by the merger
agreement. ENSCO shall use its reasonable efforts to prepare and file with the
SEC a registration statement on Form S-8 or other appropriate form with respect
to shares of ENSCO common stock subject to the assumed Chiles stock options and
to maintain the effectiveness of such registration statement or registration
statements covering such assumed Chiles stock options (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as the
Chiles stock options remain outstanding. With respect to those individuals, if
any, who subsequent to the effective time will be subject to the reporting
requirements under Section 16(a) of the Securities Exchange Act of 1934, where
applicable, ENSCO shall use all reasonable efforts to administer the Chiles
stock option plan in a manner that complies with Rule 16b-3 promulgated under
the Securities Exchange Act of 1934 to the extent the Chiles stock option plan
complied with such rule prior to the merger.
62
CHILES EMPLOYEES
ENSCO has agreed to provide to former employees of Chiles and its
subsidiaries under the plans continued or to be established by ENSCO
continuation group health coverage under Code Section 4980B of the Internal
Revenue Code and ERISA Section 601 et seq. for any individuals receiving such
coverage under the Chiles Offshore Health Care Benefits Plan as of the effective
time of the merger and for any employees of Chiles and its subsidiaries and
their dependents who become eligible for and elect such coverage as a result of
the transactions contemplated by the merger agreement; provided that ENSCO is
not obligated to extend this coverage beyond its normal expiration period.
ENSCO and the surviving company shall cause all of their respective
employee benefit and compensation plans (including, without limitation, pension,
profit-sharing, retirement, savings, 401(k), vacation, paid time-off, employee,
and other employee financial, welfare or other benefit plans) covering or
otherwise benefiting any of the employees of Chiles who are employed by the
surviving company on or after the effective time of the merger to count any
actual service performed for Chiles or any of its subsidiaries as recognized by
Chiles or any of its subsidiaries under the terms of the Chiles benefit plans,
without duplication of benefits, for purposes of eligibility to participate,
vesting and benefit accrual to the same extent such service was recognized under
the Chiles benefit plans. If ENSCO determines to terminate or merge the 401(k)
plan or any group insurance plan into its plans, the former Chiles employees who
are then employed by the surviving company shall be eligible to participate
immediately in the similar plans sponsored and maintained by ENSCO for its
employees and ENSCO and the surviving company shall also cause all waiting
periods under each such plan of ENSCO to be waived, to the extent necessary,
with respect to such employees.
ENSCO and the surviving company have agreed to give former Chiles employees
who are employed by the surviving company credit, for purposes of ENSCO's and
the surviving company's vacation and/or other paid leave benefit programs, for
such employees accrued and unpaid vacation and/or paid leave balance as of the
effective time of the merger.
Nothing contained in the merger agreement confers upon any former Chiles
employee who is employed by the surviving company any right to continued
employment after the effective time of the merger or prevent ENSCO or the
surviving company from reserving or exercising the right to amend, modify,
change or terminate or otherwise alter any of the provisions of, or benefits
provided under, any of the Chiles benefit plans that are assumed by ENSCO or the
surviving company.
INDEMNIFICATION AND INSURANCE
For six years from the effective time of the merger, ENSCO has agreed to
maintain for the benefit of the current directors and officers of Chiles all
rights to indemnification. These rights shall be observed by the surviving
company to the fullest extent permitted by Delaware law for a period of six
years from the effective time of the merger and ENSCO agrees to guarantee the
performance of these obligations.
From the effective time of the merger until September 18, 2006, the
surviving company shall maintain in effect, for the benefit of the current
directors and officers of Chiles with respect to acts or omissions occurring
prior to the effective time of the merger, the existing policy of directors' and
officers' liability insurance maintained by Chiles as of the date of the merger
agreement in the form disclosed by Chiles to ENSCO prior to the date of the
merger agreement; provided that (a) the surviving company may substitute for
such existing policy a policy or policies of comparable coverage and (b) the
surviving company shall not be required to pay annual premiums for such existing
policy (or for any substitute policies) in excess of $200,000 in the aggregate.
In the event any future annual premiums for such existing policy (or any
substitute policies) exceed $200,000 in the aggregate, the surviving company
shall be entitled to reduce the amount of coverage of the existing policy (or
any substitute policies) to the amount of coverage that can be obtained for
aggregate annual premiums not exceeding $200,000.
63
TERMINATION OF THE MERGER AGREEMENT
TERMINATION BY ENSCO OR CHILES
Either Chiles or ENSCO, by action of their respective boards of directors,
may terminate the merger agreement and abandon the merger at any time prior to
effective time of the merger:
- by mutual written consent of ENSCO and Chiles;
- if the merger is not completed by December 15, 2002 (unless the failure
to consummate the merger is attributable to a failure on the part of the
party seeking to terminate the merger agreement to perform any material
obligation required to be performed by such party at or prior to the
effective time of the merger);
- if a court of competent jurisdiction or other governmental body issues a
final and non-appealable order, decree or ruling, or has taken any other
action, having the effect of permanently restraining, enjoining or
otherwise prohibiting the merger; or
- if the Chiles stockholders do not approve and adopt the merger agreement
at a duly convened stockholders meeting at which the vote to approve and
adopt the merger agreement was taken (provided that Chiles may not
terminate the merger agreement for this reason unless it has paid
applicable termination fees to ENSCO).
TERMINATION BY ENSCO
ENSCO, by action of the ENSCO board of directors, may also terminate the
merger agreement and abandon the merger at any time prior to completion of the
merger:
- at any time prior to the approval and adoption of the merger agreement by
the Chiles stockholders, if a Chiles triggering event has occurred;
- if any of Chiles' representations and warranties has been inaccurate as
of the date of the merger agreement, unless such breaches do not have,
and are not reasonably likely to have, individually or in the aggregate,
a material adverse effect;
- if (a) any of Chiles' representations and warranties become inaccurate as
of a date subsequent to the date of the merger agreement (as if made on
such subsequent date), unless such breaches do not have, and are not
reasonably likely to have, individually or in the aggregate, a material
adverse effect and (b) such inaccuracy has not been cured by Chiles
within 10 business days after its receipt of written notice thereof and
remains uncured at the time notice of termination is given;
- any of Chiles' covenants contained in the merger agreement have been
materially breached; or
- if, since the date of the merger agreement, there has occurred any event
or occurrence, or series of events or occurrences, that has had or is
reasonably likely to have, individually or in the aggregate with all
other events or occurrences since the date of the merger agreement, a
material adverse effect.
A "Chiles triggering event" means (a) the failure of the Chiles board of
directors to recommend that the Chiles stockholders approve and adopt the merger
agreement, or the withdrawal or modification of the Chiles board of directors'
approval of the transactions contemplated by the merger agreement or its
recommendation that stockholders approve and adopt the merger agreement in a
manner adverse to ENSCO, (b) approval, endorsement or recommendation by the
Chiles board of directors of any acquisition proposal, or (c) commencement of a
tender or exchange offer relating to securities of Chiles and the failure of
Chiles to send to its stockholders, within 10 business days after the
commencement of such tender or exchange offer, a statement disclosing that the
Chiles board of directors recommends rejection of such tender or exchange offer.
64
TERMINATION BY CHILES
Chiles, by action of the Chiles board of directors, may also terminate the
merger agreement and abandon the merger at any time prior to completion of the
merger:
- if prior to the approval and adoption of the merger agreement by the
holders of Chiles common stock:
- the Chiles board of directors has received a superior proposal;
- in light of such superior proposal the Chiles board of directors has
determined in good faith, after consultation with its outside legal
advisors, that termination is required in order for the Chiles board of
directors to comply with its fiduciary obligations to Chiles'
stockholders under applicable law;
- Chiles has complied in all material respects the provisions regarding no
solicitation in the merger agreement;
- Chiles contemporaneously pays the applicable termination fee; and
- the Chiles board of directors concurrently approves, and Chiles
concurrently enters into, a binding definitive written agreement
providing for the implementation of such superior proposal;
provided that Chiles may not effect such termination unless and until (i)
ENSCO receives at least three business days' prior written notice from
Chiles of its intention to effect such termination; and (ii) during such
three business day period, Chiles shall, and shall cause its respective
financial and legal advisors to, consider any adjustment in the terms and
conditions of the merger agreement that ENSCO may propose;
- if any of ENSCO's representations and warranties has been inaccurate as
of the date of the merger agreement, unless such breaches do not have,
and are not reasonably likely to have, individually or in the aggregate,
a material adverse effect;
- if (a) any of ENSCO's representations and warranties become inaccurate as
of a date subsequent to the date of the merger agreement (as if made on
such subsequent date), unless such breaches do not have, and are not
reasonably likely to have, individually or in the aggregate, a material
adverse effect and (b) such inaccuracy has not been cured by ENSCO within
10 business days after its receipt of written notice thereof and remains
uncured at the time notice of termination is given;
- any of ENSCO's covenants contained in the merger agreement have been
materially breached; or
- if, since the date of the merger agreement, there has occurred any event
or occurrence, or series of events or occurrences, that has had or is
reasonably likely to have, individually or in the aggregate with all
other events or occurrences since the date of the merger agreement, a
material adverse effect on ENSCO or if to the extent that prior to the
effective time of the merger agreement any of Chiles' drilling rigs are
lost (including, without limitation, as a result of any condemnation,
confiscation, requisition or other taking of title, seizure or
forfeiture), totally destroyed or damaged to such an extent that the cost
of repairs and/or reconstruction constitutes a constructive, arranged or
total loss regardless of the amount of any insurance coverage.
TERMINATION FEE
Chiles shall pay to ENSCO, in cash at the time specified below (and less
the amounts paid for expenses as discussed below), a nonrefundable fee in an
amount equal to $22.5 million in the following events:
- if the merger agreement is terminated by ENSCO or Chiles because the
Chiles stockholders do not approve and adopt the merger and at the time
of the Chiles special meeting an acquisition proposal has been disclosed,
announced, commenced, submitted or made and such acquisition proposal is
65
consummated within 12 months of such termination of the merger agreement,
in which case the fee shall be paid by Chiles on the date of consummation
of the acquisition transaction provided such consummation occurs within
12 months from the date of termination;
- if the merger agreement is terminated by ENSCO because of the occurrence
of a Chiles triggering event, in which case the fee shall be paid by
Chiles within two business days after such termination; or
- if the merger agreement is terminated by Chiles because of its approval
and adoption of a superior proposal after the Chiles board of directors
determined in good faith after consulting with outside legal counsel that
termination was required in order to comply with its fiduciary duties and
after it complied in all material respects with the no-solicitation
provisions of the merger agreement, in which case the fee shall be paid
by Chiles contemporaneously with such termination.
If Chiles fails to pay when due any termination fee payable under the
merger agreement, then Chiles shall reimburse ENSCO for all costs and expenses
(including attorney's fees) incurred in connection with the collection of such
overdue amount and the enforcement by ENSCO of its rights under the merger
agreement.
EXPENSES
Except as set forth below, all fees and expenses incurred in connection
with the merger agreement and the transactions contemplated by the merger
agreement shall be paid by the party incurring such expenses, whether or not the
merger is consummated; provided that:
- ENSCO and Chiles shall share equally all fees and expenses, other than
attorneys' fees, incurred in connection with the filing, printing and
mailing of the registration statement on Form S-4, of which this proxy
statement/prospectus forms a part and solicitation of proxies in
connection with Chiles' special meeting, including fees and expenses
incurred in connection with the engagement of proxy solicitors; and
- if the merger agreement is terminated by ENSCO or Chiles because the
Chiles stockholders do not approve and adopt the merger agreement
(without limiting any obligation of Chiles to pay any termination fee),
Chiles shall make a nonrefundable cash payment to ENSCO, at the time
specified below, in an amount equal to the aggregate amount of all fees
and expenses (including all attorneys' fees, accountants' fees and filing
fees) that have been paid or that may become payable by or on behalf of
ENSCO in connection with the preparation and negotiation of the merger
agreement and otherwise in connection with the merger or any other
transaction contemplated by the merger agreement; provided, in no event
will the amount of such payment for fees and expenses exceed $1,000,000.
In the case of termination of the merger agreement by Chiles because the
Chiles stockholders do not approve and adopt the merger agreement, any
nonrefundable payment for expenses shall be paid by Chiles contemporaneously
with such termination. In the case of termination of the merger agreement by
ENSCO because the Chiles stockholders do not approve and adopt the merger
agreement, any nonrefundable payment for expenses shall be paid by Chiles within
two business days after such termination.
AMENDMENTS, EXTENSIONS AND WAIVERS
AMENDMENTS
The merger agreement may be amended by action of the ENSCO board of
directors, the Chore Acquisition, Inc. board of directors and the Chiles board
of directors at any time prior to the effective time of the merger. However,
after approval and adoption of the merger agreement by the Chiles stockholders,
no amendment which, by law, requires approval by the Chiles stockholders may be
made without further stockholder approval. All amendments to the merger
agreement must be in writing and signed by each party.
66
EXTENSIONS AND WAIVERS
To the maximum extent permitted by applicable law, (a) no claim or right
arising out of the merger agreement or any of the documents referred to in the
merger agreement can be discharged by one party, in whole or in part, by a
waiver or renunciation of the claim or right unless in a written document signed
by the other party, (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of that party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in the merger agreement or
the documents referred to in the merger agreement.
67
VOTING AGREEMENTS
The following summary describes certain material provisions of the voting
agreements, which are included in this proxy statement/prospectus as Annexes B,
C, D and E and incorporated by reference into this proxy statement/prospectus.
This summary may not contain all of the information about the voting agreements
that is important to you. We encourage you to read the voting agreements
carefully in their entirety.
GENERAL
Concurrently with the execution and delivery of the merger agreement, ENSCO
entered into separate voting agreements with each of Luis Alvarez Morphy, Javier
Alvarez Morphy, Patricio Alvarez Morphy (collectively, the "Morphy
Stockholders") and SEACOR. As of the record date for the Chiles special meeting,
these persons beneficially owned, in aggregate, 7,511,071 shares of Chiles
common stock, representing approximately 37.0% of the outstanding shares of
Chiles common stock on that date. The four voting agreements are in
substantially the same terms, except for the provisions regarding related party
agreements, as discussed below.
Under the voting agreements, the Morphy Stockholders and SEACOR have agreed
to vote all shares of Chiles common stock owned by them:
- in favor of approval and adoption of the merger agreement and the related
transactions; and
- against any action, agreement, transaction or acquisition proposal that
would result in a breach of any covenant, representation or warranty or
any other obligation or agreement of Chiles contained in the merger
agreement or (or of any of the Morphy Stockholders or SEACOR contained in
the voting agreements) that might hinder, delay, impede or frustrate the
merger or the related transactions.
The Morphy Stockholders and SEACOR have also agreed not to enter into any
contract or understanding in any manner inconsistent with the foregoing.
IRREVOCABLE PROXY
In the voting agreements, the Morphy Stockholders and SEACOR have also
granted Carl F. Thorne and C. Christopher Gaut, as representatives of ENSCO, an
irrevocable proxy to vote their shares of Chiles common stock on the matters set
forth above in such manner as ENSCO shall, in its absolute discretion, deem
proper.
REPRESENTATIONS AND WARRANTIES
The voting agreements contain customary representations, warranties and
covenants given by the Morphy Stockholders and SEACOR and by ENSCO relating to,
among other things, ownership of the shares of common stock that are the subject
of the agreements and authority to contract.
NO SOLICITATION
Each of the Morphy Stockholders and SEACOR has also agreed that it will
not:
- solicit, initiate, encourage, induce or facilitate the making, submission
or announcement of any acquisition proposal or take any action that could
reasonably be expected to lead to an acquisition proposal;
- furnish any information regarding Chiles or any of its subsidiaries to
any person in connection with or in response to an acquisition proposal
or an inquiry or indication of interest that could reasonably be expected
to lead to an acquisition proposal;
- engage in discussions or negotiations with any person with respect to any
acquisition proposal;
68
- approve, endorse or recommend any acquisition proposal; or
- enter into any letter of intent or similar document or any contract
contemplating or otherwise relating to any acquisition transaction
involving Chiles.
Each of the Morphy Stockholders and SEACOR has also agreed that it will:
- immediately cease and cause to be terminated any existing solicitation
and related discussion or negotiation with respect to any acquisition
proposal; and
- not enter into any contract that provides for or could reasonably be
expected to materially facilitate an acquisition proposal.
The voting agreements do not limit or restrict any of the Morphy
Stockholders or SEACOR or any of its representatives (a) who is a member of the
board of directors of Chiles from exercising his fiduciary duties to Chiles by
voting or taking any other action whatsoever in his capacity as a director or
(b) who is an officer or employee of Chiles from taking any action whatsoever in
such capacity.
RESTRICTIONS ON TRANSFER
The voting agreements prohibit the Morphy Stockholders and SEACOR from
subjecting any of their shares of Chiles common stock to any encumbrances other
than pursuant to the voting agreements or from selling, transferring, conveying
or otherwise disposing of any interest in or title to any of such shares
(including any such action by operation of law), other than a disposition by
operation of law pursuant to the merger.
RELATED PARTY AGREEMENTS
The respective voting agreements entered into by each of the Morphy
Stockholders each include, among other things, a representation that neither he
nor any of his affiliates is a party to any contract or understanding with
Chiles or any of its subsidiaries other than the agreement with respect to
ownership of Tonala, dated July 20, 2000, among Chiles, each of those three
Stockholders, certain of Chiles' affiliates, and the other parties named in such
agreement. In their respective voting agreements, each of the Morphy
Stockholders has consented to the assignment of the Tonala agreement by Chiles
to ENSCO as a result of the merger pursuant to the terms of the Tonala
agreement.
In its voting agreement, SEACOR represents that neither it nor any of its
affiliates is a party to any contract or understanding with Chiles or any of its
subsidiaries other than (a) a commission agreement, dated April 1, 2000, among
Bassoe, SEACOR and Chiles, and (b) an amended and restated management and
administrative services agreement, dated July 18, 2000, by and between SEACOR
and Chiles. SEACOR and Chiles have agreed that both the commission agreement and
the amended and restated management and administrative services agreement will
terminate in their entirety at the effective time of the merger, and neither
Chiles nor any of its subsidiaries will incur any further liability or
obligation to SEACOR under such agreements after the completion of the merger.
ENSCO has further agreed to pay SEACOR an amount equal to $1,000,000 within 60
days after delivery to Chiles of the new drilling rig currently being
constructed pursuant to the Commission Agreement. (See "The Merger -- Interests
of Certain Persons; Possible Conflicts of Interest of Certain Persons in the
Merger" on page 46.)
TERMINATION OF THE VOTING AGREEMENTS
Each of the voting agreements terminates upon the earliest to occur of:
- the completion of the merger;
- the termination of the merger agreement for any reason; and
- written notice by ENSCO to applicable Morphy Stockholder or SEACOR of
termination of its respective voting agreement.
69
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
SOURCES OF INFORMATION
ENSCO and Chiles are providing the following unaudited condensed pro forma
combined financial statements to help you in your analysis of the financial
aspects of the merger of the two companies. The unaudited condensed pro forma
combined financial statements are based upon the historical financial
information of ENSCO and Chiles and should be read in conjunction with the
historical consolidated financial statements and notes thereto of ENSCO and
Chiles incorporated by reference in this joint proxy statement/prospectus. See
"Where You Can Find More Information" on page 89.
HOW WE PREPARED THE UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited condensed pro forma combined balance sheet has been
prepared as if the merger had occurred on March 31, 2002. The unaudited
condensed pro forma combined statements of operations for the year ended
December 31, 2001 and the three months ended March 31, 2002 have been prepared
as if the merger had occurred on January 1, 2001.
If ENSCO and Chiles had merged on the dates assumed in the pro forma
financial statements, the combined operations of ENSCO and Chiles might have
performed differently. You should not rely on the pro forma financial
information as an indication of the financial position or results of operations
that ENSCO and Chiles would have achieved together had the merger taken place at
an earlier date or of the future results that the combined operations of ENSCO
and Chiles will achieve after the merger.
The merger will be accounted for as a purchase business combination in
accordance with generally accepted accounting principles in the United States,
with ENSCO treated as the acquirer. Accordingly, the assets and liabilities of
ENSCO are recorded at historical amounts, without restatement to fair values.
The assets and liabilities of Chiles will be revalued to estimated fair value at
the date of the merger, with the excess of the purchase price over the sum of
such fair values recorded as goodwill. The estimated fair values are preliminary
and subject to change.
The $567.9 million purchase price is calculated using the number of ENSCO
common shares expected to be issued in the merger (determined as the number of
Chiles common shares expected to be outstanding immediately prior to the merger
multiplied by the merger ratio of 0.6575) and a $33.65 per share average trading
price of ENSCO common stock for a period of time immediately before and after
the merger was announced, plus cash consideration of $5.25 per share of Chiles
common stock outstanding immediately prior to the merger, estimated direct
merger fees and expenses and the estimated fair value of Chiles employee stock
options.
The $567.9 million purchase price has been allocated based upon preliminary
estimates of the fair value of Chiles assets and liabilities and is subject to
change. The final purchase price allocation may differ from these estimates.
TRANSACTION-RELATED EXPENSES
ENSCO estimates that it will incur fees and expenses totaling approximately
$400,000 in connection with the merger. Chiles estimates that it will incur fees
and expenses totaling approximately $4 million in connection with the merger.
All of such costs have been reflected in the accompanying unaudited pro forma
combined balance sheet. After the merger, ENSCO will incur certain additional
charges and expenses relating to restructuring and integrating the operations of
ENSCO and Chiles. The pro forma financial information has not been adjusted for
these additional charges and expenses or for the estimated general and
administrative or other cost savings that may be realized as a result of the
merger.
70
ENSCO
UNAUDITED CONDENSED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 2002
HISTORICAL PRO FORMA
----------------- ------------------------
ENSCO CHILES ADJUSTMENTS COMBINED
-------- ------ ----------- --------
(IN MILLIONS)
Cash and cash equivalents.......................... $ 318.8 $ 21.7 $(106.5)(1a) $ 234.0
Accounts receivable................................ 108.0 11.3 -- 119.3
Other current assets............................... 53.2 5.7 -- 58.9
-------- ------ ------- --------
Total current assets............................. 480.0 38.7 (106.5) 412.2
Property and equipment, net........................ 1,716.6 495.2 20.8 (1b) 2,232.6
Goodwill........................................... 103.8 -- 232.1 (1c) 335.9
Other assets....................................... 42.0 10.8 (2.8)(1d) 50.0
-------- ------ ------- --------
Total assets..................................... $2,342.4 $544.7 $ 143.6 $3,030.7
======== ====== ======= ========
Current liabilities................................ $ 146.2 $ 30.0 $ 11.3 (1e) $ 187.5
Long-term debt..................................... 462.4 134.6 -- 597.0
Deferred income taxes.............................. 263.9 40.4 4.4 (1f) 308.7
Other liabilities.................................. 13.6 9.9 (2.8)(1d) 20.7
Stockholders' equity............................... 1,456.3 329.8 130.7 (1g) 1,916.8
-------- ------ ------- --------
Total liabilities and stockholders' equity....... $2,342.4 $544.7 $ 143.6 $3,030.7
======== ====== ======= ========
See Notes to Unaudited Condensed Pro Forma Combined Financial Statements.
71
ENSCO
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002
HISTORICAL PRO FORMA
---------------- ------------------------
ENSCO CHILES ADJUSTMENTS COMBINED
------- ------ ----------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Operating revenues................................... $ 142.3 $19.8 $(0.3)(2a) $161.8
Operating expenses
Operating costs.................................... 88.3 8.6 (0.3)(2a) 96.6
Depreciation and amortization...................... 28.5 3.1 (0.4)(2b) 31.2
General and administrative......................... 4.4 1.4 -- 5.8
------- ----- ----- ------
121.2 13.1 (0.7) 133.6
------- ----- ----- ------
Operating income..................................... 21.1 6.7 0.4 28.2
Other income, net.................................... 1.9 0.1 (0.8)(2c) 1.2
------- ----- ----- ------
Income before income taxes........................... 23.0 6.8 (0.4) 29.4
Provision for income taxes........................... 6.8 2.4 (0.1)(2d) 9.1
------- ----- ----- ------
Income before extraordinary item*.................... $ 16.2 $ 4.4 $(0.3) $ 20.3
======= ===== ===== ======
Earnings per share, before extraordinary item:*
Basic.............................................. $ 0.12 $0.22 $ 0.14
Diluted............................................ 0.12 0.22 0.14
Weighted average common shares outstanding:
Basic.............................................. 134.7 20.3 (7.0)(3) 148.0
Diluted............................................ 135.4 20.3 (6.5)(4) 149.2
---------------
* In the three months ended March 31, 2002, Chiles recorded a $300,000
extraordinary charge, net of tax, associated with unamortized debt issuance
costs and a cancellation fee relating to a cancelled credit facility. The
$300,000 extraordinary charge has not been reflected above in the Unaudited
Condensed Pro Forma Combined Statement of Operations for the three months
ended March 31, 2002.
See Notes to Unaudited Condensed Pro Forma Combined Financial Statements.
72
ENSCO
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
HISTORICAL PRO FORMA
---------------- ----------------------
ENSCO CHILES ADJUSTMENTS COMBINED
------- ------ ----------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Operating revenues..................................... $ 817.4 $74.2 $ 3.0(2a) $894.6
Operating expenses
Operating costs...................................... 358.9 30.5 3.0(2a) 392.4
Depreciation and amortization........................ 124.4 9.0 (4.5)(2b) 128.9
General and administrative........................... 16.8 5.0 -- 21.8
------- ----- ----- ------
500.1 44.5 (1.5) 543.1
------- ----- ----- ------
Operating income....................................... 317.3 29.7 4.5 351.5
Other income (expense), net............................ (25.4) 4.4 (3.2)(2c) (24.2)
------- ----- ----- ------
Income before income taxes............................. 291.9 34.1 1.3 327.3
Provision for income taxes............................. 84.6 11.6 0.5(2d) 96.7
------- ----- ----- ------
Net income............................................. $ 207.3 $22.5 $ 0.8 $230.6
======= ===== ===== ======
Earnings per share:
Basic................................................ $ 1.51 $1.20 $ 1.54
Diluted.............................................. 1.50 1.20 1.52
Weighted average common shares outstanding:
Basic................................................ 136.9 18.8 (5.5)(3) 150.2
Diluted.............................................. 137.9 18.9 (5.1)(4) 151.7
See Notes to Unaudited Condensed Pro Forma Combined Financial Statements.
73
ENSCO
NOTES TO UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
(1) A summary of the unaudited condensed pro forma combined balance sheet
adjustments to effect the merger is as follows:
(a) Cash and cash equivalents -- Represents the adjustment needed to
recognize the cash portion of the purchase price due to the stockholders of
Chiles at the date of merger.
(b) Property and equipment -- Represents the adjustment needed to
record Chiles property and equipment at estimated fair value at the date of
the merger.
(c) Goodwill -- The merger will be accounted for as a purchase
business combination in accordance with accounting principles generally
accepted in the United States, with ENSCO treated as the acquirer.
Accordingly, the assets and liabilities of ENSCO are recorded at historical
amounts, without restatement to fair values. The assets and liabilities of
Chiles will be revalued to estimated fair value at the date of the merger,
with the excess of the purchase price over the sum of such fair values
recorded as goodwill. The $567.9 million purchase price is calculated using
the number of ENSCO common shares expected to be issued in the merger
(determined as the number of Chiles common shares expected to be
outstanding immediately prior to the merger multiplied by the merger ratio
of 0.6575) and a $33.65 per share average trading price of ENSCO common
stock for a period of time immediately before and after the merger was
announced, plus cash consideration of $5.25 per share of Chiles common
stock outstanding immediately prior to the merger, estimated direct merger
fees and expenses and the estimated fair value of Chiles employee stock
options. The recording of goodwill is supported by the nature of the
offshore drilling industry, the acquisition of long-lived drilling
equipment, and the assembled workforce of Chiles.
(d) Other assets and other liabilities -- Represents the
reclassification of Chiles deferred mobilization costs to conform with
ENSCO's accounting policy.
(e) Current liabilities -- A reconciliation of the pro forma
adjustments to current liabilities is as follows (in millions):
Fees and expenses payable associated with the merger........ $ 4.4
Costs directly related to the issuance of ENSCO common stock
at date of merger......................................... 0.5
Other merger costs, primarily Chiles employee severance
benefits and amounts due related to terminated
agreements................................................ 6.4
-----
Total pro forma adjustments to current liabilities.......... $11.3
=====
(f) Deferred income taxes -- Represents the adjustment to deferred tax
liabilities, calculated at a statutory rate of 35%, for the net effect of
the pro forma adjustments.
(g) Stockholders' equity -- Represents the difference between the
non-cash portion of the purchase price and the book value of the net assets
of Chiles at the pro forma balance sheet date, less $500,000 of estimated
costs related to the issuance of ENSCO common shares.
74
ENSCO
NOTES TO UNAUDITED CONDENSED PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The purchase price will be allocated based on the estimated fair
values of Chiles assets and liabilities at the date of the merger. For
purposes of the unaudited condensed pro forma combined financial
statements, the purchase price has been allocated as follows (in millions):
Historical net book value of Chiles......................... $329.8
Fair value adjustment of property and equipment............. 20.8
Fees and expenses payable associated with the merger........ (4.0)
Other merger costs, primarily Chiles employee severance
benefits and amounts due related to terminated
agreements................................................ (6.4)
Deferred income tax effect of pro forma adjustments......... (4.4)
Goodwill.................................................... 232.1
------
Total purchase price........................................ $567.9
======
The $567.9 million purchase price has been allocated based upon
preliminary estimates of the fair value of Chiles assets and liabilities
and is subject to change. The final purchase price allocation may differ
from these estimates.
(2) A summary of the unaudited condensed pro forma combined statement of
operations adjustments to effect the merger is as follows:
(a) Operating revenues and operating costs -- Represents adjustment to
Chiles mobilization revenue and costs to conform to ENSCO's accounting
policy.
(b) Depreciation and amortization -- A reconciliation of the pro forma
adjustments to depreciation and amortization is as follows (in millions):
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 2002 DECEMBER 31, 2001
------------------ -----------------
Adjustment to depreciation resulting
from the adjustment to fair value
of Chiles property and equipment
and conforming depreciable lives
and salvage values to ENSCO's
accounting policy................. $(0.4) $(1.5)
Adjustment to eliminate goodwill
amortization recognized by
ENSCO............................. -- (3.0)
----- -----
$(0.4) $(4.5)
===== =====
(c) Other income (expense), net -- Represents the reduction of
estimated interest income recognized on the cash portion of the
consideration to be paid to Chiles common stockholders at the date of the
merger.
(d) Provision for income taxes -- Represents the incremental tax
effect, calculated at a statutory rate of 35%, related to the pro forma
adjustments.
(3) The adjustment to pro forma basic weighted average shares outstanding
represents the total estimated ENSCO shares expected to be issued to Chiles
common stockholders at the date of merger.
(4) The adjustment to pro forma diluted weighted average shares outstanding
represents the total estimated ENSCO shares expected to be issued to Chiles
common stockholders at the date of merger and the estimated dilutive effect of
Chiles employee stock options.
75
DESCRIPTION OF ENSCO CAPITAL STOCK
The following is a summary of the material terms of ENSCO's capital stock.
Because the following is only a summary, it does not contain all the information
that may be important to you. Accordingly, you should read carefully the more
detailed provisions of the amended and restated certificate of incorporation of
ENSCO, the bylaws of ENSCO, as amended, and the Rights Agreement dated February
21, 1995 between ENSCO and American Stock Transfer and Trust Company, as amended
on March 3, 1997, each of which has been filed with the SEC, as well as the DGCL
and the section entitled "Comparison of Stockholder Rights and Corporate
Governance Matters" on page 78.
GENERAL
As of the date of this proxy statement/prospectus, ENSCO's authorized
capital stock consists of:
- 250,000,000 shares of common stock, par value $0.10 per share;
- 5,000,000 shares of First Preferred Stock, par value $1.00 per share; and
- 15,000,000 shares of Serial Preferred Stock, par value $1.00 per share,
of which 1,250,000 have been designated as Series A Junior Participating
Preferred Stock.
As of the record date for the Chiles special meeting, shares of
ENSCO common stock were issued and outstanding. No shares of ENSCO First
Preferred Stock or Serial Preferred Stock were issued and outstanding.
COMMON STOCK
Holders of ENSCO common stock are entitled to one vote for each share held
of record on all matters submitted to a vote of holders of ENSCO common stock.
Subject to preferences that may be applicable to any outstanding preferred
stock, holders of ENSCO common stock are entitled to dividends as may be
declared from time to time by the ENSCO board of directors out of funds legally
available for that purpose. Holders of ENSCO common stock have no preemptive,
redemption, conversion or sinking fund rights. Subject to preferences that may
be applicable to any preferred stock, the holders of ENSCO common stock are
entitled to share equally and ratably in the assets of ENSCO, if any, remaining
after the payment of all debts and liabilities of ENSCO upon a liquidation,
dissolution or winding up of ENSCO. All issued and outstanding shares of ENSCO
common stock are validly issued, fully paid and nonassessable. The shares of
ENSCO common stock trade on the New York Stock Exchange under the symbol "ESV."
There is a preferred share purchase right associated with each share of
ENSCO common stock, and the preferred share purchase rights trade with the
common stock on the New York Stock Exchange. A description of the preferred
share purchase rights is incorporated by reference into this proxy
statement/prospectus. See "Where You Can Find More Information" on page 89.
PREFERRED STOCK
FIRST PREFERRED STOCK
The ENSCO board of directors is authorized to determine the dividend
rights, dividend rate, conversion rights, voting rights, rights and terms of
redemption, liquidation preferences and sinking fund terms on any series of
First Preferred Stock, the number of shares constituting any series of First
Preferred Stock, and the designation of any series of First Preferred Stock.
Dividends on outstanding shares of First Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the shares of common stock or any
subordinate and inferior series of Serial Preferred Stock with respect to the
same dividend period.
76
Upon a liquidation, dissolution or winding up of ENSCO, if the assets
available for distribution to holders of shares of First Preferred Stock of all
series shall be insufficient to pay such holders the full preferential amount to
which they are entitled, such assets shall be distributed ratably among the
shares of all series of First Preferred Stock in accordance with the respective
preferential amounts (including unpaid cumulative dividends, if any) payable
with respect thereto.
Shares of First Preferred Stock which have been redeemed or converted, or
which have been issued and reacquired in any manner and retired, shall have the
status of authorized and unissued First Preferred Stock and may be reissued by
the ENSCO board of directors as shares of the same or any other series, unless
otherwise provided with respect to any series in the resolution or resolutions
of the ENSCO board of directors creating such series.
SERIAL PREFERRED STOCK
Dividends on outstanding shares of Serial Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the shares of common stock with respect to
the same dividend period.
Shares of Serial Preferred Stock which have been redeemed or converted, or
which have been issued and reacquired in any manner and retired, shall have the
status of authorized and unissued Serial Preferred Stock and may be reissued by
the ENSCO board of directors as shares of the same or any other series, unless
otherwise provided with respect to any series in the resolution or resolutions
of the ENSCO board of directors creating such series.
The number of authorized shares of Serial Preferred Stock may be increased
or decreased (but not below the number of shares then outstanding) by the
affirmative vote of the holders of a majority of the stock of the corporation
entitled to vote. Notwithstanding the above, the ENSCO board of directors may
grant powers, preferences and rights to any series of Serial Preferred Stock
which are on a parity with, or senior to, the powers, preferences and rights of
any series of First Preferred Stock, or the class of First Preferred Stock,
provided, that such series or class of First Preferred Stock shall have approved
such powers, preferences and rights by the vote specified in the terms and
provisions of such series of First Preferred Stock, or, if no such vote is
specified, by the vote of such series or class required by applicable law, if
any.
In connection with ENSCO's rights agreement, the ENSCO board of directors
has designated 1,250,000 shares of Serial Preferred Stock as "Series A Junior
Participating Preferred Stock." See "Comparison of Stockholder Rights and
Corporate Governance Matters -- Stockholder Rights Plan" on page 84.
EXCHANGE AGENT
The exchange agent of the ENSCO common stock is American Stock Transfer and
Trust Company.
77
COMPARISON OF STOCKHOLDER RIGHTS AND CORPORATE GOVERNANCE MATTERS
ENSCO and Chiles are both incorporated under the laws of the State of
Delaware. Before the completion of the merger, the rights of holders of Chiles
common stock are governed by the DGCL, the certificate of incorporation of
Chiles and the bylaws of Chiles. After the completion of the merger, Chiles
stockholders will become stockholders of ENSCO, and their rights will be
governed by the amended and restated certificate of incorporation of ENSCO, the
bylaws of ENSCO, as amended, the Rights Agreement dated February 21, 1995
between ENSCO and American Stock Transfer and Trust Company, as amended on March
3, 1997, and the DGCL. We use the terms "charter" and "bylaws" in this summary
to describe the respective incorporation documents of ENSCO and Chiles
referenced above for ease of comparison.
While there are substantial similarities between the charters and bylaws of
ENSCO and Chiles, a number of differences do exist and we have not included a
discussion of all the similarities between the rights of ENSCO stockholders and
the rights of Chiles stockholders. The following is only a summary of the
material differences between the rights of ENSCO stockholders and the rights of
Chiles stockholders. While we believe that this summary covers the material
differences between the two, this summary may not contain all of the information
that is important to you. It should also be read in conjunction with
"Description of ENSCO Capital Stock." This summary is not intended to be a
complete discussion of the respective rights of ENSCO and Chiles stockholders
and it is qualified in its entirety by reference to the DGCL and the various
documents of ENSCO and Chiles we refer to in this summary. You should carefully
read this entire proxy statement/prospectus and the other documents we refer to
in this proxy statement/prospectus for a more complete understanding of the
differences between being a stockholder of ENSCO and being a stockholder of
Chiles. ENSCO and Chiles have filed with the SEC their respective documents
referred to in this summary and will send copies of these documents to you upon
your request. See "Where You Can Find More Information" on page 89.
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CHILES ENSCO
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AUTHORIZED CAPITAL The authorized capital stock of The authorized capital stock of
STOCK Chiles consists of: ENSCO consists of:
(a) 100,000,000 shares of common (a) 250,000,000 shares of common
stock, par value $.01 per share; and stock, $.10 par value per share;
(b) 10,000,000 shares of preferred (b) 5,000,000 shares of First
stock, par value $.01 per share, of Preferred Stock, par value $1.00 per
which no shares are issued and share; and
outstanding.
(c) 15,000,000 shares of Serial
All shares of Chiles common stock Preferred Stock, par value $1.00 per
are identical and have one vote per share, of which 1,250,000 have been
share. designated as Series A Junior
Participating Preferred Stock.
No shares of First Preferred Stock
or Serial Preferred Stock are
currently issued and outstanding.
All shares of ENSCO common stock are
identical and have one vote per
share, but see "-- Restrictions on
Ownership by Non-U.S. Citizens."
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NUMBER OF The Chiles bylaws provide that the The ENSCO charter and bylaws provide
DIRECTORS number of directors constituting the for a variable number of directors
entire board of directors will be between three and fifteen. The
seven, or such larger number as may number of directors may be fixed
be fixed from time to time by the within the foregoing limits from
action of the majority of the entire time to time by resolution of the
board of directors. board of directors.
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78
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CHILES ENSCO
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CUMULATIVE VOTING The Chiles charter does not provide The ENSCO charter does not provide
for cumulative voting. for cumulative voting.
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CLASSIFICATION OF A classified board is one in which a Except for directors elected
BOARD OF DIRECTORS certain number of the directors pursuant to the special voting
(each such group comprising a rights of any class or series of
"class") are elected on a rotating preferred stock or indebtedness then
basis each year. This method of outstanding, the ENSCO charter and
electing directors makes changes in bylaws divide the ENSCO board of
the composition of the board of directors, with respect to the time
directors, and thus a potential for which they severally hold
change in control of a corporation, office, into three classes, as
a lengthier and more difficult nearly equal in number as possible.
process. If the number of directors is
changed, any increase or decrease
Chiles does not have a classified will be apportioned among the
board of directors. classes so as to maintain each class
as nearly equal as possible.
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REMOVAL OF DIRECTORS The Chiles bylaws provide for the The ENSCO charter and bylaws provide
removal of any or all directors, that any or all of the directors may
with or without cause, by the be removed at anytime, but only with
affirmative vote of a majority in cause and only by the affirmative
voting power of the outstanding vote of the holders of a majority of
shares entitled to vote for the the outstanding shares of ENSCO
election of directors, subject to entitled to vote in the election of
the rights of preferred stock directors, voting together as a
holders or holders of any other single class, subject to the rights,
class of capital stock of Chiles if any, of the holders of any then
(other than the common stock) then outstanding class or series of
outstanding. preferred stock or indebtedness of
the corporation with special rights
to elect directors.
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VACANCIES ON THE BOARD The Chiles bylaws provide that The ENSCO charter and bylaws are
OF DIRECTORS vacancies on the board of directors substantially similar to Chiles
may be filled only by the bylaws except that a director so
affirmative vote of a majority of elected to fill a vacancy will serve
the remaining directors, although for the remainder of the then
less than a quorum, or by a sole present term of office of the class
remaining director, and directors so to which he was elected.
chosen will hold office until their
successors are elected and
qualified.
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STOCKHOLDER ACTION BY The Chiles charter provides that The ENSCO charter and bylaws provide
WRITTEN CONSENT actions without a meeting may be that any action required or
taken only if a consent or consents permitted to be taken by the
in writing, setting forth the action stockholders of the corporation may
so taken, are signed by the holders be taken by unanimous written
of not less than 66 2/3% (or such consent of stockholders, and
greater percentage as may then be stockholders may not otherwise act
required by applicable law) in by written consent.
voting power of the outstanding
shares of common stock entitled to
vote upon the action.
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79
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CHILES ENSCO
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AMENDMENT OF As provided under Delaware law, the Similarly, the provisions of the
CERTIFICATE OF Chiles charter may be amended only ENSCO charter follow Delaware law in
INCORPORATION if the proposed amendment is this respect.
approved by the board of directors
and thereafter approved by holders
of a majority of the outstanding
stock entitled to vote thereon.
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AMENDMENT OF BYLAWS The Chiles charter and bylaws The ENSCO charter and bylaws grant
provide that the Chiles bylaws may the power to alter, amend or repeal
be adopted, amended or repealed by a the ENSCO bylaws and to adopt new
majority of the board of directors, bylaws to the board of directors,
but any bylaws adopted by the board subject, however, to repeal or
of directors may be amended or change by the affirmative vote of
repealed at any meeting of the the holders of at least 66 2/3% of
stockholders at which a quorum is the outstanding shares entitled to
present or represented by the vote thereon.
affirmative vote of the holders of a
majority in voting power of the
outstanding capital stock entitled
to vote at such meeting.
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SPECIAL MEETING OF The Chiles bylaws provide that The ENSCO charter and bylaws provide
STOCKHOLDERS special meetings of stockholders for that the board of directors, the
the transaction of such business as chairman of the board of directors
may properly come before the meeting or the president may call for
may only be called by order of a special meetings of the stockholders
majority of the entire board of for any purpose at any time.
directors, the chairman of the board
of directors or by the president.
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NOTICE OF STOCKHOLDER In accordance with Delaware law, the Similarly and in accordance with
MEETINGS Chiles bylaws provide that written Delaware law, the ENSCO bylaws
notice of all meetings of the provide that written notice of the
stockholders must be mailed or annual meeting stating the place,
delivered to each stockholder not date and hour of the meeting must be
less than 10 nor more than 60 days given to each stockholder entitled
prior to the meeting. Notice of any to vote at such meeting not less
special meeting must state with than 10 nor more than 60 days before
reasonable specificity the purpose the date of the meeting. Written
or purposes for which the meeting is notice of a special meeting stating
to be held and the business proposed the place, date and hour of the
to be transacted at the meeting. meeting and the purpose or purposes
for which the meeting is called,
must be given not less than 10 nor
more than 60 days before the date of
the meeting, to each stockholder
entitled to vote at such meeting.
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80
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CHILES ENSCO
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DELIVERY AND NOTICE The Chiles bylaws provide that in The ENSCO bylaws provide that in
REQUIREMENTS OF order for a stockholder to make a order for a stockholder to make a
STOCKHOLDER nomination for the election of nomination for the election of
NOMINATIONS AND directors or propose business at a directors or propose business at an
PROPOSALS meeting of the stockholders, the annual meeting of the stockholders,
secretary of the corporation must the secretary of the corporation
receive written notice of nomination must receive written notice of
or proposed business: (a) with nomination or proposed business not
respect to an election to be held at less than 50 days nor more than 75
the annual meeting of stockholders days prior to the meeting; provided,
or other proposed business, not less however, that in the event that less
than 90 calendar days prior to the than 65 days notice or prior public
anniversary date of the last annual disclosure of the date of the
meeting; and (b) with respect to an meeting is given or made to
election to be held at a special stockholders, notice by the
meeting of stockholders, not later stockholder to be timely must be
than the close of business on the received not later than the close of
fifth calendar day following the business on the 15th day following
date notice of such meeting is first the day on which such notice of the
delivered to stockholders. date of the meeting was mailed or
such public disclosure was made,
The stockholder's written notice of whichever first occurs. A
nomination must set forth (a) the stockholder's notice must set forth
name and address of the stockholder as to each matter the stockholder
and of the person to be nominated, proposes to bring before the meeting
(b) a representation that the (a) a brief description of the
stockholder is a stockholder of business desired to be brought
record of capital stock of Chiles before the meeting and the reasons
and intends to appear in person or for conducting such business at the
by proxy at the meeting, (c) a meeting, (b) the name and record
description of all contracts or address of the stockholder proposing
understandings between the such business, (c) the number of
stockholder and each nominee, (d) shares of ENSCO which are
such other information regarding beneficially owned by the
each nominee as would be required to stockholder, and (d) any material
be included in a proxy or interest of the stockholder in such
information statement filed pursuant business.
to the Securities Exchange Act of
1934, and (e) the consent of each
nominee to serve as a director of
Chiles if so elected. The presiding
officer of the meeting may refuse to
acknowledge the nomination of any
person not made in compliance with
these procedures.
With respect to proposing business
at an annual meeting, in the event
that the date of the annual meeting
is advanced by more than 20 days, or
delayed by more than 60 days, from
such anniversary date, then, notice
by the stockholders must be received
not later than the close of business
on the later of (a) the 90th day
prior to such annual meeting or (b)
the seventh day following the date
on which notice of the date of the
annual meeting was mailed to
stockholders.
81
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CHILES ENSCO
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As to each matter the stockholder
proposes to bring before the annual
meeting, the stockholder's notice
must set forth (a) a brief
description of the business desired
to be transacted, (b) the name and
address of the stockholder, (c) the
class and number of shares of
capital stock of Chiles beneficially
owned by the stockholder, and (d)
any material interest of the
stockholder in such business.
Additionally, the stockholder must
also comply in all material respects
with the content and procedural
requirements of Rule 14a-8 of
Regulation 14A under the Securities
Exchange Act of 1934.
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PROXY In accordance with Delaware law, the The ENSCO bylaws provide that at
Chiles bylaws provide that at each every meeting of the stockholders,
meeting of stockholders, every each stockholder is entitled to one
stockholder will be entitled to vote vote in person or by proxy for each
in person or by proxy appointed by share of the capital stock having
instrument in writing, subscribed by voting power held by such
such stockholder or by such stockholder, but no proxy may be
stockholder's duly authorized voted on after three years from its
attorney-in-fact. Such proxy may not date, unless the proxy provides for
be voted or acted upon after three a longer period.
years from its date, unless the
proxy provides for a longer period.
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PREEMPTIVE RIGHTS The Chiles charter does not grant The ENSCO charter does not grant any
any preemptive rights. preemptive rights.
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DIVIDENDS The Chiles bylaws provide the board The ENSCO charter and bylaws
of directors with full power to provides that the board of directors
determine whether any, and, if any, may declare and pay dividends (in
what part of any, funds legally cash, stock, property or otherwise)
available for the payment of on the common stock from time to
dividends will be declared as time out of any funds legally
dividends and paid to holders of the available. The board of directors
capital stock of Chiles. The will determine the dividend rate on
division of the whole or any part of the shares of each series, whether
such funds of Chiles will rest dividends will be cumulative, and,
wholly within the lawful discretion if so, from which date or dates, and
of the board of directors, and it the relative rights of priority, if
will not be required at any time, any, of payment of dividends on
against such discretion, to divide shares of each series.
or pay any part of such funds among
or to the stockholders as dividends Dividends on outstanding shares of
or otherwise. Before payment of any First Preferred Stock and Serial
dividend, there may be set aside out Preferred Stock, respectively, will
of any funds of Chiles available for be paid or declared and set apart
dividends such sum or sums as the for payment before any dividends
board of directors from time to will be paid or declared and set
time, in its absolute discretion, apart for payment on
thinks proper as a reserve or
reserves to
82
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CHILES ENSCO
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meet contingencies, or for the shares of common stock or any
equalizing dividends, or for subordinate and inferior stock with
repairing or maintaining any respect to the same dividend period.
property of Chiles, or for such
other purpose as the board of Except as set forth above, the ENSCO
directors thinks conducive to the charter and bylaw provisions with
interest of Chiles, and the board of respect to dividends are
directors may modify or abolish any substantially similar to Chiles
such reserve in the manner in which provisions.
it was created.
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LIMITATION OF PERSONAL In accordance with Delaware law, the The ENSCO charter is substantially
LIABILITY OF DIRECTORS Chiles charter provides that a similar to the Chiles charter
director of Chiles will not be regarding limitation of personal
personally liable to Chiles or any liability of directors.
stockholder of Chiles for monetary
damages for breach of fiduciary duty
as a director, except in respect of
matters set forth in Section 174 of
the DGCL or for (a) any breach of
the director's duty of loyalty to
Chiles or Chiles stockholders, (b)
acts or omissions not in good faith
or which involve intentional
misconduct or a knowing violation of
law, or (c) any transaction from
which the director has derived an
improper personal benefit.
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INDEMNIFICATION OF The Chiles charter and bylaws The ENSCO charter provides that
OFFICERS, DIRECTORS, provide that Chiles must indemnify, ENSCO must indemnify to the full
EMPLOYEES AND AGENTS to the full extent permitted by extent authorized or permitted by
Section 145 of the DGCL, all persons law (as now or hereafter in effect)
whom it may indemnify pursuant to any person made, or threatened to be
that section and in the manner made, a defendant or witness to any
prescribed by that section. action, suit or proceeding (whether
civil or otherwise) by reason of the
The Chiles bylaws further provide fact that he, his testator or
that Chiles must pay the expenses intestate, is or was a director or
(including attorneys' fees) incurred officer of ENSCO or by reason of the
by an indemnitee in defending any fact that such director or officer,
proceeding in advance of its final at the request of ENSCO, is or was
disposition; provided, however, that serving any other corporation,
the payment of expenses incurred by partnership, joint venture, trust,
a director or officer in advance of employee benefit plan or other
the final disposition of the enterprise, in any capacity. The
proceeding must be made only upon ENSCO bylaws further provide that
receipt of an undertaking by the ENSCO must indemnify its officers,
director or officer to repay all directors, employees and agents to
amounts advanced if it should be the full extent permitted by the
ultimately determined that the DGCL.
director or officer is not entitled
to be indemnified under the Chiles The ENSCO charter also permits ENSCO
bylaws or otherwise. to purchase and maintain insurance
on behalf of its directors,
officers, employees, or agents or
persons serving at ENSCO's request
as a director, officer, employee or
agent of another corporation or
other entity and
83
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CHILES ENSCO
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to provide for such indemnification
by means of a trust fund, security
interest, letter of credit, surety
bond, contract, and/or similar
arrangement.
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STOCKHOLDER RIGHTS Chiles has not adopted a stockholder The ENSCO board has declared a
PLAN rights plan. dividend of one preferred share
purchase right for each outstanding
share of ENSCO common stock. Each
preferred share purchase right
entitles the registered holder to
purchase from ENSCO one-hundredth of
a share of Series A Junior
Participating Preferred Stock of
ENSCO at a price of $50.00 per one
one-hundredth of a share of Series A
Junior Participating Preferred
Stock, subject to adjustment. The
description of the preferred share
purchase rights is contained in
ENSCO's registration statement on
Form 8-A filed with the SEC on
February 23, 1995, as amended on
March 3, 1997, which is incorporated
by reference to this proxy
statement/prospectus. See
"-- Certain Business Combination
Restrictions."
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APPRAISAL RIGHTS In connection with the merger, ENSCO stockholders do not have
Chiles stockholders have statutory appraisal rights in connection with
appraisal rights as set forth in the merger.
Section 262 of DGCL, the text of
which is set forth in Annex G to
this proxy statement/ prospectus and
a summary of which appears in the
section entitled "Appraisal Rights"
on page 86.
--------------------------------------------------------------------------------------------------
CERTAIN BUSINESS The Chiles charter requires the Section 203 of the DGCL prohibits
COMBINATION affirmative vote of the holders of "business combinations," including
RESTRICTIONS not less than 66 2/3% in voting mergers, sales and leases of assets,
power of the outstanding shares of issuances of securities and similar
Chiles common stock for the approval transactions by a corporation or a
or authorization of (a) any merger, subsidiary with an interested
consolidation or similar business stockholder that beneficially owns
combination transaction involving 15% or more of a corporation's
Chiles, pursuant to which Chiles is voting stock, within three years
not the surviving or resulting after the person becomes an
corporation and/or the shares of interested stockholder, unless:
common stock of Chiles are exchanged
for or changed into other (a) prior to the time the person
securities, cash or other property, becomes an interested stockholder,
or any combination thereof, (b) the the board of directors of the target
adoption of any plan or proposal for corporation approved either the
the liquidation, dissolution, business combination or the
winding up or reorganization of transaction which will result in the
Chiles, and (c) any sale, lease or
exchange of
84
--------------------------------------------------------------------------------------------------
CHILES ENSCO
--------------------------------------------------------------------------------------------------
all of the assets of Chiles and its person becoming an interested
subsidiaries (taken as a whole). stockholder;
Chiles made an election not to be (b) after the completion of the
governed by Section 203 of the DGCL. transaction in which the person
becomes an interested stockholder,
the interested stockholder holds at
least 85% of the voting stock of the
corporation excluding for purposes
of determining the number of shares
outstanding, those shares owned (i)
by persons who are both officers and
directors, and (ii) specific
employee benefit plans; or
(c) after the person becomes an
interested stockholder, the business
combination is approved by the
target corporation's board of
directors and holders of at least
66 2/3% of the outstanding voting
stock, excluding shares held by the
interested stockholder.
A corporation can elect not to be
governed by Section 203 of the DGCL.
ENSCO has not made such an election
and is governed by this section, but
such provision is not applicable to
ENSCO in the merger.
--------------------------------------------------------------------------------------------------
RESTRICTIONS ON The Chiles charter and bylaws do not The ENSCO charter contains certain
OWNERSHIP BY NON-U.S. restrict ownership of shares of provisions to limit ownership and
CITIZENS Chiles capital stock by non-U.S. control of shares of any class of
citizens. capital stock of ENSCO by certain
non-U.S. citizens in order to permit
ENSCO to hold, obtain or reinstate a
license or franchise from a
governmental agency necessary to
conduct its business as an owner and
operator of certain U.S.-flag
vessels. The ENSCO charter restricts
the transfer of shares of ENSCO
common stock when such transfer
would result in the ownership or
control by one or more non-U.S.
citizens of an aggregate percentage
of the shares of ENSCO common stock
in excess of a specified percentage.
--------------------------------------------------------------------------------------------------
85
APPRAISAL RIGHTS
If the merger is consummated, a Chiles stockholder of record on the date of
making a written demand for appraisal, as described below, will be entitled to
have those shares appraised by the Delaware Court of Chancery under Section 262
of the DGCL and to receive payment for the "fair value" of those shares instead
of the merger consideration. In order to be eligible to receive this payment,
however, a stockholder must: (a) continue to hold its shares through the
effective date of the merger; (b) strictly comply with the procedures discussed
under Section 262; and (c) not vote in favor of the merger or consent to the
merger in writing. Shares of Chiles common stock outstanding immediately prior
to the effective date of the merger, with respect to which appraisal has been
properly demanded in accordance with Section 262, will not be converted into the
right to receive the merger consideration at or after the effective date of the
merger unless and until the holder of such shares withdraws its demand for an
appraisal or becomes ineligible for an appraisal.
Holders of ENSCO common stock outstanding at the effective date of the
merger are not entitled to appraisal rights in connection with the merger.
This proxy statement/prospectus is being sent to all Chiles stockholders of
record on the record date for the Chiles special meeting and constitutes notice
of the appraisal rights available to those holders under Section 262. THE
STATUTORY RIGHT OF APPRAISAL GRANTED BY SECTION 262 IS COMPLEX AND REQUIRES
STRICT COMPLIANCE WITH THE PROCEDURES IN SECTION 262. FAILURE TO FOLLOW ANY OF
THESE PROCEDURES MAY RESULT IN A TERMINATION OR WAIVER OF APPRAISAL RIGHTS UNDER
SECTION 262. The following is a summary of the principal provisions of Section
262 and it is not a complete statement of Section 262. The following summary is
qualified in its entirety by reference to Section 262 which is incorporated by
reference, together with any amendments to the laws that may be approved and
adopted after the date of this proxy statement/ prospectus. A copy of Section
262 is attached as Annex G to this proxy statement/prospectus.
A holder of Chiles common stock who elects to assert appraisal rights under
Section 262 must deliver a written demand for appraisal of its shares of Chiles
common stock prior to the vote on the merger. The written demand must identify
the stockholder of record and state the stockholder's intention to demand
appraisal of its shares. Voting against approval and adoption of the merger,
abstaining from voting or failing to vote with respect to approval and adoption
of the merger will not constitute a demand for appraisal within the meaning of
Section 262. All demands should be delivered to: Secretary, Chiles Offshore
Inc., 11200 Richmond Avenue, Suite 490, Houston, Texas 77082-2618. Only a Chiles
stockholder of record on the date of making a written demand for appraisal who
continuously holds those shares through the effective date of the merger is
entitled to seek appraisal. Demand for appraisal must be executed by or for the
Chiles stockholder of record, fully and correctly, as that stockholder's name
appears on the stockholder's stock certificates representing shares of Chiles
common stock.
BENEFICIAL OWNERS WHO ARE NOT RECORD OWNERS AND WHO INTEND TO ASSERT
APPRAISAL RIGHTS SHOULD INSTRUCT THE RECORD OWNER TO STRICTLY COMPLY WITH THE
STATUTORY REQUIREMENTS WITH RESPECT TO THE EXERCISE OF APPRAISAL RIGHTS BEFORE
THE DATE OF THE CHILES SPECIAL MEETING.
Within 10 days after the merger, the surviving company in the merger is
required to send notice of the effectiveness of the merger to each stockholder
who prior to the time of the merger has complied with the requirements of
Section 262.
Within 120 days after the effective date of the merger, the surviving
company in the merger or any stockholder who has strictly complied with the
requirements of Section 262 may file a petition in the Delaware Court of
Chancery demanding a determination of the fair value of the shares of Chiles
common stock held by all stockholders seeking appraisal. A dissenting
stockholder must serve a copy of the petition on the surviving company in the
merger. If no petition is filed by either Chiles, the surviving company or any
dissenting stockholder within the 120-day period, the rights of all dissenting
stockholders to an appraisal will cease. Stockholders seeking to assert
appraisal rights should not assume that the surviving company will file a
petition with respect to the appraisal of the fair value of their shares or that
the surviving company will initiate any negotiations with respect to the fair
value of those shares. The surviving
86
company is under no obligation to and has no present intention to take any
action in this regard. Accordingly, stockholders who wish to seek an appraisal
of their shares should initiate all necessary action with respect to the
assertion of their appraisal rights within the same periods and in the manner
prescribed in Section 262. FAILURE TO FILE THE PETITION ON A TIMELY BASIS WILL
CAUSE THE STOCKHOLDER'S RIGHT TO AN APPEAL TO CEASE.
Within 120 days after the time of the merger, any stockholder who has
strictly complied with subsections (a) and (d) of Section 262 is entitled, upon
written request, to receive from the surviving company a statement setting forth
the total number of shares of Chiles common stock not voted in favor of the
merger with respect to which demands for appraisal have been received and the
aggregate number of holders of those shares. The statement must be mailed within
10 days after Chiles has received the written request or within 10 days after
the time for delivery of demands for appraisal under subsection (d) of Section
262 has expired, whichever is later.
If a petition for an appraisal is filed in a timely manner, at the hearing
on that petition the Delaware Court of Chancery will determine which
stockholders are entitled to appraisal rights and will appraise the shares of
Chiles common stock owned by those stockholders. The court will determine the
fair value of those shares, exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest, if any, to be paid upon the fair value. The Delaware Court of Chancery
may require the stockholders who have demanded appraisal rights for their shares
of Chiles common stock and who hold certificates representing those shares to
submit the certificates to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings. The Delaware Court of Chancery may
dismiss the proceedings as to any stockholder who fails to comply with any such
directions.
Stockholders who consider appraisal should consider that the fair value of
their shares under Section 262 could be more than, the same as, or less than,
the value of the merger consideration without the exercise of appraisal rights.
The Delaware Court of Chancery may determine the cost of the appraisal
proceeding and assess it against the parties as the court deems equitable. Upon
application of a dissenting stockholder, the Delaware Court of Chancery may
order that all or a portion of the expenses incurred by any dissenting
stockholder in connection with the appraisal proceeding (including, without
limitation, reasonable attorney's fees and the fees and expenses of experts) be
charged pro rata against the value of all shares of Chiles common stock entitled
to appraisal. In the absence of a court determination or assessment, each party
bears its own costs.
Any stockholder who has demanded appraisal in compliance with Section 262
will not, after the effective date of the merger, be entitled to vote such stock
for any purpose or receive payment of dividends or other distributions, if any,
on the Chiles common stock, except for dividends or distributions, if any,
payable to stockholders of record at a date prior to the effective date of the
merger.
A stockholder may withdraw a demand for appraisal and accept the merger
consideration at any time within 60 days after the effective date of merger, or
thereafter may withdraw a demand for appraisal with the written approval of the
surviving company in the merger. If an appraisal proceeding is properly
instituted, it may not be dismissed as to any stockholder without the approval
of the Delaware Court of Chancery, and any such approval may be conditioned upon
such terms as the Delaware Court of Chancery deems to be just. If, after the
merger, a Chiles stockholder of record who had demanded appraisal for its shares
fails to assert or effectively withdraws or loses its right to appraisal, those
shares will be treated under the merger agreement as if they were converted into
the right to receive the merger consideration at the time of the merger.
IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF SECTION 262 OF THE DGCL,
ANY CHILES STOCKHOLDER WHO IS CONSIDERING ASSERTING APPRAISAL RIGHTS SHOULD
CONSULT A LEGAL ADVISOR.
87
LEGAL MATTERS
The legality of ENSCO common stock offered by this proxy
statement/prospectus will be passed upon for ENSCO by its counsel, Baker &
McKenzie. Certain United States federal income tax consequences of the merger
will be passed upon for Chiles by Weil, Gotshal & Manges LLP.
EXPERTS
The consolidated financial statements of ENSCO International Incorporated
and its subsidiaries as of December 31, 2001 and for the year then ended, which
appear in the annual report on Form 10-K of ENSCO International Incorporated for
the year ended December 31, 2001, have been audited by Arthur Andersen LLP,
independent certified public accountants, as set forth in their report included
therein and incorporated herein by reference. Such consolidated financial
statements of ENSCO International Incorporated are incorporated herein by
reference in reliance upon such report of Arthur Andersen LLP given on the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of ENSCO International Incorporated
and its subsidiaries as of December 31, 2000 and for each of the two years in
the period ended December 31, 2000, incorporated herein by reference to the
annual report on Form 10-K of ENSCO International Incorporated for the year
ended December 31, 2001, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements of Chiles Offshore Inc. and its
subsidiaries as of December 31, 2001 and 2000, and for each of the three years
in the period ended December 31, 2001, which appear in the annual report on Form
10-K of Chiles Offshore Inc. for the year ended December 31, 2001, have been
audited by Arthur Andersen LLP as set forth in their report included therein and
incorporated herein by reference. Such consolidated financial statements of
Chiles Offshore Inc. are incorporated herein by reference in reliance upon such
report of Arthur Andersen LLP given on the authority of such firm as experts in
accounting and auditing.
With respect to the unaudited interim financial information of ENSCO
International Incorporated for the three month period ended March 31, 2002,
included (incorporated by reference) herein, KPMG LLP, independent certified
public accountants, has reported that they applied limited procedures in
accordance with professional standards for a review of such information.
However, their separate report included in the quarterly report on Form 10-Q of
ENSCO International Incorporated for the quarterly period ended March 31, 2002,
and included (incorporated by reference) herein, states that they did not audit
and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
KPMG LLP is not subject to the liability provisions of Section 11 of the
Securities Act of 1933 for their report on the unaudited interim financial
information because that report is not a "report" or a "part" of the
registration statement prepared or certified by KPMG LLP within the meaning of
Sections 7 and 11 of the Securities Act of 1933.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
The 2003 annual meeting of Chiles stockholders will be held only if the
merger is not completed. If such meeting is held, stockholder proposals to be
presented at the 2003 annual meeting must be received by Chiles on or before
December 13, 2002, for inclusion in the proxy statement and proxy card relating
to that meeting pursuant to Rule 14a-8 of the Securities Exchange Act of 1934.
Any such proposals should be sent via registered, certified or express mail to:
the Secretary of Chiles Offshore Inc., 11200 Richmond Avenue, Suite 490,
Houston, Texas 77082-2618. As a separate and distinct matter from proposals
under Rule 14a-8 of the Securities Exchange Act of 1934, in accordance with
Article 1, Section 1 of the bylaws of Chiles, in order for business to be
properly brought before the next annual meeting by a stockholder, such
stockholder must deliver to Chiles timely written notice thereof. To be timely,
a stockholder's notice must be delivered to or mailed and received by the
Secretary at the principal executive offices of Chiles,
88
not less than 90 calendar days in advance of the anniversary date of the
previous year's annual meeting of stockholders (or if there was no such prior
annual meeting, not less than 90 calendar days prior to the date which
represents the second Tuesday in May of the current year); if, however, the date
of the annual meeting is advanced by more than 20 days, or delayed by more than
60 days, from such anniversary date, then, to be considered timely, notice by
the stockholders must be received by Chiles not later than the close of business
on the later of (a) the 90th day prior to such annual meeting or (b) the seventh
day following the date on which notice of the date of the annual meeting was
mailed to stockholders or publicly disclosed.
WHERE YOU CAN FIND MORE INFORMATION
ENSCO and Chiles file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy these
reports, statements or other information filed by either ENSCO or Chiles at the
SEC's public reference facilities at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional office of the SEC at Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference facilities. The SEC filings of ENSCO
and Chiles are also available to the public from commercial document retrieval
services and at the Internet web site maintained by the SEC at
http://www.sec.gov.
ENSCO has filed a registration statement on Form S-4 to register with the
SEC the ENSCO common stock to be issued to Chiles stockholders in the merger.
This proxy statement/prospectus is a part of that registration statement and
constitutes a prospectus of ENSCO, in addition to being a proxy statement of
Chiles for the Chiles special meeting. The registration statement, including the
attached exhibits and schedules, contains additional relevant information about
ENSCO and Chiles and ENSCO common stock. As allowed by SEC rules, this proxy
statement/prospectus does not contain all the information you can find in the
registration statement or the exhibits to the registration statement.
The SEC allows ENSCO and Chiles to "incorporate by reference" information
into this proxy statement/prospectus. This means that ENSCO and Chiles can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
to be a part of this proxy statement/prospectus, except for any information that
is superseded by information that is included directly in this proxy
statement/prospectus or incorporated by reference subsequent to the date of this
proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents
listed below that ENSCO and Chiles have previously filed with the SEC. These
documents contain important information about ENSCO and Chiles and their
financial condition. The following documents, which were filed by ENSCO or
Chiles with the SEC, are incorporated by reference into this proxy
statement/prospectus:
- annual report of ENSCO on Form 10-K for the fiscal year ended December
31, 2001, filed with the SEC on March 1, 2002;
- proxy statement of ENSCO dated March 22, 2002, filed with the SEC on
March 25, 2002;
- current report of ENSCO on Form 8-K dated January 17, 2002, filed with
the SEC on January 17, 2002;
- current report of ENSCO on Form 8-K dated February 15, 2002, filed with
the SEC on February 19, 2002;
- current report of ENSCO on Form 8-K dated March 18, 2002, filed with the
SEC on March 20, 2002;
- current report of ENSCO on Form 8-K dated April 4, 2002, filed with the
SEC on April 10, 2002;
- current report of ENSCO on Form 8-K dated April 16, 2002, filed with the
SEC on April 17, 2002;
89
- quarterly report of ENSCO on Form 10-Q for the quarter ended March 31,
2002, filed with the SEC on May 7, 2002;
- current report of ENSCO on Form 8-K dated May 14, 2002, filed with the
SEC on May 16, 2002;
- current report of ENSCO on Form 8-K dated May 15, 2002, filed with the
SEC on May 17, 2002;
- the description of ENSCO's preferred share purchase rights contained in
the registration statement on Form 8-A/A-1 (File No. 001-08097), filed
with the SEC on March 4, 1997, and any amendment or report filed with the
SEC for the purpose of updating the description;
- annual report of Chiles on Form 10-K for the fiscal year ended December
31, 2001, filed with the SEC on March 29, 2002;
- amended annual report of Chiles on Form 10-K/A for the fiscal year ended
December 31, 2001, filed with the SEC on April 2, 2002;
- proxy statement of Chiles dated April 12, 2002, filed with the SEC on
April 12, 2002;
- amended annual report of Chiles on Form 10-K/A for the fiscal year ended
December 31, 2001, filed with the SEC on April 29, 2002;
- quarterly report of Chiles on Form 10-Q for the quarter ended March 31,
2002, filed with the SEC on May 14, 2002; and
- current report of Chiles on Form 8-K dated May 14, 2002, filed with the
SEC on May 16, 2002.
In addition, ENSCO and Chiles incorporate by reference additional documents
that either may file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934 between the date of this proxy
statement/prospectus and the date of the Chiles special meeting. These documents
include periodic reports, such as annual reports on Form 10-K, quarterly reports
on Form 10-Q and current reports on Form 8-K, as well as proxy statements.
ENSCO has supplied all information contained or incorporated by reference
into this proxy statement/prospectus relating to ENSCO, and Chiles has supplied
all information contained or incorporated by reference into this proxy
statement/prospectus relating to Chiles.
You can obtain any of the documents incorporated by reference into this
proxy statement/prospectus through ENSCO or Chiles, as the case may be, or from
the SEC through the SEC's Internet web site at the address set forth above.
Documents incorporated by reference are available from ENSCO and Chiles without
charge, excluding any exhibit to those documents, unless the exhibit is
specifically incorporated by reference as an exhibit in this proxy
statement/prospectus.
ENSCO stockholders and Chiles stockholders may request a copy of
information incorporated by reference into this proxy statement/prospectus by
contacting the investor relations department for each of ENSCO and Chiles at:
ENSCO International Incorporated Chiles Offshore Inc.
2700 Fountain Place 11200 Richmond Avenue, Suite 490
1445 Ross Avenue Houston, Texas 77082-2618
Dallas, Texas 75202-2792 (713) 339-3777
(214) 922-1500 Attn: Dick Fagerstal, Senior Vice
Attn: Richard A. LeBlanc, Vice President,
President -- Chief Financial Officer and Secretary
Corporate Finance, Investor Relations and
Treasurer
In addition, you may obtain copies of the information relating to ENSCO,
without charge, by sending an e-mail to rleblanc@enscous.com. Furthermore, you
may obtain copies of some of this information by making a request through the
ENSCO investor relations Internet web site, http://www.enscous.com/
investor.asp.
90
In addition, you may obtain copies of the information relating to Chiles,
without charge, by sending an e-mail to dickf@chilesoffshore.com. Furthermore,
you may obtain copies of some of this information by making a request through
the Chiles investor relations Internet web site,
http://www.info@chilesoffshore.com.
In order for you to receive timely delivery of the documents in advance of
the Chiles special meeting, ENSCO or Chiles, respectively, should receive your
request no later than , 2002.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this proxy statement/prospectus or in any of the
materials that we have incorporated into this proxy statement/prospectus.
Therefore, if anyone does give you information of this sort, you should not rely
on it. If you are in a jurisdiction where offers to exchange or sell, or
solicitations of offers to exchange or purchase, the securities offered by this
proxy statement/prospectus or the solicitation of proxies is unlawful, or if you
are a person to whom it is unlawful to direct these types of activities, then
the offer presented in this proxy statement/prospectus does not extend to you.
The information contained in this proxy statement/prospectus is accurate only as
of the date of this document unless the information specifically indicates that
another date applies.
91
ANNEX A
MERGER AGREEMENT
BY AND AMONG
ENSCO INTERNATIONAL INCORPORATED
CHORE ACQUISITION, INC.
AND
CHILES OFFSHORE INC.
MAY 14, 2002
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 DESCRIPTION OF TRANSACTION............................. A-1
1.1 Merger of Company Into Merger Sub........................... A-1
1.2 Effects of the Merger....................................... A-1
1.3 Closing; Effective Time..................................... A-1
1.4 Certificate of Incorporation and Bylaws; Directors and
Officers.................................................... A-2
1.5 Conversion of Shares........................................ A-2
1.6 Closing of Company's Transfer Books......................... A-3
1.7 Exchange of Certificates.................................... A-3
1.8 Stock Options............................................... A-4
1.9 Tax Consequences............................................ A-5
1.10 Further Action.............................................. A-5
1.11 Dissenting Shares........................................... A-5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF COMPANY.............. A-6
2.1 Organization and Good Standing.............................. A-6
2.2 Enforceability; No Conflict................................. A-6
2.3 Capitalization and Ownership................................ A-7
2.4 SEC Filings; Financial Statements........................... A-8
2.5 Books and Records........................................... A-9
2.6 Accounts Receivable......................................... A-9
2.7 No Undisclosed Liabilities.................................. A-9
2.8 No Material Adverse Effect.................................. A-9
2.9 Absence of Certain Changes and Events....................... A-10
2.10 Properties.................................................. A-11
2.11 Intellectual Property....................................... A-11
2.12 Contracts; No Defaults...................................... A-11
2.13 Insurance................................................... A-13
2.14 Taxes....................................................... A-13
2.15 Employee Benefits........................................... A-14
2.16 Labor Relations; Employment Law Compliance.................. A-15
2.17 Environmental, Health and Safety Matters.................... A-15
2.18 Compliance with Laws; Governmental Authorizations........... A-16
2.19 Legal Proceedings; Orders................................... A-17
2.20 Relationships with Related Persons.......................... A-17
2.21 Vote Required............................................... A-17
2.22 Brokers Finders............................................. A-17
2.23 Opinion of Company's Financial Advisor...................... A-17
2.24 Parachute Payments.......................................... A-18
2.25 Certain Business Practices.................................. A-18
2.26 Change in Control........................................... A-18
2.27 Company Drilling Rigs....................................... A-18
2.28 Disclosure.................................................. A-19
2.29 Financial and Commodity Hedging............................. A-19
i
PAGE
----
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB.................................................... A-19
3.1 Organization................................................ A-19
3.2 Enforceability; No Conflict................................. A-19
3.3 Capitalization.............................................. A-20
3.4 SEC Filings; Financial Statements........................... A-21
3.5 Compliance with Laws........................................ A-21
3.6 Legal Proceedings; Orders................................... A-22
3.7 Valid Issuance.............................................. A-22
3.8 Disclosure.................................................. A-22
3.9 Cash Consideration.......................................... A-22
3.10 No Prior Activities......................................... A-22
3.11 No Material Adverse Effect.................................. A-22
3.12 Absence of Certain Changes and Events....................... A-22
3.13 Government Authorization.................................... A-23
3.14 Taxes....................................................... A-23
3.15 Brokers; Finders............................................ A-24
ARTICLE 4 CERTAIN COVENANTS OF COMPANY AND PARENT................ A-24
4.1 Access and Investigation by Parent.......................... A-24
4.2 Operation of Company's Business............................. A-24
4.3 No Solicitation............................................. A-25
4.4 Operation of Parent's Business.............................. A-26
ARTICLE 5 ADDITIONAL COVENANTS OF THE PARTIES.................... A-27
5.1 Registration Statement; Proxy Statement..................... A-27
5.2 Company Stockholders' Meeting............................... A-27
5.3 Consents; Regulatory Approvals.............................. A-28
5.4 Employee Benefits........................................... A-29
5.5 Indemnification of Directors and Officers................... A-30
5.6 Disclosure.................................................. A-30
5.7 Affiliates and Affiliate Agreements......................... A-30
5.8 Resignations................................................ A-31
5.9 Listing..................................................... A-31
5.10 Section 16b-3............................................... A-31
5.11 Taxes....................................................... A-31
ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES..... A-31
6.1 Effectiveness of Form S-4 Registration Statement............ A-31
6.2 Company Stockholder Approval................................ A-31
6.3 HSR Act..................................................... A-32
6.4 Listing..................................................... A-32
6.5 No Restraints............................................... A-32
ARTICLE 7 CONDITIONS PRECEDENT TO PARENT'S AND MERGER SUB'S
OBLIGATION TO CLOSE.................................... A-32
7.1 Accuracy of Representations................................. A-32
7.2 Company's Performance....................................... A-32
7.3 Consents.................................................... A-32
ii
PAGE
----
7.4 No Material Adverse Change.................................. A-33
7.5 Officer's Certificate....................................... A-33
7.6 Affiliate Agreements........................................ A-33
7.7 Dissenting Shares........................................... A-33
7.8 Tax Opinion................................................. A-33
ARTICLE 8 CONDITIONS PRECEDENT TO COMPANY'S OBLIGATION TO A-33
CLOSE...........................................................
8.1 Accuracy of Representations................................. A-33
8.2 Parent's and Merger Sub's Performance....................... A-33
8.3 No Material Adverse Change.................................. A-33
8.4 Officer's Certificate....................................... A-34
8.5 Tax Opinion................................................. A-34
ARTICLE 9 TERMINATION............................................ A-34
9.1 Termination................................................. A-34
9.2 Effect of Termination....................................... A-35
9.3 Expenses; Termination Fees.................................. A-35
ARTICLE 10 GENERAL PROVISIONS.................................... A-36
10.1 Confidentiality............................................. A-36
10.2 Notices..................................................... A-36
10.3 Further Actions............................................. A-37
10.4 Incorporation of Schedules and Exhibits..................... A-37
10.5 Entire Agreement and Modification........................... A-37
10.6 Drafting and Representation................................. A-38
10.7 Severability................................................ A-38
10.8 Assignment; Successors; No Third-Party Rights............... A-38
10.9 Enforcement of Agreement.................................... A-38
10.10 Waiver...................................................... A-38
10.11 Governing Law............................................... A-38
10.12 Jurisdiction; Service of Process............................ A-39
10.13 Counterparts................................................ A-39
EXHIBIT A CONSTRUCTION AND DEFINITIONS........................... A-40
EXHIBIT B VOTING AGREEMENTS...................................... A-49
Voting Agreement -- Luis Alvarez Morphy........................... A-50
Voting Agreement -- Javier Alvarez Morphy......................... A-59
Voting Agreement -- Patricio Alvarez Morphy....................... A-67
Voting Agreement -- SEACOR SMIT, Inc. ............................ A-76
EXHIBIT C AMENDED CERTIFICATE OF INCORPORATION OF SURVIVING
CORPORATION............................................ A-85
EXHIBIT D AFFILIATE AGREEMENT.................................... A-88
EXHIBIT E CERTAIN COMPENSATION ARRANGEMENTS...................... A-91
iii
MERGER AGREEMENT
This Merger Agreement ("Agreement") is made as of May 14, 2002 by and among
ENSCO International Incorporated, a Delaware corporation ("Parent"), Chore
Acquisition, Inc., a Delaware corporation ("Merger Sub"), and Chiles Offshore
Inc., a Delaware corporation ("Company"). Certain capitalized terms used in this
Agreement are defined in Exhibit A.
PRELIMINARY STATEMENTS
A. Parent, Merger Sub and Company intend to effect a merger of Company
into Merger Sub in accordance with this Agreement and the Delaware General
Corporation Law ("Merger"). Upon consummation of the Merger, Company will cease
to exist, and Merger Sub will continue as a direct wholly owned Subsidiary of
Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended ("Code").
C. The respective boards of directors of Parent, Merger Sub and Company
have approved this Agreement and approved the Merger.
D. In order to induce Parent and Merger Sub to enter into this Agreement,
certain stockholders of Company have executed the Voting Agreements ("Voting
Agreements") in the forms attached as Exhibit B.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE 1
DESCRIPTION OF TRANSACTION
1.1 MERGER OF COMPANY INTO MERGER SUB
Upon the terms and subject to the conditions set forth in this Agreement,
at the Effective Time (as defined in Section 1.3), Company shall be merged with
and into Merger Sub, and the separate existence of Company shall cease.
Following the Effective Time, Merger Sub shall continue as the surviving
corporation ("Surviving Corporation"). The name of the Surviving Corporation
shall be Chiles Offshore Inc.
1.2 EFFECTS OF THE MERGER
The Merger shall have the effects set forth in this Agreement and in the
applicable provisions of the Delaware General Corporation Law.
1.3 CLOSING; EFFECTIVE TIME
The consummation of the Contemplated Transactions ("Closing") shall take
place at the offices of Baker & McKenzie, 2001 Ross Avenue, Suite 2300, Dallas,
Texas, at 10:00 a.m. (or such other place and time as the parties may agree) on
a date to be specified by the parties ("Closing Date"), which shall be no later
than the third business day after the satisfaction or waiver of the last to be
satisfied or waived of the conditions set forth in Articles 6, 7 and 8 (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of such conditions). Subject to the
provisions of this Agreement, a certificate of merger satisfying the applicable
requirements of the Delaware General Corporation Law ("Certificate of Merger")
shall be duly executed by Merger Sub and, simultaneously with or as soon as
practicable following the Closing, filed with the Secretary of State of the
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State of Delaware ("Secretary of State"). The Merger shall become effective upon
the later of: (a) the date and time of the filing of the Certificate of Merger
with the Secretary of State, or (b) such later date and time as may be specified
in the Certificate of Merger with the consent of Parent ("Effective Time").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS
At the Effective Time:
(a) the Certificate of Incorporation of Merger Sub, as amended at the
Effective Time as set forth in Exhibit C, shall be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance with
applicable Law;
(b) the Bylaws of Merger Sub in effect at the Effective Time shall be
the Bylaws of the Surviving Corporation until amended in accordance with
applicable Law; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the respective individuals
who are directors and officers of Merger Sub immediately prior to the
Effective Time.
1.5 CONVERSION OF SHARES
(a) At the Effective Time, by virtue of the Merger and without any further
action on the part of Parent, Merger Sub, Company or any stockholder of Company:
(i) any shares of Company Common Stock held immediately prior to the
Effective Time by Company or any wholly owned Subsidiary of Company (or
held in Company's treasury) shall be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor;
(ii) any shares of Company Common Stock held immediately prior to the
Effective Time by Parent, Merger Sub or any other wholly owned Subsidiary
of Parent shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor;
(iii) except as provided in clauses (i) and (ii) of this Section
1.5(a) and subject to Sections 1.5(b) and 1.5(c), each share of Company
Common Stock outstanding immediately prior to the Effective Time shall be
converted into the right to receive (A) 0.6575 (the "Exchange Ratio") of a
share of Parent Common Stock (the "Common Stock Consideration") and (B)
$5.25 in cash (the "Cash Consideration" and, together with the Common Stock
Consideration, the "Merger Consideration"); and
(iv) each share of the common stock, $0.001 par value per share, of
Merger Sub outstanding immediately prior to the Effective Time shall remain
outstanding as a share of common stock of the Surviving Corporation.
(b) If, between the date of this Agreement and the Effective Time, the
outstanding shares of Company Common Stock or Parent Common Stock are changed
into a different number or class of shares by reason of any stock split, stock
dividend, reverse stock split, combination, reclassification, recapitalization
or other similar transaction, then the Exchange Ratio and the Cash Consideration
shall be appropriately adjusted.
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates or scrip for any such fractional
shares shall be issued. Any holder of shares of Company Common Stock who would
otherwise be entitled to receive a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock issuable to such
holder) shall, in lieu of such fraction of a share and, upon surrender of such
holder's Company Stock Certificate(s) (as defined in Section 1.6), be paid in
cash the dollar amount (rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by the closing price of a share of
Parent Common Stock on the NYSE on the date on which the Effective Time occurs.
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1.6 CLOSING OF COMPANY'S TRANSFER BOOKS
At the Effective Time:
(a) all certificates for shares of Company Common Stock outstanding
immediately prior to the Effective Time (a "Company Stock Certificate")
shall automatically be canceled and retired and shall cease to exist, and
all holders of certificates representing shares of Company Common Stock
that were outstanding immediately prior to the Effective Time shall cease
to have any rights as stockholders of Company except as set forth in
Sections 1.7 and 1.11; and
(b) the stock transfer books of Company shall be closed with respect
to all shares of Company Common Stock outstanding immediately prior to the
Effective Time. No further transfer of any such shares of Company Common
Stock shall be made on such stock transfer books after the Effective Time.
If, after the Effective Time, a valid Company Stock Certificate is
presented to the Exchange Agent (as defined in Section 1.7(a)) or to the
Surviving Corporation or Parent, such Company Stock Certificate shall be
canceled and shall be exchanged as provided in Section 1.7.
1.7 EXCHANGE OF CERTIFICATES
(a) Prior to the Closing Date, Parent shall select a reputable bank or
trust company reasonably acceptable to Company to act as exchange agent in
respect of the Merger (the "Exchange Agent"). Prior to or at the Effective Time,
Parent shall deposit with the Exchange Agent, in trust for the benefit of
holders of Company Common Stock, (i) certificates representing the shares of
Parent Common Stock issuable as the Common Stock Consideration pursuant to
Section 1.5(a)(iii)(A) and (ii) the amount of cash sufficient to pay the
aggregate amount of the Cash Consideration to be paid pursuant to Section
1.5(a)(iii)(B) and the aggregate amount of cash sufficient to make payments in
lieu of fractional shares in accordance with Section 1.5(c) and any dividends or
other distributions declared or made with respect to Parent Common Stock with a
record date after the Effective Time to which holders of Company Stock
Certificates exchangeable for Parent Common Stock pursuant to this Agreement are
entitled. The shares of Parent Common Stock and cash amounts so deposited with
the Exchange Agent, together with any dividends or distributions received by the
Exchange Agent with respect to such shares, are referred to collectively as the
"Exchange Fund."
(b) As soon as reasonably practicable after the Effective Time, Parent
shall cause the Exchange Agent to mail to the record holders of Company Stock
Certificates (i) a letter of transmittal in customary form and containing such
provisions as Parent may reasonably specify (including a provision confirming
that delivery of Company Stock Certificates shall be effected, and risk of loss
and title to Company Stock Certificates shall pass, only upon delivery of such
Company Stock Certificates to the Exchange Agent) and (ii) instructions for use
in effecting the surrender of Company Stock Certificates in exchange for Merger
Consideration. Upon surrender of a Company Stock Certificate to the Exchange
Agent for exchange, together with a duly executed letter of transmittal and such
other documents as may be reasonably required by the Exchange Agent or Parent,
(x) the holder of such Company Stock Certificate shall be entitled to receive in
exchange therefor (i) a certificate representing the number of whole shares of
Parent Common Stock that such holder has the right to receive pursuant to the
provisions of Section 1.5 and (ii) a check in the amount equal to the cash that
such holder has a right to receive pursuant to Section 1.5 (including any cash
in lieu of any fractional share of Parent Common Stock to which such holder is
entitled and any dividends or other distributions to which such holder is
entitled as contemplated by this Section 1.7) and (y) each Company Stock
Certificate so surrendered shall be canceled. Until surrendered as contemplated
by this Section 1.7, each Company Stock Certificate shall be deemed, from and
after the Effective Time, to represent only the right to receive Merger
Consideration (and cash in lieu of any fractional share of Parent Common Stock)
as contemplated by Article 1 (including any dividends or other distributions as
contemplated by Section 1.7(d)). If any Company Stock Certificate shall have
been lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the payment of any Merger Consideration, require the owner of such
lost, stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as
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Parent may reasonably direct) as indemnity against any claim that may be made
against the Exchange Agent, Parent or the Surviving Corporation with respect to
such Company Stock Certificate.
(c) Notwithstanding anything to the contrary contained in this Agreement,
no Merger Consideration shall be paid in exchange for any Company Stock
Certificate to any Person who may be an "affiliate" (as that term is used in
Rule 145 under the Securities Act) of Company until such Person shall have
delivered to Parent and Company a duly executed Affiliate Agreement as
contemplated by Section 5.7.
(d) No dividends or other distributions declared or made with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock that such holder has the right to receive in the
Merger until such holder surrenders such Company Stock Certificate in accordance
with this Section 1.7 (at which time such holder shall be entitled, subject to
the effect of applicable escheat or similar Laws, to receive all such dividends
and distributions, without interest).
(e) Any portion of the Exchange Fund that remains undistributed to holders
of Company Stock Certificates as of the date one year after the date on which
the Effective Time occurs shall be delivered to Parent upon demand, and any
holders of Company Stock Certificates who have not theretofore surrendered their
Company Stock Certificates in accordance with this Section 1.7 shall thereafter
look only to Parent for satisfaction of their claims for Merger Consideration,
cash in lieu of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock.
(f) Each of the Exchange Agent, Parent and the Surviving Corporation shall
be entitled to deduct and withhold from any consideration payable or otherwise
deliverable pursuant to this Agreement to any holder or former holder of Company
Common Stock such amounts as may be required to be deducted or withheld
therefrom under the Code or any provision of state, local or foreign Tax Law or
under any other applicable Law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
(g) Neither Parent nor the Surviving Corporation shall be liable to any
holder or former holder of Company Common Stock or to any other Person with
respect to any shares of Parent Common Stock (or dividends or distributions with
respect thereto), or for any cash amounts, delivered to any public official
pursuant to any applicable abandoned property Law, escheat Law or similar Law.
1.8 STOCK OPTIONS
(a) As soon as practicable following the date of this Agreement, Parent and
Company (or, if appropriate, any committee of the board of directors of Company
administering the Company Stock Option Plan) shall take such action as may be
required to effect the following provisions of this Section 1.8(a). Subject to
the provisions of Section 16 of the Exchange Act, as of the Effective Time each
option to purchase Company Common Stock pursuant to the Company Stock Option
Plan (a "Company Stock Option") that is then outstanding shall be assumed by
Parent and converted into an option (or a new substitute option shall be
granted) (an "Assumed Stock Option") exercisable for such amount of cash and
shares of Parent Company Stock as would have been received in respect of Company
Common Stock subject to such Company Stock Option had such Company Stock Option
been exercised in full immediately prior to the Effective Time (such that,
immediately after the Effective Time, (i) a Company Stock Option for one share
of Company Common Stock shall be converted into an Assumed Stock Option
exercisable for the Merger Consideration at the exercise price in effect
immediately prior to the Effective Time and (ii) any restriction on the exercise
of any such Company Stock Option and other provisions of such Company Stock
Option in effect at the Effective Time (after taking into account any vesting
that may result from the approval or consummation of the Merger) shall otherwise
remain unchanged; provided, however, that each Company Option assumed by Parent
in accordance with this Section 1.8 (and the cash to be received by the holder
upon exercise thereof) shall, in accordance with its terms, be subject to
further adjustment as appropriate to reflect any stock split, stock dividend,
reverse stock split, reclassification, recapitalization or other similar
transaction.
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(b) As soon as practicable after the Effective Time, Parent shall deliver
to the holders of Company Stock Options appropriate notices setting forth such
holders' rights pursuant to the Company Option Plan and the agreements
evidencing the grants of such Company Stock Options and that such Company Stock
Options and agreements have been assumed by Parent and shall continue in effect
on the same terms and conditions as in effect immediately prior to the Effective
Time (subject to the provisions of this Section 1.8). Parent shall comply with
the terms of the Company Option Plan and ensure, to the extent required by, and
subject to the provisions of, the Company Option Plan, that the Company Stock
Options which qualified as qualified stock options prior to the Effective Time
continue to qualify as qualified stock options after the Effective Time.
(c) Parent shall take such actions as are reasonably necessary for the
assumption of the Company Option Plan pursuant to this Section 1.8, including
the reservation, issuance and using its Reasonable Efforts to provide for the
listing of Parent Common Stock as is necessary to effectuate the transactions
contemplated by this Section 1.8. Parent shall use its Reasonable Efforts to
prepare and file with the SEC a registration statement on Form S-8 or other
appropriate form with respect to shares of Parent Common Stock subject to the
Assumed Stock Options and to maintain the effectiveness of such registration
statement or registration statements covering such Assumed Stock Options (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such Assumed Stock Options remain outstanding. With respect to
those individuals, if any, who subsequent to the Effective Time will be subject
to the reporting requirements under Section 16(a) of the Exchange Act, where
applicable, Parent shall use all Reasonable Efforts to administer the Company
Option Plans assumed pursuant to this Section 1.8 in a manner that complies with
Rule 16b-3 promulgated under the Exchange Act to the extent the Company Option
Plan complied with such rule prior to the Merger.
1.9 TAX CONSEQUENCES
For federal income tax purposes, the Merger is intended to constitute a
reorganization within the meaning of Section 368 of the Code. The parties to
this Agreement hereby adopt this Agreement as a "plan of reorganization" within
the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
1.10 FURTHER ACTION
If, at any time after the Effective Time, any further action is determined
by Parent to be necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full right, title and
possession of and to all rights and property of Merger Sub and Company, the
officers and directors of the Surviving Corporation and Parent shall be fully
authorized (in the name of Merger Sub, in the name of Company and otherwise) to
take such action.
1.11 DISSENTING SHARES
Notwithstanding anything in this Agreement to the contrary, Company Common
Stock outstanding immediately prior to the Effective Time and held by a holder
who has delivered a written demand for appraisal of such shares in accordance
with Section 262 of the Delaware General Corporation Law ("Dissenting Shares")
shall not be converted as provided in Section 1.5 of this Agreement, unless and
until such holder fails to perfect or effectively withdraws or loses his right
to appraisal and payment under the Delaware General Corporation Law. If, after
the Effective Time, any such holder fails to perfect or effectively withdraws or
loses his right to appraisal, such Dissenting Shares shall thereupon be treated
as if they had been converted as of the Effective Time into the right to receive
the Merger Consideration as provided in Section 1.5(a)(iii) hereof, together
with any dividends or distributions payable thereon or cash in lieu of
fractional shares, and to which such holder is entitled, without interest
thereon. Company shall give Parent prompt notice of any demands received by
Company for appraisal of Company Common Stock, and prior to the Effective Time,
Parent shall have the right to participate in all negotiations and proceedings
with respect to such demands. Prior to the Effective Time, Company shall not,
except with the prior written consent of Parent, make any payment with respect
to, or offer to settle, any such
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demands. Parent covenants and agrees that, in the event any cash payment is to
be made following the Effective Time in respect of Dissenting Shares (as a
result of a judgment, settlement or otherwise), Parent shall contribute to the
capital of the Surviving Corporation an amount sufficient to make such payment,
and no funds or other assets of the Surviving Corporation shall, directly or
indirectly, be used for such purpose.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Merger Sub that, except as
set forth in the Company Disclosure Schedule:
2.1 ORGANIZATION AND GOOD STANDING
(a) Company has no Subsidiaries, except for the Entities identified in
Section 2.1(a) of the Company Disclosure Schedule, and neither Company nor any
of the other Entities identified in Section 2.1(a) of the Company Disclosure
Schedule owns any capital stock of, or any equity interest of any nature in, any
other Entity, other than the Entities identified in Section 2.1(a) of the
Company Disclosure Schedule. (Company and each of the Entities identified on
Section 2.1(a) of the Company Disclosure Schedule are referred to collectively
in this Agreement as the "Acquired Companies.") None of the Acquired Companies
has agreed or is obligated to make, or is bound by any Contract under which it
may become obligated to make, any future investment in or capital contribution
to any other Entity. None of the Acquired Companies has, at any time, been a
general partner of any general partnership, limited partnership or other Entity.
Section 2.1(a) of the Company Disclosure Schedule contains a list of the
jurisdiction of formation of each of the Acquired Companies and other
jurisdictions in which each Acquired Company is authorized to do business.
(b) Company is a corporation, and each Subsidiary is a corporation or a
limited liability company, in each case duly organized, validly existing and in
good standing under the Laws of its jurisdiction of organization, with full
corporate or other power and authority to conduct its business as presently
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations under all Company Contracts to which it
is a party. Each Acquired Company is duly qualified to do business as a foreign
entity and is in good standing in each jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except where the
failure to be so qualified or to be in good standing does not and is not
reasonably likely to have a Company Material Adverse Effect.
(c) Company has delivered to Parent copies of the Governing Documents of
each of the Acquired Companies, as currently in effect. Neither Company nor any
Subsidiary is in violation of any provision of its Governing Documents.
2.2 ENFORCEABILITY; NO CONFLICT
(a) Assuming due authorization, execution and delivery of this Agreement by
Parent and Merger Sub, this Agreement constitutes the legal, valid and binding
obligation of Company, enforceable against Company in accordance with its terms.
Other than the approval contemplated by Section 2.21, Company has the power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement, which actions have been duly authorized and approved by
all necessary corporate action of Company.
(b) Except as set forth in Section 2.2(b) of the Company Disclosure
Schedule or as may be required by the Securities Act, the Exchange Act, state
securities or "blue sky" Laws, the Delaware General Corporation Law, the HSR
Act, MARAD and the rules and regulations promulgated thereunder, any Antitrust
Law, and the ASE rules (as they relate to the Form S-4 Registration Statement
and the Proxy Statement), none of the Acquired Companies is or will be required
to make any filing with or give any
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notice to, or to obtain any Consent from, any Governmental Body or other Person
in connection with (i) the execution, delivery or performance of this Agreement
or any of the other agreements referred to in this Agreement by Company, or (ii)
the consummation by Company of the Merger or any of the Contemplated
Transactions, except where the failure to make any such filing, give such notice
or obtain the Consent is not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
(c) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will (i)
Contravene any provision of the Governing Documents of Company, or any
resolution adopted in connection with the Contemplated Transactions by the
stockholders or board of directors of Company, (ii) Contravene any Company
Contract, Governmental Authorization, Law or Order to which Company, or any of
the assets owned or used by the Acquired Companies, may be subject, except where
such Contravention does not and is not reasonably likely to have, individually
or in the aggregate, a Company Material Adverse Effect, or (iii) result in the
imposition or creation of any Encumbrance upon or with respect to any of the
assets owned or used by the Acquired Companies, except where such Encumbrance
does not and is not reasonably likely to have, individually or in the aggregate,
a Company Material Adverse Effect.
(d) The board of directors of Company (at a meeting duly called and held)
has by a unanimous vote of those present duly and validly authorized the
execution, delivery and performance of this Agreement and approved the
consummation of the Contemplated Transactions, and taken all corporate actions
required to be taken by the board of directors of Company for the consummation
of the Contemplated Transactions and has resolved (i) that this Agreement and
the Contemplated Transactions are advisable and fair to, and in the best
interests of, Company and its stockholders and (ii) to recommend that the
stockholders of Company approve and adopt this Agreement. The board of directors
of Company has directed that this Agreement be submitted to the stockholders of
Company for their approval. Company has taken all action required to be taken by
it in order to exempt this Agreement and the Contemplated Transactions from, and
this Agreement and the Contemplated Transactions are exempt from, the
requirements of any "moratorium," "control share," "fair price," "affiliate
transaction," "business combination" or other antitakeover Laws of any state
including, without limitation, Section 203 of the Delaware General Corporation
Law, or any antitakeover provision in Company's certificate of incorporation and
bylaws. No provision of the Governing Documents of any of the Acquired Companies
or any Contract of Company would, directly or indirectly, materially restrict or
impair (x) the ability of Parent to vote, or otherwise to exercise the rights of
a stockholder with respect to, securities of the Acquired Companies that may be
acquired or controlled by Parent by virtue of this Agreement or the Voting
Agreements, the Contemplated Transactions or (y) the rights granted hereunder
and thereunder, or permit any stockholder to acquire securities of Company or
Parent, or any of their respective Subsidiaries on a basis not available to
Parent in the event that Parent were to acquire securities of Company.
2.3 CAPITALIZATION AND OWNERSHIP
(a) The authorized capital stock of Company consists of: (i) 100,000,000
shares of Company Common Stock, of which 20,293,732 shares have been issued and
are outstanding as of the date of this Agreement, (ii) 10,000,000 shares of
Company Preferred Stock, of which no shares are outstanding and (iii) 109,000
shares of Company Common Stock are held by Company in its treasury. All of the
outstanding shares of Company Common Stock have been duly authorized and validly
issued, and are fully paid and nonassessable. As of the date of this Agreement,
there are no shares of Company Common Stock held by any of the other Acquired
Companies. None of the outstanding shares of Company Common Stock is entitled or
subject to any preemptive right, right of participation, right of maintenance or
any similar right created by a Company Contract, none of the outstanding shares
of Company Common Stock is subject to any right of first refusal under a Company
Contract, and except as set forth on Schedule 2.3(b) of the Company Disclosure
Schedule or in the Voting Agreements, there is no Company Contract relating to
the voting or registration of, or restricting any Person from purchasing,
selling, pledging or otherwise disposing of (or granting any option or similar
right with respect to), any shares of
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Company Common Stock. None of the Acquired Companies is under any obligation, or
is bound by any Contract pursuant to which it may become obligated, to
repurchase, redeem or otherwise acquire any outstanding shares of Company Common
Stock.
(b) As of the date of this Agreement, (i) 971,667 shares of Company Common
Stock are reserved for future issuance pursuant to stock options (each, a
"Company Option") and restricted stock awards, of which 736,911 shares of
Company Common Stock are subject to Company Stock Options that have been granted
and are outstanding under the Company Stock Option Plan. Section 2.3(b) of the
Company Disclosure Schedule sets forth the following information with respect to
each Company Option outstanding as of the date of this Agreement: (i) the name
of the optionee, (ii) the number of shares of Company Common Stock subject to
such Company Option, (iii) the exercise price of such Company Option, (iv) the
date on which such Company Option was granted, (v) the applicable vesting
schedules, and the extent to which such Company Option is vested and exercisable
as of the date of this Agreement, and (vi) the date on which such Company Option
expires. Company has made available to Parent accurate and complete copies of
all stock option plans pursuant to which Company has ever granted stock options,
and the forms of all stock option agreements evidencing such options.
(c) Except as set forth in Section 2.3(b) of the Company Disclosure
Schedule, there is no: (i) Company Contract in respect of any outstanding
subscription, option, call, warrant or right (whether or not currently
exercisable) to acquire any shares of the capital stock or other securities of
Company, (ii) Company Contract in respect of any outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of Company, or (iii)
stockholder rights plan (or similar plan commonly referred to as a "poison
pill") or Contract under which Company is or may become obligated to sell or
otherwise issue any shares of its capital stock or any other securities.
(d) All outstanding shares of Company Common Stock, all outstanding Company
Options and all outstanding shares of capital stock or membership interests, as
applicable, of each Subsidiary of Company have been issued and granted in
compliance with (i) all applicable securities Laws and other applicable Law and
(ii) all requirements set forth in applicable Contracts, except, in each case,
where non-compliance does not have, and is not reasonably likely to have, a
Company Material Adverse Effect.
(e) All of the outstanding shares of capital stock or membership interests,
as applicable, of the companies identified in Section 2.1(a) of the Company
Disclosure Schedule have been duly authorized, validly issued, and, with respect
to shares of capital stock, are fully paid and nonassessable, and are owned
beneficially and of record by Company, free and clear of any Encumbrances.
2.4 SEC FILINGS; FINANCIAL STATEMENTS
(a) Company has made available to Parent accurate and complete copies of
all annual reports on Form 10-K, registration statements, definitive proxy
statements relating to meetings of Company's stockholders and other registration
statements and reports filed by Company with the SEC, and all amendments thereto
("Company SEC Documents"). All Company SEC Documents have been filed by Company
with the SEC on timely basis. As of the time it was filed with the SEC (or, if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing): (i) each of Company SEC Documents complied in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act (as the case may be), and (ii) none of Company SEC Documents or any
statements, schedules or other documents included or incorporated by reference
therein contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. No Company Subsidiary is currently required to file any
form, report or other document with the SEC.
(b) The consolidated financial statements (including any related notes)
contained in Company SEC Documents: (i) complied as to form in all material
respects with the published rules and regulations of the SEC applicable thereto,
(ii) fairly present in accordance with GAAP applied on a consistent basis
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throughout the periods covered (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC, and except that the unaudited financial statements need
not contain footnotes and are subject to normal year-end adjustments) and (iii)
fairly present the consolidated financial position of Company and its
consolidated Subsidiaries as of the respective dates thereof and the
consolidated results of operations and changes in the financial position of
Company and its consolidated Subsidiaries as at the respective dates thereof and
for the respective periods covered thereby.
(c) Except (i) to the extent set forth on the balance sheet of Company and
its consolidated Subsidiaries as at December 31, 2001, including the notes
thereto (the "2001 Balance Sheet"), (ii) as set forth in Section 2.4(c) of the
Company Disclosure Schedule or (iii) as disclosed in any Company SEC Document
filed by Company after December 31, 2001, neither Company nor any Subsidiary has
any Liability of any nature (whether accrued, absolute, contingent or otherwise)
which would be required by GAAP to be reflected on a balance sheet, or in the
notes thereto, prepared in accordance with GAAP, except for Liabilities which
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(d) Company has heretofore made available to Parent complete and correct
copies of all amendments and modifications (if any) that have not been filed by
Company with the SEC to all agreements, documents and other instruments that
previously had been filed by Company as exhibits to the Company SEC Documents
and are currently in effect.
2.5 BOOKS AND RECORDS
The minute books of Company contain accurate and complete records of all
meetings held of, and corporate action taken by, Company's stockholders and
directors. At the time of the Closing, all of those books and records will be in
the possession of Company.
2.6 ACCOUNTS RECEIVABLE
All Accounts Receivable that are reflected in the financial statements
contained in the Company SEC Documents or the accounting records of Company as
of the Closing Date represent or will represent valid obligations arising from
sales actually made or services actually performed in the Ordinary Course of
Business. All of the Accounts Receivable reflected in the 2001 Balance Sheet or
created thereafter are, to the Company's Knowledge, (i) valid receivables
subject to no setoffs or counterclaims and (ii) current and collectible in
accordance with their terms at their recorded amounts, subject in each case only
to the reserve for bad debts set forth in the 2001 Balance Sheet as such
reserves may thereafter be adjusted for operations and transactions through the
Effective Time in accordance with the past custom and practice of the Acquired
Companies.
2.7 NO UNDISCLOSED LIABILITIES
Except as would not be reasonably likely to have a Company Material Adverse
Effect, the Acquired Companies have no Liabilities that would be required by
GAAP to be included in a reserve amount or reserve described in the consolidated
balance sheet of Company, including the notes thereto, except for Liabilities
disclosed in the Company SEC Documents and current Liabilities incurred in the
Ordinary Course of Business since the respective dates thereof.
2.8 NO MATERIAL ADVERSE EFFECT
Since the date of the most recent Company SEC Document, no event has
occurred or circumstance has arisen that, in combination with any other events
or circumstances, would reasonably be expected to have a Company Material
Adverse Effect.
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2.9 ABSENCE OF CERTAIN CHANGES AND EVENTS
From and after December 31, 2001 through and including the date hereof,
except as disclosed in any Company SEC Document or Section 2.9 of the Company
Disclosure Schedule, each Acquired Company has conducted its business only in
the Ordinary Course of Business and there has not been any:
(a) except for grants of stock options or restricted stock under the
Company Stock Option Plan, (i) change in the authorized or issued shares or
membership interests, as applicable, of any of the Acquired Companies,
grant of any equity option or right to purchase shares or membership
interests, as applicable, of any of the Acquired Companies; issuance of any
security convertible into such equity; (ii) grant of any registration
rights; purchase, redemption, retirement or other acquisition by any of the
Acquired Companies of any shares or membership interests, as applicable, or
securities or obligations convertible into or exchangeable or exercisable
for such capital stock or membership interests; declaration or payment of
any dividend or other distribution or payment with respect to any shares or
membership interests, as applicable (other than to Company from its
Subsidiaries); or (iii) sale, pledge, disposal, Encumbrance, or the
authorization of the sale, pledge, disposal or Encumbrance by any of the
Acquired Companies of any shares of their capital stock of any class or any
membership interests;
(b) any reclassification, combination, split or division by any of the
Acquired Companies of their capital stock or membership interests;
(c) amendment or other modification to the Governing Documents of any
of the Acquired Companies;
(d) except in the Ordinary Course of Business, any payment or increase
by any of the Acquired Companies of any bonuses, salaries or other
compensation to any stockholder, member, director or officer, or entry into
any employment, severance or similar Contract with any stockholder, member,
director, officer, employee, consultant or advisor;
(e) adoption of or amendment to any Plan or material Other Benefit
Obligation of any of the Acquired Companies;
(f) damage to or destruction or loss with an aggregate value in excess
of $500,000 of any asset or property of any of the Acquired Companies,
whether or not covered by insurance;
(g) entry into, material modification, cancellation or termination of
or receipt of notice of termination of (i) any material license,
distributorship, dealer, sales representative, joint venture, credit,
guaranty or similar Company Contract, or (ii) any Contract or transaction
involving a total remaining commitment by or to any of the Acquired
Companies of at least $500,000;
(h) mobilization of, or any agreement entered into by any of the
Acquired Companies which provides for the mobilization of, any Company
Drilling Rig to any area of the world other than such area in which such
Company Drilling Rig was located on December 31, 2001;
(i) Contract that provides for contract drilling services (each, a
"Drilling Contract") entered into by any of the Acquired Companies or any
material amendment or modification thereto;
(j) sale, lease or other disposition of any asset or property of any
of the Acquired Companies with an aggregate value in excess of $2,500,000,
or the creation of any material Encumbrance on any material asset of any of
the Acquired Companies;
(k) settlement, cancellation or waiver of any claims or rights in
excess of $500,000, or which relate to any of the Contemplated
Transactions;
(l) material acceleration or delay in the payment of accounts payable
or in the collection of Accounts Receivable;
(m) material change in the accounting methods, principles or practices
used by any of the Acquired Companies; or
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(n) Contract by any of the Acquired Companies to do any of the
foregoing.
2.10 PROPERTIES
None of the Acquired Companies owns any Real Property. Section 2.10 of the
Company Disclosure Schedule contains a list of all leases of Real Property in
which any Acquired Company has a leasehold estate.
2.11 INTELLECTUAL PROPERTY
(a) Except as does not have and would not be reasonably likely to have a
Company Material Adverse Effect, (i) the Acquired Companies own or have the
right to use pursuant to a valid Contract all material items of Intellectual
Property necessary for the operation of the Acquired Companies as presently
conducted, (ii) each item of Intellectual Property owned or used by the Acquired
Companies as of the date of this Agreement will be owned or available for use by
the Acquired Companies on substantially identical terms immediately subsequent
to the Closing, and (iii) to Company's Knowledge, no Intellectual Property owned
by and/or licensed to the Acquired Companies is being used or enforced in a
manner that would result in the abandonment, cancellation or unenforceability of
such Intellectual Property.
(b) To the Knowledge of Company, none of the Acquired Companies has
interfered with, infringed upon, misappropriated or otherwise Contravened any
intellectual property rights of third parties, and none of the Acquired
Companies has received any written notice regarding any such actual, alleged or
potential interference, infringement, misappropriation or Contravention, except
where such interference, infringement, misappropriation or Contravention does
not have, and is not reasonably likely to have, a Company Material Adverse
Effect. No event has occurred or circumstance exists that may (with or without
notice or lapse of time) constitute or result, nor will the continued operation
of the Acquired Companies after the Closing as presently conducted result,
directly or indirectly, in any such interference, infringement, misappropriation
or Contravention, except where such interference, infringement, misappropriation
or Contravention does not have, and is not reasonably likely to have, a Company
Material Adverse Effect. To Company's Knowledge, no third party has interfered
with, infringed upon, misappropriated or otherwise Contravened any Intellectual
Property rights of any of the Acquired Companies, except where such
interference, infringement, misappropriation or Contravention does not have, and
is not reasonably likely to have, a Company Material Adverse Effect.
(c) None of the Acquired Companies owns any material patent, registered
trademark, service mark or copyright or has pending any material patent
application or application for registration that has been made with respect to
any Intellectual Property owned by the Acquired Companies.
2.12 CONTRACTS; NO DEFAULTS
(a) Except as set forth on Section 2.12(a) of the Company Disclosure
Schedule or filed as an exhibit to the Company SEC Documents, there is no:
(i) Company Contract that involves performance of services or delivery
of goods or materials by any of the Acquired Companies of an amount or
value in excess of $500,000;
(ii) Company Contract that involves performance of services or
delivery of goods or materials to any of the Acquired Companies of an
amount or value in excess of $500,000;
(iii) Company Contract that was not entered into in the Ordinary
Course of Business and that involves the expenditure or receipt by any of
the Acquired Companies of an amount or value in excess of $500,000;
(iv) Company Contract that is a (A) mortgage, indenture, note,
installment obligation or other instrument relating to the borrowing of
money or (B) letter of credit, bond or other indemnity (including letters
of credit, bonds or other indemnities as to which Company is the
beneficiary but excluding endorsements of instruments for collection in the
Ordinary Course of Business);
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(v) Company Contract affecting the ownership of, leasing of, title to,
use of, or any other interest in any real or personal property (except
personal property leases and installment and conditional sales agreements
having a value per item or aggregate payments of less than $500,000);
(vi) material Company Contract with respect to Intellectual Property
(including Contracts with current or former employees, consultants or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property) except for any license implied by the sale of a
product and perpetual, paid-up licenses for commonly available software
programs with a value of less than $500,000 under which any of the Acquired
Companies is the licensee, and the list identifies those pursuant to which
an Acquired Company uses Intellectual Property owned by a third party;
(vii) material Company Contract with any labor union or other employee
representative of a group of employees;
(viii) Company Contract other than Company Plans involving a sharing
of profits, losses, costs or Liabilities by any of the Acquired Companies
with any other Person;
(ix) Company Contract containing covenants that in any way purport to
restrict the business activity of Company or limit the freedom of any of
the Acquired Companies to engage in any line of business or to compete with
any Person; and
(x) Company Contract for capital expenditures in excess of $2,500,000.
(b) Company has made available to Parent a copy of each Company Contract
listed on Section 2.12(a) of the Company Disclosure Schedule or filed as an
exhibit to the Company SEC Documents.
(c) Each Company Contract set forth in Section 2.12(a) of the Company
Disclosure Schedule or filed as an exhibit to the Company SEC Documents and
material to Company's business is in full force and effect and is valid and
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar Laws of general applicability relating to or
affecting creditors' rights or by general equity principles), except where
failure to be in full force and effect or failure to be valid and enforceable
does not have, and is not reasonably likely to have, a Company Material Adverse
Effect. Except where such Contravention does not have, and is not reasonably
likely to have, a Company Material Adverse Effect: (i) none of the Acquired
Companies nor, to Company's Knowledge any other party to a Company Contract has
Contravened any of the applicable terms of a Company Contract, (ii) no event has
occurred or circumstance exists that (with or without notice or lapse of time)
would constitute or result directly or indirectly in Contravention of any
Company Contract by Company or, to Company's Knowledge any other party thereto,
and (iii) to Company's Knowledge, none of the Acquired Companies has given or
received any written notice or other communication alleging Contravention of any
Company Contract.
(d) Each Drilling Contract or each Company Contract that provides for the
construction of a Company Drilling Rig a ("Rig Contract") is in full force and
effect and is valid and enforceable in accordance with its terms and (i) none of
the Acquired Companies nor, to Company's Knowledge, any other party to a
Drilling Contract or Rig Contract has Contravened any of the applicable terms of
a Drilling Contract or Rig Contract, (ii) to Company's Knowledge, no event has
occurred or circumstance exists that (with or without notice or lapse of time)
may constitute or result directly or indirectly in Contravention of any Drilling
Contract or Rig Contract, and (iii) none of the Acquired Companies has given or
received written notice or other communication regarding any actual, alleged or
potential Contravention of any Drilling Contract or Rig Contract.
(e) To Company's Knowledge, as of the date of this Agreement, no party to a
Company Contract listed on Section 2.12(a) of the Company Disclosure Schedule or
filed as an exhibit to the Company SEC Documents and material to Company's
business has repudiated it. As of the date of this Agreement, there currently
are no renegotiations of, to Company's Knowledge, attempts to renegotiate or
outstanding material rights to renegotiate any Company Contracts listed on
Section 2.12(a) of the Company
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Disclosure Schedule or filed as an exhibit to the Company SEC Documents and
material to Company's business, nor has any written demand for renegotiation
been made.
2.13 INSURANCE
Section 2.13 of the Company Disclosure Schedule sets forth a list of each
material (a) insurance policy issued to each Acquired Company as a "named
insured" or otherwise providing insurance to such company as an insured party or
additional insured party, or on any other basis, and (b) self-insurance program,
retrospective premium program or captive insurance program in which each
Acquired Company participates. Each Acquired Company has complied with each such
insurance policy and program and to Company's Knowledge, has not failed to give
any notice or present any claim thereunder in a due and timely manner which
failure would reasonably be expected to result in a loss or forfeiture of any
material right thereunder, except where such loss or forfeiture of a material
right thereunder does not have, and is not reasonably likely to have, a Company
Material Adverse Effect.
2.14 TAXES
Except as set forth in Section 2.14 of the Company Disclosure Schedule:
(a) Each Acquired Company has filed (or has had filed on its behalf)
on a timely basis all Tax Returns as required by applicable Laws, except
where failure to file a Tax Return does not have, and is not reasonably
likely to have, a Company Material Adverse Effect. Each such Tax Return is
accurate and complete in all material respects. There are no material
Encumbrances for any Taxes on any of the assets of any of the Acquired
Companies.
(b) The amounts reflected as Liabilities in the financial statements
contained in the Company SEC Documents for all Taxes are adequate in all
material respects to cover any and all Liabilities for all Taxes, whether
or not disputed, that have been accrued with respect to, should have been
accrued with respect to, or are applicable to the period ended on and
including the date of such financial statements, or to any years and
periods prior thereto and for which any of the Acquired Companies may be
directly, indirectly or contingently liable in its own right or as a
transferee of the assets of, or successor to, any Person.
(c) No federal, state, local or foreign audits or other Proceedings
exist with regard to any material Taxes or Tax Returns of any of the
Acquired Companies. None of the Acquired Companies has received any written
notice that an audit or other Proceeding is pending or threatened with
respect to any Taxes due from or with respect to such company or any Tax
Return filed by or with respect to such company. None of the Acquired
Companies has granted or been requested to grant any waiver of any statutes
of limitations applicable to any claim for Taxes.
(d) All Tax deficiencies that have been claimed, proposed or asserted
in writing against any of the Acquired Companies have been fully paid or
finally settled. There are no pending Tax examinations as of the date of
this Agreement.
(e) There are no outstanding requests for rulings with any
Governmental Body with respect to Taxes that would materially affect the
operations of any of the Acquired Companies after the Closing Date. None of
the Acquired Companies has any pending application with any Governmental
Body requesting permission for any change in accounting method or tax year.
(f) None of the Acquired Companies has filed a consent under Code
Section 341(f) concerning collapsible corporations.
(g) None of the Acquired Companies is or has been in the past five (5)
years a United States real property holding company within the meaning of
Code Section 897(c)(2) .
(h) None of the Acquired Companies has in the past three (3) years
been a member of an affiliated group (within the meaning of Code Section
1504 or any similar group defined under a similar provision of state, local
or foreign Law) filing a consolidated Tax Return (other than a group
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of which the Company is the common parent) nor has any liability for Taxes
of any other person under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign Law).
(i) In the two-year period ending with the Closing Date, none of the
Acquiring Companies has distributed the stock of any corporation in a
distribution of stock qualifying for tax-free treatment under Section 355
of the Code or has been distributed in such a distribution, and prior to
such period, no such distribution was made with the plan or intent of
facilitating the Merger.
2.15 EMPLOYEE BENEFITS
(a) Section 2.15(a) of the Company Disclosure Schedule contains a list of
all material Company Plans. Except as set forth in Section 2.15(a) of the
Company Disclosure Schedule and the Company SEC Documents, to Company's
Knowledge, there are no material Liabilities, including fines and penalties of
any Acquired Company, with respect to any plans, arrangements or practices of
the type that would constitute a Company Plan that were terminated or
discontinued prior to the date of this Agreement and previously maintained or
contributed to by any Acquired Company, or to which any Acquired Company
previously had an obligation to contribute.
(b) Company has delivered or made available to Parent current and complete
copies of (i) each Company Plan and any related trust, including all summary
plan descriptions, (ii) all insurance policies purchased by or to provide
benefits under any Company Plan which are available to pay current benefits and
any other funding arrangements with respect to any Company Plan, (iii) the most
recent Form 5500 filed with respect to each Company Plan, including all
schedules thereto and the opinions of independent accountants and (iv) with
respect to Company Plans that are Qualified Plans, the most recent determination
letter for each such Plan.
(c) The Acquired Companies have timely performed all of their respective
obligations under all Company Plans, except where non-compliance does not and is
not reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect. Except as set forth in Section 2.15(c) of the Company
Disclosure Schedule and, in each case, where non-compliance does not and is not
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect, the Acquired Companies, with respect to all Company Plans, are
and each Company Plan is in compliance with ERISA, the Code and other applicable
Laws, including the provisions of such Laws expressly mentioned in this Section
and, including but not limited, to the Age Discrimination in Employment Act, as
amended, and Title X of the Consolidated Omnibus Budget Reconciliation Act of
1986, as amended, and with any applicable collective bargaining agreement.
Except as set forth in Section 2.15(c) of the Company Disclosure Schedule or
does not and is not reasonably likely to have, individually or in the aggregate,
a Company Material Adverse Effect, no transaction prohibited by ERISA Section
406 and no "prohibited transaction" under Code Section 4975(c) has occurred with
respect to any Company Plan or breaches of any of the duties imposed on
"fiduciaries" (within the meaning of Section 3(21) of ERISA) by ERISA with
respect to the Company Plans that could result in any Acquired Company becoming
liable directly or indirectly (by indemnification or otherwise) for any material
Liability for any excise tax, penalty or other liability under ERISA or the
Code. Other than routine claims for benefits submitted by participants or
beneficiaries, no material written claim against, or Proceeding involving, any
Company Plan is pending or, to Company's Knowledge, is threatened as of the date
hereof, except any claim or Proceeding which does not and is not reasonably
likely to have individually or in the aggregate, a Company Material Adverse
Effect. To Company's Knowledge, there is no basis to anticipate any such action,
suit, arbitration or claim exists (other than routine claims for benefits) with
respect to any Company Plan, and there are no investigations or audits of any
Company Plan by any governmental authority currently pending and there have been
no such investigations or audits that have been concluded, in any such case
which has or is reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect or resulted in any material Liability of any
Acquired Company or ERISA Affiliate that has not been fully discharged.
(d) Each Qualified Plan of the Acquired Companies has received a favorable
determination letter from the IRS that it is qualified under Code Section 401(a)
and that its related trust is exempt from
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federal income tax under Code Section 501(a), and each such Plan and trust
complies in form and in operation with the requirements of the Code and meets
the requirements of a "qualified plan" under Code Section 401(a) and a
tax-exempt trust under Code Section 501(a), except where non-compliance does not
and is not reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect.
(e) Except to the extent required under ERISA Section 601 et seq. and Code
Section 4980B, none of the Acquired Companies has any material Liability to
provide health benefits coverage for any retired employee or to provide health
benefits coverage to any active employee following such employee's retirement.
(f) Except as set forth in Section 2.15(f) of the Company Disclosure
Schedule, there are no overdue (i) insurance premiums required to be paid with
respect to any Company Plan and, (ii) to Company's Knowledge, no insurance
company issuing any such policy is in receivership, conservatorship, liquidation
or similar Proceeding and no such Proceedings with respect to any insurer are
imminent.
(g) The Acquired Companies shall reasonably cooperate with Parent with any
reasonably necessary action to ensure compliance with any federal or state Law
applicable to the Company Plans, whether such action occurs prior to, on, or
after the Effective Time.
(h) Except as set forth in Section 2.15(h) of the Company Disclosure
Schedule, the Acquired Companies have not agreed or committed (orally or in
writing) to make any amendments to any Company Plan not already embodied in the
documents comprising the Company Plans, other than any amendments required by
Law, or to establish or implement any other employee or retiree benefit or
compensation arrangement.
(i) Except as set forth in Section 2.15(i) of the Company Disclosure
Schedule, the consummation of the Contemplated Transactions will not result in
the payment, vesting or acceleration of any benefit under or in connection with
any Company Plan or constitute a "deemed severance" or "deemed termination"
under any Company Plan or under any applicable Law.
2.16 LABOR RELATIONS; EMPLOYMENT LAW COMPLIANCE
(a) The Acquired Companies have complied in all respects with all Laws
relating to employment practices, terms and conditions of employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining and plant closing, except where non-compliance does not
have, and is not reasonably likely to have, a Company Material Adverse Effect.
(b) None of the Acquired Companies has been, and is not now, a party to any
collective bargaining agreement or other labor Contract. To Company's Knowledge,
no application or petition is pending for an election of or for certification of
a collective bargaining agent representing employees of any of the Acquired
Companies.
2.17 ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
(a) The Acquired Companies are, and at all times have been, in full
compliance with, and have not been and are not in Contravention of or liable
under, any Environmental Law or Occupational Safety and Health Law, except where
failure to comply with, Contravention of or Liability under such Environmental
Law or Occupational Safety and Health Law does not have, and is not reasonably
likely to have, a Company Material Adverse Effect. None of the Acquired
Companies has any basis to expect, nor has any of them or any other Person for
whose conduct they are or may be held responsible received, any actual or
threatened Order, notice or other communication from (i) any Governmental Body
or other Person acting in the public interest, or (ii) the current or prior
owner or operator of any Facility, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or threatened
obligation to undertake or bear the cost of any Environmental, Health and Safety
Liabilities with respect to any Facility or other property or asset (whether
real, personal or mixed) in which any of the Acquired Companies has had an
interest, or with respect to any property or Facility at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used or
processed by any of the
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Acquired Companies or any other Person for whose conduct they are or may be held
responsible, or from which Hazardous Materials have been transported, treated,
stored, handled, transferred, disposed, recycled or received, except where such
violation or failure to comply with any Environmental Law, or such obligation to
undertake or bear the cost of any Environmental, Health and Safety Liabilities
does not have, and is not reasonably likely to have, a Company Material Adverse
Effect.
(b) There are no pending or, to Company's Knowledge, threatened, claims,
Encumbrances or other restrictions of any nature, resulting from any
Environmental, Health and Safety Liabilities or arising under any Environmental
Law or Occupational Safety and Health Law, with respect to or affecting any
Facilities or any other properties and assets (whether real, personal or mixed)
in which any of the Acquired Companies has or had an interest, except where such
claims, Encumbrances or other restrictions, either individually or in the
aggregate, do not have and are not reasonably likely to have a Company Material
Adverse Effect.
(c) Company has no Knowledge of or any basis to expect, nor has any of the
Acquired Companies or any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order, summons,
warning or other communication (i) that relates to Hazardous Activity, Hazardous
Materials or any actual, alleged or potential Contravention of or failure to
comply with any Environmental Law or Occupational Safety and Health Law, or (ii)
of any actual, alleged or potential obligation to undertake or bear the cost of
any Environmental, Health and Safety Liabilities with respect to any Facility or
other property or asset (whether real, personal or mixed) in which any of the
Acquired Companies had an interest, or with respect to any property or facility
to or by which Hazardous Materials generated, manufactured, refined,
transferred, imported, used or processed by any of the Acquired Companies, or
any other Person for whose conduct they are or may be held responsible, have
been transported, treated, stored, handled, transferred, disposed, recycled or
received, except for any such matters as do not and are not reasonably likely to
have a Company Material Adverse Effect.
2.18 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS
(a) Except for such matters as, individually or in the aggregate, do not
have, or are not reasonably likely to have, a Company Material Adverse Effect:
(i) each of the Acquired Companies is in full compliance with each Law that is
applicable to it or to the conduct of its business or the ownership or use of
any of its assets, and (ii) to Company's Knowledge, no event has occurred or
circumstance exists that (with or without notice or lapse of time) would cause
any of the Acquired Companies to Contravene any Law or may give rise to any
obligation on the part of any of the Acquired Companies to undertake, or to bear
all or any portion of the cost of, any remedial action of any nature. None of
the Acquired Companies has received at any time since January 1, 2000 any
written notice or other communication from any Governmental Body or any other
Person regarding any alleged Contravention of any Law or any actual, alleged or
potential obligation on the part of such company to undertake, or to bear all or
any portion of the cost of, any remedial action of any nature.
(b) Section 2.18(b) of the Company Disclosure Schedule contains an accurate
and complete list of each material Governmental Authorization that is held by
the Acquired Companies, all of which are valid and in full force and effect and
will remain so following the Closing, except where the failure of such
Governmental Authorization to be valid or in full force and effect prior to or
following the Closing does not have, and is not reasonably likely to have, a
Company Material Adverse Effect. Each of the Acquired Companies is in full
compliance with all of the terms and requirements of each such Governmental
Authorization, except where failure to comply with such terms and requirements
does not have, and is not reasonably likely to have, a Company Material Adverse
Effect. Except where such Contravention does not have, and is not reasonably
likely to have, a Company Material Adverse Effect: (i) to Company's Knowledge,
no event has occurred or circumstance exists that may (with or without notice or
lapse of time) constitute or result directly or indirectly in Contravention of
any Governmental Authorization, and (ii) none of the Acquired Companies has
received at any time since January 1, 2000 any written notice or other
communication from any Governmental Body or any other Person alleging any
Contravention of any Governmental Authorization.
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(c) The Governmental Authorizations listed in Section 2.18(b) of the
Company Disclosure Schedule collectively constitute all of the Governmental
Authorizations necessary to permit each of the Acquired Companies to conduct its
business lawfully in the manner in which it currently conducts such business and
to permit each of the Acquired Companies to own and use its assets in the manner
in which it owns and uses such assets currently, except, in each case, where the
failure to hold a Governmental Authorization does not have, and is not
reasonably likely to have, a Company Material Adverse Effect.
2.19 LEGAL PROCEEDINGS; ORDERS
(a) Section 2.19(a) of the Company Disclosure Schedule lists any pending
Proceedings not disclosed in the Company SEC Documents (i) by or against any of
the Acquired Companies or any of their respective properties, assets, officers
or directors, and none of such Proceedings are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on any of the
Acquired Companies, (ii) that challenge, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
Contemplated Transactions or (iii) in which any Acquired Company indemnifies any
third party. To Company's Knowledge, no other such Proceeding has been
threatened in writing.
(b) Section 2.19(b) of the Company Disclosure Schedule lists each material
Order not disclosed in the Company SEC Documents to which each of the Acquired
Companies, or any of the material assets owned or used by it is subject. To
Company's Knowledge, no officer, director, agent or key employee of any of the
Acquired Companies is subject to any Order that prohibits such officer,
director, agent or key employee from engaging in or continuing any conduct,
activity or practice relating to the business of any of the Acquired Companies.
2.20 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in the Company SEC Documents, no Person has, or since
January 1, 2000 has had, any interest in any property (whether real, personal or
mixed and whether tangible or intangible), used in or pertaining to the business
of any of the Acquired Companies, or any other business relationship, that would
require disclosure under Item 404 of Regulation S-K. Except as set forth in the
Company SEC Documents, no Person is a party to any Contract with, or has any
claim or right against, Company that would require disclosure under Item 404 of
Regulation S-K.
2.21 VOTE REQUIRED
The affirmative vote of the holders of not less than 66 2/3% of the then
outstanding shares of Company Common Stock is the only vote of the holders of
any class or series of capital stock of Company necessary to approve the Merger.
2.22 BROKERS FINDERS
Except for Credit Suisse First Boston Corporation, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Contemplated Transactions based upon
arrangements made by or on behalf of any of the Acquired Corporations. Company
has furnished to Parent a copy of all Contracts related to such engagement of
Credit Suisse First Boston Corporation.
2.23 OPINION OF COMPANY'S FINANCIAL ADVISOR
Company's board of directors has received the written opinion of Credit
Suisse First Boston Corporation, financial advisor to Company, dated May 14,
2002, to the effect that as of the date of the opinion the Merger Consideration
to be received by the holders of Company Common Stock in the Merger, other than
those Persons executing Voting Agreements and their respective affiliates, is
fair, from a financial point of view, to such holders.
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2.24 PARACHUTE PAYMENTS
Except as disclosed in Section 2.24 of the Company Disclosure Schedule, or
resulting from the acceleration of vesting of Company Stock Options under the
terms of the Company Stock Option Plan, the matters described in Section 5.4 and
the Severance Benefits Agreement dated June 12, 2000, none of the Acquired
Companies has made or become obligated to make, and will not as a result of any
Contemplated Transaction become obligated to make, any payments defined in Code
Sections 280G or 162(m). None of the Acquired Companies is required to "gross
up" or otherwise make any payment resulting from the imposition of any excise
tax on such payments.
2.25 CERTAIN BUSINESS PRACTICES
As of the date of this Agreement, none of the Acquired Companies, nor, to
the Knowledge of Company, any agent or employee of Acquired Companies acting on
behalf of the Acquired Companies has (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, (c) made any other unlawful payment, or (d) violated any of
the provisions of Section 999 of the Code or Section 8 of the Export
Administration Act, as amended.
2.26 CHANGE IN CONTROL
Except as set forth in Section 2.26 of the Company Disclosure Schedule or
contained in a Company Contract included in a Company SEC Document, the
consummation of the Contemplated Transactions will not (either alone or upon the
occurrence of any additional acts or events) result in (a) any payment (whether
of severance pay or otherwise) becoming due from Company or any Subsidiary to
any Person, (b) the termination of, or provide the right of any Person to
terminate, any material Company Contract, or (c) the acceleration of any
material benefits of any Person under any material Company Contract.
2.27 COMPANY DRILLING RIGS
(a) Section 2.27(a) of the Company Disclosure Schedule sets forth a list of
Company Drilling Rigs and, if applicable, the name of the nation under which
each Company Drilling Rig is documented and flagged and indicates all Company
Drilling Rigs that are laid up or being held for sale on the date hereof. With
respect to Company Drilling Rigs, with the exception of any Company Drilling Rig
not yet delivered to Company, Company or a Subsidiary has good title to each
such Company Drilling Rig, free and clear of all liens or Encumbrances except
for such as are disclosed in Section 2.27(a) of the Company Disclosure Schedule
or in the Company SEC Documents.
(b) Section 2.27(b) of the Company Disclosure Schedule contains a list of
all leases or charters in effect as of the date of this Agreement providing for
the use by Company or any Subsidiary of a Company Drilling Rig. Complete and
correct copies of each lease or charter (including material amendments or
modifications thereto) have been delivered or made available to Parent.
(c) With respect to each Company Drilling Rig with the exception of any
Company Drilling Rig not yet delivered to Company: (i) such Company Drilling Rig
is lawfully documented under the flag of the nation listed on Section 2.27(a) of
the Company Disclosure Schedule for such Company Drilling Rig, (ii) such Company
Drilling Rig is afloat and in satisfactory operating condition for charter hire,
(iii) such Company Drilling Rig holds in full force and effect all certificates,
licenses, permits and rights required for operation in the manner drilling rigs
of its kind are being operated in the geographical area in which such Company
Drilling Rig is presently being operated which the failure to hold would
reasonably be expected to have a Company Material Adverse Effect, (iv) to the
Knowledge of Company, no event has occurred and no condition exists as of the
date of this Agreement that would endanger the maintenance of the classification
of such Company Drilling Rig, (v) such Company Drilling Rig is a jack-up
drilling rig and is considered by the American Bureau of Shipping to be in class
as a Maltese Cross A1 Self-Elevating Drilling Unit and free of any
recommendations affecting class and (vi) there exists no outstanding
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requirements or recommendations resulting from any inspections by, or rules or
regulations of, any Governmental Body, including without limitation, the
American Bureau of Shipping, the U.S. Coast Guard, the U.S. Minerals Management
Service, the U.S. Occupational Safety and Health Administration, or the Laws of
any nation under which any of the Company Drilling Rigs are flagged.
(d) Section 2.27(d) of the Company Disclosure Schedule contains a list of
the geographical location in which each Company Drilling Rig, with the exception
of any Company Drilling Rig not yet delivered to Company, is being operated as
of the date hereof. Each Company Drilling Rig can be removed from such
geographical location and transported to the United States without the material
payment, Liability or imposition of any Tax or other payment of any kind to any
Governmental Body.
2.28 DISCLOSURE
None of the information to be supplied by Company for inclusion in the Form
S-4 Registration Statement will, at the time the Form S-4 Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. None of the
information to be supplied by Company for inclusion in the Proxy Statement will,
at the time the Proxy Statement is mailed to the stockholders of Company or at
the time of the Company Stockholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations promulgated by the SEC thereunder,
except that no representation or warranty is made by Company with respect to
statements made or incorporated by reference therein based on information
supplied by Parent for inclusion or incorporation by reference in the Proxy
Statement.
2.29 FINANCIAL AND COMMODITY HEDGING
Section 2.29 of the Company Disclosure Schedule sets forth a list of each
Company Contract providing for a hedging or derivative transaction of a nature
described in Financial Accounting Standards Board Release No. 133 outstanding as
of the date of this Agreement, including the fair market value of each such
outstanding hedging or derivative transaction. As of the date of this Agreement,
the cost to Company to close all of its outstanding hedging or derivative
transactions would not exceed an aggregate amount of $1.7 million.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to Company that, except as set
forth in the Parent Disclosure Schedule or Parent SEC Documents:
3.1 ORGANIZATION
Each of Parent and Merger Sub is a corporation duly organized, validly
existing and in good standing under the Laws of its jurisdiction of
organization.
3.2 ENFORCEABILITY; NO CONFLICT
(a) Assuming due authorization, execution and delivery of this Agreement by
Company, this Agreement constitutes the legal, valid and binding obligation of
each of Parent and Merger Sub, enforceable against each of Parent and Merger Sub
in accordance with its terms. Each of Parent and Merger Sub has the power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement, which actions have been duly authorized and approved by
all necessary corporate action of each of Parent and Merger Sub.
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(b) Except as may be required by the Securities Act, the Exchange Act,
state securities or "blue sky" Laws, the Delaware General Corporation Law, the
HSR Act, MARAD and the rules and regulations promulgated thereunder, any
Antitrust Law and the NYSE rules (as they relate to the Form S-4 Registration
Statement and the Proxy Statement), neither Parent nor Merger Sub is or will be
required to make any filing with or give any notice to, or obtain any Consent
from, any Governmental Body or other Person in connection with the execution and
delivery of this Agreement or any other agreements referred to in this Agreement
by Parent, or the consummation or performance of any of the Contemplated
Transactions, except where the failure to make such filing, give such notice or
obtain the Consent is not reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect.
(c) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will (i)
Contravene any provision of the Governing Documents of Parent or Merger Sub, or
any resolution adopted in connection with the Contemplated Transactions by the
stockholders or board of directors of Parent or Merger Sub, (ii) Contravene any
Parent or Merger Sub Contract, Governmental Authorization, Law or Order to which
Parent or Merger Sub, or any of the assets owned or used by Parent and its
Subsidiaries, collectively, may be subject, except where such Contravention does
not, and is not reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect, or (iii) result in the imposition or creation of
any Encumbrance upon or with respect to any of the assets owned or used by
Parent and its Subsidiaries, except where such Encumbrance does not and is not
reasonably likely to have, individually or in the aggregate, a Parent Material
Adverse Effect.
(d) The board of directors of Parent (at a meeting duly called and held)
has, by unanimous vote, duly and validly authorized the execution, delivery and
performance of this Agreement by Parent and unanimously approved the
consummation of the Contemplated Transactions.
3.3 CAPITALIZATION
(a) The authorized capital stock of Parent consists of: (i) 250,000,000
shares of Parent Common Stock, (ii) 5,000,000 shares of Parent First Preferred
Stock, and (iii) 15,000,000 shares of Parent Preferred Stock, of which 1,250,000
have been designated as Series A Junior Participating Preferred Stock. As of the
date of this Agreement, (i) 135,399,864 shares of Parent Common Stock are issued
and outstanding, (ii) no shares of Parent First Preferred Stock are issued and
outstanding, and (iii) no shares of Parent Preferred Stock are issued and
outstanding. All of the outstanding shares of Parent Common Stock have been duly
authorized and validly issued, and are fully paid and nonassessable.
(b) As of the date of this Agreement, (i) 23,548,127 shares of Parent
Common Stock are held in the treasury of Parent, (ii) 10,552,304 shares of
Parent Common Stock are reserved for future issuance pursuant to the Parent
Incentive Plans, of which 3,762,633 shares of Parent Common Stock are subject to
stock options that have been granted and are outstanding under the Parent
Incentive Plans, (iii) 492,000 shares of Parent Common stock are reserved for
future issuance pursuant to the Parent Directors Plan, of which 114,000 shares
of Parent Common Stock are subject to stock options that have been granted and
are outstanding under the Parent Directors Plan, (iv) 1,000,000 shares of Parent
Common Stock are reserved for future issuance as matching contributions under
the Parent Savings Plan, and (v) no shares of Parent Common Stock are reserved
for issuance as matching contributions under the Parent SERP.
(c) Except as contemplated by this Agreement or as set forth in the Parent
SEC Documents, as of the date of this Agreement there is no: (i) outstanding
subscription, option, call, warrant or right (whether or not currently
exercisable) to acquire any shares of the capital stock or other securities of
Parent or any Parent Subsidiary, (ii) outstanding security, instrument or
obligation that is or may become convertible into or exchangeable for any shares
of the capital stock or other securities of Parent or any Parent Subsidiary, or
(iii) stockholder rights plan (or similar plan common referred to as a "poison
pill") or Contract under which Parent or any Parent Subsidiary is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities.
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(d) The authorized capital stock of Merger Sub consists of 1,000 shares of
Merger Sub Common Stock, of which, as of the date of this Agreement, 100 shares
are issued and outstanding and held by Parent.
3.4 SEC FILINGS; FINANCIAL STATEMENTS
(a) Parent has made available to Company accurate and complete copies of
all annual reports on Form 10-K, registration statements, definitive proxy
statements relating to meetings of Parent's stockholders and other registration
statements and reports filed by Parent with the SEC since January 1, 1999, and
all amendments thereto ("Parent SEC Documents"). All Parent SEC Documents have
been filed by Parent with the SEC on a timely basis. As of the time it was filed
with the SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the Parent SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act or the Exchange Act (as the case may be), and (ii) none of
the Parent SEC Documents or any statements, schedules or other documents
included or incorporated by reference therein contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) The consolidated financial statements (including any related notes)
contained in the Parent SEC Documents: (i) complied as to form in all material
respects with the published rules and regulations of the SEC applicable thereto,
(ii) fairly present in accordance with GAAP applied on a consistent basis
throughout the periods covered (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC, and except that the unaudited financial statements need
not contain footnotes and are subject to normal year-end adjustments) and (iii)
fairly present the consolidated financial position of Parent and its
consolidated Subsidiaries as of the respective dates thereof and the
consolidated results of operations and changes in the financial position of
Parent and its consolidated Subsidiaries as at the respective dates thereof and
for the respective periods covered thereby.
(c) Except (i) to the extent set forth on the balance sheet of Parent and
its consolidated Subsidiaries as at December 31, 2001, including the notes
thereto (the "2001 Parent Balance Sheet") or (ii) as disclosed in any Parent SEC
Document filed by Parent after December 31, 2001, neither Parent nor any
Subsidiary has any Liability of any nature (whether accrued, absolute,
contingent or otherwise) which would be required by GAAP to be reflected on a
balance sheet, or in the notes thereto, prepared in accordance with GAAP, except
for Liabilities, which would not, individually or in the aggregate, reasonably
be expected to have a Parent Material Adverse Effect.
(d) Parent has heretofore made available to Company complete and correct
copies of all amendments and modifications (if any) that have not been filed by
Parent with the SEC to all agreements, documents and other instruments that
previously had been filed by Parent as exhibits to the Parent SEC Documents and
are currently in effect.
3.5 COMPLIANCE WITH LAWS
Except for such matters as, individually or in the aggregate, do not have,
or are not reasonably likely to have, a Parent Material Adverse Effect: (a)
Parent is in full compliance with each Law that is applicable to it or to the
conduct of its business or the ownership or use of any of its assets, and (b) to
Parent's Knowledge no event has occurred or circumstance exists that (with or
without notice or lapse of time) may cause Parent to Contravene any Law or may
give rise to any obligation on the part of Parent to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature. Parent has not
received at any time since January 1, 2000 any written notice or other
communication from any Governmental Body or any other Person regarding any
alleged Contravention of any Law or any actual, alleged or potential obligation
on the part of such company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature.
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3.6 LEGAL PROCEEDINGS; ORDERS
There are no pending Proceedings not disclosed in the Parent SEC Documents
(a) by or against Parent or that otherwise relate to or may affect the business
of, or any of the assets owned or used by, Parent that are reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse Effect, or (b)
that challenge, or that may have the effect of preventing, delaying, making
illegal or otherwise interfering with, any of the Contemplated Transactions. To
Parent's Knowledge, no other such Proceeding has been threatened, and no event
has occurred or circumstance exists that may give rise to or serve as a basis
for the commencement of any such Proceeding.
3.7 VALID ISSUANCE
The Parent Common Stock to be issued in the Merger will, when issued in
accordance with the provisions of this Agreement, be validly issued, fully paid
and nonassessable.
3.8 DISCLOSURE
None of the information to be supplied by Parent or Merger Sub for
inclusion in the Form S-4 Registration Statement will, at the time the Form S-4
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, not
misleading. None of the information to be supplied by Parent or Merger Sub for
inclusion in the Proxy Statement will, at the time the Proxy Statement is mailed
to the stockholders of Company or at the time of the Company Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading.
3.9 CASH CONSIDERATION
Parent has available to it, and at the Closing will have available to it,
all funds necessary to pay the Cash Consideration and to satisfy its obligations
hereunder.
3.10 NO PRIOR ACTIVITIES
Except for obligations incurred in connection with its incorporation or
organization or the negotiation and consummation of this Agreement and the
Contemplated Transactions, Merger Sub has neither incurred any obligation or
liability nor engaged in any business or activity of any type or kind
whatsoever, or entered into any agreement or arrangement with any Person.
3.11 NO MATERIAL ADVERSE EFFECT
Since the date of the most recent Parent SEC Document no event has occurred
or circumstance has arisen that, in combination with any other events or
circumstances, would reasonably be expected to have a Parent Material Adverse
Effect.
3.12 ABSENCE OF CERTAIN CHANGES AND EVENTS
From and after December 31, 2001 through and including the date hereof,
except as disclosed in any Parent SEC Document, Parent has conducted its
business only in ordinary course of business and there has not been any:
(a) material change in the authorized or issued shares of Parent,
other than grants of stock options under any Parent option plan or Parent
Other Benefit Obligation, grant of any right to purchase shares of Parent;
issuance of any security convertible into such equity; grant of any
registration rights; purchase, redemption, retirement or other acquisition
by Parent of any shares or securities or obligations convertible into or
exchangeable or exercisable for such capital stock, except pursuant to any
Parent Plan; declaration or payment of any dividend or other distribution
or payment with respect to any shares; other than in the ordinary course of
business.
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(b) any reclassification, combination, split or division of Parent
Common Stock;
(c) amendment or other modification to the Governing Documents of
Parent;
(d) damage to or destruction or loss with an aggregate value in excess
of $5 million of any asset or property of Parent;
(e) sale, lease or other disposition of any asset or property of
Parent with an aggregate value in excess of $5 million, or the creation of
any material Encumbrance on any material asset of Parent;
(f) settlement, cancellation or waiver of any claims or rights in
excess of $5 million, or which relates to any of the Contemplated
Transactions;
(g) material change in the accounting methods, principles or practices
used by Parent; or
(h) Contract by Parent to do any of the foregoing.
3.13 GOVERNMENT AUTHORIZATION
(a) Each material Governmental Authorization that is held by Parent is
valid and in full force and effect and will remain so following the Closing,
except where the failure of such Governmental Authorization to be valid or in
full force and effect prior to or following the Closing does not have, and is
not reasonably likely to have, a Parent Material Adverse Effect. Parent is in
full compliance with all of the terms and requirements of each such Governmental
Authorization, except where failure to comply with such terms and requirements
does not have, and is not reasonably likely to have, a Parent Material Adverse
Effect. Except where such Contravention does not have, and is not reasonably
likely to have, a Parent Material Adverse Effect: (i) to Parent's Knowledge, no
event has occurred or circumstance exists that may (with or without notice or
lapse of time) constitute or result directly or indirectly in Contravention of
any Governmental Authorization, and (ii) Parent has not received at any time
since January 1, 2000 any written notice or other communication from any
Governmental Body or any other Person alleging any Contravention of any
Governmental Authorization.
(b) All such Governmental Authorizations constitute all of the Governmental
Authorizations necessary to permit the Parent to conduct its business lawfully
in the manner in which it currently conducts such business and to permit Parent
to own and use its assets in the manner in which it owns and uses such assets
currently, except, in each case, where the failure to hold a Governmental
Authorization does not have, and is not reasonably likely to have, a Parent
Material Adverse Effect.
3.14 TAXES
(a) Parent has filed (or has had filed on its behalf) on a timely basis all
material Tax Returns as required by applicable Laws. Each such Tax Return is
accurate and complete in all material respects. There are no material
Encumbrances for any Taxes on any of the assets of Parent.
(b) The amounts reflected as Liabilities in the financial statements
contained in the Parent SEC Documents for all Taxes are adequate in all material
respects to cover any and all Liabilities for all Taxes, whether or not
disputed, that have been accrued with respect to, should have been accrued with
respect to, or are applicable to the period ended on and including the date of
such financial statements, or to any years and periods prior thereto and for
which Parent may be directly, indirectly or contingently liable in its own right
or as a transferee of the assets of, or successor to, any Person.
(c) No federal, state, local or foreign audits or other Proceedings exist
with regard to any material Taxes or Tax Returns of Parent. Parent has not
received any written notice that an audit or other Proceeding is pending or
threatened with respect to any Taxes due from or with respect to such company or
any Tax Return filed by or with respect to such company. Parent has not granted
or been requested to grant any waiver of any statutes of limitations applicable
to any claim for Taxes.
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3.15 BROKERS; FINDERS
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Contemplated
Transactions based upon arrangements made by or on behalf of Parent or Merger
Sub.
ARTICLE 4
CERTAIN COVENANTS OF COMPANY AND PARENT
4.1 ACCESS AND INVESTIGATION BY PARENT
(a) Between the date hereof and the Effective Time (the "Pre-Closing
Period"), Company will give Parent and Merger Sub and their authorized
Representatives reasonable access during normal business hours to all employees,
plants, offices, drilling rigs and other facilities and to all books and records
of the Acquired Companies, will permit Parent and Merger Sub to make such
inspections as Parent and Merger Sub may reasonably require and will cause the
Acquired Companies' officers to furnish Parent and Merger Sub with such
financial and operating data and other information with respect to the business,
properties and personnel of the Acquired Companies as Parent or Merger Sub may
from time to time reasonably request, provided that no investigation pursuant to
this Section 4.1 shall affect or be deemed to modify any of the representations
or warranties made by Company or be deemed a waiver of any breach thereof.
(b) During the Pre-Closing Period, Company shall furnish to Parent and
Merger Sub: (i) promptly after the delivery thereof to management, such monthly
financial statements, data and operating reports as are regularly prepared for
distribution to Company management, and (ii) at the earliest time they are
available, such quarterly and annual financial statements as are prepared for
the Company SEC Documents, which (in the case of this clause (ii)), shall be in
accordance with the books and records of Company.
(c) Each of Parent and Merger Sub will hold and will cause its authorized
Representatives to hold in confidence all documents and information concerning
Company and its Subsidiaries furnished to Parent or Merger Sub in connection
with the Contemplated Transactions pursuant to the terms of the Confidentiality
Agreement.
4.2 OPERATION OF COMPANY'S BUSINESS
(a) During the Pre-Closing Period, except as set forth in Section 4.2(a) of
the Company Disclosure Schedule or as contemplated by any other provision of
this Agreement: (i) Company shall ensure that each of the Acquired Companies
conducts its business and operations (A) in the Ordinary Course of Business, and
(B) in material compliance with all applicable Laws and the requirements of all
Company Contracts that constitute Material Contracts, (ii) Company shall use its
Reasonable Efforts to ensure that each of the Acquired Companies preserves
intact its current business organization, keeps available the services of its
current officers and employees and maintains its relations and goodwill with all
suppliers, customers, landlords, creditors, licensors, licensees, employees and
other Persons having business relationships with the respective Acquired
Companies and (iii) without the prior written consent of Parent, which shall not
be unreasonably withheld, (A) Company shall not, and shall cause each of the
other Acquired Companies not to, take any affirmative action, or fail to take
any reasonable action within its control, which action or failure to act is
reasonably likely to result in any of the changes or events described in clauses
(a) -- (n) of Section 2.9 (other than those specified in Section 2.9(f)
resulting from inaction), (B) Company shall keep in full force and effect, and
without modification or amendment, or any lapse of coverage under, all insurance
policies referred to in Section 2.13 of the Company Disclosure Schedule, (C)
Company shall promptly notify Parent of (1) any written notice or other
communication in writing from any Person alleging that the Consent of such
Person is or may be required in connection with the Contemplated Transactions
and (2) any Proceeding commenced or, to the best of its Knowledge threatened
against, relating to or involving or otherwise affecting any of the Acquired
Companies that
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relates to the consummation of the Contemplated Transactions, (D) Company shall
not enter into any Contract providing for a hedging or derivative transaction of
a nature described in Financial Accounting Standards Board Release No. 133 and
(E) Company shall not grant any Company Options or restricted stock awards under
the Company Stock Option Plan.
(b) During the Pre-Closing Period, Company shall promptly notify Parent in
writing of: (i) the discovery by Company of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes a material inaccuracy or breach in any
representation or warranty made by Company in this Agreement, (ii) any event,
condition, fact or circumstance that occurs, arises or exists after the date of
this Agreement, and that causes or constitutes a material inaccuracy or breach
in any representation or warranty made by Company in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement, (iii) any material breach of any
covenant or obligation of any of the Acquired Companies, and (iv) any event,
condition, fact or circumstance that would make the timely satisfaction of any
of the conditions set forth in Articles 6, 7 and 8 impossible or unlikely or
that has had or could reasonably be expected to have a Company Material Adverse
Effect. Without limiting the generality of the foregoing, Company shall promptly
advise Parent in writing of any Proceeding or material claim or Contract dispute
threatened, commenced or asserted against or with respect to any of the Acquired
Companies. No notification given to Parent pursuant to this Section 4.2(b) shall
limit or otherwise affect any of the representations, warranties, covenants or
obligations of Company contained in this Agreement.
4.3 NO SOLICITATION
(a) Company shall not directly or indirectly, and shall not authorize or
permit any of the other Acquired Companies or any Representative of any of the
Acquired Companies directly or indirectly to, (i) solicit, initiate, encourage,
induce or facilitate the making, submission or announcement of any Acquisition
Proposal or take any action that could reasonably be expected to lead to an
Acquisition Proposal, (ii) furnish any information regarding any of the Acquired
Companies to any Person in connection with or in response to an Acquisition
Proposal, (iii) engage in discussions or negotiations with any Person with
respect to any Acquisition Proposal, (iv) approve, endorse or recommend any
Acquisition Proposal (except pursuant to Section 5.2(c)) or (v) enter into any
Contract contemplating or otherwise relating to any Acquisition Transaction
(except pursuant to Section 9.1(f)); provided, however, that prior to the
adoption of this Agreement by the Required Company Stockholder Vote, this
Section 4.3(a) shall not prohibit Company from furnishing information regarding
the Acquired Companies to, or entering into discussions or negotiations with,
any Person in response to an Acquisition Proposal that is submitted to Company
by such Person (and not withdrawn) and that is a Superior Proposal (determined
based on facts known at the time of such proposal) if (i) neither Company nor
any Representative of any of the Acquired Companies shall have violated in any
material respect any of the restrictions set forth in this Section 4.3, (ii) the
board of directors of Company concludes in good faith, after having taken into
account the advice of its outside legal counsel, that such action is required in
order for the board of directors of Company to comply with its fiduciary
obligations to Company's stockholders under applicable Law, (iii) within two
business days after furnishing any such information to, or entering into
discussions or negotiations with, such Person, Company gives Parent written
notice of the identity of such Person and the fact that the Company furnished
information to, or entered into discussions or negotiations with, such Person,
and (iv) Company receives from such Person an executed confidentiality agreement
containing customary limitations on the use and disclosure of all information
furnished to such Person by or on behalf of Company. Without limiting the
generality of the foregoing, Company acknowledges and agrees that any violation
of or the taking of any action inconsistent with any of the restrictions set
forth in the preceding sentence by any Representative of any of the Acquired
Companies, whether or not such Representative is purporting to act on behalf of
any of the Acquired Companies, shall be deemed to constitute a breach of this
Section 4.3 by Company.
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(b) Company shall promptly advise Parent orally and in writing of any
Acquisition Proposal, any inquiry or indication of interest that is reasonably
likely to lead to an Acquisition Proposal (including the identity of the Person
making or submitting such Acquisition Proposal, inquiry, or indication of
interest, and the terms of any such Acquisition Proposal) that is made or
submitted by any Person during the Pre-Closing Period. Company shall keep Parent
informed with respect to the status of any such Acquisition Proposal, inquiry or
indication of interest.
(c) Company shall immediately cease and cause to be terminated any existing
discussions as of the date of this Agreement with any Person that relate to any
Acquisition Proposal.
(d) Company agrees not to release or permit the release of any Person from,
or to waive or permit the waiver of any provision of, any confidentiality or
similar agreement to which any of the Acquired Companies is a party, and will
use its Reasonable Efforts to enforce or cause to be enforced each such
agreement at the request of Parent.
4.4 OPERATION OF PARENT'S BUSINESS
(a) During the Pre-Closing Period, except as contemplated by any other
provision of this Agreement: (i) Parent shall conduct its business and
operations in the ordinary course of business, (ii) Parent shall use its
Reasonable Efforts to preserve intact its current business organization, (iii)
without the prior written consent of Company, which shall not be unreasonably
withheld, Parent shall not, and shall cause its Subsidiaries not to, take any
affirmative action, or fail to take any reasonable action within its control,
which action or failure to act is reasonably likely to result in any of the
changes or events described in clauses (a), (b), (c) or (g) (or (h) as it
relates to the foregoing) of Section 3.12, (iv) acquire or enter into any
Contract to acquire (by means of acquisition of capital stock, assets, merger,
other business combination or otherwise) any businesses or assets, if the
aggregate amount of consideration (whether comprised of cash, securities or
other property) paid or payable by Parent or its Subsidiaries in respect of any
and all such acquisitions would exceed, in the aggregate, $400 million (with any
Parent Common Stock issued or to be issued as consideration to be valued based
upon the closing price of Parent Common Stock on the date of this Agreement),
and (v) Parent shall promptly notify Company of (A) any written notice or other
communication in writing from any Person alleging that the Consent of such
Person is or may be required in connection with the Contemplated Transactions
and (B) any Proceeding commenced or, to the best of its Knowledge threatened
against, relating to or involving or otherwise affecting Parent that relates to
the Contemplated Transactions.
(b) During the Pre-Closing Period, Parent shall promptly notify Company in
writing of: (i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes a material inaccuracy or breach in any
representation or warranty made by Parent in this Agreement, (ii) any event,
condition, fact or circumstance that occurs, arises or exists after the date of
this Agreement, and that causes or constitutes a material inaccuracy or breach
in any representation or warranty made by Parent in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement, (iii) any material breach of any
covenant or obligation of Parent, and (iv) any event, condition, fact or
circumstance that would make the timely satisfaction of any of the conditions
set forth in Articles 6, 7 and 8 impossible or unlikely or that has had or could
reasonably be expected to have a Parent Material Adverse Effect. Without
limiting the generality of the foregoing, Parent shall promptly advise Company
in writing of any Proceeding or material claim threatened, commenced or asserted
against or with respect to it. No notification given to Company pursuant to this
Section 4.4(b) shall limit or otherwise affect any of the representations,
warranties, covenants or obligations of Parent contained in this Agreement.
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ARTICLE 5
ADDITIONAL COVENANTS OF THE PARTIES
5.1 REGISTRATION STATEMENT; PROXY STATEMENT
(a) As promptly as practicable after the date of this Agreement, Company
shall prepare and cause to be filed with the SEC the Proxy Statement and Parent
shall prepare and cause to be filed with the SEC the Form S-4 Registration
Statement, in which the Proxy Statement will be included as a prospectus, with
respect to the issuance of Parent Common Stock in the Merger. Each of Parent and
Company shall furnish all information concerning it and the holders of its
capital stock as the other may reasonably request in connection with the
preparation of the Form S-4 Registration Statement and Proxy Statement. Each of
Parent and Company shall use its Reasonable Efforts to cause the Form S-4
Registration Statement and the Proxy Statement to comply with the rules and
regulations promulgated by the SEC, to respond promptly to any comments of the
SEC or its staff and to have the Form S-4 Registration Statement declared
effective under the Securities Act as promptly as practicable after it is filed
with the SEC. Company will cause the Proxy Statement to be mailed to Company's
stockholders as promptly as practicable after the Form S-4 Registration
Statement is declared effective under the Securities Act. Each of Parent and
Company shall also promptly file, use its Reasonable Efforts to cause to become
effective as promptly as possible and, if required, mail to Company's
stockholders any amendment to the Form S-4 Registration Statement or Proxy
Statement that becomes necessary after the date the S-4 Registration Statement
is declared effective.
(b) If at any time prior to the Effective Time any event or circumstance
relating to Parent or its directors or officers is discovered by Parent which is
required to be set forth in an amendment or supplement to the Form S-4
Registration Statement or Proxy Statement, Parent shall promptly inform Company.
All documents that Parent is responsible for filing with the SEC in connection
with the Contemplated Transactions will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act.
(c) If at any time prior to the Effective Time any event or circumstance
relating to any of the Acquired Companies or their respective directors or
officers is discovered by Company which is required to be set forth in an
amendment or supplement to the Form S-4 Registration Statement or Proxy
Statement, Company shall promptly inform Parent. All documents that Company is
responsible for filing with the SEC in connection with the Contemplated
Transactions will comply as to form and substance in all material respects with
the applicable requirements of the Securities Act and the Exchange Act.
(d) Each of Parent and Company will advise the other, promptly after it
receives notice thereof, of the time when the Form S-4 Registration Statement
has become effective or any supplement or amendment thereto has been filed, the
issuance of any stop order, or any request by the SEC for amendment of the Proxy
Statement or Form S-4 Registration Statement or comments thereon or responses
thereto.
(e) Prior to the Effective Time, Parent shall use Reasonable Efforts to
obtain all regulatory approvals needed to ensure that the Parent Common Stock to
be issued in the Merger will be registered or qualified under the securities law
of every jurisdiction of the United States in which any registered holder of
Company Common Stock has an address of record on the record date for determining
the stockholders entitled to notice of and to vote at Company Stockholders'
Meeting (as defined in Section 5.2); provided, however, that Parent shall not be
required (i) to qualify to do business as a foreign corporation in any
jurisdiction in which it is not now qualified or (ii) to file a general consent
to service of process in any jurisdiction.
5.2 COMPANY STOCKHOLDERS' MEETING
(a) Company shall take all action necessary under all applicable Laws to
call, give notice of and hold a meeting of the holders of Company Common Stock
to vote on a proposal to adopt this Agreement
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("Company Stockholders' Meeting"). The Company Stockholders' Meeting shall be
held (on a date selected by Company in consultation with Parent) as promptly as
practicable after the Form S-4 Registration Statement is declared effective
under the Securities Act. Company shall ensure that all proxies solicited in
connection with the Company Stockholders' Meeting are solicited in compliance
with all applicable Laws.
(b) Subject to Section 5.2(c): (i) the Proxy Statement shall include a
statement to the effect that the board of directors of Company recommends that
Company's stockholders vote to adopt this Agreement at the Company Stockholders'
Meeting (the recommendation of Company's board of directors that Company's
stockholders vote to adopt this Agreement being referred to as the "Company
Board Recommendation"), and (ii) except as permitted by Section 5.2(c), the
Company Board Recommendation shall not be withdrawn or modified in a manner
adverse to Parent, and no resolution by the board of directors of Company or any
committee thereof to withdraw or modify the Company Board Recommendation in a
manner adverse to Parent shall be adopted or proposed.
(c) Notwithstanding anything to the contrary contained in Section 5.2(b),
at any time prior to the adoption of this Agreement by the Required Company
Stockholder Vote, the Company Board Recommendation may be withdrawn or modified
in a manner adverse to Parent if: (i) a proposal to acquire (by merger or
otherwise) all of the outstanding shares of Company Common Stock is made to
Company and is not withdrawn, (ii) Company provides Parent with at least three
business days prior notice of any meeting of Company's board of directors at
which such board of directors will consider and determine whether such offer is
a Superior Proposal, (iii) Company's board of directors determines in good faith
that such offer constitutes a Superior Proposal, (iv) Company's board of
directors determines in good faith, after having taken into account the advice
of Company's outside legal counsel, that, in light of such Superior Proposal,
the withdrawal or modification of the Company Board Recommendation is required
in order for Company's board of directors to comply with its fiduciary duties to
Company's stockholders under applicable Law, and (v) none of the Acquired
Companies nor any of their Representatives shall have violated in any material
respect any of the restrictions set forth in Section 4.3.
(d) Company's obligation to call, give notice of and hold the Company
Stockholders' Meeting in accordance with Section 5.2(a) shall not be limited or
otherwise affected by the commencement, disclosure, announcement or submission
of any Superior Proposal or other Acquisition Proposal, or by any withdrawal or
modification of the Company Board Recommendation.
5.3 CONSENTS; REGULATORY APPROVALS
(a) Subject to Section 5.3(c), each of Parent and Company shall use its
Reasonable Efforts to take, or cause to be taken, all actions necessary to
consummate the Merger and make effective the other Contemplated Transactions.
Without limiting the generality of the foregoing, but subject to Section 5.3(c),
Parent and Company shall (i) make all filings (if any) and give all notices (if
any) required to be made and given by such party in connection with the Merger
and the Contemplated Transactions and to submit promptly any additional
information requested in connection with such filings and notices, (ii) use its
Reasonable Efforts to obtain each Consent (if any) required to be obtained
(pursuant to any applicable Laws or Contract, or otherwise) by such party in
connection with any of the Contemplated Transactions and (iii) use its
Reasonable Efforts to lift any restraint, injunction or other legal bar to the
Merger. Company shall promptly deliver to Parent a copy of each such filing
made, each such notice given and each such Consent obtained by Company during
the Pre-Closing Period.
(b) Without limiting the generality of Section 5.3(a), each of Company and
Parent shall, promptly after the date of this Agreement, prepare and file the
notifications required under the HSR Act and any applicable Antitrust Laws in
connection with the Merger. Company and Parent shall respond as promptly as
practicable to any inquiries or requests received from any Governmental Body in
connection with antitrust or related matters and supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act and use its Reasonable Efforts to take or
cause to be taken, all other actions consistent with this Section 5.3(b)
reasonably necessary to
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cause the expiration or termination of the applicable waiting periods under the
HSR Act as soon as practicable. Each of Company and Parent shall (i) give the
other party prompt notice of the commencement or threat of commencement of any
Proceeding by or before any Governmental Body with respect to the Merger or any
of the Contemplated Transactions, (ii) keep the other party informed as to the
status of any such Proceeding or threat and (iii) promptly inform the other
party of any material communication concerning Antitrust Laws to or from any
Governmental Body regarding the Merger. Except as may be prohibited by any
Governmental Body or by any Law, Company and Parent will consult and cooperate
with one another, and will consider in good faith the views of one another, in
connection with any analysis, appearance, presentation, memorandum, brief,
argument, opinion or proposal made or submitted in connection with any
Proceeding under or relating to the HSR Act or any other Antitrust Law.
(c) Notwithstanding anything to the contrary contained in this Agreement,
Parent shall not have any obligation under this Agreement to: (i) dispose or
transfer or cause any of the Acquired Companies to dispose of or transfer any
assets, or to commit to cause any of the Acquired Companies to dispose of any
assets, (ii) discontinue or cause any of Acquired Companies to discontinue
offering any product or service, or to commit to cause any of the Acquired
Companies to discontinue offering any product or service, (iii) hold separate or
cause any of the Acquired Companies to hold separate any assets or operations
(either before or after the Closing Date), or to commit to cause any of the
Acquired Companies to hold separate any assets or operations, (iv) make or cause
any of the Acquired Companies to make any commitment (to any Governmental Body
or otherwise) regarding its future operations or the future operations of any of
the Acquired Companies, or (v) contest any Proceeding relating to the Merger if
Parent determines in good faith that contesting such Proceeding might not be
advisable.
5.4 EMPLOYEE BENEFITS
(a) Parent agrees to provide to former employees of the Acquired Companies
under the plans continued or to be established by Parent continuation group
health coverage under Code Section 4980B of the Code and ERISA Section 601 et
seq. ("COBRA Coverage") for any individuals receiving COBRA Coverage under the
Chiles Offshore Health Care Benefits Plan (the "Medical Plan") as of the
Effective Time and for any employees of the Acquired Companies and their
dependents who become eligible for and elect COBRA Coverage as a result of the
Contemplated Transactions; provided, however, nothing contained herein shall
obligate Parent to extend COBRA Coverage beyond its normal expiration period. As
soon as practicable after the Effective Time, the Acquired Companies shall
transfer to Parent or, if directed by Parent, to the Surviving Corporation, any
assets, including any insurance policies, held by the Acquired Companies
supporting the payment of benefits under the Medical Plan, the Chiles Offshore
Inc. group vision plan, the Chiles Offshore Inc. group life insurance plan, the
Chiles Offshore Inc. long-term disability plan and the Chiles Offshore Inc.
cafeteria plan (collectively, the "Group Insurance Plans"). Parent and the
Acquired Companies agree that any Acquired Company shall take such action as
appropriate to merge or terminate as of any date determined by Parent on or
after the Effective Time the Chiles Offshore Inc. 401(k) Retirement Savings Plan
(the "401(k) Plan") or any Group Insurance Plan, liquidate the assets of any
trust or funding arrangement for any such plan and settle all claims for
benefits under any such plan, in each case conditioned upon the occurrence of
the Merger.
(b) Parent and the Surviving Corporation shall cause all of their
respective employee benefit and compensation plans (including, without
limitation, pension, profit-sharing, retirement, savings, 401(k), vacation, paid
time-off, employee, and other employee financial, welfare or other benefit
plans) covering or otherwise benefiting any of the employees of Company who are
employed by the Surviving Corporation on or after the Effective Time (the
"Assumed Employees") to count any actual service performed for any Acquired
Company as recognized by any Acquired Company under the terms of the Company
Plans, without duplication of benefits, for purposes of eligibility to
participate, vesting and benefit accrual to the same extent such service was
recognized under the Company Plans. If Parent determines to terminate or merge
the 401(k) Plan or any Group Insurance Plan into its plans, the Assumed
Employees who are then employed by the Surviving Corporation shall be eligible
to participate immediately in the similar plans
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sponsored and maintained by Parent for its employees and Parent and the
Surviving Corporation shall also cause all waiting periods under each such plan
of Parent to be waived, to the extent necessary, with respect to such Assumed
Employees.
(c) Parent and the Surviving Corporation shall give Assumed Employees
credit, for purposes of Parent's and the Surviving Corporation's vacation and/or
other paid leave benefit programs, for such employees accrued and unpaid
vacation and/or paid leave balance as of the Effective Time.
(d) Parent agrees to the terms and conditions of the compensation
arrangements specified in Exhibit E.
(e) Nothing contained in this Agreement is intended to (i) confer upon any
Assumed Employee any right to continued employment after the Effective Time or
(ii) prevent Parent or the Surviving Corporation from reserving or exercising
the right to amend, modify, change or terminate or otherwise alter any of the
provisions of, or benefits provided under, any of the Company Plans, that are
assumed by Parent or the Surviving Corporation.
5.5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) All rights to indemnification existing in favor of those Persons who
are, or were, directors and officers of Company at or prior to the date of this
Agreement ("Indemnified Persons") shall survive the Merger and shall be observed
by the Surviving Corporation to the fullest extent permitted by Delaware Law for
a period of six years from the Effective Time, and Parent hereby guarantees the
performance of such obligations, it being understood that any Person entitled to
the benefits thereof may proceed directly against Parent without first
proceeding against the Surviving Corporation.
(b) From the Effective Time until September 18, 2006, the Surviving
Corporation shall maintain in effect, for the benefit of the Indemnified Persons
with respect to acts or omissions occurring prior to the Effective Time, the
existing policy of directors' and officers' liability insurance maintained by
Company as of the date of this Agreement in the form disclosed by Company to
Parent prior to the date of this Agreement ("Existing Policy"); provided,
however, that (i) the Surviving Corporation may substitute for the Existing
Policy a policy or policies of comparable coverage and (ii) the Surviving
Corporation shall not be required to pay annual premiums for the Existing Policy
(or for any substitute policies) in excess of $200,000 in the aggregate. In the
event any future annual premiums for the Existing Policy (or any substitute
policies) exceeds $200,000 in the aggregate, the Surviving Corporation shall be
entitled to reduce the amount of coverage of the Existing Policy (or any
substitute policies) to the amount of coverage that can be obtained for a
premium equal to $200,000.
5.6 DISCLOSURE
Parent and Company shall consult with each other before issuing any press
release or otherwise making any public statement with respect to the Merger or
any of the other Contemplated Transactions. Without limiting the generality of
the foregoing, Company shall not, and shall not permit any of its
Representatives to, make any disclosure regarding the Merger or any of the other
Contemplated Transactions unless (a) Parent shall have approved such disclosure
or (b) Company shall have been advised by its outside legal counsel that such
disclosure is required by applicable Law or the rules and regulations of any
applicable securities exchanges.
5.7 AFFILIATES AND AFFILIATE AGREEMENTS
(a) Company shall use its Reasonable Efforts to cause each Person
identified in Section 5.7(a) of the Company Disclosure Schedule and each other
Person who is or becomes (or may be deemed to be) an "affiliate" (as that term
is used in Rule 145 under the Securities Act) of Company to execute and deliver
to Parent, prior to the date of the mailing of the Proxy Statement to Company's
stockholders, an Affiliate Agreement in the form of Exhibit D (each, an
"Affiliate Agreement").
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(b) Company shall terminate the agreements identified in Section 5.7(b) of
the Company Disclosure Schedule, with termination to be effective as of the
Effective Time. Company shall not incur any Liability in connection with such
termination of such agreements and none of the Acquired Companies shall have any
Liability under such agreements from and after the Effective Time.
5.8 RESIGNATIONS
Company shall use its Reasonable Efforts to obtain and deliver to Parent
the resignation of each officer and director of each of the Acquired Companies
prior to Closing.
5.9 LISTING
Parent shall use Reasonable Efforts to cause the shares of Parent Common
Stock being issued in the Merger to be approved for listing at or prior to the
Closing Date (subject to notice of issuance) on the NYSE.
5.10 SECTION 16B-3
Parent, Merger Sub, and Company shall use its Reasonable Efforts as may be
required to cause the Contemplated Transactions and any other dispositions of
equity securities of Company (including derivative securities) or acquisitions
of equity securities of Parent by each individual who (a) is a director or
officer of Company, or (b) at the Effective Time will become a director or
officer of Parent, to be exempt under Rule 16b-3 promulgated under the Exchange
Act.
5.11 TAXES
Company, Parent and Merger Sub shall execute and deliver to Weil, Gotshal &
Manges LLP, counsel to Company, and Baker & McKenzie, counsel to Parent,
certificates at such time or times as reasonably requested by such law firms in
connection with their respective deliveries of opinions to the effect that the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368 of the Code. Prior to the Effective Time, none
of Company, Parent or Merger Sub shall take or cause to be taken any action
which would cause to be untrue (or fail to take or cause not to be taken any
action which would cause to be untrue) any of the representations in such
previously-agreed certificates.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES
The obligation of each party to effect the Merger and otherwise consummate
the Contemplated Transactions is subject to the satisfaction, at or prior to
Closing, of each of the following conditions:
6.1 EFFECTIVENESS OF FORM S-4 REGISTRATION STATEMENT
The Form S-4 Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending the effectiveness of the Form S-4 Registration Statement shall have
been issued by the SEC, and no Proceeding for that purpose shall have been
initiated by the SEC and all necessary approvals under state securities Laws or
the Securities Act or the Exchange Act relating to the issuance of the Parent
Common Stock shall have been received.
6.2 COMPANY STOCKHOLDER APPROVAL
This Agreement shall have been duly adopted by the Required Company
Stockholder Vote.
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6.3 HSR ACT
The waiting period applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated and, on the Closing Date, there
shall not be in effect any voluntary agreement between Parent and the Federal
Trade Commission or the Department of Justice pursuant to which Parent has
agreed not consummate the Merger for a period of time (it being understood that
no such agreement will be entered into without Company's consent); any similar
waiting period under any applicable Antitrust Law shall have expired or been
terminated and any Consent required under any applicable Antitrust Law shall
have been obtained.
6.4 LISTING
The shares of Parent Common Stock to be issued in the Merger pursuant to
this Agreement shall have been approved for listing (subject to notice of
issuance) on the NYSE.
6.5 NO RESTRAINTS
No temporary restraining order, preliminary or permanent injunction or
other order preventing the consummation of the Merger shall have been issued by
any court of competent jurisdiction or any other Governmental Body and shall
remain in effect, and there shall not be any Law enacted, adopted or deemed
applicable to the Merger that makes consummation of the Merger illegal;
provided, however, that, prior to invoking this condition, each party agrees to
comply with Section 5.3, and with respect to other matters not covered by
Section 5.3, to use its Reasonable Efforts to have any such order or injunction
lifted or vacated.
ARTICLE 7
CONDITIONS PRECEDENT TO PARENT'S AND MERGER SUB'S OBLIGATION TO CLOSE
The obligations of Parent and Merger Sub to effect the Merger and to take
the other actions required to be taken by Parent and Merger Sub at the Closing
is subject to the satisfaction, on or before the Closing Date, of each of the
following conditions (any of which may be waived by Parent and Merger Sub, in
whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
The representations and warranties of Company contained in this Agreement
shall be true and correct in all respects as of the Closing Date (without taking
into account any qualification as to materiality or Company Material Adverse
Effect), except to the extent such representations and warranties expressly
relate to an earlier date (in which case as of such earlier date), and except
for such breaches of representations and inaccuracies in warranties that do not
have, and are not reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect.
7.2 COMPANY'S PERFORMANCE
Company shall have performed, in all material respects, its covenants and
agreements contained in this Agreement required to be performed on or prior to
the Closing Date.
7.3 CONSENTS
Each of the Governmental Authorizations and Consents identified in Section
2.2(b) of the Company Disclosure Schedule must have been obtained and must be in
full force and effect, in each case, without limitation or condition that has
had or would reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect or a Parent Material Adverse Effect.
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7.4 NO MATERIAL ADVERSE CHANGE
At any time after the date of this Agreement, there shall not have been any
event or occurrence, or series of events or occurrences, that has had or is
reasonably likely to have, individually or in the aggregate with all other
events or occurrences since the date of this Agreement, a Company Material
Adverse Effect.
7.5 OFFICER'S CERTIFICATE
Company shall have delivered to Parent and Merger Sub a certificate,
executed on behalf of Company by an executive officer of Company, and dated as
of the Closing Date that the conditions set forth in Sections 7.1, 7.2, 7.3 and
7.4 have been duly satisfied.
7.6 AFFILIATE AGREEMENTS
Parent shall have received Affiliate Agreements from each Person identified
in Section 5.7(a) of the Company Disclosure Schedule.
7.7 DISSENTING SHARES
The number of Dissenting Shares (if any) with respect to which the holders
thereof shall have properly demanded appraisal in accordance with the Delaware
General Corporation Law before the taking of a vote on the Merger at the Company
Stockholders' Meeting or any adjournment thereof, the holders of which shall not
have withdrawn such demand as of the Closing Date, shall not exceed ten percent
(10%) of the issued and outstanding Company Common Stock entitled to vote
thereon.
7.8 TAX OPINION
Parent shall have received an opinion of Baker & McKenzie, in customary
form, dated the Effective Time, that the Merger constitutes a reorganization
within the meaning of Section 368 of the Code.
ARTICLE 8
CONDITIONS PRECEDENT TO COMPANY'S OBLIGATION TO CLOSE
Company's obligation to effect the Merger and to take the other actions
required to be taken by Company at the Closing is subject to the satisfaction,
on or before the Closing Date, of each of the following conditions (any of which
may be waived by Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
The representations and warranties of Parent and Merger Sub contained in
this Agreement shall be true and correct in all respects as of the Closing Date
(without taking into account any qualifications to materiality or Parent
Material Adverse Effect), except to the extent such representations and
warranties expressly relate to an earlier date (in which case as of such earlier
date), and except for such breaches of representations and inaccuracies in
warranties that do not have, and are not reasonably likely to have, individually
or in the aggregate, a Parent Material Adverse Effect.
8.2 PARENT'S AND MERGER SUB'S PERFORMANCE
Parent and Merger Sub shall have performed, in all material respects, their
respective covenants and agreements contained in this Agreement required to be
performed on or prior to the Closing Date.
8.3 NO MATERIAL ADVERSE CHANGE
At any time after the date of this Agreement, there shall not have been any
event or occurrence, or series of events or occurrences, that has had or is
reasonably likely to have, individually or in the aggregate with all other
events or occurrences since the date of this Agreement, a Parent Material
Adverse Effect.
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8.4 OFFICER'S CERTIFICATE
Parent shall have delivered to Company a certificate, executed on behalf of
Parent and Merger Sub by an executive officer of Parent, and dated as of the
Closing Date that the conditions set forth in Sections 8.1, 8.2 and 8.3 have
been duly satisfied.
8.5 TAX OPINION.
Company shall have received an opinion of Weil, Gotshal & Manges LLP, in
customary form, dated the Effective Time, that the Merger constitutes a
reorganization within the meaning of Section 368 of the Code.
ARTICLE 9
TERMINATION
9.1 TERMINATION
This Agreement may be terminated prior to the Effective Time:
(a) by mutual written consent of Parent and Company;
(b) by either Parent or Company if the Merger shall not have been
consummated by December 15, 2002 (unless the failure to consummate the Merger is
attributable to a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party at or prior to the Effective Time);
(c) by either Parent or Company if a court of competent jurisdiction or
other Governmental Body shall have issued a final and non-appealable order,
decree or ruling, or shall have taken any other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger;
(d) by either Parent or Company if (i) the Company Stockholders' Meeting
(including any adjournments and postponements thereof) shall have been held and
completed and Company's stockholders shall have voted on a proposal to adopt
this Agreement, and (ii) this Agreement shall not have been adopted at such
meeting (and shall not have been adopted at any adjournment or postponement
thereof) by the Required Company Stockholder Vote; provided, however, that
Company shall not be permitted to terminate this Agreement pursuant to this
Section 9.1(d) unless Company shall contemporaneously make the payment(s)
required to be made to Parent pursuant to Section 9.3(a);
(e) by Parent (at any time prior to the adoption of this Agreement by the
Required Company Stockholder Vote) if a Company Triggering Event shall have
occurred;
(f) by Company, if prior to the adoption of this Agreement by the Required
Company Stockholder Vote (i) the board of directors of Company has received a
Superior Proposal, (ii) in light of such Superior Proposal the board of
directors of Company shall have determined in good faith, after consultation
with its outside legal advisors, that termination is required in order for the
board of directors of the Company to comply with its fiduciary obligations to
Company's stockholders under applicable Law, (iii) Company has complied in all
material respects with Section 4.3, (iv) Company contemporaneously pays the fee
provided for under Section 9.3(b) and (v) the board of directors of Company
concurrently approves, and Company concurrently enters into, a binding
definitive written agreement providing for the implementation of such Superior
Proposal; provided that Company may not effect such termination pursuant to this
Section 9.1(f) unless and until (i) Parent receives at least three business
days' prior written notice from Company of its intention to effect such
termination pursuant to this Section 9.1(f); and (ii) during such three business
day period, Company shall, and shall cause its respective financial and legal
advisors to, consider any adjustment in the terms and conditions of this
Agreement that Parent may propose;
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(g) by Parent (i) if any of Company's representations and warranties shall
have been inaccurate as of the date of this Agreement, such that the condition
set forth in Section 7.1 would not be satisfied, or (ii) if (A) any of Company's
representations and warranties become inaccurate as of a date subsequent to the
date of this Agreement (as if made on such subsequent date), such that the
condition set forth in Section 7.1 would not be satisfied and (B) such
inaccuracy has not been cured by Company within 10 business days after its
receipt of written notice thereof and remains uncured at the time notice of
termination is given, or (iii) any of Company's covenants contained in this
Agreement shall have been breached, such that the condition set forth in Section
7.2 would not be satisfied;
(h) by Company (i) if any of Parent's representations and warranties shall
have been inaccurate as of the date of this Agreement, such that the condition
set forth in Section 8.1 would not be satisfied, or (ii) if (A) any of Parent's
representations and warranties shall have become inaccurate as of a date
subsequent to the date of this Agreement (as if made on such subsequent date),
such that the condition set forth in Section 8.1 would not be satisfied and (B)
such inaccuracy has not been cured by Parent within 10 business days after its
receipt of written notice thereof and remains uncured at the time notice of
termination is given, or (iii) if any of Parent's covenants contained in this
Agreement shall have been breached such that the condition set forth in Section
8.2 would not be satisfied;
(i) by Parent if, since the date of this Agreement, there shall have
occurred any event or occurrence such that the condition set forth in Section
7.4 would not be satisfied; or
(j) by Company if, since the date of this Agreement, (i) there shall have
occurred any event or occurrence such that the condition set forth in Section
8.3 would not be satisfied or (ii) a Company Material Adverse Effect within the
meaning of the last sentence of such definition shall have occurred.
9.2 EFFECT OF TERMINATION
If this Agreement is terminated as provided in Section 9.1, this Agreement
shall be of no further force or effect; provided, however, that (a) this Section
9.2, Section 9.3 and Article 10 shall survive the termination of this Agreement
and shall remain in full force and effect, and (b) the termination of this
Agreement shall not relieve any party from any Liability for any material
inaccuracy in or breach of any representation or any material breach of any
warranty, covenant or other provision contained in this Agreement.
9.3 EXPENSES; TERMINATION FEES
(a) Except as set forth in this Section 9.3, all fees and expenses incurred
in connection with this Agreement and the Contemplated Transactions shall be
paid by the party incurring such expenses (including, for the avoidance of doubt
payment by Parent of any fees payable pursuant to the HSR Act), whether or not
the Merger is consummated; provided, however, that:
(i) Parent and Company shall share equally all fees and expenses,
other than attorneys' fees, incurred in connection with the filing,
printing and mailing of the Form S-4 Registration Statement and the Proxy
Statement and any amendments or supplements thereto; and
(ii) If this Agreement is terminated by Parent or Company pursuant to
Section 9.1(d), then (without limiting any obligation of Company to pay any
fee payable pursuant to Section 9.3(b)) Company shall make a nonrefundable
cash payment to Parent, at the time specified below, in an amount equal to
the aggregate amount of all fees and expenses (including all attorneys'
fees, accountants' fees and filing fees) that have been paid or that may
become payable by or on behalf of Parent in connection with the preparation
and negotiation of this Agreement and otherwise in connection with the
Merger or any other Contemplated Transaction; provided, in no event shall
the amount of such fees and expenses exceed $1,000,000. In the case of
termination of this Agreement by
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Company pursuant to Section 9.1(d) any nonrefundable payment required to be
made pursuant to this clause (ii) shall be paid by Company
contemporaneously with such termination; and in the case of termination of
this Agreement by Parent pursuant to Section 9.1(d), any nonrefundable
payment required to be made pursuant this clause (ii) shall be paid by
Company within two business days after such termination.
(b) If this Agreement is terminated by (i) Parent or Company pursuant to
Section 9.1(d) and at the time of the Company Stockholders' Meeting an
Acquisition Proposal shall have been disclosed, announced, commenced, submitted
or made and such Acquisition Proposal is consummated within 12 months of such
termination, (ii) Parent pursuant to Section 9.1(e) or (iii) Company pursuant to
Section 9.1(f), then Company shall pay to Parent, in cash at the time specified
in the next sentence (and less the amounts paid, if any pursuant to Section
9.3(a)(ii)), a nonrefundable fee in the amount equal to $22,500,000. In the case
of termination of this Agreement by Company pursuant to Section 9.1(d), the fee
referred to in the preceding sentence shall be paid by Company on the date of
consummation of the Acquisition Transaction provided such consummation occurs
within 12 months from the date of termination. In the case of termination of
this Agreement by Parent pursuant to Section 9.1(e), the fee referred to in the
preceding sentence shall be paid by Company within two business days after such
termination. In the case of termination of this Agreement by Company pursuant to
Section 9.1(f), the fee referred to in the preceding sentence shall be paid by
Company contemporaneously with such termination.
(c) If Company fails to pay when due any amount payable under this Section
9.3, then Company shall reimburse Parent for all costs and expenses (including
attorney's fees) incurred in connection with the collection of such overdue
amount and the enforcement by Parent of its rights under this Section 9.3.
ARTICLE 10
GENERAL PROVISIONS
10.1 CONFIDENTIALITY
This Agreement is not intended to supersede or replace the Confidentiality
Agreement dated as of May 6, 2002 between Company and Parent (the
"Confidentiality Agreement"). The Confidentiality Agreement will remain in full
force and effect in accordance with its terms and Parent will continue to be
obligated to perform and comply with its obligations under the Confidentiality
Agreement until the Closing, after which the Confidentiality Agreement will
terminate in full at the Effective Time and Parent will have no further
obligations thereunder.
10.2 NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed given to a party when
(a) delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid), (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment, or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested;
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number, e-mail address or individual
as a party may designate by notice to the other parties):
If to Company:
Chiles Offshore Inc.
11200 Richmond Avenue, Suite 480
Houston, Texas 77082-2618
Attention: Dick Fagerstal
Facsimile: 832-486-3540
E-mail Address: dfagerstal@chilesoffshore.com
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with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: David E. Zeltner, Esq.
Facsimile: (212) 310-8007
E-mail Address: david.zeltner@weil.com
If to Parent or Merger Sub:
ENSCO International Incorporated
Attention: C. Christopher Gaut
Address: 1445 Ross Avenue, Suite 2700
Dallas, Texas 75002
Facsimile No.: 214-855-0300
E-mail Address: cgaut@enscous.com
with a copy (which will not constitute notice) to:
Baker & McKenzie
Attention: Daniel W. Rabun
Address: 2001 Ross Avenue, Suite 2400
Dallas, Texas 75201
Facsimile No.: 214-978-3099
E-mail Address: daniel.w.rabun@bakernet.com
10.3 FURTHER ACTIONS
Upon the request of any party to this Agreement, the other parties will (a)
furnish to the requesting party any additional information, (b) execute and
deliver, at their own expense, any other documents and (c) take any other
actions as the requesting party may reasonably require to more effectively carry
out the intent of this Agreement and the Contemplated Transactions.
10.4 INCORPORATION OF SCHEDULES AND EXHIBITS
The Schedules and Exhibits identified in this Agreement, including the
Company Disclosure Schedule and the Parent Disclosure Schedule and any
supplements thereto, are incorporated herein by reference and made a part of
this Agreement.
10.5 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
Without limiting the foregoing, no party makes any representation, warranty or
covenant not expressly set forth in this Agreement. This Agreement may be
amended with the approval of the respective boards of directors of Company,
Parent and Merger Sub at any time (whether before or after adoption of this
Agreement by the stockholders of Company); provided, however, that after any
such adoption of this Agreement by Company's stockholders, no amendment shall be
made which by Law requires further approval of the stockholders of Company
without the further approval of the stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties.
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10.6 DRAFTING AND REPRESENTATION
The parties have participated jointly in the negotiation and drafting of
this Agreement. No provision of this Agreement will be interpreted for or
against any party because that party or its legal representative drafted the
provision.
10.7 SEVERABILITY
If a court of competent jurisdiction holds any provision of this Agreement
invalid or unenforceable, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
10.8 ASSIGNMENT; SUCCESSORS; NO THIRD-PARTY RIGHTS
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto, whether by operation
of Law (including, but not limited to, by merger or consolidation) or otherwise,
without the prior written consent of the other parties. Any assignment in
violation of the preceding sentence shall be void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns. Nothing
expressed or referred to in this Agreement will be construed to give any Person,
other than the parties to this Agreement, any legal or equitable right, remedy
or claim under or with respect to this Agreement or any provision of this
Agreement except such rights as may inure to a successor or permitted assignee
under this Section and for the provisions of Article 1, Section 5.4 and Section
5.5 (collectively, the "Third-Party Provisions"). The Third-Party Provisions may
be enforced by the beneficiaries thereof.
10.9 ENFORCEMENT OF AGREEMENT
The parties agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement, in addition to any other remedy to which they are entitled at Law or
in equity.
10.10 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither any failure nor any delay by any party in exercising
any right, power or privilege under this Agreement or any of the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable Law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in a written document signed by the other party, (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is given and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of that party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
10.11 GOVERNING LAW
This Agreement will be governed by and construed under the Laws of the
State of Delaware without regard to conflicts of Laws principles that would
require the application of any other Law.
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10.12 JURISDICTION; SERVICE OF PROCESS
Any action, hearing, suit or proceeding arising out of or relating to this
Agreement or any Contemplated Transaction must be brought in the courts of the
State of Delaware, County of New Castle, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of Delaware.
Each of the parties irrevocably submits to the exclusive jurisdiction of each
such court in any such Proceeding and waives any objection it may now or
hereafter have to venue or to convenience of forum. The parties agree that any
or all of them may file a copy of this Section with any court as written
evidence of the knowing, voluntary and bargained agreement between the parties
irrevocably to waive any objections to venue or to convenience of forum. Process
in any Proceeding referred to in this Section may be served on any party
anywhere in the world.
10.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same Agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties.
The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.
ENSCO INTERNATIONAL INCORPORATED
By: /s/ CARL F. THORNE
------------------------------------
Carl F. Thorne
Chairman of the Board and Chief
Executive Officer
CHORE ACQUISITION, INC.
By: /s/ C. CHRISTOPHER GAUT
------------------------------------
C. Christopher Gaut
President
CHILES OFFSHORE INC.
By: /s/ DICK FAGERSTAL
------------------------------------
Dick Fagerstal
Senior Vice President and Chief
Financial Officer
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EXHIBIT A
CONSTRUCTION AND DEFINITIONS
1. CONSTRUCTION
Any reference in the Agreement (as defined below) to an "Article,"
"Section" or "Schedule" refers to the corresponding Article, Section or Schedule
of or to the Agreement, unless the context indicates otherwise. The headings of
Articles and Sections are provided for convenience only and should not affect
the construction or interpretation of the Agreement. All words used in the
Agreement should be construed to be of such gender or number as the
circumstances require. The terms "include" and "including" indicate examples of
a foregoing general statement and not a limitation on that general statement.
Any reference to a statute refers to the statute, any amendments or successor
legislation, and all regulations promulgated under or implementing the statute,
as in effect at the relevant time. Any reference to a Contract or other document
as of a given date means the Contract or other document as amended, supplemented
and modified from time to time through such date.
2. DEFINITIONS
For the purposes of the Agreement, the following terms and variations on
them have the meanings specified in this Section:
"401(k) Plan" is defined in Section 5.4.
"Accounts Receivable" means (a) all trade accounts receivable and other
rights to payment from customers of the Acquired Companies and the full benefit
of all security for such accounts or rights to payment, including all trade
accounts receivable representing amounts receivable in respect of goods shipped,
products sold or services rendered to customers of the Acquired Companies, (b)
all other accounts or notes receivable of the Acquired Companies and the full
benefit of all security for such accounts or notes and (c) any claim, remedy or
other right related to any of the foregoing.
"Acquired Companies" is defined in Section 2.1(a).
"Acquisition Proposal" means any offer, proposal, inquiry or indication of
interest (other than an offer, proposal, inquiry or indication of interest by
Parent) contemplating or otherwise relating to any Acquisition Transaction.
"Acquisition Transaction" means any transaction or series of transactions
involving:
(a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange offer
or other similar transaction (i) in which any of the Acquired Companies is a
constituent corporation, (ii) in which a Person or "group" (as defined in the
Exchange Act) of Persons directly or indirectly acquires beneficial or record
ownership of securities representing more than 15% of the outstanding securities
of any class of voting securities of any of the Acquired Companies, or (iii) in
which any of the Acquired Companies issues or sells securities representing more
than 20% of the outstanding securities of any class of voting securities of any
of the Acquired Companies; or
(b) any sale (other than sales of inventory in the Ordinary Course of
Business), lease (other than in the Ordinary Course of Business), exchange,
transfer (other than sales of inventory in the Ordinary Course of Business),
license (other than nonexclusive licenses in the Ordinary Course of Business),
acquisition or disposition of any business or businesses or assets that
constitute or account for 20% or more of the consolidated net revenues, net
income or assets of the Acquired Companies.
"Adverse Consequence" means any Liability, loss, damage (including
incidental and consequential damages), claim, cost, deficiency, diminution of
value or expense (including costs of investigation and defense, penalties and
reasonable attorney's fees and costs), whether or not involving a third-party
claim.
"Affiliate Agreement" is defined in Section 5.7.
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"Agreement" is defined in the first paragraph of the Agreement.
"Antitrust Laws" means United States federal and state statutes and foreign
statutes, and the rules and regulations promulgated thereunder, to protect trade
and commerce from unlawful restraints, price discriminations, price fixing and
monopolies.
"ASE" means the American Stock Exchange.
"Assumed Employees" is defined in Section 5.4(b).
"Assumed Stock Option" is defined in Section 1.8(a).
"Cash Consideration" is defined in Section 1.5(a).
"Certificate of Merger" is defined in Section 1.3.
"Cleanup" means any investigative, monitoring, cleanup, removal,
containment or other remedial or response action required by any Environmental
Law or Occupational Safety and Health Law. The terms "removal," "remedial" and
"response action" include the types of activities covered by the Comprehensive
Environmental Response, Compensation, and Liability Act.
"Closing" is defined in Section 1.3.
"Closing Date" is defined in Section 1.3.
"COBRA Coverage" is defined in Section 5.4(a).
"Code" is defined in the Preliminary Statements.
"Common Stock Consideration" is defined in Section 1.5(a).
"Company" is defined in the first paragraph of the Agreement.
"Company Board Recommendation" is defined in Section 5.2(b).
"Company Common Stock" means the common stock, par value $0.01 per share,
of Company.
"Company Contract" means any Contract (a) under which any Acquired Company
has or may acquire rights, (b) under which any Acquired Company is or may become
subject to Liability or (c) by which any Acquired Company or any of its assets
is or may become bound.
"Company Disclosure Schedule" means the Disclosure Schedule delivered
pursuant to Article 2 by Company to Parent concurrently with the execution and
delivery of the Agreement, together with any updates to it permitted by the
Agreement.
"Company Drilling Rigs" means the drilling rigs owned by Company described
in Company SEC Documents.
"Company Material Adverse Effect" means an event, violation, inaccuracy,
circumstance or other matter (considered together with all other matters that
would constitute exceptions to the representations and warranties set forth in
the Agreement but for the presence of "Material Adverse Effect" or other
materiality qualifications, or any similar qualifications, in such
representations and warranties) that has had or would reasonably be expected to
have a material adverse effect on (a) the business, condition, capitalization,
assets, Liabilities, operations or financial performance of the Acquired
Companies taken as a whole, (b) the ability of Company to consummate any of the
Contemplated Transactions or to perform any of its obligations under the
Agreement, or (c) Parent's ability to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to the stock of the Surviving
Corporation; provided, however, that the following shall not be deemed to
constitute, create or cause a Material Adverse Effect: any changes,
circumstances or effects that (i) affect generally the drilling services
industry, and do not disproportionately affect such Persons, and that result
from national, regional, state or local economic conditions, from general
developments or conditions in the industry in which the Company conducts
business, from acts of war or terrorism, from changes in laws, rules or
regulations applicable to such party
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or its subsidiaries or from other general economic conditions, facts or
circumstances that are not subject to the control or such party, or (ii) that
result from the Contemplated Transactions and public announcement thereof. A
Company Material Adverse Effect shall also be deemed to have occurred in the
event that prior to the Effective Time any of the Company Drilling Rigs is lost
(including, without limitation, as a result of any condemnation, confiscation,
requisition or other taking of title, seizure or forfeiture), totally destroyed
or damaged to such an extent that the cost of repairs and/or reconstruction
constitutes a constructive, arranged or total loss regardless of the amount of
any insurance coverage.
"Company Option" is defined in Section 2.3(b).
"Company Plan" means any Plan as to which any Acquired Company has
Liability (contingent or otherwise).
"Company Preferred Stock" means the preferred stock, par value $0.01 per
share, of Company.
"Company SEC Documents" is defined in Section 2.4(a).
"Company Stock Certificate" is defined in Section 1.6(a).
"Company Stockholders' Meeting" is defined in Section 5.2(a).
"Company Stock Option Plan" means the Chiles 2000 Stock Option Plan, as
amended.
"Company Triggering Event" means (a) the failure of the board of directors
of Company to make the Company Board Recommendation, or the withdrawal or
modification of the board of directors' approval of the Contemplated
Transactions or the Company Board Recommendation in a manner adverse to the
Parent, (b) the failure of Company to include in the Proxy Statement the Company
Board Recommendation or a statement to the effect that the board of directors of
Company has determined and believes that the Merger is advisable and in the best
interests of Company's stockholders; (c) approval, endorsement or recommendation
by the board of directors of Company of any Acquisition Proposal; or (d)
commencement of a tender or exchange offer relating to securities of Company and
the failure of Company to send to its stockholders, within ten business days
after the commencement of such tender or exchange offer, a statement disclosing
that the board of directors of Company recommends rejection of such tender or
exchange offer.
"Confidentiality Agreement" is defined in Section 10.1.
"Consent" means any approval, consent, ratification, waiver or other
authorization.
"Contemplated Transactions" means all of the transactions to be carried out
pursuant to the Agreement, including the Merger, the performance by the parties
of their other obligations under the Agreement and the execution, delivery and
performance of any ancillary agreements.
"Contract" means any (i) contract, agreement, commitment, understanding,
lease, license, franchise, warranty, guaranty, mortgage, note, bond or other
instrument or consensual obligation (whether written or oral and whether express
or implied) that is legally binding, or (ii) any letter of intent or expression
of interest that evidences an intent or desire to enter into an arrangement
described in clause (i).
"Contravene" or "Contravention" -- an act or omission would "Contravene"
something if, as the context requires:
(a) the act or omission would conflict with it, violate it, result in
a breach or violation of or failure to comply with it, or constitute a
default under it;
(b) the act or omission would give any Governmental Body or other
Person the right to challenge, revoke, withdraw, suspend, cancel, terminate
or modify it, to exercise any remedy or obtain any relief under it, or to
declare a default or accelerate the maturity of any obligation under it; or
(c) the act or omission would result in the creation of an Encumbrance
on the stock or any of the assets of any of the Acquired Companies.
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"Dissenting Shares" is defined in Section 1.11.
"Drilling Contract" is defined in Section 2.9(i).
"Effective Time" is defined in Section 1.3.
"Encumbrance" means any charge, claim, mortgage, servitude, easement, right
of way, community or other marital property interest, covenant, equitable
interest, license, lease or other possessory interest, lien, option, pledge,
security interest, preference, priority, right of first refusal or similar
restriction; provided, however, that the term "Encumbrance" does not include (a)
mechanic's, materialman's or similar liens with respect to amounts arising or
incurred in the ordinary course of business, (b) statutory liens for current
Taxes, not yet delinquent or the amount or validity of which is being contested
in good faith by appropriate Proceedings, (c) liens securing rental payments
under capital lease arrangements, (d) defects, exceptions, restrictions,
easements, rights of way and encumbrances disclosed in policies of title
insurance or zoning, entitlement and other land use and environmental
regulations by any Governmental Body, and (e) such other imperfections in title,
charges, easements, restrictions and encumbrances which do not materially
detract from the value of or materially interfere with the present use of any
property subject thereto or affected thereby.
"Entity" means any corporation, general partnership, limited liability
company, limited partnership, limited liability partnership, joint venture,
estate, trust, company, firm, society or other enterprise, association or
organization.
"Environment" means soil, land surface or subsurface strata, surface waters
(including navigable water and ocean waters), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air), plant life, animal
life and any other similar medium or natural resource.
"Environmental, Health and Safety Liabilities" means any Adverse
Consequence or other responsibility arising from or under an Environmental Law
or Occupational Safety and Health Law, including those consisting of or relating
to (a) any environmental, health or safety matter or condition (including
on-site or off-site contamination, occupational safety and health, and
regulation of any chemical substance or product), (b) any fine, penalty,
judgment, award, settlement, Proceeding, damages, loss, claim, demand and
response, investigative, monitoring, remedial or inspection cost or expense
arising under Environmental Law or Occupational Safety and Health Law, (c)
financial responsibility under any Environmental Law or Occupational Safety and
Health Law for Cleanup costs or corrective action, (whether or not such Cleanup
has been required or requested by any Governmental Body or other Person) and for
any natural resource damage, or (d) any other compliance, corrective or remedial
measures required under any Environmental Law or Occupational Safety and Health
Law.
"Environmental Law" means any Law that requires or relates to (a) advising
appropriate Governmental Bodies, employees or the public of intended or actual
Releases of pollutants or hazardous substances or materials, violations of
discharge limits or other prohibitions and the commencement of activities, such
as resource extraction or construction, that could have significant impact on
the Environment, (b) preventing or reducing to acceptable levels the Release of
pollutants or hazardous substances or materials into the Environment, (c)
reducing the quantities, preventing the Release or minimizing the hazardous
characteristics of wastes that are generated, (d) assuring that products are
designed, formulated, packaged and used so that they do not present unreasonable
risks to human health or the Environment when used or disposed of, (e)
protecting resources, species or ecological amenities, (f) reducing to
acceptable levels the risks inherent in the transportation of hazardous
substances, pollutants, oil or other potentially harmful substances, (g) Cleanup
of pollutants that have been Released, preventing the threat of Release, or
paying the costs of such Cleanup or prevention, or (h) making responsible
parties pay private parties, or groups of them, for damages done to their health
or the Environment, or permitting self-appointed representatives of the public
interest to recover for injuries done to public assets.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"ERISA Affiliate" means any other Person that, together with any Acquired
Company, is or would have been at any date of determination occurring within the
preceding six years treated as a single employer under Code Section 414 or ERISA
Section 4001(b)(1).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" is defined in Section 1.7(a).
"Exchange Fund" is defined in Section 1.7(a).
"Exchange Ratio" is defined in Section 1.5(a).
"Existing Policy" is defined in Section 5.5(b).
"Facility" means any Real Property or any equipment (including motor
vehicles, tank cars and rolling stock) owned or operated by any of the Acquired
Companies, including the Real Property and equipment used or operated by the
Acquired Companies at the respective locations of the Real Property listed in
Section 2.10 of Company Disclosure Schedule. For purposes of Section 2.17 and
the definition of "Hazardous Activity," the term also includes any Real Property
or equipment formerly owned or operated by any of the Acquired Companies or any
predecessor Person.
"Form S-4 Registration Statement" means the registration statement on Form
S-4 to be filed with the SEC by Parent in connection with issuance of Parent
Common Stock in the Merger, as said registration statement may be amended prior
to the time it is declared effective by the SEC.
"GAAP" means generally accepted accounting principles for financial
reporting in the United States.
"Governing Document" means any charter, articles, bylaws, certificate,
statement, statutes or similar document adopted, filed or registered in
connection with the creation, formation or organization of an entity, and any
Contract among all equityholders, partners or members of an entity.
"Governmental Authorization" means any Consent, license, permit or
registration issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Law.
"Governmental Body" means any (a) nation, region, state, county, city,
town, village, district or other jurisdiction, (b) federal, state, local,
municipal, foreign or other government, (c) governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department
or other entity and any court or other tribunal), (d) multinational
organization, (e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, policy, regulatory or taxing authority or
power of any nature, or (f) official of any of the foregoing.
"Group Insurance Plan" is defined in Section 5.4.
"Hazardous Activity" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about or from any of the Facilities or any part thereof into the Environment,
and any other act, business, operation or thing that increases the danger, or
risk of danger, or poses an unreasonable risk of harm to individuals or property
on or off the Facilities, or that may affect the value of any of the Facilities
or the Acquired Companies.
"Hazardous Material" means any waste or other substance that is listed,
defined, designated or classified as, or otherwise determined to be, hazardous,
radioactive or toxic or a pollutant or a contaminant under any Environmental
Law, including any admixture or solution thereof, and specifically including
petroleum and all derivatives thereof or synthetic substitutes therefor and
asbestos or asbestos-containing materials.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
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"Improvements" means all buildings, structures, fixtures and other
improvements located on the Real Property.
"Indemnified Persons" is defined in Section 5.5(a).
"Intellectual Property" means any intellectual property owned, used or
licensed (as licensor or licensee) by the Acquired Companies, including (a)
Company's name, assumed business names and corporate names, (b) patents, patent
disclosures, trademarks, service marks, trade dress, trade names, logos,
copyrights and mask works, and all registrations, applications and goodwill
associated with the foregoing, (c) all computer software (including source and
object codes), databases, data models or structures, algorithms, system
architectures and related documentation, data and manuals, (d) trade secrets,
know-how and confidential business information (including information concerning
products, product specifications, data, formulae, compositions, designs,
sketches, photographs, graphs, drawings, samples, inventions, discoveries,
ideas, past, current, and planned research and development, current and planned
methods and processes, client and customer lists and files, current and
anticipated client and customer requirements, vendor and supplier lists and
files, price lists, market studies, business plans, business opportunities and
financial data), (e) rights in Internet web sites and domain names used by the
Acquired Companies and (f) rights in electronic mail addresses and in telephone,
facsimile, cable or similar numbers used by the Acquired Companies.
"IRS" means the Internal Revenue Service or any successor agency and, to
the extent relevant, the Department of Treasury.
"Knowledge" means, with respect to a Person, the actual knowledge after
reasonable investigation of any of such Person's directors, officers and senior
managerial employees.
"Law" means any constitution, law, statute, treaty, rule, regulation,
ordinance, code, binding case law, principle of common law or notice of any
Governmental Body.
"Liabilities" includes liabilities or obligations of any nature, whether
known or unknown, whether absolute, accrued, contingent, choate, inchoate or
otherwise, whether due or to become due, and whether or not required to be
reflected on a balance sheet prepared in accordance with GAAP.
"MARAD" means the United States Maritime Administration.
"Medical Plan" is defined in Section 5.4.
"Merger" is defined in the Preliminary Statements.
"Merger Consideration" is defined in Section 1.5(a).
"Merger Sub" is defined in the first paragraph of the Agreement.
"Merger Sub Common Stock" means the common stock, par value $0.001 per
share, of Merger Sub.
"Multiemployer Plan" has the meaning specified in ERISA Section 3(37)(A).
"NYSE" means the New York Stock Exchange.
"Occupational Safety and Health Law" means any Law designed to provide safe
and healthful working conditions and to reduce occupational safety and health
hazards, and any program, whether governmental or private (such as those
promulgated or sponsored by industry associations and insurance companies),
designed to provide safe and healthful working conditions.
"Order" means any order, injunction, judgment, decree, ruling, assessment
or arbitration award of any Governmental Body or arbitrator, and any Contract
with any Governmental Body pertaining to compliance with Law.
"Ordinary Course of Business" refers to actions taken in Company's normal
operation, consistent with its past practice and having no Company Material
Adverse Effect.
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"Other Benefit Obligation" means any obligation, arrangement or customary
practice owed, adopted or followed by any of the Acquired Companies or any ERISA
Affiliate, whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present or former directors,
officers, employees or agents, other than obligations, arrangements and
practices that are Plans. Other Benefit Obligations include consulting
agreements under which the compensation paid does not depend upon the amount of
service rendered, sabbatical policies, severance payment policies and fringe
benefits within the meaning of Code Section 132.
"Parent" is defined in the first paragraph of the Agreement.
"Parent Common Stock" means the common stock, par value $0.10 per share, of
Parent (including associated preferred stock purchase rights).
"Parent Directors Plan" means the ENSCO 1996 Non-Employee Directors Stock
Option Plan.
"Parent Disclosure Schedule" means the Disclosure Schedule delivered
pursuant to Article 3 by Parent to Company concurrently with the execution and
delivery of the Agreement, together with any updates to it permitted by the
Agreement.
"Parent First Preferred Stock" means the first preferred stock, par value
$1.00 per share, of Parent.
"Parent Incentive Plans" means the ENSCO Incentive Plan, as amended, the
ENSCO International Incorporated 1998 Incentive Plan, and the ENSCO
International Incorporated Key Employees' Incentive Compensation Plan, as
revised and restated.
"Parent Material Adverse Effect" means an event, violation, inaccuracy,
circumstance or other matter (considered together with all other matters that
would constitute exceptions to the representations and warranties set forth in
the Agreement but for the presence of "Material Adverse Effect" or other
materiality qualifications, or any similar qualifications, in such
representations and warranties) that has had or would reasonably be expected to
have a material adverse effect on (a) the business, condition, capitalization,
assets, Liabilities, operations or financial performance of Parent and its
Subsidiaries taken as a whole; provided, however, that a decline in Parent's
stock price shall not, in and of itself, be deemed to constitute a Parent
Material Adverse Effect, or (b) the ability of Parent to consummate the
Contemplated Transactions or to perform any of its obligations under the
Agreement.
"Parent Preferred Stock" means the preferred stock, par value $1.00 per
share, of Parent.
"Parent Savings Plan" means the ENSCO Savings Plan.
"Parent SEC Documents" is defined in Section 3.4(a).
"Parent SERP" means the ENSCO Supplemental Executive Retirement Plan.
"Person" refers to an individual or an Entity.
"Plan" means all "employee benefit plans" as defined in ERISA Section
3(3)., whether or not subject to ERISA, and any other employee profit-sharing,
bonus, incentive or deferred compensation, welfare, pension, retirement,
termination, retention, change in control, stock option, stock appreciation,
stock purchase, phantom stock or other equity-based, performance, group
insurance or other employee benefit plan, retiree benefit plan, program,
arrangement, agreement, policy, practice or understanding, whether written or
unwritten, that provides or may provide benefits or compensation with respect to
any employee or former employee employed or formerly employed by any Acquired
Company, or the beneficiaries or dependents of any such employee or former
employee, or to any director, officer, stockholder or consultant of any Acquired
Company, or under which any such individual is or may become eligible to
participate or derive a benefit (excluding social security, Medicare, Medicaid,
national health care or any similar or analogous program or plan sponsored by a
Governmental Body).
"Plan Sponsor" has the meaning specified in ERISA Section 3(16)(B).
"Pre-Closing Period" is defined in Section 4.1.
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"Proceeding" means any action, arbitration, audit, examination,
investigation, hearing, litigation or suit (whether civil, criminal,
administrative, judicial or investigative, whether formal or informal, and
whether public or private) commenced, brought, conducted or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"Proxy Statement" means the proxy statement/prospectus to be sent to
Company's stockholders in connection with the Company Stockholders' Meeting.
"Qualified Plan" means any Plan that meets or purports to meet the
requirements of Code Section 401(a).
"Real Property" means all real property interests of the Acquired
Companies, including all parcels and tracts of land in which an Acquired Company
has a fee simple estate or a leasehold estate and all real property operated by
the Acquired Companies, and all Improvements, easements and appurtenances
thereto.
"Reasonable Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that result as
expeditiously as possible.
"Release" means any release, spill, emission, leaking, pumping, pouring,
dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching
or migration on or into the Environment, or into or out of any property.
"Representative" means, with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, legal counsel, accountant or
other representative of that Person.
"Required Company Stockholder Vote" means the affirmative vote in favor of
adoption of the Agreement by 66 2/3% of the issued and outstanding shares of
Company Common Stock entitled to vote on the matter.
"Rig Contract" is defined in Section 2.12(d).
"SEC" means the United States Securities and Exchange Commission.
"Secretary of State" is defined in Section 1.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means all of the issued and outstanding shares of Company Common
Stock or Parent Common Stock, as the case may be.
"Subsidiary" of any Entity means any Entity of which such Entity either
alone or through or together with any other Subsidiary owns or has a right to
acquire, beneficially or of record, (a) an amount of voting securities of other
interests in such Entity that is sufficient to enable the Entity owning the
securities to elect at least a majority of the members of such Entity's board of
directors or other governing body, or (b) at least 50% of the outstanding equity
or financial interests of such Entity.
"Superior Proposal" means an unsolicited, bona fide written offer made by a
third party to purchase all of the outstanding Company Common Stock on terms
that the board of directors of Company determines, in its reasonable judgment,
(a) after consultation with an independent financial advisor of nationally
recognized reputation, to be more favorable from a financial point of view to
Company's stockholders than the terms of the Merger and (b) is reasonably
capable of being consummated; provided, however, that any such offer shall not
be deemed to be a "Superior Proposal" if any financing required to consummate
the transactions contemplated by such offer is not committed and is not
reasonably capable of being obtained by such third party.
"Surviving Corporation" is defined in Section 1.1.
"Tax" or "Taxes" means all federal, state, local, foreign and other taxes,
charges, fees, duties (including customs duties), levies or assessments,
including income, gross receipts, net proceeds, alternative or add-on minimum,
ad valorem, turnover, real and personal property (tangible and intangible),
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sales, use, franchise, excise, value added, stamp, leasing, lease, user,
transfer, fuel, excess profits, occupational, interest equalization, windfall
profits, severance, license, payroll, environmental, capital stock, disability,
employee's income withholding, other withholding, unemployment and social
security taxes, that are imposed by any Governmental Body, and including any
interest, penalties or additions to tax attributable thereto.
"Tax Return" means any report, return or other information required to be
supplied to a Governmental Body in connection with any Taxes.
"Third-Party Provisions" is defined in Section 10.8.
"Voting Agreement" is defined in the Preliminary Statements.
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EXHIBIT B
VOTING AGREEMENTS
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VOTING AGREEMENT -- LUIS ALVAREZ MORPHY
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VOTING AGREEMENT
This Voting Agreement ("Agreement") is made as of May 14, 2002 by and
between ENSCO International Inc., a Delaware corporation ("Parent"), and Luis
Alvarez Morphy ("Stockholder").
PRELIMINARY STATEMENTS
A. Parent, Chiles Offshore Inc., a Delaware corporation ("Company"), and
Chore Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), are entering into a Merger Agreement dated as of the date
hereof (as may be amended from time to time, the "Merger Agreement").
B. Stockholder is the legal and beneficial owner (as determined pursuant
to Rule 13d-3 under the Exchange Act) of 822,434 shares of Common Stock, par
value $0.01 per share, of Company (the "Company Common Stock").
C. As a condition to the willingness of Parent to enter into the Merger
Agreement, and as an inducement for Parent to do so, Stockholder has agreed to
vote the Stockholder Shares as set forth in this Agreement and agreed to the
other covenants, obligations and agreements herein.
D. The Board of Directors of Stockholder has approved Stockholder entering
into this Agreement, the form of this Agreement and the transactions
contemplated hereby.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1. DEFINITIONS FROM MERGER AGREEMENT
Terms used but not defined in this Agreement shall have the meanings
assigned to such terms in the Merger Agreement.
2. STOCKHOLDER SHARES
The term "Stockholder Shares" shall mean (i) the Company Common Stock owned
by Stockholder on the date hereof as described in the Preliminary Statements,
(ii) any shares or securities of Company acquired by Stockholder after the date
hereof, (iii) any shares or capital stock of any Person or any securities or
other property that Stockholder is or becomes entitled to receive by reason of
being a holder of any the Stockholder Shares, and (iv) any capital stock,
securities or other property into which any the Stockholder Shares shall have
been or shall be converted or changed, whether by amendment to the certificate
of incorporation of Company, merger, consolidation, reorganization,
reclassification, capital change or otherwise.
ARTICLE II
COVENANTS OF THE STOCKHOLDER
2.1 AGREEMENT TO VOTE
At any meeting of the stockholders of Company held prior to the Expiration
Date (as defined in Section 5.13), however called, and at every adjournment or
postponement thereof prior to the Expiration Date, or in connection with any
written consent of or any other action by the stockholders of Company
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given prior to the Expiration Date, Stockholder shall vote or cause to be voted
the Stockholder Shares (y) in favor of approval of adoption of the Merger
Agreement and each of the Contemplated Transactions, and any actions required in
furtherance thereof and (z) against any action, agreement, transaction or
Acquisition Proposal that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Company
contained in the Merger Agreement (or of Stockholder contained in this
Agreement) or that might hinder, delay, impede or frustrate the Merger or
Contemplated Transactions. Stockholder shall not enter into any Contract or
understanding with any Person prior to the Expiration Date directly or
indirectly to vote, grant any proxy or give instructions with respect to the
voting of the Stockholder Shares in any manner inconsistent with this Section.
2.2 IRREVOCABLE PROXY
(a) In furtherance of Stockholder's obligations under Section 2.1,
Stockholder hereby irrevocably appoints and constitutes Carl F. Thorne and C.
Christopher Gaut, and each of them (the "Proxyholders"), the agents, proxies and
attorneys-in-fact of Stockholder, with full power of substitution and
resubstitution, to the full extent of Stockholder's rights with respect to the
Stockholder Shares, to vote, express, consent or dissent or otherwise to utilize
such voting power as Parent shall, in Parent's sole discretion, deem proper in
furtherance of Stockholder's obligations under Section 2.1, including without
limitation, the right to sign Stockholder's name to any proxy card, consent,
certificate or other document relating to Company in furtherance of the approval
and adoption of the Merger, the Merger Agreement and the Contemplated
Transactions, or with respect to any other Acquisition Proposal.
(b) This proxy is granted as of the date of this Agreement in order to
secure the obligations of Stockholder set forth in Section 2.1. Such proxy is
irrevocable and coupled with an interest and shall survive the insolvency or
liquidation of the Stockholder. This proxy will terminate on the Expiration
Date.
(c) Stockholder hereby revokes any and all prior proxies with respect to
the Stockholder Shares. Prior to the Expiration Date, Stockholder shall not
directly or indirectly, except as contemplated hereby, grant any proxies or
powers of attorney with respect to the matters set forth in Section 2.1, deposit
any of the Stockholder Shares or enter into a voting agreement with respect to
any of the Stockholder Shares.
(d) The Proxyholders may not exercise this proxy on any matters other than
as set forth in this Section 2.2 and Stockholder may vote the Stockholder Shares
on all such other matters.
2.3 NO SOLICITATION
(a) Stockholder shall not, and shall cause its Affiliates (other than the
Company and any of the Acquired Companies) and its Representatives (other than
Representatives of Stockholder who are are also Representatives of the Company
and who act or purport to act on behalf of the Company) not to, (i) solicit,
initiate, encourage, induce or facilitate the making, submission or announcement
of any Acquisition Proposal or take any action that could reasonably be expected
to lead to an Acquisition Proposal, (ii) furnish any information regarding any
of the Acquired Companies to any Person in connection with or in response to an
Acquisition Proposal or an inquiry or indication of interest that could
reasonably be expected to lead to an Acquisition Proposal, (iii) engage in
discussions or negotiations with any Person with respect to any Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v)
enter into any letter of intent or similar document or any Contract
contemplating or otherwise relating to any Acquisition Transaction.
(b) Stockholder shall immediately cease and cause to be terminated any
existing (as of the date of this Agreement) solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties conducted
heretofore by Stockholder or any of its Representatives with respect to any
Acquisition Proposal.
(c) Stockholder shall not enter into any Contract with any Person that
provides for, or could reasonably be expected to materially facilitate or is
designed to facilitate, an Acquisition Proposal.
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(d) Notwithstanding anything to the contrary contained in this Agreement:
(i) the provisions of this Section 2.3 apply solely to the Stockholder when
acting in his or its capacity as a Stockholder of the Company and not when
acting or purporting to act as a Representative of the Company (it being
understood that the Company has separate and independent obligations to Parent
and Merger Sub in respect of the solicitation of Acquisition Proposals under
Section 4.3 of the Merger Agreement); (ii) none of the provisions of this
Section 2.3 shall be construed to prohibit, limit or restrict the Stockholder or
any of its Representatives (A) who is a member of the Board of Directors of the
Company from exercising its fiduciary duties to the Company by voting or taking
any other action whatsoever in his capacity as a director or (B) who is an
officer or employee of the Company from taking any action whatsoever in such
capacity; and (iii) no action taken by the Company in compliance with the
covenants of the Merger Agreement in respect of any Acquisition Proposal shall
serve as the basis of a claim that the Stockholder is in breach of its
obligations under this Section 2.3 notwithstanding the fact that the Stockholder
or its Representatives have provided advice or assistance to the Company in
connection therewith.
2.4 TRANSFER OF STOCKHOLDER SHARES BY THE STOCKHOLDER
Stockholder shall not (a) subject any of the Stockholder Shares to, or
suffer to exist on any of the Stockholder Shares, any Encumbrance, other than
pursuant to this Agreement, or (b) sell, transfer, assign, convey or otherwise
dispose of any interest in or title to any of the Stockholder Shares (including
any such action by operation of Law), other than a disposition by operation of
Law pursuant to the Merger.
2.5 OTHER ACTIONS
Stockholder agrees not to make a written demand for appraisal in respect of
the Stockholder Shares in accordance with Section 262 of the Delaware General
Corporation Law, if such Section 262 provides for appraisal rights for such
Stockholder Shares in the Merger.
2.6 RELATED PARTY AGREEMENT
Neither Stockholder nor any of its Affiliates is currently a party to any
Contract or understanding with any Acquired Company other than the Agreement
with Respect to Ownership of Tonala, dated July 20, 2000, among Company,
Stockholder, certain of its Affiliates, and the other parties named therein (the
"Related Party Agreement"). Stockholder hereby consents to the Merger and the
assignment of the Related Party Agreement by the Company as a result of the
Merger pursuant to Section 7.11 of the Related Party Agreement. Attached to the
Related Party Agreement as Exhibit B is an Agreement and Plan of Merger entered
into at the time of the Related Party Agreement, which agreement required, among
other things, that Company nominate certain Affiliates of Stockholder to
Company's Board of Directors. For the avoidance of doubt, Stockholder agrees and
acknowledges that nothing under Section 1.5 of that agreement or otherwise
requires or would require the Surviving Corporation after the Effective Time to
nominate the Persons named therein as directors of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS OF THE STOCKHOLDER
Stockholder represents, warrants and covenants to Parent that:
3.1 OWNERSHIP
Stockholder is as of the date hereof the beneficial and legal owner of the
Stockholder Shares identified in the Preliminary Statements, Stockholder has the
sole right to vote the Stockholder Shares and there are no restrictions on
rights of disposition or other Encumbrances pertaining to the Stockholder
Shares. None of the Stockholder Shares is subject to any voting trust or other
Contract with respect to the voting of the Stockholder Shares, and no proxy,
power of attorney or other authorization has been granted with respect to any of
the Stockholder Shares.
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3.2 AUTHORITY AND NON-CONTRAVENTION
(a) If the Stockholder is a corporation, Stockholder is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization.
(b) Assuming due authorization, execution and delivery of this Agreement by
Parent, this Agreement constitutes the legal, valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms.
Stockholder has the power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement. If Stockholder is a
corporation, such actions have been duly authorized and approved by all
necessary corporate action of Stockholder.
(c) Stockholder is not nor will it be required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution, delivery or performance of this Agreement or any of the
transactions contemplated hereby.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will directly or indirectly
(with or without notice or lapse of time) (i) If Stockholder is a corporation,
contravene any provision of the Governing Documents of Stockholder, (ii)
Contravene any Contract to which Stockholder is a party, Governmental
Authorization, Law or Order to which Stockholder, or any of the assets owned or
used by Stockholder, may be subject, or (iii) result in the imposition or
creation of any Encumbrance upon or with respect to any of the assets owned or
used by Stockholder.
3.3 TOTAL SHARES
The Stockholder Shares are the only shares of Company owned beneficially by
Stockholder or registered in the name of Stockholder as of the date hereof, and
Stockholder does not have any option to purchase or right to subscribe for or
otherwise acquire any securities of Company and has no other interest in or
voting rights with respect to any other securities of Company.
3.4 BROKERS OR FINDERS
Except as provided in the Merger Agreement, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement or any of the other transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Stockholder.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT
Parent represents, warrants and covenants to Stockholder that:
4.1 AUTHORITY
Assuming due authorization, execution and delivery of this Agreement by
Stockholder, this Agreement constitutes the legal, valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms, or make
reciprocal,. Parent has the power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement, which actions
have been duly authorized and approved by all necessary corporate action of
Parent.
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ARTICLE V
GENERAL PROVISIONS
5.1 NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid), (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment, or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested;
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number, e-mail address or individual
as a party may designate by notice to the other parties):
If to Parent:
ENSCO International Incorporated
Attention: C. Christopher Gaut
Address: 2700 Fountain Place
1445 Ross Avenue
Dallas, TX 75202-279
Facsimile No.: (214) 855-0300
E-mail Address: cgaut@enscous.com
with a copy (which will not constitute notice) to:
Baker & McKenzie
Attention: Daniel W. Rabun
Address: 2001 Ross Avenue
Suite 2300
Dallas, TX 75201
Facsimile No.: (214) 978-3099
E-mail Address: daniel.w.rabun@bakernet.com
If to Stockholder:
Luis Alvarez Morphy
Address: Monte S. Urales No. 520
Lomas de Chapultepec 11000
Mexico
Facsimile No.: 011-52-5520-1859
E-mail Address: pamc@central.com.mx
5.2 FURTHER ACTIONS
Upon the request of any party to this Agreement, the other parties will (a)
furnish to the requesting party any additional information, (b) execute and
deliver, at their own expense, any other documents and (c) take any other
actions as the requesting party may reasonably require to more effectively carry
out the intent of this Agreement.
5.3 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended, supplemented or otherwise modified except in
a written document executed by the party against whose interest the modification
will operate. In the event of a conflict
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between the terms of this Agreement and the Merger Agreement, the terms of the
Merger Agreement shall control.
5.4 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
5.5 DRAFTING AND REPRESENTATION
The parties have participated jointly in the negotiation and drafting of
this Agreement. No provision of this Agreement will be interpreted for or
against any party because that party or its legal representative drafted the
provision.
5.6 SEVERABILITY
If a court of competent jurisdiction holds any provision of this Agreement
invalid or unenforceable, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
5.7 ASSIGNMENT; SUCCESSORS; NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its obligations
under this Agreement without the prior written consent of the other parties,
except that Parent may without the consent of Stockholder assign any of its
rights and delegate any of its obligations under this Agreement to any Related
Person of Parent. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of Stockholder's
heirs, executors, administrators and permitted assigns and Parent's successors
and permitted assigns. Nothing expressed or referred to in this Agreement will
be construed to give any Person, other than the parties to this Agreement, any
legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement except such rights as may inure to
a successor or permitted assignee under this Section. Notwithstanding the above,
any Related Person of Parent shall be deemed a third party beneficiary to this
Agreement.
5.8 ENFORCEMENT OF AGREEMENT
Stockholder acknowledges and agrees that Parent could be damaged
irreparably if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any breach of this Agreement by
Stockholder could not be adequately compensated in all cases by monetary damages
alone. Accordingly, Stockholder agrees that, in addition to any other right or
remedy to which Parent may be entitled, at Law or in equity, it will be entitled
to enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to prevent
breaches or threatened breaches of any of the provisions of this Agreement,
without posting any bond or other undertaking.
5.9 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither any failure nor any delay by any party in exercising
any right, power or privilege under this Agreement or any of the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable Law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in a written document signed by the other party, (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is
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given, and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of that party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
5.10 GOVERNING LAW
This Agreement will be governed by and construed under the Laws of Delaware
without regard to conflicts of Law principles that would require the application
of any other Law.
5.11 JURISDICTION; SERVICE OF PROCESS
Any action, hearing, suit or proceeding arising out of or relating to this
Agreement or any Contemplated Transaction must be brought in the courts of the
State of Delaware, County of New Castle, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of Delaware.
Each of the parties irrevocably submits to the exclusive jurisdiction of each
such court in any such Proceeding, waives any objection it may now or hereafter
have to venue or to convenience of forum and acknowledges that such exclusive
jurisdiction benefits both parities. The parties agree that any or all of them
may file a copy of this Section with any court as written evidence of the
knowing, voluntary and bargained agreement between the parties irrevocably to
waive any objections to venue or to convenience of forum. Process in any
Proceeding referred to in this Section may be served on any party anywhere in
the world. Stockholder irrevocably appoints The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware 19801 ("Process Agent") to receive, for it
and on its behalf, service of process in any Proceedings. If for any reason
Process Agent is unable to act as such, Stockholder will promptly notify Parent
and within 30 days from the date on which Stockholder first learns that Process
Agent is unable to act as such, Stockholder will appoint a substitute process
agent acceptable to Parent. Stockholder irrevocably consents to service of
process given in the manner provided for notices in Section 5.1. Nothing in this
Agreement will affect the right of Parent to serve process in any other manner
permitted by law.
5.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts.
5.13 TERMINATION
This Agreement shall terminate upon the earliest of (a) the Effective Time,
(b) the termination of the Merger Agreement for any reason whatsoever or (c)
written notice by Parent to Stockholder of termination of this Agreement (the
"Expiration Date").
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The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.
ENSCO INTERNATIONAL INCORPORATED
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
--------------------------------------
LUIS ALVAREZ MORPHY
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VOTING AGREEMENT -- JAVIER ALVAREZ MORPHY
VOTING AGREEMENT
This Voting Agreement ("Agreement") is made as of May 14, 2002 by and
between ENSCO International Inc., a Delaware corporation ("Parent"), and Javier
Alvarez Morphy ("Stockholder").
PRELIMINARY STATEMENTS
A. Parent, Chiles Offshore Inc., a Delaware corporation ("Company"), and
Chore Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), are entering into a Merger Agreement dated as of the date
hereof (as may be amended from time to time, the "Merger Agreement").
B. Stockholder is the legal and beneficial owner (as determined pursuant
to Rule 13d-3 under the Exchange Act) of 822,434 shares of Common Stock, par
value $0.01 per share, of Company (the "Company Common Stock").
C. As a condition to the willingness of Parent to enter into the Merger
Agreement, and as an inducement for Parent to do so, Stockholder has agreed to
vote the Stockholder Shares as set forth in this Agreement and agreed to the
other covenants, obligations and agreements herein.
D. The Board of Directors of Stockholder has approved Stockholder entering
into this Agreement, the form of this Agreement and the transactions
contemplated hereby.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1. DEFINITIONS FROM MERGER AGREEMENT
Terms used but not defined in this Agreement shall have the meanings
assigned to such terms in the Merger Agreement.
2. STOCKHOLDER SHARES
The term "Stockholder Shares" shall mean (i) the Company Common Stock owned
by Stockholder on the date hereof as described in the Preliminary Statements,
(ii) any shares or securities of Company acquired by Stockholder after the date
hereof, (iii) any shares or capital stock of any Person or any securities or
other property that Stockholder is or becomes entitled to receive by reason of
being a holder of any the Stockholder Shares, and (iv) any capital stock,
securities or other property into which any the Stockholder Shares shall have
been or shall be converted or changed, whether by amendment to the certificate
of incorporation of Company, merger, consolidation, reorganization,
reclassification, capital change or otherwise.
ARTICLE II
COVENANTS OF THE STOCKHOLDER
2.1 AGREEMENT TO VOTE
At any meeting of the stockholders of Company held prior to the Expiration
Date (as defined in Section 5.13), however called, and at every adjournment or
postponement thereof prior to the Expiration
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Date, or in connection with any written consent of or any other action by the
stockholders of Company given prior to the Expiration Date, Stockholder shall
vote or cause to be voted the Stockholder Shares (y) in favor of approval of
adoption of the Merger Agreement and each of the Contemplated Transactions, and
any actions required in furtherance thereof and (z) against any action,
agreement, transaction or Acquisition Proposal that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
Company contained in the Merger Agreement (or of Stockholder contained in this
Agreement) or that might hinder, delay, impede or frustrate the Merger or
Contemplated Transactions. Stockholder shall not enter into any Contract or
understanding with any Person prior to the Expiration Date directly or
indirectly to vote, grant any proxy or give instructions with respect to the
voting of the Stockholder Shares in any manner inconsistent with this Section.
2.2. IRREVOCABLE PROXY
(a) In furtherance of Stockholder's obligations under Section 2.1,
Stockholder hereby irrevocably appoints and constitutes Carl F. Thorne and C.
Christopher Gaut, and each of them (the "Proxyholders"), the agents, proxies and
attorneys-in-fact of Stockholder, with full power of substitution and
resubstitution, to the full extent of Stockholder's rights with respect to the
Stockholder Shares, to vote, express, consent or dissent or otherwise to utilize
such voting power as Parent shall, in Parent's sole discretion, deem proper in
furtherance of Stockholder's obligations under Section 2.1, including without
limitation, the right to sign Stockholder's name to any proxy card, consent,
certificate or other document relating to Company in furtherance of the approval
and adoption of the Merger, the Merger Agreement and the Contemplated
Transactions, or with respect to any other Acquisition Proposal.
(b) This proxy is granted as of the date of this Agreement in order to
secure the obligations of Stockholder set forth in Section 2.1. Such proxy is
irrevocable and coupled with an interest and shall survive the insolvency or
liquidation of the Stockholder. This proxy will terminate on the Expiration
Date.
(c) Stockholder hereby revokes any and all prior proxies with respect to
the Stockholder Shares. Prior to the Expiration Date, Stockholder shall not
directly or indirectly, except as contemplated hereby, grant any proxies or
powers of attorney with respect to the matters set forth in Section 2.1, deposit
any of the Stockholder Shares or enter into a voting agreement with respect to
any of the Stockholder Shares.
(d) The Proxyholders may not exercise this proxy on any matters other than
as set forth in this Section 2.2 and Stockholder may vote the Stockholder Shares
on all such other matters.
2.3 NO SOLICITATION
(a) Stockholder shall not, and shall cause its Affiliates (other than the
Company and any of the Acquired Companies) and its Representatives (other than
Representatives of Stockholder who are also Representatives of the Company and
who act or purport to act on behalf of the Company) not to, (i) solicit,
initiate, encourage, induce or facilitate the making, submission or announcement
of any Acquisition Proposal or take any action that could reasonably be expected
to lead to an Acquisition Proposal, (ii) furnish any information regarding any
of the Acquired Companies to any Person in connection with or in response to an
Acquisition Proposal or an inquiry or indication of interest that could
reasonably be expected to lead to an Acquisition Proposal, (iii) engage in
discussions or negotiations with any Person with respect to any Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v)
enter into any letter of intent or similar document or any Contract
contemplating or otherwise relating to any Acquisition Transaction.
(b) Stockholder shall immediately cease and cause to be terminated any
existing (as of the date of this Agreement) solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties conducted
heretofore by Stockholder or any of its Representatives with respect to any
Acquisition Proposal.
(c) Stockholder shall not enter into any Contract with any Person that
provides for, or could reasonably be expected to materially facilitate or is
designed to facilitate, an Acquisition Proposal.
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(d) Notwithstanding anything to the contrary contained in this Agreement:
(i) the provisions of this Section 2.3 apply solely to the Stockholder when
acting in his or its capacity as a Stockholder of the Company and not when
acting or purporting to act as a Representative of the Company (it being
understood that the Company has separate and independent obligations to Parent
and Merger Sub in respect of the solicitation of Acquisition Proposals under
Section 4.3 of the Merger Agreement); (ii) none of the provisions of this
Section 2.3 shall be construed to prohibit, limit or restrict the Stockholder or
any of its Representatives (A) who is a member of the Board of Directors of the
Company from exercising its fiduciary duties to the Company by voting or taking
any other action whatsoever in his capacity as a director or (B) who is an
officer or employee of the Company from taking any action whatsoever in such
capacity; and (iii) no action taken by the Company in compliance with the
covenants of the Merger Agreement in respect of any Acquisition Proposal shall
serve as the basis of a claim that the Stockholder is in breach of its
obligations under this Section 2.3 notwithstanding the fact that the Stockholder
or its Representatives have provided advice or assistance to the Company in
connection therewith.
2.4 TRANSFER OF STOCKHOLDER SHARES BY THE STOCKHOLDER
Stockholder shall not (a) subject any of the Stockholder Shares to, or
suffer to exist on any of the Stockholder Shares, any Encumbrance, other than
pursuant to this Agreement, or (b) sell, transfer, assign, convey or otherwise
dispose of any interest in or title to any of the Stockholder Shares (including
any such action by operation of Law), other than a disposition by operation of
Law pursuant to the Merger.
2.5 OTHER ACTIONS
Stockholder agrees not to make a written demand for appraisal in respect of
the Stockholder Shares in accordance with Section 262 of the Delaware General
Corporation Law, if such Section 262 provides for appraisal rights for such
Stockholder Shares in the Merger.
2.6 RELATED PARTY AGREEMENT
Neither Stockholder nor any of its Affiliates is currently a party to any
Contract or understanding with any Acquired Company other than the Agreement
with Respect to Ownership of Tonala, dated July 20, 2000, among Company,
Stockholder, certain of its Affiliates, and the other parties named therein (the
"Related Party Agreement"). Stockholder hereby consents to the Merger and the
assignment of the Related Party Agreement by the Company as a result of the
Merger pursuant to Section 7.11 of the Related Party Agreement. Attached to the
Related Party Agreement as Exhibit B is an Agreement and Plan of Merger entered
into at the time of the Related Party Agreement, which agreement required, among
other things, that Company nominate certain Affiliates of Stockholder to
Company's Board of Directors. For the avoidance of doubt, Stockholder agrees and
acknowledges that nothing under Section 1.5 of that agreement or otherwise
requires or would require the Surviving Corporation after the Effective Time to
nominate the Persons named therein as directors of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS OF THE STOCKHOLDER
Stockholder represents, warrants and covenants to Parent that:
3.1 OWNERSHIP
Stockholder is as of the date hereof the beneficial and legal owner of the
Stockholder Shares identified in the Preliminary Statements, Stockholder has the
sole right to vote the Stockholder Shares and there are no restrictions on
rights of disposition or other Encumbrances pertaining to the Stockholder
Shares. None of the Stockholder Shares is subject to any voting trust or other
Contract with respect to the voting of the Stockholder Shares, and no proxy,
power of attorney or other authorization has been granted with respect to any of
the Stockholder Shares.
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3.2 AUTHORITY AND NON-CONTRAVENTION
(a) If the Stockholder is a corporation, Stockholder is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization.
(b) Assuming due authorization, execution and delivery of this Agreement by
Parent, this Agreement constitutes the legal, valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms.
Stockholder has the power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement. If Stockholder is a
corporation, such actions have been duly authorized and approved by all
necessary corporate action of Stockholder.
(c) Stockholder is not nor will it be required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution, delivery or performance of this Agreement or any of the
transactions contemplated hereby.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will directly or indirectly
(with or without notice or lapse of time) (i) If Stockholder is a corporation,
contravene any provision of the Governing Documents of Stockholder, (ii)
Contravene any Contract to which Stockholder is a party, Governmental
Authorization, Law or Order to which Stockholder, or any of the assets owned or
used by Stockholder, may be subject, or (iii) result in the imposition or
creation of any Encumbrance upon or with respect to any of the assets owned or
used by Stockholder.
3.3 TOTAL SHARES
The Stockholder Shares are the only shares of Company owned beneficially by
Stockholder or registered in the name of Stockholder as of the date hereof, and
Stockholder does not have any option to purchase or right to subscribe for or
otherwise acquire any securities of Company and has no other interest in or
voting rights with respect to any other securities of Company.
3.4 BROKERS OR FINDERS
Except as provided in the Merger Agreement, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement or any of the other transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Stockholder.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT
Parent represents, warrants and covenants to Stockholder that:
4.1 AUTHORITY
Assuming due authorization, execution and delivery of this Agreement by
Stockholder, this Agreement constitutes the legal, valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms, or make
reciprocal,. Parent has the power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement, which actions
have been duly authorized and approved by all necessary corporate action of
Parent.
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ARTICLE V
GENERAL PROVISIONS
5.1 NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid), (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment, or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested;
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number, e-mail address or individual
as a party may designate by notice to the other parties):
If to Parent:
ENSCO International Incorporated
Attention: C. Christopher Gaut
Address: 2700 Fountain Place
1445 Ross Avenue
Dallas, TX 75202-279
Facsimile No.: (214) 855-0300
E-mail Address: cgaut@enscous.com
with a copy (which will not constitute notice) to:
Baker & McKenzie
Attention: Daniel W. Rabun
Address: 2001 Ross Avenue
Suite 2300
Dallas, TX 75201
Facsimile No.: (214) 978-3099
E-mail Address: daniel.w.rabun@bakernet.com
If to Stockholder:
Javier Alvarez Morphy
Address: Monte Urales No. 520
Lomas de Chapultepec 11000
Mexico
Facsimile No.: 011-52-5520-1859
E-mail Address: pamc@central.com.mx
5.2 FURTHER ACTIONS
Upon the request of any party to this Agreement, the other parties will (a)
furnish to the requesting party any additional information, (b) execute and
deliver, at their own expense, any other documents and (c) take any other
actions as the requesting party may reasonably require to more effectively carry
out the intent of this Agreement.
5.3 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended, supplemented or otherwise modified except in
a written document executed by the party against whose interest the modification
will operate. In the event of a conflict
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between the terms of this Agreement and the Merger Agreement, the terms of the
Merger Agreement shall control.
5.4 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
5.5 DRAFTING AND REPRESENTATION
The parties have participated jointly in the negotiation and drafting of
this Agreement. No provision of this Agreement will be interpreted for or
against any party because that party or its legal representative drafted the
provision.
5.6 SEVERABILITY
If a court of competent jurisdiction holds any provision of this Agreement
invalid or unenforceable, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
5.7 ASSIGNMENT; SUCCESSORS; NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its obligations
under this Agreement without the prior written consent of the other parties,
except that Parent may without the consent of Stockholder assign any of its
rights and delegate any of its obligations under this Agreement to any Related
Person of Parent. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of Stockholder's
heirs, executors, administrators and permitted assigns and Parent's successors
and permitted assigns. Nothing expressed or referred to in this Agreement will
be construed to give any Person, other than the parties to this Agreement, any
legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement except such rights as may inure to
a successor or permitted assignee under this Section. Notwithstanding the above,
any Related Person of Parent shall be deemed a third party beneficiary to this
Agreement.
5.8 ENFORCEMENT OF AGREEMENT
Stockholder acknowledges and agrees that Parent could be damaged
irreparably if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any breach of this Agreement by
Stockholder could not be adequately compensated in all cases by monetary damages
alone. Accordingly, Stockholder agrees that, in addition to any other right or
remedy to which Parent may be entitled, at Law or in equity, it will be entitled
to enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to prevent
breaches or threatened breaches of any of the provisions of this Agreement,
without posting any bond or other undertaking.
5.9 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither any failure nor any delay by any party in exercising
any right, power or privilege under this Agreement or any of the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable Law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in a written document signed by the other party, (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is
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given, and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of that party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
5.10 GOVERNING LAW
This Agreement will be governed by and construed under the Laws of Delaware
without regard to conflicts of Law principles that would require the application
of any other Law.
5.11 JURISDICTION; SERVICE OF PROCESS
Any action, hearing, suit or proceeding arising out of or relating to this
Agreement or any Contemplated Transaction must be brought in the courts of the
State of Delaware, County of New Castle, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of Delaware.
Each of the parties irrevocably submits to the exclusive jurisdiction of each
such court in any such Proceeding, waives any objection it may now or hereafter
have to venue or to convenience of forum and acknowledges that such exclusive
jurisdiction benefits both parities. The parties agree that any or all of them
may file a copy of this Section with any court as written evidence of the
knowing, voluntary and bargained agreement between the parties irrevocably to
waive any objections to venue or to convenience of forum. Process in any
Proceeding referred to in this Section may be served on any party anywhere in
the world. Stockholder irrevocably appoints The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware 19801 ("Process Agent") to receive, for it
and on its behalf, service of process in any Proceedings. If for any reason
Process Agent is unable to act as such, Stockholder will promptly notify Parent
and within 30 days from the date on which Stockholder first learns that Process
Agent is unable to act as such, Stockholder will appoint a substitute process
agent acceptable to Parent. Stockholder irrevocably consents to service of
process given in the manner provided for notices in Section 5.1. Nothing in this
Agreement will affect the right of Parent to serve process in any other manner
permitted by law.
5.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts.
5.13 TERMINATION
This Agreement shall terminate upon the earliest of (a) the Effective Time,
(b) the termination of the Merger Agreement for any reason whatsoever or (c)
written notice by Parent to Stockholder of termination of this Agreement (the
"Expiration Date").
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The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.
ENSCO INTERNATIONAL INCORPORATED
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
--------------------------------------
LUIS ALVAREZ MORPHY
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VOTING AGREEMENT -- PATRICIO ALVAREZ MORPHY
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VOTING AGREEMENT
This Voting Agreement ("Agreement") is made as of May 14, 2002 by and
between ENSCO International Inc., a Delaware corporation ("Parent"), and
Patricio Alvarez Morphy, ("Stockholder").
PRELIMINARY STATEMENTS
A. Parent, Chiles Offshore Inc., a Delaware corporation ("Company"), and
Chore Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), are entering into a Merger Agreement dated as of the date
hereof (as may be amended from time to time, the "Merger Agreement").
B. Stockholder is the legal and beneficial owner (as determined pursuant
to Rule 13d-3 under the Exchange Act) of 1,034,802 shares of Common Stock, par
value $0.01 per share, of Company (the "Company Common Stock").
C. As a condition to the willingness of Parent to enter into the Merger
Agreement, and as an inducement for Parent to do so, Stockholder has agreed to
vote the Stockholder Shares as set forth in this Agreement and agreed to the
other covenants, obligations and agreements herein.
D. The Board of Directors of Stockholder has approved Stockholder entering
into this Agreement, the form of this Agreement and the transactions
contemplated hereby.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1 DEFINITIONS FROM MERGER AGREEMENT
Terms used but not defined in this Agreement shall have the meanings
assigned to such terms in the Merger Agreement.
2 STOCKHOLDER SHARES
The term "Stockholder Shares" shall mean (i) the Company Common Stock owned
by Stockholder on the date hereof as described in the Preliminary Statements,
(ii) any shares or securities of Company acquired by Stockholder after the date
hereof, (iii) any shares or capital stock of any Person or any securities or
other property that Stockholder is or becomes entitled to receive by reason of
being a holder of any the Stockholder Shares, and (iv) any capital stock,
securities or other property into which any the Stockholder Shares shall have
been or shall be converted or changed, whether by amendment to the certificate
of incorporation of Company, merger, consolidation, reorganization,
reclassification, capital change or otherwise.
ARTICLE II
COVENANTS OF THE STOCKHOLDER
2.1 AGREEMENT TO VOTE
At any meeting of the stockholders of Company held prior to the Expiration
Date (as defined in Section 5.13), however called, and at every adjournment or
postponement thereof prior to the Expiration Date, or in connection with any
written consent of or any other action by the stockholders of Company
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given prior to the Expiration Date, Stockholder shall vote or cause to be voted
the Stockholder Shares (y) in favor of approval of adoption of the Merger
Agreement and each of the Contemplated Transactions, and any actions required in
furtherance thereof and (z) against any action, agreement, transaction or
Acquisition Proposal that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Company
contained in the Merger Agreement (or of Stockholder contained in this
Agreement) or that might hinder, delay, impede or frustrate the Merger or
Contemplated Transactions. Stockholder shall not enter into any Contract or
understanding with any Person prior to the Expiration Date directly or
indirectly to vote, grant any proxy or give instructions with respect to the
voting of the Stockholder Shares in any manner inconsistent with this Section.
2.2 IRREVOCABLE PROXY
(a) In furtherance of Stockholder's obligations under Section 2.1,
Stockholder hereby irrevocably appoints and constitutes Carl F. Thorne and C.
Christopher Gaut, and each of them (the "Proxyholders"), the agents, proxies and
attorneys-in-fact of Stockholder, with full power of substitution and
resubstitution, to the full extent of Stockholder's rights with respect to the
Stockholder Shares, to vote, express, consent or dissent or otherwise to utilize
such voting power as Parent shall, in Parent's sole discretion, deem proper in
furtherance of Stockholder's obligations under Section 2.1, including without
limitation, the right to sign Stockholder's name to any proxy card, consent,
certificate or other document relating to Company in furtherance of the approval
and adoption of the Merger, the Merger Agreement and the Contemplated
Transactions, or with respect to any other Acquisition Proposal.
(b) This proxy is granted as of the date of this Agreement in order to
secure the obligations of Stockholder set forth in Section 2.1. Such proxy is
irrevocable and coupled with an interest and shall survive the insolvency or
liquidation of the Stockholder. This proxy will terminate on the Expiration
Date.
(c) Stockholder hereby revokes any and all prior proxies with respect to
the Stockholder Shares. Prior to the Expiration Date, Stockholder shall not
directly or indirectly, except as contemplated hereby, grant any proxies or
powers of attorney with respect to the matters set forth in Section 2.1, deposit
any of the Stockholder Shares or enter into a voting agreement with respect to
any of the Stockholder Shares.
(d) The Proxyholders may not exercise this proxy on any matters other than
as set forth in this Section 2.2 and Stockholder may vote the Stockholder Shares
on all such other matters.
2.3 NO SOLICITATION
(a) Stockholder shall not, and shall cause its Affiliates (other than the
Company and any of the Acquired Companies) and its Representatives (other than
Representatives of Stockholder who are also Representatives of the Company and
who act or purport to act on behalf of the Company) not to, (i) solicit,
initiate, encourage, induce or facilitate the making, submission or announcement
of any Acquisition Proposal or take any action that could reasonably be expected
to lead to an Acquisition Proposal, (ii) furnish any information regarding any
of the Acquired Companies to any Person in connection with or in response to an
Acquisition Proposal or an inquiry or indication of interest that could
reasonably be expected to lead to an Acquisition Proposal, (iii) engage in
discussions or negotiations with any Person with respect to any Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v)
enter into any letter of intent or similar document or any Contract
contemplating or otherwise relating to any Acquisition Transaction.
(b) Stockholder shall immediately cease and cause to be terminated any
existing (as of the date of this Agreement) solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties conducted
heretofore by Stockholder or any of its Representatives with respect to any
Acquisition Proposal.
(c) Stockholder shall not enter into any Contract with any Person that
provides for, or could reasonably be expected to materially facilitate or is
designed to facilitate, an Acquisition Proposal.
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(d) Notwithstanding anything to the contrary contained in this Agreement:
(i) the provisions of this Section 2.3 apply solely to the Stockholder when
acting in his or its capacity as a Stockholder of the Company and not when
acting or purporting to act as a Representative of the Company (it being
understood that the Company has separate and independent obligations to Parent
and Merger Sub in respect of the solicitation of Acquisition Proposals under
Section 4.3 of the Merger Agreement); (ii) none of the provisions of this
Section 2.3 shall be construed to prohibit, limit or restrict the Stockholder or
any of its Representatives (A) who is a member of the Board of Directors of the
Company from exercising its fiduciary duties to the Company by voting or taking
any other action whatsoever in his capacity as a director or (B) who is an
officer or employee of the Company from taking any action whatsoever in such
capacity; and (iii) no action taken by the Company in compliance with the
covenants of the Merger Agreement in respect of any Acquisition Proposal shall
serve as the basis of a claim that the Stockholder is in breach of its
obligations under this Section 2.3 notwithstanding the fact that the Stockholder
or its Representatives have provided advice or assistance to the Company in
connection therewith.
2.4 TRANSFER OF STOCKHOLDER SHARES BY THE STOCKHOLDER
Stockholder shall not (a) subject any of the Stockholder Shares to, or
suffer to exist on any of the Stockholder Shares, any Encumbrance, other than
pursuant to this Agreement, or (b) sell, transfer, assign, convey or otherwise
dispose of any interest in or title to any of the Stockholder Shares (including
any such action by operation of Law), other than a disposition by operation of
Law pursuant to the Merger.
2.5 OTHER ACTIONS
Stockholder agrees not to make a written demand for appraisal in respect of
the Stockholder Shares in accordance with Section 262 of the Delaware General
Corporation Law, if such Section 262 provides for appraisal rights for such
Stockholder Shares in the Merger.
2.6 RELATED PARTY AGREEMENT
Neither Stockholder nor any of its Affiliates is currently a party to any
Contract or understanding with any Acquired Company other than the Agreement
with Respect to Ownership of Tonala, dated July 20, 2000, among Company,
Stockholder, certain of its Affiliates, and the other parties named therein (the
"Related Party Agreement"). Stockholder hereby consents to the Merger and the
assignment of the Related Party Agreement by the Company as a result of the
Merger pursuant to Section 7.11 of the Related Party Agreement. Attached to the
Related Party Agreement as Exhibit B is an Agreement and Plan of Merger entered
into at the time of the Related Party Agreement, which agreement required, among
other things, that Company nominate certain Affiliates of Stockholder to
Company's Board of Directors. For the avoidance of doubt, Stockholder agrees and
acknowledges that nothing under Section 1.5 of that agreement or otherwise
requires or would require the Surviving Corporation after the Effective Time to
nominate the Persons named therein as directors of the Surviving Corporation.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS OF THE STOCKHOLDER
Stockholder represents, warrants and covenants to Parent that:
3.1 OWNERSHIP
Stockholder is as of the date hereof the beneficial and legal owner of the
Stockholder Shares identified in the Preliminary Statements, Stockholder has the
sole right to vote the Stockholder Shares and there are no restrictions on
rights of disposition or other Encumbrances pertaining to the Stockholder
Shares. None of the Stockholder Shares is subject to any voting trust or other
Contract with respect to the voting of the Stockholder Shares, and no proxy,
power of attorney or other authorization has been granted with respect to any of
the Stockholder Shares.
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3.2 AUTHORITY AND NON-CONTRAVENTION
(a) If the Stockholder is a corporation, Stockholder is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization.
(b) Assuming due authorization, execution and delivery of this Agreement by
Parent, this Agreement constitutes the legal, valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms.
Stockholder has the power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement. If Stockholder is a
corporation, such actions have been duly authorized and approved by all
necessary corporate action of Stockholder.
(c) Stockholder is not nor will it be required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution, delivery or performance of this Agreement or any of the
transactions contemplated hereby.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will directly or indirectly
(with or without notice or lapse of time) (i) If Stockholder is a corporation,
contravene any provision of the Governing Documents of Stockholder, (ii)
Contravene any Contract to which Stockholder is a party, Governmental
Authorization, Law or Order to which Stockholder, or any of the assets owned or
used by Stockholder, may be subject, or (iii) result in the imposition or
creation of any Encumbrance upon or with respect to any of the assets owned or
used by Stockholder.
3.3 TOTAL SHARES
The Stockholder Shares are the only shares of Company owned beneficially by
Stockholder or registered in the name of Stockholder as of the date hereof, and
Stockholder does not have any option to purchase or right to subscribe for or
otherwise acquire any securities of Company and has no other interest in or
voting rights with respect to any other securities of Company.
3.4 BROKERS OR FINDERS
Except as provided in the Merger Agreement, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement or any of the other transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Stockholder.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT
Parent represents, warrants and covenants to Stockholder that:
4.1 AUTHORITY
Assuming due authorization, execution and delivery of this Agreement by
Stockholder, this Agreement constitutes the legal, valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms, or make
reciprocal,. Parent has the power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement, which actions
have been duly authorized and approved by all necessary corporate action of
Parent.
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ARTICLE V
GENERAL PROVISIONS
5.1 NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid), (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment, or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested;
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number, e-mail address or individual
as a party may designate by notice to the other parties):
If to Parent:
ENSCO International Incorporated
Attention: C. Christopher Gaut
Address: 2700 Fountain Place
1445 Ross Avenue
Dallas, TX 75202-279
Facsimile No.: (214) 855-0300
E-mail Address: cgaut@enscous.com
with a copy (which will not constitute notice) to:
Baker & McKenzie
Attention: Daniel W. Rabun
Address: 2001 Ross Avenue
Suite 2300
Dallas, TX 75201
Facsimile No.: (214) 978-3099
E-mail Address: daniel.w.rabun@bakernet.com
If to Stockholder:
Patricio Alvarez Morphy
Address: Monte Urales No. 520
Lomas de Chapultepec 11000
Mexico
Facsimile No.: 011-52-5520-1859
E-mail Address: pamc@central.com.mx
5.2 FURTHER ACTIONS
Upon the request of any party to this Agreement, the other parties will (a)
furnish to the requesting party any additional information, (b) execute and
deliver, at their own expense, any other documents and (c) take any other
actions as the requesting party may reasonably require to more effectively carry
out the intent of this Agreement.
5.3 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended, supplemented or otherwise modified except in
a written document executed by the party against whose interest the modification
will operate. In the event of a conflict
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between the terms of this Agreement and the Merger Agreement, the terms of the
Merger Agreement shall control.
5.4 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
5.5 DRAFTING AND REPRESENTATION
The parties have participated jointly in the negotiation and drafting of
this Agreement. No provision of this Agreement will be interpreted for or
against any party because that party or its legal representative drafted the
provision.
5.6 SEVERABILITY
If a court of competent jurisdiction holds any provision of this Agreement
invalid or unenforceable, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
5.7 ASSIGNMENT; SUCCESSORS; NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its obligations
under this Agreement without the prior written consent of the other parties,
except that Parent may without the consent of Stockholder assign any of its
rights and delegate any of its obligations under this Agreement to any Related
Person of Parent. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of Stockholder's
heirs, executors, administrators and permitted assigns and Parent's successors
and permitted assigns. Nothing expressed or referred to in this Agreement will
be construed to give any Person, other than the parties to this Agreement, any
legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement except such rights as may inure to
a successor or permitted assignee under this Section. Notwithstanding the above,
any Related Person of Parent shall be deemed a third party beneficiary to this
Agreement.
5.8 ENFORCEMENT OF AGREEMENT
Stockholder acknowledges and agrees that Parent could be damaged
irreparably if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any breach of this Agreement by
Stockholder could not be adequately compensated in all cases by monetary damages
alone. Accordingly, Stockholder agrees that, in addition to any other right or
remedy to which Parent may be entitled, at Law or in equity, it will be entitled
to enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to prevent
breaches or threatened breaches of any of the provisions of this Agreement,
without posting any bond or other undertaking.
5.9 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither any failure nor any delay by any party in exercising
any right, power or privilege under this Agreement or any of the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable Law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in a written document signed by the other party, (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is
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given, and (c) no notice to or demand on one party will be deemed to be a waiver
of any obligation of that party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
5.10 GOVERNING LAW
This Agreement will be governed by and construed under the Laws of Delaware
without regard to conflicts of Law principles that would require the application
of any other Law.
5.11 JURISDICTION; SERVICE OF PROCESS
Any action, hearing, suit or proceeding arising out of or relating to this
Agreement or any Contemplated Transaction must be brought in the courts of the
State of Delaware, County of New Castle, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of Delaware.
Each of the parties irrevocably submits to the exclusive jurisdiction of each
such court in any such Proceeding, waives any objection it may now or hereafter
have to venue or to convenience of forum and acknowledges that such exclusive
jurisdiction benefits both parities. The parties agree that any or all of them
may file a copy of this Section with any court as written evidence of the
knowing, voluntary and bargained agreement between the parties irrevocably to
waive any objections to venue or to convenience of forum. Process in any
Proceeding referred to in this Section may be served on any party anywhere in
the world. Stockholder irrevocably appoints The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware 19801 ("Process Agent") to receive, for it
and on its behalf, service of process in any Proceedings. If for any reason
Process Agent is unable to act as such, Stockholder will promptly notify Parent
and within 30 days from the date on which Stockholder first learns that Process
Agent is unable to act as such, Stockholder will appoint a substitute process
agent acceptable to Parent. Stockholder irrevocably consents to service of
process given in the manner provided for notices in Section 5.1. Nothing in this
Agreement will affect the right of Parent to serve process in any other manner
permitted by law.
5.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts.
5.13 TERMINATION
This Agreement shall terminate upon the earliest of (a) the Effective Time,
(b) the termination of the Merger Agreement for any reason whatsoever or (c)
written notice by Parent to Stockholder of termination of this Agreement (the
"Expiration Date").
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The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.
ENSCO INTERNATIONAL INCORPORATED
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
--------------------------------------
PATRICIO ALVAREZ MORPHY
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VOTING AGREEMENT -- SEACOR SMIT, INC.
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VOTING AGREEMENT
This Voting Agreement ("Agreement") is made as of May 14, 2002 by and
between ENSCO International Inc., a Delaware corporation ("Parent"), and SEACOR
SMIT Inc., a Delaware corporation ("Stockholder").
PRELIMINARY STATEMENTS
A. Parent, Chiles Offshore Inc., a Delaware corporation ("Company"), and
Chore Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), are entering into a Merger Agreement dated as of the date
hereof (as may be amended from time to time, the "Merger Agreement").
B. Stockholder is the legal and beneficial owner (as determined pursuant
to Rule 13d-3 under the Exchange Act) of 4,831,401 shares of Common Stock, par
value $0.01 per share, of Company (the "Company Common Stock").
C. As a condition to the willingness of Parent to enter into the Merger
Agreement, and as an inducement for Parent to do so, Stockholder has agreed to
vote the Stockholder Shares as set forth in this Agreement and agreed to the
other covenants, obligations and agreements herein.
D. The Board of Directors of Stockholder has approved Stockholder entering
into this Agreement, the form of this Agreement and the transactions
contemplated hereby.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS FROM MERGER AGREEMENT
Terms used but not defined in this Agreement shall have the meanings
assigned to such terms in the Merger Agreement.
1.2 STOCKHOLDER SHARES
The term "Stockholder Shares" shall mean (i) the Company Common Stock owned
by Stockholder on the date hereof as described in the Preliminary Statements,
(ii) any shares or securities of Company acquired by Stockholder after the date
hereof, (iii) any shares or capital stock of any Person or any securities or
other property that Stockholder is or becomes entitled to receive by reason of
being a holder of any the Stockholder Shares, and (iv) any capital stock,
securities or other property into which any the Stockholder Shares shall have
been or shall be converted or changed, whether by amendment to the certificate
of incorporation of Company, merger, consolidation, reorganization,
reclassification, capital change or otherwise.
ARTICLE II
COVENANTS OF THE STOCKHOLDER
2.1 AGREEMENT TO VOTE
At any meeting of the stockholders of Company held prior to the Expiration
Date (as defined in Section 5.13), however called, and at every adjournment or
postponement thereof prior to the Expiration
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Date, or in connection with any written consent of or any other action by the
stockholders of Company given prior to the Expiration Date, Stockholder shall
vote or cause to be voted the Stockholder Shares (y) in favor of approval of
adoption of the Merger Agreement and each of the Contemplated Transactions, and
any actions required in furtherance thereof and (z) against any action,
agreement, transaction or Acquisition Proposal that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
Company contained in the Merger Agreement (or of Stockholder contained in this
Agreement) or that might hinder, delay, impede or frustrate the Merger or
Contemplated Transactions. Stockholder shall not enter into any Contract or
understanding with any Person prior to the Expiration Date directly or
indirectly to vote, grant any proxy or give instructions with respect to the
voting of the Stockholder Shares in any manner inconsistent with this Section.
2.2 IRREVOCABLE PROXY
(a) In furtherance of Stockholder's obligations under Section 2.1,
Stockholder hereby irrevocably appoints and constitutes Carl F. Thorne and C.
Christopher Gaut, and each of them (the "Proxyholders"), the agents, proxies and
attorneys-in-fact of Stockholder, with full power of substitution and
resubstitution, to the full extent of Stockholder's rights with respect to the
Stockholder Shares, to vote, express, consent or dissent or otherwise to utilize
such voting power as Parent shall, in Parent's sole discretion, deem proper in
furtherance of Stockholder's obligations under Section 2.1, including without
limitation, the right to sign Stockholder's name to any proxy card, consent,
certificate or other document relating to Company in furtherance of the approval
and adoption of the Merger, the Merger Agreement and the Contemplated
Transactions, or with respect to any other Acquisition Proposal.
(b) This proxy is granted as of the date of this Agreement in order to
secure the obligations of Stockholder set forth in Section 2.1. Such proxy is
irrevocable and coupled with an interest and shall survive the insolvency or
liquidation of the Stockholder. This proxy will terminate on the Expiration
Date.
(c) Stockholder hereby revokes any and all prior proxies with respect to
the Stockholder Shares. Prior to the Expiration Date, Stockholder shall not
directly or indirectly, except as contemplated hereby, grant any proxies or
powers of attorney with respect to the matters set forth in Section 2.1, deposit
any of the Stockholder Shares or enter into a voting agreement with respect to
any of the Stockholder Shares.
(d) The Proxyholders may not exercise this proxy on any matters other than
as set forth in this Section 2.2 and Stockholder may vote the Stockholder Shares
on all such other matters.
2.3 NO SOLICITATION
(a) Stockholder shall not, and shall cause its Affiliates (other than the
Company and any of the Acquired Companies) and its Representatives (other than
Representatives of Stockholder who are also Representatives of the Company and
who act or purport to act on behalf of the Company) not to, (i) solicit,
initiate, encourage, induce or facilitate the making, submission or announcement
of any Acquisition Proposal or take any action that could reasonably be expected
to lead to an Acquisition Proposal, (ii) furnish any information regarding any
of the Acquired Companies to any Person in connection with or in response to an
Acquisition Proposal or an inquiry or indication of interest that could
reasonably be expected to lead to an Acquisition Proposal, (iii) engage in
discussions or negotiations with any Person with respect to any Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v)
enter into any letter of intent or similar document or any Contract
contemplating or otherwise relating to any Acquisition Transaction.
(b) Stockholder shall immediately cease and cause to be terminated any
existing (as of the date of this Agreement) solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties conducted
heretofore by Stockholder or any of its Representatives with respect to any
Acquisition Proposal.
(c) Stockholder shall not enter into any Contract with any Person that
provides for, or could reasonably be expected to materially facilitate or is
designed to facilitate, an Acquisition Proposal.
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(d) Notwithstanding anything to the contrary contained in this Agreement:
(i) the provisions of this Section 2.3 apply solely to the Stockholder when
acting in his or its capacity as a Stockholder of the Company and not when
acting or purporting to act as a Representative of the Company (it being
understood that the Company has separate and independent obligations to Parent
and Merger Sub in respect of the solicitation of Acquisition Proposals under
Section 4.3 of the Merger Agreement); (ii) none of the provisions of this
Section 2.3 shall be construed to prohibit, limit or restrict the Stockholder or
any of its Representatives (A) who is a member of the Board of Directors of the
Company from exercising its fiduciary duties to the Company by voting or taking
any other action whatsoever in his capacity as a director or (B) who is an
officer or employee of the Company from taking any action whatsoever in such
capacity; and (iii) no action taken by the Company in compliance with the
covenants of the Merger Agreement in respect of any Acquisition Proposal shall
serve as the basis of a claim that the Stockholder is in breach of its
obligations under this Section 2.3 notwithstanding the fact that the Stockholder
or its Representatives have provided advice or assistance to the Company in
connection therewith.
2.4 TRANSFER OF STOCKHOLDER SHARES BY THE STOCKHOLDER
Stockholder shall not (a) subject any of the Stockholder Shares to, or
suffer to exist on any of the Stockholder Shares, any Encumbrance, other than
pursuant to this Agreement, or (b) sell, transfer, assign, convey or otherwise
dispose of any interest in or title to any of the Stockholder Shares (including
any such action by operation of Law), other than a disposition by operation of
Law pursuant to the Merger.
2.5 OTHER ACTIONS
Stockholder agrees not to make a written demand for appraisal in respect of
the Stockholder Shares in accordance with Section 262 of the Delaware General
Corporation Law, if such Section 262 provides for appraisal rights for such
Stockholder Shares in the Merger.
2.6 TERMINATION OF RELATED PARTY AGREEMENTS
(a) Stockholder represents and warrants to Parent that it is currently a
party to the following agreements with Company:
(i) Commission Agreement, dated April 1, 2000, among Bassoe Offshore
(USA), Inc., Stockholder and Company.
(ii) Amended and Restated Management and Administrative Services
Agreement, dated July 18, 2000, by and between Stockholder and Company
(collectively, the "Related Party Agreements").
Neither Stockholder nor any of its Affiliates is a party to any Contract or
understanding with any Acquired Company other than the Related Party Agreements.
(b) Stockholder and Company agree that the Related Party Agreements
terminate in their entirety as of the Effective Time. Stockholder and its
Affiliates hereby waive any provisions in the Related Party Agreements requiring
prior notice of such termination and Company shall incur no liability or
obligation to the Stockholder as a result of such termination and shall have no
further liability or obligation to Stockholder under such agreements (monetary
or otherwise) effective as of the Effective Time.
(c) Notwithstanding anything to the contrary herein, Parent shall pay to
Stockholder an amount equal to $1,000,000 within 60 days after delivery of the
Vessel to Company by Builder, in accordance with, and in the manner contemplated
by, Section 1 of the Commission Agreement referred to in Section 2.6(a)(i)
above. For the purpose of this Section 2.6(c), "Vessel" and "Builder" have the
meanings assigned to those terms in the Commission Agreement.
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ARTICLE III
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS OF THE STOCKHOLDER
Stockholder represents, warrants and covenants to Parent that:
3.1 OWNERSHIP
Stockholder is as of the date hereof the beneficial and legal owner of the
Stockholder Shares identified in the Preliminary Statements, Stockholder has the
sole right to vote the Stockholder Shares and there are no restrictions on
rights of disposition or other Encumbrances pertaining to the Stockholder
Shares. None of the Stockholder Shares is subject to any voting trust or other
Contract with respect to the voting of the Stockholder Shares, and no proxy,
power of attorney or other authorization has been granted with respect to any of
the Stockholder Shares.
3.2 AUTHORITY AND NON-CONTRAVENTION
(a) If the Stockholder is a corporation, Stockholder is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization.
(b) Assuming due authorization, execution and delivery of this Agreement by
Parent, this Agreement constitutes the legal, valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms.
Stockholder has the power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement. If Stockholder is a
corporation, such actions have been duly authorized and approved by all
necessary corporate action of Stockholder.
(c) Stockholder is not nor will it be required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution, delivery or performance of this Agreement or any of the
transactions contemplated hereby.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will directly or indirectly
(with or without notice or lapse of time) (i) If Stockholder is a corporation,
contravene any provision of the Governing Documents of Stockholder, (ii)
Contravene any Contract to which Stockholder is a party, Governmental
Authorization, Law or Order to which Stockholder, or any of the assets owned or
used by Stockholder, may be subject, or (iii) result in the imposition or
creation of any Encumbrance upon or with respect to any of the assets owned or
used by Stockholder.
3.3 TOTAL SHARES
The Stockholder Shares are the only shares of Company owned beneficially by
Stockholder or registered in the name of Stockholder as of the date hereof, and
Stockholder does not have any option to purchase or right to subscribe for or
otherwise acquire any securities of Company and has no other interest in or
voting rights with respect to any other securities of Company.
3.4 BROKERS OR FINDERS
Except as provided in the Merger Agreement, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement or any of the other transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Stockholder.
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ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT
Parent represents, warrants and covenants to Stockholder that:
4.1 AUTHORITY
Assuming due authorization, execution and delivery of this Agreement by
Stockholder, this Agreement constitutes the legal, valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms, or make
reciprocal,. Parent has the power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement, which actions
have been duly authorized and approved by all necessary corporate action of
Parent.
ARTICLE V
GENERAL PROVISIONS
5.1 NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid), (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment, or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested;
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number, e-mail address or individual
as a party may designate by notice to the other parties):
If to Parent:
ENSCO International Incorporated
Attention: C. Christopher Gaut
Address: 2700 Fountain Place
1445 Ross Avenue
Dallas, TX 75202-279
Facsimile No.: (214) 855-0300
E-mail Address: cgaut@enscous.com
with a copy (which will not constitute notice) to:
Baker & McKenzie
Attention: Daniel W. Rabun
Address: 2001 Ross Avenue
Suite 2300
Dallas, TX 75201
Facsimile No.: (214) 978-3099
E-mail Address: daniel.w.rabun@bakernet.com
If to Stockholder:
SEACOR SMIT Inc.
Attention: Randall Blank
Address: 1370 Avenue of the Americas, 25th Floor
New York, New York 10019
Facsimile No.: (212) 582-8522
E-mail Address: ran@ckor.com
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with a copy (which will not constitute notice) to:
Weil, Gotshal & Manges, LLP
Attention: David E. Zeltner
Address: 767 Fifth Avenue
Facsimile No.: (212) 310-8007
E-mail Address: david.zeltner@weil.com
5.2 FURTHER ACTIONS
Upon the request of any party to this Agreement, the other parties will (a)
furnish to the requesting party any additional information, (b) execute and
deliver, at their own expense, any other documents and (c) take any other
actions as the requesting party may reasonably require to more effectively carry
out the intent of this Agreement.
5.3 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended, supplemented or otherwise modified except in
a written document executed by the party against whose interest the modification
will operate. In the event of a conflict between the terms of this Agreement and
the Merger Agreement, the terms of the Merger Agreement shall control.
5.4 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
5.5 DRAFTING AND REPRESENTATION
The parties have participated jointly in the negotiation and drafting of
this Agreement. No provision of this Agreement will be interpreted for or
against any party because that party or its legal representative drafted the
provision.
5.6 SEVERABILITY
If a court of competent jurisdiction holds any provision of this Agreement
invalid or unenforceable, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
5.7 ASSIGNMENT; SUCCESSORS; NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its obligations
under this Agreement without the prior written consent of the other parties,
except that Parent may without the consent of Stockholder assign any of its
rights and delegate any of its obligations under this Agreement to any Related
Person of Parent. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of Stockholder's
heirs, executors, administrators and permitted assigns and Parent's successors
and permitted assigns. Nothing expressed or referred to in this Agreement will
be construed to give any Person, other than the parties to this Agreement, any
legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement except such rights as may inure to
a successor or permitted assignee under this Section. Notwithstanding the above,
any Related Person of Parent shall be deemed a third party beneficiary to this
Agreement.
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5.8 ENFORCEMENT OF AGREEMENT
Stockholder acknowledges and agrees that Parent could be damaged
irreparably if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any breach of this Agreement by
Stockholder could not be adequately compensated in all cases by monetary damages
alone. Accordingly, Stockholder agrees that, in addition to any other right or
remedy to which Parent may be entitled, at Law or in equity, it will be entitled
to enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to prevent
breaches or threatened breaches of any of the provisions of this Agreement,
without posting any bond or other undertaking.
5.9 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither any failure nor any delay by any party in exercising
any right, power or privilege under this Agreement or any of the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable Law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in a written document signed by the other party, (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is given, and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of that party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
5.10 GOVERNING LAW
This Agreement will be governed by and construed under the Laws of Delaware
without regard to conflicts of Law principles that would require the application
of any other Law.
5.11 JURISDICTION; SERVICE OF PROCESS
Any action, hearing, suit or proceeding arising out of or relating to this
Agreement or any Contemplated Transaction must be brought in the courts of the
State of Delaware, County of New Castle, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of Delaware.
Each of the parties irrevocably submits to the exclusive jurisdiction of each
such court in any such Proceeding, waives any objection it may now or hereafter
have to venue or to convenience of forum and acknowledges that such exclusive
jurisdiction benefits both parities. The parties agree that any or all of them
may file a copy of this Section with any court as written evidence of the
knowing, voluntary and bargained agreement between the parties irrevocably to
waive any objections to venue or to convenience of forum. Process in any
Proceeding referred to in this Section may be served on any party anywhere in
the world. Stockholder irrevocably appoints The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware 19801 ("Process Agent") to receive, for it
and on its behalf, service of process in any Proceedings. If for any reason
Process Agent is unable to act as such, Stockholder will promptly notify Parent
and within 30 days from the date on which Stockholder first learns that Process
Agent is unable to act as such, Stockholder will appoint a substitute process
agent acceptable to Parent. Stockholder irrevocably consents to service of
process given in the manner provided for notices in Section 5.1. Nothing in this
Agreement will affect the right of Parent to serve process in any other manner
permitted by law.
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5.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts.
5.13 TERMINATION
This Agreement shall terminate upon the earliest of (a) the Effective Time,
(b) the termination of the Merger Agreement for any reason whatsoever or (c)
written notice by Parent to Stockholder of termination of this Agreement (the
"Expiration Date").
The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.
ENSCO INTERNATIONAL INCORPORATED
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
SEACOR SMIT INC.
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
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EXHIBIT C
AMENDED CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
A-85
AMENDED CERTIFICATE OF INCORPORATION
OF
CHILES OFFSHORE INC.
ARTICLE I
The name of the corporation is Chiles Offshore Inc. (the "Corporation").
The address of the Corporation's registered office in the State of Delaware
is The Corporation Trust Company, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE II
The total number of shares of stock which the Corporation shall have the
authority to issue is 1,000 shares of common stock, par value $.001 per share.
ARTICLE III
Elections of directors need not be by written ballot unless the bylaws of
the Corporation shall so provide.
ARTICLE IV
The Board of Directors of the Corporation is expressly authorized to adopt,
amend or repeal bylaws of the Corporation, but the stockholders may make
additional bylaws and may alter or repeal any bylaw whether adopted by them or
otherwise.
ARTICLE V
No contract or transaction between the Corporation and one or more of its
directors, officers or stockholders or between the Corporation and any person
(as used herein "person" means other corporation, partnership, association,
firm, trust, joint venture, political subdivision or instrumentality) or other
organization in which one or more of its directors, officers or stockholders are
directors, officers or stockholders, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the board or committee which
authorizes the contract or transaction, or solely because his, her or their
votes are counted for such purpose, if: (a) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed or
are known to the board of directors or the committee, and the board of directors
or committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (b) the material facts as to
his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (c) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the board of directors,
a committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the board of
directors or of a committee which authorizes the contract or transaction.
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ARTICLE VI
The Corporation shall indemnify, to the full extent permitted by Section
145 of the General Corporation Law of the State of Delaware or any amendment
thereto or any successor provision thereto, all persons whom it may indemnify
pursuant thereto and in the manner thereby. No director shall be personally
liable to the Corporation or any stockholder for monetary damages for breach of
fiduciary duty as a director, except for any matter in respect of which such
director shall be liable under Section 174 of the General Corporation Law of
Delaware or any amendment thereto or successor provision thereto or shall be
liable by reason that, in addition to any and all other requirements for such
liability, such director (i) shall have breached his or her duty of loyalty to
the Corporation or its stockholders, (ii) shall not have acted in good faith or,
in failing to act, shall not have acted in good faith, (iii) shall have acted in
a manner involving intentional misconduct or a knowing violation of law or, in
failing to act, shall have acted in a manner involving intentional misconduct or
a knowing violation of law, or (iv) shall have derived an improper personal
benefit. Neither the amendment nor repeal of this Article VI nor the adoption of
any provision of the Certificate of Incorporation inconsistent with this Article
VI, shall eliminate or reduce the effect of this Article VI in respect of any
matter occurring, or any cause of action, suit or claim that, but for this
Article VI, would accrue or arise, prior to such amendment, repeal or adoption
of an inconsistent provision.
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EXHIBIT D
AFFILIATE AGREEMENT
A-88
FORM OF AFFILIATE AGREEMENT
ENSCO International Incorporated
1445 Ross Avenue, Suite 2700
Dallas, Texas 75202
Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Chiles Offshore Inc., a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of "Rule 145" under the Securities Act of 1933, as amended (including
the rules and regulations promulgated thereunder, the "Act"). Pursuant to the
terms of the Merger Agreement dated May , 2002 (the "Agreement"), between
ENSCO International Incorporated, a Delaware corporation ("Parent"), Chore
Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and Company, Merger Sub will be merged with and into
Company (the "Merger"). Terms used but not defined in this letter shall have the
meanings assigned to such terms in the Agreement.
In connection with the Contemplated Transactions, I may receive shares of
Parent Common Stock.
I represent, warrant and covenant to Parent that in the event I receive any
Parent Common Stock as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of Parent
Common Stock in violation of the Act.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of Parent Common Stock to
the extent I felt necessary with my counsel or counsel for Company.
C. I have been advised that the issuance of Parent Common Stock to me
in connection with the Contemplated Transactions has been registered with
the SEC under the Act on a Registration Statement on Form S-4. However, I
have also been advised that, since, at the time the Agreement was submitted
to a vote of the stockholders of Company, I may be deemed to have been an
affiliate of Company and the distribution by me of Parent Common Stock has
not been registered under the Act, I may be prohibited from selling,
transferring or otherwise disposing of Parent Common Stock issued to me in
connection with the Contemplated Transactions unless (i) such sale,
transfer or other disposition has been registered under the Act, (ii) such
sale, transfer or other disposition is made in conformity with Rule 145, or
(iii) in the opinion of counsel reasonably acceptable to Parent, or a "no
action" letter obtained by the undersigned from the staff of the SEC, such
sale, transfer or other disposition is otherwise exempt from registration
under the Act.
D. I understand that Parent is under no obligation to register the
sale, transfer or other disposition of Parent Common Stock by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
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Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of Company as described in the first paragraph of this
letter or as a waiver of any rights I may have to object to any claim that I am
such an affiliate on or after the date of this letter.
Very truly yours,
--------------------------------------
Name:
Accepted this day of , 2002 by
ENSCO INTERNATIONAL INCORPORATED
By:
-----------------------------------------------------
Cary A. Moomjian, Jr.
Secretary
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EXHIBIT E
CERTAIN COMPENSATION ARRANGEMENTS
A-91
CHILES MANAGEMENT GROUP COMPENSATION AND
NON-OFFICER EMPLOYEE BONUS POOL (THE "PROGRAM")
PERFORMANCE AND STAY BONUSES. Subject to the terms and conditions
specified in this Program, the following Performance and Stay Bonuses will
become payable to the corporate officers of Company ("Corporate Officers")
specified below:
OFFICER PERFORMANCE BONUS STAY BONUS
------- ----------------- -------------
William E. Chiles..................................... $800,000.00 $1,200,000.00
Don Gregg............................................. $600,000.00 $ 0
Bruce Brumley......................................... $150,000.00 $ 150,000.00
Bill Hopkins.......................................... $150,000.00 $ 150,000.00
Gabe Padilla.......................................... $150,000.00 $ 150,000.00
Chris Pinkard......................................... $125,000.00 $ 125,000.00
Anna Goss............................................. $ 50,000.00 $ 50,000.00
In addition to the foregoing, a pool shall be created and funded with
$500,000 to be allocated among the non-officer employees of Company as
determined by Bill Chiles ("Chiles") and Don Gregg ("Gregg") for their efforts
in completing the transaction contemplated by the Agreement (the "Bonus Pool"),
to assist Company in maintaining critical staff, including an allocation to the
six most senior rig based employees per rig.
PERFORMANCE AND STAY BONUSES POTENTIALLY PAYABLE TO CHILES AND GREGG.
Parent agrees to continue the current employment agreement between Company
and Chiles as modified by this Program and to offer Chiles a position as a Vice
President working in metropolitan Houston. Upon acceptance of the position,
Chiles will receive $280,000 per year in base salary payable in accordance with
Parent's standard payroll practices for management employees and full
eligibility for all medical and other benefits and profit sharing programs for
Vice Presidents of Parent, and stock and option grants as approved by the Board
of Directors of Parent. Chiles' Performance Bonus shall be payable at the
Effective Time. Chiles' Stay Bonus shall vest on a monthly basis and be payable
on an annual basis during his employment with Parent. If Chiles accepts a
position with Parent, the balance of any unpaid Stay Bonus (vested and unvested)
shall be payable if he is subsequently terminated or constructively terminated
by Parent without cause (defined in a similar manner as in his current
employment agreement) within two years of commencement of employment with
Parent; provided that acceptance by Chiles of employment with Parent under the
terms and conditions of this Program shall not be considered a constructive
termination under his employment agreement. If Chiles does not accept Parent's
offer of a position, he will not receive the Stay Bonus, but shall receive (i)
his Performance Bonus at the Effective Time and (ii) $840,000 in severance
payments in 36 equal monthly payments commencing with the month following the
Effective Time.
Gregg shall receive all of his Performance Bonus and his severance payment
at the Effective Time, if he does not accept a position with Parent. If Gregg
enters into part-time employment with Parent, (i) he shall receive the same
salary and comparable medical and similar benefits as he currently receives with
Company, and (ii) at Gregg's option, $200,000 to $300,000 of his Performance
Bonus will be deferred and paid at such future date determined by Gregg.
Performance and Stay Bonuses Payable to the Other Corporate Officers
(Brumley, Hopkins, Padilla, Pinkard and Goss) and Employees. All of the
Performance Bonuses payable to the Corporate Officers (other than Chiles and
Gregg) shall be payable at the Effective Time. If any such Corporate Officer
accepts employment with Parent, one-half of his Stay Bonus shall be payable at
the first anniversary of his employment and the remaining one-half shall be
payable at the second anniversary of his employment. If employment is not
offered to any such Corporate Officer or a position that does not have
comparable pay and benefits (irrespective of title or location of employment) is
offered but not accepted, 15% of the Stay
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Bonus for that Corporate Officer shall be payable at the Effective Time
(together with the severance payment discussed below). If a Corporate Officer is
offered and accepts employment with Parent, the balance of any unpaid Stay Bonus
shall be payable to him if he is subsequently terminated by Parent without cause
(as defined in the current Severance Benefits Agreement covering such Corporate
Officer) within two years of his commencement of employment with Parent. Each
employee receiving an allocation of money from the Bonus Pool shall receive 100%
of his allocated bonus at the Effective Time.
Deferred Bonuses. All Deferred Bonuses shall vest immediately and become
payable at the Effective Time.
Existing Company Options and Restricted Stock. Except as provided in the
next sentence, all outstanding Company options shall vest immediately and
convert automatically to options of Parent as provided in Section 1.8 of the
Agreement, at the same ratio as the overall transaction between Company and
Parent. If Chiles accepts a position with Parent, he may agree to modify the
vesting schedule of his unvested options and restricted stock. If Chiles is
terminated or constructively terminated (as defined in this Program) without
cause, all of his unvested options and restricted stock will immediately vest.
If Chiles and Gregg do not accept positions with Parent, Chiles and Gregg
will each have two years from the Effective Time to exercise any and all
options, irrespective of any offer of employment with Parent. If Chiles and
Gregg accept employment with Parent, Chiles and Gregg will each have the
remaining term of his options within which to exercise his options. If Chiles or
Gregg is terminated by Parent without cause, he will have two years within which
to exercise his options, such period not to exceed the remaining term of the
applicable option period. If Chiles or Gregg is terminated by Parent with cause
or voluntarily terminates his employment with Parent, he will have a minimum of
one year within the first year after the Effective Time and thereafter three
months after the termination of his employment with Parent to exercise his
options.
If any of the other Corporate Officers (other than Chiles and Gregg) does
not accept employment with Parent, he will have one year from the Effective Time
to exercise his options. If he accepts employment with Parent, any such
Corporate Officer will have the remaining term of his options within which to
exercise the options. If any such Corporate Officer is terminated without cause,
he will have one year within which to exercise his options, such period not to
exceed the remaining term of the option period. If any such Corporate Officer is
terminated with cause or voluntarily terminates his employment, he will have a
minimum of one year after the Effective Time and thereafter three months after
termination of his employment with Parent to exercise his options.
If the remaining employees do not accept employment with Parent, they would
have three months from the Effective Time to exercise their options. If the
employees accept employment with Parent, they would have until (i) three months
after termination of employment with Parent, or (ii) the original term of the
Company option, whichever is shorter.
Subject to Chiles rights described above, all restricted stock shall vest
immediately and be unrestricted as of the Effective Time.
Severance Payments. The severance payable under the employment contract of
Chiles shall be payable in full if Chiles' employment is terminated up to one
year from commencement of his employment with Parent. If, however, Chiles
remains employed for more than one year but less than three (3) years, he will
be entitled to the pro-rata portion of his severance payments such that after
three years of being employed by Parent, he will not be entitled to any
severance payments other than what might be provided to him as an employee of
Parent. As provided in his current employment agreement, Chiles may terminate
the non-compete provisions at any time by waiving his right to receive any
further severance payment. Gregg shall be paid one year of severance under the
existing Severance Benefits Agreement if he is not offered or does not accept
employment with Parent. If, however, Gregg accepts (part-time) employment with
Parent, at his existing salary, he will be entitled to the pro-rata portion of
his severance if his employment ceases for any reason during the first year of
his employment with Parent and any deferred portion of his Performance Bonus
shall be paid to him. Any Corporate Officer (other than Chiles
A-93
and Gregg) shall be paid severance equal to one year of salary if he is not
offered or does not accept employment with Parent for whatever reason. Any such
Corporate Officer who accepts employment with Parent will not receive severance.
The remaining Company employees have no current severance arrangements. These
employees (and the Corporate Officers) shall be entitled to relocation expenses,
temporary housing, etc. if offered employment with Parent. Otherwise, the
employees shall receive no severance benefits other than allocations, if any,
from the Bonus Pool.
Medical Coverage. Any Chiles employees (including the officers) who do not
accept employment with Parent will receive COBRA benefits only as provided in
Section 5.4(a) of the Agreement.
Gross Up Provisions/Golden Parachute Payments. Neither Parent or Chiles
shall be liable in any way for any reimbursement or gross-up of income, excise
or other payroll taxes resulting from any payments described herein.
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ANNEX B
VOTING AGREEMENT
This Voting Agreement ("Agreement") is made as of May 14, 2002 by and
between ENSCO International Inc., a Delaware corporation ("Parent"), and Luis
Alvarez Morphy ("Stockholder").
PRELIMINARY STATEMENTS
A. Parent, Chiles Offshore Inc., a Delaware corporation ("Company"), and
Chore Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), are entering into a Merger Agreement dated as of the date
hereof (as may be amended from time to time, the "Merger Agreement").
B. Stockholder is the legal and beneficial owner (as determined pursuant
to Rule 13d-3 under the Exchange Act) of 822,434 shares of Common Stock, par
value $0.01 per share, of Company (the "Company Common Stock").
C. As a condition to the willingness of Parent to enter into the Merger
Agreement, and as an inducement for Parent to do so, Stockholder has agreed to
vote the Stockholder Shares as set forth in this Agreement and agreed to the
other covenants, obligations and agreements herein.
D. The Board of Directors of Stockholder has approved Stockholder entering
into this Agreement, the form of this Agreement and the transactions
contemplated hereby.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1. DEFINITIONS FROM MERGER AGREEMENT
Terms used but not defined in this Agreement shall have the meanings
assigned to such terms in the Merger Agreement.
2. STOCKHOLDER SHARES
The term "Stockholder Shares" shall mean (i) the Company Common Stock owned
by Stockholder on the date hereof as described in the Preliminary Statements,
(ii) any shares or securities of Company acquired by Stockholder after the date
hereof, (iii) any shares or capital stock of any Person or any securities or
other property that Stockholder is or becomes entitled to receive by reason of
being a holder of any the Stockholder Shares, and (iv) any capital stock,
securities or other property into which any the Stockholder Shares shall have
been or shall be converted or changed, whether by amendment to the certificate
of incorporation of Company, merger, consolidation, reorganization,
reclassification, capital change or otherwise.
B-1
ARTICLE II
COVENANTS OF THE STOCKHOLDER
2.1 AGREEMENT TO VOTE
At any meeting of the stockholders of Company held prior to the Expiration
Date (as defined in Section 5.13), however called, and at every adjournment or
postponement thereof prior to the Expiration Date, or in connection with any
written consent of or any other action by the stockholders of Company given
prior to the Expiration Date, Stockholder shall vote or cause to be voted the
Stockholder Shares (y) in favor of approval of adoption of the Merger Agreement
and each of the Contemplated Transactions, and any actions required in
furtherance thereof and (z) against any action, agreement, transaction or
Acquisition Proposal that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Company
contained in the Merger Agreement (or of Stockholder contained in this
Agreement) or that might hinder, delay, impede or frustrate the Merger or
Contemplated Transactions. Stockholder shall not enter into any Contract or
understanding with any Person prior to the Expiration Date directly or
indirectly to vote, grant any proxy or give instructions with respect to the
voting of the Stockholder Shares in any manner inconsistent with this Section.
2.2 IRREVOCABLE PROXY
(a) In furtherance of Stockholder's obligations under Section 2.1,
Stockholder hereby irrevocably appoints and constitutes Carl F. Thorne and C.
Christopher Gaut, and each of them (the "Proxyholders"), the agents, proxies and
attorneys-in-fact of Stockholder, with full power of substitution and
resubstitution, to the full extent of Stockholder's rights with respect to the
Stockholder Shares, to vote, express, consent or dissent or otherwise to utilize
such voting power as Parent shall, in Parent's sole discretion, deem proper in
furtherance of Stockholder's obligations under Section 2.1, including without
limitation, the right to sign Stockholder's name to any proxy card, consent,
certificate or other document relating to Company in furtherance of the approval
and adoption of the Merger, the Merger Agreement and the Contemplated
Transactions, or with respect to any other Acquisition Proposal.
(b) This proxy is granted as of the date of this Agreement in order to
secure the obligations of Stockholder set forth in Section 2.1. Such proxy is
irrevocable and coupled with an interest and shall survive the insolvency or
liquidation of the Stockholder. This proxy will terminate on the Expiration
Date.
(c) Stockholder hereby revokes any and all prior proxies with respect to
the Stockholder Shares. Prior to the Expiration Date, Stockholder shall not
directly or indirectly, except as contemplated hereby, grant any proxies or
powers of attorney with respect to the matters set forth in Section 2.1, deposit
any of the Stockholder Shares or enter into a voting agreement with respect to
any of the Stockholder Shares.
(d) The Proxyholders may not exercise this proxy on any matters other than
as set forth in this Section 2.2 and Stockholder may vote the Stockholder Shares
on all such other matters.
2.3 NO SOLICITATION
(a) Stockholder shall not, and shall cause its Affiliates (other than the
Company and any of the Acquired Companies) and its Representatives (other than
Representatives of Stockholder who are also Representatives of the Company and
who act or purport to act on behalf of the Company) not to, (i) solicit,
initiate, encourage, induce or facilitate the making, submission or announcement
of any Acquisition Proposal or take any action that could reasonably be expected
to lead to an Acquisition Proposal, (ii) furnish any information regarding any
of the Acquired Companies to any Person in connection with or in response to an
Acquisition Proposal or an inquiry or indication of interest that could
reasonably be expected to lead to an Acquisition Proposal, (iii) engage in
discussions or negotiations with any Person with respect to any Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v)
enter into any letter of intent or similar document or any Contract
contemplating or otherwise relating to any Acquisition Transaction.
B-2
(b) Stockholder shall immediately cease and cause to be terminated any
existing (as of the date of this Agreement) solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties conducted
heretofore by Stockholder or any of its Representatives with respect to any
Acquisition Proposal.
(c) Stockholder shall not enter into any Contract with any Person that
provides for, or could reasonably be expected to materially facilitate or is
designed to facilitate, an Acquisition Proposal.
(d) Notwithstanding anything to the contrary contained in this Agreement:
(i) the provisions of this Section 2.3 apply solely to the Stockholder when
acting in his or its capacity as a Stockholder of the Company and not when
acting or purporting to act as a Representative of the Company (it being
understood that the Company has separate and independent obligations to Parent
and Merger Sub in respect of the solicitation of Acquisition Proposals under
Section 4.3 of the Merger Agreement); (ii) none of the provisions of this
Section 2.3 shall be construed to prohibit, limit or restrict the Stockholder or
any of its Representatives (A) who is a member of the Board of Directors of the
Company from exercising its fiduciary duties to the Company by voting or taking
any other action whatsoever in his capacity as a director or (B) who is an
officer or employee of the Company from taking any action whatsoever in such
capacity; and (iii) no action taken by the Company in compliance with the
covenants of the Merger Agreement in respect of any Acquisition Proposal shall
serve as the basis of a claim that the Stockholder is in breach of its
obligations under this Section 2.3 notwithstanding the fact that the Stockholder
or its Representatives have provided advice or assistance to the Company in
connection therewith.
2.4 TRANSFER OF STOCKHOLDER SHARES BY THE STOCKHOLDER
Stockholder shall not (a) subject any of the Stockholder Shares to, or
suffer to exist on any of the Stockholder Shares, any Encumbrance, other than
pursuant to this Agreement, or (b) sell, transfer, assign, convey or otherwise
dispose of any interest in or title to any of the Stockholder Shares (including
any such action by operation of Law), other than a disposition by operation of
Law pursuant to the Merger.
2.5 OTHER ACTIONS
Stockholder agrees not to make a written demand for appraisal in respect of
the Stockholder Shares in accordance with Section 262 of the Delaware General
Corporation Law, if such Section 262 provides for appraisal rights for such
Stockholder Shares in the Merger.
2.6 RELATED PARTY AGREEMENT
Neither Stockholder nor any of its Affiliates is currently a party to any
Contract or understanding with any Acquired Company other than the Agreement
with Respect to Ownership of Tonala, dated July 20, 2000, among Company,
Stockholder, certain of its Affiliates, and the other parties named therein (the
"Related Party Agreement"). Stockholder hereby consents to the Merger and the
assignment of the Related Party Agreement by the Company as a result of the
Merger pursuant to Section 7.11 of the Related Party Agreement. Attached to the
Related Party Agreement as Exhibit B is an Agreement and Plan of Merger entered
into at the time of the Related Party Agreement, which agreement required, among
other things, that Company nominate certain Affiliates of Stockholder to
Company's Board of Directors. For the avoidance of doubt, Stockholder agrees and
acknowledges that nothing under Section 1.5 of that agreement or otherwise
requires or would require the Surviving Corporation after the Effective Time to
nominate the Persons named therein as directors of the Surviving Corporation.
B-3
ARTICLE III
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS OF THE STOCKHOLDER
Stockholder represents, warrants and covenants to Parent that:
3.1 OWNERSHIP
Stockholder is as of the date hereof the beneficial and legal owner of the
Stockholder Shares identified in the Preliminary Statements, Stockholder has the
sole right to vote the Stockholder Shares and there are no restrictions on
rights of disposition or other Encumbrances pertaining to the Stockholder
Shares. None of the Stockholder Shares is subject to any voting trust or other
Contract with respect to the voting of the Stockholder Shares, and no proxy,
power of attorney or other authorization has been granted with respect to any of
the Stockholder Shares.
3.2 AUTHORITY AND NON-CONTRAVENTION
(a) If the Stockholder is a corporation, Stockholder is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization.
(b) Assuming due authorization, execution and delivery of this Agreement
by Parent, this Agreement constitutes the legal, valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms.
Stockholder has the power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement. If Stockholder is a
corporation, such actions have been duly authorized and approved by all
necessary corporate action of Stockholder.
(c) Stockholder is not nor will it be required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution, delivery or performance of this Agreement or any of the
transactions contemplated hereby.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will directly or indirectly
(with or without notice or lapse of time) (i) If Stockholder is a corporation,
contravene any provision of the Governing Documents of Stockholder, (ii)
Contravene any Contract to which Stockholder is a party, Governmental
Authorization, Law or Order to which Stockholder, or any of the assets owned or
used by Stockholder, may be subject, or (iii) result in the imposition or
creation of any Encumbrance upon or with respect to any of the assets owned or
used by Stockholder.
3.3 TOTAL SHARES
The Stockholder Shares are the only shares of Company owned beneficially by
Stockholder or registered in the name of Stockholder as of the date hereof, and
Stockholder does not have any option to purchase or right to subscribe for or
otherwise acquire any securities of Company and has no other interest in or
voting rights with respect to any other securities of Company.
3.4 BROKERS OR FINDERS
Except as provided in the Merger Agreement, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement or any of the other transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Stockholder.
B-4
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT
Parent represents, warrants and covenants to Stockholder that:
4.1 AUTHORITY
Assuming due authorization, execution and delivery of this Agreement by
Stockholder, this Agreement constitutes the legal, valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms, or make
reciprocal,. Parent has the power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement, which actions
have been duly authorized and approved by all necessary corporate action of
Parent.
ARTICLE V
GENERAL PROVISIONS
5.1 NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid), (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment, or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested;
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number, e-mail address or individual
as a party may designate by notice to the other parties):
If to Parent:
ENSCO International Incorporated
Attention: C. Christopher Gaut
Address: 2700 Fountain Place
1445 Ross Avenue
Dallas, TX 75202-279
Facsimile No.: (214) 855-0300
E-mail Address: cgaut@enscous.com
with a copy (which will not constitute notice) to:
Baker & McKenzie
Attention: Daniel W. Rabun
Address: 2001 Ross Avenue
Suite 2300
Dallas, TX 75201
Facsimile No.: (214) 978-3099
E-mail Address: daniel.w.rabun@bakernet.com
If to Stockholder:
Luis Alvarez Morphy
Address: Monte S. Urales No. 520
Lomas de Chapultepec 11000
Mexico
Facsimile No.: 011-52-5520-1859
E-mail Address: pamc@central.com.mx
B-5
5.2 FURTHER ACTIONS
Upon the request of any party to this Agreement, the other parties will (a)
furnish to the requesting party any additional information, (b) execute and
deliver, at their own expense, any other documents and (c) take any other
actions as the requesting party may reasonably require to more effectively carry
out the intent of this Agreement.
5.3 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended, supplemented or otherwise modified except in
a written document executed by the party against whose interest the modification
will operate. In the event of a conflict between the terms of this Agreement and
the Merger Agreement, the terms of the Merger Agreement shall control.
5.4 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
5.5 DRAFTING AND REPRESENTATION
The parties have participated jointly in the negotiation and drafting of
this Agreement. No provision of this Agreement will be interpreted for or
against any party because that party or its legal representative drafted the
provision.
5.6 SEVERABILITY
If a court of competent jurisdiction holds any provision of this Agreement
invalid or unenforceable, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
5.7 ASSIGNMENT; SUCCESSORS; NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its obligations
under this Agreement without the prior written consent of the other parties,
except that Parent may without the consent of Stockholder assign any of its
rights and delegate any of its obligations under this Agreement to any Related
Person of Parent. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of Stockholder's
heirs, executors, administrators and permitted assigns and Parent's successors
and permitted assigns. Nothing expressed or referred to in this Agreement will
be construed to give any Person, other than the parties to this Agreement, any
legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement except such rights as may inure to
a successor or permitted assignee under this Section. Notwithstanding the above,
any Related Person of Parent shall be deemed a third party beneficiary to this
Agreement.
5.8 ENFORCEMENT OF AGREEMENT
Stockholder acknowledges and agrees that Parent could be damaged
irreparably if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any breach of this Agreement by
Stockholder could not be adequately compensated in all cases by monetary damages
alone. Accordingly, Stockholder agrees that, in addition to any other right or
remedy to which Parent may be entitled, at Law or in equity, it will be entitled
to enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to
B-6
prevent breaches or threatened breaches of any of the provisions of this
Agreement, without posting any bond or other undertaking.
5.9 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither any failure nor any delay by any party in exercising
any right, power or privilege under this Agreement or any of the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable Law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in a written document signed by the other party, (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is given, and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of that party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
5.10 GOVERNING LAW
This Agreement will be governed by and construed under the Laws of Delaware
without regard to conflicts of Law principles that would require the application
of any other Law.
5.11 JURISDICTION; SERVICE OF PROCESS
Any action, hearing, suit or proceeding arising out of or relating to this
Agreement or any Contemplated Transaction must be brought in the courts of the
State of Delaware, County of New Castle, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of Delaware.
Each of the parties irrevocably submits to the exclusive jurisdiction of each
such court in any such Proceeding, waives any objection it may now or hereafter
have to venue or to convenience of forum and acknowledges that such exclusive
jurisdiction benefits both parities. The parties agree that any or all of them
may file a copy of this Section with any court as written evidence of the
knowing, voluntary and bargained agreement between the parties irrevocably to
waive any objections to venue or to convenience of forum. Process in any
Proceeding referred to in this Section may be served on any party anywhere in
the world. Stockholder irrevocably appoints The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware 19801 ("Process Agent") to receive, for it
and on its behalf, service of process in any Proceedings. If for any reason
Process Agent is unable to act as such, Stockholder will promptly notify Parent
and within 30 days from the date on which Stockholder first learns that Process
Agent is unable to act as such, Stockholder will appoint a substitute process
agent acceptable to Parent. Stockholder irrevocably consents to service of
process given in the manner provided for notices in Section 5.1. Nothing in this
Agreement will affect the right of Parent to serve process in any other manner
permitted by law.
5.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts.
5.13 TERMINATION
This Agreement shall terminate upon the earliest of (a) the Effective Time,
(b) the termination of the Merger Agreement for any reason whatsoever or (c)
written notice by Parent to Stockholder of termination of this Agreement (the
"Expiration Date").
B-7
The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.
ENSCO INTERNATIONAL INCORPORATED
By: /s/ C. CHRISTOPHER GAUT
------------------------------------
Name: C. Christopher Gaut
Title: Sr. Vice President
/s/ LUIS ALVAREZ MORPHY
--------------------------------------
Luis Alvarez Morphy
B-8
ANNEX C
VOTING AGREEMENT
This Voting Agreement ("Agreement") is made as of May 14, 2002 by and
between ENSCO International Inc., a Delaware corporation ("Parent"), and Javier
Alvarez Morphy ("Stockholder").
PRELIMINARY STATEMENTS
A. Parent, Chiles Offshore Inc., a Delaware corporation ("Company"), and
Chore Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), are entering into a Merger Agreement dated as of the date
hereof (as may be amended from time to time, the "Merger Agreement").
B. Stockholder is the legal and beneficial owner (as determined pursuant
to Rule 13d-3 under the Exchange Act) of 822,434 shares of Common Stock, par
value $0.01 per share, of Company (the "Company Common Stock").
C. As a condition to the willingness of Parent to enter into the Merger
Agreement, and as an inducement for Parent to do so, Stockholder has agreed to
vote the Stockholder Shares as set forth in this Agreement and agreed to the
other covenants, obligations and agreements herein.
D. The Board of Directors of Stockholder has approved Stockholder entering
into this Agreement, the form of this Agreement and the transactions
contemplated hereby.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1. DEFINITIONS FROM MERGER AGREEMENT
Terms used but not defined in this Agreement shall have the meanings
assigned to such terms in the Merger Agreement.
2. STOCKHOLDER SHARES
The term "Stockholder Shares" shall mean (i) the Company Common Stock owned
by Stockholder on the date hereof as described in the Preliminary Statements,
(ii) any shares or securities of Company acquired by Stockholder after the date
hereof, (iii) any shares or capital stock of any Person or any securities or
other property that Stockholder is or becomes entitled to receive by reason of
being a holder of any the Stockholder Shares, and (iv) any capital stock,
securities or other property into which any the Stockholder Shares shall have
been or shall be converted or changed, whether by amendment to the certificate
of incorporation of Company, merger, consolidation, reorganization,
reclassification, capital change or otherwise.
C-1
ARTICLE II
COVENANTS OF THE STOCKHOLDER
2.1 AGREEMENT TO VOTE
At any meeting of the stockholders of Company held prior to the Expiration
Date (as defined in Section 5.13), however called, and at every adjournment or
postponement thereof prior to the Expiration Date, or in connection with any
written consent of or any other action by the stockholders of Company given
prior to the Expiration Date, Stockholder shall vote or cause to be voted the
Stockholder Shares (y) in favor of approval of adoption of the Merger Agreement
and each of the Contemplated Transactions, and any actions required in
furtherance thereof and (z) against any action, agreement, transaction or
Acquisition Proposal that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Company
contained in the Merger Agreement (or of Stockholder contained in this
Agreement) or that might hinder, delay, impede or frustrate the Merger or
Contemplated Transactions. Stockholder shall not enter into any Contract or
understanding with any Person prior to the Expiration Date directly or
indirectly to vote, grant any proxy or give instructions with respect to the
voting of the Stockholder Shares in any manner inconsistent with this Section.
2.2 IRREVOCABLE PROXY
(a) In furtherance of Stockholder's obligations under Section 2.1,
Stockholder hereby irrevocably appoints and constitutes Carl F. Thorne and C.
Christopher Gaut, and each of them (the "Proxyholders"), the agents, proxies and
attorneys-in-fact of Stockholder, with full power of substitution and
resubstitution, to the full extent of Stockholder's rights with respect to the
Stockholder Shares, to vote, express, consent or dissent or otherwise to utilize
such voting power as Parent shall, in Parent's sole discretion, deem proper in
furtherance of Stockholder's obligations under Section 2.1, including without
limitation, the right to sign Stockholder's name to any proxy card, consent,
certificate or other document relating to Company in furtherance of the approval
and adoption of the Merger, the Merger Agreement and the Contemplated
Transactions, or with respect to any other Acquisition Proposal.
(b) This proxy is granted as of the date of this Agreement in order to
secure the obligations of Stockholder set forth in Section 2.1. Such proxy is
irrevocable and coupled with an interest and shall survive the insolvency or
liquidation of the Stockholder. This proxy will terminate on the Expiration
Date.
(c) Stockholder hereby revokes any and all prior proxies with respect to
the Stockholder Shares. Prior to the Expiration Date, Stockholder shall not
directly or indirectly, except as contemplated hereby, grant any proxies or
powers of attorney with respect to the matters set forth in Section 2.1, deposit
any of the Stockholder Shares or enter into a voting agreement with respect to
any of the Stockholder Shares.
(d) The Proxyholders may not exercise this proxy on any matters other than
as set forth in this Section 2.2 and Stockholder may vote the Stockholder Shares
on all such other matters.
2.3 NO SOLICITATION
(a) Stockholder shall not, and shall cause its Affiliates (other than the
Company and any of the Acquired Companies) and its Representatives (other than
Representatives of Stockholder who are also Representatives of the Company and
who act or purport to act on behalf of the Company) not to, (i) solicit,
initiate, encourage, induce or facilitate the making, submission or announcement
of any Acquisition Proposal or take any action that could reasonably be expected
to lead to an Acquisition Proposal, (ii) furnish any information regarding any
of the Acquired Companies to any Person in connection with or in response to an
Acquisition Proposal or an inquiry or indication of interest that could
reasonably be expected to lead to an Acquisition Proposal, (iii) engage in
discussions or negotiations with any Person with respect to any Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v)
enter into any letter of intent or similar document or any Contract
contemplating or otherwise relating to any Acquisition Transaction.
C-2
(b) Stockholder shall immediately cease and cause to be terminated any
existing (as of the date of this Agreement) solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties conducted
heretofore by Stockholder or any of its Representatives with respect to any
Acquisition Proposal.
(c) Stockholder shall not enter into any Contract with any Person that
provides for, or could reasonably be expected to materially facilitate or is
designed to facilitate, an Acquisition Proposal.
(d) Notwithstanding anything to the contrary contained in this Agreement:
(i) the provisions of this Section 2.3 apply solely to the Stockholder when
acting in his or its capacity as a Stockholder of the Company and not when
acting or purporting to act as a Representative of the Company (it being
understood that the Company has separate and independent obligations to Parent
and Merger Sub in respect of the solicitation of Acquisition Proposals under
Section 4.3 of the Merger Agreement); (ii) none of the provisions of this
Section 2.3 shall be construed to prohibit, limit or restrict the Stockholder or
any of its Representatives (A) who is a member of the Board of Directors of the
Company from exercising its fiduciary duties to the Company by voting or taking
any other action whatsoever in his capacity as a director or (B) who is an
officer or employee of the Company from taking any action whatsoever in such
capacity; and (iii) no action taken by the Company in compliance with the
covenants of the Merger Agreement in respect of any Acquisition Proposal shall
serve as the basis of a claim that the Stockholder is in breach of its
obligations under this Section 2.3 notwithstanding the fact that the Stockholder
or its Representatives have provided advice or assistance to the Company in
connection therewith.
2.4 TRANSFER OF STOCKHOLDER SHARES BY THE STOCKHOLDER
Stockholder shall not (a) subject any of the Stockholder Shares to, or
suffer to exist on any of the Stockholder Shares, any Encumbrance, other than
pursuant to this Agreement, or (b) sell, transfer, assign, convey or otherwise
dispose of any interest in or title to any of the Stockholder Shares (including
any such action by operation of Law), other than a disposition by operation of
Law pursuant to the Merger.
2.5 OTHER ACTIONS
Stockholder agrees not to make a written demand for appraisal in respect of
the Stockholder Shares in accordance with Section 262 of the Delaware General
Corporation Law, if such Section 262 provides for appraisal rights for such
Stockholder Shares in the Merger.
2.6 RELATED PARTY AGREEMENT
Neither Stockholder nor any of its Affiliates is currently a party to any
Contract or understanding with any Acquired Company other than the Agreement
with Respect to Ownership of Tonala, dated July 20, 2000, among Company,
Stockholder, certain of its Affiliates, and the other parties named therein (the
"Related Party Agreement"). Stockholder hereby consents to the Merger and the
assignment of the Related Party Agreement by the Company as a result of the
Merger pursuant to Section 7.11 of the Related Party Agreement. Attached to the
Related Party Agreement as Exhibit B is an Agreement and Plan of Merger entered
into at the time of the Related Party Agreement, which agreement required, among
other things, that Company nominate certain Affiliates of Stockholder to
Company's Board of Directors. For the avoidance of doubt, Stockholder agrees and
acknowledges that nothing under Section 1.5 of that agreement or otherwise
requires or would require the Surviving Corporation after the Effective Time to
nominate the Persons named therein as directors of the Surviving Corporation.
C-3
ARTICLE III
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS
OF THE STOCKHOLDER
Stockholder represents, warrants and covenants to Parent that:
3.1 OWNERSHIP
Stockholder is as of the date hereof the beneficial and legal owner of the
Stockholder Shares identified in the Preliminary Statements, Stockholder has the
sole right to vote the Stockholder Shares and there are no restrictions on
rights of disposition or other Encumbrances pertaining to the Stockholder
Shares. None of the Stockholder Shares is subject to any voting trust or other
Contract with respect to the voting of the Stockholder Shares, and no proxy,
power of attorney or other authorization has been granted with respect to any of
the Stockholder Shares.
3.2 AUTHORITY AND NON-CONTRAVENTION
(a) If the Stockholder is a corporation, Stockholder is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization.
(b) Assuming due authorization, execution and delivery of this Agreement by
Parent, this Agreement constitutes the legal, valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms.
Stockholder has the power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement. If Stockholder is a
corporation, such actions have been duly authorized and approved by all
necessary corporate action of Stockholder.
(c) Stockholder is not nor will it be required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution, delivery or performance of this Agreement or any of the
transactions contemplated hereby.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will directly or indirectly
(with or without notice or lapse of time) (i) If Stockholder is a corporation,
contravene any provision of the Governing Documents of Stockholder, (ii)
Contravene any Contract to which Stockholder is a party, Governmental
Authorization, Law or Order to which Stockholder, or any of the assets owned or
used by Stockholder, may be subject, or (iii) result in the imposition or
creation of any Encumbrance upon or with respect to any of the assets owned or
used by Stockholder.
3.3 TOTAL SHARES
The Stockholder Shares are the only shares of Company owned beneficially by
Stockholder or registered in the name of Stockholder as of the date hereof, and
Stockholder does not have any option to purchase or right to subscribe for or
otherwise acquire any securities of Company and has no other interest in or
voting rights with respect to any other securities of Company.
3.4 BROKERS OR FINDERS
Except as provided in the Merger Agreement, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement or any of the other transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Stockholder.
C-4
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT
Parent represents, warrants and covenants to Stockholder that:
4.1 AUTHORITY
Assuming due authorization, execution and delivery of this Agreement by
Stockholder, this Agreement constitutes the legal, valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms, or make
reciprocal,. Parent has the power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement, which actions
have been duly authorized and approved by all necessary corporate action of
Parent.
ARTICLE V
GENERAL PROVISIONS
5.1 NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid), (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment, or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested;
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number, e-mail address or individual
as a party may designate by notice to the other parties):
If to Parent:
ENSCO International Incorporated
Attention: C. Christopher Gaut
Address: 2700 Fountain Place
1445 Ross Avenue
Dallas, TX 75202-279
Facsimile No.: (214) 855-0300
E-mail Address:cgaut@enscous.com
with a copy (which will not constitute notice) to:
Baker & McKenzie
Attention: Daniel W. Rabun
Address: 2001 Ross Avenue
Suite 2300
Dallas, TX 75201
Facsimile No.: (214) 978-3099
E-mail Address: daniel.w.rabun@bakernet.com
If to Stockholder:
Javier Alvarez Morphy
Address: Monte Urales No. 520
Lomas de Chapultepec 11000
Mexico
Facsimile No.: 011-52-5520-1859
E-mail Address: pamc@central.com.mx
C-5
5.2 FURTHER ACTIONS
Upon the request of any party to this Agreement, the other parties will (a)
furnish to the requesting party any additional information, (b) execute and
deliver, at their own expense, any other documents and (c) take any other
actions as the requesting party may reasonably require to more effectively carry
out the intent of this Agreement.
5.3 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended, supplemented or otherwise modified except in
a written document executed by the party against whose interest the modification
will operate. In the event of a conflict between the terms of this Agreement and
the Merger Agreement, the terms of the Merger Agreement shall control.
5.4 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
5.5 DRAFTING AND REPRESENTATION
The parties have participated jointly in the negotiation and drafting of
this Agreement. No provision of this Agreement will be interpreted for or
against any party because that party or its legal representative drafted the
provision.
5.6 SEVERABILITY
If a court of competent jurisdiction holds any provision of this Agreement
invalid or unenforceable, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
5.7 ASSIGNMENT; SUCCESSORS; NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its obligations
under this Agreement without the prior written consent of the other parties,
except that Parent may without the consent of Stockholder assign any of its
rights and delegate any of its obligations under this Agreement to any Related
Person of Parent. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of Stockholder's
heirs, executors, administrators and permitted assigns and Parent's successors
and permitted assigns. Nothing expressed or referred to in this Agreement will
be construed to give any Person, other than the parties to this Agreement, any
legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement except such rights as may inure to
a successor or permitted assignee under this Section. Notwithstanding the above,
any Related Person of Parent shall be deemed a third party beneficiary to this
Agreement.
5.8 ENFORCEMENT OF AGREEMENT
Stockholder acknowledges and agrees that Parent could be damaged
irreparably if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any breach of this Agreement by
Stockholder could not be adequately compensated in all cases by monetary damages
alone. Accordingly, Stockholder agrees that, in addition to any other right or
remedy to which Parent may be entitled, at Law or in equity, it will be entitled
to enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to
C-6
prevent breaches or threatened breaches of any of the provisions of this
Agreement, without posting any bond or other undertaking.
5.9 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither any failure nor any delay by any party in exercising
any right, power or privilege under this Agreement or any of the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable Law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in a written document signed by the other party, (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is given, and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of that party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
5.10 GOVERNING LAW
This Agreement will be governed by and construed under the Laws of Delaware
without regard to conflicts of Law principles that would require the application
of any other Law.
5.11 JURISDICTION; SERVICE OF PROCESS
Any action, hearing, suit or proceeding arising out of or relating to this
Agreement or any Contemplated Transaction must be brought in the courts of the
State of Delaware, County of New Castle, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of Delaware.
Each of the parties irrevocably submits to the exclusive jurisdiction of each
such court in any such Proceeding, waives any objection it may now or hereafter
have to venue or to convenience of forum and acknowledges that such exclusive
jurisdiction benefits both parities. The parties agree that any or all of them
may file a copy of this Section with any court as written evidence of the
knowing, voluntary and bargained agreement between the parties irrevocably to
waive any objections to venue or to convenience of forum. Process in any
Proceeding referred to in this Section may be served on any party anywhere in
the world. Stockholder irrevocably appoints The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware 19801 ("Process Agent") to receive, for it
and on its behalf, service of process in any Proceedings. If for any reason
Process Agent is unable to act as such, Stockholder will promptly notify Parent
and within 30 days from the date on which Stockholder first learns that Process
Agent is unable to act as such, Stockholder will appoint a substitute process
agent acceptable to Parent. Stockholder irrevocably consents to service of
process given in the manner provided for notices in Section 5.1. Nothing in this
Agreement will affect the right of Parent to serve process in any other manner
permitted by law.
5.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts.
5.13 TERMINATION
This Agreement shall terminate upon the earliest of (a) the Effective Time,
(b) the termination of the Merger Agreement for any reason whatsoever or (c)
written notice by Parent to Stockholder of termination of this Agreement (the
"Expiration Date").
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The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.
ENSCO INTERNATIONAL INCORPORATED
By: /s/ C. CHRISTOPHER GAUT
------------------------------------
Name: C. Christopher Gaut
Title: Sr. Vice President
/s/ JAVIER ALVAREZ MORPHY
--------------------------------------
Javier Alvarez Morphy
C-8
ANNEX D
VOTING AGREEMENT
This Voting Agreement ("Agreement") is made as of May 14, 2002 by and
between ENSCO International Inc., a Delaware corporation ("Parent"), and
Patricio Alvarez Morphy, ("Stockholder").
PRELIMINARY STATEMENTS
A. Parent, Chiles Offshore Inc., a Delaware corporation ("Company"), and
Chore Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), are entering into a Merger Agreement dated as of the date
hereof (as may be amended from time to time, the "Merger Agreement").
B. Stockholder is the legal and beneficial owner (as determined pursuant
to Rule 13d-3 under the Exchange Act) of 1,034,802 shares of Common Stock, par
value $0.01 per share, of Company (the "Company Common Stock").
C. As a condition to the willingness of Parent to enter into the Merger
Agreement, and as an inducement for Parent to do so, Stockholder has agreed to
vote the Stockholder Shares as set forth in this Agreement and agreed to the
other covenants, obligations and agreements herein.
D. The Board of Directors of Stockholder has approved Stockholder entering
into this Agreement, the form of this Agreement and the transactions
contemplated hereby.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1. DEFINITIONS FROM MERGER AGREEMENT
Terms used but not defined in this Agreement shall have the meanings
assigned to such terms in the Merger Agreement.
2. STOCKHOLDER SHARES
The term "Stockholder Shares" shall mean (i) the Company Common Stock owned
by Stockholder on the date hereof as described in the Preliminary Statements,
(ii) any shares or securities of Company acquired by Stockholder after the date
hereof, (iii) any shares or capital stock of any Person or any securities or
other property that Stockholder is or becomes entitled to receive by reason of
being a holder of any the Stockholder Shares, and (iv) any capital stock,
securities or other property into which any the Stockholder Shares shall have
been or shall be converted or changed, whether by amendment to the certificate
of incorporation of Company, merger, consolidation, reorganization,
reclassification, capital change or otherwise.
D-1
ARTICLE II
COVENANTS OF THE STOCKHOLDER
2.1 AGREEMENT TO VOTE
At any meeting of the stockholders of Company held prior to the Expiration
Date (as defined in Section 5.13), however called, and at every adjournment or
postponement thereof prior to the Expiration Date, or in connection with any
written consent of or any other action by the stockholders of Company given
prior to the Expiration Date, Stockholder shall vote or cause to be voted the
Stockholder Shares (y) in favor of approval of adoption of the Merger Agreement
and each of the Contemplated Transactions, and any actions required in
furtherance thereof and (z) against any action, agreement, transaction or
Acquisition Proposal that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Company
contained in the Merger Agreement (or of Stockholder contained in this
Agreement) or that might hinder, delay, impede or frustrate the Merger or
Contemplated Transactions. Stockholder shall not enter into any Contract or
understanding with any Person prior to the Expiration Date directly or
indirectly to vote, grant any proxy or give instructions with respect to the
voting of the Stockholder Shares in any manner inconsistent with this Section.
2.2 IRREVOCABLE PROXY
(a) In furtherance of Stockholder's obligations under Section 2.1,
Stockholder hereby irrevocably appoints and constitutes Carl F. Thorne and C.
Christopher Gaut, and each of them (the "Proxyholders"), the agents, proxies and
attorneys-in-fact of Stockholder, with full power of substitution and
resubstitution, to the full extent of Stockholder's rights with respect to the
Stockholder Shares, to vote, express, consent or dissent or otherwise to utilize
such voting power as Parent shall, in Parent's sole discretion, deem proper in
furtherance of Stockholder's obligations under Section 2.1, including without
limitation, the right to sign Stockholder's name to any proxy card, consent,
certificate or other document relating to Company in furtherance of the approval
and adoption of the Merger, the Merger Agreement and the Contemplated
Transactions, or with respect to any other Acquisition Proposal.
(b) This proxy is granted as of the date of this Agreement in order to
secure the obligations of Stockholder set forth in Section 2.1. Such proxy is
irrevocable and coupled with an interest and shall survive the insolvency or
liquidation of the Stockholder. This proxy will terminate on the Expiration
Date.
(c) Stockholder hereby revokes any and all prior proxies with respect to
the Stockholder Shares. Prior to the Expiration Date, Stockholder shall not
directly or indirectly, except as contemplated hereby, grant any proxies or
powers of attorney with respect to the matters set forth in Section 2.1, deposit
any of the Stockholder Shares or enter into a voting agreement with respect to
any of the Stockholder Shares.
(d) The Proxyholders may not exercise this proxy on any matters other than
as set forth in this Section 2.2 and Stockholder may vote the Stockholder Shares
on all such other matters.
2.3 NO SOLICITATION
(a) Stockholder shall not, and shall cause its Affiliates (other than the
Company and any of the Acquired Companies) and its Representatives (other than
Representatives of Stockholder who are are also Representatives of the Company
and who act or purport to act on behalf of the Company) not to, (i) solicit,
initiate, encourage, induce or facilitate the making, submission or announcement
of any Acquisition Proposal or take any action that could reasonably be expected
to lead to an Acquisition Proposal, (ii) furnish any information regarding any
of the Acquired Companies to any Person in connection with or in response to an
Acquisition Proposal or an inquiry or indication of interest that could
reasonably be expected to lead to an Acquisition Proposal, (iii) engage in
discussions or negotiations with any Person with respect to any Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v)
enter into any letter of intent or similar document or any Contract
contemplating or otherwise relating to any Acquisition Transaction.
D-2
(b) Stockholder shall immediately cease and cause to be terminated any
existing (as of the date of this Agreement) solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties conducted
heretofore by Stockholder or any of its Representatives with respect to any
Acquisition Proposal.
(c) Stockholder shall not enter into any Contract with any Person that
provides for, or could reasonably be expected to materially facilitate or is
designed to facilitate, an Acquisition Proposal.
(d) Notwithstanding anything to the contrary contained in this Agreement:
(i) the provisions of this Section 2.3 apply solely to the Stockholder when
acting in his or its capacity as a Stockholder of the Company and not when
acting or purporting to act as a Representative of the Company (it being
understood that the Company has separate and independent obligations to Parent
and Merger Sub in respect of the solicitation of Acquisition Proposals under
Section 4.3 of the Merger Agreement); (ii) none of the provisions of this
Section 2.3 shall be construed to prohibit, limit or restrict the Stockholder or
any of its Representatives (A) who is a member of the Board of Directors of the
Company from exercising its fiduciary duties to the Company by voting or taking
any other action whatsoever in his capacity as a director or (B) who is an
officer or employee of the Company from taking any action whatsoever in such
capacity; and (iii) no action taken by the Company in compliance with the
covenants of the Merger Agreement in respect of any Acquisition Proposal shall
serve as the basis of a claim that the Stockholder is in breach of its
obligations under this Section 2.3 notwithstanding the fact that the Stockholder
or its Representatives have provided advice or assistance to the Company in
connection therewith.
2.4 TRANSFER OF STOCKHOLDER SHARES BY THE STOCKHOLDER
Stockholder shall not (a) subject any of the Stockholder Shares to, or
suffer to exist on any of the Stockholder Shares, any Encumbrance, other than
pursuant to this Agreement, or (b) sell, transfer, assign, convey or otherwise
dispose of any interest in or title to any of the Stockholder Shares (including
any such action by operation of Law), other than a disposition by operation of
Law pursuant to the Merger.
2.5 OTHER ACTIONS
Stockholder agrees not to make a written demand for appraisal in respect of
the Stockholder Shares in accordance with Section 262 of the Delaware General
Corporation Law, if such Section 262 provides for appraisal rights for such
Stockholder Shares in the Merger.
2.6 RELATED PARTY AGREEMENT
Neither Stockholder nor any of its Affiliates is currently a party to any
Contract or understanding with any Acquired Company other than the Agreement
with Respect to Ownership of Tonala, dated July 20, 2000, among Company,
Stockholder, certain of its Affiliates, and the other parties named therein (the
"Related Party Agreement"). Stockholder hereby consents to the Merger and the
assignment of the Related Party Agreement by the Company as a result of the
Merger pursuant to Section 7.11 of the Related Party Agreement. Attached to the
Related Party Agreement as Exhibit B is an Agreement and Plan of Merger entered
into at the time of the Related Party Agreement, which agreement required, among
other things, that Company nominate certain Affiliates of Stockholder to
Company's Board of Directors. For the avoidance of doubt, Stockholder agrees and
acknowledges that nothing under Section 1.5 of that agreement or otherwise
requires or would require the Surviving Corporation after the Effective Time to
nominate the Persons named therein as directors of the Surviving Corporation.
D-3
ARTICLE III
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS
OF THE STOCKHOLDER
Stockholder represents, warrants and covenants to Parent that:
3.1 OWNERSHIP
Stockholder is as of the date hereof the beneficial and legal owner of the
Stockholder Shares identified in the Preliminary Statements, Stockholder has the
sole right to vote the Stockholder Shares and there are no restrictions on
rights of disposition or other Encumbrances pertaining to the Stockholder
Shares. None of the Stockholder Shares is subject to any voting trust or other
Contract with respect to the voting of the Stockholder Shares, and no proxy,
power of attorney or other authorization has been granted with respect to any of
the Stockholder Shares.
3.2 AUTHORITY AND NON-CONTRAVENTION
(a) If the Stockholder is a corporation, Stockholder is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization.
(b) Assuming due authorization, execution and delivery of this Agreement by
Parent, this Agreement constitutes the legal, valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms.
Stockholder has the power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement. If Stockholder is a
corporation, such actions have been duly authorized and approved by all
necessary corporate action of Stockholder.
(c) Stockholder is not nor will it be required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution, delivery or performance of this Agreement or any of the
transactions contemplated hereby.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will directly or indirectly
(with or without notice or lapse of time) (i) If Stockholder is a corporation,
contravene any provision of the Governing Documents of Stockholder, (ii)
Contravene any Contract to which Stockholder is a party, Governmental
Authorization, Law or Order to which Stockholder, or any of the assets owned or
used by Stockholder, may be subject, or (iii) result in the imposition or
creation of any Encumbrance upon or with respect to any of the assets owned or
used by Stockholder.
3.3 TOTAL SHARES
The Stockholder Shares are the only shares of Company owned beneficially by
Stockholder or registered in the name of Stockholder as of the date hereof, and
Stockholder does not have any option to purchase or right to subscribe for or
otherwise acquire any securities of Company and has no other interest in or
voting rights with respect to any other securities of Company.
3.4 BROKERS OR FINDERS
Except as provided in the Merger Agreement, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement or any of the other transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Stockholder.
D-4
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT
Parent represents, warrants and covenants to Stockholder that:
4.1 AUTHORITY
Assuming due authorization, execution and delivery of this Agreement by
Stockholder, this Agreement constitutes the legal, valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms, or make
reciprocal,. Parent has the power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement, which actions
have been duly authorized and approved by all necessary corporate action of
Parent.
ARTICLE V
GENERAL PROVISIONS
5.1 NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid), (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment, or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested;
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number, e-mail address or individual
as a party may designate by notice to the other parties):
If to Parent:
ENSCO International Incorporated
Attention: C. Christopher Gaut
Address: 2700 Fountain Place
1445 Ross Avenue
Dallas, TX 75202-279
Facsimile No.: (214) 855-0300
E-mail Address: cgaut@enscous.com
with a copy (which will not constitute notice) to:
Baker & McKenzie
Attention: Daniel W. Rabun
Address: 2001 Ross Avenue
Suite 2300
Dallas, TX 75201
Facsimile No.: (214) 978-3099
E-mail Address: daniel.w.rabun@bakernet.com
If to Stockholder:
Patricio Alvarez Morphy
Address: Monte Urales No. 520
Lomas de Chapultepec 11000
Mexico
Facsimile No.: 011-52-5520-1859
E-mail Address: pamc@central.com.mx
D-5
5.2 FURTHER ACTIONS
Upon the request of any party to this Agreement, the other parties will (a)
furnish to the requesting party any additional information, (b) execute and
deliver, at their own expense, any other documents and (c) take any other
actions as the requesting party may reasonably require to more effectively carry
out the intent of this Agreement.
5.3 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended, supplemented or otherwise modified except in
a written document executed by the party against whose interest the modification
will operate. In the event of a conflict between the terms of this Agreement and
the Merger Agreement, the terms of the Merger Agreement shall control.
5.4 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
5.5 DRAFTING AND REPRESENTATION
The parties have participated jointly in the negotiation and drafting of
this Agreement. No provision of this Agreement will be interpreted for or
against any party because that party or its legal representative drafted the
provision.
5.6 SEVERABILITY
If a court of competent jurisdiction holds any provision of this Agreement
invalid or unenforceable, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
5.7 ASSIGNMENT; SUCCESSORS; NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its obligations
under this Agreement without the prior written consent of the other parties,
except that Parent may without the consent of Stockholder assign any of its
rights and delegate any of its obligations under this Agreement to any Related
Person of Parent. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of Stockholder's
heirs, executors, administrators and permitted assigns and Parent's successors
and permitted assigns. Nothing expressed or referred to in this Agreement will
be construed to give any Person, other than the parties to this Agreement, any
legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement except such rights as may inure to
a successor or permitted assignee under this Section. Notwithstanding the above,
any Related Person of Parent shall be deemed a third party beneficiary to this
Agreement.
5.8 ENFORCEMENT OF AGREEMENT
Stockholder acknowledges and agrees that Parent could be damaged
irreparably if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any breach of this Agreement by
Stockholder could not be adequately compensated in all cases by monetary damages
alone. Accordingly, Stockholder agrees that, in addition to any other right or
remedy to which Parent may be entitled, at Law or in equity, it will be entitled
to enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to
D-6
prevent breaches or threatened breaches of any of the provisions of this
Agreement, without posting any bond or other undertaking.
5.9 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither any failure nor any delay by any party in exercising
any right, power or privilege under this Agreement or any of the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable Law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in a written document signed by the other party, (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is given, and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of that party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
5.10 GOVERNING LAW
This Agreement will be governed by and construed under the Laws of Delaware
without regard to conflicts of Law principles that would require the application
of any other Law.
5.11 JURISDICTION; SERVICE OF PROCESS
Any action, hearing, suit or proceeding arising out of or relating to this
Agreement or any Contemplated Transaction must be brought in the courts of the
State of Delaware, County of New Castle, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of Delaware.
Each of the parties irrevocably submits to the exclusive jurisdiction of each
such court in any such Proceeding, waives any objection it may now or hereafter
have to venue or to convenience of forum and acknowledges that such exclusive
jurisdiction benefits both parities. The parties agree that any or all of them
may file a copy of this Section with any court as written evidence of the
knowing, voluntary and bargained agreement between the parties irrevocably to
waive any objections to venue or to convenience of forum. Process in any
Proceeding referred to in this Section may be served on any party anywhere in
the world. Stockholder irrevocably appoints The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware 19801 ("Process Agent") to receive, for it
and on its behalf, service of process in any Proceedings. If for any reason
Process Agent is unable to act as such, Stockholder will promptly notify Parent
and within 30 days from the date on which Stockholder first learns that Process
Agent is unable to act as such, Stockholder will appoint a substitute process
agent acceptable to Parent. Stockholder irrevocably consents to service of
process given in the manner provided for notices in Section 5.1. Nothing in this
Agreement will affect the right of Parent to serve process in any other manner
permitted by law.
5.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts.
5.13 TERMINATION
This Agreement shall terminate upon the earliest of (a) the Effective Time,
(b) the termination of the Merger Agreement for any reason whatsoever or (c)
written notice by Parent to Stockholder of termination of this Agreement (the
"Expiration Date").
D-7
The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.
ENSCO INTERNATIONAL INCORPORATED
By: /s/ C. CHRISTOPHER GAUT
------------------------------------
Name: C. Christopher Gaut
Title: Sr. Vice President
/s/ PATRICIO ALVAREZ MORPHY
--------------------------------------
Patricio Alvarez Morphy
D-8
ANNEX E
VOTING AGREEMENT
This Voting Agreement ("Agreement") is made as of May 14, 2002 by and
between ENSCO International Inc., a Delaware corporation ("Parent"), and SEACOR
SMIT Inc., a Delaware corporation ("Stockholder").
PRELIMINARY STATEMENTS
A. Parent, Chiles Offshore Inc., a Delaware corporation ("Company"), and
Chore Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), are entering into a Merger Agreement dated as of the date
hereof (as may be amended from time to time, the "Merger Agreement").
B. Stockholder is the legal and beneficial owner (as determined pursuant
to Rule 13d-3 under the Exchange Act) of 4,831,401 shares of Common Stock, par
value $0.01 per share, of Company (the "Company Common Stock").
C. As a condition to the willingness of Parent to enter into the Merger
Agreement, and as an inducement for Parent to do so, Stockholder has agreed to
vote the Stockholder Shares as set forth in this Agreement and agreed to the
other covenants, obligations and agreements herein.
D. The Board of Directors of Stockholder has approved Stockholder entering
into this Agreement, the form of this Agreement and the transactions
contemplated hereby.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS FROM MERGER AGREEMENT
Terms used but not defined in this Agreement shall have the meanings
assigned to such terms in the Merger Agreement.
1.2 STOCKHOLDER SHARES
The term "Stockholder Shares" shall mean (i) the Company Common Stock owned
by Stockholder on the date hereof as described in the Preliminary Statements,
(ii) any shares or securities of Company acquired by Stockholder after the date
hereof, (iii) any shares or capital stock of any Person or any securities or
other property that Stockholder is or becomes entitled to receive by reason of
being a holder of any the Stockholder Shares, and (iv) any capital stock,
securities or other property into which any the Stockholder Shares shall have
been or shall be converted or changed, whether by amendment to the certificate
of incorporation of Company, merger, consolidation, reorganization,
reclassification, capital change or otherwise.
E-1
ARTICLE II
COVENANTS OF THE STOCKHOLDER
2.1 AGREEMENT TO VOTE
At any meeting of the stockholders of Company held prior to the Expiration
Date (as defined in Section 5.13), however called, and at every adjournment or
postponement thereof prior to the Expiration Date, or in connection with any
written consent of or any other action by the stockholders of Company given
prior to the Expiration Date, Stockholder shall vote or cause to be voted the
Stockholder Shares (y) in favor of approval of adoption of the Merger Agreement
and each of the Contemplated Transactions, and any actions required in
furtherance thereof and (z) against any action, agreement, transaction or
Acquisition Proposal that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Company
contained in the Merger Agreement (or of Stockholder contained in this
Agreement) or that might hinder, delay, impede or frustrate the Merger or
Contemplated Transactions. Stockholder shall not enter into any Contract or
understanding with any Person prior to the Expiration Date directly or
indirectly to vote, grant any proxy or give instructions with respect to the
voting of the Stockholder Shares in any manner inconsistent with this Section.
2.2. IRREVOCABLE PROXY
(a) In furtherance of Stockholder's obligations under Section 2.1,
Stockholder hereby irrevocably appoints and constitutes Carl F. Thorne and C.
Christopher Gaut, and each of them (the "Proxyholders"), the agents, proxies and
attorneys-in-fact of Stockholder, with full power of substitution and
resubstitution, to the full extent of Stockholder's rights with respect to the
Stockholder Shares, to vote, express, consent or dissent or otherwise to utilize
such voting power as Parent shall, in Parent's sole discretion, deem proper in
furtherance of Stockholder's obligations under Section 2.1, including without
limitation, the right to sign Stockholder's name to any proxy card, consent,
certificate or other document relating to Company in furtherance of the approval
and adoption of the Merger, the Merger Agreement and the Contemplated
Transactions, or with respect to any other Acquisition Proposal.
(b) This proxy is granted as of the date of this Agreement in order to
secure the obligations of Stockholder set forth in Section 2.1. Such proxy is
irrevocable and coupled with an interest and shall survive the insolvency or
liquidation of the Stockholder. This proxy will terminate on the Expiration
Date.
(c) Stockholder hereby revokes any and all prior proxies with respect to
the Stockholder Shares. Prior to the Expiration Date, Stockholder shall not
directly or indirectly, except as contemplated hereby, grant any proxies or
powers of attorney with respect to the matters set forth in Section 2.1, deposit
any of the Stockholder Shares or enter into a voting agreement with respect to
any of the Stockholder Shares.
(d) The Proxyholders may not exercise this proxy on any matters other than
as set forth in this Section 2.2 and Stockholder may vote the Stockholder Shares
on all such other matters.
2.3 NO SOLICITATION
(a) Stockholder shall not, and shall cause its Affiliates (other than the
Company and any of the Acquired Companies) and its Representatives (other than
Representatives of Stockholder who are are also Representatives of the Company
and who act or purport to act on behalf of the Company) not to, (i) solicit,
initiate, encourage, induce or facilitate the making, submission or announcement
of any Acquisition Proposal or take any action that could reasonably be expected
to lead to an Acquisition Proposal, (ii) furnish any information regarding any
of the Acquired Companies to any Person in connection with or in response to an
Acquisition Proposal or an inquiry or indication of interest that could
reasonably be expected to lead to an Acquisition Proposal, (iii) engage in
discussions or negotiations with any Person with respect to any Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v)
enter into any letter of intent or similar document or any Contract
contemplating or otherwise relating to any Acquisition Transaction.
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(b) Stockholder shall immediately cease and cause to be terminated any
existing (as of the date of this Agreement) solicitation, initiation,
encouragement, activity, discussion or negotiation with any parties conducted
heretofore by Stockholder or any of its Representatives with respect to any
Acquisition Proposal.
(c) Stockholder shall not enter into any Contract with any Person that
provides for, or could reasonably be expected to materially facilitate or is
designed to facilitate, an Acquisition Proposal.
(d) Notwithstanding anything to the contrary contained in this Agreement:
(i) the provisions of this Section 2.3 apply solely to the Stockholder when
acting in his or its capacity as a Stockholder of the Company and not when
acting or purporting to act as a Representative of the Company (it being
understood that the Company has separate and independent obligations to Parent
and Merger Sub in respect of the solicitation of Acquisition Proposals under
Section 4.3 of the Merger Agreement); (ii) none of the provisions of this
Section 2.3 shall be construed to prohibit, limit or restrict the Stockholder or
any of its Representatives (A) who is a member of the Board of Directors of the
Company from exercising its fiduciary duties to the Company by voting or taking
any other action whatsoever in his capacity as a director or (B) who is an
officer or employee of the Company from taking any action whatsoever in such
capacity; and (iii) no action taken by the Company in compliance with the
covenants of the Merger Agreement in respect of any Acquisition Proposal shall
serve as the basis of a claim that the Stockholder is in breach of its
obligations under this Section 2.3 notwithstanding the fact that the Stockholder
or its Representatives have provided advice or assistance to the Company in
connection therewith.
2.4 TRANSFER OF STOCKHOLDER SHARES BY THE STOCKHOLDER
Stockholder shall not (a) subject any of the Stockholder Shares to, or
suffer to exist on any of the Stockholder Shares, any Encumbrance, other than
pursuant to this Agreement, or (b) sell, transfer, assign, convey or otherwise
dispose of any interest in or title to any of the Stockholder Shares (including
any such action by operation of Law), other than a disposition by operation of
Law pursuant to the Merger.
2.5 OTHER ACTIONS
Stockholder agrees not to make a written demand for appraisal in respect of
the Stockholder Shares in accordance with Section 262 of the Delaware General
Corporation Law, if such Section 262 provides for appraisal rights for such
Stockholder Shares in the Merger.
2.6 TERMINATION OF RELATED PARTY AGREEMENTS
(a) Stockholder represents and warrants to Parent that it is currently a
party to the following agreements with Company:
(i) Commission Agreement, dated April 1, 2000, among Bassoe Offshore
(USA), Inc., Stockholder and Company.
(ii) Amended and Restated Management and Administrative Services
Agreement, dated July 18, 2000, by and between Stockholder and Company
(collectively, the "Related Party Agreements").
Neither Stockholder nor any of its Affiliates is a party to any Contract or
understanding with any Acquired Company other than the Related Party Agreements.
(b) Stockholder and Company agree that the Related Party Agreements
terminate in their entirety as of the Effective Time. Stockholder and its
Affiliates hereby waive any provisions in the Related Party Agreements requiring
prior notice of such termination and Company shall incur no liability or
obligation to the Stockholder as a result of such termination and shall have no
further liability or obligation to Stockholder under such agreements (monetary
or otherwise) effective as of the Effective Time.
(c) Notwithstanding anything to the contrary herein, Parent shall pay to
Stockholder an amount equal to $1,000,000 within 60 days after delivery of the
Vessel to Company by Builder, in accordance with,
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and in the manner contemplated by, Section 1 of the Commission Agreement
referred to in Section 2.6(a)(i) above. For the purpose of this Section 2.6(c),
"Vessel" and "Builder" have the meanings assigned to those terms in the
Commission Agreement.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS OF THE STOCKHOLDER
Stockholder represents, warrants and covenants to Parent that:
3.1 OWNERSHIP
Stockholder is as of the date hereof the beneficial and legal owner of the
Stockholder Shares identified in the Preliminary Statements, Stockholder has the
sole right to vote the Stockholder Shares and there are no restrictions on
rights of disposition or other Encumbrances pertaining to the Stockholder
Shares. None of the Stockholder Shares is subject to any voting trust or other
Contract with respect to the voting of the Stockholder Shares, and no proxy,
power of attorney or other authorization has been granted with respect to any of
the Stockholder Shares.
3.2 AUTHORITY AND NON-CONTRAVENTION
(a) If the Stockholder is a corporation, Stockholder is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization.
(b) Assuming due authorization, execution and delivery of this Agreement by
Parent, this Agreement constitutes the legal, valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms.
Stockholder has the power and authority to execute and deliver this Agreement
and to perform its obligations under this Agreement. If Stockholder is a
corporation, such actions have been duly authorized and approved by all
necessary corporate action of Stockholder.
(c) Stockholder is not nor will it be required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in connection with
the execution, delivery or performance of this Agreement or any of the
transactions contemplated hereby.
(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will directly or indirectly
(with or without notice or lapse of time) (i) If Stockholder is a corporation,
contravene any provision of the Governing Documents of Stockholder, (ii)
Contravene any Contract to which Stockholder is a party, Governmental
Authorization, Law or Order to which Stockholder, or any of the assets owned or
used by Stockholder, may be subject, or (iii) result in the imposition or
creation of any Encumbrance upon or with respect to any of the assets owned or
used by Stockholder.
3.3 TOTAL SHARES
The Stockholder Shares are the only shares of Company owned beneficially by
Stockholder or registered in the name of Stockholder as of the date hereof, and
Stockholder does not have any option to purchase or right to subscribe for or
otherwise acquire any securities of Company and has no other interest in or
voting rights with respect to any other securities of Company.
3.4 BROKERS OR FINDERS
Except as provided in the Merger Agreement, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with this Agreement or any of the other transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Stockholder.
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ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT
Parent represents, warrants and covenants to Stockholder that:
4.1 AUTHORITY
Assuming due authorization, execution and delivery of this Agreement by
Stockholder, this Agreement constitutes the legal, valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms, or make
reciprocal,. Parent has the power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement, which actions
have been duly authorized and approved by all necessary corporate action of
Parent.
ARTICLE V
GENERAL PROVISIONS
5.1 NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid), (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment, or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested;
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number, e-mail address or individual
as a party may designate by notice to the other parties):
If to Parent:
ENSCO International Incorporated
Attention: C. Christopher Gaut
Address: 2700 Fountain Place
1445 Ross Avenue
Dallas, TX 75202-279
Facsimile No.: (214) 855-0300
E-mail Address: cgaut@enscous.com
with a copy (which will not constitute notice) to:
Baker & McKenzie
Attention: Daniel W. Rabun
Address: 2001 Ross Avenue
Suite 2300
Dallas, TX 75201
Facsimile No.: (214) 978-3099
E-mail Address: daniel.w.rabun@bakernet.com
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If to Stockholder:
SEACOR SMIT Inc.
Attention: Randall Blank
Address: 1370 Avenue of the Americas, 25th Floor
New York, New York 10019
Facsimile No.: (212) 582-8522
E-mail Address:ran@ckor.com
with a copy (which will not constitute notice) to:
Weil, Gotshal & Manges, LLP
Attention: David E. Zeltner
Address: 767 Fifth Avenue
Facsimile No.: (212) 310-8007
E-mail Address: david.zeltner@weil.com
5.2 FURTHER ACTIONS
Upon the request of any party to this Agreement, the other parties will (a)
furnish to the requesting party any additional information, (b) execute and
deliver, at their own expense, any other documents and (c) take any other
actions as the requesting party may reasonably require to more effectively carry
out the intent of this Agreement.
5.3 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended, supplemented or otherwise modified except in
a written document executed by the party against whose interest the modification
will operate. In the event of a conflict between the terms of this Agreement and
the Merger Agreement, the terms of the Merger Agreement shall control.
5.4 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
5.5 DRAFTING AND REPRESENTATION
The parties have participated jointly in the negotiation and drafting of
this Agreement. No provision of this Agreement will be interpreted for or
against any party because that party or its legal representative drafted the
provision.
5.6 SEVERABILITY
If a court of competent jurisdiction holds any provision of this Agreement
invalid or unenforceable, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
5.7 ASSIGNMENT; SUCCESSORS; NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its obligations
under this Agreement without the prior written consent of the other parties,
except that Parent may without the consent of Stockholder
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assign any of its rights and delegate any of its obligations under this
Agreement to any Related Person of Parent. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon, and inure to the
benefit of Stockholder's heirs, executors, administrators and permitted assigns
and Parent's successors and permitted assigns. Nothing expressed or referred to
in this Agreement will be construed to give any Person, other than the parties
to this Agreement, any legal or equitable right, remedy or claim under or with
respect to this Agreement or any provision of this Agreement except such rights
as may inure to a successor or permitted assignee under this Section.
Notwithstanding the above, any Related Person of Parent shall be deemed a third
party beneficiary to this Agreement.
5.8 ENFORCEMENT OF AGREEMENT
Stockholder acknowledges and agrees that Parent could be damaged
irreparably if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that any breach of this Agreement by
Stockholder could not be adequately compensated in all cases by monetary damages
alone. Accordingly, Stockholder agrees that, in addition to any other right or
remedy to which Parent may be entitled, at Law or in equity, it will be entitled
to enforce any provision of this Agreement by a decree of specific performance
and to temporary, preliminary and permanent injunctive relief to prevent
breaches or threatened breaches of any of the provisions of this Agreement,
without posting any bond or other undertaking.
5.9 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither any failure nor any delay by any party in exercising
any right, power or privilege under this Agreement or any of the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable Law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in a written document signed by the other party, (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is given, and (c) no notice to or demand on one party will
be deemed to be a waiver of any obligation of that party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.
5.10 GOVERNING LAW
This Agreement will be governed by and construed under the Laws of Delaware
without regard to conflicts of Law principles that would require the application
of any other Law.
5.11 JURISDICTION; SERVICE OF PROCESS
Any action, hearing, suit or proceeding arising out of or relating to this
Agreement or any Contemplated Transaction must be brought in the courts of the
State of Delaware, County of New Castle, or, if it has or can acquire
jurisdiction, in the United States District Court for the District of Delaware.
Each of the parties irrevocably submits to the exclusive jurisdiction of each
such court in any such Proceeding, waives any objection it may now or hereafter
have to venue or to convenience of forum and acknowledges that such exclusive
jurisdiction benefits both parities. The parties agree that any or all of them
may file a copy of this Section with any court as written evidence of the
knowing, voluntary and bargained agreement between the parties irrevocably to
waive any objections to venue or to convenience of forum. Process in any
Proceeding referred to in this Section may be served on any party anywhere in
the world. Stockholder irrevocably appoints The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware 19801 ("Process Agent") to receive, for it
and on its behalf, service of process in any Proceedings. If for any reason
Process Agent is unable to act as such, Stockholder will promptly notify Parent
and within 30 days from the date on which Stockholder first learns that Process
Agent is unable to
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act as such, Stockholder will appoint a substitute process agent acceptable to
Parent. Stockholder irrevocably consents to service of process given in the
manner provided for notices in Section 5.1. Nothing in this Agreement will
affect the right of Parent to serve process in any other manner permitted by
law.
5.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts.
5.13 TERMINATION
This Agreement shall terminate upon the earliest of (a) the Effective Time,
(b) the termination of the Merger Agreement for any reason whatsoever or (c)
written notice by Parent to Stockholder of termination of this Agreement (the
"Expiration Date").
The parties have executed and delivered this Agreement as of the date
indicated in the first sentence of this Agreement.
ENSCO INTERNATIONAL INCORPORATED
By: /s/ C. CHRISTOPHER GAUT
------------------------------------
Name: C. Christopher Gaut
Title: Sr. Vice President
SEACOR SMIT INC.
By: /s/ CHARLES FABRIKANT
------------------------------------
Name: Charles Fabrikant
Title: CEO
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ANNEX F
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
May 14, 2002
Board of Directors
Chiles Offshore Inc.
11200 Richmond Avenue, Suite 490
Houston, Texas 77082-2618
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock of Chiles Offshore
Inc. ("Chiles"), other than SEACOR SMIT Inc. ("SEACOR"), Patricio Alvarez
Morphy, Luis Alvarez Morphy and Javier Alvarez Morphy (collectively, the "Morphy
Group") and, in each case, their respective affiliates, of the Merger
Consideration (as defined below) set forth in the Merger Agreement, dated as of
May 14, 2002 (the "Merger Agreement"), among ENSCO International Incorporated
("ENSCO"), Chore Acquisition, Inc., a wholly owned subsidiary of ENSCO ("Merger
Sub"), and Chiles. The Merger Agreement provides for, among other things, the
merger of Chiles with and into Merger Sub (the "Merger"), pursuant to which
Merger Sub will continue as the surviving corporation and each outstanding share
of the common stock, par value $0.01 per share, of Chiles ("Chiles Common
Stock") will be converted into the right to receive (i) .6575 of a share of the
common stock, par value $0.10 per share, of ENSCO ("ENSCO Common Stock") (the
"Common Stock Consideration") and (ii) $5.25 in cash (the "Cash Consideration"
and, together with the Common Stock Consideration, the "Merger Consideration").
In arriving at our opinion, we have reviewed the Merger Agreement and
certain related documents, as well as certain publicly available business and
financial information relating to Chiles and ENSCO. We have also reviewed
certain other information relating to Chiles and ENSCO, including financial
forecasts, provided to or discussed with us by Chiles and ENSCO, and have met
with the managements of Chiles and ENSCO to discuss the businesses and prospects
of Chiles and ENSCO. We have considered certain financial and stock market data
of Chiles and ENSCO, and we have compared those data with similar data for
publicly held companies in businesses similar to Chiles and ENSCO, and we have
considered, to the extent publicly available, the financial terms of certain
other business combinations and other transactions which have been announced or
effected. We also considered such other information, financial studies, analyses
and investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the financial forecasts, we have been advised, and have assumed, that
such forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of Chiles and
ENSCO as to the future financial performance of Chiles and ENSCO and the
strategic benefits and potential synergies (including the amount, timing and
achievability thereof) anticipated to result from the Merger. We also have
assumed, with your consent, that the Merger will be consummated as set forth
above in accordance with the terms of the Merger Agreement, without amendment,
modification or waiver of any material term, condition or agreement and that in
the course of obtaining any necessary regulatory and third party approvals and
consents relating to the Merger, no modification, condition, restriction,
limitation or delay will be imposed that will have an adverse effect on Chiles
or ENSCO or the contemplated benefits of the Merger. We also have assumed, with
your consent, that the Merger will be treated as a tax-free reorganization for
federal income tax purposes. We have not been requested to make, and have not
made, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of Chiles or ENSCO, nor have we been furnished with
any such evaluations or appraisals. Our opinion is necessarily based upon
information available to us, and financial, economic, market and other
conditions as they exist and can be evaluated, on the date hereof. We are not
expressing any opinion as to what the value of ENSCO Common Stock actually will
be when issued pursuant to the Merger or the prices at which ENSCO
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Board of Directors
Chiles Offshore Inc.
May 14, 2002
Page 2
Common Stock will trade at any time. Our opinion does not address the relative
merits of the Merger as compared to other business strategies that might be
available to Chiles, nor does it address the underlying business decision of
Chiles to proceed with the Merger.
We have acted as financial advisor to Chiles in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger. We also will receive a fee in
connection with the delivery of this opinion. We and our affiliates have in the
past provided, and may in the future provide, investment banking and financial
services to Chiles and ENSCO and certain of their affiliates, including SEACOR,
unrelated to the proposed Merger, for which services we have received, and
expect to receive, compensation. In the ordinary course of business, we and our
affiliates may actively trade the debt and equity securities of Chiles and ENSCO
and certain of their affiliates, including SEACOR, for our own and such
affiliates' accounts and for the accounts of customers and, accordingly, may at
any time hold long or short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of Chiles in connection with its evaluation of the Merger and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote or act on any matter relating to the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration is fair, from a financial point of view,
to the holders of Chiles Common Stock, other than SEACOR, the Morphy Group and
their respective affiliates.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
F-2
ANNEX G
APPRAISAL RIGHTS
DELAWARE CODE
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER, CONSOLIDATION OR CONVERSION
8 Del. C. sec.262 (2001)
sec.262. Appraisal rights
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to
sec.251(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or
sec.264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
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d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, then either a constituent corporation before the
effective date of the merger or consolidation, or the surviving or
resulting corporation within ten days thereafter, shall notify each of the
holders of any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section. Such notice may, and, if
given on or after the effective date of the merger or consolidation, shall,
also notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of such notice, demand in writing from the
surviving or resulting corporation the appraisal of such holder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the
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transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided, that if the notice
is given on or after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is fixed and
the notice is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which the notice
is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final
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determination of the stockholder entitled to an appraisal. Any stockholder whose
name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted such
stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
G-4
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, or the DGCL, provides
that, subject to specific limitations in the case of derivative suits brought by
a corporation's stockholders in its name, a corporation may indemnify any
individual who is made a party or threatened to be made a party to any third
party suit or proceeding on account of being a director, officer, employee or
agent of the corporation against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement reasonably incurred by him or her in
connection with the action, if the individual:
- acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation; and
- in the case of a criminal proceeding, had no reasonable cause to believe
his or her conduct was unlawful.
Moreover, to the extent a present or former director or officer is
successful in the defense of the action, suit or proceeding, the DGCL requires a
corporation to indemnify the individual for reasonable expenses incurred
thereby.
Article 15 of ENSCO's certificate of incorporation provides, in general,
that ENSCO must, to the full extent authorized or permitted by law, indemnify
its directors and officers under certain of the circumstances defined in Section
145 of the DGCL, and that no director of ENSCO will be personally liable to
ENSCO or its stockholders for monetary damages for any breach of such director's
fiduciary duty, with certain exceptions. Article 15 further allows ENSCO to
purchase and maintain insurance on behalf of ENSCO's directors, officers,
employees or agents and to provide for such indemnification by means of a trust
fund, security interest, letter of credit, surety bond, contract and/or similar
arrangement. The directors and officers of ENSCO and its subsidiaries are
insured (subject to certain exceptions and deductions) against liabilities which
they may incur in their capacity as such, including liabilities under the
Securities Act of 1933, under a liability insurance policy carried by ENSCO.
ENSCO has also entered into agreements with its officers and directors which
essentially provide that ENSCO will indemnify the officers and directors to the
extent set forth in ENSCO's certificate of incorporation and bylaws.
Article VII, Section 7 of ENSCO's bylaws provides that ENSCO must indemnify
its officers, directors, employees and agents to the full extent permitted by
the DGCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index
(b) Not applicable.
(c) Not applicable.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by
II-1
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(c) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (b) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offering therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(e) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(f) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas,
on June 6, 2002.
ENSCO INTERNATIONAL INCORPORATED
By: /s/ CARL F. THORNE
------------------------------------
Name: Carl F. Thorne
Title: Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes Carl F. Thorne,
H.E. Malone and C. Christopher Gaut, and each of them, any one of whom may act
without joinder of the others, to file one or more amendments (including
post-effective amendments) to this registration statement, which amendments may
make such changes in this registration statement as each of them deems
appropriate, and each such person hereby appoints Carl F. Thorne, H.E. Malone
and C. Christopher Gaut, and each of them, any one of whom may act without the
joinder of the others, attorney-in-fact to execute in the name and on behalf of
the registrant and any such person, individually and in each capacity stated
below, any such amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and as of the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ CARL F. THORNE Chairman of the Board and Chief June 6, 2002
------------------------------------------------ Executive Officer (Principal
Carl F. Thorne Executive Officer)
/s/ H.E. MALONE Vice President -- Accounting, June 6, 2002
------------------------------------------------ Tax & Information Systems
H.E. Malone (Principal Financial Officer)
/s/ DAVID A. ARMOUR Controller (Principal Accounting June 6, 2002
------------------------------------------------ Officer)
David A. Armour
/s/ DAVID M. CARMICHAEL Director June 6, 2002
------------------------------------------------
David M. Carmichael
/s/ GERALD W. HADDOCK Director June 6, 2002
------------------------------------------------
Gerald W. Haddock
/s/ THOMAS L. KELLY II Director June 6, 2002
------------------------------------------------
Thomas L. Kelly II
II-3
SIGNATURE TITLE DATE
--------- ----- ----
/s/ MORTON H. MEYERSON Director June 6, 2002
------------------------------------------------
Morton H. Meyerson
/s/ PAUL E. ROWSEY, III Director June 6, 2002
------------------------------------------------
Paul E. Rowsey, III
/s/ JOEL V. STAFF Director June 6, 2002
------------------------------------------------
Joel V. Staff
II-4
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
2.1 Merger Agreement, dated May 14, 2002, by and among ENSCO
International Incorporated, Chore Acquisition, Inc. and
Chiles Offshore Inc. (incorporated by reference to Annex A
to the proxy statement/prospectus included as part of this
Registration Statement)
4.1 Rights Agreement, dated February 21, 1995, between ENSCO
International Incorporated and American Stock Transfer and
Trust Company, as Rights Agent, which includes as Exhibit A
the Form of Certificate of Designations of Series A Junior
Participating Preferred Stock of ENSCO International
Incorporated, as Exhibit B the Form of Right Certificate,
and as Exhibit C the Summary of Rights to Purchase Shares of
Preferred Stock of ENSCO International Incorporated
(incorporated by reference to Exhibit 4 to Registrant's Form
8-K dated February 21, 1995, File No. 1-8097)
4.2 First Amendment to Rights Agreement, dated March 3, 1997,
between ENSCO International Incorporated and American Stock
Transfer and Trust Company, as Rights Agent (incorporated by
reference to Exhibit 4.2 to the Registrant's Current Report
on Form 8-K dated March 3, 1997, File No. 1-8097)
5.1 Opinion of Baker & McKenzie as to the legality of the
securities being issued
8.1 Form of Opinion of Weil, Gotshal & Manges LLP as to certain
tax matters
10.1 Voting Agreement, dated May 14, 2002, between ENSCO
International Incorporated and Luis Alvarez Morphy
(incorporated by reference to Annex B to the proxy
statement/prospectus included as part of this Registration
Statement)
10.2 Voting Agreement, dated May 14, 2002, between ENSCO
International Incorporated and Javier Alvarez Morphy
(incorporated by reference to Annex C to the proxy
statement/prospectus included as part of this Registration
Statement)
10.3 Voting Agreement, dated May 14, 2002, between ENSCO
International Incorporated and Patricio Alvarez Morphy
(incorporated by reference to Annex D to the proxy
statement/prospectus included as part of this Registration
Statement)
10.4 Voting Agreement, dated May 14, 2002, between ENSCO
International Incorporated and SEACOR SMIT Inc.
(incorporated by reference to Annex E to the proxy
statement/prospectus included as part of this Registration
Statement)
10.5 Letter Agreement, dated May 15, 2002, among Bassoe Offshore
(USA), Inc., Bassoe Rig Partners Ltd., Chiles Offshore Inc.
and ENSCO International Incorporated
15.1 Letter from KPMG LLP regarding unaudited interim financial
information.
23.1* Consent of PricewaterhouseCoopers LLP
23.2 Consent of KPMG LLP
23.3 Consent of Baker & McKenzie (included in Exhibit 5.1)
23.4 Consent of Weil, Gotshal & Manges LLP (included in Exhibit
8.1)
24 Power of Attorney (included in the signature pages to the
Registration Statement)
99.1 Consent of Credit Suisse First Boston Corporation
99.2 Form of proxy card
---------------
* To be filed by amendment.
II-5