UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: June 30, 2014
OR
¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
to
Paragon
Offshore plc
(Exact name of registrant as specified in its charter)
|
|
|
|
|
England and Wales |
|
001-36465 |
|
98-1146017 |
(State or other jurisdiction of
incorporation or organization) |
|
(Commission
file number) |
|
(I.R.S. employer
identification number) |
3151 Briarpark Drive Suite 700, Houston, Texas 77042
(Address of principal executive offices) (Zip Code)
Registrants Telephone Number, Including Area Code: +1 832 783 4000
Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x
Indicate by check mark
whether each registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
|
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|
Large accelerated filer |
|
¨ |
|
Accelerated filer |
|
¨ |
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|
|
Non-accelerated filer |
|
x |
|
Smaller reporting company |
|
¨ |
Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes ¨ No x
Number of shares outstanding and trading at August 4, 2014: 84,753,393
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Explanatory Note
On June 30, 2014,
Paragon Offshore Limited was an indirect wholly owned subsidiary of Noble Corporation plc (Noble) incorporated under the laws of England and Wales. On July 17, 2014, Paragon Offshore Limited re-registered under the Companies Act
2006 as a public limited company under the name of Paragon Offshore plc (together with its subsidiaries, Paragon, the Company, we, us or our).
Subsequent to June 30, 2014, Noble transferred to us the assets and liabilities (the Separation) constituting most of
Nobles standard specification drilling units and related assets, liabilities and business. On August 1, 2014, Noble made a pro rata distribution to its shareholders of all of our issued and outstanding ordinary shares (the
Distribution and, collectively with the Separation, the Spin-Off). In connection with the Distribution, Noble shareholders received one ordinary share of Paragon for every three ordinary shares of Noble owned. Noble owned
84.8 million ordinary shares of Paragon as of July 23, 2014, Nobles record date for the Distribution.
The historical
financial information contained in this report relates to periods that ended prior to the Spin-Off. Consequently, the unaudited combined financial statements and related discussion of financial condition and results of operations contained in this
report pertain to the Noble Standard-Spec Business (the Predecessor), which comprised the entire standard specification drilling fleet and related operations of Noble. The Separation included the transfer to us of the Predecessor, except
for six standard specification drilling units, three of which were retained by Noble and three of which were sold by Noble prior to the Separation. We will consolidate the historical financial results of the Predecessor in our consolidated financial
statements for all periods prior to the Spin-Off.
While management believes that the financial statements contained herein are prepared
in accordance with accounting principles generally accepted in the United States of America (GAAP) and in compliance with the rules and regulations of the U.S. Securities and Exchange Commission (the SEC), the financial
statements of the Predecessor may not be indicative of the financial results that will be reported by us for periods subsequent to the Spin-Off. The information contained in this report should be read in conjunction with the information contained in
our registration statement on Form 10, as filed with the SEC on July 14, 2014.
1
Item 1. Financial Statements
PARAGON OFFSHORE PLC
UNAUDITED BALANCE SHEET
(In thousands)
|
|
|
|
|
|
|
June 30, |
|
|
|
2014 |
|
ASSETS |
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
84 |
|
Other assets |
|
|
1,799 |
|
|
|
|
|
|
Total assets |
|
$ |
1,883 |
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
Current liabilities |
|
|
|
|
Related party accounts payable |
|
$ |
1,883 |
|
|
|
|
|
|
Total liabilities |
|
|
1,883 |
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
Equity |
|
|
|
|
Ordinary shares (2 shares of $1 par value) |
|
|
|
|
Subscription receivable from parent |
|
|
|
|
Retained deficit |
|
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
1,883 |
|
|
|
|
|
|
See accompanying notes to the unaudited balance sheet.
2
PARAGON OFFSHORE PLC
NOTES TO UNAUDITED BALANCE SHEET
Note 1Nature of Business
On
June 30, 2014, Paragon Offshore Limited was an indirect wholly owned subsidiary of Noble Corporation plc (Noble) incorporated under the laws of England and Wales. On July 17, 2014, Paragon Offshore Limited re-registered under
the Companies Act 2006 as a public limited company under the name of Paragon Offshore plc (together with its subsidiaries, Paragon, the Company, we, us or our).
Subsequent to June 30, 2014, Noble transferred to us the assets and liabilities (the Separation) constituting most of
Nobles standard specification drilling units and related assets, liabilities and business. On August 1, 2014, Noble made a pro rata distribution to its shareholders of all of our issued and outstanding ordinary shares (the
Distribution and, collectively with the Separation, the Spin-Off). In connection with the Distribution, Noble shareholders received one ordinary share of Paragon for every three ordinary shares of Noble owned. Noble owned
84.8 million ordinary shares of Paragon as of July 23, 2014, Nobles record date for the Distribution.
We are a pure-play
global provider of standard specification offshore drilling rigs which includes 34 jackups and eight floaters (five drillships and three semisubmersibles), and one floating production storage and offloading unit (FPSO). We refer to our
semisubmersibles and drillships collectively as floaters. We also operate the Hibernia platform offshore of Canada. Our primary business is to contract our drilling rigs, related equipment and work crews to conduct oil and gas drilling
and workover operations for our exploration and production customers on a dayrate basis around the world.
Note 2Significant Accounting Policies
Management Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Certain accounting policies involve judgments and uncertainties
to such an extent that there is reasonable likelihood that materially different amounts could have been reported under different conditions, or if different assumptions had been used. We evaluate our estimates and assumptions on a regular basis. We
base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not
readily apparent from other sources. Our actual results may differ from these estimates and assumptions used in preparation of these consolidated financial statements.
Note 3Related Party Accounts Payable
Prior to the Distribution on August 1, 2014, Noble paid for certain administrative functions on our behalf. As of June 30, 2014,
Noble had incurred $1.3 million of such expenses related to rating agency fees in connection with our debt issuance, discussed below, and $0.5 million related to registration fees. These costs are accumulated within Other assets and
Related party accounts payable.
Note 4Debt
On June 17, 2014, we entered into a senior secured revolving credit agreement with lenders that provided commitments in the amount of $800
million (the Revolving Credit Facility). Subject to the satisfaction of certain conditions, we may obtain up to $800 million of letters of credit and up to $80 million of swingline loans under the Revolving Credit Facility. The Revolving
Credit Facility has a term of five years after the funding date. Borrowings under the Revolving Credit Facility bear interest, at our option, at either (i) an adjusted LIBOR, plus a margin ranging between 1.50% to 2.50%, depending on our
leverage ratio, or (ii) the Base Rate, which is calculated as the greatest of (1) a fluctuating rate of interest publicly announced by JPMorgan Chase Bank, N.A., as its prime rate, (2) the U.S. federal funds effective rate
plus 0.50% and (3) the one month LIBOR Rate plus 1.00%, plus a margin ranging between 0.50% to 1.50%, depending on our leverage ratio. Issuance of Letters of Credit reduces availability to borrow under the Revolving Credit Facility.
3
PARAGON OFFSHORE PLC
NOTES TO UNAUDITED BALANCE SHEET
On July 18, 2014, we issued $1.08 billion of senior notes (the Senior Notes) and also borrowed $650 million under a term loan
facility (the Term Loan Facility). The Term Loan Facility is secured by all of our rigs except three, which are currently cold-stacked. The proceeds from the Term Loan Facility and the Senior Notes were used to repay $1.7 billion of
intercompany indebtedness to Noble incurred as partial consideration for the Separation. The Senior Notes consisted of $500 million of 6.75% senior notes and $580 million of 7.25% senior notes, which mature on July 15, 2022 and August 15,
2024, respectively. The Senior Notes were issued without an original issue discount. Borrowings under the term loan facility bear interest at an adjusted LIBOR rate plus 2.75%, subject to a minimum LIBOR rate of 1% or a base rate plus 1.75%, at our
option. The Term Loan Facility matures in July 2021. The loans under the Term Loan Facility were issued with 0.5% original issue discount.
The covenants and events of default under our Revolving Credit Facility, Senior Notes, and Term Loan Facility are substantially similar. The
agreements governing these obligations contain covenants that place restrictions on certain merger and consolidation transactions; our ability to sell or transfer certain assets; payment of dividends; making distributions; redemption of stock;
incurrence or guarantee of debt; issuance of loans; prepayment, redemption of certain debt, as well as incurrence or assumption of certain liens. In addition to these covenants, the Revolving Credit Facility includes a covenant requiring us to
maintain a net leverage ratio, defined as total debt net of cash and cash equivalents, divided by earnings excluding interest, taxes, depreciation and amortization charges, not greater than 4.00 to 1.00 and a covenant requiring us to maintain a
minimum interest coverage ratio, defined as interest expense divided by earnings excluding interest, taxes, depreciation and amortization charges, of 3.00 to 1.00.
4
NOBLE STANDARD-SPEC BUSINESS (PREDECESSOR)
COMBINED BALANCE SHEETS
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
32,688 |
|
|
$ |
36,581 |
|
Accounts receivable |
|
|
364,244 |
|
|
|
356,241 |
|
Prepaid and other current assets |
|
|
57,886 |
|
|
|
51,182 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
454,818 |
|
|
|
444,004 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, at cost |
|
|
6,171,698 |
|
|
|
6,067,066 |
|
Accumulated depreciation |
|
|
(2,809,195 |
) |
|
|
(2,607,382 |
) |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
3,362,503 |
|
|
|
3,459,684 |
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
72,837 |
|
|
|
79,111 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
3,890,158 |
|
|
$ |
3,982,799 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
123,249 |
|
|
$ |
124,442 |
|
Accrued payroll and related costs |
|
|
54,186 |
|
|
|
60,738 |
|
Other current liabilities |
|
|
35,547 |
|
|
|
41,374 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
212,982 |
|
|
|
226,554 |
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
2,268,613 |
|
|
|
1,561,141 |
|
Deferred income taxes |
|
|
97,063 |
|
|
|
101,703 |
|
Other liabilities |
|
|
82,792 |
|
|
|
88,068 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,661,450 |
|
|
|
1,977,466 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Net parent investment |
|
|
1,228,687 |
|
|
|
2,005,339 |
|
Accumulated other comprehensive gain (loss) |
|
|
21 |
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
Total equity |
|
|
1,228,708 |
|
|
|
2,005,333 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
3,890,158 |
|
|
$ |
3,982,799 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited combined financial statements.
5
NOBLE STANDARD-SPEC BUSINESS (PREDECESSOR)
COMBINED STATEMENTS OF INCOME
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services |
|
$ |
462,334 |
|
|
$ |
444,208 |
|
|
$ |
954,297 |
|
|
$ |
877,619 |
|
Reimbursables |
|
|
8,477 |
|
|
|
11,769 |
|
|
|
22,893 |
|
|
|
23,646 |
|
Labor contract drilling services |
|
|
8,146 |
|
|
|
8,902 |
|
|
|
16,357 |
|
|
|
17,684 |
|
Other |
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
478,957 |
|
|
|
464,945 |
|
|
|
993,547 |
|
|
|
919,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services |
|
|
222,317 |
|
|
|
226,281 |
|
|
|
448,780 |
|
|
|
451,124 |
|
Reimbursables |
|
|
5,224 |
|
|
|
9,053 |
|
|
|
15,850 |
|
|
|
17,597 |
|
Labor contract drilling services |
|
|
6,223 |
|
|
|
6,033 |
|
|
|
12,436 |
|
|
|
11,746 |
|
Depreciation and amortization |
|
|
112,536 |
|
|
|
101,897 |
|
|
|
223,120 |
|
|
|
200,601 |
|
General and administrative |
|
|
12,683 |
|
|
|
15,538 |
|
|
|
25,928 |
|
|
|
31,003 |
|
Gain on contract settlements/extinguishments, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,800 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
358,983 |
|
|
|
358,802 |
|
|
|
726,114 |
|
|
|
710,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
119,974 |
|
|
|
106,143 |
|
|
|
267,433 |
|
|
|
208,744 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amount capitalized |
|
|
(2,972 |
) |
|
|
(1,097 |
) |
|
|
(6,272 |
) |
|
|
(2,235 |
) |
Interest income and other, net |
|
|
338 |
|
|
|
121 |
|
|
|
525 |
|
|
|
224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
117,340 |
|
|
|
105,167 |
|
|
|
261,686 |
|
|
|
206,733 |
|
Income tax provision |
|
|
(22,292 |
) |
|
|
(22,623 |
) |
|
|
(42,075 |
) |
|
|
(41,618 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
95,048 |
|
|
$ |
82,544 |
|
|
$ |
219,611 |
|
|
$ |
165,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited combined financial statements.
6
NOBLE STANDARD-SPEC BUSINESS (PREDECESSOR)
COMBINED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
Net income |
|
$ |
95,048 |
|
|
$ |
82,544 |
|
|
$ |
219,611 |
|
|
$ |
165,115 |
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments |
|
|
63 |
|
|
|
(437 |
) |
|
|
27 |
|
|
|
(743 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
$ |
95,111 |
|
|
$ |
82,107 |
|
|
$ |
219,638 |
|
|
$ |
164,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited combined financial statements.
7
NOBLE STANDARD-SPEC BUSINESS (PREDECESSOR)
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2014 |
|
|
2013 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
219,611 |
|
|
$ |
165,115 |
|
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
223,120 |
|
|
|
200,601 |
|
Deferred income taxes |
|
|
(4,640 |
) |
|
|
(8,375 |
) |
Capital contribution by parentshare-based compensation |
|
|
11,757 |
|
|
|
10,523 |
|
Net change in other assets and liabilities |
|
|
(44,160 |
) |
|
|
(81,869 |
) |
|
|
|
|
|
|
|
|
|
Net cash from operating activities |
|
|
405,688 |
|
|
|
285,995 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(110,687 |
) |
|
|
(216,304 |
) |
Change in accrued capital expenditures |
|
|
13,594 |
|
|
|
(5,086 |
) |
Proceeds from sale of assets |
|
|
6,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(90,523 |
) |
|
|
(221,390 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Net change in borrowings outstanding on bank credit facilities |
|
|
707,472 |
|
|
|
941,653 |
|
Financing costs on credit facilities |
|
|
(386 |
) |
|
|
(1,912 |
) |
Net transfers to parent |
|
|
(1,026,144 |
) |
|
|
(1,028,932 |
) |
|
|
|
|
|
|
|
|
|
Net cash (to) from financing activities |
|
|
(319,058 |
) |
|
|
(89,191 |
) |
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
(3,893 |
) |
|
|
(24,586 |
) |
Cash and cash equivalents, beginning of period |
|
|
36,581 |
|
|
|
70,538 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
32,688 |
|
|
$ |
45,952 |
|
|
|
|
|
|
|
|
|
|
Supplemental information for non-cash activities |
|
|
|
|
|
|
|
|
Transfer from parent of property and equipment |
|
|
18,124 |
|
|
|
13,131 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
18,124 |
|
|
$ |
13,131 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited combined financial statements.
8
NOBLE STANDARD-SPEC BUSINESS (PREDECESSOR)
COMBINED STATEMENTS OF CHANGES IN EQUITY
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other |
|
|
|
|
|
|
Net Parent Investment |
|
|
Comprehensive (Loss)/Gain |
|
|
Total Equity |
|
Balance at December 31, 2012 |
|
$ |
3,365,417 |
|
|
$ |
(185 |
) |
|
$ |
3,365,232 |
|
Net income |
|
|
165,115 |
|
|
|
|
|
|
|
165,115 |
|
Net transfers to parent |
|
|
(1,005,278 |
) |
|
|
|
|
|
|
(1,005,278 |
) |
Foreign currency translation adjustments |
|
|
|
|
|
|
(743 |
) |
|
|
(743 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2013 |
|
$ |
2,525,254 |
|
|
$ |
(928 |
) |
|
$ |
2,524,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013 |
|
$ |
2,005,339 |
|
|
$ |
(6 |
) |
|
$ |
2,005,333 |
|
Net income |
|
|
219,611 |
|
|
|
|
|
|
|
219,611 |
|
Net transfers to parent |
|
|
(996,263 |
) |
|
|
|
|
|
|
(996,263 |
) |
Foreign currency translation adjustments |
|
|
|
|
|
|
27 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2014 |
|
$ |
1,228,687 |
|
|
$ |
21 |
|
|
$ |
1,228,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited combined financial statements.
9
Note 1Organization and Basis of Presentation
Organization and Business
On
June 30, 2014, Paragon Offshore Limited was an indirect wholly owned subsidiary of Noble Corporation plc (Noble) incorporated under the laws of England and Wales. On July 17, 2014, Paragon Offshore Limited re-registered under
the Companies Act 2006 as a public limited company under the name of Paragon Offshore plc (together with its subsidiaries, Paragon, the Company, we, us or our).
Subsequent to June 30, 2014, Noble transferred to us the assets and liabilities (the Separation) constituting most of
Nobles standard specification drilling units and related assets, liabilities and business. On August 1, 2014, Noble made a pro rata distribution to its shareholders of all of our issued and outstanding ordinary shares (the
Distribution and, collectively with the Separation, the Spin-Off). In connection with the Distribution, Noble shareholders received one ordinary share of Paragon for every three ordinary shares of Noble owned. Noble owned
84.8 million ordinary shares of Paragon as of July 23, 2014, Nobles record date for the Distribution.
We are a pure-play
global provider of standard specification offshore drilling rigs which includes 34 jackups and eight floaters (five drillships and three semisubmersibles), and one floating production storage and offloading unit (FPSO). We refer to our
semisubmersibles and drillships collectively as floaters. We also operate the Hibernia platform offshore of Canada. Our primary business is to contract our drilling rigs, related equipment and work crews to conduct oil and gas drilling
and workover operations for our exploration and production customers on a dayrate basis around the world.
Basis of Presentation
The historical financial information contained in this report relates to periods that ended prior to the Spin-Off. Consequently, the unaudited
combined financial statements and related discussion of financial condition and results of operations contained in this report pertain to the Noble Standard-Spec Business (the Predecessor), which comprised the entire standard
specification drilling fleet and related operations of Noble. The Separation included the transfer to us of the Predecessor, except for six standard specification drilling units, three of which were retained by Noble and three of which were sold by
Noble prior to the Separation. We will consolidate the historical financial results of the Predecessor in our consolidated financial statements for all periods prior to the Spin-Off.
These combined financial statements have been prepared on a stand-alone basis and are derived from Nobles consolidated financial
statements and accounting records. The Predecessor combined financial statements reflect our Predecessors financial position, results of operations, and cash flows in conformity with GAAP. The combined financial position, results of
operations, and cash flows of our Predecessor may not be indicative of our Predecessor had it been a separate stand-alone entity during the periods presented, nor are the results stated herein indicative of what our financial position, results of
operations, and cash flows may be in the future.
These combined financial statements include assets and liabilities that are specifically
identifiable or have been allocated to our Predecessor. Costs directly related to our Predecessor have been included in the accompanying financial statements. Our Predecessor received service and support functions from Noble and the costs associated
with these support functions have been allocated to our Predecessor using various inputs, such as head count, services rendered, and assets assigned to our Predecessor. These allocated costs are primarily related to corporate administrative
expenses, employee related costs including pensions and other benefits, and corporate and shared employees for the following functional groups:
|
|
|
information technology, |
|
|
|
marketing and product support, |
|
|
|
other corporate and infrastructural services. |
10
Note 2Property and Equipment
Predecessor capital expenditures, including capitalized interest, totaled $68.2 million and $110.7 million for the three and six months ended
June 30, 2014, respectively, as compared to $115.0 million and $216.3 million for the three and six months ended June 30, 2013.
Predecessor interest expense capitalized included in these combined financial statements was $1.2 million and $2.4 million for the three and
six months ended June 30, 2014, respectively, as compared to $1.5 million and $2.4 million for the three and six months ended June 30, 2013.
Note 3Debt
Predecessor long-term
debt consisted of the amount drawn on the Noble Credit Facility at June 30, 2014 and December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
Noble Credit Facilities / Commercial Paper Program |
|
$ |
2,268,613 |
|
|
$ |
1,561,141 |
|
|
|
|
|
|
|
|
|
|
At June 30, 2014, our Predecessor was supported by Nobles three separate credit facilities with an
aggregate maximum available capacity of $2.9 billion (collectively, the Noble Credit Facilities). Noble established a commercial paper program, which allowed Noble to issue up to $2.7 billion in unsecured commercial paper notes. Amounts
issued under the commercial paper program were supported by the unused capacity under the Noble Credit Facilities and, therefore, have been classified as long-term on our Predecessors Consolidated Balance Sheet. The outstanding amounts of
commercial paper reduce availability under the Noble Credit Facilities.
The Noble Credit Facilities provided Noble with the ability to
issue up to $375 million in letters of credit in the aggregate. The issuance of letters of credit under the Noble Credit Facilities would have reduced the amount available for borrowing. At June 30, 2014, Noble had no letters of credit issued
under the Credit Facilities.
The covenants and events of default under the Noble Credit Facilities are substantially similar, and each
facility contains a covenant that limits Nobles ratio of debt to total tangible capitalization, as defined in the Credit Facilities, to 0.60. At June 30, 2014, Nobles ratio of debt to total tangible capitalization was approximately
0.39. Noble was in compliance with all covenants under the Noble Credit Facilities as of June 30, 2014.
On June 17, 2014, we
entered into a senior secured revolving credit agreement with lenders that provided commitments in the amount of $800 million (the Revolving Credit Facility). Subject to the satisfaction of certain conditions, we may obtain up to $800
million of letters of credit and up to $80 million of swingline loans under the Revolving Credit Facility. The Revolving Credit Facility has a term of five years after the funding date. Borrowings under the Revolving Credit Facility bear interest,
at our option, at either (i) an adjusted LIBOR, plus a margin ranging between 1.50% to 2.50%, depending on our leverage ratio, or (ii) the Base Rate, which is calculated as the greatest of (1) a fluctuating rate of interest publicly
announced by JPMorgan Chase Bank, N.A., as its prime rate, (2) the U.S. federal funds effective rate plus 0.50% and (3) the one month LIBOR Rate plus 1.00%, plus a margin ranging between 0.50% to 1.50%, depending on our
leverage ratio. Issuance of Letters of Credit reduces availability to borrow under the Revolving Credit Facility.
On July 18, 2014,
we issued $1.08 billion of senior notes (the Senior Notes) and also borrowed $650 million under a term loan facility (the Term Loan Facility). The Term Loan Facility is secured by all of our rigs except three, which are
currently cold-stacked. The proceeds from the Term Loan Facility and the Senior Notes were used to repay $1.7 billion of intercompany indebtedness to Noble incurred as partial consideration for the Separation. The Senior Notes consisted of $500
million of 6.75% senior notes and $580 million of 7.25% senior notes, which mature on July 15, 2022 and August 15, 2024, respectively. The Senior Notes were issued without an original issue discount. Borrowings under the term loan facility
bear interest at an adjusted LIBOR rate plus 2.75%, subject to a minimum LIBOR rate of 1% or a base rate plus 1.75%, at our option. The Term Loan Facility matures in July 2021. The loans under the Term Loan Facility were issued with 0.5% original
issue discount.
11
The covenants and events of default under our Revolving Credit Facility, Senior Notes, and Term
Loan Facility are substantially similar. The agreements governing these obligations contain covenants that place restrictions on certain merger and consolidation transactions; our ability to sell or transfer certain assets; payment of dividends;
making distributions; redemption of stock; incurrence or guarantee of debt; issuance of loans; prepayment, redemption of certain debt, as well as incurrence or assumption of certain liens. In addition to these covenants, the Revolving Credit
Facility includes a covenant requiring us to maintain a net leverage ratio, defined as total debt net of cash and cash equivalents, divided by earnings excluding interest, taxes, depreciation and amortization charges, not greater than 4.00 to 1.00
and a covenant requiring us to maintain a minimum interest coverage ratio, defined as interest expense divided by earnings excluding interest, taxes, depreciation and amortization charges, of 3.00 to 1.00.
As discussed above, Noble received approximately $1.7 billion in cash as settlement of intercompany notes. Noble used these proceeds to repay
amounts outstanding under its commercial paper program. Accordingly, debt that is included in our Predecessors combined financial statements represent the amounts outstanding under Nobles commercial paper program, and has been pushed
down to our Predecessor in accordance with guidance of the Securities and Exchange Commission. The remaining outstanding debt not repaid from our Predecessors approximately $2.3 billion debt at June 30, 2014 is considered as part of
Net Parent Investment in our Predecessor.
Note 4Gain on Contract Settlements/Extinguishments, Net
During the fourth quarter of 2012, our Predecessor received a deposit of $1.8 million related to the potential sale of one of our
Predecessors cold-stacked drilling units to an unrelated third party. During the first quarter of 2013, negotiations led to the sale not being completed and the deposit forfeited by the buyer was recognized as a gain.
Note 5Income Taxes
Our Predecessor
operated through various subsidiaries in numerous countries throughout the world. Consequently, income taxes have been based on the laws and rates in effect in the countries in which operations were conducted, or in which our Predecessor or its
subsidiaries were considered to have a taxable presence.
At December 31, 2013, the reserve for uncertain tax positions totaled $36.5
million. At June 30, 2014, the reserve for uncertain tax positions of our Predecessor totaled $35.3 million, and if not utilized, would reduce the provision for income taxes of our Predecessor by $35.3 million.
Our Predecessor periodically transferred its drilling rigs between related entities included in these combined financial statements. The
unamortized tax benefit associated with these transfers totaled $44.9 million and $46.5 million at June 30, 2014 and December 31, 2013, respectively, and is included in Other liabilities in these Combined Balance Sheets.
Note 6Deferred Revenues
Deferred
revenues from drilling contracts totaled $19.1 million at June 30, 2014 as compared to $21.9 million at December 31, 2013. Such amounts are included in either Other current liabilities or Other liabilities in the
combined balance sheets, based upon the expected time of recognition of such deferred revenues.
Note 7Commitments and Contingencies
Litigation
We are a defendant in
certain claims and litigation arising out of operations in the ordinary course of business, the resolution of which, in the opinion of management, will not have material adverse effect on our financial position, results of operations or cash flows.
There is inherent risk in any litigation or dispute and no assurance can be given as to the outcome of these claims.
12
Tax audit claims of approximately $330.0 million, of which $63.0 million is subject to indemnity
by Noble, primarily in Mexico and Brazil attributable to our income, customs and other business taxes have been assessed against us. We have contested, or intend to contest, these assessments, including through litigation if necessary, and we
believe the ultimate resolution, for which we have not made any accrual, will not have a material adverse effect on our combined financial statements. Tax authorities may issue additional assessments or pursue legal actions as a result of tax audits
and we cannot predict or provide assurance as to the ultimate outcome of such assessments and legal actions. In some cases we will be required to post a surety bond or a letter of credit as collateral to defend us, and as of June 30, 2014, we
have no surety bonds outstanding.
In addition, we have been notified by Petróleo Brasileiro S.A. (Petrobras) that it
is currently challenging assessments by Brazilian tax authorities of withholding taxes associated with its operations in Brazil during 2008 and 2009 totaling $118.0 million, of which $36 million is subject to indemnity by Noble. Petrobras has also
notified us that if Petrobras must ultimately pay such withholding taxes, it will seek reimbursement from us. We believe that we are contractually indemnified by Petrobras for these amounts and dispute the validity of the assessment. We have
notified Petrobras of our position. We will, if necessary, vigorously defend our rights.
Insurance
Our Predecessor maintained certain insurance coverage against specified marine perils, which included physical damage and loss of hire. Damage
caused by hurricanes has negatively impacted the energy insurance market, resulting in more restrictive and expensive coverage for named windstorm perils.
Although our Predecessor maintained insurance in the geographic areas in which we operate, pollution, reservoir damage and environmental risks
generally are not fully insurable. Our Predecessors insurance policies and contractual rights to indemnity may not adequately cover our losses or may have exclusions of coverage for some losses. Our Predecessor did not have insurance coverage
or rights to indemnity for all risks, including loss of hire insurance on most of the rigs in our fleet. Uninsured exposures may include expatriate activities prohibited by U.S. laws and regulations, radiation hazards, certain loss or damage to
property on board our rigs and losses relating to shore-based terrorist acts or strikes. If a significant accident or other event occurs and is not fully covered by insurance or contractual indemnity, it could materially adversely affect our
financial position, results of operations or cash flows. Additionally, there can be no assurance that those parties with contractual obligations to indemnify us will necessarily be financially able to indemnify us against all these risks.
Our Predecessor carried protection and indemnity insurance covering marine third party liability exposures, which also includes coverage for
employers liability resulting from personal injury to our offshore drilling crews.
In connection with the Separation, we replaced
our Predecessors insurance policies, which were supported by Noble, with substantially similar stand-alone insurance policies.
Capital
Expenditures
In connection with our capital expenditure program, our Predecessor had outstanding commitments, including shipyard
and purchase commitments of approximately $102.4 million at June 30, 2014.
Other
At June 30, 2014, our Predecessor had letters of credit of $24.3 million and performance and temporary import bonds totaling $109.8
million supported by surety bonds outstanding. Certain of our Predecessors subsidiaries issued guarantees to the temporary import status of rigs or equipment imported into certain countries in which our Predecessor operated. These guarantees
are issued in-lieu of payment of custom, value added or similar taxes in those countries.
13
Separation Agreements
In connection with the Spin-off, on July 31, 2014, we entered into several definitive agreements with Noble or its subsidiaries that,
among other things, set forth the terms and conditions of the Spin-Off and provide a framework for our relationship with Noble after the Spin-off, including the following agreements:
|
|
|
Master Separation Agreement; |
|
|
|
Employee Matters Agreement; |
|
|
|
Transition Services Agreement relating to services Noble and Paragon will provide to each other on an interim basis; and |
|
|
|
Transition Services Agreement relating to Nobles Brazil operations. |
Master Separation Agreement
On July 31, 2014, we entered into a Master Separation Agreement with Noble Corporation, a Cayman Islands company and an indirect,
wholly-owned subsidiary of Noble (Noble-Cayman), which provided for, among other things, the Distribution of our ordinary shares to Noble shareholders and the transfer to us of the assets and the assumption by us of the liabilities
relating to our business and the responsibility of Noble for liabilities related to Nobles, and in certain limited cases, our business. The Master Separation Agreement identified which assets and liabilities constitute our business and which
assets and liabilities constitute Nobles business.
Tax Sharing Agreement
On July 31, 2014, we entered into a Tax Sharing Agreement with Noble, which governs the parties respective rights, responsibilities
and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and certain other matters regarding taxes following the Distribution.
Employee Matters Agreement
On
July 31, 2014, we entered into an Employee Matters Agreement with Noble Cayman to allocate liabilities and responsibilities relating to our employees and their participation in certain compensation and benefit plans maintained by Noble or a
subsidiary of Noble. The Employee Matters Agreement provides that, following the Distribution, most of our employee benefits are provided under compensation and benefit plans adopted or assumed by us. In general, our plans are substantially similar
to the plans of Noble or its subsidiaries that covered our employees prior to the completion of the Distribution. The Employee Matters Agreement also addresses the treatment of outstanding Noble equity awards held by transferring employees,
including the grant of our equity awards or other rights with respect to Noble equity awards held by transferring employees that are cancelled in connection with the Spin-Off.
Transition Services Agreement
On
July 31, 2014, we entered into a Transition Services Agreement with Noble-Cayman pursuant to which Noble-Cayman provides, on a transitional basis, certain administrative and other assistance, generally consistent with the services that Noble
provided to us before the separation, and we provide certain transition services to Noble and its subsidiaries. The charges for the transition services are generally intended to allow the party providing the services to fully recover the costs
directly associated with providing the services, plus all out-of-pocket costs and expenses, generally without profit. The charges for each of the transition services generally are based on either a pre-determined flat fee or an allocation of the
costs incurred, including certain fees and expenses of third-party service providers.
Transition Services Agreement (Brazil)
On July 31, 2014, we and Noble-Cayman and certain other subsidiaries of Noble entered into a Transition Services Agreement (and a related
rig charter) pursuant to which we will provide certain transition services to Noble and its subsidiaries in connection with Nobles Brazil operations. We will continue to provide both rig-based and shore-based support services in respect of
Nobles remaining business through the term of Nobles existing rig contracts. Noble-Cayman will compensate us on a cost-plus basis for providing such services and also indemnify us for liabilities arising out of the services agreement.
This agreement will terminate when the last of the Noble semisubmersibles working in Brazil finish the existing contract, which is expected to occur in 2016.
14
Note 8Segment and Related Information
At June 30, 2014, our Predecessors contract drilling operations were reported as a single reportable segment, Contract Drilling
Services, which reflects how our Predecessors business was managed, and the fact that all of our Predecessors drilling fleet was dependent upon the worldwide oil industry. The mobile offshore drilling units that comprised our
Predecessors offshore rig fleet operated in a single, global market for contract drilling services and were often redeployed globally due to changing demands of our customers, which consisted largely of major non-U.S. and government
owned/controlled oil and gas companies throughout the world. Our Predecessors contract drilling services segment conducted contract drilling operations in the United States, Mexico, Brazil, North Sea, West Africa, Middle East, and India.
Note 9Accounting Pronouncements
In
April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-08, which amends FASB Accounting Standards Codification (ASC) Topic 205, Presentation of
Financial Statements and ASC Topic 360, Property, Plant, and Equipment. This ASU alters the definition of a discontinued operation to cover only asset disposals that are a strategic shift with a major effect on an entitys
operations and finances, and calls for more extensive disclosures about a discontinued operations assets, liabilities, income and expenses. The guidance is effective for all disposals, or classifications as held-for-sale, of components of an
entity that occur within annual periods beginning on or after December 15, 2014. We are still evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial
disclosures.
In May 2014, the FASB issued ASU No. 2014-09, which amends ASC Topic 606, Revenue from Contracts with
Customers. The amendments in this ASU are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices and improve disclosure requirements. The amendments in this accounting
standard update are effective for interim and annual reporting periods beginning after December 15, 2016. We are still evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations,
cash flows or financial disclosures.
In June 2014, the FASB issued ASU No. 2014-12, which amends ASC Topic 718,
Compensation-Stock Compensation. The guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition and should not be reflected in the
estimate of the grant-date fair value of the award. The guidance is effective for annual periods beginning after December 15, 2015. The guidance can be applied prospectively for all awards granted or modified after the effective date or
retrospectively to all awards with performance targets outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. We are still evaluating what impact, if any, the
adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
15
Note 10Net Change in Other Assets and Liabilities
The net effect of changes in other assets and liabilities on cash flows from operating activities is as follows:
|
|
|
|
|
|
|
|
|
|
|
Six months ended |
|
|
|
June 30, |
|
|
|
2014 |
|
|
2013 |
|
Accounts receivable |
|
$ |
(8,003 |
) |
|
$ |
(92,542 |
) |
Other current assets |
|
|
(6,704 |
) |
|
|
(1,602 |
) |
Other assets |
|
|
2,962 |
|
|
|
6,916 |
|
Accounts payable |
|
|
(14,683 |
) |
|
|
11,186 |
|
Other current liabilities |
|
|
(12,483 |
) |
|
|
1,237 |
|
Other liabilities |
|
|
(5,249 |
) |
|
|
(7,064 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
(44,160 |
) |
|
$ |
(81,869 |
) |
|
|
|
|
|
|
|
|
|
Note 11Related Parties (Including Relationship with Parent and Corporate Allocations)
At June 30, 2014, our Predecessor was managed in the normal course of business by Noble and its subsidiaries. Accordingly, certain shared
costs have been allocated to our Predecessor and are reflected as expenses in these financial statements. Our management considers the allocation methodologies used to be reasonable and appropriate reflections of the related expenses attributable to
us for purposes of the carve-out financial statements; however, the expenses reflected in our Predecessors financial statements may not be indicative of the actual expenses that would have been incurred
during the periods presented if our Predecessor had operated as a separate stand-alone entity and may not be indicative of expenses that will be incurred in the future by us.
Allocated costs include, but are not limited to: corporate accounting, human resources, government affairs, information technology, shared
real estate expenses, treasury, legal, employee benefits and incentives (excluding allocated postretirement benefits described below in Employee Benefit Plans,) and stock-based compensation. Our Predecessors allocated costs
included in contract drilling services in the accompanying Combined Statements of Income totaled $34.9 million and $69.4 million for the three and six months ended June 30, 2014, respectively, as compared to $41.5 million and $76.0 million for
the three and six months ended June 30, 2013. Our Predecessors allocated costs included in general, and administrative expenses in the accompanying Predecessor combined statements of income totaled $11.8 million and $24.1 million for the
three and six months ended June 30, 2014, respectively, as compared to $13.8 million and $27.5 million for the three and six months ended June 30, 2013. The costs were allocated to our Predecessor using various inputs, such as head count,
services rendered, and assets assigned to our Predecessor.
Employee Benefit Plans
During the periods presented in the historical combined financial statements of our Predecessor, most of our employees were eligible to
participate in various Noble benefit programs. Our Predecessors historical combined financial statements include an allocation of the costs of such employee benefit plans. These costs were allocated based on our employee population for each of
the periods presented. We consider the expense allocation methodology and results to be reasonable for all periods presented; however, the allocated costs included in our Predecessors historical combined financial statements could differ from
amounts that would have been incurred by us if we operated on a stand-alone basis and are not necessarily indicative of costs to be incurred in the future.
We have instituted competitive compensation policies and programs, as well as carried over certain plans as a standalone public company, the
expense for which may differ from the compensation expense allocated by Noble in our Predecessors historical combined financial statements.
16
Defined Benefit Plans
At June 30, 2014, Noble sponsored two U.S. noncontributory defined benefit pension plans: one covering salaried employees and the other
covering hourly employees, whose initial date of employment are prior to August 31, 2004 (qualified U.S. plans), and three non-U.S. noncontributory defined benefit pension plans, two of which were carried over by us, which cover
certain Europe-based salaried, non-union employees. Pension benefit expense related to these plans included in the accompanying Predecessor combined statements of income for the three and six months ended June 30, 2014 totaled $2.0 million and
$3.7 million, respectively, as compared to $2.6 million and $5.4 million for the three and six months ended June 30, 2013.
Other Benefit Plans
At June 30, 2014, Noble sponsored a 401(k) defined contribution plan and a profit sharing plan, which covered our
Predecessors employees who are not otherwise enrolled in the above defined benefit plans. Other postretirement benefit expense related to these plans included in the accompanying Predecessor combined statements of income for the three and six
months ended June 30, 2014 totaled $0.9 million and $2.0 million, respectively, as compared to $1.1 million and $2.5 million for the three and six months ended June 30, 2013.
17
Note 12Subsequent Events
As discussed in Note 1, we completed the Spin-Off from Noble on August 1, 2014. As part of the Spin-Off, we transferred approximately $1.7
billion in cash proceeds from the Senior Notes and Term Loan Facility to Noble as settlement of intercompany notes issued by us to Noble as partial consideration for the Paragon business.
Our effective tax rate will be higher subsequent to the Separation. In July 2014, legislation was enacted by the U.K. government that will
restrict deductions on certain related party transactions, such as those relating to the bareboat charter agreements used in connection with our U.K. continental shelf operations. The legislation, enacted in July 2014 and effective retroactively to
April 1, 2014, will result in an increase in the effective tax rate on our consolidated operations, and will be shown in our statement of operations beginning in the third quarter of 2014. We estimate that the retroactive impact of this change
will result in an increase of approximately $6.0$8.0 million in income tax expense for the period from April 1, 2014 through June 30, 2014.
18
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion of financial condition and results of operations pertain to the Noble Standard-Spec
Business (the Predecessor), which comprised the entire standard specification drilling fleet and related operations of Noble Corporation plc (Noble). The Separation (as defined below) included the transfer to Paragon Offshore
plc (together with its subsidiaries, Paragon, the Company, we, us or our) of the Predecessor, except for six standard specification drilling units, three of which were retained by Noble and
three of which were sold by Noble prior to the Separation. Paragon will consolidate the historical financial results of the Predecessor in its consolidated financial statements for all periods prior to the Spin-Off (as defined below). The following
discussion should be read in conjunction with the Predecessors historical combined financial statements and related notes contained in this Quarterly Report on Form 10-Q and our combined financial statements and notes thereto included in our
registration statement on Form-10 information statement.
This Quarterly Report on Form 10-Q includes forward-looking
statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included
in this report regarding contract backlog, fleet status, our financial position, business strategy, taxes, timing or results of acquisitions or dispositions, repayment of debt, borrowings under our credit facilities or other instruments, completion,
delivery dates and acceptance of our newbuild rigs, future capital expenditures, contract commitments, dayrates, contract commencements, extension or renewals, contract tenders, the outcome of any dispute, litigation, audit or investigation, plans
and objectives of management for future operations, foreign currency requirements, results of joint ventures, indemnity and other contract claims, construction and upgrade of rigs, industry conditions, access to financing, impact of competition,
governmental regulations and permitting, availability of labor, worldwide economic conditions, taxes and tax rates, indebtedness covenant compliance, dividends and distributable reserves, and timing for compliance with any new regulations are
forward-looking statements. When used in this report, the words anticipate, believe, estimate, expect, intend, may, plan, project, should and
similar expressions are intended to be among the statements that identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot assure you that such expectations
will prove to be correct. These forward-looking statements speak only as of the date of this report on Form 10-Q and we undertake no obligation to revise or update any forward-looking statement for any reason, except as required by law. We have
identified factors including but not limited to operating hazards and delays, risks associated with the ability to consummate future restructurings, operations outside the U.S., actions by regulatory authorities, customers, joint venture partners,
contractors, lenders and other third parties, legislation and regulations affecting drilling operations, costs and difficulties relating to the integration of businesses, factors affecting the level of activity in the oil and gas industry, supply
and demand of drilling rigs, factors affecting the duration of contracts, the actual amount of downtime, factors that reduce applicable dayrates, violations of anti-corruption laws, hurricanes and other weather conditions and the future price of oil
and gas that could cause actual plans or results to differ materially from those included in any forward-looking statements. These factors include those referenced or described in this quarterly report on Form 10-Q, Part I, Item 1A. Risk
Factors of our registration statement on Form 10 as filed with the SEC on July 14, 2014 and in our other filings with SEC. We cannot control such risk factors and other uncertainties, and in many cases, we cannot predict the risks and
uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. You should consider these risks and uncertainties when you are evaluating us.
Separation from Noble
On June 30,
2014, Paragon Offshore Limited was an indirect wholly owned subsidiary of Noble incorporated under the laws of England and Wales. On July 17, 2014, Paragon Offshore Limited re-registered under the Companies Act 2006 as a public limited company
under the name of Paragon Offshore plc.
Subsequent to June 30, 2014, Noble transferred to us the assets and liabilities (the
Separation) constituting most of Nobles standard specification drilling units and related assets, liabilities and business. On August 1, 2014, Noble made a pro rata distribution to its shareholders of all of our issued and
outstanding ordinary shares (the Distribution and, collectively with the Separation, the Spin-Off). In connection with the Distribution, Noble shareholders received one ordinary share of Paragon for every three ordinary
shares of Noble owned. Noble owned 84.8 million ordinary shares of Paragon as of July 23, 2014, Nobles record date for the Distribution. We will consolidate the historical financial results of the Predecessor in our consolidated
financial statements for all periods prior to the Spin-Off.
19
Our Predecessors historical combined financial statements may also not be reflective of
what our results of operations, effective tax rate, comprehensive income, financial position, equity or cash flows might be in the future as a standalone public company as a result of the matters discussed below:
Centralized Support Functions
Our Predecessors historical combined financial statements include expense allocations for certain support functions that were provided on
a centralized basis within Noble, including, but not limited to, general corporate expenses related to communications, corporate administration, finance, legal, information technology, human resources, compliance, and employee benefits and
incentives. These allocated costs are not necessarily indicative of the costs that we would incur in the future as a standalone public company. Following the spin-off, Noble will continue to provide us with some of the services related to these
functions on a transitional basis pursuant to a transition services agreement relating to our business, and we expect to incur other costs to replace the services and resources that will not be provided by Noble. Please read Paragon Offshore plc
Spin-off transaction within the Commitments and Contingencies footnote to the Predecessor Combined Financial Statements for additional information on such transition services agreement.
During the period that Noble will provide services to us pursuant to such transition services agreement, we expect to incur higher costs for
certain services than the allocated costs included in our Predecessors historical combined financial statements as we will incur additional expenses to continue staffing our organization to perform such functions internally in addition to the
amounts we will pay Noble for such services.
Taxes
Income Taxes
The
operations of our business have been included in the consolidated U.S. federal income tax return and certain foreign income tax returns of Noble. The income tax provisions and related deferred tax assets and liabilities that have been reflected in
our Predecessors historical combined financial statements have been computed as if our Predecessor were a separate taxpayer using the separate return method. These amounts are not necessarily indicative of what our income tax provisions and
related deferred tax assets and liabilities will be in the future following the completion of the Spin-Off. We entered into a tax sharing agreement with Noble on July 31, 2014 that will govern the parties respective rights, responsibilities
and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.
Our effective tax rate will be higher subsequent to the Separation primarily for the following reasons. First, prior to the Spin-Off, Noble
restructured certain aspects of our business to effect the Separation. This restructuring resulted in significant tax inefficiencies for our business and operations, including our inability to deduct interest expense with respect to borrowings under
the Term Loan Facility and Senior Notes and ownership of certain of our assets in structures subject to higher tax rates than prior to the restructuring.
Second, in July 2014, legislation was enacted by the U.K. government that will restrict deductions on certain intercompany transactions, such
as those relating to the bareboat charter agreements used in connection with our U.K. continental shelf operations. These bareboat charter agreements are common within the offshore drilling industry. The legislation, enacted in July 2014 and
effective retroactively to April 1, 2014, will result in an increase in our income taxes in the U.K. We estimate that the retroactive impact of this change will result in an increase of approximately $6.0 - $8.0 million in income tax expense for the
period from April 1, 2014 through June 30, 2014. In addition, we expect that the new legislation will increase the effective tax rate on our consolidated operations beginning in the third quarter of 2014. We are actively reviewing our overall
structure to better align it with our business objectives as a standalone company.
Other Contingencies
Petrobras has notified us, along with other industry participants that it is currently challenging assessments by Brazilian tax authorities of
withholding taxes associated with the provision of drilling rigs for its operations in Brazil during the years 2008 and 2009 totaling $118.0 million, of which $36.0 million is subject to indemnity by Noble. Petrobras has also notified us that if
Petrobras is ultimately assessed and must pay such withholding taxes, it will seek reimbursement from us. We believe that we are contractually indemnified by Petrobras for these amounts and dispute any basis for Petrobras to obtain such
reimbursement. We have notified Petrobras of our position. We will, if necessary, vigorously defend our rights. If we were required to pay such reimbursement, however, the amount of such reimbursement could be substantial and could have a material
adverse effect on our financial condition, results of operations and cash flows. See Note 7 Commitments and Contingencies to our Combined Financial Statements included in Item 1 of Part I of this Quarterly Report on Form
10-Q.
20
Compensation and Benefit Plan Matters
During the periods presented in the historical combined financial statements of our Predecessor, most of our emp1oyees were eligible to
participate in various Noble benefit programs. Our Predecessors historical combined financial statements include an allocation of the costs of such employee benefit plans. These costs were allocated based on our employee population for each of
the periods presented. The allocated costs included in our Predecessors historical combined financial statements could differ from amounts that would have been incurred by us if we operated on a stand-alone basis and are not necessarily
indicative of costs to be incurred in the future.
We have instituted competitive compensation policies and programs, as well as carried
over several plans as a standalone public company, the expense for which may differ from the compensation expense allocated by Noble in our Predecessors historical combined financial statements.
Public Company Expenses
As a result of the Spin-Off, we became subject to the reporting requirements of the Exchange Act and the Sarbanes Oxley Act. We are required to
establish procedures and practices as a standalone public company in order to comply with our obligations under those laws and the related rules and regulations. As a result, we expect to incur approximately $8 million of additional costs annually,
for functions including external and internal audit, investor relations, share administration and regulatory compliance. The amount of these expenses will exceed the amount historically allocated to us from Noble for these types of expenses.
Overview
The business environment for
offshore drillers during the first six months of 2014 has been challenging. While the price of Brent crude oil, a key factor in determining customer activity levels, remained generally steady throughout the period, there has been a decrease in
contractual activity. Many offshore drilling industry analysts project a decrease in the rate of global offshore exploration and development spending relative to previous years. In addition, according to RigLogix, as of August 27, 2014, 136
jackup drilling rigs were under construction or on order, which could negatively impact the contracting environment as these rigs enter the market. While we believe the short-term outlook has downside risks, we continue to have confidence in the
long-term fundamentals for the industry. These fundamental factors include stable crude oil prices, strong exploration results, geographic expansion of offshore drilling activities, a growing backlog of multi-year field development programs and
greater access by our customers to promising offshore regions, as evidenced by energy reform legislation in Mexico that could potentially lead to an increase in drilling activity in Mexican waters.
During the recent period of high utilization and high dayrates, industry participants have increased the supply of drilling rigs by building
new drilling rigs. Historically, this has often resulted in an oversupply of drilling rigs and has caused a subsequent decline in utilization and dayrates when new drilling rigs have entered the market, which has sometimes continued for extended
periods of time. The increase in supply created by the number and types of rigs being built, as well as changes in our competitors drilling rig fleets, could intensify price competition and require higher capital investment to keep our rigs
competitive. A number of customers are drilling more wells that require rigs with higher specification than many of our rigs. Our proforma contract drilling backlog as of June 30, 2014 was down by approximately 20% as compared to March 31,
2014, due to the industry wide decrease in the contractual activity.
21
Paragon Contract Drilling Services Backlog
We maintain a backlog (as defined below) of commitments for contract drilling services. The following table sets forth, as of June 30,
2014, the amount of our pro forma contract drilling services backlog and the percent of available operating days committed for the periods indicated:
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|
For the Years Ending December 31 |
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|
|
Total |
|
|
2014* |
|
|
2015 |
|
|
2016 |
|
|
2017 |
|
|
2018 |
|
|
|
|
|
|
(dollars in millions) |
|
|
|
|
|
|
|
Floaters (1) |
|
$ |
1,101 |
|
|
$ |
292 |
|
|
$ |
443 |
|
|
$ |
255 |
|
|
$ |
111 |
|
|
$ |
|
|
Jackups (2) |
|
|
1,170 |
|
|
|
561 |
|
|
|
508 |
|
|
|
99 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(3)(4) |
|
$ |
2,271 |
|
|
$ |
853 |
|
|
$ |
951 |
|
|
$ |
354 |
|
|
$ |
113 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
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|
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|
|
Percent of available days committed (5) |
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|
|
|
|
|
70 |
% |
|
|
35 |
% |
|
|
10 |
% |
|
|
2 |
% |
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
Represents a six-month period beginning July 1, 2014. |
(1) |
Our drilling contracts with Petrobras provide an opportunity for us to earn performance bonuses based on reaching targets for downtime experienced for our rigs operating offshore Brazil, for which we have included in
our backlog an amount equal to 50% of potential performance bonuses for such rigs, or $64 million. |
(2) |
Pemex has the ability to cancel its drilling contracts on 30 days or less notice without Pemexs making an early termination payment. At June 30, 2014, we had ten rigs contracted to Pemex, and our backlog
included approximately $308 million related to such contracts. |
(3) |
Some of our drilling contracts provide the customer with certain early termination rights. |
(4) |
Excludes approximately $136 million of total backlog related to two jackups and one floater that will be retained by Noble. |
(5) |
Percent of available days committed is calculated by dividing the total number of days our rigs are operating under contract for such period, or committed days, by the product of the total number of our rigs, including
cold-stacked rigs, and the number of calendar days in such period. Committed days do not include the days that a rig is stacked or the days that a rig is expected to be out of service for significant overhaul repairs or maintenance.
|
Our pro forma contract drilling services backlog typically reflects estimated future revenues attributable to both signed
drilling contracts and letters of intent that we expect to realize. A letter of intent is generally subject to customary conditions, including the execution of a definitive drilling contract. It is possible that some customers that have entered into
letters of intent will not enter into signed drilling contracts. As of June 30, 2014, our pro forma contract drilling services backlog did not include any letters of intent.
We calculate backlog for any given unit and period by multiplying the full contractual operating dayrate for such unit by the number of days
remaining in the period. The reported contract drilling services backlog does not include amounts representing revenues for mobilization, demobilization and contract preparation, which are not expected to be significant to our contract drilling
services revenues, amounts constituting reimbursables from customers or amounts attributable to uncommitted option periods under drilling contracts.
The amount of actual revenues earned and the actual periods during which revenues are earned may be materially different than the pro forma
backlog amounts and pro forma backlog periods set forth in the table above due to various factors, including, but not limited to, shipyard and maintenance projects, unplanned downtime, achievement of bonuses, weather conditions and other factors
that result in applicable dayrates lower than the full contractual operating dayrate. In addition, amounts included in the pro forma backlog may change because drilling contracts may be varied or modified by mutual consent or customers may exercise
early termination rights contained in some of our drilling contracts or decline to enter into a drilling contract after executing a letter of intent. As a result, our pro forma backlog as of any particular date may not be indicative of our actual
operating results for the periods for which the backlog is calculated. In addition, we generally do not expect to re-contract our floaters, which accounted for 48% of our pro forma backlog at June 30, 2014, until late in their contract terms.
Due to the higher dayrates earned by our floaters, until these rigs are re-contracted, our total pro forma backlog is expected to decline.
22
Results of Operations
As part of Noble, our Predecessor has not operated on a standalone basis. When the term we or our is used in the
following discussion, the reference is to the historical operations of our Predecessor, which includes rigs retained by Noble or sold by Noble prior to the Distribution.
For the Three Months Ended June 30, 2014 and 2013
Rig Utilization, Operating Days and Average Dayrates
Operating results for our contract drilling services segment are dependent on three primary metrics: rig utilization, operating days, and
dayrates. The following table sets forth the average rig utilization, operating days, and average dayrates for our rig fleet for the three months ended June 30, 2014 (the Current Quarter) and for the three months ended June 30,
2013 (the Comparable Quarter):
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Average Rig |
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|
Operating |
|
|
Average |
|
|
|
Utilization (1) |
|
|
Days (2) |
|
|
Dayrates |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
Jackups |
|
|
76 |
% |
|
|
91 |
% |
|
|
2,492 |
|
|
|
3,048 |
|
|
|
-18 |
% |
|
$ |
113,125 |
|
|
$ |
102,550 |
|
|
|
10 |
% |
Floaters |
|
|
78 |
% |
|
|
62 |
% |
|
|
637 |
|
|
|
506 |
|
|
|
26 |
% |
|
|
283,221 |
|
|
|
260,151 |
|
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
75 |
% |
|
|
80 |
% |
|
|
3,129 |
|
|
|
3,554 |
|
|
|
-12 |
% |
|
$ |
147,752 |
|
|
$ |
124,990 |
|
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
(1) |
We define utilization for a specific period as the total number of days our rigs are operating under contract, divided by the product of the total number of our rigs, including cold-stacked rigs, and the number of
calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet, excluding newbuild rigs under construction. |
(2) |
Information reflects the number of days that our rigs were operating under contract. |
The
following table sets forth the operating results of our Predecessor for the three months ended June 30, 2014 and 2013:
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Change |
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|
|
2014 |
|
|
2013 |
|
|
$ |
|
|
% |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
Operating Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services |
|
$ |
462,334 |
|
|
$ |
444,208 |
|
|
$ |
18,126 |
|
|
|
4 |
% |
Labor contract drilling services |
|
|
8,146 |
|
|
|
8,902 |
|
|
|
(756 |
) |
|
|
-8 |
% |
Reimbursables/Other (1) |
|
|
8,477 |
|
|
|
11,835 |
|
|
|
(3,358 |
) |
|
|
-28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
478,957 |
|
|
|
464,945 |
|
|
|
14,012 |
|
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services |
|
|
222,317 |
|
|
|
226,281 |
|
|
|
(3,964 |
) |
|
|
-2 |
% |
Labor contract drilling services |
|
|
6,223 |
|
|
|
6,033 |
|
|
|
190 |
|
|
|
3 |
% |
Reimbursables (1) |
|
|
5,224 |
|
|
|
9,053 |
|
|
|
(3,829 |
) |
|
|
-42 |
% |
Depreciation and amortization |
|
|
112,536 |
|
|
|
101,897 |
|
|
|
10,639 |
|
|
|
10 |
% |
General and Administrative |
|
|
12,683 |
|
|
|
15,538 |
|
|
|
(2,855 |
) |
|
|
-18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
358,983 |
|
|
|
358,802 |
|
|
|
181 |
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (2) |
|
$ |
119,974 |
|
|
$ |
106,143 |
|
|
$ |
13,831 |
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
We record reimbursements from customers for out-of-pocket expenses as operating revenues and the related direct costs as operating expenses. Changes in the amount of these reimbursables generally do not have a material
effect on our financial position, results of operations or cash flows. |
(2) |
The rigs retained and sold by Noble represent revenues of $42.4 and $54.0 million for the three months ended June 30, 2014 and 2013 respectively. The expenses for these same periods are $29.7 and $36.4 million
respectively. |
23
Contract Drilling Services Operating RevenuesChanges in contract drilling services
revenues for the Current Quarter as compared to the Comparable Quarter were driven by an increase in average dayrates, partially offset by a decrease in operating days. The 18 percent increase in average dayrates increased revenue by $71 million but
the 12% decrease in operating days decreased revenue by $53 million.
The increase in contract drilling services revenues was driven by
our floaters, which generated approximately $49 million more revenue in the Current Quarter. The increase in revenue from our floaters was partially offset by a $31 million decrease in revenue from our jackups.
The increase in floater revenues in the Current Quarter was driven by a 26 percent increase in operating days coupled with a 9 percent
increase in average dayrates which resulted in a $34 million and a $15 million increase in revenues, respectively, from the comparable quarter. The increase in both average dayrates and operating days was the result of the Noble Roger Eason
returning to full operations during the Current Quarter after receiving a reduced rate while in the shipyard to undergo its reliability upgrade project during the Comparable Quarter. The increase in average dayrates was also driven by the Noble
Driller, which received higher day rates, but was retained by Noble after the Separation.
The decrease in jackup revenues in the
Current Quarter was driven by an 18 percent decrease in operating days, which was offset by a 10 percent increase in jackup average dayrates resulting in a $57 million decrease and $26 million increase in revenues, respectively from the Comparable
Quarter. The increase in average dayrates resulted from improved market conditions in the global shallow water market. The decrease in operating days was driven by the Noble Gus Androes, Noble Gene Rosser, Noble Charlie Yester and
Noble David Tinsley, which were off contract in the Current Quarter but experienced full utilization during the Comparable Quarter, coupled with increased shipyard time on the Noble Percy Johns and Noble Ed Noble during the
Current Quarter. Additionally, the Noble Lewis Dugger, which was sold in July 2013, was fully utilized during the Comparable Quarter.
Contract Drilling Services Operating Costs and ExpensesContract drilling services operating costs and expenses remained
consistent in the Current Quarter as compared to the Comparable Quarter.
Labor Contract Drilling Services Operating Revenues and Costs
and ExpensesThe decline in revenues associated with our Canadian labor contract drilling services were primarily related to fluctuations in foreign currency exchange rates. Expenses associated with our labor contract drilling services
remained relatively constant.
Depreciation and AmortizationThe $11 million increase in depreciation and amortization in the
Current Quarter from the Comparable Quarter was primarily attributable to completion of the Noble Roger Eason shipyard upgrade which was completed during the fourth quarter of 2013 and the rig went back into service in 2013.
General and AdministrativeThe decrease in general and administrative expenses of our Predecessor related to the sales of the
Noble Lewis Dugger (July 2013), Noble Lester Pettus (January 2014), and Noble Joe Alford (January 2014), which affected the various inputs used for the allocation of costs to our Predecessor in the Current Quarter as compared to
the Comparable Quarter.
Other Expenses
Income tax provisionIncome tax expense for the Predecessor for the Current Quarter remained consistent with the Comparable Quarter
as the impact on income tax expense resulting from the increase in revenues was offset by the geographic mix of earnings in more tax efficient jurisdictions.
24
For the Six Months Ended June 30, 2014 and 2013
Rig Utilization, Operating Days and Average Dayrates
Operating results for our contract drilling services segment are dependent on three primary metrics: rig utilization, operating days and
dayrates. The following table sets forth the average rig utilization, operating days and average dayrates for our rig fleet for the six months ended June 30, 2014 (the Current Period) and for the six months ended June 30, 2013
(the Comparable Period):
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|
Average Rig |
|
|
Operating |
|
|
Average |
|
|
|
Utilization (1) |
|
|
Days (2) |
|
|
Dayrates |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
2014 |
|
|
2013 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
Jackups |
|
|
80 |
% |
|
|
91 |
% |
|
|
5,193 |
|
|
|
6,106 |
|
|
|
-15 |
% |
|
$ |
112,717 |
|
|
$ |
100,136 |
|
|
|
13 |
% |
Floaters |
|
|
78 |
% |
|
|
65 |
% |
|
|
1,267 |
|
|
|
1,058 |
|
|
|
20 |
% |
|
|
291,184 |
|
|
|
251,596 |
|
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
77 |
% |
|
|
81 |
% |
|
|
6,460 |
|
|
|
7,164 |
|
|
|
-10 |
% |
|
$ |
147,718 |
|
|
$ |
122,508 |
|
|
|
21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
We define utilization for a specific period as the total number of days our rigs are operating under contract, divided by the product of the total number of our rigs, including cold-stacked rigs, and the number of
calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet, excluding newbuild rigs under construction. |
(2) |
Information reflects the number of days that our rigs were operating under contract. |
The
following table sets forth the operating results for our Predecessor for the six months ended June 30, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
2014 |
|
|
2013 |
|
|
$ |
|
|
% |
|
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
Operating Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services |
|
$ |
954,297 |
|
|
$ |
877,619 |
|
|
$ |
76,678 |
|
|
|
9 |
% |
Labor contract drilling services |
|
|
16,357 |
|
|
|
17,684 |
|
|
|
(1,327 |
) |
|
|
-8 |
% |
Reimbursables/Other (1) |
|
|
22,893 |
|
|
|
23,712 |
|
|
|
(819 |
) |
|
|
-3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
993,547 |
|
|
|
919,015 |
|
|
|
74,532 |
|
|
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services |
|
|
448,780 |
|
|
|
451,124 |
|
|
|
(2,344 |
) |
|
|
-1 |
% |
Labor contract drilling services |
|
|
12,436 |
|
|
|
11,746 |
|
|
|
690 |
|
|
|
6 |
% |
Reimbursables (1) |
|
|
15,850 |
|
|
|
17,597 |
|
|
|
(1,747 |
) |
|
|
-10 |
% |
Depreciation and amortization |
|
|
223,120 |
|
|
|
200,601 |
|
|
|
22,519 |
|
|
|
11 |
% |
General and Administrative |
|
|
25,928 |
|
|
|
31,003 |
|
|
|
(5,075 |
) |
|
|
-16 |
% |
Gain on contract settlements / extinguishments |
|
|
|
|
|
|
(1,800 |
) |
|
|
1,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
726,114 |
|
|
|
710,271 |
|
|
|
15,843 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (2) |
|
$ |
267,433 |
|
|
$ |
208,744 |
|
|
$ |
58,689 |
|
|
|
28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
We record reimbursements from customers for out-of-pocket expenses as operating revenues and the related direct costs as operating expenses. Changes in the amount of these reimbursables generally do not have a material
effect on our financial position, results of operations or cash flows. |
(2) |
The rigs retained and sold by Noble represent revenues of $100.9 and $103.2 million for the six months ended June 30, 2014 and 2013 respectively. The expenses for these same periods are $61.1 and $69.7 million
respectively. |
Contract Drilling Services Operating RevenuesChanges in contract drilling services revenues for
the Current Period as compared to the Comparable Period were driven by an increase in average dayrates, partially offset by a decrease in operating days. The 21 percent increase in average dayrates increased revenue by $163 million but the 10%
decrease in operating days decreased revenue by $86 million.
The increase in contract drilling services revenues was driven by our
floaters, which generated approximately $103 million more revenue in the Current Period. The increase in revenue from our floaters was partially offset by a $26 million decrease in revenue from our jackups.
25
The increase in floater revenues in the Current Period was driven by a 20 percent increase in
operating days coupled with a 16 percent increase in average dayrates which resulted in a $53 million and a $50 million increase in revenues, respectively, from the Comparable Period. The increase in both average dayrates and operating days was the
result of the Noble Roger Eason returning to full operations during the Current Period, after receiving a reduced rate while in the shipyard to undergo its reliability upgrade project during the Comparable Period. The increase in average
dayrates was also driven by the Noble Driller, which received a higher dayrate after starting a new contract but was retained by Noble after the Separation.
The 15 percent decrease in jackup operating days resulted in a $91 million decrease in revenues, offset by a 13 percent increase in jackup
average dayrates resulted in a $65 million increase in revenues, resulting in a $26 million decrease in revenues from the Comparable Period. The increase in average dayrates resulted from improved market conditions in the global shallow water
market. The decrease in operating days was driven by the Noble Gus Androes, Noble Gene Rosser, and Noble Charlie Yester, which were off contract in the Current Period but experienced full utilization during the Comparable
Period, coupled with increased shipyard time on the Noble Percy Johns and Noble Ed Noble during the Current Period. Additionally, the Noble Lewis Dugger, which was sold in July 2013, was fully utilized during the Comparable
Period.
Contract Drilling Services Operating Costs and ExpensesContract drilling services operating costs and expenses
remained consistent in the Current Quarter as compared to the Comparable Quarter.
Labor Contract Drilling Services Operating Revenues
and Costs and ExpensesThe decline in revenues associated with our Canadian labor contract drilling services were primarily related to fluctuations in foreign currency exchange rates. Expenses associated with our labor contract drilling
services remained relatively constant.
Depreciation and AmortizationThe $22 million increase in depreciation and
amortization in the Current Period was primarily attributable to completion of the Noble Roger Eason shipyard upgrade. This upgrade was completed during the fourth quarter of 2013 and the rig went back into service in 2013.
General and AdministrativeThe decrease in general and administrative expenses of our Predecessor related to the sales of the
Noble Lewis Dugger (July 2013), Noble Lester Pettus (January 2014), and Noble Joe Alford (January 2014), which affected the various inputs used for the allocation of costs to our Predecessor in the Current Quarter as compared to
the Comparable Quarter.
Other Expenses
Income tax provisionIncome tax expense for the Predecessor for the Current Period remained consistent with the Comparable Period
as the impact on income tax expense resulting from the increase in revenues was offset by the geographic mix of earnings in more tax efficient jurisdictions.
Liquidity and Capital Resources
In
connection with the Separation, we have entered into a revolving credit agreement, a term loan agreement and a senior note indenture that contain customary covenants relating to, among other things, the incurrence of additional indebtedness,
dividends and other restricted payments and mergers, consolidations or the sale of substantially all of our assets.
We expect our primary
sources of liquidity in the future will be cash generated from operations, our revolving credit facility and any future financing arrangements, if necessary. Our principal uses of liquidity will be to fund our working capital and capital
expenditures, including major projects, upgrades and replacements to drilling equipment, to service our outstanding indebtedness and to pay future dividends. Our working capital and capital expenditure requirements have historically been part of the
corporate-wide cash management program for Noble. As part of such program, Noble periodically swept all available cash from our operating accounts until June 30, 2014. Prior to the Distribution, Noble delivered to us $40 million in cash to
increase our working capital.
After June 30, 2014, we have been solely responsible for the provision of funds to finance our working
capital and other cash requirements. We believe our liquidity will be sufficient to fund our operations for at least the next 12 months. Our ability to continue to fund these items may be affected by general economic, competitive and other factors,
many of which are outside of our control. If our future cash flows from operations and other capital resources are insufficient to fund our liquidity needs, we may be forced to reduce or delay our capital expenditures, sell assets, refrain from
paying or reduce the amount of any dividends, obtain additional debt or equity or refinance all or a portion of our debt.
26
Financial Resources and Liquidity
Predecessor
The table below sets forth
our Predecessors summary cash flow information for the six months ended June 30, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2014 |
|
|
2013 |
|
|
|
(unaudited)
(dollars in thousands) |
|
Cash flows provided by (used in): |
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
405,688 |
|
|
$ |
285,995 |
|
Investing activities |
|
|
(90,523 |
) |
|
|
(221,390 |
) |
Financing activities |
|
|
(319,058 |
) |
|
|
(89,191 |
) |
Changes in cash flows from operating activities from period to period are primarily driven by changes in net
income. Changes in cash flows from investing activities are dependent upon our Predecessors level of capital expenditures which vary based on the timing of projects, while changes in cash flows from financing activities from period to period
are based on activity under Nobles commercial paper program and credit facilities and investments to and from Parent.
Paragon
Our currently anticipated cash flow needs, both in the short-term and long-term, may include the following:
|
|
|
normal recurring operating expenses; |
|
|
|
committed capital expenditures; |
|
|
|
discretionary capital expenditures, including various capital upgrades; |
|
|
|
reduction of outstanding debt; |
We currently expect to fund these cash flow needs with cash generated by our
operations, cash on hand, borrowings under future credit facilities, potential issuances of long-term debt, or asset sales.
At
June 30, 2014, we had a total pro forma contract drilling services backlog of approximately $2.3 billion. Our pro forma backlog as of June 30, 2014 reflects a commitment of 70 percent of available days for the remainder of 2014 and 35
percent of available days for 2015. For additional information regarding our pro forma backlog, see Pro Forma Contract Drilling Services Backlog.
Capital Expenditures
Our primary use of
available liquidity during 2014 is for capital expenditures. Capital expenditures, including maintenance, rig reactivations, major projects and upgrades to our fleet, totaled $111 million during the six months ended June 30, 2014 and $216
million during the six months ended June 30, 2013. Capital expenditures considered necessary to sustain the capabilities of the fleet were $43 million for the six months ended June 30, 2014. Capital expenditures for the six months ended
June 30, 2013 included $110 million related to upgrade projects on drillships in Brazil, which we completed in 2013. As of June 30, 2014, we had approximately $102 million in capital commitments related to ongoing major projects, upgrades
and replacements to drilling equipment, all of which we expect to spend within the next twelve months. Capital commitments include all open purchase orders issued to vendors to procure capital equipment.
27
From time to time we consider possible projects that would require expenditures that are not
included in our capital budget, and such unbudgeted expenditures could be significant. In addition, we will continue to evaluate acquisitions of drilling units from time to time. Other factors that could cause actual capital expenditures to
materially exceed plan include delays and cost overruns in shipyards (including costs attributable to labor shortages), shortages of equipment, latent damage or deterioration to hull, equipment and machinery in excess of engineering estimates and
assumptions, changes in governmental regulations and requirements and changes in design criteria or specifications during repair or construction.
New
Accounting Pronouncements
In April 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-08, which amends
FASB Accounting Standards Codification (ASC) Topic 205, Presentation of Financial Statements and ASC Topic 360, Property, Plant, and Equipment. This ASU alters the definition of a discontinued operation to cover
only asset disposals that are a strategic shift with a major effect on an entitys operations and finances, and calls for more extensive disclosures about a discontinued operations assets, liabilities, income and expenses. The guidance is
effective for all disposals, or classifications as held-for-sale, of components of an entity that occur within annual periods beginning on or after December 15, 2014. We are still evaluating what impact, if any, the adoption of this guidance
will have on our financial condition, results of operations, cash flows or financial disclosures.
In May 2014, the FASB issued ASU
No. 2014-09, which amends ASC Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition
practices and improve disclosure requirements. The amendments in this accounting standard update are effective for interim and annual reporting periods beginning after December 15, 2016. We are still evaluating what impact, if any, the adoption
of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
In June 2014, the FASB
issued ASU No. 2014-12, which amends ASC Topic 718, Compensation-Stock Compensation. The guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a
performance condition and should not be reflected in the estimate of the grant-date fair value of the award. The guidance is effective for annual periods beginning after December 15, 2015. The guidance can be applied prospectively for all
awards granted or modified after the effective date or retrospectively to all awards with performance targets outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards
thereafter. We are still evaluating what impact, if any, the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.
28
PARAGON OFFSHORE PLC
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
On June 30, 2014, Paragon Offshore Limited was an indirect wholly owned subsidiary of Noble Corporation plc (Noble)
incorporated under the laws of England and Wales. On July 17, 2014, Paragon Offshore Limited re-registered under the Companies Act 2006 as a public limited company under the name of Paragon Offshore plc (together with its subsidiaries,
Paragon, the Company, we, us or our).
Subsequent to June 30, 2014, Noble
transferred to us the assets and liabilities (the Separation) constituting most of Nobles standard specification drilling units and related assets, liabilities and business. On August 1, 2014, Noble made a pro rata
distribution to its shareholders of all of our issued and outstanding ordinary shares (the Distribution and, collectively with the Separation, the Spin-Off). In connection with the Distribution, Noble shareholders received
one ordinary share of Paragon for every three ordinary shares of Noble owned. Noble owned 84.8 million ordinary shares of Paragon as of July 23, 2014, Nobles record date for the Distribution.
The historical financial information contained in this report relates to periods that ended prior to the Spin-Off. Consequently, the unaudited
combined financial statements and related discussion of financial condition and results of operations contained in this report pertain to the Noble Standard-Spec Business (the Predecessor), which comprised the entire standard
specification drilling fleet and related operations of Noble. The Separation included the transfer to us of the Predecessor, except for six standard specification drilling units, three of which were retained by Noble and three of which were sold by
Noble prior to the Separation (collectively, the Excluded Assets). We will consolidate the historical financial results of the Predecessor in our consolidated financial statements for all periods prior to the Spin-Off.
We are a pure-play global provider of standard specification offshore drilling rigs and includes 34 jackups and eight floaters (five
drillships and three semisubmersibles), and one floating production storage and offloading unit (FPSO). We refer to our semisubmersibles and drillships collectively as floaters. We also operate the Hibernia platform offshore
of Canada. Our primary business is to contract our drilling rigs, related equipment and work crews to conduct oil and gas drilling and workover operations for our exploration and production customers on a dayrate basis around the world.
Set forth below are our unaudited pro forma combined balance sheet as of June 30, 2014 and our unaudited pro forma combined statements of
operations for the six months ended June 30, 2014 and 2013. Our unaudited pro forma combined financial data have been derived by adjusting the historical combined financial statements of our Predecessor.
At the Separation, our fleet consisted of 34 jackups, five drillships, three semisubmersibles and one floating production storage and
offloading unit, as well as the Hibernia platform operations.
The following unaudited pro forma combined financial information sets forth:
|
a) |
the historical financial information of our Predecessor as of June 30, 2014 and for the six months ended June 30, 2014 and 2013, as derived from the unaudited combined financial statements of our Predecessor;
and |
|
b) |
the unaudited pro forma combined financial statements of Paragon assuming a) the transfer of our Predecessor (less the Excluded Assets) to us in exchange for our shares and intercompany indebtedness in an aggregate
principal amount of approximately $1.7 billion and b) repayment of the intercompany indebtedness to Noble using the proceeds from the $1.7 billion of indebtedness under the Term Loan Facility and the Debt Securities from unaffiliated third-parties
and lenders. |
The pro forma adjustments applied in the unaudited pro forma combined financial statements are based upon
currently available information and certain estimates and assumptions, and actual results may differ from the pro forma adjustments. However, we believe that these estimates and assumptions provide a reasonable basis for presenting the significant
effects of the contemplated transactions and that the pro forma adjustments are factually supportable and give appropriate effect to those estimates and assumptions.
29
As a result of the Distribution, we became subject to the reporting requirements of the
Securities Exchange Act of 1934 and the Sarbanes-Oxley Act. We are required to establish procedures and practices as a standalone public company in order to comply with our obligations under those laws and the related rules and regulations. As a
result, we expect to incur approximately $8 million of incremental annual expenses related to being a public company, including internal and external audit, investor relations, share administration and regulatory compliance costs. The amount of
these expenses will exceed the amount historically allocated to us from Noble for these types of expenses. No pro forma adjustments have been made for these incremental public company expenses.
The unaudited pro forma combined financial statements are presented for comparative purposes only and may not necessarily be indicative of
what our actual financial position or results of operations would have been as of, and for, the period presented, nor does it purport to represent our future financial position or results of operations.
You should read our unaudited pro forma combined financial statements and the accompanying notes in conjunction with our Predecessor combined
financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q for our fiscal quarter ended June 30, 2014 and the financial and other information appearing elsewhere in this report.
30
PARAGON OFFSHORE PLC
UNAUDITED PRO FORMA
COMBINED BALANCE SHEET AS OF JUNE 30, 2014
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluded or |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
disposed |
|
|
|
|
|
|
|
|
|
|
|
Paragon |
|
|
|
Predecessor |
|
|
standard-spec |
|
|
Pre-financing |
|
|
Financing |
|
|
Separation |
|
|
Offshore |
|
|
|
Historical |
|
|
assets |
|
|
subtotal |
|
|
Adjustments |
|
|
adjustments |
|
|
Pro Forma |
|
|
|
|
|
|
Note 1 |
|
|
|
|
|
Note 2 |
|
|
Note 3 |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
32,688 |
|
|
$ |
|
|
|
$ |
32,688 |
|
|
$ |
|
|
|
$ |
40,000 |
|
|
$ |
72,688 |
|
Accounts receivable |
|
|
364,244 |
|
|
|
(40,965 |
) |
|
|
323,279 |
|
|
|
|
|
|
|
|
|
|
|
323,279 |
|
Prepaid and other current assets |
|
|
57,886 |
|
|
|
(3,680 |
) |
|
|
54,206 |
|
|
|
|
|
|
|
55,315 |
|
|
|
109,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
454,818 |
|
|
|
(44,645 |
) |
|
|
410,173 |
|
|
|
|
|
|
|
95,315 |
|
|
|
505,488 |
|
Property and equipment, at cost |
|
|
6,171,698 |
|
|
|
(686,748 |
) |
|
|
5,484,950 |
|
|
|
|
|
|
|
|
|
|
|
5,484,950 |
|
Accumulated depreciation |
|
|
(2,809,195 |
) |
|
|
207,974 |
|
|
|
(2,601,221 |
) |
|
|
|
|
|
|
|
|
|
|
(2,601,221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
3,362,503 |
|
|
|
(478,774 |
) |
|
|
2,883,729 |
|
|
|
|
|
|
|
|
|
|
|
2,883,729 |
|
Other assets |
|
|
72,837 |
|
|
|
(15,405 |
) |
|
|
57,432 |
|
|
|
33,223 |
|
|
|
4,807 |
|
|
|
95,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
3,890,158 |
|
|
$ |
(538,824 |
) |
|
$ |
3,351,334 |
|
|
$ |
33,223 |
|
|
$ |
100,122 |
|
|
$ |
3,484,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
123,249 |
|
|
$ |
(6,911 |
) |
|
$ |
116,338 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
116,338 |
|
Accrued payroll and related costs |
|
|
54,186 |
|
|
|
(4,947 |
) |
|
|
49,239 |
|
|
|
|
|
|
|
|
|
|
|
49,239 |
|
Other current liabilities |
|
|
35,547 |
|
|
|
|
|
|
|
35,547 |
|
|
|
|
|
|
|
80,226 |
|
|
|
115,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
212,982 |
|
|
|
(11,858 |
) |
|
|
201,124 |
|
|
|
|
|
|
|
80,226 |
|
|
|
281,350 |
|
Long-term debt |
|
|
2,268,613 |
|
|
|
|
|
|
|
2,268,613 |
|
|
|
(541,863 |
) |
|
|
|
|
|
|
1,726,750 |
|
Deferred income taxes |
|
|
97,063 |
|
|
|
|
|
|
|
97,063 |
|
|
|
|
|
|
|
(18,107 |
) |
|
|
78,956 |
|
Other liabilities |
|
|
82,792 |
|
|
|
|
|
|
|
82,792 |
|
|
|
|
|
|
|
23,826 |
|
|
|
106,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,661,450 |
|
|
|
(11,858 |
) |
|
|
2,649,592 |
|
|
|
(541,863 |
) |
|
|
85,945 |
|
|
|
2,193,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
848 |
|
|
|
848 |
|
Additional paid-in capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,330,120 |
|
|
|
1,330,120 |
|
Net parent investment |
|
|
1,228,687 |
|
|
|
(526,966 |
) |
|
|
701,721 |
|
|
|
575,086 |
|
|
|
(1,276,807 |
) |
|
|
|
|
Accumulated other comprehensive loss |
|
|
21 |
|
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
(39,984 |
) |
|
|
(39,963 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
1,228,708 |
|
|
|
(526,966 |
) |
|
|
701,742 |
|
|
|
575,086 |
|
|
|
14,177 |
|
|
|
1,291,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
$ |
3,890,158 |
|
|
$ |
(538,824 |
) |
|
$ |
3,351,334 |
|
|
$ |
33,223 |
|
|
$ |
100,122 |
|
|
$ |
3,484,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited pro forma combined financial statements.
31
PARAGON OFFSHORE PLC
UNAUDITED PRO FORMA
COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2014
(In thousands, except net income per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluded or |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
disposed |
|
|
|
|
|
|
|
|
Paragon |
|
|
|
Predecessor |
|
|
standard-spec |
|
|
Pre-financing |
|
|
Financing |
|
|
Offshore |
|
|
|
Historical |
|
|
assets |
|
|
subtotal |
|
|
adjustments |
|
|
Pro Forma |
|
|
|
|
|
|
Note 1 |
|
|
|
|
|
Note 2 |
|
|
|
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services |
|
$ |
954,297 |
|
|
$ |
(97,591 |
) |
|
$ |
856,706 |
|
|
$ |
|
|
|
$ |
856,706 |
|
Reimbursables |
|
|
22,893 |
|
|
|
(3,391 |
) |
|
|
19,502 |
|
|
|
|
|
|
|
19,502 |
|
Labor contract drilling services |
|
|
16,357 |
|
|
|
|
|
|
|
16,357 |
|
|
|
|
|
|
|
16,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
993,547 |
|
|
|
(100,982 |
) |
|
|
892,565 |
|
|
|
|
|
|
|
892,565 |
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services |
|
|
448,780 |
|
|
|
(34,387 |
) |
|
|
414,393 |
|
|
|
|
|
|
|
414,393 |
|
Reimbursables |
|
|
15,850 |
|
|
|
(2,020 |
) |
|
|
13,830 |
|
|
|
|
|
|
|
13,830 |
|
Labor contract drilling services |
|
|
12,436 |
|
|
|
|
|
|
|
12,436 |
|
|
|
|
|
|
|
12,436 |
|
Depreciation and amortization |
|
|
223,120 |
|
|
|
(22,282 |
) |
|
|
200,838 |
|
|
|
|
|
|
|
200,838 |
|
General and administrative |
|
|
25,928 |
|
|
|
(2,422 |
) |
|
|
23,506 |
|
|
|
|
|
|
|
23,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
726,114 |
|
|
|
(61,111 |
) |
|
|
665,003 |
|
|
|
|
|
|
|
665,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
267,433 |
|
|
|
(39,871 |
) |
|
|
227,562 |
|
|
|
|
|
|
|
227,562 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amount capitalized |
|
|
(6,272 |
) |
|
|
|
|
|
|
(6,272 |
) |
|
|
(47,772 |
) |
|
|
(54,044 |
) |
Interest income and other, net |
|
|
525 |
|
|
|
|
|
|
|
525 |
|
|
|
|
|
|
|
525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
261,686 |
|
|
|
(39,871 |
) |
|
|
221,815 |
|
|
|
(47,772 |
) |
|
|
174,043 |
|
Income tax provision |
|
|
(42,075 |
) |
|
|
3,204 |
|
|
|
(38,871 |
) |
|
|
|
|
|
|
(38,871 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
219,611 |
|
|
$ |
(36,667 |
) |
|
$ |
182,944 |
|
|
$ |
(47,772 |
) |
|
$ |
135,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
$ |
1.59 |
|
Diluted |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
$ |
1.59 |
|
Weighted-average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
84,753 |
|
Diluted |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
84,753 |
|
See accompanying notes to the unaudited pro forma combined financial statements.
32
PARAGON OFFSHORE PLC
UNAUDITED PRO FORMA
COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2013
(In thousands, except net income per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluded or |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
disposed |
|
|
|
|
|
|
|
|
Paragon |
|
|
|
Predecessor |
|
|
standard-spec |
|
|
Pre-financing |
|
|
Financing |
|
|
Offshore |
|
|
|
Historical |
|
|
assets |
|
|
subtotal |
|
|
adjustments |
|
|
Pro Forma |
|
|
|
|
|
|
Note 1 |
|
|
|
|
|
Note 2 |
|
|
|
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services |
|
$ |
877,619 |
|
|
$ |
(100,885 |
) |
|
$ |
776,734 |
|
|
$ |
|
|
|
$ |
776,734 |
|
Reimbursables |
|
|
23,646 |
|
|
|
(2,310 |
) |
|
|
21,336 |
|
|
|
|
|
|
|
21,336 |
|
Labor contract drilling services |
|
|
17,684 |
|
|
|
|
|
|
|
17,684 |
|
|
|
|
|
|
|
17,684 |
|
Other revenues |
|
|
66 |
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
919,015 |
|
|
|
(103,195 |
) |
|
|
815,820 |
|
|
|
|
|
|
|
815,820 |
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling services |
|
|
451,124 |
|
|
|
(41,879 |
) |
|
|
409,245 |
|
|
|
|
|
|
|
409,245 |
|
Reimbursables |
|
|
17,597 |
|
|
|
(1,848 |
) |
|
|
15,749 |
|
|
|
|
|
|
|
15,749 |
|
Labor contract drilling services |
|
|
11,746 |
|
|
|
|
|
|
|
11,746 |
|
|
|
|
|
|
|
11,746 |
|
Depreciation and amortization |
|
|
200,601 |
|
|
|
(22,723 |
) |
|
|
177,878 |
|
|
|
|
|
|
|
177,878 |
|
General and administrative |
|
|
31,003 |
|
|
|
(3,260 |
) |
|
|
27,743 |
|
|
|
|
|
|
|
27,743 |
|
Gain on contract settlements/extinguishments |
|
|
(1,800 |
) |
|
|
|
|
|
|
(1,800 |
) |
|
|
|
|
|
|
(1,800 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
710,271 |
|
|
|
(69,710 |
) |
|
|
640,561 |
|
|
|
|
|
|
|
640,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
208,744 |
|
|
|
(33,485 |
) |
|
|
175,259 |
|
|
|
|
|
|
|
175,259 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amount capitalized |
|
|
(2,235 |
) |
|
|
|
|
|
|
(2,235 |
) |
|
|
(51,809 |
) |
|
|
(54,044 |
) |
Interest income and other, net |
|
|
224 |
|
|
|
(121 |
) |
|
|
103 |
|
|
|
|
|
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
206,733 |
|
|
|
(33,606 |
) |
|
|
173,127 |
|
|
|
(51,809 |
) |
|
|
121,318 |
|
Income tax provision |
|
|
(41,618 |
) |
|
|
2,720 |
|
|
|
(38,898 |
) |
|
|
|
|
|
|
(38,898 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
165,115 |
|
|
$ |
(30,886 |
) |
|
$ |
134,229 |
|
|
$ |
(51,809 |
) |
|
$ |
82,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
$ |
0.97 |
|
Diluted |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
$ |
0.97 |
|
Weighted-average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
84,753 |
|
Diluted |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
84,753 |
|
See accompanying notes to the unaudited pro forma combined financial statements.
33
Note 1. Removal of Excluded or Disposed Standard-Spec Assets Adjustments
The pro forma adjustments included in the accompanying unaudited pro forma combined financial statements include adjustments to assets,
liabilities, revenues and costs that are specifically identifiable or have been allocated directly to the Excluded Assets. Shareholders equity for the Excluded Assets represents our Predecessors interest in the recorded net assets of the
Excluded Assets and cumulative operating results.
General and Administrative Expenses
The Excluded Assets received service and support functions from Noble and certain of its subsidiaries. The costs associated with these support
functions have been allocated to these rigs relative to Noble in its entirety, which is considered to be the most meaningful under the circumstances. The costs were allocated using various inputs, such as head count, services rendered and assets
assigned to our Predecessor. These costs have been allocated to the Excluded Assets in the same manner they were allocated to our Predecessor.
Income Taxes
A
reasonable allocation of income taxes to the Excluded Assets has been made in instances where the operations of the Excluded Assets were included in the filing of a consolidated or combined return of Noble or its subsidiaries.
Note 2. Financing Adjustments
We have
adjusted the amounts of long-term debt pushed down to our Predecessor financial statements to reflect the $1.7 billion of long-term debt on the unaudited pro forma combined balance sheet and have included the related interest expense in the three
and six months ended June 30, 2014 and June 30, 2013, unaudited pro forma combined statements of operations. This debt comprises $1.08 billion of Senior Notes and $650 million of borrowings under our Term Loan Facility, the proceeds of
each of which were used to repay our intercompany indebtedness to Noble as consideration for the Separation. The Senior Notes consisted of $500 million of 6.75% senior notes and $580 million of 7.25% senior notes and mature on July 15, 2022 and
August 15, 2024, respectively. The Senior Notes were issued without an original issue discount. Borrowings under the Term Loan Facility bear interest at an adjusted LIBOR rate plus 2.75%, subject to a minimum LIBOR rate of 1% or a base rate
plus 1.75%, at our option, and the Term Loan Facility matures in July 2021. The loans under the Term Loan Facility were issued with 0.5% original issue discount. In addition, we have adjusted for issuance costs for the Senior Notes and the Term Loan
Facility of approximately $33.2 million, which will be amortized over the term of the associated debt and included in interest expense.
The pro forma adjustments do not include adjustments for capitalized interest for qualifying major projects. The impact of interest expense
has not been tax adjusted in the unaudited pro forma combined statement of operations as we do not anticipate recognizing a tax benefit from such interest expense.
Note 3. Other Adjustments
Working
Capital Adjustment
Prior to the Distribution, Noble delivered to us $40 million in cash to increase our working capital.
Net Parent Investment
The balance accumulated in Net parent investment was reclassified to Shares and Additional paid-in capital
upon the Distribution.
Income Tax Expense, Assets and Liabilities
Income taxes for our Predecessor were prepared on a separate return basis as if our Predecessor had been a standalone company. For purposes of
these pro forma financials, adjustments have been made to our Predecessor financial statements to reflect the assets, liabilities and related indemnities which we ultimately will receive from Noble.
34
Accumulated Other Comprehensive Loss
Currency translation adjustments of $18 million associated with Noble legal entities that were transferred to, and are held by us, after the
Separation will be included in Accumulated other comprehensive loss. Actuarial losses and prior service costs of $22 million related to Noble-sponsored pension plans and other employee benefit arrangements located in certain countries
outside of the United States that were transferred to and held by us after the Separation will be included in Accumulated other comprehensive loss. The assets and liabilities related to these pension plans and other employee benefit
arrangements will be included in Other assets and Other liabilities.
Note. 4. Earnings per Share
The calculations of pro forma basic earnings per share and average shares outstanding for the periods presented are based on the number of
Noble ordinary shares outstanding at July 23, 2014, adjusted for the distribution ratio of one share of us for every three Noble ordinary shares.
The calculations of pro forma diluted earnings per share and average shares outstanding for the periods presented are also based on the pro
forma basic earnings per share and average shares outstanding, as the unvested share-based awards related to our employees are not expected to have a material effect on these calculations. These calculations are not indicative of the dilutive effect
of our share-based awards issued in connection with the adjustment of outstanding Noble share-based awards or the grant of new share-based awards in connection with the Spin-Off.
35
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential for loss from a change in the value of a financial instrument as a result of fluctuations in interest rates,
currency exchange rates or equity prices, as further described below.
Interest Rate Risk
Following the completion of the Separation, a portion of our long-term debt portfolio contains variable rate debt instruments.
For variable rate debt, interest rate changes generally do not affect the fair market value of such debt, but do impact future earnings and
cash flows, assuming other factors are held constant. Our pro forma interest expense for the six months ended June 30, 2014 after giving effect to the Separation would have been $54.0 million. Holding other variables constant (such as foreign
exchange rates and debt levels), a 1% increase in interest rates would have increased our pro forma interest expense for such period by approximately $3.3 million.
Foreign Currency Risk
Although we are a UK company, we define foreign currency as any non-U.S. denominated currency. Our functional currency is primarily the
U.S. Dollar, which is consistent with the oil and gas industry. However, outside the United States, a portion of our expenses are incurred in local currencies. Therefore, when the U.S. Dollar weakens (strengthens) in relation to the
currencies of the countries in which we operate, our expenses reported in U.S. Dollars will increase (decrease).
We are exposed to risks
on future cash flows to the extent that local currency expenses exceed revenues denominated in local currency that are other than the functional currency. To help manage this potential risk, we periodically enter into derivative instruments to
manage our exposure to fluctuations in currency exchange rates, and we may conduct hedging activities in future periods to mitigate such exposure.
Item 4. Controls and Procedures
Randall D. Stilley, President, Chief Executive Officer, and Director of Paragon, and Steven
A. Manz, Senior Vice President and Chief Financial Officer of Paragon, have evaluated the disclosure controls and procedures of Paragon as of the end of the period covered by this report. On the basis of this evaluation, Mr. Stilley and
Mr. Manz have concluded that Paragons disclosure controls and procedures were effective as of June 30, 2014. Paragons disclosure controls and procedures are designed to ensure that information required to be disclosed by
Paragon in the reports that it files with or submits to the SEC is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms and is accumulated and communicated to management as appropriate to
allow timely decisions regarding required disclosure.
The SEC has adopted rules that generally require every company that files reports
with the SEC to evaluate its effectiveness of internal controls over financial reporting. Our management, with the participation of our principal executive and principal financial officers, will not be required to evaluate the effectiveness of our
internal controls over financial reporting until the filing of our 2015 Annual Report on Form 10-K, due to a transition period established by the SEC rules applicable to new public companies. There was no change in our internal control over
financial reporting that occurred during the quarter ended June 30, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
36
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding legal proceedings is set forth in Note 7 of the combined financial statements included in Item 1 of Part I of this
Quarterly Report on Form 10-Q and is incorporated herein by reference.
Item 1A. Risk Factors
Risk Factors Relating to Our Business
The
risk factor below updates and supplements the risk described under Item 1A, Risk Factors, in our Registration Statement on Form 10, as amended, that was declared effective on July 16, 2014.
Our effective tax rate as a standalone business will be substantially higher than our effective tax rate as a wholly-owned subsidiary of Noble.
Prior to the Spin-Off, Noble restructured certain aspects of our business to effect our separation from Noble. This restructuring
resulted in significant tax inefficiencies for our business and operations following the Spin-Off. These tax inefficiencies include our inability to deduct interest expense with respect to borrowings under our Term Loan Facility and Senior Notes and
ownership of certain of our assets in structures subject to higher tax rates than those prior to the restructuring. In addition, in July 2014, legislation was enacted in the U.K. that will restrict deductions on certain related party transactions,
such as those relating to the bareboat charter agreements used in connection with our U.K. continental shelf operations. As a result, our effective tax rate as a standalone entity will be substantially higher than our effective tax rate prior to the
Spin-Off. If we are unable to address these tax inefficiencies, it could materially adversely affect our business, financial condition and results of operations.
Possible changes in tax laws could affect us and our shareholders.
We operate through various subsidiaries in numerous countries throughout the world. Consequently, we are subject to changes in tax laws,
treaties or regulations or the interpretation or enforcement thereof in the United Kingdom, the U.S. or jurisdictions in which we or any of our subsidiaries operate or are incorporated. For example, recently enacted U.K. legislation will restrict
deductions on certain intercompany transactions, such as those relating to the bareboat charter agreements used in connection with our U.K. continental shelf operations. Tax laws and regulations are highly complex and subject to interpretation. Our
income tax expense is based upon our interpretation of the tax laws in effect in various countries at the time that the expense was incurred. If these laws, treaties or regulations change or other taxing authorities do not agree with our assessment
of the effects of such laws, treaties and regulations, this could have a material adverse effect on us, resulting in a higher effective tax rate on our worldwide earnings.
In addition, the manner in which our shareholders are taxed on distributions on, and dispositions of, our shares could be affected by changes
in tax laws, treaties or regulations or the interpretation or enforcement thereof in the United Kingdom, the U.S. or other jurisdictions in which our shareholders are resident. Any such changes could result in increased taxes for our shareholders
and affect the trading price of our shares.
Item 6. Exhibits
The information required by this Item 6 is set forth in the Index to Exhibits accompanying this Quarterly Report on Form 10-Q and is
incorporated herein by reference.
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Paragon Offshore plc, a company registered under the laws of England and Wales
|
|
|
|
|
/s/ Randall D. Stilley |
|
|
|
August 29, 2014 |
Randall D. Stilley President, Chief Executive
Officer, and Director (Principal Executive Officer) |
|
|
|
Date |
|
|
|
/s/ Steven A. Manz |
|
|
|
|
Steven A. Manz Senior Vice President and Chief
Financial Officer (Principal Financial Officer) |
|
|
|
|
38
Index to Exhibits
|
|
|
Number |
|
Description |
|
|
2.1* |
|
Master Separation Agreement, dated as of July 31, 2014, between Noble Corporation and Paragon Offshore plc (incorporated by reference to Exhibit 2.1 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No.
001-36465) filed on August 5, 2014). |
|
|
3.1 |
|
Articles of Association of Paragon Offshore plc. |
|
|
4.1* |
|
Senior Secured Revolving Credit Agreement dated as of June 17, 2014 among Paragon Offshore Limited, Paragon International Finance Company, the Lenders from time to time parties thereto; JPMorgan Chase Bank, N.A., as
Administrative Agent, Swingline Lender and an Issuing Bank; Deutsche Bank Securities Inc. and Barclays Bank PLC, as Syndication Agents; and J.P. Morgan Securities LLC, Deutsche Bank Securities Inc. and Barclays Bank PLC, as Joint Lead Arrangers and
Joint Lead Bookrunners (incorporated by reference to Exhibit 4.1 to Paragon Offshore Limiteds Registration Statement on Form 10 (Commission File No. 001-36465) filed on July 3, 2014). |
|
|
4.2* |
|
Indenture, dated as of July 18, 2014, by and among Paragon Offshore plc, the guarantors listed therein, Deutsche Bank Trust Company Americas, as trustee, and Deutsche Bank Luxembourg S.A., as paying agent and transfer agent
(incorporated by reference to Exhibit 4.1 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No. 001-36465) filed on July 22, 2014). |
|
|
4.3* |
|
Senior Secured Term Loan Credit Agreement, dated as of July 18, 2014, by and among Paragon Offshore plc, as parent guarantor, Paragon Offshore Finance Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent,
and the lenders party thereto (incorporated by reference to Exhibit 4.2 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No. 001-36465) filed on July 22, 2014). |
|
|
10.1* |
|
Tax Sharing Agreement, dated as of July 31, 2014, between Noble Corporation plc and Paragon Offshore plc (incorporated by reference to Exhibit 10.1 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No.
001-36465) filed on August 5, 2014). |
|
|
10.2* |
|
Employee Matters Agreement, dated as of July 31, 2014, between Noble Corporation and Paragon Offshore plc (incorporated by reference to Exhibit 10.2 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No.
001-36465) filed on August 5, 2014). |
|
|
10.3* |
|
Transition Services Agreement, dated as of July 31, 2014, between Noble Corporation and Paragon Offshore plc (incorporated by reference to Exhibit 10.3 to Paragon Offshore plcs Current Report on Form 8-K (Commission File
No. 001-36465) filed on August 5, 2014). |
|
|
10.4* |
|
Transition Services Agreement (Brazil), dated as of July 31, 2014, among Paragon Offshore do Brasil Limitada, Paragon Offshore (Nederland) B.V., Paragon Offshore plc, Noble Corporation, Noble Dave Beard Limited and Noble
Drilling (Nederland) II B.V. (incorporated by reference to Exhibit 10.4 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No. 001-36465) filed on August 5, 2014). |
|
|
10.5* |
|
Paragon Offshore plc 2014 Employee Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No. 001-36465) filed on August 5, 2014). |
|
|
10.6* |
|
Paragon Offshore plc 2014 Director Omnibus Plan (incorporated by reference to Exhibit 10.6 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No. 001-36465) filed on August 5, 2014). |
|
|
10.7* |
|
Paragon Grandfathered 401(k) Savings Restoration Plan (incorporated by reference to Exhibit 10.7 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No. 001-36465) filed on August 5, 2014). |
|
|
10.8* |
|
Paragon 401(k) Savings Restoration Plan (incorporated by reference to Exhibit 10.8 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No. 001-36465) filed on August 5, 2014). |
|
|
10.9* |
|
Form of Deeds of Indemnity between Paragon Offshore plc and certain directors and officers (incorporated by reference to Exhibit 10.9 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No. 001-36465) filed on
August 5, 2014). |
|
|
10.10* |
|
Paragon Offshore Services LLC 2014 Short-Term Incentive Program (incorporated by reference to Exhibit 10.1 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No. 001-36465) filed on August 18,
2014). |
|
|
10.11* |
|
Form of Change of Control Agreement between Paragon Offshore plc and certain officers thereof (incorporated by reference to Exhibit 10.2 to Paragon Offshore plcs Current Report on Form 8-K (Commission File No. 001-36465) filed
on August 18, 2014). |
|
|
10.12 |
|
Form of Performance Vested Restricted Stock Unit Replacement Award Agreement. |
|
|
10.13 |
|
Form of Time Vested Restricted Stock Unit Replacement Award Agreement. |
|
|
10.14 |
|
Form of Employee Time Vested Restricted Stock Unit Award Agreement. |
|
|
10.15 |
|
Form of Director Restricted Stock Unit Award Agreement. |
|
|
31.1 |
|
Certification of Chief Executive Officer pursuant to the U.S. Securities Exchange Act of 1934, as amended, Rule 13a-14(a) or Rule 15d-14(a). |
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant to the U.S. Securities Exchange Act of 1934, as amended, Rule 13a- 14(a) or Rule 15d-14(a). |
|
|
32.1 |
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
32.2 |
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
101 |
|
Interactive Data File |
39
Exhibit 3.1
Company Number: 8814042
THE COMPANIES ACT 2006
ARTICLES
OF ASSOCIATION
- of -
PARAGON OFFSHORE PLC
CONTENTS
|
|
|
|
|
Heading |
|
Articles |
|
Exclusion of Other Regulations |
|
|
1 |
|
Definitions and Interpretation |
|
|
1 |
|
Registered office |
|
|
5 |
|
Limited liability |
|
|
5 |
|
Change of name |
|
|
5 |
|
Share Capital |
|
|
5-9 |
|
Variation of Rights |
|
|
9 |
|
Shares in Uncertificated Form |
|
|
10 |
|
Share Certificates |
|
|
10-11 |
|
Lien |
|
|
11-12 |
|
Calls on Shares |
|
|
12-13 |
|
Forfeiture |
|
|
13-14 |
|
Transfer of Shares |
|
|
15 |
|
Transmission of Shares |
|
|
16 |
|
Alteration of Share Capital |
|
|
16-17 |
|
Purchase of Own Shares |
|
|
17 |
|
General Meetings |
|
|
17 |
|
Notice of General Meetings |
|
|
17-19 |
|
Proceedings at General Meetings |
|
|
19-23 |
|
Votes of Members |
|
|
23-26 |
|
Proxies and Corporate Representatives |
|
|
26-29 |
|
Powers of the Board |
|
|
29-30 |
|
Number and Qualification of Directors |
|
|
30 |
|
Appointment and Retirement of Directors |
|
|
30-32 |
|
Resignation and Removal of Directors |
|
|
32 |
|
Vacation of office |
|
|
32-33 |
|
Remuneration of Directors |
|
|
33 |
|
Executive Directors |
|
|
33-34 |
|
Chief Executive Officer, President, Vice President and Treasurer |
|
|
34-35 |
|
Directors Gratuities and Pensions |
|
|
35 |
|
Proceedings of the Board |
|
|
35-36 |
|
Directors Interests |
|
|
36-40 |
|
Fair Price Provisions |
|
|
40-46 |
|
Transactions with Interested Shareholders |
|
|
46-51 |
|
Secretary |
|
|
51 |
|
Minutes |
|
|
51-52 |
|
The Seal |
|
|
52 |
|
|
|
|
|
|
Accounting Records, Books and Registers |
|
|
52-53 |
|
Audit |
|
|
53 |
|
Authentication of Documents |
|
|
53 |
|
Record Dates |
|
|
54 |
|
Dividends |
|
|
54-59 |
|
Reserves |
|
|
59 |
|
Capitalisation of Profits |
|
|
59-60 |
|
Capitalisation of Reserves Employees Share Schemes |
|
|
60-65 |
|
Notices |
|
|
65-66 |
|
Untraced Members |
|
|
66-67 |
|
Destruction of Documents |
|
|
67-68 |
|
Winding-up |
|
|
68 |
|
Provision for Employees |
|
|
68-69 |
|
Indemnity |
|
|
69 |
|
Insurance |
|
|
69 |
|
Dispute Resolution |
|
|
70-71 |
|
Appendix |
|
|
|
|
THE COMPANIES ACT 2006
ARTICLES OF ASSOCIATION
- of -
PARAGON
OFFSHORE PLC
EXCLUSION OF OTHER REGULATIONS
1. |
This document comprises the Articles of Association of the Company and no regulations set out in any statute or statutory instrument concerning companies shall apply as Articles of Association of the Company.
|
DEFINITIONS AND INTERPRETATION
2.1 |
In these Articles the following expressions have the following meanings unless the context otherwise requires: |
|
|
|
Act |
|
the Companies Act 2006. |
|
|
address |
|
in relation to electronic communications, includes any number or address (including, in the case of any Uncertificated Proxy Instruction permitted in accordance with these Articles, an identification number of a participant in the
relevant system concerned) used for the purposes of such communications. |
|
|
Articles |
|
these Articles of Association as altered from time to time. |
|
|
auditors |
|
the auditors for the time being of the Company. |
|
|
Board |
|
the board of directors of the Company or the Directors present at a duly convened meeting of the Directors at which a quorum is present. |
|
|
certificated share |
|
a share in the capital of the Company which is held in physical certificated form. |
|
|
|
|
|
clear days |
|
in relation to the period of a notice, that period calculated in accordance with section 360 of the Act. |
|
|
communication |
|
has the same meaning as in section 15 of the Electronic Communications Act. |
|
|
Company |
|
Paragon Offshore plc. |
|
|
Companys website |
|
any websites operated or controlled by the Company, which contain information about the Company in accordance with the Statutes. |
|
|
Corporate Governance Guidelines |
|
the corporate governance guidelines adopted by resolution of the Board from time to time. |
|
|
Deferred Sterling Share |
|
a share in the capital of the Company with the rights described in Article 6.2. |
|
|
Directors |
|
the directors of the Company for the time being. |
|
|
elected |
|
elected or re-elected. |
|
|
electronic communication |
|
has the same meaning as in section 15 of the Electronic Communications Act. |
|
|
Electronic Communications Act |
|
the Electronic Communications Act 2000 (as amended from time to time). |
|
|
employees share scheme |
|
means a scheme for encouraging or facilitating the holding of shares in a company by or for the benefit of employees, former employees or officers of: (i) the Company, (ii) any subsidiary, or (iii) the Companys holding company
or any subsidiary of the Companys holding company. |
|
|
FSMA |
|
the Financial Services and Markets Act 2000 (as amended from time to time). |
|
|
group |
|
the Company and its subsidiary undertakings for the time being. |
|
|
holder |
|
in relation to shares, the member whose name is entered in the register as the holder of the shares. |
2
|
|
|
in electronic form |
|
in a form specified by section 1168(3) of the Act and otherwise complying with the provisions of that section. |
|
|
member |
|
a member of the Company. |
|
|
month |
|
calendar month. |
|
|
Ordinary Share |
|
a share in the capital of the Company with the rights described in Article 6.1. |
|
|
paid up |
|
paid up or credited as paid up. |
|
|
recognised person |
|
a recognised clearing house acting in relation to a recognised investment exchange, or a nominee of a recognised clearing house acting in that way, or a nominee of a recognised investment exchange. |
|
|
register |
|
the register of members of the Company. |
|
|
secretary |
|
the secretary of the Company or any other person appointed to perform any of the duties of the secretary of the Company including a joint, temporary, assistant or deputy secretary. |
|
|
share |
|
any share in the capital of the Company from time to time and shares shall be construed accordingly. |
|
|
Shareholder Information |
|
notices, documents or information which the Company wishes or is required to communicate to shareholders including, without limitation, annual reports and accounts, interim financial statements, summary financial statements, notices
of meetings and proxy forms. |
|
|
Statutes |
|
the Act and every other statute (including any orders, regulations or other subordinate legislation made under them) for the time being in force concerning companies and affecting the Company (including, without limitation, the
Electronic Communications Act). |
3
|
|
|
|
|
Uncertificated Proxy Instruction |
|
a properly authenticated dematerialised instruction, and/or other instruction or notification, which is sent by means of the relevant system concerned and received by such participant in that system acting on behalf of the Company
as the Directors may prescribe, in such form and subject to such terms and conditions as may from time to time be prescribed by the Directors (subject always to the facilities and requirements of the relevant system concerned). |
|
|
uncertificated share |
|
a share in the capital of the Company which is not held in physical certificated form. |
|
|
United Kingdom |
|
Great Britain and Northern Ireland. |
|
|
website communication |
|
the publication of a notice or other Shareholder Information on the Companys website in accordance with Part 4 of Schedule 5 to the Act. |
|
|
year |
|
calendar year. |
2.2 |
References to writing include references to printing, typewriting, lithography, photography and any other mode or modes of presenting or reproducing words in a visible and non-transitory form.
|
2.3 |
Words importing one gender shall (where appropriate) include any other gender and words importing the singular shall (where appropriate) include the plural and vice versa. |
2.4 |
Any words or expressions defined in the Act or the Electronic Communications Act shall, if not inconsistent with the subject or context and unless otherwise expressly defined in these Articles, bear the same
meaning in these Articles save that the word company shall include any body corporate. |
|
2.5.1 |
mental disorder mean mental disorder as defined in section 1 of the Mental Health Act 1983 or the Mental Health (Scotland) Act 1984 (as the case may be); |
|
2.5.2 |
any statute, regulation or any section or provision of any statute or regulation, if consistent with the subject or context, shall include any corresponding or substituted statute, regulation or section or provision of
any amending, consolidating or replacement statute or regulation; |
4
|
2.5.3 |
executed include any mode of execution; |
|
2.5.4 |
an Article by number are to a particular Article of these Articles; |
|
2.5.5 |
a meeting shall be taken as not requiring more than one person to be present if any quorum requirement can be satisfied by one person; |
|
2.5.6 |
subject to Article 7, a person include references to a body corporate and to an unincorporated body of persons; |
|
2.5.7 |
a share (or to a holding of shares) being in uncertificated form or in certificated form are references respectively to that share being an uncertificated unit of a security or a certificated unit of a security.
|
REGISTERED OFFICE
3. |
The registered office is to be situated in England and Wales. |
LIMITED LIABIILTY
4. |
The liability of the members is limited. |
CHANGE OF NAME
5. |
The Company may change its registered name in accordance with the Statutes or by majority decision of the Board. |
SHARE CAPITAL
6. |
Subject to the provisions of the Statutes and without prejudice to the rights attaching to any existing shares or class of shares, any share may be issued with, or have attached to it, such powers, designations,
preferences and relative participating, optional or other special rights and qualifications, limitations and restrictions attaching thereto as the Board may determine. Without prejudice to the foregoing, the Company may issue the following shares in
the capital of the Company with rights attaching to them and denominated, in each case, as follows: |
6.1 |
Ordinary Shares: Ordinary Shares shall be denominated in US Dollars with a nominal value of US$0.01 each. Ordinary Shares shall be issued with voting rights attached to them and each Ordinary Share shall rank
equally with all other shares in the capital of the Company that have voting rights for voting purposes. Each Ordinary Share shall rank equally with all other Ordinary Shares in the capital of the Company for any dividend declared. Each Ordinary
Share shall rank equally with all other Ordinary Shares in the capital of the Company for any distribution made on a winding up of the Company. |
5
6.2 |
Deferred Sterling Shares: Deferred Sterling Shares shall be denominated in British Pounds Sterling with a nominal value of GBP£1. Deferred Sterling Shares shall be issued without voting rights attached to
them. Deferred Sterling Shares shall have no entitlement to dividends. Deferred Sterling Shares do not have any right to participate in any distribution on a winding up of the Company save that after the return of the nominal value paid up or
credited as paid up on every ordinary share in the capital of the Company and the distribution of £100,000,000 to each holder thereof, each Deferred Sterling Shares shall be entitled to £1. The Deferred Sterling Shares may be issued as
redeemable shares. |
7. |
Subject to the provisions of the Statutes, the Board may exercise any power of the Company to establish a shareholder rights plan (the Rights Plan) as follows: |
7.1 |
The Rights Plan may be in such form as the Board shall in its absolute discretion decide and may in particular (but without restriction or limitation) include such terms as are described in the Summary of Example
Terms in the form appearing in the Appendix to these Articles. |
7.2 |
Subject to the provisions of the Statutes, the Board may exercise any power of the Company to grant rights (a) to subscribe for the shares of the Company and/or (b) to acquire shares of the Company, in
each case in accordance with the Rights Plan (the Rights). |
7.3 |
The purposes for which the Board shall be entitled to establish the Rights Plan and to grant Rights in accordance therewith, as provided in Articles 7.1 and 7.2 above, shall include (without limitation) the
following where, in the opinion of the majority of the Board, acting in good faith and on such grounds as the Board shall genuinely consider reasonable, irrespective of whether such grounds would be considered reasonable by any other party with or
without the benefit of hindsight, to do so would improve the likelihood that: |
|
(a) |
any process which may result in an acquisition or change of Control (as defined in Article 7.5) of the Company is conducted in an orderly manner; |
|
(b) |
all members of the Company will be treated equally and fairly; |
|
(c) |
an optimum price for shares would be received by or on behalf of all members of the Company; |
|
(d) |
the success of the Company would be promoted for the benefit of its members as a whole; |
|
(e) |
the long term interests of the Company, its employees, its members and its business would be safeguarded; and/or |
|
(f) |
the Company would not suffer serious economic harm. |
6
7.4 |
Subject to the provisions of the Statutes, the Board may determine not to redeem the Rights and accordingly exercise any power of the Company to allot shares of the Company pursuant to the exercise of the Rights in
accordance with the Rights Plan. The purposes for which the Board shall be entitled not to redeem the Rights, and accordingly to exercise any power of the Company to allot shares of the Company, shall include (without limitation) the following
where, in the opinion of the majority of the Board, acting in good faith and on such grounds as the Board shall genuinely consider reasonable, irrespective of whether such grounds would be considered reasonable by any other party with or without the
benefit of hindsight, not to redeem the Rights and accordingly to exercise any power of the Company to allot shares in the Company would improve the likelihood that: |
|
(a) |
the use of abusive tactics by any person in connection with any potential acquisition or change of Control of the Company would be prevented; |
|
(b) |
any potential acquisition or change of Control of the Company which would be unlikely to treat all members of the Company equally and fairly and in a similar manner would be prevented; |
|
(c) |
any potential acquisition or change of Control of the Company at a price which would undervalue the Company or its shares would be prevented; |
|
(d) |
any potential acquisition or change of Control of the Company which would be likely to harm the prospects of the success of the Company for the benefit of its members as a whole will be prevented; |
|
(e) |
the long term interests of the Company, its employees, its members and its business would be safeguarded; and/or |
|
(f) |
the Company would not suffer serious economic harm. |
7.5 |
For the purposes of this Article 7: |
|
(a) |
above a person shall be deemed to have control (Control) of the Company if he, either alone or with any group of affiliated or associated persons, exercises, or is able to exercise or is entitled to
acquire, the direct or indirect power to direct or cause the direction of the management and policies of the Company, whether through the ownership of voting securities, by contract or otherwise, and in particular, but without prejudice to the
generality of the preceding words, if he, either alone or with any group of affiliated or associated persons, possesses or is entitled to acquire: |
|
(i) |
beneficial ownership of 15% or more of the voting rights attributable to the capital of the Company which are exercisable at a general meeting, or |
7
|
(ii) |
such percentage of the issued share capital of the Company as would, if the whole of the income or assets of the Company were in fact distributed among the members (without regard to any rights which he or any other
person has as a loan creditor), entitle him to receive 15% or more of the income or assets so distributed, or |
|
(iii) |
such rights as would, in the event of the winding-up of the Company or in any other circumstances, entitle him to receive 15% or more of the assets of the Company which would then be available for distribution among the
members; |
|
(b) |
person shall include any individual, firm, body corporate, unincorporated association, government, state or agency of state, association, joint venture or partnership, in each case whether or not
having a separate legal personality and group of affiliated or associated persons shall have the meaning given to such terms under the U.S. federal securities laws, including the Securities Exchange Act of 1934, as amended from time to
time, and shall also include any persons acting in concert with such person; |
|
(c) |
a person shall be treated as entitled to acquire anything which he is entitled to acquire at a future date, or will at a future date be entitled to acquire, irrespective of whether such future acquisition is contingent
upon satisfaction of any conditions precedent; |
|
(d) |
there shall be attributed to any person any rights or powers of a nominee for him, that is to say, any rights or powers which another person possesses on his behalf or may be required to exercise on his direction or
behalf; and |
|
(e) |
beneficial ownership of any person or group of affiliated or associated persons shall have the meaning given to such term under the U.S. federal securities laws, including the Securities
Exchange Act of 1934, as amended from time to time and shall also mean the notional securities underlying any derivatives contract held by the person or group in question (whether to be settled in cash, Ordinary Shares or otherwise).
|
8. |
Subject to the provisions of these Articles and to the Statutes and without prejudice to the rights attaching to any existing shares or class of shares, the Board may offer, allot (with or without a right of
renunciation), issue, grant options over or otherwise deal with or dispose of shares to such persons, at such time and for such consideration and upon such terms and conditions as the Board may determine. |
9. |
Subject to the provisions of the Statutes and to any rights conferred on the holders of any other shares, shares may be issued on terms that they are, at the option of the Company or a member, liable to be
redeemed on such terms and in such manner as may be determined by the Board (such terms to be determined before the shares are allotted). |
8
10. |
Except as required by law, no person shall be recognised by the Company as holding any share upon any trust, and (except as otherwise provided by these Articles or by law) the Company shall not be bound by or
compelled in any way to recognise any interest in any share, except an absolute right to the entirety thereof in the holder. |
11. |
The Company may give financial assistance for the acquisition of shares in the Company to the extent that it is not restricted by the Statutes. The Company may exercise the powers of paying commissions conferred
by the Statutes. Subject to the provisions of the Statutes, any such commission may be satisfied by the payment of cash or by the allotment of fully or partly paid shares or partly in one way and partly in the other. The Company may also on any
issue of shares pay such brokerage commission as may be lawful. |
VARIATION OF RIGHTS
12. |
Subject to the provisions of the Statutes and to the rights of any class of shares, whenever the capital of the Company is divided into different classes of shares, the rights attached to any class may (unless
otherwise provided by the terms of issue of the shares of that class) be varied or abrogated, whether or not the Company is being wound up, either with the consent in writing of the holders of not less than three-quarters in nominal amount of the
issued shares of the affected class, or with the sanction of a special resolution passed at a separate general meeting of the holders of shares of that class (but not otherwise). |
13. |
All the provisions of these Articles relating to general meetings shall, mutatis mutandis, apply to every such separate general meeting, and for the avoidance of doubt: |
13.1 |
the necessary quorum at any such meeting other than an adjourned meeting shall be members of that class who together represent at least the majority of the voting rights of all the members of that class entitled
to vote, present in person or by proxy, at the relevant meeting; |
13.2 |
all votes shall be taken on a poll; and |
13.3 |
the holder of shares of the class in question shall have one vote in respect of every share of such class held by him. |
14. |
Subject to the terms on which any shares may be issued, the rights or privileges attached to any class of shares in the capital of the Company shall be deemed not to be varied or abrogated by the creation or issue of
any new shares ranking in priority to or pari passu in all respects (save as to the date from which such new shares shall rank for dividend) with or subsequent to those already issued or by any purchase by the Company of its own shares.
|
15. |
The provisions of Articles 12 to 14 shall apply to the variation or abrogation of the special rights attached to some only of the shares of any class as if such group of shares of the class differently treated formed a
separate class. |
9
SHARES IN UNCERTIFICATED FORM
16. |
The Board may permit the holding of shares of any class in uncertificated form. |
17. |
The Company shall be entitled to assume that the entries on any record of securities maintained by it and regularly reconciled with the register of securities held by a third party for the purposes of facilitating the
trading of shares in the Company in uncertificated form are a complete and accurate reproduction of the particulars entered in the register of securities held by such third party and shall accordingly not be liable in respect of any act or thing
done or omitted to be done by or on behalf of the Company in reliance upon such assumption; in particular, any provision of these Articles which requires or envisages that action will be taken in reliance on information contained in the register
shall be construed to permit that action to be taken in reliance on information contained in any relevant record of securities (as so maintained and reconciled). |
18. |
Where the Company is entitled under any provision of the Companies Acts or these Articles to sell, transfer or otherwise dispose of, forfeit, re-allot, accept the surrender of, or otherwise enforce a lien over, a share
held in uncertificated form, the Company shall be entitled, subject to the provisions of the Statutes and these Articles: |
18.1 |
to require the holder of that uncertificated share by notice to change that share into certificated form within the period specified in the notice and to hold that share in certificated form so long as required by the
Company; and |
18.2 |
to take any action that the board considers appropriate to achieve the sale, transfer, disposal, forfeiture, re-allotment or surrender of that share, or otherwise to enforce a lien in respect of that share.
|
SHARE CERTIFICATES
19. |
A person (except a person in respect of whom the Company is not by law required to complete and have ready for delivery a certificate) whose name is entered as a holder of any share in the register shall be
entitled without payment to receive one certificate in respect of each class of shares held by him or, with the consent of the Board and upon payment of such reasonable out-of-pocket expenses for every certificate after the first as the Board shall
determine, several certificates, each for one or more of his shares. Shares of different classes may not be included in the same certificate. |
20. |
Where a holder of any share (except a recognised person) has transferred a part of the shares comprised in his holding, he shall be entitled to a certificate for the balance without charge. |
21. |
Any two or more certificates representing shares of any one class held by any member may at his request be cancelled and a single new certificate for such shares issued in lieu without charge. |
10
22. |
The Company shall not be bound to issue more than one certificate for shares held jointly by several persons and delivery of a certificate to the joint holder who is named first in the register shall be a
sufficient delivery to all of them. |
23. |
In the case of shares held jointly by several persons, any such request mentioned in Articles 19, 20 or 21 may only be made by the joint holder who is named first in the register. |
24. |
Every certificate shall be executed by the Company in such manner as the Board, having regard to the Statutes and any other applicable legal or regulatory requirements, may authorise. Every certificate shall
specify the number, class and distinguishing number (if any) of the shares to which it relates and the nominal value of and the amount paid up on each share. |
25. |
The Board may by resolution decide, either generally or in any particular case or cases, that any signatures on any certificates for shares or any other form of security at any time issued by the Company need not
be autographic but may be applied to the certificates by some mechanical means or may be printed on them or that the certificates need not be signed by any person. |
26. |
If a share certificate is worn out, defaced, lost or destroyed, it may be replaced without charge (other than exceptional out-of-pocket expenses) and otherwise on such terms (if any) as to evidence and/or
indemnity (with or without security) as the Board may require. In the case where the certificate is worn out or defaced, it may be renewed only upon delivery of the certificate to the Company. |
LIEN
27. |
The Company shall have a first and paramount lien on every share (not being a fully paid share) for all money (whether presently due or not) payable in respect of that share. The Companys lien over a share
extends to any dividend and (if the lien is enforced and the share is sold by the Company) the proceeds of sale of that share. The Board may at any time declare any share to be wholly or in part exempt from the provisions of this Article.
|
28. |
The Company may sell, in such manner as the Board decides, any shares on which the Company has a lien, if a sum in respect of which the lien exists is presently payable and is not paid within 14 clear days after
notice in writing has been served on the holder of the shares in question or the person entitled to such shares by reason of death or bankruptcy of the holder or otherwise by operation of law, demanding payment of the sum presently payable and
stating that if the notice is not complied with the shares may be sold. |
11
29. |
To give effect to any such sale, the Board may authorise such person as it directs to execute any instrument of transfer of the shares sold to, or in accordance with the directions of, the purchaser. If the share
is an uncertificated share, the board may exercise any of the powers of the Company under Article 18 to effect the sale of the share. The title of the transferee to the shares shall not be affected by any irregularity in or invalidity of the
proceedings relating to the sale, and he shall not be bound to see to the application of the purchase money. |
30. |
The net proceeds of the sale, after payment of the costs of such sale, shall be applied in or towards satisfaction of the liability in respect of which the lien exists so far as the same is presently payable, and
any residue shall (upon surrender to the Company for cancellation of the certificate for the shares sold (where applicable) and subject to a like lien for any monies not presently payable or any liability or engagement not likely to be presently
fulfilled or discharged as existed upon the shares before the sale) be paid to the holder of (or person entitled by transmission to) the shares immediately before the sale. |
CALLS ON SHARES
31. |
Subject to the terms of allotment of any shares, the Board may send a notice and make calls upon the members in respect of any monies unpaid on their shares (whether in respect of the nominal value of the shares
or by way of premium) provided that (subject as aforesaid) no call on any share shall be payable within one month from the date fixed for the payment of the last preceding call and that at least 14 clear days notice from the date the notice is
sent shall be given of every call specifying the time or times, place of payment and the amount called on the members shares. A call may be revoked in whole or in part or the time fixed for its payment postponed in whole or in part by the
Board at any time before receipt by the Company of the sum due thereunder. |
32. |
A call may be made payable by instalments. |
33. |
The joint holders of a share shall be jointly and severally liable to pay all calls in respect of the share. |
34. |
Each member shall pay to the Company, at the time and place of payment specified in the notice of the call, the amount called on his shares. A person on whom a call is made will remain liable for calls made upon
him, notwithstanding the subsequent transfer of the shares in respect of which the call was made. |
35. |
If a sum called in respect of a share shall not be paid before or on the day appointed for payment, the person from whom the sum is due shall pay interest on the sum from the day fixed for payment to the time of
actual payment at such rate, not exceeding 5 per cent. above the base lending rate per annum most recently set by the Monetary Policy Committee of the Bank of England, as the Board may decide, together with all expenses that may have been
incurred by the Company by reason of such non-payment, but the Board may waive payment of interest and such expenses wholly or in part. No dividend or other payment or distribution in respect of any such share shall be paid or distributed and no
other rights which would otherwise normally be exercisable in accordance with these Articles may be exercised by a holder of any such share so long as any such sum or any interest or expenses payable in accordance with this Article in relation
thereto remains due. |
12
36. |
Any sum which becomes payable by the terms of allotment of a share, whether on allotment or on any other fixed date or as an instalment of a call and whether on account of the nominal value of the share or by way
of premium, shall for the purposes of these Articles be deemed to be a call duly made, notified and payable on the date on which, by the terms of allotment or in the notice of the call, it becomes payable. In the case of non-payment, all the
provisions of these Articles relating to payment of interest and expenses, forfeiture and otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. |
37. |
The Board may, if it thinks fit, receive from any member willing to advance it all or any part of the money (whether on account of the nominal value of the shares or by way of premium) uncalled and unpaid upon
any shares held by him, and may pay upon all or any part of the money so advanced (until it would but for the advance become presently payable) interest at such rate (if any) not exceeding 5 per cent. above the base lending rate per annum most
recently set by the Monetary Policy Committee of the Bank of England, as the Board may decide. No sum paid in advance of calls shall entitle the holder of a share to any portion of a dividend or other payment or distribution subsequently declared in
respect of any period prior to the date upon which such sum would, but for such payment, become presently payable. |
38. |
The Board may on the allotment of shares differentiate between the allottees or holders as to the amount of calls to be paid and the times of payment. |
FORFEITURE
39. |
If a member fails to pay the whole or any part of any call or instalment of a call on the day fixed for payment, the Board may, at any time thereafter during such time as any part of such call or instalment
remains unpaid, serve a notice on him requiring payment of so much of the call or instalment as is unpaid, together with any accrued interest and any costs, charges and expenses incurred by the Company by reason of the non-payment.
|
40. |
The notice shall fix a further day (not being less than seven clear days from the date of the notice) on or before which, and the place where, the payment required by the notice is to be made, and shall state
that, in the event of non-payment at or before the time and at the place specified, the shares on which the call was made will be liable to be forfeited. The Board may accept the surrender of any share liable to be forfeited upon such terms and
conditions as may be agreed and, subject to any such terms and conditions, a surrendered share shall be treated as if it had been forfeited. |
13
41. |
If the requirements of the notice are not complied with, any share in respect of which the notice has been given may, at any time before the payments required by the notice have been made, be forfeited by a
resolution of the Board to that effect. Every forfeiture shall include all dividends and other payments or distributions declared in respect of the forfeited shares and not paid or distributed before forfeiture. Forfeiture shall be deemed to occur
at the time of the passing of the said resolution of the Board. |
42. |
Subject to the provisions of the Statutes, a forfeited share shall be deemed to be the property of the Company and may be sold, reallotted or otherwise disposed of upon such terms and in such manner as the Board
decides, either to the person who was before the forfeiture the holder or to any other person, and at any time before sale, reallotment or other disposition the forfeiture may be cancelled on such terms as the Board decides. The Company shall not
exercise any voting rights in respect of such a share. Where for the purposes of its disposal a forfeited share is to be transferred to any person, the Board may authorise a person to execute an instrument of transfer of the share.
|
43. |
When any share has been forfeited, notice of the forfeiture shall be served upon the person who was before forfeiture the holder, or the person entitled to the share by transmission, and an entry of the
forfeiture, with the date of the forfeiture, shall be entered in the register, but no forfeiture shall be invalidated by any failure to give such notice or make such entry. |
44. |
A person, any of whose shares have been forfeited, shall cease to be a member in respect of the forfeited shares and shall surrender to the Company for cancellation the certificate for the shares forfeited, but
shall, notwithstanding the forfeiture, remain liable to pay to the Company all money which at the date of forfeiture was then payable by him to the Company in respect of the shares, with interest on such money at such rate not exceeding 5 per
cent. above the base lending rate per annum most recently set by the Monetary Policy Committee of the Bank of England, as the Board may decide, from the date of forfeiture until payment. The Board may, if it thinks fit, waive the payment of all or
part of such money and/or the interest payable thereon. |
45. |
A statutory declaration by a Director or the secretary that a share has been duly forfeited or surrendered on a specified date shall be conclusive evidence of the facts stated in it as against all persons
claiming to be entitled to the share. The statutory declaration shall (subject to the execution of an instrument of transfer, if necessary) constitute a good title to the share and the person to whom the share is disposed of shall not be bound to
see to the application of the consideration (if any) nor shall his title to the share be affected by any irregularity in or invalidity of the proceedings in reference to the forfeiture, surrender, sale, reallotment or disposal of the share.
|
46. |
If the Company sells a forfeited share, the person who held it prior to its forfeiture is entitled to receive from the Company the proceeds of such sale, net of any commission, and excluding any amount which was,
or would have become, payable and had not, when that share was forfeited, been paid by that person in respect of that share, but no interest is payable to such person in respect of such proceeds and the Company is not required to account for any
money earned on them. |
14
TRANSFER OF SHARES
47. |
The instrument of transfer of a share may be in any usual form or in any other form which the Board may approve. |
48. |
The instrument of transfer of a share shall be executed by or on behalf of the transferor and (in the case of a partly paid share) by or on behalf of the transferee. The transferor shall be deemed to remain the
holder until the name of the transferee is entered in the register. |
49. |
The Board may, in its absolute discretion, refuse to register the transfer of a share which is not fully paid, provided that the refusal does not prevent dealings in shares in the Company from taking place on an
open and proper basis. |
50. |
The Board may also refuse to register any transfer of shares, unless: |
50.1 |
the instrument of transfer is lodged (duly stamped if the Statutes so require) at the registered office or at such other place as the Board may appoint, accompanied by the certificate for the shares to which it
relates and such other evidence (if any) as the Board may reasonably require to show the right of the transferor to make the transfer (and, if the instrument of transfer is executed by some other person on his behalf, the authority of that person to
do so) provided that, in the case of a transfer by a recognised person where a certificate has not been issued in respect of the share, the lodgment of share certificates shall not be necessary; |
50.2 |
the instrument of transfer is in respect of only one class of share; and |
50.3 |
in the case of a transfer to joint holders, they do not exceed four in number. |
51. |
The Company shall be entitled to retain any instrument of transfer which is registered, but any instrument of transfer which the Board refuses to register (except in the case of fraud) shall be returned to the person
lodging it when notice of the refusal is given. |
52. |
If the Board refuses to register a transfer, it shall within two months after the date on which the instrument of transfer was lodged with the Company send to the transferee notice of, together with the reasons for, the
refusal. |
53. |
No fee shall be payable to the Company for the registration of any transfer or any other document relating to or affecting the title to any share or for making any entry in the register affecting the title to any share.
|
54. |
Nothing in these Articles shall preclude the Directors from recognising a renunciation of the allotment of any share by the allottee in favour of some other person. |
15
TRANSMISSION OF SHARES
55. |
If a member dies, the survivor or survivors where he was a joint holder and his personal representatives where he was a sole holder or the only survivor of joint holders shall be the only person(s) recognised by
the Company as having any title to his shares, but nothing contained in these Articles shall release the estate of a deceased member from any liability in respect of any share held by him solely or jointly with other persons. |
56. |
Any person becoming entitled to a share in consequence of the death or bankruptcy of a member or by operation of law may, upon such evidence as to his title being produced as may be reasonably required by the
Board and subject to these Articles, elect either to be registered as the holder of the share or to have a person nominated by him registered as the holder. If the person elects to become the holder, he shall give notice in writing to that effect.
If the person elects to have another person registered, he shall execute an instrument of transfer of the share to that person. All the provisions of these Articles relating to the transfer of shares shall apply to the notice or instrument of
transfer as if the death or bankruptcy of the member or other event giving rise to the transmission had not occurred and the notice or instrument of transfer were an instrument of transfer executed by the member. |
57. |
Any person becoming entitled to a share in consequence of the death or bankruptcy of a member or by operation of law shall, subject to the requirements of these Articles and to the provisions of this Article, be
entitled to receive, and may give a good discharge for, all dividends and other money payable in respect of the share, but he shall not be entitled to receive notice of or to attend or vote at meetings of the Company or at any separate meetings of
the holders of any class of shares or to any of the rights or privileges of a member until he shall have become a holder in respect of the share in question. The Board may at any time give notice requiring any such person to elect either to be
registered or to transfer the share, and if the notice is not complied with within 60 days, the Board may withhold payment of all dividends and other distributions and payments declared in respect of the share until the requirements of the notice
have been complied with. |
ALTERATION OF SHARE CAPITAL
58. |
The Company may by ordinary resolution alter its share capital in accordance with the Act. |
59. |
A resolution to sub-divide shares may determine that, as between the holders of such shares resulting from the sub-division, any of them may have any preference or advantage or be subject to any restriction as compared
with the others. |
16
60. |
Whenever as a result of a consolidation of shares any members would become entitled to fractions of a share, the Board may deal with the fractions as it thinks fit and in particular may, on behalf of those members, sell
the shares representing the fractions for the best price reasonably obtainable to any person (including, subject to the provisions of the Statutes, the Company) and distribute the net proceeds of sale (subject to retention by the Company of amounts
not exceeding $5, the cost of distribution of which would be disproportionate to the amounts involved) in due proportion among those members, and the Board may authorise a person to execute an instrument of transfer of the shares to, or in
accordance with the directions of, the purchaser. The transferee shall not be bound to see the application of the purchase money nor shall his title to the shares be affected by any irregularity in or invalidity of the proceedings relating to the
sale. |
PURCHASE OF OWN SHARES
61. |
On any purchase by the Company of its own shares, neither the Company nor the Board shall be required to select the shares to be purchased rateably or in any manner as between the holders of shares of the same
class or as between them and the holders of shares of any other class or in accordance with the rights as to dividends or capital conferred by any class of shares. |
GENERAL MEETINGS
62. |
The Company shall hold an annual general meeting which shall be convened by the Board in accordance with the Statutes and giving due consideration to the governance framework set forth in the Corporate Governance
Guidelines of the Company. |
63. |
The Board may call a general meeting whenever it thinks fit and, on the requisition of members in accordance with the Act, it shall proceed to convene a general meeting for a date not more than 28 days after the
date of the notice convening the meeting. |
NOTICE OF GENERAL MEETINGS
64. |
An annual general meeting shall be called by at least 21 clear days notice in writing. All other general meetings shall be called by at least 21 clear days notice in writing. The notice shall specify:
|
64.1 |
if the meeting is an annual general meeting, that the meeting is an annual general meeting; |
64.2 |
the day, time and place of the meeting (including without limitation any satellite meeting place arranged for the purposes of Article 80, which shall be identified as such in the notice); |
64.3 |
the general nature of the business to be transacted; |
64.4 |
if the meeting is convened to consider a special resolution, the intention to propose the resolution as such; and |
64.5 |
with reasonable prominence, that a member entitled to attend and vote is entitled to appoint one or more proxies to attend, to speak and to vote instead of him and that a proxy need not also be a member.
|
17
65. |
Subject to the provisions of these Articles, to the rights attaching to any class of shares and to any restriction imposed on any holder, notice of any general meeting shall be given to all members, the Directors and
(in the case of an annual general meeting) the auditors. |
66. |
The accidental omission to send a notice of any meeting, or notice of a resolution to be moved at a meeting or (where forms of proxy are sent out with notices) to send a form of proxy with a notice to any person
entitled to receive the same, or the non-receipt of a notice of any meeting or a form of proxy by such a person, shall not invalidate the proceedings at the meeting. |
67. |
The Board may postpone a general meeting if they deem it necessary to do so. Notice of such postponement shall be given in accordance with these Articles. |
68. |
In relation to any proposal to appoint a Director pursuant to Article 123 a nomination may (i) be made by the Board or (ii) any shareholder or shareholders may, in accordance with the provisions of the Act,
request the Company to call a general meeting or give notice of a resolution to be proposed at an annual general meeting for the purposes of electing a person as a Director (a Nominee). Where any such request relates to the
proposal of a resolution for the election of a director at an annual general meeting of shareholders, such request must be delivered, either by personal delivery or by prepaid mail to the Company Secretary 90 days in advance of such meeting.
|
69. |
Any notice given in accordance with Article 68 must set out: |
69.1 |
the name and address of the shareholder who intends to make the nomination; |
69.2 |
the name and address of the Nominee or Nominees to be nominated; |
69.3 |
a representation that the shareholder intends to appear in person or by proxy at the meeting to nominate the Nominee or Nominees specified in the notice and be accompanied by evidence of the shareholding required
to make such request by the relevant shareholder or shareholders; |
69.4 |
a description of all arrangements or understandings between the shareholder and each Nominee and any other person or persons (giving their names) pursuant to which the nomination or nominations are to be made by the
shareholder; |
69.5 |
such other information regarding each Nominee as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the SEC; and |
69.6 |
the consent of each Nominee to serve as a Director if so elected. |
18
70. |
If the notice of nomination is not received in accordance with Article 69, the Chairman may, so far as permitted by the Statutes, refuse to acknowledge such proposed nomination and may determine that the shareholder who
has nominated a person to be elected as a Director at a general meeting or annual general meeting shall not be permitted to vote any shares entitled to vote at that meeting on the matter of election of Directors. |
71. |
Other than a request to which Article 68 applies, where a shareholder or shareholders, in accordance with the provisions of the Act, request the Company to call a general meeting or give notice of a resolution to
be proposed at an annual general meeting, such request must, in each case and in addition to the requirements of the Act: |
71.1 |
set out the name and address of the shareholder or shareholders making the request; |
71.2 |
set out a clear and concise statement of the agenda items to be put before the general meeting or annual general meeting as the case may be; and |
71.3 |
be accompanied by evidence of the shareholding required to make such request by the relevant shareholder or shareholders. |
72. |
Without prejudice to the rights of any member under the Act, a member who makes a request to which Article 71 relates, must deliver any such request in writing to the company secretary no less than 60 nor more than 120
calendar days prior to the relevant meeting. If a request made in accordance with Article 71 does not include the information specified above or if a request made in accordance with Article 71 is not received in the time and manner indicated, in
respect of the shares which the relevant member(s) making the request hold, such member(s) shall not be entitled to vote such shares, either personally or by proxy at a general meeting or at a separate meeting of the holders of that class of shares
(or at an adjournment of any such meeting), with respect to the matters detailed in the request made pursuant to Article 71. |
PROCEEDINGS AT GENERAL MEETINGS
73. |
No business shall be transacted at any general meeting unless a quorum is present but the absence of a quorum shall not preclude the choice or appointment of a Chairman in accordance with these Articles (which
shall not be treated as part of the business of the meeting). Subject to Article 74 a quorum shall be members who, present in person (which, in the case of a corporate member shall include being present by a representative) or by proxy, together
represent at least the majority of the shares entitled to vote at the meeting. |
74. |
The matters set forth below require the presence in person or by proxy of members who represent at least two thirds of the shares entitled to vote at the meeting: |
74.1 |
the adoption by the Company of a resolution to remove a serving member of the Board; |
19
74.2 |
the adoption by the Company of a resolution to amend, vary, suspend the operation of, disapply or cancel: |
|
74.2.4 |
any of Articles 118 to 133 inclusive; |
|
74.2.5 |
any of Articles 165 to 168 inclusive; and |
|
74.2.6 |
any of Articles 169 to 174 inclusive. |
75. |
If within 30 minutes from the time fixed for a meeting a quorum is not present or if during a meeting a quorum ceases to be present, the meeting, if convened on the requisition of members, shall be dissolved and
in any other case it shall stand adjourned to such day and to such time and place as may, subject to the Act, be fixed by the Chairman of the meeting. At such adjourned meeting, if within 30 minutes from the time fixed for holding the adjourned
meeting a quorum is not present or if during an adjourned meeting a quorum ceases to be present, the adjourned meeting shall be dissolved. |
76. |
The Chairman of the Board or in his absence the Deputy Chairman shall preside as Chairman at every general meeting of the Company. If there is no such Chairman or Deputy Chairman or if at any meeting neither the
Chairman nor the Deputy Chairman is present within 30 minutes from the time fixed for holding the meeting or if neither is willing to act as Chairman of the meeting, the Directors present shall choose one of their number, or if no Director is
present or if all the Directors present decline to take the chair, the members present in person or by proxy or by corporate representative and entitled to vote shall choose one of their number to be Chairman of the meeting. |
77. |
The Board may implement at general meetings of the Company, such security arrangements as it shall think appropriate to which members, representatives (in the case of corporate members) and their proxies shall be
subject. The Board shall be entitled to refuse entry to the meeting to any such member, representative or proxy who fails to comply with such security arrangements. |
78. |
The Chairman of each general meeting of the Company may take such action as he considers appropriate to permit the orderly conduct of the business of the meeting as set out in the notice of the meeting.
|
20
79. |
The Chairman of a meeting at which a quorum is present may, without prejudice to any other power of adjournment which he may have under these Articles or at common law, with the consent of the meeting (and shall
if so directed by the meeting), adjourn the meeting from time to time (or indefinitely) and from place to place (or, in the case of a meeting held at a principal meeting place and a satellite meeting place, from places to places). No business shall
be transacted at any adjourned meeting except business left unfinished at the meeting from which the adjournment took place. Where a meeting is adjourned for an indefinite period, the time and place for the adjourned meeting shall be fixed by the
Board. The Board may determine whether to give any notice of an adjournment or of the business to be transacted at an adjourned meeting, and if so, the nature and timing of such notice. |
80. |
The Board may resolve to enable persons entitled to attend a general meeting to do so by simultaneous attendance and participation at a satellite meeting place anywhere in the world. The members present in person
or by proxy at satellite meeting places shall be counted in the quorum for, and entitled to vote at, the general meeting in question, and that meeting shall be duly constituted and its proceedings valid if the Chairman of the general meeting is
satisfied that adequate facilities are available throughout the general meeting to ensure that members attending at all the meeting places are able to: |
80.1 |
participate in the business for which the meeting has been convened; |
80.2 |
hear and see all persons who speak (whether by the use of microphones, loudspeakers, audio-visual communications equipment or otherwise) in the principal meeting place and any satellite meeting place; and
|
80.3 |
be heard and seen by all other persons so present in the same manner. |
81. |
The Chairman of the general meeting shall be present at, and the meeting shall be deemed to take place at, the principal meeting place. |
82. |
If it appears to the Chairman that the principal meeting place specified in the notice convening the meeting is inadequate to accommodate all members entitled and wishing to attend, the meeting shall nevertheless
be duly constituted and its proceedings valid provided that the Chairman is satisfied that adequate facilities are available to ensure that any member who is unable to be accommodated is nonetheless able to: |
82.1 |
participate in the business for which the meeting has been convened; |
82.2 |
hear and see all persons present who speak (whether by the use of microphones, loudspeakers, audiovisual communication equipment or otherwise), in the principal meeting place and any satellite meeting place; and
|
82.3 |
to be heard and seen by all other persons so present in the same manner. |
21
83. |
If it appears to the Chairman that such facilities at the principal meeting place or any satellite meeting place have become inadequate for the purposes referred in Article 80 or Article 82 respectively then the
Chairman may, without the consent of the meeting, interrupt or adjourn the general meeting. All business conducted at that general meeting up to the time of that adjournment shall be valid. |
84. |
The Board may make arrangements for persons entitled to attend a general meeting or an adjourned general meeting to be able to view and hear the proceedings of the general meeting or adjourned general meeting and
to speak at the meeting (whether by the use of microphones, loudspeakers, audio-visual communications equipment or otherwise) by attending at a venue anywhere in the world not being a satellite meeting place. Those attending at any such venue shall
not be regarded as present at the general meeting or adjourned general meeting and shall not be entitled to vote at the meeting at or from that venue. The inability for any reason of any member present in person or by proxy at such a venue to view
or hear all or any of the proceedings of the meeting or to speak at the meeting shall not in any way affect the validity of the proceedings of the meeting. |
85. |
The Board may from time to time make any arrangements for controlling the level of attendance at any venue for which arrangements have been made pursuant to Article 84 (including without limitation the issue of
tickets or the imposition of some other means of selection) which it in its absolute discretion considers appropriate, and may from time to time change those arrangements. If a member, pursuant to those arrangements, is not entitled to attend in
person or by proxy at a particular venue, he shall be entitled to attend in person or by proxy at any other venue for which arrangements have been made pursuant to Article 84. The entitlement of any member to be present at such venue in person or by
proxy shall be subject to any such arrangement then in force and stated by the notice of meeting or adjourned meeting to apply to the meeting. |
86. |
At any general meeting, any resolution put to the vote of the meeting shall be decided on a poll. A poll shall be taken as the Chairman directs and he may appoint scrutineers (who need not be members) in
connection with such poll and fix a time and place for declaring the result of the poll. The result of the poll shall be the decision of the meeting at which it was taken. |
87. |
Any poll conducted on the election of the Chairman or on any question of adjournment shall be taken at the meeting and without adjournment. A poll conducted on another question shall be taken at such time and
place as the Chairman decides, either at once or after an interval or adjournment. |
88. |
The date and time of the opening and the closing of a poll for each matter upon which the shareholders will vote at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the scrutineers or inspectors after the closing of the poll unless a court with relevant jurisdiction upon application by a shareholder shall determine otherwise. |
22
89. |
The conduct of a poll (other than on the election of a Chairman or on a question of adjournment) does not prevent the meeting continuing for the transaction of business other than the question on which a poll is
to be conducted. |
90. |
A Director shall, notwithstanding that he is not a member, be entitled to attend and speak at any general meeting and at any separate meeting of the holders of any class of shares in the Company.
|
VOTES OF MEMBERS
91. |
Subject to any terms as to voting upon which any shares may be issued or may for the time being be held every member present at a general meeting in person or by proxy or by representative (in the case of a
corporate member) shall have one vote for each share of which he is the holder, proxy or representative. A member entitled to more than one vote need not, if he votes, use all his votes or cast all the votes in the same way. |
92. |
In the case of joint holders of a share the vote of the senior holder who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this
purpose seniority shall be determined by the order in which the names stand in the register in respect of the joint holding. |
93. |
A member in respect of whom an order has been made by any court or official having jurisdiction (whether in the United Kingdom or elsewhere) that he is or may be suffering from mental disorder or is otherwise
incapable of running his affairs may vote by his guardian, receiver, curator bonis or other person authorised for that purpose and appointed by the court (and that person may vote by proxy) provided that evidence to the satisfaction of the Board of
the authority of the person claiming to exercise the right to vote shall be deposited at the registered office, or at such other place as is specified in accordance with these Articles for the deposit of instruments of proxy, not less than 48 hours
before the time appointed for holding the meeting or adjourned meeting at which the right to vote is to be exercised, and in default the right to vote shall not be exercisable. |
94. |
No member shall, unless the Board otherwise determines, be entitled to vote at any general meeting or at any separate general meeting of the holders of any class of shares in the Company unless all calls or other
sums presently payable by him in respect of shares in the Company have been paid. |
95. |
Where, in respect of any shares of the Company, any holder or any other person appearing to be interested in such shares held by a member has been issued with a notice pursuant to section 793 of the Act (a
statutory notice) and has failed in relation to any shares (the default shares) to comply with the statutory notice and to give the Company the information required by such notice within the prescribed period as
defined in Article 100.4 from the date of the statutory notice, then the Board may serve on the holder of such default shares a notice (a disenfranchisement notice) whereupon the following sanctions shall apply: |
23
95.1 |
such holder shall not with effect from the service of the disenfranchisement notice be entitled in respect of the default shares to be present or to vote (either in person or by representative or by proxy) either
at any general meeting or at any separate general meeting of the holders of any class of shares or to exercise any other right conferred by membership in relation to any such meeting; and |
95.2 |
where such shares represent not less than 0.25 per cent. in nominal value of the issued shares of their class: |
|
(a) |
any dividend or other monies payable in respect of the default shares shall be withheld by the Company which shall not be under any obligation to pay interest on it and the holder shall not be entitled under Article 208
to elect to receive shares instead of that dividend; and |
|
(b) |
no transfer, other than an excepted transfer (as defined in Article 100.5), of any shares in certificated form held by the holder shall be registered unless: |
|
(i) |
the holder is not himself in default as regards supplying the information required; and |
|
(ii) |
the holder proves to the satisfaction of the Board that no person in default as regards supplying such information is interested in any of the shares the subject of the transfer. |
96. |
Any new shares in the Company issued in right of default shares shall be subject to the same sanctions as apply to the default shares provided that any sanctions applying to, or to a right to, new shares by
virtue of this Article shall cease to have effect when the sanctions applying to the related default shares cease to have effect (and shall be suspended or cancelled if and to the extent that the sanctions applying to the related default shares are
suspended or cancelled) and provided further that Article 95 shall apply to the exclusion of this Article if the Company gives a separate notice under section 793 of the Act in relation to the new shares. |
97. |
The Company may at any time withdraw a disenfranchisement notice by serving on the holder of the default shares a notice in writing to that effect (a withdrawal notice), and a
disenfranchisement notice shall be deemed to have been withdrawn at the end of the period of seven days (or such shorter period as the Directors may determine) following receipt by the Company of the information required by the statutory notice in
respect of all the shares to which the disenfranchisement notice related. |
24
98. |
Unless and until a withdrawal notice is duly served in relation thereto or a disenfranchisement notice in relation thereto is deemed to have been withdrawn or the shares to which a disenfranchisement notice
relates are transferred by means of an excepted transfer, the sanctions referred to in Articles 95 and 96 shall continue to apply. |
99. |
Where, on the basis of information obtained from a holder in respect of any share held by him, the Company issues a notice pursuant to section 793 of the Act to any other person and such person fails to give the
Company the information thereby required within the prescribed period and the Board serves a disenfranchisement notice upon such person, it shall at the same time send a copy of the disenfranchisement notice to the holder of such share, but the
accidental omission to do so, or the non-receipt by the holder of the copy, shall not invalidate or otherwise affect the application of Articles 95 and 96. |
100. |
For the purposes of these Articles: |
100.1 |
a person other than the holder of a share shall be treated as appearing to be interested in that share if the holder has informed the Company that the person is or may be so interested or if (after taking into account
the said notification and any other relevant notification pursuant to section 793 of the Act) the Company knows or has reasonable cause to believe that the person in question is or may be interested in the share; |
100.2 |
interested shall be construed as it is for the purpose of section 793 of the Act; |
100.3 |
reference to a person having failed to give the Company the information required by a notice, or being in default as regards supplying such information, includes: |
|
(a) |
reference to his having failed or refused to give all or any part of it; and |
|
(b) |
reference to his having given information which he knows to be false in a material particular or having recklessly given information which is false in a material particular; |
100.4 |
the prescribed period means: |
|
(a) |
in a case where the default shares represent at least 0.25 per cent. of their class, 14 days; and |
|
(b) |
in any other case, 28 days; and |
100.5 |
an excepted transfer means, in relation to any share held by a holder: |
|
(a) |
a transfer pursuant to acceptance of an offer made to all the holders (or all the holders other than the person making the offer and his nominees) of the shares in the Company to acquire those shares or a specified
proportion of them, or to all the holders (or all the holders other than the person making the offer and his nominees) of a particular class of those shares to acquire the shares of that class or a specified proportion of them; or |
25
|
(b) |
a transfer in consequence of a sale made through a recognised investment exchange (as defined in the FSMA) or any other stock exchange outside the United Kingdom on which the Companys shares are normally traded;
or |
|
(c) |
a transfer which is shown to the satisfaction of the Board to be made in consequence of a bona fide sale of the whole of the beneficial interest in the share to a person who is unconnected with the holder and with any
other person appearing to be interested in the share. |
101. |
Nothing contained in these Articles shall prejudice or affect the right of the Company to apply to the court for an order under section 794 of the Act and in connection with such an application or intended application
or otherwise to require information on shorter notice than the prescribed period. |
102. |
No objections may be raised to the qualification of any person voting at a general meeting except at the meeting or adjourned meeting at which the vote objected to is tendered, and every vote not disallowed at the
meeting is valid. Any such objection must be referred to the Chairman of the meeting whose decision is final. |
103. |
If an amendment shall be proposed to any resolution under consideration but shall in good faith be ruled out of order by the Chairman of the meeting, the proceedings on the substantive resolution shall not be
invalidated by any error in such ruling. In the case of a resolution proposed as a special resolution, no amendment to it (other than a mere clerical amendment to correct a patent error) may in any event be considered or voted upon.
|
PROXIES AND CORPORATE REPRESENTATIVES
104. |
Invitations to appoint a proxy (whether made by instrument in writing, in electronic form or by website communication) shall be in any usual form or in such other form as the Board may approve. Invitations to appoint a
proxy shall be sent or made available by the Company to all persons entitled to notice of and to attend and vote at any meeting, and shall provide for voting both for and against all resolutions to be proposed at that meeting other than resolutions
relating to the procedure of the meeting. The accidental omission to send or make available an invitation to appoint a proxy or the non-receipt thereof by any member entitled to attend and vote at a meeting shall not invalidate the proceedings at
that meeting. The appointment of a proxy shall be deemed to confer authority to vote on any amendment of a resolution put to the meeting for which it is given or any procedural resolution as the proxy thinks fit. A proxy need not be a member of the
Company. |
105. |
The appointment of a proxy shall, if made by instrument in writing, be signed in the case of an individual, by the appointer or his attorney who is authorised in writing to do so. In the case of a body corporate, the
proxy appointment must be executed under seal or otherwise executed by it in accordance with the Act or signed on its behalf by an officer, attorney or duly authorised signatory. |
26
106. |
If the Directors from time to time so permit, a proxy may be appointed by electronic communication to such address as may be notified by or on behalf of the Company for that purpose, or by any other lawful means from
time to time authorised by the Directors. Any means of appointing a proxy which is authorised by or under Article 104, Article 105 and this Article shall be subject to any terms, limitations, conditions or restrictions that the Directors may from
time to time prescribe. Without limiting the foregoing, in relation to any shares which are held in uncertificated form, the Directors may from time to time permit appointments of a proxy to be made by means of an electronic communication in the
form of an Uncertificated Proxy Instruction, and received by such participant in the relevant system concerned acting on behalf of the Company as the Directors may prescribe, in such form and subject to such terms and conditions as may from time to
time be prescribed by the Directors (subject always to the facilities and requirements of the relevant system concerned), and may in a similar manner permit supplements to, or amendments or revocations of, any such Uncertificated Proxy Instruction
to be made by like means. The Directors may in addition prescribe the method of determining the time at which any such properly authenticated dematerialised instruction (and/or other instruction or notification) is to be treated as received by the
Company or such participant. The Directors may treat any such Uncertificated Proxy Instruction which purports to be or is expressed to be sent on behalf of a holder of a share as sufficient evidence of the authority of the person sending that
instruction to send it on behalf of that holder. |
107. |
Any corporation which is a member of the Company may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at any meeting of the Company or of any
class of members of the Company, and (except as otherwise provided in these Articles) the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as that corporation could exercise if it
were an individual member of the Company. A certified copy of such a resolution shall be delivered at the meeting to the Chairman of the meeting or secretary or any person appointed by the Company to receive such authorisation, and unless such
certified copy of such resolution is so delivered the authority granted by such resolution shall not be treated as valid. Where certified copies of two or more valid but differing resolutions authorising any person or persons to act as the
representative of any corporation pursuant to this Article at the same meeting in respect of the same share are delivered, the resolution, a certified copy of which is delivered to the Company (in accordance with the provisions of this Article) last
in time (regardless of the date of such certified copy or of the date upon which the resolution set out therein was passed), shall be treated as revoking and replacing all other such authorities as regards that share, but if the Company is unable to
determine which of any such two or more valid but differing resolutions was so deposited last in time, none of them shall be treated as valid in respect of that share. The authority granted by any such resolution shall, unless the contrary is stated
in the certified copy thereof delivered to the Company pursuant to this Article, be treated as valid for any adjournment of any meeting at which such authority may be used as well as at such meeting. |
27
108. |
A corporation which is a member of the Company may authorise more than one person to act as its representative pursuant to Article 107 in respect of any meeting or meetings, and such a member who holds different classes
of shares may so authorise one or more different persons for each class of shares held. |
109. |
The appointment of proxy and the power of attorney or other written authority (if any) under which it is signed, or a copy of any such power or written authority certified notarially or in any other manner approved by
the Directors, shall: |
|
(a) |
in the case of an appointment otherwise than by electronic communication, be deposited at the registered office (or at such other place as shall be specified in the notice of meeting or in any instrument of proxy or
other document accompanying the same) by the time specified by the Board (as the board may determine, in compliance with the Act) in any such instrument or other document accompanying the same. |
|
(b) |
in the case of an appointment by electronic communication where an address has been specified for the purpose of receiving appointments by electronic communication (i) in the notice convening the meeting,
(ii) in any instrument of proxy sent out by the Company in relation to the meeting or (iii) in any invitation contained in an electronic communication to appoint a proxy issued by the Company in relation to the meeting, be received at such
address by the time specified by the Board (as the Board may determine, in compliance with the Act) in any such notice, instrument of proxy or invitation. |
The board may specify, when determining the dates by which proxies are to be lodged, that no account need be taken of any part of a day that
is not a working day.
110. |
The deposit, delivery or receipt of an appointment of proxy shall not preclude a member from attending and voting at the meeting or at any adjourned meeting. When two or more valid but differing appointments of proxy
are deposited, delivered or received in respect of the same share for use at the same meeting, the one which is deposited with, delivered to or received by the Company (in accordance with the provisions of Article 109) last in time (regardless of
the date of its making or transmission) shall be treated as revoking and replacing any others as regards that share, but if the Company is unable to determine which of any such two or more valid but differing instruments of proxy was so deposited,
delivered or received last in time, none of them shall be treated as valid in respect of that share. |
111. |
No appointment of proxy shall be valid after the expiration of 12 months from the date stated in it as the date of its making or transmission. The appointment of proxy shall, unless the contrary is stated, be valid as
well for any adjournment of the meeting as for the meeting to which it relates. |
28
112. |
Any vote cast by a proxy who does not vote in accordance with any instructions given by the member by whom he is appointed shall be treated as being valid and the Company shall not be bound to enquire whether a proxy
has complied with the instructions he has been given. |
113. |
A vote given by proxy or by the duly authorised representative of a corporation shall be valid, notwithstanding the previous determination of the authority of the person voting, unless notice of the determination shall
have been received by the Company at the registered office (or other place at which the appointment of proxy was duly deposited, delivered or received in accordance with Article 109) before the commencement of the meeting or adjourned meeting at
which the appointment of proxy is used. |
POWERS OF THE BOARD
114. |
Subject to the provisions of the Statutes, these Articles and any directions given by special resolution, the business of the Company shall be managed by the Board which may exercise all the powers of the Company. No
alteration of these Articles and no directions given by special resolution shall invalidate any prior act of the Board which would have been valid if such alteration had not been made or such direction had not been given. The general powers given by
this Article shall not be limited or restricted by any special authority or power given to the Board by any other Article. |
115. |
The Board may from time to time make such arrangements as it thinks fit for the management and transaction of the Companys affairs in the United Kingdom or elsewhere and may for that purpose appoint managers,
inspectors and agents and delegate to them any of the powers, authorities and discretions vested in the Board (other than the power to borrow and make calls) with power to sub-delegate and may authorise the members of any local board or any of them
to fill any vacancies therein and to act notwithstanding such vacancies. Any such appointment or delegation may be made upon such terms and subject to such conditions as the Board thinks fit. The Board may at any time remove any person so appointed
and may vary or annul such delegation, but no person dealing in good faith and without notice of such removal, variation or annulment shall be affected by it. |
116. |
The Board may from time to time by power of attorney appoint any company, firm or person, or any fluctuating body of persons, whether nominated directly or indirectly by the Board, to be the attorney or attorneys of the
Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board under these Articles) and for such period and subject to such conditions as it may think fit. Any such power of
attorney may contain such provisions for the protection or convenience of persons dealing with any such attorney as the Board may think fit and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and
discretions vested in him. The Board may revoke or vary any such appointment, but no person dealing in good faith and without notice of such revocation or variation shall be affected by it. |
29
117. |
The Board may delegate any of its powers to any committee consisting of one or more Directors. It may also delegate to any Director holding any executive office or any other Director such of its powers as it considers
desirable to be exercised by him. Any such delegation may be made subject to any conditions the Board may impose and either collaterally with or to the exclusion of its own powers and may be revoked or altered, but no person dealing in good faith
and without notice of such revocation or variation shall be affected by it. Subject to any such conditions, the proceedings of a committee with two or more members shall be governed by these Articles regulating the proceedings of the Board so far as
they are capable of applying. If any such committee determines to co-opt persons other than Directors onto such committee, the number of such co-opted persons shall be less than one-half of the total number of members of the committee and no
resolution of the committee shall be effective unless a majority of the members of the committee present at the meeting concerned are Directors. |
NUMBER AND QUALIFICATION OF DIRECTORS
118. |
The number of Directors shall be not less than two nor more than nine in number. The number of directors may be fixed within the foregoing limits from time to time by resolution of the Board. |
119. |
A Director shall not be required to hold any shares of the Company by way of qualification. |
120. |
If the number of Directors is reduced below the minimum number fixed in accordance with these Articles, the Directors for the time being may act for the purpose of filling up vacancies in their number or of calling a
general meeting of the Company, but not for any other purpose. If there are no Directors able or willing to act, then any two members may summon a general meeting for the purpose of appointing Directors. |
121. |
No person other than a Director retiring (or, if appointed by the Board, vacating office) at the meeting shall, unless recommended by the Board, be eligible for election to the office of a Director at any general
meeting, unless the provisions of Articles 68 and 69 have been complied with. |
APPOINTMENT AND RETIREMENT OF DIRECTORS
122. |
Except as otherwise authorised by the Act, a motion for the appointment of two or more persons as Directors by a single resolution shall not be made unless a resolution that it should be so made has first been agreed to
by the meeting without any vote being given against it. |
30
123. |
Should a vacancy on the Board occur or be created, whether arising through death, retirement, resignation, or removal of a Director, or through an increase in the number of Directors set under Article 118, such vacancy
shall be filled by the majority vote of all of the remaining Directors, giving due consideration to the governance framework set forth in the Corporate Governance Guidelines of the Company, whether or not a quorum, or by a sole remaining Director.
Subject to the provisions hereof, any Director so appointed to fill a vacancy shall serve until the next annual general meeting for which a notice has not been sent at the time of appointment. Save to the extent Article 124 applies, the Company may
also by ordinary resolution elect a person who is willing to act to be a Director either to fill a vacancy or as an additional Director; but so that the total number of Directors shall not at any time exceed the maximum number fixed by these
Articles. |
124. |
In the event that at a general meeting of the Company it is proposed to vote upon a number of resolutions for the appointment of a person as a Director (each a Director Resolution) that exceeds the
total number of Directors that are to be appointed to the Board at that meeting (the Board Number), the persons that shall be appointed shall: first be the person who receives the greatest number of for
votes (whether or not a majority of those votes cast in respect of that Director Resolution), and then shall second be the person who receives the second greatest number of for votes (whether or not a majority of those votes
cast in respect of that Director Resolution), and so on, until the number of Directors so appointed equals the Board Number. |
125. |
Subject to Article 128, the Directors shall be elected at each annual general meeting of the Company. A Director who stands for re-election at an annual general meeting and is re-appointed shall be treated as continuing
in office throughout. |
126. |
Without prejudice to Article 128, each Director elected shall hold office until his successor is elected or until a resolution to re-appoint such Director is put to the meeting and lost or until his resignation or
removal in accordance with Article 129, Article 130, Article 131 or Article 132. |
127. |
No person shall be appointed a Director at any general meeting unless: |
|
(a) |
he is recommended by the Board; or |
|
(b) |
notice in respect of that person is given by a member qualified to vote at the meeting has been received by the Company in accordance with Article 68 and Article 69 or section 338 of the Act of the intention to propose
that person for appointment stating the particulars which would, if he were so appointed, be required to be included in the Companys register of directors, together with notice by that person of his willingness to be appointed.
|
31
128. |
If at any annual general meeting all the resolutions for the re-appointment of Directors are put to the meeting and lost or if by reason of Directors failing to be re-appointed the number of Directors falls below the
minimum number fixed by or in accordance with the Articles or below the number fixed by or in accordance with the Articles as the quorum, all Directors retiring at the meeting and standing for re-appointment (the Dismissed
Directors) shall continue to be Directors for a maximum period of 60 days (and are treated as continuing in office without interruption). During such period, Directors shall be appointed either at a further general meeting and/or by the
Directors (but in this latter case, none of those appointed may be Dismissed Directors). Once a sufficient number of Directors has been so appointed, the Dismissed Directors shall cease to be Directors. |
RESIGNATION AND REMOVAL OF DIRECTORS
129. |
A Director may resign his office either by notice in writing submitted to the Board or, if he shall in writing offer to resign, if the other Directors resolve to accept such offer. |
130. |
The Company may, by ordinary resolution at a meeting of which special notice has been given, in accordance with section 312 of the Act, remove any Director before the expiration of his period of office notwithstanding
anything in these Articles or in any agreement between the Company and such Director. Such removal shall be without prejudice to any claim which such Director may have for damages for breach of any contract of service between him and the Company.
The quorum requirement set out in Article 74 shall apply to any such resolution. An executive Director (as defined in Article 137) may also be removed from office in accordance with Article 131 and Article 136. |
131. |
A Director may be removed from office if he receives written notice signed by not less than 75 per cent. of the other Directors removing him from office, without prejudice to any claim which such Director may have
for damages for breach of any contract of service or letter of appointment between him and the Company. |
VACATION OF
OFFICE
132. |
Without prejudice to the other provisions of these Articles, the office of a Director shall be vacated if: |
132.1 |
the Director becomes bankrupt or the subject of an interim receiving order or makes any arrangement or composition with his creditors generally or applies to the court for an interim order under section 253 of the
Insolvency Act 1986 (as amended) in connection with a voluntary arrangement under that Act; or |
132.2 |
a registered medical practitioner who is treating that person gives a written opinion to the Company stating that person has become physically or mentally incapable of acting as a Director and may remain so for more
than three months; or |
132.3 |
the Director is absent from meetings of the Board for six consecutive months without permission of the Board and the Board resolves that his office be vacated; or |
32
132.4 |
ceases to be a Director by virtue of any provision of the Statutes or becomes prohibited by law from being a Director. |
133. |
A resolution of the Board declaring a Director to have vacated or have been removed from office under the terms of Article 130 or Article 132 shall be conclusive as to the fact and grounds of vacation or removal stated
in the resolution. |
REMUNERATION OF DIRECTORS
134. |
Subject to the Statutes, the Directors shall be paid such remuneration (by way of fee) for their services as may be determined by the Board. Such remuneration shall be deemed to accrue from day to day, shall be divided
between the Directors as they shall agree or, failing agreement, equally and shall be distinct from and additional to any remuneration or other benefits which may be paid or provided to any Director pursuant to any other provision of these Articles.
The Directors shall also be entitled to be repaid all travelling, hotel and other expenses of attending Board meetings, committee meetings, general meetings, or otherwise incurred while engaged on the business of the Company. |
135. |
Any Director who by request of the Board performs special services or goes or resides abroad for any purposes of the Company may, subject to the Statutes, be paid such extra remuneration by way of salary, commission,
percentage of profits or otherwise as the Board may decide. |
EXECUTIVE DIRECTORS
136. |
The Board may from time to time (giving due consideration to the governance framework set forth in the Corporate Governance Guidelines of the Company): |
136.1 |
appoint one or more of its body to any executive or other office (except that of auditor) or employment in the Company, for such period (subject to the Statutes and these Articles) and on such terms as it thinks fit,
and may revoke such appointment (but so that such revocation shall be without prejudice to any rights or claims which the person whose appointment is revoked may have against the Company by reason of such revocation); and |
136.2 |
permit any person elected or appointed to be a Director to continue in any other office or employment held by that person before he was so elected or appointed. |
137. |
A Director holding any such office or employment with a member of the group is referred to in these Articles as an executive Director. Subject to the Statutes, the remuneration of any executive
Director (whether by way of salary, commission, participation in profits or otherwise) shall be decided by the Board and may be either in addition to or in lieu of any remuneration as a Director. |
33
138. |
The Board may entrust to and confer upon any executive Director any of the powers, authorities and discretions vested in or exercisable by it upon such terms and conditions and with such restrictions as it thinks fit,
either collaterally with or to the exclusion of its own powers, authorities and discretions and may from time to time revoke or vary all or any of them, but no person dealing in good faith and without notice of the revocation or variation shall be
affected by it. |
CHIEF EXECUTIVE OFFICER, PRESIDENT, VICE PRESIDENT AND TREASURER
139. |
The Directors may from time to time, and at any time, pursuant to this Article appoint any other persons to any post (other than the office of Director) with such descriptive title, including that of Chief Executive
Officer, President, Vice President and/or Treasurer as the Directors may determine and may define, limit, vary and restrict the powers, authorities and discretions of persons so appointed and, subject to the Statutes, may fix and determine their
remuneration and duties and, subject to any contract between him and the Company, may remove from such post any person so appointed. Unless expressly agreed by the Board to the contrary (in which case Articles 122 to 138 shall also apply to the role
of such person as a Director), a person so appointed shall not be a Director for any of the purposes of these Articles or of the Statutes, and accordingly shall not be a member of the Board or (subject to Article 117) of any committee hereof, nor
shall he be entitled to be present at any meeting of the Board or of any such committee except at the request of the Board or of such committee, and if present at such request he shall not be entitled to vote thereat. |
140. |
Subject always to the direction and control of the Board, the Chief Executive Officer shall have the general control and management of the business and affairs of the Company. The Chief Executive Officer shall see that
all orders and resolutions of the Board are carried into effect, and shall exercise or perform such other powers and duties as may from time to time be assigned to the Chief Executive Officer by the Board or any committee empowered by the Board to
authorize the same. Subject to the Act, the Chief Executive Officer may sign and execute on behalf of the Company such contracts as may be authorised by the Board or any Board Committee empowered to authorise the same in accordance with these
Articles. |
141. |
Any person appointed President shall exercise or perform such powers and duties as may from time to time be assigned to the President by the Chief Executive Officer, Chairman or the Board. Subject to the Act, the
President may sign and execute on behalf of the Company such contracts as may be authorised by the Board or any Board Committee empowered to authorise the same in accordance with these Articles. |
142. |
Each Vice President shall have such powers and duties as shall be prescribed by the Chief Executive Officer, the President, the Chairman or the Board. Subject to the Act, any Vice President may sign and execute on
behalf of the Company such contracts as may be authorised by the Board or any Board Committee empowered to authorise the same in accordance with these Articles. |
34
143. |
The Treasurer shall perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to the Treasurer by the Chief Executive Officer, the President, the Chairman or the
Board. |
DIRECTORS GRATUITIES AND PENSIONS
144. |
The Board may exercise all the powers of the Company to provide benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, for any Director who has held but no longer holds any executive
office or employment with the Company or with any body corporate which is or has been a subsidiary undertaking of the Company or a predecessor in business of the Company or of any such subsidiary undertaking, and for any member of his family
(including a spouse and a former spouse) or any person who is or was dependent on him, and may (as well before as after he ceases to hold such office or employment) contribute to any fund and pay premiums for the purchase or provision of any such
benefit. |
PROCEEDINGS OF THE BOARD
145. |
The Board may meet together for the despatch of business, adjourn and otherwise regulate its meetings as it thinks fit. Questions arising at any such meetings shall be determined by a majority of votes. In the case of
an equality of votes, the Chairman of the meeting shall not have a casting vote. A Director may, and the secretary on the requisition of a Director shall, call a meeting of the Board and notice of such meeting shall be deemed to be duly given to
each Director if it is given to him personally or by word of mouth or sent in writing to him at his last-known address or any other address given by him to the Company for this purpose or sent by way of electronic communication to an address for the
time being notified by him to the Company for this purpose. |
146. |
The quorum necessary for the transaction of the business of the Board shall be a majority of the Board. |
147. |
Any Director may validly participate in a meeting of the Board or a committee of the Board through the medium of conference telephone or similar form of communication equipment provided that all persons participating in
the meeting are able to hear and speak to each other throughout such meeting. A person so participating shall be deemed to be present in person at the meeting and shall accordingly be counted in a quorum and be entitled to vote. Subject to the
Statutes, all business transacted in such a manner by the Board or a committee of the Board shall, for the purposes of these Articles, be deemed to be validly and effectively transacted at a meeting of the Board or a committee of the Board,
notwithstanding that fewer than two Directors are physically present at the same place. Such a meeting shall be deemed to take place where the largest group of those participating is assembled or, if there is no such group, where the Chairman of the
meeting then is. |
35
148. |
The Board may appoint from its number, and remove, a Chairman and, if it thinks fit, a Deputy Chairman of its meetings and determine the period for which they are respectively to hold office. If no such Chairman or
Deputy Chairman is appointed, or neither is present within five minutes after the time fixed for holding any meeting, or neither of them is willing to act as Chairman, the Directors present may choose one of their number to act as Chairman of such
meeting. |
149. |
A resolution in writing signed by all the Directors for the time being entitled to vote on the resolution at a meeting of the Board (not being less than the number of Directors required to form a quorum of the Board at
such meeting) or by all the members of a committee of the Board for the time being shall be as valid and effective as a resolution passed at a meeting of the Board or committee duly convened and held. The resolution may consist of one document or
several documents in like form (and in hard copy or electronic form) each signed by one or more Directors and such documents may be exact copies of the signed resolution. |
150. |
All acts done by any meeting of the Board, or of a committee of the Board, or by any person acting as a Director, shall as regards all persons dealing in good faith with the Company, notwithstanding it be afterwards
discovered that there was some defect in the appointment or continuance in office of any Director or person so acting, or that they or any of them were disqualified, or had vacated office or were not entitled to vote, be as valid as if every such
person had been duly appointed or had duly continued in office and was qualified and had continued to be a Director and had been entitled to vote. |
DIRECTORS INTERESTS
Declarations of interest relating to transactions or arrangements
151. |
Subject to the provisions of the Statutes, and provided that he has made the disclosures required by Article 152, a Director notwithstanding his office may be a party to or otherwise directly or indirectly interested
in: |
151.1 |
any transaction or arrangement with the Company or in which the Company is otherwise interested; or |
151.2 |
a proposed transaction or arrangement with the Company. |
152. |
A Director shall, subject to sub-section 177(6) of the Act, be required to disclose all interests whether or not material in any transaction or arrangement referred to in Article 151 and the declaration of interest must
(in the case of a transaction or arrangement referred to in Article 151.1) and may (in the case of a transaction or arrangement referred to in Article 151.2), but need not, be made: |
152.1 |
at a meeting of the Directors; or |
36
152.2 |
by notice to the Directors in accordance with: |
|
(a) |
Section 184 of the Act (notice in writing); or |
|
(b) |
Section 185 of the Act (general notice). |
153. |
The Directors may resolve that any situation referred to in Article 151 and disclosed to them thereunder shall also be subject to such terms as they may determine including, without limitation, the terms referred to in
paragraphs (a) to (d) of Article 157. |
Directors interests other than in relation to transactions or
arrangements with the Company
154. |
For the purposes of Section 175 of the Act, the Directors shall have the power to authorise any matter which would or might otherwise constitute or give rise to a breach of the duty of a Director under that
Section to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company. For these purposes references to a conflict of interest include a conflict of
interest and duty and a conflict of duties. This Article does not apply to a conflict of interest arising in relation to a transaction or arrangement with the Company which are governed by Articles 151 to 153 inclusive. |
155. |
Authorisation of a matter under Article 154 shall be effective only if: |
|
(a) |
the matter in question shall have been proposed in writing (giving full particulars of the relevant situation) for consideration at a meeting of the Directors, in accordance with the Boards normal procedures or in
such other manner as the Directors may approve; |
|
(b) |
any requirement as to the quorum at the meeting of the Directors at which the matter is considered is met without counting the Director in question and any other interested Director (together the Interested
Directors); and |
|
(c) |
the matter was agreed to without the Interested Directors voting or would have been agreed to if the votes of the Interested Directors had not been counted. |
156. |
Any authorisation of a matter pursuant to Article 154 shall extend to any actual or potential conflict of interest which may reasonably be expected to arise out of the matter so authorised. |
157. |
Any authorisation of a matter under Article 154 shall be subject to such terms as the Directors may determine, whether at the time such authorisation is given or subsequently, and may be terminated by the
Directors at any time. Such terms may include, without limitation, terms that the relevant Directors: |
37
|
(a) |
will not be obliged to disclose to the Company or use for the benefit of the Company any confidential information received by him otherwise than by virtue of his position as a Director, if to do so would breach any duty
of confidentiality to a third party; |
|
(b) |
may be required by the Company to maintain in the strictest confidence any confidential information relating to the Company which also relates to the situation as a result of which the conflict arises (the
conflict situation); |
|
(c) |
may be required by the Company not to attend any part of a meeting of the Directors at which any matter which may be relevant to the conflict situation is to be discussed, and not to view any board papers relating to
such matters; and |
|
(d) |
shall not be obliged to account to the Company for any remuneration or other benefits received by him in consequence of the conflict situation. |
A Director shall comply with any obligation imposed on him by the Directors pursuant to any such authorisation.
158. |
A Director shall not, save as otherwise agreed by him, be accountable to the Company for any benefit which he (or a person connected with him) derives from any matter authorised by the Directors under Article 154
and any contract, transaction or arrangement relating thereto shall not be liable to be avoided on the grounds of any such benefit. |
159. |
Save as otherwise provided by these Articles, a Director shall not vote at a meeting of the Board or of a committee of the Board on any resolution concerning a matter in which he has, directly or indirectly, an
interest (other than by virtue of his interest in shares, debentures or other securities of or in or otherwise through the Company) which is material, or a duty which conflicts or may conflict with the interests of the Company, unless:
|
159.1 |
the resolution relates to the giving to him or any other person of a guarantee, security or indemnity in respect of money lent to, or an obligation incurred by him or by any other person at the request of or for
the benefit of, the Company or any of its subsidiary undertakings; |
159.2 |
the resolution relates to the giving to a third party of a guarantee, security or indemnity in respect of an obligation of the Company or any of its subsidiary undertakings for which the Director has assumed
responsibility in whole or in part and whether alone or jointly with others under a guarantee or indemnity or by the giving of security; |
159.3 |
his interest arises by virtue of his being, or intending to become, a participant in the underwriting or sub-underwriting of an offer of any shares, debentures or other securities by the Company or any of its
subsidiary undertakings for subscription, purchase or exchange; |
38
159.4 |
the resolution relates to any proposal concerning any other company in which he is interested, directly or indirectly, and whether as an officer or shareholder or otherwise howsoever provided that he does not
hold an interest in shares (as that term is used in Part 22 of the Act) representing 1 per cent. or more of either any class of the equity share capital of such company or of the voting rights available to members of such company (any such
interest being deemed for the purpose of this Article to be a material interest in all circumstances); |
159.5 |
the resolution relates to any arrangement for the benefit of the employees of the Company or any of its subsidiary undertakings, which does not award him any privilege or benefit not generally awarded to the
employees to whom such arrangement relates; or |
159.6 |
the resolution relates to any proposal concerning any insurance which the Company is empowered to purchase and/or maintain for or for the benefit of any of the Directors or for persons who include Directors
provided that, for the purposes of this Article, insurance means only insurance against liability incurred by a Director in respect of any act or omission by him as is referred to in Article 243 or any other insurance which the
Company is empowered to purchase and/or maintain for or for the benefit of any groups of persons consisting of or including Directors. |
160. |
For the purposes of Articles 151 to 159 inclusive: |
160.1 |
an interest of a person who is, for any purpose of the Act (excluding any such modification thereof not in force when these Articles became binding on the Company), connected with a Director shall be treated as an
interest of the Director; and |
160.2 |
an interest of which a Director has no knowledge and of which it is unreasonable to expect him to have knowledge shall not be treated as an interest of his. |
161. |
The Board may exercise the voting power conferred by the shares in any company held or owned by the Company in such manner and in all respects as it thinks fit (including the exercise thereof in favour of any
resolution appointing the Directors or any of them directors of such company, or voting or providing for the payment of remuneration to the directors of such company). |
162. |
A Director shall not be counted in the quorum present at a meeting in relation to a resolution on which he is not entitled to vote. |
163. |
Where proposals are under consideration concerning the appointment (including the fixing or varying of terms of appointment) of two or more Directors to offices or employments with the Company or any body
corporate in which the Company is interested, the proposals may be divided and considered in relation to each Director separately and (provided he is not caught by the proviso to Article 159.4 or for another reason precluded from voting) each of the
Directors concerned shall be entitled to vote and be counted in the quorum in respect of each resolution except that concerning his own appointment. |
39
164. |
If a question arises at a meeting of the Board or of a committee of the Board as to the right of a Director to vote, the question may, before the conclusion of the meeting, be referred to the Chairman of the
meeting (or if the Director concerned is the Chairman, to the other Directors at the meeting) and his ruling in relation to any Director (or, as the case may be, the ruling of the majority of the other Directors in relation to the Chairman) shall be
final and conclusive. |
FAIR PRICE PROVISIONS
165. |
The Directors shall not, to the extent it is within their power, take or permit to be taken any of the following actions: |
165.1 |
any merger or consolidation of the Company with (i) any Interested Member or (ii) any other company (whether or not itself an Interested Member) that is, or after such merger or consolidation would be, an
Affiliate or Associate of an Interested Member; or |
165.2 |
any sale, lease, exchange, mortgage, pledge, transfer, dividend or distribution (other than on a pro rata basis to all members) or other disposition (in one transaction or a series of transactions) to or with any
Interested Member or any Affiliate or Associate of any Interested Member of any assets of the Company or of any Subsidiary having an aggregate Fair Market Value of US$1,000,000 or more; or |
165.3 |
any merger or consolidation of any Subsidiary of the Company having assets with an aggregate Fair Market Value of US$1,000,000 or more with (i) any Interested Member; or (ii) any other company (whether
or not itself an Interested Member) that is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Member; or |
165.4 |
the issuance or transfer by the Company or any Subsidiary (in one transaction or a series of transactions) to any Interested Member or any Affiliate or Associate of any Interested Member of any securities of the
Company or any Subsidiary in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of US$1,000,000 or more, other than the issuance of securities upon the conversion of convertible
securities of the Company or any Subsidiary; or |
165.5 |
the adoption of any plan or proposal for the liquidation or dissolution of the Company proposed by or on behalf of any Interested Member or any Affiliate or Associate of any Interested Member; or
|
40
165.6 |
any reclassification of securities (including any reverse stock split), or recapitalisation of the Company, or any merger or consolidation of the Company with any of its Subsidiaries, or any other transaction
(whether or not with or into or otherwise involving any Interested Member), that in any such case has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class or series of shares or securities
convertible into shares of the Company or any Subsidiary that is directly or indirectly beneficially owned by any Interested Member or any Affiliate or Associate of any Interested Member; or |
165.7 |
any series or combination of transactions directly or indirectly having the same effect as any of the foregoing; or |
165.8 |
any agreement, contract or other arrangement providing directly or indirectly for any of the foregoing; |
without the affirmative vote of the holders of at least 80 per cent. of the combined voting power of the entire issued share capital of
the Company entitled to vote at a general meeting of the Company (Voting Shares). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by
these Articles or by any resolution or resolutions of the Board or in any agreement with any national securities exchange or otherwise.
For the purposes of this Article 165, the term Business Combination shall mean any transaction that is referred to in any
one or more of Articles 165.1 to 165.8.
166. |
The provisions of Article 165 shall not be applicable to any particular Business Combination, if all of the conditions specified in either Article 166.1 or 166.2 are met: |
166.1 |
such Business Combination shall have been approved by a majority of the Disinterested Directors; or |
166.2 |
all six of the conditions set out in Articles 166.2.1 to 166.2.6 have been met: |
|
166.2.1 |
the transaction constituting the Business Combination provides for consideration to be received by holders of Ordinary Shares in exchange for all their Ordinary Shares, and the aggregate amount of the cash and
the Fair Market Value (as of the date of the consummation of the Business Combination) of any consideration other than cash to be received per share by holders of Ordinary Shares in such Business Combination shall be at least equal to the higher of
the following: |
|
(a) |
(if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers fees) paid in order to acquire any Ordinary Shares beneficially owned by the Interested
Member that were acquired (i) within the two-year period immediately prior to the Announcement Date or (ii) in the transaction in which it became an Interested Member, whichever is higher; and |
41
|
(b) |
the Fair Market Value per share of Ordinary Shares on the Announcement Date or on the Determination Date, whichever is higher; and |
|
166.2.2 |
the transaction constituting the Business Combination shall provide for consideration to be received by holders of any class of issued Voting Shares other than Ordinary Shares in exchange for all their Voting Shares,
and the aggregate amount of the cash and the Fair Market Value (as of the date of the consummation of the Business Combination) of any consideration other than cash to be received per share by holders of such Voting Shares in such Business
Combination shall be at least equal to the highest of the following (it being intended that the requirements of this Article 166.2.2 shall be required to be met with respect to every class of outstanding Voting Shares, whether or not the Interested
Member beneficially owns any shares of a particular class of Voting Shares): |
|
(a) |
(if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers fees) paid in order to acquire any shares of such class of Voting Shares beneficially owned
by the Interested Member that were acquired (i) within the two-year period immediately prior to the Announcement Date or (ii) in the transaction in which it became an Interested Member, whichever is higher; |
|
(b) |
(if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Shares are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company; and |
|
(c) |
the Fair Market Value per share of such class of Voting Shares on the Announcement Date or on the Determination Date, whichever is higher; and |
|
166.2.3 |
the consideration to be received by holders of a particular class of issued Voting Shares (including Ordinary Shares) shall be in cash or in the same form as was previously paid in order to acquire the shares of
such class of Voting Shares that are beneficially owned by the Interested Member, and if the Interested Member beneficially owns shares of any class of Voting Shares that were acquired with varying forms of consideration, the form of consideration
to be received by holders of such class of Voting Shares shall be either cash or the form used to acquire the largest number of shares of such class of Voting Shares beneficially owned by it; and |
42
|
166.2.4 |
after such Interested Member has become an Interested Member and prior to the consummation of such Business Combination: |
|
(a) |
except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular dates therefor the full amount of any dividends (whether or not cumulative) payable on
any class of shares having a preference over the Ordinary Shares as to dividends or upon liquidation; |
|
(b) |
there shall have been (i) no reduction in the annual rate of dividends paid on the Ordinary Shares (except as necessary to reflect any subdivision of the Ordinary Shares), except as approved by a majority of the
Disinterested Directors, and (ii) an increase in such annual rate of dividends (as necessary to prevent any such reduction) in the event of any reclassification (including any reverse stock split), recapitalisation, reorganisation or any
similar transaction that has the effect of reducing the number of outstanding Ordinary Shares, unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors; and |
|
(c) |
such Interested Member shall not have become the beneficial owner of any additional Voting Shares except as part of the transaction that resulted in such Interested Member becoming an Interested Member; and
|
|
166.2.5 |
after such Interested Member has become an Interested Member, such Interested Member shall not have received the benefit, directly or indirectly (except proportionately as a member), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Company, whether in anticipation of or in connection with such Business Combination or otherwise; and |
|
166.2.6 |
a proxy or information statement describing the proposed Business Combination and complying with the requirements of the U.S. Securities Exchange Act of 1934 and the rules and regulations thereunder (or any
subsequent provisions replacing such act, rules or regulations) shall be mailed to members of the Company at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions). |
43
167. |
For purposes of Article 165 and Article 166: |
167.1 |
Affiliate and Associate shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the U.S. Securities Exchange Act of 1934,
as in effect on January 1 2013. |
167.2 |
Announcement Date means the date of first public announcement of the proposal of the Business Combination. |
167.3 |
A person shall be a beneficial owner of any Voting Shares: |
|
(a) |
that such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or |
|
(b) |
that such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote or to direct the vote pursuant to any agreement, arrangement or understanding; or |
|
(c) |
that are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any Voting Shares. |
167.4 |
For the purposes of determining whether a person is an Interested Member pursuant to paragraph 167.8 the number of Voting Shares deemed to be outstanding shall include shares deemed owned by such person through
application of paragraph 167.3 but shall not include any other Voting Shares that may be issuable to other persons pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, exchange rights, warrants or options,
or otherwise. |
167.5 |
Determination Date means the date on which the Interested Member became an Interested Member. |
167.6 |
Disinterested Director means any member of the Board of Directors of the Company who is unaffiliated with, and not a nominee of, the Interested Member and was a member of the Board of Directors prior
to the time that the Interested Member became an Interested Member, and any successor of a Disinterested Director who is unaffiliated with, and not a nominee of, the Interested Member and is recommended to succeed a Disinterested Director by a
majority of Disinterested Directors then on the Board of Directors. |
44
167.7 |
Fair Market Value means: |
|
(a) |
in the case of shares or stock, the highest closing sale price during the 30-day period immediately preceding the date in question of such share or stock on the New York Stock Exchange Composite Tape, or, if such share
or stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such share or stock is not listed on such Exchange, on the principal United States securities exchange registered under the US Securities Exchange Act of 1934 on
which such share or stock is listed, or, if such share or stock is not listed on any such exchange, the highest closing sale price or bid quotation with respect to such share or stock during the 30-day period immediately preceding the date in
question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or, if no such prices or quotations are available, the fair market value on the date in question of such share or stock as
determined by a majority of the Disinterested Directors in good faith; and |
|
(b) |
in the case of property other than cash or shares or stock, the fair market value of such property on the date in question as determined by a majority of the Disinterested Directors in good faith. |
167.8 |
Interested Member shall mean any person (other than the Company or any Subsidiary) who or that: |
|
(a) |
is the beneficial owner, directly or indirectly, of five percent or more of the combined voting power of the Voting Shares then in issue; or |
|
(b) |
is an Affiliate of the Company and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of five percent or more of the combined voting power
of the Voting Shares then in issue; or |
|
(c) |
is an assignee of or has otherwise succeeded to the beneficial ownership of any Voting Shares that were at any time within the two-year period immediately prior to the date in question beneficially owned by an
Interested Member, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the U.S. Securities Act of 1933. |
167.9 |
a person shall mean any individual, firm, corporation, company, partnership, trust or other entity. |
45
167.10 |
Subsidiary shall mean any company a majority of whose outstanding shares or stock having ordinary voting power in the election of Directors is owned by the Company, by a Subsidiary or by the Company
and one or more Subsidiaries; provided, however, that for the purposes of the definition of Interested Member set forth in Article 167.8, the term Subsidiary shall mean only a company of which a majority of each class of equity security
is owned by the Company, by a Subsidiary or by the Company and one or more Subsidiaries. |
168. |
A majority of the Disinterested Directors of the Company shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with
Article 167, including, without limitation, (a) whether a person is an Interested Member, (b) the number of Voting Shares beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another person,
(d) whether the requirements of Article 166.2 have been met with respect to any Business Combination, and (e) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or
transfer of securities by the Company or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of US$1,000,000 or more; and the good faith determination of a majority of the Disinterested Directors on such matters shall be
conclusive and binding for all purposes of Articles 166 and 167. |
TRANSACTIONS WITH INTERESTED SHAREHOLDERS
169. |
The Company shall not engage in any Business Combination with any Interested Member for a period of 3 years following the date that such member became an Interested Member, unless: |
169.1 |
prior to such date the Board approved either the Business Combination or the transaction which resulted in the member becoming an Interested Member, or |
169.2 |
upon consummation of the transaction which resulted in the member becoming an Interested Member, the Interested Member owned at least 85 per cent. of the Voting Shares of the Company issued at the time the
transaction commenced, excluding for these purposes, shares owned by (i) persons who are Directors and also executive officers of the Company and (ii) employee share plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or |
169.3 |
on or subsequent to such date the Business Combination is approved by the Board and authorised at a general meeting of members, and not by written consent, by the affirmative vote of at least 66 (2/3) per
cent. of the issued Voting Shares which are not owned by the Interested Member. |
46
170. |
The restrictions contained in Article 169 shall not apply if: |
170.1 |
a member becomes an Interested Member inadvertently and (i) as soon as practicable divests itself of ownership of sufficient shares so that the member ceases to be an Interested Member and (ii) would
not, at any time within the 3 year period immediately prior to a Business Combination between the Company and such member, have been an interested member but for the inadvertent acquisition of ownership; or |
170.2 |
the Business Combination is proposed prior to the consummation or abandonment of and subsequent to the earlier of the public announcement or any notice required hereunder of a proposed transaction which:
|
|
(a) |
constitutes one of the transactions described in Article 171; |
|
(b) |
is with or by a person who either was not an Interested Member during the previous 3 years or who became an Interested Member with the approval of the Board of Directors; and |
|
(c) |
is approved or not opposed by a majority of the members of the Board of Directors then in office (but not less than 1) who were Directors prior to any person becoming an Interested Member during the previous 3 years or
were recommended for election or elected to succeed such Directors by a majority of such Directors. |
171. |
The proposed transactions referred to in Article 170.2 are limited to: |
171.1 |
a merger or consolidation of the Company (except for a merger in respect of which, pursuant to Section 251(f) of the General Corporation Law of the State of Delaware, U.S., no vote of the members would be
required if the Company were incorporated under the law of such State); |
171.2 |
a sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) of assets of the Company or of any direct or indirect majority-owned subsidiary of the Company
(other than to any direct or indirect wholly-owned subsidiary or to the Company) having an aggregate market value equal to 50 per cent. or more of either that aggregate market value of all of the assets of the Company determined on a
consolidated basis or the aggregate market value of all the outstanding shares of the Company; or |
171.3 |
a proposed tender or exchange offer for 50 per cent. or more of the outstanding Voting Shares of the Company. |
172. |
The Company shall give not less than 20 days notice to all Interested Members prior to the consummation of any of the transactions described in Article 171.1 and Article 171.2. |
47
173. |
As used in Articles 169 to 173, the term: |
173.1 |
affiliate means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another person. |
173.2 |
associate when used to indicate a relationship with any person means: |
|
(a) |
any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or which is, directly or indirectly, the owner of 20 per cent. or more of any class of
Voting Shares; |
|
(b) |
any trust or other estate in which such person has at least a 20 per cent. beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and |
|
(c) |
any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person. |
173.3 |
Business Combination, when used in reference to the Company and any Interested Member of the Company, means: |
|
(a) |
any merger or consolidation of the Company or any direct or indirect majority-owned subsidiary of the Company with (i) the Interested Member, or (ii) with any other corporation, partnership, unincorporated
association or other entity if the merger or consolidation is caused by the Interested Member and as a result of such merger or consolidation Article 169 is not applicable to the surviving entity; |
|
(b) |
any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or series of transactions), except proportionately as a member of the Company, to or with the Interested Member, of assets
of the Company or of any direct or indirect majority-owned subsidiary of the Company which assets have an aggregate market value equal to 10 per cent. or more of either the aggregate market value of all the assets of the Company determined on a
consolidated basis or the aggregate market value of all the Voting Shares of the Company; |
48
|
(c) |
any transaction which results in the issuance or transfer by the Company or by any direct or indirect majority-owned subsidiary of the Company of any shares of the Company or of such subsidiary to the Interested Member,
except (i) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into shares of the Company or any such subsidiary which securities were outstanding prior to the time that the Interested
Member became such, (ii) pursuant to a merger which could be accomplished under Section 251(g) of the General Corporation Law of the State of Delaware, U.S. if the Company were incorporated under the laws of such State, (iii) pursuant
to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into shares of such Company or any such subsidiary which security is distributed, pro rata to all
holders of a class or series of shares of such Company subsequent to the time the Interested Shares became such, (iv) pursuant to an exchange offer by the Company to purchase shares made on the same terms to all holders of said shares, or
(v) any issuance or transfer of shares by the Company, provided however, that in no case under (iii)-(v) above shall there be an increase in the Interested Members proportionate share of the shares of any class or series of the
Company or of the voting shares of the Company; |
|
(d) |
any transaction involving the Company or any direct or indirect majority owned subsidiary of the Company which has the effect, directly or indirectly, of increasing the proportionate share of the shares of any class or
securities convertible into the shares of any class of the Company or of any such subsidiary which is owned by the Interested Member, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or
redemption of any shares not caused, directly or indirectly, by the Interested Member; or |
|
(e) |
any receipt by the Interested Member of the benefit, directly or indirectly (except proportionately as a member of the Company) of any loans, advance, guarantees, pledges or other financial benefits (other than those
expressly permitted in subparagraphs (a)-(d) above) provided by or through the Company or any direct or indirect majority owned subsidiary. |
173.4 |
control, including the term controlling, controlled by and under common control with means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and polices of a person whether through the ownership of Voting Shares, by contract or otherwise. A person who is the owner of 20 per cent. or more of the outstanding Voting Shares of any
corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control
shall not apply where such person holds Voting Shares, in good faith and not for the purpose of circumventing this Article, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have
control of such entity. |
49
173.5 |
Interested Member means any person (other than the Company and any direct or indirect majority-owned subsidiary of the Company) that: |
|
(a) |
is the owner of 15 per cent. or more of the issued Voting Shares of the Company, or |
|
(b) |
is an affiliate or associate of the Company and was the owner of 15 per cent. or more of the outstanding Voting Shares of the Company at any time within the 3 year period immediately prior to the date on which it
is sought to be determined whether such person is an Interested Member; and the affiliates and associates of such person; provided, however, that the term Interested Member shall not include any person whose ownership of shares in excess
of the 15 per cent. limitation set forth herein is the result of action taken solely by the Company provided that such person shall be an Interested Member if thereafter such person acquires additional Voting Shares of the Company, except as a
result of further corporate action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an Interested Member, the Voting Shares of the Company deemed to be outstanding shall include shares deemed to
be owned by the person through application of Article 173.7 but shall not include any other unissued shares of the Company which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants
or options, or otherwise. |
173.6 |
owner including the terms own and owned when used with respect to any shares means a person that individually or with or through any of its affiliates or
associates: |
|
(a) |
beneficially owns such shares directly or indirectly; or |
|
(b) |
has (i) the right to acquire such shares (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the owner of shares tendered pursuant to a tender or exchange offer made by such person or any of such persons affiliates or
associates until such tendered stock is accepted for purchase or exchange; or (ii) the right to vote such shares pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any
shares because of such persons right to vote such shares if the agreement, arrangement or understanding to vote such shares arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to 10 or more
persons; or |
|
(c) |
has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (ii) of clause (b) of this Article
173.6) disposing of such shares with any other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, such shares. |
50
173.7 |
person means any individual, corporation, partnership, unincorporated association or other entity. |
173.8 |
Voting Shares means with respect to any company or corporation, shares of any class entitled to vote generally in the election of directors and, with respect to any entity that is not a company or
corporation, any equity interest entitled to vote generally in the election of the governing body of such entity. |
174. |
In addition to any approval of members required pursuant to the terms of any class of shares other than the Ordinary Shares, the approval of the holders of a majority of the issued shares generally entitled to vote at a
meeting called for such purpose, following approval by the Board of Directors, shall be required in order for the Company to sell, lease, or exchange all or substantially all of its property and assets (as that phrase is interpreted for
the purposes of Section 271 of the General Corporation Law of the State of Delaware, U.S., as amended or re-enacted from time to time), provided that the foregoing approval by members shall not be required in the case of any transaction between
the Company and any entity the Company directly or indirectly controls (as that phrase is defined in Rule 405 under the United States Securities Act of 1933, as amended or re-enacted from time to time). |
SECRETARY
175. |
Subject to the Statutes, the secretary shall be appointed by the Board for such term, at such remuneration and upon such conditions as it may think fit, and any secretary appointed by the Board may at any time be
removed by it. |
176. |
Any provision of the Statutes or these Articles requiring or authorising a thing to be done by or to a Director and the secretary shall not be satisfied by its being done by or to the same person acting both as Director
and as, or in place of, the secretary. |
MINUTES
177. |
The Board shall cause minutes to be kept: |
177.1 |
of all appointments of officers made by the Board; |
177.2 |
of proceedings at meetings of the Board and of any committee of the Board and the names of the Directors present at each such meeting; and |
177.3 |
of all resolutions of the Company, proceedings at meetings of the Company or the holders of any class of shares in the Company. |
178. |
Any such minutes, if purporting to be signed by the Chairman of the meeting to which they relate or of the meeting at which they are read, shall be sufficient evidence without any further proof of the facts therein
stated. |
51
179. |
Any such minutes must be kept for the period specified by the Act. |
SEAL
180. |
In addition to its powers under section 44 of the Act, the Company may have a seal and the Board shall provide for the safe custody of such seal. The seal shall only be used by the authority of the Board or of a
committee of the Board authorised by the Board. The Board shall determine who may sign any instrument to which the seal is affixed and, unless otherwise so determined, it shall also be signed by at least one authorised person in the presence of a
witness who attests the signature. For the purpose of this Article an authorised person is any director of the Company, secretary of the Company or any person authorised by the Directors for the purpose of signing documents to which the common seal
is applied. |
181. |
All forms of certificates for shares or debentures or representing any other form of security (other than letters of allotment or scrip certificates) shall be issued executed by the Company but the Board may by
resolution determine, either generally or in any particular case, that any signatures may be affixed to such certificates by some mechanical or other means or may be printed on them or that such certificates need not bear any signature.
|
|
(a) |
an official seal for use abroad, it may only be affixed to a document if its use on that document, or documents of a class to which it belongs, had been authorised by a decision of the Directors; and |
|
(b) |
a security seal, it may only be affixed to securities by the Company Secretary or a person authorised to apply it to securities by the Company Secretary. |
ACCOUNTING RECORDS, BOOKS AND REGISTERS
183. |
The Directors shall cause accounting records to be kept and such other books and registers as are necessary to comply with the provisions of the Statutes and, subject to the provisions of the Statutes, the Directors may
cause the Company to keep an overseas or local or other register in any place, and the Directors may make and vary such directions as they may think fit respecting the keeping of the registers. |
184. |
The accounting records shall be kept at the registered office or (subject to the provisions of the Statutes) at such other place in Great Britain as the Board thinks fit, and shall always be open to inspection by the
Directors. No member of the Company (other than a Director) shall have any right of inspecting any accounting record or book or document except as conferred by law or authorised by the Board or by the Company in general meeting. |
52
185. |
The Board shall, in accordance with the Statutes, cause to be prepared and to be laid before the Company in general meeting such profit and loss accounts, balance sheets, group accounts (if any) and reports as are
required by the Statutes. The Board shall in its report state the amount which it recommends to be paid by way of dividend. |
186. |
A printed copy of every balance sheet (including every document required by law to be annexed thereto) which is to be laid before the Company in general meeting and of the Directors and auditors reports
shall, at least 21 clear days before the meeting, be delivered or sent by post to every member and to every debenture holder of the Company of whose address the Company is aware or, in the case of joint holders of any share or debenture, to the
joint holder who is named first in the register and to the auditors provided that, if and to the extent that the Statutes so permit and without prejudice to Article 188, the Company need not send copies of the documents referred to above to members
but may send such members summary financial statements or other documents authorised by the Statutes. |
AUDIT
187. |
Auditors of the Company shall be appointed and their duties regulated in accordance with the Statutes. |
188. |
The auditors report to the members made pursuant to the statutory provisions as to audit shall be laid before the Company in general meeting and shall be open to inspection by any member; and in accordance
with the Statutes every member shall be entitled to be furnished with a copy of the balance sheet (including every document required by law to be annexed thereto) and auditors report. |
AUTHENTICATION OF DOCUMENTS
189. |
Any Director or the secretary or any person appointed by the Board for the purpose shall have power to authenticate any documents affecting the constitution of the Company and any resolutions passed by the
Company or the Board and any books, records, documents and accounts relating to the business of the Company, and to certify copies thereof or extracts therefrom as true copies or extracts; and where any books, records, documents or accounts are
elsewhere than at the registered office, the officer of the Company having the custody thereof shall be deemed to be a person appointed by the Board, as aforesaid. |
190. |
A document purporting to be a copy of a resolution, or an extract from the minutes of a meeting of the Company or of the Board or of any committee of the Board which is certified as such in accordance with
Article 189 shall be conclusive evidence in favour of all persons dealing with the Company on the faith thereof that such resolution has been duly passed or, as the case may be, that such extract is a true and accurate record of proceedings at a
duly constituted meeting. |
53
RECORD DATES
191. |
Notwithstanding any other provision of these Articles, and subject to the Act, the Company or the Board may: |
191.1 |
fix any date as the record date for any dividend, distribution, allotment or issue, which may be on or at any time before or after any date on which the dividend, distribution, allotment or issue is declared,
paid or made; |
191.2 |
for the purpose of determining which persons are entitled to attend and vote at a general meeting of the Company, or a separate general meeting of the holders of any class of shares in the capital of the Company,
specify in the notice of meeting a time by which a person must be entered on the register in order to have the right to attend or vote at the meeting; changes to the register after the time specified by virtue of this Article 191 shall be
disregarded in determining the rights of any person to attend or vote at the meeting; and |
191.3 |
for the purpose of sending notices of general meetings of the Company, or separate general meetings of the holders of any class of shares in the capital of the Company, under these Articles, determine that
persons entitled to receive such notices are those persons entered on the register at the close of business on a day determined by the Company or the Board, which day may not be more than 21 days before the day that notices of the meeting are sent.
|
DIVIDENDS
192. |
Subject to the Statutes, the Company may by ordinary resolution declare that out of profits available for distribution there be paid dividends to members in accordance with their respective rights and priorities
but no dividend shall exceed the amount recommended by the Board. Unless the rights attached to any shares, the terms of any shares or the Articles provide otherwise, a dividend or any other money payable in respect of a share can be declared and
paid in any currency the Board decides using an exchange rate selected by the Board for any currency conversions required. The board can also decide how any costs relating to the choice of currency will be met. |
193. |
Except as otherwise provided by these Articles or the rights attached to any shares, all dividends shall be declared and paid according to the amounts paid on the shares in respect of which the dividend is paid;
but no amount paid on a share in advance of the date upon which a call is payable shall be treated for the purposes of this Article or Article 196 as paid on the share. |
194. |
All dividends shall be apportioned and paid proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of which the dividend is paid; but if any
share is issued on terms providing that it shall rank for dividend as from a particular date or be entitled to dividends declared after a particular date, such share shall rank for or be entitled to dividends accordingly. |
54
195. |
Any dividend may be paid or satisfied wholly or partly by the distribution of assets, and in particular by paid-up shares or debentures of any other company, if: |
|
(a) |
upon the recommendation of the Board, an ordinary resolution in general meeting is passed to that effect, in which case the Board shall give effect to such direction; or |
|
(b) |
the Board, acting pursuant to Article 196, determines that any such dividend shall be so paid or satisfied as an interim dividend. |
If the shares in respect of which such a non-cash distribution is paid are uncertificated, any shares in the Company which are issued as a
non-cash distribution in respect of them must be uncertificated. Where any legal regulatory or other difficulty arises in regard to such distribution, the Board may settle it as it thinks expedient, and in particular may issue fractional
certificates or authorise any person to sell and transfer any fractions or may ignore fractions altogether, and may fix the value for distribution purposes of such assets (or any part thereof) and may determine that cash shall be paid to any members
upon the footing of the value so fixed in order to secure equality of distribution, and may vest any such assets in trustees, upon trust for the members entitled to the dividend, as may seem expedient to the Board.
196. |
Subject to the Statutes, the Board may from time to time pay to the members such interim dividends as appear to the Board to be justified by the profits of the Company available for distribution and the position
of the Company, and the Board may also pay the fixed dividend payable on any shares of the Company with preferential rights half-yearly or otherwise on fixed dates whenever such profits, in the opinion of the Board, justify that course. In
particular (but without prejudice to the generality of the foregoing), if at any time the share capital of the Company is divided into different classes, the Board may pay interim dividends on shares in the capital of the Company which confer
deferred or non-preferential rights as well as in respect of shares which confer preferential rights with regard to dividend, but no interim dividend shall be paid on shares carrying deferred or non-preferential rights if, at the time of payment,
any preferential dividend is in arrear. Provided the Board acts in good faith, the Board shall not incur any liability to the holders of shares conferring any preferential rights for any loss that they may suffer by reason of the lawful payment of
an interim dividend on any shares having deferred or non-preferential rights. |
197. |
The Board may deduct from any dividend payable to any member on or in respect of a share all sums of money (if any) presently payable by him to the Company on account of calls or otherwise in relation to shares
in the Company. |
198. |
All dividends and interest shall belong and be paid (subject to any lien of the Company) to those members whose names shall be on the register at the date at which such dividend shall be declared or at the date
at which such interest shall be payable respectively, or at such other date as the Company by ordinary resolution or the Board may determine, notwithstanding any subsequent transfer or transmission of shares. |
55
199. |
The Board may pay the dividends or interest payable on shares in respect of which any person is by transmission entitled to be registered as holder to such person upon production of such certificate and evidence
as would be required if such person desired to be registered as a member in respect of such shares. |
200. |
No dividend or other monies payable in respect of a share shall bear interest against the Company unless otherwise expressly provided by the rights attached to the share. All dividends, interest and other sums
payable which are unclaimed for one year after having been declared may be invested or otherwise made use of by the Board for the benefit of the Company until such time as they are claimed. The payment of any unclaimed dividend, interest or other
sum payable by the Company on or in respect of any share into a separate account shall not constitute the Company a trustee of the same. All dividends unclaimed for a period of 12 years after having been declared shall be forfeited and shall revert
to the Company. |
201. |
Where a dividend or other sum which is a distribution is payable in respect of a share, it may, subject to Article 202, be paid by one or more of the following means: |
201.1 |
transfer to a bank or building society account specified by the distribution recipient either in writing or as the Board may otherwise decide; |
201.2 |
sending a cheque made payable to the distribution recipient by post to the distribution recipient at the distribution recipients registered address (if the distribution recipient is a holder of the share),
or (in any other case) to an address specified by the distribution recipient either in writing or as the Board may otherwise decide; |
201.3 |
sending a cheque made payable to such person by post to such person at such address as the distribution recipient has specified either in writing or as the Board may otherwise decide; |
201.4 |
by means of a system facilitating the trading of shares in the Company in uncertificated form in such manner as may be consistent with the facilities and requirements of the relevant system or as the Board may
otherwise decide; or |
201.5 |
by any electronic or other means as the Board may decide, to an account, or in accordance with the details, specified by the distribution recipient either in writing or as the Board may otherwise decide.
|
202. |
In respect of the payment of any dividend or other sum which is a distribution, the Board may decide, and notify distribution recipients, that: |
202.1 |
one or more of the means described in Article 201 will be used for payment and a distribution recipient may elect to receive the payment by one of the means so notified in the manner prescribed by the Board;
|
56
202.2 |
one or more of such means will be used for the payment unless a distribution recipient elects otherwise in the manner prescribed by the Board; or |
202.3 |
one or more of such means will be used for the payment and that distribution recipients will not be able to elect otherwise. |
203. |
The Board may decide that different methods of payment may apply to different distribution recipients or groups of distribution recipients. |
204. |
Payment of any dividend or other sum which is a distribution is made at the risk of the distribution recipient. The Company is not responsible for a payment which is lost or delayed. Payment, in accordance with
these Articles, of any cheque by the bank upon which it is drawn, or the transfer of funds by any means, or (in respect of shares in uncertificated form) the making of payment by means of a system facilitating the trading of shares in the Company in
uncertificated form, shall be a good discharge to the Company. |
205.1 |
a distribution recipient does not specify an address, or does not specify an account of a type prescribed by the Board, or |
205.2 |
other details necessary in order to make a payment of a dividend or other distribution by the means by which the Board have decided in accordance with Article 201 that a payment is to be made, or by which the
distribution recipient has elected to receive payment, and such address or details are necessary in order for the Company to make the relevant payment in accordance with such decision or election; or |
205.3 |
if payment cannot be made by the Company using the details provided by the distribution recipient, then the dividend or other distribution shall be treated as unclaimed for the purposes of these Articles.
|
206. |
For the purposes of these Articles, distribution recipient means, in respect of a share in respect of which a dividend or other sum is payable |
206.1 |
the holder of the share; or |
206.2 |
if the share has two or more joint holders, whichever of them is named first in the register of members; or |
206.3 |
if the holder is no longer entitled to the share by reason of death or bankruptcy, or otherwise by operation of law, the transmittee. |
57
207. |
Any one of two or more joint holders may give effectual receipts for any dividends or other monies payable in respect of the share held by him as joint holder. |
208. |
The Board may, if authorised by an ordinary resolution of the Company, offer the holders of ordinary shares the right to elect to receive additional ordinary shares, credited as fully paid, instead of cash in
respect of any dividend or any part (to be determined by the Board) of any dividend specified by the ordinary resolution. The following provisions shall apply: |
208.1 |
an ordinary resolution may specify a particular dividend or dividends, or may specify all or any dividends declared within a specified period, but such period may not end later than the conclusion of the fifth
annual general meeting following the date of the meeting at which the ordinary resolution is passed; |
208.2 |
the entitlement of each holder of ordinary shares to new ordinary shares shall be such that the relevant value of such new ordinary shares shall in aggregate be as nearly as possible equal to (but not greater
than) the cash amount (disregarding any tax credit) that such holder would have received by way of dividend. For this purpose relevant value shall be calculated by reference to the average of the high and low sale price for the
Companys Ordinary Shares on the New York Stock Exchange as derived from such source as the Board may deem appropriate on the day on which the ordinary shares are first quoted ex the relevant dividend and the four subsequent dealing
days, or in such other manner as may be determined by or in accordance with the ordinary resolution, but shall never be less than the par value of the new ordinary share. A certificate or report by the Company Secretary or a Director as to the
amount of the relevant value in respect of any dividend shall be conclusive evidence of that amount; |
208.3 |
the Board may, after determining the basis of allotment, notify the holders of ordinary shares in writing of the right of election offered to them, and specify the procedure to be followed and place at which, and
the latest time by which, elections must be lodged in order to be effective. The basis of allotment shall be such that no shareholder may receive a fraction of a share; |
208.4 |
the Board may exclude from any offer any holders of ordinary shares where the Board believes that the making of the offer to them would or might involve the contravention of the laws of any territory or that for
any other reason the offer should not be made to them; |
208.5 |
the dividend (or that part of the dividend in respect of which a right of election has been offered) shall not be payable on ordinary shares in respect of which an election has been made (the elected
ordinary shares) and instead additional ordinary shares shall be allotted to the holders of the elected ordinary shares on the basis of allotment calculated as stated. For such purpose the Board shall capitalise, out of any amount for the
time being standing to the credit of any reserve or fund (including any share premium account, any capital reserve and the profit and loss account) or otherwise available for distribution as the Board may determine, a sum equal to the aggregate
nominal amount of the additional ordinary shares to be allotted on that basis and apply it in paying up in full the appropriate number of unissued ordinary shares for allotment and distribution to the holders of the elected ordinary shares on that
basis; |
58
208.6 |
the additional ordinary shares when allotted shall rank pari passu in all respects with fully paid ordinary shares then in issue except that they will not be entitled to participate in the relevant dividend
(including the share election in lieu of such dividend); and |
208.7 |
the Board may do such acts and things which it considers necessary or expedient to give effect to any such capitalisation and may authorise any person to enter on behalf of all the members interested into an
agreement with the Company providing for such capitalisation, and any incidental matters and any agreement so made shall be binding on all concerned. |
RESERVES
209. |
The Board may, before recommending any dividend (whether preferential or otherwise), set aside out of the profits of the Company such sums as it thinks fit as a reserve or reserves which shall, at the discretion
of the Board, be applicable for any purpose to which the profits of the Company may be properly applied, and pending such application may, also at such discretion, either be employed in the business of the Company or be invested in such investments
as the Board may think fit, and so that it shall not be necessary to keep any investments constituting the reserve or reserves separate or distinct from any other investments of the Company. The Board may also, without placing the same to reserve,
carry forward any profits which it may think prudent not to distribute. |
CAPITALISATION OF PROFITS
210. |
The Board may resolve, or the Company may, upon the recommendation of the Board, resolve by ordinary resolution, that it be desirable to capitalise all or any part of the profits of the Company specified in
Article 214 and accordingly that the Board be authorised and directed to appropriate the profits so resolved to be capitalised to any member or members in such proportions and to such extent as may be specified in the relevant resolution or
determined by the Board. |
211. |
Subject to any direction given by the Company, the Board shall appropriate the profits resolved to be capitalised by any such resolution, and apply such profits on behalf of the members entitled thereto either:
|
211.1 |
in or towards paying up the amounts, if any, for the time being unpaid on any shares held by such members respectively and such premium thereon (if any) as the Board may determine; or |
211.2 |
in paying up in full unissued shares and such premium thereon (if any) as the Board may determine, debentures or obligations of the Company, of a nominal amount equal to such profits, for allotment and
distribution, credited as fully paid, to and amongst such members in the proportions referred to above or as they may direct, |
59
or partly in one way and partly in the other provided that no unrealised profit shall be applied
in paying up amounts unpaid on any issued shares and the only purpose to which sums standing to capital redemption reserve or share premium account shall be applied pursuant to this Article shall be the payment up in full of unissued shares to be
allotted and distributed to members credited as fully paid.
212. |
The Board shall have power after the passing of any such Board or ordinary resolution: |
212.1 |
to make such provision (by the issue of fractional certificates or by payment in cash or otherwise) as it thinks fit for the case of shares, debentures or obligations becoming distributable in fractions, such
power to include the right for the Company to retain small amounts the cost of distribution of which would be disproportionate to the amounts involved; |
212.2 |
to authorise any person to enter, on behalf of all the members entitled thereto, into an agreement with the Company providing (as the case may require) either: |
|
212.2.1 |
for the payment up by the Company on behalf of such members (by the application thereto of their respective proportions of the profits resolved to be capitalised) of the amounts, or any part of the amounts, remaining
unpaid on their existing shares; or |
|
212.2.2 |
for the allotment to such members respectively, credited as fully paid, of any further shares, debentures or obligations to which they may be entitled upon such capitalisation, |
and any agreement made under such authority shall be effective and binding on all such members;
212.3 |
to resolve that any shares allotted pursuant to Articles 210 to 212 (inclusive) to holders of any partly paid ordinary shares shall, so long as such ordinary shares remain partly paid, rank for dividends only to
the extent that such partly paid ordinary shares rank for dividends. |
CAPITALISATION OF RESERVES EMPLOYEES
SHARE SCHEMES
213. |
This Article applies where: |
|
(a) |
a person is granted pursuant to an employees share scheme a right to subscribe for shares in the capital of the Company in cash at a subscription price less than their nominal value; or |
60
|
(b) |
pursuant to an employees share scheme, the terms on which any person is entitled to subscribe for shares in the capital of the Company are adjusted as a result of a capitalisation issue, rights issue or other
variation of capital so that the subscription price is less than their nominal value. |
213.1 |
In any such case the Board: |
|
(a) |
may transfer to a reserve account a sum equal to the deficiency between the subscription price if any and the nominal value of the shares (the Cash Deficiency) from the profits or reserves of the
Company specified in Article 214; and |
|
(b) |
subject to Article 214, shall not apply that reserve account for any purpose other than paying up the Cash Deficiency on the allotment of those shares. |
213.2 |
Whenever the Company is required to allot shares pursuant to such a right to subscribe, the Board may, subject to the provisions of the Act: |
|
(a) |
appropriate to capital out of the reserve account an amount equal to the Cash Deficiency applicable to those shares; |
|
(b) |
apply that amount in paying up the deficiency on the nominal value of those shares; and |
|
(c) |
allot those shares credited as fully paid to the person entitled to them. |
213.3 |
If any person ceases to be entitled to subscribe for shares as described, the restrictions on the reserve account shall cease to apply in relation to such part of the account as is equal to the amount of the Cash
Deficiency applicable to those shares. |
213.4 |
No right shall be granted under any employees share scheme under Article 213.1(a) and no adjustment shall be made as mentioned in Article 213.1(b) unless there are sufficient profits or reserves of the
Company as specified in Article 214. |
214. |
The profits or reserves of the Company to which Articles 210 to 214 (inclusive) apply shall be any undivided profits of the Company not required for paying the fixed dividends on any preference shares or other
shares issued on special conditions and shall also be deemed to include: |
214.1 |
any profits arising from appreciation in capital assets (whether realised by sale or ascertained by valuation); and |
214.2 |
any amounts for the time being standing to any reserve or reserves or to the capital redemption reserve or to the share premium or other special account. |
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NOTICES
215. |
Subject to the specific terms of any Article, any notice to be given to or by any person pursuant to these Articles shall be in writing (which, for the avoidance of doubt, shall be deemed to include a notice
given in electronic form or by website communication), save that a notice convening a meeting of the Board or of a committee of the Board need not be in writing. |
216. |
Subject to Article 215 and unless otherwise provided by these Articles, the Company shall send or supply a document or information that is required or authorised to be sent or supplied to a member or any other
person by the Company by the Statutes or pursuant to these Articles or to any other rules or regulations to which the Company may be subject in such form and by such means as it may in its absolute discretion determine provided that the provisions
of the Statutes which apply to sending or supplying a document or information required or authorised to be sent or supplied by the Statutes shall, the necessary changes having been made, also apply to sending or supplying any document or information
required or authorised to be sent by these Articles or any other rules or regulations to which the Company may be subject. In the case of joint holders of a share all notices or other Shareholder Information shall be given or supplied to the joint
holder who is named first in the register, and notice so given or other Shareholder Information so supplied shall be sufficient notice or supply to all the joint holders. Any notice to be given to a person may be given by reference to the register
as it stands at any time within the period of 21 days before the notice is given and no change in the register after that time shall invalidate the giving of the notice. |
217. |
In the case of notices or other Shareholder Information sent by post, proof that an envelope containing the communication was properly addressed, prepaid and posted shall be conclusive evidence that the notice
was given or other Shareholder Information sent. If the communication is made by post, it shall be deemed to be given or received at the expiration of 48 hours after the envelope containing it was posted. In calculating the period of hours for the
purposes of this Article no account shall be taken of Sundays or Bank Holidays. |
218. |
Subject to the provisions of the Statutes, any notice or other Shareholder Information (excluding a share certificate) will be validly sent or supplied if sent or supplied by the Company to any member or person
nominated by a member to receive Shareholder Information in electronic form if that person has agreed (generally or specifically) (or, if the member is a company and it is deemed by the Statutes to have agreed) that the communication may be sent or
supplied in that form and: |
218.1 |
the notice or other Shareholder Information is sent using electronic means (as that term is used in section 1168 of the Act) to such address (or to one of such addresses if more than one) as may for the time
being be notified by the member to the Company (generally or specifically) for that purpose or, if the intended recipient is a company, to such address as may be deemed by a provision of the Statutes to have been so specified; |
62
218.2 |
the notice or other Shareholder Information is sent or supplied in electronic form by hand, handed to the recipient or sent or supplied to an address to which it could validly be sent if it were in hard copy
form; and |
218.3 |
in each case that person has not revoked the agreement. |
219. |
Subject to the provisions of the Statutes any notice or other Shareholder Information (excluding a share certificate) will be validly sent or supplied by the Company if it is made available by means of a website
communication where that person has agreed, or is deemed by the Statutes to have agreed (generally or specifically) that the communication may be sent or supplied to him in that manner and: |
219.1 |
that person has not revoked the agreement; |
219.2 |
that person is notified in a manner for the time being agreed for the purpose between that person and the Company of: |
|
(a) |
the publication of the notice or other Shareholder Information on a website; |
|
(b) |
the address of that website; and |
|
(c) |
the place on that website where the notice or other Shareholder Information may be accessed and how it may be accessed; |
219.3 |
the notice or other Shareholder Information continues to be published on the website throughout the period specified in the Act; and |
219.4 |
the notice or other Shareholder Information is published on the website throughout the period referred to in Article 219.3 provided that if the notice or other Shareholder Information is published on that website
for a part but not all of such period, the notice or other Shareholder Information will be treated as published throughout that period if the failure to publish the notice or other Shareholder Information throughout that period is wholly
attributable to circumstances which it would not be reasonable to have expected the Company to prevent or avoid. |
220. |
When any notice or other Shareholder Information is given or sent by the Company by electronic means (as that term is used in section 1168 of the Act), it shall be deemed to have been given on the same day as it
was sent to an address supplied by the member or person nominated by the member to receive Shareholder Information, and in the case of the publication of a notice or other Shareholder Information by website communication, it shall be deemed to have
been received by the intended recipient when the material was first made available on the website or, if later, when the recipient received (or is deemed to have received) notice of the fact that the material was available on the website pursuant to
Article 219.2. Proof that a notice contained in an electronic communication was sent in accordance with guidance issued by the Institute of Chartered Secretaries and Administrators shall be conclusive evidence that the notice was given.
|
63
221. |
Any provision of Articles 215 to 220 which refer to anything agreed, notified or specified by a member shall be deemed to have been validly agreed, notified or specified, notwithstanding any provisions of the
Statutes, if agreed, notified or specified by only one and not all of the joint holders of any shares held in joint names. |
222. |
Where in accordance with these Articles a member is entitled or required to give or send to the Company a notice in writing, the Company may, if it in its absolute discretion so decides, (and shall, if it is
registered to do so or is deemed to have so agreed by any provision of the Statutes) permit such notices (or specified classes thereof) to be sent to the Company by such means of electronic communication as may from time to time be specified (or be
deemed by the Statutes to be agreed) by the Company, so as to be received at such address as may for the time being be specified (or deemed by the Statutes to be specified) by the Company (generally or specifically) for the purpose. Any means of so
giving or sending such notices by electronic communication shall be subject to any terms, limitations, conditions or restrictions that the Directors may from time to time prescribe. |
223. |
A member or person nominated by the member to receive Shareholder Information who (having no registered address within the United Kingdom) has not supplied to the Company either a postal address within the United
Kingdom for the service of notices or an address for the service of notices in electronic form, subject always to the terms of Article 218 shall not be entitled to receive notices from the Company. If, on three consecutive occasions, a notice to a
member or person nominated by the member to receive Shareholder Information has been returned undelivered or the Company receives notice that it is undelivered, such member shall not thereafter be entitled to receive notices from the Company until
he shall have communicated with the Company and supplied in writing to the registered office a new postal address within the United Kingdom for the service of notices or shall have informed the Company, in such manner as may be specified by the
Company, of an address for the service of notices in electronic form, subject always to the terms of Article 218. For these purposes, a notice sent by post shall be treated as returned undelivered if the notice is sent back to the Company (or its
agents) and a notice sent by electronic communication shall be treated as returned undelivered if the Company (or its agents) receive(s) notification that the notice was not delivered to the address to which it was sent. |
224. |
Every person who becomes entitled to a share: |
224.1 |
except as mentioned in Article 224.2, shall be bound by any notice in respect of that share which, before his name is entered in the register, has been duly given to a person from whom he derives his title; but
|
224.2 |
shall not be bound by any such notice given by the Company under section 793 of the Act or under Article 95. |
64
225. |
A person entitled to a share in consequence of the death, mental disorder or bankruptcy of a member on supply to the Company of such evidence as the Board may reasonably require to show his title to that share, and upon
supplying also a postal address within the United Kingdom for the service of notices and documents and, if he wishes, an address for the service and delivery of electronic communications, shall be entitled (subject always to the terms of Article
218, Article 219, Article 220 and Article 221) to have served on or delivered to him at such address any notice or document to which the member but for his death, mental disorder or bankruptcy would have been entitled, and such service or delivery
shall for all purposes be deemed a sufficient service or delivery of such notice or document on all persons interested (whether jointly with or as claiming through or under him) in the share. Until such address or addresses have been so supplied,
any notice or other Shareholder Information may be sent or supplied in any manner in which it might have been sent or supplied if the death, mental disorder or bankruptcy had not occurred and if so sent or supplied shall be deemed to have been duly
sent or supplied in respect of any share registered in the name of such member as sole or first-named joint holder. |
226. |
Any member present, either personally or by proxy or (in the case of a corporate member) by representative, at any general meeting of the Company or of the holders of any class of shares in the Company shall for all
purposes be deemed to have received due notice of such meeting and, where required, of the purposes for which such meeting was called. |
UNTRACED MEMBERS
227. |
The Company shall be entitled to sell at the best price reasonably obtainable the shares of a member or the shares to which a person is entitled by virtue of transmission on death or bankruptcy if and provided that:
|
227.1 |
during the period of 12 years prior to the date of the publication of the advertisements referred to in Article 227.2 (or, if published on different dates, the earlier or earliest thereof), at least three
dividends in respect of the shares have become payable and no dividend has been claimed during that period in respect of such shares; |
227.2 |
the Company shall, on or after the expiry of the said 12 years, have inserted advertisements, both in a national newspaper and in a newspaper circulating in the area of the last-known postal address of such member or
other person (or the postal address at which service of notices may be effected in accordance with these Articles), giving notice of its intention to sell the said shares; |
227.3 |
the said advertisements, if not published on the same day, shall be published within 30 days of each other; and |
65
227.4 |
during the said period of 12 years and the period of three months following the date of publication of the said advertisements (or, if published on different dates, the later or latest thereof) and prior to the exercise
of the power of sale, the Company shall not have received an indication either of the whereabouts or of the existence of such member or person. |
228. |
If, during the period referred to in Article 227.1, any additional shares have been issued by way of rights in respect of shares held at the commencement of such period or in respect of shares so issued previously
during such period, the Company may, if the requirement of Articles 227.1 to 227.4 have been satisfied, also sell such additional shares. |
229. |
To give effect to any such sale the Company may: |
229.1 |
if the shares concerned are held in uncertificated form, do all acts and things it considers necessary and expedient to effect such; and |
229.2 |
appoint any person to execute as transferor an instrument of transfer of the said shares and such instrument of transfer shall be as effective as if it had been executed by the holder of, or person entitled by
transmission to, such shares. |
230. |
The title of the transferee shall not be affected by any irregularity in or invalidity of the proceedings relating thereto. |
231. |
The net proceeds of sale shall belong to the Company which shall: |
231.1 |
be obliged to account to the former member or other person previously entitled as aforesaid for an amount equal to such proceeds; and |
231.2 |
(until the Company has so accounted) enter the name of such former member or other person in the books of the Company as a creditor for such amount. |
232. |
No trust shall be created in respect of the debt, no interest shall be payable in respect of the same and the Company shall not be required to account for any money earned on the net proceeds which may be employed in
the business of the Company or invested in such investments (other than shares of the Company or its holding company (if any)) as the Board may think fit. |
DESTRUCTION OF DOCUMENTS
233. |
The Company shall be entitled to destroy: |
233.1 |
at any time after the expiration of six years from the date of registration thereof or on which an entry in respect thereof shall have been made (as the case may be), all instruments of transfer of shares of the Company
which shall have been registered and all letters of request, renounced allotment letters, renounceable share certificates, forms of acceptance and transfers and applications for allotment in respect of which an entry in the register shall have been
made; |
66
233.2 |
at any time after the expiration of one year from the date of cancellation thereof, all registered certificates for shares of the Company (being certificates for shares in the name of a transferor and in respect whereof
the Company has registered a transfer) and all mandates and other written directions as to the payment of dividends (being mandates or directions which have been cancelled); and |
233.3 |
at any time after the expiration of one year from the date of the recording thereof, all notifications of change of name or address (including addresses for the purpose of receipt of communications in electronic
form and any Nomination Notices). |
234. |
It shall conclusively be presumed in favour of the Company that every entry in the register purporting to have been made on the basis of an instrument of transfer or other document so destroyed was duly and
properly made, and every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered, and every share certificate so destroyed was a valid and effective certificate duly and properly cancelled, and every
other document hereinbefore mentioned was in accordance with the recorded particulars thereof in the books or records of the Company provided always that: |
234.1 |
the foregoing provisions shall apply only to the destruction of a document in good faith and without notice of any claim (regardless of the parties thereto) to which the document might be relevant;
|
234.2 |
nothing contained in this Article 234 or Article 233 shall be construed as imposing upon the Company any liability in respect of the destruction of any such document earlier than as aforesaid or in any other
circumstances which would not attach to the Company in the absence of this Article 234 or Article 233; |
234.3 |
references herein to the destruction of any document include references to its disposal in any manner; and |
234.4 |
any document referred to in Articles 233.1, 233.2 and 233.3 may be destroyed at a date earlier than that authorised by Article 233 provided that a permanent copy of such document shall have been made which shall not be
destroyed before the expiration of the period applicable to the destruction of the original of such document and in respect of which the Board shall take adequate precautions for guarding against falsification and shall provide adequate means for
its reproduction. |
WINDING-UP
235. |
The power of sale of a liquidator shall include a power to sell wholly or partially shares or debentures, or other obligations of another company, either then already constituted, or about to be constituted, for the
purpose of carrying out the sale. |
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236. |
On any voluntary winding-up of the Company, the liquidator may, with the sanction of a special resolution of the Company and any other sanction required by the Act or the Insolvency Act 1986 (as amended) or the
rights of any other class of shares, divide among the members in specie the whole or any part of the assets of the Company and may, for that purpose, value any assets and determine how the division shall be carried out as between the members or
different classes of members. Any such division shall be in accordance with the existing rights of the members. The liquidator may, with the like sanction, vest the whole or any part of the assets of the Company in trustees on such trusts for the
benefit of the members as he, with the like sanction, shall determine, but no member shall be compelled to accept any assets on which there is a liability. |
PROVISION FOR EMPLOYEES
237. |
The Company may, pursuant to a resolution of the Board and in accordance with the Act, make provision for the benefit of persons employed or formerly employed by the Company or any of its subsidiaries in connection with
the cessation or the transfer to any person of the whole or part of the undertaking of the Company or that subsidiary. |
INDEMNITY
238. |
Subject to the Act the Company may indemnify, out of the assets of the Company, any Director or other officer of the Company or of any associated company against all losses and liabilities which he may sustain or
incur in the execution of the duties of his office or otherwise in relation thereto, provided that this Article 238 shall only have effect insofar as its provisions are not void under sections 232 or 234 of the Act. |
239. |
The Company may also indemnify, out of the assets of the Company, any Director or other officer of either the Company or any associated company where the Company or such associated company acts as trustee of a pension
scheme, against liability incurred by him in connection with the relevant companys activities as trustee of such scheme, provided that this Article 239 shall only have effect in so far as its provisions are not void under sections 232 or 235
of the Act. |
240. |
Subject to sections 205(2) to (4) of the Act, the Company may provide a Director or officer with funds to meet expenditure incurred or to be incurred by him in defending (or seeking relief in respect of) any civil
or criminal proceedings brought or threatened against him in connection with any alleged negligence, default, breach of duty or breach of trust by him in relation to the Company or an associated company, and the Company shall be permitted to take or
omit to take any action or enter into any arrangement which would otherwise be prohibited under sections 197 to 203 of the Act to enable a Director or officer to avoid incurring such expenditure. |
68
241. |
Subject to section 206 of the Act, the Company may also provide a Director or officer with funds to meet expenditure incurred or to be incurred by him in defending himself in an investigation by a regulatory
authority or against action proposed to be taken by a regulatory authority in connection with any alleged negligence, default, breach of duty or breach of trust by him in relation to the Company or any associated company and the Company shall be
permitted to take or omit to take any action or enter into any arrangement which would otherwise be prohibited under section 197 of the Act to enable a Director of officer to avoid incurring such expenditure. |
242. |
For the purpose of Articles 238, 239, 240 and 241 the expression associated company shall mean a company which is either a subsidiary or a holding company of the Company or a subsidiary of such
holding company as such terms are defined in the Act. |
INSURANCE
243. |
Subject to the provisions of the Act, the Board shall have the power to purchase and maintain insurance for or for the benefit of any persons who are or were at any time Directors, officers or employees of the Company,
or of any company or body which is its holding company or in which the Company or such holding company has an interest whether direct or indirect or which is in any way allied to or associated with the Company or who were at any time trustees of any
pension fund in which any employees of the Company or of any other such company or body are interested including (without prejudice to the generality of the foregoing) insurance against any liability incurred by such persons in respect of any act or
omission in the actual or purported execution and/or discharge of their duties and/or in the exercise or purported exercise of their powers and/or otherwise in relation to their duties, powers or offices in relation to the Company and/or any such
other company, body or pension fund. |
DISPUTE RESOLUTION
244. |
The courts of England and Wales shall have exclusive jurisdiction to determine any and all disputes brought by a member in that members capacity as such against the Company and/or the Board and/or any of
the Directors individually or collectively, arising out of or in connection with these Articles or any obligations arising out of or in connection with these Articles. |
245. |
The governing law of these Articles is the law of England and Wales and these Articles shall be interpreted in accordance with English law. |
246. |
For the purpose of Article 244 Director shall be read so as to include each and any Director of the Company from time to time in his capacity as such or as an employee of the Company and shall include any
former Director of the Company. |
69
Appendix
Summary of Example Terms
Rights to Purchase Ordinary Shares of Paragon Offshore plc
Subject to the provisions of the Companies Act 2006 and every other enactment from time to time in force concerning companies (including any orders,
regulations or other subordinate legislation made under the Companies Act 2006 or any such other enactment), so far as they apply to or affect Paragon Offshore plc (the Company), the Board of Directors of the Company (the
Board) may exercise any power of the Company to establish a shareholder rights plan (the Rights Plan). The Rights Plan may be in such form as the Board shall in its absolute discretion decide and may in
particular (but without restriction or limitation) include such terms as are described in this Summary of Example of Terms.
Pursuant to the Rights Plan,
the Board would declare and issue one purchase right (a Right) for each outstanding ordinary share, nominal value $0.01 per share, of the Company (the Ordinary Shares). Each Right would entitle the registered
holder, upon payment to the Company of the price per Ordinary Share specified in the Rights Plan, to have delivered to such holder one Ordinary Share, subject to adjustment.
Until the earlier to occur of (i) 10 days following a public announcement that a person or group of affiliated or associated persons, or persons acting
in concert (a group) has acquired beneficial ownership of 15% or more of the outstanding Ordinary Shares (such person or group, an Acquiring Person) or (ii) 10 business days (or such later date as may be
determined by action of the Board prior to such time as any person or group were to become and Acquiring Person) following the commencement of, or announcement of an intention to make, a takeover offer by a person or group the consummation of which
would result in the beneficial ownership of 15% or more of the outstanding Ordinary Shares being acquired by that person or group (the earlier of such dates being called the Distribution Date), each Right would be associated with
an individual Ordinary Share and the Rights would be transferred with and only with the Ordinary Shares.
After the Distribution Date, separate
certificates evidencing the Rights (Right Certificates) would be mailed to (or credited to the account of) holders of record of the Ordinary Shares as of the close of business on the Distribution Date. Such separate Right
Certificates alone would then evidence the Rights, and the Rights would then be separately transferrable.
The Rights would not be exercisable until the
Distribution Date. The Rights would expire on a date to be specified in the Rights Plan, unless the Rights were earlier redeemed or exchanged by the Company.
After a person or group becomes an Acquiring Person, each holder of a Right, other than Rights held by or on behalf of any Acquiring Person (which would
thereupon become void), would thereafter have the right to receive upon exercise of a Right that number of Ordinary Shares having a market value of two times the exercise price for the Right.
70
In the event that, after a person or group were to become an Acquiring Person, the Company were to be acquired by
a third party (including, without limitation, by way of merger, amalgamation or other business combination transaction, or by acquisition of 50% or more of the Companys assets, cash flow or earning power), proper provisions would be made so
that each holder of a Right (other than Rights held by or on behalf of an Acquiring Person which would have become void) would thereafter have the right to receive upon the exercise of a Right that number of shares of such third party (or its
parent) that at the time of such acquisition would have a market value of two times the exercise price of the Right.
At any time after any person or
group were to become an Acquiring Person and prior to the earlier of one of the events described in the previous paragraph or the acquisition by such Acquiring Person of 50% or more of the outstanding Ordinary Shares, the Board would have the
authority to exchange or cause to be exchanged the Rights (other than Rights held by or on behalf of such Acquiring Person, which would have become void), in whole or in part, for Ordinary Shares at an exchange ratio of one Ordinary Share per Right,
subject to the receipt of any consideration required by applicable law to be received by the Company in respect of the same.
At any time until 10 days
following the first date of public announcement that any person or group has become an Acquiring Person, the Board would have the authority to redeem the Rights in whole, but not in part, at a price per Right to be specified in the Rights Plan (the
Redemption Price).
So long as rights are redeemable, the Board would have the authority, except with respect to the Redemption Price,
to amend the Rights Plan in any manner, subject to applicable law and any restrictions set forth in the Articles of Association of the Company. Thereafter, the Board would have the authority, except with respect to the Redemption Price, to amend the
Rights Plan in any manner that would not adversely affect the interests of holders of the Rights (other than Rights held by or on behalf of any Acquiring Person, which would have become void), or to shorten or lengthen any time period under the
Rights Agreement (other than the time period within which redemption can occur).
Prior to the exercise of Right, a Right would not entitle the holder
thereof to any rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends in respect of such Right.
71
Exhibit 10.12
PARAGON OFFSHORE PLC
PERFORMANCE-VESTED RESTRICTED
STOCK UNIT EMA AWARD
THIS
INSTRUMENT, made as of the 15th day of August, 2014 by Paragon Offshore plc, a public limited company incorporated under the laws of England and Wales (the Company) evidences the EMA Award (as defined in the Paragon Offshore plc 2014
Employee Omnibus Incentive Plan (the Plan)) of performance-vested restricted stock units awarded hereunder to
(Employee) and sets forth the restrictions, terms and conditions that apply thereto.
W I T N E S S E T H:
WHEREAS, the Company was previously an indirect, wholly-owned subsidiary of Noble Corporation plc, a public limited company incorporated under
the laws of England and Wales (Noble);
WHEREAS, at a meeting held on April 25, 2014, the Board of Directors of Noble
approved a plan to transfer ownership of the majority of its standard specification drilling business to the Company (the Separation) and the subsequent distribution of the ordinary shares of the Company to the shareholders of Noble (the
Distribution and, together with the Separation, the Spin-Off);
WHEREAS, in connection with the completion of the
Distribution and in connection with the Spin-Off, the Company has entered into an Employee Matters Agreement with Noble Corporation, a company organized under the laws of the Cayman Islands (the Employee Matters Agreement);
WHEREAS, prior to the Distribution, Employee previously received an award of Noble performance-vested
restricted stock units dated (the Prior Award), under the Noble Corporation 1991 Stock Option and Restricted Stock
Plan (the Noble Plan);
WHEREAS, pursuant to the Employee Matters Agreement, a portion of the Prior Award shall be cancelled
as of the Distribution Date and Employee shall be provided with an award of performance-vested restricted stock units of the Company (Paragon PVRSUs) with respect to such cancelled portion;
WHEREAS, as of such time that is immediately prior to the 1st day of August, 2014 (the Distribution Date), performance-vested restricted stock units were outstanding under the portion of the Prior Award that shall be cancelled pursuant to the
Employee Matters Agreement (Outstanding Noble PVRSUs);
WHEREAS, pursuant to the Employee Matters Agreement, the number of
Paragon PVRSUs granted hereunder shall be based on the number of Outstanding Noble PVRSUs multiplied by the Paragon Price Ratio (as defined in the Employee Matters Agreement); and
WHEREAS, the number of Outstanding Noble PVRSUs as adjusted by the Paragon Price Ratio pursuant
to the Employee Matters Agreement is set forth below.
NOW, THEREFORE, the award of Paragon PVRSUs subject to the restrictions, terms and
conditions set forth in this Instrument is hereby granted to Employee as follows:
1. Performance-Vested Restricted Stock Unit
Award. On the terms and conditions and subject to the restrictions, including forfeiture, hereinafter set forth, the Company hereby awards Restricted Stock Units (the
Awarded Restricted Stock Units) to Employee pursuant to the Plan. The Awarded Restricted Stock Units shall vest or be forfeited in accordance with (and otherwise be subject to) the provisions of this Instrument. The Awarded Restricted
Stock Units are being awarded to Employee without the payment of any cash consideration by Employee, except that payment of nominal value in respect of the Shares hereunder may be required by the Committee or pursuant to procedures of the Committee
in respect of the allotment and issuance, transfer or delivery of such Shares. The award of Restricted Stock Units made to Employee pursuant to this Section 1 is hereby designated by the Committee to be a Performance Award for the purposes of
the Plan.
2. Vesting and Forfeiture. The Awarded Restricted Stock Units shall be subject to being forfeited by Employee during the
Restricted Period specified in the attached Schedule I (the Restricted Period), and shall vest in or be forfeited by Employee as follows:
(a) If Employee remains continuously employed by the Company or a Subsidiary from the Distribution Date through the end of the
Restricted Period, the Awarded Restricted Stock Units shall vest and the forfeiture restrictions applicable to them under this Instrument shall terminate to the extent of the percentage of vesting achieved under the performance measure and vesting
schedule provisions of the attached Schedule I, and any Awarded Restricted Stock Units that do not vest at the end of the Restricted Period shall be forfeited by Employee.
(b) If Employees employment with the Company or a Subsidiary terminates during the Restricted Period by reason of the
death, Disability or Retirement of Employee, then the number of Awarded Restricted Stock Units equal to the total number of Awarded Restricted Stock Units awarded hereunder multiplied by a fraction, (i) the numerator of which is the number of
calendar months remaining in the Restricted Period that end after the date of Employees termination of employment with the Company or a Subsidiary by reason of death, Disability or Retirement, and (ii) the denominator of which is the
total number of months that comprise the Restricted Period (as specified in the attached Schedule I), shall be forfeited by Employee. The remaining number of Awarded Restricted Stock Units awarded hereunder shall vest subject to the forfeiture
restrictions applicable to them under this Instrument which shall terminate at the end of the Restricted Period to the extent of the percentage of vesting achieved under the performance measure and vesting schedule provisions of the attached
Schedule I, and any Awarded Restricted Stock Units that do not vest at the end of the Restricted Period shall be forfeited by Employee.
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(c) If Employees employment with the Company or any Subsidiary terminates
during the Restricted Period for any reason other than the death, Disability or Retirement of Employee, all of the Awarded Restricted Stock Units shall be forfeited by Employee.
(d) The foregoing provisions of this Section 2 to the contrary notwithstanding, if a 409A Change in Control (as defined
below) occurs during the Restricted Period, 50% of the then outstanding Awarded Restricted Stock Units awarded hereunder shall vest and the forfeiture restrictions applicable to them under this Instrument shall terminate, and the remaining 50% of
the then outstanding Awarded Restricted Stock Units awarded hereunder shall be forfeited by Employee. For the purposes of this Instrument, a 409A Change in Control means a Change in Control that also is a change in control event within
the meaning of U.S. Treas. Reg. section 1.409A-3(i)(5). The provisions of this Section 2(d) shall be the exclusive means by which an Awarded Restricted Stock Unit shall vest in connection with a change in the ownership or effective control of
the Company or a change in the ownership of the assets of the Company, and that no provision of any plan, employment agreement or other agreement or arrangement pertaining to Employee and the Company or an Affiliate shall cause an Awarded Restricted
Stock Unit to vest in connection with a change in the ownership or effective control of the Company or a change in the ownership of the assets of the Company unless this Section 2(d) is amended in writing by the parties to provide for such
vesting.
For the purposes of this Instrument, transfers of employment without interruption of service between or among the Company and any of its
Affiliates shall not be considered a termination of employment.
3. Allotment and Issuance of Shares. With respect to any Awarded
Restricted Stock Unit that vests pursuant to the provisions of Section 2(a) or Section 2(b) hereof, as soon as practicable after the percentage of vesting achieved under the performance measure and vesting provisions of the attached
Schedule I has been determined and certified in writing by the Committee and during the period beginning at the end of the Restricted Period and ending on the later of the end of the calendar year in which the Restricted Period ends or 2.5 months
after the time the Restricted Period ends, the Company shall, subject to Section 6(b) herein, allot and issue or transfer to Employee one Share in settlement of such Awarded Restricted Stock Unit and such Awarded Restricted Stock Unit shall be
canceled. With respect to an Awarded Restricted Stock Unit that vests pursuant to the provisions of Section 2(d) hereof, as soon as practicable following the occurrence of a 409A Change in Control (but in no event later than the end of the
calendar year in which such 409A Change in Control occurs, or if later, 2.5 months after such 409A Change in Control), the Company shall, subject to Section 6(b) herein, allot and issue or transfer to Employee one Share in settlement of such
Awarded Restricted Stock Unit and such Awarded Restricted Stock Unit shall be canceled.
4. No Rights as Shareholder. Employee shall
have no rights as a shareholder of the Company, including, without limitation, voting rights or the right to receive dividends and distributions as a shareholder, with respect to the Shares subject to the Awarded Restricted Stock Units, unless and
until and to the extent such Shares are allotted and issued or transferred to Employee as provided herein.
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5. Cash Dividend and Cash Distribution Equivalent Rights.
(a) The Company hereby awards cash dividend and cash distribution equivalent rights to Employee with respect to the Awarded
Restricted Stock Units. The cash dividend and cash distribution equivalent rights awarded to Employee under this Section 5 shall entitle Employee to the payment, with respect to each Share that is subject to an Awarded Restricted Stock Unit
that has not been canceled or forfeited, of an amount in cash equal to the amount of any cash dividend or other cash distribution paid by the Company with respect to one Share while such Awarded Restricted Stock Unit remains outstanding. Such amount
shall be paid to Employee by Employees employer on the date of the payment of the related cash dividend or cash distribution.
(b) To the extent a dividend equivalent payment would have otherwise been paid by Noble after the Distribution Date for the
third quarter of 2014 with respect to the Outstanding Noble PVRSUs had such Outstanding Noble PVRSUs remained in effect, the Company shall pay a cash bonus to Employee, which bonus amount shall be equal to the dividend equivalent payment that would
have otherwise been paid by Noble with respect to the Outstanding Noble PVRSUs had such Outstanding Noble PVRSUs remained in effect. Such amount shall be paid to Employee on the date Noble would have otherwise paid the dividend equivalent payment
with respect to the Outstanding Noble PVRSUs had such Outstanding Noble PVRSUs remained in effect, or as soon as practicable thereafter.
(c) The award of cash dividend and cash distribution rights made to Employee pursuant to this Section 5 is not a
Performance Award for the purposes of the Plan.
6. Arrangements and Procedures Regarding Nominal Value and Withholding Taxes.
(a) Employee shall make arrangements satisfactory to the Committee for (i) the payment of the aggregate nominal value with
respect to the Shares that are allotted and issued, transferred or delivered to or on behalf of Employee in settlement of Awarded Restricted Stock Units that have become vested and (ii) the payment of taxes of any kind that are required by law
to be withheld with respect to the Awarded Restricted Stock Units or the cash dividend and cash distribution equivalent rights awarded under this Instrument, including, without limitation, taxes applicable to (x) the awarding of the Awarded
Restricted Stock Units or the allotment and issuance or transfer of Shares in settlement thereof, or (y) the awarding of the cash dividend and cash distribution equivalent rights or the payments made with respect thereto.
(b) Unless and until the Committee shall determine otherwise and provide notice to Employee in accordance with
Section 6(c), any obligation of Employee under Section 6(a) that arises with respect to the allotment and issuance, transfer or delivery of Shares in settlement of Awarded Restricted Stock Units that have become vested may be satisfied, in
accordance with procedures adopted by the Committee, by (i) Employees
4
forfeiture or surrender of the right to require the Company to allot and issue, transfer or deliver Shares subject to such Awarded Restricted Stock Units, (ii) causing such Awarded
Restricted Stock Units to be settled partly in cash, or (iii) otherwise withholding a portion of such Shares. In the case of Shares as to which the right to require allotment and issuance, transfer or delivery is forfeited or surrendered
pursuant to clause (i) and Shares withheld pursuant to clause (iii), such Shares or rights shall be valued at the Fair Market Value (of such Shares or the Shares to which such rights relate, as the case may be) as of the date on which the
taxable event that gives rise to the withholding requirement occurs.
(c) The Committee may determine, after the
Distribution Date and on notice to Employee, to authorize one or more arrangements (in addition to or in lieu of the arrangement described in Section 6(b)) satisfactory to the Committee for Employee to satisfy the obligation of Employee under
Section 6(a).
(d) If Employee does not, for whatever reason, satisfy the obligation of Employee under
Section 6(a), then the Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct from any payments of any kind otherwise due to Employee the amount required to satisfy the obligation of Employee under such
Section 6(a).
7. Non-Assignability. This Instrument is not assignable or transferable by Employee. No right or interest of
Employee under this Instrument or the Plan may be assigned, transferred or alienated, in whole or in part, either directly or by operation of law (except pursuant to a qualified domestic relations order within the meaning of Section 414(p) of
the Code or a similar domestic relations order under applicable foreign law, either in such form as is acceptable to the committee), and no such right or interest shall be liable for or subject to any debt, obligation or liability of Employee.
8. Defined Terms; Plan Provisions. Unless the context clearly indicates otherwise, the capitalized terms used (and not otherwise
defined) in this Instrument shall have the meanings assigned to them under the provisions of the Plan, or as applicable, the Noble Plan as provided for under Section 8(b)(v) of the Plan. The Awarded Restricted Stock Units and the cash dividend
and cash distribution equivalent rights subject to this Instrument shall be governed by and subject to all applicable provisions of the Plan. This Instrument is subject to the Plan, and the Plan shall govern where there is any inconsistency between
the Plan and this Instrument.
9. Governing Law. This Instrument shall be governed by and construed and enforced in accordance with
the laws of the State of Texas, without regard to the principles of conflicts of laws thereof, except to the extent Texas law is preempted by federal law of the United States or by the laws of England and Wales.
10. Binding Effect. This Instrument shall be binding upon and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.
5
11. Prior Communications; Amendment. This Instrument, together with any Schedules and
Exhibits and any other writings referred to herein or delivered pursuant hereto, evidences the Award granted hereunder, which shall be subject to the restrictions, terms and conditions hereof, and supersedes all prior agreements and understandings,
whether written or oral, between the parties with respect to the subject matter hereof. To the fullest extent provided by applicable law, this Instrument may only be amended, modified and supplemented in accordance with the applicable terms and
conditions set forth in the Plan.
12. Notices. All notices and other communications hereunder shall be in writing and shall be
deemed given if directed in the manner specified below, to the parties at the following addresses and numbers:
(a) If to
the Company, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
Paragon
Offshore plc
3151 Briarpark Drive, Suite 700
Houston, Texas 77024
Attention: Legal Department
Fax: (832) 783-4176
With a copy to:
Chairman of Compensation Committee
c/o Paragon Offshore plc
3151 Briarpark Drive, Suite 700
Houston, Texas 77024
Fax: (832) 783-4176
(b) If to Employee, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
The last known address and number for Employee as maintained in the personnel records of the Company
For purposes of this Section 12, the Company shall provide Employee with written notice of any change of the Companys address, and Employee shall
be responsible for providing the Company with proper notice of any change of Employees address pursuant to the Companys personnel policies, and from and after the giving of such notice the address or addresses therein specified will be
deemed to be the address of such party for the purposes of giving notice hereunder.
13. Severability. If any provision of this
Instrument is held to be unenforceable, this Instrument shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects the restrictions, terms and conditions set forth
in this Instrument shall remain in full force and effect; provided, however, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum
extent permitted by applicable law.
6
14. Descriptive Headings. The descriptive headings herein are inserted for convenience of
reference only, do not constitute a part of this Instrument, and shall not affect in any manner the meaning or interpretation of this Instrument.
15. Gender. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular
form shall be construed to include the plural and vice versa, unless the context otherwise requires.
16. References. The words
this Instrument, herein, hereof, hereby, hereunder and words of similar import refer to this Instrument as a whole and not to any particular subdivision unless expressly so limited.
Whenever the words include, includes and including are used in this Instrument, such words shall be deemed to be followed by the words without limitation.
17. Unfunded Awards. The awards made under this Instrument are unfunded and unsecured obligations and rights to provide or receive
compensation in accordance with the provisions hereof, and to the extent that Employee acquires a right to receive compensation from the Company or a Subsidiary pursuant to this Instrument, such right shall be no greater than the right of any
unsecured general creditor of the Company or such Subsidiary.
18. Compliance with Code Section 409A. The compensation payable
to or with respect to Employee pursuant to the Awarded Restricted Stock Units is intended to be compensation that is not subject to the tax imposed by Code Section 409A, and this Instrument shall be administered and construed to the fullest
extent possible to reflect and implement such intent.
IN WITNESS WHEREOF, the Company has signed and delivered this Instrument as of the
date first above written.
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SCHEDULE I
PARAGON OFFSHORE PLC
8
Exhibit 10.13
PARAGON OFFSHORE PLC
TIME-VESTED RESTRICTED
STOCK UNIT EMA AWARD
THIS
INSTRUMENT, made as of the 15th day of August, 2014 by Paragon Offshore plc, a public limited company incorporated under the laws of England and Wales (the Company) evidences the EMA Award (as defined in the Paragon Offshore plc 2014
Employee Omnibus Incentive Plan (the Plan)) of time-vested restricted stock units awarded hereunder to
(Employee) and sets forth the restrictions, terms and conditions that apply thereto.
W I T N E S S E T H:
WHEREAS, the Company was previously an indirect, wholly-owned subsidiary of Noble Corporation plc, a public limited company incorporated under
the laws of England and Wales (Noble);
WHEREAS, at a meeting held on April 25, 2014, the Board of Directors of Noble
approved a plan to transfer ownership of the majority of its standard specification drilling business to the Company (the Separation) and the subsequent distribution of the ordinary shares of the Company to the shareholders of Noble (the
Distribution and, together with the Separation, the Spin-Off);
WHEREAS, in connection with the completion of the
Distribution and in connection with the Spin-Off, the Company has entered into an Employee Matters Agreement with Noble Corporation, a company organized under the laws of the Cayman Islands (the Employee Matters Agreement);
WHEREAS, prior to the Distribution, Employee previously received an award of Noble time-vested
restricted stock units dated (the Prior Award), under the Noble Corporation 1991 Stock Option and Restricted Stock
Plan (the Noble Plan);
WHEREAS, pursuant to the Employee Matters Agreement, the Prior Award shall be cancelled as of the
Distribution Date and Employee shall be provided with an award of time-vested restricted stock units of the Company (Paragon TVRSUs) with respect to such cancelled Prior Award;
WHEREAS, as of such time that is immediately prior to the 1st day of August, 2014 (the Distribution Date), time-vested restricted stock units were outstanding under the Prior Award that shall be cancelled pursuant to the Employee Matters Agreement
(Outstanding Noble TVRSUs);
WHEREAS, pursuant to the Employee Matters Agreement, the number of Paragon TVRSUs granted
hereunder shall be based on the number of Outstanding Noble TVRSUs multiplied by the Paragon Price Ratio (as defined in the Employee Matters Agreement); and
WHEREAS, the number of Outstanding Noble TVRSUs as adjusted by the Paragon Price Ratio pursuant
to the Employee Matters Agreement is set forth below.
NOW, THEREFORE, the award of Paragon TVRSUs subject to the restrictions, terms and
conditions set forth in this Instrument is hereby granted to Employee as follows:
1. Time-Vested Restricted Stock Unit Award. On
the terms and conditions and subject to the restrictions, including forfeiture, hereinafter set forth, the Company hereby awards Restricted Stock Units (the Awarded
Restricted Stock Units) to Employee pursuant to the Plan. The Awarded Restricted Stock Units shall vest or be forfeited in accordance with (and otherwise be subject to) the provisions of this Instrument. The Awarded Restricted Stock Units are
being awarded to Employee without the payment of any cash consideration by Employee, except that payment of nominal value in respect of the Shares hereunder may be required by the Committee or pursuant to procedures of the Committee in respect of
the allotment and issuance, transfer or delivery of such Shares.
2. Vesting and Forfeiture. Except as set forth in Section 3
of this Instrument, the Awarded Restricted Stock Units shall vest and the forfeiture restrictions applicable to them under this Instrument shall terminate in accordance with the provisions of the attached Schedule I, provided that Employee remains
continuously employed by the Company or a Subsidiary from the Distribution Date to the applicable date of vesting. Any Awarded Restricted Stock Units that have not already vested shall be forfeited by Employee upon the termination of Employees
employment with the Company or a Subsidiary for any reason other than (i) death or Disability or (ii) after the occurrence of a Change in Control, by reason of (A) the Companys termination of Employees employment other
than for Cause (as defined below) or (B) Employees termination of Employees employment for Good Reason (as defined below). Transfers of employment without interruption of service between or among the Company and any of its
Subsidiaries shall not be considered a termination of employment.
3. Acceleration of Vesting.
(a) All of the Awarded Restricted Stock Units that have not already vested shall become fully vested and no longer subject to
any forfeiture restrictions under this Instrument if Employees employment with the Company or a Subsidiary terminates (i) by reason of the death or Disability of Employee or (ii) after the occurrence of a Change in Control, by reason
of (A) the Companys termination of Employees employment other than for Cause or (B) Employees termination of Employees employment for Good Reason.
(b) For purposes of this Instrument, Cause shall mean (i) the willful and continued failure of Employee to
perform substantially Employees duties for the Company (other than any such failure resulting from bodily injury or disease or any other incapacity due to mental or physical illness) after a written demand for substantial performance is
delivered to Employee by the Vice PresidentAdministration of the Company, which specifically identifies the manner in which the Company believes Employee has not substantially performed Employees duties; or (ii) the willful engaging
by Employee in illegal conduct or gross misconduct that is materially and demonstrably detrimental to the Company and/or its Subsidiaries, monetarily or otherwise. For purposes of this provision, no act, or failure to act, on the part of Employee
shall be
2
considered willful unless done, or omitted to be done, by Employee in bad faith or without reasonable belief that Employees action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, upon the instructions of the Chief Executive Officer or another senior officer of the Company or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by the Company in good faith and in the best interests of the Company and its Subsidiaries.
(c) For purposes of this Instrument, Good Reason shall mean any of the following (without Employees express
written consent): (i) a material diminution in Employees base salary as of the day immediately preceding the Change in Control or (ii) the Companys requiring Employee to be based at any office or location more than 50 miles
from Employees principal office or location as of the day immediately preceding the Change in Control. Notwithstanding the foregoing, Employee shall not have the right to terminate Employees employment hereunder for Good Reason unless
(1) within 60 days of the initial existence of the condition or conditions giving rise to such right Employee provides written notice to the Vice PresidentAdministration of the Company of the existence of such condition or conditions, and
(2) the Company fails to remedy such condition or conditions within 30 days following the receipt of such written notice (the Cure Period). If any such condition is not remedied within the Cure Period, Employee must terminate
Employees employment with the Company within a reasonable period of time, not to exceed 30 days, following the end of the Cure Period.
4. Allotment and Issuance of Shares. As soon as practicable following the date any Awarded Restricted Stock Unit vests (but no later
than the end of the calendar year in which vesting occurs or, if later, 2.5 months after vesting), the Company shall, subject to Section 7(b) herein, allot and issue or transfer to Employee one Share in settlement of such Awarded Restricted
Stock Unit and such Awarded Restricted Stock Unit shall be canceled.
5. No Rights as Shareholder. Employee shall have no rights as
a shareholder of the Company, including, without limitation, voting rights or the right to receive dividends and distributions as a shareholder, with respect to the Shares subject to the Awarded Restricted Stock Units, unless and until and to the
extent such Shares are allotted and issued or transferred to Employee as provided herein.
6. Cash Dividend and Cash Distribution
Equivalent Rights.
(a) The Company hereby awards cash dividend and cash distribution equivalent rights to Employee
with respect to the Awarded Restricted Stock Units. The cash dividend and cash distribution equivalent rights awarded to Employee under this Section 6 shall entitle Employee to the payment, with respect to each Share that is subject to an
Awarded Restricted Stock Unit that has not been canceled or forfeited, of an amount in cash equal to the amount of any cash dividend or other cash distribution paid by the Company with respect to one Share while such Awarded Restricted Stock Unit
remains outstanding. Such amount shall be paid to Employee by Employees employer on the date of the payment of the related cash dividend or cash distribution.
3
(b) To the extent a dividend equivalent payment would have otherwise been paid by
Noble after the Distribution Date for the third quarter of 2014 with respect to the Outstanding Noble TVRSUs had such Outstanding Noble TVRSUs remained in effect, the Company shall pay a cash bonus to Employee, which bonus amount shall be equal to
the dividend equivalent payment that would have otherwise been paid by Noble with respect to the Outstanding Noble TVRSUs had such Outstanding Noble TVRSUs remained in effect. Such amount shall be paid to Employee on the date Noble would have
otherwise paid the dividend equivalent payment with respect to the Outstanding Noble TVRSUs had such Outstanding Noble TVRSUs remained in effect, or as soon as practicable thereafter.
7. Arrangements and Procedures Regarding Nominal Value and Withholding Taxes.
(a) Employee shall make arrangements satisfactory to the Committee for (i) the payment of the aggregate nominal value with
respect to the Shares that are allotted and issued, transferred or delivered to or on behalf of Employee in settlement of Awarded Restricted Stock Units that have become vested and (ii) the payment of taxes of any kind that are required by law
to be withheld with respect to the Awarded Restricted Stock Units or the cash dividend and cash distribution equivalent rights awarded under this Instrument, including, without limitation, taxes applicable to (x) the awarding of the Awarded
Restricted Stock Units or the allotment and issuance or transfer of Shares in settlement thereof, or (y) the awarding of the cash dividend and cash distribution equivalent rights or the payments made with respect thereto.
(b) Unless and until the Committee shall determine otherwise and provide notice to Employee in accordance with
Section 7(c), any obligation of Employee under Section 7(a) that arises with respect to the allotment and issuance, transfer or delivery of Shares in settlement of Awarded Restricted Stock Units that have become vested may be satisfied, in
accordance with procedures adopted by the Committee, by (i) Employees forfeiture or surrender of the right to require the Company to allot and issue, transfer or deliver Shares subject to such Awarded Restricted Stock Units,
(ii) causing such Awarded Restricted Stock Units to be settled partly in cash or (iii) otherwise withholding a portion of such Shares. In the case of Shares as to which the right to require allotment and issuance, transfer or delivery is
forfeited or surrendered pursuant to clause (i) and Shares withheld pursuant to clause (iii) such Shares or rights shall be valued at the Fair Market Value (of such Shares or the Shares to which such rights relate, as the case may be) as
of the date on which the taxable event that gives rise to the withholding requirement occurs.
(c) The Committee may
determine, after the Distribution Date and on notice to Employee, to authorize one or more arrangements (in addition to or in lieu of the arrangement described in Section 7(b)) satisfactory to the Committee for Employee to satisfy the
obligation of Employee under Section 7(a).
(d) If Employee does not, for whatever reason, satisfy the obligation of
Employee under Section 7(a), then the Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct from any payments of any kind otherwise due to Employee the amount required to satisfy the obligation of Employee
under Section 7(a).
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8. Non-Assignability. This Instrument is not assignable or transferable by Employee. No
right or interest of Employee under this Instrument or the Plan may be assigned, transferred or alienated, in whole or in part, either directly or by operation of law (except pursuant to a qualified domestic relations order within the meaning of
Section 414(p) of the Code or a similar domestic relations order under applicable foreign law, either in such form as is acceptable to the committee), and no such right or interest shall be liable for or subject to any debt, obligation or
liability of Employee.
9. Defined Terms; Plan Provisions. Unless the context clearly indicates otherwise, the capitalized terms
used (and not otherwise defined) in this Instrument shall have the meanings assigned to them under the provisions of the Plan, or as applicable, the Noble Plan as provided for under Section 8(b)(v) of the Plan. The Awarded Restricted Stock
Units and the cash dividend and cash distribution equivalent rights subject to this Instrument shall be governed by and subject to all applicable provisions of the Plan. This Instrument is subject to the Plan, and the Plan shall govern where there
is any inconsistency between the Plan and this Instrument.
10. Governing Law. This Instrument shall be governed by and construed
and enforced in accordance with the laws of the State of Texas, without regard to the principles of conflicts of laws thereof, except to the extent Texas law is preempted by federal law of the United States or by the laws of England and Wales.
11. Binding Effect. This Instrument shall be binding upon and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.
12. Prior Communications; Amendment. This Instrument, together with any
Schedules and Exhibits and any other writings referred to herein or delivered pursuant hereto, evidences the Award granted hereunder, which shall be subject to the restrictions, terms and conditions hereof, and supersedes all prior agreements and
understandings, whether written or oral, between the parties with respect to the subject matter hereof. To the fullest extent provided by applicable law, this Instrument may only be amended, modified and supplemented in accordance with the
applicable terms and conditions set forth in the Plan.
13. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if directed in the manner specified below, to the parties at the following addresses and numbers:
(a) If to the Company, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
Paragon Offshore plc
3151
Briarpark Drive, Suite 700
Houston, Texas 77024
Attention: Legal Department
Fax:
(832) 783-4176
5
With a copy to:
Chairman of Compensation Committee
c/o Paragon Offshore plc
3151
Briarpark Drive, Suite 700
Houston, Texas 77024
Fax: (832) 783-4176
(b) If to Employee, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
The last known address and number for Employee as maintained in the personnel records of the Company
For purposes of this Section 13, the Company shall provide Employee with written notice of any change of the Companys address, and Employee shall
be responsible for providing the Company with proper notice of any change of Employees address pursuant to the Companys personnel policies, and from and after the giving of such notice the address or addresses therein specified will be
deemed to be the address of such party for the purposes of giving notice hereunder.
14. Severability. If any provision of this
Instrument is held to be unenforceable, this Instrument shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects the restrictions, terms and conditions set forth
in this Instrument shall remain in full force and effect; provided, however, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum
extent permitted by applicable law.
15. Descriptive Headings. The descriptive headings herein are inserted for convenience of
reference only, do not constitute a part of this Instrument, and shall not affect in any manner the meaning or interpretation of this Instrument.
16. Gender. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular
form shall be construed to include the plural and vice versa, unless the context otherwise requires.
17. References. The words
this Instrument, herein, hereof, hereby, hereunder and words of similar import refer to this Instrument as a whole and not to any particular subdivision unless expressly so limited.
Whenever the words include, includes and including are used in this Instrument, such words shall be deemed to be followed by the words without limitation.
18. Unfunded Awards. The awards made under this Instrument are unfunded and unsecured obligations and rights to provide or receive
compensation in accordance with the provisions hereof, and to the extent that Employee acquires a right to receive compensation from the Company or a Subsidiary pursuant to this Instrument, such right shall be no greater than the right of any
unsecured general creditor of the Company or such Subsidiary.
6
19. Compliance with Code Section 409A. The compensation payable to or with respect to
Employee pursuant to the Awarded Restricted Stock Units is intended to be compensation that is not subject to the tax imposed by Code Section 409A, and this Instrument shall be administered and construed to the fullest extent possible to
reflect and implement such intent.
7
IN WITNESS WHEREOF, the Company has signed and delivered this Instrument as of the date first
above written.
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PARAGON OFFSHORE PLC |
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Name: |
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Title: |
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8
SCHEDULE I
PARAGON OFFSHORE PLC
RESTRICTED PERIOD(S)
FOR AWARD OF TIME-VESTED RESTRICTED STOCK UNITS
The following specified restricted time periods shall be applicable to the Awarded Restricted Stock Units awarded pursuant to the Instrument:
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[[ ] of the Awarded Restricted Stock Units shall vest and no longer be subject to forfeiture on
[ ]; and] |
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[[ ] of the Awarded Restricted Stock Units shall vest and no longer be subject to forfeiture on
[ ]; and] |
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[ ] of the Awarded Restricted Stock Units shall vest and no longer be subject to forfeiture on
[ ]. |
Exhibit 10.14
PARAGON OFFSHORE PLC
2014 EMPLOYEE OMNIBUS INCENTIVE PLAN
TIME-VESTED RESTRICTED STOCK UNIT AWARD
THIS INSTRUMENT, made as of the day of
, 201 , by Paragon Offshore plc, a public limited company incorporated under the laws of England and Wales
(the Company) evidences the time-vested Restricted Stock Units (as defined in the Plan) awarded hereunder to
(Employee) and sets forth the restrictions, terms and conditions that apply thereto.
W I T N E S S E T H:
WHEREAS, the committee (the Committee) acting under the Companys 2014 Employee Omnibus Incentive Plan (the
Plan), has determined that it is desirable to award time-vested Restricted Stock Units to Employee pursuant to the Plan; and
WHEREAS, pursuant to the Plan, the Committee has determined that the time-vested Restricted Stock Units so awarded shall be subject to the
restrictions, terms and conditions set forth in this Instrument;
NOW, THEREFORE, the award of time-vested Restricted Stock Units is
hereby granted to Employee as follows:
1. Time-Vested Restricted Stock Unit Award. On the terms and conditions and subject
to the restrictions, including forfeiture, hereinafter set forth, the Company hereby awards Restricted Stock Units (the
Awarded Restricted Stock Units) to Employee pursuant to the Plan. The Awarded Restricted Stock Units are being awarded to Employee effective as of the date of this Instrument (the Effective Date), and shall vest or be
forfeited in accordance with (and otherwise be subject to) the provisions of this Instrument. The Awarded Restricted Stock Units are being awarded to Employee without the payment of any cash consideration by Employee, except that payment of nominal
value in respect of the Shares hereunder may be required by the Committee or pursuant to procedures of the Committee in respect of the allotment and issuance, transfer or delivery of such Shares.
2. Vesting and Forfeiture. Except as set forth in Section 3 of this Instrument, the Awarded Restricted Stock Units shall vest and
the forfeiture restrictions applicable to them under this Instrument shall terminate in accordance with the provisions of the attached Schedule I, provided that Employee remains continuously employed by the Company or a Subsidiary from the Effective
Date to the applicable date of vesting. Any Awarded Restricted Stock Units that have not already vested shall be forfeited by Employee upon the termination of Employees employment with the Company or a Subsidiary for any reason other than
(i) death or Disability or (ii) after the occurrence of a Change in Control, by reason of (A) the Companys termination of Employees employment other than for Cause (as defined below) or (B) Employees termination
of Employees employment for Good Reason (as defined below). Transfers of employment without interruption of service between or among the Company and any of its Subsidiaries shall not be considered a termination of employment.
3. Acceleration of Vesting.
(a) All of the Awarded Restricted Stock Units that have not already vested shall become fully vested and no longer subject to any forfeiture
restrictions under this Instrument if Employees employment with the Company or a Subsidiary terminates (i) by reason of the death or Disability of Employee or (ii) after the occurrence of a Change in Control, by reason of
(A) the Companys termination of Employees employment other than for Cause or (B) Employees termination of Employees employment for Good Reason.
(b) For purposes of this Instrument, Cause shall mean (i) the willful and continued failure of Employee to perform
substantially Employees duties for the Company (other than any such failure resulting from bodily injury or disease or any other incapacity due to mental or physical illness) after a written demand for substantial performance is delivered to
Employee by the Vice PresidentAdministration of the Company, which specifically identifies the manner in which the Company believes Employee has not substantially performed Employees duties; or (ii) the willful engaging by Employee
in illegal conduct or gross misconduct that is materially and demonstrably detrimental to the Company and/or its Subsidiaries, monetarily or otherwise. For purposes of this provision, no act, or failure to act, on the part of Employee shall be
considered willful unless done, or omitted to be done, by Employee in bad faith or without reasonable belief that Employees action or omission was in the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board, upon the instructions of the Chief Executive Officer or another senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to
be done, or omitted to be done, by the Company in good faith and in the best interests of the Company and its Subsidiaries.
(c) For
purposes of this Instrument, Good Reason shall mean any of the following (without Employees express written consent): (i) a material diminution in Employees base salary as of the day immediately preceding the Change in
Control or (ii) the Companys requiring Employee to be based at any office or location more than 50 miles from Employees principal office or location as of the day immediately preceding the Change in Control. Notwithstanding the
foregoing, Employee shall not have the right to terminate Employees employment hereunder for Good Reason unless (1) within 60 days of the initial existence of the condition or conditions giving rise to such right Employee provides written
notice to the Vice PresidentAdministration of the Company of the existence of such condition or conditions, and (2) the Company fails to remedy such condition or conditions within 30 days following the receipt of such written notice (the
Cure Period). If any such condition is not remedied within the Cure Period, Employee must terminate Employees employment with the Company within a reasonable period of time, not to exceed 30 days, following the end of the Cure
Period.
4. Allotment and Issuance of Shares. As soon as practicable following the date any Awarded Restricted Stock Unit vests (but
no later than the end of the calendar year in which vesting occurs or, if later, 2.5 months after vesting), the Company shall, subject to the satisfaction of Employees obligations under Section 7 herein, allot and issue or transfer to
Employee one Share in settlement of such Awarded Restricted Stock Unit and such Awarded Restricted Stock Unit shall be canceled.
2
5. No Rights as Shareholder. Employee shall have no rights as a shareholder of the
Company, including, without limitation, voting rights or the right to receive dividends and distributions as a shareholder, with respect to the Shares subject to the Awarded Restricted Stock Units, unless and until and to the extent such Shares are
allotted and issued or transferred to Employee as provided herein.
6. Dividend Equivalent Rights. The Company hereby awards to
Employee rights to Dividend Equivalents with respect to the Awarded Restricted Stock Units. The rights awarded to Employee under this Section 6 shall entitle Employee to the payment, with respect to each Share that is subject to an Awarded
Restricted Stock Unit that has not been canceled or forfeited, of an amount in cash equal to the amount of any cash dividend or other cash distribution paid by the Company with respect to one Share while such Awarded Restricted Stock Unit remains
outstanding. Such amount shall be paid to Employee by Employees employer on the date of the payment of the related cash dividend or cash distribution.
7. Arrangements and Procedures Regarding Nominal Value and Withholding Taxes.
(a) Employee shall make arrangements satisfactory to the Committee for (i) the payment of the aggregate nominal value with respect to the
Shares that are allotted and issued, transferred or delivered to or on behalf of Employee in settlement of Awarded Restricted Stock Units that have become vested and (ii) the payment of taxes of any kind that are required by law to be withheld
with respect to the Awarded Restricted Stock Units or the cash dividend and cash distribution equivalent rights awarded under this Instrument, including, without limitation, taxes applicable to (x) the awarding of the Awarded Restricted Stock
Units or the allotment and issuance or transfer of Shares in settlement thereof, or (y) the awarding of the cash dividend and cash distribution equivalent rights or the payments made with respect thereto.
(b) Unless and until the Committee shall determine otherwise and provide notice to Employee in accordance with Section 7(c), any
obligation of Employee under Section 7(a) that arises with respect to the allotment and issuance, transfer or delivery of Shares in settlement of Awarded Restricted Stock Units that have become vested may be satisfied, in accordance with
procedures adopted by the Committee, by (i) Employees forfeiture or surrender of the right to require the Company to allot and issue, transfer or deliver Shares subject to such Awarded Restricted Stock Units, (ii) causing such
Awarded Restricted Stock Units to be settled partly in cash or (iii) otherwise withholding a portion of such Shares. In the case of Shares as to which the right to require allotment and issuance, transfer or delivery is forfeited or surrendered
pursuant to clause (i) and Shares withheld pursuant to clause (iii) such Shares or rights shall be valued at the Fair Market Value (of such Shares or the Shares to which such rights relate, as the case may be) as of the date on which the
taxable event that gives rise to the withholding requirement occurs.
(c) The Committee may determine, after the Effective Date and on
notice to Employee, to authorize one or more arrangements (in addition to or in lieu of the arrangement described in Section 7(b)) satisfactory to the Committee for Employee to satisfy the obligation of Employee under Section 7(a).
(d) If Employee does not, for whatever reason, satisfy his or her obligations under Section 7(a), then the Company and its Subsidiaries
shall, to the extent permitted by law, have the right to deduct from any payments of any kind otherwise due to Employee the amount required to satisfy the obligation of Employee under Section 7(a).
3
8. Non-Assignability. This Instrument is not assignable or transferable by Employee. No
right or interest of Employee under this Instrument or the Plan may be assigned, transferred or alienated, in whole or in part, either directly or by operation of law (except by will or the laws of descent and distribution or pursuant to a qualified
domestic relations order within the meaning of Section 414(p) of the Code or a similar domestic relations order under applicable foreign law, either in such form as is acceptable to the Committee), and no such right or interest shall be liable
for or subject to any debt, obligation or liability of Employee.
9. Defined Terms; Plan Provisions. Unless the context clearly
indicates otherwise, the capitalized terms used (and not otherwise defined) in this Instrument shall have the meanings assigned to them under the provisions of the Plan. The Awarded Restricted Stock Units and the Dividend Equivalent rights subject
to this Instrument shall be governed by and subject to all applicable provisions of the Plan. This Instrument is subject to the Plan, and the Plan shall govern where there is any inconsistency between the Plan and this Instrument.
10. Governing Law. This Instrument shall be governed by and construed and enforced in accordance with the laws of the State of Texas,
without regard to the principles of conflicts of laws thereof, except to the extent Texas law is preempted by federal law of the United States or by the laws of England and Wales.
11. Binding Effect. This Instrument shall be binding upon and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.
12. Prior Communications; Amendment. This Instrument, together with any
Schedules and Exhibits and any other writings referred to herein or delivered pursuant hereto, evidences the Award granted hereunder, which shall be subject to the restrictions, terms and conditions hereof, and supersedes all prior agreements and
understandings, whether written or oral, between the parties with respect to the subject matter hereof. To the fullest extent provided by applicable law, this Instrument may only be amended, modified and supplemented in accordance with the
applicable terms and conditions set forth in the Plan.
13. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if directed in the manner specified below, to the parties at the following addresses and numbers:
(a) If
to the Company, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
Paragon Offshore
plc
3151 Briarpark Drive,
Suite 700
Houston, Texas 77042
Attention: Legal Department
Fax: (832) 783-4176
4
With a copy to:
Chairman of Compensation Committee
Paragon Offshore plc
3151
Briarpark Drive,
Suite 700
Houston, Texas 77042
Fax:
(832) 783-4176
(b) If to Employee, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid)
to:
The last known address and number for Employee as maintained in the personnel records of the Company
For purposes of this Section 13, the Company shall provide Employee with written notice of any change of the Companys address, and Employee shall
be responsible for providing the Company with proper notice of any change of Employees address pursuant to the Companys personnel policies, and from and after the giving of such notice the address or addresses therein specified will be
deemed to be the address of such party for the purposes of giving notice hereunder.
14. Severability. If any provision of this
Instrument is held to be unenforceable, this Instrument shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects the restrictions, terms and conditions set forth
in this Instrument shall remain in full force and effect; provided, however, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum
extent permitted by applicable law.
15. Descriptive Headings. The descriptive headings herein are inserted for convenience of
reference only, do not constitute a part of this Instrument, and shall not affect in any manner the meaning or interpretation of this Instrument.
16. Gender. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular
form shall be construed to include the plural and vice versa, unless the context otherwise requires.
17. References. The words
this Instrument, herein, hereof, hereby, hereunder and words of similar import refer to this Instrument as a whole and not to any particular subdivision unless expressly so limited.
Whenever the words include, includes and including are used in this Instrument, such words shall be deemed to be followed by the words without limitation.
18. Unfunded Awards. The awards made under this Instrument are unfunded and unsecured obligations and rights to provide or receive
compensation in accordance with the provisions hereof, and to the extent that Employee acquires a right to receive compensation from the Company or a Subsidiary pursuant to this Instrument, such right shall be no greater than the right of any
unsecured general creditor of the Company or such Subsidiary.
5
19. Compliance with Code Section 409A. The compensation payable to or with respect to
Employee pursuant to the Awarded Restricted Stock Units is intended to be compensation that is not subject to the tax imposed by Code Section 409A, and this Instrument shall be administered and construed to the fullest extent possible to
reflect and implement such intent. If any provision of this Award or the Plan would result in the imposition of an additional tax under Section 409A of the Code, the Company may in its discretion amend that provision, to the extent permissible
under Section 409A of the Code, to avoid imposition of the additional tax; provided, however, that this Section 19 shall not create any obligation on the part of the Company to adopt any such amendment, nor shall the Company have any
liability for failing to do so.
20. No Company Representations or Advice. Employee is hereby notified, and by accepting the award
under this Instrument, Employee acknowledges, that the Company is not providing, and no employee or Subsidiary of the Company is authorized to provide, any tax, legal or financial advice, nor to make any recommendations regarding Employees
participation in the Plan and/or the acquisition or disposition of the Shares subject to the Restricted Stock Units. Employee is advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in
the Plan before taking any action related to the Plan. The Company and its Subsidiaries (i) make no representations or undertakings regarding the tax treatment of any aspect of the Restricted Stock Units or cash dividend or cash distribution
equivalent rights, the issuance of Shares or payment of cash in respect thereof, the subsequent sale of Shares acquired pursuant to such issuance and the receipt of any dividends with respect to such Shares, and (ii) are under no obligation to
structure the terms of the grant or any other aspect of the Restricted Stock Units or the cash dividend or cash distribution equivalent rights to reduce or eliminate Employees tax liability or achieve any particular tax result. The Company
makes no representation or guarantee to Employee as to the future value of the Shares underlying the Restricted Stock Units.
21.
Electronic Delivery and Participation. The Company may, in its sole discretion, decide to deliver any documents related to the award under this Instrument or to Employees current or future participation in the Plan by electronic means.
By accepting the award under this Instrument, Employee consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party
designated by the Company.
22. Data Privacy. By accepting the award under this Instrument, Employee explicitly and unambiguously
consents to the collection, use and transfer, in electronic or other form, of Employees personal data as described in this Instrument and any other Plan-related materials by and among the Company and any of its Subsidiaries (collectively, the
Company Group) and service providers for the exclusive purpose of implementing, administering and managing Employees participation in the Plan. Employee understands that the Company Group may hold certain personal information about
Employee, including, but not limited to, Employees name, home address and telephone number, date of birth, social security number or other identification number, salary, nationality, job title, any shares or directorships held in the Company
Group, details of any awards under the Plan or any other entitlement to shares awarded, canceled, exercised, vested, unvested or outstanding (collectively, Data) which may be transferred within the Company Group or to such Plan service
providers as may be selected by the Company from time to time for the exclusive purpose of assisting the Company with the
6
implementation, administration and management of the Plan. The recipients of Data may be located in the United States or elsewhere, and the recipients country (e.g., the United States) may
have different data privacy laws and protections than Employees country. Employees consent to the sharing of such Data as provided herein may be refused or revoked, but such refusal or withdrawal of his or her consent may affect the his
or her ability to participate in the Plan. For more information, Employee may contact his or her human resources representative.
IN
WITNESS WHEREOF, the Company has signed and delivered this Instrument as of the date first above written.
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PARAGON OFFSHORE PLC |
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Name:
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Title:
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7
SCHEDULE I
PARAGON OFFSHORE PLC
RESTRICTION PERIODS
FOR
AWARD OF TIME-VESTED RESTRICTED STOCK UNITS
The Committee has determined that the following specified restricted time periods shall
be applicable to the Awarded Restricted Stock Units awarded pursuant to the Instrument:
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(i) |
of the Awarded Restricted Stock Units shall vest and no longer be subject to forfeiture on the first anniversary of the Effective Date; and
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(ii) |
of the Awarded Restricted Stock Units shall vest and no longer be subject to forfeiture on the second anniversary of the Effective Date; and
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(iii) |
of the Awarded Restricted Stock Units shall vest and no longer be subject to forfeiture on the third anniversary of the Effective Date.
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Exhibit 10.15
PARAGON OFFSHORE PLC
2014 DIRECTOR OMNIBUS PLAN
TIME-VESTED RESTRICTED STOCK UNIT AWARD
THIS INSTRUMENT, made as of the day of
, 201 , by Paragon Offshore plc, a public limited company incorporated under the laws of England and Wales (the
Company) evidences the time-vested Restricted Stock Units (as defined in the Plan) awarded hereunder to
(Director) and sets forth the restrictions, terms and conditions that apply thereto.
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the Board) acting under the Companys 2014 Director Omnibus Plan (the
Plan), has determined that it is desirable to award time-vested Restricted Stock Units to Director pursuant to the Plan; and
WHEREAS, pursuant to the Plan, the Board has determined that the time-vested Restricted Stock Units so awarded shall be subject to the
restrictions, terms and conditions set forth in this Instrument;
NOW, THEREFORE, the award of time-vested Restricted Stock Units is
hereby granted to Director as follows:
1. Time-Vested Restricted Stock Unit Award. On the terms and conditions and subject to the
restrictions, including forfeiture, hereinafter set forth, the Company hereby awards Restricted Stock Units (the Awarded
Restricted Stock Units) to Director pursuant to the Plan. The Awarded Restricted Stock Units are being awarded to Director effective as of the date of this Instrument (the Effective Date), and shall vest or be forfeited in
accordance with (and otherwise be subject to) the provisions of this Instrument. The Awarded Restricted Stock Units are being awarded to Director without the payment of any cash consideration by Director, except that payment of nominal value in
respect of the Shares hereunder may be required by the Board or pursuant to procedures of the Board in respect of the allotment and issuance, transfer or delivery of such Shares.
2. Vesting and Forfeiture. Except as set forth in Section 3 of this Instrument, the Awarded Restricted Stock Units shall
vest and the forfeiture restrictions applicable to them under this Instrument shall terminate in accordance with the provisions of the attached Schedule I, provided that Director serves on the Board continuously from the Effective Date to the
applicable date of vesting. Any Awarded Restricted Stock Units that have not already vested shall be forfeited by Director upon the termination of Directors service on the Board for any reason other than (i) death or Disability or
(ii) after the occurrence of a Change in Control, for any reason other than the Directors voluntary resignation.
3. Acceleration of Vesting. All of the Awarded Restricted Stock Units that have not
already vested shall become fully vested and no longer subject to any forfeiture restrictions under this Instrument if Directors service on the Board terminates (i) by reason of the death or Disability of Director or (ii) after the
occurrence of a Change in Control, for any reason other than the Directors voluntary resignation.
4. Allotment and Issuance of
Shares. As soon as practicable following the date any Awarded Restricted Stock Unit vests (but no later than the end of the calendar year in which vesting occurs or, if later, 2.5 months after vesting), the Company shall, subject to the
satisfaction of Directors obligations under Section 7 herein, allot and issue or transfer to Director one Share in settlement of such Awarded Restricted Stock Unit and such Awarded Restricted Stock Unit shall be canceled.
5. No Rights as Shareholder. Director shall have no rights as a shareholder of the Company, including, without limitation, voting
rights or the right to receive dividends and distributions as a shareholder, with respect to the Shares subject to the Awarded Restricted Stock Units, unless and until and to the extent such Shares are allotted and issued or transferred to Director
as provided herein.
6. Dividend Equivalent Rights. The Company hereby awards to Director rights to Dividend Equivalents with
respect to the Awarded Restricted Stock Units. The rights awarded to Director under this Section 6 shall entitle Director to the payment, with respect to each Share that is subject to an Awarded Restricted Stock Unit that has not been canceled
or forfeited, of an amount in cash equal to the amount of any cash dividend or other cash distribution paid by the Company with respect to one Share while such Awarded Restricted Stock Unit remains outstanding. Such amount shall be paid to Director
by Directors employer on the date of the payment of the related cash dividend or cash distribution.
7. Arrangements and
Procedures Regarding Nominal Value and Withholding Taxes.
(a) Director shall make arrangements satisfactory to the Board for
(i) the payment of the aggregate nominal value with respect to the Shares that are allotted and issued, transferred or delivered to or on behalf of Director in settlement of Awarded Restricted Stock Units that have become vested and
(ii) the payment of taxes of any kind, if any, that are required by law to be withheld with respect to the Awarded Restricted Stock Units or the cash dividend and cash distribution equivalent rights awarded under this Instrument, including,
without limitation, taxes, if any, applicable to (x) the awarding of the Awarded Restricted Stock Units or the allotment and issuance or transfer of Shares in settlement thereof, or (y) the awarding of the cash dividend and cash
distribution equivalent rights or the payments made with respect thereto.
(b) Unless and until the Board shall determine otherwise and
provide notice to Director in accordance with Section 7(c), any obligation of Director under Section 7(a) that arises with respect to the allotment and issuance, transfer or delivery of Shares in settlement of Awarded Restricted Stock
Units that have become vested may be satisfied, in accordance with procedures adopted by the Board, by (i) Directors forfeiture or surrender of the right to require the Company to allot and issue, transfer or deliver Shares subject to
such Awarded Restricted Stock Units, (ii) causing such Awarded Restricted Stock Units to be settled partly in cash or (iii) otherwise withholding a portion of such Shares. In the case of Shares as to which the right to require allotment
and issuance, transfer or delivery is forfeited or surrendered pursuant to clause
2
(i) and Shares withheld pursuant to clause (iii) such Shares or rights shall be valued at the Fair Market Value (of such Shares or the Shares to which such rights relate, as the case may be)
as of the date on which the applicable event that gives rise to the withholding requirement occurs.
(c) The Board may determine, after the
Effective Date and on notice to Director, to authorize one or more arrangements (in addition to or in lieu of the arrangement described in Section 7(b)) satisfactory to the Board in order for Director to satisfy the obligation of Director under
Section 7(a).
(d) If Director does not, for whatever reason, satisfy his or her obligations under Section 7(a), then the Company
and its Subsidiaries shall, to the extent permitted by law, have the right to deduct from any payments of any kind otherwise due to Director the amount required to satisfy the obligation of Director under Section 7(a).
8. Non-Assignability. This Instrument is not assignable or transferable by Director. No right or interest of Director under this
Instrument or the Plan may be assigned, transferred or alienated, in whole or in part, either directly or by operation of law (except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order within the
meaning of Section 414(p) of the Code or a similar domestic relations order under applicable foreign law, either in such form as is acceptable to the Board), and no such right or interest shall be liable for or subject to any debt, obligation
or liability of Director.
9. Defined Terms; Plan Provisions. Unless the context clearly indicates otherwise, the capitalized terms
used (and not otherwise defined) in this Instrument shall have the meanings assigned to them under the provisions of the Plan. The Awarded Restricted Stock Units and the Dividend Equivalent rights subject to this Instrument shall be governed by and
subject to all applicable provisions of the Plan. This Instrument is subject to the Plan, and the Plan shall govern where there is any inconsistency between the Plan and this Instrument.
10. Governing Law. This Instrument shall be governed by and construed and enforced in accordance with the laws of the State of Texas,
without regard to the principles of conflicts of laws thereof, except to the extent Texas law is preempted by federal law of the United States or by the laws of England and Wales.
11. Binding Effect. This Instrument shall be binding upon and inure to the benefit of the parties hereto and their respective heirs,
personal representatives, successors and permitted assigns.
12. Prior Communications; Amendment. This Instrument, together with any
Schedules and Exhibits and any other writings referred to herein or delivered pursuant hereto, evidences the Award granted hereunder, which shall be subject to the restrictions, terms and conditions hereof, and supersedes all prior agreements and
understandings, whether written or oral, between the parties with respect to the subject matter hereof. To the fullest extent provided by applicable law, this Instrument may only be amended, modified and supplemented in accordance with the
applicable terms and conditions set forth in the Plan.
13. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if directed in the manner specified below, to the parties at the following addresses and numbers:
3
(a) If to the Company, when delivered by hand, confirmed fax or mail (registered or certified
mail with postage prepaid) to:
Paragon Offshore plc
3151 Briarpark Drive,
Suite
700
Houston, Texas 77042
Attention: Legal Department
Fax: (832) 783-4176
With
a copy to:
Chairman of Compensation Committee
Paragon Offshore plc
3151
Briarpark Drive,
Suite 700
Houston, Texas 77042
Fax:
(832) 783-4176
(b) If to Director, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid)
to:
The last known address and number for Director as maintained in the records of the Company
For purposes of this Section 13, the Company shall provide Director with written notice of any change of the Companys address, and Director shall
be responsible for providing the Company with proper notice of any change of Directors address pursuant to the Companys policies, and from and after the giving of such notice the address or addresses therein specified will be deemed to
be the address of such party for the purposes of giving notice hereunder.
14. Severability. If any provision of this Instrument is
held to be unenforceable, this Instrument shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects the restrictions, terms and conditions set forth in this
Instrument shall remain in full force and effect; provided, however, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent
permitted by applicable law.
15. Descriptive Headings. The descriptive headings herein are inserted for convenience of reference
only, do not constitute a part of this Instrument, and shall not affect in any manner the meaning or interpretation of this Instrument.
16. Gender. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular
form shall be construed to include the plural and vice versa, unless the context otherwise requires.
4
17. References. The words this Instrument, herein,
hereof, hereby, hereunder and words of similar import refer to this Instrument as a whole and not to any particular subdivision unless expressly so limited. Whenever the words include,
includes and including are used in this Instrument, such words shall be deemed to be followed by the words without limitation.
18. Unfunded Awards. The awards made under this Instrument are unfunded and unsecured obligations and rights to provide or receive
compensation in accordance with the provisions hereof, and to the extent that Director acquires a right to receive compensation from the Company or a Subsidiary pursuant to this Instrument, such right shall be no greater than the right of any
unsecured general creditor of the Company or such Subsidiary.
19. Compliance with Code Section 409A. The compensation payable
to or with respect to Director pursuant to the Awarded Restricted Stock Units is intended to be compensation that is not subject to the tax imposed by Code Section 409A, and this Instrument shall be administered and construed to the fullest
extent possible to reflect and implement such intent. If any provision of this Award or the Plan would result in the imposition of an additional tax under Section 409A of the Code, the Company may in its discretion amend that provision, to the
extent permissible under Section 409A of the Code, to avoid imposition of the additional tax; provided, however, that this Section 19 shall not create any obligation on the part of the Company to adopt any such amendment, nor shall the
Company have any liability for failing to do so.
20. No Company Representations or Advice. Director is hereby notified, and by
accepting the award under this Instrument, Director acknowledges, that the Company is not providing, and no employee or Subsidiary of the Company is authorized to provide, any tax, legal or financial advice, nor to make any recommendations regarding
Directors participation in the Plan and/or the acquisition or disposition of the Shares subject to the Restricted Stock Units. Director is advised to consult with his or her own personal tax, legal and financial advisors regarding his or her
participation in the Plan before taking any action related to the Plan. The Company and its Subsidiaries (i) make no representations or undertakings regarding the tax treatment of any aspect of the Restricted Stock Units or cash dividend or
cash distribution equivalent rights, the issuance of Shares or payment of cash in respect thereof, the subsequent sale of Shares acquired pursuant to such issuance and the receipt of any dividends with respect to such Shares, and (ii) are under
no obligation to structure the terms of the grant or any other aspect of the Restricted Stock Units or the cash dividend or cash distribution equivalent rights to reduce or eliminate Directors tax liability or achieve any particular tax
result. The Company makes no representation or guarantee to Director as to the future value of the Shares underlying the Restricted Stock Units.
21. Electronic Delivery and Participation. The Company may, in its sole discretion, decide to deliver any documents related to the award
under this Instrument or to Directors current or future participation in the Plan by electronic means. By accepting the award under this Instrument, Director consents to receive such documents by electronic delivery and agrees to participate
in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
5
22. Data Privacy. By accepting the award under this Instrument, Director explicitly and
unambiguously consents to the collection, use and transfer, in electronic or other form, of Directors personal data as described in this Instrument and any other Plan-related materials by and among the Company and any of its Subsidiaries
(collectively, the Company Group) and service providers for the exclusive purpose of implementing, administering and managing Directors participation in the Plan. Director understands that the Company Group may hold certain
personal information about Director, including, but not limited to, Directors name, home address and telephone number, date of birth, social security number or other identification number, salary, nationality, job title, any shares or
directorships held in the Company Group, details of any awards under the Plan or any other entitlement to shares awarded, canceled, exercised, vested, unvested or outstanding (collectively, Data) which may be transferred within the
Company Group or to such Plan service providers as may be selected by the Company from time to time for the exclusive purpose of assisting the Company with the implementation, administration and management of the Plan. The recipients of Data may be
located in the United States or elsewhere, and the recipients country (e.g., the United States) may have different data privacy laws and protections than Directors country. Directors consent to the sharing of such Data as provided
herein may be refused or revoked, but such refusal or withdrawal of his or her consent may affect the his or her ability to participate in the Plan. For more information, Director may contact his or her human resources representative.
IN WITNESS WHEREOF, the Company has signed and delivered this Instrument as of the date first above written.
|
PARAGON OFFSHORE PLC |
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Name:
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Title:
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6
SCHEDULE I
PARAGON OFFSHORE PLC
RESTRICTION PERIODS
FOR
AWARD OF TIME-VESTED RESTRICTED STOCK UNITS
The Board has determined that the following specified restricted time periods shall be
applicable to the Awarded Restricted Stock Units awarded pursuant to the Instrument:
|
(i) |
All of the Awarded Restricted Stock Units shall vest and no longer be subject to forfeiture on
[
]. |
EXHIBIT 31.1
Paragon Offshore plc, a company registered under the laws of England and Wales
I, Randall D. Stilley, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Paragon Offshore plc; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report; |
|
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Paragraph omitted in accordance with instructions of the United States Securities and Exchange Commission; |
|
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
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5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the
registrants board of directors: |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record,
process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 29, 2014
|
/s/ Randall D. Stilley |
Randall D. Stilley |
President, Chief Executive Officer and Director
of Paragon Offshore plc, a company registered under the laws of England and Wales |
EXHIBIT 31.2
Paragon Offshore plc, a company registered under the laws of England and Wales
I, Steven A. Manz, certify that:
|
1. |
I have reviewed this quarterly report on Form 10-Q of Paragon Offshore plc; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report; |
|
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and
have: |
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b) |
Paragraph omitted in accordance with instructions of the United States Securities and Exchange Commission; |
|
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and |
|
d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter
in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
|
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the
registrants board of directors: |
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record,
process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 29, 2014
|
/s/ Steven A. Manz |
Steven A. Manz |
Senior Vice President and Chief Financial Officer of Paragon Offshore plc, a company registered under the laws of England and Wales |
EXHIBIT 32.1
Paragon Offshore plc, a company registered under the laws of England and Wales
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Paragon Offshore plc, a company registered under the laws of England and Wales (the
Company), on Form 10-Q for the period ended June 30, 2014, as filed with the United States Securities and Exchange Commission on the date hereof (the Report), I, Randall D. Stilley, President, Chief Executive Officer and
Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
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|
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August 29, 2014 |
|
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|
|
/s/ Randall D. Stilley |
|
|
|
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|
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Randall D. Stilley |
|
|
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|
|
|
President, Chief Executive Officer and Director
of Paragon Offshore plc, a company registered under the laws of England and Wales |
EXHIBIT 32.2
Paragon Offshore plc, a company registered under the laws of England and Wales
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Paragon Offshore plc, a company registered under the laws of England and Wales (the Company), on Form
10-Q for the period ended June 30, 2014, as filed with the United States Securities and Exchange Commission on the date hereof (the Report), I, Steven A. Manz, Senior Vice President and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
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|
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August 29, 2014 |
|
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|
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/s/ Steven A. Manz |
|
|
|
|
|
|
Steven A. Manz |
|
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|
|
|
|
Senior Vice President and Chief Financial Officer |
|
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|
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of Paragon Offshore plc, a company registered under the laws of England and Wales |