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As filed with the Securities and Exchange Commission on
June 6, 2008
Registration No. 333-149326
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 2
to
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
Allis-Chalmers Energy
Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
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1389
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39-0126090
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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5075 Westheimer,
Suite 890
Houston, Texas 77056
(713) 369-0550
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Victor M. Perez
Allis-Chalmers Energy
Inc.
Chief Financial
Officer
5075 Westheimer,
Suite 890
Houston, Texas 77056
(713) 369-0550
Fax:
(713) 369-0555
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies to:
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Robert V. Jewell
Andrew M. Tucker
Henry Havre
Andrews Kurth LLP
600 Travis, Suite 4200
Houston, Texas 77002
(713) 220-4200
Fax: (713) 238-7235
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D. Frank Harrison
Bronco Drilling Company, Inc.
Chief Executive Officer
16217 North May Avenue
Edmond, Oklahoma 73013
(405) 242-4444
Fax: (405) 285-9234
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Seth R. Molay, P.C.
Joseph L. Motes III
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
(214) 969-2800
Fax: (214) 969-4343
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Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable
after the effectiveness of this registration statement and the
satisfaction or waiver of all other conditions to the proposed
merger described in the joint proxy statement/prospectus forming
a part of this registration statement.
If the securities being registered on this form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following
box. o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the Exchange Act. (Check One):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller reporting company)
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CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Title of Each Class of
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Amount to Be
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Offering Price Per
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Aggregate Offering
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Amount of
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Securities to Be Registered
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Registered(1)
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Unit
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Price(2)
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Registration Fee(3)
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Common stock, par value $0.01 per share
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16,846,500
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N/A
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$277,727,506
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$10,915
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(1)
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Represents the number of shares of
common stock of Allis-Chalmers Energy Inc. issuable upon
completion of the merger, which number is fixed and is not
subject to change.
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(2)
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Calculated pursuant to
Rules 457(c) and 457(f), and estimated solely for purposes
of calculating the registration fee. The proposed maximum
aggregate offering price is $277,727,506, which is (a) the
product of (i) the average of the high and low trading
prices of the common stock of Bronco Drilling Company, Inc. as
reported by the NASDAQ Stock Market on June 4, 2008, or
$17.82, and (ii) the maximum number of shares of common
stock of Bronco Drilling Company, Inc. to be cancelled in the
merger, or 26,808,502 shares, less (b) the amount of
cash to be paid by Allis-Chalmers Energy Inc. in the merger, or
$200 million.
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(3)
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A registration fee of $6,203 was
previously paid in connection with the initial filing of this
registration statement.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this joint proxy statement/prospectus is not
complete and may be changed. Allis-Chalmers Energy Inc. may not
distribute or issue the shares of Allis-Chalmers Energy Inc.
common stock being registered pursuant to this registration
statement until the registration statement filed with the
Securities and Exchange Commission, of which this joint proxy
statement/prospectus is a part, is effective. This joint proxy
statement/prospectus is not an offer to distribute these
securities and Allis-Chalmers Energy Inc. is not soliciting
offers to receive these securities in any state where such offer
or distribution is not permitted.
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SUBJECT TO COMPLETION, DATED
JUNE , 2008
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PROPOSED MERGER YOUR VOTE IS VERY IMPORTANT
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To the Stockholders of Allis-Chalmers Energy Inc. and Bronco
Drilling Company, Inc.:
On January 23, 2008, Allis-Chalmers Energy Inc., or
Allis-Chalmers, and Bronco Drilling Company, Inc., or Bronco,
entered into an Agreement and Plan of Merger, providing for the
acquisition of Bronco by Allis-Chalmers. On June 1, 2008,
Allis-Chalmers and Bronco entered into the First Amendment to
the Agreement and Plan of Merger. Pursuant to the amended merger
agreement, Allis-Chalmers and Bronco agreed that, subject to the
satisfaction of several closing conditions (including approval
by each companys stockholders), Bronco would merge with
and into Elway Merger Sub, LLC, a wholly-owned subsidiary of
Allis-Chalmers,
with Elway Merger Sub, LLC surviving the merger and changing its
name to Bronco Drilling Company LLC.
In the merger, Bronco stockholders will receive
$200.0 million in cash and 16,846,500 shares of
Allis-Chalmers common stock. The number of Allis-Chalmers shares
that will be issued in the merger is fixed and is not subject to
change based on the value of Allis-Chalmers common stock or
otherwise. Based on the closing price of Allis-Chalmers common
stock on June , 2008 and the number of shares
of Bronco common stock outstanding as of that date, the merger
consideration would be valued at
$ per share of Bronco common
stock, consisting of $7.46 in cash and Allis-Chalmers common
stock valued at $ . When Bronco
stockholders grant proxies, they will not know the actual value
of the merger consideration they will receive in the merger.
Call
1-877- -
for the value of the merger consideration per share of Bronco
common stock calculated as of the latest practicable date. We
expect the merger to occur on the first business day following
stockholder approvals. The amended merger agreement is not
terminable due solely to a change in the price of Allis-Chalmers
stock.
The board of directors of Allis-Chalmers has (1) determined
that the merger is advisable and in the best interests of
Allis-Chalmers
and its stockholders, (2) approved the merger and the
amended merger agreement and (3) directed that the issuance
of Allis-Chalmers common stock in the merger be submitted to the
stockholders of Allis-Chalmers for approval at a special meeting
of Allis-Chalmers stockholders. Accordingly, the
Allis-Chalmers board recommends that the stockholders of
Allis-Chalmers vote FOR the issuance of
Allis-Chalmers
common stock in the merger.
The board of directors of Bronco has unanimously
(1) determined that the amended merger agreement, the
merger and the other transactions contemplated thereby are
advisable and in the best interests of Bronco and its
stockholders, (2) approved the amended merger agreement,
the merger and the other transactions contemplated thereby and
(3) directed that the amended merger agreement be submitted
for adoption by the stockholders of Bronco at a special meeting
of Broncos stockholders. Accordingly, the Bronco board
unanimously recommends that the stockholders of Bronco vote FOR
the adoption of the amended merger agreement.
Your vote is very important. We cannot complete the
merger unless, among other things, the Bronco stockholders vote
to adopt the amended merger agreement and the Allis-Chalmers
stockholders vote to approve the issuance of Allis-Chalmers
stock in the merger. Allis-Chalmers and Bronco will each hold a
special meeting of stockholders to vote on these matters. The
special meetings of stockholders will be held at the times and
locations set forth below. Regardless of whether you plan to
attend a special meeting, please submit your proxy by completing
and mailing the enclosed proxy card or, in the case of Bronco,
by using the telephone or Internet procedures provided to you.
If your shares are held in street name, you must
instruct your broker how to vote them.
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For Allis-Chalmers stockholders:
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For Bronco stockholders:
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2008 at 9:00 a.m. Central Time at the
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2008 at 9:00 a.m. Central Time at the
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Houston,
Texas
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Oklahoma
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Before casting your vote, please take the time to review
carefully this joint proxy statement/prospectus, including the
section entitled Risk Factors beginning on
page 26 for a discussion of the risks relating to the
merger.
Allis-Chalmers common stock trades on the NYSE, under the symbol
ALY. Bronco common stock trades on The NASDAQ Global
Market, which we refer to as Nasdaq, under the symbol
BRNC.
Sincerely,
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Munawar H. Hidayatallah
Chairman of the Board and CEO
Allis-Chalmers Energy Inc.
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D. Frank Harrison
Chairman of the Board and CEO
Bronco Drilling Company, Inc.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities to be issued under this joint proxy
statement/prospectus or has passed upon the adequacy or accuracy
of the disclosure in this joint proxy statement/prospectus. Any
representation to the contrary is a criminal offense.
This joint proxy statement/prospectus is
dated ,
2008, and is first being mailed to Allis-Chalmers stockholders
and Bronco stockholders on or
about ,
2008.
ALLIS-CHALMERS
ENERGY INC.
5075 Westheimer,
Suite 890
Houston, Texas 77056
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To be held
on ,
2008
To the Stockholders
of Allis-Chalmers Energy Inc.:
The special meeting of stockholders of Allis-Chalmers Energy
Inc., or the Allis-Chalmers Meeting, will be held
on ,
2008, at 9:00 a.m., Central Time, at
the ,
Houston, Texas for the following purposes:
1. to approve the issuance of Allis-Chalmers Energy
Inc.s common stock to the stockholders of Bronco Drilling
Company, Inc. in connection with the merger of Bronco Drilling
Company, Inc. with and into Elway Merger Sub, LLC, a
wholly-owned subsidiary of Allis-Chalmers Energy Inc., as set
forth in the Agreement and Plan of Merger, dated as of
January 23, 2008, by and among Allis-Chalmers Energy Inc.,
Bronco Drilling Company, Inc. and Elway Merger Sub, Inc. (which
prior to the merger will convert to Elway Merger Sub, LLC), as
amended by the First Amendment thereto, dated as of June 1,
2008, copies of which are attached as
Annexes A-1
and A-2, respectively, to the joint proxy statement/prospectus
accompanying this notice;
2. to approve the adjournment of the Allis-Chalmers
Meeting, if necessary or appropriate, to solicit additional
proxies in favor of the foregoing proposal; and
3. to transact any other business as may properly come
before the Allis-Chalmers Meeting or any adjournments or
postponements thereof.
Attached to this notice is a joint proxy statement/prospectus
setting forth information with respect to these proposals and
certain other information.
The Allis-Chalmers board of directors has fixed the close of
business
on ,
2008 as the record date for the determination of stockholders
entitled to notice of and to vote at the Allis-Chalmers Meeting
or any adjournment or postponement thereof. Only holders of
record of Allis-Chalmers common stock at the close of business
on the record date are entitled to notice of and to vote at the
Allis-Chalmers Meeting. For a period of ten days prior to the
Allis-Chalmers Meeting, a complete list of the holders of record
of Allis-Chalmers common stock entitled to vote at the meeting
will be available at Allis-Chalmers executive offices for
inspection by stockholders during normal business hours for
proper purposes, and will also be available at the
Allis-Chalmers Meeting.
The Allis-Chalmers Energy Inc. Board of Directors recommends
that you vote FOR the issuance of Allis-Chalmers common stock in
the merger and any adjournments of the Allis-Chalmers Meeting,
if necessary or appropriate, to solicit additional proxies.
Your vote is important. All stockholders are cordially
invited to attend the meeting. Regardless of whether you
plan to attend the Allis-Chalmers Meeting, please sign, date and
return the enclosed proxy card as promptly as possible in the
envelope provided, using the procedures in the voting
instructions provided to you. No postage is required if
mailed in the United States. Should you receive more than one
proxy card because your shares are registered in different names
and addresses, each proxy card should be signed and returned to
ensure that all your shares will be voted. Your proxy may be
revoked at any time prior to the time it is voted at the
Allis-Chalmers Meeting.
By Order of the Board of Directors
Munawar H. Hidayatallah
Chairman of the Board of Directors
and Chief Executive Officer
Houston, Texas
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2008
Bronco
Drilling Company, Inc.
16217 North May Avenue
Edmond, Oklahoma 73013
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
To be held
on ,
2008
Notice is hereby given that a special meeting of stockholders of
Bronco Drilling Company, Inc., or the Bronco Meeting, will be
held at
the , ,
Oklahoma, at 9:00 a.m., Central Time,
on ,
2008, for the following purposes:
1. to adopt the Agreement and Plan of Merger, dated as of
January 23, 2008, by and among Allis-Chalmers Energy Inc.,
Bronco Drilling Company, Inc. and Elway Merger Sub, Inc. (which
prior to the merger will convert into Elway Merger Sub, LLC), as
amended by the First Amendment thereto, dated as of June 1,
2008, copies of which are attached as
Annexes A-1
and A-2,
respectively, to the joint proxy statement/prospectus
accompanying this notice, pursuant to which Bronco Drilling
Company, Inc. will merge with and into Elway Merger Sub, LLC, a
wholly-owned subsidiary of Allis-Chalmers Energy Inc.;
2. to approve the adjournment of the Bronco Meeting, if
necessary or appropriate, to solicit additional proxies in favor
of the foregoing proposal; and
3. to transact any other business as may properly come
before the Bronco Meeting or any adjournments or postponements
thereof.
Attached to this notice is a joint proxy statement/prospectus
setting forth information with respect to these proposals and
certain other information.
The Bronco board of directors has fixed the close of business
on ,
2008 as the record date for the determination of stockholders
entitled to notice of and to vote at the Bronco Meeting or any
adjournment or postponement thereof. Only holders of record of
Bronco common stock at the close of business on the record date
are entitled to notice of and to vote at the Bronco Meeting or
any adjournment or postponement thereof. For a period of ten
days prior to the Bronco Meeting, a complete list of the holders
of record of Bronco common stock entitled to vote at the meeting
will be available at Broncos executive offices for
inspection by stockholders during normal business hours for
proper purpose, and will also be available at the Bronco Meeting.
The Bronco Board of Directors recommends that you vote FOR
the adoption of the amended merger agreement and any
adjournments of the Bronco Meeting, if necessary or appropriate,
to solicit additional proxies.
By Order of the Board of Directors
Zachary M. Graves
Chief Financial Officer, Secretary and Treasurer
Edmond, Oklahoma
,
2008
Your vote is important. All stockholders are cordially
invited to attend the meeting. Regardless of whether you
plan to attend the Bronco Meeting, please sign, date and return
the enclosed proxy card as promptly as possible in the envelope
provided, or submit your proxy by telephone or the Internet if
telephone and Internet voting is made available to you in your
proxy card, using the procedures in the voting instructions
provided to you. No postage is required if mailed in the
United States. Should you receive more than one proxy card
because your shares are registered in different names and
addresses, each proxy card should be signed and returned to
ensure that all your shares will be voted. Your proxy may be
revoked at any time prior to the time it is voted at the Bronco
Meeting.
ADDITIONAL
INFORMATION
This joint proxy statement/prospectus incorporates by reference
important business and financial information about
Allis-Chalmers and Bronco that is not included in or delivered
with this joint proxy statement/prospectus. Such information is
included in Allis-Chalmers and Broncos documents
filed with the Securities and Exchange Commission, which we
refer to as the SEC, which are available to Allis-Chalmers and
Bronco stockholders without charge from the SECs website
at www.sec.gov, or upon written or oral request,
excluding any exhibits to those documents, unless the exhibit is
specifically incorporated by reference as an exhibit in this
joint proxy statement/prospectus. You can obtain any of these
documents by requesting them in writing or by telephone from the
appropriate company.
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Allis-Chalmers Energy Inc.
5075 Westheimer, Suite 890
Houston, Texas 77056
Attention: Investor Relations
Telephone number:
(713) 369-0550
www.alchenergy.com
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Bronco Drilling Company, Inc.
16217 North May Avenue
Edmond, Oklahoma 73013
Attention: Investor Relations
Telephone number: (405) 242-4444
www.broncodrill.com
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See Where You Can Find More Information beginning on
page 116 for a detailed description of the documents
incorporated by reference into this joint proxy
statement/prospectus.
In order for you to receive timely delivery of the documents
in advance of the meetings, Allis-Chalmers or Bronco, as
applicable, should receive your request by no later
than ,
2008.
Information contained on the Allis-Chalmers and Bronco websites
is expressly not incorporated by reference into this joint proxy
statement/prospectus.
All information in this joint proxy statement/prospectus
concerning Allis-Chalmers has been furnished by Allis-Chalmers.
All information in this document concerning Bronco has been
furnished by Bronco. Allis-Chalmers has represented to Bronco,
and Bronco has represented to Allis-Chalmers, that the
information furnished by and concerning it is true and complete
in all material respects.
ABOUT
THIS DOCUMENT
This document, which forms part of a registration statement on
Form S-4
filed with the SEC by
Allis-Chalmers
(File
No. 333-149326),
constitutes a prospectus of Allis-Chalmers under Section 5
of the Securities Act of 1933, as amended, which we refer to as
the Securities Act, with respect to the shares of Allis-Chalmers
common stock to be issued to Bronco stockholders in the merger
pursuant to the amended merger agreement.
This document also constitutes a notice of meeting and a proxy
statement under Section 14(a) of the Securities Exchange
Act of 1934, as amended, which we refer to as the Exchange Act,
(1) with respect to the Allis-Chalmers Meeting, at which
Allis-Chalmers stockholders will be asked to consider and vote
upon certain proposals, including a proposal to approve the
issuance of shares of Allis-Chalmers common stock to Bronco
stockholders in the merger pursuant to the amended merger
agreement, and (2) with respect to the Bronco Meeting, at
which Bronco stockholders will be asked to consider and vote
upon certain proposals, including a proposal to adopt the
amended merger agreement.
TABLE OF
CONTENTS
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1
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36
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Tabulation of the Votes
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36
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36
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36
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103
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103
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104
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104
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ii
QUESTIONS
AND ANSWERS ABOUT THE MERGER
Important Information and Risks: The
following are brief answers to some questions that you may have
regarding the proposed merger and the proposals being considered
at the Allis-Chalmers Meeting and the Bronco Meeting.
Allis-Chalmers and Bronco urge you to read and consider
carefully the remainder of this joint proxy
statement/prospectus, including the Risk Factors beginning on
page 26 and the attached Annexes, because the information
in this section does not provide all of the information that
might be important to you. Additional important information and
descriptions of risk factors are also contained in the documents
incorporated by reference in this joint proxy
statement/prospectus.
Your vote
is very important. You are encouraged to submit a proxy as soon
as possible.
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Q: |
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What is the proposed merger? |
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A: |
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Allis-Chalmers, Bronco and Elway Merger Sub, Inc. (which prior
to the merger will convert into Elway Merger Sub, LLC) have
entered into a merger agreement, dated as of January 23,
2008, and an amendment, dated as of June 1, 2008, which we
refer to together as the merger agreement, pursuant to which
Bronco will merge with and into Elway Merger Sub, LLC, with
Elway Merger Sub, LLC surviving the merger and changing its name
to Bronco Drilling Company LLC. Stockholders of both
Allis-Chalmers and Bronco must approve proposals enabling the
merger to occur. |
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Q: |
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Why is the merger being proposed? |
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A: |
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We are proposing the merger because we believe that the combined
company will be a diversified international oilfield service
provider. We also believe that the combination of Allis-Chalmers
and Bronco will: |
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create a strong presence in the U.S. oilfield
services sector;
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provide the opportunity to diversify the asset base
of the two companies;
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increase operational flexibility, including through
the ability to move drilling rigs to international locations to
capitalize on favorable market conditions;
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expand the international operations of the two
companies, which provides diversity as well as a platform for
future growth in existing and new locations;
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create a larger company with an expanded stockholder
base and greater market capitalization;
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enable Allis-Chalmers to combine the operational and
safety best practices developed by both companies in order to
deliver high quality drilling and oilfield services to the
combined companys customers; and
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generate additional career and development
opportunities for the employees of Allis-Chalmers and Bronco,
which in turn will enhance our ability to recruit and retain a
skilled workforce.
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Q: |
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How much in total is Allis-Chalmers paying the Bronco
stockholders in the merger? |
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A: |
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Allis-Chalmers will pay total merger consideration of
$200.0 million in cash and 16,846,500 shares of
Allis-Chalmers common stock. |
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Q: |
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What will Bronco stockholders receive as a result of the
merger? |
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A: |
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At the effective time of the merger, each outstanding share of
Bronco common stock (other than shares held by Bronco
stockholders who do not vote in favor of the adoption of the
merger agreement and who are entitled to and properly demand
appraisal rights in accordance with Delaware law and shares held
by Allis-Chalmers, Bronco or any subsidiary of Bronco or
Allis-Chalmers) will be converted into the right to receive
merger consideration comprised of (1) an amount in cash,
calculated to the nearest $0.01, resulting from dividing
$200.0 million by the aggregate number of shares of Bronco
common stock issued and outstanding immediately prior to the
effective time of the merger (subject to certain exceptions) and
(2) a number of shares of Allis-Chalmers common stock equal
to the exchange ratio. The exchange ratio will be the fraction,
expressed as a decimal and calculated to the nearest one-ten
thousandth, the numerator of which is 16,846,500, and the
denominator of which is the aggregate number of shares of Bronco
common stock issued and outstanding immediately prior to the
effective time of the merger (subject to certain exceptions).
Based on the closing price of Allis-Chalmers common stock on
June , 2008 and the number of shares of Bronco
common stock outstanding as of that date, the merger
consideration would be valued |
1
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at $ per share of Bronco common
stock, consisting of $7.46 in cash and Allis-Chalmers common
stock valued at $ . |
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At the time the Bronco stockholders grant their proxies or vote
at their stockholder meeting, they will not know the actual
value of the merger consideration they will receive in the
merger. Interested stockholders may call
1-877- -
for the value of the merger consideration per share of Bronco
common stock calculated as of the latest practicable date. We
expect the merger to close on the first business day following
receipt of the requisite Allis-Chalmers and Bronco stockholder
approvals. Neither company may terminate the merger agreement
due solely to a change in the price of Allis-Chalmers common
stock. |
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The value of the merger consideration that Bronco stockholders
will receive in the merger will depend on the value of
Allis-Chalmers common stock at the effective time of the merger
and thereafter. The following table indicates the value of the
merger consideration per share of Bronco common stock using a
range of assumed prices of Allis-Chalmers common stock: |
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Value of Allis-Chalmers
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Value of Total
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Common Stock to be
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Amount of Cash to
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Consideration to be
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Assumed
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Issued for Each Share of
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be Paid for Each
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Paid for Each Share
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Allis-Chalmers Common
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Bronco Common
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Share of Bronco
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of Bronco Common
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Stock Price
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Stock(1)
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Common Stock(1)
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Stock(1)
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$
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27.80
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(2)
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$
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17.47
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$
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7.46
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$
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24.93
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$
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20.00
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$
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12.57
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$
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7.46
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$
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20.03
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$
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19.00
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$
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11.94
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$
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7.46
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$
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19.40
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$
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18.37
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(3)
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$
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11.54
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$
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7.46
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$
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19.00
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$
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18.00
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$
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11.31
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$
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7.46
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$
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18.77
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$
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17.17
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(4)
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$
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10.79
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$
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7.46
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$
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18.25
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$
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17.00
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$
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10.68
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$
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7.46
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$
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18.14
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$
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16.00
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$
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10.05
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$
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7.46
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$
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17.51
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$
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15.00
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$
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9.43
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$
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7.46
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$
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16.89
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$
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9.73
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(5)
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$
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6.11
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$
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7.46
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$
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13.57
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(1) |
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Assumes 26,808,502 shares of Bronco common stock
outstanding. |
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(2) |
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The closing price of Allis-Chalmers common stock on
July 12, 2007 (the 52-week high closing price). |
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(3) |
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The closing price of Allis-Chalmers common stock on May 9,
2008 (the
year-to-date
high closing price). |
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(4) |
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The closing price of Allis-Chalmers common stock on May 30,
2008, the last trading day before the public announcement of the
amendment to the initial merger agreement. |
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(5) |
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The closing price of Allis-Chalmers common stock on
February 8, 2008 (the 52-week low closing price). |
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The table above includes the highest and lowest closing sale
prices of Allis-Chalmers common stock within the last year and
therefore indicates a range within which the price at the
effective time of the merger can reasonably be expected to fall,
although there can be no assurance that the price of
Allis-Chalmers common stock at the effective time of the merger
or thereafter will not be higher or lower than the values shown
in the table. |
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Q: |
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Will Bronco stockholders be able to choose whether to receive
cash or Allis-Chalmers common stock in the merger? |
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A: |
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No. Each Bronco stockholder will receive cash and
Allis-Chalmers common stock as described above. |
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Q: |
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When do Allis-Chalmers and Bronco expect to complete the
merger? |
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A: |
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Allis-Chalmers and Bronco are working to complete the merger as
quickly as possible. Allis-Chalmers and Bronco currently expect
to complete the merger promptly following the Allis-Chalmers and
Bronco stockholder meetings that will be held
on ,
2008. However, neither Allis-Chalmers nor Bronco can predict the
exact timing of the completion of the merger because it is
subject to conditions both within |
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and beyond their respective control. See The Merger
Agreement Conditions to the Completion of the
Merger, beginning on page 91. |
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Q: |
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How will Allis-Chalmers stockholders be affected by the
merger and issuance of shares of
Allis-Chalmers
common stock? |
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A: |
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After the merger, each Allis-Chalmers stockholder will have the
same number of shares of Allis-Chalmers common stock that the
stockholder held immediately prior to the merger. However,
because Allis-Chalmers will be issuing new shares of
Allis-Chalmers common stock to Bronco stockholders in the
merger, each share of Allis-Chalmers common stock outstanding
immediately prior to the merger will represent a smaller
percentage of the aggregate number of shares of Allis-Chalmers
common stock outstanding after the merger. As a result of the
merger, each Allis-Chalmers stockholder will own a smaller
percentage of the shares of common stock of a larger company
with more outstanding shares and more assets. Upon completion of
the merger, it is anticipated that Allis-Chalmers and
Broncos stockholders will own approximately 68% and 32%,
respectively, of the combined company. |
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Q: |
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What conditions are required to be fulfilled to complete the
merger? |
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A: |
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Allis-Chalmers and Bronco are not required to complete the
merger unless certain specified conditions are satisfied or
waived. These conditions include, but are not limited to: |
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the approval by the Allis-Chalmers stockholders of
the issuance of the shares of Allis-Chalmers common stock to be
issued in the merger;
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the adoption of the merger agreement by the Bronco
stockholders;
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the expiration or termination of the waiting period
under the Hart-Scott Rodino Antitrust Improvements Act of 1976,
as amended, which we refer to as the Hart-Scott-Rodino Act
(early termination of the waiting period was granted on
March 10, 2008);
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the receipt by each of Allis-Chalmers and Bronco
from its legal counsel of a legal opinion to the effect that for
federal income tax purposes, (i) the merger will be treated as a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, and (ii) each
of
Allis-Chalmers
and Bronco will be a party to such reorganization within the
meaning of Section 368(b) of the Internal Revenue Code;
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obtaining all other consents, approvals, permits and
authorizations required to be obtained from any governmental
authority to consummate the merger;
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the absence of any action taken by any governmental
entity that restrains or otherwise prohibits the consummation of
the merger or imposes any material restrictions on the parties
with respect to the merger;
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subject to certain exceptions, the accuracy of
Allis-Chalmers and Broncos respective
representations and warranties contained in the merger agreement;
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the absence of any event or circumstance that
constitutes a material adverse effect with respect to either
Allis-Chalmers or Bronco;
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the effectiveness of a registration statement
relating to the shares of Allis-Chalmers common stock to be
issued in the merger; and
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the approval of the shares of Allis-Chalmers common
stock to be issued in the merger for listing on the NYSE.
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Neither Allis-Chalmers nor Bronco can assure you that these
required conditions will be satisfied. For a more complete
summary of the conditions that must be satisfied or waived prior
to the effective time of the merger, see The Merger
Agreement Conditions to the Completion of the
Merger, beginning on page 91. |
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Q: |
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Is the merger subject to Allis-Chalmers receiving
financing? |
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A: |
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No. Allis-Chalmers
expects to receive financing to fund the cash component of the
merger consideration, the repayment of outstanding Bronco debt
and transaction expenses as described below, but receipt of
financing is not a condition to completing the merger. See
Financing of the Merger, beginning on page 107. |
3
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Q: |
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How will Allis-Chalmers finance the cash component of the
merger, the repayment of outstanding Bronco debt and transaction
expenses? |
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A: |
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To finance the cash component of the merger consideration, the
repayment of outstanding Bronco debt and transaction expenses,
and to raise cash for working capital and general corporate
purposes, Allis-Chalmers expects to incur incremental
indebtedness of up to $350.0 million from either (1) a
permanent debt financing of up to $350.0 million, or
(2) if the permanent debt financing cannot be consummated
prior to or concurrently with the closing of the merger, the
draw down under a senior unsecured bridge facility in an
aggregate principal amount of up to $350.0 million to be
arranged by RBC Capital Markets Corporation, which we refer to
as RBC, and Goldman Sachs Credit Partners L.P., which we refer
to as GSCP, acting as joint lead arrangers and joint
bookrunners, with Royal Bank of Canada, which we refer to as
Royal Bank, acting as the administrative agent. Under the
commitment letter, dated June 1, 2008, and subject to the
terms and conditions set forth in the commitment letter, Royal
Bank and GSCP each committed to provide 50% of the loans under a
$350.0 million senior unsecured bridge facility to
Allis-Chalmers or one of its wholly-owned subsidiaries
reasonably satisfactory to Royal Bank and GSCP. The commitments
will terminate on July 31, 2008, if the bridge facility has
not been drawn by such date and the merger is not consummated by
such date. The commitments may also terminate prior to
July 31, 2008, if the merger is abandoned, a material
condition to the merger is not satisfied or Allis-Chalmers
breaches its obligations under the commitment letter. See
Financing of the Merger, beginning on page 107. |
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Q: |
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Are Bronco stockholders entitled to appraisal rights? |
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A: |
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Holders of shares of Bronco common stock who do not vote in
favor of the merger will have the right to seek appraisal of the
fair value of their shares, but only if they submit a written
demand for such an appraisal before the vote on the merger and
comply with other Delaware law procedures and the requirements
described in this joint proxy statement/prospectus under the
heading Appraisal Rights, beginning on page 103.
Bronco stockholders who wish to seek appraisal of their shares
are in any case urged to seek the advice of counsel with respect
to the availability of appraisal rights. |
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Q: |
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Are Allis-Chalmers stockholders entitled to appraisal
rights? |
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A: |
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Holders of shares of Allis-Chalmers common stock will not have
the right to seek appraisal of the fair value of their shares. |
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Q: |
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Will the merger be taxable to Bronco stockholders? |
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A: |
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Allis-Chalmers and Bronco anticipate that receipt of the stock
portion of the merger consideration will not be taxable to
Bronco stockholders. See Material U.S. Federal Income Tax
Consequences of the Merger beginning on page 85. |
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Q: |
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Are there risks associated with the merger that I should
consider in deciding how to vote? |
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A: |
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Yes. You should carefully read the detailed description of the
risks associated with the merger and the combined companys
operations described under the heading Risk Factors,
beginning on page 26. |
4
QUESTIONS
AND ANSWERS ABOUT THE MEETINGS
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Q: |
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Why am I receiving this joint proxy statement/prospectus? |
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A: |
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Allis-Chalmers: Allis-Chalmers stockholders
are being asked to approve the issuance of shares of
Allis-Chalmers common stock, which will be issued to Bronco
stockholders under the merger agreement. |
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Bronco: Bronco stockholders are being asked to
adopt the merger agreement. |
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Q: |
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When and where will the Allis-Chalmers Meeting take place? |
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A: |
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The Allis-Chalmers Meeting will be held
on ,
2008 at 9:00 a.m., Central Time, at
the ,
Houston,
Texas . |
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Q: |
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When and where will the Bronco Meeting take place? |
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A: |
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The Bronco Meeting will be held
on ,
2008 at 9:00 a.m., Central Time, at
the , ,
Oklahoma . |
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Q: |
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Who can attend and vote at the stockholders meetings? |
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A: |
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Allis-Chalmers: All Allis-Chalmers
stockholders of record as of the close of business
on ,
2008, the record date for the Allis-Chalmers Meeting, are
entitled to receive notice of and to vote at the Allis-Chalmers
Meeting. |
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Bronco: All Bronco stockholders of record as
of the close of business
on ,
2008, the record date for the Bronco Meeting, are entitled to
receive notice of and to vote at the Bronco Meeting. |
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Q: |
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How does the Allis-Chalmers board of directors recommend that
Allis-Chalmers stockholders vote? |
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A: |
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The Allis-Chalmers board of directors recommends that
Allis-Chalmers stockholders vote FOR the issuance of shares of
Allis-Chalmers common stock to Bronco stockholders in the merger
pursuant to the merger agreement. For a more complete
description of the recommendation of the Allis-Chalmers board of
directors, see The Merger Recommendation of
the Allis-Chalmers Board of Directors and Its Reasons for the
Merger, beginning on page 54. |
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The Allis-Chalmers board of directors also recommends that
Allis-Chalmers stockholders vote FOR any adjournments of the
Allis-Chalmers Meeting, if necessary or appropriate, to solicit
additional proxies. |
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Q: |
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How does the Bronco board of directors recommend that Bronco
stockholders vote? |
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A: |
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The Bronco board of directors unanimously recommends that Bronco
stockholders vote FOR the proposal to adopt the merger
agreement. For a more complete description of the recommendation
of the Bronco board of directors, see The
Merger Recommendation of the Bronco Board of
Directors and Its Reasons for the Merger, beginning on
page 56. |
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The Bronco board of directors also unanimously recommends that
Bronco stockholders vote FOR any adjournments of the Bronco
Meeting, if necessary or appropriate, to solicit additional
proxies. |
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Q: |
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What is the vote required to approve the proposals related to
the merger? |
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A: |
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Allis-Chalmers: Under the rules of the NYSE,
which are applicable to Allis-Chalmers, approval of the issuance
of shares of Allis-Chalmers common stock to Bronco stockholders
in the merger pursuant to the merger agreement requires the
affirmative vote of the holders of a majority of the votes cast
at a meeting at which a majority of the outstanding shares of
Allis-Chalmers common stock as of the record date are present in
person or by proxy. This stockholder vote is required under the
rules of the NYSE because the aggregate number of shares of
Allis-Chalmers common stock to be issued to Bronco stockholders
in the merger will be equal to or exceed 20% of the total number
of shares of Allis-Chalmers common stock outstanding immediately
prior to the completion of the merger. If an Allis-Chalmers
stockholder attends but fails to vote on the issuance of shares
of Allis-Chalmers common stock to Bronco stockholders in the
merger, or if an Allis-Chalmers stockholder abstains, the
presence of the Allis-Chalmers stockholder will be counted for
purposes of a quorum, but will not constitute a vote cast.
Abstentions and broker non-votes |
5
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will not be counted either in favor of or against approval of
the issuance of shares of Allis-Chalmers common stock in the
merger at the Allis-Chalmers Meeting. |
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Bronco: Under the General Corporation Law of
the State of Delaware, which we refer to as the DGCL, and Nasdaq
rules, which are applicable to Bronco, adoption of the merger
agreement requires the affirmative vote of the holders of a
majority of the outstanding shares of Bronco common stock
entitled to vote as of the record date. Accordingly, if a Bronco
stockholder fails to vote at the Bronco Meeting, fails to return
a proxy or abstains, that will have the same effect as a vote
against adoption of the merger agreement. Broker non-votes will
also have the same effect as a vote against adoption of the
merger agreement. |
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Q: |
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What other proposals are to be considered and voted upon at
the Allis-Chalmers Meeting and the Bronco Meeting? |
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A: |
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Allis-Chalmers: Allis-Chalmers stockholders
are being asked to consider and vote on a proposal to approve
the adjournment of the Allis-Chalmers Meeting, if necessary or
appropriate, to solicit additional proxies in favor of the
proposal to approve the issuance of Allis-Chalmers common stock
to Bronco stockholders in the merger. |
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The Allis-Chalmers board of directors recommends that
Allis-Chalmers stockholders vote FOR the adjournment of the
Allis-Chalmers Meeting, if necessary or appropriate, to solicit
additional proxies. The proposal is described in the section
Proposals Being Submitted to a Vote of Allis-Chalmers
Stockholders at the Allis-Chalmers Meeting, beginning on
page 114. |
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Bronco: Bronco stockholders are being asked to
consider and vote on a proposal to approve the adjournment of
the Bronco Meeting, if necessary or appropriate, to solicit
additional proxies in favor of the proposal to adopt the merger
agreement. |
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The Bronco board of directors unanimously recommends that Bronco
stockholders vote FOR the adjournment of the Bronco Meeting, if
necessary or appropriate, to solicit additional proxies. This
proposal is described in the section Proposals Being
Submitted to a Vote of Bronco Stockholders at the Bronco
Meeting, beginning on page 115. |
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Q: |
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What is the vote required to approve a proposal to adjourn
the special meeting? |
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A: |
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Allis-Chalmers: The affirmative vote of a
majority of the votes cast at the Allis-Chalmers Meeting is
required to approve any adjournment proposal. |
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If an Allis-Chalmers stockholder attends but fails to vote on
the adjournment proposal discussed above, or if an
Allis-Chalmers stockholder abstains, the presence of the
Allis-Chalmers stockholder will be counted for purposes of a
quorum, but will not constitute a vote cast. Abstentions and
broker non-votes will not be counted either in favor of or
against approval of a proposal to adjourn the Allis-Chalmers
Meeting. |
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Bronco: The affirmative vote of a majority of
the votes cast at the Bronco Meeting is required to approve any
adjournment proposal. |
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If a Bronco stockholder attends but fails to vote on the
adjournment proposal discussed above, or if a Bronco stockholder
abstains, the presence of the Bronco stockholder will be counted
for purposes of a quorum, but will not constitute a vote cast.
Abstentions and broker non-votes will not be counted either in
favor of or against approval of a proposal to adjourn the Bronco
Meeting. |
|
Q: |
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How do I vote my shares? |
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A: |
|
After you have carefully read this joint proxy
statement/prospectus, please respond by completing, signing and
dating your proxy card and returning it in the enclosed
postage-paid envelope as soon as possible or, if you are a
Bronco stockholder, submit your proxy by telephone or the
Internet (if such method is made available to you in your proxy
card) in accordance with the instructions provided under
The Bronco Meeting Proxy Voting by Holders of
Record, beginning on page 38. |
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Please refer to your proxy card or the information forwarded by
your broker, bank or other nominee to see which options are
available to you. Broncos Internet and telephone proxy
submission procedures are |
6
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designed to authenticate stockholders and to allow you to
confirm that your instructions have been properly recorded. |
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The method you use to submit a proxy will not limit your right
to vote in person at the Allis-Chalmers Meeting or the Bronco
Meeting if you later decide to attend one of the meetings. If
your shares of
Allis-Chalmers
common stock or Bronco common stock are held in the name of a
broker, bank or other nominee, you must obtain a proxy, executed
in your favor, from the holder of record, to be able to vote in
person at the applicable stockholders meeting. |
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Q: |
|
How will my shares be voted? |
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A: |
|
Allis-Chalmers: All shares of Allis-Chalmers
common stock entitled to vote and represented by properly
completed proxies received prior to the Allis-Chalmers Meeting,
and not revoked, will be voted at the Allis-Chalmers Meeting as
instructed on the proxies. Except as indicated in the next
Q&A, if you properly complete and sign your
proxy card but do not indicate how your shares should be voted
on a proposal, the shares of Allis-Chalmers common stock
represented by your proxy will be voted as the Allis-Chalmers
board of directors recommends and therefore will be voted FOR
the issuance of additional shares of Allis-Chalmers common stock
in the merger, and FOR the adjournment of the meeting, if
necessary or appropriate, to solicit additional proxies in favor
of such proposal. |
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Bronco: All shares of Bronco common stock
entitled to vote and represented by properly completed proxies
received prior to the Bronco Meeting, and not revoked, will be
voted at the Bronco Meeting as instructed on the proxies.
Except as indicated in the next Q&A, if you
properly complete and sign your proxy card but do not indicate
how your shares of Bronco common stock should be voted on a
proposal, the shares of Bronco common stock represented by your
proxy will be voted as the Bronco board of directors recommends
and therefore will be voted FOR the adoption of the merger
agreement and FOR the adjournment of the meeting, if necessary
or appropriate, to solicit additional proxies in favor of such
proposal. |
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If my shares are held in street name by my
broker, bank or other nominee, will my broker, bank or other
nominee vote my shares for me in connection with the merger and
the issuance of shares in the merger? |
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No. Your broker, bank or other nominee will NOT be able to
vote your shares of Allis-Chalmers or Bronco common stock held
in street name on the Allis-Chalmers proposal to
approve the issuance of Allis-Chalmers common stock in the
merger or the Bronco proposal to adopt the merger agreement, as
applicable, unless you instruct your broker, bank or other
nominee how to vote. Please follow the voting instructions
provided by your broker, bank or other nominee. Please note that
you may not vote shares held in street name by returning a proxy
card directly to Allis-Chalmers or Bronco or by voting in person
at your stockholders meeting unless you provide a
legal proxy, which you must obtain from your broker,
bank or other nominee. |
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If you are an Allis-Chalmers stockholder and you do not instruct
your broker or other nominee on how to vote your shares: |
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your broker, bank or other nominee may not vote your
shares on the proposal to approve the issuance of shares of
Allis-Chalmers common stock in the merger, and your vote will
not be cast in favor of this proposal.
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If you are a Bronco stockholder and you do not instruct your
broker, bank or other nominee on how to vote your shares: |
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your broker, bank or other nominee may not vote your
shares on the proposal to adopt the merger agreement, which will
have the same effect as a vote AGAINST the adoption of the
merger agreement.
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You should therefore provide your broker, bank or other nominee
with instructions as to how to vote your shares of
Allis-Chalmers or Bronco common stock. |
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If I am a Bronco stockholder, should I send in my stock
certificates with my proxy card? |
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No. Please DO NOT send your Bronco stock
certificates with your proxy card. After the merger is
completed, you will be sent a letter of transmittal with
detailed written instructions for exchanging your Bronco common
stock certificates for the merger consideration. If your shares
of Bronco common stock are held in street name by
your broker, bank or other nominee, you will receive
instructions from your broker, bank or other nominee as to how
to effect the surrender of your street name shares
in exchange for the merger consideration. |
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Can I change my vote after I deliver my proxy? |
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Yes. You may change your vote at any time before your proxy is
voted at the Allis-Chalmers Meeting or the Bronco Meeting, as
applicable. You can do this in any of the three following ways: |
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by sending a written notice to the Secretary of
Allis-Chalmers or Bronco, as applicable, in time to be received
before the Allis-Chalmers Meeting or the Bronco Meeting, as
applicable, stating that you would like to revoke your proxy;
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by completing, signing and dating a later proxy card
or, if you are a Bronco stockholder, by submitting a later proxy
by telephone or by the Internet (if such method is made
available to you in your proxy card), in which case your
later-submitted proxy will be recorded and your earlier proxy
revoked; or
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if you are a holder of record, or if you hold a
proxy in your favor executed by a holder of record, by attending
the applicable stockholders meeting and voting in person. Simply
attending the Allis-Chalmers Meeting or the Bronco Meeting
without voting will not revoke your proxy or change your vote.
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If your shares of Allis-Chalmers common stock or Bronco common
stock are held in an account at a broker, bank or other nominee
and you desire to change your vote, you should contact your
broker, bank or other nominee. |
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What should I do if I receive more than one set of voting
materials for the Allis-Chalmers Meeting or the Bronco
Meeting? |
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You may receive more than one set of voting materials for the
Allis-Chalmers Meeting or the Bronco Meeting and the materials
may include multiple proxy cards or voting instruction cards.
For example, you will receive a separate voting instruction card
for each brokerage account in which you hold shares. If you are
a holder of record registered in more than one name, you will
receive more than one proxy card. Please complete, sign, date
and return each proxy card and voting instruction card that you
receive according to the instructions on it or, if you are a
Bronco stockholder, submit a proxy by mail or by telephone or
the Internet, if such method is made available to you in your
proxy card for each proxy card you receive, according to the
instructions on it. |
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Can I submit my proxy by telephone or the Internet? |
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Allis-Chalmers: No. Holders of record may
not submit their proxies by telephone or by the Internet. See
The Allis-Chalmers Meeting Proxy Voting by
Holders of Record, beginning on page 35. |
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Bronco: Yes. Holders of record may submit
their proxies by telephone or by the Internet. See The
Bronco Meeting Proxy Voting by Holders of
Record, beginning on page 38. |
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How will the solicitation of proxies be handled? |
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Allis-Chalmers: Allis-Chalmers expects to
solicit proxies primarily by mail. Allis-Chalmers and Bronco
will each pay one-half of the expenses incurred in connection
with the printing and mailing of this joint proxy
statement/prospectus. Allis-Chalmers has retained Georgeson Inc.
for a fee of $8,500, plus certain expenses, to assist in the
solicitation of proxies and otherwise in connection with the
Allis-Chalmers Meeting. Allis-Chalmers and Georgeson will also
request brokers, banks and other nominees holding shares of
Allis-Chalmers common stock beneficially owned by others to send
this joint proxy statement/prospectus to, and obtain proxies
from, the beneficial owners and will reimburse holders for their
reasonable expenses in so doing. |
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Allis-Chalmers stock transfer agent and registrar,
American Stock Transfer & Trust Company, will
also solicit proxies from holders of record of Allis-Chalmers
common stock for a fee not in excess of its usual fee for
serving as Allis-Chalmers stock transfer agent and
registrar. Solicitation of proxies by mail may be supplemented
by telephone, email and other electronic means, advertisements
and personal solicitations by the directors, officers and
employees of Allis-Chalmers. No additional compensation will be
paid to
Allis-Chalmers
directors, officers or employees for their solicitation efforts. |
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Bronco: Bronco expects to solicit proxies
primarily by mail, but its directors, officers and employees may
also solicit proxies by personal interview, telephone or similar
means. No additional compensation will be paid to Broncos
directors, officers or employees for their solicitation efforts.
Bronco and Allis-Chalmers will each pay one-half of the expenses
incurred in connection with printing and mailing of this joint
proxy statement/prospectus. Bronco has retained Georgeson Inc.
for a fee of $10,500 (subject to adjustment in certain
circumstances), plus reasonable out-of-pocket expenses, to
assist in the solicitation of proxies and otherwise in
connection with the Bronco Meeting. Bronco and Georgeson will
also request brokers, banks and other nominees holding shares of
Bronco common stock beneficially owned by others to send this
joint proxy statement/prospectus to, and obtain proxies from,
the beneficial owners and will reimburse holders for their
reasonable expenses in so doing. |
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Who can answer my questions? |
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If you have any questions about the merger or how to submit your
proxy, or if you need additional copies of this joint proxy
statement/prospectus, the enclosed proxy card or voting
instructions, you should contact the information agent, which is
assisting us in the solicitation of proxies, as follows: |
Georgeson
Inc.
199 Water Street
26th Floor
New York, NY 10038
Banks,
brokers and other nominees call 212-440-9800
Allis-Chalmers stockholders call toll-free 1-866-577-4988
Bronco stockholders call toll-free 1-877-668-1647
9
SUMMARY
Important information and risks regarding the
merger: This summary highlights selected information
from this joint proxy statement/prospectus and may not contain
all of the information that is important to you. To better
understand the merger and the other proposals being considered
at the Allis-Chalmers Meeting and Bronco Meeting, you should
read this entire joint proxy statement/prospectus carefully,
including the Risk Factors beginning on page 26 and the
initial merger agreement and the first amendment thereto,
attached as
Annexes A-1
and A-2,
respectively. In addition, you are encouraged to read the
information incorporated by reference into this joint proxy
statement/prospectus, which includes important business and
financial information and risks about Allis-Chalmers and Bronco.
Unless otherwise indicated, references to the merger
agreement mean the Agreement and Plan of Merger, dated as
of January 23, 2008, as amended by the First Amendment
thereto, dated as of June 1, 2008. References to the
initial merger agreement mean the Agreement and Plan
of Merger, dated as of January 23, 2008, prior to the
adoption of the First Amendment thereto. References to
Merger Sub mean, prior to its conversion to a
limited liability company, Elway Merger Sub, Inc., and
subsequent to such conversion, Elway Merger Sub, LLC.
The
Companies
Allis-Chalmers Energy Inc. Allis-Chalmers
provides services and equipment to oil and natural gas
exploration and production companies throughout the United
States including Texas, Louisiana, New Mexico, Colorado,
Oklahoma, Mississippi, Wyoming, Arkansas and West Virginia,
offshore in the Gulf of Mexico, and internationally primarily in
Argentina and Mexico. Allis-Chalmers operates in three sectors
of the oil and natural gas service industry: Oilfield Services,
Drilling and Completion and Rental Services.
Allis-Chalmers central operating strategy is to provide
high-quality, technologically advanced services and equipment.
As a result of Allis-Chalmers commitment to customer
service, it has developed strong relationships with many of the
leading oil and natural gas companies, including both
independents and majors.
Allis-Chalmers growth strategy is focused on identifying
and pursuing opportunities in markets Allis-Chalmers believes
are growing faster than the overall oilfield services industry
and in which Allis-Chalmers believes it can capitalize on its
competitive strengths. Over the past several years,
Allis-Chalmers has significantly expanded the geographic scope
of its operations, both domestically and internationally, and
the range of services it provides through strategic acquisitions
and organic growth. Since the beginning of 2004, Allis-Chalmers
has invested approximately $214.9 million in capital
expenditures. Its organic growth has primarily been achieved
through expanding its geographic scope, acquiring new and
technologically advanced equipment, hiring personnel to service
new regions and cross-selling its products and services from
existing operating locations. Since 2001, Allis-Chalmers has
completed 23 acquisitions, including six in 2005, five in 2006
and four in 2007.
Allis-Chalmers common stock is traded on the NYSE under the
symbol ALY. Allis-Chalmers principal executive
offices are located at 5075 Westheimer, Suite 890,
Houston, Texas 77056, and its telephone number is
(713) 369-0550.
Bronco Drilling Company, Inc. Bronco
provides contract land drilling and workover services to oil and
natural gas exploration and production companies. As of
June 2, 2008, Bronco owned a fleet of 56 land drilling
rigs, of which 45 were marketed and 11 were held in inventory,
and a fleet of 59 workover rigs, of which 56 were operating and
three were in the process of being manufactured. In addition,
Bronco owns a fleet of 70 trucks used to transport its rigs.
Bronco also holds a 25% equity interest in Challenger Limited,
an international provider of contract land drilling and workover
services to oil and natural gas companies with its principal
operations in Libya.
Bronco commenced operations in 2001 with the purchase of one
stacked 650-horsepower drilling rig that Bronco refurbished and
deployed. Bronco subsequently made selective acquisitions of
both operational and inventoried drilling rigs, as well as
ancillary equipment. Broncos management team has
significant experience not only with acquiring rigs, but also
with refurbishing and deploying inventoried rigs. Bronco
successfully refurbished and brought into operation 25
inventoried drilling rigs during the period from November 2003
through December 2007. Upon completion of refurbishment, the
rigs either met or exceeded their operating
10
expectations. In addition, Bronco has a 41,000 square foot
machine shop in Oklahoma City, which allows it to refurbish and
repair its rigs and equipment in-house. This facility, which
complements Broncos four rig refurbishment yards,
significantly reduces its reliance on outside machine shops and
the attendant risk of third-party delays in its rig
refurbishment program.
As of June 2, 2008, Bronco was operating its drilling rigs
in Oklahoma, Texas, Colorado, North Dakota, Utah and Louisiana.
Broncos workover rigs are currently operating in Oklahoma,
Texas, Kansas, Colorado, Arkansas and New Mexico.
A majority of the wells Bronco has drilled for its customers
have been drilled in search of natural gas reserves. Natural gas
is often found in deep and complex geologic formations that
generally require higher horsepower, premium rigs and
experienced crews to reach targeted depths. Broncos fleet
of 56 land drilling rigs includes 36 rigs ranging from 950
to 2,500 horsepower. Accordingly, such rigs can, or in the case
of inventoried rigs upon refurbishment will be able to, reach
the depths required to explore for deep natural gas reserves.
Broncos higher horsepower land drilling rigs can also
drill horizontal wells, which are increasing as a percentage of
total wells drilled in North America. Bronco believes that its
premium rig fleet, rig inventory and experienced crew position
it to benefit from the natural gas drilling activity in its core
operating areas.
Bronco common stock is traded on Nasdaq under the symbol
BRNC. Broncos principal executive offices are
located at 16217 North May Avenue, Edmond, Oklahoma 73013, and
its telephone number is
(405) 242-4444.
Merger Sub. Elway Merger Sub, Inc. is a
direct, wholly-owned subsidiary of Allis-Chalmers and is a
corporation formed under the laws of the State of Delaware.
Elway Merger Sub, Inc. was formed on January 22, 2008
solely for the purpose of effecting the merger. Elway Merger
Sub, Inc. has not conducted any business operations other than
activities incidental to its formation and in connection with
the transactions contemplated by the merger agreement. Prior to
the closing of the merger, Elway Merger Sub, Inc. will convert
into a Delaware limited liability company named Elway Merger
Sub, LLC. At the effective time of the merger, Elway Merger Sub,
LLC will change its name to Bronco Drilling Company LLC.
The principal executive offices of Merger Sub are located at
5075 Westheimer, Suite 890, Houston, Texas 77056, and
its telephone number is
(713) 369-0550.
The
Merger (see page 40)
Allis-Chalmers and Bronco have agreed to combine their
businesses pursuant to the merger agreement described in this
joint proxy statement/prospectus, subject to the requisite
stockholder approvals and other conditions. Under the terms of
the merger agreement, Bronco will merge with and into Merger
Sub, with Merger Sub surviving the merger and changing its name
to Bronco Drilling Company LLC. The initial merger agreement and
the first amendment to the initial merger agreement are attached
as
Annexes A-1
and A-2,
respectively, to this joint proxy statement/prospectus and are
incorporated by reference herein. Allis-Chalmers and Bronco
encourage you to read the initial merger agreement and the first
amendment thereto in their entirety because together they are
the legal document that governs the merger.
Risk
Factors (see page 26)
There are risks associated with the merger and the operations of
Allis-Chalmers after the merger. These risks are more fully
described in Risk Factors, beginning on page 26.
Risk
Factors Relating to the Merger
Among the risk factors relating to the merger are the following:
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any delay in completing the merger may reduce the benefits
expected to be obtained from the merger;
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the failure to complete the merger could negatively affect the
stock price and the future business and financial results of
Allis-Chalmers and Bronco;
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the rights of Bronco stockholders who become stockholders of
Allis-Chalmers in the merger will be governed by
Allis-Chalmers certificate of incorporation and bylaws,
which are different in some respects from the Bronco certificate
of incorporation and bylaws; and
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the directors and executive officers of Bronco have personal
interests that may motivate them to support or approve the
merger.
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Risk
Factors Relating to Allis-Chalmers Following the
Merger
Among the risk factors relating to Allis-Chalmers after the
merger are the following:
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Allis-Chalmers may experience difficulties in integrating
Broncos businesses, which could cause the combined company
to fail to realize many of the anticipated potential benefits of
the merger;
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Allis-Chalmers will incur significant debt to fund the
merger; and
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the impact of purchase accounting could adversely affect
Allis-Chalmers earnings.
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Merger
Consideration (see page 88)
At the effective time of the merger, each outstanding share of
Bronco common stock (other than shares held by Bronco
stockholders who do not vote in favor of the adoption of the
merger agreement and who are entitled to and properly demand
appraisal rights in accordance with Delaware law and shares held
by Allis-Chalmers, Merger Sub or Bronco or by any subsidiary of
Bronco or Allis-Chalmers) will be converted into the right to
receive merger consideration comprised of (1) an amount in
cash, calculated to the nearest $0.01, resulting from dividing
$200.0 million by the aggregate number of shares of Bronco
common stock issued and outstanding immediately prior to the
effective time of the merger and (2) a number of shares of
Allis-Chalmers common stock equal to the exchange ratio. The
exchange ratio will be the fraction, expressed as a decimal and
calculated to the nearest one-ten thousandth, the numerator of
which is 16,846,500, and the denominator of which is the
aggregate number of shares of Bronco common stock issued and
outstanding immediately prior to the effective time of the
merger (subject to certain exceptions). Based on the closing
price of Allis-Chalmers common stock on June , 2008
and the number of shares of Bronco common stock outstanding as
of that date, the merger consideration would be valued
at $ per share of Bronco
common stock, consisting of $7.46 in cash and
Allis-Chalmers common stock valued
at $ .
At the time the Bronco stockholders grant their proxies or vote
at their stockholder meeting, they will not know the actual
value of the merger consideration they will receive in the
merger. Interested stockholders may call
1-877- -
for the value of merger consideration per share of Bronco common
stock calculated as of the latest practicable date. We expect
the merger to close on the first business day following receipt
of the requisite Allis-Chalmers and Bronco stockholder
approvals. Neither company may terminate the merger agreement
due solely to a change in the price of Allis-Chalmers common
stock.
Financing
of the Merger (see page 107)
In order to finance the cash component of the merger
consideration, the repayment of outstanding Bronco debt and
transaction expenses, and to raise cash for working capital and
general corporate purposes, Allis-Chalmers expects to incur
incremental indebtedness of up to $350.0 million from
either (1) a permanent debt financing of up to
$350.0 million, or (2) if the permanent debt financing
cannot be consummated prior to or concurrently with the closing
of the merger, the draw down under a senior unsecured bridge
facility in an aggregate principal amount of up to
$350.0 million to be arranged by RBC and GSCP, acting as
joint lead arrangers and joint bookrunners, with Royal Bank
acting as the administrative agent. Under the commitment letter,
dated June 1, 2008, and subject to the terms and conditions
set forth in the commitment letter, Royal Bank and GSCP each
committed to provide 50% of the loans under a
$350.0 million senior unsecured bridge facility to
Allis-Chalmers or one of its wholly-owned subsidiaries
reasonably satisfactory to Royal Bank and GSCP. The commitments
will terminate on July 31, 2008, if the bridge facility has
not been drawn by such date and the merger is not consummated by
such date. The commitments may also terminate prior to
July 31,
12
2008, if the merger is abandoned, a material condition to the
merger is not satisfied or Allis-Chalmers breaches its
obligations under the commitment letter. See Financing of
the Merger, beginning on page 107.
Treatment
of Bronco Equity Awards (see page 90)
The treatment of stock options and restricted share awards
outstanding under the Bronco stock plans is discussed under the
heading The Merger Agreement Treatment of
Bronco Equity Awards beginning on page 90.
Recommendation
of the Allis-Chalmers Board of Directors and Its Reasons for the
Merger (see page 54)
The Allis-Chalmers board of directors (1) has determined
that the merger is advisable and in the best interests of
Allis-Chalmers and its stockholders, (2) has approved the
merger and the merger agreement, (3) has directed that the
issuance of shares of Allis-Chalmers common stock in the merger
be submitted to the stockholders of Allis-Chalmers for approval
at a special meeting of Allis-Chalmers stockholders and
(4) recommends that the stockholders of Allis-Chalmers
approve the issuance of shares of Allis-Chalmers common stock in
the merger. No stockholder vote is required for Merger Sub to
adopt the merger agreement and consummate the transactions
contemplated by the merger agreement, other than the vote of
Allis-Chalmers acting as the sole stockholder, or subsequent to
the conversion of Merger Sub to a limited liability company, the
sole member, of Merger Sub.
The Allis-Chalmers board of directors recommends that
Allis-Chalmers stockholders vote FOR the issuance of shares of
Allis-Chalmers common stock to Bronco stockholders in the merger
and FOR the adjournment of the Allis-Chalmers Meeting, if
necessary or appropriate, to solicit additional proxies.
Recommendation
of the Bronco Board of Directors and Its Reasons for the Merger
(see page 56)
The Bronco board of directors unanimously (1) has
determined that the merger agreement, the merger and the other
transactions contemplated by the merger agreement are advisable
and in the best interests of Bronco and its stockholders,
(2) has approved the merger agreement, the merger and the
other transactions contemplated thereby, (3) has directed
that the merger agreement be submitted for adoption by the
stockholders of Bronco at a special meeting of Broncos
stockholders and (4) recommends that the stockholders of
Bronco adopt the merger agreement.
The Bronco board of directors unanimously recommends that
Bronco stockholders vote FOR the adoption of the merger
agreement and FOR the adjournment of the Bronco Meeting, if
necessary or appropriate, to solicit additional proxies.
Stockholders
Entitled to Vote; Vote Required for Approval (see pages 34
and 37)
Allis-Chalmers
Record date: Allis-Chalmers stockholders can
vote at the Allis-Chalmers Meeting if they owned shares of
Allis-Chalmers common stock at the close of business
on ,
2008, which is referred to as the Allis-Chalmers record date. On
the Allis-Chalmers record date, there
were shares
of Allis-Chalmers common stock outstanding and entitled to vote
at the Allis-Chalmers Meeting, held by
approximately
stockholders of record. Allis-Chalmers stockholders may cast one
vote for each share of Allis-Chalmers common stock that they
owned on the Allis-Chalmers record date.
Vote required: The affirmative vote of the
holders of a majority of the votes cast by Allis-Chalmers
stockholders entitled to vote at the Allis-Chalmers Meeting, at
which a quorum is present, is required to approve the issuance
of shares of Allis-Chalmers common stock in the merger and to
approve any adjournment of the Allis-Chalmers Meeting, if
necessary or appropriate, to solicit additional proxies.
Abstentions and broker non-votes will not be counted either in
favor of or against approval of the issuance of shares of
Allis-Chalmers common stock in the merger or any adjournment at
the Allis-Chalmers Meeting.
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Quorum required: For purposes of conducting
the Allis-Chalmers Meeting, the presence in person or by proxy
of holders of at least a majority of the shares of
Allis-Chalmers common stock issued and outstanding and entitled
to vote at the Allis-Chalmers Meeting will constitute a quorum.
Abstentions and broker non-votes will be counted in determining
whether a quorum is present at the Allis-Chalmers Meeting.
Your vote is very important. You are
encouraged to vote as soon as possible. If you do not indicate
how your shares of Allis-Chalmers common stock should be voted,
the shares of Allis-Chalmers common stock represented by your
properly completed proxy will be voted as the Allis-Chalmers
board of directors recommends and therefore FOR the issuance of
additional shares of Allis-Chalmers common stock in the merger
and FOR the adjournment of the Allis-Chalmers Meeting, if
necessary or appropriate, to solicit additional proxies.
However, if your shares are held in street name and
you do not instruct your broker or other nominee on how to vote
your Allis-Chalmers shares, your shares will not be voted.
Bronco
Record date: Bronco stockholders can vote at
the Bronco Meeting if they owned shares of Bronco common stock
at the close of business
on ,
2008, which is referred to as the Bronco record date. On the
Bronco record date, there
were shares
of Bronco common stock outstanding and entitled to vote at the
Bronco Meeting, held by
approximately
stockholders of record. Bronco stockholders may cast one vote
for each share of Bronco common stock that they owned on the
Bronco record date.
Vote required: The holders of a majority of
the outstanding shares of Bronco common stock entitled to vote
must vote in favor of the adoption of the merger agreement for
it to be approved. Therefore, your failure to vote, your failure
to instruct your broker to vote your shares or your abstaining
from voting will have the same effect as a vote against the
merger. The approval of an adjournment of the Bronco Meeting, if
necessary or appropriate, to solicit additional proxies will
require the affirmative vote of the holders of a majority of the
votes cast at the Bronco Meeting, without regard to broker
non-votes or abstentions.
Quorum required: For purposes of conducting
the Bronco Meeting, the presence in person or by proxy of
holders of at least a majority of the shares of Bronco common
stock issued and outstanding and entitled to vote at the Bronco
Meeting will constitute a quorum. Abstentions and broker
non-votes will be counted in determining whether a quorum is
present at the Bronco Meeting.
Your vote is very important. You are
encouraged to vote as soon as possible. If you do not indicate
how your shares of Bronco common stock should be voted, the
shares of Bronco common stock represented by your properly
completed proxy will be voted as the Bronco board of directors
recommends and therefore FOR the adoption of the merger
agreement and FOR the adjournment of the Bronco Meeting, if
necessary or appropriate, to solicit additional proxies.
However, if your shares are held in street name and
you do not instruct your broker or other nominee on how to vote
your Bronco shares, your shares will not be voted.
Opinions
of Financial Advisers (see pages 58 and 70)
Opinion
of Allis-Chalmers Financial Adviser
In connection with the evaluation of the proposed merger by the
Allis-Chalmers board of directors, Allis-Chalmers
financial adviser, RBC, rendered a written opinion to the
Allis-Chalmers board of directors on June 1, 2008 that, as
of such date and subject to the assumptions, qualifications and
limitations set forth in its opinion, the merger consideration
per share of Bronco common stock (defined in RBCs opinion
as the amount of cash, without interest, to be determined by the
formula specified in the amended merger agreement, and the
number of fully paid and nonassessable shares of Allis-Chalmers
common stock equal to the exchange ratio specified in the
amended merger agreement, to be received by Bronco stockholders
for each of their shares) was fair, from a financial point of
view, to Allis-Chalmers. RBCs opinion was approved by
RBCs M&A Fairness Opinion Committee. The full text of
RBCs written opinion, dated June 1, 2008, is attached
to this joint proxy statement/prospectus as Annex B. We
encourage you to read this opinion carefully in its entirety for
a description of the procedures followed, assumptions made,
matters considered and limitations on the review undertaken.
RBCs opinion was addressed to, and provided for the
information and assistance of,
14
the Allis-Chalmers board of directors and does not constitute
a recommendation to any stockholder as to how such stockholder
should vote with respect to the merger.
Opinion
of Broncos Financial Adviser
In connection with the merger, Broncos financial adviser,
Johnson Rice & Company L.L.C., which we refer to as
Johnson Rice, delivered a written opinion dated June 1,
2008 to the Bronco board of directors to the effect that as of
the date of its opinion, the consideration to be received by the
holders of Bronco common stock in the merger (other than
Allis-Chalmers, Merger Sub and their respective subsidiaries and
affiliates) was fair, from a financial point of view, to such
holders. Johnson Rices opinion was approved by Johnson
Rices Fairness Opinion Committee. The full text of Johnson
Rices written opinion, dated June 1, 2008, is
attached to this joint proxy statement/prospectus as
Annex C. Holders of Bronco common stock are encouraged to
read the opinion carefully in its entirety for a description of
the procedures followed, assumptions made, matters considered
and limitations on the scope of the review undertaken.
Johnson Rices opinion was provided to the Bronco board
of directors in connection with its evaluation of the
consideration to be paid by Allis-Chalmers to the holders of
Bronco common stock in the merger, does not address any other
aspect of the proposed merger and does not constitute a
recommendation to any holder of shares of Bronco common stock as
to how the stockholder should vote or act on any matter relating
to the merger.
Ownership
of Allis-Chalmers After the Merger
Allis-Chalmers will issue 16,846,500 shares of
Allis-Chalmers common stock to Bronco stockholders in the
merger, representing approximately 32% of the outstanding shares
of Allis-Chalmers common stock after the merger on a fully
diluted basis. Consequently, Allis-Chalmers stockholders, as a
general matter, will have less influence over the management and
policies of Allis-Chalmers than they currently exercise over the
management and policies of Allis-Chalmers.
Share
Ownership of Directors and Executive Officers of
Allis-Chalmers
As of the record date, the directors and executive officers of
Allis-Chalmers and their affiliates beneficially owned and were
entitled to vote
approximately shares
of Allis-Chalmers common stock, collectively representing
approximately % of the shares of
Allis-Chalmers common stock outstanding and entitled to vote on
that date.
Share
Ownership of Directors and Executive Officers of
Bronco
As of the record date, the directors and executive officers of
Bronco and their affiliates beneficially owned and were entitled
to vote
approximately shares
of Bronco common stock, collectively representing
approximately % of the shares of
Bronco common stock outstanding and entitled to vote on that
date.
Voting
Agreements (see page 99)
Bronco
Broncos executive officers and directors who in the
aggregate
hold shares
of Bronco common stock, or % of the
outstanding common stock eligible to vote, have agreed to vote
their shares in favor of the proposal to adopt the merger
agreement at the Bronco Meeting.
Allis-Chalmers
Allis-Chalmers executive officers and directors who in the
aggregate
hold shares
of Allis-Chalmers common stock,
or % of the outstanding common
stock eligible to vote, have agreed to vote their shares in
favor of the proposal to issue shares of Allis-Chalmers common
stock in the merger at the Allis-Chalmers Meeting.
15
Interests
of Directors and Executive Officers of Bronco in the Merger (see
page 77)
In considering the recommendation of the Bronco board of
directors with respect to the merger agreement, Bronco
stockholders should be aware that certain members of the Bronco
board of directors and certain of Broncos executive
officers have interests in the transactions contemplated by the
merger agreement that may be different from, or in addition to,
the interests of Bronco stockholders generally. These interests
may include, among other things, the following:
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change of control severance payments for Broncos executive
officers at the effective time of the merger;
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the accelerated vesting of, and payment of the merger
consideration with respect to, shares of Bronco restricted stock
held by Broncos executive officers and certain directors;
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arrangements that all current and former Bronco directors and
officers will be indemnified by Allis-Chalmers with respect to
acts or omissions by them in their capacities as directors and
officers of Bronco prior to the effective time of the
merger; and
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the expected employment of one or more executive officers of
Bronco by Allis-Chalmers after the merger, although no agreement
with any executive officer of Bronco regarding future employment
has been discussed.
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The Bronco board of directors was aware of these interests and
considered them, among other matters, in making its
recommendation. See The Merger Recommendation
of the Bronco Board of Directors and Its Reasons for the
Merger, beginning on page 56.
Listing
of Allis-Chalmers Common Stock; Delisting and Deregistration of
Bronco Common Stock (see page 84)
Allis-Chalmers will use its reasonable best efforts to cause the
shares of Allis-Chalmers common stock to be issued in the merger
pursuant to the merger agreement to be approved for listing on
the NYSE, subject to official notice of issuance, at the
effective time of the merger. Under the merger agreement, Bronco
is required to cooperate with Allis-Chalmers with respect to
such listing to facilitate obtaining such approval as soon as
practicable. Approval of the listing on the NYSE of the shares
of Allis-Chalmers common stock to be issued in the merger
pursuant to the merger agreement is a condition to each
partys obligation to complete the merger. If the merger is
completed, the Bronco common stock will be delisted from Nasdaq
and deregistered under the Exchange Act.
Appraisal
Rights in the Merger (see page 103)
Bronco stockholders who wish to seek appraisal of their shares
are urged to seek the advice of counsel with respect to the
availability of appraisal rights.
Shares of Bronco common stock outstanding immediately prior to
the effective time of the merger and held by a holder who has
not voted in favor of the adoption of the merger agreement and
who has delivered a written demand for appraisal of
his/her or
its shares in accordance with Section 262 of the DGCL will
not be converted into the right to receive the merger
consideration. The holder will instead be entitled to seek an
appraisal of
his/her or
its shares under the DGCL unless and until the dissenting holder
fails to perfect or withdraws or otherwise loses
his/her or
its right to appraisal and payment under the DGCL. If, after the
effective time of the merger, a dissenting stockholder fails to
perfect or withdraws or otherwise loses
his/her or
its right to appraisal,
his/her or
its shares of Bronco common stock will be treated as if they had
been converted as of the effective time of the merger into the
right to receive the merger consideration. The full text of
Section 262 of the DGCL is attached to this joint proxy
statement/prospectus as Annex D.
16
Conditions
to the Completion of the Merger (see page 91)
A number of conditions must be satisfied or waived, where
legally permissible, before the proposed merger can be
consummated. These include, among others:
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the approval by the Allis-Chalmers stockholders of the issuance
of the shares of Allis-Chalmers common stock to be issued in the
merger;
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the adoption of the merger agreement by the Bronco stockholders;
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the expiration or termination of the waiting period under the
Hart-Scott-Rodino
Act (early termination of the waiting period was granted on
March 10, 2008);
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the receipt by each of Allis-Chalmers and Bronco from its legal
counsel of a legal opinion to the effect that for federal income
tax purposes, (i) the merger will be treated as a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, and (ii) each
of
Allis-Chalmers
and Bronco will be a party to such reorganization within the
meaning of Section 368(b) of the Internal Revenue Code;
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obtaining all other consents, approvals, permits and
authorizations required to be obtained from any governmental
authority to consummate the merger;
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the absence of any action taken by any governmental entity that
restrains or otherwise prohibits the consummation of the merger
or imposes any material restrictions on the parties with respect
to the merger;
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subject to certain exceptions, the accuracy of
Allis-Chalmers and Broncos respective
representations and warranties contained in the merger agreement;
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the absence of any event or circumstance that constitutes a
material adverse effect with respect to either Allis-Chalmers or
Bronco;
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the effectiveness of a registration statement relating to the
shares of Allis-Chalmers common stock to be issued in the
merger; and
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the approval of the shares of Allis-Chalmers common stock to be
issued in the merger for listing on the NYSE.
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Neither Allis-Chalmers nor Bronco can assure you when or if all
or any of the conditions to the merger will be either satisfied
or waived or whether the merger will occur as intended.
Regulatory
Approvals Required for the Merger (see page 82)
The merger is subject to review under the
Hart-Scott-Rodino
Act. Early termination of the waiting period under such act was
granted on March 10, 2008.
Litigation
Relating to the Merger (see page 83)
Following the joint announcement of the initial merger agreement
on January 24, 2008, three separate complaints were filed
on behalf of Bronco stockholders against Bronco, the Bronco
board of directors and Allis-Chalmers (and in the case of the
action filed in Delaware, Merger Sub) seeking class action
status. Two complaints were filed in Oklahoma in the District
Court of Oklahoma County, the first on January 29, 2008,
which we refer to as the Boothe action, and the second on
February 28, 2008, which we refer to as the Goff action.
The third complaint was filed in the Delaware Court of Chancery
on January 29, 2008, which we refer to as the Delaware
action. Allis-Chalmers and Bronco filed motions to dismiss the
Boothe action. In response to these motions, the parties to the
Boothe action agreed to extend the time for the plaintiff to
amend his complaint, and for the defendants to amend or withdraw
their motions to dismiss, or file answers to the amended
complaint. On April 9, 2008, the Boothe action and the Goff
action were consolidated into a single action, which we refer to
as the Oklahoma action. The defendants named in the Oklahoma
action are Bronco, the Bronco board of directors and
Allis-Chalmers.
On April 17, 2008, the plaintiffs in the Oklahoma action
filed a consolidated amended complaint. Allis-Chalmers filed a
motion to dismiss the amended complaint on May 14, 2008, and
Bronco and the Bronco board of directors filed a motion to
dismiss the amended complaint
17
on May 19, 2008. In response to these motions, the parties
to the Oklahoma action agreed to extend the time for the
plaintiffs to respond to the defendants motions to
dismiss. Under the agreement, the plaintiffs must respond by
July 7, 2008. In the Delaware action, the plaintiff filed
an amended complaint on April 23, 2008. The parties to the
Delaware action agreed to extend the time for the defendants to
respond to the plaintiffs amended complaint. Under the
agreement, the defendants must respond by June 23, 2008.
All stockholders of Allis-Chalmers and Bronco are encouraged to
read the complaints in their entirety to apprise themselves of
the plaintiffs allegations, which the plaintiffs purport
to make on behalf of themselves and Broncos other
stockholders.
Allis-Chalmers, Bronco, the Bronco board of directors and Merger
Sub deny the substantive allegations in the two complaints,
believe the claims asserted are baseless and intend to
vigorously defend these actions.
No
Solicitation of Alternative Transactions (see
page 98)
Under the merger agreement, Bronco is not permitted to solicit,
initiate, encourage or facilitate any inquiries regarding any
other acquisition proposal or enter into discussions concerning
or provide information in connection with any other acquisition
proposal.
Notwithstanding the foregoing, before receipt of the requisite
approval by its stockholders, Bronco may engage in negotiations
with a third party making an unsolicited, bona fide, written
acquisition proposal, provided that:
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the board of directors of Bronco, acting in good faith, has
determined that the acquisition proposal constitutes, or is
reasonably likely to result in, a superior proposal and that the
conditions of such proposal are all reasonably capable of being
satisfied in a timely manner; and
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Bronco has complied with the terms of the merger agreement
relating to superior proposals.
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In addition, before receipt of the requisite approval by its
stockholders, the board of directors of Bronco may withdraw its
recommendation or declaration of advisability of the merger
agreement if the board of directors determines in good faith
that a failure to change its recommendation is reasonably likely
to be inconsistent with its fiduciary duties to the Bronco
stockholders, subject to payment of the termination fees set
forth in the merger agreement.
Termination
of the Merger Agreement (see page 99)
The merger agreement may be terminated and the merger may be
abandoned at any time prior to the effective time of the merger
by mutual written consent of Allis-Chalmers and Bronco. Either
party (except as otherwise indicated) will also have the right
to terminate the merger agreement upon the occurrence of any of
the following:
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the failure to consummate the merger by October 31, 2008,
unless extended pursuant to the merger agreement, provided that
a party may not terminate upon occurrence of this event if that
partys breach of a representation or warranty or such
partys failure to fulfill its obligations under the merger
agreement has been the principal cause or resulted in the merger
not occurring before October 31, 2008, unless extended
pursuant to the merger agreement;
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the failure to obtain the necessary Bronco or Allis-Chalmers
stockholder approvals;
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any governmental authority has issued an order, decree or ruling
or taken any other action permanently prohibiting the
consummation of the merger or making the merger illegal and such
order, decree or ruling or other action will have become final
and nonappealable;
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a material breach of the other partys representations,
warranties or covenants that gives rise to a failure of certain
conditions to closing or would otherwise materially impair or
delay or otherwise have a material adverse effect on the
non-breaching partys ability to consummate the
transactions contemplated by the merger agreement (subject to a
20-day cure
period, if the breach is capable of being cured);
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by Allis-Chalmers upon the occurrence of a material breach or
failure to perform by Bronco of any of its covenants or
agreements contained in the merger agreement as described under
The Merger
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18
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Agreement Covenants No Solicitation of
Alternative Transactions, or a change by the board of
directors of Bronco of its recommendation with respect to the
merger or upon the Bronco board of directors resolution to
make an adverse recommendation change; or
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by Bronco, if Bronco receives an acquisition proposal that the
Bronco board of directors determines in good faith is a superior
proposal, provided that, prior to termination, Bronco provides
Allis-Chalmers with written notice of its intention to accept
the superior proposal and a four business day period for
Allis-Chalmers to make a counterproposal and Bronco pays a
$10 million termination fee.
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See The Merger Agreement Termination of the
Merger Agreement and Termination Fees, beginning on
page 99.
Termination
Fees and Expenses (see page 101)
Under the merger agreement, Bronco may be required to pay
Allis-Chalmers a termination fee of $10 million if the
merger agreement is terminated under specified circumstances.
Either party may be required to pay the other partys
actual expenses relating to the merger up to a maximum amount of
$5 million if the merger agreement is terminated under
specified circumstances. See The Merger
Agreement Termination of the Merger Agreement and
Termination Fees, beginning on page 99.
Material
U.S. Federal Income Tax Consequences (see
page 85)
Allis-Chalmers and Bronco anticipate that the merger will
qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. Assuming that
the merger qualifies as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, a U.S. holder
of Bronco common stock who, pursuant to the merger, exchanges
shares of Bronco common stock for a combination of
Allis-Chalmers
common stock and cash (other than cash received in lieu of a
fractional share) will generally recognize gain (but not loss)
in an amount equal to the lesser of (1) the excess, if any,
of the sum of the amount of cash and the fair market value of
the
Allis-Chalmers
common stock received, over the adjusted tax basis of the Bronco
common stock surrendered in exchange therefore, and (2) the
amount of cash received by the holder.
Please refer to Material U.S. Federal Income Tax
Consequences of the Merger, beginning on page 85 of
this joint proxy statement/prospectus, for a description of the
material U.S. federal income tax consequences of the
merger. Determining the actual tax consequences of the merger to
you may be complex and will depend on your specific situation.
You are urged to consult your tax adviser for a full
understanding of the tax consequences of the merger to you.
Accounting
Treatment (see page 83)
Allis-Chalmers prepares its financial statements in accordance
with accounting principles generally accepted in the United
States of America, which is referred to as GAAP. The merger will
be accounted for using the purchase method of accounting. As
discussed under The Merger Accounting
Treatment, on page 83, based upon the terms of the
merger and other factors, such as the size of Allis-Chalmers,
the payment of the merger consideration (including issuance of
Allis-Chalmers stock to Bronco stockholders at a premium of the
fair market value of Bronco stock on the date preceding the
announcement of the amendment to the initial merger agreement)
by Allis-Chalmers, and the composition of the combined
companys board of directors and senior management,
Allis-Chalmers is considered to be the acquirer of Bronco for
accounting purposes. Therefore, Allis-Chalmers will allocate the
purchase price to Broncos assets and liabilities at the
acquisition date based on the estimated relative fair value of
the assets acquired and liabilities assumed, with the excess
purchase price to be recorded as goodwill. Under the purchase
method of accounting, goodwill is not amortized but is tested
for impairment at least annually.
Payment
of Dividends (see page 109)
Allis-Chalmers: Allis-Chalmers has not paid
any cash dividends on its common stock within the last ten
years, and does not intend to declare or pay regular dividends
on its common stock in the foreseeable future. Instead,
Allis-Chalmers generally intends to invest any future earnings
in Allis-Chalmers business. Subject to
19
Delaware law, the Allis-Chalmers board of directors will
determine the payment of future dividends on Allis-Chalmers
common stock, if any, and the amount of any dividends based on
factors the board of directors deems relevant, including any
applicable contractual restrictions limiting
Allis-Chalmers ability to pay dividends,
Allis-Chalmers earnings and cash flows,
Allis-Chalmers capital requirements and
Allis-Chalmers financial condition. Allis-Chalmers
senior credit agreement restricts, and the new facility expected
to be entered into in connection with the merger will also
restrict, Allis-Chalmers ability to pay dividends or other
distributions on its equity securities.
Bronco: No cash dividends have ever been paid
on shares of Bronco common stock. The merger agreement generally
provides that Bronco may not declare, set aside or pay any
dividend prior to the effective time of the merger or the
termination of the merger agreement.
Comparison
of Rights of Allis-Chalmers and Bronco Stockholders (see
page 111)
Allis-Chalmers and Bronco are incorporated under the laws of the
State of Delaware. Accordingly, the rights of the stockholders
of Allis-Chalmers and Bronco are currently, and will continue to
be, governed by the DGCL. If the merger is completed, Bronco
stockholders will become stockholders of Allis-Chalmers, and
their rights will be governed by the DGCL, the certificate of
incorporation of Allis-Chalmers and the bylaws of
Allis-Chalmers. The rights of Allis-Chalmers stockholders
contained in the certificate of incorporation and bylaws of
Allis-Chalmers differ from the rights of Bronco stockholders
under the certificate of incorporation and bylaws of Bronco, as
more fully described under the section entitled Comparison
of Rights of Allis-Chalmers and Bronco Stockholders,
beginning on page 111 of this joint proxy
statement/prospectus.
20
SUMMARY
HISTORICAL FINANCIAL AND OPERATING INFORMATION OF
ALLIS-CHALMERS
The following table presents summary historical consolidated
financial data for Allis-Chalmers as of December 31, 2007,
2006 and 2005, for the years ended December 31, 2007, 2006
and 2005, as of March 31, 2008 and for the
three months ended March 31, 2008 and 2007. The
summary historical consolidated financial data as of and for the
years ended December 31, 2007, 2006 and 2005 are derived
from Allis-Chalmers audited financial statements that are
not included in this joint proxy statement/prospectus. The
summary historical consolidated financial data as of
March 31, 2008 and for the three months ended
March 31, 2008 and 2007 are derived from
Allis-Chalmers unaudited consolidated financial statements
that are not included in this joint proxy statement/prospectus.
In the opinion of management, the unaudited consolidated
financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation
of the financial condition and results of operations for these
periods. Operating results for the three months ended
March 31, 2008 are not necessarily indicative of the
results that may be expected for the full year.
You should read the following data in connection with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated
financial statements set forth in Allis-Chalmers Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2008 and Annual Report on
Form 10-K
for the year ended December 31, 2007, where there is
additional disclosure regarding the information in the following
table. See also the pro forma information set forth elsewhere in
this joint proxy statement/prospectus regarding the proposed
merger with Bronco. Allis-Chalmers historical results are
not necessarily indicative of results to be expected in future
periods.
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Three Months
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Ended March 31,
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Years Ended December 31,
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2008
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2007
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2007
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2006
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2005
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(In thousands, except per share data)
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Statement of Operations Data:
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Revenues
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$
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153,182
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$
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135,900
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$
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570,967
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$
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310,964
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$
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108,022
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Income from operations
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$
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23,582
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$
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31,470
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$
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124,782
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$
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67,730
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$
|
13,518
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Net income
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$
|
8,050
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$
|
12,165
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$
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50,440
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$
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35,626
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$
|
7,175
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Net income per common share:
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Basic
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$
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0.23
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$
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0.38
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$
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1.48
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$
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1.73
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$
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0.48
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Diluted
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$
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0.23
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$
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0.37
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$
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1.45
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$
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1.66
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$
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0.44
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Weighted average number of common shares outstanding:
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Basic
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34,837
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32,330
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34,158
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20,548
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14,832
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Diluted
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35,173
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33,011
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34,701
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21,410
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16,238
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As of
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As of December 31,
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March 31, 2008
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2007
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2006
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2005
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(In thousands, except per share data)
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Consolidated Balance Sheet Data:
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Total assets
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$
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1,099,564
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$
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1,053,585
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$
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908,326
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$
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137,355
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Long-term debt classified as:
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Current
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$
|
6,232
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$
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6,434
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$
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6,999
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$
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5,632
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Long-term
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$
|
539,852
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$
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508,300
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$
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561,446
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$
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54,937
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Stockholders equity
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$
|
425,052
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$
|
414,329
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$
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253,933
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$
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60,875
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Book value per share
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$
|
12.10
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$
|
11.80
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$
|
8.99
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|
$
|
3.61
|
|
21
SUMMARY
HISTORICAL FINANCIAL AND OPERATING INFORMATION OF
BRONCO
The following table presents Broncos summary historical
consolidated financial data as of December 31, 2007, 2006
and 2005, for the years ended December 31, 2007, 2006 and
2005, as of March 31, 2008 and for the three months
ended March 31, 2008 and 2007. The summary historical
consolidated financial data as of and for the years ended
December 31, 2007, 2006 and 2005 are derived from
Broncos audited financial statements that are not included
in this joint proxy statement/prospectus. The summary historical
consolidated financial data as of March 31, 2008 and for
the three months ended March 31, 2008 and 2007 are derived
from Broncos unaudited consolidated financial statements
that are not included in this joint proxy statement/prospectus.
In the opinion of management, the unaudited consolidated
financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation
of the financial condition and results of operations for these
periods. Operating results for the three months ended
March 31, 2008 are not necessarily indicative of the
results that may be expected for the full year.
You should read the following data in connection with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated
financial statements set forth in Broncos Quarterly Report
on
Form 10-Q
for the quarter ended March 31, 2008 and Annual Report on
Form 10-K
for the year ended December 31, 2007, where there is
additional disclosure regarding the information in the following
table. See also the pro forma information set forth elsewhere in
this joint proxy statement/prospectus regarding the proposed
merger with Allis-Chalmers. Broncos historical results are
not necessarily indicative of results to be expected in future
periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
Ended March 31,
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except per share data)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
67,003
|
|
|
$
|
78,904
|
|
|
$
|
298,952
|
|
|
$
|
285,828
|
|
|
$
|
77,885
|
|
Income from operations
|
|
$
|
11,206
|
|
|
$
|
19,564
|
|
|
$
|
63,925
|
|
|
$
|
100,177
|
|
|
$
|
14,652
|
|
Net income
|
|
$
|
8,148
|
|
|
$
|
11,386
|
|
|
$
|
37,592
|
|
|
$
|
59,833
|
|
|
$
|
5,131
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.31
|
|
|
$
|
0.44
|
|
|
$
|
1.45
|
|
|
$
|
2.43
|
|
|
$
|
0.32
|
|
Diluted
|
|
$
|
0.31
|
|
|
$
|
0.44
|
|
|
$
|
1.44
|
|
|
$
|
2.43
|
|
|
$
|
0.31
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,265
|
|
|
|
25,907
|
|
|
|
25,996
|
|
|
|
24,585
|
|
|
|
16,259
|
|
Diluted
|
|
|
26,287
|
|
|
|
25,909
|
|
|
|
26,101
|
|
|
|
24,623
|
|
|
|
16,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of December 31,
|
|
|
|
March 31, 2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except per share data)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
585,852
|
|
|
$
|
568,605
|
|
|
$
|
482,488
|
|
|
$
|
330,520
|
|
Long-term debt classified as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
66,078
|
|
|
$
|
1,256
|
|
|
$
|
636
|
|
|
$
|
8,012
|
|
Long-term
|
|
$
|
5,333
|
|
|
$
|
66,862
|
|
|
$
|
64,091
|
|
|
$
|
36,310
|
|
Stockholders/members equity
|
|
$
|
405,727
|
|
|
$
|
396,429
|
|
|
$
|
339,985
|
|
|
$
|
239,336
|
|
Book value per share
|
|
$
|
15.44
|
|
|
$
|
15.23
|
|
|
$
|
13.63
|
|
|
$
|
10.33
|
|
22
SUMMARY
UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
The merger will be accounted for under the purchase method of
accounting, which means the assets and liabilities of Bronco
will be recorded, as of completion of the merger, at their
respective fair values and added to those of Allis-Chalmers. For
a more detailed description of purchase accounting see The
Merger Accounting Treatment, beginning on
page 83.
The summary unaudited pro forma condensed combined financial
information presented below reflects the purchase method of
accounting and is for illustrative purposes only. The financial
results may have been different had the companies actually
combined. The summary unaudited pro forma condensed combined
financial information does not reflect the effect of asset
dispositions, if any, or revenue, cost or other operating
synergies that may result from the merger, nor does it reflect
the effects of any financing, liquidity or other balance sheet
repositioning that may be undertaken (except for the financing
directly related to the merger) in connection with or subsequent
to the merger. You should not rely on the summary unaudited pro
forma condensed combined financial information as being
indicative of the historical results that would have occurred
had the companies been combined or the future results that may
be achieved after the merger. The following summary pro forma
unaudited condensed combined financial information has been
derived from, and should be read in conjunction with, the
Unaudited Pro Forma Condensed Combined Financial
Statements and related notes beginning on page 119.
The unaudited pro forma balance sheet data were prepared as if
the merger had occurred as of March 31, 2008. The unaudited
pro forma statement of operations data were prepared as if the
merger had occurred as of January 1, 2007.
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
Year Ended
|
|
|
Ended March 31,
|
|
December 31,
|
|
|
2008
|
|
2007
|
|
|
(Unaudited)
|
|
|
(In thousands, except
|
|
|
per share data)
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
220,185
|
|
|
$
|
869,919
|
|
Income from operations
|
|
$
|
40,245
|
|
|
$
|
207,074
|
|
Net income
|
|
$
|
15,220
|
|
|
$
|
82,025
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.29
|
|
|
$
|
1.61
|
|
Diluted
|
|
$
|
0.29
|
|
|
$
|
1.59
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
51,684
|
|
|
|
51,005
|
|
Diluted
|
|
|
52,020
|
|
|
|
51,548
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
March 31,
|
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
|
(Unaudited)
|
|
|
Balance Sheet Data:
|
|
|
|
|
Total current assets
|
|
$
|
255,849
|
|
Total assets
|
|
$
|
1,777,909
|
|
Long-term debt
|
|
$
|
842,272
|
|
Total stockholders equity
|
|
$
|
704,030
|
|
23
UNAUDITED
COMPARATIVE PER SHARE DATA
We present below per common share data regarding the income and
book value of Allis-Chalmers on both historical and unaudited
pro forma condensed bases and of Bronco on a historical basis.
We have derived the unaudited pro forma condensed combined per
share information from the unaudited pro forma condensed
combined financial statements of Allis-Chalmers presented
elsewhere in this document. You should read the information
below in conjunction with the financial statements and
accompanying notes of Allis-Chalmers and Bronco that are
incorporated by reference into this document and with the
unaudited pro forma condensed combined information of
Allis-Chalmers included under the section entitled
Unaudited Pro Forma Condensed Combined Financial
Statements, beginning on page 119.
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2008:
|
|
Allis-Chalmers
|
|
|
Bronco
|
|
|
Basic net income per common share
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
0.23
|
|
|
$
|
0.31
|
|
Pro forma (1)
|
|
$
|
0.29
|
|
|
|
|
|
Diluted net income per common share
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
0.23
|
|
|
$
|
0.31
|
|
Pro forma (1)
|
|
$
|
0.29
|
|
|
|
|
|
Dividends declared on common stock
|
|
|
|
|
|
|
|
|
Historical
|
|
|
|
|
|
|
|
|
Pro forma
|
|
|
|
|
|
|
|
|
Book value per common share (2)
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
12.10
|
|
|
$
|
15.44
|
|
Pro forma
|
|
$
|
13.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2007:
|
|
|
|
|
|
|
|
Basic net income per common share
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
1.48
|
|
|
$
|
1.45
|
|
Pro forma (1)
|
|
$
|
1.61
|
|
|
|
|
|
Diluted net income per common share
|
|
|
|
|
|
|
|
|
Historical
|
|
$
|
1.45
|
|
|
$
|
1.44
|
|
Pro forma (1)
|
|
$
|
1.59
|
|
|
|
|
|
Dividends declared on common stock
|
|
|
|
|
|
|
|
|
Historical
|
|
|
|
|
|
|
|
|
Pro forma
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Allis-Chalmers pro forma combined earnings per share is
calculated by dividing the pro forma net income by the pro forma
weighted average number of shares outstanding during the period. |
|
|
|
(2) |
|
Book value per share is computed by dividing stockholders
equity at March 31, 2008 by the number of shares of common
stock outstanding at the end of the period. |
24
COMPARATIVE
ALLIS-CHALMERS AND BRONCO
MARKET PRICE DATA AND DIVIDEND INFORMATION
Allis-Chalmers common stock is listed on the NYSE under the
symbol ALY. Bronco common stock is listed on Nasdaq
under the symbol BRNC. The following table presents
the closing prices for shares of Allis-Chalmers common stock and
Bronco common stock on May 30, 2008, the last trading day
before the public announcement of the amendment to the initial
merger agreement, and June , 2008, the latest
practicable trading day before the date of this joint proxy
statement/prospectus.
The following table also shows the merger consideration proposed
for each share of Bronco common stock, on a fully-diluted basis,
based on the closing price of Allis-Chalmers common stock on the
dates indicated. If the closing of the merger had been on the
dates indicated below, Bronco stockholders would have received
the merger consideration shown below for each share of Bronco
common stock held by them.
Although the number of shares of Allis-Chalmers common stock to
be received in the merger is fixed at 16,846,500, the value of
the shares of Allis-Chalmers common stock constituting merger
consideration to be received by Bronco stockholders will depend
on the value of Allis-Chalmers common stock at the effective
time of the merger and thereafter. We urge you to obtain the
market prices for Allis-Chalmers common stock and Bronco common
stock before you vote. See The Merger
Agreement Merger Consideration, beginning on
page 88.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Value of
|
|
Value of
|
|
|
|
|
|
|
|
|
Shares of
|
|
Allis-Chalmers
|
|
Total Merger
|
|
|
|
|
|
|
Cash
|
|
Allis-Chalmers
|
|
Common Stock
|
|
Consideration
|
|
|
|
|
|
|
Consideration
|
|
Common Stock to be Issued
|
|
to be Issued
|
|
per Share
|
|
|
|
|
|
|
per Share of
|
|
per Share
|
|
per Share
|
|
of Bronco
|
|
|
Allis-Chalmers
|
|
Bronco
|
|
Bronco
|
|
of Bronco
|
|
of Bronco Common
|
|
Common
|
|
|
Common Stock
|
|
Common Stock
|
|
Common Stock(1)
|
|
Common Stock(1)
|
|
Stock(1)
|
|
Stock(1)
|
|
May 30, 2008
|
|
$
|
17.17
|
|
|
$
|
18.18
|
|
|
$
|
7.46
|
|
|
|
0.6284
|
|
|
$
|
10.79
|
|
|
$
|
18.25
|
|
June , 2008
|
|
|
|
|
|
|
|
|
|
$
|
7.46
|
|
|
|
0.6284
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Assumes 26,808,502 shares of Bronco common stock
outstanding. |
See Comparative Market Prices and Dividends,
beginning on page 109 for additional market price
information.
25
RISK
FACTORS
In addition to the matters addressed under Cautionary
Statement Concerning Forward-Looking Statements, you
should carefully consider the following risks before deciding
how to vote. In addition, you should read and consider the
discussion of other risks included in the Annual Reports on
Form 10-K
of Allis-Chalmers and Bronco for the year ended
December 31, 2007, all of which are incorporated by
reference into this joint proxy statement/prospectus. You should
also consider the other information in this joint proxy
statement/prospectus and the other documents incorporated by
reference into this joint proxy statement/prospectus. See
Where You Can Find More Information,
beginning on page 116.
Risk
Factors Relating to the Merger
The
number of shares of Allis-Chalmers common stock that holders of
Bronco common stock will receive is fixed, but the value of the
merger consideration that holders of Bronco common stock will
receive will depend on the value of Allis-Chalmers common stock
at and following the effective time of the merger.
The number of shares of Allis-Chalmers common stock to be issued
in the merger is fixed at 16,846,500. Although the number of
shares of Allis-Chalmers common stock comprising the stock
consideration in the merger is fixed, the value of those shares
will fluctuate. Therefore, Bronco stockholders cannot be sure of
the value of the merger consideration that they will receive,
and Allis-Chalmers stockholders cannot be sure of the value of
the shares of Allis-Chalmers common stock that will be issued to
the Bronco stockholders.
The
price of Allis-Chalmers common stock will continue to fluctuate
after the merger and may be affected by factors that are
different than the separate factors that currently affect the
prices of Allis-Chalmers common stock and Bronco common
stock.
Holders of Bronco common stock will receive Allis-Chalmers
common stock in the merger. Allis-Chalmers results of
operations, as well as the price of Allis-Chalmers common stock
following the merger, may be affected by factors that are
different than those factors currently affecting
Allis-Chalmers or Broncos results of operations and
the prices of Allis-Chalmers common stock and Bronco common
stock. For a discussion of Allis-Chalmers business,
Broncos business and certain factors to consider in
connection with their respective businesses, including risk
factors associated therewith, see their respective Annual
Reports on
Form 10-K
for the fiscal year ended December 31, 2007 and Quarterly
Reports on
Form 10-Q
for the quarter ended March 31, 2008, which are
incorporated by reference into this joint proxy
statement/prospectus. See also the other documents incorporated
by reference into this joint proxy statement/prospectus under
the caption Where You Can Find More Information,
beginning on page 116.
Any
delay in completing the merger and integrating the businesses
may reduce the benefits expected to be obtained from the
merger.
In addition to obtaining the required regulatory clearances and
approvals, the merger is subject to a number of other conditions
beyond the control of Bronco and Allis-Chalmers that may
prevent, delay or otherwise materially adversely affect its
completion. See The Merger Agreement
Conditions to the Completion of the Merger, beginning on
page 91. Allis-Chalmers and Bronco cannot predict whether
or when the conditions to closing will be satisfied. Any delay
in completing the merger and integrating the businesses may
reduce the benefits that Allis-Chalmers and Bronco expect to
achieve in the merger.
Failure
to complete the merger could negatively affect the stock price
and the future business and financial results of Allis-Chalmers
and Bronco.
Neither Allis-Chalmers nor Bronco can assure you that the merger
agreement will be adopted by Bronco stockholders, that the
issuance of the shares of Allis-Chalmers common stock will be
approved by Allis-Chalmers stockholders or that the other
conditions to the completion of the merger will be satisfied. In
addition, Bronco has the right to terminate the merger agreement
and pursue alternative transactions under
26
certain conditions. If the merger is not completed, neither
Allis-Chalmers nor Bronco will receive any expected benefits of
the merger and will be subject to risks
and/or
liabilities, including the following:
|
|
|
|
|
failure to complete the merger might be followed by a decline in
the market price of Bronco common stock
and/or
Allis-Chalmers common stock;
|
|
|
|
Bronco may be required to pay Allis-Chalmers a termination fee
of $10 million or out-of-pocket expenses of up to
$5 million if the merger agreement is terminated under
specified circumstances;
|
|
|
|
Allis-Chalmers may be required to pay Bronco out-of-pocket
expenses of up to $5 million if the merger agreement is
terminated under specified circumstances;
|
|
|
|
some costs relating to the merger (such as legal and accounting
fees) are payable by Allis-Chalmers and by Bronco regardless of
whether the merger is completed; and
|
|
|
|
the proposed merger may disrupt the business of Allis-Chalmers
and Bronco and distract their management and employees from
day-to-day operations, because work related to the merger
(including integration planning) requires substantial time and
resources, which could otherwise have been devoted to other
business opportunities for the benefit of Allis-Chalmers and
Bronco.
|
If the merger is not completed, these risks and liabilities may
materially adversely affect Broncos and
Allis-Chalmers business, financial results, financial
condition and stock price.
In addition, there can be no assurance that Allis-Chalmers will
be successful in obtaining expected financing. Although
financing is not a condition to closing of the merger, if
Allis-Chalmers were not able to obtain the expected financing,
or not able to obtain the financing on commercially reasonable
terms, it might not be able to complete the merger and might be
subject to other adverse consequences.
There
are two separate lawsuits seeking to delay or prevent the
consummation of the merger.
Three purported Bronco stockholders separately filed complaints
seeking class action status relating to the merger. The Boothe
action was filed in Oklahoma in the District Court of Oklahoma
County on January 29, 2008. The Goff action was filed in
the same court on February 28, 2008. On April 9, 2008,
the Boothe action and the Goff action were consolidated into a
single action, which we refer to as the Oklahoma action. The
defendants named in the Oklahoma action are Bronco, the Bronco
board of directors and Allis-Chalmers. A third action was filed
in the Delaware Court of Chancery on January 29, 2008. The
defendants in the Delaware action are Bronco, the Bronco board
of directors, Allis-Chalmers and Merger Sub. The Oklahoma and
Delaware actions generally allege that the merger consideration
is inadequate, that the Bronco board of directors breached its
fiduciary duties and that Allis-Chalmers aided and abetted the
Bronco board of directors alleged breaches of fiduciary
duties. The actions also allege that the preliminary joint proxy
statement/prospectus included as part of Allis-Chalmers
registration statement on Form S-4, filed with the SEC on
February 20, 2008, contains materially incomplete and
misleading information. The actions generally request, among
other things, that the suits be designated class actions on
behalf of Broncos stockholders, that the proposed merger
be enjoined, and that the Bronco board of directors undertake an
auction of Bronco or otherwise take action to maximize
stockholder value. Additionally, the Delaware action requests
that all allegedly misleading or omitted information be
corrected in Allis-Chalmers preliminary joint proxy
statement/prospectus. The Delaware action seeks monetary damages
for Broncos stockholders, and the Oklahoma action requests
that the proposed merger be rescinded if it is consummated. As
of this time, no order has been issued in either of the actions
that would preclude the consummation of the merger. If such an
order is entered in either of the actions, the stockholder votes
or the consummation of the merger could be delayed or prevented.
Each of Allis-Chalmers and Bronco has the right to terminate the
merger agreement in the event a court enjoins the consummation
of the merger.
27
Two
groups that beneficially own a significant amount of the
outstanding voting stock of Bronco have announced their
intention to oppose the merger.
On January 25, 2008, Bronco received a letter from Third
Avenue Management LLC, which we refer to as Third Avenue,
stating that it was opposed to the merger. The letter was also
filed with the SEC by Third Avenue on an amendment to its
Schedule 13D on January 25, 2008. On February 27,
2008 and again on March 7, 2008, representatives of Third
Avenue advised Bronco during telephone calls that it continued
to be dissatisfied with the merger consideration and that it
intended to vote against the merger as currently structured.
According to its most recent Schedule 13D filing, Third
Avenue, on behalf of its investment advisory clients,
beneficially owns 5,836,116 shares of Bronco common stock,
representing 22.42% of Broncos outstanding common stock as
of March 7, 2008. On April 25, 2008, Bronco received a
letter from Alpine Associates stating that it was opposed to the
merger. The letter was also filed with the SEC by Alpine
Associates on an amendment to its Schedule 13D on
April 25, 2008. According to its amended Schedule 13D,
Alpine Associates and its related parties own more than
1,600,000 shares of Bronco common stock, representing more
than 6.1% of Broncos outstanding common stock on
April 25, 2008.
The
rights of Bronco stockholders who become Allis-Chalmers
stockholders in the merger will be governed by
Allis-Chalmers certificate of incorporation and
bylaws.
Bronco stockholders who receive shares of Allis-Chalmers common
stock in the merger will become Allis-Chalmers stockholders.
Although their rights as stockholders will remain subject to the
DGCL, they will be governed by Allis-Chalmers certificate
of incorporation and bylaws, rather than Broncos
certificate of incorporation and bylaws. As a result, there will
be material differences between the current rights of Bronco
stockholders, as compared to the rights they will have as
Allis-Chalmers stockholders. For more information, see
Comparison of Rights of Allis-Chalmers and Bronco
Stockholders, beginning on page 111.
The
directors and executive officers of Bronco may have personal
interests that differ from yours and that may motivate them to
support or approve the merger.
The directors of Bronco who have recommended the merger to
Bronco stockholders and the executive officers of Bronco who
provided information to the Bronco board of directors relating
to the merger have employment, indemnification
and/or
severance benefit arrangements, will benefit from the
acceleration of restricted stock awards, if any, and have rights
to ongoing indemnification and director and officer insurance.
Any of these arrangements or benefits may cause these
individuals to have interests that may differ from yours. The
benefits that would result from the merger may have influenced
these directors in approving the merger and these executive
officers in supporting the merger.
You should consider these interests when you consider the
recommendation of the Bronco board of directors that you vote
for the adoption of the merger agreement. As a result of these
interests, these directors and executive officers may be more
likely to support the merger than they would if they did not
have these interests. For a discussion of the interests of
directors and executive officers in the merger, see The
Merger Interests of Directors and Executive Officers
of Bronco in the Merger, beginning on page 77.
The
merger agreement limits Broncos ability to pursue an
alternative to the merger.
The merger agreement prohibits Bronco from soliciting
alternative transactions. See The Merger
Agreement Conditions to the Completion of the
Merger beginning on page 91. Additionally, under the
merger agreement, before (i) the board of directors of
Bronco changes its recommendation regarding the merger as a
result of its receipt of an unsolicited acquisition proposal,
(ii) the board of directors of Bronco recommends an
alternative transaction or (iii) Bronco enters into an
alternative transaction, Bronco must allow Allis-Chalmers a
four-business day period to make a revised proposal. These
provisions limit Broncos ability to pursue offers from
third parties that could result in greater value to its
stockholders.
Broncos obligation to pay a termination fee may also
discourage a third party from pursuing an alternative
transaction proposal. Under the merger agreement, Bronco may be
required to pay to Allis-Chalmers a termination fee of
$10 million or out-of-pocket expenses of up to
$5 million if the merger
28
agreement is terminated under specified circumstances. If a
termination fee is payable, the payment of this fee could have
material and adverse consequences on Broncos financial
condition.
Risk
Factors Relating to Allis-Chalmers Following the
Merger
Allis-Chalmers
may experience difficulties in integrating Broncos
business and could fail to realize potential benefits of the
merger.
Achieving the anticipated benefits of the merger will depend in
part upon whether Allis-Chalmers is able to integrate
Broncos business in an efficient and effective manner.
Allis-Chalmers may not be able to accomplish this integration
process smoothly or successfully. The difficulties of combining
the two companies businesses potentially will include,
among other things:
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geographically separated organizations and possible differences
in corporate cultures and management philosophies;
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significant demands on management resources, which may distract
managements attention from day-to-day business;
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differences in the disclosure systems, accounting systems, and
accounting controls and procedures of the two companies, which
may interfere with the ability of Allis-Chalmers to make timely
and accurate public disclosure; and
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the demands of managing new locations and new lines of business
acquired from Bronco in the merger.
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Any inability to realize the potential benefits of the merger,
as well as any delays in integration, could have an adverse
effect upon the revenues, level of expenses and operating
results of the combined company, which may affect the value of
Allis-Chalmers common stock after the closing of the merger.
Allis-Chalmers
will have substantial debt after the merger, which could have a
material adverse effect on its financial health and limit its
future operations.
Allis-Chalmers will have a significant amount of debt
immediately after the merger. As of March 31, 2008, on a
pro forma basis to reflect the merger and Allis-Chalmers
borrowing to finance the cash component of the merger
consideration, repayment of outstanding Bronco debt and expenses
relating to the merger, and to raise cash for working capital
and general corporate purposes, Allis-Chalmers total
outstanding long-term debt would have been $842.3 million.
Under the commitment letter between Allis-Chalmers, Royal Bank
and GSCP, dated June 1, 2008, and subject to the terms and
conditions set forth in the commitment letter, Royal Bank and
GSCP have committed to provide an aggregate principal amount of
up to $350.0 million under a senior unsecured bridge
facility to Allis-Chalmers or one of its wholly-owned
subsidiaries reasonably satisfactory to Royal Bank and GSCP. The
proceeds of the bridge facility may be used by Allis-Chalmers to
finance the cash component of the merger consideration, repay
outstanding Bronco debt and pay expenses relating to the merger.
Allis-Chalmers substantial debt could have a material
adverse effect on its financial condition and results of
operations. In particular, it could:
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increase Allis-Chalmers vulnerability to general adverse
economic and industry conditions, and require it to dedicate a
substantial portion of its cash flow from operations to payments
on its indebtedness, thereby reducing the availability of its
cash flow to fund working capital, capital expenditures,
acquisitions, other debt service requirements and other general
corporate purposes;
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increase Allis-Chalmers exposure to risks inherent in
interest rate fluctuations and changes in credit ratings or
statements from rating agencies because certain of its
borrowings are at variable rates of interest, which would result
in higher interest expense to the extent Allis-Chalmers has not
hedged these risks against increases in interest rates;
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place Allis-Chalmers at a competitive disadvantage compared to
its competitors that have less debt; and
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limit Allis-Chalmers ability to borrow additional funds.
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Allis-Chalmers
debt agreements contain restrictive covenants that may limit the
ability of Allis-Chalmers to respond to changes in market
conditions or pursue business opportunities.
The credit agreements and other instruments governing
Allis-Chalmers credit facilities will contain restrictive
covenants that will limit Allis-Chalmers ability and the
ability of certain of its subsidiaries after the merger to,
among other things:
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incur or guarantee additional indebtedness;
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make investments and other restricted payments, including
dividends;
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purchase equity interests or redeem subordinated indebtedness
early;
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create or incur certain liens;
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enter into transactions with affiliates;
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sell assets; and
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merge or consolidate with another company.
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In addition, Allis-Chalmers will have to meet certain quarterly
financial ratios and tests, notably with respect to a fixed
charge coverage ratio and a maximum leverage ratio.
Allis-Chalmers need to comply with these provisions may
materially adversely affect its ability to react to changes in
market conditions, take advantage of business opportunities it
believes to be desirable, obtain future financing, fund needed
capital expenditures, finance its acquisitions, equipment
purchases and development expenditures, or withstand a future
downturn in its business.
If
Allis-Chalmers is unable to comply with the restrictions and
covenants in the agreements governing its indebtedness, there
could be a default under the terms of these agreements, which
could result in an acceleration of payment of funds that
Allis-Chalmers has borrowed.
If Allis-Chalmers is unable to comply with the restrictions and
covenants in the agreements governing its indebtedness or in
current or future debt financing agreements, there could be a
default under the terms of these agreements.
Allis-Chalmers ability to comply with these restrictions
and covenants, including meeting financial ratios and tests, may
be affected by events beyond its control. As a result,
Allis-Chalmers cannot assure Allis-Chalmers and Bronco
stockholders that Allis-Chalmers will be able to comply with
these restrictions and covenants or meet these tests. If a
default occurs under these agreements, lenders could terminate
their commitments to lend or accelerate the outstanding loans
and declare all amounts borrowed due and payable. Borrowings
under other debt instruments that contain cross-acceleration or
cross-default provisions may also be accelerated and become due
and payable. If any of these events occur, the assets of
Allis-Chalmers might not be sufficient to repay in full all of
its outstanding indebtedness and Allis-Chalmers may be unable to
find alternative financing. Even if Allis-Chalmers could obtain
alternative financing, it might not be on terms that are
favorable or acceptable to Allis-Chalmers. If Allis-Chalmers
were unable to repay amounts borrowed, the holders of the debt
could initiate a bankruptcy proceeding or liquidation proceeding
against collateral.
The
effect of purchase accounting could adversely affect
Allis-Chalmers earnings.
Purchase accounting will require the combined company to
allocate the price being paid in the merger to Broncos
assets and liabilities on the basis of their estimated fair
values at the time of the closing of the merger. Those
adjustments are expected to result in significant increases in
the carrying values of property, plant and equipment, and
intangibles as reflected in the unaudited pro forma condensed
combined balance sheet contained elsewhere in this document.
In addition, the preliminary estimate of goodwill as of
March 31, 2008 associated with the merger is approximately
$95.5 million, as reflected in the unaudited pro forma
condensed combined balance sheet
30
contained elsewhere in this joint proxy statement/prospectus.
Allis-Chalmers will annually assess this amount for impairment
under generally accepted accounting principles as applied by
Allis-Chalmers. If Allis-Chalmers concludes that the goodwill
associated with the merger is impaired or, additionally, that
the carrying value of assets acquired in the merger are
impaired, the amount of the impairment would reduce the amount
of earnings Allis-Chalmers would otherwise report but would have
no effect on its cash flows.
The business of Allis-Chalmers following the merger is expected
to continue to be cyclical. The goodwill associated with the
merger and the increased carrying values of Broncos assets
on the balance sheet of Allis-Chalmers could, therefore,
increase the potential for impairment, possibly causing a
write-down or write-off of the goodwill and the carrying values
of Allis-Chalmers assets acquired in the merger.
Failure
to retain key employees could adversely affect Allis-Chalmers
following the merger.
Allis-Chalmers performance following the merger could be
adversely affected if it is unable to retain certain key
employees of Allis-Chalmers and Bronco. The loss of the services
of one or more of these key employees, including Allis-Chalmers
Chief Executive Officer and President, Mr. Hidayatallah,
could adversely affect Allis-Chalmers future operating results
because of their experience and knowledge of the respective
businesses of Allis-Chalmers and Bronco. Allis-Chalmers does not
currently have any agreements with Broncos senior
management regarding their continued employment following the
merger.
Allis-Chalmers
and Bronco will incur substantial costs in connection with the
merger.
Allis-Chalmers and Bronco expect to incur a number of
non-recurring transaction fees and other costs associated with
completing the merger and combining the operations of the two
companies, including legal and accounting fees and expenses
related to stockholder litigation. These fees and costs will be
substantial and many of them will be incurred regardless of
whether the merger is consummated. Additional unanticipated
costs may also be incurred in the integration of the businesses
of Allis-Chalmers and Bronco. If the total costs and
indebtedness incurred in completing the merger exceed estimates,
the financial results of the combined company may be materially
adversely affected.
The
issuance of shares of Allis-Chalmers common stock to Bronco
stockholders in the merger will dilute the ownership interests
of Allis-Chalmers stockholders.
After the merger, Allis-Chalmers stockholders will own a
significantly smaller percentage of the combined company than
they currently own of Allis-Chalmers due to the issuance of
shares of Allis-Chalmers common stock to Bronco stockholders. As
a result, the relative percentage interest of current
Allis-Chalmers stockholders with respect to earnings, voting,
liquidation value, book value and market value will be reduced
to approximately 68% of the combined company. If the merger
fails to produce the results Allis-Chalmers and Bronco
anticipate, the acquisition may not be accretive to
Allis-Chalmers stockholders on a per share basis.
31
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus, including information
incorporated by reference into this joint proxy
statement/prospectus, contains certain forward-looking
statements within the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Generally, the words
expects, anticipates,
targets, goals, projects,
intends, plans, believes,
seeks, estimates, variations of these
words, their negatives and similar expressions identify
forward-looking statements, and any statements regarding the
timing or benefits of the merger, or Allis-Chalmers or
Broncos future financial condition, results of operations
and business, are also forward-looking statements. All
statements other than statements of historical fact are
statements that could be deemed forward-looking statements.
These statements are based upon current expectations and
estimates of the respective management of Allis-Chalmers and
Bronco. These statements occur in, among other places:
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Questions and Answers About the Merger;
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The Merger Recommendation of the
Allis-Chalmers Board of Directors and Its Reasons for the
Merger and Recommendation of the Bronco Board
of Directors and Its Reasons for the Merger;
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Summary Historical Financial and Operating Information of
Allis-Chalmers, Summary Historical Financial and
Operating Information of Bronco, Summary Unaudited
Pro Forma Condensed Combined Financial Statements and
Unaudited Comparative Per Share Data;
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The Merger Opinion of Allis-Chalmers
Financial Adviser and Opinion of
Broncos Financial Adviser; and
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Statements contained elsewhere in this joint proxy
statement/prospectus concerning the merger and combined
companys growth and future operations or financial
position.
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Allis-Chalmers and Bronco have based these statements on their
assumptions and analyses in light of their experience and
perception of historical trends, current conditions, expected
future developments and other factors they believe are
appropriate in the circumstances. Forward-looking statements by
their nature involve substantial risks and uncertainties that
could significantly affect expected results, and actual future
results and stockholder values of Allis-Chalmers, Bronco and the
combined company could differ materially from those described in
these statements. Although it is not possible to identify all
factors, Allis-Chalmers and Bronco continue to face many risks
and uncertainties, many of which are beyond Allis Chalmers
and Broncos ability to control or predict. Among the
factors that could cause actual future results or values to
differ materially are the risks and uncertainties described
under Risk Factors, beginning on page 26,
elsewhere in this joint proxy statement/prospectus and in the
documents incorporated by reference into this joint proxy
statement/prospectus, including, but not limited to, the
following:
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the inability to consummate the merger;
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the inability to achieve, or difficulties and delays in
achieving, synergies and cost savings relating to the merger;
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difficulties and delays in obtaining consents and approvals that
are conditions to the completion of the merger;
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oil and natural gas prices and industry expectations about
future prices;
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the ability of Allis-Chalmers and Bronco to enter into, and the
terms of, future contracts;
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the effect of governmental laws and regulations;
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the adequacy of sources of liquidity;
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uncertainties relating to the level of activity in oil and
natural gas exploration, development and production;
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the ability of Allis-Chalmers to retain certain employees key to
the ongoing success of the combined company and the availability
of other skilled personnel;
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the effect of litigation, claims and contingencies, including
those that have been filed by certain stockholders of Bronco;
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the inability to carry out plans and strategies as expected;
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future capital expenditures and refurbishment, repair and
upgrade costs;
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delays in refurbishment and upgrade projects;
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the sufficiency of funds for required capital expenditures,
working capital and debt service; and
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liabilities under laws and regulations protecting the
environment.
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Actual results and plans could differ materially from those
expressed in any forward-looking statements if underlying
assumptions prove incorrect, or if there occurs one or more of
the risks or uncertainties described elsewhere herein or in the
reports and documents incorporated by reference into this joint
proxy statement/prospectus as described under Where You
Can Find More Information, beginning on page 116.
All forward-looking statements, expressed or implied, included
in this joint proxy statement/prospectus are expressly qualified
in their entirety by this cautionary statement. This cautionary
statement should also be considered in connection with any
subsequent written or oral forward-looking statements that
Allis-Chalmers, Bronco or persons acting on their behalf may
issue.
Except as otherwise required by applicable law, Allis-Chalmers
and Bronco disclaim any duty to update any forward-looking
statements, all of which are expressly qualified by the
statements in this section. See also Where You Can Find
More Information, beginning on page 116.
33
THE
ALLIS-CHALMERS MEETING
This section contains information from Allis-Chalmers for
Allis-Chalmers stockholders about the Allis-Chalmers Meeting to
approve the issuance of Allis-Chalmers common stock in the
merger and transact other business described below. Together
with this document, Allis-Chalmers is also sending a notice of
the Allis-Chalmers Meeting and a form of proxy that is being
solicited by the Allis-Chalmers board of directors for use at
the Allis-Chalmers Meeting. The information and instructions
contained in this section are addressed to Allis-Chalmers
stockholders only, and all references to you in this
section should be understood to be addressed to Allis-Chalmers
stockholders.
Date,
Time, Place and Purposes of the Allis-Chalmers Meeting
The special meeting of stockholders of Allis-Chalmers Energy
Inc. will be held
on ,
2008, at 9:00 a.m., Central Time, at
the ,
Houston, Texas for the following purposes:
1. to approve the issuance of Allis-Chalmers Energy
Inc.s common stock to the stockholders of Bronco Drilling
Company, Inc. in connection with the merger of Bronco Drilling
Company, Inc. with and into Elway Merger Sub, LLC, a
wholly-owned subsidiary of Allis-Chalmers Energy Inc., as set
forth in the Agreement and Plan of Merger, dated as of
January 23, 2008, by and among Allis-Chalmers Energy Inc.,
Bronco Drilling Company, Inc. and Elway Merger Sub, Inc. (which
prior to the merger will convert into Elway Merger Sub, LLC), as
amended by the First Amendment thereto, dated as of June 1,
2008, copies of which are attached as
Annexes A-1
and A-2,
respectively, to the joint proxy statement/prospectus
(Proposal No. 1);
2. to approve the adjournment of the Allis-Chalmers
Meeting, if necessary or appropriate, to solicit additional
proxies in favor of the foregoing proposal
(Proposal No. 2); and
3. to transact any other business as may properly come
before the Allis-Chalmers Meeting or any adjournments or
postponements thereof.
The approval of Proposal No. 1 is a condition to
the completion of the merger. Accordingly, if
Allis-Chalmers
stockholders wish to support the merger, they must approve
Proposal No. 1.
The Allis-Chalmers board of directors recommends that
Allis-Chalmers stockholders vote FOR Proposal No. 1
and Proposal No. 2.
Who Can
Vote at the Allis-Chalmers Meeting
Only holders of record of Allis-Chalmers common stock at the
close of business
on ,
2008, the record date for the Allis-Chalmers Meeting, are
entitled to notice of and to vote at the Allis-Chalmers Meeting.
On the record date, there
were shares
of Allis-Chalmers common stock outstanding and entitled to be
voted at the Allis-Chalmers Meeting held by
approximately stockholders
of record. A majority of these shares, present in person or
represented by proxy, is necessary to constitute a quorum. Each
share of Allis-Chalmers common stock is entitled to one vote at
the Allis-Chalmers Meeting.
Vote
Required for Approval; Quorum
The affirmative vote of the holders of a majority of the votes
cast by Allis-Chalmers stockholders entitled to vote at the
Allis-Chalmers Meeting, at which a quorum is present, is
required to approve the issuance of shares of Allis-Chalmers
common stock in the merger and to approve any adjournment of the
Allis-Chalmers Meeting, if necessary or appropriate, to solicit
additional proxies. Abstentions and broker non-votes will not be
counted either in favor of or against Proposals No. 1
or 2 at the Allis-Chalmers Meeting.
A quorum will be present at the Allis-Chalmers Meeting if a
majority of all the shares of Allis-Chalmers common stock issued
and outstanding on the Allis-Chalmers record date and entitled
to vote at the
Allis-Chalmers
Meeting are present in person or represented by proxy at the
Allis-Chalmers Meeting. Abstentions and broker non-votes will be
treated as present at the Allis-Chalmers Meeting for purposes of
determining the presence or absence of a quorum for the
transaction of all business.
34
Adjournments
If a quorum of Allis-Chalmers stockholders is not present in
person or represented by proxy at the
Allis-Chalmers
Meeting, the Allis-Chalmers Meeting may be adjourned by
Allis-Chalmers stockholders holding a majority of Allis-Chalmers
common stock present or represented at the meeting until a
quorum is present or represented. In addition, if the
adjournment proposal is approved, adjournments of the
Allis-Chalmers Meeting may be made for the purpose of soliciting
additional proxies in favor of Proposal No. 1.
Manner of
Voting
We refer to a stockholder who holds Allis-Chalmers common stock
in the stockholders own name (as opposed to being held in
the name of their broker, bank or other nominee) as a
holder of record. Holders of record may vote in
person at the Allis-Chalmers Meeting or by proxy. Allis-Chalmers
recommends that holders of record vote by proxy even if they
plan to attend the Allis-Chalmers Meeting. Holders of record can
always revoke their proxy and change their votes at the
Allis-Chalmers Meeting.
Proxy
Voting by Holders of Record
Voting instructions are attached to your proxy card. If you
properly submit your proxy to Allis-Chalmers in time to vote,
one of the individuals named as your proxy will vote your shares
as you have directed. You may vote for or against any or all of
the proposals submitted at the Allis-Chalmers Meeting or abstain
from voting.
If you are a holder of record, please vote your proxy by mail as
provided below. Your submission of proxy authorizes Munawar H.
Hidayatallah and Victor M. Perez, and each of them, as proxies,
each with the power to appoint his or her substitute, to
represent and vote your shares.
To submit your proxy by mail:
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mark, sign and date your proxy card and return it in the
postage-paid envelope provided, or
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return it to Allis-Chalmers Energy Inc.,
c/o Secretary,
5075 Westheimer, Suite 890, Houston, Texas 77056.
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Only the latest dated proxy received from you will be voted at
the Allis-Chalmers Meeting.
Voting of
Shares Held in Street Name
If your shares of Allis-Chalmers common stock are not held in
your own name but rather by your broker, bank or another
nominee, we refer to your shares as being held in street
name by your nominee. If your shares are held in street
name you must instruct your nominee how to vote your shares.
Your nominee may send to you a separate voting instruction form
asking you for your voting instructions. If you do not receive a
request for voting instructions well in advance of the
Allis-Chalmers Meeting, we recommend that you directly contact
your nominee to determine how to cause your shares to be voted
as you wish.
Unless you give voting instructions, your nominee will not
vote your shares on the proposal to issue Allis-Chalmers
common stock in the merger or any other matter that comes before
the Allis-Chalmers Meeting. Your shares held in street name
will, however, be counted for purposes of determining whether a
quorum is present at the Allis-Chalmers Meeting.
If you wish to attend the Allis-Chalmers Meeting and personally
vote your shares held in street name, you must obtain a legally
sufficient proxy from your nominee authorizing you to vote your
shares held in street name.
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How
Proxies Will Be Voted
If holders of record do not indicate how their shares of
Allis-Chalmers common stock should be voted on a matter, the
shares of Allis-Chalmers common stock represented by their
properly completed proxy will be voted (unless properly
withdrawn) as the Allis-Chalmers board of directors recommends
and therefore will be voted:
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FOR the proposal to issue shares of Allis-Chalmers common
stock in the merger, and
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FOR the proposal to adjourn the Allis-Chalmers Meeting,
if necessary or appropriate, to allow for the solicitation of
additional proxies.
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No proxy that is voted against a proposal described in this
joint proxy statement/prospectus will be voted in favor of
adjournment of the Allis-Chalmers Meeting for the purpose of
soliciting additional proxies.
Revoking
a Proxy
You may revoke your proxy at any time prior to its exercise by:
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submitting a new proxy card bearing a later date;
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giving written notice of the revocation to Allis-Chalmers
corporate secretary before the Allis-Chalmers meeting; or
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appearing and voting in person at the Allis-Chalmers Meeting.
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Your attendance at the Allis-Chalmers Meeting in person without
voting will not automatically revoke your proxy. If you revoke
your proxy during the meeting, this will not affect any vote
previously taken. If you hold shares through someone else, such
as a broker, bank or other nominee, and you desire to revoke
your proxy, you should follow the instructions provided by your
nominee.
Tabulation
of the Votes
Allis-Chalmers has appointed American Stock Transfer &
Trust Company to serve as the Inspector of Election for the
Allis-Chalmers Meeting. American Stock Transfer & Trust
Company will independently tabulate affirmative and negative
votes and abstentions.
Solicitation
of Proxies and Expenses
Allis-Chalmers and Bronco will each pay one-half of the expenses
incurred in connection with the printing and mailing of this
joint proxy statement/prospectus. Allis-Chalmers has retained
Georgeson Inc. for a fee of approximately $8,500, plus certain
expenses, to assist in the solicitation of proxies and otherwise
in connection with the Allis-Chalmers Meeting. Allis-Chalmers
and Georgeson will also request brokers, banks and other
nominees holding shares of Allis-Chalmers common stock
beneficially owned by others to send this joint proxy
statement/prospectus to, and obtain proxies from, the beneficial
owners and will reimburse holders for their reasonable expenses
in so doing.
Allis-Chalmers stock transfer agent and registrar,
American Stock Transfer & Trust Company, will
also solicit proxies from holders of record of Allis-Chalmers
common stock for a fee not in excess of its usual fee for
serving as Allis-Chalmers stock transfer agent and
registrar. Solicitation of proxies by mail may be supplemented
by telephone, email and other electronic means, advertisements
and personal solicitations by the directors, officers and
employees of Allis-Chalmers. No additional compensation will be
paid to
Allis-Chalmers
directors, officers or employees for their solicitation efforts.
Questions
About Voting or the Allis-Chalmers Meeting
If you have any questions or need further assistance in voting
your shares, please call Georgeson Inc. at the following numbers:
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brokers, banks and other nominees call
212-440-9800, and
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holders of record of Allis-Chalmers common stock call
(toll-free)
1-866-577-4988.
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36
THE
BRONCO MEETING
This section contains information from Bronco for Bronco
stockholders about the special meeting of stockholders it has
called to adopt the merger agreement and the other proposals
described below. Together with this document, Bronco is also
sending you a notice of the Bronco Meeting and a form of proxy
that is being solicited by the Bronco board of directors for use
at the Bronco Meeting. The information and instructions
contained in this section are addressed to Bronco stockholders
only, and all references to you in this section
should be understood to be addressed to Bronco stockholders.
Date,
Time, Place and Purposes of the Bronco Meeting
The Bronco Meeting will be held
on ,
2008, at 9:00 a.m., Central Time, at
the , ,
Oklahoma. The purpose of the Bronco Meeting is:
1. to adopt the Agreement and Plan of Merger, dated as of
January 23, 2008, by and among
Allis-Chalmers
Energy Inc., Bronco Drilling Company, Inc. and Elway Merger Sub,
Inc. (which prior to the merger will convert into Elway Merger
Sub, LLC), as amended by the First Amendment thereto, dated as
of June 1, 2008, copies of which are attached as
Annexes A-1
and A-2,
respectively, to the joint proxy statement/prospectus
accompanying this notice, pursuant to which Bronco Drilling
Company, Inc. will merge with and into Elway Merger Sub, LLC, a
wholly-owned subsidiary of Allis-Chalmers Energy Inc. (Proposal
No. 1);
2. to approve the adjournment of the Bronco Meeting, if
necessary or appropriate, to solicit additional proxies in favor
of the foregoing proposal (Proposal No. 2); and
3. to transact any other business as may properly come
before the Bronco Meeting or any adjournment or postponement of
the Bronco Meeting.
The Bronco board of directors unanimously recommends that
Bronco stockholders vote:
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FOR the proposal to adopt the merger agreement, and
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FOR the proposal to approve the adjournment of the Bronco
Meeting, if necessary or appropriate, to solicit additional
proxies in favor of adopting the merger agreement.
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For the reasons for these recommendations, see The
Merger Recommendation of the Bronco Board of
Directors and Its Reasons for the Merger, beginning on
page 56.
Who Can
Vote at the Bronco Meeting
Only holders of record of Bronco common stock at the close of
business
on ,
2008, the Bronco record date, are entitled to notice of, and to
vote at, the Bronco Meeting. As of that date, there
were shares
of Bronco common stock outstanding and entitled to vote at the
Bronco Meeting, held by
approximately
stockholders of record. Each share of Bronco common stock is
entitled to one vote at the Bronco Meeting.
Vote
Required for Approval; Quorum
A majority of the outstanding shares of Bronco common stock
entitled to vote must be cast in favor of adoption of the merger
agreement for it to be approved. Abstentions and broker
non-votes will have the same effect as a vote against the
proposal to adopt the merger agreement.
The affirmative vote of a majority of votes cast is required to
approve the proposal to adjourn the Bronco Meeting to solicit
additional proxies in favor of adopting the merger agreement.
Abstentions and broker non-votes will not be counted either in
favor of or against this proposal.
For purposes of conducting the Bronco Meeting, the holders of at
least a majority of the stock issued and outstanding and
entitled to vote at the Bronco Meeting will constitute a quorum.
Abstentions and broker non-votes will count for purposes of
determining whether a quorum is present.
37
Adjournments
If a quorum is not present in person or represented by proxy at
the Bronco Meeting, the Chairman of the Bronco board of
directors or Bronco stockholders holding a majority of the
Bronco common stock present or represented at the Bronco Meeting
have the power to adjourn the meeting from time to time, without
notice other than an announcement at the meeting. In addition,
if the adjournment proposal is approved, adjournments of the
Bronco Meeting may be made for the purpose of soliciting
additional proxies in favor of Proposal No. 1. However, no
proxy that is voted against a proposal described in this joint
proxy statement/prospectus will be voted in favor of adjournment
of the Bronco Meeting for the purpose of soliciting additional
proxies.
Manner of
Voting
We refer to stockholders who hold their Bronco common stock in
their own name (as opposed to being held in the name of their
broker, bank or other nominee) as holders of record.
Holders of record may vote in person at the Bronco Meeting or by
proxy. Bronco recommends that holders of record vote by proxy
even if they plan to attend the Bronco Meeting. Holders of
record can always revoke their proxy and change their votes at
the Bronco Meeting.
Proxy
Voting by Holders of Record
Voting instructions are attached to your proxy card. If you
properly submit your proxy to Bronco in time to vote, one of the
individuals named as your proxy will vote your shares as you
have directed. You may vote for or against any or all of the
proposals submitted at the Bronco Meeting or abstain from voting.
If you are a holder of record, there are three ways to vote your
proxy: by telephone, by Internet or by mail. Please follow the
instructions provided on your proxy card with respect to voting
by mail, telephone or Internet. Your submission of proxy by
telephone or Internet authorizes D. Frank Harrison and Zachary
M. Graves, and each of them, as proxies, each with the power to
appoint his substitute, to represent and vote your shares in the
same manner as if you marked, signed and returned your proxy
form by mail.
Only the latest dated proxy received from you, whether by mail,
telephone or Internet, will be voted at the Bronco Meeting. If
you submit your proxy by telephone or Internet, please do not
mail your proxy form.
Voting of
Shares Held in Street Name
If your shares of Bronco common stock are not held in your own
name but rather by your broker, bank or another nominee, we
refer to your shares as being held in street name by
your nominee. If your shares are held in street name you must
instruct your nominee how to vote your shares.
Your nominee may send to you a separate voting instruction form
asking you for your voting instructions. If you do not receive a
request for voting instructions well in advance of the Bronco
Meeting, we recommend that you directly contact your nominee to
determine how to cause your shares to be voted as you wish. Your
nominee may permit you to instruct the voting of your shares
electronically using the telephone or Internet.
Unless you give voting instructions, your nominee will not
vote your shares on the proposal to adopt the merger
agreement. Shares held in street name but not voted will have
the same effect as a vote against adoption of the merger
agreement. We therefore urge you to provide voting instructions
to your nominee. Your shares held in street name will, however,
be counted for purposes of determining whether a quorum is
present at the Bronco Meeting, if your shares are represented at
the Bronco Meeting by your nominee.
How
Proxies Will Be Voted
All shares of Bronco common stock entitled to vote and
represented by properly completed proxies received prior to the
Bronco Meeting (unless properly revoked) will be voted at the
Bronco Meeting as instructed on the proxies. If Bronco
stockholders do not indicate how their shares of Bronco common
stock should be voted on a matter, the shares of Bronco common
stock represented by their properly completed and not properly
withdrawn proxy will be voted as the Bronco board of directors
recommends and therefore will
38
be voted FOR the adoption of the merger agreement and
FOR approval to adjourn the Bronco meeting, if necessary
or appropriate to solicit additional votes. Any proxy that is
voted against adoption of the merger agreement will also be
voted against any adjournment of the Bronco Meeting for the
purpose of soliciting additional proxies.
Revoking
a Proxy
You may revoke your proxy before it is voted by:
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submitting a new proxy card bearing a later date, or if
telephone or Internet voting is made available to you in your
proxy card, submitting a new proxy by telephone or through the
Internet,
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providing a written notice revoking your proxy to the Secretary
of Bronco before the Bronco Meeting, or
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attending the Bronco Meeting and voting in person.
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If you have instructed your nominee to vote your shares for you,
you must follow directions you receive from your nominee in
order to change or revoke your vote.
Tabulation
of the Votes
Bronco has appointed Computershare Trust Company, N.A. to
serve as the Inspector of Election for the Bronco Meeting.
Computershare Trust Company, N.A. will independently tabulate
affirmative and negative votes and abstentions.
Solicitation
of Proxies and Expenses
Bronco and Allis-Chalmers will each pay one-half of the expenses
incurred in connection with printing and mailing of this joint
proxy statement/prospectus. Bronco has retained Georgeson Inc.
for a fee of $10,500 (subject to adjustment in certain
circumstances), plus reasonable out-of-pocket expenses, to
assist in the solicitation of proxies and otherwise in
connection with the Bronco Meeting. Bronco and Georgeson will
also request brokers, banks and other nominees holding shares of
Bronco common stock beneficially owned by others to send this
joint proxy statement/prospectus to, and obtain proxies from,
the beneficial owners and will reimburse holders for their
reasonable expenses in so doing.
Broncos stock transfer agent and registrar, Computershare
Trust Company, N.A., will also solicit proxies from holders
of record of Bronco common stock for a fee not in excess of its
usual fee for serving as Broncos stock transfer agent and
registrar. Solicitation of proxies by mail may be supplemented
by telephone, email and other electronic means, advertisements
and personal solicitations by the directors, officers and
employees of Bronco. No additional compensation will be paid to
Bronco directors, officers or employees for their solicitation
efforts.
Questions
About Voting or the Bronco Meeting
If you have any questions or need further assistance in voting
your shares, please call Georgeson Inc. at the following numbers:
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brokers, banks and other nominees call
212-440-9800
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holders of record of Bronco common stock call (toll-free)
1-877-668-1647
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39
THE
MERGER
The following is a description of material aspects of the
merger. Although Allis-Chalmers and Bronco believe that the
following description provides certain material information
regarding the merger, the description may not contain all of the
information that is important to you. Allis-Chalmers and Bronco
encourage their stockholders to carefully read this entire joint
proxy statement/prospectus, including the initial merger
agreement and the amendment to the initial merger agreement
attached as
Annexes A-1
and A-2, respectively, to, and incorporated by reference into,
this joint proxy statement/prospectus for a more complete
understanding of the merger.
General
The boards of directors of Allis-Chalmers, Merger Sub and Bronco
have approved the merger agreement providing for the merger of
Bronco with and into Merger Sub. Merger Sub, a wholly-owned
subsidiary of Allis-Chalmers, will be the surviving entity in
the merger, and upon completion of the merger, Merger Sub will
change its name to Bronco Drilling Company LLC and the separate
corporate existence of Bronco will terminate. Bronco
stockholders will receive the merger consideration described
below under The Merger Agreement Merger
Consideration, beginning on page 88.
Background
of the Merger
Each of Allis-Chalmers and Broncos boards of
directors has from time to time engaged with its companys
senior management in strategic reviews and evaluation of
opportunities to achieve long-term strategic goals and enhance
stockholder value of its company. As part of this review
process, the senior management of each company has periodically
made presentations to its board of directors regarding potential
opportunities for business combinations, acquisitions and
dispositions, and each companys board of directors has
evaluated a variety of options in light of the business trends
and other conditions affecting the company and the industry in
which it operates. In addition, during the last several years
various parties, including investment bankers, other companies
operating in the same or similar industries and financial
buyers, have informally raised with members of the boards of
directors and senior management of each company the possibility
of strategic acquisitions or combinations. As a result, since
2001, Allis-Chalmers has completed 23 acquisitions,
including six in 2005, five in 2006 and four in 2007, and since
commencing its operations in 2001, Bronco has completed a number
of strategic acquisitions.
On October 17, 2007, representatives of Johnson Rice
arranged a lunch meeting with Frank Harrison, Broncos
Chairman and Chief Executive Officer, and Munawar Hidayatallah,
Allis-Chalmers Chairman and Chief Executive Officer. Also
present were Ms. Alya Hidayatallah, Allis-Chalmers
manager of corporate finance, and representatives of Johnson
Rice. The purpose of the meeting was to introduce the chief
executive officers of companies that operate in related
industries and share a strategic vision. During this meeting,
Mr. Hidayatallah and Mr. Harrison discussed generally
their respective businesses, philosophies and strategies for
international growth and diversification. Mr. Harrison
commented that Bronco was pursuing this strategy through
acquisitions and that Bronco could be on either side of a
transaction if it were in the best interest of Bronco
stockholders.
In early December 2007, Mr. Hidayatallah contacted a
representative of Johnson Rice with the request to arrange a
second meeting with Mr. Harrison.
On December 12, 2007, Mr. Hidayatallah and
Ms. Hidayatallah met with Mr. Harrison,
Mark Dubberstein, Broncos president, Zachary Graves,
Broncos chief financial officer, and representatives of
Johnson Rice in Oklahoma City, Oklahoma, to further discuss each
companys outlook, strategy and desire to expand
internationally, which discussions were based on publicly
available information for each company. During the meeting,
Mr. Hidayatallah noted that, from his perspective, to
enhance international growth opportunities, a company such as
Allis-Chalmers needed a fleet of land drilling rigs to
complement its oilfield services business. Mr. Hidayatallah
then hypothetically raised the possibility of a business
combination involving Allis-Chalmers and Bronco whereby
Allis-Chalmers would consider acquiring Bronco for cash and
common stock with an implied enterprise value of approximately
$500 million.
40
On December 17, 2007, Mr. Hidayatallah called
Mr. Harrison to make arrangements to continue their prior
discussions. During the telephone call, the parties agreed to
meet in Houston, Texas on December 19, 2007.
On December 18, 2007, Bronco and Allis-Chalmers negotiated
the terms of a confidentiality agreement to facilitate the
disclosure by Bronco of non-public information to Allis-Chalmers
and its advisers and potential lenders. The confidentiality
agreement was executed by Allis-Chalmers on December 18,
2007 and by Bronco on December 19, 2007.
On December 18, 2007, in anticipation of the
December 19, 2007 meeting, Mr. Hidayatallah began
discussions with RBC about its potential role as
Allis-Chalmers financial adviser in connection with any
potential transaction with Bronco and in arranging financing
from its parent company, Royal Bank, and other potential
lenders. Royal Bank subsequently contacted GSCP and invited GSCP
to participate in the financing.
On December 18, 2007, Allis-Chalmers engaged RBC to provide
financial advisory services in connection with a possible
business combination transaction with Bronco. Thereafter,
representatives of RBC provided financial advisory services to
Allis-Chalmers throughout the process that culminated in the
execution of the initial merger agreement on January 23,
2008, and representatives of RBC, Royal Bank and GSCP performed
due diligence with respect to both Allis-Chalmers and Bronco.
RBC, as lead arranger of the potential financing for the merger,
negotiated with Allis-Chalmers the terms of such financing,
which negotiations culminated in the execution of initial bridge
financing commitment documents with Royal Bank on
January 23, 2008 and superseding commitment documents with
Royal Bank and GSCP on January 28, 2008.
On December 19, 2007, Mr. Hidayatallah and
representatives of RBC met with Mr. Harrison and
representatives of Johnson Rice at Allis-Chalmers offices
in Houston, Texas. During the meeting,
Allis-Chalmers
discussed its business strategy, its objective to diversify its
business and capitalize on growing markets outside the United
States and its pending and potential acquisitions. In addition,
Allis-Chalmers discussed its projected financial and operating
results for the fourth quarter of 2007 and projected outlook for
2008. Following such discussion, Mr. Hidayatallah presented
a non-binding proposal for the acquisition of Bronco by
Allis-Chalmers for consideration consisting of approximately 60%
cash and 40% Allis-Chalmers common stock, representing a 10% to
15% premium to the trading price of Broncos common stock
as of the date of signing of a definitive agreement for such
acquisition. The parties then discussed the scope and timing of
due diligence, valuation alternatives, financing requirements,
possible structures and the timing of a potential business
combination involving Allis-Chalmers and Bronco.
Mr. Harrison then briefly discussed near term corporate
plans for Bronco, including its intention to issue restricted
stock awards in early January 2008 primarily to employees,
including Broncos executive officers, to replace awards
that were vesting at that time. These restricted stock awards
were ultimately granted by the compensation committee of
Broncos board on January 18, 2008.
Mr. Hidayatallah and Mr. Harrison indicated their
understanding that both Bronco and Allis-Chalmers would continue
their respective business operations in the ordinary course
while the two companies discussed a potential business
combination.
From December 20 to December 24, 2007, Allis-Chalmers and
Bronco negotiated a revised written confidentiality agreement to
confirm in writing their prior understanding of the confidential
nature of the disclosure of non-public due diligence information
by Allis-Chalmers to Bronco and its advisers, and they executed
the revised written confidentiality agreement on
December 24, 2007.
On December 20, 2007, the Allis-Chalmers board of directors
met telephonically with senior management of Allis-Chalmers and
its financial advisers to discuss the proposed acquisition by
Allis-Chalmers of Bronco. The Allis-Chalmers board reviewed
Broncos business and operations, the then-proposed terms
of the transaction, transaction structures and the potential
benefits and risks of the proposed transaction. Representatives
from RBC presented a preliminary financial analysis of the
proposed transaction. After discussion, the Allis-Chalmers board
authorized Mr. Hidayatallah to proceed with negotiations on
the basis of consideration consisting of an aggregate of
$280 million in cash, 11.7 million shares of
Allis-Chalmers common stock with a floating exchange ratio
between 83% and 117% of Allis-Chalmers stock price and a fixed
exchange ratio beyond those price levels, and assumption of
Broncos debt. The board agreed that the transaction did
not
41
need to be subject to a financing contingency and instructed
Mr. Hidayatallah to present a non-binding proposal to
Bronco regarding the terms of the proposed acquisition.
Late on December 20, 2007, Mr. Hidayatallah advised
Mr. Harrison via telephone of the non-binding terms he had
been authorized to propose, and Allis-Chalmers, through RBC,
provided to Bronco, through Johnson Rice, a non-binding term
sheet reflecting those proposed terms.
On December 21, 2007, the Bronco board of directors met in
Oklahoma City, Oklahoma for a special meeting called by
Mr. Harrison. Messrs. Harrison, Dubberstein, Graves
and David Treadwell, Broncos general counsel,
representatives of Akin Gump Strauss Hauer & Feld LLP,
outside counsel to Bronco, which we refer to as Akin Gump, and
representatives of Johnson Rice also attended the meeting. At
the meeting, Mr. Harrison informed the Bronco board that
Bronco had received a non-binding proposal from Allis-Chalmers
regarding a possible business combination transaction and
recounted for the board the process that led to the discussions
between the companies. He noted that the purpose of the meeting
was to inform the Bronco board of the proposal and to seek the
boards authorization to further explore a possible
transaction. Johnson Rice then provided the board with
additional details regarding the terms of the proposal and
Allis-Chalmers desired timeline. Representatives of
Johnson Rice next presented an overview of industry trends and
the challenges facing domestic drilling companies. The
representatives referenced a recent industry survey suggesting
that domestic exploration and production expenditures were
expected to rise at a rate of less than 5% annually while
drilling rig capacity was expected to increase, which could add
further downward pressure on utilization and day rates. While
this same survey suggested international exploration and
production expenditures were projected to grow at 16% to 20%
annually, Johnson Rice expressed its belief that, based on its
own assessment and discussions with Broncos senior
management, it would take Bronco longer than five years to
achieve the product, service and geographic diversification that
a combination between Bronco and Allis-Chalmers would have upon
the closing of the proposed transaction.
At that meeting, representatives of Johnson Rice also reviewed
in detail with the Bronco board Johnson Rices preliminary
financial analysis of the Allis-Chalmers proposal, which
included a pro forma deal analysis, an accretion/dilution
analysis, a pro forma credit statistics analysis and relative
publicly traded peer comparison analysis for both companies.
Throughout this presentation, the board asked questions
regarding and discussed these analyses. The board also focused
on the stock component of the proposed merger consideration and
the effect of the 17% exchange ratio collar. The board was
concerned that unfavorable financial results for
Allis-Chalmers
for the fourth quarter of 2007, which under the schedule
proposed by Allis-Chalmers would not be disclosed prior to the
announcement of a transaction with Bronco, could adversely
affect the merger consideration received by Broncos
stockholders. The Bronco board also questioned management and
Johnson Rice regarding the possibility of other potential
transactions. The board and management then reviewed prior
discussions and negotiations since June 2006 with two other
public oilfield services companies and one financial investor,
none of which had progressed beyond preliminary discussions.
Both management and Johnson Rice advised the Bronco board that,
in their view based on their knowledge of the industry,
Broncos peers and financial investors, they did not think
it likely that a strategic or financial buyer would emerge with
an interest in a business combination transaction with Bronco.
Following completion of the presentation by Johnson Rice and the
boards discussion of such presentation, Akin Gump reviewed
with the Bronco board its fiduciary duties under Delaware law
with respect to evaluating and responding to the proposal. As
part of this discussion, the representatives of Akin Gump
inquired if any of the members of the board were financially
interested in the transaction
and/or not
independent with respect to it. In response to this discussion,
Mr. Harrison noted that the change of control provision in
his employment agreement would be triggered by the closing of
the proposed transaction. Three other directors held restricted
stock awards received as part of their standard director
compensation that would vest upon a change of control. No other
potential interests in the transaction were identified by
members of the board. Following this discussion and to
facilitate further consideration of the proposal from
Allis-Chalmers, the board resolved to form a negotiating
committee comprised of Messrs. Gary Hill and William
Snipes, with Mr. Hill serving as chairman of the committee.
The Bronco board authorized and empowered the negotiating
committee to review, evaluate, negotiate and reject or recommend
to the full board any potential transaction related to the
Allis-Chalmers proposal. The board then authorized the
engagement of Johnson Rice as its
42
financial advisor and Akin Gump as its outside legal counsel in
connection with the proposed transaction. The board also
authorized Broncos management to engage in negotiations
regarding the proposed transaction, but only within parameters
established by the board and the negotiating committee and
subject to the direction and supervision of the board and the
committee. The Bronco board further instructed management not to
discuss any post-closing employment or other personal service
agreements with Allis-Chalmers unless and until a definitive
agreement for a transaction had been signed.
Following the Bronco board meeting, Mr. Harrison called
Mr. Hidayatallah to inform him that the Bronco board had
authorized further consideration of Allis-Chalmers
proposal. Subsequently, on December 21, 2007, Andrews Kurth
LLP, counsel to Allis-Chalmers, which we refer to as Andrews
Kurth, delivered an initial draft of the initial merger
agreement, which had been reviewed by Allis-Chalmers and RBC, to
Bronco and its legal and financial advisers reflecting the
non-binding proposal made by Allis-Chalmers on December 20,
2007.
On December 24, 2007, representatives from Allis-Chalmers
and its financial advisers met telephonically with
representatives of Bronco and its legal and financial advisers
to facilitate, and assign responsibilities for, their respective
due diligence reviews. Management presentations from both
companies were subsequently scheduled for early January 2008.
Thereafter, throughout the period prior to the execution of the
initial merger agreement, the two companies, directly and
through their respective financial and legal advisers, exchanged
due diligence information, which was also provided to Royal Bank
and GSCP as prospective lenders.
On December 31, 2007, the negotiating committee of the
Bronco board met telephonically to discuss the terms of the
draft of the initial merger agreement with Allis-Chalmers and
related process matters. Messrs. Dubberstein and Treadwell
and representatives of Johnson Rice and Akin Gump also took part
in the meeting via telephone. Mr. Hill, serving as the
chairman of the negotiating committee, asked representatives of
Akin Gump to update the negotiating committee with respect to
the negotiations of the terms of the initial merger agreement, a
draft of which had been distributed by Allis-Chalmers
counsel on December 21, 2007. Each member of the committee
was provided with a marked copy of the draft of the initial
merger agreement reflecting proposed changes to
Allis-Chalmers
original draft of the initial merger agreement. Representatives
of Akin Gump provided a general overview of the Allis-Chalmers
draft of the initial merger agreement and then conducted a
page-by-page
review of the draft that included detailed explanations of the
terms of, and material open issues in, the draft and proposed
alternatives. These discussions included, but were not limited
to, the definition of material adverse effect, the
termination date of the initial merger agreement, the purchase
price and calculation of the purchase price, the treatment of
stock options and restricted stock awards, the representations
and warranties of each party, non-competition and voting
agreements, the circumstances under which the agreement could be
terminated and the consequences of such terminations (including
break-up
fees and payment of expenses), the non-solicitation provision
and the boards related fiduciary out.
Specifically to assure that the negotiation of an acquisition
agreement with Allis-Chalmers would not foreclose the
possibility of achieving even greater value for Broncos
stockholders, the committee instructed that the initial merger
agreement must permit Bronco to terminate the agreement to
accept a superior proposal, subject to payment of an appropriate
break-up
fee. The negotiating committee then directed representatives of
Akin Gump to continue to negotiate the terms of the initial
merger agreement and to attempt to resolve the open points as
discussed in the meeting.
On December 31, 2007, Akin Gump delivered to
Allis-Chalmers counsel a revised draft of the initial
merger agreement. Negotiations between Allis-Chalmers and
Bronco, and their respective counsel, regarding the initial
merger agreement continued through the execution of the initial
merger agreement on January 23, 2008.
On January 2, 2008, representatives of Bronco, Johnson Rice
and RBC held a conference call to discuss a trip to Argentina to
perform due diligence with respect to Allis-Chalmers
international operations. On January 3 and 4, 2008,
representatives of Bronco met with representatives of
Allis-Chalmers in Buenos Aires, Argentina and performed due
diligence on Allis-Chalmers Argentine drilling operations.
On January 3, 2008, representatives of Allis-Chalmers held
a telephone conference attended by representatives of Bronco,
Johnson Rice and RBC, during which Allis-Chalmers presented its
estimated results for the fourth quarter of 2007.
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On January 9, 2008, representatives of the senior
management teams of Allis-Chalmers and Bronco met at Andrews
Kurths offices in Houston, Texas, to present a summary of
their respective companies operations and financial
information. Representatives of the two companies legal
and financial advisers were also present, as well as
representatives of Royal Bank and GSCP as prospective lenders to
Allis-Chalmers.
On January 12, 2008, Mr. Harrison advised
Mr. Hidayatallah during a telephone conversation that
Bronco was uncomfortable with coupling any announcement of a
transaction with Allis-Chalmers earnings release and that
Broncos board would expect at least a 20% premium to the
companys trading price at the time of signing of a
definitive agreement.
On January 15, 2008, representatives of Allis-Chalmers
performed due diligence at Broncos manufacturing and
refurbishing facilities in Oklahoma City, Oklahoma, and on its
rigs in the surrounding area.
On January 15, 2008, representatives of Bronco,
Allis-Chalmers, Johnson Rice and RBC had a telephone conference
call to further discuss the Allis-Chalmers and Bronco financial
information that was presented at the January 9, 2008
meeting in Houston. The parties also discussed the status of the
initial merger agreement negotiations and due diligence and the
timing of the proposed transaction. Due diligence efforts
continued until the signing of the initial merger agreement on
January 23, 2008.
On January 16, 2008, Bronco communicated through Johnson
Rice to Allis-Chalmers and RBC that the then current structure
of the proposed transaction was no longer attractive to Bronco
given the declining price of Allis-Chalmers common stock and, as
a result, the potential declining value of the stock component
of the acquisition consideration, in light of the collar on the
exchange ratio, which had been proposed by Allis-Chalmers up
until this point. In response, Allis-Chalmers proposed to revise
its acquisition proposal to provide for consideration consisting
of an aggregate of $280.0 million in cash, shares of
Allis-Chalmers common stock with an aggregate value of
approximately $157.8 million, to be calculated based on the
average of the closing sale prices for a share of Allis-Chalmers
common stock for the ten consecutive trading days ending two
trading days prior to the closing of the merger with no collar
on the exchange ratio, and the assumption of Broncos net
indebtedness (approximately $62.4 million as of
December 31, 2007). Later that day, Andrews Kurth delivered
a revised draft of the initial merger agreement to Akin Gump
which reflected the revised transaction terms.
On January 17, 2008, the negotiating committee of the
Bronco board met telephonically to further discuss the status of
negotiations of the terms of the initial merger agreement.
Messrs. Dubberstein and Treadwell and representatives of
Akin Gump also took part in the meeting via telephone.
Mr. Hill, serving as the chairman of the negotiating
committee, asked representatives of Akin Gump to update the
negotiating committee with respect to the negotiations of the
terms of the initial merger agreement. Representatives of Akin
Gump provided the negotiating committee with details of the
exchange of comments and interim drafts of the initial merger
agreement. Each member of the committee had been provided prior
to the meeting with a marked copy of the draft of the initial
merger agreement reflecting cumulative changes that had been
made as a result of the negotiations. Representatives of Akin
Gump informed the negotiating committee that the then current
draft of the initial merger agreement proposed by Allis-Chalmers
still did not satisfactorily address many of the material issues
discussed during the December 31, 2007 meeting of the
negotiating committee. Representatives of Akin Gump again led
the negotiating committee through a
page-by-page
review of the document, explaining material changes and open
issues in the revised draft. These open material items included,
among others, the circumstances and manner in which the Bronco
board could consider and accept alternative acquisition
proposals, the size of the potential termination fee and the
circumstances under which a termination fee
and/or
expense reimbursement would have to be paid to Allis-Chalmers.
During these discussions, the committee was informed of the
proposal by Allis-Chalmers to eliminate the collar on the stock
portion of the merger consideration and of the value of the
Allis-Chalmers common stock to be paid as merger consideration
and the proposed method of calculating the exchange ratio. Based
on these discussions, the committee was not prepared to
recommend the transaction on the terms then proposed by
Allis-Chalmers and instructed Akin Gump to continue negotiation
of the initial merger agreement and related documentation
consistent with the committees position at the meeting.
During the next four days, representatives of Akin Gump and
Andrews
44
Kurth, along with members of senior management of Bronco and
Allis-Chalmers, continued their negotiations of the terms of,
and exchanged numerous drafts of, the initial merger agreement
and related documentation.
On January 17, 2008, representatives of Bronco, Johnson
Rice and RBC had a conference call regarding the status of the
initial merger agreement negotiations and due diligence and the
timing of the proposed transaction. Such discussions continued
periodically until pending issues were resolved to the mutual
satisfaction of the parties and the signing of the definitive
initial merger agreement on January 23, 2008.
On January 18, 2008, representatives of Allis-Chalmers had
a telephonic discussion with representatives of Grant Thornton,
Broncos independent accountants, a representative of
Bronco and representatives of Johnson Rice and RBC
regarding tax issues affecting Bronco.
On January 21, 2008, in contemplation of meetings of
Broncos negotiating committee and its board of directors
on January 23, 2008, the then current draft of the initial
merger agreement and related documentation were distributed to
the members of Broncos board.
On January 23, 2008, Royal Bank approved a bridge financing
commitment to Allis-Chalmers of up to $350 million to
finance the cash component of the proposed merger consideration
as well as to refinance certain Bronco debt and to pay related
fees and expenses.
Later on January 23, 2008, the Allis-Chalmers board of
directors met telephonically to consider the proposed merger. In
addition to Allis-Chalmers directors, representatives of Andrews
Kurth and RBC were in attendance. Mr. Hidayatallah made a
presentation regarding his views as to the business and
strategic aspects of the proposed merger. Representatives of RBC
reviewed RBCs analysis of the fairness of the merger
consideration then contemplated, from a financial point of view,
to Allis-Chalmers. These representatives also delivered
RBCs oral opinion (which was subsequently confirmed in
writing on January 23, 2008) that, as of such date,
and based upon and subject to the assumptions, qualifications
and limitations set forth in RBCs written opinion, the
merger consideration then contemplated was fair, from a
financial point of view, to Allis-Chalmers (RBCs
January 23, 2008 written opinion was for all purposes
superseded by RBCs subsequent written opinion dated
June 1, 2008 with respect to the fairness to
Allis-Chalmers, from a financial point of view, of the merger
consideration provided for in the amended merger agreement and,
accordingly, only RBCs June 1, 2008 written opinion
is included in this joint proxy statement/prospectus; the full
text of RBCs June 1, 2008 written opinion is set
forth in Annex B to this joint proxy statement/prospectus
and should be read carefully in its entirety in conjunction with
the information contained in The Merger Opinion of
Allis-Chalmers Financial Adviser, beginning on
page 58). Representatives of RBC also summarized the
proposed terms of Royal Banks bridge financing commitment.
The Allis-Chalmers board of directors then discussed the
information it had received and the terms, potential benefits
and potential risks associated with the merger. Following this
discussion, the board determined that the merger was advisable
and in the best interests of Allis-Chalmers and its
stockholders, approved the initial merger agreement, approved
the Royal Bank financing commitment and voted to recommend that
Allis-Chalmers stockholders approve the issuance of shares of
Allis-Chalmers common stock in the merger.
Subsequent to the Allis-Chalmers board meeting, on
January 23, 2008, Allis-Chalmers, Royal Bank and RBC
entered into agreements formalizing Royal Banks bridge
financing commitment and providing for other matters relating to
the financing of the cash component of the merger consideration.
These agreements were superseded on January 28, 2008 by
replacement agreements that added GSCP, which committed to
fund 50% of the $350 million commitment pursuant to
internal approval received on January 25, 2008.
On January 23, 2008, the negotiating committee of the
Bronco board met telephonically. Mr. Treadwell and
representatives of Akin Gump also took part in the meeting.
Mr. Hill, serving as the chairman of the negotiating
committee, asked Akin Gump to update the negotiating committee
with respect to the status of negotiations of the terms of the
initial merger agreement. Representatives of Akin Gump provided
the negotiating committee with a history of the exchange of
comments on and drafts of the initial merger agreement since the
January 17, 2008 meeting of the negotiating committee and
updated the committee on the status of the negotiations and the
resolution of all open issues in the initial merger agreement
and related
45
documentation. Following a discussion of the agreement and such
documentation, the meeting was adjourned so that a joint meeting
of Broncos negotiating committee and its full board of
directors could be convened for purposes of receiving Johnson
Rices analysis of the fairness of the merger consideration
to be received by Broncos stockholders in the transaction,
from a financial point of view. It was agreed that the meeting
of the negotiating committee would be reconvened following
receipt of the Johnson Rice analysis so that the negotiating
committee could further discuss the terms of the initial merger
agreement, together with the information provided by Johnson
Rice, and thereafter make a recommendation to the board with
respect to the proposed transaction.
A joint meeting of the Bronco board and the negotiating
committee was held on January 23, 2008 following the
adjournment of the negotiating committee meeting. All Bronco
directors and members of the negotiating committee participated
in the meeting either in person or, in the case of
Mr. Houston, via telephone. Messrs. Dubberstein,
Graves and Treadwell and representatives of Akin Gump (via
telephone) and Johnson Rice also attended the meeting.
Representatives of Akin Gump explained that the meeting was a
joint meeting of the Bronco board and the negotiating committee,
which would allow all members of the board, including the
members of the negotiating committee, to hear and actively
participate in Johnson Rices fairness analysis and
delivery of its fairness opinion with respect to the proposed
merger. Representatives of Akin Gump then led the Bronco board
and the negotiating committee through a review of the terms of
the final draft of the initial merger agreement, a copy of which
had been provided to each director prior to the meeting, and
other legal matters. Members of the Bronco board and the
negotiating committee asked questions and discussed the terms of
the initial merger agreement throughout Akin Gumps
presentation. Representatives of Johnson Rice then led the
Bronco board and the negotiating committee through Johnson
Rices financial analysis regarding the fairness of the
transaction. Under the terms of the initial merger agreement,
the total consideration per share represented a premium of
approximately 29.1% to the closing sale price of Broncos
common stock on January 22, 2008. The Bronco board and the
negotiating committee asked questions and engaged in discussion
throughout Johnson Rices presentation. Upon completion of
the discussion, representatives of Johnson Rice delivered
Johnson Rices oral opinion, which was subsequently
confirmed in writing later that day, that subject to specified
assumptions and limitations, the merger consideration to be
received by the holders of Bronco common stock in the merger
pursuant to the initial agreement (other than Allis-Chalmers,
Merger Sub and their respective subsidiaries and affiliates) was
fair, from a financial point of view, to such holders. (Johnson
Rices January 23, 2008 written opinion was for all
purposes superseded by Johnson Rices subsequent
written opinion dated June 1, 2008 with respect to the
fairness to Bronco stockholders, from a financial point of view,
of the merger consideration provided for in the amended merger
agreement and, accordingly, only Johnson Rices
June 1, 2008 written opinion is included in this joint
proxy
statement/prospectus.
The full text of Johnson Rices written fairness opinion
dated June 1, 2008 is set forth in Annex C to this
joint proxy
statement/prospectus
and should be read carefully in its entirety in conjunction with
the information contained in The Merger
Opinion of Broncos Financial Adviser, beginning on
page 70). The Bronco board and the negotiating committee
then engaged in discussions with representatives of Johnson Rice
and Akin Gump regarding the terms of the proposed transaction,
the reasons for the merger, related advantages and disadvantages
and other issues relating to the proposed transaction. Following
such discussion, the meeting of the Bronco board was temporarily
adjourned and the negotiating committee reconvened to discuss
the proposed transaction. With the benefit of the foregoing
presentation and advice, the negotiating committee, having
deliberated regarding the terms of the proposed transaction,
unanimously resolved that the merger and the initial merger
agreement and the other transactions contemplated thereby were
advisable and fair to and in the best interest of Bronco and its
stockholders and recommended that the Bronco board declare the
advisability of the merger, the initial merger agreement and the
other transactions contemplated thereby, approve the merger and
the initial merger agreement and the other transactions
contemplated thereby and recommend that Broncos
stockholders adopt the initial merger agreement.
Following the receipt of the recommendation of the negotiating
committee, the Bronco board deliberated and, based on its review
of all the relevant factors, including without limitation the
terms of the initial merger agreement, the business prospects
of, and alternatives available to, Bronco, the unanimous
recommendation of the negotiating committee, the fairness
opinion and the related presentation by Johnson Rice,
unanimously determined that the initial merger agreement, the
merger and the other transactions contemplated by the initial
46
merger agreement were advisable and fair to and in the best
interest of Bronco and its stockholders and approved the merger,
the initial merger agreement and the transactions contemplated
by the initial merger agreement, recommended that stockholders
of Bronco adopt the initial merger agreement and directed that
the initial merger agreement be submitted for adoption to the
Bronco stockholders at the Bronco Meeting.
On January 23, 2008, representatives of both Allis-Chalmers
and Bronco had several telephone calls to finalize due diligence
and related matters.
On January 23, 2008, Allis-Chalmers and Bronco executed the
initial merger agreement.
On January 24, 2008, before the opening of trading in their
respective stocks, Allis-Chalmers and Bronco issued a joint
press release publicly announcing the merger.
On February 27, 2008, representatives of Bronco spoke with
representatives of Third Avenue Management LLC, which we refer
to as Third Avenue, by telephone at the request of Third
Avenue. Third Avenue is Broncos largest stockholder with
reported holdings as of that date of 5,512,116 shares
representing approximately 21.18% of Broncos outstanding
common stock. During that call, Third Avenue advised Bronco
that it continued to be dissatisfied with the merger
consideration and that it intended to vote against the
transaction as currently structured. Third Avenue did indicate,
however, that it would be prepared to support the merger with
Allis-Chalmers and enter into an agreement to vote its shares in
favor of the transaction if the merger consideration was
increased to a level acceptable to Third Avenue, which it
indicated could be $19.00 per share. On February 29, 2008,
representatives of Johnson Rice informed RBC of Broncos
discussion with Third Avenue and raised the possibility of
renegotiating the merger consideration. Then, on March 3, 2008,
Mr. Harrison met with Mr. Hidayatallah to discuss further Third
Avenues position and the possibility of renegotiating the
merger consideration. In each instance, Bronco was informed
that Allis-Chalmers would not, at that time, consider
renegotiating the terms of the initial merger agreement. In a
telephone conversation on March 7, 2008, a representative
of Third Avenue informed a representative of Akin Gump that
Third Avenue remained dissatisfied with the merger consideration
and that it had continued to purchase shares of Bronco common
stock. Later that day, Third Avenue filed with the SEC an
amendment to its Schedule 13D reflecting its beneficial
ownership of 5,836,116 shares of Bronco common stock
representing approximately 22.42% of Broncos outstanding
common stock.
On April 15, 2008, representatives of Bronco,
Allis-Chalmers, Johnson Rice and RBC met at Allis-Chalmers
office in Houston to discuss the changes in general market
conditions that had occurred since the announcement of the
transaction. The discussion focused primarily on the fixed value
to be paid to Bronco stockholders under the terms of the initial
merger agreement and the strong stock performance of land
drillers since the proposed merger was announced. With
Broncos stock trading at a price above $16.33 and the
public announcement by Third Avenue that it would oppose the
proposed merger, Mr. Harrison advised Allis-Chalmers that
there was substantial uncertainty as to whether Bronco
stockholders would approve the acquisition. A representative of
Johnson Rice then suggested that obtaining the stockholder
approval needed to complete the proposed acquisition would
likely require an increase in the value of the merger
consideration to a level more in line with the current trading
values of Broncos peer group. Mr. Hidayatallah noted
that as no additional inquiries or bids had been received by
Bronco since the announcement of the proposed transaction,
Allis-Chalmers did not believe a change in the merger
consideration was warranted.
On April 27 and 29, 2008, representatives of Bronco,
Allis-Chalmers, Johnson Rice and RBC had telephonic conference
calls to discuss Broncos and Allis-Chalmers
preliminary first quarter 2008 financial results and related
matters. During these calls, RBC and Allis-Chalmers were
informed that Bronco would miss its budgeted and research
analyst consensus earnings for the first quarter 2008. The
participants also discussed the facts that the Bronco net debt
for the first quarter of 2008 was higher than the net debt
levels reported by Bronco at December 31, 2007, and that
the expected capital expenditures in connection with its
Challenger joint venture investment in Libya were higher than
budgeted. The parties also discussed the business factors
contributing to such results. In addition, during the
April 29, 2008 call, Mr. Hidayatallah stated that the
Allis-Chalmers board of directors would meet on May 2, 2008
but would likely defer considering a revised offer until after
Bronco had released its financial results for the first quarter
of 2008 and the markets had been given sufficient opportunity to
respond to that information.
47
On May 2, 2008, the Allis-Chalmers board of directors met
to discuss the status of the merger, and Mr. Hidayatallah
updated the board regarding discussions with Bronco and the
first quarter earnings result of Bronco. Representatives of RBC
and Andrews Kurth were also in attendance. The Allis-Chalmers
board focused on the first quarter 2008 earnings of Bronco and
asked various questions about the negative variances from
previous estimates. The board also discussed various
alternatives with respect to the merger, but resolved to take no
action at that time, in anticipation of Broncos impending
public release of information confirming that Broncos
first quarter earnings were lower than analysts consensus
expectations. The board instructed RBC to get more clarity into
the reasons for the higher than budgeted capital expenditures
relating to Broncos investment in Challenger. Following
the May 2, 2008 Allis-Chalmers board meeting,
Mr. Hidayatallah called Mr. Harrison and advised him
that the Allis-Chalmers board had deferred the decision
regarding whether to make any revised offer to Bronco until its
next meeting, which was scheduled for May 21, 2008.
On May 8, 2008, the Bronco negotiating committee met
telephonically to review the status of the transaction. A
representative of Johnson Rice updated the committee on industry
developments since the date of the initial merger agreement and
the communications between Bronco and Allis-Chalmers, including
their discussions regarding first quarter 2008 results and the
expectation that a revised offer might be made following the
Allis-Chalmers board meeting on May 21, 2008. The Johnson
Rice representative, together with Mr. Treadwell and a
representative of Akin Gump, then reviewed with the negotiating
committee the SEC filings made by, and telephone calls received
from, certain Bronco stockholders and other matters relating to
the pending transaction. In light of communications by
Allis-Chalmers and RBC to Bronco management and Johnson Rice
representatives that a revised offer would be considered at the
May 21, 2008 Allis-Chalmers board meeting, the negotiating
committee deferred further action with respect to the
transaction in expectation of a proposal from Allis-Chalmers to
change the terms of the merger.
On May 9, 2008, the Bronco board of directors held its
regularly scheduled meeting. At the meeting, the Bronco
negotiating committee updated the full board on the status of
the pending merger transaction, including the committees
expectation that Allis-Chalmers would present a proposal
regarding changes to the merger terms following the May 21,
2008 Allis-Chalmers board meeting. Consequently, the Bronco
board of directors deferred further action with respect to the
transaction in expectation of such proposal from Allis-Chalmers.
On May 12, 2008, representatives of Bronco, Allis-Chalmers,
Johnson Rice and RBC held a telephone conference to further
discuss Broncos first quarter 2008 financial results.
During the call, Mr. Hidayatallah again communicated that
the Allis-Chalmers board of directors was planning to meet on
May 21, 2008 to review and discuss Broncos results.
He also stated his expectation that the Allis-Chalmers board, at
that meeting, would consider an increase in the merger
consideration to be paid in the proposed merger.
Mr. Hidayatallah confirmed that representatives of
Allis-Chalmers would call Bronco management immediately after
the meeting to discuss the results of such meeting.
On May 15, 2008, RBC informed Johnson Rice that the
May 21, 2008 Allis-Chalmers board meeting had been
rescheduled for May 23, 2008 due to scheduling conflicts
involving its board members.
On May 19, 2008, representatives of Allis-Chalmers and
Bronco held a telephone conference to discuss
Allis-Chalmers additional questions relating to
Broncos first quarter 2008 results and continuing
operations.
On May 23, 2008, the Allis-Chalmers board of directors met
to discuss the status of the merger and the possibility of
increasing the merger consideration, and Mr. Hidayatallah
again updated the board regarding discussions with Bronco.
Representatives of RBC and Andrews Kurth were also in
attendance. The board asked RBC questions about the Bronco first
quarter results and several recent developments in Broncos
business, including Broncos higher than expected capital
expenditures and the resulting effect on Broncos cash
position and level of debt. The board also focused on the
quality of Broncos accounts receivable.
Mr. Hidayatallah informed the board that the lack of
liquidity in the Challenger minority investment and the lack of
an exit strategy, together with issues with certain aged
accounts receivable of Bronco, might result in Allis-Chalmers
lowering the tangible book value of Bronco in its purchase price
allocation at closing. The excess purchase price over tangible
assets would be allocated to intangible assets to be determined
on the closing date. The board then discussed various
alternatives with respect to the merger. Given the developments
relating to Bronco, the board resolved to take no action at that
time with respect to the terms of the merger.
48
Following the meeting, a representative of RBC advised a
representative of Johnson Rice that the Allis-Chalmers board had
decided not to propose any changes to the merger terms at such
time.
On May 28, 2008, Broncos negotiating committee met
with members of Bronco management and representatives of Johnson
Rice and Akin Gump to further review the status of the pending
merger, including Allis-Chalmers decision to not propose
revised merger terms. Following lengthy discussions, the
negotiating committee directed management to send a letter to
Allis-Chalmers describing the continued opposition of certain
significant holders of Bronco stock to the $16.33 per share
merger consideration contemplated by the initial merger
agreement in light of the increased stock prices of Bronco and
its peers and proposing to meet and discuss the options
available to the two companies if Allis-Chalmers was not
prepared to increase the value of the merger consideration to at
least $19.00 per share. The letter was delivered to
Allis-Chalmers on the morning of May 29, 2008 and requested
a response from Allis-Chalmers by the close of business on
June 3, 2008.
Later on May 29, 2008, RBC was instructed by
Mr. Hidayatallah to convey to Johnson Rice a proposal for
changed merger terms, which Mr. Hidayatallah believed would
be acceptable to the Allis-Chalmers board. Specifically, the
proposed changes included (1) an increase in the stock
portion of the merger consideration to 16,440,000 shares of
Allis-Chalmers common stock, with such number being fixed and
not subject to adjustment based on the trading price of
Allis-Chalmers stock, and (2) a decrease in the cash
portion of the merger consideration from $280 million to
$200 million. This proposal represented an overall increase
of approximately $41.5 million in the aggregate value of
the merger consideration from approximately $437.8 million
under the terms of the initial merger agreement to approximately
$479 million, or $17.88 per share of Bronco common stock,
based on the closing price of Allis-Chalmers common stock on
May 29, 2008. The proposal also included structural changes
to the merger terms intended to make the transaction tax free to
Broncos stockholders with respect to shares of
Allis-Chalmers common stock received in the merger. The proposal
was conditioned upon Third Avenue entering into a voting
agreement in support of the merger.
During the afternoon of May 29, 2008, following receipt of
this proposal from Allis-Chalmers, the Bronco negotiating
committee convened a telephonic meeting. Also attending this
meeting were members of Bronco management and representatives of
Johnson Rice and Akin Gump. A representative of Johnson Rice
made a detailed presentation regarding the Allis-Chalmers
proposal. The committee questioned Johnson Rice regarding the
proposal and discussed various counter-proposals, including
increasing the aggregate value of the consideration to be
received by Broncos stockholders in the proposed merger,
establishing a floor for Allis-Chalmers stock price to
protect Broncos stockholders in the event that
Allis-Chalmers stock price dropped below a specified level
and clarifying that the merger structure would be revised to
ensure the tax free treatment of the stock portion of the merger
consideration to be received by Broncos stockholders.
Since the Allis-Chalmers proposal was conditioned upon receiving
a voting agreement from Third Avenue, the Bronco negotiating
committee also considered it advisable to ascertain Third
Avenues position with respect to the proposal, including
its willingness to enter into a voting agreement in support of
the merger, before the Bronco negotiating committee finalized a
counter-proposal and responded to Allis-Chalmers. The
negotiating committee then directed a representative of Akin
Gump to contact Third Avenue to discuss whether Third Avenue
would enter into a confidentiality agreement with Bronco to
allow those discussions to take place. A representative of Akin
Gump had previously asked a representative of Third Avenue on
several occasions if Third Avenue would be willing to enter into
a confidentiality agreement to facilitate an open discussion of
the transaction, but Third Avenue had declined such requests.
On May 29, 2008, following the meeting of the negotiating
committee, a representative of Akin Gump again contacted a
representative of Third Avenue to discuss its willingness to
enter into a confidentiality agreement with Bronco. The
representatives agreed to continue their discussions the
following morning.
During the morning of May 30, 2008, a representative of
Third Avenue advised a representative of Akin Gump that Third
Avenue would like to speak with Allis-Chalmers or RBC before
entering into a confidentiality agreement with Bronco. Later
that morning during a telephone conversation, Mr. Harrison
advised Mr. Hidayatallah that Bronco viewed the
May 29, 2008 offer as insufficient and unlikely to be
approved by Broncos stockholders. Mr. Hidayatallah
then advised Mr. Harrison that the Allis-Chalmers board
would be
49
meeting later on May 30, 2008 to reconsider the terms of
the merger and that if the Allis-Chalmers board were to approve
changes in the merger terms, Bronco would be receiving a new
proposal after that meeting. He also informed Mr. Harrison
that he did not feel it was necessary for Allis-Chalmers or RBC
to speak with Third Avenue, and that he expected the new
proposal from Allis-Chalmers to not be contingent on delivery of
a voting agreement by Third Avenue.
On May 30, 2008, the Allis-Chalmers board of directors
again met to discuss the status of the merger and the
possibility of increasing the merger consideration, and
Mr. Hidayatallah again updated the board regarding the
ongoing discussions with Bronco. Representatives of RBC and
Andrews Kurth were also in attendance. Mr. Hidayatallah
presented to the board a draft letter regarding a proposal to
change the terms of the merger agreement. The key components of
the proposal were a change in the merger consideration to
$200.0 million in cash and 16,750,000 shares of
Allis-Chalmers common stock, such number to be fixed, and a
restructuring of the merger such that the receipt of the stock
portion of the merger consideration would be tax-free to
Broncos stockholders. Based on the closing price of
Allis-Chalmers common stock on May 30, 2008 and
26,808,502 shares of Bronco common stock outstanding, the
merger consideration proposed in Mr. Hidayatallahs
draft letter amounted to approximately $18.19 per share of
Bronco common stock. Andrews Kurth also presented to the board a
draft of an amendment to the initial merger agreement reflecting
the proposal. The Allis-Chalmers board, in discussions with
representatives of RBC, considered the proposed changes to the
merger terms. Representatives of RBC informed the board that,
given the terms being discussed and assuming that the terms
finally negotiated between Allis-Chalmers and Bronco were not
different in any respect material to RBCs analysis, RBC
expected to be able to deliver its opinion that, subject to
assumptions, qualifications and limitations similar to those
contained in its January 23, 2008 opinion as to the
fairness, from a financial point of view, to Allis-Chalmers of
the consideration provided for in the initial merger agreement,
the revised merger consideration was fair, from a financial
point of view, to Allis-Chalmers. Taking into account
Broncos first quarter results and higher than expected
capital expenditures in connection with its Challenger joint
venture investment in Libya, when balanced against the increased
trading price of the common stock of Bronco and its peers, as
well as the boards continued belief that the merger would
provide strategic benefits to Allis-Chalmers, the board approved
the proposed changes to the merger terms and the form of the
amendment to the merger agreement that would implement such
changes, and authorized Mr. Hidayatallah to deliver it to
Bronco.
Later on May 30, 2008 Allis-Chalmers delivered to Bronco a
letter from Mr. Hidayatallah proposing aggregate merger
consideration of $200.0 million in cash and
16,750,000 shares of Allis-Chalmers common stock. In this
letter, Mr. Hidayatallah noted that (1) the increased
stock component enabled the stock portion of the transaction to
be structured on a tax free basis for the Bronco stockholders
and enabled Broncos stockholders to have a chance to
participate more fully in the potential upside from the
strategic and accretive combination and (2) the net
leverage of the combined company would be lower due to the
decreased cash component. The May 30, 2008 proposal
reflected an increase in the value of the merger consideration
to be received by Broncos stockholders to $18.19 per share
of Bronco common stock, based on the closing price of
Allis-Chalmers common stock on May 30, 2008. Allis-Chalmers
stated in its letter that its offer would expire at
7:00 p.m. on June 1, 2008.
The Bronco negotiating committee met in the evening of
May 30, 2008, to discuss Allis-Chalmers May 30,
2008 proposal. A representative of Akin Gump reviewed the terms
of Allis-Chalmers proposal with the committee. The Akin
Gump representative also stated that Akin Gump received from
Andrews Kurth a draft amendment to the initial merger agreement
reflecting the terms of the May 30, 2008 revised offer and
a request to provide comments to the draft amendment in advance
of the meeting of the board of directors of Allis-Chalmers
scheduled for June 1, 2008. A representative of Johnson
Rice then discussed the structure and components of the proposed
merger consideration from a financial point of view. The Johnson
Rice representative reiterated that, under Allis-Chalmers
proposed changes to the terms of the merger, Bronco stockholders
would receive a fixed number of shares of Allis-Chalmers common
stock rather than a floating number of shares, with a fixed
aggregate value, as provided in the initial merger agreement. As
a result, the value of the stock portion of the merger
consideration would float with the value of Allis-Chalmers
common stock, allowing Broncos stockholders to participate
in the upside in the value of Allis-Chalmers common
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stock should the price of Allis-Chalmers common stock increase.
He also noted that the year-to-date and 52-week high closing
prices for Allis-Chalmers common stock were $18.37 and $28.10,
respectively, and that at those levels the value of the merger
consideration would be valued at $18.94 and $25.02,
respectively. The Johnson Rice representative also noted that
the revised merger consideration proposal would cause
Broncos stockholders to bear the risk of any decrease in
Allis-Chalmers stock price. The Johnson Rice
representative stated his expectation that the transaction would
continue to be viewed as accretive to the combined company and
that the trading price of Allis-Chalmers common stock should
respond positively to the revised merger consideration in the
event that Bronco were to accept Allis-Chalmers proposal.
A representative of Akin Gump then discussed the terms of the
draft amendment to the initial merger agreement proposed by
Allis-Chalmers, including an additional provision imposing a
12-business day period between the satisfaction or waiver of all
closing conditions, including the stockholder vote, and the
closing of the merger, rather than the one business day
contemplated by the initial merger agreement. A discussion
ensued regarding the risks to Bronco associated with such delay
in closing and, following such discussion, the negotiating
committee rejected the provision. The Akin Gump representative
then discussed the timing requested by Allis-Chalmers with
respect to Broncos response to the Allis-Chalmers proposal.
The negotiating committee then discussed with
Messrs. Harrison, Dubberstein, Graves and Treadwell and the
representatives of Johnson Rice the Allis-Chalmers proposal and
possible responses to the proposal. Following lengthy
discussion, the negotiating committee directed the Johnson Rice
representative to relate to Allis-Chalmers through RBC its
request that the cash portion of the merger consideration be
increased by $21 million, bringing the aggregate cash
portion of the merger consideration to be paid by Allis-Chalmers
to Bronco stockholders to $221 million, resulting in merger
consideration of approximately $19.00 per share of Bronco common
stock based on the closing price of Allis-Chalmers common stock
on May 30, 2008. On May 30, 2008 following the meeting
of the negotiating committee, the Johnson Rice representative
contacted a representative of RBC and related Broncos
counter-proposal to Allis-Chalmers requesting a $21 million
increase in the cash portion of the merger consideration. The
next morning, on May 31, 2008, the RBC representative, at
the instruction of Mr. Hidayatallah, advised Johnson Rice
that Broncos request for the $21 million cash
increase had been rejected by Allis-Chalmers based on, among
other things, Allis-Chalmers belief that the revised
structure of the merger consideration would allow Broncos
stockholders to participate in any upside in the value of
Allis-Chalmers common stock, which could feasibly result in
merger consideration in excess of $19.00 per share, as well as
certain other financial aspects of the transaction considered by
Allis-Chalmers, including Broncos first quarter results
and increased debt levels.
On May 31, 2008, the negotiating committee convened a
meeting to discuss Allis-Chalmers response to
Broncos counter-proposal. Also attending were
representatives of Bronco management. Representatives of Akin
Gump and Johnson Rice attended by telephone. A representative of
Johnson Rice advised the committee of Allis-Chalmers
rejection of the request for an increase in the cash portion of
the merger consideration and communicated Allis-Chalmers
reasons for its decision. The Johnson Rice representative then
discussed with the negotiating committee Johnson Rices
preliminary financial analysis of Allis-Chalmers
May 30, 2008 proposal. The negotiating committee then
discussed Broncos short- and long-term goals, including
Broncos stated goals of becoming a large, diversified
company and expanding its international presence, and concluded
that the transaction, on the revised terms, appeared to continue
to advance those goals. The Johnson Rice representative stated
that based on its preliminary analysis, the proposed merger, on
the revised terms proposed by Allis-Chalmers on May 30,
2008, appeared to be fair, from a financial point of view, to
Bronco stockholders. The Johnson Rice representative then stated
that Johnson Rice would continue with its analysis and expected
to be in the position to deliver, if requested, its final
fairness opinion to the Bronco board of directors on
June 1, 2008. The negotiating committee then decided to
meet with the full board of directors of Bronco as soon as
possible to update the board on the status of negotiations with
Allis-Chalmers, determine the boards position with respect
to the revised merger consideration proposal and further develop
its negotiation position.
A joint meeting of the negotiating committee and the full board
of directors of Bronco was convened that afternoon following the
conclusion of the negotiating committee meeting.
Messrs. Dubberstein, Graves and Treadwell were in
attendance at the meeting. Representatives of Johnson Rice and
Akin Gump participated in
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the meeting by telephone. The Bronco board was updated
regarding the status of negotiations with Allis-Chalmers. A
representative of Johnson Rice then reviewed Johnson Rices
preliminary financial analysis with respect to the terms of
Allis-Chalmers May 30, 2008 proposal. The Bronco
board of directors and management of Bronco then discussed the
future of Bronco, its short- and long-term goals and whether the
proposed merger, on the revised terms, was in the best interest
of Bronco and its stockholders. The Johnson Rice representative
noted that no other potential bidders had contacted either
Johnson Rice or Bronco since the January 2008 announcement of
the proposed merger with Allis-Chalmers. A representative of
Akin Gump discussed with the board of directors the terms of the
proposed amendment to the initial merger agreement. Following
such discussion, the Bronco negotiating committee instructed
Johnson Rice to convey to Allis-Chalmers through RBC a
counter-proposal requesting (1) the establishment of a
floor to Allis-Chalmers stock price with respect to the stock
portion of the merger consideration to be received by Bronco
stockholders, (2) the elimination of the 12-business day
period between the satisfaction or waiver of all conditions to
closing and the closing of the merger and (3) elimination
of the termination fee to be received by Allis-Chalmers in the
event Bronco common stock traded above the value of the merger
consideration for a specified period of time and Broncos
board of directors modified its recommendation to Bronco
stockholders with respect to the merger. The Johnson Rice
representative was also instructed to re-issue Broncos
request for an additional increase in the aggregate value of the
merger consideration to be received by Broncos
stockholders in the merger. During the evening of May 31,
2008, the Johnson Rice representative contacted a representative
of RBC with the request that Broncos counter-proposal be
related to Allis-Chalmers. Later that night, upon hearing back
from an RBC representative who was acting at the direction of
Mr. Hidayatallah, Johnson Rice informed Bronco that
Allis-Chalmers had rejected Broncos request for a floor to
Allis-Chalmers stock price, but agreed to increase the
fixed number of Allis-Chalmers shares to be issued in the merger
to 16,846,500, thereby raising the value of the aggregate merger
consideration to be received by Bronco stockholders to $18.25
per share of Bronco common stock based on the closing price of
Allis-Chalmers common stock on May 30, 2008.
Later that night, representatives of Akin Gump, as instructed by
the Bronco negotiating committee, distributed to Andrews Kurth a
revised draft of the proposed amendment to the initial merger
agreement reflecting the issues discussed during the board
meeting, negotiations between Bronco and Allis-Chalmers that
evening and certain additional comments. Representatives of Akin
Gump and Andrews Kurth continued to negotiate the remaining
points of the proposed amendment to the initial merger agreement
that night and during the morning of June 1, 2008. During
the morning of June 1, 2008, representatives of Andrews
Kurth informed representatives of Akin Gump that Allis-Chalmers
had rejected Broncos requested changes to the termination
fee, but agreed to withdraw its proposal to delay the closing of
the merger by 12 business days and accepted certain other
technical changes to the amendment proposed by Bronco.
On June 1, 2008, Andrews Kurth circulated to the
Allis-Chalmers board of directors the then current draft of the
amendment to the initial merger agreement, which provided for
aggregate merger consideration of $200.0 million in cash
and 16,846,500 shares of Allis-Chalmers common stock and
contained provisions that would serve to make the stock
component of the merger consideration tax free to Broncos
stockholders. Later on June 1, 2008, the Allis-Chalmers
board of directors met telephonically to consider the terms of
the amendment to the initial merger agreement. Representatives
of RBC and Andrews Kurth were also in attendance.
Mr. Hidayatallah updated the board regarding the previous
days discussions among the parties and stated that he
continued to believe that the merger would provide business and
strategic benefits to Allis-Chalmers and would be in the best
interests of its stockholders. Representatives of RBC reviewed
RBCs analysis of the fairness of the revised merger
consideration, from a financial point of view, to
Allis-Chalmers. These representatives also delivered RBCs
oral opinion (which was subsequently confirmed in writing on
June 1, 2008) that, as of such date, and based upon
and subject to the assumptions, qualifications and limitations
set forth in RBCs written opinion, the revised merger
consideration was fair, from a financial point of view, to
Allis-Chalmers (the full text of RBCs written opinion is
set forth in Annex B to this joint proxy
statement/prospectus and should be read carefully in its
entirety in conjunction with the information contained in
The Merger Opinion of Allis-Chalmers
Financial Adviser, beginning on page 58).
The Allis-Chalmers board of directors then discussed the
information it had received and the terms, potential benefits
and potential risks associated with the amended merger
agreement, including the fact that
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the value of the merger consideration was no longer fixed and
would fluctuate with the value of Allis-Chalmers common stock.
Following this discussion, the board determined that the merger,
on the terms set forth in the amended merger agreement,
continued to be advisable and in the best interests of
Allis-Chalmers and its stockholders, approved the amended merger
agreement, and voted to recommend that Allis-Chalmers
stockholders approve the issuance of shares of Allis-Chalmers
common stock in the merger, in each case subject to the approval
of the amended merger agreement by Broncos board of
directors.
Also on June 1, 2008, the board of directors and the
negotiating committee of Bronco held a joint meeting to consider
the proposed amendment to the initial merger agreement, a copy
of which had been provided to each director prior to the
meeting. All Bronco directors and members of the negotiating
committee participated in the meeting in person.
Messrs. Dubberstein, Graves and Treadwell attended the
meeting in person and representatives of Akin Gump and Johnson
Rice participated telephonically. An Akin Gump representative
then led the Bronco board and the negotiating committee through
a review of the terms of the final draft of the proposed
amendment to the initial merger agreement and other legal
matters. Members of the Bronco board and the negotiating
committee asked questions and discussed the terms of the
proposed amendment throughout Akin Gumps presentation. A
Johnson Rice representative then led the Bronco board and the
negotiating committee through Johnson Rices financial
analysis regarding the fairness to Broncos stockholders of
the proposed amendment to the initial merger agreement. The
Johnson Rice representative informed the Bronco board and
negotiating committee that under the terms of the proposed
amendment, the total consideration to be received by Bronco
stockholders in the merger would have a value of $18.25 per
share of Broncos common stock based on the closing price
of Allis-Chalmers common stock on May 30, 2008, as compared
to the $18.18 per share closing price of Broncos common
stock on May 30, 2008 and the $16.33 per share value under
the terms of the initial merger agreement. The Bronco board and
the negotiating committee asked questions and engaged in
discussion throughout Johnson Rices presentation. Upon
completion of the discussion, the Johnson Rice representative
delivered Johnson Rices oral opinion, which was confirmed
in writing later that day, that subject to specified assumptions
and limitations, the merger consideration to be received by the
holders of Bronco common stock in the merger contemplated by the
amended merger agreement (other than Allis-Chalmers, Merger Sub
and their respective subsidiaries and affiliates) was fair, from
a financial point of view, to such holders. The full text of
Johnson Rices written fairness opinion, dated as of
June 1, 2008, is set forth in Annex C to this joint
proxy statement/prospectus and should be read carefully in its
entirety in conjunction with the information contained in
The Merger Opinion of Broncos Financial
Adviser, beginning on page 70.
The Bronco board and the negotiating committee then engaged in
discussions with representatives of Johnson Rice and Akin Gump
regarding the terms of the proposed amendment to the initial
merger agreement, including the reasons for the proposed
amendment, the related advantages and disadvantages thereto and
other issues relating to the proposed amendment and the
transaction. With the benefit of the foregoing presentation,
advice and discussion, the negotiating committee, having
deliberated regarding the terms of the proposed amendment to the
initial merger agreement, unanimously resolved that the merger
and the merger agreement, as amended, and the other transactions
contemplated thereby were advisable and in the best interest of
Bronco and its stockholders and recommended that the Bronco
board declare the advisability of the merger, the merger
agreement, as amended, and the other transactions contemplated
thereby, approve the merger, the merger agreement, as amended,
and the other transactions contemplated thereby and recommend
that Broncos stockholders adopt the merger agreement, as
amended.
Following the receipt of the recommendation of the negotiating
committee, the Bronco board deliberated and, based on its review
of all the relevant factors, including without limitation the
terms of the merger agreement, as amended, the business
prospects of, and alternatives available to, Bronco, the
unanimous recommendation of the negotiating committee, the
fairness opinion and the related presentation by Johnson Rice,
unanimously determined that the merger, the merger agreement, as
amended, and the other transactions contemplated thereby were
advisable and in the best interest of Bronco and its
stockholders and approved the merger, the merger agreement, as
amended, and the other transactions contemplated thereby,
recommended that stockholders of Bronco adopt the merger
agreement, as amended, and directed that the merger agreement,
as amended, be submitted for adoption to the Bronco stockholders
at the Bronco Meeting.
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On June 1, 2008, Allis-Chalmers, Bronco and Merger Sub
executed the amendment to the initial merger agreement.
On June 2, 2008, before the opening of trading in their
respective stocks, Allis-Chalmers and Bronco issued a joint
press release publicly announcing their entry into an amendment
to their previously announced initial merger agreement.
Recommendation
of the Allis-Chalmers Board of Directors and Its Reasons for the
Merger
The Allis-Chalmers board of directors, at a special meeting held
on June 1, 2008, determined that the merger agreement and
the transactions contemplated by the merger agreement were
advisable and in the best interests of Allis-Chalmers and its
stockholders and approved the merger and the merger agreement.
The
Allis-Chalmers
board of directors recommends that Allis-Chalmers stockholders
vote FOR the issuance of the shares of Allis-Chalmers common
stock in the merger.
Terms
of the Merger Agreement and Merger Consideration
In reaching its decision to approve the merger agreement and
recommend the issuance of shares of Allis-Chalmers common stock
in the merger, the Allis-Chalmers board of directors considered
the following factors relating to the terms of the merger
agreement:
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the form of the merger consideration consists of a fixed amount
of cash and a fixed number of shares of Allis-Chalmers common
stock, and therefore permits Allis-Chalmers to project its
expected capital structure and indebtedness immediately
following the merger;
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the written opinion of RBC to the Allis-Chalmers board of
directors dated June 1, 2008 that, as of such date, and
based upon and subject to the assumptions, qualifications and
limitations set forth in such opinion, the merger consideration
was fair, from a financial point of view, to Allis-Chalmers (the
full text of RBCs written opinion is set forth in
Annex B to this joint proxy statement/prospectus and should
be carefully read in its entirety in conjunction with the
information contained in The
Merger
Opinion of Allis-Chalmers Financial Adviser,
beginning on page 58), as well as the analyses performed by RBC
in connection with its fairness opinion and reviewed with the
board;
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the structure of the merger transaction, which generally is not
taxable to Allis-Chalmers or its stockholders;
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the potential to reduce the companys weighted average cost
of capital as a larger entity with the increased use of
leverage, and the availability of financing that, subject to the
satisfaction of specified conditions, would provide
Allis-Chalmers with the ability to borrow the funds necessary to
pay the cash component of the merger consideration, repay
outstanding Bronco debt and expenses relating to the merger, and
to borrow for general corporate purposes; and
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the fact that, aside from stockholder approval, filings with the
SEC and compliance with the
Hart-Scott-Rodino
Act, there did not appear to be any conditions to closing in the
merger agreement that would be expected to result in a
significant delay in completing the merger.
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Strategic
and Other Considerations
In addition to the factors listed above, the Allis-Chalmers
board of directors considered the following strategic and other
factors:
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the opportunity for Allis-Chalmers to grow strategically in a
single transaction, and the potential advantages of a single
larger transaction when compared to incremental growth through
equipment purchases and smaller acquisitions, which could
require significantly more management time and resources;
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the potential to enhance international growth opportunities by
relocating newly acquired and certain underutilized drilling and
workover rigs of Bronco to the international markets;
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the complementary nature of the business of Bronco, including
its assets, domestic and international geographic scope and
customer base, and the potential to integrate Broncos
business efficiently with the Allis-Chalmers business;
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the potential efficiencies from greater economies of scale,
savings on the procurement of materials and employee benefits
and the elimination of redundant public company expenses;
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the potential for enhanced future earnings and growth prospects
when compared to Allis-Chalmers prospects as a smaller
company on a stand-alone basis;
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the fact that the number of shares of common stock to be issued
in the merger is fixed, although the aggregate value of those
shares will fluctuate;
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the level of earnings and cash flow accretion expected as a
result of the merger based on managements forecast;
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the expectation that Allis-Chalmers would be the acquirer of
Bronco for generally accepted accounting purposes, and that
Allis-Chalmers accounting policies would generally remain
the same for the combined company;
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the opportunity to diversify Allis-Chalmers asset base and
service offerings and mitigate some of the risks of its
operations and revenue sources;
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the advantages of expanding the stockholder base and market
capitalization of the combined company, as well as the float of
the Allis-Chalmers common stock;
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the opportunity in a tight labor market to retain substantially
all of Broncos non-executive management employees, many of
whom have skills and experience needed by Allis-Chalmers and are
expected to continue their employment with the combined company;
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for purposes of integrating the two businesses after the merger,
Allis-Chalmers ability to apply its experience with
successfully integrating the operations, assets and employees of
its previous smaller acquisitions; and
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the execution risks associated with completing other potential
acquisitions.
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Risks
of the Merger
The Allis-Chalmers board of directors also considered the
following potential risks related to the merger with Bronco, but
concluded that the anticipated benefits from the merger with
Bronco were likely to outweigh these risks:
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possible difficulties in integrating the operations of the two
businesses, including possible loss of key employees, disruption
in ongoing operations, and loss of or reduction in business from
customers;
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the significant level of indebtedness of the combined company
immediately following the merger, which could subject the
combined company to additional risk in the event of a downturn
in its business, limit its flexibility or otherwise limit future
growth and expansion opportunities;
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the risk of diverting management focus and resources from
operational matters while working to implement the merger and
the integration of the combined company post-merger;
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the substantial transaction costs associated with the merger,
including change of control payments and other transaction costs;
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additional exposure to declines in volatile U.S. natural
gas prices; and
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other matters described under Risk Factors,
beginning on page 26 and risks incorporated by reference
herein.
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The preceding list of factors considered is not intended to be
exhaustive. After due consideration of the potential benefits
and risks and other information, the Allis-Chalmers board of
directors determined, in its
55
judgment, that the merger is in the best interests of
Allis-Chalmers and its stockholders. The Allis-Chalmers board of
directors did not quantify or assign relative weight to the
factors considered in reaching its conclusion but approved the
merger based on the totality of the information it reviewed and
considered. Individual directors may have given different weight
to different factors.
This description of the factors considered by the Allis-Chalmers
board of directors and all other information presented in this
section is forward-looking in nature, and, therefore, should be
read in light of the factors discussed under the heading
Cautionary Statement Concerning Forward-Looking
Statements, beginning on page 32.
Recommendation
of the Bronco Board of Directors and Its Reasons for the
Merger
The Bronco board of directors, at a special meeting held on
June 1, 2008, unanimously determined that the merger
agreement and the other transactions contemplated by the merger
agreement were advisable and in the best interests of Bronco and
its stockholders, unanimously approved the merger agreement, the
merger and the transactions contemplated thereby and directed
that the merger agreement be submitted for adoption by the
Bronco stockholders at the Bronco Meeting. The Bronco board
of directors unanimously recommends that Bronco stockholders
vote FOR adoption of the merger agreement.
Terms
of the Merger Agreement and Merger Consideration
In reaching its decision to approve and recommend the merger
agreement for adoption by the Bronco stockholders, the Bronco
board of directors considered the following factors relating to
the terms of the merger agreement, the merger and merger
consideration:
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the merger consideration per share represented a significant
premium per share to the closing sales price of shares of Bronco
common stock as of the last trading day prior to the execution
of the initial merger agreement and to the ten days
average closing sale price of Bronco common stock prior to the
execution of the initial merger agreement, and a premium over
the closing sale price of shares of Bronco common stock as of
the last trading day prior to the execution of the amendment;
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the form of the aggregate merger consideration is a combination
of cash and a fixed number of shares of Allis-Chalmers common
stock based on an exchange ratio that provides Bronco
stockholders with the ability to participate in any increase in
the value of Allis-Chalmers common stock prior to the closing of
the merger and in the future growth and increases in future
value of the combined company while at the same time providing
immediate value through the cash component of the merger
consideration;
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the financial analyses of Johnson Rice, and its opinion that, as
of June 1, 2008 and based upon and subject to the
assumptions, qualifications and limitation set forth in the
opinion, the merger consideration to be received by Bronco
stockholders (other than Allis-Chalmers, Merger Sub and their
respective subsidiaries and affiliates) was fair, from a
financial point of view, to such stockholders;
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the terms of the merger agreement that permit Bronco to furnish
information to and conduct negotiations with a third party in
connection with an unsolicited proposal for an alternative
business combination, and that permit the Bronco board of
directors to withdraw its recommendation of the merger agreement
to Bronco stockholders and terminate the merger agreement if
Bronco receives a superior offer, in each case subject to
certain specific conditions set forth in the merger agreement,
including in certain cases payment of a $10 million
termination fee;
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the merger agreement has no financing condition and the belief
that Allis-Chalmers has the ability to fund the merger and
on-going operations, based in large part on the commitment
letter from RBC to provide Allis-Chalmers with funds necessary
to fund the merger, among other things;
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other terms and conditions of the merger agreement, including
the likelihood that the merger would be completed in a timely
manner, taking into account any regulatory and other approvals
required in connection with the merger (including under the
Hart-Scott-Rodino
Act); and
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the merger is expected to qualify as a tax free
reorganization for U.S. federal income tax purposes
such that it is not taxable to Bronco stockholders with respect
to the stock portion of the merger consideration.
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Strategic
and Other Considerations
In addition to the factors listed above, the Bronco board of
directors considered the following strategic and other factors:
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the belief that the combined company would have enhanced future
earnings and growth prospects when compared to Broncos
prospects on a stand-alone basis based on the complementary
nature of the two companies asset bases as well as the
critical mass that would be gained in the merger in terms of
assets, geographic coverage and customer base;
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for many of the same reasons, the belief that the combined
company would benefit from the larger and more diverse asset
class due to the increased and broader geographic presence that
would be gained as a result of the merger;
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substantially all of Broncos non-executive management
employees are expected to be offered continued employment with
the combined company;
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Allis-Chalmers history of successfully integrating the
operations, assets and employees from its past acquisitions,
although on a much smaller scale than the merger;
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the belief that Allis-Chalmers would be considered the acquirer
of Bronco for generally accepted accounting purposes and the
possible effects of Allis-Chalmers accounting policies on
the financial reporting of the combined company; and
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the financial condition, results of operations, business and
prospects of each of Allis-Chalmers and Bronco, after taking
into account, in the case of Allis-Chalmers, its general
familiarity with their business and the results of Broncos
due diligence review.
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Risks
and Challenges of the Merger
The Bronco board of directors also considered the following
potential risks and challenges related to the merger, but
concluded that the anticipated benefits from the merger with
Allis-Chalmers were likely to outweigh these risks and
challenges:
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the possibility that the combined company could encounter
difficulties in integrating the operations of the two businesses
that could result in, among other things, loss of key employees,
disruption in the combined companys ongoing business and
loss or reduced business from customers;
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the significant level of indebtedness that the combined company
will have after the merger, which could limit its flexibility or
otherwise impede its growth and expansion opportunities;
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the number of shares of Allis-Chalmers common stock comprising
the stock consideration in the merger is fixed and the value of
those shares will fluctuate, and therefore Bronco stockholders
cannot be sure of the value of the merger consideration;
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the ability and speed at which Allis-Chalmers management team
can integrate the cultures of the two organizations,
particularly in light of the tight labor market in which the
companies operate;
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the limitations imposed on Broncos ability to solicit
alternative business transactions prior to closing or
termination of the merger agreement, including the requirement
to pay a $10 million termination fee under certain
circumstances;
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the risk of diverting management focus and resources from
operational matters while working to implement the merger or the
combined companys integration efforts post-merger;
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the substantial transaction costs associated with the merger;
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certain directors and the executive officers of Bronco will
receive certain benefits that are different from, and in
addition to, those of other Bronco stockholders, as more
particularly described in The Merger Interests
of Directors and Executive Officers of Bronco in the
Merger, beginning on page 77; and
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certain of the other matters described under Risk
Factors, beginning on page 26.
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Although the preceding list of factors considered is not
intended to be exhaustive, in the judgment of the Bronco board
of directors, the potential benefits of the merger outweigh the
risks and the potential disadvantages. In view of the variety of
factors considered in connection with its evaluation of the
proposed merger and the terms of the merger agreement, the
Bronco board of directors did not quantify or assign relative
weight to the factors considered in reaching its conclusion.
Rather, the Bronco board of directors views its recommendation
as being based on the totality of the information presented to
and considered by it. In addition, individual Bronco directors
may have given different weight to different factors.
It should be noted that this explanation of the reasoning of the
Bronco board of directors and all other information presented in
this section is forward-looking in nature, and, therefore,
should be read in light of the factors discussed under the
heading Cautionary Statement Concerning Forward-Looking
Statements, beginning on page 32.
Opinion
of Allis-Chalmers Financial Adviser
General
Information Regarding RBCs Fairness Opinion
On June 1, 2008, RBC, in its capacity as financial adviser
to Allis-Chalmers, rendered its written opinion to
Allis-Chalmers board of directors that, as of that date
and subject to the assumptions, qualifications and limitations
set forth in its opinion, the merger consideration per share of
Bronco common stock (defined in RBCs opinion and this
section as the amount of cash, without interest, to be
determined by the formula specified in the amended merger
agreement, and the number of fully paid and nonassessable shares
of
Allis-Chalmers
common stock equal to the exchange ratio specified in the
amended merger agreement, to be received by Bronco stockholders
for each of their shares) was fair, from a financial point of
view, to Allis-Chalmers. The full text of RBCs written
opinion, dated June 1, 2008, is attached to this joint
proxy statement/prospectus as Annex B. RBCs opinion
was approved by the RBC M&A Fairness Opinion Committee.
Upon the execution of the amended merger agreement, RBCs
opinion dated June 1, 2008 superseded for all purposes
RBCs opinion dated January 23, 2008 with respect to
the fairness to Allis-Chalmers, from a financial point of view,
of the consideration to be paid by Allis-Chalmers under the
initial merger agreement (referred to in RBCs June 1,
2008 opinion and this section as the Prior Opinion).
All references in this section to RBCs opinion are
references to RBCs June 1, 2008 opinion except for
specific references to the Prior Opinion. This summary of
RBCs opinion is qualified in its entirety by reference to
the full text of the opinion. Allis-Chalmers stockholders are
urged to read the RBC opinion carefully and in its entirety.
RBCs opinion was addressed to, and provided for the
information and assistance of, the Allis-Chalmers board of
directors in connection with its evaluation of the merger.
RBCs opinion did not address the merits of
Allis-Chalmers underlying decision to engage in the merger
or the relative merits of the merger compared to any alternative
business strategy or transaction in which Allis-Chalmers might
engage. RBCs opinion and its related analysis reviewed
with Allis-Chalmers board of directors were only two of
many factors taken into consideration by Allis-Chalmers
board of directors in making its determination to approve the
merger. RBCs opinion does not constitute a
recommendation to any stockholder as to how such stockholder
should vote with respect to the merger.
RBCs opinion addressed solely the fairness, from a
financial point of view, of the merger consideration to
Allis-Chalmers, and did not in any way address other terms or
arrangements of the merger or the merger agreement, including,
without limitation, the financial or other terms of any other
agreement contemplated by, or to be entered into in connection
with, the merger agreement, nor did it address, and RBC
expressed no opinion with respect to, Allis-Chalmers
solvency or the impact thereon of the bridge financing for the
merger (referred to below in this section and described in more
detail under the heading Financing of the Merger,
beginning on page 107) or the merger. Further, in rendering
its opinion, RBC expressed no opinion about the
58
fairness of the amount or nature of the compensation (if any) to
any of the officers, directors, or employees of any party to the
merger, or class of such persons, relative to the merger
consideration or otherwise.
In rendering its opinion, RBC assumed and relied upon the
accuracy and completeness of all information that was publicly
available to RBC and all of the financial, legal, tax,
operating, and other information provided to or discussed with
RBC by Allis-Chalmers or Bronco (including, without limitation,
the financial statements and related notes thereto of each of
Allis-Chalmers and Bronco, respectively). RBC did not assume
responsibility for independently verifying, and did not
independently verify, this information. RBC assumed that the
financial projections and forecasts (referred to in RBCs
opinion and this section as the Forecasts) of
Allis-Chalmers and the combined post-merger company provided by
Allis-Chalmers management (including forecasts provided to
RBC by Allis-Chalmers with respect to certain cost and revenue
synergies expected to be realized from the merger), and of
Bronco, prepared by its management, and reviewed by RBC, were
reasonably prepared on bases reflecting the best currently
available estimates and good faith judgments of the future
financial performance of Allis-Chalmers or Bronco (as the case
may be), respectively, as standalone entities (or, in the case
of the projected synergies, as a combined company). RBC
expressed no opinion as to the Forecasts or the assumptions on
which they were based. RBC did not assume any responsibility to
perform, and did not perform, an independent evaluation or
appraisal of any of the assets or liabilities of
Allis-Chalmers
or Bronco, and RBC was not furnished with any such valuations or
appraisals (except that an independent June 2007 appraisal of
Broncos drilling rigs, performed for Bronco, was provided
to
Allis-Chalmers
and RBC as part of the merger due diligence process but was not
considered relevant by RBC in connection with the analyses it
performed for purposes of its opinion). In addition, RBC did not
assume any obligation to conduct, and did not conduct, any
physical inspection of the property or facilities of
Allis-Chalmers
or Bronco. Additionally, RBC did not investigate, and made no
assumption regarding, any litigation or other claims affecting
Allis-Chalmers or Bronco.
In rendering its opinion, RBC assumed, in all respects material
to its analysis, that all conditions to the consummation of the
merger would be satisfied without waiver and also assumed that
the executed version of the merger agreement would not differ,
in any respect material to its opinion, from the proposed
execution version RBC reviewed.
RBCs opinion spoke only as of the date it was rendered,
was based on the conditions as they existed and information with
which RBC was supplied as of such date, and was without regard
to any market, economic, financial, legal or other circumstances
or event of any kind or nature which may exist or occur after
such date. RBC has not undertaken to reaffirm or revise its
opinion or otherwise comment on events occurring after the date
of its opinion and does not have an obligation to update, revise
or reaffirm its opinion. Unless otherwise noted, all analyses
were performed based on market and other information available
as of May 30, 2008, the last trading day preceding the
finalization of RBCs analysis. RBC expressed no opinion as
to the prices at which Allis-Chalmers or Bronco common stock had
traded or would trade following the announcement of the merger
nor the price at which
Allis-Chalmers
common stock would trade following the consummation of the
merger.
For the purpose of rendering its opinion, RBC undertook the
review and inquiries it deemed necessary and appropriate under
the circumstances, including:
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reviewing the financial terms of the proposed execution version
of the merger agreement received by it on June 1, 2008;
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reviewing and analyzing certain publicly available financial and
other data with respect to
Allis-Chalmers
and Bronco and certain other relevant historical operating data
relating to
Allis-Chalmers
and Bronco made available to RBC from published sources and from
the internal records of Allis-Chalmers and Bronco;
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reviewing the Forecasts;
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conducting discussions with members of the senior management of
Allis-Chalmers and Bronco with respect to the business prospects
and financial outlook of Allis-Chalmers and Bronco as standalone
entities as well as the strategic rationale and potential
benefits of the merger;
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reviewing Wall Street research estimates regarding the potential
future performance of Allis-Chalmers and Bronco as standalone
entities;
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reviewing the reported prices and trading activity for
Allis-Chalmers common stock and Bronco common stock; and
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performing other studies and analyses as RBC deemed appropriate.
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In arriving at its opinion, in addition to reviewing the matters
listed above, RBC performed the following analyses:
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RBC performed a valuation analysis of each of Allis-Chalmers and
Bronco as a standalone entity, using comparable company and
discounted cash flow analyses with respect to each of
Allis-Chalmers and Bronco as well as research price target
analysis with respect to Allis-Chalmers and precedent
transaction analysis with respect to Bronco; and
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RBC performed a pro forma combination analysis, determining the
potential impact of the merger on the projected 2008 earnings
per share of Allis-Chalmers as a standalone entity.
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The following is a summary of the material financial analyses
performed by RBC in connection with the preparation of its
opinion. The summary of the analyses used by RBC contained in
this section includes information presented in tabular format.
To fully understand the summary of the analyses used by RBC, the
tables must be read together with the text of each summary. The
tables alone do not constitute a complete description of the
analyses.
Implied
Merger Consideration Value and Related Implied
Data
For purposes of its analyses, RBC used $18.25 as the implied
value of the merger consideration per share of Bronco common
stock, comprised of $7.46 per share in cash and $10.79 per share
in Allis-Chalmers common stock. In the case of the stock
component of the merger consideration, this implied value of
$10.79 per share was based on an implied exchange
ratio of 0.628 shares of Allis-Chalmers common stock per
share of Bronco common stock (which was based on the fixed
aggregate number of 16,846,500 shares of Allis-Chalmers common
stock issuable under the terms of the amended merger agreement
and the closing stock price of $17.17 per share of
Allis-Chalmers common stock on May 30, 2008, the last
trading date preceding the finalization of RBCs analysis)
and 32.1% as the pro forma percentage of the number of
fully-diluted shares of Allis-Chalmers outstanding immediately
following the effective time of the merger that would be owned
by the former Bronco stockholders.
RBCs determination of an implied value of $18.25 for
the merger consideration was based on data available to it as of
May 30, 2008 and does not represent a prediction on
RBCs part of the actual value of the merger consideration
on any subsequent date prior to or following the completion of
the merger.
In its analyses, RBC took into account the fact that these
implied values per Bronco share, and other implied data, were
based, in part, on factors that are subject to potential change
between May 30, 2008 and the effective time of the merger:
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under the formula specified in the merger agreement, the cash
component of the merger consideration per share of Bronco common
stock is equal to the quotient resulting from dividing
(x) $200 million by (y) the aggregate number of
shares of Bronco common stock issued and outstanding immediately
prior to the effective time (excluding any shares held by
Bronco, Allis-Chalmers on any of their respective wholly-owned
subsidiaries and including any dissenting shares and any
shares issued prior to the effective time in connection with
Broncos stock options);
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under the formula specified in the merger agreement, the number
of shares of Allis-Chalmers common stock issuable for each share
of Bronco common stock is equal to an exchange ratio which is
determined by a fraction (x) the numerator of which is
16,846,500 shares of Allis-Chalmers common stock, and
(y) the denominator of which is the aggregate number of
shares of Bronco common stock
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issued and outstanding immediately prior to the effective time
(calculated in the same manner as for determining the per-share
cash component of the merger consideration); and
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the actual percentage of Allis-Chalmers outstanding
fully-diluted shares owned by the former Bronco stockholders
immediately following the effective time will depend on
(x) the number of fully-diluted shares of
Allis-Chalmers common stock outstanding immediately prior
to the effective time, and (y) the aggregate number of
shares of its common stock issued by Allis-Chalmers in the
merger.
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For purposes of its analyses, RBC used data available to it on
May 30, 2008, including the closing sale prices of
Allis-Chalmers and Bronco common stock and information from each
company as to its respective capitalization. However, RBC also
took into account, in its analyses, the facts that the amount of
$200 million to be issued in calculating the per-share cash
component of the merger consideration limits the aggregate
amount of cash to be paid by Allis-Chalmers and the aggregate
number of shares of Allis-Chalmers common stock to be issued in
the merger is limited to 16,846,500.
RBC also took into account the fact that the total number of
shares that the merger agreement permits Bronco to issue prior
to the effective time of the merger would not affect the
aggregate amount of cash or the aggregate number of shares of
Allis-Chalmers common stock to be paid or issued (as the case
may be) in the merger nor the $18.25 implied value of the merger
consideration per Bronco share derived by RBC as of May 30,
2008.
Allis-Chalmers
Standalone Valuation Analysis
RBC used several methodologies to derive a current standalone
valuation for Allis-Chalmers in order to determine, as of
May 30, 2008, the relationship between the current market
valuation of Allis-Chalmers and its valuation as determined by
other selected metrics. In this analysis, RBC used the $17.17
closing sale price per share of Allis-Chalmers common stock on
the NYSE on May 30, 2008, or the
5/30/08
Allis-Chalmers
Price. RBC noted that the
5/30/08
Allis-Chalmers Price was near the middle of the range of low
($9.73) to high ($27.80) closing sales prices of Allis-Chalmers
common stock on the NYSE for the preceding 52-week period.
Research Price Target Analysis. Using
information available through Bloomberg and Thomson Research
regarding the most recent Wall Street research reports issued
with respect to Allis-Chalmers (including RBCs research
report), RBC identified estimated targets for the price of
Allis-Chalmers common stock ranging from $15.00 to $23.00 per
share, as compared to the
5/30/08
Allis-Chalmers
Price of $17.17.
Comparable Company Analysis. RBC prepared a
comparable company analysis of certain implied multiples of
Allis-Chalmers in relation to the corresponding implied
multiples of a group of publicly-traded companies that RBC
deemed for purposes of its analysis to be comparable to
Allis-Chalmers.
RBC reviewed the relevant metrics of the following
publicly-traded oilfield services companies (with their metrics
adjusted, as applicable, in two cases, to reflect
recently-completed or pending acquisitions):
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Basic Energy Services, Inc.
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Complete Production Services, Inc.
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Oil States International, Inc.
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RPC, Inc.
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Superior Well Services, Inc.
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TETRA Technologies, Inc.
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W-H Energy Services, Inc.
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In this analysis, RBC compared the total enterprise value, or
TEV, and market capitalization of
Allis-Chalmers
implied by the
5/30/08
Allis-Chalmers Price, expressed as a multiple of
Allis-Chalmers latest twelve months, or LTM, earnings
before interest, taxes, depreciation and amortization, or
EBITDA, and net income, respectively, and of its fiscal 2008
projected EBITDA and projected net income, respectively, to the
corresponding multiples of the selected comparable companies
(excluding Basic Energy Services, Inc., by
61
reason of its pending combination with Grey Wolf, Inc.) implied
by the respective public trading prices of their common stock.
Estimated and projected EBITDA and net income were based on
Allis-Chalmers management estimates and projections in the case
of Allis-Chalmers and, in the case of the comparable companies,
on consensus research estimates obtain from IBES (Institutional
Brokers Estimate System, a data service that monitors and
publishes compilations of earnings estimates by selected
research analysts regarding companies of interest to
institutional investors) except where company projections were
publicly available.
RBC defined TEV as total market capitalization as of
May 30, 2008 plus net debt (defined by RBC as total debt
less cash (other than restricted cash, where identified as such)
and cash equivalents, and preferred stock and minority
interests, where applicable), using Allis-Chalmers balance sheet
data as of March 31, 2008 per Allis-Chalmers
managements estimate and latest publicly-available balance
sheet data for the comparable companies. Calculations of
Allis-Chalmers TEV as a multiple of EBITDA were based on
fully-diluted shares outstanding as of May 30, 2008, using
the treasury stock method, based on Allis-Chalmers
managements capitalization information, and calculations
of Allis-Chalmers market capitalization were derived using
the 5/30/08
Allis-Chalmers Price.
The following table presents, as of May 30, 2008,
Allis-Chalmers implied TEV-to-EBITDA and Market
Capitalization-to-Net Income multiples, as determined on the
basis of the
5/30/08
Allis-Chalmers Price, and the corresponding multiples for the
comparable companies, as determined on the basis of their
respective stock prices, for the periods reviewed by RBC in
connection with its analysis:
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Allis-Chalmers
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(5/30/08
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Comparable Companies
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Allis-Chalmers
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Min.
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Mean
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Median
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Max.
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Price)
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TEV as a multiple of:
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LTM EBITDA
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6.4
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x
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8.1
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x
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8.2
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x
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9.4
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x
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6.9
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x
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2008E EBITDA
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5.7
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x
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6.8
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x
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6.8
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x
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8.1
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x
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6.1
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x
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Market Capitalization as a multiple of:
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LTM Net Income
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12.4
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x
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18.5
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x
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17.2
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x
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27.6
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x
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14.9
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x
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2008E Net Income
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12.0
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x
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16.1
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x
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16.3
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x
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21.7
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x
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12.3
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x
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Using the minimum and maximum multiples of the comparable
companies reflected in the table above, RBC also calculated a
range of implied stock prices of Allis-Chalmers common stock and
compared those implied stock prices to the
5/30/08
Allis-Chalmers Price. The following table sets forth the results
of this analysis:
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Allis-Chalmers
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Implied Stock
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Price Per
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Comparable
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Companies
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Allis-Chalmers
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Multiples
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(5/30/08
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Low
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High
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Allis-Chalmers Price)
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TEV as a multiple of:
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LTM EBITDA
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$
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14.69
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$
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28.73
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$
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17.17
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2008E EBITDA
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$
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15.03
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$
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27.67
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$
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17.17
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Market Capitalization as a multiple of:
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LTM Net Income
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$
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14.25
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$
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31.61
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$
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17.17
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2008E Net Income
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$
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16.81
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$
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30.28
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$
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17.17
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62
Discounted Cash Flow Analysis. RBC performed a
discounted cash flow, or DCF, analysis of
Allis-Chalmers
to calculate the estimated present value of the stand-alone,
unlevered, after-tax free cash flows that Allis-Chalmers could
generate, based on (i) estimates of Allis-Chalmers
management for Allis-Chalmers EBITDA for the nine months ending
December 31, 2008, plus each of the fiscal years 2009
through 2012, and (ii) the present value of the projected
terminal value, based on a multiple of projected EBITDA for
fiscal year 2012. RBC defined terminal value as the estimated
present value of the stand-alone unlevered, after-tax free cash
flows that could be generated in perpetuity from fiscal 2013
onward.
DCF analyses are analyses of the present value of the projected
unlevered free cash flows of the subject company for the periods
using the indicated discount rate. Unlevered free cash flows are
cash flows that would, prior to the servicing of the interest on
the subject companys outstanding debt, be available for
distribution to the equity holders of the subject company.
RBCs DCF analysis on Allis-Chalmers was based on terminal
value EBITDA multiples ranging from 4.0x to 5.0x and applied
discount rates reflecting a weighted-average cost of capital, or
WACC, of 10.0% to 15.0%. RBC defined WACC as the cost of equity
plus the after-tax cost of debt, weighted for capital structure
using industry standard practices. The range of discount rates
used in this analysis was based on RBCs estimate of the
equity cost of capital of Allis-Chalmers after taking into
account Bloombergs estimated five-year (three-year, in the
case of Allis-Chalmers) betas of Allis-Chalmers and the selected
comparable publicly traded oilfield services companies used in
the Comparable Company Analysis for Allis-Chalmers on a
standalone basis, described above. The projections of terminal
value EBITDA multiples were based upon RBCs judgment as
well as its review of the publicly available business and
financial information, and the respective financial and the
respective business characteristics of Allis-Chalmers and the
comparable publicly traded oilfield services companies used in
the Comparable Company Analysis for Allis-Chalmers on a
standalone basis, described above.
After adjusting for Allis-Chalmers current leverage, these
calculations indicated implied per-share equity values for
Allis-Chalmers ranging from $17.95 to $30.62, as compared to the
5/30/08
Allis-Chalmers Price.
Bronco
Standalone Valuation Analysis
RBC used several methodologies to derive a current standalone
valuation for Bronco in order to determine, as of May 30,
2008, the relationship between the market valuation of Bronco
and its valuation as determined by other selected metrics. In
this analysis, RBC used the $13.41 closing sales price per share
of Bronco common stock on Nasdaq on January 23, 2008, or
the Unaffected Bronco Price, the $18.18 closing sales price per
share of Bronco common stock on Nasdaq on May 30, 2008, or
the 5/30/08
Bronco Price, as well as the $18.25 implied value of the merger
consideration per Bronco share. The valuation methodologies that
RBC used for these analysis were the same as those used for the
RBC standalone valuation of Allis-Chalmers except that:
(i) RBC did not perform a research price target analysis
because, in RBCs view, the most recent Wall Street
research reports issued with respect to Bronco had taken into
account the pendency of the merger provided for in the original
January 23, 2008 merger agreement and were therefore not
indicative of Broncos estimated share value as a
standalone company; and (ii) RBC additionally used a selected
precedent transaction analysis in the case of its standalone
valuation of Bronco since Bronco is being acquired by
Allis-Chalmers in the merger. RBC noted that the Unaffected
Bronco Price was near the bottom of the range of low ($12.65) to
high ($18.18) closing sales prices of Bronco common stock on
Nasdaq for the preceding 52-week period.
Comparable Company Analysis. RBC prepared a
comparable company analysis of certain implied multiples of
Bronco in relation to the corresponding implied multiples of a
group of publicly-traded companies that RBC deemed for purposes
of its analysis to be comparable to Bronco.
RBC reviewed the relevant metrics of the following
publicly-traded U.S. and International land drilling
companies (with their metrics adjusted, as applicable, in one
case, to reflect recently-completed or pending acquisitions and,
in one case, for conversion from foreign currency into
U.S. dollars):
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Grey Wolf, Inc.
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Patterson-UTI Energy, Inc.
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Pioneer Drilling Co.
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Savanna Energy Services Corp.
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Saxon Energy Services, Inc.
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Union Drilling, Inc.
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Unit Corp.
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In this analysis, RBC compared the TEV of Bronco implied by the
$18.25 implied value of the merger consideration per Bronco
share, expressed as a multiple of Broncos LTM Adjusted
EBITDA and LTM Adjusted net income, respectively, and its fiscal
2008 projected Adjusted EBITDA (as defined below) and projected
net income, respectively, to the corresponding multiples of the
selected comparable companies (excluding Grey Wolf, Inc. by
reason of its pending combination with Basic Energy Services,
Inc. and Saxon Energy Services, Inc. by reason of its pending
acquisition by a corporation controlled by Schlumberger Limited
and First Reserve Corporation), implied by the respective
trading prices of their common stock. Estimated and projected
EBITDA and net income were based on Bronco management estimates
and projections in the case of Bronco and, in the case of the
comparable companies, on IBES consensus research estimates
except where company projections were publicly available.
Adjusted EBITDA represented Broncos EBITDA, adjusted by
RBC to include investment income projected by Bronco management
from an international minority equity investment beginning in
the first quarter of 2008, the effect of which RBC annualized in
determining LTM EBITDA (but excluding a one-time gain projected
by Bronco management for that quarter relating to the sale of
certain assets to the international entity).
RBC defined TEV in the same manner as for its standalone
valuation of Allis-Chalmers, using Bronco balance sheet data as
of March 31, 2008 per Bronco managements estimate and
latest publicly-available balance sheet data for the comparable
companies. Calculations of Broncos TEV as a multiple of
Adjusted EBITDA were based on fully-diluted shares outstanding
as of May 30, 2008, using the treasury stock method, based
on Bronco managements capitalization information, and
calculations of Broncos market capitalization were derived
from the
5/30/08
Bronco Price.
The following table presents, as of May 30, 2008,
Broncos implied TEV-to-Adjusted EBITDA and Market
Capitalization-to-Net Income or Adjusted Net Income (as
applicable) multiples, as determined on the basis of the $18.25
implied value of the merger consideration per Bronco share, and
the corresponding multiples for the comparable companies, as
determined on the basis of their respective stock prices, for
the periods reviewed by RBC in connection with its analysis:
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Bronco
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Comparable Companies
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(Implied Per Share
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Min.
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Mean
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Median
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Max.
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Merger Consideration)
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TEV as a multiple of:
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LTM EBITDA
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5.0
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x
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7.0
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x
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6.0
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x
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11.8
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x
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5.4
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x
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2008E Adjusted EBITDA
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5.0
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x
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6.6
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x
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5.9
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x
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10.6
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x
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5.2
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x
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Market capitalization as a multiple of:
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LTM Net Income
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10.6
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x
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15.9
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x
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13.6
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x
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25.5
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x
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13.6
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x
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2008E Net Income
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10.5
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x
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15.9
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x
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15.1
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x
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21.0
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x
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14.2
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x
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Using the minimum and maximum multiples of the comparable
companies reflected in the table above, RBC also calculated a
range of implied stock prices of Bronco common stock and
compared those implied
64
stock prices to the $18.25 implied value of the merger
consideration per Bronco share. The following table sets forth
the results of this analysis:
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Bronco
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Implied Stock
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Price Per
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Comparable
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Bronco
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Companies Multiples
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(Implied Per Share
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Low
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High
|
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Merger Consideration)
|
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TEV as a multiple of:
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LTM Adjusted EBITDA
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$
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16.55
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$
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42.90
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$
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18.25
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2008E Adjusted EBITDA
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$
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17.42
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$
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39.88
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$
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18.25
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Market capitalization as a multiple of:
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LTM Adjusted Income
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$
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14.23
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$
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34.18
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$
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18.25
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2008E Net Income
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$
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13.51
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$
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27.04
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$
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18.25
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Selected Precedent Transaction Analysis. RBC
reviewed the financial terms of certain recent merger and
acquisition transactions in the U.S. land drilling sector
since 2002, as reported in SEC filings, public company
disclosures and other publicly-available sources:
RBC selected transactions announced since 2002 where the target
companies were involved in the U.S. land drilling sector.
Although none of the selected precedent transactions involved
businesses that are directly comparable to Broncos
business, each of the target businesses involved in the selected
precedent transactions had land drilling operations in the
United States and RBC determined that the operations of the
target businesses involved in the selected transactions as a
whole for purposes of analysis may be considered comparable to
Broncos operations. Based on these criteria, the following
sixteen transactions were selected, of which five (denoted with
an asterisk next to the targets name) had
publicly-disclosed EBITDA data for the target.
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Date Announced
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Acquiror
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Target
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04/21/08
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Schlumberger Ltd/First Reserve Corp
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Saxon Energy Services Inc. *
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10/10/07
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Patterson-UTI Energy Incorporated
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Undisclosed
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06/13/07
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Trinidad Energy Services Income Trust
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P.C. Axxis LLC; DPR International LLC *
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03/15/07
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Basic Energy Services Inc
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Sledge Drilling Holding Corp. *
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08/28/06
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Blast Energy Services Inc
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Eagle Domestic Drilling Operations LLC *
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06/20/06
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Savanna Energy Services Corp
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Western Lakota Energy Services Inc *
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04/11/06
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Union Drilling Inc
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National Oilwell Varco
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01/17/06
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Chesapeake Energy Corporation
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Martex Drilling Company LLP
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11/30/05
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Trinidad Energy Services Income Trust
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Cheyenne Drilling LP *
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09/02/05
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Bronco Drilling Co Inc
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Thomas Drilling Co
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08/08/05
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Unit Corporation
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Texas Wyoming Drilling Inc
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12/08/04
|
|
Patterson-UTI Energy Incorporated
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Key Energy Services Incorporated
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11/11/04
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Pioneer Drilling Company
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Wolverine Drilling Inc
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06/29/04
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Unit Corporation
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Tom Brown Incorporated; Sauer Drilling Co.
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03/08/04
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Grey Wolf Incorporated
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New Patriot Drilling Inc
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11/21/03
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Unit Corporation
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Serdrilco Inc
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03/21/02
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Unit Corporation
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CREC Rig Equipment and CDC Drilling Co.
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65
RBC reviewed the transaction values of the five asterisked
selected precedent transactions listed above as a multiple of
LTM EBITDA of each of the target companies. This analysis
resulted in a range of multiples from a minimum of 2.4x to a
maximum of 10.1x LTM EBITDA, with median and mean values of 4.9x
and 5.9x LTM EBITDA, respectively. Based on its analysis of the
multiples calculated for the selected precedent transactions,
including qualitative judgments involving non-mathematical
considerations, RBC determined an implied per share equity value
range for Bronco of $6.80 to $36.36, with a median of $16.49 and
a mean of $19.98, as compared to the $18.25 implied value of the
merger consideration per Bronco share.
Discounted Cash Flow Analysis. RBC performed a
DCF analysis of Bronco to calculate the estimated present value
of the stand-alone, unlevered, after-tax free cash flows that
Bronco could generate based on (i) estimates of
Broncos management for Bronco EBITDA for the nine months
ending December 31, 2008, plus each of the fiscal years
2009 through 2012, and (ii) the present value of the
projected terminal value, based on a multiple of projected
EBITDA for fiscal year 2012. RBC defined terminal value in the
same manner as for its standalone valuation of Allis-Chalmers.
RBCs DCF analysis on Bronco was based on terminal value
EBITDA multiples ranging from 4.0x to 5.0x and applied discount
rates reflecting a WACC of 10.0% to 15.0%. The range of discount
rates used in this analysis was based on RBCs estimate of
the equity cost of capital of Bronco after taking into account
Bloombergs estimated five-year betas of Bronco and the
selected comparable publicly traded land drilling services
companies used in the Comparable Company Analysis for Bronco on
a standalone basis, described above. The projections of terminal
value EBITDA multiples were based upon RBCs judgment as
well as its review of the publicly available business and
financial information, and the respective financial and business
characteristics of Bronco and the comparable publicly traded
land drilling companies used in the Comparable Company Analysis
and the targets in the selected precedent transactions in the
land drilling industry used in the Selected Precedent
Transaction Analysis for Bronco on a standalone basis, described
above.
After adjusting for Broncos current leverage, these
calculations indicated implied per-share equity values for
Bronco ranging from $19.44 to $26.50, as compared to the $18.25
per share implied value of the merger consideration per Bronco
share.
Pro
Forma Combination Analysis
Assumptions Used. To analyze the pro forma
potential impact of the merger on Allis-Chalmers, RBC performed
an accretion/dilution analysis. For purposes of this analysis,
RBC used a December 31, 2007 illustrative closing date for
the merger, the following assumptions derived from the formula
specified in the merger agreement for determining the merger
consideration, and information as of May 30, 2008 related
to the implied value of the merger consideration under that
formula, and related data, as described above under
Implied Merger Consideration and Related Implied
Data:
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|
$489.3 million as the implied value of the aggregate merger
consideration, comprising an aggregate cash component of
$200 million and an aggregate stock component of
$289.3 million; and
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|
|
$18.25 as the implied value of the merger consideration per
share of Bronco common stock, comprising $7.46 in cash
consideration and $10.79 in stock consideration; and
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|
|
|
|
0.628 per Bronco share as the implied exchange ratio for the
stock component of the merger consideration, based on an
aggregate of 16,846,500 shares of Allis-Chalmers common stock
issuable to the Bronco stockholders.
|
RBC also assumed, in performing its pro forma combination
analysis, $350 million of senior unsecured financing,
amortized over ten years, at a 9.50% interest rate to finance
the cash component of the merger consideration, refinance a
portion of existing Bronco debt and pay transaction fees and
expenses (RBC assumed that such financing would be drawn down at
the closing of the merger in lieu of the bridge financing for
which RBCs parent company, Royal Bank, subsequently issued
its financing commitment to
Allis-Chalmers
on January 23, 2008; see Financing of the
Merger, beginning on page 107).
66
In addition, RBCs pro forma combination analysis was based
on: (i) the unaudited balance sheets of Allis-Chalmers and
Bronco as of March 31, 2008; (ii) fiscal 2008 and 2009
earnings of Allis-Chalmers and Bronco, as projected by the
companies respective managements; (iii) the Forecasts
provided by Allis-Chalmers management as to the revenue and cost
synergies expected to be realized from the merger; and
(iv) an amount of aggregate non-recurring one-time fees and
expenses associated with the merger and the financing, as
determined from the projections of Allis-Chalmers and
Broncos respective managements.
RBCs pro forma combination analysis does not represent
a prediction on RBCs part of the actual financial effect
of the merger on the stock price, financial performance or any
other metrics of Allis-Chalmers following the merger and was
based on the assumptions set forth herein and elsewhere in this
section.
Analysis. RBC analyzed the potential pro forma
effect of the merger on the 2008 and 2009 projected earnings per
fully-diluted post-merger share of Allis-Chalmers, determined on
the basis of generally accepted accounting principles, as
provided by Allis-Chalmers management, or Projected
Allis-Chalmers 2008 EPS and Projected
Allis-Chalmers
2009 EPS. Based on the
5/30/08
Allis-Chalmers Price of $17.17 and the other assumptions used by
RBC in its pro forma combination analysis, as summarized above,
RBC determined that the merger could be expected to be
approximately $0.13, or 9.4%, accretive to Allis-Chalmers
Projected 2008 EPS, and approximately $0.49, or 27.0%, accretive
to
Allis-Chalmers
Projected 2009 EPS.
RBC also performed separate sensitivity analyses to determine
the potential impact on Projected
Allis-Chalmers
2008 EPS and Projected
Allis-Chalmers
2009 EPS, respectively, using a range of illustrative possible
aggregate number of shares of
Allis-Chalmers
common stock to be issued in the merger from 13.85 million
to 17.0 million, a range of illustrative possible Bronco 2008
and 2009 EBITDA, and a range of alternative synergy assumptions
(including zero), resulting in a range of implied values of the
merger consideration per share of Bronco common stock of a
minimum of approximately $16.33 to a maximum of approximately
$18.35 and an accretion/dilution range of a minimum of
approximately 1.6% dilution to a maximum of approximately 22.7%
accretion for Allis-Chalmers Projected 2008 EPS, and a minimum
of approximately 15.4% accretion to a maximum of approximately
41.2% accretion for Allis-Chalmers Projected 2009 EPS.
Overview
of Analyses; Other Considerations
In reaching its opinion, RBC did not assign any particular
weight to any one analysis or the results yielded by that
analysis. Rather, having reviewed these results in the
aggregate, RBC exercised its professional judgment in
determining that, based on the aggregate of the analyses used
and the results they yielded, the merger consideration was fair,
from a financial point of view, to Allis-Chalmers. RBC believed
that it was inappropriate to, and therefore did not, rely solely
on the quantitative results of the analyses and, accordingly,
also made qualitative judgments concerning differences between
the characteristics of Allis-Chalmers and Bronco respectively,
and the merger, and the data selected for use in its analyses,
as further discussed below.
No single company or transaction used in the above analyses as a
comparison is identical to
Allis-Chalmers
or Bronco, or the merger, and an evaluation of the results of
those analyses is not entirely mathematical. Rather, the
analyses involve complex considerations and judgments concerning
financial and operating characteristics and other factors that
could affect the acquisition, public trading or other values of
the companies, businesses, or transactions analyzed. The
analyses were prepared solely for purposes of RBC providing an
opinion as to the fairness of the merger consideration, from a
financial point of view, to
Allis-Chalmers
and do not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be
acquired, which are inherently subject to uncertainty.
The opinion of RBC as to the fairness, from a financial point of
view, of the merger consideration to Allis-Chalmers was
necessarily based upon market, economic, and other conditions
that existed as of the date of its opinion and on information
available to RBC as of that date.
The preparation of a fairness opinion is a complex process that
involves the application of subjective business judgment in
determining the most appropriate and relevant methods of
financial analysis and the
67
application of those methods to the particular circumstances.
Several analytical methodologies were used by RBC and no one
method of analysis should be regarded as critical to the overall
conclusion reached. Each analytical technique has inherent
strengths and weaknesses, and the nature of the available
information may further affect the value of particular
techniques. The overall conclusions of RBC were based on all the
analyses and factors presented herein taken as a whole and also
on application of RBCs own experience and judgment. Such
conclusions may involve significant elements of subjective
judgment and qualitative analysis. RBC therefore believes that
its analyses must be considered as a whole and that selecting
portions of the analyses and of the factors considered, without
considering all factors and analyses, could create an incomplete
or misleading view of the processes underlying its opinion.
In connection with its analyses, RBC made, and was provided by
Allis-Chalmers management with, numerous assumptions with
respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the
control of Allis-Chalmers. Analyses based upon forecasts of
future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than
suggested by these analyses. Because these analyses are
inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of Allis-Chalmers or its
advisers, none of
Allis-Chalmers,
RBC or any other person assumes responsibility if future results
or actual values are materially different from these forecasts
or assumptions.
Allis-Chalmers selected RBC to serve as its financial adviser
with respect to the merger and render its opinion based on
RBCs experience in mergers and acquisitions and in
securities valuation generally.
Allis-Chalmers,
in selecting RBC as its financial adviser, and
Allis-Chalmers board, in receiving RBCs opinion,
took into consideration prior financial advisory and financing
services that RBC and Royal Bank had performed for
Allis-Chalmers, as further discussed below in this section.
RBC is an internationally recognized investment banking firm and
is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions,
corporate restructurings, underwritings, secondary distributions
of listed and unlisted securities, private placements, and
valuations for corporate and other purposes. In the ordinary
course of business, RBC may act as a market maker and broker in
the publicly-traded securities of Allis-Chalmers
and/or
Bronco and receive customary compensation, and may also actively
trade the securities of Allis-Chalmers
and/or
Bronco for its own account and the accounts of its customers,
and, accordingly, RBC and its affiliates may hold a long or
short position in such securities.
Under its December 18, 2007 engagement agreement with
Allis-Chalmers, RBC became entitled to receive a fee of
$1 million upon the delivery of the Prior Opinion without
regard to whether the merger is consummated. In addition, if the
merger is consummated, RBC will become entitled to a further fee
of $5 million against which the opinion fee will be
credited. If, in connection with the merger not being completed,
Allis-Chalmers receives a termination fee, RBC will be entitled
to 20% (subject to a maximum of $2 million) of that fee in
cash, when it is received by Allis-Chalmers, less the aggregate
of all expenses incurred by Allis-Chalmers in connection with
the merger, all expenses of RBC that have been reimbursed by
Allis-Chalmers under the terms of RBCs engagement and the
fee paid by
Allis-Chalmers
to RBC for the delivery of its opinion. In the event the merger
is not completed, RBC will be entitled to receive a similar fee
for any fairness opinion requested by Allis-Chalmers in
connection with any other transaction or series of transactions
whereby, directly or indirectly, capital stock of Bronco or any
of its assets is transferred to Allis-Chalmers, its
shareholders, any of its subsidiaries or any company of which
Allis-Chalmers
is a subsidiary, and a similar contingent transaction fee if
such other transaction or series of transaction is consummated
at any time pursuant to a definitive agreement, letter of intent
or other evidence of commitment entered into during the term of
RBCs engagement or within twelve months thereafter. In
addition, regardless of whether the merger closes, or any such
other transaction occurs, Allis-Chalmers has also agreed to
reimburse RBC for its reasonable out-of-pocket expenses and to
indemnify it against liability that may arise out of services
performed by RBC as financial adviser, including without
limitation, liabilities arising under the federal securities
laws.
RBC has provided investment banking and financial advisory
services to Allis-Chalmers in the past, for which it received
customary fees, including, in the past two years, as financial
adviser in connection with
68
Allis-Chalmers 2006 acquisitions of DLS Drilling
Logistics & Services Corporation and Oil &
Gas Rental Services, Inc., its 2007 sale of its Capillary Tubing
Business and a potential acquisition transaction that was
mutually abandoned by the parties, as well as sole book-running
manager for Allis-Chalmers public offerings of equity
securities in 2006 and 2007 and debt securities in 2006 (two
offerings) and 2007. In addition, Royal Bank has extended
financing to Allis-Chalmers in the past, including, in the past
two years, a $300 million bridge financing in 2006
(subsequently repaid) and $17.5 million of a
$90 million revolving credit facility in 2007 (currently
outstanding) for which RBC acts as the lead arranger and
administrative agent and is paid customary fees for such
services.
Under the terms of the engagement agreement providing for RBC to
act as its financial advisor,
Allis-Chalmers
has agreed that, to the extent it seeks to raise any term debt
or equity financing in connection with the merger, either
through public markets or by private placement, it will provide
RBC with the right, but not the obligation, to act as not less
than lead book-running manager for an equity offering, lead
manager/placement agent for a public debt offering or lead agent
for bank financing, as applicable, in each case on terms and
conditions acceptable to Allis-Chalmers. Under the terms of
financing commitment documents executed on June 1, 2008,
summarized under the heading Financing of the
Merger, beginning on page 107, and which superseded
financing commitment documents executed on January 28,
2008, Royal Bank and GSCP have each committed to provide
(subject to the terms and conditions of their respective
commitments) 50% of an senior unsecured bridge financing to
Allis-Chalmers
of up to $350 million (which could be syndicated among
other lenders) to finance the cash component of the merger
consideration as well as to refinance certain Bronco debt, to
pay related fees and expenses, and for up to $50 million
for working capital and other general corporate purposes, to the
extent permitted by the loan documentation. If the bridge
financing is funded, Royal Bank and GSCP will receive specified
interest (increasing over time) on the principal advanced by it.
In addition, if the bridge financing is funded, Royal Bank (as
administrative agent), Goldman Sachs & Co., or GS, and
their respective affiliates (including RBC and GS as joint lead
arrangers and joint lead book-runners) will receive a rateable
share of the following fees: (i) customary structuring and
funding fees payable at the closing of the bridge financing
(subject to a refunding schedule for the funding fee if the
bridge financing is repaid in full within 180 days of
funding); (ii) a customary rollover fee based on the
aggregate principal amount (if any) of the bridge financing
outstanding on the first anniversary of the closing; and
(iii) annual administrative fees so long as any of the
bridge financing is outstanding. In addition, Royal Bank, and
GSCP will be entitled to a rateable share of a customary
commitment fee on the date on which Allis-Chalmers acquires all
or substantially all the capital stock or assets of Bronco
regardless of the source of the financing. In the event that the
bridge financing is replaced as a source of financing for the
merger prior to the effective time, or funded prior to the
effective time but refinanced thereafter, by a senior secured
note offering (as described below in this paragraph), a fee
structure appropriate to that offering would apply in lieu of
the fee structure described above. In addition, Allis-Chalmers
has agreed to reimburse certain expenses of Royal Bank, GSCP and
their respective affiliates in connection with their bridge
financing commitments and if, in connection with the merger not
being completed, Allis-Chalmers receives a termination fee,
Royal Bank for the account of Royal Bank and GSCP, will be
entitled to payment of those expenses as if the closing of the
bridge financing had occurred (subject to an aggregate specified
maximum percentage of the termination fee), in cash, when such
termination fee is received by Allis-Chalmers. Further,
Allis-Chalmers has engaged RBC and GS to act as exclusive joint
lead underwriters, joint book-runners and joint placement agents
and/or initial purchasers in connection with any offering of
senior notes which will either replace the bridge financing or,
if the bridge financing is funded, be used to refinance any
amounts outstanding under the bridge financing. RBC and GS will
receive customary fees in connection with any such senior notes
offering. Allis-Chalmers has also agreed, in connection with the
bridge financing and any other financing provided or arranged,
or co-provided or co-arranged, by Royal Bank, GS or any of their
respective affiliates to reimburse their expenses and to
indemnify them for certain liabilities that may arise in
connection with such services.
In light of RBCs prior services to Allis-Chalmers and the
financial advisory and financing roles of RBC and Royal Bank for
Allis-Chalmers in connection with the merger, RBC anticipates
that it
and/or its
affiliates (including Royal Bank) may be selected by
Allis-Chalmers to provide investment banking and financial
advisory,
and/or
financing and financing services, that may be required by
Allis-Chalmers in the future, regardless of whether the merger
is successfully completed. RBC has not received any fees from
Bronco in the
69
past, will not receive any fees from Bronco in connection with
the merger, and does not have any agreement or understanding
with Bronco regarding any services to be performed by RBC now or
in the future.
Opinion
of Broncos Financial Adviser
Bronco retained Johnson Rice to act as its financial adviser and
to provide a financial fairness opinion to the Bronco board of
directors in connection with the merger. The Bronco board of
directors selected Johnson Rice to act as its financial adviser
based upon Johnson Rices qualifications, reputation and
experience in connection with mergers and acquisitions. The
Bronco board of directors instructed Johnson Rice, in its role
as financial adviser, to evaluate the fairness to Bronco
stockholders, from a financial point of view, of the merger
consideration to be paid by Allis-Chalmers to such stockholders
pursuant to the initial merger agreement, and in connection with
the execution of the amendment to the initial merger agreement
on June 1, 2008, pursuant to such amendment.
On June 1, 2008, Johnson Rice delivered its oral opinion to
the board of directors of Bronco to the effect that, as of that
date and based upon and subject to factors and assumptions set
forth in its opinion, which were discussed with the Bronco board
of directors, the consideration to be received by the holders of
Bronco common stock in the merger (other than Allis-Chalmers,
Merger Sub and their respective subsidiaries and affiliates) to
be determined by the formula specified in the amendment to the
merger agreement was fair, from a financial point of view, to
such holders. Johnson Rice subsequently confirmed its opinion in
writing by a letter dated June 1, 2008. The full text of
Johnson Rices written opinion, dated June 1, 2008, is
attached to this joint proxy statement/prospectus as
Annex C. Johnson Rices opinion was approved by
Johnson Rices Fairness Opinion Committee. Upon the
execution of the amendment to the initial merger agreement
Johnson Rices opinion dated June 1, 2008 superseded
for all purposes Johnson Rices opinion dated
January 23, 2008 with respect to the fairness to Bronco
stockholders, from a financial point of view, of the
consideration to be paid by Allis-Chalmers under the initial
merger agreement dated January 23, 2008 (referred to in
this section as the Prior Opinion). All references in this
section to Johnson Rices opinion are references to Johnson
Rices June 1, 2008 opinion except for specific
references to the Prior Opinion. The opinion speaks only as of
the date it was delivered and not as of the time the merger will
be completed. The opinion does not reflect changes that may
occur or may have occurred after June 1, 2008, which could
significantly alter the value of Bronco or Allis-Chalmers or the
respective trading prices of shares of their common stock, which
are factors on which Johnson Rices opinion was based.
The full text of the Johnson Rice fairness opinion, dated
June 1, 2008, which sets forth the assumptions made,
matters considered and qualifications and limitations on the
review undertaken, is attached as Annex C to this joint
proxy statement/prospectus and is incorporated into this
document by reference. The summary of the Johnson Rice fairness
opinion set forth in this joint proxy statement/prospectus is
qualified in its entirety by reference to the full text of the
Johnson Rice fairness opinion. Bronco stockholders should read
the Johnson Rice fairness opinion carefully and in its entirety.
In arriving at its opinion, Johnson Rice did not ascribe a
specific value to Bronco, but rather made its determination as
to the fairness, from a financial point of view, of the merger
consideration to be paid by Allis-Chalmers to Bronco
stockholders in the merger on the basis of the financial and
comparative analyses described below. Johnson Rices
opinion is for the use and benefit of the Bronco board of
directors and was rendered to the Bronco board of directors in
connection with its consideration of the merger. The opinion
does not address the merits of the underlying decision of the
Bronco board of directors to proceed with or effect the merger
or other transactions contemplated by the merger agreement.
Moreover, it does not constitute a recommendation by Johnson
Rice to any Bronco stockholder as to whether the stockholders
should vote to approve the merger. Johnson Rice was not
requested to, and it did not, solicit third party indications of
interest in the possible acquisition of all or a part of Bronco,
nor was Johnson Rice requested to consider, and its opinion does
not address, the relative merits of the merger compared to any
alternative business strategies that might exist for Bronco or
the effect of any other transaction in which Bronco might
engage.
In connection with rendering its opinion described above,
Johnson Rice reviewed, among other things:
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the merger agreement dated as of January 23, 2008 and a
draft of the amendment thereto, dated as of June 1, 2008;
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certain publicly available financial statements and other
information concerning Bronco, including Broncos Annual
Reports on
Form 10-K
for the years ended December 31, 2005, December 31,
2006, and December 31, 2007, Broncos Quarterly
Reports on
Form 10-Q
for the quarters ended March 31, 2006, June 30, 2006,
September 30, 2006, March 31, 2007, June 30,
2007, September 30, 2007, and March 31, 2008,
Broncos Current Reports on
Form 8-K
filed for 2006, 2007 and 2008, and Broncos Registration
Statement on
Form S-3
filed on May 22, 2007;
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certain other internal information, primarily financial in
nature, concerning the business and operations of Bronco
furnished to Johnson Rice by Bronco, including financial
forecasts;
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certain publicly available information concerning the trading
of, and the trading market for, Bronco common stock;
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certain publicly available financial statements and other
information concerning Allis-Chalmers, including
Allis-Chalmers Annual Reports on
Form 10-K
for the years ended December 31, 2004, December 31,
2005, December 31, 2006, and December 31, 2007,
Allis-Chalmers Quarterly Reports on
Form 10-Q
for the quarters ended March 31, 2006, June 30, 2006,
September 30, 2006, March 31, 2007, June 30,
2007, September 30, 2007, and March 31, 2008,
Allis-Chalmers Current Reports on
Form 8-K
filed in 2006, 2007 and 2008, and Allis-Chalmers
Registration Statement on
Form S-3
filed on October 11, 2007;
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certain other internal information, primarily financial in
nature, concerning the business and operations of Allis-Chalmers
furnished to Johnson Rice by Allis-Chalmers, including detailed
financial forecasts for 2008 and 2009 and summary forecasts for
2008-2012;
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certain publicly available information concerning the trading
of, and the trading market for, Allis-Chalmers common stock;
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certain publicly available information with respect to certain
other companies that Johnson Rice believes to be comparable to
Bronco and Allis-Chalmers and the trading markets for certain of
such other companies securities;
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publicly available research reports and earnings estimates as
well as information concerning future operating and financial
performance of Bronco, Allis-Chalmers, and the comparable
companies prepared by industry experts unaffiliated with either
Bronco or Allis-Chalmers; and
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certain publicly available information concerning the nature and
terms of certain other transactions considered relevant to the
inquiry.
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In addition, Johnson Rice made such other analyses and
examinations as Johnson Rice deemed appropriate or necessary and
had discussions with certain officers and employees of Bronco
and Allis-Chalmers regarding the foregoing, as well as other
matters believed to be relevant to the inquiry. In addition,
Johnson Rice attended and participated in a formal due diligence
session hosted by the management teams of each of Allis-Chalmers
and Bronco at which each management team delivered its company
presentation. Johnson Rice also participated in several
telephonic due diligence sessions hosted by Allis-Chalmers and
Bronco management to update their respective financial results
and forecasts.
Johnson Rice did not independently verify any of the foregoing
information and has relied on it being complete and accurate in
all material respects. With respect to the financial forecasts,
Johnson Rice has assumed that they have been reasonably prepared
on bases reflecting the best currently available estimates and
judgments of Broncos and Allis-Chalmers management
as to the future financial performance of Bronco and
Allis-Chalmers, respectively, and that the financial results
reflected in such forecasts will be realized in the amounts and
at the times projected. Johnson Rice has also assumed that the
merger will be consummated in accordance with its terms, without
waiver, modification or amendment of any material term,
condition or agreement and that, in the course of obtaining the
necessary regulatory or third party approvals, consents and
releases for the merger, no delay, limitation, restriction or
condition will be imposed that would have an adverse effect on
Bronco, Allis-Chalmers or the contemplated benefits of the
merger. Johnson Rice did not express any opinion as to what the
value of Allis-Chalmers common stock actually will be when
issued
71
pursuant to the merger or the price at which the Allis-Chalmers
common stock will trade at any time. In addition, Johnson Rice
did not make, and was not provided with, an independent
evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of Bronco or Allis-Chalmers, nor has Johnson Rice
evaluated the solvency or fair value of Bronco or Allis Chalmers
under any state or federal laws relating to bankruptcy,
insolvency or similar matters. Johnson Rice did not conduct any
physical inspection of the properties or assets of Bronco or
Allis-Chalmers. Johnson Rice did not perform any tax analysis,
nor was Johnson Rice furnished with any such analysis, and
accordingly Johnson Rice did not evaluate (and Johnson
Rices opinion does not include) any potential tax
consequences related to the merger including, without
limitation, any potential tax consequences to Bronco,
Allis-Chalmers or their respective stockholders.
In conducting its analysis and arriving at its opinion, Johnson
Rice considered such financial and other factors as it deemed
appropriate under the circumstances including, among others, the
following: (i) the historical and current financial
position and results of operations of Bronco and Allis Chalmers;
(ii) the business prospects of Bronco and Allis Chalmers;
(iii) the historical and current market for Broncos
common stock, for Allis Chalmers common stock and for the
equity securities of certain other companies believed to be
comparable to both companies; (iv) a pro forma combined
accretion dilution analysis; (v) publicly traded peer
comparisons for Bronco and Allis Chalmers, and Broncos per
rig value; (vi) credit sensitivity analysis for Bronco,
Allis Chalmers and the combined company; (vii) the
respective contributions in terms of various financial measures
of Bronco and Allis Chalmers to the combined company under
several scenarios, and the relative pro forma ownership of Allis
Chalmers after the merger by the current holders of Allis
Chalmers common stock and Bronco common stock; (viii) the
value of Allis Chalmers and Broncos respective
discounted cash flows under several scenarios and related
sensitivity analysis; (ix) the nature and terms of certain
other acquisition transactions that Johnson Rice believed to be
relevant; and (x) scenario analysis of potential value
creation, pro forma for the merger under a range of potential
post-close trading multiples. Johnson Rice also took into
account its assessment of general economic, market and financial
conditions and its experience in connection with similar
transactions and securities valuation generally.
In preparing its fairness opinion for the Bronco board of
directors, Johnson Rice performed a variety of financial and
comparative analyses, including those described below. The
summary of the analyses performed by Johnson Rice, as set forth
below, does not purport to be a complete description of the
analyses underlying the opinion. The preparation of a fairness
opinion is a complex analytic process involving various
determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to
the particular circumstances and, therefore, fairness opinions
are not readily susceptible to partial or summary description.
No company or transaction used in such analyses as a comparison
is identical to Bronco, Allis-Chalmers, or the transactions
contemplated by the merger agreement, nor is an evaluation of
the results of such analyses entirely mathematical; rather, it
involves complex considerations and judgments concerning
financial and operational characteristics and other factors that
could affect the public trading or other values of the companies
or transactions being analyzed. The estimates contained in such
analyses and the ranges of valuations resulting from any
particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by
such analyses. In addition, analyses relating to the value of
the business or securities do not purport to be appraisals or to
reflect the prices at which businesses, companies or securities
actually may be sold. Accordingly, such analyses and estimates
are subject inherently to substantial uncertainty.
In arriving at the fairness opinion, Johnson Rice made
qualitative judgments as to the significance and relevance of
each analysis and factor considered by it. Accordingly, Johnson
Rice believes that its analyses must be considered as a whole
and that selecting portions of its analyses and factors, without
considering all analyses and factors, could create an incomplete
view of the processes underlying such analyses and the fairness
opinion. In its analyses, Johnson Rice made numerous assumptions
with respect to general business, economic, market and financial
conditions, as well as other matters, many of which are beyond
the control of Bronco and Allis-Chalmers and involve the
application of complex methodologies and experienced and
educated judgment.
The analyses were prepared solely as part of Johnson Rices
analysis of the fairness to Bronco stockholders, from a
financial point of view, of the merger consideration to be paid
by Allis-Chalmers in the proposed merger.
72
Johnson Rices opinion and financial analyses were only one
of the many factors considered by Bronco and the Bronco board of
directors in their evaluation of the merger and should not be
viewed as determinative of the views of Broncos management
or the Bronco board of directors with respect to the merger and
the merger consideration.
The data and analysis summarized herein were reviewed with the
Bronco board of directors on June 1, 2008, and primarily
utilize data from market closing prices as of May 30, 2008.
For purposes of its analysis, Johnson Rice defined EBITDA as net
income plus income taxes, interest expense (less interest
income), depreciation and amortization. TTM stands for the
trailing twelve-month period.
Relative
Trading and Exchange Ratio Analysis
Johnson Rice examined the historical ratio of Broncos
closing share price to Allis-Chalmers closing stock price
since April 2008 and calculated the average trading ratios over
various periods of time.
Assuming an all-stock transaction, the implied exchange ratio
for the transaction would be 1.063. When compared to the trading
exchange ratios for the last 20 and 30 trading days this ratio
reflects a 5.6% and 1.6% premium, respectively. Johnson Rice
noted that Bronco is receiving a premium of 0.4% to its stock
price on May 30, 2008, a premium of 3.3% to the
20-day
average price, and a premium of 4.3% to the
30-day
average price.
Allis-Chalmers
Comparable Company Analysis
Johnson Rice performed a comparable company analysis of
Allis-Chalmers against the current valuation of a defined peer
group. In conducting its analysis, Johnson Rice reviewed
publicly-available information with respect to certain middle
capitalization oilfield service companies. Although none of the
selected companies is directly comparable to Allis-Chalmers,
Johnson Rice selected a group of companies from the universe of
possible companies based on its views as to the comparability of
the financial and operating characteristics of oilfield service
companies to Allis-Chalmers operations. With respect to each
such analysis, Johnson Rice compared the following companies to
Allis-Chalmers:
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Basic Energy Services, Inc.
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Complete Production Services, Inc.
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Key Energy Services, Inc.
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Superior Energy Services, Inc.
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Superior Well Services, Inc.
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W-H Energy Services, Inc.
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Public valuation multiples of Allis-Chalmers were also
considered. With respect to each companys public valuation
multiples, Johnson Rice examined the share price, enterprise
value, equity value, ratio of enterprise value to projected 2008
and 2009 EBITDA, as well as earnings per share and cash flow per
share for projected 2008 and 2009. The 2008 and 2009 projections
for each company were based on published analysts
estimates. Enterprise value was calculated by adding the market
value of common equity, the estimated market value of debt and
then subtracting cash and cash equivalents.
Johnson Rice compared the valuation multiples for Allis-Chalmers
to the valuation multiples of the comparable companies using
consensus estimates. The table below provides comparable company
multiples compared to those of Allis-Chalmers. The peer group
trades at 2008 P/E, P/CFPS and EV/EBITDA multiples of 16.7x,
8.4x and 7.1x, respectively, and 2009 multiples of 13.2x, 7.2x,
and 5.9x, respectively. This compares to Allis-Chalmers
2008 P/E, P/CFPS and EV/EBITDA multiples of 12.8x, 4.9x, and
6.2x, respectively, and 2009 multiples of 8.9x, 4.0x and 5.0x,
respectively.
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Peer
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Peer
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Range
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Average
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Allis-Chalmers
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2008 Price/Earnings per share
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11.9x - 24.7x
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16.7x
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12.8x
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2009 Price/Earnings per share
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9.9x - 18.6x
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13.2x
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8.9x
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2008 Price/Cash flow per share
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5.7x - 13.4x
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8.4x
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4.9x
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2009 Price/Cash flow per share
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5.1x - 12.0x
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7.2x
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4.0x
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2008 EV/EBITDA
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5.4x - 11.7x
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7.1x
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6.2x
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2009 EV/EBITDA
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4.7x - 9.3x
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5.9x
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5.0x
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Pro
Forma Case Assumptions
As part of its analysis, Johnson Rice utilized three different
cases for the projected financial results of Bronco and
Allis-Chalmers. Case 1 reflected published analysts
estimates for fiscal years 2008 and 2009, Case 2 reflected
Broncos and Allis-Chalmers internal company
estimates for fiscal years 2008 and 2009, and Case 3 reflected a
downside case based on Broncos and
Allis-Chalmers internal company estimates for fiscal years
2008 and 2009. The downside case for Bronco included
a 15% decrease in day rates and utilization in the fiscal year
2008 estimates. The downside case for Allis-Chalmers
included a 15% decrease in revenue and EBITDA margins for the
DLS unit and Rental Tools segment in the fiscal year 2008 and
2009 estimates. These case assumptions were also used in
preparing a credit sensitivity analysis discussed later.
Comparable
Company Analysis and Per Rig Value
Johnson Rice performed a comparable company analysis to compare
the implied value offered to Bronco against the current
valuation of a defined peer group. In conducting its analysis,
Johnson Rice reviewed publicly-available information with
respect to certain domestic land drilling companies while making
adjustments for non-drilling business divisions. Although none
of the selected companies is directly comparable to Bronco,
Johnson Rice selected a group of companies from the universe of
possible companies based on its views as to the comparability of
the financial and operating characteristics of domestic land
drilling companies to Broncos operations. With respect to
each such analysis, Johnson Rice compared the following
companies to Bronco:
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Patterson-UTI Energy, Inc.
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Pioneer Drilling Company
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Public valuation multiples of Bronco were also considered. With
respect to each companys public valuation multiples,
Johnson Rice examined the share price, enterprise value, equity
value, ratio of enterprise value to projected 2008 and 2009
EBITDA, enterprise value per operating rig, as well as earnings
per share and cash flow per share for projected 2008 and 2009.
The 2008 and 2009 projections for each company were based on
published analysts estimates. Enterprise value was
calculated by adding the market value of common equity, the
estimated market value of debt and then subtracting cash and
cash equivalents.
Johnson Rice compared the valuation multiples for Bronco implied
by the mergers transaction value to the valuation
multiples of the comparable companies using consensus estimates.
The table below provides comparable company multiples compared
to those of Bronco. The peer group trades at 2008 P/E, P/CFPS
and EV/EBITDA multiples of 14.4x, 6.4x and 5.3x, respectively,
and 2009 multiples of 11.5x, 5.6x, and 4.5x, respectively. This
compares to Broncos 2008 P/E, P/CFPS and EV/EBITDA
multiples of 15.2x, 5.3x, and 6.2x, respectively, and 2009
multiples of 10.6x, 4.3x and 5.3x, respectively. With certain
adjustments for non-rig divisions made for each comparable
company, the average enterprise value per U.S. rig and per
U.S. operating rig for the peer group was $11.4 and
$12.9 million, respectively, compared to Broncos
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enterprise value per U.S. rig and per U.S. operating
rig of $7.9 and $9.8 million, respectively. The terms of
the merger value Bronco at a premium to most metrics.
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Peer
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Peer
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Bronco
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Range
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Average
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Bronco
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Premium
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2008 Price/Earnings per share
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10.6x - 19.2x
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14.4x
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15.2x
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15.2x
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2009 Price/Earnings per share
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9.6x - 12.8x
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11.5x
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10.6x
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10.6x
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2008 Price/Cash flow per share
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5.3x - 7.9x
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6.4x
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5.3x
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5.3x
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2009 Price/Cash flow per share
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4.9x - 6.9x
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5.6x
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4.3x
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4.3x
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2008 EV/EBITDA
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4.4x - 6.1x
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5.3x
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6.2x
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6.2x
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2009 EV/EBITDA
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3.9x - 5.4x
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4.5x
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5.3x
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5.3x
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Comparable
Transaction Analysis
Johnson Rice analyzed certain information relating to selected
transactions in the domestic land drilling industry since
September 1998. Specifically, Johnson Rice calculated, when
available, the projected year-end EBITDA and projected year-end
EV/EBITDA multiples implied by the transaction value of the
selected transactions. Johnson Rice determined the overall high,
low, and average EV/EBITDA from similar transactions were 12.9x,
3.1x and 6.7x, respectively. Johnson Rice noted that the
multiple to be paid by Allis-Chalmers in the merger were 6.2x
and 5.3x, based on the consensus 2008 and 2009 forward EBITDA
estimates, respectively.
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Date Announced
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Acquirer
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Target
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04/08
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Schlumberger/First Reserve
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Saxon Energy Services
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04/08
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Grey Wolf
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Basic Energy Services
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04/08
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National Oilwell Varco
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Grant Prideco
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04/08
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Key Energy Services
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Western Drilling
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03/08
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Pioneer Drilling
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Wedge Well Services
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12/07
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Cal-Dive
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Horizon Offshore
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10/07
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Key Energy Services
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Moncla Cos
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07/07
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Hercules Offshore
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TODCO
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12/06
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Superior Energy Services
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Warrior Energy
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11/06
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Complete Production Services
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Pumpco Services
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08/05
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Weatherford International
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Precision Drilling
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03/05
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National Oilwell
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Varco International
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12/02
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Grant Prideco
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Reed-Hycalog (Schlumberger)
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09/02
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Varco International
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Ico
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07/02
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Key Energy Services
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Q Services
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05/02
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BJ Services
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OSCA
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05/01
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Patterson Energy
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UTI Energy Corp.
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11/99
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Nabors Industries
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Pool Energy Services
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09/98
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Key Energy Services
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Dawson Production
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Discounted
Cash Flow Analysis
Johnson Rice performed a discounted cash flow analysis of the
projected cash flows of Bronco for the calendar years 2008
through 2012. A discounted cash flow analysis is used to derive
a valuation of an asset by calculating the present
value of projected cash flows of the asset. Present
value refers to the current value of projected cash flows
or amounts and is obtained by discounting those projected cash
flows or amounts by a discount rate that takes into account
macro-economic assumptions and estimates of risk, the
opportunity cost of capital, expected returns and other
appropriate factors applicable to a particular asset. Johnson
Rice calculated the discounted cash flow by using weighted
average cost of capital values of 8.7%, 11.2%, and
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13.8%, and calculated terminal values using mid-cycle day rate
and utilization assumptions and mid-cycle EV/EBITDA multiples of
4.0x to 5.0x. Utilizing the various case assumptions discussed
above, Johnson Rices discounted cash flow analysis implied
an equity value of the Bronco common stock ranging between
$16.36 and $22.11 per share, compared to the offer price of
$18.25 per share.
The weighted average cost of capital of 8.7% was based on a cost
of equity of 9.2%, a marginal tax rate of 36.0%, a marginal debt
rate of 8.0%, an equity to capitalization ratio of 87.7%, and a
debt to capitalization ratio of 12.3%. The cost of equity of
9.2% was calculated using the capital asset pricing model with
an expected market return of 10.7%, a risk premium of 6.6%, and
a beta of 0.78. The expected market return, risk premium and
beta were obtained from Bloomberg as of May 30, 2008.
The weighted average cost of capital of 11.2% and 13.8% were
based on costs of equity of 12.0% and 15.0%, respectively, a
marginal tax rate of 36.0%, a marginal debt rate of 8.0%, an
equity to capitalization ratio of 87.7%, and a debt to
capitalization ratio of 12.3%. Cases using the higher costs of
equity of 12.0% and 15.0% were utilized in the discounted cash
flow analysis to reflect that Bronco is a small capitalization
company operating in a volatile industry.
Bronco internal estimates were used in arriving at free cash
flow values for 2008 and 2009. Free cash flow was calculated
utilizing project net income adjusted for certain non-cash
items, capital expenditures and depreciation. Johnson
Rices discounted cash flow analysis increased net income
by 5% each year beginning in 2010 through 2012. Mid-cycle
utilization, dayrates and EV/EBITDA multiple assumptions were
used in calculating the terminal value for the discounted cash
flow model and were based on Johnson Rices judgment and
historical analysis of the land drilling industry. The range of
mid-cycle multiples applied to mid-cycle EBITDA was between 4.0x
and 5.0x.
Contribution
Analysis
Johnson Rice compared the relative contribution of Bronco and
Allis-Chalmers to the combined company based on projected 2008
and 2009 results based on the various case assumptions discussed
above. Historical and projected EBITDA, net income and cash flow
were analyzed before taking into account any of the possible
benefits from cost savings or operating synergies that may be
realized following the merger. Three separate cases were
analyzed using various weightings on EBITDA, operating cash flow
and net income contributions for 2008 and 2009. In each case,
contributions for 2008 were assigned a 25% weighting and
contributions for 2009 were assigned a 75% weighting. Each of
the cases resulted in approximately the same outcome with Bronco
contributing enterprise value ranging from $492 million to
$519 million, compared to the resultant deal implied
$558 million in enterprise value.
Accretion/Dilution
Analysis
Johnson Rice prepared a pro forma merger model that incorporated
Broncos and Allis-Chalmers internal financial
projections based on various case assumptions for the years 2008
and 2009. Johnson Rice assumed $5.0 in cost savings and
synergies related to the elimination of duplicate public company
costs that may be realized following the merger, and based its
analysis on 16.8465 million shares issued to Broncos
stockholders in the merger. Johnson Rice then compared the
earnings and cash flow per share for Allis-Chalmers on a
stand-alone basis to the earnings and cash flow per share for
the combined company following the completion of the merger.
Based on such analysis, the merger would be 2.5% and 11.5%
accretive to earnings per share in 2008 and 2009, respectively,
and 11.3% and 15.5% accretive to cash flow per share in 2008 and
2009, respectively.
Credit
Sensitivity Analysis
Johnson Rice performed a credit sensitivity analysis using
published analysts estimates, Broncos and
Allis-Chalmers internal company estimates and a
downside case. The downside case assumed
a 15% discount to Broncos day rates and utilization for
drilling rigs in 2008 and a 15% discount for revenue and EBITDA
margins for the DLS unit and Rental Tools segment of
Allis-Chalmers. The analysis resulted in a range of net debt to
2008/2009 EBITDA of 2.7x to 3.7x and 2.2x to 3.2x, respectively,
and a range of
2008/2009
EBITDA to interest expense of 3.3x to 4.6x and 3.6x to 5.4x,
respectively.
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Pro
Forma Value Analysis
Johnson Rice also considered the potential impact of the fixed
stock component of the transaction on the total consideration
paid to Bronco between the signing of the amended merger
agreement on June 1, 2008 and closing. Johnson Rice used a
trading range for Allis-Chalmers stock between $15.50 and
$20.50. Based on the fixed stock component of the transaction,
Johnson Rice calculated that the total implied stock price paid
to Bronco shareholders would range between $17.20 and $20.34
based on the range of Allis-Chalmers stock price.
Implied
Bronco Stock Price Relative to Allis-Chalmers Potential
Trading Range
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Allis-Chalmers Trading Range
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$
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15.50
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$
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16.00
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$
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16.50
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$
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17.00
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$
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17.50
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$
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18.00
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$
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18.50
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$
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19.00
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$
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19.50
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$
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20.00
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$
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20.50
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Bronco Implied Stock Price
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$
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17.20
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$
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17.51
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$
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17.83
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$
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18.14
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$
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18.46
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$
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18.77
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$
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19.09
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$
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19.40
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$
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19.71
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$
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20.03
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$
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20.34
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Miscellaneous
Johnson Rice is a nationally recognized investment banking firm
specializing in the energy industry and is continually engaged
in the valuation of businesses and their securities in
connection with mergers and acquisitions. Bronco selected
Johnson Rice as its financial adviser in connection with the
merger because of Johnson Rices experience and expertise.
In the ordinary course of its business, Johnson Rice actively
trades the equity securities of both Bronco and Allis-Chalmers
for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in
such securities.
Johnson Rice has in the past provided investment banking
services to Bronco, for which it received customary underwriting
compensation and reimbursement of expenses. Johnson Rice served
as an underwriter in connection with Broncos initial
public offering in August 2005 and in Broncos subsequent
October 2005 and March 2006 secondary equity offerings. The
aggregate amount that Johnson Rice has received from Bronco for
such services was approximately $6,126,350. Johnson Rice has
also previously provided investment banking services to
Allis-Chalmers for which it has received compensation and
reimbursement of expenses from Allis-Chalmers. Johnson Rice
served as an underwriter in connection with Allis-Chalmers
secondary public offerings in August 2006 and January 2007. The
aggregate amount that Johnson Rice has received from
Allis-Chalmers for such services was approximately $1,494,000.
Johnson Rice anticipates that it may act as financial advisor to
Bronco
and/or
Allis-Chalmers with respect to future transactions.
Pursuant to the terms of the engagement of Johnson Rice, Bronco
has agreed to pay Johnson Rice for its financial advisory
services in connection with the transaction contemplated by the
merger agreement a transaction fee equal to 1% of the total
transaction value upon the closing of the merger. Johnson Rice
has also received a fee of $250,000 for the delivery of its
fairness opinion on June 1, 2008 to the Bronco board of
directors, which fee will be credited against the transaction
fee upon the closing of the merger. Johnson Rice has also
received a fee of $250,000 for the delivery of its fairness
opinion on January 23, 2008 to the Bronco board of
directors, which fee will also be credited against the
transaction fee upon the closing of the merger. In addition,
Bronco has agreed to reimburse Johnson Rice for its reasonable
out-of-pocket expenses, including the fees and expenses of its
legal counsel, incurred in connection with the engagement,
including the delivery of its opinion, and to indemnify Johnson
Rice against certain liabilities that may arise out of the
engagement, including certain liabilities under federal
securities laws.
Interests
of Directors and Executive Officers of Bronco in the
Merger
In considering the recommendation of the Bronco board of
directors with respect to the merger agreement, Bronco
stockholders should be aware that some of Broncos
directors and the executive officers have interests in the
merger and have arrangements that may be different from, or in
addition to, those of the Bronco stockholders generally. These
interests and arrangements may create potential conflicts of
interest. The Bronco board of directors was aware of these
interests and considered them, among other matters, in making
its recommendation.
77
Restricted
Stock
Certain of Broncos directors and its executive officers
will benefit from the lapse of restrictions on shares of
restricted common stock, and the payment of the merger
consideration in respect of such shares in the merger, as
described under The Merger Agreement Treatment
of Bronco Equity Awards beginning on page 90.
The following table sets forth, as of June 5, 2008, for
each of Broncos directors and executive officers:
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the number of shares of Bronco unvested restricted common stock
held by each such person;
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the aggregate cash payment that will be made to each such person
as partial consideration for shares of Bronco restricted common
stock upon the consummation of the merger, assuming that the
closing date of the merger had been June 5, 2008;
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the estimated value of Allis-Chalmers common stock to be
received by each such person as partial consideration for shares
of Bronco restricted common stock upon the consummation of the
merger, assuming that the closing date of the merger had been
June 5, 2008;
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the number of shares of Bronco common stock held by each such
person;
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the aggregate cash payment that will be made to each such person
as partial consideration for shares of Bronco common stock upon
the consummation of the merger, assuming that the closing date
of the merger had been June 5, 2008;
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the estimated value of Allis-Chalmers common stock to be
received by each such person as partial consideration for shares
of Bronco common stock upon the consummation of the merger,
assuming the closing date of the merger had been June 5,
2008; and
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The estimated value of total merger consideration to be received
by each such person in the merger.
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Restricted Stock Awards
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Common Stock
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Merger Consideration(2)
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Merger Consideration(2)
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Estimated
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Estimated
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Value of
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Value of
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Shares of
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Shares of
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Estimated
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Allis-Chalmers
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Allis-Chalmers
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Value of Total
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Unvested
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Common
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Shares
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Common
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Merger
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Shares
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Cash
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Stock
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Owned
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Cash
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Stock
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Consideration
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Directors:
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D. Frank Harrison(1)
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133,333
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994,707
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1,423,535
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55,884
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416,913
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596,648
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3,431,802
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Gary C. Hill
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10,000
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74,603
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106,765
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5,000
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37,302
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53,383
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272,053
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David L. Houston
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10,000
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74,603
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106,765
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5,000
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37,302
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53,383
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272,053
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Mike Liddell
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William R. Snipes
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10,000
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74,603
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106,765
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5,000
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37,302
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53,383
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272,053
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Executive Officers:
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Mark Dubberstein
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75,000
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559,524
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800,740
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1,360,264
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Zachary M. Graves
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105,000
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783,334
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1,121,037
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26,583
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198,318
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283,814
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2,386,502
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Larry Bartlett
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65,000
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484,921
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693,975
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15,583
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116,254
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166,373
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1,461,523
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Steven Starke
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21,750
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162,262
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232,215
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5,523
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41,203
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58,967
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494,647
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(1) |
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Mr. Harrison also serves as Broncos Chairman of the
Board of Directors and Chief Executive Officer. |
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(2) |
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At the effective time of the merger, each outstanding share of
Bronco common stock (other than shares held by stockholders who
do not vote in favor of the adoption of the merger agreement and
who are entitled to and properly demand appraisal rights in
accordance with Delaware law and shares held by Allis-Chalmers,
Merger Sub or Bronco or by any subsidiary of Bronco or
Allis-Chalmers) will be converted into the right to receive
merger consideration comprised of (1) an amount in cash
calculated to the nearest $0.01, resulting from dividing $200.0
million by the aggregate number of issued and outstanding shares
of Bronco common |
78
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stock immediately prior to the effective time of the merger and
(2) a number of shares of Allis-Chalmers common stock equal
to the exchange ratio. The exchange ratio is a fraction,
calculated to the nearest one-ten thousandth, the numerator of
which is (a) 16,846,500, and the denominator of which is
(b) the aggregate number of issued and outstanding shares
of Bronco common stock (subject to certain exceptions)
immediately prior to the effective time of the merger. Based on
the closing price of Allis-Chalmers common stock on June 5,
2008 and the number of shares of Bronco common stock outstanding
as of that date, the merger consideration to be received by each
Bronco stockholder, including each executive officer and
director of Bronco, would be valued at $18.14 per share of
Bronco common stock (including shares of restricted stock that
will vest as a result of the merger), consisting of $7.46 in
cash and Allis-Chalmers common stock valued at $10.68. |
Severance
Arrangements of Bronco Executive Officers
All of Broncos executive officers will be entitled to
severance benefits under the employment agreements described
below in connection with the consummation of the merger.
Employment
Agreements
Bronco is a party to employment agreements with each of its
executive officers. Employment agreements with D. Frank
Harrison, Broncos Chairman of the Board and Chief
Executive Officer, Mark Dubberstein, Broncos President,
and Zachary M. Graves, Broncos Chief Financial Officer,
were each entered into effective as of August 8, 2006, as
amended effective as of August 2, 2007. An employment
agreement with Larry L. Bartlett, Broncos Senior Vice
President of Rig Operations, was entered into effective as of
August 2, 2007, and with Steven Starke, Broncos Chief
Accounting Officer, effective as of August 3, 2007. As used
in this section, all references to an individuals
employment agreement will describe the agreement as amended, if
applicable. The employment agreements each have a
three-year
term, subject to automatic extensions for one additional year so
that the remaining term will be not less than two nor more than
three years. The employment agreements provide for a base salary
of $450,000 per year for Mr. Harrison, $200,000 per year
for Mr. Dubberstein, $200,000 per year for Mr. Graves,
$225,000 per year for Mr. Bartlett and $125,000 per year
for Mr. Starke. In each case, the base salary is subject to
review by the compensation committee of the board of directors
at least annually. Mr. Harrison will be eligible to receive
an annual bonus in an amount not less than 66.7% of his annual
base salary and Messrs. Dubberstein, Graves, Bartlett and
Starke will be eligible to receive an annual bonus as
established by Broncos board of directors (or the
compensation committee of the board of directors). If Bronco
terminates an employment agreement without cause, the executive
officer is entitled to severance pay in an amount equal to:
(1) the base salary earned and unpaid through the date of
such termination plus the executive officers base salary
for the remainder of the term of his agreement; provided,
however, that such amount may not be less than twice the base
salary in effect on the date of the termination, plus
(2) the greater of any target bonus for the year of
termination or the average of the two immediately preceding
years annual incentive bonuses; plus (3) any vacation
pay accrued through the date of the termination. In addition,
for a period of the greater of 24 months after such
termination or the remainder of the term of the executive
officers agreement, Bronco will continue to provide the
executive officer (and his family, as applicable) with medical,
dental, life insurance and other similar benefits. If, within
two years following a change of control Bronco terminates the
employment of any such executive officer with or without cause
or such executive officer resigns with or without cause or good
reason, such executive officer would be entitled to a severance
payment, payable in a lump sum in cash following such executive
officers termination, in an amount equal to three times
the sum of (1) his highest paid annual base salary, plus (2) the
bonus calculated as discussed below, plus any applicable
gross-up
payment. For Messrs. Harrison, Dubberstein and Graves, the
bonus paid upon qualifying termination in the event of a change
of control will be calculated based on the average of the last
three years annual bonuses or such lesser number of years
as such executive may have been employed. For
Messrs. Bartlett and Starke, the bonus payable to each such
executive upon qualifying termination in the event of a change
of control will be the greater of any target bonus for the year
of termination or the highest bonus paid to such executive
officer during his employment with Bronco.
79
The employment agreements also provide that in the event of a
termination of the executive officers employment
(1) by Bronco without cause, (2) by the executive
officer for good reason or (3) in connection with a change
of control, (a) all units, stock options, incentive stock
options, performance shares, stock appreciation rights and
restricted stock held by such executive officer immediately
prior to such termination will immediately become 100% vested
and (b) the executive officers right to exercise any
previously unexercised options will not terminate until the
latest date on which such option would expire but for the
executive officers termination of employment.
As defined in the employment agreements, change of
control occurs in the event any individual, entity or
group acquires beneficial ownership of 40% or more of either
(a) the then outstanding shares of Bronco common stock or
(b) the combined voting power of Broncos then
outstanding voting securities entitled to vote generally in the
election of directors, provided that any acquisition by any
employee benefit plan (or related trust) sponsored or maintained
by Bronco or any corporation controlled by Bronco will not
constitute a change in control. In addition, a
change of control occurs when the individuals who, as of the
date of these employment agreements, constitute Broncos
board of directors (the incumbent board) cease for
any reason to constitute at least a majority of Broncos
board of directors. Any individual becoming a director
subsequent to the date of these employment agreements whose
election, or nomination for election by Broncos
stockholders, is approved by a vote of at least a majority of
the directors then comprising the incumbent board will be
considered a member of the incumbent board as of the date
thereof, but any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents
by or on behalf of a person other than the incumbent board will
not be deemed a member of the incumbent board as of the date of
these employment agreements. In addition, a change of control
will occur upon the consummation of certain specified business
combinations and upon the approval by Broncos stockholders
of a complete liquidation or dissolution of Bronco.
The employment agreements also provide that in the event of
termination upon the disability of the executive officer, Bronco
will pay him his base salary in effect on the date of
termination through the remaining term of the employment
agreement, but in any event through the expiration date. The
payment of such amounts will be made during the remaining term
of the employment agreements in installments consistent with
Broncos normal payroll practices; provided, however, that
if the named executive officer is a specified
employee as defined in regulations under Section 409A
of the Internal Revenue Code, such payments will commence on the
first payroll payment date that is more than six months
following the termination date and the first payment will
include any amounts that would have otherwise been payable
during the six-months period. Notwithstanding the foregoing, the
amounts payable to the executive officer in the event of
termination upon disability will be reduced by any benefits
payable under any of Broncos disability plans to such
executive officer. If the executive officer dies during the term
of his employment agreement, his employment will be terminated
on such date and his estate will be entitled to receive his base
salary for a period of twelve months after the effective date of
such termination any other benefits accrued through the
effective date of such termination.
In addition, in the event it is determined that any payment or
distribution by Bronco or its subsidiaries or affiliates to or
for the benefit of the executive officer (whether paid or
payable or distributed or distributable pursuant to the terms of
his employment agreement or otherwise) is subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code or
any interest or penalties related to such excise tax, the
executive officer will be entitled to receive an additional
gross-up
payment from Bronco. The
gross-up
payment will be equal to the amount such that after payment by
the executive officer of all taxes (including the excise tax,
income taxes, interest and penalties imposed with respect to
such taxes) on the
gross-up
payment, the executive officer will retain an amount of the
gross-up
payment equal to the excise tax imposed on the payment or
distribution to or for the benefit of such executive officer.
The agreements also provide that each executive officer may not,
during the term of his employment with Bronco and for a period
extending one year from the date of the termination of his
employment with Bronco, disclose any confidential information
regarding Bronco or use any such confidential information for
any purpose other than the performance of his employment with
Bronco. Each executive officer is also prohibited,
80
during the term of his employment with Bronco and for a period
of six months following the termination of his employment with
Bronco for any reason other than without cause or in connection
with a change of control, from soliciting, inducing, enticing or
attempting to entice any employee, contractor, customer, vendor
or subcontractor to terminate or breach any relationship with
Bronco or any of its subsidiaries or affiliates.
Under the terms of the merger agreement, the employment
agreements with Broncos executive officers are required to
be amended to provide that each executive officer would continue
to have an obligation not to compete with Bronco for a period of
one year following the effective time of the merger.
Change
in Control Payments to Executive Officers
The following table sets forth an estimate of the cash severance
payment and the value of continued benefits and
gross-up
payments that will be received by each executive officer of
Bronco, each of whom is a party to an employment agreement with
Bronco, in connection with the merger.
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Severance
|
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|
Executive Officer
|
|
Amount
|
|
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Gross-Up
|
|
|
Total
|
|
|
D. Frank Harrison
|
|
$
|
2,381,250
|
|
|
$
|
999,957
|
|
|
$
|
3,381,207
|
|
Mark Dubberstein
|
|
$
|
1,237,500
|
|
|
$
|
564,883
|
|
|
$
|
1,802,383
|
|
Zachary M. Graves
|
|
$
|
1,440,000
|
|
|
$
|
709,291
|
|
|
$
|
2,149,291
|
|
Larry Bartlett
|
|
$
|
825,000
|
|
|
$
|
399,216
|
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|
$
|
1,224,216
|
|
Steven Starke
|
|
$
|
457,500
|
|
|
$
|
204,077
|
|
|
$
|
661,577
|
|
Employment
with Allis-Chalmers
Allis-Chalmers does not currently have any agreements with
Broncos senior management regarding their employment
following the merger. However, Allis-Chalmers expects to employ
one or more executive officers of Bronco after the merger.
Indemnification
and Insurance
The merger agreement provides that for a period of six years
from the effective time of the merger Allis-Chalmers will cause
the surviving company in the merger to indemnify, defend and
hold harmless, to the fullest extent permitted by applicable
law, each person who is, has been or becomes prior to the
effective time of the merger a director, officer, fiduciary,
agent or employee of Bronco and any of its subsidiaries in their
capacities as such from and against any claims and expenses
arising out of, relating to or in connection with any action or
omission in his or her capacity as such occurring or alleged to
have occurred at or before the effective time of the merger. The
merger agreement also requires Allis-Chalmers to cause the
surviving company to pay the expenses of the indemnified person
in advance of the final disposition of any claim made against
the indemnified person during such six-year period.
In addition, the merger agreement provides that Allis-Chalmers
and the surviving company in the merger will maintain in effect
all exculpation, indemnification and advancement of expenses
provisions of the certificate of incorporation and bylaws of
each of Bronco and its subsidiaries in effect as of the date of
the initial merger agreement or in any indemnification
agreements between Bronco and its subsidiaries and their
respective current and former directors and officers.
Allis-Chalmers and the surviving company may not, for a period
of six years from the effective time of the merger, amend,
repeal or otherwise modify, unless required by law, any such
provisions in any manner that would adversely affect the rights
under such provisions of any indemnitee, and all rights to
indemnification thereunder in respect of any claim asserted or
made within such period shall continue until the final
disposition or resolution of such claim. In addition,
Allis-Chalmers and the surviving company agreed that the
organizational documents of the surviving company would contain
exculpation, indemnification and advancement of expenses
provisions with respect to the current and former directors,
officers, fiduciaries and employees of Bronco and the surviving
company that are no less favorable to such persons than those
contained in Broncos organizational documents.
81
For a period of six years after the effective time of the
merger, the surviving company will also maintain liability
insurance for directors and officers with respect to claims
arising from facts or events that occurred at or prior to the
effective time of the merger from an insurance carrier with the
same or better credit rating as Broncos current insurance
carrier for all directors and officers of Bronco who are
currently covered by Broncos existing directors and
officers liability insurance. The insurance will be no
less advantageous to the directors and officers than the
coverage and amounts they currently have. However, the surviving
company will not be obligated to make annual premium payments
for this insurance to the extent that the premiums exceed 200%
of the per annum rate of the premium currently paid by Bronco
for similar insurance as of the date of the initial merger
agreement. In the event that the annual premium for this
insurance exceeds the maximum amount, the surviving company will
purchase as much coverage per policy year as reasonably
practicable for the maximum amount. Allis-Chalmers will have the
right to cause the coverage to be extended under the insurance
by obtaining a six year tail policy on terms and
conditions no less advantageous than the existing insurance
policy. Such tail insurance will satisfy the
requirement discussed above that the surviving company
indemnify, defend and hold harmless, for a period of six years
from the effective time of the merger, the current and former
directors and officers of Bronco and any of its subsidiaries for
claims and expenses occurring at or before the effective time of
the merger, and advance amounts for their expenses associated
with such claims. Prior to the effective time of the merger,
Bronco may purchase such tail insurance at
Allis-Chalmers expense, provided that the aggregate annual
premiums for such insurance do not exceed the maximum amount
currently paid by Bronco for similar insurance.
Regulatory
Matters
Antitrust
Approvals
Under the
Hart-Scott-Rodino
Act, the merger may not be consummated until notifications have
been given and certain information has been furnished to the
Antitrust Division of the U.S. Department of Justice and
the Federal Trade Commission and the applicable waiting period
has expired or been terminated.
Allis-Chalmers and Bronco filed the requisite Pre-Merger
Notification and Report Forms under the
Hart-Scott-Rodino
Act with the Antitrust Division and the Federal Trade Commission
on February 29, 2008. Early termination of the applicable
statutory waiting period was granted on March 10, 2008.
Neither Allis-Chalmers nor Bronco can assure you that the merger
will not be challenged on antitrust or competition grounds or,
if a challenge is made, what result will occur. The Antitrust
Division, the Federal Trade Commission, any U.S. state and
other applicable regulatory bodies may challenge the merger on
antitrust or competition grounds at any time, including after
the expiration or termination of the
Hart-Scott-Rodino
Act waiting period. Accordingly, at any time before or after the
completion of the merger, any of these parties could take action
under the antitrust laws, including, without limitation, by
seeking to enjoin the effective time of the merger or permitting
completion subject to regulatory concessions or conditions.
Private parties may also seek to take legal action under
antitrust laws under certain circumstances.
Other
Regulatory Procedures
The merger may be subject to certain regulatory requirements of
other municipal, state, federal and foreign governmental
agencies and authorities, including those relating to the offer
and sale of securities. Allis-Chalmers and Bronco are currently
working to evaluate and comply in all material respects with
these requirements, as appropriate, and do not currently
anticipate that they will hinder, delay or restrict completion
of the merger.
It is possible that one or more of the regulatory approvals
required to complete the merger will not be obtained on a timely
basis or at all. In addition, it is possible that any of the
governmental entities with which filings are made may seek
regulatory concessions as conditions for granting approval of
the merger. Under the merger agreement, Allis-Chalmers and
Bronco have each agreed to take all actions and do all things
necessary to complete the merger, including to gain clearance
from antitrust authorities and obtain other required approvals,
except that neither Allis-Chalmers or Bronco is required to sell
any business or assets to obtain regulatory approval. See
The Merger Agreement Covenants,
beginning on page 93.
82
Although Allis-Chalmers and Bronco do not expect regulatory
authorities to raise any significant objections to the merger,
Allis-Chalmers and Bronco cannot be certain that all required
regulatory approvals will be obtained or that these approvals
will not contain terms, conditions or restrictions that would be
detrimental to Allis-Chalmers or the combined corporation after
the effective time of the merger.
Litigation
Relating to the Merger
Following the joint announcement of the initial merger agreement
on January 24, 2008, three purported class action
complaints were filed challenging the proposed merger between
Allis-Chalmers, Bronco and Merger Sub. Two complaints were filed
in Oklahoma in the District Court of Oklahoma County, the first
on January 29, 2008, which we refer to as the Boothe
action, and the second on February 28, 2008, which we refer
to as the Goff action. The defendants named in both actions are
Bronco, the Bronco board of directors and Allis-Chalmers. On
April 9, 2008, the Boothe action and the Goff action were
consolidated into a single action, which we refer to as the
Oklahoma action. The defendants named in the Oklahoma action are
Bronco, the Bronco board of directors and Allis-Chalmers. The
third complaint was filed in the Delaware Court of Chancery on
January 29, 2008, which we refer to as the Delaware action.
The defendants named in the Delaware action are Bronco, the
Bronco board of directors, Allis-Chalmers and Merger Sub.
The Oklahoma and Delaware actions generally allege that the
proposed merger consideration is inadequate, that the Bronco
board of directors breached its fiduciary duties and that
Allis-Chalmers has aided and abetted the Bronco board of
directors alleged breaches of fiduciary duties. The
actions also allege that the preliminary joint proxy
statement/prospectus included as part of Allis-Chalmers
registration statement on
Form S-4,
filed with the SEC on February 20, 2008, contains
materially incomplete and misleading information. The actions
generally request, among other things, that the suits be
designated class actions on behalf of the Bronco stockholders,
that the proposed merger be enjoined and that the Bronco board
of directors undertake an auction of Bronco or otherwise take
action to maximize stockholder value. Additionally, the Delaware
action requests that all allegedly misleading or omitted
information be corrected in Allis-Chalmers preliminary
joint proxy statement/prospectus. The Delaware action seeks
monetary damages for Broncos stockholders and the Oklahoma
action requests that the proposed merger be rescinded if it is
consummated. All stockholders of Allis-Chalmers and Bronco are
encouraged to read the complaints in their entirety to apprise
themselves of the plaintiffs allegations, which the
plaintiffs purport to make on behalf of themselves and
Broncos other stockholders.
Allis-Chalmers and Bronco filed motions to dismiss the Boothe
action on February 21, 2008 and February 19, 2008,
respectively. In response to these motions, the parties to the
Boothe action agreed to extend the time for the plaintiff to
amend his complaint, and for the defendants to amend or withdraw
their motions to dismiss, or file answers to the amended
complaint. After the Boothe action and the Goff action were
consolidated into the Oklahoma action on April 9, 2008, the
plaintiffs in the Oklahoma action filed a consolidated amended
complaint on April 17, 2008. Allis-Chalmers filed a motion
to dismiss the amended complaint on May 14, 2008, and
Bronco and the Bronco board of directors filed a motion to
dismiss the amended complaint on May 19, 2008. In response
to these motions, the parties to the Oklahoma action agreed to
extend the time for the plaintiffs to respond to the
defendants motions to dismiss. Under the agreement, the
plaintiffs must respond by July 7, 2008. Discovery in the
Oklahoma action is ongoing at this time.
The plaintiff in the Delaware action filed an amended complaint
on April 23, 2008. The parties to the Delaware action
agreed to extend the time for the defendants to respond to the
plaintiffs amended complaint. Under the agreement, the
defendants must respond by June 23, 2008. Discovery in the
Delaware action is ongoing at this time.
Allis-Chalmers, Bronco, the Bronco board of directors and Merger
Sub deny the substantive allegations in the two complaints,
believe the claims asserted are baseless and intend to
vigorously defend these actions.
Accounting
Treatment
Allis-Chalmers prepares its financial statements in accordance
with GAAP. The merger will be accounted for using the purchase
method of accounting. Statement of Financial Accounting
Standards No. 141, Business
83
Combinations, referred to as SFAS 141, provides guidance
for determining the accounting acquirer in a business
combination when equity interests are exchanged between two
entities. SFAS 141 provides that in a business combination
effected through an exchange of equity interests, such as the
merger, the entity that issues the equity interests is generally
the acquiring entity. Commonly, the acquiring entity is the
larger entity. SFAS 141 further provides that in
identifying the acquiring entity in a combination effected
through an exchange of equity interests, all pertinent facts and
circumstances must be considered, including: the relative voting
rights of the stockholders of the constituent companies in the
combined entity, the composition of the board of directors and
senior management of the combined company and the terms of the
exchange of equity securities in the business combination,
including payment of any premium.
Allis-Chalmers will be considered to be the acquirer of Bronco
for accounting purposes under SFAS 141 based upon the terms
of the merger and other factors, such as the size of
Allis-Chalmers, the payment of the merger consideration
(including issuance of Allis-Chalmers stock to Bronco
stockholders at a premium of the fair market value of Bronco
stock on the date preceding the announcement of the amendment to
the initial merger agreement) by Allis-Chalmers, and the
composition of the combined companys board of directors
and senior management. This means that Allis-Chalmers will
allocate the purchase price to Broncos assets and
liabilities at the acquisition date based on the estimated
relative fair value of the assets acquired and liabilities
assumed, with the excess purchase price being recorded as
goodwill. Under the purchase method of accounting, goodwill is
not amortized but is tested for impairment annually.
Listing
of Allis-Chalmers Common Stock
Allis-Chalmers will use its reasonable best efforts to cause the
shares of Allis-Chalmers common stock to be issued in connection
with the merger to be approved for listing on the NYSE upon the
completion of the merger, subject to official notice of
issuance. Approval of the listing on the NYSE of the shares of
Allis-Chalmers common stock to be issued in the merger is a
condition to each partys obligation to complete the merger.
Delisting
and Deregistration of Bronco Common Stock
If the merger is completed, Bronco common stock will be delisted
from Nasdaq and deregistered under the Exchange Act.
Restrictions
on Sales of Shares of Allis-Chalmers Common Stock Received in
the Merger
The shares of Allis-Chalmers common stock to be issued in
connection with the merger will be registered under the
Securities Act and will be freely transferable, except for
shares of Allis-Chalmers common stock issued to any person who
may be deemed to be an affiliate of Allis-Chalmers
under the Securities Act following the closing of the merger.
Such persons may not sell any of the shares of Allis-Chalmers
common stock received by them in connection with the merger
except pursuant to:
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an effective registration statement under the Securities Act
covering the resale of those shares;
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an exemption provided by Rule 144 under the Securities
Act; or
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any other applicable exemption under the Securities Act.
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84
MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of the material United States federal
income tax consequences of the merger generally applicable to
U.S. holders (as defined below) of Bronco
common stock. This summary is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the
Code), applicable current and proposed United States
Treasury Regulations, judicial authorities and administrative
rulings and practice, all as in effect as of the date of this
registration statement and all of which are subject to change,
possibly on a retroactive basis.
This discussion assumes that a holder holds Bronco common stock
as a capital asset within the meaning of Section 1221 of
the Code (generally, property held for investment). This
discussion does not address all aspects of United States federal
income taxation that may be relevant to a holder in light of
such holders particular circumstances or to holders
subject to special treatment under the United States federal
income tax laws (including, for example, insurance companies,
dealers or brokers in securities or currencies, traders in
securities who elect mark-to-market treatment, tax-exempt
organizations, financial institutions, mutual funds, entities or
arrangements treated as partnerships for United States federal
income tax purposes (and holders holding Bronco common stock
through such entities or arrangements), United States
expatriates, holders liable for the alternative minimum tax,
holders who hold Bronco common stock as part of a hedging,
straddle, constructive sale, conversion or other
integrated transaction, non-U.S. holders, and holders who
acquired their Bronco common stock through the exercise of
employee stock options or other compensation arrangements). In
addition, the discussion does not address any aspects of
foreign, state, local, estate or gift taxation that may be
applicable to a holder.
Holders of Bronco common stock are urged to consult with
their own tax advisors as to the particular tax consequences to
them of the merger, including the applicability and effect of
the alternative minimum tax and any state, local or foreign and
other tax laws.
For purposes of this discussion, the term
U.S. holder means a beneficial owner of Bronco
common stock that is for United States federal income tax
purposes: (i) a citizen or resident of the United States;
(ii) a corporation, or other entity taxable as a
corporation, created or organized in or under the laws of the
United States or any state thereof or the District of Columbia;
(iii) a trust if it (a) is subject to the primary
supervision of a court within the United States and one or more
United States persons have the authority to control all
substantial decisions of the trust or (b) has a valid
election in effect under applicable United States Treasury
Regulations to be treated as a United States person; or
(iv) an estate the income of which is subject to United
States federal income tax regardless of its source.
The United States federal income tax consequence to a partner in
an entity or arrangement treated as a partnership, for United
States federal income tax purposes, that holds Bronco common
stock generally will depend on the status of the partner and the
activities of the partnership. Partners in a partnership holding
Bronco common stock are urged to consult their own tax advisors.
Tax
Consequences of the Merger Generally
Allis-Chalmers and Bronco have structured the merger to qualify
as a reorganization within the meaning of Section 368(a) of
the Code. It is a condition to Allis-Chalmerss obligation
to complete the merger that Allis-Chalmers receive an opinion of
its counsel, Andrews Kurth LLP, dated the closing date of the
merger, to the effect that the merger will be treated as a
reorganization within the meaning of Section 368(a) of the
Code and that each of Allis-Chalmers and Bronco will be a party
to the reorganization within the meaning of Section 368(b)
of the Code. It is a condition to Broncos obligation to
complete the merger that Bronco receive an opinion of its
counsel, Akin Gump Strauss Hauer & Feld LLP, dated the
closing date of the merger, to the effect that the merger will
be treated as a reorganization within the meaning of
Section 368(a) of the Code and that each of Allis-Chalmers
and Bronco will be a party to the reorganization within the
meaning of Section 368(b) of the Code. These opinions will
be based on facts, representations and assumptions set forth or
referred to in the opinions and on representation letters from
Allis-Chalmers and Bronco.
85
While receipt of opinions of counsel on the tax consequences of
the merger is a condition to the closing, an opinion of counsel
is not a guaranty of a result as it merely represents
counsels best legal judgment and is not binding on the
Internal Revenue Service or any court, and neither
Allis-Chalmers nor Bronco intends to request any ruling from the
Internal Revenue Service as to the United States federal income
tax consequences of the merger. Consequently, no assurance can
be given that the Internal Revenue Service will not assert, or
that a court would not sustain, a position contrary to any of
the conclusions set forth below.
Assuming the merger qualifies as a reorganization within the
meaning of Section 368(a) of the Code, the material United
States federal income tax consequences of the merger to
U.S. holders of Bronco common stock are, in general, as
follows.
A U.S. holder that pursuant to the merger exchanges its
shares of Bronco common stock for a combination of
Allis-Chalmers common stock and cash (other than cash received
in lieu of a fractional share) will generally recognize gain
(but not loss) in an amount equal to the lesser of (1) the
excess, if any, of the sum of the amount of cash and the fair
market value of the Allis-Chalmers common stock received, over
the adjusted tax basis of the Bronco common stock surrendered in
exchange therefor, and (2) the amount of cash received by
the holder.
Gain or loss will be determined separately for each block of
Bronco shares (i.e., shares acquired at the same price per share
in a single transaction) surrendered pursuant to the merger. If
a U.S. holder of Bronco common stock acquired different
blocks of Bronco common stock at different times or different
prices, the holder should consult the holders tax advisor
regarding the manner in which gain or loss should be determined.
Gain recognized upon the exchange generally will be capital
gain, unless the receipt of cash by a U.S. holder has the
effect of a distribution of a dividend, in which case the gain
will be treated as dividend income to the extent of the
U.S. holders ratable share of Broncos current
or accumulated earnings and profits as calculated for
U.S. federal income tax purposes. Any recognized gain
generally will be long-term capital gain if, as of the effective
date of the merger, the U.S. holders holding period
with respect to the Bronco common stock surrendered exceeds one
year. The maximum federal income tax rate on net long-term
capital gain recognized by individuals is 15% under current law.
There are currently no preferential tax rates for long-term
capital gains recognized by corporations.
In general, the determination as to whether the receipt of cash
has the effect of a distribution of a dividend depends upon
whether and to what extent the transactions related to the
merger will be deemed to reduce a U.S. holders
percentage ownership of the companies following the merger. For
purposes of that determination, a U.S. holder will be
treated as if it first exchanged all of the
U.S. holders Bronco common stock solely for
Allis-Chalmers common stock, and then a portion of that stock
was immediately redeemed by Allis-Chalmers for the cash that the
U.S. holder actually received in the merger. The Internal
Revenue Service has indicated that a reduction in the interest
of a minority stockholder that owns a small number of shares in
a publicly and widely held corporation and that exercises no
control over corporate affairs would result in capital gain (as
opposed to dividend) treatment. In determining whether or not
the receipt of cash has the effect of a distribution of a
dividend, certain constructive ownership rules must be taken
into account. A U.S. holder is urged to consult its tax
advisors about the possibility that all or a portion of any cash
received in exchange for Bronco common stock will be treated as
a dividend.
The aggregate tax basis of the Allis-Chalmers common stock
received (including any fractional shares deemed received and
exchanged for cash) by a U.S. holder that exchanges its
shares of Bronco common stock for a combination of
Allis-Chalmers common stock and cash will be equal to the
aggregate adjusted tax basis of the shares of Bronco common
stock surrendered, reduced by the amount of cash received by the
holder (excluding any cash received instead of fractional shares
of Allis-Chalmers common stock) and increased by the amount of
gain, if any, recognized by the holder (excluding any gain
recognized with respect to cash received instead of fractional
shares of Allis-Chalmers common stock) on the exchange.
The holding period of the Allis-Chalmers common stock received
(including any fractional shares deemed received and exchanged
for cash) will include the holding period of the Bronco common
stock surrendered. U.S. holders should consult their tax
advisors regarding the manner in which cash and Allis-Chalmers
common
86
stock should be allocated among the holders shares of
Bronco common stock and the manner in which the above rules
would apply in the holders particular circumstances.
Dissenting
Shares
A U.S. holder who receives cash in respect of dissenting
Bronco common shares will generally recognize capital gain or
loss equal to the difference between the amount of cash received
and such shareholders basis in the dissenting shares
unless such shareholder actually or constructively owns
Allis-Chalmers common stock before the merger and the payment to
such shareholder has the effect of a distribution of a dividend.
In such case, some or all of the payment could be taxed as
dividend income. U.S. holders who dissent from the merger
are urged to consult their own tax advisors.
Cash
Instead of Fractional Shares
A U.S. holder who receives cash instead of a fractional
share of Allis-Chalmers common stock generally will be treated
as having received such fractional share pursuant to the merger
and then as having received cash in exchange for such fractional
share. Gain or loss generally will be recognized based on the
difference between the amount of cash received instead of the
fractional share and the tax basis allocated to such fractional
share of Allis-Chalmers common stock. Such gain or loss
generally will be long-term capital gain or loss if, as of the
effective date of the merger, the holding period for the
fractional share (including the holding period for the shares of
Bronco common stock surrendered therefor) is greater than one
year.
Backup
Withholding
Non-corporate U.S. holders may be subject to backup
withholding (currently at a rate of 28%), on cash payments
received in the merger. Backup withholding will not apply,
however, to a U.S. holder who:
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furnishes a correct taxpayer identification number and
certifies, under penalties of perjury, that such
U.S. holder is not subject to backup withholding on a
Form W-9
(or appropriate substitute), and otherwise complies with
applicable requirements of the backup withholding rules; or
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is a corporation or otherwise exempt from backup withholding
and, when required, demonstrates this fact.
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A U.S. holder who fails to provide the correct taxpayer
identification number on
Form W-9
(or appropriate substitute) may be subject to penalties imposed
by the IRS. Each U.S. holder should complete and sign the
substitute
Form W-9
that is part of the letter of transmittal to be returned to the
exchange agent in order to provide the information and
certification necessary to avoid backup withholding, unless an
applicable exemption exists and is otherwise proved in a manner
acceptable to the exchange agent. Any amounts withheld from
payments to a U.S. holder under the backup withholding
rules are not additional tax and will be allowed as a refund or
credit against the U.S. holders United States federal
income tax liability, provided that the required information is
timely furnished to the Internal Revenue Service.
Reporting
Requirements
Certain significant U.S. holders (generally those who own
at least five percent of Broncos common stock) may be
required to attach a statement to their tax returns for the
taxable year in which the merger is completed that contains the
information set forth in
Section 1.368-3(b)
of the Treasury regulations. The statement would include the
fair market value of, and such U.S. holders tax basis
in the Bronco common stock surrendered, in the merger.
U.S. holders are urged to consult their own tax advisors as
to the necessity of attaching such a statement to their tax
returns.
This summary of certain material U.S. federal income tax
consequences is for general information only and is not tax
advice. Holders are urged to consult their tax advisors with
respect to the application of U.S. federal income tax laws
to their particular situations as well as any tax consequences
arising under the U.S. federal estate or gift tax rules, or
under the laws of any state, local, foreign or other taxing
jurisdiction or under any applicable tax treaty.
87
THE
MERGER AGREEMENT
The following summary describes selected material provisions
of the initial merger agreement, as amended by the first
amendment to the initial merger agreement, copies of which are
attached as
Annexes A-1
and A-2,
respectively, to, and are incorporated by reference into, this
joint proxy statement/prospectus. This summary may not contain
all of the information about the merger agreement that is
important to Allis-Chalmers stockholders and Bronco
stockholders. You are encouraged to carefully read the full
initial merger agreement and the amendment attached as
Annexes A-1
and A-2,
respectively.
The representations and warranties contained in the merger
agreement are as of specified dates and were made only for
purposes of the merger agreement. The representations and
warranties are solely for the benefit of the parties to the
merger agreement and may be subject to limitations agreed
between the parties. Additionally, certain representations and
warranties in the merger agreement were used for the purpose of
allocating risk between Allis-Chalmers and Bronco. Accordingly,
investors should not rely on the representations and warranties
in the merger agreement as characterizations of facts about
Allis-Chalmers or Bronco. None of the representations and
warranties contained in the merger agreement will have any legal
effect among the parties to the merger agreement after the
closing of the merger.
Structure
of the Merger
Prior to the effective time of the merger, Merger Sub will
convert into a Delaware limited liability company. Subject to
the conditions of the merger agreement, at the effective time of
the merger, Bronco will merge with and into Merger Sub, with
Merger Sub surviving the merger and changing its name to Bronco
Drilling Company LLC. Upon the effectiveness of the merger, the
separate corporate existence of Bronco will cease.
Effective
Time of the Merger
The closing of the merger and the other transactions
contemplated by the merger agreement are expected to occur,
subject to the satisfaction or waiver of all closing conditions,
promptly following the Allis-Chalmers Meeting and the Bronco
Meeting. The merger will become effective immediately when the
certificate of merger is accepted for filing by the Secretary of
State of Delaware (or such later time as set forth in the
certificate of merger and agreed to by the parties). In this
summary, the time when the merger becomes effective is referred
to as the effective time of the merger.
Merger
Consideration
General
At the effective time of the merger, each outstanding share of
Bronco common stock (other than shares held by Bronco
stockholders who do not vote in favor of the adoption of the
merger agreement and who are entitled to and properly demand
appraisal rights in accordance with Delaware law and shares held
by Allis-Chalmers, Merger Sub or Bronco or by any subsidiary of
Bronco or Allis-Chalmers) will be converted into the right to
receive merger consideration comprised of (1) an amount in
cash, calculated to the nearest $0.01, resulting from dividing
$200.0 million by the aggregate number of shares of Bronco
common stock issued and outstanding immediately prior to the
effective time of the merger and (2) a number of shares of
Allis-Chalmers common stock equal to the exchange ratio. The
exchange ratio will be the fraction, expressed as a decimal and
calculated to the nearest one-ten thousandth, the numerator of
which is 16,846,500, and the denominator of which is the
aggregate number of shares of Bronco common stock issued and
outstanding immediately prior to the effective time of the
merger (subject to certain exceptions). Based on the closing
price of Allis-Chalmers common stock on June ,
2008 and the number of shares of Bronco common stock outstanding
as of that date, the merger consideration would be valued at
$ per share of Bronco common
stock, consisting of $7.46 in cash and Allis-Chalmers common
stock valued at $ .
At the time the Bronco stockholders grant their proxies or vote
at their stockholder meeting, they will not know the actual
value of the merger consideration they will receive in the
merger. Interested stockholders may
88
call
1-877- -
for the value of the merger consideration per share of Bronco
common stock calculated as of the latest practicable date. We
expect the merger to occur on the first business day following
receipt of the requisite Allis-Chalmers and Bronco stockholder
approvals. Neither company may terminate the merger agreement
due solely to a change in the price of Allis-Chalmers common
stock.
The value of the merger consideration that Bronco stockholders
will receive in the merger will depend on the value of
Allis-Chalmers common stock at the effective time of the merger
and thereafter. The following table indicates the value of the
merger consideration per share of Bronco common stock using a
range of assumed prices of Allis-Chambers common stock:
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Value of Allis-Chalmers
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Value of Total
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Common Stock to be
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Amount of Cash to
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Consideration to be
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Assumed
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Issued for Each
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be Paid for Each
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Paid for Each Share
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Allis-Chalmers
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Share of Bronco
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Share of Bronco
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of Bronco Common
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Common Stock Price
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Common Stock(1)
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Common Stock(1)
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Stock(1)
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$
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27.80
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(2)
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$
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17.47
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$
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7.46
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$
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24.93
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$
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20.00
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$
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12.57
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$
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7.46
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$
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20.03
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$
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19.00
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$
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11.94
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$
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7.46
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$
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19.40
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$
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18.37
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(3)
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$
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11.54
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$
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7.46
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$
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19.00
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$
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18.00
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$
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11.31
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$
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7.46
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$
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18.77
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$
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17.17
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(4)
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$
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10.79
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$
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7.46
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|
|
$
|
18.25
|
|
$
|
17.00
|
|
|
$
|
10.68
|
|
|
$
|
7.46
|
|
|
$
|
18.14
|
|
$
|
16.00
|
|
|
$
|
10.05
|
|
|
$
|
7.46
|
|
|
$
|
17.51
|
|
$
|
15.00
|
|
|
$
|
9.43
|
|
|
$
|
7.46
|
|
|
$
|
16.89
|
|
$
|
9.73
|
(5)
|
|
$
|
6.11
|
|
|
$
|
7.46
|
|
|
$
|
13.57
|
|
|
|
|
(1) |
|
Assumes 26,808,502 shares of Bronco common stock
outstanding. |
|
|
|
(2) |
|
The closing price of Allis-Chalmers common stock on
July 12, 2007 (the 52-week high closing price). |
|
|
|
(3) |
|
The closing price of Allis-Chalmers common stock on May 9,
2008 (the
year-to-date
high closing price). |
|
|
|
(4) |
|
The closing price of Allis-Chalmers common stock on May 30,
2008, the last trading day before the public announcement of the
amendment to the initial merger agreement. |
|
|
|
(5) |
|
The closing price of Allis-Chalmers common stock on
February 8, 2008 (the 52-week low closing price). |
The table above includes the highest and lowest closing sale
prices of Allis-Chalmers common stock within the last year and
therefore indicates a range within which the price at the
effective time of the merger can reasonably be expected to fall,
although there can be no assurance that the price of
Allis-Chalmers common stock at the effective time of the merger
and thereafter will not be higher or lower than the values shown
in the table.
If, between the date of the initial merger agreement and the
effective time of the merger, the shares of Bronco common stock
or Allis-Chalmers common stock are changed into a different
number or class of shares by reason of any stock split,
combination, merger, consolidation, reorganization or other
similar transaction, or any distribution of shares of Bronco
common stock or Allis-Chalmers common stock shall be declared
with a record date within that period, appropriate adjustments
will be made to the per share stock consideration and per share
cash consideration to have the same economic effect as was
contemplated by the merger agreement prior to giving effect to
such event.
No fractional shares of Allis-Chalmers common stock will be
issued to any holder of Bronco common stock in connection with
the merger. Allis-Chalmers will convert into cash to the nearest
whole cent each fractional share that would otherwise be issued.
No interest will be paid or accrued on cash payable in lieu of
fractional shares of Allis-Chalmers common stock. Further, no
fractional share will be entitled to vote or have any other
rights of an Allis-Chalmers stockholder.
89
Treatment
of Bronco Common Stock
Conversion
of Shares
The conversion of shares of Bronco common stock into the right
to receive the merger consideration will occur automatically at
the effective time of the merger. As soon as reasonably
practicable after the effective time of the
merger, ,
as exchange agent, will exchange certificates formerly
representing shares of Bronco common stock for merger
consideration based on the exchange ratio.
Dividends
and Distributions with Respect to Unexchanged Bronco Common
Stock
Bronco stockholders prior to the effective time of the merger
will not be paid any dividends or other distributions on shares
of Allis-Chalmers common stock declared or made after the
effective time of the merger until they surrender their shares
of Bronco common stock to the exchange agent (upon surrender of
certificates a holder of Bronco common stock will receive any
accrued but unpaid dividends, without interest). After the
effective time of the merger occurs, there will be no transfers
on the stock transfer books of Bronco of any shares of Bronco
common stock.
Withholding
Each of Allis-Chalmers, the combined company and the exchange
agent will be entitled to deduct and withhold from the merger
consideration payable to any Bronco stockholder the amounts it
is required to deduct and withhold under the Internal Revenue
Code or any state, local or foreign tax law. Withheld amounts
will be treated for all purposes as having been paid to the
Bronco stockholders from whom they were withheld.
Treatment
of Bronco Equity Awards
Treatment
of Stock Options and Other Equity Awards
The following summarizes the treatment of Bronco stock options
and other equity awards held by Bronco employees:
Stock
Options
There are no Bronco stock options outstanding.
Restricted
Shares
Each outstanding share of Bronco common stock that is subject to
a restriction or other condition under the Bronco stock plans
will be immediately vested and become free of such conditions or
restrictions and will be treated in the merger equally with each
share of Bronco common stock that is not subject to any such
restrictions or conditions.
Representations
and Warranties
The merger agreement contains representations and warranties
made by each of the parties regarding aspects of their
respective businesses, financial condition and structure, as
well as other facts pertinent to the merger. Each of Bronco, on
the one hand, and Allis-Chalmers and Merger Sub, on the other
hand, has made representations and warranties to the other in
the merger agreement, including with respect to the following
subject matters:
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existence, good standing and qualification to conduct business;
|
|
|
|
|
|
power and authorization and the enforceability of the merger
agreement;
|
|
|
|
|
|
absence of any conflict or violation of organizational
documents, third party agreements or laws;
|
90
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|
|
|
|
governmental, third party and regulatory approvals or consents
required to complete the merger;
|
|
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|
filings and reports with the SEC and financial information;
|
|
|
|
ownership and condition of assets;
|
|
|
|
absence of material adverse effect and certain other changes,
events or circumstances;
|
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|
absence of undisclosed liabilities;
|
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|
employee benefit plans and ERISA;
|
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|
litigation and compliance with laws;
|
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|
intellectual property;
|
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|
material agreements;
|
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|
tax matters;
|
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|
environmental matters;
|
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|
insurance;
|
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|
labor matters and employees;
|
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|
disclosure controls and procedures;
|
|
|
|
ownership of the other partys capital stock;
|
|
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|
required vote by stockholders;
|
|
|
|
opinion of its financial adviser as to the fairness of the
merger consideration from a financial point of view;
|
|
|
|
recommendations of merger by boards of directors;
|
|
|
|
fees payable to brokers in connection with the merger;
|
|
|
|
inapplicability of state takeover statutes;
|
|
|
|
valid existence, good standing and qualification to do business
of all subsidiaries;
|
|
|
|
absence of rights granted to any person under its respective
rights agreement;
|
|
|
|
absence of improper payments; and
|
|
|
|
absence of other representations or warranties.
|
Allis-Chalmers has made additional representations and
warranties to Bronco with respect to its receipt of a commitment
letter for financing and the solvency of Allis-Chalmers
following the merger.
Certain representations and warranties of Allis-Chalmers, Bronco
and Merger Sub are qualified as to materiality or as to
material adverse effect, which generally means the
existence of a materially adverse change to (1) the ability
of the party to complete the merger or (2) the assets,
properties, business, results of operations or condition
(financial or otherwise) of the party and its subsidiaries,
taken as a whole, except for any materially adverse change that
is caused by or arises from a discrete list of certain causes,
including among others, changes to general economic conditions
due to natural disasters or changes that affect generally the
industry in which the party operates so long as not
disproportionate to that party.
Conditions
to the Completion of the Merger
The completion of the merger is subject to various conditions.
While it is anticipated that all of these conditions will be
satisfied, there can be no assurance as to whether or when all
of the conditions will be satisfied or, where permissible,
waived.
91
Conditions
to Each Partys Obligations
Each partys obligation to complete the merger is subject
to the satisfaction or waiver of the following conditions:
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|
|
adoption by Bronco stockholders of the merger agreement;
|
|
|
|
approval by Allis-Chalmers stockholders of the issuance of
Allis-Chalmers common stock pursuant to the merger;
|
|
|
|
absence of any action taken by any governmental entity that
restrains or otherwise prohibits the consummation of the merger
or imposes any material restrictions on the parties with respect
to the merger;
|
|
|
|
expiration or termination of the waiting period under the
Hart-Scott-Rodino
Act (early termination of the waiting period was granted on
March 10, 2008);
|
|
|
|
effectiveness of the registration statement on
Form S-4,
of which this joint proxy statement/prospectus constitutes a
part, and the absence of any stop order or proceedings for that
purpose pending before or threatened by the SEC;
|
|
|
|
authorization for listing on the NYSE of the shares of
Allis-Chalmers common stock issuable to Bronco stockholders
pursuant to the merger, subject to official notice of
issuance; and
|
|
|
|
obtaining all consents, approvals, permits and authorizations
required to be obtained from any governmental authority to
consummate the merger.
|
Additional
Conditions to Broncos Obligations
The obligation of Bronco to complete the merger is subject to
the satisfaction or waiver of the following conditions:
|
|
|
|
|
subject to certain limitations, Allis-Chalmers and Merger
Subs representations and warranties set forth in the
merger agreement will be true and correct as of the date of the
initial merger agreement and at and as of the closing date of
the merger;
|
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|
|
|
the performance or compliance in all material respects by
Allis-Chalmers and Merger Sub of each of their respective
obligations contained in the merger agreement;
|
|
|
|
|
|
the absence of any event or circumstance constituting a
material adverse effect with respect to
Allis-Chalmers;
|
|
|
|
|
|
Allis-Chalmers has delivered to the exchange agent satisfactory
transfer instructions; and
|
|
|
|
|
|
Bronco will have received from its legal counsel a legal opinion
to the effect that for federal income tax purposes, (i) the
merger will be treated as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code,
and (ii) each of Allis-Chalmers and Bronco will be a party
to such reorganization within the meaning of Section 368(b)
of the Internal Revenue Code.
|
Additional
Conditions to the Obligations of Allis-Chalmers and Merger
Sub
The obligations of Allis-Chalmers and Merger Sub to complete the
merger are subject to the satisfaction or waiver of the
following conditions:
|
|
|
|
|
subject to certain limitations, Broncos representations
and warranties set forth in the merger agreement will be true
and correct as of the date of the initial merger agreement and
at and as of the closing date of the merger;
|
|
|
|
|
|
the performance or compliance in all material respects by Bronco
of each of its obligations contained in the merger agreement;
|
92
|
|
|
|
|
the absence of any event or circumstance constituting a
material adverse effect with respect to
Bronco; and
|
|
|
|
|
|
Allis-Chalmers will have received from its legal counsel a legal
opinion to the effect that for federal income tax purposes,
(i) the merger will be treated as a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, and
(ii) each of Allis-Chalmers and Bronco will be a party to
such reorganization within the meaning of Section 368(b) of
the Internal Revenue Code.
|
Covenants
Conduct
of Business Pending the Merger
Each of Allis-Chalmers and Bronco has agreed that it will, and
will cause its subsidiaries to, during the period from the date
of the initial merger agreement until the effective time of the
merger or until the earlier termination of the merger agreement,
except as disclosed in its disclosure letter, expressly
permitted by the merger agreement or agreed to in writing by the
other party (which consent will not be unreasonably withheld,
delayed or conditioned):
|
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|
|
conduct its business and that of its subsidiaries only in the
ordinary course consistent with past practices and policies;
|
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|
|
use commercially reasonable efforts to preserve intact its
business organization and goodwill;
|
|
|
|
use commercially reasonable efforts to keep available the
services of its current officers, directors and key
employees; and
|
|
|
|
use commercially reasonable efforts to preserve and maintain
existing relationships with customers, suppliers, agents and
creditors.
|
Each of Allis-Chalmers and Bronco (and their subsidiaries) has
also agreed during the period from the date of the initial
merger agreement until the effective time of the merger or until
the earlier termination of the merger agreement, except as
disclosed in its disclosure letter, expressly permitted by the
merger agreement or agreed to in writing by the other party
(which consent will not be unreasonably withheld, delayed or
conditioned) to limitations or prohibitions on the following
activities:
|
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|
|
entering into any material new line of business;
|
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|
|
incurring or committing to any capital expenditures exceeding
$50 million in the aggregate (in the case of Bronco and its
subsidiaries) or $150 million in the aggregate (in the case
of Allis-Chalmers and its subsidiaries);
|
|
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|
|
amending its certificate of incorporation or bylaws or similar
organizational documents unless required to comply with
applicable law or rules of the NYSE or Nasdaq and except with
respect to the conversion of Merger Sub into a Delaware limited
liability company prior to the effective time of the merger;
|
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|
|
|
|
declaring, setting aside or paying dividends or other
distributions with respect to its equity interests;
|
|
|
|
adjusting, splitting, combining, reclassifying or disposing any
of its outstanding equity interests;
|
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|
issuing, granting, selling or agreeing to issue, grant or sell
any equity interests, except pursuant to the exercise of any
current outstanding equity options and other contractual
obligations;
|
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|
subject to certain exceptions, purchasing, redeeming or
acquiring any outstanding equity interests;
|
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|
subject to certain exceptions, merging or consolidating with, or
transferring, leasing, subleasing or otherwise disposing of all
or a substantial portion of its assets, to any other person;
|
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|
liquidating, winding up, dissolving or adopting any plan to
liquidate, wind up or dissolve;
|
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|
|
acquiring or agreeing to acquire the business of any other
person;
|
93
|
|
|
|
|
selling, leasing, subleasing, transferring or otherwise
disposing of any specified Bronco drilling rigs that have a
value in excess of $1.5 million individually or
$4.5 million in the aggregate;
|
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|
|
selling, transferring or otherwise disposing of or mortgaging,
pledging or otherwise encumbering any equity interests of any
other person, except for permitted liens;
|
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|
making any loans or investments in any person, other than
advances to its wholly-owned subsidiaries or from its
wholly-owned subsidiaries, customer loans and advances to
employees consistent with past practices or short-term
investment of cash in the ordinary course of business in
accordance with its cash management procedures;
|
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|
terminating or amending any material contract or waiving or
assigning any of its rights under a material contract in a
manner that would be materially adverse to it, or entering into
any material contract other than customer contracts entered into
in the ordinary course of business;
|
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|
incurring or assuming any indebtedness, except indebtedness
incurred under its respective credit agreement, letters of
credit, surety bonds or similar arrangement incurred in the
ordinary course of business and consistent with its past
practices;
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|
assuming, endorsing, guaranteeing or otherwise becoming liable
for the liabilities, obligations or performance of any other
person, except under its credit agreements or in the ordinary
course of its business consistent with past practices;
|
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|
unless permitted by the merger agreement, entering into any
additional contracts, benefit plans or agreements with
employees, directors or consultants, or granting any increase in
compensation or benefits other than consistent with past
practice;
|
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|
|
|
adopting, entering into, amending or otherwise increasing or
accelerating the payment or vesting of the amounts, benefits or
rights payable or accrued or to become accrued or payable under
any of its respective benefit plans, except as required to
comply with applicable law or any agreement or policy in
existence as of the date of the initial merger agreement;
|
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|
|
increasing any compensation or benefits to, or amending,
modifying or extending any employment or consulting agreement or
benefit plan with, former, present or future representatives (as
defined in the merger agreement) of either party;
|
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|
creating, incurring, assuming or permitting to exist any lien on
any of its assets, except for permitted liens;
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|
making or rescinding any material election relating to taxes,
settling or compromising any material claim or investigation
relating to taxes, or changing in any material respect any of
its methods of reporting any item for tax purposes, except as
may be required by applicable law;
|
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|
taking any action that is likely to materially delay or impair
completion of the merger;
|
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|
|
entering into any contract that subjects Allis-Chalmers or the
surviving company to any material non-compete agreement;
|
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|
|
entering into any contract the effect of which would be to grant
a third party following the merger any right or potential right
of license to any material intellectual property;
|
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|
|
changing any of its material accounting principles, estimates,
or practices (except as may be required as a result of a change
in GAAP);
|
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|
subject to certain exceptions, compromising, settling or
granting any waiver or release related to any litigation or
proceeding;
|
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|
subject to certain exceptions, engaging in any transaction or
entering into any agreement with any of its affiliates; and
|
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|
|
entering into any contract or obligation with respect to any of
the foregoing.
|
94
In addition, each of Allis-Chalmers, Merger Sub and Bronco
agreed to use its commercially reasonable best efforts to cause
the merger to qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and
to obtain certain tax opinions from its counsel relating thereto.
Access
to Information and Properties
Subject to certain exceptions, during the period prior to the
effective time of the merger, Allis-Chalmers and Bronco and
their respective subsidiaries will provide each other reasonable
access to their books and records and copies of these materials.
The parties will also provide each other a copy of any report or
communication with the SEC related to the merger.
Additional
Arrangements
Each of Allis-Chalmers and Bronco also has agreed to do the
following:
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|
take all actions necessary to enable the closing to occur as
soon as reasonably practicable;
|
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|
provide to the other party such information and reasonable
assistance as the other party may reasonably request in
connection with its preparation of any regulatory filings;
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|
take all action to cause the covenants and conditions in the
merger agreement to be performed or satisfied as soon as
practicable;
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|
use its reasonable best efforts to avoid the entry of, or to
have vacated or terminated, any decree, order, ruling or
injunction that would restrain, prevent or delay the closing,
and if any order, decree, ruling, injunction or other action has
been taken by a governmental authority that would restrain,
enjoin or otherwise prohibit, delay or prevent closing,
Allis-Chalmers and Bronco must use their reasonable best efforts
to have the action declared ineffective as soon as practicable;
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|
promptly notify each other of any communication concerning the
merger or the merger agreement from any governmental authority
and permit the other party to review in advance any proposed
communication to any governmental authority concerning the
merger or the merger agreement;
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|
allow the other party to participate in any substantive meeting
with any governmental authority relating to any filings or
inquiry concerning the merger or the merger agreement; and
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|
provide the other partys counsel with copies of all
correspondence, filings and communications between it and any
governmental authority with respect to the merger or the merger
agreement.
|
In addition, Allis-Chalmers and the surviving company agreed
that the organizational documents of the surviving company would
contain exculpation, indemnification and advancement of expenses
provisions with respect to the current and former directors,
officers, fiduciaries and employees of Bronco and the surviving
company that are no less favorable to such persons than those
contained in Broncos organizational documents.
However, nothing contained in the merger agreement will be
interpreted so as to require any party or its subsidiaries or
affiliates, without such partys written consent, to sell,
license, dispose of, hold separate or operate in any specified
manner any of its businesses or assets. Further, nothing
contained in the merger agreement will give either party,
directly or indirectly, the right to control the operations of
the other party.
Stockholder
Meetings
Promptly after the registration statement on
Form S-4
is declared effective, the Bronco board of directors will
recommend adoption of the merger agreement to its stockholders
and the Allis-Chalmers board of directors will recommend to its
stockholders the approval of the issuance of common stock in
connection with the merger.
Unless the merger agreement is terminated in accordance with its
terms, Bronco will submit the merger agreement to its
stockholders for adoption regardless of whether Bronco board of
directors withdraws,
95
modifies or changes its recommendation and declaration regarding
the proposal to adopt the merger agreement. Allis Chalmers has
agreed to submit its proposal to issue shares of Allis-Chalmers
common stock to Bronco stockholders in the merger to
Allis-Chalmers stockholders for approval regardless of
whether Allis-Chalmers board of directors withdraws, modifies or
changes its recommendation regarding such proposal.
Notification
Requirements
Each of Allis-Chalmers and Bronco will give prompt notice to the
other party of any occurrence that would be reasonably expected
to result in the inaccuracy of a representation or any failure
by Allis-Chalmers or Bronco, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied
with under the terms of the merger agreement.
Registration
Statement
Allis-Chalmers and Bronco, subject to certain exceptions, have
agreed that this registration statement on
Form S-4
(at the time it becomes effective and at the time it is first
mailed to the stockholders) will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading.
The registration statement of
Form S-4,
of which this joint proxy statement/prospectus is a part, and
any amendment to the same, will not be filed or disseminated to
stockholders without the prior approval of both Allis-Chalmers
and Bronco. Allis-Chalmers and Bronco will use commercially
reasonable efforts to cause to be delivered to each other two
comfort letters from their respective independent auditors, one
dated on the effective date of the registration statement on
Form S-4,
and one dated the closing date (as defined in the merger
agreement), that are customary in scope and substance for such
letters in connection with public offerings.
Directors
and Officers Insurance and Indemnification
The merger agreement provides that for a period of six years
from the effective time of the merger Allis-Chalmers will cause
the surviving company in the merger to indemnify, defend and
hold harmless, to the fullest extent permitted by applicable
law, each person who is, has been or becomes prior to the
effective time of the merger a director, officer, fiduciary,
agent or employee of Bronco and any of its subsidiaries in their
capacities as such from and against all claims and expenses
arising out of, relating to or in connection with any action or
omission in his or her capacity as such occurring or alleged to
have occurred at or before the effective time of the merger. The
merger agreement also requires Allis-Chalmers to cause the
surviving company to pay the expenses of the indemnified person
in advance of the final disposition of any claim made against
the indemnified person during such six-year period.
In addition, the merger agreement provides that Allis-Chalmers
and the surviving company in the merger will maintain in effect
all exculpation, indemnification and advancement of expenses
provisions of the certificate of incorporation and bylaws of
each of Bronco and its subsidiaries in effect as of the date of
the initial merger agreement or in any indemnification
agreements between Bronco and its subsidiaries and their
respective current and former directors and officers.
Allis-Chalmers and the surviving company may not, for a period
of six years from the effective time of the merger, amend,
repeal or otherwise modify, unless required by law, any such
provisions in any manner that would adversely affect the rights
under such provisions of any indemnitee, and all rights to
indemnification thereunder in respect of any claim asserted or
made within such period shall continue until the final
disposition or resolution of such claim. In addition,
Allis-Chalmers and the surviving company agreed that the
organizational documents of the surviving company would contain
exculpation, indemnification and advancement of expenses
provisions with respect to the current and former directors,
officers, fiduciaries and employees of Bronco and the surviving
company that are no less favorable to such persons than those
contained in Broncos organizational documents.
For a period of six years after the effective time of the
merger, the surviving company will also maintain liability
insurance for directors and officers with respect to claims
arising from facts or events that occurred at or prior to the
effective time of the merger from an insurance carrier with the
same or better credit rating as Broncos current insurance
carrier for all directors and officers of Bronco who are
currently covered by
96
Broncos existing directors and officers
liability insurance. The insurance will be no less advantageous
to the directors and officers than the coverage and amounts they
currently have. However, the surviving company will not be
obligated to make annual premium payments for this insurance to
the extent that the premiums exceed 200% of the per annum rate
of the premium currently paid by Bronco for similar insurance as
of the date of the initial merger agreement. In the event that
the annual premium for this insurance exceeds the maximum
amount, the surviving company will purchase as much coverage per
policy year as reasonably practicable for the maximum amount.
Allis-Chalmers will have the right to cause the coverage to be
extended under the insurance by obtaining a six year
tail policy on terms and conditions no less
advantageous than the existing insurance policy. Such
tail insurance will satisfy the requirement
discussed above that the surviving company indemnify, defend and
hold harmless, for a period of six years from the effective time
of the merger, the current and former directors and officers of
Bronco and any of its subsidiaries for claims and expenses
occurring at or before the effective time of the merger, and
advance amounts for their expenses associated with such claims.
Prior to the effective time of the merger, Bronco may purchase
such tail insurance at Allis-Chalmers expense,
provided that the aggregate annual premiums for such insurance
do not exceed the maximum amount currently paid by Bronco for
similar insurance.
Stock
Exchange Listing
Allis-Chalmers will use its reasonable best efforts to cause the
shares of Allis-Chalmers common stock to be issued in connection
with the merger to be listed on the NYSE, as of the effective
time of the merger, subject to official notice of issuance.
Employee
Matters
Allis-Chalmers will give Bronco employees full credit for their
years of service with Bronco or Broncos subsidiaries and
past participation in Bronco benefit plans for purposes of
eligibility and vesting (excluding benefit accruals) under all
employee benefit plans maintained by Allis-Chalmers that
constitute post-merger plans (as defined in the merger
agreement) to the extent Allis-Chalmers does not, at its sole
discretion, continue any Bronco pre-merger plans (as defined in
the merger agreement). Allis-Chalmers will give Bronco employees
credit toward deductibles and out-of-pocket requirements for any
payments made during the current year under the old Bronco
employee benefit plans.
The value of the compensation and benefits provided under the
pre-merger plans or the post-merger plans, as applicable, to
Bronco employees, taken as a whole, after the effective time of
the merger through December 31, 2008, will be substantially
similar to the value of the compensation and benefits previously
provided under Broncos employee benefit plans to such
Bronco employees, taken as a whole, immediately prior to the
effective time of the merger, as determined by Allis-Chalmers in
good faith after taking into account all facts and circumstances.
Allis-Chalmers is required to establish a severance plan for the
benefit of certain non-executive employees of Bronco, as listed
in Allis-Chalmers disclosure letter. The severance plan
will be effective for at least one year from the effective time
of the merger.
Other than with respect to the employee benefits matters
referenced in the three immediately preceding paragraphs, no
third party will have any rights with respect to
Allis-Chalmers agreements in the merger agreement
regarding employee benefits after the merger.
Please also read The Merger Interests of
Directors and Executive Officers of Bronco in the Merger,
beginning on page 77.
Section 16
Matters
Prior to the effective time of the merger, Allis-Chalmers and
Bronco will take all required actions to cause any dispositions
of shares of Bronco common stock (or derivatives thereof) or
acquisitions of Allis-Chalmers common stock (or derivatives
thereof) resulting from the transactions contemplated by the
merger agreement by each individual who is subject to the
reporting requirements of Section 16(a) of the Exchange
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Act, to be exempt from Section 16(b) of the Exchange Act
under
Rule 16b-3
promulgated under the Exchange Act.
Allis-Chalmers
Board of Directors
Prior to the closing of the merger, Bronco will deliver to
Allis-Chalmers written resignations of all members of the board
of directors and all officers of Bronco and its subsidiaries,
with such resignations to be effective as of the effective time
of the merger.
No
Solicitation of Alternative Transactions
The merger agreement provides that during the period from the
date of the initial merger agreement until the effective time of
the merger or the earlier termination of the merger agreement,
subject to limited exceptions described below, Bronco will not,
and will cause its subsidiaries and representatives not to:
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solicit, initiate, encourage or facilitate any inquiries, offers
or proposals that constitute, or are reasonably likely to lead
to, another acquisition proposal;
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engage in any discussions or negotiations with, furnish or
disclose any non-public information relating to itself or any of
its subsidiaries to any person that has made or may be
considering making another acquisition proposal;
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approve, endorse or recommend another acquisition
proposal; or
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enter into any agreement in principle, letter of intent,
arrangement, understanding or other contract relating to another
acquisition proposal.
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Except as permitted below, Bronco is required to cease all
solicitations, discussions or negotiations with any person with
respect to another acquisition proposal and will inform its
subsidiaries to do the same.
Nothing in the merger agreement prevents Bronco, prior to
obtaining its required stockholder approval, from doing any of
the following provided its board of directors, acting in good
faith, has determined (1) after consultation with its
outside legal counsel and financial advisors, that the
acquisition proposal constitutes, or is reasonably likely to
result in, a superior proposal (as defined in the merger
agreement) and (2) after consultation with its outside
legal counsel, that the failure to take such action would be
reasonably likely to be inconsistent with the board of
directors fiduciary obligations to Broncos
stockholders:
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engaging in discussions or negotiations with, or disclosing
information to, a third party who has made a bona fide written
and unsolicited acquisition proposal, but only so long as the
Bronco board of directors, acting in good faith, has also
determined that the conditions of the proposal are all
reasonably capable of being satisfied in a timely manner and the
third party executes a confidentiality agreement with material
terms that are no more favorable to the third party than those
contained in the confidentiality agreement between
Allis-Chalmers and Bronco;
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subject to provisions requiring notification to Allis-Chalmers
of the existence of a superior proposal and negotiating in good
faith exclusively with Allis-Chalmers for four business days to
enable Allis-Chalmers to submit a revised offer,
(1) recommending, adopting, approving or submitting to its
stockholders or proposing publicly to recommend, adopt, approve
or submit to its stockholders another acquisition proposal or
(2) entering into any agreement related to another
acquisition proposal, provided that prior to taking either of
these actions, Bronco concurrently terminates the merger
agreement; or
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subject to provisions requiring notification to Allis-Chalmers
of the existence of a superior proposal and negotiating in good
faith exclusively with Allis-Chalmers for four business days to
enable Allis-Chalmers to submit a revised offer, withdrawing or
amending (or publicly proposing to withdraw or amend) the
approval, recommendation or declaration of advisability by its
board of directors of the merger or the other transactions
contemplated by the merger agreement.
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Bronco, upon receiving an unsolicited bona fide written
acquisition proposal from a third party, has agreed to inform
Allis-Chalmers of the acquisition proposal, the identity of the
third party making the
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acquisition proposal and the material terms of the acquisition
proposal. Bronco has agreed to keep Allis-Chalmers informed as
to any changes to acquisition proposals and to provide
Allis-Chalmers with a copy of any material correspondence with
any third party regarding another acquisition proposal.
Nothing contained in the no-solicitation provisions of the
merger agreement prohibits Bronco or its board of directors from
taking and disclosing to Broncos stockholders a position
with respect to another acquisition proposal pursuant to
Rule 14d-9
and 14e-2(a)
under the Exchange Act or from making any similar disclosure, in
either case to the extent required by applicable law.
Public
Announcements
On the date of execution of the initial merger agreement (or if
executed after close of business, no later than the opening of
the NYSE and Nasdaq on the next day), Allis-Chalmers and Bronco
agreed to issue a joint press release with respect to the
execution of the initial merger agreement and the transactions
contemplated thereunder. Allis-Chalmers and Bronco also agreed
to consult with each other regarding any other public
announcements relating to the merger agreement or the merger.
Expenses
Subject to certain exceptions, each party will pay its own
expenses relating to the preparing, entering into, and carrying
out of the merger agreement and the consummation of the
transactions contemplated thereunder.
Tax
Each of Allis-Chalmers, Merger Sub and Bronco will use its
commercially reasonable best efforts to cause the merger to
qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and to obtain
certain tax opinions from its counsel relating thereto. Bronco
shall provide Allis-Chalmers with a certification in accordance
with Treasury
Regulation Section 1.1445-2(c)(3)
that it is not a United States real property holding corporation.
Agreements
with Executive Officers and Directors
The merger agreement requires Bronco to use its commercially
reasonable efforts to cause each executive officer and director
of Bronco to execute and deliver to Allis-Chalmers a voting
agreement stating that such officer or director will vote in
favor of adopting the merger agreement at the Bronco Meeting.
Bronco will cause certain executive officers of Bronco to
execute and deliver amended employment agreements that provide
that such officers and directors will have continuing
non-competition obligations under their previous employment
agreements. With the exception of the non-competition
obligations, all resigning officers and directors will be
released from all obligations contained is their employment
agreements upon their respective resignation.
The merger agreement requires Allis-Chalmers to use its
commercially reasonable efforts to cause each executive officer
and director of Allis-Chalmers to execute and deliver to Bronco
a voting agreement stating that such officer or director will
vote in favor of the issuance of Allis-Chalmers common stock
pursuant to the merger agreement at the Allis-Chalmers Meeting.
Termination
of the Merger Agreement and Termination Fees
Termination
of the Merger Agreement
The merger agreement may be terminated by written notice at any
time prior to the effective time of the merger in any of the
following ways:
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by mutual written consent of Allis-Chalmers and Bronco;
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by either Allis-Chalmers or Bronco (provided the terminating
party is not the cause of the failure or action described) if:
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(1) the failure to consummate the merger by
October 31, 2008, unless extended pursuant to the merger
agreement, provided that a party may not terminate upon
occurrence of this event if that partys failure to fulfill
its obligations has caused or resulted in the merger not
occurring before October 31, 2008, unless extended pursuant
to the merger agreement;
(2) any governmental authority has issued an order, decree
or ruling or taken any other action permanently prohibiting the
consummation of the merger or making the merger illegal and such
order, decree or ruling or other action will have become final
and nonappealable;
(3) the Bronco stockholders fail to adopt the merger
agreement by the requisite vote; or
(4) the Allis-Chalmers stockholders fail to approve the
issuance of additional shares of Allis-Chalmers common stock
pursuant to the merger.
(1) there has been a material breach by Bronco of any of
its representations and warranties which is incapable of being
cured by October 31, 2008, unless extended pursuant to the
merger agreement, or has not been cured within 20 days
following receipt of written notice of the breach from
Allis-Chalmers;
(2) Bronco has failed to comply in any material respect
with any of its covenants or other agreements and the failure is
incapable of being cured by October 31, 2008, unless
extended pursuant to the merger agreement, or has not been cured
within 20 days following receipt of written notice of the
failure from Allis-Chalmers;
(3) the Bronco board of directors has resolved to withdraw
or change adversely its recommendation of the merger, Bronco or
its subsidiaries has entered into another acquisition agreement,
Bronco has breached its no-solicitation covenant in any material
respect, or Bronco has publicly announced its intention to take
any of the forgoing actions; or
(4) there has been a material adverse effect with respect
to Bronco that is incapable of being cured by October 31,
2008, unless extended pursuant to the merger agreement, or
within 20 days following receipt of written notice of the
material adverse effect from Allis-Chalmers.
(1) there has been a material breach by Allis-Chalmers or
Merger Sub of any of their representations and warranties which
is incapable of being cured by October 31, 2008, unless
extended pursuant to the merger agreement, or has not been cured
within 20 days following receipt of written notice of the
breach from Bronco;
(2) Allis-Chalmers or Merger Sub has failed to comply in
any material respect with any of its covenants or other
agreements and the failure is incapable of being cured by
October 31, 2008, unless extended pursuant to the merger
agreement, or has not been cured within 20 days following
receipt of written notice of the failure from Bronco;
(3) prior to the adoption of the merger agreement by the
Bronco stockholders, Bronco receives a superior proposal and
complies in all material respects with the provisions of the
merger agreement applying to dealing with the superior
proposal; or
(4) there has been a material adverse effect with respect
to Allis-Chalmers that is incapable of being cured by
October 31, 2008, unless extended pursuant to the merger
agreement, or within 20 days following receipt of written
notice of the material adverse effect from Bronco.
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Termination
Fees and Expenses
Except for the termination fees set forth in the merger
agreement and as described below, all costs and expenses
incurred in connection with the merger agreement and the
transactions contemplated thereby (other than certain costs
related to the printing of this joint proxy statement/prospectus
and the filing fees with respect to the
Hart-Scott-Rodino
Act) will be paid by the party incurring the costs or expenses.
Bronco must pay Allis-Chalmers a termination fee of
$10 million upon termination of the merger agreement for
any of the following reasons:
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a material breach by Bronco of its no-solicitation covenant;
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the withdrawal or adverse change by the Bronco board of
directors of its recommendation of the merger;
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the entry by Bronco or its subsidiaries into another acquisition
agreement; or
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a public announcement by Bronco or its board of directors of its
intention to do any of the foregoing.
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In addition, Bronco must pay Allis-Chalmers a termination fee of
$10 million, less any amount paid by Bronco to
Allis-Chalmers for Allis-Chalmers out-of-pocket expenses
incurred in connection with the merger and the transactions
contemplated by the merger agreement (which expenses may not in
the aggregate exceed $5 million), upon consummation of an
acquisition proposal if the merger fails to close for reasons
other than the failure of conditions relating to securities laws
matters, injunctions or restraints imposed by government
authorities, the listing of the Allis-Chalmers common stock
issued as consideration in the merger on the NYSE or the receipt
of necessary consents and approvals from government authorities
on or before October 31, 2008, unless extended pursuant to
the merger agreement, (but only if Allis-Chalmers would have met
the condition relating to its representations and warranties as
of the termination date) or because the Bronco stockholders
failed to adopt the merger agreement by the required
vote and:
(1) prior to the termination, any acquisition proposal with
respect to Bronco or any of its subsidiaries has been publicly
announced and not withdrawn by any person (other than by
Allis-Chalmers or any of its respective affiliates); and
(2) within 365 days after termination of the merger
agreement, Bronco or any of its subsidiaries enters into any
definitive agreement providing for an acquisition proposal or an
acquisition proposal is consummated (regardless of whether it
relates to the same acquisition proposal referred to in
clause (1) above).
Bronco must pay an expense reimbursement payment equal to
Allis-Chalmers out-of-pocket and documented expenses up to
$5 million in the aggregate if Bronco stockholders fail to
adopt the merger agreement by the requisite vote and the merger
agreement is terminated as a result. Any expense reimbursement
payment will be credited toward the payment of any termination
fee.
Allis-Chalmers must pay an expense reimbursement payment equal
to Broncos out-of-pocket and documented expenses up to
$5 million in the aggregate if Allis-Chalmers stockholders
fail to approve the issuance of the Allis-Chalmers common stock
in the merger by the requisite vote and the merger agreement is
terminated as a result.
Effect
of Termination
In the event of the termination of the merger agreement as
described above, the merger agreement will become null and void
and there will be no liability on the part of Allis-Chalmers or
Merger Sub, on the one hand, or Bronco, on the other hand,
except as described above under Termination Fees and
Expenses, and except with respect to the requirement to
comply with the terms of the confidentiality agreement executed
between Allis-Chalmers and Bronco as well as other specified
provisions in the merger agreement, including provisions related
to confidentiality, filings with the SEC and expenses; provided,
that no party will be relieved from any liability with respect
to any willful or intentional breach of any representation,
warranty, covenant, agreement or other obligation under the
merger agreement.
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Amendment
Allis-Chalmers, Merger Sub and Bronco may amend the merger
agreement in writing at any time before the effective time of
the merger. However, after the adoption of the merger agreement
by the Bronco stockholders, no amendment may be made without
first obtaining such stockholders approval where such
amendment would materially adversely affect the rights of the
Bronco stockholders or require further approval by the Bronco
stockholders under applicable law or Broncos listing
agreement with Nasdaq.
Extension;
Waiver
Allis-Chalmers, Merger Sub and Bronco may at any time before the
effective time of the merger and to the extent legally allowed:
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extend the time for the performance of any of the obligations or
the other acts of the other parties;
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waive any inaccuracies in the representations and warranties
contained in the merger agreement or in any document delivered
pursuant to the merger agreement; and
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waive performance of any of the covenants or agreements, or
satisfaction of any of the conditions, contained in the merger
agreement.
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APPRAISAL
RIGHTS
If appraisal rights are available, Bronco stockholders who do
not vote in favor of the adoption of the merger agreement and
who properly demand appraisal of their shares will be entitled
to appraisal rights in connection with the merger under
Section 262 of the DGCL. Allis-Chalmers stockholders do not
have appraisal rights regardless of how they vote.
The following discussion is not a complete statement of the law
pertaining to appraisal rights under the DGCL and is qualified
in its entirety by the full text of Section 262, which is
attached to this joint proxy statement/prospectus as
Annex D. The following summary does not constitute any
legal or other advice nor does it constitute a recommendation
that stockholders exercise their appraisal rights, if any, under
Section 262. All references in Section 262 and in this
summary to a stockholder are to the record holder of
the shares of Bronco common stock as to which appraisal rights
are asserted. A person having a beneficial interest in shares of
Bronco common stock held of record in the name of another
person, such as a broker, fiduciary, depositary or other
nominee, must act promptly to cause the record holder to follow
the steps summarized below properly and in a timely manner to
perfect appraisal rights, if available.
In the event that appraisal rights are available, under
Section 262, holders of shares of Bronco common stock who
do not vote in favor of the adoption of the merger agreement and
who otherwise follow the procedures set forth in
Section 262 will be entitled to have their shares appraised
by the Delaware Court of Chancery and to receive payment in cash
of the fair value of the shares, exclusive of any
element of value arising from the accomplishment or expectation
of the merger, together with a fair rate of interest, if any, as
determined by the court. The stockholder must not vote in
favor of the adoption of the merger agreement. A proxy that is
submitted and does not contain voting instructions will, unless
revoked, be voted in favor of the adoption of the merger
agreement, and it will constitute a waiver of the
stockholders right of appraisal and will nullify any
previously delivered written demand for appraisal. Therefore, a
stockholder who submits a proxy and who wishes to exercise
appraisal rights must submit a proxy containing instructions to
vote against the adoption of the merger agreement or abstain
from voting on the adoption of the merger agreement.
Under Section 262, where a merger agreement is to be
submitted for adoption at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
must notify each of its stockholders entitled to appraisal
rights that appraisal rights are available and include in the
notice a copy of Section 262. To the extent appraisal
rights are available in connection with the merger, this joint
proxy statement/prospectus will constitute the notice, and the
full text of Section 262 is attached as Annex D. In
the event appraisal rights are available in connection with the
merger, any holder of shares of Bronco common stock who wishes
to exercise appraisal rights, or who wishes to preserve his or
her right to do so, should review the following discussion and
Annex D carefully because failure to timely and properly
comply with the procedures specified will result in the loss of
appraisal rights. Moreover, because of the complexity of the
procedures for exercising the right to seek appraisal of shares
of common stock, Bronco believes that if a stockholder considers
exercising appraisal rights, the stockholder should seek the
advice of legal counsel.
Filing
Written Demand
Any holder of shares of Bronco common stock wishing to exercise
appraisal rights must deliver to Bronco, before the vote on the
adoption of the merger agreement at the Bronco Meeting at which
the proposal to adopt the merger agreement will be submitted to
the stockholders, a written demand for the appraisal of the
stockholders shares, and that stockholder must not vote in
favor of the adoption of the merger agreement. A holder of
shares of Bronco common stock wishing to exercise appraisal
rights must hold of record the shares on the date the written
demand for appraisal is made and must continue to hold the
shares of record through the effective time of the merger. The
stockholder must not vote in favor of the adoption of the merger
agreement. A proxy that is submitted and does not contain voting
instructions will, unless revoked, be voted in favor of the
adoption of the merger agreement, and it will constitute a
waiver of the stockholders right of appraisal and will
nullify any previously delivered written demand for appraisal.
Therefore, a stockholder who submits a proxy and who wishes to
exercise appraisal rights must submit a proxy containing
instructions to
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vote against the adoption of the merger agreement or abstain
from voting on the adoption of the merger agreement. Neither
voting against the adoption of the merger agreement nor
abstaining from voting or failing to vote on the proposal to
adopt the merger agreement will, in and of itself, constitute a
written demand for appraisal satisfying the requirements of
Section 262. The written demand for appraisal must be in
addition to and separate from any proxy or vote on the adoption
of the merger agreement. The demand must reasonably inform
Bronco of the identity of the holder, as well as the intention
of the holder to demand an appraisal of the fair
value of the shares held by the holder. A
stockholders failure to make the written demand prior to
the taking of the vote on the adoption of the merger agreement
at the Bronco Meeting will constitute a waiver of appraisal
rights.
If appraisal rights are available in connection with the merger,
only a holder of record of shares of Bronco common stock is
entitled to assert appraisal rights for the shares registered in
that holders name. A demand for appraisal in respect of
shares of Bronco common stock should be executed by or on behalf
of the holder of record and must state that the person intends
thereby to demand appraisal of the holders shares in
connection with the merger. If the shares are owned of record in
a fiduciary capacity, such as by a trustee, guardian or
custodian, execution of the demand should be made in that
capacity, and if the shares are owned of record by more than one
person, as in a joint tenancy and tenancy in common, the demand
should be executed by or on behalf of all joint owners. An
authorized agent, including an agent for two or more joint
owners, may execute a demand for appraisal on behalf of a holder
of record; however, the agent must identify the record owner or
owners and expressly disclose that, in executing the demand, the
agent is acting as agent for the record owner or owners. If the
shares are held in street name by a broker, bank or
nominee, the broker, bank or nominee may exercise appraisal
rights with respect to the shares held for one or more
beneficial owners while not exercising the rights with respect
to the shares held for other beneficial owners; in such case,
however, the written demand should set forth the number of
shares as to which appraisal is sought, and where no number of
shares is expressly mentioned, the demand will be presumed to
cover all shares of Bronco common stock held in the name of the
record owner. Stockholders who hold their shares in brokerage
accounts or other nominee forms and who wish to exercise
appraisal rights are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand
for appraisal by such a nominee.
All written demands for appraisal pursuant to Section 262
should be sent or delivered to Bronco at 16217 North May Avenue,
Edmond, Oklahoma 73013, Attention: Corporate Secretary.
Any holder of shares of Bronco common stock may withdraw his,
her or its demand for appraisal and accept the consideration
offered pursuant to the merger agreement by delivering to Merger
Sub, as the surviving company, a written withdrawal of the
demand for appraisal. However, any attempt to withdraw the
demand made more than 60 days after the effective date of
the merger will require written approval of Bronco. No appraisal
proceeding in the Delaware Court of Chancery will be dismissed
without the approval of the Delaware Court of Chancery, and this
approval may be conditioned upon the terms as the Court deems
just.
Notice by
the Surviving Corporation
If appraisal rights are available in connection with the merger,
within ten days after the effective time of the merger, the
surviving company must notify each holder of shares of Bronco
common stock who has made a written demand for appraisal
pursuant to Section 262, and who has not voted in favor of
the adoption of the merger agreement, that the merger has become
effective.
Filing a
Petition for Appraisal
Within 120 days after the effective time of the merger, but
not thereafter, Bronco or any holder of shares of Bronco common
stock who has so complied with Section 262 and is entitled
to appraisal rights under Section 262 may file a petition
in the Delaware Court of Chancery demanding a determination of
the fair value of the shares held by all dissenting holders.
Bronco is under no obligation to and has no present intention to
file a petition, and holders should not assume that Bronco will
file a petition. Accordingly, it is the obligation of the
holders of shares of Bronco common stock to initiate all
necessary action to perfect their appraisal rights in respect of
shares of Bronco common stock within the time prescribed in
Section 262.
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Within 120 days after the effective time of the merger, any
holder of shares of Bronco common stock who has complied with
the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the surviving
company a statement setting forth the aggregate number of shares
not voted in favor of the adoption of the merger agreement and
with respect to which demands for appraisal have been received
and the aggregate number of holders of those shares. The
statement must be mailed within ten days after a written request
therefor has been received by the surviving company or within
ten days after expiration of the period for delivery of demands
for appraisal, whichever is later.
If a petition for an appraisal is timely filed by a holder of
shares of Bronco common stock and a copy thereof is served upon
Bronco, Bronco will then be obligated within 20 days to
file with the Delaware Register in Chancery a duly verified list
containing the names and addresses of all stockholders who have
demanded an appraisal of their shares and with whom agreements
as to the value of their shares have not been reached. After
notice to the stockholders as required by the court, the
Delaware Court of Chancery is empowered to conduct a hearing on
the petition to determine those stockholders who have complied
with Section 262 and who have become entitled to appraisal
rights thereunder. The Delaware Court of Chancery may require
the stockholders who demanded payment for their shares to submit
their stock certificates to the Register in Chancery for
notation thereon of the pendency of the appraisal proceeding,
and if any stockholder fails to comply with the direction, the
Court of Chancery may dismiss the proceedings as to that
stockholder.
Determination
of Fair Value
After determining the holders of shares of Bronco common stock
entitled to appraisal, the Delaware Court of Chancery will
appraise the fair value of their shares, exclusive
of any element of value arising from the accomplishment or
expectation of the merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be
the fair value. In determining fair value and, if applicable, a
fair rate of interest, the Delaware Court of Chancery will take
into account all relevant factors. In Weinberger v. UOP,
Inc., the Supreme Court of Delaware discussed the factors
that could be considered in determining fair value in an
appraisal proceeding, stating that proof of value by any
techniques or methods that are generally considered acceptable
in the financial community and otherwise admissible in
court should be considered, and that fair price
obviously requires consideration of all relevant factors
involving the value of a company. The Delaware Supreme
Court stated that, in making this determination of fair value,
the court must consider market value, asset value, dividends,
earnings prospects, the nature of the enterprise and any other
facts that could be ascertained as of the date of the merger
that throw any light on future prospects of the merged
corporation. Section 262 provides that fair value is to be
exclusive of any element of value arising from the
accomplishment or expectation of the merger. In
Cede & Co. v. Technicolor, Inc., the
Delaware Supreme Court stated that the exclusion is a
narrow exclusion that does not encompass known elements of
value, but which rather applies only to the speculative
elements of value arising from the accomplishment or
expectation. In Weinberger, the Supreme Court of Delaware also
stated that elements of future value, including the nature
of the enterprise, which are known or susceptible of proof as of
the date of the merger and not the product of speculation, may
be considered.
Stockholders considering seeking appraisal should be aware that
the fair value of their shares as so determined could be more
than, the same as or less than the consideration they would
receive pursuant to the merger if they did not seek appraisal of
their shares and that an investment banking opinion as to the
fairness from a financial point of view of the consideration
payable in a merger is not an opinion as to fair value under
Section 262. Although Bronco believes that the merger
consideration is fair, no representation is made as to the
outcome of the appraisal of fair value as determined by the
Delaware Court of Chancery, and stockholders should recognize
that an appraisal could result in a determination of a value
higher or lower than, or the same as, the merger consideration.
Neither Bronco, Allis-Chalmers nor Merger Sub anticipates
offering more than the applicable merger consideration to any
Bronco stockholder exercising appraisal rights, and each of
Bronco, Allis-Chalmers and Merger Sub reserves the right to
assert, in any appraisal proceeding, that for purposes of
Section 262, the fair value of a share of
Bronco common stock is less than the applicable merger
consideration, and that the methods which are generally
considered acceptable in the financial community and otherwise
admissible in court should be considered in the appraisal
proceedings. The Delaware Court of
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Chancery will also determine the amount of interest, if any, to
be paid upon the amounts to be received by persons whose shares
of Bronco common stock have been appraised. If a petition for
appraisal is not timely filed, then the right to an appraisal
will cease. The costs of the action (which do not include
attorneys fees or the fees and expenses of experts) may be
determined by the Court and taxed upon the parties as the Court
deems equitable under the circumstances. The Court may also
order that all or a portion of the expenses incurred by a
stockholder in connection with an appraisal, including, without
limitation, reasonable attorneys fees and the fees and
expenses of experts utilized in the appraisal proceeding, be
charged pro rata against the value of all the shares entitled to
be appraised.
If any stockholder who demands appraisal of shares of Bronco
common stock under Section 262 fails to perfect, or
successfully withdraws or loses, the holders right to
appraisal, the stockholders shares of Bronco common stock
will be deemed to have been converted at the effective time of
the merger into the right to receive the merger consideration
applicable to no election shares, subject to the right of
Allis-Chalmers to treat the shares as cash election shares,
without interest or dividends thereon. A stockholder will fail
to perfect, or lose or withdraw, the holders right to
appraisal if no petition for appraisal is filed within
120 days after the effective time of the merger or if the
stockholder delivers to the surviving company a written
withdrawal of the holders demand for appraisal and an
acceptance of the merger consideration in accordance with
Section 262.
From and after the effective time of the merger, no dissenting
stockholder will have any rights of a Bronco stockholder with
respect to that holders shares for any purpose, except to
receive payment of fair value and to receive payment of
dividends or other distributions on the holders shares of
Bronco common stock, if any, payable to Bronco stockholders of
record as of a time prior to the effective time of the merger;
provided, however, that if a dissenting stockholder delivers to
the surviving company a written withdrawal of the demand for an
appraisal within 60 days after the effective time of the
merger, or subsequently with the written approval of Bronco,
then the right of that dissenting stockholder to an appraisal
will cease and the dissenting stockholder will be entitled to
receive only the merger consideration in accordance with the
terms of the merger agreement. Once a petition for appraisal is
filed with the Delaware court, however, the appraisal proceeding
may not be dismissed as to any stockholder of Bronco without the
approval of the court.
Failure to comply strictly with all of the procedures set forth
in Section 262 of the DGCL may result in the loss of a
stockholders statutory appraisal rights. Consequently, any
stockholder wishing to exercise appraisal rights is urged to
consult legal counsel before attempting to exercise those rights.
106
FINANCING
OF THE MERGER
In order to finance the cash component of the merger
consideration, the repayment of outstanding Bronco debt and
transaction expenses, and to raise up to $50 million in
cash for working capital and general corporate purposes,
Allis-Chalmers expects to incur incremental indebtedness of up
to $350.0 million. Allis-Chalmers intends to obtain up to
$350.0 million from either (1) a permanent debt
financing of up to $350.0 million, or (2) if the
permanent debt financing cannot be consummated prior to or
concurrently with the closing of the merger, the draw down under
a senior unsecured bridge facility in an aggregate principal
amount of up to $350.0 million to be arranged by RBC, and
GSCP, acting as joint lead arrangers and joint bookrunners, with
Royal Bank, acting as the administrative agent. Under a
commitment letter, dated June 1, 2008, Royal Bank and GSCP
severally committed to provide 50% and 50%, respectively, of the
loans under a $350.0 million senior unsecured bridge
facility to Allis-Chalmers or one of its wholly owned subsidiary
reasonably satisfactory to Royal Bank and GSCP. The obligation
of Royal Bank and GSCP to make loans under the bridge facility
is subject to the satisfaction of certain other conditions
including, among others, (1) the execution of satisfactory
documentation; (2) the absence of any action that could
reasonably be expected to have a material adverse effect on
Allis-Chalmers, its ability to perform under the obligations of
the bridge facility, or the rights and remedies of Royal Bank
and GSCP under the bridge facility; (3) the equity
component of the merger consideration must have a value of not
less than $150 million. The commitments will terminate on
July 31, 2008, if the bridge facility will not have been
drawn by such date and the merger is not consummated by such
date. The commitments may also terminate prior to July 31,
2008, if the merger is abandoned or a material condition to the
merger is not satisfied or Allis-Chalmers breaches its
obligations under the commitment letter. The proceeds of the
bridge facility may be used by Allis-Chalmers to finance the
cash component of the merger consideration, repay outstanding
Bronco debt, pay transaction expenses and provide up to
$50 million for working capital and other general corporate
purposes, to the extent permitted by the loan documentation.
The senior unsecured bridge facility will mature on the date
that is twelve months after the closing date of the merger,
which we refer to as the initial maturity date. Upon the
satisfaction of certain terms and conditions, the senior
unsecured bridge facility will be exchanged for, at the option
of Royal Bank and GSCP, either (a) senior unsecured debt
securities, which we refer to as rollover securities, maturing
on the four year anniversary of the initial maturity date or
(b) senior unsecured loans maturing on the four year
anniversary of the initial maturity date, which we refer to as
rollover loans.
The senior unsecured bridge facility will bear interest at a
rate per annum equal to (1) one month or three month (as
selected by the borrower) LIBOR (as adjusted for all applicable
reserve requirements) plus 6.75% or (ii) Royal Banks
alternate base rate plus 5.75%, as selected by the borrower, in
each case increasing by an additional 0.50% at the end of six
months following the closing date of the merger and at the end
of each subsequent three-month period for as long as the bridge
facility remains outstanding.
The rollover securities and the rollover loans will bear
interest, beginning on the initial maturity date, at a rate per
annum equal to the higher of (i) 0.50% above the rate of
interest per annum on the senior unsecured bridge facility as of
the initial maturity date, and (ii) (x) one month or three
month (as selected by borrower) LIBOR (as adjusted for all
applicable reserve requirements) plus 8.25% or (y) in the
case of rollover loans only, Royal Banks alternate base
rate plus 7.25%, as selected by the borrower, in each case,
increasing by an additional 0.50% at the end of each subsequent
three-month period for as long as the rollover securities or the
rollover loans are outstanding. Any holder of rollover
securities or rollover loans may elect, at its sole option, to
fix the interest rate per annum on its rollover securities or
rollover loans at the then effective rate of interest per annum
(in which case interest shall then be paid semi-annually in
arrears).
Notwithstanding the foregoing, in no event will the interest
rate per annum in respect of the senior unsecured bridge
facility, the rollover securities or the rollover loans be
(i) greater than the greater of (x) subject to
clause (ii) below, the average yield of the existing notes
of the borrower (outstanding prior to the closing of the merger)
at any time, as determined by reference to TRACE at the close of
business for the five trading days immediately preceding such
time, plus (1) if the senior notes rating from Moodys
Investor Services, Inc., or Moodys is greater than or
equal to B2 and from Standard & Poors Ratings
Group, a
107
division of The McGraw Hill Corporation, or S&P, is greater
than or equal to B, 3.25%, or (2) if the senior notes
rating from Moodys is less than B2 or from S&P, is
less than B, 3.75%, and (y) (1) if the senior notes rating
from Moodys is greater than or equal to B2 and from
S&P, is greater than or equal to than B, 13.50%, or
(2) if the senior notes rating from Moodys is less
than B2 or from S&P, is less than B, 14.00%, in each case
exclusive of any additional interest payable in the event of a
default, or (ii) less than 10.75% at any time.
Interest will be payable quarterly in arrears, provided that if
the interest rate is fixed as discussed above, semi-annually, in
arrears.
The senior unsecured bridge facility may be prepaid at any time
in whole or in part without premium or penalty (except breakage
costs, if any, related to prepayments not made on the last day
of the relevant interest period). In addition, the bridge
facility requires mandatory prepayments of outstanding
borrowings in an amount equal to 100% of the net cash proceeds
resulting from any of the following: (1) asset sales and
other asset dispositions by Allis-Chalmers or any of its
subsidiaries above a predetermined threshold; (2) the
issuance of equity by Allis-Chalmers or any of its subsidiaries;
(3) the issuance or incurrence of debt by Allis-Chalmers or
any of its subsidiaries; and (4) any Extraordinary
Receipts, as defined in the bridge facility.
The senior unsecured bridge facility (and the rollover
securities and rollover loans) will be pari passu with all
senior unsecured indebtedness of the borrower (whether existing
now or created in the future) and senior to all subordinated
indebtedness of the borrower. The senior unsecured bridge
facility will be guaranteed on a senior unsecured basis by all
domestic subsidiaries of the borrower, including the surviving
company in the merger and its subsidiaries.
The senior unsecured bridge facility is expected to contain
customary financial covenants. Other covenants contained in the
facility are expected to restrict, among other things, asset
dispositions, mergers and acquisitions, dividends, stock
repurchases and redemptions, other restricted payments,
indebtedness and guaranties, liens, investments and affiliate
transactions. Allis-Chalmers anticipates that the facility will
contain customary events of default. The bridge facility will
also contain registration rights with respect to rollover
securities that may be issued under the facility.
108
COMPARATIVE
MARKET PRICES AND DIVIDENDS
The table below sets forth, for the calendar quarters indicated,
the high and low intraday sale prices per share of
Allis-Chalmers common stock on the NYSE (for periods after
March 22, 2007) and on the American Stock Exchange (for
periods prior to March 22, 2007), and on Nasdaq for Bronco
common stock since its initial public offering on
August 16, 2005. No cash dividends have been declared on
shares of Allis-Chalmers common stock or Bronco Common Stock for
the calendar quarters indicated.
Allis-Chalmers present or future ability to pay dividends
is governed by (1) the provisions of the DGCL,
(2) Allis-Chalmers certificate of incorporation and
bylaws, and (3) Allis-Chalmers bank credit
facilities. Allis-Chalmers existing bank credit facilities
limit Allis-Chalmers ability to make restricted payments,
which include dividend payments. The future payment of cash
dividends, if any, on the Allis-Chalmers common stock is within
the discretion of the Allis-Chalmers board of directors and will
depend on Allis-Chalmers earnings, capital requirements,
financial condition and other relevant factors. The merger
agreement generally provides that Bronco may not declare, set
aside or pay any dividend prior to the effective time of the
merger or the termination of the merger agreement. In addition,
Broncos existing credit facility limits Broncos
ability to make restricted payments, which include dividend
payments.
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Allis-Chalmers Common
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Bronco Common
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Stock
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Stock
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Calendar Year
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High
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Low
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High
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Low
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2005 First Quarter
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$
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7.25
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$
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3.64
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$
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$
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Second Quarter
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6.00
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4.38
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Third Quarter
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14.70
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5.65
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30.00
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18.00
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Fourth Quarter
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13.75
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8.61
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29.10
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20.97
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2006 First Quarter
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18.50
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12.46
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32.00
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22.50
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Second Quarter
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17.62
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10.85
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29.57
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17.50
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Third Quarter
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19.33
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9.80
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21.41
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16.01
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Fourth Quarter
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25.55
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12.15
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19.69
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15.25
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2007 First Quarter
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23.61
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14.10
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17.20
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13.53
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Second Quarter
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24.39
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15.83
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19.21
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15.37
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Third Quarter
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28.10
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18.35
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16.67
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13.58
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Fourth Quarter
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19.49
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14.09
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16.04
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13.10
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2008 First Quarter
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15.21
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9.56
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16.25
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11.21
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Second Quarter(1)
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(1) |
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Reflects trading activity through June , 2008. |
109
The following table presents the closing prices for shares of
Allis-Chalmers common stock and Bronco common stock on
May 30, 2008, the last trading day before the public
announcement of the amendment to the initial agreement, and
June , 2008, the latest practicable trading day
before the date of this joint proxy statement/prospectus. The
following table also shows the merger consideration proposed for
each share of Bronco common stock, on a fully-diluted basis,
based on the closing price of Allis-Chalmers common stock on the
dates indicated. If the closing of the merger had been on the
dates indicated below, Bronco stockholders would have received
the merger consideration shown below for each share of Bronco
common stock held by them.
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Number of
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Value of
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Value of
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Shares of
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Allis-Chalmers
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Total Merger
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Cash
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Allis-Chalmers
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Common Stock
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Consideration
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Consideration
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Common Stock to be Issued
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to be Issued
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per Share
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per Share of
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per Share
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per Share
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of Bronco
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Allis-Chalmers
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Bronco
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Bronco
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of Bronco
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of Bronco Common
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Common
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Common Stock
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Common Stock
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Common Stock(1)
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Common Stock(1)
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Stock(1)
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Stock(1)
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May 30, 2008
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$
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17.17
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$
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18.18
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$
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7.46
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0.6284
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$
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10.79
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$
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18.25
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June , 2008
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$
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7.46
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0.6284
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(1) |
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Assumes 26,808,502 shares of Bronco common stock
outstanding. |
The value of the shares of Allis-Chalmers common stock that will
be issued in the merger will not be known at the time Bronco and
Allis-Chalmers stockholders grant their proxies or vote at their
respective stockholder meetings. The above tables show only
historical comparisons. Interested stockholders are encouraged
to call
1-877- -
for the value of the merger consideration per share of Bronco
common stock calculated as of the latest practicable date and to
review carefully the other information contained or incorporated
by reference in this joint proxy statement/prospectus in
considering whether to approve the applicable merger proposals.
See the section entitled Where You Can Find More
Information, beginning on page 116.
110
COMPARISON
OF RIGHTS OF ALLIS-CHALMERS AND BRONCO STOCKHOLDERS
As a result of the merger, the stockholders of Bronco may
become stockholders of Allis-Chalmers. As Allis-Chalmers
stockholders, their rights will be governed by the DGCL and by
Allis-Chalmers certificate of incorporation and bylaws.
The following is a summary of the material differences
between the rights of Allis-Chalmers stockholders and the rights
of Bronco stockholders under each companys respective
certificate of incorporation, as amended, and bylaws, as
amended. While Allis-Chalmers and Bronco believe that this
summary covers the material differences between the two, this
summary may not contain all of the information that is important
to you. This summary is not intended to be a complete discussion
of the respective rights of Allis-Chalmers and Bronco
stockholders and is qualified in its entirety by reference to
the DGCL and the various documents of Allis-Chalmers and Bronco
that are referred to in this summary. You should carefully read
this entire joint proxy statement/prospectus and the other
documents referred to in this joint proxy statement/prospectus
for a more complete understanding of the differences between
being a stockholder of Allis-Chalmers and being a stockholder of
Bronco. Allis-Chalmers has filed copies of its certificate of
incorporation, as amended, and bylaws, as amended, with the SEC,
which are exhibits to the registration statement of which this
joint proxy statement/prospectus is a part, and will send copies
of these documents to you upon your request. Bronco will also
send copies of its documents referred to herein to you upon your
request. See the section entitled Where You Can Find More
Information, beginning on page 116 of this joint
proxy statement/prospectus.
Authorized
Capital
Allis-Chalmers. The total number of authorized
shares of capital stock of Allis-Chalmers is 125,000,000,
consisting of 100,000,000 shares of common stock, par value
$0.01 per share, and 25,000,000 shares of preferred stock,
par value $0.01 per share.
Bronco. The total number of authorized shares
of capital stock of Bronco is 101,000,000, consisting of
100,000,000 shares of common stock, par value $0.01 per
share, and 1,000,000 shares of preferred stock, par value
$0.01 per share.
Number
and Election of Directors
Allis-Chalmers. The Allis-Chalmers board of
directors has ten members. The Allis-Chalmers bylaws provide
that the board of directors will consist of a number of
directors, not less than three nor more than 15. In addition,
the preferred stockholders may elect additional directors in
accordance with the Allis-Chalmers Certificate of
Designations, Preferences and Rights of the Series A 10%
Cumulative Convertible preferred Stock.
Upon the closing of Allis-Chalmers acquisition of DLS
Drilling, Logistics & Services Corporation, or DLS, in
August 2006, Allis-Chalmers entered into an investors rights
agreement, which provided, among other things, that the sellers
of DLS have the right to designate two nominees for election to
Allis-Chalmers board of directors. Effective upon the
closing of the DLS acquisition, Thomas O. Whitener, Jr. and
Jens H. Mortensen, Jr. resigned as directors of
Allis-Chalmers, and the DLS sellers (pursuant to their rights as
set forth in the investors rights agreement) designated
Alejandro P. Bulgheroni and Carlos A. Bulgheroni as nominees to
fill the board vacancies created by the resignation of
Mr. Whitener and Mr. Mortensen. In accordance with the
provisions of the investors rights agreement, the board
appointed Alejandro P. Bulgheroni and Carlos A. Bulgheroni to
the board upon receipt of the nominations.
Upon the closing of Allis-Chalmers acquisition of
substantially all of the assets of Oil & Gas Rental
Services, Inc., or OGR, in December 2006, Allis-Chalmers entered
into an investor rights agreement, which provided, among other
things, that OGR shall have the right to designate one nominee
for election to Allis-Chalmers board of directors.
Effective upon the closing of the acquisition, OGR designated
Burt A. Adams as a nominee to Allis-Chalmers board of
directors. In accordance with the provisions of the investor
rights agreement, the board appointed Burt A. Adams to the board
upon receipt of the nomination. Effective May 2, 2008, Mr.
Adams resigned as a member of the board of directors and OGR has
not designated another nominee.
111
Bronco. The Bronco board of directors has five
members. The Bronco certificate of incorporation provides that
the board of directors will consist of a number of directors,
not less than five nor more than nine, plus a number of
directors who may be elected by the holders of preferred stock.
Stockholder
Meetings and Provisions for Notices
Allis-Chalmers. The Allis-Chalmers bylaws
provide that a special meeting of stockholders may be called at
any time by a majority of the board of directors.
Bronco. The Bronco bylaws provide that, unless
otherwise provided by the DGCL, or the certificate of
incorporation, a special meeting of stockholders may be called
at any time only by the Chairman of the board of directors, the
Chief Executive Officer or by the Whole Board
pursuant to a resolution adopted by a majority of the board of
directors. The Whole Board is the total number of
directors if there are no vacancies.
Voting by
Stockholders
Allis-Chalmers. The Allis-Chalmers bylaws
state that unless otherwise provided by applicable law, the
certificate of incorporation, or the bylaws, all matters of
business presented at a shareholders meeting will be decided by
the affirmative vote of the majority of shares present in person
or represented by proxy at the meeting and entitled to vote on
that matter. The Allis-Chalmers bylaws state that the
stockholders entitled to vote for the election of directors
shall do so by a plurality vote.
Bronco. The Bronco bylaws state that, unless
otherwise provided by applicable law, the certificate of
incorporation, the bylaws, or applicable stock exchange rules,
all matters other than election of directors will be decided by
the affirmative vote of a majority of the shares present in
person or represented by proxy at the meeting and entitled to
vote on that matter. The Bronco bylaws state that subject to the
rights of the holders of preferred stock, directors will
generally be elected by a plurality of the votes cast.
Amendment
of Certificate of Incorporation
Allis-Chalmers. The Allis-Chalmers certificate
of incorporation and bylaws are silent with respect to amendment
of its certificate of incorporation. The DGCL provides that a
certificate of incorporation may be amended, so long as it is
amended to contain provisions that would be lawful and proper to
insert in an original certificate of incorporation. The
affirmative vote of a majority of the outstanding stock entitled
to vote, and a majority of the outstanding stock of each class
entitled to vote is required to amend a certificate of
incorporation. The holders of the outstanding shares of a class
shall be entitled to vote, even if otherwise restricted by the
certificate of incorporation, if the proposed amendment would
increase or decrease the aggregate number of authorized shares
of such class or adversely affect the rights, powers and
preferences of such class.
Bronco. The Bronco certificate of
incorporation provides that, in addition to any other vote
required by applicable law, the affirmative vote of
662/3%
of the voting power of all the outstanding shares of capital
stock generally entitled to vote in the election of directors,
voting together as a single class, is required to amend, modify
or repeal certain portions of the certificate of incorporation.
Specifically, this relates to those portions regarding
(1) the entitlement of the holders of common stock to
dividends and other distributions, (2) the power, number,
election, term and removal of directors, (3) the amendment
or alteration of the bylaws, (4) the meetings of
stockholders, or (5) the amendment of the certificate of
incorporation. Bronco reserves the right to amend any other
portion of the bylaws subject to provisions of DGCL, except the
rights to indemnification granted in the certificate of
incorporation unless required by law.
Amendment
of Bylaws
Allis-Chalmers. Under the Allis-Chalmers
bylaws and certificate of incorporation, the bylaws may be
amended or repealed and any new bylaws may be adopted by the
directors; provided that the amended,
112
repealed and adopted bylaws may be reinstated or amended by the
stockholders entitled to vote at the time for the election of
directors.
Bronco. Under the Bronco bylaws and
certificate of incorporation, the affirmative vote of a majority
of the Whole Board is required to adopt, amend,
alter, or repeal the bylaws. The Whole Board is the
total number of directors if there are no vacancies. The bylaws
also may be adopted, amended, altered or repealed by the
stockholders; provided, however, that in addition to any vote of
the holders of any class or series of capital stock required by
law or the certificate of incorporation, the affirmative vote of
the holders of at least
662/3%
of the voting power of the outstanding shares of capital stock
entitled to vote generally in the election of directors, voting
together as a single class, shall be required.
Exchange
Listing of Common Stock
Allis-Chalmers
common stock:
Allis-Chalmers common stock is listed on the NYSE under the
symbol ALY, and the rights of Allis-Chalmers
stockholders are determined in part by the NYSE listing
requirements.
Bronco
common stock:
Bronco common stock is listed on Nasdaq under the symbol
BRNC, and the rights of Bronco stockholders are
determined in part by Nasdaq listing requirements.
113
PROPOSALS BEING
SUBMITTED TO A VOTE OF
ALLIS-CHALMERS STOCKHOLDERS AT THE ALLIS-CHALMERS
MEETING
Allis-Chalmers
Proposal No. 1:
APPROVAL
OF THE ISSUANCE OF COMMON STOCK PURSUANT TO THE
MERGER
At the Allis-Chalmers Meeting, as previously described in this
joint proxy statement/prospectus,
Allis-Chalmers
stockholders will be asked to approve the issuance of
Allis-Chalmers common stock to the stockholders of Bronco
Drilling Company, Inc. in connection with the merger of Bronco
Drilling Company, Inc. with and into Elway Merger Sub, LLC, a
wholly-owned subsidiary of Allis-Chalmers, as set forth in the
Agreement and Plan of Merger, dated January 23, 2008, by
and among Allis-Chalmers, Bronco Drilling Company, Inc. and
Elway Merger Sub, Inc. (which prior to the merger will convert
to Elway Merger Sub, LLC), as amended by the First Amendment
thereto, dated as of June 1, 2008, copies of which are
attached as
Annexes A-1
and A-2,
respectively, to the joint proxy statement/prospectus.
The affirmative vote of the holders of a majority of votes cast
at the Allis-Chalmers Meeting at which a majority of the
outstanding shares of Allis-Chalmers common stock are present in
person or represented by proxy will be required for approval of
Allis-Chalmers Proposal No. 1. Abstentions and broker
non-votes will not be counted either in favor of or against
approval of Allis-Chalmers Proposal No. 1.
Board
Recommendation
The
Allis-Chalmers board of directors recommends that the
Allis-Chalmers stockholders vote FOR
Allis-Chalmers
Proposal No. 1 to approve the issuance of
Allis-Chalmers common stock pursuant to the merger agreement.
Proxies will be voted FOR approval unless a stockholder gives
other instructions on the proxy card.
Allis-Chalmers
Proposal No. 2:
APPROVAL
OF THE ADJOURNMENT OF THE ALLIS-CHALMERS MEETING
Description
of the Proposal
Allis-Chalmers is asking its stockholders to vote on a proposal
to adjourn the Allis-Chalmers Meeting, if necessary or
appropriate, in order to allow for the solicitation of
additional proxies.
Vote
Required
The affirmative vote of a majority of the votes cast on this
matter is required to adjourn the Allis-Chalmers Meeting, if
necessary or appropriate, in order to allow for the solicitation
of additional proxies. Abstentions and broker non-votes will not
be counted either in favor of or against approval of
Allis-Chalmers Proposal No. 2.
Board
Recommendation
The
Allis-Chalmers board of directors recommends that the
Allis-Chalmers stockholders vote FOR
Allis-Chalmers
Proposal No. 2 to approve the adjournment of the
Allis-Chalmers Meeting, if necessary or appropriate, to solicit
additional proxies. Proxies will be voted FOR adjournment unless
a stockholder gives other instructions on the proxy
card.
114
PROPOSALS BEING
SUBMITTED TO A VOTE OF
BRONCO STOCKHOLDERS AT THE BRONCO MEETING
Bronco
Proposal No. 1:
ADOPTION
OF THE MERGER AGREEMENT
At the Bronco Meeting, as previously described in this joint
proxy statement/prospectus, Bronco stockholders will be asked to
adopt the Agreement and Plan of Merger, dated as of
January 23, 2008, by and among Allis-Chalmers Energy Inc.,
Bronco Drilling Company, Inc. and Elway Merger Sub, Inc. (which
prior to the merger will convert to Elway Merger Sub, LLC), as
amended by the First Amendment thereto, dated as of June 1,
2008, copies of which are attached as
Annexes A-1
to A-2,
respectively, to the joint proxy statement/prospectus, pursuant
to which Bronco Drilling Company, Inc. will merge with and into
Elway Merger Sub, LLC, a wholly-owned subsidiary of
Allis-Chalmers Energy Inc.
Vote
Required
A majority of the outstanding shares of Bronco common stock
entitled to vote must be cast in favor of Bronco
Proposal No. 1 for it to be approved. Abstentions and
broker non-votes will have the same effect as a vote
against the Bronco Proposal No. 1.
Board
Recommendation
The
Bronco board of directors unanimously recommends that the Bronco
stockholders vote FOR Bronco Proposal No. 1 to adopt
the merger agreement. Proxies will be voted FOR adoption unless
a stockholder gives other instructions on the proxy
card.
Bronco
Proposal No. 2:
APPROVAL
OF THE ADJOURNMENT OF THE BRONCO MEETING
Description
of the Proposal
Bronco is asking its stockholders to vote on a proposal to
adjourn the Bronco Meeting, if necessary or appropriate, in
order to allow for the solicitation of additional proxies.
Vote
Required
The affirmative vote of a majority of the votes cast on this
matter is required to adjourn the Bronco Meeting, if necessary
or appropriate, in order to allow for the solicitation of
additional proxies. Abstentions and broker non-votes will not be
counted either in favor of or against approval of Bronco
Proposal No. 2.
Board
Recommendation
The
Bronco board of directors unanimously recommends that the Bronco
stockholders vote FOR Bronco Proposal No. 2 to approve
the adjournment of the Allis-Chalmers Meeting, if necessary or
appropriate, to solicit additional proxies. Proxies will be
voted FOR adjournment unless a stockholder gives other
instructions on the proxy card.
115
LEGAL
MATTERS
The validity of the shares of Allis-Chalmers common stock to be
issued in connection with the merger will be passed upon for
Allis-Chalmers by Andrews Kurth LLP, Houston, Texas. Certain
U.S. federal income tax consequences relating to the merger will
be passed upon for Bronco by Akin, Gump, Strauss, Hauer &
Feld, L.L.P., and for Allis-Chalmers by Andrews Kurth LLP.
EXPERTS
The consolidated financial statements and the related financial
statement schedule of Allis-Chalmers Energy Inc. as of
December 31, 2007 and 2006 and for each of the three years
in the period ended December 31, 2007 appearing in our
annual report on
Form 10-K
for the year ended December 31, 2007 have been audited by
UHY LLP, independent registered public accounting firm, as set
forth in their report thereon, and are incorporated by reference
herein in reliance upon such report given the authority of said
firm as experts in auditing and accounting.
The consolidated financial statements of Bronco and Bronco
managements assessment of the effectiveness of internal
control over financial reporting appearing in Broncos
Annual Report on Form 10-K for the year ended
December 31, 2007 and incorporated by reference herein have
been so incorporated by reference in reliance upon the reports
of Grant Thornton LLP, independent registered public
accountants, upon the authority of said firm as experts in
accounting and auditing.
WHERE YOU
CAN FIND MORE INFORMATION
Allis-Chalmers and Bronco each file reports and other
information with the SEC. Allis-Chalmers and Bronco stockholders
may read and copy these reports, statements or other information
filed by either
Allis-Chalmers
or Bronco at the SECs Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the Public Reference Room. The SEC
filings of Allis-Chalmers and Bronco are also available to the
public from commercial document retrieval services and at the
website maintained by the SEC at
http://www.sec.gov.
Allis-Chalmers stockholders and Bronco stockholders also may
obtain certain of these documents at Allis-Chalmers
website, www.alchenergy.com and at Broncos website,
www.broncodrill.com. Information contained on the
Allis-Chalmers and Bronco websites is expressly not incorporated
by reference into this joint proxy statement/prospectus.
Allis-Chalmers has filed a registration statement on
Form S-4,
as amended, to register with the SEC the shares of
Allis-Chalmers common stock to be issued to Bronco stockholders
pursuant to the merger. This joint proxy statement/prospectus
forms a part of that registration statement and constitutes a
prospectus of Allis-Chalmers, as well as a proxy statement of
Allis-Chalmers and Bronco for their respective meetings. As
allowed by SEC rules, this joint proxy statement/prospectus,
which is part of the registration statement, does not contain
all the information Allis-Chalmers and Bronco stockholders can
find in the registration statement or the exhibits to the
registration statement. For further information about
Allis-Chalmers or Bronco, please refer to the registration
statement including the exhibits.
The SEC allows Allis-Chalmers and Bronco to incorporate by
reference information into this joint proxy
statement/prospectus. This means that Allis-Chalmers and Bronco
can disclose important information to Allis-Chalmers and Bronco
stockholders by referring them to another document filed
separately with the SEC. The information incorporated by
reference is considered to be a part of this joint proxy
statement/prospectus, except for any information that is
superseded by information that is included directly in this
joint proxy statement/prospectus or incorporated by reference
subsequent to the date of this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference
the documents listed below that Allis-Chalmers and Bronco have
previously filed with the SEC (other than information furnished
pursuant to
116
Item 2.02 or Item 7.01 of a Current Report on
Form 8-K).
They contain important information about Allis-Chalmers and
Bronco and the financial condition of each company.
We incorporate by reference into this prospectus the following
documents or information filed with the SEC (other than, in each
case, documents or information deemed to have been furnished and
not filed in accordance with SEC rules):
Allis-Chalmers
Filings (File
No. 001-02199)
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Annual Report on
Form 10-K
for the year ended December 31, 2007 (filed on
March 7, 2008), as amended by Amendment No. 1 on
Form 10-K/A (filed April 29, 2008),
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Quarterly Report on Form 10-Q for the quarter ended
March 31, 2008 (filed May 8, 2008),
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Current Reports on
Form 8-K
filed on January 24, 2008, January 31, 2008,
February 6, 2008, February 25, 2008, April 3,
2008, May 1, 2008, May 5, 2008 and June 2, 2008,
and
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the description of Allis-Chalmers common stock set forth in the
registration statement on
Form 8-A
filed August 14, 1992 pursuant to Section 12(b) of the
Exchange Act, including any amendment or report filed with the
SEC for the purpose of updating this description.
|
Bronco
Filings (File
No. 001-51471)
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Annual Report on
Form 10-K
for the year ended December 31, 2007 (filed on
March 17, 2008), as amended by Amendment No. 1 on
Form 10-K/A (filed April 29, 2008),
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Quarterly Report on Form 10-Q for the quarter ended
March 31, 2008 (filed May 12, 2008), and
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Current Reports on
Form 8-K
filed on January 9, 2008, January 24, 2008 and
June 2, 2008.
|
In addition, Allis-Chalmers and Bronco incorporate by reference
additional documents that they may file or furnish with the SEC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act between the date of this joint proxy
statement/prospectus and the date of the meetings (other than
information furnished pursuant to Item 2.02 or
Item 7.01 of any Current Report on
Form 8-K,
unless expressly stated otherwise therein).
Allis-Chalmers and Bronco also incorporate by reference the
following Annexes attached to this joint proxy
statement/prospectus:
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the initial merger agreement attached as
Annex A-1,
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the amendment to the initial merger agreement attached as Annex
A-2,
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the opinion of RBC attached as Annex B,
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the opinion of Johnson Rice attached hereto as
Annex C, and
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Section 262 of the DGCL attached hereto as Annex D.
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Allis-Chalmers has supplied all information contained in or
incorporated by reference into this joint proxy
statement/prospectus relating to Allis-Chalmers and Merger Sub,
and Bronco has supplied all information contained in this joint
proxy statement/prospectus relating to Bronco.
Documents incorporated by reference are available to
Allis-Chalmers stockholders and Bronco stockholders without
charge upon written or oral request, excluding any exhibits to
those documents, unless the exhibit is specifically incorporated
by reference as an exhibit in this joint proxy
statement/prospectus. Allis-Chalmers
117
stockholders and Bronco stockholders can obtain any of these
documents by requesting them in writing or by telephone from the
appropriate company at:
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Allis-Chalmers Energy Inc.
5075 Westheimer, Suite 890
Houston, Texas 77056
Attention: Investor Relations
Telephone number:
(713) 369-0550
www.alchenergy.com
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Bronco Drilling Company, Inc.
16217 North May Avenue
Edmond, Oklahoma 73013
Attention: Investor Relations
Telephone number: (405) 242-4444
www.broncodrill.com
|
In order for Allis-Chalmers stockholders and Bronco stockholders
to receive timely delivery of the documents in advance of the
Bronco Meeting, Allis-Chalmers or Bronco, as applicable, should
receive requests for documents no later
than ,
2008.
Allis-Chalmers and Bronco have not authorized anyone to give any
information or make any representation about the merger or their
companies that is different from, or in addition to, that
contained in this joint proxy statement/prospectus or in any of
the materials that are incorporated into this joint proxy
statement/prospectus. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are
in a jurisdiction where offers to exchange or sell, or
solicitations of offers to exchange or purchase, the securities
offered by this joint proxy statement/prospectus or the
solicitation of proxies is unlawful, or if you are a person to
whom it is unlawful to direct these types of activities, then
the offer presented in this joint proxy statement/prospectus
does not extend to you. The information contained in this joint
proxy statement/prospectus is accurate only as of the date of
this joint proxy statement/prospectus unless the information
specifically indicates that another date applies.
Stockholder
Proposals for the Allis-Chalmers 2008 Annual Meeting
Rule 14a-8
under the Exchange Act addresses when a company must include a
stockholders proposal in its proxy statement and identify
the proposal in its form of proxy when the company holds an
annual or special meeting of stockholders. Any stockholder who
wishes to submit a proposal to be included in Allis-Chalmers
proxy statement and form of proxy relating to the 2008 annual
stockholders meeting must have submitted the proposal to
Allis-Chalmers on or before January 1, 2008. Such proposal
must meet all of the requirements of the SEC to be eligible for
inclusion in Allis-Chalmers 2008 proxy materials. Any
stockholder who wishes to submit a proposal for Allis-Chalmers
2008 annual stockholders meeting that is not to be included in
Allis-Chalmers proxy statement and form of proxy must have
submitted the proposal to Allis-Chalmers on or before
March 22, 2008.
All notices should be directed to Corporate Secretary,
Allis-Chalmers Energy Inc., 5075 Westheimer,
Suite 890, Houston, Texas 77056. Under current SEC rules,
Allis-Chalmers is not required to include in its proxy statement
any director nominated by a stockholder using this process. If
Allis-Chalmers chooses not to include a nominee, the stockholder
will be required to distribute its own proxy materials in
connection with its solicitation of proxies with respect to that
nominee.
Bronco
2008 Annual Stockholder Meeting and Stockholder
Proposals
Bronco reserves the right to postpone or cancel its 2008 Annual
Meeting. If the 2008 Annual Meeting is held, Bronco stockholders
may submit proposals on matters appropriate for stockholder
action (including any election of a director) at meetings of
Bronco stockholders in accordance with
Rule 14a-8
under the Exchange Act. If a Bronco stockholder wants to make
such a proposal that will not be included in the proxy statement
pursuant to
Rule 14a-8
at the 2008 Annual Meeting of Bronco stockholders, Broncos
bylaws require that the proposal must be received at the
principal executive office of Bronco, at Bronco Drilling
Company, Inc., 16217 North May Avenue, Edmond, Oklahoma 73013,
not later than the close of business on the 90th day nor
earlier than the opening of business on the 120th day
before the anniversary date of the immediately proceeding annual
meeting of stockholders; provided however, that in the event
that the annual meeting is called for a date that is not within
45 days before or after such anniversary date, notice by
the stockholder must be received not earlier than the opening of
business on the 120th day before the meeting and not later
than the later of (x) the close of business on the
90th day before the meeting or (y) the close of
business on the 10th day following the day on which public
announcement of the date of the annual meeting is first made by
Bronco.
118
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined financial statements
of Allis-Chalmers have been prepared using the purchase method
of accounting under accounting principles generally accepted in
the United States of America, and are based on the audited
historical consolidated financial statements of each of
Allis-Chalmers and Bronco which include, in the opinion of the
management for their respective company, all adjustments
necessary to present fairly the results as of and for such
periods. The historical financial information has been adjusted
to give effect to pro forma items that are: (1) directly
attributable to the acquisition, (2) factually supportable,
and (3) with respect to the statement of operations,
expected to have a continuing effect on the consolidated
results. However, the unaudited pro forma condensed combined
financial statements do not reflect the effect of asset
dispositions, if any, or revenue, cost or other operating
synergies that may result from the merger, nor do they reflect
the effects of any financing, liquidity or other balance sheet
repositioning that may be undertaken (except for the financing
directly related to the merger) in connection with or subsequent
to the merger. The unaudited pro forma condensed combined
balance sheet was prepared as if the merger had occurred as of
March 31, 2008. The unaudited pro forma condensed combined
statement of operations was prepared as if the merger had
occurred as of January 1, 2007. These unaudited pro forma
condensed combined financial statements should be read in
conjunction with the audited historical financial statements of
Allis-Chalmers and Bronco and the related notes which are
incorporated by reference into this joint proxy
statement/prospectus. See Where You Can Find More
Information, beginning on page 116.
The unaudited pro forma condensed combined financial statements
reflect Allis-Chalmers as the acquirer for
accounting purposes. References to we and
our refer to Allis-Chalmers. Accordingly,
consideration paid by Allis-Chalmers to consummate the
acquisition will be allocated to Broncos assets and
liabilities based upon their estimated fair values as of the
date of the consummation of the acquisition. This allocation is
dependent upon certain valuations and other assessments that
have not progressed to a stage where there is sufficient
information to make a definitive allocation. The notes to the
unaudited pro forma condensed combined financial statements
provide a more detailed discussion of how such adjustments were
derived and presented in the unaudited pro forma condensed
combined financial statements. The allocation of the purchase
price is dependent upon a final determination of the fair value
of Broncos assets and liabilities as of the date of the
consummation of the acquisition. Accordingly, the pro forma
purchase price adjustments are preliminary, subject to future
adjustments and have been made solely for the purpose of
providing the unaudited pro forma condensed combined financial
information presented below. Final determinations of fair market
value may differ materially from those presented herein.
The pro forma results of operations do not include any
anticipated cost reductions from the elimination of redundant
public company expenses that management believes will be
specifically identified during the integration planning process
or after consummation of the acquisition.
Certain information normally included in the financial
statements prepared in accordance with generally accepted
accounting principles, or GAAP, has been condensed or omitted in
accordance with the rules and regulations of the SEC. The
unaudited pro forma condensed combined financial statements and
accompanying notes should be read in conjunction with the
historical financial statements and related notes thereto
incorporated herein. The unaudited pro forma condensed combined
financial statements do not purport to be indicative of the
results of operations or financial position that we actually
would have achieved if the transactions had been consummated on
the date indicated, nor do they project our results of
operations or financial position of any future period or date.
119
The estimated purchase price has been preliminarily assigned to
the net tangible and intangible assets acquired and liabilities
assumed as follows (in thousands):
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Bronco Historical
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Amounts as of
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Purchase
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Preliminary
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March 31,
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Price
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Estimated
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2008
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Adjustments
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Fair Value
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Current assets
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$
|
69,062
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$
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$
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69,062
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Property and equipment
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404,414
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13,452
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|
417,866
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Goodwill
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23,909
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71,569
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95,478
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Other assets
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88,467
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|
10,810
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|
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|
99,277
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Current liabilities
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(102,257
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)
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(102,257
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)
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Long-term debt, net of current maturities
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(5,333
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)
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(5,333
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)
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Deferred income tax liabilities
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(72,535
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)
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5,535
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(67,000
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$
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405,727
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$
|
101,366
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|
$
|
507,093
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Our unaudited pro forma condensed combined balance sheet as of
March 31, 2008 reflects the following transactions as if
they occurred on March 31, 2008:
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our pending merger with Bronco Drilling Company, Inc., or
Bronco, for $200.0 million in cash and 16,846,500 shares of
our common stock with a value of approximately
$279.0 million. The value of our common stock to be issued
in the merger is based on the average trading price of our
common stock on the day before, the day of and the day after the
announcement of the amended merger agreement, or $16.56 per
share. The acquisition will be funded with cash on hand and
additional debt financing through a $350.0 million senior
unsecured bridge facility. The pro forma financial statements
provide for borrowings of approximately $296.2 million
under the bridge facility. The following table summarizes the
preliminary allocation of the purchase price to the estimated
fair value of the assets acquired and liabilities assumed (in
thousands):
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Current assets
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|
$
|
69,062
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Property and equipment
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417,866
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Intangible assets including goodwill
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109,278
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Other long-term assets
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85,477
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Total assets acquired
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681,683
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Current liabilities
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102,257
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Long-term debt
|
|
|
5,333
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Deferred income tax liabilities
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|
|
67,000
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|
|
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Total liabilities assumed
|
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|
174,590
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|
|
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Net assets acquired
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$
|
507,093
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We estimate that the costs associated with the merger (other
than the merger consideration) will be approximately
$28.1 million. Those costs include approximately
$11.4 million of transaction costs, $13.2 million of
severance costs to Bronco executives and $3.5 million
related to other acquisition costs. Broncos historical
property and equipment values are estimated to increase by
approximately $13.5 million based on third-party valuations
and intangible assets are estimated to increase by
$10.8 million.
Our unaudited pro forma condensed combined statement of
operations for the three months ended March 31, 2008 and
the year ended December 31, 2007 reflects the following
transactions as if such transactions occurred on January 1,
2007:
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our acquisition of Bronco for $200.0 million in cash and
16,846,500 shares of our common stock; and
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our borrowing of approximately $296.2 million under the
$350.0 million under the bridge facility.
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120
ALLIS-CHALMERS
ENERGY INC. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF
MARCH 31, 2008
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Pro Forma
|
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Historical
|
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Purchase
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Financing
|
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Allis-Chalmers
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Bronco
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Adjustments
|
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Adjustments
|
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Combined
|
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(Amounts in thousands)
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ASSETS
|
Cash and cash equivalents
|
|
$
|
10,247
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|
|
$
|
3,034
|
|
|
$
|
(299,526
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)A
|
|
$
|
291,245
|
F
|
|
$
|
5,000
|
|
Trade receivables, net
|
|
|
140,133
|
|
|
|
58,752
|
|
|
|
|
|
|
|
|
|
|
|
198,885
|
|
Inventories
|
|
|
33,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,019
|
|
Prepaids and other
|
|
|
11,669
|
|
|
|
7,276
|
|
|
|
|
|
|
|
|
|
|
|
18,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
195,068
|
|
|
|
69,062
|
|
|
|
(299,526
|
)
|
|
|
291,245
|
|
|
|
255,849
|
|
Property and equipment, net
|
|
|
650,485
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|
|
|
404,414
|
|
|
|
13,452
|
B
|
|
|
|
|
|
|
1,068,351
|
|
Goodwill
|
|
|
138,398
|
|
|
|
23,909
|
|
|
|
71,569
|
C
|
|
|
|
|
|
|
233,876
|
|
Other intangibles, net
|
|
|
34,064
|
|
|
|
2,990
|
|
|
|
10,810
|
C
|
|
|
|
|
|
|
47,864
|
|
Note receivable, less current maturities
|
|
|
40,000
|
|
|
|
5,855
|
|
|
|
|
|
|
|
|
|
|
|
45,855
|
|
Investments
|
|
|
|
|
|
|
76,820
|
|
|
|
|
|
|
|
|
|
|
|
76,820
|
|
Debt issuance costs, net
|
|
|
13,730
|
|
|
|
|
|
|
|
|
|
|
|
4,943
|
F
|
|
|
18,673
|
|
Other assets
|
|
|
27,819
|
|
|
|
2,802
|
|
|
|
|
|
|
|
|
|
|
|
30,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,099,564
|
|
|
$
|
585,852
|
|
|
$
|
(203,695
|
)
|
|
$
|
296,188
|
|
|
$
|
1,777,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current maturities of long-term debt
|
|
$
|
6,232
|
|
|
$
|
66,078
|
|
|
$
|
(66,078
|
)A
|
|
$
|
|
|
|
$
|
6,232
|
|
Trade accounts payable
|
|
|
38,987
|
|
|
|
18,964
|
|
|
|
|
|
|
|
|
|
|
|
57,951
|
|
Accrued employee benefits
|
|
|
15,847
|
|
|
|
3,773
|
|
|
|
|
|
|
|
|
|
|
|
19,620
|
|
Accrued interest
|
|
|
6,891
|
|
|
|
933
|
|
|
|
|
|
|
|
|
|
|
|
7,824
|
|
Accrued expenses
|
|
|
31,488
|
|
|
|
12,509
|
|
|
|
|
|
|
|
|
|
|
|
43,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
99,445
|
|
|
|
102,257
|
|
|
|
(66,078
|
)
|
|
|
|
|
|
|
135,624
|
|
Long-term debt, net of current maturities
|
|
|
539,852
|
|
|
|
5,333
|
|
|
|
(5,333
|
)A
|
|
|
296,188
|
F
|
|
|
836,040
|
|
Deferred income taxes
|
|
|
32,054
|
|
|
|
72,535
|
|
|
|
(5,535
|
)D
|
|
|
|
|
|
|
99,054
|
|
Other long-term liabilities
|
|
|
3,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
674,512
|
|
|
|
180,125
|
|
|
|
(76,946
|
)
|
|
|
296,188
|
|
|
|
1,073,879
|
|
|
STOCKHOLDERS EQUITY
|
Common stock
|
|
|
351
|
|
|
|
263
|
|
|
|
(95
|
)E
|
|
|
|
|
|
|
519
|
|
Capital in excess of par value
|
|
|
328,768
|
|
|
|
299,344
|
|
|
|
(20,534
|
)E
|
|
|
|
|
|
|
607,578
|
|
Retained earnings
|
|
|
95,933
|
|
|
|
106,120
|
|
|
|
(106,120
|
)E
|
|
|
|
|
|
|
95,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
|
425,052
|
|
|
|
405,727
|
|
|
|
(126,749
|
)
|
|
|
|
|
|
|
704,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
1,099,564
|
|
|
$
|
585,852
|
|
|
$
|
(203,695
|
)
|
|
$
|
296,188
|
|
|
$
|
1,777,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited pro forma condensed combined financial
statements.
121
ALLIS-CHALMERS
ENERGY INC. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE
THREE MONTHS ENDED MARCH 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
Historical
|
|
|
Purchase
|
|
|
Financing
|
|
|
|
|
|
|
Allis-Chalmers
|
|
|
Bronco
|
|
|
Adjustments
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
$
|
153,182
|
|
|
$
|
67,003
|
|
|
|
|
|
|
$
|
|
|
|
$
|
220,185
|
|
Cost of revenues
|
|
|
113,700
|
|
|
|
49,815
|
|
|
|
(5,525
|
)G
|
|
|
|
|
|
|
157,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
39,482
|
|
|
|
17,188
|
|
|
|
5,525
|
|
|
|
|
|
|
|
62,195
|
|
General and administrative expense
|
|
|
15,900
|
|
|
|
5,982
|
|
|
|
68
|
H
|
|
|
|
|
|
|
21,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
23,582
|
|
|
|
11,206
|
|
|
|
5,457
|
|
|
|
|
|
|
|
40,245
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,152
|
|
|
|
734
|
|
|
|
|
|
|
|
|
|
|
|
1,886
|
|
Interest expense
|
|
|
(12,041
|
)
|
|
|
(1,226
|
)
|
|
|
|
|
|
|
(6,981
|
)K
|
|
|
(20,248
|
)
|
Other
|
|
|
107
|
|
|
|
1,986
|
|
|
|
|
|
|
|
|
|
|
|
2,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
12,800
|
|
|
|
12,700
|
|
|
|
5,457
|
|
|
|
(6,981
|
)
|
|
|
23,976
|
|
Income taxes
|
|
|
(4,750
|
)
|
|
|
(4,552
|
)
|
|
|
(1,956
|
)I
|
|
|
2,502
|
I
|
|
|
(8,756
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
8,050
|
|
|
$
|
8,148
|
|
|
$
|
3,501
|
|
|
$
|
(4,479
|
)
|
|
$
|
15,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.23
|
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.23
|
|
|
$
|
0.31
|
|
|
|
|
|
|
|
|
|
|
$
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
34,837
|
|
|
|
26,265
|
|
|
|
(9,418
|
)J
|
|
|
|
|
|
|
51,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
35,173
|
|
|
|
26,287
|
|
|
|
(9,440
|
)J
|
|
|
|
|
|
|
52,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited pro forma condensed combined financial
statements.
122
ALLIS-CHALMERS
ENERGY INC. AND SUBSIDIARIES
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE
YEAR ENDED DECEMBER 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
Historical
|
|
|
Purchase
|
|
|
Financing
|
|
|
|
|
|
|
Allis-Chalmers
|
|
|
Bronco
|
|
|
Adjustments
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenues
|
|
$
|
570,967
|
|
|
$
|
298,952
|
|
|
|
|
|
|
$
|
|
|
|
$
|
869,919
|
|
Cost of revenues
|
|
|
392,364
|
|
|
|
211,418
|
|
|
|
(18,648
|
)G
|
|
|
|
|
|
|
585,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
178,603
|
|
|
|
87,534
|
|
|
|
18,648
|
|
|
|
|
|
|
|
284,785
|
|
General and administrative expense
|
|
|
62,689
|
|
|
|
23,609
|
|
|
|
281
|
H
|
|
|
|
|
|
|
86,579
|
|
Gain on asset sales
|
|
|
(8,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
124,782
|
|
|
|
63,925
|
|
|
|
18,367
|
|
|
|
|
|
|
|
207,074
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
3,259
|
|
|
|
1,239
|
|
|
|
|
|
|
|
|
|
|
|
4,498
|
|
Interest expense
|
|
|
(49,534
|
)
|
|
|
(4,762
|
)
|
|
|
|
|
|
|
(28,067
|
)K
|
|
|
(82,363
|
)
|
Other
|
|
|
776
|
|
|
|
294
|
|
|
|
|
|
|
|
|
|
|
|
1,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
79,283
|
|
|
|
60,696
|
|
|
|
18,367
|
|
|
|
(28,067
|
)
|
|
|
130,279
|
|
Income taxes
|
|
|
(28,843
|
)
|
|
|
(23,104
|
)
|
|
|
(6,992
|
)I
|
|
|
10,684
|
I
|
|
|
(48,254
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
50,440
|
|
|
$
|
37,592
|
|
|
$
|
11,375
|
|
|
$
|
(17,383
|
)
|
|
$
|
82,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.48
|
|
|
$
|
1.45
|
|
|
|
|
|
|
|
|
|
|
$
|
1.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.45
|
|
|
$
|
1.44
|
|
|
|
|
|
|
|
|
|
|
$
|
1.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
34,158
|
|
|
|
25,996
|
|
|
|
(9,149
|
)J
|
|
|
|
|
|
|
51,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
34,701
|
|
|
|
26,101
|
|
|
|
(9,254
|
)J
|
|
|
|
|
|
|
51,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited pro forma condensed combined financial
statements.
123
ALLIS-CHALMERS ENERGY INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
Certain reclassifications, which are not material to the pro
forma presentation, have been made to Broncos historical
financial statements to be in conformity with our financial
statement presentation.
The following pro forma adjustments have been made to the
historical financial statements:
A) Reflects the cash needed to complete the Bronco merger,
including a cash payment of $200.0 million to the
stockholders of Bronco, the repayment of Broncos
$71.4 million of borrowings under existing credit
facilities, the payment of $11.4 million of transaction
costs, the payment of $3.5 million related to other
acquisition costs and the payment of $13.2 million for
severance costs under existing employment contracts of Bronco.
B) Reflects the
step-up in
the basis of the fixed assets as a result of the Bronco
acquisition to the estimated fair market value.
C) Reflects the estimated allocation of the Bronco purchase
price to goodwill and other intangibles such as customer lists.
D) Reflects the deferred taxes related to the difference
between the
step-up
basis of the fixed assets as compared to the tax basis of those
assets.
E) Reflects the elimination of Bronco stockholders
equity and the issuance of 16,846,500 shares of common
stock valued at approximately $279.0 million in the Bronco
acquisition. The common stock to be issued to the stockholders
of Bronco is valued at $16.56 per share, which was the
average of the closing sale prices of our common stock on the
day before, the day of and the day after the announcement of the
amended merger agreement.
F) Reflects the proceeds from the $350.0 million
bridge facility less the debt issuance costs. These proceeds
will be used to fund the cash component of the Bronco merger
consideration, repayment of Broncos existing long-term
debt and payment of transaction and severance costs. For
purposes of these pro forma financial statements, only
$296.2 million was drawn on the bridge facility.
G) Reflects the decrease in depreciation expense as a
result of the application of a longer asset life to the drilling
rigs acquired from Bronco, offset by an increase in depreciation
due to the
step-up in
basis of fixed assets.
H) Reflects the increase in amortization due to the
increase in other intangible assets in connection with the
acquisition of Bronco.
I) Reflects a tax rate which represents the approximate
effective domestic rate for both Allis-Chalmers and Bronco.
J) Reflects the elimination of Broncos outstanding
common stock, offset by the issuance of common stock to the
Bronco stockholders.
K) Reflects the amortization of the financing fees related
to the funding of the Bronco acquisition and interest expense at
an assumed average interest rate of 10.75% per annum on the
amount drawn on the $350.0 million bridge facility, less
interest incurred by Bronco on its credit facility, the
refinancing of which with the bridge facility has been assumed.
124
ANNEX
A-1
AGREEMENT
AND PLAN OF MERGER
BY AND AMONG
ALLIS-CHALMERS ENERGY INC.,
BRONCO DRILLING COMPANY, INC.
AND
ELWAY MERGER SUB, INC.
Dated as of January 23, 2008
A-1-1
TABLE OF
CONTENTS
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Page
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Article 1
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Definitions
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A-1-5
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Section 1.1
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Defined Terms
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A-1-5
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Section 1.2
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References, Construction and Titles
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A-1-14
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Article 2
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The Merger
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A-1-14
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Section 2.1
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The Merger
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A-1-14
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Section 2.2
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Effect of the Merger
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A-1-15
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Section 2.3
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Governing Instruments, Directors and Officers of the Surviving
Corporation
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A-1-15
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Section 2.4
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Effect on Equity Securities
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A-1-15
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Section 2.5
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Exchange of Certificates
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A-1-17
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Section 2.6
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Closing
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A-1-20
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Section 2.7
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Effective Time of the Merger
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A-1-20
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Section 2.8
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Taking of Necessary Action; Further Action
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A-1-20
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Section 2.9
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Withholding
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A-1-20
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Article 3
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Representations and Warranties of the Company
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A-1-20
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Section 3.1
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Corporate Existence; Good Standing; Corporate Authority
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A-1-21
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Section 3.2
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Authorization, Validity and Effect of Agreements
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A-1-21
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Section 3.3
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Capitalization
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A-1-21
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Section 3.4
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Subsidiaries
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A-1-22
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Section 3.5
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Compliance with Laws; Permits
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A-1-22
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Section 3.6
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No Violations; Consents
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A-1-23
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Section 3.7
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SEC Documents
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A-1-23
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Section 3.8
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Litigation
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A-1-25
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Section 3.9
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Absence of Company Material Adverse Effect and Certain Other
Changes
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A-1-25
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Section 3.10
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Taxes
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A-1-25
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Section 3.11
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Employee Benefit Plans
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A-1-26
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Section 3.12
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Labor Matters
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A-1-28
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Section 3.13
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Environmental Matters
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A-1-29
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Section 3.14
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Intellectual Property
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A-1-29
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Section 3.15
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Insurance
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A-1-29
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Section 3.16
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No Brokers
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A-1-30
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Section 3.17
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Opinion of Financial Advisor
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A-1-30
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Section 3.18
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Parent Share Ownership
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A-1-30
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Section 3.19
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Vote Required; Board of Director Approval
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A-1-30
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Section 3.20
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Ownership and Condition of Drilling Rigs
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A-1-30
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Section 3.21
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Undisclosed Liabilities
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A-1-31
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Section 3.22
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Certain Contracts
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A-1-31
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Section 3.23
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State Takeover Statutes
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A-1-31
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Section 3.24
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Improper Payments
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A-1-32
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Section 3.26
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No Other Representations or Warranties
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A-1-32
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A-1-2
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Page
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Article 4
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Representations and Warranties of Parent and Merger Sub
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A-1-32
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Section 4.1
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Corporate Existence; Good Standing; Corporate Authority
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A-1-32
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Section 4.2
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Authorization, Validity and Effect of Agreements
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A-1-33
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Section 4.3
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Capitalization
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A-1-33
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Section 4.4
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Subsidiaries
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A-1-34
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Section 4.5
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Compliance with Laws; Permits
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A-1-34
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Section 4.6
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No Violations; Consents
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A-1-35
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Section 4.7
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SEC Documents
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A-1-36
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Section 4.8
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Litigation
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A-1-37
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Section 4.9
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Absence of Certain Changes
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A-1-37
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Section 4.10
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Taxes
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A-1-37
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Section 4.11
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Employee Benefit Plans
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A-1-38
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Section 4.12
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Labor Matters
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A-1-40
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Section 4.13
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Environmental Matters
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A-1-41
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Section 4.14
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Intellectual Property
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A-1-41
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Section 4.15
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Insurance
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A-1-42
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Section 4.16
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No Brokers
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A-1-42
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Section 4.17
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Opinion of Financial Advisor
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A-1-42
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Section 4.18
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Company Share Ownership
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A-1-42
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Section 4.19
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Vote Required; Board of Director Approval
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A-1-42
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Section 4.20
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Ownership and Condition of Assets
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A-1-42
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Section 4.21
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Undisclosed Liabilities
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A-1-43
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Section 4.22
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Certain Contracts
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A-1-43
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Section 4.23
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State Takeover Statutes
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A-1-43
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Section 4.24
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Improper Payments
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A-1-44
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Section 4.25
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Financing
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A-1-44
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Section 4.26
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Solvency
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A-1-44
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Section 4.27
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No Other Representations or Warranties
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A-1-44
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Article 5
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Covenants
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A-1-45
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Section 5.1
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Business in Ordinary Course
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A-1-45
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Section 5.2
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Conduct of Business Pending Closing
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A-1-45
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Section 5.3
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Access to Assets, Personnel and Information
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A-1-48
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Section 5.4
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No Solicitation by the Company
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A-1-49
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Section 5.5
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Stockholders Meetings
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A-1-52
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Section 5.6
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Registration Statement and Proxy Statement/Prospectus
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A-1-52
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Section 5.7
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NYSE Listing
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A-1-54
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A-1-3
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Page
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Section 5.8
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Additional Arrangements
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A-1-54
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Section 5.9
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Section 16
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A-1-55
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Section 5.10
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Public Announcements
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A-1-55
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Section 5.11
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Notification of Certain Matters
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A-1-56
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Section 5.12
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Payment of Expenses
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A-1-56
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Section 5.13
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Indemnification and Insurance
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A-1-56
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Section 5.14
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Employee Matters
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A-1-58
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Section 5.15
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Company Board and Executive Officers
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A-1-59
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Section 5.16
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Tax Matters
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A-1-59
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Section 5.17
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Continuing Obligation to Call, Hold and Convene
Stockholders Meeting; No Other Vote
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A-1-59
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Section 5.18
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Additional Instruments and Agreements
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A-1-59
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Section 5.19
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Control of Other Partys Business
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A-1-59
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Section 5.20
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Agreements of Executive Officers and Directors
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A-1-59
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Article 6
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Conditions
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A-1-60
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Section 6.1
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Conditions to Each Partys Obligation to Effect the Merger
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A-1-60
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Section 6.2
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Conditions to Obligations of Parent and Merger Sub
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A-1-61
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Section 6.3
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Conditions to Obligation of the Company
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A-1-61
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Article 7
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Termination
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A-1-62
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Section 7.1
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Termination Rights
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A-1-62
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Section 7.2
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Effect of Termination
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A-1-64
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Section 7.3
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Fees and Expenses
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A-1-64
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Article 8
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Miscellaneous
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A-1-65
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Section 8.1
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Nonsurvival of Representations and Warranties
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A-1-65
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Section 8.2
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Amendment
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A-1-65
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Section 8.3
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Notices
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A-1-65
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Section 8.4
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Counterparts
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A-1-66
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Section 8.5
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Severability
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A-1-66
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Section 8.6
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Entire Agreement; No Third Party Beneficiaries
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A-1-66
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Section 8.7
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Applicable Law
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A-1-66
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Section 8.8
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Assignment
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A-1-66
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Section 8.9
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Waivers
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A-1-66
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Section 8.10
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Confidentiality Agreement
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A-1-67
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Section 8.11
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Incorporation
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A-1-67
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Section 8.12
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Specific Performance; Remedies
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A-1-67
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Section 8.13
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Waiver of Jury Trial
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A-1-67
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A-1-4
AGREEMENT
AND PLAN OF MERGER
This Agreement and Plan of Merger (as amended, supplemented or
modified from time to time, this Agreement),
dated as of January 23, 2008, is by and among
ALLIS-CHALMERS ENERGY INC., a Delaware corporation
(Parent), ELWAY MERGER SUB, INC., a Delaware
corporation and a direct, wholly owned subsidiary of Parent
(Merger Sub), and BRONCO DRILLING COMPANY,
INC., a Delaware corporation (the Company).
Recitals
WHEREAS, the boards of directors of each of Parent,
Merger Sub and the Company (each a Party, and
collectively, the Parties) have approved this
Agreement and the merger of Merger Sub with and into the
Company, with the Company continuing as the surviving
corporation, upon the terms and subject to the conditions of
this Agreement and the Delaware General Corporation Law, as
amended (the DGCL);
WHEREAS, the boards of directors of each of Parent,
Merger Sub and the Company have determined that the Merger (as
defined below) and this Agreement and the transactions
contemplated hereby are advisable and in the best interests of
their respective companies and stockholders;
WHEREAS, for federal income Tax purposes, it is intended
that the Merger be treated as a taxable stock purchase of all of
the Company Common Stock (as defined below) by Parent; and
WHEREAS, the Parties desire to make certain
representations, warranties, covenants and agreements in
connection with the Merger and also to set forth various
conditions to the consummation of the Merger;
NOW, THEREFORE, for and in consideration of the recitals
and the mutual covenants and agreements set forth in this
Agreement, the Parties agree as follows:
Article 1
Definitions
Section 1.1 Defined Terms. As
used in this Agreement, capitalized terms shall have the
meanings set forth below or shall have the meanings set forth
for such terms in the sections of this Agreement referenced
below:
Acquired Companies means the Company and each
of the Companys Subsidiaries.
Acquisition Proposal means, for any Person,
any Contract, proposal, offer or other inquiry or indication of
interest (regardless of whether in writing and regardless of
whether delivered to the stockholders) relating to any of the
following (other than the transactions contemplated by this
Agreement or the Merger): (a) any merger, reorganization,
share exchange, take-over bid, tender offer, recapitalization,
consolidation, liquidation, dissolution or other business
combination, purchase or similar transaction or series of
transactions directly or indirectly involving 20% or more of the
assets, net revenues or net income of such Person and its
Subsidiaries, taken as a whole; (b) the sale, lease,
exchange, transfer or other disposition, directly or indirectly,
of any business or assets that generate 20% or more of the
consolidated net revenues or net income or of assets
representing 20% or more of the book value of the consolidated
assets, of such Person and its Subsidiaries, taken as a whole,
or any license, lease, exchange, mortgage, pledge or other
agreement or arrangement having a similar economic effect, in
each case in a single transaction or a series of related
transactions; or (c) any direct or indirect acquisition of
beneficial ownership (as defined in Section 13(d) of the
Exchange Act) or any direct or indirect acquisition of the right
to acquire beneficial ownership (as defined in
Section 13(d) of the Exchange Act) by any Person or any
group (as defined in the Exchange Act) of 20% or
more of the shares of any class of the issued and outstanding
Equity Interests of such Person, whether in a single transaction
or a series of related transactions.
A-1-5
Affiliate means, with respect to any Person,
each other Person that directly or indirectly Controls, is
Controlled by, or is under common Control with such Person.
Agreement has the meaning given to such term
in the preamble.
Benefit Plan means any qualified or
non-qualified employee benefit plan, program, policy, practice,
agreement, Contract or other arrangement, regardless of whether
written, regardless of whether
U.S.-based,
including any employee welfare benefit plan within
the meaning of Section 3(1) of ERISA (including
post-retirement medical and life insurance), any employee
pension benefit plan within the meaning of
Section 3(2) of ERISA (regardless of whether such plan is
subject to ERISA), including any multiemployer plan (as defined
in Section 3(37) of ERISA) or multiple employer plan (as
defined in Section 413 of the Internal Revenue Code), any
employment or severance agreement or other arrangement, and any
employee benefit, bonus, incentive, deferred compensation,
profit sharing, vacation, stock, stock purchase, stock option,
severance, change of control, fringe benefit or other plan,
program, policy, practice, agreement, Contract, or other
arrangement, regardless of whether subject to ERISA and
regardless of whether funded.
Business Day means any day other than a
Saturday, Sunday or any day on which banks in the States of
Texas or Oklahoma are authorized or required by federal Law to
be closed.
Cash Consideration has the meaning given to
such term in Section 2.4(c)(i)(A).
Certificate of Merger means the certificate
of merger, prepared and executed in accordance with the
applicable provisions of the DGCL and this Agreement, filed with
the Secretary of State of the State of Delaware to effect the
Merger.
Claim has the meaning given to such term in
Section 5.13(b).
Closing has the meaning given to such term in
Section 2.6.
Closing Date has the meaning given to such
term in Section 2.6.
Commitment Letter has the meaning given to
such term in Section 4.25.
Company has the meaning given to such term in
the preamble.
Company Acquisition Agreement has the meaning
given to such term in Section 5.4(c)(ii).
Company Acquisition Proposal means an
Acquisition Proposal with respect to the Company.
Company Acquisition
Proposal Recommendation has the meaning given to
such term in Section 5.4(c)(ii).
Company Adverse Recommendation Change has the
meaning given to such term in Section 5.4(c)(ii).
Company Benefit Plan means a Benefit Plan
(a) providing benefits to (i) any current or former
employee, officer or director of the Company or any of its
Subsidiaries or ERISA Affiliates or (ii) any beneficiary or
dependent of any such employee, officer or director, (b) in
which any of the foregoing is a participant, (c) that is
sponsored, maintained or contributed to by the Company or any of
its Subsidiaries or ERISA Affiliates or to which the Company or
any of its Subsidiaries or ERISA Affiliates is a party or is
obligated to contribute, or (d) with respect to which the
Company or any of its Subsidiaries or ERISA Affiliates has any
liability, whether direct or indirect, contingent or otherwise.
Company Board means the board of directors of
the Company.
Company Certificate means a certificate
representing a share or shares of Company Common Stock or other
appropriate evidence of a share or shares of Company Common
Stock issued in book-entry form.
Company Charter Documents has the meaning
given to such term in Section 3.1.
Company Common Stock means the common stock,
par value $0.01 per share, of the Company.
A-1-6
Company Credit Agreement means that certain
Credit Agreement, dated January 13, 2006, by and between
the Company and Fortis Capital Corp., as Administrative Agent,
Lead Arranger and Sole Bookrunner, and a syndicate of lenders,
as amended.
Company Disclosure Letter has the meaning
given to such term in the introduction to Article 3.
Company Employees means the individuals who
are employed as employees by the Company or any of its
Affiliates immediately prior to the Effective Time who remain
employed as employees of Parent or any of its Affiliates after
the Effective Time.
Company Financial Statements has the meaning
given to such term in Section 3.7(a).
Company Incentive Plans has the meaning given
to such term in Section 3.3(a).
Company Information has the meaning given to
such term in Section 5.3(b).
Company Leased Real Property means real
property leased by the Company or any of its Subsidiaries.
Company Material Adverse Effect means a
Material Adverse Effect with respect to the Company.
Company Material Contract has the meaning
given to such term in Section 3.22(a).
Company Meeting means a meeting of the
stockholders of the Company duly called and held for the purpose
specified in the Proxy Statement/Prospectus, including the
Company Proposal.
Company Owned Real Property means real
property owned by the Company or any of its Subsidiaries.
Company Permits has the meaning given to such
term in Section 3.5(b).
Company Preferred Stock means the preferred
stock of the Company, par value $0.01 per share.
Company Proposal means the proposal to adopt
this Agreement, which proposal is to be presented to the
stockholders of the Company in the Proxy Statement/Prospectus.
Company Real Property means the Company
Leased Real Property and the Company Owned Real Property.
Company Regulatory Filings has the meaning
given to such term in Section 3.6(b).
Company Reports has the meaning given to such
term in Section 3.7(a).
Company Representative means a Representative
of the Company or its Subsidiaries.
Company Restricted Stock has the meaning
given to such term in Section 2.4(c)(iv).
Company Securities means the Company Common
Stock and Company Restricted Stock.
Company Stock Option means an option issued
and outstanding immediately prior to the Effective Time to
acquire shares of Company Common Stock granted to an employee or
non employee director of the Company pursuant to a
Company Incentive Plan.
Company Subsidiary means a Subsidiary of the
Company.
Company Subsidiary Charter Documents means
the certificate of incorporation, articles of incorporation,
certificate of formation, certificate of limited partnership,
bylaws, limited liability company agreement, operating
agreement, partnership agreement or other governing or
organizational documents of each of the Company Subsidiaries.
Company Superior Proposal means a Company
Acquisition Proposal that is a Superior Proposal.
Confidentiality Agreement means the Amended
and Restated Confidentiality Agreement, dated as of
December 24, 2007, between the Company and Parent.
A-1-7
Contract means any agreement, arrangement,
commitment or instrument, written or oral, including, without
limitation, any loan or credit agreement or other agreement
evidencing Indebtedness, promissory note, bond, mortgage,
indenture, guarantee, permit, lease, sublease, license,
agreement to render services, or other agreement, arrangement,
commitment or instrument evidencing rights or obligations of any
kind or nature, including all amendments, modifications,
supplements and options relating thereto.
Control (and related terms) means the
possession, directly or indirectly, of the power to direct or
cause the direction of the management policies of a Person,
whether through the ownership of stock, by contract, credit
arrangement or otherwise.
D&O Insurance has the meaning given to
such term in Section 5.13(c).
DGCL has the meaning given to such term in
the Recitals.
Disclosure Letter means, as applicable, the
Company Disclosure Letter or the Parent Disclosure Letter.
Dissenting Shares means any shares of Company
Common Stock held by a Dissenting Stockholder as of the
Effective Time.
Dissenting Stockholder means any holder of
shares of Company Common Stock who does not vote in favor of the
Merger (or consent thereto in writing) and who is entitled to
demand and properly demands a judicial appraisal of the fair
value of such stockholders shares pursuant to, and
otherwise complies in all respects with, the provisions of
Section 262 of the DGCL.
DOJ means the United States Department of
Justice.
Effective Time has the meaning given to such
term in Section 2.7.
Environmental, Health and Safety Laws means
any Laws relating to (a) emissions, discharges, releases or
threatened releases of Hazardous Materials into the environment,
including into ambient air, soil, sediments, land surface or
subsurface, buildings or facilities, surface water, groundwater,
publicly-owned treatment works, or septic systems, (b) the
generation, treatment, storage, disposal, use, handling,
manufacturing, recycling, transportation or shipment of
Hazardous Materials, (c) occupational health and safety, or
(d) the pollution of the environment, solid waste handling,
treatment or disposal, reclamation or remediation activities, or
protection of environmentally sensitive areas.
Equity Interests means (a) with respect
to a corporation, any and all shares, interests, participation,
phantom stock plans or arrangements or other equivalents
(however designated) of corporate stock, including all common
stock, preferred stock and other equity and voting interests,
and warrants, options, calls, subscriptions or other convertible
securities or other rights to acquire any of the foregoing, and
(b) with respect to a partnership, limited liability
company or similar Person, any and all units, membership or
other interests, including rights to purchase, warrants,
options, calls, subscriptions or other equivalents of, or other
interests convertible into, any beneficial or legal ownership
interest in such Person.
ERISA means the Employee Retirement Income
Security Act of 1974, as amended, and any regulations
promulgated pursuant thereto.
ERISA Affiliate means any trade or business,
regardless of whether incorporated, which is required to be
treated as a single employer together with an entity pursuant to
Section 414(b), (c), (m) or (o) of the Internal
Revenue Code or Section 4001(b)(1) of ERISA.
Exchange Act means the Securities Exchange
Act of 1934, as amended.
Exchange Agent has the meaning given to such
term in Section 2.5(a).
Exchange Fund has the meaning given to such
term in Section 2.5(a).
Exchange Ratio has the meaning given to such
term in Section 2.4(c)(i)(A).
FTC means the United States Federal
Trade Commission.
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GAAP means generally accepted accounting
principles, as recognized by the U.S. Financial Accounting
Standards Board (or any generally recognized successor).
Governmental Authority means any national,
state, local, county, parish or municipal government, domestic
or foreign, any agency, board, bureau, commission, court,
tribunal, subdivision, department or other governmental or
regulatory authority or instrumentality, or any arbitrator in
any case that has jurisdiction over any of the Acquired
Companies or Parent Companies, as the case may be, or any of
their respective properties or assets.
Hazardous Material means any chemical,
pollutant, contaminant, material, waste or substance regulated
by any Governmental Authority or subject to liability under any
Environmental, Health and Safety Law, including, but not limited
to, any hazardous waste, hazardous substance, toxic substance,
radioactive material (including any naturally occurring
radioactive material), asbestos-containing materials in any form
or condition, polychlorinated biphenyls in any form or
condition, or petroleum, petroleum hydrocarbons, petroleum
products or any fraction or byproducts thereof.
HSR Act has the meaning given to such term in
Section 3.6(b).
Indebtedness of any Person means and includes
any obligations consisting of (a) the outstanding principal
amount of and accrued and unpaid interest on, and other payment
obligations for, borrowed money, or payment obligations issued
or incurred in substitution or exchange for payment obligations
for borrowed money, (b) amounts owing as deferred purchase
price for property or services, including earn-out
payments, (c) payment obligations evidenced by any
promissory note, bond, debenture, mortgage or other debt
instrument or debt security, (d) commitments or obligations
by which such Person assures a creditor against loss, including
contingent reimbursement obligations with respect to letters of
credit, (e) payment obligations secured by a Lien, other
than a Permitted Lien, on assets or properties of such Person,
(f) obligations to repay deposits or other amounts advanced
by and owing to third parties, (g) obligations under
capitalized leases, (h) obligations under any interest
rate, currency or other hedging agreement or derivatives
transaction, (i) guarantees or other contingent liabilities
with respect to any amounts of a type described in clauses
(a) through (h) above, and (j) any change of
control payments or prepayment premiums, penalties, charges or
equivalents thereof with respect to any indebtedness, obligation
or liability of a type described in clauses (a) through
(i) above that are required to be paid at the time of, or
the payment of which would become due and payable solely as a
result of, the execution of this Agreement or the consummation
of the transactions contemplated by this Agreement at such time,
in each case determined in accordance with GAAP; provided,
however, that Indebtedness shall not include accounts
payable to trade creditors and accrued expenses arising in the
ordinary course of business consistent with past practice and
shall not include the endorsement of negotiable instruments for
collection in the ordinary course of business.
Indemnified Parties has the meaning given to
such term in Section 5.13(b).
Intellectual Property means all United States
and foreign (a) patents and patent applications and all
reissues, renewals, divisions, extensions, provisionals,
continuations and continuations in part thereof,
(b) inventions (regardless of whether patentable),
invention disclosures, trade secrets, proprietary information,
industrial designs and registrations and applications, mask
works and applications and registrations therefor,
(c) copyrights and copyright applications and corresponding
rights, (d) trade dress, trade names, logos, URLs, common
law trademarks and service marks, registered trademarks and
trademark applications, registered service marks and service
mark applications, (e) domain name rights and
registrations, (f) databases, customer lists, data
collections and rights therein, and (g) confidentiality
rights or other intellectual property rights of any nature, in
each case throughout the world.
Internal Revenue Code means the Internal
Revenue Code of 1986, as amended.
International Plans means Benefit Plans
subject to the Laws of any jurisdiction outside the United
States.
IRS has the meaning given to such term in
Section 3.11(b).
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Law means any federal, state, local or
foreign statute, code, ordinance, rule, regulation, permit,
consent, approval, license, judgment, Order, writ, decree,
injunction or other authorization, treaty, convention, or
governmental certification requirement of any Governmental
Authority.
Lien means any lien, mortgage, security
interest, indenture, deed of trust, pledge, deposit,
restriction, burden, lien, license, lease, sublease, right of
first refusal, right of first offer, charge, privilege,
easement, right of way, reservation, option, preferential
purchase right, right of a vendor under any title retention or
conditional sale agreement, or other arrangement substantially
equivalent thereto, in each case regardless of whether relating
to the extension of credit or the borrowing of money.
Material Adverse Effect means, with respect
to any Person, any fact, circumstance, event, change, effect or
occurrence that, individually or in the aggregate with all other
facts, circumstances, events, changes, effects or occurrences,
has had or caused or would reasonably be expected to have or
cause a material adverse effect on the assets, properties,
business, results of operations or condition (financial or
otherwise) of such Person and its Subsidiaries, taken as a
whole, or that would reasonably be expected to prevent,
materially delay or materially impair the ability of such Person
to consummate the Merger in the timeframe contemplated hereby,
but shall not include (a) facts, circumstances, events,
changes, effects or occurrences generally affecting (i) the
industry in which such Person and its Subsidiaries operate or
(ii) the economy or the financial, securities or credit
markets in the U.S. or elsewhere in the world, including natural
disasters, any regulatory or political conditions or
developments, or any outbreak or escalation of hostilities or
declared or undeclared acts of war, terrorism or insurrection,
whether occurring before or after the date hereof, unless any
such facts, circumstances, events, changes, effects or
occurrences disproportionately affect the assets, properties,
business, results of operations or financial condition of such
Person and its Subsidiaries, taken as a whole, relative to other
industry participants, (b) facts, circumstances, events,
changes, effects or occurrences to the extent resulting from the
negotiation or performance of this Agreement, the announcement
of the execution of this Agreement or the consummation or the
pendency of the Merger (including, without limitation, and
solely by way of example of such facts, circumstances, events,
changes, effects or occurrences, the direct and substantiated
effect of the public announcement of this Agreement or the
Merger on the relationships of such Person or any of its
Subsidiaries with customers, suppliers, distributors or
employees); provided, however, that this clause
(b) shall not diminish the effect of, and shall be
disregarded for purposes of, any representations or warranties
herein, (c) fluctuations in the price or trading volume of
shares of any trading stock of such Person (provided,
however, that the exception in this clause (c) shall
not prevent or otherwise affect a determination that any fact,
circumstance, event, change, effect or occurrence underlying
such fluctuation has resulted in, or contributed to, a Material
Adverse Effect with respect to such Person), (d) facts,
circumstances, events, changes, effects or occurrences to the
extent resulting from any changes in Law or in GAAP (or the
interpretation thereof) after the date hereof, (e) facts,
circumstances, events, changes, effects or occurrences to the
extent resulting from any legal proceedings initiated by any of
the current or former stockholders of such Person (or on their
behalf or on behalf of such Person) and related to this
Agreement or any of the transactions contemplated hereby,
(f) any failure by such Person to meet any published
analyst estimates or expectations regarding such Persons
revenue, earnings or other financial performance or results of
operations for any period or any failure by such Person to meet
its internal budgets, plans or forecasts regarding its revenues,
earnings or other financial performance or results of operations
(provided, however, that the exception in this
clause (f) shall not prevent or otherwise affect a
determination that any fact, circumstance, event, change, effect
or occurrence underlying such failure has resulted in, or
contributed to, a Material Adverse Effect) or (g) any
change or announcement of a potential change in the credit
rating of any Person or any of its Subsidiaries.
Maximum Amount has the meaning given to such
term in Section 5.13(c).
Merger means the merger of Merger Sub with
and into the Company under the DGCL, with the Company continuing
as the surviving corporation, upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with
the requirements of the DGCL.
Merger Consideration has the meaning given to
such term in Section 2.4(c)(i)(A).
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Merger Sub has the meaning given to such term
in the preamble.
Merger Sub Charter Documents has the meaning
given to such term in Section 4.1.
Nasdaq means The Nasdaq Stock Market.
Notification and Report Forms has the meaning
given to such term in Section 3.6(b).
NYSE means the New York Stock Exchange, Inc.
Order means any order, writ, fine,
injunction, decree, judgment, award or enforceable determination
of any Governmental Authority.
Parent has the meaning given to such term in
the preamble.
Parent Benefit Plan means a Benefit Plan
(a) providing benefits to (i) any current or former
employee, officer or director of Parent or any of its
Subsidiaries or ERISA Affiliates or (ii) any beneficiary or
dependent of any such employee, officer or director, (b) in
which any of the foregoing is a participant, (c) that is
sponsored, maintained or contributed to by Parent or any of its
Subsidiaries or ERISA Affiliates or to which Parent or any of
its Subsidiaries or ERISA Affiliates is a party or is obligated
to contribute, or (d) with respect to which Parent or any
of its Subsidiaries or ERISA Affiliates has any liability,
whether direct or indirect, contingent or otherwise.
Parent Board means the board of directors of
Parent.
Parent Certificate means a certificate
representing a share or shares of Parent Common Stock or other
appropriate evidence of a share or shares of Parent Common Stock
issued in book-entry form.
Parent Charter Documents has the meaning
given to such term in Section 4.1.
Parent Common Stock means the common stock,
par value $0.01 per share, of Parent.
Parent Companies means Parent and each of the
Parent Subsidiaries.
Parent Credit Agreement means the Second
Amended and Restated Credit Agreement, dated as of
April 26, 2007, among Parent, Royal Bank of Canada, as
Administrative Agent, Collateral Agent, and the lenders party
thereto, as amended by the First Amendment thereto.
Parent Disclosure Letter has the meaning
given to such term in the introduction to Article 4.
Parent Financial Statements has the meaning
given to such term in Section 4.7(a).
Parent Incentive Plans means the 2003
Incentive Stock Plan and 2006 Incentive Plan of Parent.
Parent Information has the meaning given to
such term in Section 5.3(a).
Parent Leased Real Property means real
property leased by Parent or any of its Subsidiaries.
Parent Material Adverse Effect means an
Material Adverse Effect with respect to Parent.
Parent Material Contract has the meaning
given to such term in Section 4.22(a).
Parent Meeting means a meeting of the
stockholders of Parent duly called and held for the purposes set
forth in the Proxy Statement/Prospectus, including the Parent
Proposal.
Parent Owned Real Property means real
property owned by Parent or any of its Subsidiaries.
Parent Permits has the meaning given to such
term in Section 4.5(b).
Parent Preferred Stock means the preferred
stock of Parent, par value $0.01 per share.
Parent Proposal means the proposal to approve
the issuance of Parent Common Stock in the Merger, which
proposal is to be presented to the stockholders of Parent in the
Proxy Statement/Prospectus.
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Parent Real Property means the Parent Leased
Real Property and the Parent Owned Real Property.
Parent Regulatory Filings has the meaning
given to such term in Section 4.6(b).
Parent Reports has the meaning given to such
term in Section 4.7(a).
Parent Representative means a Representative
of Parent or its Subsidiaries.
Parent Revised Offer has the meaning given to
such term in Section 5.4(e)(ii).
Parent Common Stock Value has the meaning
given to such term in Section 2.4(c)(i)(A).
Parent Stock Consideration has the meaning
given to such term in Section 2.4(c)(i)(A).
Parent Subsidiary means a Subsidiary of
Parent identified on the Parent Disclosure Letter.
Parent Subsidiary Charter Documents means the
certificate of incorporation, articles of incorporation,
certificate of formation, certificate of limited partnership,
bylaws, limited liability company agreement, operating
agreement, partnership agreement or other governing or
organizational documents of each of the Parent Subsidiaries.
Parties has the meaning given to such term in
the Recitals.
Party has the meaning given to such term in
the Recitals.
PBGC means the Pension Benefit Guaranty
Corporation.
Permitted Liens means (a) Liens for
Taxes, assessments or other governmental charges or levies that
are not yet due and payable or that are being contested in good
faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP have been established and described in
the applicable Disclosure Letter, (b) Liens in connection
with workmens compensation, unemployment insurance or
other social security, old age pension or public liability
obligations not yet due or which are being contested in good
faith by appropriate proceedings and for which adequate reserves
in accordance with GAAP have been established and described in
the applicable Disclosure Letter, (c) operators,
vendors, suppliers, carriers,
warehousemens, repairmens, mechanics,
workmens, materialmens, or construction Liens
(during repair or upgrade periods) or other like Liens arising
by operation of Law in the ordinary course of business or
statutory landlords Liens, each of which is in respect of
obligations that have not been outstanding more than
90 days (so long as no action has been taken to file or
enforce such Liens within said
90-day
period) or which are being contested in good faith,
(d) Liens described in the applicable Disclosure Letter or
(e) any other Lien, encumbrance or other imperfection of
title that does not materially affect the value or use of the
property subject thereto (provided, however, that
this clause (e) shall be excluded from the definition of
Permitted Liens for purposes of Section 3.20(a) or
4.20(a)).
Person means any natural person, corporation,
company, limited or general partnership, joint stock company,
joint venture, association, limited liability company, trust,
bank, trust company, land trust, business trust or other entity
or organization, regardless of whether a Governmental Authority.
Post-Merger Plans has the meaning given to
such term in Section 5.14.
Pre-Merger Plan has the meaning given to such
term in Section 5.14.
Proxy Statement/Prospectus means the joint
proxy statement in definitive form relating to the Company
Meeting and the Parent Meeting, which joint proxy statement will
be included in the prospectus contained in the Registration
Statement.
Registration Statement means the Registration
Statement on
Form S-4
to be filed by Parent in connection with the issuance of Parent
Common Stock in the Merger.
Regulatory Filings has the meaning given to
such term in Section 5.8(a).
Related Documents has the meaning given to
such term in Section 3.2(a).
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Representative means any director, officer,
employee, agent, advisor (including legal, accounting and
financial advisors) or other representative.
Required Company Vote has the meaning given
to such term in Section 3.19.
Required Parent Vote has the meaning given to
such term in Section 4.19.
Responsible Officers means, with respect to
each Party, the Chief Executive Officer and the Chief Financial
Officer of such Party.
SEC means the United States Securities and
Exchange Commission.
Securities Act means the Securities Act of
1933, as amended.
SOX means the Sarbanes-Oxley Act of 2002, as
amended.
Subsidiary means for any Person at any time
(a) any corporation of which such Person owns, either
directly or through its Subsidiaries, a majority of the total
combined voting power of all classes of voting securities of
such corporation, or (b) any partnership, association,
joint venture, limited liability company or other business
organization, regardless of whether such constitutes a legal
entity, in which such Person directly or indirectly owns a
majority of the total Equity Interests.
Superior Proposal means a bona fide written
Acquisition Proposal (with all percentages used in the
definition of Acquisition Proposal increased to 50% for purposes
of this definition) made by a Third Party after the date of this
Agreement through the Effective Time (or such earlier date that
this Agreement is terminated in accordance with the terms set
forth herein), if the Company Board determines in good faith
(after receipt of the advice of its independent financial
advisors, and after consultation with its outside counsel and
taking into account all legal, financial, regulatory and other
aspects of the Acquisition Proposal) that such Acquisition
Proposal (a) would, if consummated in accordance with its
terms, result in a transaction that is more favorable, from a
financial point of view, to the holders of the common stock of
the Company than the transactions contemplated by this Agreement
(taking into account any amounts payable pursuant to
Section 7.3 and any Parent Revised Offer made under
Section 5.4(e)), (b) contains conditions which
are all reasonably capable of being satisfied in a timely
manner, and (c) is not subject to any financing contingency
or, to the extent financing for such proposal is required, that
such financing is then committed in writing.
Surviving Corporation has the meaning given
to such term in Section 2.2.
Tax or Taxes (including
with correlative meaning, Taxable) means
(a) any federal, foreign, state or local tax, including any
income, gross income, gross receipts, ad valorem, excise, sales,
use, value added, admissions, business, occupation, license,
franchise, margin, capital, net worth, customs, premium, real
property, personal property, intangibles, capital stock,
transfer, profits, windfall profits, environmental, severance,
fuel, utility, payroll, social security, employment,
withholding, disability, stamp, rent, recording, registration,
alternative minimum, add-on minimum, or other tax, assessment,
duty, fee, levy or other governmental charge of any kind
whatsoever imposed by a Governmental Authority (a Tax
Authority), together with and including, without
limitation, any and all interest, fines, penalties, assessments
and additions to tax resulting from, relating to, or incurred in
connection with any such tax or any contest or dispute thereof,
(b) any liability for the payment of any amount of the type
described in the immediately preceding clause (a) as a
result of being a member of a consolidated, affiliated, unitary
or combined group with any other corporation or entity at any
time prior to and through the Closing Date, and (c) any
liability for the payment of any amount of the type described in
the preceding clauses (a) or (b) as a result of a
contractual obligation to any other Person or of transferee,
successor or secondary liability.
Tax Authority has the meaning given to such
term in the definition of Tax.
Tax Return means any report, return,
document, declaration or other information (including any
attached schedules and any amendments to such report, return,
document, declaration or other information) required to be
supplied to or filed with any Tax Authority with respect to any
Tax, including an information
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return and any document with respect to or accompanying
payments, deposits or estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file
any such report, return, document, declaration or other
information.
Termination Date means October 31, 2008
or such later date to which the Termination Date
shall be extended pursuant to Section 5.5.
Third Party means a Person other than any of
the Acquired Companies or any of the Parent Companies.
Treasury Regulations means the regulations
promulgated by the United States Treasury Department under the
Internal Revenue Code.
U.S. means the United States of America.
Voting Debt of any Person, means any bonds,
debentures, promissory notes or other obligations, the holders
of which have the right to vote (or which are convertible into
or exercisable for Equity Interests having the right to vote)
with the stockholders of such Person on any matter.
Section 1.2 References, Construction and
Titles.
(a) All references in this Agreement to Exhibits,
Schedules, Articles, Sections, subsections and other
subdivisions refer to the corresponding Exhibits, Schedules,
Articles, Sections, subsections and other subdivisions of or to
this Agreement, unless expressly provided otherwise. Titles
appearing at the beginning of any Articles, Sections,
subsections or other subdivisions of this Agreement are for
convenience only, do not constitute any part of this Agreement,
and shall be disregarded in construing the language hereof. The
words this Agreement, herein,
hereby, hereunder and
hereof, and words of similar import, refer to this
Agreement as a whole and not to any particular Article, Section,
subsection or subdivision unless expressly so limited. The words
this Article and this Section, and words
of similar import, refer only to the Article or Section hereof
in which such words occur.
(b) The word or is not exclusive, and the word
including (in its various forms) means including
without limitation. Pronouns in masculine, feminine or neuter
genders shall be construed to state and include any other
gender, and words, terms and titles (including terms defined
herein) in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise requires.
(c) As used in the representations and warranties contained
in this Agreement, the phrase to the knowledge of
the representing Party or known to a representing
Party shall mean to the actual knowledge (and not constructive
or imputed knowledge) of one or more of the Responsible Officers
of the representing Party.
(d) The Parties have participated jointly in negotiating
and drafting this Agreement. In the event an ambiguity or a
question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the Parties, and no
presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any
provision(s) of this Agreement.
(e) Provisions hereof referring to delivery of documents by
one Party to another Party prior to the date hereof shall be
deemed to refer to either actual physical delivery of such
documents or making such documents available for review in a
data room or computer based virtual data room at least three
Business Days prior to the date hereof.
Article 2
The
Merger
Section 2.1 The Merger. On the
terms and subject to the conditions set forth in this Agreement
and in accordance with the provisions of this Agreement, the
Certificate of Merger and the DGCL, at the Effective Time,
Merger Sub shall be merged with and into the Company.
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Section 2.2 Effect of the
Merger. Upon the effectiveness of the Merger, the
separate corporate existence of Merger Sub shall cease and the
Company shall be the surviving entity in the Merger (referred to
from time to time herein as the Surviving
Corporation). The Company shall continue its company
existence under the Laws of the State of Delaware with all its
rights, privileges, immunities and franchises continuing
unaffected by the Merger. The Merger shall have the effects
specified in this Agreement and the DGCL.
Section 2.3 Governing Instruments, Directors
and Officers of the Surviving Corporation.
(a) At the Effective Time, the certificate of incorporation
of the Company shall be amended to read in its entirety as the
certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, except that the name of
the Company shall remain Bronco Drilling Company,
Inc. and the incorporator of the Company shall not be
amended, and as so amended shall be the certificate of
incorporation of the Surviving Corporation until subsequently
amended in accordance with applicable Law.
(b) At the Effective Time, the bylaws of the Company shall
be amended to read in their entirety as the bylaws of Merger Sub
as in effect immediately prior to the Effective Time, and as so
amended shall be the bylaws of the Surviving Corporation until
subsequently amended in accordance with applicable Law.
(c) The directors and officers of Merger Sub at the
Effective Time shall be the initial directors and officers,
respectively, of the Surviving Corporation from the Effective
Time until their respective successors have been duly elected or
appointed in accordance with the certificate of incorporation
and bylaws of the Surviving Corporation and applicable Law.
Section 2.4 Effect on Equity Securities.
(a) Merger Sub Capital Stock. At
the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Merger Sub, the Company or its
stockholders, each share of common stock, par value $0.01 per
share, of Merger Sub then issued and outstanding shall be
converted into one fully paid and nonassessable share of common
stock, par value $0.01 per share, of the Surviving Corporation.
(b) Parent Capital Stock. At the
Effective Time, each share of Parent capital stock then issued
and outstanding shall remain issued, outstanding and unchanged.
(c) Company Securities.
(i) Company Common Stock.
(A) At the Effective Time, by virtue of the Merger and
without any action on the part of Merger Sub, Parent, the
Company or any holder thereof (but subject to the provisions of
Section 2.5(e)), each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time
(excluding Dissenting Shares and shares to be cancelled pursuant
to Section 2.4(c)(ii), but including, without
limitation, shares of Company Common Stock that are issued prior
to the Effective Time in connection with Company Stock Options)
shall be converted into the right to receive (i) an amount
in cash (without interest) (the Cash
Consideration) equal to the quotient, calculated to
the nearest $0.01, resulting from dividing $280,000,000 by the
aggregate number of issued and outstanding shares of Company
Common Stock immediately prior to the Effective Time (excluding
shares to be cancelled pursuant to
Section 2.4(c)(ii), but including, without
limitation, shares of Company Common Stock that are issued prior
to the Effective Time in connection with Company Stock Options
and all Dissenting Shares), and (ii) a number (which may be
less than one) of fully paid and nonassessable shares of Parent
Common Stock (the Parent Stock Consideration)
equal to the Exchange Ratio. Exchange Ratio
means the fraction, expressed as a decimal, calculated to the
nearest one-ten thousandth, the numerator of which is
(a) the quotient, calculated to the nearest one-ten
thousandth, resulting from dividing $157,836,000 by the Parent
Common Stock Value, and the denominator of which is (b) the
aggregate number of issued and outstanding shares of Company
Common Stock immediately prior to the Effective Time (excluding
shares to be cancelled pursuant to
Section 2.4(c)(ii), but including, without
limitation, shares of
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Company Common Stock that are issued prior to the Effective Time
in connection with Company Stock Options and all Dissenting
Shares). Parent Common Stock Value means the
average closing sale prices for a share of Parent Stock on the
NYSE Composite Transactions Tape (as reported by The Wall
Street Journal (Northeast edition), or, if not reported
thereby, as reported by any other authoritative source) for each
of the ten consecutive trading days ending with the second
complete trading day prior to the Closing Date (not counting the
Closing Date). The Parent Stock Consideration using the Exchange
Ratio shall be calculated to the nearest one-ten thousandth of a
share of Parent Stock and the Parent Common Stock Value shall be
calculated to the nearest one-tenth of one cent. The Cash
Consideration and the Parent Stock Consideration to be received
by the holders of Common Stock hereunder (together with the cash
in lieu of fractional shares of Parent Stock as specified below)
are referred to herein collectively as the Merger
Consideration.
(B) Each share of Company Common Stock, when so converted,
shall automatically be cancelled and retired, shall cease to
exist and shall no longer be outstanding; each Certificate that,
immediately prior to the Effective Time, represented any such
shares (other than any Certificate representing Dissenting
Shares or shares to be cancelled pursuant to
Section 2.4(c)(ii)) shall thereafter represent the right to
receive the Merger Consideration therefor and the holder of any
Company Certificate shall cease to have any rights with respect
to such Company Common Stock, except the right to receive the
Merger Consideration (along with any cash in lieu of fractional
shares of Parent Common Stock as provided in
Section 2.5(e) and any unpaid dividends and
distributions with respect to such shares of Parent Common Stock
as provided in Section 2.5(c)), without interest,
upon the surrender of such Company Certificate in accordance
with Section 2.5(b).
(ii) Company Treasury Stock. At
the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Parent, the Company or any
holder thereof, all shares of Company Common Stock that are held
immediately prior to the Effective Time by the Company, by
Parent or Merger Sub or by any direct or indirect wholly owned
Subsidiary of Parent or the Company shall be cancelled and
retired without any conversion and shall cease to exist, and no
Merger Consideration shall be paid or payable in exchange
therefor.
(iii) Company Stock Options. In
light of the Companys representation in
Section 3.3, no provision is made herein for the
treatment of Company Stock Options in the Merger.
(iv) Company Restricted
Stock. Immediately prior to the Effective
Time, each share of Company Common Stock then outstanding that
is unvested or is subject to a repurchase option, risk of
forfeiture or other condition or restriction under any Company
Incentive Plans or any applicable restricted stock purchase
agreement or other agreement with the Company (Company
Restricted Stock) shall be immediately vested and
become free of such conditions or restrictions and the holder
thereof shall be entitled to receive the Merger Consideration
upon surrender of the Company Certificate(s) representing such
shares of Company Common Stock to the Exchange Agent.
(v) Dissenting Shares. Dissenting
Shares shall not be converted into or represent the right to
receive any Merger Consideration, but instead shall represent
only the right to receive the amount determined pursuant to the
provisions of Section 262 of the DGCL. At the Effective
Time, such Dissenting Shares shall no longer be outstanding and
shall automatically be cancelled and shall cease to exist, and
the holder thereof shall cease to have any rights with respect
thereto, except the right to receive the amount determined
pursuant to the provisions of Section 262 of the DGCL,
unless a Dissenting Stockholder holding particular Dissenting
Shares has failed to perfect or lost his right to receive, or
has effectively withdrawn his demand for, the fair value of such
shares under the DGCL. If a Dissenting Stockholder has so failed
to perfect or lost his right to receive, or has effectively
withdrawn his demand for, the amount determined under
Section 262 of the DGCL, then the shares of Company Common
Stock held by such holder shall cease to be Dissenting Shares
and shall entitle such holder to receive the Merger
Consideration in respect of such shares as provided in
Section 2.4(c)(i), and promptly following the
occurrence of such event and upon the surrender of the Company
Certificate(s) representing such
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shares, the Exchange Agent and the Surviving Corporation (as
applicable) shall deliver to such holder the Merger
Consideration in respect of such shares. The Company shall
comply with those provisions of Section 262 of the DGCL
which are required to be performed by the Company prior to the
Effective Time to the reasonable satisfaction of Parent. The
Company shall give Parent (A) prompt notice of any written
demands to exercise dissenters rights with respect to any
shares of Company Common Stock under the DGCL actually received
by the Company, any withdrawals of any such demands and any
other documents or instruments received by the Company relating
to dissenters rights and (B) an opportunity to
participate at its own expense in all negotiations and
proceedings with respect to demands for fair value under the
DGCL. The Company shall not, except with the prior written
consent of Parent (such consent not to be unreasonably delayed
or withheld), voluntarily make any payment with respect to
demands for fair value under the DGCL or offer to settle or
settle any such demands.
(vi) Certain Adjustments. If
between the date of this Agreement and the Effective Time,
regardless of whether permitted pursuant to the terms of this
Agreement, the outstanding Parent Common Stock or Company Common
Stock shall be changed into a different number or type of
securities by reason of any stock split, combination, merger,
consolidation, reorganization or other similar transaction, or
any distribution of shares of Parent Common Stock or Company
Common Stock shall be declared with a record date within such
period, the Merger Consideration shall be appropriately adjusted
to provide the holders of Company Common Stock and Company
Restricted Stock with the same economic effect as was
contemplated by this Agreement prior to giving effect to such
event.
Section 2.5 Exchange of Certificates.
(a) Exchange Fund. Prior to the
Effective Time, Parent shall appoint an exchange agent selected
by Parent that is reasonably satisfactory to the Company (the
Exchange Agent), and enter into an exchange
agent agreement, in form and substance reasonably satisfactory
to the Company, with such Exchange Agent to act as agent for
payment of the Merger Consideration in respect of Company
Certificates upon surrender of such Company Certificates (or
affidavits of loss in lieu thereof) in accordance with this
Article 2 from time to time after the Effective Time. At
the Effective Time, Parent shall deposit with the Exchange
Agent, in trust for the benefit of the holders of shares of
Company Securities, (i) Parent Certificates representing
shares of Parent Stock Consideration to be issued pursuant to
Section 2.4(c)(i) and Section 2.4(c)(iv)
and delivered pursuant to Section 2.5(b) and
(ii) cash or immediately available funds equal to the cash
portion of the aggregate Merger Consideration and cash for
payment in lieu of fractional shares pursuant to
Section 2.5(e). Such shares of Parent Common Stock,
together with any interest, dividends or distributions with
respect thereto (as provided in Section 2.5(c)) and
such cash, are referred to herein as the Exchange
Fund. The Exchange Agent, pursuant to irrevocable
instructions consistent with the terms of this Agreement given
on the Closing Date, shall deliver the Parent Common Stock and
the cash portion of the aggregate Merger Consideration to be
issued or paid pursuant to Section 2.4(c)(i) and
Section 2.4(c)(iv) as well as cash in lieu of
fractional shares pursuant to Section 2.5(e) out of
the Exchange Fund, and the Exchange Fund shall not be used for
any other purpose whatsoever; provided that the Exchange
Agent shall invest or hold the Exchange Fund only in cash or
direct, short-term obligations of, or short-term obligations
fully guaranteed as to principal and interest by, the United
States of America or in commercial paper obligations rated
A-1 or
P-1 or
better by Moodys Investor Services, Inc. or
Standard & Poors Corporation, respectively, in
each case as directed by Parent and acceptable to the Exchange
Agent; provided, however, that no such investment or
losses thereon shall affect the Merger Consideration payable to
the holders of the Company Securities and following any losses,
Parent shall promptly provide additional funds to the Exchange
Agent for the benefit of the holders of the Company Securities
in the amount of any such losses to the extent necessary to pay
the Merger Consideration to such holders. The Exchange Agent
shall not be entitled to vote or exercise any rights of
ownership with respect to the Parent Common Stock held by it
from time to time hereunder, except that it shall receive and
hold all dividends or other distributions paid or distributed
with respect thereto after the establishment of such Exchange
Fund for the account of Persons entitled thereto.
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(b) Exchange Procedures.
(i) As soon as reasonably practicable after the Effective
Time (but in no event later than five Business Days following
the Effective Time), Parent shall cause the Exchange Agent to
mail to each holder of record of a Company Certificate that,
immediately prior to the Effective Time, represented shares of
Company Common Stock, a letter of transmittal (in customary form
and reasonably acceptable to the Company) to be used to effect
the exchange of such Company Certificate for the Merger
Consideration payable in respect of the shares of Company Common
Stock represented by such Company Certificate, along with
instructions for using such letter of transmittal to effect such
exchange. The letter of transmittal (or the instructions
thereto) shall specify that delivery of any Company Certificate
shall be effected, and risk of loss and title thereto shall
pass, only upon proper delivery of such Company Certificate to
the Exchange Agent. Such letter of transmittal shall be in such
form and have such other provisions as Parent may reasonably
specify.
(ii) Upon surrender to the Exchange Agent of a Company
Certificate for cancellation, together with a duly completed and
executed letter of transmittal and any other documents that may
reasonably be required by the Exchange Agent: (A) the
holder of such Company Certificate shall be entitled to receive
in exchange therefor a Parent Certificate representing the
number of whole shares of Parent Common Stock, if any, and the
cash portion of the Merger Consideration that such holder has
the right to receive pursuant to Section 2.4(c)(i) and
Section 2.4(c)(iv), any cash in lieu of fractional shares
of Parent Common Stock as provided in Section 2.5(e), and
any unpaid dividends and distributions that such holder has the
right to receive pursuant to Section 2.5(c) (all after
giving effect to any required withholding of Taxes); and
(B) the Company Certificate so surrendered shall forthwith
be cancelled. No interest shall be paid or accrue on any Merger
Consideration, cash in lieu of fractional shares or unpaid
dividends and distributions, if any, payable to holders of
Company Certificates.
(iii) In the event of a transfer of ownership of Company
Common Stock that is not registered in the transfer records of
the Company, the Merger Consideration payable in respect of such
shares of Company Common Stock (along with any cash in lieu of
fractional shares
and any unpaid dividends and distributions that such holder has
the right to receive under this Agreement) may be issued or paid
to a transferee if the Company Certificate representing such
shares of Company Common Stock is presented to the Exchange
Agent accompanied by all documents required to evidence and
effect such transfer, including such signature guarantees as
Parent or the Exchange Agent may request, and to evidence that
any applicable stock transfer Taxes have been paid.
(iv) Until surrendered as contemplated by this
Section 2.5(b), each Company Certificate shall be
deemed at any time after the Effective Time to represent only
the right to receive, upon surrender of a Company Certificate
and execution of such other documents as the Exchange Agent may
require, the Merger Consideration payable in respect of the
shares of Company Common Stock represented by such Company
Certificate as provided in Section 2.4(c)(i) and
Section 2.4(c)(iv) (along with any cash in lieu of
fractional shares and any unpaid dividends and distributions
payable pursuant to the terms of this Agreement) or the right to
demand to be paid the amount determined pursuant to the
provisions of Section 262 of the DGCL as contemplated by
Section 2.4(c)(v).
(c) Distributions with Respect to Unexchanged
Shares. No dividends or other distributions
with respect to Parent Common Stock declared or made after the
Effective Time with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Company Certificate.
Subject to the effect of applicable Law: (i) at the time of
the surrender of a Company Certificate for exchange in
accordance with the provisions of this Section 2.5,
there shall be paid to the surrendering holder, without
interest, the amount of dividends or other distributions (having
a record date after the Effective Time but on or prior to
surrender and a payment date on or prior to surrender) not
theretofore paid with respect to the number of whole shares of
Parent Common Stock that such holder is entitled to receive
(less the amount of any withholding Taxes that may be required
with respect thereto); and (ii) at the appropriate payment
date and without duplicating any payment made under clause
(i) above, there shall be paid to the surrendering holder,
without interest, the amount of dividends or other distributions
(having a record date after the Effective Time but on or prior
to surrender and
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a payment date subsequent to surrender) payable with respect to
the number of whole shares of Parent Common Stock that such
holder receives (less the amount of any withholding Taxes that
may be required with respect thereto).
(d) No Further Ownership Rights in Company Common
Stock. The Merger Consideration issued and
paid upon the surrender for exchange of shares of Company Common
Stock in accordance with the terms hereof (including any cash in
lieu of fractional shares and any unpaid dividends and
distributions payable pursuant to the terms of this Agreement)
shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock. At the
Effective Time the stock transfer books of the Company shall be
closed, and from and after the Effective Time there shall be no
further registration of transfers of the shares of Company
Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, a Company
Certificate is presented to the Surviving Corporation or Parent
for any reason, it shall be cancelled and exchanged as provided
in this Section 2.5.
(e) Treatment of Fractional
Shares. No Parent Certificates or scrip
representing fractional shares of Parent Common Stock shall be
issued in the Merger and, except as provided in this
Section 2.5(e), no dividend or other distribution,
stock split or interest shall relate to any such fractional
share, and such fractional share shall not entitle the owner
thereof to vote or to any other rights of a stockholder of
Parent. In lieu of any fractional share of Parent Common Stock
to which a holder of Company Common Stock would otherwise be
entitled (after taking into account all Company Certificates
delivered by or on behalf of such holder), such holder, upon
surrender of a Company Certificate as described in this
Section 2.5, shall be paid an amount in cash to the
nearest whole cent (without interest) determined by multiplying
(i) the closing price of a share of Parent Common Stock on
the NYSE on the Business Day immediately preceding the Closing
Date by (ii) the fraction of a share of Parent Common Stock
to which such holder would otherwise be entitled, in which case
Parent shall make available to the Exchange Agent, in addition
to any other cash being provided to the Exchange Agent pursuant
to Section 2.5(a), the amount of cash necessary to
make such payments. The Parties acknowledge that payment of cash
consideration in lieu of issuing fractional shares of Parent
Common Stock was not separately bargained for consideration but
represents merely a mechanical rounding off for purposes of
simplifying the problems that would otherwise be caused by the
issuance of fractional shares of Parent Common Stock.
(f) Termination of Exchange
Fund. Any portion of the Exchange Fund and
cash held by the Exchange Agent in accordance with the terms of
this Section 2.5 that remains unclaimed by the
former stockholders of the Company as of the date that is twelve
months following the Effective Time shall be delivered to
Parent, upon demand. Thereafter, any former stockholders of the
Company, other than those exercising appraisal rights pursuant
to Section 262 of the DGCL as provided in
Section 2.4(c)(v), who have not theretofore complied
with the provisions of this Section 2.5 shall look
only to Parent for payment of their claim for Merger
Consideration, any cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with respect to
Parent Common Stock (all without interest).
(g) No Liability. None of Parent,
the Company, the Surviving Corporation, the Exchange Agent or
any other Person shall be liable to any former holder of shares
of Company Common Stock for any amount properly delivered to any
public official pursuant to any applicable abandoned property,
escheat or similar Law.
(h) Lost, Stolen, or Destroyed Company
Certificates. If any Company Certificate
shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Company
Certificate to be lost, stolen or destroyed, and, if required by
Parent or the Exchange Agent, the posting by such Person of a
bond, in such reasonable amount as Parent or the Exchange Agent
may direct, as indemnity against any Claims that may be made
against it with respect to such Company Certificate, the
Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Company Certificate the Merger Consideration (along
with any cash in lieu of fractional shares payable pursuant to
Section 2.5(e) and any unpaid dividends and
distributions payable pursuant to Section 2.5(c),
without interest) deliverable with respect thereto pursuant to
this Agreement.
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Section 2.6 Closing. Subject
to the terms and conditions of this Agreement, the closing of
the Merger (the Closing) shall take place
(a) at the offices of Andrews Kurth LLP, 600 Travis,
Suite 4200, Houston, Texas 77002 as soon as practicable
after 10:00 a.m., local time, on the first Business Day
immediately following the day on which all of the conditions set
forth in Article 6 have been satisfied or waived (by the
party entitled to waive the condition) (except for those
conditions that by their nature cannot be satisfied until the
Closing, but subject to the satisfaction or waiver of those
conditions) or (b) at such other time, date or place as the
Parties may agree. The date on which the Closing occurs is
hereinafter referred to as the Closing
Date.
Section 2.7 Effective Time of the
Merger. The Merger shall become effective (the
Effective Time) at the time the Certificate
of Merger is accepted for filing by the Delaware Secretary of
State, or at such time thereafter as is permitted by law, agreed
by the Parties and provided in the Certificate of Merger. At the
Closing, the Certificate of Merger shall be filed with the
Secretary of State of the State of Delaware.
Section 2.8 Taking of Necessary Action;
Further Action. Subject to the terms and
conditions of this Agreement, each of the Parties shall use its
reasonable best efforts to take all actions as may be necessary
or appropriate in order to effectuate the Merger under the DGCL
as promptly as commercially practicable. In addition, the
Parties agree to execute and deliver any additional instruments
necessary to consummate the transactions contemplated by this
Agreement. If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, real estate and other
property, rights, privileges, powers and franchises of either of
Merger Sub or the Company, the officers and directors of the
Surviving Corporation are fully authorized, in the name of the
Surviving Corporation or otherwise to take, and shall take, all
such lawful and necessary action.
Section 2.9 Withholding. Each
of Parent, the Surviving Corporation and the Exchange Agent
shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of
Company Common Stock such amounts as are required to be deducted
or withheld under the Internal Revenue Code or any provision of
state, local or foreign Tax Law with respect to the making of
such payment (including withholding shares of Parent Common
Stock). Any such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of
Company Common Stock in respect of whom such deduction and
withholding was made.
Article 3
Representations
and Warranties of the Company
As an inducement for Parent and Merger Sub to enter into this
Agreement, the Company hereby makes the following
representations and warranties to Parent and Merger Sub;
provided, however, that such representation and
warranties shall be subject to and qualified by (a) the
disclosure schedule delivered by the Company to Parent as of the
date hereof (each section of which qualifies the correspondingly
numbered representation and warranty or covenant to the extent
specified therein) (the Company Disclosure
Letter) (it being understood that (i) the
disclosure of any fact or item in any section of the Company
Disclosure Letter shall, should the existence of such fact or
item be relevant to any other section, be deemed to be disclosed
with respect to that other section to the extent that such
disclosure is made in a manner that makes its relevance to the
other section reasonably apparent and (ii) the disclosure
of any matter or item in the Company Disclosure Letter shall not
be deemed to constitute an acknowledgment that such matter or
item is required to be disclosed therein or is material to a
representation or warranty set forth in this Agreement and shall
not be used as a basis for interpreting the terms
material, materially,
materiality, Company Material Adverse
Effect or any word or phrase of similar import and does
not mean that such matter or item, alone or together with any
other matter or item, would constitute a Company Material
Adverse Effect) or (b) information contained in the Company
Reports (excluding any exhibits thereto) filed with the SEC
prior to the date hereof
A-1-20
(but only to the extent that such disclosure on its face appears
to constitute information that could reasonably be deemed a
qualification or exception to the following representations and
warranties):
Section 3.1 Corporate Existence; Good
Standing; Corporate Authority. The Company is a
corporation duly incorporated, validly existing and in good
standing under the Laws of the State of Delaware. The Company is
duly qualified to conduct business and is in good standing (to
the extent such concept exists in the relevant jurisdiction) in
each jurisdiction in which the ownership, operation or lease of
its property or the nature of the Companys business
requires such qualification, except for jurisdictions in which
any failures to be so qualified or to be in good standing,
individually or in the aggregate, do not constitute a Company
Material Adverse Effect. The Company has all requisite corporate
power and authority to own or lease and operate its properties
and assets and to carry on its business as it is currently being
conducted. The Company has delivered to Parent true, accurate
and complete copies of the Certificate of Incorporation
(including any and all Certificates of Designations) and Bylaws
of the Company, each as amended to date (the
Company Charter Documents), and each
Company Charter Document is in full force and effect, has not
been amended or modified and has not been terminated, superseded
or revoked. The Company is not in violation of its Company
Charter Documents.
Section 3.2 Authorization, Validity and
Effect of Agreements.
(a) The Company has the requisite corporate power and
authority to execute and deliver this Agreement and all other
agreements, instruments, certificates and documents contemplated
hereunder (collectively, the Related
Documents) to which it is, or will become, a party, to
perform its obligations hereunder and thereunder and to
consummate the Merger and all other transactions contemplated
hereunder and thereunder, subject to the approval of the Company
Proposal by Companys stockholders. The execution, delivery
and performance of this Agreement and the Related Documents and
the consummation of the Merger and the other transactions
contemplated hereunder and thereunder have been duly authorized
by all requisite corporate action on behalf of the Company, and
no other corporate proceedings by the Company are necessary to
authorize the execution and delivery of this Agreement or the
Related Documents or to consummate the Merger and the other
transactions contemplated hereunder or under the Related
Documents, except for the approval of the Company Proposal by
the Companys stockholders, the filing of the Certificate
of Merger pursuant to the DGCL and the Governmental Authority
applications and approvals described in
Section 3.6(b).
(b) This Agreement and each of the Related Documents to
which the Company is a party have been or will be duly executed
and delivered by the Company and, assuming the due
authorization, execution and delivery hereof and thereof by
Parent to the extent Parent is a party hereof and thereof,
constitute or will constitute the valid and legally binding
obligations of the Company, enforceable against the Company in
accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or
other Laws now or hereafter in effect relating to or affecting
the rights and remedies of creditors generally and to general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at Law).
Section 3.3 Capitalization.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock and
1,000,000 shares of Company Preferred Stock. As of the
close of business on January 22, 2008, there were
26,808,502 issued and outstanding shares of Company Common Stock
(including 549,652 shares of Company Restricted Stock), no
shares of Company Common Stock held by the Company in its
treasury, and no issued or outstanding shares of Company
Preferred Stock. The stockholders of the Company previously
approved a 2005 Stock Incentive Plan, as amended, and a 2006
Stock Incentive Plan (together, the Company Incentive
Plans). As of January 22, 2008,
20,000 shares of Company Common Stock were reserved for
future issuance pursuant to outstanding Company Stock Options
under the Company Incentive Plans. These outstanding Company
Stock Options will be cancelled prior to the Effective Time. As
of January 22, 2008, there were 1,679,828 shares of
Company Common Stock remaining available for the grant of awards
under the Company Incentive Plans. There are no outstanding or
authorized stock appreciation, phantom stock, profit
A-1-21
participation or other similar rights with respect to the
Company. All shares of Company Common Stock are, and all shares
of Company Common Stock which may be issued and outstanding
immediately prior to the Effective Time as permitted under this
Agreement shall be when issued, duly authorized, validly issued,
fully paid and nonassessable shares of Company Common Stock and
not subject to any preemptive rights.
(b) The Company has no outstanding Voting Debt. Except as
set forth in Section 3.3(b) of the Company
Disclosure Letter, since January 22, 2008, the Company and
its Subsidiaries have not issued, sold, granted or delivered,
are not obligated to issue, sell, grant or deliver (or to cause
to be issued, sold, granted or delivered), and are not a party
to any Contract or other obligation to issue, sell, grant or
deliver, any Equity Interest or Voting Debt of the Company or
any of its Subsidiaries. Except as set forth in
Section 3.3(b) of the Company Disclosure Letter,
there are no outstanding or authorized (i) contractual or
other obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Equity Interest of
the Company or any of its Subsidiaries or any such securities or
agreements referred to in the prior sentence or (ii) voting
trusts or similar agreements to which the Company or any of its
Subsidiaries is a party with respect to the voting of the
capital stock of the Company or any of its Subsidiaries, except
(with respect to foreign Company Subsidiaries only) repurchases,
redemptions or acquisitions that would have an immaterial effect
on the Company and its Subsidiaries, taken as a whole.
Section 3.4 Subsidiaries.
(a) Each Company Subsidiary is a corporation or other legal
entity duly organized or constituted and validly existing under
the Laws of its jurisdiction of incorporation, organization or
formation. Each Company Subsidiary has all requisite corporate,
limited liability company, partnership or other business power
and authority to own or lease and operate its properties and
assets and to carry on its business as currently conducted,
except (with respect to foreign Company Subsidiaries only) as
would have an immaterial effect on the Company and its
Subsidiaries, taken as a whole. Each Company Subsidiary is duly
qualified to conduct business and is in good standing (to the
extent such concept exists in the relevant jurisdiction) in each
jurisdiction in which the ownership or lease and operation of
its property or the nature of its business requires such
qualification, except for jurisdictions in which any failures to
be so qualified or to be in good standing, individually or in
the aggregate, do not constitute a Company Material Adverse
Effect. All of the outstanding shares of capital stock of, or
other Equity Interests in, each Company Subsidiary are duly
authorized, validly issued, fully paid and nonassessable and are
owned, directly or indirectly, by the Company free and clear of
all Liens, except for Liens granted under the Company Credit
Agreement.
(b) Section 3.4(b) of the Company Disclosure Letter
sets forth all of the Company Subsidiaries. The Companys
U.S. Subsidiaries are not in violation of their respective
Company Subsidiary Charter Documents. The Company has no
Subsidiaries that are not U.S. Subsidiaries.
Section 3.5 Compliance with Laws;
Permits. Except for such matters that,
individually or in the aggregate, do not constitute a Company
Material Adverse Effect, and except for (x) matters
relating to Taxes, which are treated exclusively in
Section 3.10, and (y) matters relating to
Company Benefit Plans, which are treated exclusively in
Section 3.11 and (z) matters arising under
Environmental, Health and Safety Laws, which are treated
exclusively in Section 3.13:
(a) Neither the Company nor any Company Subsidiary is in
violation of any applicable Law relating to its business or the
ownership or operation of any of its assets, and no Claim is
pending or, to the knowledge of the Company, threatened with
respect to any such matters;
(b) The Company and each Company Subsidiary hold all
permits, licenses, certifications, variations, exemptions,
Orders, franchises, registrations, filings, approvals,
authorizations or other required grant of operating authority
required by any Governmental Authority necessary for the conduct
of their respective businesses (the Company
Permits). All Company Permits are in full force and
effect and there exists no default thereunder or breach thereof,
and the Company has no notice or knowledge that such Company
Permits will not be renewed in the ordinary course after the
Effective Time. No Governmental Authority has given, or
A-1-22
to the knowledge of the Company, threatened to give, notice of
any action to terminate, cancel or reform any Company Permits;
and
(c) The Company and each Company Subsidiary possess all
Company Permits required for the present ownership or lease, as
the case may be, and operation of all Company Real Property, and
there exists no default or breach with respect to, and no
Person, including any Governmental Authority, has taken or, to
the knowledge of the Company, threatened to take, any action to
terminate, cancel or reform any such Company Permit pertaining
to the Company Real Property.
Section 3.6 No Violations; Consents.
(a) The execution and delivery by the Company of this
Agreement and the Related Documents, the performance of the
Companys obligations hereunder and thereunder and the
consummation by the Company of the Merger and the other
transactions contemplated hereby and thereby in accordance with
the terms hereof and thereof will not (i) violate any
provisions of the Company Charter Documents, (ii) violate
any provisions of the Company Subsidiary Charter Documents of
any Company Subsidiary, (iii) violate, result in a breach
of any provision of, constitute a default (or an event which,
with notice or lapse of time or both, would constitute a
default) under, impair the Companys rights under, alter
the rights or obligations of third parties under, result in the
termination of or in a right of termination or cancellation of,
give rise to a right of purchase under, or accelerate the
performance required by, any Company Material Contract,
(iv) result in the creation of any Lien (other than
Permitted Liens) upon any of the properties or assets of the
Company or its Subsidiaries under any Company Material Contract,
(v) result in any Company Material Contract being declared
void, voidable, or without further binding effect,
(vi) result in a detriment to the Company or any of its
Subsidiaries (constituting a Material Adverse Effect) under the
terms, conditions or provisions of any Contracts by which the
Company or any of its Subsidiaries is bound or to which any of
their properties is subject or (vii) assuming that the
consents and approvals referred to in Section 3.6(b)
are duly and timely made or obtained and that Company Proposal
is approved by the requisite Company stockholders, contravene or
constitute a violation of any provision of any applicable Law
binding upon or applicable to the Company or any of its
Subsidiaries, other than, in the cases of clauses
(iii) through (vii), any such violations, breaches,
defaults, impairments, alterations, terminations, cancellations,
purchase rights, accelerations, Liens, voidings or detriments
that, individually or in the aggregate, do not constitute a
Company Material Adverse Effect.
(b) Neither the execution and delivery by the Company of
this Agreement or any Related Document nor the consummation by
the Company of the Merger and the other transactions
contemplated hereby or thereby in accordance with the terms
hereof or thereof will require any consent, approval or
authorization of, notice to or filing or registration with any
Governmental Authority, other than (i) the filing of the
Certificate of Merger with the Secretary of State of the State
of Delaware and the filing of other documents required to be
filed as a result of the Merger with the relevant Governmental
Authorities in the states and foreign jurisdictions in which
Company or any Company Subsidiary is qualified to conduct
business, (ii) the filing of the Proxy Statement/Prospectus
with the SEC in accordance with the Exchange Act and the filing
and effectiveness of the Registration Statement,
(iii) filings required under the
U.S. Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act), including the filing of forms and other
documents with the FTC and the Antitrust Division of the DOJ as
required by the HSR Act (Notification and Report
Forms), (iv) filings required under federal and
state securities or Blue Sky Laws, applicable
non-U.S. Laws
or the rules of the Nasdaq or the NYSE or (v) any other
applicable filings or notifications under the antitrust,
competition or similar Laws of foreign jurisdictions ((i), (ii),
(iii), (iv) and (v) collectively, the Company
Regulatory Filings), except for any failures to obtain
any such consent, approval or authorization or to make any such
filing, notification or registration that, individually or in
the aggregate, do not constitute a Company Material Adverse
Effect.
Section 3.7 SEC Documents.
(a) The Company has filed with the SEC all documents
required to be so filed by it since January 1, 2006
pursuant to Sections 13(a), 14(a) and 15(d) of the Exchange
Act, and has made available to Parent each
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registration statement, periodic or other report, proxy
statement or information statement (other than preliminary
materials) it has so filed, each in the form (including exhibits
and any amendments thereto) filed with the SEC (collectively,
the Company Reports). As used in this
Section 3.7, the term file shall include
any reports on
Form 8-K
furnished to the SEC. As of its respective date or, if amended
by a subsequent filing prior to the date hereof, on the date of
such filing, each Company Report complied in all material
respects with the applicable requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and
regulations thereunder, and did not contain any untrue statement
of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading. None of the Company Subsidiaries is
required to file any forms, reports or other documents with the
SEC pursuant to Section 13 or 15 of the Exchange Act. There
are no outstanding or unresolved comments to any comment letters
received by the Company from the SEC and, to the knowledge of
the Company, none of the Company Reports is the subject of any
ongoing review by the SEC. Each of the consolidated balance
sheets included in or incorporated by reference into the Company
Reports (including the related notes and schedules) fairly
presents in all material respects the consolidated financial
position of the Company and its Subsidiaries as of its date, and
each of the consolidated statements of operations, cash flows
and changes in stockholders equity included in or
incorporated by reference into the Company Reports (including
any related notes and schedules) fairly presents in all material
respects the results of operations, cash flows or changes in
stockholders equity, as the case may be, of the Company
and its Subsidiaries for the periods set forth therein (such
consolidated balance sheets and consolidated statements of
operations, cash flows and changes in stockholders equity,
each including the notes and schedules thereto, the
Company Financial Statements). The Company
Financial Statements (i) complied as to form in all
material respects with the published rules and regulations of
the SEC and (ii) were prepared in accordance with GAAP
consistently applied during the periods involved, except as may
be noted in the Company Financial Statements or as permitted by
Form 10-Q
or
Form 8-K.
(b) The Company has not entered into or modified any loans
or arrangements with its officers and directors in violation of
Section 402 of SOX. The Company has established and
maintains disclosure controls and procedures and internal
control over financial reporting (as such terms are defined in
paragraphs (e) and (f), respectively, of
Rule 13a-15
under the Exchange Act) as required by
Rule 13a-15
under the Exchange Act. The Companys disclosure controls
and procedures are reasonably designed to ensure that all
material information required to be disclosed by the Company in
the reports that it files under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in the rules and forms of the SEC, and that all such
material information is accumulated and communicated to the
management of the Company as appropriate to allow timely
decisions regarding required disclosure and to make the
certifications required pursuant to Sections 302 and 906 of
SOX. The management of the Company has completed its assessment
of the effectiveness of the Companys internal controls
over financial reporting in compliance with the requirements of
Section 404 of SOX for the year ended December 31,
2006, and such assessment concluded that such controls were
effective. The Company has disclosed, based on the most recent
evaluations by its chief executive officer and its chief
financial officer, to the Companys outside auditors and
the audit committee of the Company Board (A) any
significant deficiencies or material weaknesses (as such terms
are defined in the Public Company Accounting Oversight
Boards Auditing Standard No. 2 or No. 5, as
applicable) in the design or operation of internal controls over
financial reporting and (B) any fraud, regardless of
whether material, that involves management or other employees
who have a significant role in the Companys internal
controls over financial reporting.
(c) Since January 1, 2006, to the knowledge of the
Company, neither the Company nor any of its Subsidiaries nor any
director, officer, employee, auditor, accountant or
representative of the Company or any of its Subsidiaries has
received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or Claim, whether written or
oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of the Company or any of
its Subsidiaries, including any complaint, allegation, assertion
or Claim that the Company or any of its Subsidiaries has a
material weakness (as such terms is
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defined in the Public Company Accounting Oversight Boards
Auditing Standard No. 2 or No. 5, as applicable), in
its internal control over financial reporting.
(d) The Company is in compliance in all material respects
with all current listing and corporate governance requirements
of Nasdaq and is in compliance in all material respects with all
rules, regulations and requirements of SOX.
Section 3.8 Litigation. There
is no litigation, arbitration, mediation, action, suit, claim,
proceeding or investigation, whether legal or administrative,
pending against the Company or any of its Subsidiaries or, to
the Companys knowledge, threatened against the Company or
any of its Subsidiaries or any of their respective assets,
properties or operations, at Law or in equity, before or by any
Governmental Authority or any Order of any Governmental
Authority that, individually or in the aggregate, and taking
into consideration the aggregate amounts reserved for any such
matters in the Companys consolidated balance sheet at
September 30, 2007, constitutes a Company Material Adverse
Effect.
Section 3.9 Absence of Company Material
Adverse Effect and Certain Other Changes. Since
December 31, 2006, there has not been (a) any Company
Material Adverse Effect, (b) any material change by the
Company or any of its Subsidiaries, when taken as a whole, in
any of their accounting methods, principles or practices or any
of their Tax methods, practices or elections, (c) any
declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock or other Equity
Interest of the Company or any redemption, purchase or other
acquisition of any of its Equity Interests, or (d) except
in the ordinary course of business consistent with past
practice, any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option, stock purchase or
other employee benefit plan.
Section 3.10 Taxes.
(a) Except (x) as set forth in
Section 3.10 of the Company Disclosure Letter,
(y) as described in Company Reports or (z) for such
matters that, individually or in the aggregate, do not
constitute a Company Material Adverse Effect:
(i) The Acquired Companies have timely filed, or have
caused to be timely filed on their behalf, all Tax Returns
required to be filed by or on behalf of the Acquired Companies
(including any Tax Return required to be filed by an affiliated,
consolidated, combined, unitary or similar group that included
the Acquired Companies) in the manner prescribed by applicable
Law. All such Tax Returns are complete and correct. The Acquired
Companies have timely paid (or the Company has paid on each
Company Subsidiarys behalf) all Taxes due and owing, and,
in accordance with GAAP, the most recent Company Financial
Statements contained in the Company Reports reflect a reserve
(excluding any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) for all Taxes
payable by the Acquired Companies for all Taxable periods and
portions thereof through the date of such Company Financial
Statements.
(ii) No Tax Return of the Acquired Companies is under audit
or examination by any Tax Authority, and no written or, to the
knowledge of the Company, unwritten notice of such an audit or
examination has been received by the Acquired Companies. Each
material assessed deficiency resulting from any audit or
examination relating to Taxes by any Tax Authority has been
timely paid and there is no assessed deficiency, refund
litigation, proposed adjustment or matter in controversy with
respect to any Taxes due and owing by the Acquired Companies.
(iii) Since December 31, 2006, the Acquired Companies
have not made or rescinded any material election relating to
Taxes or settled or compromised any Claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or
controversy relating to any Taxes, or, except as may be required
by applicable Law, made any change to any of their methods of
reporting income or deductions for federal income Tax purposes
from those employed in the preparation of their most recently
filed federal Tax Returns.
A-1-25
(iv) The Acquired Companies do not have any liability for
any Tax under Treasury
Regulation Section 1.1502-6
or any similar provision of any other Tax Law, except for Taxes
of the Acquired Companies and the affiliated group of which the
Company is the common parent, within the meaning of
Section 1504(a)(1) of the Internal Revenue Code or any
similar provision of any other Tax Law.
(v) There is no agreement or other document extending, or
having the effect of extending, the period of assessment or
collection of any material Taxes and no power of attorney with
respect to any such Taxes has been executed or filed with any
Tax Authority by or on behalf of the Acquired Companies.
(vi) Except for statutory Liens for Taxes not yet due, no
Liens for Taxes exist with respect to any assets or properties
of the Acquired Companies.
(vii) Except for any agreements or arrangements
(A) with customers, vendors, lessors or similar persons
entered into in the ordinary course of business or
(B) among the Acquired Companies, no Acquired Company is a
party to or bound by any Tax sharing agreement, Tax indemnity
obligation or agreement or arrangement with respect to Taxes
(including any advance pricing agreement, closing agreement or
other agreement relating to Taxes with any Tax Authority).
(viii) The Acquired Companies have complied with all
applicable Laws relating to the payment and withholding of Taxes
(including withholding of Taxes pursuant to Sections 1441,
1442 and 3402 of the Internal Revenue Code or similar provisions
of any other Tax Law) and have, within the time and the manner
prescribed by applicable Law, withheld from and paid over to the
proper Tax Authorities all amounts required to be so withheld
and paid over under applicable Tax Law.
(ix) No Acquired Company is or has been a United States
real property holding corporation within the meaning of
Section 897(c)(2) of the Internal Revenue Code.
(x) No Acquired Company shall be required to include in a
Taxable period ending after the Closing Date any item of income
that accrued in a prior Taxable period but was not recognized in
any prior Taxable period as a result of the installment method
of accounting, the long-term contract method of accounting, the
cash method of accounting or Section 481 of the Internal
Revenue Code or comparable provisions of any other Tax Law.
(xi) No Acquired Company has participated in any
reportable transaction as defined in Treasury
Regulation Section 1.6011-4.
(b) Since December 31, 2005, no Acquired Company has
been a distributing corporation or a
controlled corporation in connection with a
distribution described in Section 355 of the Internal
Revenue Code.
Section 3.11 Employee Benefit Plans.
(a) Section 3.11(a) of the Company Disclosure
Letter contains a list of all the Company Benefit Plans. The
Company has provided or made available to Parent true and
complete copies of the Company Benefit Plans and, if applicable,
all amendments thereto, the most recent trust agreements, the
Forms 5500 for the prior three years, the most recent IRS
determination or opinion letters, summary plan descriptions, any
summaries of material modifications provided to participants
since the most recent summary plan descriptions, material
notices to participants, funding statements, annual reports and
actuarial reports, if applicable, and all correspondence with
any Governmental Authority for each Company Benefit Plan.
(b) There has been no reportable event, as that
term is defined in Section 4043 of ERISA, with respect to
the Company Benefit Plans subject to Title IV of ERISA for
which the
30-day
reporting requirement has not been waived that, individually or
in the aggregate with other reportable events, constitutes a
Company Material Adverse Effect; to the extent applicable, the
Company Benefit Plans comply in all material respects with the
requirements of ERISA and the Internal Revenue Code or with the
Laws and regulations of any applicable jurisdiction, and except
as set forth in Section 3.11(b) of the Company
Disclosure Letter, any Company Benefit Plan intended to be
qualified under Section 401(a) of the Internal Revenue Code
has received a favorable determination letter from the Internal
Revenue Service (the IRS) (or, if applicable,
an
A-1-26
opinion letter) and such letter has not been revoked; all
required amendments since the issuance of such favorable
determination letter from the IRS have been made and no
amendments have been made which could reasonably be expected to
result in the disqualification of any of such Company Benefit
Plans; the Company Benefit Plans have been maintained and
operated in compliance in all material respects with their
terms; to the Companys knowledge, there are no breaches of
fiduciary duty in connection with the Company Benefit Plans for
which the Company could be liable; there are no pending or, to
the Companys knowledge, threatened Claims against or
otherwise involving any Company Benefit Plan that, individually
or in the aggregate, constitute a Company Material Adverse
Effect, and no suit, action or other litigation (excluding
claims for benefits incurred in the ordinary course of the
Company Benefit Plan activities) has been brought against or
with respect to any such Company Benefit Plan for which the
Company could be liable, that, individually or in the aggregate,
constitutes a Company Material Adverse Effect; all material
contributions required to be made as of the date hereof to the
Company Benefit Plans have been made or have been properly
accrued and are reflected in the Company Financial Statements as
of the date thereof; neither the Company nor any of its
Subsidiaries or ERISA Affiliates has any material liability,
contingent or otherwise, under Title IV of ERISA; and with
respect to the Company Benefit Plans or any employee
pension benefit plans, as defined in Section 3(2) of
ERISA, that are subject to Title IV of ERISA, there does
not exist any accumulated funding deficiency within the meaning
of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, regardless of whether waived.
(c) Neither the Company nor any of its Subsidiaries or
ERISA Affiliates contributes to, or has an obligation to
contribute to, and has not within six years prior to the
Effective Time contributed to, or had an obligation to
contribute to, (i) a multiemployer plan within
the meaning of Section 3(37) of ERISA, (ii) any plan
that is covered by Title IV of ERISA, (iii) any plan
subject to Section 412 of the Internal Revenue Code or
(iv) any plan funded by a VEBA within the
meaning of Section 501(c)(9) of the Internal Revenue Code.
(d) No Company Benefit Plan maintained by the Acquired
Companies provides medical, surgical, hospitalization, death or
similar benefits (regardless of whether insured) for employees
or former employees of the Company or any Company Subsidiary for
periods extending beyond their retirement or other termination
of service other than coverage mandated by applicable Law.
(e) All accrued material obligations of the Company and its
Subsidiaries, whether arising by operation of Law, Contract, or
past custom, for compensation and benefits, including, but not
limited to, bonuses and accrued vacation, and benefits under
Company Benefit Plans, have been paid or adequate accruals for
such obligations are reflected on the Company Financial
Statements as of the date thereof.
(f) Section 3.11(f) of the Company Disclosure
Letter sets forth an accurate and complete list of each Company
Benefit Plan (and the particular circumstances described in this
Section 3.11(f) relating to such Company Benefit
Plan) under which the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby
could (either alone or in conjunction with any other event, such
as termination of employment), result in, cause the accelerated
vesting, funding or delivery of, or increase the amount or value
of, any payment or benefit to any employee, officer or director
of the Company or any of its Subsidiaries. As to each Company
Benefit Plan, the Company or the applicable Company Subsidiary,
as the case may be, has reserved the right to amend or terminate
such plan without material liability to any Person except with
respect to benefits accrued in the ordinary course prior to the
date of such amendment or termination.
(g) The Company has provided to Parent an estimate of all
amounts paid or payable (whether in cash, in property, or in the
form of benefits, accelerated cash, property, or benefits, or
otherwise) in connection with the transactions contemplated
hereby (either solely as a result thereof or as a result of such
transactions in conjunction with any other event) that were or
will be an excess parachute payment within the
meaning of Section 280G of the Internal Revenue Code.
(h) Each Company Benefit Plan which is or reasonably could
be determined to be an arrangement subject to Section 409A
of the Internal Revenue Code has been operated in good faith
compliance with Section 409A
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of the Internal Revenue Code since January 1, 2005 and has
been, or may be, timely amended with the consent of the
participant, if necessary, to comply in good faith with
Section 409A of the Internal Revenue Code and any
applicable guidance, whether proposed or final, issued by the
IRS with respect thereto.
(i) No Company Benefit Plan is a multiple employer plan as
defined in Section 413(c) of the Internal Revenue Code.
(j) No Company Benefit Plan that is not subject to ERISA
has any material liabilities thereunder which are not otherwise
fully funded, if applicable, or properly accrued and reflected
under the Company Financial Statements as of the date thereof.
(k) No Company Benefit Plan holds any qualifying
employer securities or qualifying employer real
estate within the meaning of ERISA.
(l) No Company Benefit Plan is subject to the Laws of any
jurisdiction outside the United States of America.
(m) No Company Benefit Plan that is an employee pension
benefit plan has been completely or partially terminated and no
proceeding to terminate any such plan has been instituted or
threatened. The market value of assets under each Company
Benefit Plan that is an employee pension benefit plan (other
than a multiemployer plan) equals or exceeds the present value
of all vested and non-vested liabilities thereunder determined
in accordance with the PBGC methods, factors and assumptions
applicable to employee pension benefit plans determined as if
terminating on the date hereof. None of the Company, any of its
Subsidiaries or any ERISA Affiliate has incurred, and none of
the Company, its Subsidiaries, ERISA Affiliates or their
directors, officers and employees has any reason to expect that
the Company, any of its Subsidiaries or any ERISA Affiliate will
incur, any liability to the PBGC (other than with respect to
PBGC premium payments not yet due) or otherwise under
Title IV of ERISA or under the Internal Revenue Code with
respect to any employee pension benefit plan. None of the
Company, any of its Subsidiaries, or any ERISA Affiliate has
incurred any liability on account of a partial
withdrawal or a complete withdrawal (within
the meaning of ERISA Sections 4205 and 4203, respectively)
from any multiemployer plan, no such liability has been
asserted, and there are no events or circumstances that could
result in any such partial or complete withdrawal. None of the
Company, any of its Subsidiaries or any ERISA Affiliate is bound
by any Contract or agreement or has any liability described in
ERISA Section 4204.
Section 3.12 Labor Matters.
(a) (i) As of the date of this Agreement, neither the
Company nor any of its Subsidiaries is a party to, or bound by,
any collective bargaining agreement or similar Contract,
agreement or understanding with a labor union or similar labor
organization and (ii) to the Companys knowledge,
there are no organizational efforts with respect to the
formation of a collective bargaining unit presently being made
or threatened.
(b) Except for such matters that, individually or in the
aggregate, do not constitute a Company Material Adverse Effect,
(i) neither the Company nor any Company Subsidiary has
received any written complaint of any unfair labor practice or
other unlawful employment practice or any written notice of any
material violation of any federal, state or local statutes,
Laws, ordinances, rules, regulations, Orders or directives with
respect to the employment of individuals by, or the employment
practices of, the Company or any Company Subsidiary, or the work
conditions, terms and conditions of employment, wages or hours
of their respective businesses, (ii) there are no unfair
labor practice charges or other employee related complaints
against the Company or any Company Subsidiary pending or, to the
knowledge of the Company threatened, before any Governmental
Authority by or concerning the employees working in their
respective businesses, and (iii) there is no labor dispute,
strike, slowdown or work stoppage against the Company or any of
its Subsidiaries or, to the Companys knowledge, pending or
threatened against the Company or any of its Subsidiaries.
A-1-28
Section 3.13 Environmental
Matters. Except for such matters that,
individually or in the aggregate, do not constitute a Company
Material Adverse Effect:
(a) The Company and each Company Subsidiary has been and is
in compliance with all applicable Environmental, Health and
Safety Laws and possesses and is in compliance with any permits
or licenses required under Environmental, Health and Safety
Laws. To the knowledge of the Company, there are no past or
present facts, conditions or circumstances that interfere with
or preclude, or could interfere with or preclude if known to a
Governmental Authority, the conduct of any of the Acquired
Companies businesses as now conducted or which interfere
with continued compliance with applicable Environmental, Health
and Safety Laws.
(b) No proceedings or known investigations of any
Governmental Authority are pending or, to the knowledge of the
Company, threatened against the Company or its Subsidiaries (or
any other Person the obligations of which have been assumed by
the Company or any Company Subsidiary) that allege the violation
of or seek to impose liability pursuant to any Environmental,
Health and Safety Laws, and, to the knowledge of the Company,
there are no past or present facts, conditions or circumstances
at, on or arising out of, or otherwise associated with, any
current (or, to the knowledge of the Company or its
Subsidiaries, former) businesses, assets or properties of the
Company or any Company Subsidiary (or any other Person the
obligations of which have been assumed by the Company or any
Company Subsidiary), including, but not limited to, any
on-site or
off-site disposal, release or spill of any Hazardous Materials,
which constitute a material violation of Environmental, Health
and Safety Laws or are reasonably likely to give rise to
(i) costs, expenses, liabilities or obligations for any
cleanup, remediation, disposal or corrective action under any
Environmental, Health and Safety Laws, (ii) Claims arising
for personal injury, property damage or damage to natural
resources, or (iii) fines, penalties or injunctive relief.
(c) Neither the Company nor any of its Subsidiaries has
(i) received any written notice of noncompliance with,
violation of, or liability or potential liability under any
Environmental, Health and Safety Laws or (ii) entered into
or become subject to any consent decree, Order or agreement with
any Governmental Authority or other Persons pursuant to any
Environmental, Health and Safety Laws or relating to the cleanup
of any Hazardous Materials.
Section 3.14 Intellectual
Property. Except for such matters that,
individually or in the aggregate, do not constitute a Company
Material Adverse Effect, (a) the products, services and
operations of the Company and its Subsidiaries do not infringe
upon, violate or misappropriate the Intellectual Property of any
Third Party, (b) the Company and its Subsidiaries own or
possess valid licenses or other valid rights to use the
Intellectual Property that the Company and its Subsidiaries use,
exercise or exploit in, or that may be necessary or desirable
for, their businesses as currently being conducted, free and
clear of all Liens (other than Permitted Liens), and (c) to
the knowledge of the Company, there is no infringement of any
Intellectual Property owned by or licensed by or to the Company
or any of its Subsidiaries. To the Companys knowledge,
there are no unauthorized uses, disclosures, infringements or
misappropriations of any Intellectual Property of the Company or
any Company Subsidiary by any Person, including, without
limitation, any employee or independent contractor (present or
former) of the Company or any Company Subsidiary, that,
individually or in the aggregate, constitute a Company Material
Adverse Effect.
Section 3.15 Insurance. Except
for such matters that, individually or in the aggregate, do not
constitute a Company Material Adverse Effect:
(a) The Company and its Subsidiaries maintain and will
maintain through the Closing Date the insurance coverages
summarized in Section 3.15(a) of the Company
Disclosure Letter or replacement policies that are substantially
similar to the policies replaced. In addition, there is no
default with respect to any provision contained in any such
policy or binder, and none of the Acquired Companies has failed
to give any notice or present any claim under any such policy or
binder in a timely fashion.
(b) To the knowledge of the Company, no event relating
specifically to the Company or its Subsidiaries (as opposed to
events affecting the drilling service industry in general) has
occurred that is
A-1-29
reasonably likely, after the date of this Agreement, to result
in an upward adjustment in premiums under any insurance policies
they maintain. Neither the Company nor any of its Subsidiaries
has received notice from any insurer or agent of such insurer
that substantial capital improvements or other expenditures will
have to be made in order to continue such insurance policies.
Excluding insurance policies that have expired and been replaced
in the ordinary course of business, no excess liability or
protection and indemnity insurance policy has been canceled by
the insurer within one year prior to the date hereof, and to the
Companys knowledge, no threat in writing has been made to
cancel (excluding cancellation upon expiration or failure to
renew) any current insurance policy of the Company or any
Company Subsidiary.
Section 3.16 No
Brokers. Neither the Company nor any of its
Subsidiaries has entered into any Contract with any Person that
may result in the obligation of the Company, the Surviving
Corporation, Merger Sub, Parent or any of their respective
Subsidiaries to pay any finders fees, brokerage or other
like payments in connection with the negotiations leading to
this Agreement or the consummation of the transactions
contemplated hereby, except that the Company has retained
Johnson Rice & Company L.L.C. as its financial
advisor, the fee and expense reimbursement arrangements with
which have been disclosed in writing to Parent prior to the date
hereof.
Section 3.17 Opinion of Financial
Advisor. The Company Board has received the
opinion of Johnson Rice & Company L.L.C. to the effect
that, as of the date of such opinion, the Merger Consideration
to be received by the holders of Company Common Stock in the
Merger (other than Parent, Merger Sub and their respective
Subsidiaries and Affiliates) is fair, from a financial point of
view, to such holders, and the Company will promptly deliver a
copy of such opinion to Parent.
Section 3.18 Parent Share
Ownership. Neither the Company nor any of its
Subsidiaries owns any shares of the capital stock of Parent or
any other securities convertible into or otherwise exercisable
to acquire shares of capital stock of Parent.
Section 3.19 Vote Required; Board of Director
Approval. Under Delaware Law and the rules of the
Nasdaq, the only vote of the holders of any class or series of
Company Equity Interests necessary to approve the Company
Proposal is the affirmative vote in favor of the Company
Proposal by the holders of a majority of the issued and
outstanding shares of Company Common Stock (the
Required Company Vote). The Company Board
has, by resolutions duly adopted by the directors present at a
meeting of such board duly called and held and not subsequently
rescinded or modified in any way, unanimously
(a) determined that this Agreement, the Merger and the
other transactions contemplated hereby are advisable and in the
best interests of the Company and its stockholders,
(b) approved this Agreement and the Merger and the other
transactions contemplated hereby, (c) directed that this
Agreement be submitted for adoption by the stockholders of the
Company and (d) recommended that the stockholders of the
Company adopt this Agreement. Notwithstanding the foregoing, any
change in or modification or revocation of the recommendation to
the Companys stockholders of this Agreement by the Company
Board in accordance with the terms of this Agreement shall not
constitute a breach of the representation set forth in
clause (d) of this Section 3.19.
Section 3.20 Ownership and Condition of
Drilling Rigs.
(a) As of the date hereof, the Company or a Company
Subsidiary has good and marketable title to the drilling rigs
listed in Section 3.20(a) of the Company Disclosure
Letter, other than defects or irregularities of title that do
not materially impair the ownership or operation of such rigs
and in each case free and clear of all Liens, except for
Permitted Liens, Liens securing the Company Credit Agreement or
Liens that do not constitute a Company Material Adverse Effect.
No such rig is leased under an operating lease from a lessor
that, to the Companys knowledge, has incurred non-recourse
Indebtedness to finance the acquisition or construction of such
rig.
(b) Except for such matters that, individually or in the
aggregate, have not had or caused and would not be reasonably
expected to have or cause a Company Material Adverse Effect, and
except for drilling rigs that are warm-stacked, cold-stacked,
undergoing refurbishment, repair or maintenance or enroute to a
location for refurbishment, repair or maintenance, with respect
to each drilling rig owned or operated by the Acquired
A-1-30
Companies, (i) an Acquired Company holds all necessary
licenses, certificates and permits required for the operation of
such rig or, if such rig is not working, required for its most
recently completed customer work, and (ii) such rig is in
satisfactory operating condition, subject to normal maintenance
and repair requirements and normal wear and tear.
(c) The appraisal of the Companys drilling rigs by
Hadco International, dated June 11, 2007, a copy of which
has been delivered to Parent prior to the date hereof, is true
and correct in all material respects.
Section 3.21 Undisclosed
Liabilities. Neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature,
regardless of whether fixed, accrued, contingent or otherwise,
except liabilities and obligations that (a) are fully
reflected or reserved against in the Companys quarterly
report on
Form 10-Q
for the fiscal quarter ended September 30, 2007,
(b) liabilities and obligations arising under this
Agreement and the transaction contemplated by this Agreement and
(c) liabilities or obligations incurred in the ordinary
course of business consistent with past practice since
September 30, 2007, which liabilities and obligations,
individually or in the aggregate, do not constitute a Company
Material Adverse Effect.
Section 3.22 Certain Contracts.
(a) Section 3.22(a) of the Company Disclosure
Letter contains a list of all of the following Contracts (other
than those set forth on an exhibit index in the Company Reports
filed prior to the date of this Agreement) to which the Company
or any Company Subsidiary is a party or by which any of them is
bound (other than this Agreement or any Related Document):
(i) any non-competition agreement that purports to limit
the manner in which, or the localities in which, all or any
portion of their respective businesses are conducted;
(ii) any hedging agreements by which any of the assets of
the Company or any Company Subsidiary are bound, in an aggregate
amount in excess of $1.0 million; (iii) any Contract
granting any Person registration or other purchase or sale
rights with respect to any Equity Interest in the Company or any
Company Subsidiary; (iv) any voting agreement relating to
any Equity Interest of the Company or any Company Subsidiary;
(v) any Contract outside the ordinary course to which the
Company or any Company Subsidiary is a party that entitles the
other party or parties thereto to receive the benefits thereof
without incurring the obligation to pay for same within sixty
days after services are provided; (vi) any Contract outside
the ordinary course between the Company or any Company
Subsidiary and any current or former Affiliate of the Company;
(vii) any drilling rig construction or conversion Contract
with respect to which the drilling rig has not been delivered
and paid for; (viii) any drilling Contracts of one year or
greater in remaining duration; (ix) any Contract or
agreement for the borrowing of money with a borrowing capacity
or outstanding Indebtedness of $2.0 million or more; or
(x) any material contract (as such term is
defined in Item 601(b)(10) of
Regulation S-K
of the SEC) (all Contracts of the types described in
clauses (i) through (x), regardless of whether listed in
Section 3.22(a) of the Company Disclosure Letter and
regardless of whether in effect as of the date of this
Agreement, being referred to herein as Company Material
Contracts).
(b) Each of the Company Material Contracts is, to the
knowledge of the Company, in full force and effect. Except for
such matters that, individually or in the aggregate, do not
constitute a Company Material Adverse Effect, neither the
Company nor any of its Subsidiaries knows of, or has received
written notice of, any breach or violation of, or default under
(nor, to the knowledge of the Company and its Subsidiaries, does
there exist any condition which with the passage of time or the
giving of notice or both would result in such a violation or
default under), any Company Material Contract, or has received
written notice of the desire of the other party or parties to
any such Company Material Contract to exercise any rights such
party has to cancel, terminate or repudiate such Contract or
exercise remedies thereunder.
Section 3.23 State Takeover
Statutes. The Company has, or will have prior to
the Effective Time, taken all necessary action so that, assuming
compliance by Parent and Merger Sub with their respective
obligations hereunder and the accuracy of the representations
and warranties made by Parent and Merger Sub herein, the
restrictions on business combinations and voting requirements
set forth in Section 203 of the DGCL would not apply to
this Agreement, the Merger, and the transactions contemplated
hereby, and no other business combination,
moratorium, fair price, control
share acquisition or other state antitakeover
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statute or regulation, nor any takeover-related provision in the
Company Charter Documents, would apply to this Agreement, any
Related Document or the Merger.
Section 3.24 Improper
Payments. No funds, assets or properties of the
Company or its Affiliates have been used or offered for illegal
purposes. No accumulation or use of any funds, assets or
properties of the Company or its Affiliates has been made
without being properly accounted for in the financial books and
records of the Company or its Affiliates. All payments by or on
behalf of the Company or its Affiliates have been duly and
properly recorded and accounted for in their financial books and
records and such books and records accurately and fairly reflect
all transactions and dispositions of the assets of the Company
and its Affiliates. The Company has devised and maintained
systems that provide reasonable assurances that transactions are
and have been executed in accordance with managements
general or specific authorization. Neither the Company nor any
of its Affiliates, nor any director, officer, agent, employee or
other Person associated with or acting on behalf of the Company
or its Affiliates, has (a) used any corporate funds for any
unlawful contribution, gift, entertainment or payment of
anything of value relating to political activity, (b) made
any direct or indirect unlawful payment to any employee, agent,
officer, director, representative or stockholder of a
Governmental Authority or political party, or official or
candidate thereof, or any immediate family member of the
foregoing or (c) made any bribe, unlawful rebate, payoff,
influence payment, kickback or other unlawful payment in
connection with the conduct of the Companys or its
Affiliates businesses. In addition, none of the Company,
any of its Affiliates or any agent of any of them has received
any bribes, kickbacks or other improper payments from vendors,
suppliers or other Persons. The Company has no knowledge that
any payment made to a Person would be or has thereafter been
offered, given or provided to any foreign official, political
party or official thereof, or to any candidate for public office.
Section 3.26 No Other Representations or
Warranties. Except for the representations and
warranties contained in this Article 3, neither the
Company nor any other Person makes any other express or implied
representation or warranty on behalf of the Company or any of
its Affiliates in connection with this Agreement or the
transactions contemplated hereby.
Article 4
Representations
and Warranties of Parent and Merger Sub
As an inducement for the Company to enter into this Agreement,
Parent and Merger Sub hereby jointly and severally make the
following representations and warranties to the Company;
provided, however, that such representation and
warranties shall be subject to and qualified by (a) the
disclosure schedule delivered by Parent to the Company as of the
date hereof (each section of which qualifies the correspondingly
numbered representation and warranty or covenant to the extent
specified therein) (the Parent Disclosure
Letter) (it being understood that (i) the
disclosure of any fact or item in any section of the Parent
Disclosure Letter shall, should the existence of such fact or
item be relevant to any other section, be deemed to be disclosed
with respect to that other section to the extent that such
disclosure is made in a manner that makes its relevance to the
other section reasonably apparent and (ii) the disclosure
of any matter or item in the Parent Disclosure Letter shall not
be deemed to constitute an acknowledgment that such matter or
item is required to be disclosed therein or is material to a
representation or warranty set forth in this Agreement and shall
not be used as a basis for interpreting the terms
material, materially,
materiality, Parent Material Adverse
Effect or any word or phrase of similar import and does
not mean that such matter or item, alone or together with any
other matter or item, would constitute a Parent Material Adverse
Effect) or (b) information contained in the Parent Reports
(excluding any exhibits thereto) filed with the SEC prior to the
date hereof (but only to the extent that such disclosure on its
face appears to constitute information that could reasonably be
deemed a qualification or exception to the following
representations and warranties):
Section 4.1 Corporate Existence; Good
Standing; Corporate Authority. Parent is a
corporation duly incorporated, validly existing and in good
standing under the Laws of the State of Delaware. Merger Sub is
a corporation duly incorporated, validly existing and in good
standing under the Laws of the State of
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Delaware. Parent and Merger Sub are duly qualified to conduct
business and are in good standing (to the extent such concept
exists in the relevant jurisdiction) in each jurisdiction in
which the ownership, operation or lease of their respective
properties or the nature of their respective businesses requires
such qualification, except for jurisdictions in which any
failures to be so qualified or to be in good standing,
individually or in the aggregate, do not constitute a Parent
Material Adverse Effect. Parent and Merger Sub have all
requisite corporate power and authority to own or lease and
operate their respective properties and assets and to carry on
their respective businesses as they are currently being
conducted. Parent has delivered to the Company true, accurate
and complete copies of (a) the Amended and Restated
Certificate of Incorporation (including any and all Certificates
of Designations) and the Amended and Restated By-laws of Parent,
each as amended to date (the Parent Charter
Documents), and (b) the certificate of
incorporation and bylaws of Merger Sub, each as amended to date
(the Merger Sub Charter Documents), and each
Parent Charter Document and Merger Sub Charter Document is in
full force and effect, has not been amended or modified and has
not been terminated, superseded or revoked. Parent and Merger
Sub are not in violation of the Parent Charter Documents or
Merger Sub Charter Documents, as applicable.
Section 4.2 Authorization, Validity and
Effect of Agreements.
(a) Parent and Merger Sub have the requisite corporate
power and authority to execute and deliver this Agreement and
the Related Documents to which they are, or will become, a
party, to perform their respective obligations hereunder and
thereunder and to consummate the Merger and all other
transactions contemplated hereunder and thereunder, subject to
the adoption of the Parent Proposal by Parents
stockholders and the adoption of this Agreement by Parent as the
sole stockholder of Merger Sub. The execution, delivery and
performance of this Agreement and the Related Documents and the
consummation of the Merger and the other transactions
contemplated hereunder and thereunder have been duly authorized
by all requisite corporate action on behalf of Parent and Merger
Sub, and no other corporate proceedings by Parent and Merger Sub
are necessary to authorize the execution and delivery of this
Agreement or the Related Documents or to consummate the Merger
and the other transactions contemplated hereunder or under the
Related Documents, except for the approval of the Parent
Proposal by Parents stockholders, the adoption of this
Agreement by Parent as the sole stockholder of Merger Sub, the
filing of the Certificate of Merger pursuant to the DGCL and the
Governmental Authority applications and approvals described in
Section 5.8.
(b) This Agreement and each of the Related Documents to
which Parent
and/or
Merger Sub is a party have been or will be duly executed and
delivered by Parent
and/or
Merger Sub and, assuming the due authorization, execution and
delivery hereof and thereof by the Company to the extent the
Company is a party hereof and thereof, constitute or will
constitute the valid and legally binding obligations of Parent
and/or
Merger Sub, enforceable against Parent
and/or
Merger Sub in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other Laws now or hereafter in effect relating to
or affecting the rights and remedies of creditors generally and
to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
Law).
Section 4.3 Capitalization.
(a) The authorized capital stock of Parent consists of
100,000,000 shares of Parent Common Stock and
10,000,000 shares of Parent Preferred Stock. As of the
close of business on January 22, 2008, there were
35,116,035 issued and outstanding shares of Parent Common Stock,
no shares of Parent Common Stock held by Parent in its treasury
and no issued and outstanding shares of Parent Preferred Stock.
As of January 22, 2008, 1,696,763 shares of Parent
Common Stock were reserved for future issuance pursuant to
outstanding Parent stock options or restricted stock awards
under the Parent Incentive Plans. As of January 22, 2008,
there were 527,131 shares of Parent Common Stock remaining
available for the grant of awards under the Parent Incentive
Plans. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or other
similar rights with respect to Parent. All shares of Parent
Common Stock are, and all shares of Parent Common Stock which
may be issued and outstanding immediately prior to the Effective
Time as permitted under this Agreement shall be when issued,
duly authorized, validly issued, fully paid and nonassessable
shares of Parent Common Stock and not subject to any preemptive
rights. All shares of Parent Common Stock
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constituting Parent Stock Consideration will be, upon issuance,
duly authorized and validly issued, fully paid and non
assessable and not subject to any preemptive rights.
(b) Parent has no Voting Debt. As of the date of this
Agreement, except as set forth in Section 4.3 of the
Parent Disclosure Letter, since January 22, 2008, Parent
and its Subsidiaries have not issued, sold, granted or
delivered, are not obligated to issue, sell, grant or deliver
(or to cause to be issued, sold, granted or delivered), and are
not a party to any Contract or other obligation to issue, sell,
grant or deliver, any Equity Interest or Voting Debt of Parent
or any of its Subsidiaries.
(c) Parent directly or indirectly owns 100% of the
outstanding Equity Interests of Merger Sub. All of the
outstanding Equity Interests of Merger Sub are duly authorized,
validly issued, fully paid and nonassessable and are owned,
directly or indirectly, by Parent free and clear of all Liens.
Section 4.4 Subsidiaries.
(a) Each Parent Subsidiary is a corporation or other legal
entity duly organized or constituted and validly existing under
the Laws of its jurisdiction of incorporation, organization or
formation. Each Parent Subsidiary has all requisite corporate,
limited liability company, partnership or other business power
and authority to own or lease and operate its properties and
assets and to carry on its business as currently conducted,
except (with respect to foreign Parent Subsidiaries only) as
would have an immaterial effect on Parent and its Subsidiaries,
taken as a whole. Each Parent Subsidiary is duly qualified to
conduct business and is in good standing (to the extent such
concept exists in the relevant jurisdiction) in each
jurisdiction in which the ownership or lease and operation of
its property or the nature of its business requires such
qualification, except for jurisdictions in which any failures to
be so qualified or to be in good standing, individually or in
the aggregate, do not constitute a Parent Material Adverse
Effect. All of the outstanding shares of capital stock of, or
other Equity Interests in, each Parent Subsidiary are duly
authorized, validly issued, fully paid and nonassessable and are
owned, directly or indirectly, by Parent (except for Equity
Interest representing an immaterial ownership required under the
Laws of any foreign jurisdiction to be owned by others) free and
clear of all Liens except for Liens granted under the Parent
Credit Agreement.
(b) Merger Sub has been formed solely for the purpose of
engaging in the transactions contemplated hereby and, as of the
Effective Time, will not have engaged in any activities other
than in connection with the transactions contemplated by this
Agreement. Merger Sub has not conducted any business prior to
the date of this Agreement and has, and prior to the Effective
Time will have, no assets, liabilities or obligations of any
kind other than those incident to its formation and pursuant to
this Agreement and the transactions contemplated hereunder.
Merger Sub is and shall be at the Effective Time a disregarded
entity for federal income tax purposes in accordance with
Treasury Regulation §301.7701-3(b)(1) of the Internal
Revenue Code.
(c) Except as set forth in Section 4.4(c) of
the Parent Disclosure Letter, Exhibit 21.1 to Parents
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006 sets forth all
of the Parent Subsidiaries. Parents U.S. Subsidiaries
are not in violation of their respective Parent Subsidiary
Charter Documents, and Parents
non-U.S. Subsidiaries
are not in material violation of their respective Parent
Subsidiary Charter Documents.
Section 4.5 Compliance with Laws;
Permits. Except for such matters that,
individually or in the aggregate, do not constitute a Parent
Material Adverse Effect, and except for (x) matters
relating to Taxes, which are treated exclusively in
Section 4.10, (y) matters relating to Parent
Benefit Plans, which are treated exclusively in
Section 4.11 and (z) matters arising under
Environmental, Health and Safety Laws, which are treated
exclusively in Section 4.13:
(a) Neither Parent nor any Parent Subsidiary is in
violation of any applicable Law relating to its business or the
ownership or operation of any of its assets, and no Claim is
pending or, to the knowledge of Parent, threatened with respect
to any such matters;
(b) Parent and each Parent Subsidiary hold all permits,
licenses, certifications, variations, exemptions, Orders,
franchises, registrations, filings, approvals, authorizations or
other required grant of operating authority
A-1-34
required by any Governmental Authority necessary for the conduct
of their respective businesses (the Parent
Permits). All Parent Permits are in full force and
effect and there exists no default thereunder or breach thereof,
and Parent has no notice or knowledge that such Parent Permits
will not be renewed in the ordinary course after the Effective
Time. No Governmental Authority has given, or to the knowledge
of Parent, threatened to give, notice of any action to
terminate, cancel or reform any Parent Permits;
(c) Parent and each Parent Subsidiary possess all Parent
Permits required for the present ownership or lease, as the case
may be, and operation of all Parent Real Property, and there
exists no default or breach with respect to, and no Person,
including any Governmental Authority, has taken or, to the
knowledge of Parent, threatened to take, any action to
terminate, cancel or reform any such Parent Permit pertaining to
the Parent Real Property.
Section 4.6 No Violations; Consents.
(a) The execution and delivery by Parent and Merger Sub of
this Agreement and the Related Documents, the performance of
their respective obligations hereunder and thereunder and the
consummation by them of the Merger and the other transactions
contemplated hereby and thereby in accordance with the terms
hereof and thereof will not (i) violate any provisions of
the Parent Charter Documents or Merger Sub Charter Documents,
(ii) violate any provisions of the Parent Subsidiary
Charter Documents of any U.S. Parent Subsidiary,
(iii) result in a material violation of any provisions of
the Parent Subsidiary Charter Documents of any
non-U.S. Parent
Subsidiary, (iv) except as set forth in
Section 4.6(a) of the Parent Disclosure Letter,
violate, result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of time or
both, would constitute a default) under, impair Parents or
Merger Subs rights under, alter the rights or obligations
of third parties under, result in the termination or in a right
of termination or cancellation of, give rise to a right of
purchase under, or accelerate the performance required by, any
Parent Material Contract, (v) result in the creation of any
Lien (other than Permitted Liens) upon any of the properties or
assets of Parent or its Subsidiaries under any Parent Material
Contract, (vi) except as set forth in
Section 4.6(a) of the Parent Disclosure Letter,
result in any Parent Material Contract being declared void,
voidable, or without further binding effect, (vii) result
in a detriment to Parent or any of its Subsidiaries
(constituting a Parent Material Adverse Effect) under the terms,
conditions or provisions of any Contract by which Parent or any
of its Subsidiaries is bound or to which any of their properties
is subject or (viii) (assuming that the consents and approvals
referred to in Section 4.6(b) are duly and timely
made or obtained and that the Parent Proposal is approved by the
requisite Parent stockholders), constitute a violation of any
provision of any applicable Law binding upon or applicable to
Parent or any of its Subsidiaries, other than, in the cases of
clauses (iv) through (viii), any such violations, breaches,
defaults, impairments, alterations, terminations, cancellations,
purchase rights, accelerations, Liens, voidings or detriments
that, individually or in the aggregate, , do not constitute a
Parent Material Adverse Effect.
(b) Neither the execution and delivery by Parent and Merger
Sub of this Agreement or any Related Document nor the
consummation by Parent and Merger Sub of the Merger and the
other transactions contemplated hereby or thereby in accordance
with the terms hereof or thereof will require any consent,
approval or authorization of, notice to or filing or
registration with any Governmental Authority, other than
(i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and the filing of
other documents required to be filed as a result of the Merger
with the relevant Governmental Authorities in the states and
foreign jurisdictions in which Parent, Merger Sub or any Parent
Subsidiary is qualified to conduct business, (ii) the
filing of the Proxy Statement/Prospectus with the SEC in
accordance with the Exchange Act and the filing and
effectiveness of the Registration Statement, (iii) filings
required under the HSR Act, including the filing of Notification
and Report Forms with the FTC and the Antitrust Division of the
DOJ as required by the HSR Act, (iv) filings required under
federal and state securities or Blue Sky Laws,
applicable
non-U.S. Laws
or the rules of the NYSE, and (v) any other applicable
filings or notifications under the antitrust, competition or
similar Laws of foreign jurisdictions ((i), (ii), (iii),
(iv) and (v) collectively, the Parent
Regulatory Filings), except for any failures to obtain
any such consent, approval or authorization or
A-1-35
to make any such filing, notification or registration that,
individually or in the aggregate, do not constitute a Parent
Material Adverse Effect.
Section 4.7 SEC Documents.
(a) Parent has filed with the SEC all documents required to
be so filed by it since January 1, 2006 pursuant to
Sections 13(a), 14(a) and 15(d) of the Exchange Act, and
has made available to Parent each registration statement,
periodic or other report, proxy statement or information
statement (other than preliminary materials) it has so filed,
each in the form (including exhibits and any amendments thereto)
filed with the SEC (collectively, the Parent
Reports). As used in this Section 4.7, the
term file shall include any reports on
Form 8-K
furnished to the SEC. As of its respective date, or, if amended
by a subsequent filing prior to the date hereof, on the date of
such filing, each Parent Report complied in all material
respects with the applicable requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and
regulations thereunder, and did not contain any untrue statement
of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading. None of the Parent Subsidiaries is
required to file any forms, reports or other documents with the
SEC pursuant to Section 13 or 15 of the Exchange Act. There
are no outstanding or unresolved comments to any comment letters
received by the Parent from the SEC and, to the knowledge of
Parent, none of the Parent Reports is the subject of any ongoing
review by the SEC. Each of the consolidated balance sheets
included in or incorporated by reference into the Parent Reports
(including the related notes and schedules) fairly presents in
all material respects the consolidated financial position of
Parent and its Subsidiaries as of its date, and each of the
consolidated statements of operations, cash flows and changes in
stockholders equity included in or incorporated by
reference into the Parent Reports (including any related notes
and schedules) fairly presents in all material respects the
results of operations, cash flows or changes in
stockholders equity, as the case may be, of Parent and its
Subsidiaries for the periods set forth therein (such
consolidated balance sheets and consolidated statements of
operations, cash flows and changes in stockholders equity,
each including the notes and schedules thereto, the
Parent Financial Statements). The Parent
Financial Statements (i) complied as to form in all
material respects with the published rules and regulations of
the SEC and (ii) were prepared in accordance with GAAP
consistently applied during the periods involved, except as may
be noted in the Parent Financial Statements or as permitted by
Form 10-Q
or
Form 8-K.
(b) Parent has not entered into or modified any loans or
arrangements with its officers and directors in violation of
Section 402 of SOX. Parent has established and maintains
disclosure controls and procedures and internal control over
financial reporting (as such terms are defined in paragraphs
(e) and (f), respectively, of
Rule 13a-15
under the Exchange Act) as required by
Rule 13a-15
under the Exchange Act. Parents disclosure controls and
procedures are reasonably designed to ensure that all material
information required to be disclosed by Parent in the reports
that it files under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the SEC, and that all such material
information is accumulated and communicated to the management of
Parent as appropriate to allow timely decisions regarding
required disclosure and to make the certifications required
pursuant to Sections 302 and 906 of SOX. The management of
Parent has completed its assessment of the effectiveness of
Parents internal controls over financial reporting in
compliance with the requirements of Section 404 of SOX for
the year ended December 31, 2006, and such assessment
concluded that such controls were effective. Parent has
disclosed, based on the most recent evaluations by its chief
executive officer and its chief financial officer, to
Parents outside auditors and the audit committee of the
Parent Board (A) all significant deficiencies or material
weaknesses (as such terms are defined in the Public Company
Accounting Oversight Boards Auditing Standard No. 2
or No. 5, as applicable) in the design or operation of
internal controls over financial reporting and (B) any
fraud, regardless of whether material, that involves management
or other employees who have a significant role in Parents
internal controls over financial reporting.
(c) Since January 1, 2006, to the knowledge of Parent,
neither Parent nor any of its Subsidiaries nor any director,
officer, employee, auditor, accountant or representative of
Parent or any of its Subsidiaries has
A-1-36
received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or Claim, whether written or
oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of Parent or any of its
Subsidiaries, including any material complaint, allegation,
assertion or Claim that Parent or any of its Subsidiaries has a
material weakness (as such term is defined in the Public Company
Accounting Oversight Boards Auditing Standard No. 2
or No. 5, as applicable), in its internal control over
financial reporting.
(d) Parent is in compliance in all material respects with
all current listing and corporate governance requirements of the
NYSE and is in compliance in all material respects with all
rules, regulations and requirements of SOX.
Section 4.8 Litigation. There
is no litigation, arbitration, mediation, action, suit, claim,
proceeding or investigation, whether legal or administrative,
pending against Parent or any of its Subsidiaries or, to
Parents knowledge, threatened against Parent or any of its
Subsidiaries or any of their respective assets, properties or
operations, at Law or in equity, before or by any Governmental
Authority or any Order of any Governmental Authority that,
individually or in the aggregate, and taking into consideration
the aggregate amounts reserved for any such matters in
Parents consolidated balance sheet at September 30,
2007, constitutes a Parent Material Adverse Effect.
Section 4.9 Absence of Certain
Changes. Since December 31, 2006, there has
not been (a) any Parent Material Adverse Effect,
(b) any material change by Parent or any of its
Subsidiaries, when taken as a whole, in any of their accounting
methods, principles or practices or any of their Tax methods,
practices or elections, (c) any declaration, setting aside
or payment of any dividend or distribution in respect of any
capital stock or other Equity Interest of Parent or any
redemption, purchase or other acquisition of any of its Equity
Interests, or (d) except in the ordinary course of business
consistent with past practice, any increase in or establishment
of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option, stock
purchase or other employee benefit plan.
Section 4.10 Taxes.
(a) Except (x) as set forth in
Section 4.10 of the Parent Disclosure Letter,
(y) as described in the Parent Reports or (z) for such
matters that, individually or in the aggregate, do not
constitute a Parent Material Adverse Effect:
(i) The Parent Companies have timely filed, or have caused
to be timely filed on their behalf, all Tax Returns required to
be filed by or on behalf of the Parent Companies (including any
Tax Return required to be filed by an affiliated, consolidated,
combined, unitary or similar group that included the Parent
Companies) in the manner prescribed by applicable Law. All such
Tax Returns are complete and correct. The Parent Companies have
timely paid (or Parent has paid on each Parent Subsidiarys
behalf) all Taxes due and owing, and, in accordance with GAAP,
the most recent Parent Financial Statements contained in the
Parent Reports reflect a reserve (excluding any reserve for
deferred Taxes established to reflect timing differences between
book and Tax income) for all Taxes payable by the Parent
Companies for all Taxable periods and portions thereof through
the date of such.
(ii) No Tax Return of the Parent Companies is under audit
or examination by any Tax Authority, and no written or, to the
knowledge of Parent, unwritten notice of such an audit or
examination has been received by the Parent Companies. Each
material assessed deficiency resulting from any audit or
examination relating to Taxes by any Tax Authority has been
timely paid and there is no assessed deficiency, refund
litigation, proposed adjustment or matter in controversy with
respect to any Taxes due and owing by the Parent Companies.
(iii) Since December 31, 2006, the Parent Companies
have not made or rescinded any material election relating to
Taxes or settled or compromised any Claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or
controversy relating to any Taxes, or, except as may be required
by applicable Law, made any change to any of their methods of
reporting income or deductions for federal
A-1-37
income Tax purposes from those employed in the preparation of
their most recently filed federal Tax Returns.
(iv) The Parent Companies do not have any liability for any
Tax under Treasury
Regulation Section 1.1502-6
or any similar provision of any other Tax Law, except for Taxes
of the Parent Companies and the affiliated group of which Parent
is the common parent, within the meaning of
Section 1504(a)(1) of the Internal Revenue Code or any
similar provision of any other Tax Law.
(v) There is no agreement or other document extending, or
having the effect of extending, the period of assessment or
collection of any material Taxes and no power of attorney with
respect to any such Taxes has been executed or filed with any
Tax Authority by or on behalf of the Parent Companies.
(vi) Except for statutory Liens for Taxes not yet due, no
Liens for Taxes exist with respect to any assets or properties
of the Parent Companies.
(vii) Except for any agreements or arrangements
(A) with customers, vendors, lessors or similar persons
entered into in the ordinary course of business or
(B) among the Parent Companies, no Parent Company is a
party to or bound by any Tax sharing agreement, Tax indemnity
obligation or agreement or arrangement with respect to Taxes
(including any advance pricing agreement, closing agreement or
other agreement relating to Taxes with any Tax Authority).
(viii) The Parent Companies have complied with all
applicable Laws relating to the payment and withholding of Taxes
(including withholding of Taxes pursuant to Sections 1441,
1442 and 3402 of the Internal Revenue Code or similar provisions
of any other Tax Law) and have, within the time and the manner
prescribed by applicable Tax Law, withheld from and paid over to
the proper Tax Authorities all amounts required to be so
withheld and paid over under applicable Tax Law.
(ix) No Parent Company is or has been a United States real
property holding corporation within the meaning of
Section 897(c)(2) of the Internal Revenue Code.
(x) No Parent Company shall be required to include in a
Taxable period ending after the Closing Date any item of income
that accrued in a prior Taxable period but was not recognized in
any prior Taxable period as a result of the installment method
of accounting, the long-term contract method of accounting, the
cash method of accounting or Section 481 of the Internal
Revenue Code or comparable provisions of any other Tax Law.
(xi) No Parent Company has participated in any
reportable transaction as defined in Treasury
Regulation Section 1.6011-4.
(b) Since December 31, 2005, no Parent Company has
been a distributing corporation or a
controlled corporation in connection with a
distribution described in Section 355 of the Internal
Revenue Code.
Section 4.11 Employee Benefit Plans.
(a) Section 4.11(a) of the Parent Disclosure
Letter contains a list of all the Parent Benefit Plans. Parent
has provided or made available to the Company true and complete
copies of the Parent Benefit Plans and, if applicable, all
amendments thereto, the most recent trust agreements, the
Forms 5500 for the prior three years (except as set forth
on Section 4.11(a) of the Parent Disclosure Letter),
the most recent IRS determination or opinion letters, summary
plan descriptions, any summaries of material modifications
provided to participants since the most recent summary plan
descriptions, material notices to participants, funding
statements, annual reports and actuarial reports, if applicable,
and all correspondence with any Governmental Authority for each
Parent Benefit Plan.
(b) There has been no reportable event, as that
term is defined in Section 4043 of ERISA, with respect to
the Parent Benefit Plans subject to Title IV of ERISA for
which the
30-day
reporting requirement has not been waived that, individually or
in the aggregate with other reportable events, constitutes a
Parent Material Adverse Effect; to the extent applicable, the
Parent Benefit Plans comply in all material respects with the
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requirements of ERISA and the Internal Revenue Code or with the
Laws and regulations of any applicable jurisdiction, and except
as set forth in Section 4.11(b) of the Parent
Disclosure Letter, any Parent Benefit Plan intended to be
qualified under Section 401(a) of the Internal Revenue Code
has received a favorable determination letter from the IRS (or,
if applicable, an opinion letter) and such letter has not been
revoked; all required amendments since the issuance of such
favorable determination letter from the IRS have been made and
no amendments have been made which could reasonably be expected
to result in the disqualification of any of such Parent Benefit
Plans; the Parent Benefit Plans have been maintained and
operated in compliance in all material respects with their
terms; to Parents knowledge, there are no breaches of
fiduciary duty in connection with the Parent Benefit Plans for
which Parent could be liable; there are no pending or, to
Parents knowledge, threatened Claims against or otherwise
involving any Parent Benefit Plan that, individually or in the
aggregate, constitute a Parent Material Adverse Effect, and no
suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of the Parent Benefit Plan
activities) has been brought against or with respect to any such
Parent Benefit Plan for which Parent could be liable that,
individually or in the aggregate, constitutes a Parent Material
Adverse Effect; all material contributions required to be made
as of the date hereof to the Parent Benefit Plans have been made
or have been properly accrued and are reflected in the Parent
Financial Statements as of the date thereof; neither Parent nor
any of its Subsidiaries or ERISA Affiliates has any material
liability, contingent or otherwise, under Title IV of
ERISA; and with respect to the Parent Benefit Plans or any
employee pension benefit plans, as defined in
Section 3(2) of ERISA, that are subject to Title IV of
ERISA, there does not exist any accumulated funding deficiency
within the meaning of Section 412 of the Internal Revenue
Code or Section 302 of ERISA, regardless of whether waived.
(c) Neither Parent nor any of its Subsidiaries or ERISA
Affiliates contributes to, or has an obligation to contribute
to, and has not within six years prior to the Effective Time
contributed to, or had an obligation to contribute to,
(i) a multiemployer plan within the meaning of
Section 3(37) of ERISA, (ii) any plan that is covered
by Title IV of ERISA, (iii) any plan subject to
Section 412 of the Internal Revenue Code or (iv) any
plan funded by a VEBA within the meaning of
Section 501(c)(9) of the Internal Revenue Code.
(d) No Parent Benefit Plan maintained by the Parent
Companies provides medical, surgical, hospitalization, death or
similar benefits (regardless of whether insured) for employees
or former employees of Parent or any Parent Subsidiary for
periods extending beyond their retirement or other termination
of service other than coverage mandated by applicable Law.
(e) All accrued material obligations of Parent and its
Subsidiaries, whether arising by operation of Law, Contract, or
past custom, for compensation and benefits, including, but not
limited to, bonuses and accrued vacation, and benefits under
Parent Benefit Plans, have been paid or adequate accruals for
such obligations are reflected on the Parent Financial
Statements as of the date thereof.
(f) Section 4.11(f) of the Parent Disclosure
Letter sets forth an accurate and complete list of each Parent
Benefit Plan (and the particular circumstances described in this
Section 4.11(f) relating to such Parent Benefit
Plan) under which the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby
could (either alone or in conjunction with any other event, such
as termination of employment), result in, cause the accelerated
vesting, funding or delivery of, or increase the amount or value
of, any payment or benefit to any employee, officer or director
of Parent or any of its Subsidiaries. As to each Parent Benefit
Plan, Parent or the applicable Parent Subsidiary, as the case
may be, has reserved the right to amend or terminate such plan
without material liability to any Person except with respect to
benefits accrued in the ordinary course prior to the date of
such amendment or termination.
(g) Parent has provided to the Company an estimate of all
amounts paid or payable (whether in cash, in property, or in the
form of benefits, accelerated cash, property, or benefits, or
otherwise) in connection with the transactions contemplated
hereby (either solely as a result thereof or as a result of such
transactions in conjunction with any other event) that were or
will be an excess parachute payment within the
meaning of Section 280G of the Internal Revenue Code.
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(h) Each Parent Benefit Plan which is or reasonably could
be determined to be an arrangement subject to Section 409A
of the Internal Revenue Code has been operated in good faith
compliance with Section 409A of the Internal Revenue Code
since January 1, 2005 and has been, or may be, timely
amended with the consent of the participant, if necessary, to
comply in good faith with Section 409A of the Internal
Revenue Code and any applicable guidance, whether proposed or
final, issued by the IRS with respect thereto.
(i) No Parent Benefit Plan is a multiple employer plan as
defined in Section 413(c) of the Internal Revenue Code.
(j) No Parent Benefit Plan that is not subject to ERISA has
any material liabilities thereunder which are not otherwise
fully funded, if applicable, or properly accrued and reflected
under the Parent Financial Statements as of the date thereof.
(k) No Parent Benefit Plan holds any qualifying
employer securities or qualifying employer real
estate within the meaning of ERISA.
(l) With respect to all Parent International Plans,
(i) to Parents knowledge, the International Plans
have been maintained in all material respects in accordance with
all applicable Laws, (ii) if intended to qualify for
special Tax treatment, the International Plans meet the
requirements for such treatment in all material respects,
(iii) if intended to be funded
and/or
book-reserved, the International Plans are fully funded
and/or
book-reserved based upon reasonable actuarial assumptions, and
(iv) no liability which could be material to Parent and its
Subsidiaries, taken as a whole, exists or reasonably could be
imposed upon the assets of Parent or any of its Subsidiaries by
reason of such International Plans, other than to the extent
reflected on the Companys balance sheet as contained in
Parents
Form 10-K
for the year ended December 31, 2006.
(m) Except as disclosed in Section 4.11(m) of
the Parent Disclosure Letter with respect to each Parent Benefit
Plan that is an employee pension benefit plan, no such Parent
Benefit Plan has been completely or partially terminated and no
proceeding to terminate any such plan has been instituted or
threatened. With respect to any such Parent Benefit Plan that
has been terminated, all plan distributions have been made,
there are no outstanding liabilities and none of the plan,
Parent, its Subsidiaries or any ERISA Affiliate has or could
have any liability with respect thereto. The market value of
assets under each Parent Benefit Plan that is an employee
pension benefit plan (other than a multiemployer plan) equals or
exceeds the present value of all vested and non-vested
liabilities thereunder determined in accordance with the PBGC
methods, factors and assumptions applicable to employee pension
benefit plans determined as if terminating on the date hereof.
None of Parent, any of its Subsidiaries or any ERISA Affiliate
has incurred, and none of Parent, its Subsidiaries, ERISA
Affiliates or their directors, officers and employees has any
reason to expect that Parent, any of its Subsidiaries or any
ERISA Affiliate will incur, any liability to the PBGC (other
than with respect to PBGC premium payments not yet due) or
otherwise under Title IV of ERISA or under the Internal
Revenue Code with respect to any employee pension benefit plan.
None of Parent, any of its Subsidiaries, or any ERISA Affiliate
has incurred any liability on account of a partial
withdrawal or a complete withdrawal (within
the meaning of ERISA Sections 4205 and 4203, respectively)
from any multiemployer plan, no such liability has been
asserted, and there are no events or circumstances that could
result in any such partial or complete withdrawal. None of
Parent, any of its Subsidiaries, or any ERISA Affiliate is bound
by any Contract or agreement or has any liability described in
ERISA Section 4204.
Section 4.12 Labor Matters.
(a) As of the date of this Agreement, (i) neither
Parent nor any of its Subsidiaries is a party to, or bound by,
any collective bargaining agreement or similar Contract,
agreement or understanding with a labor union or similar labor
organization and (ii) to Parents knowledge, there are
no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened.
(b) Except for such matters that, individually or in the
aggregate, do not constitute a Parent Material Adverse Effect,
(i) neither Parent nor any Parent Subsidiary has received
any written complaint of any unfair labor practice or other
unlawful employment practice or any written notice of any
material violation of any
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federal, state or local statutes, Laws, ordinances, rules,
regulations, Orders or directives with respect to the employment
of individuals by, or the employment practices of, Parent or any
Parent Subsidiary or the work conditions, terms and conditions
of employment, wages or hours of their respective businesses,
(ii) there are no unfair labor practice charges or other
employee related complaints against Parent or any Parent
Subsidiary pending or, to the knowledge of Parent, threatened,
before any Governmental Authority by or concerning the employees
working in their respective businesses and (iii) there is
no labor dispute, strike, slowdown or work stoppage against
Parent or any of its Subsidiaries or, to the knowledge of
Parent, pending or threatened against Parent or any of its
Subsidiaries.
Section 4.13 Environmental
Matters. Except for such matters that,
individually or in the aggregate, do not constitute a Parent
Material Adverse Effect:
(a) Parent and each Parent Subsidiary has been and is in
compliance with all applicable Environmental, Health and Safety
Laws and possesses and is in compliance with any permits or
licenses required under Environmental, Health and Safety Laws.
To the knowledge of Parent, there are no past or present facts,
conditions or circumstances that interfere with or preclude, or
could interfere with or preclude if known to a Governmental
Authority, the conduct of any of the Parent Companies
businesses as now conducted or which interfere with continued
compliance with applicable Environmental, Health and Safety Laws.
(b) No proceedings or known investigations of any
Governmental Authority are pending or, to the knowledge of
Parent, threatened against Parent or its Subsidiaries (or any
other Person the obligations of which have been assumed by
Parent or any Parent Subsidiary) that allege the violation of or
seek to impose liability pursuant to any Environmental, Health
and Safety Laws, and, to the knowledge of Parent, there are no
past or present facts, conditions or circumstances at, on or
arising out of, or otherwise associated with, any current (or,
to the knowledge of Parent or its Subsidiaries, former)
businesses, assets or properties of Parent or any Parent
Subsidiary (or any other Person the obligations of which have
been assumed by Parent or any Parent Subsidiary), including, but
not limited to, any
on-site or
off-site disposal, release or spill of any Hazardous Materials,
which constitute a material violation of Environmental, Health
and Safety Laws or are reasonably likely to give rise to
(i) costs, expenses, liabilities or obligations for any
cleanup, remediation, disposal or corrective action under any
Environmental, Health and Safety Laws, (ii) Claims arising
for personal injury, property damage or damage to natural
resources, or (iii) fines, penalties or injunctive relief.
(c) Neither Parent nor any of its Subsidiaries has
(i) received any written notice of noncompliance with,
violation of, or liability or potential liability under any
Environmental, Health and Safety Laws or (ii) entered into
or become subject to any consent decree, Order or agreement with
any Governmental Authority or other Persons pursuant to any
Environmental, Health and Safety Laws or relating to the cleanup
of any Hazardous Materials.
Section 4.14 Intellectual
Property. Except for such matters that,
individually or in the aggregate, do not constitute a Parent
Material Adverse Effect, (a) the products, services and
operations of Parent and its Subsidiaries do not infringe upon,
violate or misappropriate the Intellectual Property of any Third
Party, (b) Parent and its Subsidiaries own or possess valid
licenses or other valid rights to use the Intellectual Property
that Parent and its Subsidiaries use, exercise or exploit in, or
that may be necessary or desirable for, their businesses as
currently being conducted, free and clear of all Liens (other
than Permitted Liens), and (c) to the knowledge of Parent,
there is no infringement of any Intellectual Property owned by
or licensed by or to Parent or any of its Subsidiaries. To
Parents knowledge, there are no unauthorized uses,
disclosures, infringements or misappropriations of any
Intellectual Property of Parent or any Parent Subsidiary by any
Person, including, without limitation, any employee or
independent contractor (present or former) of Parent or any
Parent Subsidiary, that, individually or in the aggregate,
constitute a Parent Material Adverse Effect.
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Section 4.15 Insurance. Except
for such matters that, individually or in the aggregate, do not
constitute a Parent Material Adverse Effect:
(a) Parent and its Subsidiaries maintain and will maintain
through the Closing Date the insurance coverages summarized in
Section 4.15(a) of the Parent Disclosure Letter or
replacement policies that are substantially similar to the
policies replaced. In addition, there is no material default
with respect to any provision contained in any such policy or
binder, and none of the Parent Companies has failed to give any
notice or present any claim under any such policy or binder in a
timely fashion.
(b) To the knowledge of Parent, no event relating
specifically to Parent or its Subsidiaries (as opposed to events
affecting the drilling service industry in general) has occurred
that is reasonably likely, after the date of this Agreement, to
result in an upward adjustment in premiums under any insurance
policies they maintain. Neither Parent nor any of its
Subsidiaries has received notice from any insurer or agent of
such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such
insurance policies. Excluding insurance policies that have
expired and been replaced in the ordinary course of business, no
excess liability or protection and indemnity insurance policy
has been canceled by the insurer within one year prior to the
date hereof, and to Parents knowledge, no threat in
writing has been made to cancel (excluding cancellation upon
expiration or failure to renew) any current insurance policy of
Parent or any Parent Subsidiary.
Section 4.16 No
Brokers. Neither Parent nor any of its
Subsidiaries has entered into any Contract with any Person that
may result in the obligation of the Company, the Surviving
Corporation, Merger Sub, Parent or any of their respective
Subsidiaries to pay any finders fees, brokerage or other
like payments in connection with the negotiations leading to
this Agreement or the consummation of the transactions
contemplated hereby, except that Parent has retained RBC Capital
Markets Corporation as its financial advisor, the fee and
expense reimbursement arrangements with which have been
disclosed in writing to the Company prior to the date hereof.
Section 4.17 Opinion of Financial
Advisor. The Parent Board has received the
opinion of RBC Capital Markets Corporation to the effect that,
as of the date of such opinion and subject to the assumptions,
qualifications and limitations set forth therein, the Merger
Consideration was fair, from a financial point of view, to
Parent, and Parent will promptly furnish a copy of such opinion
to the Company for informational purposes.
Section 4.18 Company Share
Ownership. Neither Parent nor any of its
Subsidiaries owns any shares of the capital stock of the Company
or any other securities convertible into or otherwise
exercisable to acquire shares of capital stock of the Company.
Section 4.19 Vote Required; Board of Director
Approval. Under Delaware Law and the rules of the
NYSE, the only vote of the holders of any class or series of
Parent Equity Interests necessary to approve the Parent Proposal
is the affirmative vote in favor of the Parent Proposal by the
holders of a majority of the shares of Parent Common Stock that
are voted on the Parent Proposal, as long as a majority of the
issued and outstanding shares of Parent Common Stock are voted
on the Parent Proposal (the Required Parent
Vote). The Parent Board has, by resolutions duly
adopted at a meeting of all directors on the Parent Board, which
meeting was duly called and held, (a) determined that the
Merger is advisable and in the best interests of Parent and its
stockholders, (b) approved the Merger and this Agreement,
(c) recommended that the stockholders of Parent approve the
issuance of shares of Parent Common Stock in the Merger and
(d) directed that such matter be submitted to the
stockholders of Parent at the Parent Meeting. No stockholder
vote is required for Merger Sub to adopt this Agreement and
consummate the transactions contemplated hereby, other than the
vote of Parent acting as the sole stockholder of Merger Sub.
Section 4.20 Ownership and Condition of
Assets.
(a) As of the date hereof, Parent or a Parent Subsidiary
has good and marketable title to the assets of the Parent
Companies, other than defects or irregularities of title that do
not materially impair the ownership or
A-1-42
operation of such assets and in each case free and clear of all
Liens, except for Permitted Liens, Liens securing the Parent
Credit Agreement or Liens that do not constitute a Parent
Material Adverse Effect.
(b) Except for such matters that, individually or in the
aggregate, do not constitute a Parent Material Adverse Effect,
the assets of the Parent Companies are in satisfactory operating
condition as of the date of this Agreement, subject to normal
maintenance and repair requirements and normal wear and tear.
Section 4.21 Undisclosed
Liabilities. Neither Parent nor any of its
Subsidiaries has any liabilities or obligations of any nature,
regardless of whether fixed, accrued, contingent or otherwise,
except liabilities and obligations that (a) are fully
reflected or reserved against in the Parents quarterly
report on
Form 10-Q
for the fiscal quarter ended September 30, 2007,
(b) liabilities and obligations arising under this
Agreement and the transaction contemplated by this Agreement and
(c) liabilities or obligations incurred in the ordinary
course of business consistent with past practice since
September 30, 2007, which liabilities and obligations,
individually or in the aggregate, do not constitute a Parent
Material Adverse Effect.
Section 4.22 Certain Contracts.
(a) Section 4.22(a) of the Parent Disclosure
Letter contains a list of all of the following Contracts (other
than those set forth on an exhibit index in the Parent Reports
filed prior to the date of this Agreement) to which Parent or
any Parent Subsidiary is a party or by which any of them is
bound (other than this Agreement or any Related Document):
(i) any non- competition agreement that purports to limit
the manner in which, or the localities in which, all or any
portion of their respective businesses are conducted;
(ii) any hedging agreements by which any of the assets of
Parent or any Parent Subsidiary are bound, in an aggregate
amount in excess of $1.0 million; (iii) any Contract
granting any Person registration or other purchase or sale
rights with respect to any Equity Interest in Parent or any
Parent Subsidiary; (iv) any voting agreement relating to
any Equity Interest of Parent or any Parent Subsidiary;
(v) any Contract outside the ordinary course to which
Parent or any Parent Subsidiary is a party that entitles the
other party or parties thereto to receive the benefits thereof
without incurring the obligation to pay for same within sixty
days after services are provided; (vi) any Contract outside
the ordinary course between Parent or any Parent Subsidiary and
any current or former Affiliate of Parent, (vii) any
drilling rig construction or conversion Contract with respect to
which the drilling rig has not been delivered and paid for;
(viii) any drilling Contracts of one year or greater in
remaining duration; (ix) any Contract or agreement for the
borrowing of money with a borrowing capacity or outstanding
Indebtedness of $2.0 million or more; or (x) any
material contract (as such term is defined in
Item 601(b)(10) of Regulation S K of the
SEC) (all Contracts of the types described in clauses (i)
through (x), regardless of whether listed in
Section 4.22(a) of the Parent Disclosure Letter and
regardless of whether in effect as of the date of this
Agreement, being referred to herein as Parent Material
Contracts).
(b) Each of the Parent Material Contracts is, to the
knowledge of Parent, in full force and effect. Except for such
matters that, individually or in the aggregate, do not
constitute a Parent Material Adverse Effect, neither Parent nor
any of its Subsidiaries knows of, or has received written notice
of, any breach or violation of, or default under (nor, to the
knowledge of Parent, does there exist any condition which with
the passage of time or the giving of notice or both would result
in such a violation or default under), any Parent Material
Contract, or has received written notice of the desire of the
other party or parties to any such Parent Material Contract to
exercise any rights such party has to cancel, terminate or
repudiate such Contract or exercise remedies thereunder.
Section 4.23 State Takeover
Statutes. Parent and Merger Sub have, or will
have prior to the Effective Time, taken all necessary action so
that, assuming compliance by the Company with its obligations
hereunder and the accuracy of the representations and warranties
made by the Company herein, the restrictions on business
combinations and voting requirements set forth in
Section 203 of the DGCL would not apply to this Agreement,
the Merger, and the transactions contemplated hereby, and no
other business combination, moratorium,
fair price, control share acquisition or
other state antitakeover statute or regulation, nor any
takeover-related provision in the Parent Charter Documents or
Merger Sub Charter Documents, would apply to this Agreement, any
Related Documents or the Merger.
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Section 4.24 Improper
Payments. No funds, assets or properties of
Parent or its Affiliates have been used or offered for illegal
purposes. No accumulation or use of any funds, assets or
properties of Parent or its Affiliates has been made without
being properly accounted for in the financial books and records
of Parent or its Affiliates. All payments by or on behalf of
Parent or its Affiliates have been duly and properly recorded
and accounted for in their financial books and records and such
books and records accurately and fairly reflect all transactions
and dispositions of the assets of Parent and its Affiliates.
Parent has devised and maintained systems that provide
reasonable assurances that transactions are and have been
executed in accordance with managements general or
specific authorization. Neither Parent nor any of its
Affiliates, nor any director, officer, agent, employee or other
Person associated with or acting on behalf of Parent or its
Affiliates, has (a) used any corporate funds for any
unlawful contribution, gift, entertainment or payment of
anything of value relating to political activity, (b) made
any direct or indirect unlawful payment to any employee, agent,
officer, director, representative or stockholder of a
Governmental Authority or political party, or official or
candidate thereof, or any immediate family member of the
foregoing or (c) made any bribe, unlawful rebate, payoff,
influence payment, kickback or other unlawful payment in
connection with the conduct of Parents or its
Affiliates businesses. In addition, none of Parent, any of
its Affiliates or any agent of any of them has received any
bribes, kickbacks or other improper payments from vendors,
suppliers or other Persons. Parent has no knowledge that any
payment made to a Person would be or has thereafter been
offered, given or provided to any foreign official, political
party or official thereof, or to any candidate for public office.
Section 4.25 Financing. Parent
has received a commitment letter (including the term sheet
referenced therein, but excluding the fee letter referenced
therein) from RBC Capital Markets Corporation and other
financial institutions (the Commitment
Letter) whereby such financial institution has
committed, upon the terms and subject to the conditions set
forth therein, to provide debt financing that, when combined
with Parents other sources of financing (including cash on
hand), is sufficient to fund the cash portion of the Merger
Consideration and the expenses of Parent and Merger Sub in
connection with the Merger. Parent has delivered to the Company
a true, complete and correct copy of the Commitment Letter as in
effect on the date hereof (including any amendments in effect
through the date of this Agreement). As of the date hereof, the
Commitment Letter is in full force and effect. The obligations
of the financing sources to fund the commitments under the
Commitment Letter are not subject to any conditions other than
as set forth in the Commitment Letter. No event has occurred
that (with or without notice, lapse of time, or both) would
constitute a breach of or default under the Commitment Letter by
Parent, or if alternative financing has been arranged by Parent,
a breach of or default under the terms of such alternative
financing. Parent has paid any and all commitment fees and other
fees, in each case, required by the Commitment Letter to be paid
as of the date hereof. Parent has no knowledge of any facts or
circumstances that would reasonably be expected to result in
(a) any of the conditions set forth in the Commitment
Letter not being satisfied (or, if alternative financing has
been arranged by Parent, any of the conditions set forth in such
alternative financing not being satisfied) or (b) the
funding contemplated in the Commitment Letter (or in such
alternative financing) not being made available to Parent on a
timely basis in order to consummate the transactions
contemplated by this Agreement.
Section 4.26 Solvency. Immediately
following the Effective Time, and after giving effect to the
Merger, neither Parent nor Surviving Corporation will
(a) be insolvent (either because its financial condition is
such that the sum of its debts is greater than the fair market
value of its assets or because the fair saleable value of its
assets is less than the amount required to pay its probable
liability on its existing debts as they mature), (b) have
unreasonably small capital with which to engage in its business
or (c) have incurred debts beyond its ability to pay them
as they become due.
Section 4.27 No Other Representations or
Warranties. Except for the representations and
warranties contained in this Article 4, none of
Parent, Merger Sub or any other Person makes any other express
or implied representation or warranty on behalf of Parent,
Merger Sub or any of their Affiliates in connection with this
Agreement or the transactions contemplated hereby.
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Article 5
Covenants
Section 5.1 Business in Ordinary
Course. Except as permitted or contemplated by
the terms of this Agreement, and except as provided in
Section 5.1 of the Company Disclosure Letter or the
Parent Disclosure Letter (as the case may be), unless with the
prior written consent of the other Parties hereto (which consent
shall not be unreasonably withheld, delayed or conditioned),
during the period from the date hereof and continuing until the
earlier of the termination of this Agreement pursuant to its
terms or the Effective Time, each of the Company and Parent
shall, and shall cause each of their respective Subsidiaries to,
carry on its business in all material respects in the usual,
regular and ordinary course, in substantially the same manner as
heretofore conducted, and use their respective commercially
reasonable efforts consistent with past practices and policies
to (a) preserve intact their respective present business
organizations and goodwill, (b) keep available the services
of their respective present executive officers, directors and
key employees, and (c) preserve their relationships with
customers, suppliers, agents, and creditors.
Section 5.2 Conduct of Business Pending
Closing. Without limiting the generality of
Section 5.1, except as permitted or contemplated by
the terms of this Agreement, and except as provided in
Section 5.1 of the Company Disclosure Letter or the
Parent Disclosure Letter (as the case may be), during the period
from the date hereof and continuing until the earlier of the
termination of this Agreement pursuant to its terms or the
Effective Time, neither the Company nor Parent shall, and
neither the Company nor Parent shall permit any of its
Subsidiaries to, do any of the following without the prior
written consent of the other Parties hereto (which consent shall
not be unreasonably withheld, delayed or conditioned):
(a) except to the extent required to comply with applicable
Law or the rules and regulations of the NYSE or Nasdaq (as the
case may be), amend its certificate or articles of
incorporation, bylaws, certificate of formation, certificate of
organization, certificate of limited partnership, limited
liability company agreement, operating agreement, partnership
agreement, or other governing or organizational documents;
(b) adjust, split, combine, reclassify or dispose of any of
its outstanding Equity Interests (other than dispositions by or
among direct or indirect wholly owned Subsidiaries and
cancellations of stock options or restricted stock grants
forfeited in accordance with the terms of a Benefit Plan in
existence on the date of this Agreement or related stock option
or restricted stock grant agreements);
(c) declare, set aside or pay any dividends or other
distributions (whether payable in cash, property or Equity
Interests) with respect to its Equity Interests (other than by
or among direct or indirect wholly owned Subsidiaries);
(d) issue, grant or sell, or agree to issue, grant or sell,
any Equity Interests, including capital stock (other than
issuances of Equity Interests (i) pursuant to the exercise
of any stock options or other equity awards outstanding on the
date of this Agreement, (ii) in an amount consistent with
past practices to non-executive officer employees hired after
the date hereof in the ordinary course of business consistent
with past practices, not to exceed 70,000 shares in the
aggregate of Parent Common Stock or 52,000 shares in the
aggregate of Company Common Stock, as the case may be, or
(iii) by a wholly owned Subsidiary of the Company or Parent
(as the case may be) to the Company or Parent or any of their
respective wholly owned Subsidiaries (as the case may be),
change its capitalization from that which exists on the date
hereof (except as described by the foregoing exceptions), issue,
sell, award or grant any rights, options or warrants to acquire
its Equity Interests or any conversion rights with respect to
its Equity Interests, or enter into or amend any agreements with
any holder of its Equity Interests with respect to holding,
voting or disposing of such Equity Interests;
(e) purchase, redeem or otherwise acquire any of its
outstanding Equity Interests, except (i) by or among direct
or indirect wholly owned Subsidiaries or (ii) shares of
Company Common Stock or Parent
A-1-45
Common Stock that are withheld to satisfy federal withholding
requirements upon vesting of Company Restricted Stock or Parent
Restricted Stock;
(f) merge or consolidate with, or sell, transfer, lease,
sublease or otherwise dispose of all or a substantial portion of
its assets to, any other Person (other than transfers among the
Acquired Companies or the Parent Companies, as the case may be),
except for any sales, leases or dispositions of assets
(i) to customers in the ordinary course of business
consistent with past practices or (ii) to a non-affiliated
Person in an arms-length transaction for not less than fair
market value and not in excess of $5.0 million individually
or $10.0 million in the aggregate;
(g) liquidate,
wind-up,
dissolve or adopt any plan to liquidate,
wind-up or
dissolve (or suffer any liquidation or dissolution) (other than
direct or indirect wholly owned Subsidiaries);
(h) acquire or agree to acquire by merger, consolidation or
otherwise (including by purchase of Equity Interests or all or
substantially all of the assets) the business of any Person or a
division thereof;
(i) sell, lease or sublease, transfer or otherwise dispose
of any drilling rigs listed in Section 3.20(a) of
the Company Disclosure Letter that have a value in excess of
$1.5 million individually or $4.5 million in the
aggregate;
(j) sell, transfer or otherwise dispose of, or mortgage,
pledge or otherwise encumber, any Equity Interests of any other
Person (including any Equity Interests in any Subsidiary), other
than Permitted Liens or Liens pursuant to any credit agreement
to which it is a party and that is outstanding as of the date
hereof;
(k) make any loans, advances or capital contributions to,
or investments in, any Person (other than (i) loans,
advances or capital contributions to a wholly owned Subsidiary
or loans or advances from such a Subsidiary, (ii) customer
loans and advances to employees consistent with past practices
or (iii) short-term investments of cash in the ordinary
course of business in accordance with the cash management
procedures of the Company, Parent or their respective
Subsidiaries (as the case may be));
(l) terminate or amend any Company Material Contract or
Parent Material Contract (as the case may be) or waive or assign
any of its rights under any Company Material Contract or Parent
Material Contract (as the case may be) in a manner that would be
materially adverse to the Company or Parent (as the case may
be), or enter into any Company Material Contract or Parent
Material Contract (as the case may be) other than customer
Contracts entered into in the ordinary course of business;
(m) (i) incur or assume any Indebtedness, except
indebtedness incurred under any credit agreement to which it is
a party and that is outstanding as of the date hereof, letters
of credit, surety bonds or similar arrangements incurred in the
ordinary course of business consistent with past practices or
indebtedness incurred with respect to any matter expressly
permitted by this Section 5.2, or (ii) assume,
endorse (other than endorsements of negotiable instruments in
the ordinary course of business), guarantee or otherwise become
liable or responsible for (whether directly, indirectly,
contingently or otherwise) the liabilities, obligations or
performance of any other Person, except under any credit
agreement to which it is a party and that is outstanding as of
the date hereof or in the ordinary course of business consistent
with past practices;
(n) (i) during the period from the date of this
Agreement to the Closing Date, except as otherwise permitted
under this Agreement, enter into any additional Contracts,
Benefit Plans or agreements, in each case, with employees,
directors or consultants of the Company or Parent (as the case
may be) or any of their respective Subsidiaries, or make or
agree to make any material changes to any existing Contracts,
Benefit Plans or agreements, in each case, with employees,
directors or consultants of the Company or Parent (as the case
may be) or any of their respective Subsidiaries; provided,
however, that each of the Parties may in its sole discretion
and without the prior written consent of any other Party, amend
or adopt any arrangement to cause an arrangement existing on the
date hereof to comply with, or be exempt from, Section 409A
of the Internal Revenue Code if such amendment or arrangement
does not cause or entail
A-1-46
any cost or expense to Parent (other than reasonable and
necessary fees and expenses of advisors in connection
therewith), (ii) grant any increase in the compensation
(including base salary or bonus) or benefits payable to any
officer, (iii) except in connection with promotions
consistent with past practices, grant any increase in the
compensation or benefits payable to any non-officer or
(iv) except as required to comply with applicable Law or
any agreement or policy in existence as of the date of this
Agreement, adopt, enter into, amend or otherwise increase, or
accelerate the payment or vesting of any amounts, benefits or
rights payable or accrued (or to become payable or accrued)
under any Benefit Plan;
(o) with respect to any former, present or future
Representative, increase any compensation or benefits payable to
such Representative or enter into, amend, modify or extend any
employment or consulting agreement or Benefit Plan with of for
such Representative, except in each case in the ordinary course
of business consistent with past practice;
(p) create, incur, assume or permit to exist any Lien on
any of its properties or assets, except for Permitted Liens or
Liens pursuant to any credit agreement to which it is a party
and that is outstanding as of the date thereof;
(q) make or rescind any material election relating to
Taxes, including any election for any and all joint ventures,
partnerships, limited liability companies or other investments;
settle or compromise any material Claim, action, litigation,
proceeding, arbitration or investigation relating to Taxes; or
change in any material respect any of its methods of reporting
any items for Tax purposes from those employed in the
preparation of its Tax Returns for the most recent Taxable year
for which a Tax Return has been filed, except as may be required
by applicable Law;
(r) make or commit to make capital expenditures exceeding
$50.0 million in the aggregate (in the case of the Company
and its Subsidiaries) or $150.0 million in the aggregate
(in the case of Parent and its Subsidiary);
(s) take any action that is reasonably likely to materially
delay or impair the ability of the Parties hereto to consummate
the transactions contemplated by this Agreement;
(t) enter into any new line of business material to it and
its Subsidiaries taken as a whole;
(u) enter into any Contract that subjects or will subject
the Surviving Corporation or Parent to any material non-compete
or similar restriction on any Acquired Company or Parent Company
business following the Effective Time;
(v) enter into any Contract the effect of which is or will
be to grant a Third Party any right or potential right of
license to any material Intellectual Property of any Acquired
Company or Parent Company;
(w) except as may be required as a result of a change in
GAAP, change any of the material accounting principles,
estimates, or practices used by the Acquired Companies or Parent
Companies;
(x) compromise, settle or grant any waiver or release
related to any litigation or proceeding, other than settlements
or compromises of such litigation or proceedings where the full
amount to be paid is covered by insurance or where the amount to
be paid does not exceed $5.0 million individually or
$10.0 million in the aggregate;
(y) engage in any transaction (other than pursuant to
agreements in effect as of the date of this Agreement and that
are disclosed in the Company Disclosure Letter or Parent
Disclosure Letter (as the case may be) and transactions between
or among Parent or Company and their respective Subsidiaries in
the ordinary course of business consistent with past practice)
or enter into any agreement with any Affiliate (provided
that for the purpose of this clause (y) only, the term
Affiliate shall not include any employee of
the Company, Parent or their respective Subsidiaries (as the
case may be) other than directors and executive officers thereof
and any employees who share the same household as any such
directors and executive officers); or
A-1-47
(z) enter into any Contract or obligation with respect to
any of the foregoing.
Section 5.3 Access to Assets, Personnel and
Information.
(a) Upon reasonable notice and subject to applicable Laws
relating to the exchange of information, from the date hereof
until the Effective Time, Parent shall: (i) afford to the
Company and the Company Representatives, at the Companys
sole risk and expense, reasonable access during normal business
hours to any and all of the facilities and assets of the Parent
Companies and the books and records, files, data,
correspondence, Contracts, permits, audits and all other
information relating to the Parent Companies financial
position, business, employees, representatives, agents,
facilities and assets, whether written or computerized, that are
within the possession or control of any of the Parent Companies
(the Parent Information); and (ii) upon
request during normal business hours, furnish promptly to the
Company (at the Companys expense), or similarly provide
reasonable access to, a copy of any Parent Information. The
Company agrees to review such information in a manner that does
not interfere unreasonably with the Parent Companies
operations and with the prompt discharge by such Parent
Companies employees of their duties. The Company agrees to
indemnify and hold the Parent Companies harmless from any and
all Claims and liabilities, including costs and expenses for the
loss, injury to or death of any Representative of the Acquired
Companies, and any loss or destruction of any property owned by
the Parent Companies or others (including Claims or liabilities
for use of any property) resulting directly or indirectly from
the action or inaction of any of the Acquired Companies or their
Representatives during any visit to the business or property of
the Parent Companies prior to the completion of the Merger,
whether pursuant to this Section 5.3 or otherwise No
Parent Company shall be required to provide access to or to
disclose Parent Information where such access or disclosure
would constitute a violation of attorney/client privilege,
violate any Law or violate a Contract pursuant to which any
Parent Company is required to keep such information
confidential. In such circumstances, the Parties will use
reasonable best efforts to make reasonable and appropriate
substitute disclosure arrangements. None of the Acquired
Companies or their Representatives shall conduct any invasive
environmental sampling on any business or property of the Parent
Companies prior to completion of the Merger without the prior
written consent of Parent.
(b) Upon reasonable notice and subject to applicable Laws
relating to the exchange of information, from the date hereof
until the Effective Time, the Company shall: (i) afford to
Parent and the Parent Representatives, at Parents sole
risk and expense, reasonable access during normal business hours
to any and all of the facilities and assets of the Acquired
Companies and the books and records, files, data,
correspondence, Contracts, permits, audits and all other
information relating to the Acquired Companies financial
position, business, employees, representatives, agents,
facilities and assets, whether written or computerized, that are
within the possession or control of any of the Acquired
Companies (the Company Information); and
(ii) upon request during normal business hours, furnish
promptly to Parent (at Parents expense), or similarly
provide reasonable access to, a copy of any Company Information.
Parent agrees to review such information in a manner that does
not interfere unreasonably with the Acquired Companies
operations and with the prompt discharge by such Acquired
Companies employees of their duties. Parent agrees to
indemnify and hold the Acquired Companies harmless from any and
all Claims and liabilities, including costs and expenses for the
loss, injury to or death of any Representative of the Parent
Companies, and any loss of destruction of any property owned by
the Acquired Companies or others (including Claims or
liabilities for use of any property) resulting directly or
indirectly from the action or inaction of any of the Parent
Companies or their Representatives during any visit to the
business or property of the Acquired Companies prior to the
completion of the Merger, whether pursuant to this
Section 5.3 or otherwise. None of the Acquired Companies
shall be required to provide access to or to disclose Company
Information where such access or disclosure would constitute a
violation of attorney/client privilege, violate any Law or
violate a Contract pursuant to which any Acquired Company is
required to keep such information confidential. In such
circumstances, the Parties will use reasonable best efforts to
make reasonable and appropriate substitute disclosure
arrangements. None of the Parent Companies or their
Representatives shall conduct any invasive environmental
sampling on any business or property of the Acquired Companies
prior to the completion of the Merger without prior written
consent of the Company.
A-1-48
(c) From the date hereof until the Effective Time, each of
Parent and the Company shall: (i) furnish to the other,
promptly upon receipt or filing (as the case may be), a copy of
each communication between such Party and the SEC after the date
hereof relating to the Merger or the Registration Statement and
each report, schedule, registration statement or other document
filed by such Party with the SEC after the date hereof relating
to the Merger or the Registration Statement, unless such
communication, report, schedule, registration statement or other
document is otherwise readily available through the SECs
EDGAR system, in which case Parent or the Company (as the case
may be) shall provide notice to the other of such availability;
and (ii) promptly advise the other of the substance of any
oral communications between such Party and the SEC relating to
the Merger or the Registration Statement.
(d) The Company will not (and will cause the Company
Subsidiaries and the Company Representatives not to), and Parent
will not (and will cause the Parent Subsidiaries and the Parent
Representatives not to), use any information obtained pursuant
to this Section 5.3 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement.
Any information obtained by the Acquired Companies or Parent
Companies or their respective Representatives under this
Section 5.3 shall be subject to the confidentiality and use
restrictions set forth in the Confidentiality Agreement.
(e) Notwithstanding anything in this
Section 5.3 to the contrary: (i) the Company
shall not be obligated under the terms of this
Section 5.3 to disclose to Parent or the Parent
Representatives, or grant Parent or the Parent Representatives
access to, information that is within the possession or control
of any of the Acquired Companies but subject to a valid and
binding confidentiality agreement with a Third Party without
first obtaining the consent of such Third Party, and the
Company, to the extent requested by Parent, will use its
reasonable best efforts to obtain any such consent; and
(ii) Parent shall not be obligated under the terms of this
Section 5.3 to disclose to the Company or the
Company Representatives, or grant the Company or the Company
Representatives access to, information that is within the
possession or control of any of the Parent Companies but subject
to a valid and binding confidentiality agreement with a Third
Party without first obtaining the consent of such Third Party,
and Parent, to the extent requested by the Company, will use
reasonable best efforts to obtain any such consent.
(f) No investigation by Parent or the Company or their
respective Representatives shall affect the representations,
warranties, covenants or agreements of the other set forth in
this Agreement, and no Party shall be deemed to have made any
representation or warranty to the other Party except as
expressly set forth in this Agreement.
Section 5.4 No Solicitation by the
Company.
(a) From the date of this Agreement until the first to
occur of the Effective Time and the termination of this
Agreement in accordance with Article 7, except as
specifically permitted in Section 5.4(c),
Section 5.4(d) or Section 5.4(e), the
Company agrees that neither it nor any of its Subsidiaries or
Representatives will, directly or indirectly: (i) solicit,
initiate, encourage or facilitate (including by way of
furnishing or disclosing non-public information) any inquiries,
offers or proposals that constitute, or are reasonably likely to
lead to, a Company Acquisition Proposal, and upon becoming aware
of any violation of this Section 5.4(a)(i), the
Company shall, and shall cause its Subsidiaries to, and use its
reasonable best efforts to cause its Representatives to, stop
soliciting, initiating, encouraging, facilitating (including by
way of furnishing or disclosing non-public information) or
taking any action designed to facilitate, directly or
indirectly, any inquiry, offer or proposal that constitutes, or
is reasonably likely to lead to, a Company Acquisition Proposal;
(ii) engage in discussions or negotiations with, furnish or
disclose any non-public information or data relating to the
Acquired Companies to, or in response to a request therefor,
give access to the properties, assets or books and records of
the Acquired Companies to, any Person who has made or may be
considering making a Company Acquisition Proposal or take any
action which may otherwise lead to a Company Acquisition
Proposal; (iii) approve, endorse or recommend any Company
Acquisition Proposal; or (iv) enter into any agreement in
principle, letter of intent, arrangement, understanding or other
Contract relating to any Company Acquisition Proposal.
A-1-49
(b) Except as specifically permitted in
Section 5.4(c) and Section 5.4(d), the
Company shall, and shall cause each of its Subsidiaries and
Representatives to, immediately cease and terminate any existing
solicitations, discussions, negotiations or other activity with
any Person with respect to any Company Acquisition Proposal or
which could reasonably be expected to lead to a Company
Acquisition Proposal, and shall inform its Subsidiaries and
Representatives which are engaged in any such solicitations,
discussions, negotiations or other activity of the
Companys obligations under this Section 5.4.
The Company shall promptly inform its Representatives who have
been involved with or otherwise providing assistance in
connection with the negotiation of this Agreement and the
transactions contemplated by this Agreement of the
Companys obligations under this Section 5.4.
The Company shall promptly demand that any Person (and the
legal, financial or other representatives of any such Person)
who has heretofore executed a confidentiality agreement with or
for the benefit of any of the Acquired Companies with respect to
such Persons consideration of a possible Company
Acquisition Proposal promptly return or destroy (and the Company
shall use commercially reasonable efforts to cause any such
destruction to be certified in writing by any such Person to the
Company) all confidential information heretofore furnished by
the Acquired Companies or any of their legal, financial or other
representatives to such Person or any of its legal, financial or
other representatives in accordance with the terms of the
confidentiality agreement with such Person.
(c) Notwithstanding anything to the contrary in this
Agreement or in the Confidentiality Agreement, prior to
obtaining the Required Company Vote, nothing in this Agreement
shall prevent the Company or the Company Board from:
(i) after the date of this Agreement, engaging in
discussions or negotiations with, furnishing or disclosing any
information or data relating to the Acquired Companies to, or in
response to a request therefor, giving access to the properties,
assets or books and records of the Acquired Companies to, any
Person who has made an unsolicited, bona fide, written Company
Acquisition Proposal after the date hereof that did not result
from a violation by the Acquired Companies of this
Section 5.4; provided, however, that prior to
engaging in discussions or negotiations with, furnishing or
disclosing any information or data relating to the Acquired
Companies to, or giving access to the properties, assets or
books and records of the Acquired Companies to, such Person,
(A) the Company Board, acting in good faith, has determined
(I) after consultation with its outside legal counsel and
financial advisors and based on such other matters as it deems
relevant, that such Company Acquisition Proposal constitutes, or
is reasonably likely to result in, a Company Superior Proposal
and (II) after consultation with its outside legal counsel,
that the failure to take such action is reasonably likely to be
inconsistent with its fiduciary obligations to the stockholders
of the Company under applicable Law and (B) the Company
(I) enters into a confidentiality agreement with such
Person with use and disclosure limitations,
standstill provisions and other material terms that
are no more favorable to such Person than those contained in the
Confidentiality Agreement and (II) has complied with
Section 5.4(d); and
(ii) subject to compliance by the Company with
Section 5.4(e), (A) withdrawing (or amending or
modifying in a manner adverse to Parent), or publicly proposing
to withdraw (or to amend or modify in a manner adverse to
Parent), the approval, recommendation or declaration of
advisability by the Company Board or any committee thereof (as
the case may be) of this Agreement, the Merger or the
transactions contemplated hereby (the actions referred to in
this clause (A) being collectively referred to herein as a
Company Adverse Recommendation Change),
(B) recommending, adopting, approving or submitting to its
stockholders, or proposing publicly to recommend, adopt, approve
or submit to its stockholders, any Company Acquisition Proposal
(the actions referred to in this clause (B) being
collectively referred to as a Company Acquisition
Proposal Recommendation), or (C) entering into
any agreement, including any agreement in principle, letter of
intent or understanding, acquisition or merger agreement, option
agreement, joint venture agreement, partnership agreement or
similar agreement, arrangement or understanding which
constitutes, relates to, is intended to lead to or could
reasonably be expected to lead to a Company Acquisition Proposal
(other than a Confidentiality Agreement contemplated by
Section 5.4(c)(i)(B)(I)) (each a Company
Acquisition Agreement); provided, however, that in
any case, the Company Board, acting in good faith, has
previously determined, after consultation with its outside
A-1-50
legal counsel, that the failure to take such action is
reasonably likely to be inconsistent with its fiduciary
obligations to the stockholders of the Company under applicable
Law; and provided, further, that in the case of a Company
Acquisition Proposal Recommendation or an entry into a
Company Acquisition Agreement, (X) the Company Board,
acting in good faith, has previously determined, after
consultation with its outside legal counsel and financial
advisors and based on such other matters as it deems relevant,
that such Company Acquisition Proposal or Company Acquisition
Agreement constitutes a Company Superior Proposal and
(Y) the Company concurrently terminates this Agreement
pursuant to and after complying with the provisions of
Article 7. For the avoidance of doubt, the Parties
acknowledge and agree that a Company Adverse Recommendation
Change may or may not involve a Company Acquisition Proposal.
(d) If the Company or any Company Representative receives a
request for information from a Person who has made an
unsolicited, bona fide, written Company Acquisition Proposal,
and the Company is permitted to provide such Person with
information pursuant to this Section 5.4, the
Company will provide to Parent a copy of the confidentiality
agreement with such Person promptly upon its execution and
provide to Parent a list of, and copies of, all information
provided to such Person as promptly as practicable after its
delivery to such Person and promptly provide Parent with access
to all information to which such Person was provided access, in
each case only to the extent not previously provided to Parent.
The Company shall promptly provide notice to Parent, in writing,
of the receipt of any Company Acquisition Proposal or any
inquiry with respect to or that could lead to a Company
Acquisition Proposal (but in no event more than forty-eight
hours after the receipt thereof), which notice shall include the
identity of the Person or group requesting such information or
making such inquiry or Company Acquisition Proposal and the
material terms and conditions of any such Company Acquisition
Proposal. The Company shall promptly provide Parent with copies
of any written changes to any Company Acquisition Proposal, with
written notice of material changes in the status of any Company
Acquisition Proposal (including proposed changes to the status)
and with written notice of any changes in the price, form of
consideration, timing of payment thereof or any other material
terms of any Company Acquisition Proposal. The Company shall
promptly provide Parent with written notice of the substance of
any oral communications concerning material terms of any Company
Acquisition Proposal. The Company shall promptly provide Parent,
upon receipt or delivery thereof, with copies of all material
correspondence or other material documents sent or provided to
the Company by any Person in connection with any Company
Acquisition Proposal or sent or provided to any Person by the
Company in connection with any Company Acquisition Proposal.
(e) Notwithstanding anything herein to the contrary, the
Company Board shall not (x) make a Company Adverse
Recommendation Change, (y) make a Company Acquisition
Proposal Recommendation or (z) enter into any Company
Acquisition Agreement relating to a Company Acquisition
Proposal, unless:
(i) The Company complies with the terms of
Section 5.4(c)(ii) and
Section 5.4(d); and
(ii) Promptly upon a determination by the Company Board
that a Company Acquisition Proposal constitutes a Company
Superior Proposal, the Company immediately notifies, in writing,
Parent of such determination and describes in reasonable detail
the material terms and conditions of such Company Superior
Proposal and the identity of the Person making such Company
Superior Proposal. Parent shall have four Business Days after
delivery of such written notice to submit an offer to engage in
an alternative transaction or to modify the terms and conditions
of this Agreement such that the Company may proceed with this
Agreement (a Parent Revised Offer). During
such four Business Day period, the Company and its financial and
legal advisors shall negotiate in good faith exclusively with
Parent to enable Parent to submit a Parent Revised Offer. Any
amendment to the price or any other material term of a Company
Superior Proposal shall require a new notice from the Company
and an additional three Business Day period within which Parent
may negotiate a Parent Revised Offer. For the avoidance of
doubt, the four Business Day period and additional three
Business Day periods, if any, referred to in this
Section 5.4(e)(ii) are the same periods referenced
in Section 7.1(d)(iii).
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(f) Nothing contained in this Section 5.4 shall
prohibit the Company or the Company Board from taking and
disclosing to the stockholders of the Company a position with
respect to a Company Acquisition Proposal pursuant to
Rule 14d-9
and 14e-2(a)
promulgated under the Exchange Act or from making any similar
disclosure, in either case to the extent required by applicable
Law.
(g) All notices to be given by the Parties under this
Section 5.4 shall be given by facsimile transmission
in accordance with Section 8.3 (which notice shall
be effective as of the day of transmission if transmitted on or
before 5:00 p.m. U.S. Central Standard Time on
the date of transmission, otherwise the next day after
transmission).
Section 5.5 Stockholders
Meetings. Promptly after the Registration
Statement is declared effective under the Securities Act, each
of Parent and the Company shall take all necessary action, in
accordance with applicable Law, the rules and regulations of the
NYSE or the Nasdaq (as the case may be) and the Parent Charter
Documents or Company Charter Documents (as the case may be), to
properly give notice of and hold a meeting of its stockholders
for the purpose of voting on the Parent Proposal or the Company
Proposal (as the case may be). Subject to Article 7,
Parent shall recommend approval of the Parent Proposal, and
subject to Section 5.4 and Article 7,
the Company Board shall recommend approval of the Company
Proposal. Each of the Parent Board and the Company Board shall
take all lawful action to solicit such approval, including
timely mailing the Proxy Statement/Prospectus to the
stockholders of Parent and the Company. The Company and Parent
shall coordinate and cooperate with respect to the timing of
their respective stockholder meetings and use reasonable best
efforts to hold such meetings on the same day and within
45 days after the date the Registration Statement is
declared effective; provided, however, that the Company
may postpone or adjourn the Company Meeting (A) for the
absence of a quorum or (B) to allow reasonable additional
time for the filing and mailing of any supplemental or amended
disclosure that the Company believes in good faith is necessary
under applicable Law and for such supplemental or amended
disclosure to be disseminated and reviewed by the Companys
stockholders prior to the Company Meeting; provided,
further, that in the event that the Company Meeting is
delayed to a date after the Termination Date as a result of
either (A) or (B) above, then the Termination Date
shall be extended to the fifth Business Day after such Company
Meeting date. Notwithstanding any other provisions of this
Agreement to the contrary, unless this Agreement is terminated
in accordance with its terms, (i) the Company shall submit
this Agreement to its stockholders for approval regardless of
whether the Company Board withdraws, modifies or changes its
recommendation and declaration regarding the Company Proposal
and (ii) the Parent Board shall submit the Parent Proposal
to its stockholders for approval regardless of whether the
Parent Board withdraws, modifies or changes its recommendation
and declaration regarding the Parent Proposal.
Section 5.6 Registration Statement and Proxy
Statement/Prospectus.
(a) Parent and the Company shall cooperate and promptly
prepare the Registration Statement and the Proxy
Statement/Prospectus and shall file the Registration Statement
in which the Proxy Statement/Prospectus will be included as a
prospectus with the SEC as soon as practicable after the date
hereof and in any event not later than 60 days after the
date hereof. Each Party shall give the other Party and its
counsel a reasonable opportunity to review and comment on the
Registration Statement and the Proxy Statement/Prospectus,
including all amendments and supplements thereto, prior to such
documents being filed with the SEC or disseminated to
stockholders of the Company or Parent and shall give the other
Party and its counsel a reasonable opportunity to review and
comment on all responses to requests for additional information
and comments from the SEC prior to their being filed with, or
sent to, the SEC. Parent and the Company shall use their
respective reasonable best efforts to cause the Registration
Statement to be declared effective under the Securities Act as
promptly as practicable after filing. Parent and the Company
will provide each other with any information which may be
required to prepare and file the Proxy Statement/Prospectus and
the Registration Statement. Each of Parent and the Company will
cause the Proxy Statement/Prospectus to be mailed to its
stockholders as promptly as reasonably practicable after the
Registration Statement is declared effective by the SEC. If at
any time prior to the Effective Time any event occurs which is
required to be set forth in an amendment or supplement to the
Proxy Statement/Prospectus or the Registration Statement, Parent
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or the Company, as applicable, will as promptly as reasonably
practicable inform the other of such occurrence, and Parent and
the Company will cooperate in filing such amendment or
supplement with the SEC, use commercially reasonable best
efforts to cause such amendment to become effective as promptly
as possible and, if required, mail such amendment or supplement
to their respective stockholders. Parent shall use its
reasonable best efforts, and the Company shall cooperate with
Parent, to obtain any and all necessary state securities Laws or
blue sky permits, approvals and registrations in
connection with the issuance of Parent Common Stock pursuant to
the Merger.
(b) Parent will cause the Registration Statement, at the
time it becomes effective under the Securities Act, to comply as
to form in all material respects with the applicable provisions
of the Securities Act, the Exchange Act and the rules and
regulations of the SEC thereunder, and the Company shall be
responsible for furnishing to Parent true, accurate and complete
information relating to the Company and holders of Company
Common Stock and Company Stock Options as is required to be
included therein.
(c) The Company hereby covenants and agrees with Parent
that: (i) the Registration Statement (at the time it
becomes effective under the Securities Act through the Effective
Time) will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading
(provided, however, that this clause (i)
shall apply only to information included or incorporated by
reference in the Registration Statement that was supplied by the
Company for inclusion therein); and (ii) the Proxy
Statement/Prospectus (at the time it is first mailed to
stockholders of the Company, at the time of the Company Meeting,
and at the Effective Time) will not contain an untrue statement
of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not misleading (provided, however, that this
clause (ii) shall apply only to information included or
incorporated by reference in the Proxy Statement/Prospectus that
was supplied by the Company for inclusion therein). If, at any
time prior to the Effective Time, any event with respect to the
Company, or with respect to other information supplied by the
Company for inclusion in the Registration Statement or the Proxy
Statement/Prospectus, occurs and such event is required to be
described in an amendment or supplement to the Registration
Statement or the Proxy Statement/Prospectus, the Company shall
promptly notify Parent of such occurrence and shall cooperate
with Parent in the preparation, filing an dissemination of such
amendment or supplement.
(d) Parent hereby covenants and agrees with the Company
that: (i) the Registration Statement (at the time it
becomes effective under the Securities Act and until the
Effective Time) will not contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading (provided, however, that this
clause (i) shall not apply to any information included or
incorporated by reference in the Registration Statement that was
supplied by the Company for inclusion therein); and
(ii) the Proxy Statement/Prospectus (at the time it is
first mailed to stockholders of Parent, at the time of the
Parent Meeting, and at the Effective Time) will not contain an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under
which they are made, not misleading (provided,
however, that this clause (ii) shall not apply to
any information included or incorporated by reference in the
Proxy Statement/Prospectus that was supplied by the Company for
inclusion therein). If, at any time prior to the Effective Time,
any event with respect to Parent, or with respect to other
information included in the Registration Statement, occurs and
such event is required to be described in an amendment to the
Registration Statement, such event shall be so described and
such amendment shall be promptly prepared and filed. If, at any
time prior to the Effective Time, any event with respect to
Parent, or with respect to other information included in the
Proxy Statement/Prospectus, occurs and such event is required to
be described in a supplement to the Proxy Statement/Prospectus,
Parent shall promptly notify the Company of such occurrence and
shall cooperate with the Company in the preparation, filing and
dissemination of such supplement.
(e) None of the Registration Statement, the Proxy
Statement/Prospectus or any amendment or supplement thereto will
be filed or disseminated to the stockholders of the Company
without the approval of both Parent and the Company. Parent
shall advise the Company, promptly after it receives notice
thereof, of the time when
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the Registration Statement has become effective under the
Securities Act, the issuance of any stop order with respect to
the Registration Statement, the suspension of the qualification
of the Parent Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any comments
or requests for additional information by the SEC with respect
to the Registration Statement.
(f) The Company shall use its commercially reasonable
efforts to cause to be delivered to the Parent two comfort
letters from Grant Thornton LLP, Companys independent
auditors, one dated on the date on which the Registration
Statement shall become effective, and one bring-down letter
dated on the Closing Date, each addressed to the Parent and
customary in scope and substance for letters delivered by
independent auditors in connection with public offerings.
(g) Parent shall use its commercially reasonable efforts to
cause to be delivered to the Company two comfort letters from
UHY LLP, Parents independent auditors, one dated on the
date on which the Registration Statement shall become effective,
and one bring-down letter dated on the Closing Date, each
addressed to the Company and customary in scope and substance
for letters delivered by independent auditors in connection with
public offerings.
Section 5.7 NYSE
Listing. Parent shall prepare and submit to the
NYSE, as soon as practicable, a listing application covering the
shares of Parent Common Stock representing Parent Stock
Consideration to be issued in the Merger and shall use its
reasonable best efforts to obtain, prior to the Effective Time,
approval for the listing of such Parent Common Stock, subject to
official notice of issuance, and the Company shall cooperate
with Parent with respect to such listing, in order to facilitate
obtaining such approval as soon as practicable.
Section 5.8 Additional Arrangements.
(a) Subject to the terms and conditions herein provided,
each of the Company and Parent shall take, or cause to be taken,
all action and shall do, or cause to be done, all things
necessary, appropriate or desirable under any applicable Law
(including the HSR Act) or under applicable Contracts so as to
enable the Closing to occur as soon as reasonably practicable,
including using its reasonable best efforts to obtain all
necessary waivers, consents and approvals, remove all
impediments to the Closing, and make all Parent Regulatory
Filings and Company Regulatory Filings (the Regulatory
Filings). Parent and the Company each will cause all
documents it is responsible for filing with any Governmental
Authority under this Section 5.8 to comply in all
material respects with all applicable Laws.
(b) Each of Parent and the Company shall furnish the other
Party with such information and reasonable assistance as such
other Party and its respective affiliates may reasonably request
in connection with their preparation of any Regulatory Filings
with any Governmental Authorities; provided,
however, that if the provisions of the HSR Act would
prevent a Party from disclosing such information to the other
Party, then such information may be disclosed to such
Partys counsel.
(c) Each of the Company and Parent shall take, or cause to
be taken, all action or shall do, or cause to be done, all
things necessary, appropriate or desirable to cause the
covenants and conditions applicable to the transactions
contemplated hereby to be performed or satisfied as soon as
practicable, including responding promptly to requests for
additional information made by the DOJ or the FTC, and to cause
the waiting periods under the HSR Act to terminate or expire at
the earliest possible date after the date of filing.
(d) Each of Parent and the Company shall use its reasonable
best efforts to avoid the entry of, or to have vacated or
terminated, any decree, Order, ruling or injunction that would
restrain, prevent or delay the Closing. Furthermore, if any
Governmental Authority shall have issued any Order, decree,
ruling or injunction, or taken any other action, that would have
the effect of restraining, enjoining or otherwise prohibiting,
delaying or preventing the consummation of the transactions
contemplated hereby, each of the Company and Parent shall use
its reasonable best efforts to have such Order, decree, ruling
or injunction or other action declared ineffective as soon as
practicable.
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(e) Parent and the Company shall promptly notify each other
of any communication concerning this Agreement or the Merger
from any Governmental Authority and, subject to applicable Law,
permit the other Party to review in advance any proposed
communication to any Governmental Authority concerning this
Agreement or the Merger. In addition, Parent and Company shall
not agree to participate in any substantive meeting or
discussion with any Governmental Authority in respect of any
filings, investigation or another inquiry concerning this
Agreement or the Merger, or enter into any agreements with any
Governmental Authority, including, without limitation, extending
any antitrust waiting periods, unless it consults with the other
Party in advance and, to the extent permitted by such
Governmental Authority, gives the other Party the opportunity to
attend and participate thereat. Parent and the Company shall
furnish counsel to the other Party with copies of all
correspondence, filings and communications (and memoranda
setting forth the substance thereof) between them and their
affiliates and their respective representatives on the one hand,
and any Governmental Authorities or members of their respective
staffs on the other hand, relating to this Agreement and the
Merger.
(f) Notwithstanding the foregoing, and except as provided
in Section 5.1 and 5.2, nothing contained in
this Agreement shall be construed so as to require Parent,
Merger Sub or the Company, or any of their respective
Subsidiaries or Affiliates, without its written consent, to
sell, license, dispose of, hold separate, or operate in any
specified manner any assets or businesses of Parent, Merger Sub,
the Company or the Surviving Corporation (or to require Parent,
Merger Sub, the Company or any of their respective Subsidiaries
or Affiliates to agree to any of the foregoing). The obligations
of each Party under this Section 5.8 to use
reasonable best efforts with respect to antitrust matters shall
be limited to compliance with the reporting provisions of the
HSR Act and with its obligations under this
Section 5.8. In connection with its obligations
under this Section 5.8, the Company shall not,
without Parents prior written consent, commit to (or allow
its Subsidiaries to commit to) any divestitures, licenses, hold
separate arrangements or similar matters, including covenants
affecting business operating practices in connection with the
transactions contemplated under this Agreement.
Section 5.9 Section 16. Prior
to the Effective Time, Parent, the Company and their respective
Boards of Directors shall adopt resolutions consistent with the
interpretive guidance of the SEC and take any other actions as
may be required, to the extent permitted under applicable Law,
to cause any dispositions of Company Common Stock (including
derivative securities with respect to Company Common Stock) or
acquisitions of Parent Common Stock (including derivative
securities with respect to Parent Common Stock) resulting from
the transactions contemplated hereby by each individual who is
subject to the reporting requirements of Section 16(a) of
the Exchange Act to be exempt from Section 16(b) of the
Exchange Act under
Rule 16b-3
promulgated under the Exchange Act.
Section 5.10 Public Announcements.
(a) On the date this Agreement is executed (or if executed
after the close of business, no later than the opening of the
NYSE and the Nasdaq on the next day), Parent and the Company
shall issue a joint press release with respect to the execution
hereof and the transactions contemplated hereby. Except as may
be required by applicable Law, Order or any listing agreement
with or rule of any regulatory body, national securities
exchange or association, Parent and the Company shall consult
with each other before issuing any press release, making any
other public statement or scheduling any press conference or
conference call with investors or analysts with respect to this
Agreement or the transactions contemplated by this Agreement.
(b) No Party shall issue any press release or other public
statement concerning the transactions contemplated by this
Agreement without first providing the other Parties with a
written copy of the text of such release or statement and
obtaining the consent of the other Parties to such release or
statement, which consent will not be unreasonably withheld. The
consent provided for in this Section 5.10(b) shall
not be required if the delay would preclude the timely issuance
of a press release or public statement required by law or any
applicable regulations. The provisions of this
Section 5.10(b) shall not be construed as limiting
the Parties from communications consistent with the purposes of
this Agreement, including but not limited to seeking the
regulatory and stockholder approvals contemplated hereby.
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Section 5.11 Notification of Certain
Matters.
(a) The Company shall give prompt notice to Parent and
Merger Sub of any of the following: (i) any representation
or warranty contained in Article 3 being untrue or
inaccurate when made, (ii) the occurrence of any event or
development that would cause (or could reasonably be expected to
cause) any representation or warranty contained in
Article 3 to be untrue or inaccurate at any time on
or before the Closing Date, or (iii) any failure of the
Company to comply with or satisfy any covenant, condition, or
agreement to be complied with or satisfied by it hereunder.
(b) Parent shall give prompt notice to the Company of any
of the following: (i) any representation or warranty
contained in Article 4 being untrue or inaccurate
when made, (ii) the occurrence of any event or development
that would cause (or could reasonably be expected to cause) any
representation or warranty contained in Article 4 to
be untrue or inaccurate at any time on or before the Closing
Date, or (iii) any failure of Parent to comply with or
satisfy any covenant, condition, or agreement to be complied
with or satisfied by it hereunder.
Section 5.12 Payment of
Expenses. Except as provided in
Section 7.3, each Party shall pay its own expenses
incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated
hereby, regardless of whether the Merger is consummated, except
that Parent and the Company shall equally share the following:
(i) all fees and expenses, other than attorneys,
accountants, financial advisors and
consultants fees and expenses (which shall be paid by the
Party incurring same), incurred for printing the Proxy
Statement/Prospectus, including preliminary materials related
thereto, and the Registration Statement, including financial
statements and exhibits and any amendments and supplements
thereto, and (ii) the filing fees for the Notification and
Report Forms filed with the FTC and DOJ under the HSR Act.
Section 5.13 Indemnification and
Insurance.
(a) Parent and the Surviving Corporation shall maintain in
effect any and all exculpation, indemnification and advancement
of expenses provisions of the Company Charter Documents and
Company Subsidiary Charter Documents in effect as of the date
hereof or in any indemnification agreements between the Acquired
Companies and their respective current or former directors,
officers, fiduciaries, agents or employees in effect as of the
date hereof (which have previously been provided to Parent).
Parent and the Surviving Corporation shall not, for a period of
six years from the Effective Time, amend, repeal or otherwise
modify any such provisions in any manner that would adversely
affect the rights thereunder of any individuals who, immediately
prior to the Effective Time, were current or former directors,
officers, agents, fiduciaries or employees of the Acquired
Companies unless such amendment, repeal or modification is
required by applicable Law, and all rights to indemnification
thereunder in respect of any Claim asserted or made within such
period shall continue until the final disposition or resolution
of such Claim.
(b) During the period beginning at the Effective Time and
ending on the sixth anniversary of the Effective Time, Parent
shall cause the Surviving Corporation to the fullest extent
permitted under applicable Law, indemnify and hold harmless each
person who is as of the date hereof, has been at any time prior
to the date hereof, or becomes prior to the Effective Time a
director, officer, fiduciary, agent or employee of the Company
or any of its Subsidiaries (each such person, together with such
persons heirs, executors or administrators, an
Indemnified Party) against any costs,
expenses (including reasonable attorneys fees), judgments,
fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any actual or threatened claim,
action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative (a
Claim), whether asserted or claimed prior to,
at or after the Effective Time, arising out of, relating to or
in connection with any action or omission in his or her capacity
as such occurring or alleged to have occurred at or prior to the
Effective Time, including any act or omission in connection with
the approval of this Agreement and the consummation of the
transactions contemplated hereby. Each Indemnified Party shall
also be entitled to advancement of expenses as incurred (and not
later that ten Business Days after receipt by Parent or the
Surviving Corporation of receipts therefor) to the fullest
extent permitted under
A-1-56
applicable Law, provided that such Indemnified Party
undertakes to repay such advances if it is ultimately determined
by a court of competent jurisdiction that such Indemnified Party
is not entitled to indemnification. Neither Parent nor the
Surviving Corporation shall settle, compromise or consent to the
entry of any judgment in any Claim for which indemnification
could be sought by any Indemnified Party hereunder, unless such
settlement, compromise or consent includes an unconditional
release of such Indemnified Party from all liability arising out
of such Claim or such Indemnified Party otherwise consents. In
the event of any Claim, any Indemnified Party wishing to claim
indemnification shall promptly notify Parent thereof
(provided that failure to so notify Parent will not
affect the obligations of Parent except to the extent that
Parent shall have been prejudiced as a result of such failure)
and shall deliver to Parent the undertaking contemplated by the
applicable provisions of the DGCL, but without any requirement
for the posting of a bond. Without limiting the foregoing, in
the event any Claim is brought against any Indemnified Party
(whether arising before or after the Effective Time),
(i) the Indemnified Party will cooperate reasonably with
Parent, at Parents expense, in the defense of such matter
and (ii) Parent shall have the right to control the defense
of such matter and shall retain only one set of legal counsel
selected by Parent and reasonably satisfactory to the
Indemnified Party (plus one local counsel, if necessary) to
represent all Indemnified Parties with respect to each such
matter unless the use of one counsel to represent the
Indemnified Parties would present such counsel with a conflict
of interest, or the representation of all of the Indemnified
Parties by the same counsel would be inappropriate due to actual
differing interests between them, in which case such additional
counsel as may be required (as shall be reasonably determined by
the Indemnified Parties and Parent) may be retained by the
Indemnified Parties. Parent shall pay all reasonable fees and
expenses of all such counsel for such Indemnified Parties.
(c) The Surviving Corporation shall maintain the
Companys officers and directors liability
insurance policies and fiduciary liability insurance policies in
effect on the date of this Agreement (collectively, the
D&O Insurance), for a period of not less
than six years after the Effective Time, but only to the extent
related to actions or omissions occurring at or prior to the
Effective Time; provided, however, that
(i) the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing
terms no less advantageous to such former directors or officers
from insurance carriers with financial strength ratings equal to
or greater than the financial strength rating of the
Companys current insurance carrier and (ii) such
substitution shall not result in gaps or lapses of coverage with
respect to matters occurring prior to the Effective Time;
provided, further, that in no event shall the
Surviving Corporation be required to expend more than an amount
per year equal to 200% of current annual premiums paid by the
Company in the aggregate for such insurance (the
Maximum Amount) to maintain or procure
insurance coverage pursuant hereto; and provided,
further, that if the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceeds
the Maximum Amount, the Surviving Corporation shall procure and
maintain for such six year period as much coverage as reasonably
practicable for the Maximum Amount. Parent shall have the right
to cause coverage to be extended under the D&O Insurance by
obtaining a six year tail policy on terms and
conditions no less advantageous than the existing D&O
Insurance, and such tail insurance shall satisfy the
provisions of Section 5.13(b).
Prior to the Effective Time, the Company may purchase such
tail insurance, at Parents expense, provided
that the aggregate annual premiums for such policies do not
exceed the Maximum Amount, and such tail insurance
shall satisfy the provisions of Section 5.13(b).
(d) This covenant is intended to be for the benefit of, and
shall be enforceable by, each of the Indemnified Parties and
their respective heirs and legal representatives. The
indemnification and advancement of expenses provided for herein
shall not be deemed exclusive of any other rights to which an
Indemnified Party is entitled, whether pursuant to Law, Contract
or otherwise.
(e) In the event that the Surviving Corporation or Parent,
or any of their respective successors or assigns,
(i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to
any Person, then, and in each such case, proper provision shall
be made so that the successors
A-1-57
and assigns of the Surviving Corporation or Parent, as the case
may be, shall succeed to the obligations set forth in this
Section 5.13.
(f) The obligations of Parent and the Surviving Corporation
under this Section 5.13 shall survive the
consummation of the Merger and shall not be terminated or
modified in such a manner as to adversely affect any Indemnified
Party to whom this Section 5.13 applies without the
consent of such affected Indemnified Party.
Section 5.14 Employee Matters.
(a) Parent may, in its sole discretion, continue any
Company Benefit Plan or employee policy or program in effect
immediately prior to the Effective Time (each a
Pre-Merger Plan), including but not limited
to a 401(k) plan or medical plan, for any period of time after
the Effective Time for the benefit of any Company Employees. To
the extent Parent does not continue a Pre-Merger Plan applicable
to a Company Employee, such Company Employee shall be eligible,
subject to the provisions herein, to participate in any
corresponding Parent Benefit Plan providing benefits to any
Company Employee after the Effective Time (the
Post-Merger Plans) to the extent such
Post-Merger Plan replaces coverage under such Pre-Merger Plan.
For all purposes under such Post-Merger Plans, Parent will, or
will cause its Subsidiaries to, give Company Employees full
credit for their years of service with the Company or any
Company Subsidiary to the same extent recognized by the Company
or such Company Subsidiary immediately prior the Effective Time
for purposes of eligibility and vesting (excluding benefit
accruals) under any such Post-Merger Plan. The value of the
compensation and benefits provided under the Pre-Merger Plans or
the Post-Merger Plans, as applicable in accordance with the
foregoing, to Company Employees, taken as a whole, after the
Effective Time through December 31, 2008, shall be
substantially similar to the value of the compensation and
benefits provided under the Company Benefit Plans to the Company
Employees, taken as a whole, immediately prior to the Effective
time, as determined by Parent in good faith after taking into
account all facts and circumstances. In addition, and without
limiting the generality of the foregoing: (i) each Company
Employee shall be immediately eligible to participate, without
any waiting time, in any and all Post-Merger Plans to the extent
coverage under such Post-Merger Plan replaces coverage under any
Pre-Merger Plan; provided, however, to the extent such
Company Employee is not covered by a Pre-Merger Plan immediately
prior to the Effective Time due to failure to satisfy the
applicable waiting period, such Company Employee shall be
subject to the waiting time applicable to a Parent Employee with
respect to the corresponding Post-Merger Benefit Plan that
replaces such Pre-Merger Plan (giving full service credit for
service by such Company Employee with the Company in satisfying
such waiting time); provided further, to the extent a
Company Employee is covered by a Pre-Merger Plan but does not
satisfy the service requirements for the corresponding
Post-Merger Plan, the Post-Merger Plan may allow such Company
Employee to participate in such Post-Merger Plan to the extent
permitted under such Post-Merger Plan, as determined in good
faith by Parent, or Parent shall continue the Pre-Merger Plan
for such Company Employee or otherwise provide comparable
substitute coverage; and (ii) for purposes of each
Post-Merger Plan providing medical, dental, pharmaceutical
and/or
vision benefits to any Company Employee, Parent shall cause all
pre-existing condition exclusions and actively-at-work
requirements of such Post-Merger Plan to be waived for such
employee and his or her covered dependents to the extent
permitted under the Post-Merger Plans or otherwise required by
applicable Law, and Parent shall cause any eligible expenses
incurred by such employee and his or her covered dependents
during the portion of the plan year of the Pre-Merger Plan
ending on the date such employees participation in the
corresponding Post-Merger Plan begins to be taken into account
under such Post-Merger Plan for purposes of satisfying all
deductible, coinsurance and maximum out-of-pocket requirements
applicable to such employee and his or her covered dependents
for the applicable plan year as if such amounts had been paid in
accordance with such Post-Merger Plan.
(b) Parent shall establish a severance plan, the terms of
which (including maximum severance payments) have been agreed
upon and are set forth in Section 5.14 of the Parent
Disclosure Letter, effective for no less than the period from
the Effective Time until the first anniversary of the Effective
Time, for the benefit of the Company Employees indicated in
Section 5.14 of the Parent Disclosure Letter.
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Section 5.15 Company Board and Executive
Officers. At or prior to Closing, the Company
shall deliver to Parent written resignations of all members of
the Company Board and all officers of the Company and its
Subsidiaries, to be effective as of the Effective Time.
Section 5.16 Tax Matters. The
Company shall provide Parent with a certification in accordance
with the requirements of Treasury
Regulation Section 1.1445-2(c)(3)
that it is not a United States real property holding corporation.
Section 5.17 Continuing Obligation to Call,
Hold and Convene Stockholders Meeting; No Other
Vote. Notwithstanding anything herein to the
contrary, the obligations of Parent or the Company (as the case
may be) to call, give notice of, convene and hold the Parent
Meeting or Company Meeting (as applicable) shall not be limited
or otherwise affected by the commencement, disclosure,
announcement or submission to it of any Acquisition Proposal
with respect to it, or by any determination by the Company Board
or the Parent Board (as the case may be) to modify, withdraw,
amend or modify its recommendation in favor of the Merger. Other
than in accordance with the provisions of
Section 5.4, the Company shall not submit to the
vote of its stockholders any Company Acquisition Proposal, or
propose to do so.
Section 5.18 Additional Instruments and
Agreements. Parent, Merger Sub and the Company
agree to execute and deliver any and all additional instruments
necessary to consummate the transactions contemplated by this
Agreement. In addition, Company agrees to use its reasonable
best efforts to cooperate with Parent in the actions
contemplated by the Commitment Letter. Parent agrees to vote to
adopt this Agreement by written consent of stockholder in lieu
of meeting in its capacity as sole stockholder of Merger Sub
promptly (but not later than 72 hours) after execution of
this Agreement by Parent, Merger Sub and the Company.
Section 5.19 Control of Other Partys
Business. Nothing contained in this Agreement
shall give the Company, directly or indirectly, the right to
control or direct Parents operations or give Parent,
directly or indirectly, the right to control or direct the
Companys operations prior to the Effective Time. Prior to
the Effective Time, each of Company and Parent shall exercise,
consistent with the terms and conditions of this Agreement,
complete control and supervision over its respective operations.
Section 5.20 Agreements of Executive Officers
and Directors.
(a) The Company shall use its commercially reasonable
efforts to cause each executive officer and director of the
Company to execute and deliver to Parent as soon as practicable
and prior to the mailing of the Proxy Statement/Prospectus a
voting agreement in the form attached hereto as
Exhibit 5.20(a) to the effect that such executive officer
or director shall vote any and all shares of Company Common
Stock owned by him or her to approve the Company Proposal.
(b) Parent shall use its commercially reasonable efforts to
cause each executive officer and director of Parent to execute
and deliver to Parent as soon as practicable and prior to the
mailing of the Proxy Statement/Prospectus a voting agreement in
the form attached hereto as Exhibit 5.20(b) to the effect
that such executive officer shall vote any and all shares of
Parent Common Stock owned by him or her to approve the Parent
Proposal.
(c) The Parties hereby agree and acknowledge that the
consummation of the Merger constitutes a change of
control of the Company with respect to (i) the
Company Benefit Plans, (ii) the Company Incentive Plans,
(iii) any awards or award agreements under the Company
Incentive Plans, and (iv) all existing employment
agreements between the Company and its employees, including but
not limited to those set forth in Section 5.20(c) of
the Company Disclosure Letter. Parent, Merger Sub and the
Company hereby agree and acknowledge that the amounts set forth
opposite the names of the employees identified in
Section 5.20(c) of the Company Disclosure Letter are
the amounts due to such employees pursuant to Section 6.3
(or, in the case of Kim Snell, Section 8.3) of their
respective employment agreements with the Company and that such
amounts will be paid to the designated employees at the
Effective Time. Upon the effectiveness of an employees
resignation pursuant to Section 5.15, such employee
shall be released from all obligations under
A-1-59
his or her employment agreement; provided, however, that
the employees mentioned in Section 5.20(c) of the
Company Disclosure Letter as having continuing non-competition
obligations shall not be released from the non-competition
obligations contained in their existing employment agreements
with the Company, and accordingly, the Company shall cause such
employment agreements to be amended, in form and substance
approved in writing by Parent, to provide that such employees
shall continue to be subject to such existing obligations to not
compete with the Surviving Corporation or any of its
Subsidiaries for one year following the Effective Time.
Article 6
Conditions
Section 6.1 Conditions to Each Partys
Obligation to Effect the Merger. The respective
obligations of each Party to effect the Merger shall be subject
to the satisfaction, at or prior to the Closing Date, of each of
the following conditions, any or all of which may be waived in
writing in whole or in part by either Parent or the Company (to
the extent permitted by applicable Law):
(a) Stockholder Approval. The
Company Proposal and the Parent Proposal shall have been duly
and validly approved and adopted by the requisite vote of the
stockholders of the Company and Parent, respectively.
(b) HSR Act. Any applicable
waiting period under the HSR Act (including extensions thereof)
shall have expired or been terminated.
(c) Securities Law Matters. The
Registration Statement shall have been declared effective by the
SEC under the Securities Act and shall be effective at the
Effective Time, and no stop order suspending such effectiveness
shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend such effectiveness shall
have been initiated and be continuing, and any and all necessary
approvals under state securities Laws relating to the issuance
or trading of the Parent Common Stock to be issued in the Merger
shall have been received.
(d) No Injunctions or
Restraints. No Governmental Authority of
competent jurisdiction shall have issued, promulgated, enforced
or entered any Order, decree, temporary restraining order,
preliminary or permanent injunction, or other legal restraint or
prohibition that is continuing and which prevents the
consummation of the Merger or imposes any material restrictions
on the Parties with respect thereto; provided,
however, that, prior to invoking this condition, each
Party shall have complied fully with its obligations under
Section 5.8 and, in addition, shall have used its
reasonable best efforts to have any such decree, ruling,
injunction or Order vacated, except as otherwise contemplated by
this Agreement, including Section 5.8(d).
(e) NYSE Listing. The shares of
Parent Common Stock to be issued in the Merger shall have been
authorized for listing on the NYSE, subject to official notice
of issuance.
(f) Consents and Approvals. Other
than filing the Certificate of Merger pursuant to
Section 2.1 and the filings and consents addressed
in Section 6.1(b), all consents, approvals, permits
and authorizations required to be obtained by the Parties prior
to the Effective Time from any Governmental Authority to
consummate the Merger shall have been made or obtained (as the
case may be), except for any failures to make such filings or
obtain such consents, approvals, permits and authorizations
that, individually or in the aggregate, would not constitute a
Material Adverse Effect on or with respect to the Surviving
Corporation (assuming the Merger has taken place) provided,
however, that the provisions of this
Section 6(f) shall not be available to any Party
whose failure to fulfill its obligations pursuant to
Section 5.8 shall have been the cause of, or shall
have resulted in, the failure to obtain such consent, approval,
permit or authorization.
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Section 6.2 Conditions to Obligations of
Parent and Merger Sub. The obligations of Parent
and Merger Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any or all of
which may be waived in writing in whole or in part by Parent and
Merger Sub:
(a) Representations and
Warranties. (i) The representations and
warranties of the Company set forth in Sections 3.2,
3.3, 3.9(a) and 3.16 shall be true,
accurate and complete in all respects as of the date of this
Agreement and (except to the extent such representation or
warranty speaks as of an earlier date, in which case the
representation or warranty shall be true and correct as of such
date) as of the Closing Date as though made on and as of that
time and (ii) the representations and warranties of the
Company set forth in Article 3 (other than the
representations and warranties set forth in
Sections 3.2, 3.3, 3.9(a) and
3.16) shall be true, accurate and complete (disregarding
any qualifications as to materiality or Material Adverse Effect)
as of the date of this Agreement and (except to the extent such
representation or warranty speaks as of an earlier date, in
which case the representation or warranty shall be true and
correct as of such date) as of the Closing Date as though made
on and as of that time, except (in the case of this
clause (ii) only), for any failures of such representations
and warranties to be so true, accurate and complete that,
individually or in the aggregate, do not constitute a Material
Adverse Effect with respect to the Company or the Surviving
Corporation; and Parent shall have received a certificate signed
by the Responsible Officers of the Company to such effect.
(b) Performance of Covenants and Agreements by the
Company. The Company shall have performed in
all material respects all covenants and agreements required to
be performed by it under this Agreement at or prior to the
Closing Date, and Parent shall have received a certificate
signed by the Responsible Officers of the Company to such effect.
(c) No Company Material Adverse
Effect. From the date of this Agreement
through the Closing, there shall not have occurred any event or
circumstance that constitutes a Company Material Adverse Effect.
Section 6.3 Conditions to Obligation of the
Company. The obligation of the Company to effect
the Merger is subject to the satisfaction of each of the
following conditions, any or all of which may be waived in
writing in whole or in part by the Company:
(a) Representations and
Warranties. (i) The representations and
warranties of Parent and Merger Sub set forth in
Sections 4.2, 4.3, 4.9(a) and
4.16 shall be true, accurate and complete in all respects
as of the date of this Agreement and (except to the extent such
representation or warranty speaks as of an earlier date, in
which case the representation or warranty shall be true and
correct as of such date) as of the Closing Date as though made
on and as of that time and (ii) the representations and
warranties of Parent and Merger Sub set forth in
Article 4 (other than the representations and
warranties set forth in Sections 4.2, 4.3,
4.9(a) and 4.16) shall be true, accurate and
complete (disregarding any qualifications as to materiality or
Material Adverse Effect) as of the date of this Agreement and
(except to the extent such representation or warranty speaks as
of an earlier date, in which case the representation or warranty
shall be true and correct as of such date) as of the Closing
Date as though made on and as of that time, except (in the case
of this clause (ii) only), for any failures of such
representations and warranties to be so true, accurate and
complete that, individually or in the aggregate, do not
constitute a Material Adverse Effect with respect to Parent or
the Surviving Corporation; and the Company shall have received a
certificate signed by the Responsible Officers of Parent to such
effect.
(b) Performance of Covenants and Agreements by Parent
and Merger Sub. Parent and Merger Sub shall
have performed in all material respects all covenants and
agreements required to be performed by them under this Agreement
at or prior to the Closing Date (including payment in full of
the amounts contemplated in Section 5.20(c)), and the
Company shall have received a certificate signed by the
Responsible Officers of Parent to such effect.
(c) No Parent Material Adverse
Effect. From the date of this Agreement
through the Closing, there shall not have occurred any event or
circumstance that constitutes a Parent Material Adverse Effect.
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(d) Delivery of Transfer
Instructions. Parent shall have delivered to
the Exchange Agent an irrevocable letter of instruction in a
form reasonably satisfactory to the Company authorizing and
directing the transfer of the Merger Consideration to holders of
shares of Company Common Stock upon surrender of such
holders certificates representing such shares of Company
Common Stock in accordance with Article 2.
Article 7
Termination
Section 7.1 Termination
Rights. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time,
whether before or after approval of the Company Proposal by the
stockholders of the Company or approval of the Parent Proposal
by the stockholders of Parent (except as provided below), by
action taken by the board of directors of the terminating Party
or Parties upon the occurrence of any of the following:
(a) By mutual written consent duly authorized by the Parent
Board and the Company Board.
(b) By either the Company or Parent if:
(i) the Merger has not been consummated by the Termination
Date (provided, however, that the right to terminate this
Agreement pursuant to this clause (i) shall not be
available to any Party whose breach of any representation or
warranty or failure to perform or satisfy any covenant or
agreement under this Agreement has been the principal cause of
or resulted in the failure of the Merger to occur on or before
such date);
(ii) any Governmental Authority shall have issued an Order,
decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation
of the Merger or making consummation of the Merger illegal, and
such Order, decree, ruling or other action shall have become
final and nonappealable (provided, however, that
the right to terminate this Agreement pursuant to this
clause (ii) shall not be available to any Party who
directly or indirectly initiated such action or whose failure to
fulfill any material obligation under this Agreement has been
the principal cause of or resulted in such Order, decree, ruling
or other action);
(iii) the Company Proposal shall not have been approved by
the Required Company Vote at the Company Meeting or at any
adjournment or postponement thereof (provided,
however, that the right to terminate this Agreement
pursuant to this clause (iii) shall not be available to the
Company if the failure to obtain approval of the Company
Proposal is caused by the action or failure to act of the
Company and such action or failure to act constitutes a material
breach of this Agreement); or
(iv) the Parent Proposal shall not have been approved by
the Required Parent Vote at the Parent Meeting or at any
adjournment or postponement thereof (provided,
however, that the right to terminate this Agreement
pursuant to this clause (iv) shall not be available to
Parent if the failure to obtain approval of the Parent Proposal
is caused by the action or failure to act of Parent and such
action or failure to act constitutes a material breach of this
Agreement).
(c) By Parent if:
(i) There has been a material breach of the representations
and warranties made by the Company in Article 3 of
this Agreement, which breach (A) would cause a failure of
the condition described in Section 6.2(a) and
(B) is incapable of being cured by the Termination Date or
is not cured by the Company within 20 days following
receipt of written notice from Parent of such breach;
(ii) The Company has failed to comply in any material
respect with any of its covenants or agreements contained in
this Agreement, which failure to comply (A) would cause a
failure of the
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condition described in Section 6.2(b) and
(B) is incapable of being cured by the Termination Date or
is not cured by the Company within 20 days following
written notice from Parent of such failure;
(iii) (A) The Company shall have breached in any
material respect any of its obligations under
Section 5.4, (B) the Company Board (or any
committee thereof) shall have made a Company Adverse
Recommendation Change or a Company Acquisition
Proposal Recommendation, (C) any Acquired Company
shall have entered into a Company Acquisition Agreement or
(D) the Company or the Company Board (or any committee
thereof) publicly shall have announced its intention to do any
of the foregoing; or
(iv) There has been a Company Material Adverse Effect that
(A) would cause a failure of the condition described in
Section 6.2(c) and (B) is incapable of being cured by
the Termination Date or is not cured by the Company within
20 days following receipt of written notice from Parent of
such Company Material Adverse Effect.
(d) By the Company if:
(i) There has been a material breach of the representations
and warranties made by Parent and Merger Sub in
Article 4 of this Agreement, which breach
(A) would cause a failure of the condition described in
Section 6.3(a), and (B) is incapable of being
cured by the Termination Date or is not cured by Parent within
20 days following receipt of written notice from the
Company of such breach;
(ii) Parent or Merger Sub has failed to comply in any
material respect with any of its covenants or agreements
contained in this Agreement, which failure to comply
(A) would cause a failure of the condition described in
Section 6.3(b) and (B) is incapable of being
cured by the Termination Date or is not cured by Parent within
20 days following receipt of written notice from the
Company of such failure;
(iii) Prior to the approval of the Company Proposal by the
Required Company Vote, the Company receives a bona fide written
Company Acquisition Proposal not solicited in violation of
Section 5.4 that the Company Board determines in
good faith (after consultation with its outside legal counsel
and financial advisors and based on such other matters as it
deems relevant) is a Company Superior Proposal; provided,
however, that the Company may not terminate this
Agreement pursuant to this Section 7.1(d)(iii)
unless (A) the Company shall not have breached the terms of
Section 5.4 in any material respect, (B) the
Company shall have notified Parent in writing of such
determination, describing in reasonable detail the material
terms and conditions of such Company Superior Proposal and the
identity of the Person making such Company Superior Proposal,
and shall have provided Parent with a copy of the proposal
documents to the extent not previously provided, (C) during
the four Business Days after delivery of such notice to Parent,
the Company and its financial and legal advisors shall have
negotiated, in good faith, exclusively with Parent regarding a
Parent Revised Offer (it being understood that any amendment to
the price or any other material term of a Company Superior
Proposal shall require a new notice from the Company and an
additional three Business Day period within which Parent may
negotiate a Parent Revised Offer) and (D) the Company Board
shall have determined in good faith, after consultation with its
financial advisors and outside legal counsel and after
considering the results of any negotiations with Parent and any
Parent Revised Offer, that the Company Superior Proposal giving
rise to the notice described in clause (B) (including any
subsequent amendments or modifications) continues to be a
Company Superior Proposal. No termination pursuant to this
Section 7.1(d)(iii) shall be effective unless the
Company simultaneously pays in full the payment required by
Section 7.3(a). For the avoidance of doubt, the four
Business Day period and additional three Business Day periods,
if any, referred to in this Section 7.1(d)(iii) are
the same periods referenced in
Section 5.4(e)(B); or
(iv) There has been a Parent Material Adverse Effect that
(A) would cause a failure of the condition described in
Section 6.3(c) and (B) is incapable of being cured by
the Termination Date or is not cured by the Parent within
20 days following receipt of written notice from the
Company of such Parent Material Adverse Effect.
A-1-63
Section 7.2 Effect of
Termination. If this Agreement is terminated by
either the Company or Parent pursuant to the provisions of
Section 7.1, this Agreement shall forthwith become
null and void, and there shall be no further obligation on the
part of any Party or its Affiliates, directors, officers or
stockholders except pursuant to the provisions of
Section 5.3(c), Section 5.3(d),
Section 5.5(c), Section 5.5(d),
Section 5.12, Section 7.3,
Article 8 and the Confidentiality Agreement (which
shall continue pursuant to their terms); provided,
however, that a termination of this Agreement shall not
relieve any Party from any liability for damages incurred as a
result of a willful or intentional breach by such Party of its
representations, warranties, covenants, agreements or other
obligations hereunder occurring prior to such termination.
Section 7.3 Fees and
Expenses. Notwithstanding the provisions of
Section 5.12:
(a) The Company will, immediately upon termination of this
Agreement pursuant to Sections 7.1(c)(iii) or
7.1(d)(iii), pay, or cause to be paid, to Parent by wire
transfer of immediately available funds to an account designated
by Parent a termination fee in the amount of $10.0 million.
(b) The Company will, immediately upon termination of this
Agreement pursuant to Section 7.1(b)(iii), pay, or
cause to be paid, to Parent by wire transfer of immediately
available funds to an account designated by Parent an amount
equal to Parents out-of-pocket and documented expenses
incurred in connection with the transactions contemplated
hereby, including without limitation all such expenses relating
to accounting, legal and investment banking fees, and all
expenses and fees incurred in connection with any financing
contemplated by the Commitment Letter; provided, however,
that such amount shall not exceed $5.0 million in the
aggregate.
(c) The Company will pay, or cause to be paid, to Parent a
termination fee in the amount of $10.0 million less the
amount of the payment, if any, previously made by the Company
pursuant to Section 7.3(b) if (i) this
Agreement is terminated pursuant to
Section 7.1(b)(i) or 7.1(b)(iii),
(ii) prior to such termination, there has been publicly
announced and not withdrawn a Company Acquisition Proposal
involving any Acquired Company and (iii) within
365 days of such termination, any Acquired Company enters
into any definitive agreement with respect to or consummates any
Company Acquisition Proposal (regardless of whether such Company
Acquisition Proposal is the same Company Acquisition Proposal
referred to in clause (ii) above); provided that as
used in clauses (ii) and (iii) above the term
Company Acquisition Proposal shall have the meaning
given to such term in Section 1.1 with all percentages
mentioned in the definition of the term Acquisition
Proposal appearing in such Section changed to 50%. Such
termination fee shall be paid on the day such Acquired Company
consummates such Company Acquisition Proposal, by wire transfer
of immediately available funds to an account designated by
Parent. Notwithstanding the foregoing, the Company shall not be
required to pay, or cause to be paid, to Parent any amounts
pursuant to this Section 7.3(c) if the reason the
Merger has not been timely consummated is the result of a
failure to satisfy the conditions set forth in
Section 6.1(b), 6.1(c), 6.1(d),
6.1(e) or 6.1(f).
(d) Parent will, immediately upon termination of this
Agreement pursuant to Section 7.1(b)(iv) pay, or
cause to be paid, to the Company by wire transfer of immediately
available funds to an account designated by the Company an
amount equal to the Companys out-of-pocket and documented
expenses incurred in connection with the transactions
contemplated hereby, including without limitation all such
expenses relating to accounting, legal and investment banking
fees; provided, however, that such amount shall not
exceed $5.0 million in the aggregate.
(e) The Company acknowledges that the agreements contained
in this Section 7.3 are an integral part of the
transactions contemplated by this Agreement, and that, without
these agreements, Parent would not have entered into this
Agreement. Accordingly, if the Company fails to pay promptly any
amounts due pursuant to this Section 7.3, the
Company shall pay to Parent its costs and expenses (including
attorneys fees and expenses) in connection with collecting
these amounts, together with interest on the amounts so owed, at
the rate of interest per annum specified as the Prime Rate in
The Wall Street Journal (Northeast edition) as of the
date of termination plus 2.0%, from the date of termination of
this Agreement until the date all such amounts are paid to
Parent.
A-1-64
(f) Parent acknowledges that the agreements contained in
this Section 7.3 are an integral part of the
transactions contemplated by this Agreement, and that, without
these agreements, the Company would not have entered into this
Agreement. Accordingly, if Parent fails to pay promptly any
amounts due pursuant to this Section 7.3, Parent
shall pay to the Company its costs and expenses (including
attorneys fees and expenses) in connection with collecting
these amounts, together with interest on the amounts so owed, at
the rate of interest per annum specified as the Prime Rate in
The Wall Street Journal (Northeast edition) as of the
date of termination plus 2.0%, from the date of termination of
this Agreement until the date all such amounts are paid to
Company.
Article 8
Miscellaneous
Section 8.1 Nonsurvival of Representations
and Warranties. None of the representations or
warranties contained in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the
consummation of the Merger.
Section 8.2 Amendment. This
Agreement may be amended by the Parties at any time before or
after approval of the Company Proposal by the stockholders of
the Company; provided, however, that, after any such
approval, no amendment shall be made without the further
approval of such stockholders if such amendment would
(a) in any way materially adversely affect the rights of
the Company stockholders (other than a termination of this
Agreement in accordance with the provisions hereof) or
(b) require a shareholder vote under applicable Law or the
Companys listing agreement with Nasdaq. This Agreement may
not be amended except by a written instrument signed by an
authorized representative of each of the Parties.
Section 8.3 Notices. Any
notice or other communication required or permitted hereunder
shall be in writing and, unless delivery instructions are
otherwise expressly set forth above herein, either delivered
personally (effective upon delivery), by facsimile transmission
(effective upon confirmation of successful transmission), by
recognized overnight delivery service (effective on the next day
after delivery to the service), or by registered or certified
mail, postage prepaid and return receipt requested (effective on
the third Business Day after the date of mailing), at the
following addresses or facsimile transmission numbers (or at
such other address(es) or facsimile transmission number(s) for a
Party as shall be specified by like notice):
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To Parent and/or Merger Sub:
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Allis-Chalmers Energy Inc.
5075 Westheimer, Suite 890
Houston, Texas 77056
Attention: Munawar H. Hidayatallah
Chief Executive Officer
Facsimile: (713) 369-0555
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with a copy (which shall
not constitute notice) to:
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Andrews Kurth LLP
600 Travis Street, Suite 4200
Houston, Texas 77002
Attention: Robert V. Jewell, Esq.
Facsimile: (713) 220-7135
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To the Company:
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Bronco Drilling Company, Inc.
16217 N. May Avenue
Edmond, OK 73013
Attention: General Counsel
Facsimile: (405)285-9234
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with a copy (which shall
not constitute notice) to:
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Akin Gump Strauss Hauer & Feld LLP
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
Attention: Seth R. Molay, P.C.
Facsimile: (214) 969-4343
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A-1-65
Section 8.4 Counterparts. This
Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall
become effective when one or more counterparts have been signed
by each of the Parties and delivered to the other Parties
whether such delivery is by physical delivery or by means of a
facsimile or portable document format (pdf) transmission, it
being understood that all Parties need not sign the same
counterpart.
Section 8.5 Severability. The
provisions of this Agreement will be severable and the
invalidity or unenforceability of any provision will not affect
the validity or enforceability of the other provisions hereof so
long as the economic and legal substance of the transactions
contemplated hereby are not affected in any manner materially
adverse to any Party. Subject to the preceding sentence, any
term or provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be deemed modified to the minimum extent necessary
to make such term or provision valid and enforceable, provided
that if such term or provision is incapable of being so
modified, then such term or provision shall be deemed
ineffective to the extent of such invalidity or unenforceability
without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision
shall be interpreted to be only so broad as is enforceable.
Section 8.6 Entire Agreement; No Third Party
Beneficiaries. This Agreement (together with the
Confidentiality Agreement and the documents and instruments
delivered by the Parties in connection with this Agreement):
(a) constitutes the entire agreement and supersedes all
other prior agreements and understandings, both written and
oral, among the Parties with respect to the subject matter
hereof; and (b) except as provided in
Section 5.13 (which is intended to be for the
benefit of the Persons covered thereby) and
Section 5.14 (which is intended to be for the
benefit of the Persons covered thereby) is solely for the
benefit of the Parties and their respective successors, legal
representatives and assigns and does not confer on any Person
other than the Parties any rights or remedies hereunder. The
representations and warranties in this Agreement are the product
of negotiations among the Parties and are for the sole benefit
of the Parties. Any inaccuracies in such representations and
warranties are subject to waiver by the Parties hereto in
accordance with Section 8.10 without notice of
liability to any other Person. In some instances, the
representations and warranties in this Agreement may represent
an allocation among the Parties of risks associated with
particular matters regardless of knowledge of any of the
Parties. Consequently, Persons other than the Parties may not
rely upon the representations and warranties in this Agreement
as characterizations of actual facts or circumstances as of the
date of this Agreement or as of any other date. Without limiting
the foregoing, it is expressly understood and agreed that the
provisions of Section 5.14 are statements of intent,
and no Company Employee or other Person shall have any rights or
remedies with respect thereto (including any right of
employment) and no Person is intended to be a Third Party
beneficiary thereof.
Section 8.7 Applicable
Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the
Laws of the State of Delaware (including the Laws of Delaware
with respect to statutes of limitation and statutes of repose).
Section 8.8 Assignment. Neither
this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the Parties (whether by
operation of Law or otherwise) without the prior written consent
of the other Parties, and any such attempted assignment without
such consent shall be immediately null and void. Subject to the
preceding sentence, this Agreement will be binding upon, inure
to the benefit of and be enforceable by the Parties and their
respective successors and assigns.
Section 8.9 Waivers. At any
time prior to the Effective Time, any Party may, for itself only
and to the extent legally allowed: (a) extend the time for
the performance of any of the obligations or other acts of the
other Parties, (b) waive any inaccuracies in the
representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive
performance of any of the covenants or agreements, or
satisfaction of any of the conditions, contained herein. Any
agreement on the part of a Party to any such extension or waiver
shall be valid only if set forth in a written instrument signed
by an authorized representative of such Party. Except as
provided in this Agreement, no action taken pursuant to this
A-1-66
Agreement, including any investigation by or on behalf of any
Party, shall be deemed to constitute a waiver by the Party
taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement.
The waiver by any Party of a breach of any provision hereof
shall not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provisions hereof.
Section 8.10 Confidentiality
Agreement. The Confidentiality Agreement shall
remain in full force and effect following the execution of this
Agreement is hereby incorporated herein by reference, and shall
constitute a part of this Agreement for all purposes;
provided, however, that any standstill provisions
contained therein will, effective as of the Closing, be deemed
to have been waived to the extent necessary for the Parties to
consummate the Merger in accordance with the terms of this
Agreement. Any and all information received by Parent and the
Company pursuant to the terms and provisions of this Agreement
shall be governed by the applicable terms and provisions of the
Confidentiality Agreement.
Section 8.11 Incorporation. Exhibits
and Schedules referred to herein are attached to and by this
reference incorporated herein for all purposes.
Section 8.12 Specific Performance;
Remedies. Each Party acknowledges and agrees that
the other Parties would be damaged irreparably if any provision
of this Agreement were not performed in accordance with its
specific terms or were otherwise breached. Accordingly, the
Parties will be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and its provisions in any
action or proceeding instituted in any state or federal court
sitting in the State of Delaware having jurisdiction over the
parties and the matter, in addition to any other remedy to which
they may be entitled, at Law or in equity. Except as expressly
provided herein, the rights, obligations and remedies created by
this Agreement are cumulative and in addition to any other
rights, obligations or remedies otherwise available at Law or in
equity. Except as expressly provided herein, nothing herein will
be considered an election of remedies.
Section 8.13 Waiver of Jury
Trial. Each of the Parties hereto hereby waives
to the fullest extent permitted by applicable Law any right it
may have to a trial by jury with respect to any litigation
directly or indirectly arising out of, under or in connection
with this Agreement or the transactions contemplated by this
Agreement. Each of the Parties hereto (a) certifies that no
representative, agent or attorney of any other Party has
represented, expressly or otherwise, that such other Party would
not, in the event of litigation, seek to enforce that foregoing
waiver and (b) acknowledges that it and the other hereto
have been induced to enter into this Agreement and the
transactions contemplated by this Agreement, as applicable, by,
among other things, the mutual waivers and certifications in
this Section 8.13.
(Signature
Page Follows)
A-1-67
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives, on the date
first written above.
Company:
BRONCO DRILLING COMPANY, INC., a Delaware corporation
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By:
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/s/ D.
Frank Harrison
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Name: D. Frank Harrison
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Title:
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Chief Executive Officer
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Parent:
ALLIS-CHALMERS ENERGY INC., a Delaware corporation
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By:
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/s/ Munawar
H. Hidayatallah
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Name: Munawar H. Hidayatallah
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Title:
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Chairman and Chief Executive Officer
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Merger Sub:
ELWAY MERGER SUB, INC., a Delaware corporation
Name: Victor M. Perez
A-1-68
Exhibit 5.20(a)
VOTING
AGREEMENT
This VOTING AGREEMENT (this Agreement), dated
as
of ,
2008, is by and between Allis-Chalmers Energy Inc., a Delaware
corporation (Parent), and the undersigned
holder (the Affiliate) of shares or options
to acquire shares of common stock of Bronco Drilling Company,
Inc., a Delaware corporation (Bronco).
Capitalized terms used and not defined herein shall have the
respective meanings ascribed to them in the Merger Agreement
referenced below.
RECITALS
A. Parent, Elway Merger Sub, Inc., a Delaware corporation
and a subsidiary of Parent (Merger Sub), and
Bronco have entered into an Agreement and Plan of Merger dated
January 23, 2008 (as the same may be amended from time to
time, the Merger Agreement) pursuant to which
Merger Sub will merge (the Merger) with and
into Bronco, with Bronco surviving the Merger as a wholly-owned
subsidiary of Parent, on the terms and subject to the conditions
set forth in the Merger Agreement.
B. As of the date hereof, Affiliate owns and has the
present power and right to vote (or to direct the voting of) the
number of shares of common stock, par value of $0.01 per share,
of Bronco (the Bronco Common Stock) set forth
beneath the Affiliates name on the signature page hereto
and identified as Number of shares of Bronco Common Stock
owned, as such shares may be adjusted by stock dividend,
stock split, recapitalization, combination, merger,
consolidation, reorganization or other change in the capital
structure of Bronco affecting the Bronco Common Stock (such
shares of Bronco Common Stock, plus any other shares of Bronco
Common Stock the voting power over which is acquired by
Affiliate and less any shares of Bronco Common Stock the entire
beneficial ownership in which, including all voting rights with
respect thereto, are disposed of by Affiliate, in each case
during the period from and including the date hereof through and
including the date on which this Agreement is terminated in
accordance with its terms, are collectively referred to herein
as Affiliates Subject Shares).
C. As an inducement to the willingness of Parent to enter
into the Merger Agreement, and as an inducement and in
consideration therefor, the Merger Agreement requires certain
persons and entities, including Affiliate, to execute and
deliver this Agreement prior to the mailing of the Proxy
Statement/Prospectus, and Affiliate has agreed to enter into
this Agreement.
NOW, THEREFORE, intending to be legally bound, the parties agree
as follows:
1. Agreement to Vote the Subject
Shares. Affiliate, solely in Affiliates
capacity as a stockholder of Bronco, hereby agrees that during
the period commencing on the date hereof and continuing until
the termination of this Agreement (such period, the
Voting Period), at any and all meetings (or
any adjournments or postponements thereof) of the holders of any
class or classes of the capital stock of Bronco at which the
Merger Agreement and the transactions contemplated thereby are
considered, however called, or in connection with any and all
written consents of the holders of any class or classes of the
capital stock of Bronco relating to the Merger Agreement and
transactions contemplated thereby, Affiliate shall vote (or
cause to be voted) Affiliates Subject Shares in favor of
the approval and adoption of the Company Proposal and the terms
of the Merger Agreement and the Merger and each of the other
transactions contemplated by the Merger Agreement (and any
actions required in furtherance thereof). Affiliate agrees not
to enter into any agreement, letter of intent, agreement in
principle or understanding with any person that violates or
could reasonably be expected to violate the provisions and
agreements contained in this Agreement or the Merger Agreement;
provided, however, that nothing in this Agreement shall
be deemed to prevent Affiliate from making a bona fide
disposition of the entire beneficial ownership in, including all
voting rights with respect to, any or all of the Subject Shares.
For the avoidance of doubt, this Agreement is intended to
constitute a voting agreement
A-1-69
entered into under Section 218 of the Delaware General
Corporation Law, as amended, for the duration of the Voting
Period.
2. Covenants. Except for pledges
in existence as of the date hereof, Affiliate agrees that,
except as contemplated by the terms of this Agreement, Affiliate
shall not (a) grant any proxies or powers of attorney in
respect of the Subject Shares, deposit any of Affiliates
Subject Shares into a voting trust or enter into a voting
agreement with respect to any of Affiliates Subject Shares
or (b) take any action that would have the effect of
preventing, impeding, interfering with or adversely affecting
Affiliates ability to perform Affiliates obligations
under this Agreement. Notwithstanding the foregoing, nothing
herein shall prevent Affiliate from assigning or transferring
any Subject Shares beneficially owned by Affiliate to any trust,
estate, family partnership, foundation (whether family, private
or public) or other entity under Affiliates control or
subject to the same ultimate control as Affiliate (each a
Permitted Transferee) if such Permitted
Transferee agrees in writing to hold any Subject Shares subject
to all of the provisions of this Agreement as Affiliate
hereunder or making a bona fide disposition of the entire
beneficial ownership in, including all voting rights with
respect to, any or all of the Subject Shares.
3. Representations and Warranties of
Affiliate. Affiliate hereby represents and
warrants to Parent as follows:
(a) Due Authority. Affiliate has
the capacity to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. If Affiliate is
an entity, Affiliate is duly organized and validly existing
under the laws of the jurisdiction of its organization, and
Affiliate has all necessary power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby by Affiliate have, if Affiliate is an entity, been duly
authorized by all necessary action on the part of Affiliate,
and, assuming its due authorization, execution and delivery by
Parent, constitutes a valid and binding obligation of Affiliate,
enforceable against Affiliate in accordance with its terms,
except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting the enforcement of creditors
rights generally and by equitable principles.
(b) Ownership of Shares. Affiliate
owns and has the present power and right to vote (or to direct
the voting of) the number of shares of Bronco Common Stock set
forth beneath the Affiliates name on the signature page
hereto and identified as Number of shares of Bronco Common
Stock owned. Affiliate has sole voting power and sole
power of disposition, in each case with respect to all of the
shares of Bronco Common Stock set forth beneath Affiliates
name on the signature page hereto and identified as Number
of shares of Bronco Common Stock owned, with no
limitations, qualifications or restrictions on such rights,
subject only to applicable securities laws and the terms of this
Agreement and as otherwise noted on the signature page hereto.
Also set forth on the signature page hereto is (i) the
number of shares of Bronco Common Stock issuable pursuant to
options to purchase Bronco Common Stock held by Affiliate (the
Options) and (ii) the number of
restricted shares of Bronco Common Stock (which have not vested)
held by Affiliate (the Restricted Shares).
The shares of Bronco Common Stock set forth beneath the
Affiliates name on the signature page hereto and
identified as Number of shares of Bronco Common Stock
owned, the Options and the Restricted Shares are all of
the equity interests in Bronco legally or beneficially owned by
Affiliate.
(c) No Violations. (i) No
filing with any governmental authority, and no authorization,
consent or approval of any other person is necessary for the
execution of this Agreement by Affiliate and the consummation by
Affiliate of the transactions contemplated hereby (it being
understood that nothing herein shall prevent Affiliates
compliance with Section 13(d) of the Exchange Act) and
(ii) none of the execution and delivery of this Agreement
by Affiliate or compliance by Affiliate with any of the
provisions hereof shall (A) result in, or give rise to, a
violation or breach of or a default under any of the terms of
any material contract, understanding, agreement or other
instrument or obligation to which Affiliate is a party or by
which Affiliate or any of Affiliates Subject Shares or
assets may be bound, or (B) violate any applicable order,
writ,
A-1-70
injunction, decree, judgment, statute, rule or regulation which
could reasonably be expected to adversely affect
Affiliates ability to perform Affiliates obligations
under this Agreement.
(d) Reliance by Parent. Affiliate
understands and acknowledges that Parent has entered into the
Merger Agreement in reliance upon the covenants contained
therein requiring the execution and delivery of this Agreement
by Affiliate.
4. Miscellaneous.
(a) Affiliate Capacity. If
Affiliate is or becomes during the term hereof a director or
officer of Bronco, Affiliate does not make any agreement or
understanding herein in Affiliates capacity as such
director or officer. Affiliate executes this Agreement solely in
Affiliates capacity as the record holder or beneficial
owner of Affiliates Subject Shares and nothing herein
shall limit or affect any actions taken by Affiliate in
Affiliates capacity as an officer or director of Bronco.
Without limiting the foregoing, nothing in this Agreement shall
limit or affect the ability of a director or officer of Bronco
to take any action as may be advisable or necessary in the
discharge of his or her fiduciary duties as such director or
officer, and without regard to whether he or she is, without
limitation, (i) a trustee or co-trustee of one or more
Affiliates, (ii) an officer, consultant or other
representative of a trustee or co-trustee of one or more
Affiliates, or (iii) a beneficiary of one or more
Affiliates.
(b) Publication. Affiliate hereby
permits Parent and Bronco to publish and disclose in the Proxy
Statement/Prospectus (including all documents and schedules
filed with the SEC) and in other filings with the SEC
Affiliates identity and ownership of shares of Bronco
Common Stock and the nature of Affiliates commitments,
arrangements, and understandings pursuant to this Agreement.
(c) Further Actions. Each of the
parties hereto agrees that it will use its commercially
reasonable efforts to do all things necessary to effectuate this
Agreement.
(d) Entire Agreement. This
Agreement contains the entire understanding of the parties
hereto with respect to the subject matter contained herein and
supersedes all prior agreements and understandings, oral and
written, with respect thereto.
(e) Binding Effect; Benefit;
Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
Permitted Transferees, heirs, estates and successors. Neither
this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto, except
by will or by the laws of descent and distribution, without the
prior written consent of each of the other parties. Nothing in
this Agreement, expressed or implied, is intended to confer on
any person, other than the parties hereto, any rights or
remedies.
(f) Amendments, Waivers, etc. This
Agreement may not be amended, changed, supplemented, waived or
otherwise modified or terminated, except upon the execution and
delivery of a written agreement executed by all of the parties
hereto.
(g) Specific Enforcement. The
parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise
breached. Accordingly, the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which
they are entitled at law or in equity.
(h) Remedies Cumulative. All
rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such
party.
(i) No Waiver. The failure of any
party hereto to exercise any right, power or remedy provided
under this Agreement or otherwise available in respect hereof at
law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or
practice of the parties at variance
A-1-71
with the terms hereof shall not constitute a waiver by such
party of its right to exercise any such or other right, power or
remedy or to demand such compliance.
(j) Governing Law; Waiver of Jury
Trial. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH
SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
(k) Headings. The descriptive
headings of this Agreement are inserted for convenience only, do
not constitute a part of this Agreement and shall not affect in
any way the meaning or interpretation of this Agreement.
(l) Counterparts; Facsimiles. This
Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, and all of which together
shall be deemed to be one and the same instrument. A signature
transmitted by facsimile or by electronic mail in portable
document format shall be treated for all purposes by the
parties hereto as an original and shall be binding upon the
party transmitting such signature without limitation.
(m) Termination. This Agreement
shall terminate, neither Parent nor Affiliate shall have any
rights or obligations hereunder, and this Agreement shall become
null and void and have no effect upon the earliest to occur of
(i) the mutual consent of Parent and Affiliate,
(ii) the Effective Time, or (iii) the effective
termination of the Merger Agreement pursuant to its terms;
provided, further, that termination of this Agreement shall not
prevent any party hereunder from seeking any remedies (at law or
in equity) against any other party hereto for such partys
breach of any of the terms of this Agreement. Notwithstanding
the foregoing, Sections 4(d), 4(e), 4(h) and 4(j) shall
survive the termination of this Agreement.
(Signature
page follows)
A-1-72
IN WITNESS WHEREOF, this Agreement is executed as of the date
first stated above.
ALLIS-CHALMERS ENERGY INC.,
a Delaware corporation
AFFILIATE
Number of shares of Bronco Common Stock owned:
Number of shares of Bronco Common Stock issuable upon exercise
of options to purchase Bronco Common Stock held:
Number of restricted shares of Bronco Common Stock (which have
not vested) held:
A-1-73
Exhibit 5.20(b)
VOTING
AGREEMENT
This VOTING AGREEMENT (this Agreement), dated
as
of ,
2008, is by and between Bronco Drilling Company, Inc., a
Delaware corporation (Bronco), and the
undersigned holder (the Affiliate) of shares
or options to acquire shares of common stock of Allis-Chalmers
Energy Inc., a Delaware corporation (Parent).
Capitalized terms used and not defined herein shall have the
respective meanings ascribed to them in the Merger Agreement
referenced below.
RECITALS
A. Parent, Elway Merger Sub, Inc., a Delaware corporation
and a subsidiary of Parent (Merger Sub), and
Bronco have entered into an Agreement and Plan of Merger dated
January 23, 2008 (as the same may be amended from time to
time, the Merger Agreement) pursuant to which
Merger Sub will merge (the Merger) with and
into Bronco, with Bronco surviving the Merger as a wholly-owned
subsidiary of Parent, on the terms and subject to the conditions
set forth in the Merger Agreement.
B. As of the date hereof, Affiliate owns and has the
present power and right to vote (or to direct the voting of) the
number of shares of common stock, par value of $0.01 per share,
of Parent (the Parent Common Stock) set forth
beneath the Affiliates name on the signature page hereto
and identified as Number of shares of Parent Common Stock
owned, as such shares may be adjusted by stock dividend,
stock split, recapitalization, combination, merger,
consolidation, reorganization or other change in the capital
structure of Parent affecting the Parent Common Stock (such
shares of Parent Common Stock, plus any other shares of Parent
Common Stock the voting power over which is acquired by
Affiliate and less any shares of Parent Common Stock the entire
beneficial ownership in which, including all voting rights with
respect thereto, are disposed of by Affiliate, in each case
during the period from and including the date hereof through and
including the date on which this Agreement is terminated in
accordance with its terms, are collectively referred to herein
as Affiliates Subject Shares).
C. As an inducement to the willingness of Bronco to enter
into the Merger Agreement, and as an inducement and in
consideration therefor, the Merger Agreement requires certain
persons and entities, including Affiliate, to execute and
deliver this Agreement prior to the mailing of the Proxy
Statement/Prospectus, and Affiliate has agreed to enter into
this Agreement.
NOW, THEREFORE, intending to be legally bound, the parties agree
as follows:
1. Agreement to Vote the Subject
Shares. Affiliate, solely in Affiliates
capacity as a stockholder of Parent, hereby agrees that during
the period commencing on the date hereof and continuing until
the termination of this Agreement (such period, the
Voting Period), at any and all meetings (or
any adjournments or postponements thereof) of the holders of any
class or classes of the capital stock of Parent at which the
Parent Proposal and the transactions contemplated by the Merger
Agreement are considered, however called, or in connection with
any and all written consents of the holders of any class or
classes of the capital stock of Parent relating to the Parent
Proposal and the transactions contemplated by the Merger
Agreement, Affiliate shall vote (or cause to be voted)
Affiliates Subject Shares in favor of the approval and
adoption of the Parent Proposal and the terms of the Merger
Agreement and the Merger and each of the other transactions
contemplated by the Merger Agreement (and any actions required
in furtherance thereof). Affiliate agrees not to enter into any
agreement, letter of intent, agreement in principle or
understanding with any person that violates or could reasonably
be expected to violate the provisions and agreements contained
in this Agreement or the Merger Agreement; provided,
however, that nothing in this Agreement shall be deemed to
prevent Affiliate from making a bona fide disposition of the
entire beneficial ownership in, including all voting rights with
respect to, any or all of the Subject Shares. For the avoidance
of doubt, this Agreement is intended
A-1-74
to constitute a voting agreement entered into under
Section 218 of the Delaware General Corporation Law, as
amended, for the duration of the Voting Period.
2. Covenants. Except for pledges
in existence as of the date hereof, Affiliate agrees that,
except as contemplated by the terms of this Agreement, Affiliate
shall not (a) grant any proxies or powers of attorney in
respect of the Subject Shares, deposit any of Affiliates
Subject Shares into a voting trust or enter into a voting
agreement with respect to any of Affiliates Subject Shares
or (b) take any action that would have the effect of
preventing, impeding, interfering with or adversely affecting
Affiliates ability to perform Affiliates obligations
under this Agreement. Notwithstanding the foregoing, nothing
herein shall prevent Affiliate from assigning or transferring
any Subject Shares beneficially owned by Affiliate to any trust,
estate, family partnership, foundation (whether family, private
or public) or other entity under Affiliates control or
subject to the same ultimate control as Affiliate (each a
Permitted Transferee) if such Permitted
Transferee agrees in writing to hold any Subject Shares subject
to all of the provisions of this Agreement as Affiliate
hereunder or making a bona fide disposition of the entire
beneficial ownership in, including all voting rights with
respect to, any or all of the Subject Shares.
3. Representations and Warranties of
Affiliate. Affiliate hereby represents and
warrants to Bronco as follows:
(a) Due Authority. Affiliate has
the capacity to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. If Affiliate is
an entity, Affiliate is duly organized and validly existing
under the laws of the jurisdiction of its organization, and
Affiliate has all necessary power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby by Affiliate have, if Affiliate is an entity, been duly
authorized by all necessary action on the part of Affiliate,
and, assuming its due authorization, execution and delivery by
Bronco, constitutes a valid and binding obligation of Affiliate,
enforceable against Affiliate in accordance with its terms,
except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting the enforcement of creditors
rights generally and by equitable principles.
(b) Ownership of Shares. Affiliate
owns and has the present power and right to vote (or to direct
the voting of) the number of shares of Parent Common Stock set
forth beneath the Affiliates name on the signature page
hereto and identified as Number of shares of Parent Common
Stock owned. Affiliate has sole voting power and sole
power of disposition, in each case with respect to all of the
shares of Parent Common Stock set forth beneath Affiliates
name on the signature page hereto and identified as Number
of shares of Parent Common Stock owned, with no
limitations, qualifications or restrictions on such rights,
subject only to applicable securities laws and the terms of this
Agreement and as otherwise noted on the signature page hereto.
Also set forth on the signature page hereto is (i) the
number of shares of Parent Common Stock issuable pursuant to
options to purchase Parent Common Stock held by Affiliate (the
Options) and (ii) the number of
restricted shares of Parent Common Stock (which have not vested)
held by Affiliate (the Restricted Shares).
The shares of Parent Common Stock set forth beneath the
Affiliates name on the signature page hereto and
identified as Number of shares of Parent Common Stock
owned, the Options and the Restricted Shares are all of
the equity interests in Parent legally or beneficially owned by
Affiliate.
(c) No Violations. (i) No
filing with any governmental authority, and no authorization,
consent or approval of any other person is necessary for the
execution of this Agreement by Affiliate and the consummation by
Affiliate of the transactions contemplated hereby (it being
understood that nothing herein shall prevent Affiliates
compliance with Section 13(d) of the Exchange Act) and
(ii) none of the execution and delivery of this Agreement
by Affiliate or compliance by Affiliate with any of the
provisions hereof shall (A) result in, or give rise to, a
violation or breach of or a default under any of the terms of
any material contract, understanding, agreement or other
instrument or obligation to which Affiliate is a party or by
which Affiliate or any of Affiliates Subject Shares or
assets may be bound, or (B) violate any applicable order,
writ, injunction, decree, judgment, statute, rule or regulation
which could reasonably be expected to adversely affect
Affiliates ability to perform Affiliates obligations
under this Agreement.
A-1-75
(d) Reliance by Bronco. Affiliate
understands and acknowledges that Bronco has entered into the
Merger Agreement in reliance upon the covenants contained
therein requiring the execution and delivery of this Agreement
by Affiliate.
4. Miscellaneous.
(a) Affiliate Capacity. If
Affiliate is or becomes during the term hereof a director or
officer of Parent, Affiliate does not make any agreement or
understanding herein in Affiliates capacity as such
director or officer. Affiliate executes this Agreement solely in
Affiliates capacity as the record holder or beneficial
owner of Affiliates Subject Shares and nothing herein
shall limit or affect any actions taken by Affiliate in
Affiliates capacity as an officer or director of Parent.
Without limiting the foregoing, nothing in this Agreement shall
limit or affect the ability of a director or officer of Parent
to take any action as may be advisable or necessary in the
discharge of his or her fiduciary duties as such director or
officer, and without regard to whether he or she is, without
limitation, (i) a trustee or co-trustee of one or more
Affiliates, (ii) an officer, consultant or other
representative of a trustee or co-trustee of one or more
Affiliates, or (iii) a beneficiary of one or more
Affiliates.
(b) Publication. Affiliate hereby
permits Parent and Bronco to publish and disclose in the Proxy
Statement/Prospectus (including all documents and schedules
filed with the SEC) and in other filings with the SEC
Affiliates identity and ownership of shares of Parent
Common Stock and the nature of Affiliates commitments,
arrangements, and understandings pursuant to this Agreement.
(c) Further Actions. Each of the
parties hereto agrees that it will use its commercially
reasonable efforts to do all things necessary to effectuate this
Agreement.
(d) Entire Agreement. This
Agreement contains the entire understanding of the parties
hereto with respect to the subject matter contained herein and
supersedes all prior agreements and understandings, oral and
written, with respect thereto.
(e) Binding Effect; Benefit;
Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their
Permitted Transferees, heirs, estates and successors. Neither
this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto, except
by will or by the laws of descent and distribution, without the
prior written consent of each of the other parties. Nothing in
this Agreement, expressed or implied, is intended to confer on
any person, other than the parties hereto, any rights or
remedies.
(f) Amendments, Waivers, etc. This
Agreement may not be amended, changed, supplemented, waived or
otherwise modified or terminated, except upon the execution and
delivery of a written agreement executed by all of the parties
hereto.
(g) Specific Enforcement. The
parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise
breached. Accordingly, the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this
Agreement, this being in addition to any other remedy to which
they are entitled at law or in equity.
(h) Remedies Cumulative. All
rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such
party.
(i) No Waiver. The failure of any
party hereto to exercise any right, power or remedy provided
under this Agreement or otherwise available in respect hereof at
law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof shall
not constitute a waiver by such party of its right to exercise
any such or other right, power or remedy or to demand such
compliance.
A-1-76
(j) Governing Law; Waiver of Jury
Trial. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH
SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
(k) Headings. The descriptive
headings of this Agreement are inserted for convenience only, do
not constitute a part of this Agreement and shall not affect in
any way the meaning or interpretation of this Agreement.
(l) Counterparts; Facsimiles. This
Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, and all of which together
shall be deemed to be one and the same instrument. A signature
transmitted by facsimile or by electronic mail in portable
document format shall be treated for all purposes by the
parties hereto as an original and shall be binding upon the
party transmitting such signature without limitation.
(m) Termination. This Agreement
shall terminate, neither Bronco nor Affiliate shall have any
rights or obligations hereunder, and this Agreement shall become
null and void and have no effect upon the earliest to occur of
(i) the mutual consent of Bronco and Affiliate,
(ii) the Effective Time, or (iii) the effective
termination of the Merger Agreement pursuant to its terms;
provided, further, that termination of this Agreement shall not
prevent any party hereunder from seeking any remedies (at law or
in equity) against any other party hereto for such partys
breach of any of the terms of this Agreement. Notwithstanding
the foregoing, Sections 4(d), 4(e), 4(h) and 4(j) shall
survive the termination of this Agreement.
(Signature
page follows)
A-1-77
IN WITNESS WHEREOF, this Agreement is executed as of the date
first stated above.
BRONCO DRILLING COMPANY, INC.,
a Delaware corporation
AFFILIATE
Number of shares of Parent Common Stock owned:
Number of shares of Parent Common Stock issuable upon exercise
of options to purchase Parent Common Stock held:
Number of restricted shares of Parent Common Stock (which have
not vested) held:
A-1-78
ANNEX A-2
FIRST
AMENDMENT
TO THE
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ALLIS-CHALMERS ENERGY INC.,
BRONCO DRILLING COMPANY, INC.
AND
ELWAY MERGER SUB, INC.
Dated as of June 1, 2008
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TABLE OF
CONTENTS
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Article 1 Definitions
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Article 2 The Merger
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Article 3 Representations and Warranties of the Company
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Article 4 Representations and Warranties of Parent and
Merger Sub
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Article 5 Covenants
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Article 6 Conditions
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Article 7 Miscellaneous
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FIRST
AMENDMENT TO THE
AGREEMENT AND PLAN OF MERGER
This First Amendment to the Agreement and Plan of Merger, dated
as of June 1, 2008 (this Amendment), is
by and among ALLIS-CHALMERS ENERGY INC., a Delaware corporation
(Parent), ELWAY MERGER SUB, INC., a Delaware
corporation and a direct, wholly owned subsidiary of Parent
(Merger Sub), and BRONCO DRILLING COMPANY,
INC., a Delaware corporation (the Company).
Recitals
WHEREAS, Parent, Merger Sub and the Company (each, a
Party, and collectively, the
Parties) entered into an Agreement and Plan
of Merger dated as of January 23, 2008 (the Original
Agreement), which the boards of directors of each of the
Parties desire to amend in order to effect certain modifications
deemed desirable by each of such boards of directors;
WHEREAS, the boards of directors of each of the Parties
have approved (i) this Amendment and (ii) the Merger
(as defined below), upon the terms and subject to the conditions
of the Original Agreement, as amended by this Amendment, and the
Delaware General Corporation Law, as amended (the
DGCL), and the Delaware Limited Liability
Company Act, as amended (the Delaware LLC
Act);
WHEREAS, the boards of directors of each of the Parties
have determined that the Merger, this Amendment, the Original
Agreement and the transactions contemplated by the Original
Agreement, as amended by this Amendment, are advisable and in
the best interests of their respective companies and
stockholders;
WHEREAS, for federal income tax purposes, the Parties
intend for the Merger to qualify as a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code, and that the Original Agreement, as amended by
this Amendment, constitutes a plan of reorganization within the
meaning of
Section 1.368-2(g)
of the Treasury Regulations (as defined in the Original
Agreement); and
WHEREAS, the Parties desire that after the date hereof
and prior to the Effective Time of the Merger, Merger Sub become
a limited liability company, organized under the laws of the
State of Delaware, pursuant to a conversion effected under
Section 266 of the DGCL and
Section 18-214
of the Delaware LLC Act;
NOW, THEREFORE, for and in consideration of the
recitals and the mutual covenants and agreements set forth in
the Original Agreement and this Amendment, the Parties agree to
amend the Original Agreement as follows:
Article 1
Definitions
Section 1.1 Capitalized terms used but not defined
in this Amendment shall have the respective meanings given to
such terms in the Original Agreement. Each reference to
hereof, hereunder, hereby,
and this Agreement in the Original Agreement shall,
from and after the date of this Amendment, refer to the Original
Agreement, as amended by this Amendment.
Section 1.2 The definitions of the following
capitalized terms found in Section 1.1 of the
Original Agreement are hereby amended and restated in their
entirety as set forth below:
Certificate of Merger means the certificate
of merger, prepared and executed in accordance with the
applicable provisions of the DGCL, the Delaware LLC Act and this
Agreement, filed with the Secretary of State of the State of
Delaware to effect the Merger and the change of Merger
Subs name to Bronco Drilling Company LLC.
Merger means the merger of the Company with
and into Merger Sub, under the DGCL and the Delaware LLC Act,
with Merger Sub continuing as the surviving company and changing
its name to
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Bronco Drilling Company LLC, upon the terms and
subject to the conditions set forth in this Agreement, and in
accordance with the requirements of the DGCL and the Delaware
LLC Act.
Section 1.3 Each of the following definitions is
hereby added to Section 1.1 of the Original
Agreement in the correct alphabetical location within such
Section:
Conversion means the conversion of Merger Sub
from a Delaware corporation to a Delaware limited liability
company pursuant to Section 266 of the DGCL and
Section 18-214
of the Delaware LLC Act.
Delaware LLC Act means the Delaware Limited
Liability Company Act, as amended.
First Amendment Date means June 1, 2008.
New Merger Sub Charter Documents has the
meaning given to such term in Section 4.1.
Old Merger Sub Charter Documents has the
meaning given to such term in Section 4.1.
Original Agreement means the Agreement and
Plan of Merger, dated as of January 23, 2008, among the
Parties.
Surviving Company means the entity that
survives the Merger pursuant to Section 2.2.
Section 1.4
The definitions of Surviving Corporation and of
Parent Common Stock Value appearing in
Section 1.1 of the Original Agreement are hereby
deleted in their entirety.
Section 1.5 Pursuant to this Amendment, each
reference to the term Surviving Corporation in the
Original Agreement shall be deemed to be a reference to the term
Surviving Company.
Article 2
The
Merger
Section 2.1 Section 2.1 of the Original
Agreement is hereby amended and restated in its entirety as
follows:
Section 2.1 The Merger. On the terms and
subject to the conditions set forth in this Agreement and in
accordance with the provisions of this Agreement, the
Certificate of Merger, the DGCL and the Delaware LLC Act, at the
Effective Time, the Company shall be merged with and into Merger
Sub and the name of Merger Sub shall be changed to be
Bronco Drilling Company LLC.
Section 2.2 Section 2.2 of the Original
Agreement is hereby amended and restated in its entirety as
follows:
Section 2.2 Effect of the Merger. Upon the
effectiveness of the Merger, the separate corporate existence of
the Company shall cease and Merger Sub shall be the surviving
entity in the Merger (referred to from time to time herein as
the Surviving Company). Merger Sub shall continue
its company existence under the Laws of the State of Delaware
with all its rights, privileges, immunities and franchises
continuing unaffected by the Merger, except that the name of
Merger Sub shall be changed upon effectiveness of the Merger to
be Bronco Drilling Company LLC. The Merger shall
have the effects specified in this Agreement, the Certificate of
Merger, the DGCL and the Delaware LLC Act.
Section 2.3 Section 2.3 of the Original
Agreement is hereby amended and restated in its entirety as
follows:
Section 2.3 Governing Instruments, Directors and
Officers of the Surviving Company.
(a) At the Effective Time, the certificate of formation of
Merger Sub, as in effect immediately prior to the Effective
Time, shall be the certificate of formation of the Surviving
Company until subsequently amended in accordance with its terms
and applicable Law.
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(b) At the Effective Time, the limited liability company
agreement of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the limited liability company agreement
of the Surviving Company until subsequently amended in
accordance with its terms and applicable Law.
(c) The managers and officers of Merger Sub immediately
prior to the Effective Time shall continue as the managers and
officers, respectively, of the Surviving Company from the
Effective Time until their respective successors have been duly
elected or appointed in accordance with the certificate of
formation and limited liability company agreement of the
Surviving Company and applicable Law.
Section 2.4
(a) Section 2.4(a) of the Original Agreement is
hereby amended and restated in its entirety as follows:
(a) Merger Sub Membership Interests. At the
Effective Time, by virtue of the Merger and without any action
on the part of any holder thereof, the membership interests of
Merger Sub outstanding immediately prior to the Merger shall
remain outstanding and continue as membership interests of the
Surviving Company.
(b) Section 2.4(c)(i)(A) of the Original
Agreement is hereby amended and restated in its entirety as
follows:
(c) Company Securities.
(i) Company Common Stock.
(A) At the Effective Time, by virtue of the Merger and
without any action on the part of Merger Sub, Parent, the
Company or any holder of any Equity Interest in any of such
Parties (but subject to the provisions of
Section 2.5(e)), each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time
(excluding Dissenting Shares and shares to be cancelled pursuant
to Section 2.4(c)(ii), but including, without
limitation, shares of Company Common Stock that are issued prior
to the Effective Time in connection with Company Stock Options)
shall be converted into the right to receive (i) an amount
in cash (without interest) (the Cash
Consideration) equal to the quotient, calculated to
the nearest $0.01, resulting from dividing $200,000,000 by the
aggregate number of issued and outstanding shares of Company
Common Stock immediately prior to the Effective Time (excluding
shares to be cancelled pursuant to
Section 2.4(c)(ii), but including, without
limitation, shares of Company Common Stock that are issued prior
to the Effective Time in connection with Company Stock Options
and all Dissenting Shares), and (ii) a number (which may be
less than one) of fully paid and nonassessable shares of Parent
Common Stock (the Parent Stock Consideration)
equal to the Exchange Ratio. Exchange Ratio
means the fraction, expressed as a decimal, calculated to the
nearest one-ten thousandth, the numerator of which is
(a) 16,846,500 and the denominator of which is (b) the
aggregate number of issued and outstanding shares of Company
Common Stock immediately prior to the Effective Time (excluding
shares to be cancelled pursuant to
Section 2.4(c)(ii), but including, without
limitation, shares of Company Common Stock that are issued prior
to the Effective Time in connection with Company Stock Options
and all Dissenting Shares). The Cash Consideration and the
Parent Stock Consideration to be received by the holders of
Company Common Stock hereunder (together with the cash in lieu
of fractional shares of Parent Stock as specified below) are
referred to herein collectively as the Merger
Consideration.
Section 2.5 The first sentence of
Section 2.8 of the Original Agreement is hereby
amended by inserting the words and the Delaware LLC
Act immediately following the words under the
DGCL.
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Article 3
Representations
and Warranties of the Company
Section 3.1 The last sentence of
Section 3.2(a) of the Original Agreement is hereby
amended by inserting the words and the Delaware LLC
Act immediately following the words pursuant to the
DGCL.
Section 3.2 Section 3.10 of the Original
Agreement is hereby amended by inserting the following
subsection at the end thereof:
(c) No Acquired Company has taken or agreed to take any
action, or is aware of any fact or circumstance, that would
prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code.
Article 4
Representations
and Warranties of Parent and Merger Sub
Section 4.1 Section 4.1 of the Original
Agreement is hereby amended and restated in its entirety as
follows:
Section 4.1 Corporate Existence; Good Standing;
Corporate Authority. Parent is a corporation duly
incorporated, validly existing and in good standing under the
Laws of the State of Delaware. Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the
Laws of the State of Delaware. Prior to the Effective Date,
Merger Sub shall complete the Conversion and, upon the
completion thereof, will be a limited liability company duly
formed, validly existing and in good standing under the laws of
the State of Delaware. Parent and Merger Sub are duly qualified
to conduct business and are in good standing (to the extent such
concept exists in the relevant jurisdiction) in each
jurisdiction in which the ownership, operation or lease of their
respective properties or the nature of their respective
businesses requires such qualification, except for jurisdictions
in which any failures to be so qualified or to be in good
standing, individually or in the aggregate, do not constitute a
Parent Material Adverse Effect. Parent and Merger Sub have all
requisite corporate power and authority, and Merger Sub
following the Conversion will have all requisite limited
liability company power and authority, to own or lease and
operate their respective properties and assets and to carry on
their respective businesses as they are currently being
conducted. Parent has delivered to the Company true, accurate
and complete copies of (a) the Amended and Restated
Certificate of Incorporation (including any and all Certificates
of Designations) and the Second Amended and Restated By-laws of
Parent, each as amended to date (the Parent Charter
Documents), (b) the certificate of incorporation
and bylaws of Merger Sub, each as amended to date (prior to the
Conversion, the Old Merger Sub Charter
Documents), and (c) the forms of the certificate
of conversion from a corporation into a limited liability
company, the certificate of formation and the limited liability
company agreement to be executed and filed with the Secretary of
State of the State of Delaware in connection with the Conversion
(as so executed and filed, the New Merger Sub Charter
Documents, and together with the Old Merger Sub
Charter Documents, the Merger Sub Charter
Documents). Each Parent Charter Document and each Old
Merger Sub Charter Document is in full force and effect, has not
been amended or modified and has not been terminated, superseded
or revoked, and following the Conversion each New Merger Sub
Charter Document will be in full force and effect, will not have
been amended or modified and will not have been terminated,
superseded or revoked. Parent and Merger Sub are not in
violation of the Parent Charter Documents or the Old Merger Sub
Charter Documents, and following the Conversion Merger Sub will
not be in violation of the New Merger Sub Charter Documents.
Section 4.2 Section 4.2(a) of the
Original Agreement is hereby amended and restated in its
entirety as follows:
(a) Parent and Merger Sub have the requisite corporate
power and authority, and following the Conversion Merger Sub
will have the requisite limited liability company power and
authority, to execute and deliver this Agreement and the Related
Documents to which they are, or will become, a party, to
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perform their respective obligations hereunder and thereunder
and to consummate the Merger and all other transactions
contemplated hereunder and thereunder, subject to the adoption
of the Parent Proposal by Parents stockholders and the
adoption of this Agreement by Parent as the sole stockholder or,
following the Conversion, the sole member, of Merger Sub. The
execution, delivery and performance of this Agreement and the
Related Documents and the consummation of the Merger and the
other transactions contemplated hereunder and thereunder have
been duly authorized by all requisite corporate action on behalf
of Parent and Merger Sub, and no other corporate proceedings by
Parent and Merger Sub or, following the Conversion, limited
liability company proceedings by Merger Sub are or will be
necessary to authorize the execution and delivery of this
Agreement or the Related Documents or to consummate the Merger
and the other transactions contemplated hereunder or under the
Related Documents, except for the approval of the Parent
Proposal by Parents stockholders, the adoption of this
Agreement by Parent as the sole stockholder or, following the
Conversion, the sole member of Merger Sub, the filing of the
requisite documents with the Secretary of State of the State of
Delaware to effect the Conversion pursuant to the DGCL and the
Delaware LLC Act, the filing of the Certificate of Merger
pursuant to the DGCL and the Delaware LLC Act and the
Governmental Authority applications and approvals described in
Section 5.8.
Section 4.3 The last sentence of
Section 4.4(b) of the Original Agreement is hereby
amended by deleting the words is and which
immediately follow the words Merger Sub.
Section 4.4 Section 4.10 of the Original
Agreement is hereby amended by inserting the following
subsection at the end thereof:
(c) No Parent Company has taken or agreed to take any
action, or is aware of any fact or circumstance, that would
prevent the Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code.
Section 4.5 The last sentence of
Section 4.19 of the Original Agreement is hereby
amended and restated in its entirety as follows:
No stockholder vote, and following the Conversion no vote of any
member or a holder of any Equity Interest in Merger Sub, is
required for Merger Sub to adopt this Agreement and consummate
the transactions contemplated hereby, other that the vote of
Parent acting as the sole stockholder, or following the
Conversion, as the sole member of Merger Sub.
Section 4.6 Section 4.25 of the Original
Agreement is hereby amended and restated in its entirety as
follows:
Section 4.25 Financing. Parent has received a
commitment letter (including the term sheet referenced therein,
but excluding the fee letter referenced therein) which was
amended
and/or
revised subsequent to the date of the Original Agreement from
RBC Capital Markets Corporation and other financial institutions
(the Commitment Letter) whereby such
financial institution has committed, upon the terms and subject
to the conditions set forth therein, to provide debt financing
that, when combined with Parents other sources of
financing (including cash on hand), is sufficient to fund the
cash portion of the Merger Consideration and the expenses of
Parent and Merger Sub in connection with the Merger. Parent has
delivered to the Company a true, complete and correct copy of
the Commitment Letter as in effect on the First Amendment Date
(including any amendments in effect through the First Amendment
Date). As of the First Amendment Date, the Commitment Letter is
in full force and effect. The obligations of the financing
sources to fund the commitments under the Commitment Letter are
not subject to any conditions other than as set forth in the
Commitment Letter. No event has occurred that (with or without
notice, lapse of time, or both) would constitute a breach of or
default under the Commitment Letter by Parent, or if alternative
financing has been arranged by Parent, a breach of or default
under the terms of such alternative financing. Parent has paid
any and all commitment fees and other fees, in each case,
required by the Commitment Letter to be paid as of the First
Amendment Date. Parent has no knowledge of any facts or
circumstances that would reasonably be expected to result in
(a) any of the conditions set forth in the Commitment
Letter not being satisfied (or, if alternative
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financing has been arranged by Parent, any of the conditions set
forth in such alternative financing not being satisfied) or
(b) the funding contemplated in the Commitment Letter (or
in such alternative financing) not being made available to
Parent on a timely basis in order to consummate the transactions
contemplated by this Agreement.
Article 5
Covenants
Section 5.1 Section 5.13(a) of the
Original Agreement is hereby amended by inserting the following
sentence at the end thereof:
The New Merger Sub Charter Documents shall contain exculpation,
indemnification and advancement of expenses provisions with
respect to the current and former directors, officers,
fiduciaries, agents and employees of Company and the Surviving
Corporation that are no less favorable to such Persons than
those contained in the Company Charter Documents.
Section 5.2 The fourth sentence of
Section 5.13(b) of the Original Agreement is hereby
amended by inserting the words and the Delaware LLC
Act, as applicable, immediately following the words
of the DGCL.
Section 5.3 The list appearing at the end of
Section 5.14 of the Parent Disclosure Letter is
hereby amended by (a) deleting the names Derek Garber,
Allen Strider and David Luster and (b) inserting the names
Kim Powell, Sheree Stump and Dustin Eisenhauer.
Section 5.4 Section 5.16 of the Original
Agreement is hereby amended and restated in its entirety as
follows:
Section 5.16 Tax Matters.
(a) Each of Parent, Merger Sub and the Company shall use
its commercially reasonable best efforts to cause the Merger to
qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and to obtain
the Tax opinions set forth in Section 6.2(d) and
Section 6.3(e). No Party will knowingly take any
action or fail to take any action, which action or failure to
act would cause the Merger to fail to qualify as a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code and the
Treasury Regulations promulgated thereunder. The Parties shall
file all Tax Returns consistent with the treatment of the Merger
as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. This Agreement
is intended to constitute a plan of reorganization
within the meaning of
Section 1.368-2(g)
of the Treasury Regulations.
(b) Parent shall deliver to Andrews Kurth LLP and Akin,
Gump, Strauss, Hauer & Feld, L.L.P. an officers
certificate dated as of the Closing Date and signed by the Chief
Executive Officer or the Chief Financial Officer of Parent,
containing representations of Parent and Merger Sub, and the
Company shall deliver to Akin, Gump, Strauss, Hauer &
Feld, L.L.P. and Andrews Kurth LLP an officers certificate
dated as of the Closing Date and signed by the Chief Executive
Officer or the Chief Financial Officer of the Company,
containing representations of the Company, in each case as shall
be reasonably necessary or appropriate or customary to enable
Andrews Kurth LLP to render the opinion referred to in
Section 6.2(d) and Akin, Gump, Strauss,
Hauer & Feld, L.L.P. to render the opinion referred to
in Section 6.3(e). Each of the Parties shall use its
commercially reasonable best efforts not to take or cause to be
taken any action that would cause to be untrue (or fail to take
or cause not to be taken any action which would cause to be
untrue) any of the certifications and representations included
in the officers certificates described in this
Section 5.16(b).
(c) The Parties intend and believe that this Agreement
constitutes a binding Contract for fixed consideration pursuant
to
Section 1.368-1T(e)(2)
of the Treasury Regulations.
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(d) The Company shall provide Parent with a certification
in accordance with the requirements of
Section 1.1445-2(c)(3)
of the Treasury Regulations that it is not a United States real
property holding corporation.
Section 5.5 The first sentence of
Section 5.20(b) of the Original Agreement is hereby
amended by replacing the third instance of the word
Parent with the words the Company.
Article 6
Conditions
Section 6.1 Section 6.2 of the Original
Agreement is hereby amended by inserting the following
subsection at the end thereof:
(d) Tax Opinion. Parent shall have received
an opinion (reasonably acceptable in form and substance to
Parent) from Andrews Kurth LLP, dated as of the Closing Date, to
the effect that for federal income tax purposes (i) the
Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code,
and (ii) each of Parent and the Company will be a party to
such reorganization within the meaning of Section 368(b) of
the Internal Revenue Code, and such opinion shall not have been
withdrawn, revoked or modified. Such opinion will be based upon
representations of the Parties contained in this Agreement and
in the officers certificates described in
Section 5.16(b).
Section 6.2 Section 6.3 of the Original
Agreement is hereby amended by inserting the following
subsection at the end thereof:
(e) Tax Opinion. The Company shall have
received an opinion (reasonably acceptable in form and substance
to the Company) from Akin, Gump, Strauss, Hauer &
Feld, L.L.P., dated as of the Closing Date, to the effect that
for federal income tax purposes (i) the Merger will be
treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, and
(ii) each of Parent and the Company will be a party to such
reorganization within the meaning of Section 368(b) of the
Internal Revenue Code, and such opinion shall not have been
withdrawn, revoked or modified. Such opinion will be based upon
representations of the Parties contained in this Agreement and
in the officers certificates described in
Section 5.16(b).
Article 7
Miscellaneous
Section 7.1 Notwithstanding anything in the
Agreement to the contrary, Parent and Merger Sub may effect the
Conversion.
Section 7.2 This Amendment may be executed in one or
more counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more
counterparts have been signed by each of the Parties and
delivered to the other Parties whether such delivery is by
physical delivery or by means of a facsimile or portable
document format (PDF) transmission, it being understood that all
Parties need not sign the same counterpart.
Section 7.3 This Amendment shall be governed in all
respects, including validity, interpretation and effect, by the
Laws of the State of Delaware (including the Laws of Delaware
with respect to statutes of limitation and statutes of repose).
Section 7.4 The Article and Section headings of this
Amendment and the Article and Section headings of the Original
Agreement are for convenience of reference only and shall not be
deemed to modify, explain, restrict, alter or affect the meaning
or interpretation of any provision of this Amendment or the
Original Agreement.
(Signature page follows)
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IN WITNESS WHEREOF, the Parties have caused this Amendment to be
executed by their duly authorized representatives, on the date
first written above.
Company:
BRONCO DRILLING COMPANY, INC., a Delaware corporation
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By:
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/s/ D.
Frank Harrison
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Name: D. Frank Harrison
Parent:
ALLIS-CHALMERS ENERGY INC., a Delaware corporation
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By:
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/s/ Theodore
F. Pound III
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Name: Theodore F. Pound III
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Title:
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General Counsel and Secretary
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Merger Sub:
ELWAY MERGER SUB, INC., a Delaware corporation
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By:
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/s/ Theodore
F. Pound III
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Name: Theodore F. Pound III
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Title:
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Vice President and Secretary
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RBC Capital Markets
Corporation
Two Embarcadero Center
Suite 1200
San Francisco, CA 94111
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Telephone: (415) 633-8500
June 1, 2008
The Board of Directors
Allis-Chalmers Energy Inc.
5075 Westheimer, Suite 890
Houston, TX 77056
Members of the Board:
You have requested our opinion as to the fairness, from a
financial point of view, to Allis-Chalmers Energy, Inc., a
Delaware corporation (Parent), of the Merger
Consideration (as defined below) provided for under the terms of
the proposed First Amendment to the Agreement and Plan of Merger
(as amended by such First Amendment, the Agreement)
by and among Parent, Bronco Drilling Company, Inc., a Delaware
corporation (the Company), and a wholly-owned
Delaware subsidiary of Parent that, prior to the Effective Time,
will be converted from a Delaware corporation into a Delaware
limited liability company (Merger Sub). Capitalized
terms used herein shall have the meanings used in the Agreement
unless otherwise defined herein.
The Agreement provides, among other things, that the Company
will merge with and into Merger Sub (the Merger)
and, at the Effective Time, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time
(other than (A) Dissenting Shares and (B) shares held
by the Company, Parent, Merger Sub or any direct or indirect
wholly-owned subsidiary of Parent or the Company, which will be
cancelled for no consideration) will be converted into the right
to receive consideration (the Merger Consideration)
comprised of an amount in cash without interest to be determined
by the formula specified in the Agreement and a number of fully
paid and nonassessable shares of Parent Common Stock equal to
the Exchange Ratio. The Agreement also provides, among other
things, that each share of Company Restricted Stock outstanding
immediately prior to the Effective Time will be immediately
vested and, at the Effective Time, the holder thereof will
become entitled to receive the Merger Consideration therefor.
The parties to the Merger Agreement intend the Merger to qualify
as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended. The terms and conditions of the Merger are more fully
set forth in the Agreement.
RBC Capital Markets Corporation (RBC), as part of
its investment banking services, is regularly engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, corporate restructurings,
underwritings, secondary distributions of listed and unlisted
securities, private placements, and valuations for corporate and
other purposes.
We are acting as a financial advisor to Parent in connection
with the Merger. We previously received a fee for our services
upon delivery of an opinion dated January 23, 2008 with
respect to the fairness to Parent, from a financial point of
view, of the consideration to be paid by Parent under the
original version of the Agreement dated as of January 23,
2008 (the Prior Opinion), which fee was not
contingent upon the successful completion of the Merger. In
addition, for our services as financial advisor to Parent in
connection with the Merger, if the Merger is successfully
completed we will receive an additional larger fee, against
which the fee we received for delivery of the Prior Opinion will
be credited. In addition, if, in connection with the Merger not
being completed, Parent receives a termination fee, we will be
entitled to a specified percentage (subject to an aggregate
specified maximum amount) of that fee in cash, when it is
received by Parent, less the aggregate of all expenses incurred
by Parent in connection with the Merger, all expenses of RBC
that have been reimbursed by Parent under the terms of
RBCs engagement and the fee paid by Parent to RBC for the
delivery of this opinion. In the event the Merger is not
completed, we will be entitled to receive a similar fee for any
fairness opinion requested by Parent in connection with any
other transaction or series of transactions whereby, directly or
indirectly, capital stock of
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the Company or any of its assets is transferred to Parent, its
shareholders, any of its subsidiaries or any Company of which
Parent is a subsidiary, and a similar contingent transaction fee
if such other transaction or series of transaction is
consummated at any time pursuant to a definitive agreement,
letter of intent or other evidence of commitment entered into
during the term of our engagement or within twelve months
thereafter. Parent has also agreed to indemnify us for certain
liabilities that may arise out of our engagement and to
reimburse us for our reasonable out-of-pocket expenses incurred
in connection with our services.
In the ordinary course of business, RBC may act as a market
maker and broker in the publicly traded securities of Parent
and/or the
Company and receive customary compensation, and may also
actively trade securities of Parent
and/or the
Company for our own account and the accounts of our customers,
and, accordingly, RBC and its affiliates, may hold a long or
short position in such securities. RBC has provided investment
banking and financial advisory services to Parent in the past,
for which it received customary fees, including, in the past two
years, as financial advisor in connection with Parents
2006 acquisitions of DLS Drilling Logistics & Services
Corporation and Oil & Gas Rental Services, Inc., its
2007 sale of its Capillary Tubing Business and a potential
acquisition transaction that was mutually abandoned by the
parties, as well as sole book-running manager for Parents
public offerings of equity securities in 2006 and 2007 and debt
securities in 2006 (two offerings) and 2007. In addition,
RBCs parent company, Royal Bank of Canada (Royal
Bank), has extended financing to Parent in the past,
including, in the past two years, a $300 million bridge
financing in 2006 (subsequently repaid) and $17.5 million
of a $90 million revolving credit facility in 2007
(currently outstanding) for which RBC acts as the lead arranger
and administrative agent and is paid customary fees for such
services.
In connection with the financing of the Merger, RBC and Goldman
Sachs Credit Partners L.P. (GSCP), acting as Lead
Arrangers, Royal Bank, acting as Administrative Agent, and Royal
Bank and GSCP, as Lenders, are providing (subject to the terms
and conditions of the Lenders respective commitments of
50% per Lender) committed senior unsecured bridge financing (the
Bridge Financing) to Parent of up to
$350 million (which could be syndicated among other
lenders) to finance the cash component of the Merger
Consideration as well as to refinance certain Company debt, to
pay related fees and expenses, and for working capital and
general corporate purposes. For this commitment Royal Bank will
receive, in addition to specified interest (increasing over
time) on the principal advanced by it as a Lender if the Bridge
Financing is funded, its rateable share of customary structuring
and funding fees (the funding fee being subject to a specified
refund schedule if the Bridge Financing is repaid in full within
180 days of funding) payable at the closing of the Bridge
Financing, a customary rollover fee based on the aggregate
principal amount (if any) of the Bridge Financing outstanding on
the first anniversary of the closing, a customary commitment fee
payable on the date on which Parent acquires all or
substantially all the capital stock or assets of the Company
with financing provided other than pursuant to arrangements with
Royal Bank and GSCP, and annual administrative fees so long as
any of the Bridge Financing is outstanding. In addition, Parent
has agreed to reimburse certain expenses of Royal Bank and its
affiliates in connection with its commitment and if, in
connection with the Merger not being completed, Parent receives
a termination fee, Royal Bank and its affiliates will be
entitled to payment of those expenses as if the closing of the
Bridge Financing had occurred (subject to an aggregate specified
maximum percentage of the termination fee), in cash, when such
termination fee is received by Parent. Parent has also agreed
that, to the extent it seeks to raise any term debt or equity
financing in connection with the Merger, either through public
markets or by private placement, it will provide RBC with the
right, but not the obligation, to act as not less than lead
book-running manager for an equity offering, lead
manager/placement agent for a public debt offering or lead agent
for bank financing, as applicable, in each case on terms and
conditions acceptable to Parent. In addition, Parent has engaged
RBC and Goldman Sachs & Co. to act as exclusive joint
lead underwriters, joint book-runners and joint placement agents
and/or
initial purchasers in connection with any offering of senior
notes which will either replace the Bridge Financing or, if the
Bridge Financing is funded, be used to refinance any amounts
outstanding under the Bridge Financing. RBC will receive
customary fees in connection with any such senior notes
offering. Parent has also agreed, in connection with the Bridge
Financing and any other financing provided or arranged, or
co-provided or co-arranged, by Royal Bank or RBC, to indemnify
it for certain liabilities that may arise in connection
therewith.
RBC Capital Markets Corporation
B-2
In light of RBCs prior services to Parent and its
financial advisory and financing roles for Parent in connection
with the Merger, RBC anticipates that it may be selected by
Parent to provide investment banking and financial advisory
and/or
financing services that may be required by Parent in the future,
regardless of whether the Merger is successfully completed.
For the purposes of rendering our opinion, we have undertaken
such review and inquiries as we deemed necessary or appropriate
under the circumstances, including the following: (i) we
reviewed the financial terms of the proposed execution version
of the Agreement provided to us on June 1, 2008 (the
Latest Draft Agreement); (ii) we reviewed and
analyzed certain publicly available financial and other data
with respect to Parent and the Company and certain other
relevant historical operating data relating to Parent and the
Company made available to us from published sources and from the
internal records of Parent and the Company, respectively;
(iii) we reviewed financial projections and forecasts of
Parent and the combined post-Merger company prepared by
Parents management, and the Company, prepared by its
management (Forecasts); (iv) we conducted
discussions with members of the senior managements of Parent and
the Company with respect to the business prospects and financial
outlook of Parent and the Company as standalone entities as well
as the strategic rationale and potential benefits of the Merger;
(v) we reviewed Wall Street research estimates regarding
the potential future performance of Parent and the Company as
standalone entities; (vi) we reviewed the reported prices
and trading activity for Parent Common Stock and Company Common
Stock; and (vii) we performed other studies and analyses as
we deemed appropriate.
In arriving at our opinion, we performed the following analyses
in addition to the review, inquiries, and analyses referred to
in the preceding paragraph: (i) we performed a valuation
analysis of each of Parent and the Company as a standalone
entity, using comparable company and discounted cash flow
analyses with respect to each of Parent and the Company as well
as research price target analysis with respect to Parent and
precedent transaction analysis with respect to the Company; and
(ii) we performed a pro forma combination analysis,
determining the potential impact of the Merger on the projected
2008 and 2009 earnings per share of Parent as a standalone
entity.
Several analytical methodologies have been employed and no one
method of analysis should be regarded as critical to the overall
conclusion we have reached. Each analytical technique has
inherent strengths and weaknesses, and the nature of the
available information may further affect the value of particular
techniques. The overall conclusions we have reached are based on
all the analysis and factors presented, taken as a whole, and
also on application of our own experience and judgment. Such
conclusions may involve significant elements of subjective
judgment and qualitative analysis. We therefore give no opinion
as to the value or merit standing alone of any one or more parts
of the analyses.
In rendering our opinion, we have assumed and relied upon the
accuracy and completeness of all the information that was
publicly available to us and all of the financial, legal, tax,
operating and other information provided to or discussed with us
by Parent or the Company (including, without limitation, the
financial statements and related notes thereto of each of Parent
and the Company, respectively), and have not assumed
responsibility for independently verifying and have not
independently verified such information. We have assumed that
all Forecasts provided to us by Parent or the Company, as the
case may be (including Forecasts provided to us by Parent with
respect to certain cost and revenue synergies expected to be
realized from the Merger), were reasonably prepared on bases
reflecting the best currently available estimates and good faith
judgments of the future financial performance of Parent or the
Company (as the case may be), respectively, as standalone
entities (or, in the case of the projected synergies, as a
combined company). We express no opinion as to such Forecasts or
the assumptions upon which they were based.
In rendering our opinion, we have not assumed any responsibility
to perform, and have not performed, an independent evaluation or
appraisal of any of the assets or liabilities of Parent or the
Company, and we have not been furnished with any such valuations
or appraisals (except that an independent June 2007 appraisal of
the Companys drilling rigs, performed for the Company, was
provided to Parent and us as part of the Merger due diligence
process but was not considered relevant by us in connection with
the analyses we performed for
RBC Capital Markets Corporation
B-3
purposes of our opinion). We have not assumed any obligation to
conduct, and have not conducted, any physical inspection of the
property or facilities of Parent or the Company. We have not
investigated, and make no assumption regarding, any litigation
or other claims affecting Parent or the Company.
We have assumed, in all respects material to our analysis, that
all conditions to the consummation of the Merger will be
satisfied without waiver thereof. We have further assumed that
the executed version of the Agreement will not differ, in any
respect material to our opinion, from the Latest Draft Agreement.
Our opinion speaks only as of the date hereof, is based on the
conditions as they exist and information which we have been
supplied as of the date hereof, and is without regard to any
market, economic, financial, legal, or other circumstances or
event of any kind or nature which may exist or occur after such
date. We have not undertaken to reaffirm or revise this opinion
or otherwise comment upon events occurring after the date hereof
and do not have an obligation to update, revise or reaffirm this
opinion. We are not expressing any opinion herein as to the
prices at which Parent Common Stock or Company Common Stock have
traded or will trade following the announcement of the Merger
nor the prices at which Company Common Stock will trade
following the consummation of the Merger.
The opinion expressed herein is provided for the information and
assistance of the Board of Directors of Parent in connection
with the Merger. We express no opinion and make no
recommendation to any stockholder of Parent as to how such
stockholder should vote with respect to the Parent Proposal or
any other proposal to be voted upon by them in connection with
the Merger. All advice and opinions (written and oral) rendered
by RBC are intended for the use and benefit of the Board of
Directors of Parent. Such advice or opinions may not be
reproduced, summarized, excerpted from or referred to in any
public document or given to any other person without the prior
written consent of RBC. If required by applicable law, such
opinion may be included in any disclosure document filed by
Parent with the SEC with respect to the Merger; provided
however, that such opinion must be reproduced in full and
that any description of or reference to RBC be in a form
reasonably acceptable to RBC and its counsel. RBC shall have no
responsibility for the form or content of any such disclosure
document, other than the opinion itself.
Our opinion does not address the merits of the underlying
decision by Parent to engage in the Merger or the relative
merits of the Merger compared to any alternative business
strategy or transaction in which Parent might engage.
Our opinion addresses solely the fairness of the Merger
Consideration, from a financial point of view, to Parent. Our
opinion does not in any way address other terms or arrangements
of the Merger or the Agreement, including, without limitation,
the financial or other terms of any other agreement contemplated
by, or to be entered into in connection with, the Agreement, nor
does it address, and we express no opinion with respect to, the
solvency of Parent or the impact thereon of the Bridge Financing
or the Merger. Further, in rendering our opinion we express no
opinion about the fairness of the amount or nature of the
compensation (if any) to any of the officers, directors or
employees of any party of the Merger, or class of such persons,
relative to the Merger Consideration or otherwise.
Our opinion has been approved by RBCs M&A Fairness
Opinion Committee. Upon execution of the Agreement, this opinion
will supersede for all purposes the Prior Opinion.
Based on our experience as investment bankers and subject to the
foregoing, including the various assumptions and limitations set
forth herein, it is our opinion that, as of the date hereof, the
Merger Consideration is fair, from a financial point of view, to
Parent.
Very truly yours,
RBC CAPITAL MARKETS CORPORATION
RBC Capital Markets Corporation
B-4
ANNEX
C
June 1,
2008
The Board of Directors
Bronco Drilling Company, Inc.
16217 N. May Ave.
Edmond, OK 73013
Gentlemen:
You have asked us to advise you with respect to the fairness to
the stockholders of Bronco Drilling Company, Inc.
(Bronco) from a financial point of view of the
consideration to be paid by Allis Chalmers Energy, Inc.
(Allis Chalmers) to such stockholders pursuant to
the terms of that certain Agreement and Plan of Merger, dated as
of January 23, 2008, as amended as of June 1, 2008
(the Merger Agreement), by and among Allis Chalmers,
Bronco and Elway Merger Sub, Inc., a wholly-owned subsidiary of
Allis Chalmers (Merger Sub). The Merger Agreement
provides (i) for the merger (the Merger) of
Bronco with and into Merger Sub and (ii) that the shares of
Bronco common stock issued and outstanding immediately prior to
the effective time of the Merger (other than Dissenting Shares
(as defined in the Merger Agreement) and shares of Bronco common
stock held immediately prior to the effective time of the Merger
by Bronco, by Allis Chalmers or Merger Sub or by any direct or
indirect wholly-owned subsidiary of Allis Chalmers or Bronco)
will be cancelled and converted into the right to receive
(a) $200,000,000 in cash in the aggregate, or $7.46 per
share based on the number of Bronco shares outstanding as of the
date hereof and (b) 16,846,500 shares of Allis
Chalmers common stock, or $10.79 per share based on the closing
price per share of Allis Chalmers common stock on May 30,
2008 and the number of Bronco shares outstanding as of the date
hereof, equating to a total aggregate consideration of
$489,254,405 or $18.25 per share of Bronco common stock plus the
assumption of all indebtedness.
In arriving at our opinion, we have reviewed and analyzed, among
other things, the following: (i) the Merger Agreement;
(ii) publicly available financial statements and other
information concerning Allis Chalmers, including the Allis
Chalmers Annual Reports on
Form 10-K
for the years ended December 31, 2004, December 31,
2005, December 31, 2006, and December 31, 2007, the
Allis Chalmers Quarterly Reports on
Form 10-Q
for the quarters ended March 31, 2008, March 31, 2007,
June 30, 2007, September 30, 2007, March 31,
2006, June 30, 2006, and September 30, 2006, all of
the Allis Chalmers Current Reports on
Form 8-K
for 2006, 2007 and 2008 and the Allis Chalmers Registration
Statement on
Form S-3
filed on October 11, 2007; (iii) certain other
internal information, including information concerning the
business and operations of Allis Chalmers furnished to Johnson
Rice & Company L.L.C. (Johnson Rice) by
Allis Chalmers, including detailed financial forecasts for 2008
and 2009 and summary forecasts for
2008-2012;
(iv) publicly available trading information for Allis
Chalmers common stock; (v) publicly available financial
statements and other information concerning Bronco, including
the Bronco Annual Reports on
Form 10-K
for the years ended December 31, 2005, December 31,
2006, and December 31, 2007, the Bronco Quarterly Reports
on
Form 10-Q
for the quarters ended March 31, 2008, March 31, 2007,
June 30, 2007, September 30, 2007, March 31,
2006, June 30, 2006, and September 30, 2006, all of
the Bronco Current Reports on
Form 8-K
for 2006, 2007 and 2008 and the Bronco Registration Statement on
Form S-3
filed May 22, 2007; (vi) certain other internal
information, including information concerning the business and
operations of Bronco furnished to Johnson Rice by Bronco,
including detailed financial forecasts for 2008 and 2009 and
639 Loyola Avenue
Suite 2775 New Orleans, Louisiana
70113 (504) 525 - 3767
C-1
summary forecasts for
2008-2012;
(vii) publicly available trading information for Bronco
common stock; (viii) publicly available information for
other companies that Johnson Rice believes to be comparable to
Bronco and Allis Chalmers; (ix) publicly available
information concerning future operating and financial
performance of Bronco, Allis Chalmers and the comparable
companies prepared by industry experts; (x) publicly
available research analysts reports and earnings estimates for
both companies; and (xi) publicly available information
concerning the nature and terms of certain other transactions
considered relevant to this transaction. We also attended and
participated in a formal due diligence session hosted by Allis
Chalmers and Bronco management at which each management team
delivered its company presentation. We also participated in
several telephonic due diligence sessions hosted by Allis
Chalmers and Bronco management to update their financial results
and forecasts.
In connection with our review, we have not independently
verified any of the foregoing information and have relied on its
being complete and accurate in all material respects. With
respect to the financial forecasts, we have assumed that they
have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of Broncos and
Allis Chalmers management as to the future financial
performance of Bronco and Allis Chalmers, respectively, and have
assumed, with your consent, that the financial results reflected
in such forecasts will be realized in the amounts and at the
times projected. We have assumed, with your consent, that the
Merger will be consummated in accordance with its terms, without
waiver, modification or amendment of any material term,
condition or agreement and that, in the course of obtaining the
necessary regulatory or third party approvals, consents and
releases for the Merger, no delay, limitation, restriction or
condition will be imposed that would have an adverse effect on
Bronco, Allis Chalmers or the contemplated benefits of the
Merger. We are not expressing any opinion as to what the value
of Allis Chalmers common stock actually will be when issued
pursuant to the Merger or the price at which the Allis Chalmers
common stock will trade at any time. We have not made or been
provided with an independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of Bronco or
Allis Chalmers nor have we evaluated the solvency or fair value
of Bronco or Allis Chalmers under any state or federal laws
relating to bankruptcy, insolvency or similar matters. In
addition, we have not conducted any physical inspection of the
properties or assets of Bronco or Allis Chalmers. We have not
performed any tax analysis, nor have we been furnished with any
such analysis. Accordingly, we have not evaluated (and our
opinion does not include) any potential tax consequences related
to the Merger including, without limitation, any potential tax
consequences to Bronco, Allis Chalmers, or their respective
stockholders.
In conducting our analysis and arriving at our opinion as
expressed herein, we have considered such financial and other
factors as we deemed appropriate under the circumstances
including, among others, the following: (i) the historical
and current financial position and results of operations of
Bronco and Allis Chalmers; (ii) the business prospects of
Bronco and Allis Chalmers; (iii) the historical and current
market for Broncos common stock, for Allis Chalmers
common stock and for the equity securities of certain other
companies believed to be comparable to both companies;
(iv) a pro forma combined accretion dilution analysis;
(v) publicly traded peer comparisons for Bronco and Allis
Chalmers, and Broncos per rig value; (vi) credit
sensitivity analysis for Bronco, Allis Chalmers and the combined
company; (vii) the respective contributions in terms of
various financial measures of Bronco and Allis Chalmers to the
combined company under several scenarios, and the relative pro
forma ownership of Allis Chalmers after the Merger by the
current holders of Allis Chalmers common stock and Bronco common
stock; (viii) the value of Allis Chalmers and
Broncos respective discounted cash flows under several
scenarios and related sensitivity analysis; (ix) the nature
and terms of certain other acquisition transactions that we
believe to be relevant; and (x) scenario analysis of
potential value creation, pro forma for the Merger under a range
of potential post-close trading multiples. We have also taken
into account our assessment of general economic, market and
financial conditions and our experience in connection with
similar transactions and securities valuation generally.
Our opinion necessarily is based upon conditions as they exist
and can be evaluated on, and on the information made available
to us on the date hereof. We assume no responsibility for
updating or revising our opinion based on circumstances or
events occurring after the date thereof. Our opinion does not
constitute a recommendation to any stockholder as to how such
stockholder should vote on the Merger. Further, in rendering our
opinion we express no opinion about the fairness of the amount
or nature of the compensation
C-2
(if any) to any of the officers, directors or employees of any
party of the Merger, or class of such persons, relative to the
consideration to be received by the stockholders of Bronco or
otherwise.
Johnson Rice is an energy industry focused investment banking
firm and is continually engaged in the valuation of businesses
and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions
of listed and unlisted securities and private placements.
We have acted as financial advisor to Bronco in connection with
the Merger and will receive a fee for our services, a
significant portion of which is contingent upon the consummation
of the Merger. We will also receive a fee for rendering this
opinion. In addition, Bronco has agreed to indemnify us for
certain liabilities that may arise out of our engagement.
In the ordinary course of our business, we actively trade the
equity securities of both Bronco and Allis Chalmers for our own
account and for the accounts of customers and, accordingly, may
at any time hold a long or short position in such securities.
Johnson Rice has in the past provided investment banking
services to Bronco, for which it received customary underwriting
compensation and reimbursement of expenses. Johnson Rice served
as an underwriter in connection with Broncos initial
public offering in August 2005 and in Broncos subsequent
October 2005 and March 2006 secondary equity offerings. The
aggregate amount that Johnson Rice has received from Bronco for
such services was approximately $6,126,350. Johnson Rice has
also previously provided investment banking services to Allis
Chalmers for which it has received compensation and
reimbursement of expenses from Allis Chalmers. Johnson Rice
served as an underwriter in connection with Allis Chalmers
secondary public offerings in August 2006 and January 2007. The
aggregate amount that Johnson Rice has received from Allis
Chalmers for such services was approximately $1,494,000. Johnson
Rice anticipates that it may act as financial advisor to Bronco
and/or Allis
Chalmers with respect to future transactions.
It is understood that this letter is for the information of the
Board of Directors of Bronco and is not to be quoted or referred
to, in whole or in part, in any registration statement,
prospectus, or proxy statement (except for the registration
statement, proxy statement, or prospectus related to the Merger
as provided below), or in any other written document used in
connection with the offering or sale of securities, nor shall
this letter be used for any other purposes, without Johnson
Rices prior written consent. It is further understood
that, if the opinion is included in the registration statement,
proxy statement or prospectus in connection with the Merger, the
opinion will be reproduced in such registration statement, proxy
statement or prospectus in full, and any description of or
reference to Johnson Rice or summary of the opinion in such
registration statement, proxy statement or prospectus will be in
a form acceptable to Johnson Rice and its counsel. We were not
requested to, and we did not, solicit third party indications of
interest in the possible acquisition of all or a part of Bronco,
nor were we requested to consider, and our opinion does not
address Broncos underlying business decision to pursue the
Merger, the relative merits of the Merger as compared to any
alternative business strategies that might exist for Bronco or
the effects of any other transaction in which Bronco might
engage.
Our opinion has been approved by Johnson Rices Fairness
Opinion Committee.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, it is our opinion
that, as of the date hereof, the consideration to be received by
the holders of Bronco common stock in the Merger (other than
Allis Chalmers, Merger Sub and their respective subsidiaries and
affiliates), is fair from a financial point of view to such
holders.
Very truly yours,
Johnson Rice & Company L.L.C.
C-3
SECTION 262 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
§262.
APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for
its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of
§ 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate
D-1
of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the
certificate of incorporation contains such a provision, the
procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the
D-2
Court of Chancery demanding a determination of the value of the
stock of all such stockholders. Notwithstanding the foregoing,
at any time within 60 days after the effective date of the
merger or consolidation, any stockholder who has not commenced
an appraisal proceeding or joined that proceeding as a named
party shall have the right to withdraw such stockholders
demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder
who has complied with the requirements of subsections (a)
and (d) of this section hereof, upon written request, shall
be entitled to receive from the corporation surviving the merger
or resulting from the consolidation a statement setting forth
the aggregate number of shares not voted in favor of the merger
or consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
Notwithstanding subsection (a) of this section, a person
who is the beneficial owner of shares of such stock held either
in a voting trust or by a nominee on behalf of such person may,
in such persons own name, file a petition or request from
the corporation the statement described in this subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholders certificates of
D-3
stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (c) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
D-4
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
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Item 20.
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Indemnification
of Directors and Officers
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Delaware law permits a corporation to adopt a provision in its
certificate of incorporation eliminating or limiting the
personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty
as a director, except that the provision will not eliminate or
limit the liability of a director for (1) any breach of the
directors duty of loyalty to the corporation or its
stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (3) liability under section 174 of the DGCL or
(4) any transaction from which the director derived an
improper personal benefit. Allis-Chalmers certificate of
incorporation provides that, to the fullest extent of Delaware
law, none of Allis-Chalmers directors will be liable to
Allis-Chalmers or its stockholders for monetary damages for
breach of fiduciary duty as a director.
Under Delaware law, a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any
type of proceeding, other than an action by or in the right of
the corporation, by reason of the fact that he or she is or was
a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation or other
entity, against expenses, including attorneys fees,
judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with the proceeding if:
(1) he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best
interests of the corporation and (2) with respect to any
criminal proceeding, he or she had no reasonable cause to
believe that his or her conduct was unlawful. A corporation may
indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action
or suit brought by or in the right of the corporation by reason
of the fact that he or she is or was a director, officer,
employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee
or agent of another corporation or other entity, against
expenses, including attorneys fees, actually and
reasonably incurred in connection with the action or suit if he
or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the
corporation, except that no indemnification will be made if the
person is found liable to the corporation unless, in such a
case, the court determines the person is nonetheless entitled to
indemnification for the expenses. A corporation must also
indemnify a present or former director or officer that has been
successful on the merits or otherwise in defense of any
proceeding, or in defense of any claim, issue or matter therein,
against expenses, including attorneys fees, actually and
reasonably incurred by him or her. Expenses, including
attorneys fees, incurred by a director or officer, or any
employees or agents, in defending civil or criminal proceedings
may be paid by the corporation in advance of the final
disposition of the proceedings upon receipt of an undertaking by
or on behalf of current directors or officers to repay the
amount if it will ultimately be determined that he or she is not
entitled to be indemnified by the corporation. The Delaware law
regarding indemnification and the advancement of expenses is not
exclusive of any other rights a person may be entitled to under
any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
Under the DGCL, the termination of any proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, will not, of itself, create a
presumption that a person did not act in good faith and in a
manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with
respect to any criminal proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
Allis-Chalmers certificate of incorporation and bylaws
authorize indemnification of any person entitled to indemnity
under law to the full extent permitted by law.
Delaware law also provides that a corporation may purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation or other
entity, against any liability asserted against and incurred by
such person, whether or not the corporation would have
II-1
the power to indemnify such person against such liability.
Allis-Chalmers will maintain, at its expense, an insurance
policy that insures its officers and directors, subject to
customary exclusions and deductions, against specified
liabilities that may be incurred in those capacities. In
addition, Allis-Chalmers has entered into indemnification
agreements with each of its directors that provide that it will
indemnify the indemnitee against, and advance certain expenses
relating to, liabilities incurred in the performance of such
indemnitees duties on Allis-Chalmers behalf to the
fullest extent permitted under Delaware law and its bylaws.
The merger agreement provides that for a period of six years
from the effective time of the merger, Allis-Chalmers will cause
the surviving company in the merger to indemnify, defend and
hold harmless, to the fullest extent permitted by applicable
law, each person who is, has been or becomes prior to the
effective time of the merger a director, officer, fiduciary,
agent or employee of Bronco and any of its subsidiaries in their
capacities as such from and against any claims and expenses
arising out of, relating to or in connection with any action or
omission in his or her capacity as such occurring or alleged to
have occurred at or before the effective time of the merger. The
merger agreement also requires Allis-Chalmers to cause the
surviving company to pay the expenses of the indemnified person
in advance of the final disposition of any claim made against
the indemnified person during such six-year period.
In addition, the merger agreement provides that Allis-Chalmers
and the surviving company in the merger will maintain in effect
all exculpation, indemnification and advancement of expenses
provisions of the certificate of incorporation and bylaws of
each of Bronco and its subsidiaries in effect as of the date of
the initial merger agreement or in any indemnification
agreements between Bronco and its subsidiaries and their
respective current and former directors and officers.
Allis-Chalmers and the surviving company may not, for a period
of six years from the effective time of the merger, amend,
repeal or otherwise modify, unless required by law, any such
provisions in any manner that would adversely affect the rights
under such provisions of any indemnitee, and all rights to
indemnification thereunder in respect of any claim asserted or
made within such period shall continue until the final
disposition or resolution of such claim. In addition,
Allis-Chalmers and the surviving company agreed that the
organizational documents of the surviving company would contain
exculpation, indemnification and advancement of expenses
provisions with respect to the current and former directors,
officers, fiduciaries and employees of Bronco and the surviving
company that are no less favorable to such persons than those
contained in Broncos organizational documents.
For a period of six years after the effective time of the
merger, the surviving company will also maintain liability
insurance for directors and officers with respect to claims
arising from facts or events that occurred at or prior to the
effective time of the merger from an insurance carrier with the
same or better credit rating as Broncos current insurance
carrier for all directors and officers of Bronco who are
currently covered by Broncos existing directors and
officers liability insurance. The insurance will be no
less advantageous to the directors and officers than the
coverage and amounts they currently have. However, the surviving
company will not be obligated to make annual premium payments
for this insurance to the extent that the premiums exceed 200%
of the per annum rate of the premium currently paid by Bronco
for similar insurance as of the date of the initial merger
agreement. In the event that the annual premium for this
insurance exceeds the maximum amount, the surviving company will
purchase as much coverage per policy year as reasonably
practicable for the maximum amount. Allis-Chalmers will have the
right to cause the coverage to be extended under the insurance
by obtaining a six year tail policy on terms and
conditions no less advantageous than the existing insurance
policy. Such tail insurance will satisfy the
requirement discussed above that the surviving company
indemnify, defend and hold harmless, for a period of six years
from the effective time of the merger, the current and former
directors and officers of Bronco and any of its subsidiaries for
claims and expenses occurring at or before the effective time of
the merger, and advance amounts for their expenses associated
with such claims. Prior to the effective time of the merger,
Bronco may purchase such tail insurance at
Allis-Chalmers expense, provided that the aggregate annual
premiums for such insurance do not exceed the maximum amount
currently paid by Bronco for similar insurance.
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Item 21.
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Exhibits
and Financial Statement Schedules
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(a) Exhibits
II-2
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2
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.0
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Agreement and Plan of Merger effective as of January 23,
2008, by and among Allis-Chalmers Energy Inc., Elway Merger Sub,
Inc. and Bronco Drilling Company, Inc. (included as
Annex A-1
to the joint proxy statement/prospectus in Part I of this
Registration Statement).
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2
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.0.1
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First Amendment to the Agreement and Plan of Merger, dated as of
June 1, 2008, by and among
Allis-Chalmers
Energy Inc., Elway Merger Sub, Inc. and Bronco Drilling Company,
Inc. (included as Annex
A-2 to the
joint proxy
statement/prospectus
in Part I of this Registration Statement).
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2
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.1
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First Amended Disclosure Statement pursuant to Section 1125
of the Bankruptcy Code, dated September 14, 1988, which
includes the First Amended and Restated Joint Plan of
Reorganization dated September 14, 1988 (incorporated by
reference to Allis-Chalmers Current Report on
Form 8-K
filed on December 1, 1988).
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2
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.2
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Reorganization Trust Agreement dated September 14,
1988 by and between Allis-Chalmers and John T. Grigsby, Jr.,
Trustee (incorporated by reference to Exhibit D of the
First Amended and Restated Joint Plan of Reorganization dated
September 14, 1988 included in Allis-Chalmers Current
Report on
Form 8-K
filed on December 1, 1988).
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2
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.3
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Agreement and Plan of Merger dated as of May 9, 2001 by and
among Allis-Chalmers,
Allis-Chalmers
Acquisition Corp. and OilQuip Rentals, Inc. (incorporated by
reference to Exhibit 2.1 to Allis-Chalmers Current
Report on
Form 8-K
filed on May 15, 2001).
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2
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.4
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Stock Purchase Agreement dated February 1, 2002 by and
between Allis-Chalmers and Jens H. Mortensen, Jr.
(incorporated by reference to Exhibit 10.1 to
Allis-Chalmers Current Report on
Form 8-K
filed on February 21, 2002).
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2
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.5
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Stock Purchase Agreement dated February 1, 2002 by and
among Allis-Chalmers, Energy Spectrum Partners LP, and Strata
Directional Technology, Inc. (incorporated by reference to
Exhibit 2.10 to Allis-Chalmers Annual Report on
Form 10-K
for the year ended December 31, 2001).
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2
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.6
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Stock Purchase Agreement dated August 10, 2004 by and among
Allis-Chalmers Corporation and the investors named thereto
(incorporated by reference to Exhibit 10.37 to the
Registration Statement on
Form S-1,
Registration No. 118916, filed on September 10, 2004).
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2
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.7
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Amendment to Stock Purchase Agreement dated August 10, 2004
(incorporated by reference to Exhibit 10.38 to the
Registration Statement on
Form S-1,
Registration No. 118916, filed on September 10, 2004).
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2
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.8
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Addendum to Stock Purchase Agreement dated September 24,
2004 (incorporated by reference to Exhibit 10.55 to
Allis-Chalmers Current Report on
Form 8-K
filed on September 30, 2004).
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2
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.9
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Asset Purchase Agreement dated November 10, 2004 by and
among AirComp LLC, a Delaware limited liability company, Diamond
Air Drilling Services, Inc., a Texas corporation, and Marquis
Bit Co., L.L.C., a New Mexico limited liability company, Greg
Hawley and Tammy Hawley, residents of Texas and Clay Wilson and
Linda Wilson, residents of New Mexico (incorporated by reference
to Allis-Chalmers Current Report on
Form 8-K
filed on November 15, 2004).
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2
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.10
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Purchase Agreement and related Agreements by and among
Allis-Chalmers Corporation, Chevron USA, Inc., Dale Redman and
others dated December 10, 2004 (incorporated by reference
to Exhibit 10.63 to Allis-Chalmers Current Report on
Form 8-K
filed on December 16, 2004).
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2
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.11
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Stock Purchase Agreement dated April 1, 2005, by and among
Allis-Chalmers Energy Inc., Thomas Whittington, Sr., Werlyn R.
Bourgeois and SAM and D, LLC. (incorporated by reference to
Exhibit 10.51 to Allis-Chalmers Current Report on
Form 8-K
filed on April 5, 2005).
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2
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.12
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Stock Purchase Agreement effective May 1, 2005, by and
among Allis-Chalmers Energy Inc., Wesley J. Mahone, Mike T.
Wilhite, Andrew D. Mills and Tim Williams (incorporated by
reference to Exhibit 10.51 to Allis-Chalmers Current
Report on
Form 8-K
filed on May 6, 2005).
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2
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.13
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Purchase Agreement dated July 11, 2005 among Allis-Chalmers
Energy Inc., Mountain Compressed Air, Inc. and M-I, L.L.C.
(incorporated by reference to Exhibit 10.42 to
Allis-Chalmers Current Report on
Form 8-K
filed on July 15, 2005).
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2
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.14
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Asset Purchase Agreement dated July 11, 2005 between
AirComp LLC, W.T. Enterprises, Inc. and William M. Watts
(incorporated by reference to Exhibit 10.43 to
Allis-Chalmers Current Report on
Form 8-K
filed on July 15, 2005).
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2
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.15
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Asset Purchase Agreement by and between Patterson Services, Inc.
and Allis-Chalmers Tubular Services, Inc. (incorporated by
reference to Exhibit 10.44 to Allis-Chalmers Current
Report on
Form 8-K
filed on September 8,
2005).
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II-3
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2
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.16
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Stock Purchase Agreement dated as of December 20, 2005
between Allis-Chalmers and Joe Van Matre (incorporated by
reference to Exhibit 10.33 to Allis-Chalmers Annual
Report on
Form 10-K
for the year ended December 31, 2005).
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2
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.17
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Stock Purchase Agreement, dated as of April 27, 2006, by
and among Bridas International Holdings Ltd., Bridas Central
Company Ltd., Associated Petroleum Investors Limited, and
Allis-Chalmers. (incorporated by reference to Exhibit 2.3
to Allis-Chalmers Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2006).
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2
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.18
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Stock Purchase Agreement, dated as of October 17, 2006, by
and between Allis-Chalmers Production Services, Inc. and
Randolph J. Hebert (incorporated by reference to
Exhibit 10.1 to Allis-Chalmers Current Report on
Form 8-K
filed on October 19, 2006).
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2
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.19
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Asset Purchase Agreement, dated as of October 25, 2006, by
and between Allis-Chalmers Energy Inc. and Oil & Gas
Rental Services, Inc. (incorporated by reference to
Exhibit 10.1 to Allis-Chalmers Current Report on
Form 8-K
filed on October 26, 2006).
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3
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.1
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Amended and Restated Certificate of Incorporation of
Allis-Chalmers (incorporated by reference to Exhibit 3.1 to
Allis-Chalmers Annual Report on
Form 10-K
for the year ended December 31, 2001).
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3
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.2
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Certificate of Designation, Preferences and Rights of the
Series A 10% Cumulative Convertible Preferred Stock ($.01
Par Value) of Allis-Chalmers (incorporated by reference to
Exhibit 3.1 to
Allis-Chalmers
Current Report on
Form 8-K
filed on February 21, 2002).
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3
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.3
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Second Amended and Restated By-laws of Allis-Chalmers
(incorporated by reference to Exhibit 3.1 to
Allis-Chalmers
Current Report on
Form 8-K
filed on April 3, 2008).
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3
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.4
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Certificate of Amendment of Certificate of Incorporation filed
with the Delaware Secretary of State on June 9, 2004
(incorporated by reference to Exhibit 3.3 to
Allis-Chalmers Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2004).
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3
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.5
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Certificate of Amendment of Certificate of Incorporation filed
with the Delaware Secretary of State on January 5, 2005
(incorporated by reference to Exhibit 3.5 to
Allis-Chalmers Current Report on
Form 8-K
filed on January 11, 2005).
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3
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.6
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Certificate of Amendment of Certificate of Incorporation filed
with the Delaware Secretary of State on August 16, 2005
(incorporated by reference to Exhibit 3.5 to
Allis-Chalmers Current Report on
Form 8-K
filed August 17, 2005).
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4
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.1
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Specimen Stock Certificate of Common Stock of Allis-Chalmers
(incorporated by reference to Exhibit 4.1 to
Allis-Chalmers Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2004).
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4
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.2
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Registration Rights Agreement dated as of March 31, 1999,
by and between Allis-Chalmers and the Pension Benefit Guaranty
Corporation (incorporated by reference to Exhibit 10.3 to
the Allis-Chalmers Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1999).
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4
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.3
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Registration Rights Agreement dated April 2, 2004 by and
between Allis-Chalmers and the Stockholder signatories thereto
(incorporated by reference to Exhibit 10.43 to Amendment
No. 1 to Allis-Chalmers Annual Report on
Form 10-K
for the year ended December 31, 2003).
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4
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.4
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Registration Rights Agreement dated as of January 29, 2007
by and among Allis-Chalmers Energy Inc., the Guarantors named
therein and the Initial Purchasers named therein (incorporated
by reference to Exhibit 10.2 to Allis-Chalmers
Current Report on
Form 8-K
filed on January 29, 2007).
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4
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.5
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Registration Rights Agreement dated as of January 18, 2006
by and among Allis-Chalmers Energy Inc., the Guarantors named
therein and the Initial Purchasers named therein (incorporated
by reference to Exhibit 10.2 to Allis-Chalmers
Current Report on
Form 8-K
filed on January 24, 2006).
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4
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.6
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Registration Rights Agreement dated as of August 14, 2006
by and among Allis-Chalmers, the guarantors listed on
Schedule A thereto and RBC Capital Markets Corporation
(incorporated by reference to Exhibit 10.1 to
Allis-Chalmers Current Report on
Form 8-K
filed on August 14, 2006).
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4
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.7
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Indenture dated as of January 18, 2006 by and among
Allis-Chalmers, the Guarantors named therein and Wells Fargo
Bank, N.A., as trustee (incorporated by reference to
Exhibit 4.1 to Allis-Chalmers Current Report on
Form 8-K
filed on January 24, 2006).
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II-4
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4
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.8
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First Supplemental Indenture dated as of August 11, 2006 by
and among Allis-Chalmers GP, LLC, Allis-Chalmers LP, LLC,
Allis-Chalmers Management, LP, Rogers Oil Tool Services, Inc.,
Allis-Chalmers, the other Guarantors (as defined in the
Indenture referred to therein) and Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 4.2 to
Allis-Chalmers Current Report on
Form 8-K
filed on August 14, 2006).
|
|
4
|
.9
|
|
Second Supplemental Indenture dated as of January 23, 2007
by and among Petro-Rentals, Incorporated, Allis-Chalmers, the
other Guarantor parties thereto and Wells Fargo Bank, N.A., as
trustee (incorporated by reference to Exhibit 10.1 to
Allis-Chalmers Current Report on
Form 8-K
filed on January 24, 2007).
|
|
4
|
.10
|
|
Indenture dated as of January 29, 2007, by and among
Allis-Chalmers, the Guarantors named therein and Wells Fargo
Bank, N.A. (incorporated by reference to Exhibit 4.1 to
Allis-Chalmers Current Report on
Form 8-K
filed on January 29, 2007.
|
|
4
|
.11
|
|
Form of 9.0% Senior Note due 2014 (incorporated by
reference to Exhibit A to Exhibit 4.1 to
Allis-Chalmers
Current Report on
Form 8-K
filed on January 24, 2006).
|
|
4
|
.12
|
|
Form of 8.5% Senior Note due 2017 (incorporated by
reference to Exhibit A to Exhibit 4.1 to
Allis-Chalmers
Current Report on
Form 8-K
filed on January 29, 2007).
|
|
5
|
.1
|
|
Opinion of Andrews Kurth LLP as to the legality of the
securities.
|
|
8
|
.1
|
|
Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. as to
tax matters.
|
|
8
|
.2
|
|
Opinion of Andrews Kurth LLP as to tax matters.
|
|
10
|
.1
|
|
Amended and Restated Retiree Health Trust Agreement dated
September 14, 1988 by and between Allis-Chalmers and Wells
Fargo Bank (incorporated by reference to
Exhibit C-1
of the First Amended and Restated Joint Plan of Reorganization
dated September 14, 1988 included in
Allis-Chalmers
Current Report on
Form 8-K
filed on December 1, 1988).
|
|
10
|
.2
|
|
Amended and Restated Retiree Health Trust Agreement dated
September 18, 1988 by and between Allis-Chalmers and
Firstar Trust Company (incorporated by reference to
Exhibit C-2
of the First Amended and Restated Joint Plan of Reorganization
dated September 14, 1988 included in Allis-Chalmers
Current Report on
Form 8-K
filed on December 1, 1988).
|
|
10
|
.3
|
|
Product Liability Trust Agreement dated September 14,
1988 by and between Allis-Chalmers and Bruce W. Strausberg,
Trustee (incorporated by reference to Exhibit E of the
First Amended and Restated Joint Plan of Reorganization dated
September 14, 1988 included in Allis-Chalmers Current
Report on
Form 8-K
filed on December 1, 1988).
|
|
10
|
.4*
|
|
Allis-Chalmers Savings Plan (incorporated by reference to
Allis-Chalmers Annual Report on
Form 10-K
for the year ended December 31, 1988).
|
|
10
|
.5*
|
|
Allis-Chalmers Consolidated Pension Plan (incorporated by
reference to Allis-Chalmers Annual Report on
Form 10-K
for the year ended December 31, 1988).
|
|
10
|
.6
|
|
Agreement dated as of March 31, 1999 by and between
Allis-Chalmers and the Pension Benefit Guaranty Corporation
(incorporated by reference to Exhibit 10.1 to
Allis-Chalmers Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1999).
|
|
10
|
.7
|
|
Letter Agreement dated May 9, 2001 by and between
Allis-Chalmers and the Pension Benefit Guarantee Corporation
(incorporated by reference to Allis-Chalmers Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2002).
|
|
10
|
.8
|
|
Termination Agreement dated May 9, 2001 by and between
Allis-Chalmers, the Pension Benefit Guarantee Corporation and
others (incorporated by reference to Allis-Chalmers
Current Report on
Form 8-K
filed on May 15, 2002).
|
|
10
|
.9*
|
|
Executive Employment Agreement, dated April 1, 2007, by and
between Allis-Chalmers and Munawar H. Hidayatallah (incorporated
by reference to Exhibit 10.3 to Allis-Chalmers
Current Report on
Form 8-K
filed on November 6, 2007).
|
|
10
|
.10*
|
|
Executive Employment Agreement, effective April 3, 2007, by
and between Allis-Chalmers and Victor M. Perez (incorporated by
reference to Exhibit 10.4 to Allis-Chalmers Current
Report on
Form 8-K
filed on November 6, 2007).
|
|
10
|
.11*
|
|
Executive Employment Agreement, effective July 1, 2007, by
and between Allis-Chalmers and Terrence P. Keane (incorporated
by reference to Exhibit 10.1 to Allis-Chalmers
Current Report on
Form 8-K
filed on July 24, 2007).
|
|
10
|
.12*
|
|
Executive Employment Agreement, dated December 3, 2007, by
and between Allis-Chalmers and Theodore F. Pound III
(incorporated by reference to Exhibit 10.2 to
Allis-Chalmers Current Report on
Form 8-K
filed on December 6, 2007).
|
II-5
|
|
|
|
|
|
10
|
.13*
|
|
Executive Employment Agreement, effective July 1, 2007, by
and between Allis-Chalmers and David K. Bryan (incorporated
by reference to Exhibit 10.1 to Allis-Chalmers
Current Report on
Form 8-K
filed on July 13, 2007).
|
|
10
|
.14*
|
|
Employment Agreement, dated December 18, 2006, by and
between the Allis-Chalmers and Burt A. Adams (incorporated by
reference to Exhibit 10.3 to Allis-Chalmers Current
Report on
Form 8-K
filed on December 19, 2006).
|
|
10
|
.15*
|
|
Executive Employment Agreement, effective January 1, 2008,
by and between Allis-Chalmers and Mark C. Patterson
(incorporated by reference to Exhibit 10.1 to
Allis-Chalmers Current Report on
Form 8-K
filed on February 25, 2008).
|
|
10
|
.16
|
|
Purchase Agreement dated as of January 12, 2006 by and
among Allis-Chalmers Energy Inc, the Guarantors named therein
and the Initial Purchasers named therein (incorporated by
reference to Exhibit 10.1 to Allis-Chalmers Current
Report on
Form 8-K
filed on January 24, 2006).
|
|
10
|
.17
|
|
Purchase Agreement dated as of August 8, 2006 by and
between Allis-Chalmers, the guarantors listed on Schedule B
thereto and RBC Capital Markets Corporation (incorporated by
reference to Exhibit 10.4 to Allis-Chalmers Current
Report on
Form 8-K
filed on August 14, 2006).
|
|
10
|
.18
|
|
Purchase Agreement dated as of January 24, 2007 by and
among Allis-Chalmers Energy Inc., the Guarantors named therein
and the Initial Purchasers named therein (incorporated by
reference to Exhibit 10.1 to Allis-Chalmers Current
Report on
Form 8-K
filed on January 29, 2007).
|
|
10
|
.19
|
|
Amended and Restated Credit Agreement dated as of
January 18, 2006 by and among
Allis-Chalmers
Energy Inc., as borrower, Royal bank of Canada, as
administrative agent and Collateral Agent, RBC Capital Markets,
as lead arranger and sole bookrunner, and the lenders party
thereto (incorporated by reference to Exhibit 10.3 to
Allis-Chalmers Current Report on
Form 8-K
filed on January 24, 2006).
|
|
10
|
.20
|
|
First Amendment to Amended and Restated Credit Agreement dated
as of August 8, 2006, by and among Allis-Chalmers, the
guarantors named thereto and Royal Bank of Canada (incorporated
by reference to Exhibit 10.3 to Allis-Chalmers
Current Report on
Form 8-K
filed on August 14, 2006).
|
|
10
|
.21
|
|
Senior Unsecured Bridge Loan Agreement, dated December 18,
2006, by and among Allis-Chalmers, Royal Bank of Canada, as
administrative agent, RBC Capital Markets Corporation, as
exclusive lead arranger and sole bookrunner, and the guarantors
and institutional lenders named thereto (incorporated by
reference to Exhibit 10.1 to Allis-Chalmers Current
Report on
Form 8-K
filed on December 19, 2006).
|
|
10
|
.22
|
|
Strategic Agreement dated July 1, 2003 between Pan American
Energy LLC Sucursal Argentina and DLS Argentina Limited Sucursal
Argentina (incorporated by reference to Exhibit 10.13 to
Allis-Chalmers Quarterly Report on
Form 10-Q
filed on December 29, 2006).
|
|
10
|
.23
|
|
Amendment No. 1 dated May 18, 2005 to Strategic
Agreement between Pan American Energy LLC Sucursal Argentina and
DLS Argentina Limited Sucursal Argentina (incorporated by
reference to Exhibit 10.14 to Allis-Chalmers
Quarterly Report on
Form 10-Q
filed on December 29, 2006).
|
|
10
|
.24
|
|
Amendment No. 2 dated January 1, 2006 between Pan
American Energy LLC Sucursal Argentina and DLS Argentina Limited
Sucursal Argentina (incorporated by reference to
Exhibit 10.15 to
Allis-Chalmers
Quarterly Report on
Form 10-Q
filed on December 29, 2006).
|
|
10
|
.25
|
|
Investor Rights Agreement, dated December 18, 2006, by and
between Allis-Chalmers and Oil & Gas Rental Services,
Inc. (incorporated by reference to Exhibit 10.2 to
Allis-Chalmers Current Report on
Form 8-K
filed on December 19, 2006).
|
|
10
|
.26
|
|
Investors Rights Agreement dated as of August 18, 2006 by
and among Allis-Chalmers and the investors named on
Exhibit A thereto (incorporated by reference to
Exhibit 10.1 to Allis-Chalmers Current Report on
Form 8-K
filed on August 14, 2006).
|
|
10
|
.27*
|
|
2003 Incentive Stock Plan (incorporated by reference to
Exhibit 4.12 to Allis-Chalmers Current Report on
Form 8-K
filed on August 17, 2005).
|
|
10
|
.28*
|
|
Form of Option Certificate issued pursuant to 2003 Incentive
Stock Plan (incorporated by reference to Exhibit 10.41 to
Allis-Chalmers Annual Report on
Form 10-K
for the year ended December 31, 2003).
|
|
10
|
.29*
|
|
2006 Incentive Plan (incorporated by reference to
Exhibit 10.1 to Allis-Chalmers Current Report on
Form 8-K
filed on September 18, 2006).
|
|
10
|
.30*
|
|
Form of Employee Restricted Stock Agreement (incorporated by
reference to Exhibit 10.2 to
Allis-Chalmers
Current Report on
Form 8-K
filed on September 18, 2006).
|
II-6
|
|
|
|
|
|
10
|
.31*
|
|
Form of Employee Nonqualified Stock Option Agreement
(incorporated by reference to Exhibit 10.3 to
Allis-Chalmers Current Report on
Form 8-K
filed on September 18, 2006).
|
|
10
|
.32*
|
|
Form of Employee Incentive Stock Option Agreement (incorporated
by reference to Exhibit 10.4 to Allis-Chalmers
Current Report on
Form 8-K
filed on September 18, 2006).
|
|
10
|
.33*
|
|
Form of Non-Employee Director Restricted Stock Agreement
(incorporated by reference to Exhibit 10.5 to
Allis-Chalmers Current Report on
Form 8-K
filed on September 18, 2006).
|
|
10
|
.34*
|
|
Form of Non-Employee Director Nonqualified Stock Option
Agreement (incorporated by reference to Exhibit 10.6 to
Allis-Chalmers Current Report on
Form 8-K
filed on September 18, 2006).
|
|
10
|
.35*
|
|
Form of Performance Award Agreement pursuant to
Allis-Chalmers 2006 Incentive Plan (incorporated by
reference to Exhibit 10.5 to Allis-Chalmers Current
Report on
Form 8-K
filed on November 6, 2007).
|
|
10
|
.36
|
|
Second Amended and Restated Credit Agreement dated as of
April 26, 2007 by and among
Allis-Chalmers,
as borrower, Royal Bank of Canada, as administrative agent and
Collateral Agent, RBC Capital Markets, as lead arranger and sole
bookrunner, and the lenders party thereto (incorporated by
reference to Exhibit 10.1 to Allis-Chalmers Quarterly
Report on
Form 10-Q
filed on May 10, 2007).
|
|
10
|
.37
|
|
First Amendment to Second Amended and Restated Credit Agreement,
dated as of December 3, 2007, by and among Allis-Chalmers,
the guarantors named thereto, Royal Bank of Canada and the
lenders named thereto (incorporated by reference to
Exhibit 10.1 to Allis-Chalmers Current Report on
Form 8-K
filed on December 6, 2007).
|
|
10
|
.38
|
|
Amended and Restated Guaranty, dated as of April 26, 2007,
by each of the guarantors named thereto, in favor of Royal Bank
of Canada, as administrative agent for the lenders thereto,
which is also the form of Guaranty for Petro-Rentals, Inc., as
set forth on the schedule thereto (incorporated by reference to
Exhibit 10.2 to Allis-Chalmers Quarterly Report on
Form 10-Q
filed on May 10, 2007).
|
|
10
|
.39
|
|
Amended and Restated Pledge and Security Agreement, dated as of
April 26, 2007, by
Allis-Chalmers
Energy Inc., for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named
thereto, which is also the form of Pledge and Security Agreement
for each of AirComp L.L.C., Allis-Chalmers GP, LLC,
Allis-Chalmers LP, LLC,
Allis-Chalmers
Management, LP, Allis-Chalmers Production Services, Inc.,
Allis-Chalmers Rental Services, Inc., Allis-Chalmers Tubular
Services, Inc., Mountain Compressed Air, Inc., Petro-Rentals,
Inc., OilQuip Rentals, Inc., and Strata Directional Technology,
Inc. as set forth on the schedule thereto (incorporated by
reference to Exhibit 10.3 to Allis-Chalmers Quarterly
Report on
Form 10-Q
filed on May 10, 2007).
|
|
10
|
.40
|
|
Credit Agreement, dated January 31, 2008, among
Allis-Chalmers, as lender, BCH Ltd., as borrower, and BCH Energy
do Brasil Servicos de Petroleo Ltda., as guarantor (incorporated
by reference to Exhibit 10.1 to Allis-Chalmers
Current Report on
Form 8-K
filed on February 6, 2008).
|
|
10
|
.41
|
|
Option to Purchase and Governance Agreement, dated
January 31, 2008, among Allis-Chalmers, BrazAlta Resources
Corp. and BCH Ltd. (incorporated by reference to
Exhibit 10.2 to Allis-Chalmers Current Report on
Form 8-K
filed on February 6, 2008).
|
|
10
|
.42
|
|
Subordination Agreement, dated January 31, 2008, among
Allis-Chalmers, Standard Bank PLC, BCH Ltd., BCH Energy do
Brasil Servicos de Petroleo Ltda. and BrazAlta Resources Corp.
(incorporated by reference to Exhibit 10.3 to
Allis-Chalmers Current Report on
Form 8-K
filed on February 6, 2008).
|
|
10
|
.43
|
|
Form of Convertible Subordinated Secured Debenture (incorporated
by reference to Exhibit 10.4 to Allis-Chalmers
Current Report on
Form 8-K
filed on February 6, 2008).
|
|
10
|
.44*
|
|
Agreement, dated April 1, 2007, by and between
Allis-Chalmers and David Wilde (incorporated by reference to
Exhibit 99.1 to Allis-Chalmers Current Report on
Form 8-K
filed on April 3, 2007).
|
|
10
|
.45
|
|
Asset Purchase Agreement, effective as of December 16,
2005, by and between Bronco and Big A Drilling, L.C.
(incorporated by reference to Exhibit 10.2 to Broncos
Current Report on
Form 8-K,
File
No. 000-51571,
filed on January 20, 2006).
|
|
10
|
.46*
|
|
Form of Stock Option Agreement (incorporated by reference to
Exhibit 10.3 to Broncos Current Report on
Form 8-K,
File
No. 000-51571,
filed on June 15, 2006).
|
II-7
|
|
|
|
|
|
10
|
.47*
|
|
Employment Agreement, dated effective as of August 8, 2006,
by and between Bronco and D. Frank Harrison (incorporated by
reference to Exhibit 10.4 to the Broncos Quarterly
Report on
Form 10-Q
filed on August 10, 2006).
|
|
10
|
.48*
|
|
Employment Agreement, dated effective as of August 8, 2006,
by and between Bronco and Zachary M. Graves (incorporated by
reference to Exhibit 10.4 to Broncos Quarterly Report
on
Form 10-Q
filed on August 10, 2006).
|
|
10
|
.49*
|
|
Employment Agreement, dated effective as of August 8, 2006,
by and between Bronco and Mark Dubberstein (incorporated by
reference to Exhibit 10.4 to Broncos Quarterly Report
on
Form 10-Q
filed on August 10, 2006).
|
|
10
|
.50*
|
|
Separation Agreement, dated effective as of August 26,
2006, by and between Bronco and Karl W. Benzer
(incorporated by reference to Exhibit 10.1 to Broncos
Quarterly Report on
Form 10-Q
filed on November 2, 2006).
|
|
10
|
.51*
|
|
Employment Agreement, dated as of August 2, 2007, by and
between Bronco and Larry Bartlett (incorporated by reference to
Exhibit 10.1 to Broncos Quarterly Report on
Form 10-Q filed on August 3, 2007).
|
|
10
|
.52*
|
|
Employment Agreement, dated as of August 2, 2007, by and
between Bronco and Steven Starke (incorporated by reference to
Exhibit 10.2 to Broncos Quarterly Report on
Form 10-Q filed on August 3, 2007).
|
|
10
|
.53*
|
|
Amendment to Employment Agreement, dated as of August 2,
2007, by and between Bronco and D. Frank Harrison
(incorporated by reference to Exhibit 10.3 to Broncos
Quarterly Report on Form 10-Q filed on August 3, 2007).
|
|
10
|
.54*
|
|
Amendment to Employment Agreement, dated as of August 2,
2007, by and between Bronco and Zachary M. Graves (incorporated
by reference to Exhibit 10.4 to Broncos Quarterly
Report on Form 10-Q on August 3, 2007).
|
|
10
|
.55*
|
|
Amendment to Employment Agreement, dated as of August 2,
2007, by and between Bronco and Mark Dubberstein (incorporated
by reference to Exhibit 10.5 to Broncos Quarterly
Report on Form 10-Q filed on August 3, 2007).
|
|
10
|
.56*
|
|
Amendment to Executive Employment Agreement among Allis-Chalmers
Energy Inc., AirComp LLC and Terrence P. Keane, effective
April 1, 2008 (incorporated by reference to Exhibit 10.1 to
Allis-Chalmers Current Report on Form 8-K filed on
May 1, 2008).
|
|
23
|
.1
|
|
Consent of UHY LLP.
|
|
23
|
.2
|
|
Consent of Grant Thornton LLP, Oklahoma City, Oklahoma.
|
|
23
|
.3
|
|
Consent of Andrews Kurth LLP (included in the opinion filed as
Exhibit 5.1).
|
|
24
|
.1
|
|
Powers of Attorney.
|
|
99
|
.1
|
|
Form of Proxy for Holders of Allis-Chalmers Energy Inc. Common
Stock.
|
|
99
|
.2
|
|
Form of Proxy for Holders of Bronco Common Stock.
|
|
99
|
.3
|
|
Consent of RBC Capital Markets Corporation.
|
|
99
|
.4
|
|
Consent of Johnson Rice & Company L.L.C.
|
|
|
|
* |
|
Management Contract, Compensation Plan or Agreement |
|
|
|
Previously filed |
|
|
|
Filed herewith |
|
|
|
|
|
To be filed by amendment |
(b) Financial Statement Schedules.
All Schedules have been omitted because they are not applicable
or required, or the information required to be set forth therein
is included in the joint proxy statement/prospectus of which
this registration statement is a part.
(1) The undersigned Registrant hereby undertakes to file,
during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, as amended
(the Securities Act); (ii) to reflect in the
prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information
II-8
set forth in the registration statement (notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities
and Exchange Commission (the SEC) pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the Calculation of
Registration Fee table in the effective registration
statement); and (iii) to include any material information
with respect to the plan of distribution not previously
disclosed in the registration statement or any material change
to such information in the registration statement.
(2) The undersigned Registrant hereby undertakes that, for
the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) The undersigned Registrant hereby undertakes to remove
from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the
termination of the offering.
(4) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act,
each filing of the Registrants annual report pursuant to
Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plans annual report pursuant to
Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement will be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time will be deemed to be the initial
bona fide offering thereof.
(5) The undersigned Registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a joint proxy
statement/prospectus which is a part of this registration
statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering joint proxy statement/prospectus
will contain the information called for by the applicable
registration form with respect to reofferings by persons who may
be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(6) The Registrant undertakes that every prospectus
(1) that is filed pursuant to the immediately preceding
paragraph, or (2) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment
is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective
amendment will be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time will be deemed to be the initial
bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(8) The undersigned Registrant hereby undertakes to respond
to requests for information that is incorporated by reference
into the joint proxy statement/prospectus pursuant to
Items 4, 10(b), 11 or 13 of this registration statement or
Form S-4,
within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(9) The undersigned Registrant hereby undertakes to supply
by means of a post-effective amendment all information
concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in Houston, Texas, on the 6th day of
June, 2008.
ALLIS-CHALMERS ENERGY INC.
Name: Victor M. Perez
|
|
|
|
Title:
|
Chief Financial Officer
|
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
*
Munawar
H. Hidayatallah
|
|
Chairman and Chief Executive Officer (Principal Executive
Officer)
|
|
|
|
|
|
|
|
*
Victor
M. Perez
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
|
|
|
|
*
Bruce
Sauers
|
|
Chief Accounting Officer (Principal Accounting Officer)
|
|
|
|
|
|
|
|
*
Ali
H. M. Afdhal
|
|
Director
|
|
|
|
|
|
|
|
*
Alejandro
P. Bulgheroni
|
|
Director
|
|
|
|
|
|
|
|
*
Carlos
A. Bulgheroni
|
|
Director
|
|
|
|
|
|
|
|
*
Victor
F. Germack
|
|
Director
|
|
|
|
|
|
|
|
*
James
M. Hennessy
|
|
Director
|
|
|
|
|
|
|
|
*
John
E. McConnaughy, Jr.
|
|
Director
|
|
|
|
|
|
|
|
*
Robert
E. Nederlander
|
|
Director
|
|
|
II-10
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
*
Zane
Tankel
|
|
Director
|
|
|
|
|
|
|
|
*
Leonard
Toboroff
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
*By: /s/ Victor
M. Perez
Victor
M. Perez
Attorney-in-Fact
|
|
|
|
June 6, 2008
|
II-11
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
2
|
.0
|
|
Agreement and Plan of Merger effective as of January 23,
2008, by and among Allis-Chalmers Energy Inc., Elway Merger Sub,
Inc. and Bronco Drilling Company, Inc. (included as
Annex A-1
to the joint proxy statement/prospectus in Part I of this
Registration Statement).
|
|
2
|
.0.1
|
|
First Amendment to the Agreement and Plan of Merger, dated as of
June 1, 2008, by and among
Allis-Chalmers
Energy Inc., Elway Merger Sub, Inc. and Bronco Drilling Company,
Inc. (included as Annex
A-2 to the
joint proxy
statement/prospectus
in Part I of this Registration Statement).
|
|
2
|
.1
|
|
First Amended Disclosure Statement pursuant to Section 1125
of the Bankruptcy Code, dated September 14, 1988, which
includes the First Amended and Restated Joint Plan of
Reorganization dated September 14, 1988 (incorporated by
reference to Allis-Chalmers Current Report on
Form 8-K
filed on December 1, 1988).
|
|
2
|
.2
|
|
Reorganization Trust Agreement dated September 14,
1988 by and between Allis-Chalmers and John T. Grigsby, Jr.,
Trustee (incorporated by reference to Exhibit D of the
First Amended and Restated Joint Plan of Reorganization dated
September 14, 1988 included in Allis-Chalmers Current
Report on
Form 8-K
filed on December 1, 1988).
|
|
2
|
.3
|
|
Agreement and Plan of Merger dated as of May 9, 2001 by and
among Allis-Chalmers,
Allis-Chalmers
Acquisition Corp. and OilQuip Rentals, Inc. (incorporated by
reference to Exhibit 2.1 to Allis-Chalmers Current
Report on
Form 8-K
filed on May 15, 2001).
|
|
2
|
.4
|
|
Stock Purchase Agreement dated February 1, 2002 by and
between Allis-Chalmers and Jens H. Mortensen, Jr.
(incorporated by reference to Exhibit 10.1 to
Allis-Chalmers Current Report on
Form 8-K
filed on February 21, 2002).
|
|
2
|
.5
|
|
Stock Purchase Agreement dated February 1, 2002 by and
among Allis-Chalmers, Energy Spectrum Partners LP, and Strata
Directional Technology, Inc. (incorporated by reference to
Exhibit 2.10 to Allis-Chalmers Annual Report on
Form 10-K
for the year ended December 31, 2001).
|
|
2
|
.6
|
|
Stock Purchase Agreement dated August 10, 2004 by and among
Allis-Chalmers Corporation and the investors named thereto
(incorporated by reference to Exhibit 10.37 to the
Registration Statement on
Form S-1,
Registration No. 118916, filed on September 10, 2004).
|
|
2
|
.7
|
|
Amendment to Stock Purchase Agreement dated August 10, 2004
(incorporated by reference to Exhibit 10.38 to the
Registration Statement on
Form S-1,
Registration No. 118916, filed on September 10, 2004).
|
|
2
|
.8
|
|
Addendum to Stock Purchase Agreement dated September 24,
2004 (incorporated by reference to Exhibit 10.55 to
Allis-Chalmers Current Report on
Form 8-K
filed on September 30, 2004).
|
|
2
|
.9
|
|
Asset Purchase Agreement dated November 10, 2004 by and
among AirComp LLC, a Delaware limited liability company, Diamond
Air Drilling Services, Inc., a Texas corporation, and Marquis
Bit Co., L.L.C., a New Mexico limited liability company, Greg
Hawley and Tammy Hawley, residents of Texas and Clay Wilson and
Linda Wilson, residents of New Mexico (incorporated by reference
to Allis-Chalmers Current Report on
Form 8-K
filed on November 15, 2004).
|
|
2
|
.10
|
|
Purchase Agreement and related Agreements by and among
Allis-Chalmers Corporation, Chevron USA, Inc., Dale Redman and
others dated December 10, 2004 (incorporated by reference
to Exhibit 10.63 to Allis-Chalmers Current Report on
Form 8-K
filed on December 16, 2004).
|
|
2
|
.11
|
|
Stock Purchase Agreement dated April 1, 2005, by and among
Allis-Chalmers Energy Inc., Thomas Whittington, Sr., Werlyn R.
Bourgeois and SAM and D, LLC. (incorporated by reference to
Exhibit 10.51 to Allis-Chalmers Current Report on
Form 8-K
filed on April 5, 2005).
|
|
2
|
.12
|
|
Stock Purchase Agreement effective May 1, 2005, by and
among Allis-Chalmers Energy Inc., Wesley J. Mahone, Mike T.
Wilhite, Andrew D. Mills and Tim Williams (incorporated by
reference to Exhibit 10.51 to Allis-Chalmers Current
Report on
Form 8-K
filed on May 6, 2005).
|
|
2
|
.13
|
|
Purchase Agreement dated July 11, 2005 among Allis-Chalmers
Energy Inc., Mountain Compressed Air, Inc. and M-I, L.L.C.
(incorporated by reference to Exhibit 10.42 to
Allis-Chalmers Current Report on
Form 8-K
filed on July 15, 2005).
|
|
2
|
.14
|
|
Asset Purchase Agreement dated July 11, 2005 between
AirComp LLC, W.T. Enterprises, Inc. and William M. Watts
(incorporated by reference to Exhibit 10.43 to
Allis-Chalmers Current Report on
Form 8-K
filed on July 15, 2005).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
2
|
.15
|
|
Asset Purchase Agreement by and between Patterson Services, Inc.
and Allis-Chalmers Tubular Services, Inc. (incorporated by
reference to Exhibit 10.44 to Allis-Chalmers Current
Report on
Form 8-K
filed on September 8, 2005).
|
|
2
|
.16
|
|
Stock Purchase Agreement dated as of December 20, 2005
between Allis-Chalmers and Joe Van Matre (incorporated by
reference to Exhibit 10.33 to Allis-Chalmers Annual
Report on
Form 10-K
for the year ended December 31, 2005).
|
|
2
|
.17
|
|
Stock Purchase Agreement, dated as of April 27, 2006, by
and among Bridas International Holdings Ltd., Bridas Central
Company Ltd., Associated Petroleum Investors Limited, and
Allis-Chalmers. (incorporated by reference to Exhibit 2.3
to Allis-Chalmers Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2006).
|
|
2
|
.18
|
|
Stock Purchase Agreement, dated as of October 17, 2006, by
and between Allis-Chalmers Production Services, Inc. and
Randolph J. Hebert (incorporated by reference to
Exhibit 10.1 to Allis-Chalmers Current Report on
Form 8-K
filed on October 19, 2006).
|
|
2
|
.19
|
|
Asset Purchase Agreement, dated as of October 25, 2006, by
and between Allis-Chalmers Energy Inc. and Oil & Gas
Rental Services, Inc. (incorporated by reference to
Exhibit 10.1 to Allis-Chalmers Current Report on
Form 8-K
filed on October 26, 2006).
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of
Allis-Chalmers (incorporated by reference to Exhibit 3.1 to
Allis-Chalmers Annual Report on
Form 10-K
for the year ended December 31, 2001).
|
|
3
|
.2
|
|
Certificate of Designation, Preferences and Rights of the
Series A 10% Cumulative Convertible Preferred Stock ($.01
Par Value) of Allis-Chalmers (incorporated by reference to
Exhibit 3.1 to
Allis-Chalmers
Current Report on
Form 8-K
filed on February 21, 2002).
|
|
3
|
.3
|
|
Second Amended and Restated By-laws of Allis-Chalmers
(incorporated by reference to Exhibit 3.1 to
Allis-Chalmers
Current Report on
Form 8-K
filed on April 3, 2008).
|
|
3
|
.4
|
|
Certificate of Amendment of Certificate of Incorporation filed
with the Delaware Secretary of State on June 9, 2004
(incorporated by reference to Exhibit 3.3 to
Allis-Chalmers Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2004).
|
|
3
|
.5
|
|
Certificate of Amendment of Certificate of Incorporation filed
with the Delaware Secretary of State on January 5, 2005
(incorporated by reference to Exhibit 3.5 to
Allis-Chalmers Current Report on
Form 8-K
filed on January 11, 2005).
|
|
3
|
.6
|
|
Certificate of Amendment of Certificate of Incorporation filed
with the Delaware Secretary of State on August 16, 2005
(incorporated by reference to Exhibit 3.5 to
Allis-Chalmers Current Report on
Form 8-K
filed August 17, 2005).
|
|
4
|
.1
|
|
Specimen Stock Certificate of Common Stock of Allis-Chalmers
(incorporated by reference to Exhibit 4.1 to
Allis-Chalmers Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2004).
|
|
4
|
.2
|
|
Registration Rights Agreement dated as of March 31, 1999,
by and between Allis-Chalmers and the Pension Benefit Guaranty
Corporation (incorporated by reference to Exhibit 10.3 to
the Allis-Chalmers Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1999).
|
|
4
|
.3
|
|
Registration Rights Agreement dated April 2, 2004 by and
between Allis-Chalmers and the Stockholder signatories thereto
(incorporated by reference to Exhibit 10.43 to Amendment
No. 1 to Allis-Chalmers Annual Report on
Form 10-K
for the year ended December 31, 2003).
|
|
4
|
.4
|
|
Registration Rights Agreement dated as of January 29, 2007
by and among Allis-Chalmers Energy Inc., the Guarantors named
therein and the Initial Purchasers named therein (incorporated
by reference to Exhibit 10.2 to Allis-Chalmers
Current Report on
Form 8-K
filed on January 29, 2007).
|
|
4
|
.5
|
|
Registration Rights Agreement dated as of January 18, 2006
by and among Allis-Chalmers Energy Inc., the Guarantors named
therein and the Initial Purchasers named therein (incorporated
by reference to Exhibit 10.2 to Allis-Chalmers
Current Report on
Form 8-K
filed on January 24, 2006).
|
|
4
|
.6
|
|
Registration Rights Agreement dated as of August 14, 2006
by and among Allis-Chalmers, the guarantors listed on
Schedule A thereto and RBC Capital Markets Corporation
(incorporated by reference to Exhibit 10.1 to
Allis-Chalmers Current Report on
Form 8-K
filed on August 14, 2006).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
4
|
.7
|
|
Indenture dated as of January 18, 2006 by and among
Allis-Chalmers, the Guarantors named therein and Wells Fargo
Bank, N.A., as trustee (incorporated by reference to
Exhibit 4.1 to Allis-Chalmers Current Report on
Form 8-K
filed on January 24, 2006).
|
|
4
|
.8
|
|
First Supplemental Indenture dated as of August 11, 2006 by
and among Allis-Chalmers GP, LLC, Allis-Chalmers LP, LLC,
Allis-Chalmers Management, LP, Rogers Oil Tool Services, Inc.,
Allis-Chalmers, the other Guarantors (as defined in the
Indenture referred to therein) and Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 4.2 to
Allis-Chalmers Current Report on
Form 8-K
filed on August 14, 2006).
|
|
4
|
.9
|
|
Second Supplemental Indenture dated as of January 23, 2007
by and among Petro-Rentals, Incorporated, Allis-Chalmers, the
other Guarantor parties thereto and Wells Fargo Bank, N.A., as
trustee (incorporated by reference to Exhibit 10.1 to
Allis-Chalmers Current Report on
Form 8-K
filed on January 24, 2007).
|
|
4
|
.10
|
|
Indenture dated as of January 29, 2007, by and among
Allis-Chalmers, the Guarantors named therein and Wells Fargo
Bank, N.A. (incorporated by reference to Exhibit 4.1 to
Allis-Chalmers Current Report on
Form 8-K
filed on January 29, 2007.
|
|
4
|
.11
|
|
Form of 9.0% Senior Note due 2014 (incorporated by
reference to Exhibit A to Exhibit 4.1 to
Allis-Chalmers
Current Report on
Form 8-K
filed on January 24, 2006).
|
|
4
|
.12
|
|
Form of 8.5% Senior Note due 2017 (incorporated by
reference to Exhibit A to Exhibit 4.1 to
Allis-Chalmers
Current Report on
Form 8-K
filed on January 29, 2007).
|
|
5
|
.1
|
|
Opinion of Andrews Kurth LLP as to the legality of the
securities.
|
|
8
|
.1
|
|
Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. as to
tax matters.
|
|
8
|
.2
|
|
Opinion of Andrews Kurth LLP as to tax matters.
|
|
10
|
.1
|
|
Amended and Restated Retiree Health Trust Agreement dated
September 14, 1988 by and between Allis-Chalmers and Wells
Fargo Bank (incorporated by reference to
Exhibit C-1
of the First Amended and Restated Joint Plan of Reorganization
dated September 14, 1988 included in
Allis-Chalmers
Current Report on
Form 8-K
filed on December 1, 1988).
|
|
10
|
.2
|
|
Amended and Restated Retiree Health Trust Agreement dated
September 18, 1988 by and between Allis-Chalmers and
Firstar Trust Company (incorporated by reference to
Exhibit C-2
of the First Amended and Restated Joint Plan of Reorganization
dated September 14, 1988 included in Allis-Chalmers
Current Report on
Form 8-K
filed on December 1, 1988).
|
|
10
|
.3
|
|
Product Liability Trust Agreement dated September 14,
1988 by and between Allis-Chalmers and Bruce W. Strausberg,
Trustee (incorporated by reference to Exhibit E of the
First Amended and Restated Joint Plan of Reorganization dated
September 14, 1988 included in Allis-Chalmers Current
Report on
Form 8-K
filed on December 1, 1988).
|
|
10
|
.4*
|
|
Allis-Chalmers Savings Plan (incorporated by reference to
Allis-Chalmers Annual Report on
Form 10-K
for the year ended December 31, 1988).
|
|
10
|
.5*
|
|
Allis-Chalmers Consolidated Pension Plan (incorporated by
reference to Allis-Chalmers Annual Report on
Form 10-K
for the year ended December 31, 1988).
|
|
10
|
.6
|
|
Agreement dated as of March 31, 1999 by and between
Allis-Chalmers and the Pension Benefit Guaranty Corporation
(incorporated by reference to Exhibit 10.1 to
Allis-Chalmers Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1999).
|
|
10
|
.7
|
|
Letter Agreement dated May 9, 2001 by and between
Allis-Chalmers and the Pension Benefit Guarantee Corporation
(incorporated by reference to Allis-Chalmers Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2002).
|
|
10
|
.8
|
|
Termination Agreement dated May 9, 2001 by and between
Allis-Chalmers, the Pension Benefit Guarantee Corporation and
others (incorporated by reference to Allis-Chalmers
Current Report on
Form 8-K
filed on May 15, 2002).
|
|
10
|
.9*
|
|
Executive Employment Agreement, dated April 1, 2007, by and
between Allis-Chalmers and Munawar H. Hidayatallah (incorporated
by reference to Exhibit 10.3 to Allis-Chalmers
Current Report on
Form 8-K
filed on November 6, 2007).
|
|
10
|
.10*
|
|
Executive Employment Agreement, effective April 3, 2007, by
and between Allis-Chalmers and Victor M. Perez (incorporated by
reference to Exhibit 10.4 to Allis-Chalmers Current
Report on
Form 8-K
filed on November 6, 2007).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.11*
|
|
Executive Employment Agreement, effective July 1, 2007, by
and between Allis-Chalmers and Terrence P. Keane (incorporated
by reference to Exhibit 10.1 to Allis-Chalmers
Current Report on
Form 8-K
filed on July 24, 2007).
|
|
10
|
.12*
|
|
Executive Employment Agreement, dated December 3, 2007, by
and between Allis-Chalmers and Theodore F. Pound III
(incorporated by reference to Exhibit 10.2 to
Allis-Chalmers Current Report on
Form 8-K
filed on December 6, 2007).
|
|
10
|
.13*
|
|
Executive Employment Agreement, effective July 1, 2007, by
and between Allis-Chalmers and David K. Bryan (incorporated by
reference to Exhibit 10.1 to Allis-Chalmers Current
Report on
Form 8-K
filed on July 13, 2007).
|
|
10
|
.14*
|
|
Employment Agreement, dated December 18, 2006, by and
between the Allis-Chalmers and Burt A. Adams
(incorporated by reference to Exhibit 10.3 to
Allis-Chalmers Current Report on
Form 8-K
filed on December 19, 2006).
|
|
10
|
.15*
|
|
Executive Employment Agreement, effective January 1, 2008,
by and between Allis-Chalmers and Mark C. Patterson
(incorporated by reference to Exhibit 10.1 to
Allis-Chalmers Current Report on
Form 8-K
filed on February 25, 2008).
|
|
10
|
.16
|
|
Purchase Agreement dated as of January 12, 2006 by and
among Allis-Chalmers Energy Inc, the Guarantors named therein
and the Initial Purchasers named therein (incorporated by
reference to Exhibit 10.1 to Allis-Chalmers Current
Report on
Form 8-K
filed on January 24, 2006).
|
|
10
|
.17
|
|
Purchase Agreement dated as of August 8, 2006 by and
between Allis-Chalmers, the guarantors listed on Schedule B
thereto and RBC Capital Markets Corporation (incorporated by
reference to Exhibit 10.4 to Allis-Chalmers Current
Report on
Form 8-K
filed on August 14, 2006).
|
|
10
|
.18
|
|
Purchase Agreement dated as of January 24, 2007 by and
among Allis-Chalmers Energy Inc., the Guarantors named therein
and the Initial Purchasers named therein (incorporated by
reference to Exhibit 10.1 to Allis-Chalmers Current
Report on
Form 8-K
filed on January 29, 2007).
|
|
10
|
.19
|
|
Amended and Restated Credit Agreement dated as of
January 18, 2006 by and among
Allis-Chalmers
Energy Inc., as borrower, Royal bank of Canada, as
administrative agent and Collateral Agent, RBC Capital Markets,
as lead arranger and sole bookrunner, and the lenders party
thereto (incorporated by reference to Exhibit 10.3 to
Allis-Chalmers Current Report on
Form 8-K
filed on January 24, 2006).
|
|
10
|
.20
|
|
First Amendment to Amended and Restated Credit Agreement dated
as of August 8, 2006, by and among Allis-Chalmers, the
guarantors named thereto and Royal Bank of Canada (incorporated
by reference to Exhibit 10.3 to Allis-Chalmers
Current Report on
Form 8-K
filed on August 14, 2006).
|
|
10
|
.21
|
|
Senior Unsecured Bridge Loan Agreement, dated December 18,
2006, by and among Allis-Chalmers, Royal Bank of Canada, as
administrative agent, RBC Capital Markets Corporation, as
exclusive lead arranger and sole bookrunner, and the guarantors
and institutional lenders named thereto (incorporated by
reference to Exhibit 10.1 to Allis-Chalmers Current
Report on
Form 8-K
filed on December 19, 2006).
|
|
10
|
.22
|
|
Strategic Agreement dated July 1, 2003 between Pan American
Energy LLC Sucursal Argentina and DLS Argentina Limited Sucursal
Argentina (incorporated by reference to Exhibit 10.13 to
Allis-Chalmers Quarterly Report on
Form 10-Q
filed on December 29, 2006).
|
|
10
|
.23
|
|
Amendment No. 1 dated May 18, 2005 to Strategic
Agreement between Pan American Energy LLC Sucursal Argentina and
DLS Argentina Limited Sucursal Argentina (incorporated by
reference to Exhibit 10.14 to Allis-Chalmers
Quarterly Report on
Form 10-Q
filed on December 29, 2006).
|
|
10
|
.24
|
|
Amendment No. 2 dated January 1, 2006 between Pan
American Energy LLC Sucursal Argentina and DLS Argentina Limited
Sucursal Argentina (incorporated by reference to
Exhibit 10.15 to
Allis-Chalmers
Quarterly Report on
Form 10-Q
filed on December 29, 2006).
|
|
10
|
.25
|
|
Investor Rights Agreement, dated December 18, 2006, by and
between Allis-Chalmers and Oil & Gas Rental Services,
Inc. (incorporated by reference to Exhibit 10.2 to
Allis-Chalmers Current Report on
Form 8-K
filed on December 19, 2006).
|
|
10
|
.26
|
|
Investors Rights Agreement dated as of August 18, 2006 by
and among Allis-Chalmers and the investors named on
Exhibit A thereto (incorporated by reference to
Exhibit 10.1 to Allis-Chalmers Current Report on
Form 8-K
filed on August 14, 2006).
|
|
10
|
.27*
|
|
2003 Incentive Stock Plan (incorporated by reference to
Exhibit 4.12 to Allis-Chalmers Current Report on
Form 8-K
filed on August 17, 2005).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.28*
|
|
Form of Option Certificate issued pursuant to 2003 Incentive
Stock Plan (incorporated by reference to Exhibit 10.41 to
Allis-Chalmers Annual Report on
Form 10-K
for the year ended December 31, 2003).
|
|
10
|
.29*
|
|
2006 Incentive Plan (incorporated by reference to
Exhibit 10.1 to Allis-Chalmers Current Report on
Form 8-K
filed on September 18, 2006).
|
|
10
|
.30*
|
|
Form of Employee Restricted Stock Agreement (incorporated by
reference to Exhibit 10.2 to
Allis-Chalmers
Current Report on
Form 8-K
filed on September 18, 2006).
|
|
10
|
.31*
|
|
Form of Employee Nonqualified Stock Option Agreement
(incorporated by reference to Exhibit 10.3 to
Allis-Chalmers Current Report on
Form 8-K
filed on September 18, 2006).
|
|
10
|
.32*
|
|
Form of Employee Incentive Stock Option Agreement (incorporated
by reference to Exhibit 10.4 to Allis-Chalmers
Current Report on
Form 8-K
filed on September 18, 2006).
|
|
10
|
.33*
|
|
Form of Non-Employee Director Restricted Stock Agreement
(incorporated by reference to Exhibit 10.5 to
Allis-Chalmers Current Report on
Form 8-K
filed on September 18, 2006).
|
|
10
|
.34*
|
|
Form of Non-Employee Director Nonqualified Stock Option
Agreement (incorporated by reference to Exhibit 10.6 to
Allis-Chalmers Current Report on
Form 8-K
filed on September 18, 2006).
|
|
10
|
.35*
|
|
Form of Performance Award Agreement pursuant to
Allis-Chalmers 2006 Incentive Plan (incorporated by
reference to Exhibit 10.5 to Allis-Chalmers Current
Report on
Form 8-K
filed on November 6, 2007).
|
|
10
|
.36
|
|
Second Amended and Restated Credit Agreement dated as of
April 26, 2007 by and among
Allis-Chalmers,
as borrower, Royal Bank of Canada, as administrative agent and
Collateral Agent, RBC Capital Markets, as lead arranger and sole
bookrunner, and the lenders party thereto (incorporated by
reference to Exhibit 10.1 to Allis-Chalmers Quarterly
Report on
Form 10-Q
filed on May 10, 2007).
|
|
10
|
.37
|
|
First Amendment to Second Amended and Restated Credit Agreement,
dated as of December 3, 2007, by and among Allis-Chalmers,
the guarantors named thereto, Royal Bank of Canada and the
lenders named thereto (incorporated by reference to
Exhibit 10.1 to Allis-Chalmers Current Report on
Form 8-K
filed on December 6, 2007).
|
|
10
|
.38
|
|
Amended and Restated Guaranty, dated as of April 26, 2007,
by each of the guarantors named thereto, in favor of Royal Bank
of Canada, as administrative agent for the lenders thereto,
which is also the form of Guaranty for Petro-Rentals, Inc., as
set forth on the schedule thereto (incorporated by reference to
Exhibit 10.2 to Allis-Chalmers Quarterly Report on
Form 10-Q
filed on May 10, 2007).
|
|
10
|
.39
|
|
Amended and Restated Pledge and Security Agreement, dated as of
April 26, 2007, by
Allis-Chalmers
Energy Inc., for the benefit of Royal Bank of Canada, as
administrative agent and collateral agent for the lenders named
thereto, which is also the form of Pledge and Security Agreement
for each of AirComp L.L.C., Allis-Chalmers GP, LLC,
Allis-Chalmers LP, LLC,
Allis-Chalmers
Management, LP, Allis-Chalmers Production Services, Inc.,
Allis-Chalmers Rental Services, Inc., Allis-Chalmers Tubular
Services, Inc., Mountain Compressed Air, Inc., Petro-Rentals,
Inc., OilQuip Rentals, Inc., and Strata Directional Technology,
Inc. as set forth on the schedule thereto (incorporated by
reference to Exhibit 10.3 to Allis-Chalmers Quarterly
Report on
Form 10-Q
filed on May 10, 2007).
|
|
10
|
.40
|
|
Credit Agreement, dated January 31, 2008, among
Allis-Chalmers, as lender, BCH Ltd., as borrower, and BCH Energy
do Brasil Servicos de Petroleo Ltda., as guarantor (incorporated
by reference to Exhibit 10.1 to Allis-Chalmers
Current Report on
Form 8-K
filed on February 6, 2008).
|
|
10
|
.41
|
|
Option to Purchase and Governance Agreement, dated
January 31, 2008, among Allis-Chalmers, BrazAlta Resources
Corp. and BCH Ltd. (incorporated by reference to
Exhibit 10.2 to Allis-Chalmers Current Report on
Form 8-K
filed on February 6, 2008).
|
|
10
|
.42
|
|
Subordination Agreement, dated January 31, 2008, among
Allis-Chalmers, Standard Bank PLC, BCH Ltd., BCH Energy do
Brasil Servicos de Petroleo Ltda. and BrazAlta Resources Corp.
(incorporated by reference to Exhibit 10.3 to
Allis-Chalmers Current Report on
Form 8-K
filed on February 6, 2008).
|
|
10
|
.43
|
|
Form of Convertible Subordinated Secured Debenture (incorporated
by reference to Exhibit 10.4 to Allis-Chalmers
Current Report on
Form 8-K
filed on February 6, 2008).
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.44*
|
|
Agreement, dated April 1, 2007, by and between
Allis-Chalmers and David Wilde (incorporated by reference to
Exhibit 99.1 to Allis-Chalmers Current Report on
Form 8-K
filed on April 3, 2007).
|
|
10
|
.45
|
|
Asset Purchase Agreement, effective as of December 16,
2005, by and between Bronco and Big A Drilling, L.C.
(incorporated by reference to Exhibit 10.2 to Broncos
Current Report on
Form 8-K,
File
No. 000-51571,
filed on January 20, 2006).
|
|
10
|
.46*
|
|
Form of Stock Option Agreement (incorporated by reference to
Exhibit 10.3 to Broncos Current Report on
Form 8-K,
File
No. 000-51571,
filed on June 15, 2006).
|
|
10
|
.47*
|
|
Employment Agreement, dated effective as of August 8, 2006,
by and between Bronco and D. Frank Harrison (incorporated by
reference to Exhibit 10.4 to the Broncos Quarterly
Report on
Form 10-Q
filed on August 10, 2006).
|
|
10
|
.48*
|
|
Employment Agreement, dated effective as of August 8, 2006,
by and between Bronco and Zachary M. Graves (incorporated by
reference to Exhibit 10.4 to Broncos Quarterly Report
on
Form 10-Q
filed on August 10, 2006).
|
|
10
|
.49*
|
|
Employment Agreement, dated effective as of August 8, 2006,
by and between Bronco and Mark Dubberstein (incorporated by
reference to Exhibit 10.4 to Broncos Quarterly Report
on
Form 10-Q
filed on August 10, 2006).
|
|
10
|
.50*
|
|
Separation Agreement, dated effective as of August 26,
2006, by and between Bronco and Karl W. Benzer
(incorporated by reference to Exhibit 10.1 to Broncos
Quarterly Report on
Form 10-Q
filed on November 2, 2006).
|
|
10
|
.51*
|
|
Employment Agreement, dated as of August 2, 2007, by and
between Bronco and Larry Bartlett (incorporated by reference to
Exhibit 10.1 to Broncos Quarterly Report on
Form 10-Q filed on August 3, 2007).
|
|
10
|
.52*
|
|
Employment Agreement, dated as of August 2, 2007, by and
between Bronco and Steven Starke (incorporated by reference to
Exhibit 10.2 to Broncos Quarterly Report on
Form 10-Q filed on August 3, 2007).
|
|
10
|
.53*
|
|
Amendment to Employment Agreement, dated as of August 2,
2007, by and between Bronco and D. Frank Harrison
(incorporated by reference to Exhibit 10.3 to Broncos
Quarterly Report on Form 10-Q filed on August 3, 2007).
|
|
10
|
.54*
|
|
Amendment to Employment Agreement, dated as of August 2,
2007, by and between Bronco and Zachary M. Graves (incorporated
by reference to Exhibit 10.4 to Broncos Quarterly
Report on Form 10-Q on August 3, 2007).
|
|
10
|
.55*
|
|
Amendment to Employment Agreement, dated as of August 2,
2007, by and between Bronco and Mark Dubberstein (incorporated
by reference to Exhibit 10.5 to Broncos Quarterly
Report on Form 10-Q filed on August 3, 2007).
|
|
10
|
.56*
|
|
Amendment to Executive Employment Agreement among Allis-Chalmers
Energy Inc., AirComp LLC and Terrence P. Keane, effective
April 1, 2008 (incorporated by reference to Exhibit 10.1 to
Allis-Chalmers Current Report on Form 8-K filed on
May 1, 2008).
|
|
23
|
.1
|
|
Consent of UHY LLP.
|
|
23
|
.2
|
|
Consent of Grant Thornton LLP, Oklahoma City, Oklahoma.
|
|
23
|
.3
|
|
Consent of Andrews Kurth LLP (included in opinion filed as
Exhibit 5.1)
|
|
24
|
.1
|
|
Powers of Attorney.
|
|
99
|
.1
|
|
Form of Proxy for Holders of Allis-Chalmers Energy Inc. Common
Stock.
|
|
99
|
.2
|
|
Form of Proxy for Holders of Bronco Common Stock.
|
|
99
|
.3
|
|
Consent of RBC Capital Markets Corporation.
|
|
99
|
.4
|
|
Consent of Johnson Rice & Company L.L.C.
|
|
|
|
* |
|
Management Contract, Compensation Plan or Agreement |
|
|
|
Previously filed |
|
|
|
Filed herewith |
|
|
|
|
|
To be filed by amendment |