UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.  )

Filed by the Registrant x

Filed by a Party other than the Registrant o

Check the appropriate box:

xPreliminary Proxy Statement

o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

o Definitive Proxy Statement

o Definitive Additional Materials

o Soliciting Material Under §240.14a-12

TRANSOCEAN INC.

(Name of Registrant as Specified in its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

x

No fee required.

o

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

(2)

Aggregate number of securities to which transaction applies:

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

(4)

Proposed maximum aggregate value of transaction:

 

(5)

Total fee paid:

o

Fee paid previously with preliminary materials.

o

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount previously paid:

 

(2)

Form, Schedule or Registration Statement No.:

 

(3)

Filing Party:

 

(4)

Date Filed:

 

 

 


 

 


 

Dear Shareholder:

Our board of directors has unanimously approved, and is submitting to our shareholders for their approval, a proposal that would result in your holding shares in a Swiss corporation rather than a Cayman Islands company. The proposed merger by way of schemes of arrangement will effectively change our place of incorporation from the Cayman Islands to Switzerland. The number of shares you will own in Transocean Ltd., the Swiss corporation, will be the same as the number of shares you held in Transocean Inc., the Cayman Islands company, immediately prior to the completion of the transaction, and your relative economic interest in the Transocean group will remain unchanged.

After the completion of the transaction, the Swiss corporation will continue to conduct the same business operations as conducted by the Cayman Islands company before the transaction. We expect the shares of the Swiss corporation to be listed on the New York Stock Exchange under the symbol “RIG,” the same symbol under which your shares are currently listed. Upon completion of the transaction, we will remain subject to the U.S. Securities and Exchange Commission reporting requirements, the mandates of the Sarbanes-Oxley Act and the applicable corporate governance rules of the New York Stock Exchange, and we will continue to report our financial results in U.S. dollars and under U.S. generally accepted accounting principles.

Our planned change of our place of incorporation from the Cayman Islands to Switzerland and relocation of our principal executive offices to Geneva, Switzerland will establish a corporate headquarters that is more centrally located within our area of worldwide operations, will locate Transocean in a country with a stable and developed tax regime, and should improve our ability to maintain a competitive worldwide effective corporate tax rate.

Under U.S. tax law, holders of shares of Transocean Inc. generally will not recognize gain or loss on the exchange of such shares for shares in the Swiss corporation in the transaction.

This proxy statement provides you with detailed information regarding the transaction. We encourage you to read this entire document carefully. You should carefully consider “Risk Factors” beginning on page 16 for a discussion of risks before voting at the meeting.

The transaction cannot be completed without (1) the affirmative vote of a majority in number of the holders of Transocean Inc. ordinary shares present and voting on the proposal, whether in person or by proxy, representing 75% or more in value of the ordinary shares present and voting on the proposal, whether in person or by proxy, and (2) the approval of the Grand Court of the Cayman Islands. Your board of directors recommends that you vote to approve the transaction.

Sincerely,


Robert E. Rose
               Chairman of the Board


Robert L. Long
Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in the transaction or determined if this proxy statement is truthful or complete. Any representation to the contrary is a criminal offense.

This proxy statement is dated               , 2008 and is first being mailed to shareholders on or about                , 2008.


 

TRANSOCEAN INC.

P.O. BOX 10342

70 HARBOUR DRIVE, 4th FLOOR

GRAND CAYMAN, KY1-1003

CAYMAN ISLANDS

 

NOTICE OF MEETING OF TRANSOCEAN INC. SHAREHOLDERS

 

To Be Held On             , 2008

To the holders of ordinary shares of Transocean Inc.:

We will hold a meeting of our shareholders at                                                                                , commencing at          ,                          time, on             , 2008 to vote:

 

to approve the merger transaction to be effected by the Schemes of Arrangement, attached as Annex B to this proxy statement (the “Schemes of Arrangement”), in connection with the Agreement and Plan of Merger among Transocean Inc., a company organized under the laws of the Cayman Islands (“Transocean-Cayman”), Transocean Ltd., a Swiss corporation and a wholly-owned subsidiary of Transocean-Cayman (“Transocean-Switzerland”), and Transocean Cayman Ltd., a company organized under the laws of the Cayman Islands and a wholly-owned subsidiary of Transocean-Switzerland (“Transocean-Acquisition”), pursuant to which Transocean-Cayman would merge with Transocean-Acquisition, with Transocean-Cayman as the surviving company. Under the terms of the Schemes of Arrangement, each holder of Transocean-Cayman ordinary shares outstanding immediately before the transaction will receive one share of Transocean-Switzerland in exchange for each outstanding ordinary share of Transocean-Cayman. As a result of the transaction, Transocean-Acquisition will cease to exist, and Transocean-Cayman will become a direct wholly-owned subsidiary of Transocean-Switzerland.

 

on a motion to adjourn the meeting to a later date to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the merger transaction.

 

on any other matters that properly come before the meeting and any adjournments or postponements of the meeting.

We have established the close of business on            , 2008 as the record date for determining the shareholders of Transocean Inc. entitled to notice of and to vote at the meeting or any adjournments or postponements of the meeting.

Your vote is very important. To ensure your shares are represented, you should complete, sign and date the enclosed proxy and return it promptly in the enclosed envelope, whether or not you expect to attend the meeting. You may revoke your proxy and vote in person if you decide to attend the meeting. You may also designate proxies to vote your shares via the Internet or by telephone. Your Internet or telephone designation authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. Please review the instructions in the proxy statement and on your proxy card regarding each of these options.

This notice incorporates the accompanying proxy statement.

By Order of the Board of Directors


Chipman Earle

Secretary

                  , 2008


 

This proxy statement incorporates documents by reference. See “Where You Can Find More Information” beginning on page 83 for a listing of documents incorporated by reference. These documents are available to any person, including any beneficial owner, upon request directed to Investor Relations, Transocean Inc., 4 Greenway Plaza, Houston, Texas 77046, telephone (713) 232-7500. To ensure timely delivery of these documents, any request should be made by                    , 2008. The exhibits to these documents will generally not be made available unless they are specifically incorporated by reference in this proxy statement.

TABLE OF CONTENTS

TRANSACTION STRUCTURE

 

 

QUESTIONS AND ANSWERS ABOUT THE REDOMESTICATION

 

SUMMARY

 

 

Parties to the Transaction

 

 

The Redomestication

 

 

Reasons for the Redomestication

 

 

Tax Considerations

 

 

Rights of Shareholders

 

 

Stock Exchange Listing

 

 

Court Approval of the Transaction

 

 

Market Price and Dividend Information

 

 

No Appraisal Rights

 

 

Accounting Treatment of the Transaction

 

 

Shareholders Meeting

 

 

Recommendation of the Board of Directors

 

 

Required Vote

 

 

Proxies

 

 

Selected Historical Financial Data

 

 

Unaudited Summary Pro Forma Financial Information

 

RISK FACTORS

 

CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

 

THE REDOMESTICATION

 

 

Background and Reasons for the Redomestication

 

 

The Agreement and Plan of Merger

 

 

Conditions to Consummation of the Transaction

 

 

Court Approval of the Transaction

 

 

Federal Securities Law Consequences; Resale Restrictions

 

 

Effective Time

 

 

Management of Transocean-Switzerland

 

 

Interests of Certain Persons in the Redomestication

 

 

Required Vote; Board Recommendation

 

 

Regulatory Matters

 

 

No Appraisal Rights

 

 

No Action Required to Exchange Shares

 

 

Dividend Policy

 

 

Share Compensation Plans

 

 

Stock Exchange Listing

 

 

Accounting Treatment of the Transaction

 

 

Treatment of Convertible Debt

 

 

Treatment of Warrants

 

 

Guarantees

 

 

Credit Facilities

 

 

Effect of the Redomestication on Potential Future Status as a Foreign Private Issuer

 

MATERIAL TAX CONSIDERATIONS

 

 

U.S. Federal Income Tax Considerations

 

 

Swiss Tax Considerations

 

 

Cayman Islands Tax Considerations

 

DESCRIPTION OF TRANSOCEAN-SWITZERLAND SHARES

 

 

Capital Structure

 

 
i

 
 

 

Preemptive Rights and Advance Subscription Rights

 

 

Dividends

 

 

Repurchases of Registered Shares

 

 

Reduction of Share Capital

 

 

General Meetings of Shareholders

 

 

Voting

 

 

Quorum for General Meetings

 

 

Inspection of Books and Records

 

 

Special Investigation

 

 

Compulsory Acquisitions; Appraisal Rights

 

 

Anti-Takeover Provisions

 

 

Corporate Governance

 

 

Legal Name; Formation; Fiscal Year; Registered Office

 

 

Corporate Purpose

 

 

Duration; Dissolution; Rights upon Liquidation

 

 

Uncertificated Shares

 

 

Stock Exchange Listing

 

 

No Sinking Fund

 

 

No Liability for Further Calls or Assessments

 

 

No Redemption and Conversion

 

 

Transfer and Registration of Shares

 

COMPARISON OF RIGHTS OF SHAREHOLDERS

 

 

Capitalization

 

 

Preemptive Rights and Advance Subscription Rights

 

 

Distributions and Dividends; Repurchases and Redemptions

 

 

Shareholder Approval of Business Combinations

 

 

Special Vote Required for Combinations with Interested Shareholders

 

 

Other Anti-Takeover Measures

 

 

Appraisal Rights and Compulsory Acquisitions

 

 

Election of Directors; Staggered Terms of Directors

 

 

Vacancies on Board of Directors

 

 

Removal of Directors

 

 

Board and Committee Composition; Management

 

 

Duties of the Board of Directors

 

 

Indemnification of Directors and Officers; Insurance

 

 

Limitation on Director Liability

 

 

Directors’ Conflicts of Interest

 

 

Shareholders’ Suits

 

 

Shareholder Consent to Action Without Meeting

 

 

Annual Meetings of Shareholders

 

 

Special Meetings of Shareholders

 

 

Record Dates for Shareholder Meetings

 

 

Director Nominations; Proposals of Shareholders

 

 

Adjournment of Shareholder Meetings

 

 

Voting Rights

 

 

Amendment of Governing Documents

 

 

Quorum Requirements

 

 

Inspection of Books and Records; Special Investigation

 

 

Transfer and Registration of Shares

 

 

Rights upon Liquidation

 

 

Enforcement of Civil Liabilities Against Foreign Persons

 

THE SHAREHOLDERS MEETING

 

 

Time, Place and Date

 

 

Purpose of the Meeting

 

 

Record Date; Voting Rights; Vote Required for Approval

 

 

Proxies

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

 

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

 

 
ii
 

 
 

MARKET PRICE AND DIVIDEND INFORMATION

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

LEGAL MATTERS

 

FUTURE SHAREHOLDER PROPOSALS

 

HOUSEHOLDING

 

WHERE YOU CAN FIND MORE INFORMATION

 

 

Annex A – Agreement and Plan of Merger

Annex B – Schemes of Arrangement

Annex C – Court Order

Annex D – Formal Meeting Notice

Annex E – Expected Timetable

Annex F – Articles of Association of Transocean-Switzerland

Annex G – Organizational Regulations of Transocean-Switzerland

Annex H – Transocean-Switzerland Stand-Alone Statutory Financial Statements

Annex I – Transocean-Switzerland Audited Balance Sheet

 

iii

 


 

TRANSACTION STRUCTURE

We are seeking your approval at the shareholders meeting of a merger transaction by way of Schemes of Arrangement under Cayman Islands law (the “Transaction”) that will effectively change our place of incorporation from the Cayman Islands to Switzerland.

The merger involves several steps. First, we have formed a new Swiss corporation registered in Zug, Switzerland named Transocean Ltd. (“Transocean-Switzerland”) as a direct, wholly-owned subsidiary of Transocean Inc., the Cayman Islands company whose shares you currently own (“Transocean-Cayman”). Transocean-Switzerland, in turn, has formed a new Cayman Islands subsidiary named Transocean Cayman Ltd. (“Transocean-Acquisition”). Following the shareholders meeting to be held on               , 2008 and a hearing of the Grand Court of the Cayman Islands scheduled for              , 2008, assuming we have obtained the necessary shareholder and court approvals, Transocean-Acquisition will merge with Transocean-Cayman by way of Schemes of Arrangement, with Transocean-Cayman as the surviving company. As a result of the Transaction, Transocean-Acquisition will cease to exist, and Transocean-Cayman will become a direct, wholly-owned subsidiary of Transocean-Switzerland.

In the Transaction, Transocean-Switzerland will issue one share of Transocean-Switzerland in exchange for each share of Transocean-Cayman, plus an additional 16 million Transocean-Switzerland shares (the “Treasury Shares”) that Transocean-Switzerland will issue to Transocean-Cayman in the Transaction for future use to satisfy Transocean-Switzerland’s obligations to deliver shares in connection with awards granted under our incentive plans, warrants or other rights to acquire shares of Transocean-Switzerland. Transocean-Switzerland will assume Transocean-Cayman’s existing obligation to deliver shares under such incentive plans, warrants or other rights. Immediately after the Transaction, Transocean-Switzerland will have outstanding the same number of shares as there were outstanding shares of Transocean-Cayman immediately before the completion of the Transaction, plus (1) the Treasury Shares and (2) an additional 3,333 shares representing the share capital issued to Transocean-Cayman in connection with the formation of Transocean-Switzerland. As of             , 2008, the record date for the shareholders meeting, there were                ordinary shares of Transocean-Cayman outstanding.

In connection with the Transaction, we also plan to relocate our principal executive offices from the Cayman Islands and Houston, Texas to Geneva, Switzerland. Initially, we expect that 14 of our officers, including our Chief Executive Officer, will be relocated to our new principal executive offices, along with related support staff. We refer to the Transaction and the relocation of our principal executive offices together as the “Redomestication.” For a more complete description of the Redomestication, see “The Redomestication” beginning on page 22.

The following diagram shows the structure of Transocean before the Transaction and after the Transaction. The diagram does not reflect all of the legal entities owned by Transocean.

In this proxy statement, we sometimes refer to Transocean-Cayman and Transocean-Switzerland as “we,” “our” or “Transocean.”


1


 

QUESTIONS AND ANSWERS ABOUT THE REDOMESTICATION

Q:

What am I being asked to vote on at the meeting?

A:

You are being asked to vote on a proposed merger by way of Schemes of Arrangement under Cayman Islands law for the purpose of changing our place of incorporation from the Cayman Islands to Switzerland. As a result of the Transaction, Transocean-Cayman will become a direct, wholly-owned subsidiary of Transocean-Switzerland, and you will become a shareholder of Transocean-Switzerland.

You are also being asked to vote on a proposal to adjourn the meeting to a later date to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the Schemes of Arrangement proposal. Approval of the adjournment proposal is not a condition to the Schemes of Arrangement.

Q:

Why do you want to change your place of incorporation from the Cayman Islands to Switzerland?

A:

Our planned change of our place of incorporation from the Cayman Islands to Switzerland and relocation of our principal executive offices to Geneva, Switzerland will establish a corporate headquarters that is more centrally located within our area of worldwide operations, will locate Transocean in a country with a stable and developed tax regime, and should improve our ability to maintain a competitive worldwide effective corporate tax rate.

Please see “The Redomestication—Background and Reasons for the Redomestication” for more information. We cannot assure you that the anticipated benefits of the Redomestication will be realized. In addition to the potential benefits described above, the Redomestication will expose you and us to some risks. Please see the discussion under “Risk Factors.” Our board of directors has considered both the potential advantages of the Redomestication and these risks and has unanimously approved the Transaction and recommended that the shareholders vote for the Transaction.

Q:

Why was Switzerland selected as the place of domicile for Transocean-Switzerland?

A:

Switzerland is more centrally located than our current executive offices to our worldwide operations, in terms of both time zone overlap and travel time. Switzerland also has numerous tax treaties with many taxing jurisdictions throughout the world and a developed and stable tax regime.

Q:

Will the Transaction affect our current or future operations?

A:

We currently believe that the Transaction should have no material impact on how we conduct our day-to-day operations. The location of our future operations will depend on the needs of our business, independent of our legal domicile. However, please read “Risk Factors—The anticipated benefits of moving our principal executive offices to Switzerland may not be realized, and difficulties in connection with moving our principal executive offices could have an adverse effect on us.”

Q:

Will the Transaction dilute my economic interest?

A:

The Transaction will not dilute your economic interest in the Transocean group. Immediately after the Transaction, the number of outstanding shares of Transocean-Switzerland will be the same as the number of outstanding shares of Transocean-Cayman immediately before the completion of the Transaction, plus (1) an additional 16 million shares that Transocean-Switzerland will issue to Transocean-Cayman in the Transaction for future use to satisfy Transocean-Switzerland’s obligations to deliver shares in connection with awards granted under our incentive plans, warrants or other rights to acquire shares of Transocean-Switzerland and (2) an additional 3,333 shares representing the share capital issued to Transocean-Cayman in connection with the formation of Transocean-Switzerland. Transocean-Switzerland will assume Transocean-Cayman’s existing obligation to deliver shares under its incentive plans, warrants or other rights. Because Transocean-Cayman will be a wholly-owned subsidiary of Transocean-Switzerland after the completion of the Transaction, your economic interest will not be diluted by the issuance to, or retention by, Transocean-Cayman of Transocean-Switzerland shares in the Transaction.

2


 

Q:

What are the material tax consequences of the Transaction?

A:

Please read the following four questions and answers regarding some of the potential tax consequences of the Transaction. Please refer to “Material Tax Considerations” beginning on page 31 for a description of the material U.S. federal income tax and Swiss tax consequences of the Transaction to Transocean-Cayman shareholders. Determining the actual tax consequences of the Transaction 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 Transaction to you.

Q:

Is the Transaction taxable to me?

A:

Under U.S. tax law, holders of shares of Transocean-Cayman generally will not recognize gain or loss on the exchange of such shares for shares of Transocean-Switzerland in the Transaction. Under Swiss tax law, no tax is due for non-Swiss holders of Transocean-Cayman shares on the exchange of Transocean-Cayman shares for Transocean-Switzerland shares in the Transaction.

Q:

Is the Transaction a taxable transaction for any of Transocean-Cayman, Transocean-Switzerland or Transocean-Acquisition?

A:

No. The Transaction is not a taxable transaction for any of Transocean-Cayman, Transocean-Switzerland or Transocean-Acquisition.

Q:

Will there be Swiss withholding tax on future share repurchases, if any, by Transocean-Switzerland?

A:

Under present Swiss tax law, repurchases of shares for the purposes of capital reduction are treated as a partial liquidation subject to 35% Swiss withholding tax. The repurchase of shares for purposes other than capital reduction, such as to retain as treasury shares for use in connection with stock incentive plans, convertible debt or other instruments within certain periods, will generally not be subject to Swiss withholding tax. In addition, for shares repurchased for capital reduction, the portion of the repurchase price attributable to the par value of the shares repurchased will not be subject to the Swiss withholding tax. Beginning on January 1, 2011, subject to the adoption of implementing regulations and amendments to Swiss corporate law, the portion of the repurchase price attributable to the qualifying additional paid-in capital for Swiss statutory reporting purposes of the shares repurchased will also not be subject to the Swiss withholding tax. Upon completion of the Transaction, we expect Transocean-Switzerland to have a par value and qualifying additional paid-in capital for Swiss statutory reporting purposes, such that the combination of the two should approximate the market capitalization of Transocean-Cayman immediately prior to the completion of the Transaction.

In most instances, Swiss companies listed on the SWX Swiss Exchange, or SWX, carry out share repurchase programs through a “second trading line” on the SWX. Swiss institutional investors typically purchase shares from shareholders on the open market and then sell the shares on this second trading line back to the company. The Swiss institutional investors are generally able to receive a full refund of the withholding tax. Due to, among other things, the time delay between the sale to the company and the institutional investors’ receipt of the refund, the price companies pay to repurchase their shares has historically been slightly higher (but less than 1.0%) than the price of such companies’ shares in ordinary trading on the SWX first trading line.

We do not expect to be able to use the SWX second trading line process to repurchase our shares because we do not intend to list our shares on the SWX. We do, however, intend to follow an alternative process whereby we expect to be able to repurchase our shares in a manner that should allow Swiss institutional market participants selling the shares to us to receive a refund of the Swiss withholding tax and, therefore, accomplish the same purpose as share repurchases on the second trading line at substantially the same cost to us and such market participants as share repurchases on a second trading line.

3


 

Q:

Will there be Swiss withholding tax on future dividends, if any, by Transocean-Switzerland?

A:

A Swiss withholding tax of 35% is due on dividends and similar distributions to Transocean-Switzerland shareholders from Transocean-Switzerland, regardless of the place of residency of the shareholder, subject to the exceptions discussed below. Transocean-Switzerland will be required to withhold at such rate and remit on a net basis any payments made to a holder of Transocean-Switzerland shares and pay such withheld amounts to the Swiss federal tax authorities.

Under present Swiss tax law, distributions to shareholders in relation to a reduction of par value are exempt from Swiss withholding tax. Beginning on January 1, 2011, subject to the adoption of implementing regulations and amendments to Swiss corporate law, distributions to shareholders out of qualifying additional paid-in capital for Swiss statutory purposes will be exempt from the Swiss withholding tax. Upon completion of the Transaction, we expect Transocean-Switzerland to have a par value and qualifying additional paid-in capital per share for Swiss statutory reporting purposes, such that the combination of the two should approximate the market capitalization of Transocean-Cayman immediately prior to the completion of the Transaction. Assuming (1) the Transaction became effective on June 30, 2008, (2) a price of $80.39 per ordinary share of Transocean-Cayman (which was the closing price of the Transocean-Cayman ordinary shares reported on the New York Stock Exchange on October 7, 2008) and (3) a foreign exchange rate of CHF 1.13915 to $1.00 (the rate on October 7, 2008), the aggregate amount of par value and qualifying additional paid-in capital of Transocean-Switzerland’s outstanding shares would be $8.8 billion and $16.8 billion, respectively, after the completion of the Transaction. Assuming the price of Transocean-Cayman’s ordinary shares were $10.00 higher or $10.00 lower than the closing price on October 7, 2008, the aggregate amount of qualifying additional paid-in capital would increase or decrease by $3.2 billion. Consequently, Transocean-Switzerland expects that a substantial amount of any potential future distributions may be exempt from Swiss withholding tax.

Q:

What is qualifying additional paid-in capital?

A:

Under Swiss statutory reporting requirements, qualifying additional paid-in capital per share represents the amount by which the issue price of a share exceeds its par value. Following approval by shareholders of a reclassification of qualifying additional paid-in capital as freely distributable reserves, qualifying additional paid-in capital may, subject to the restrictions described under “Description of Transocean-Switzerland Shares—Dividends” and “Description of Transocean-Switzerland Shares—Repurchases of Registered Shares,” be returned to shareholders, including through dividends and share repurchases. Beginning on January 1, 2011, subject to the adoption of implementing regulations and amendments to Swiss corporate law, distributions to shareholders out of qualifying additional paid-in capital should be exempt from Swiss withholding tax. Currently, only distributions in relation to a reduction of par value are exempt from Swiss withholding tax. Please note that qualifying additional paid-in capital for Transocean-Switzerland’s statutory reporting purposes will not be the same as additional paid-in capital reflected on Transocean-Switzerland’s consolidated financial statements prepared in accordance with U.S. GAAP.

Q:

How will qualifying additional paid-in capital for Swiss statutory reporting purposes be determined?

A:

Qualifying additional paid-in capital in our Swiss statutory parent company financial statements will represent the issue price of Transocean-Switzerland shares less their aggregate par value. This issue price will be determined based on the market price of Transocean-Cayman shares immediately prior to the effective time of the Transaction. As a result of the Transaction, qualifying additional paid-in capital will represent the market capitalization of Transocean-Cayman immediately prior to the effective time of the Transaction less the aggregate par value of the Transocean-Switzerland issued shares (including the Treasury Shares). The following table presents shareholders’ equity, as adjusted, in accordance with Swiss statutory reporting requirements as if the Transaction had occurred on June 30, 2008 (assuming a Transocean-Cayman share price of $80.39 and a foreign exchange rate of CHF 1.13915 to $1.00, the closing market price and foreign exchange rate on October 7, 2008) (in millions, except share and per share amounts):

 
4

 

 

 

At June 30, 2008

 

Shareholders’ equity:

 

 

 

 

Shares, CHF 30.00 par value, 335,048,147 issued(a)

 

$

8,824

 

Qualifying additional paid-in capital

 

 

16,824

 

Special reserves(b)

 

 

 

Retained earnings

 

 

 

Total shareholders’ equity

 

$

25,648

 

___________________

 

 

 

 

 

(a)

Shares issued includes (1) 16 million shares to be issued to and held by Transocean-Cayman in connection with the Transaction and (2) 3,333 shares representing the share capital issued to Transocean-Cayman in connection with the formation of Transocean-Switzerland.

 

(b)

Special reserves, in the amount of CHF 100,000, representing the purchase price paid by Transocean-Cayman to acquire the shares of Transocean-Switzerland issued to Transocean-Cayman in connection with Transocean-Switzerland’s initial incorporation (equal to the aggregate par value of Transocean-Switzerland’s shares, without giving effect to the Transaction).

See “Unaudited Summary Pro Forma Financial Information” for a pro forma presentation of Transocean-Switzerland’s shareholders’ equity under U.S. GAAP.

Q:

When do you expect the Transaction to be completed?

A:

We are working towards completing the Transaction as quickly as possible and, assuming the Transaction is approved by the requisite shareholder vote and by the Grand Court of the Cayman Islands, we expect to do so as soon as practicable following approval from the Grand Court of the Cayman Islands. We currently expect to complete the Transaction in late 2008 or early 2009. See Annex E for an expected timetable. However, the Transaction may be abandoned or delayed for any reason by our board of directors at any time prior to the Transaction becoming effective, even though the Transaction may have been approved by our shareholders and all conditions to the Transaction may have been satisfied.

Q:

What will I receive for my Transocean-Cayman shares?

A:

After the Transaction, you will hold one Transocean-Switzerland share for each Transocean-Cayman share you held immediately prior to the completion of the Transaction.

Q:

Do I have to take any action to exchange my Transocean-Cayman shares?

A:

No. Your Transocean-Cayman ordinary shares will be exchanged for Transocean-Switzerland shares without any action on your part. All of Transocean-Cayman’s ordinary shares are issued in uncertificated book-entry form. All of Transocean-Switzerland’s shares will also be issued in uncertificated book-entry form.

Q:

Can I trade Transocean-Cayman shares between the date of this proxy statement and the effective time of the Transaction?

A:

Yes. The Transocean-Cayman shares will continue to trade during this period.

Q:

After the Transaction, where can I trade Transocean-Switzerland shares?

A:

The Transocean-Switzerland shares will be listed and traded on the New York Stock Exchange under the symbol “RIG,” the same symbol under which your shares are currently listed.

 

5


 

Q:

What vote of Transocean-Cayman shareholders is required to approve the proposals?

A:

The affirmative vote of a majority in number of the holders of the Transocean-Cayman ordinary shares present and voting at the meeting, whether in person or by proxy, representing 75% or more in value of the ordinary shares present and voting at the meeting, whether in person or by proxy, is required to approve the Transaction. The affirmative vote of holders of at least a majority of the Transocean-Cayman ordinary shares present in person or by proxy at the meeting and entitled to vote on the matter is required to approve the adjournment proposal. Please see “The Shareholders Meeting—Record Date; Voting Rights; Vote Required for Approval.”

Q:

What vote does my board of directors recommend?

A:

The Transocean-Cayman board of directors unanimously recommends that Transocean-Cayman’s shareholders vote “FOR” both of the proposals.

Q:

What should I do now to vote?

A:

The meeting will take place on             , 2008. After carefully reading and considering the information contained in this proxy statement and the documents incorporated by reference, please indicate on the enclosed proxy card how you want to vote. Submit your proxy by following the instructions on the enclosed proxy card as soon as possible, so that your shares may be represented at the meeting.

Q:

May I submit my proxy by the Internet or telephone?

A:

Yes. Instead of submitting your vote by mail on the enclosed proxy card, you may give your voting instruction by the Internet or telephone. Shareholders of record who do not hold their shares through a bank, broker or nominee may grant a proxy to vote on the Internet at http://www.eproxy.com/rig or by telephone by calling the number listed on the proxy card. Please have your proxy card in hand when calling or going online. If you hold your shares in the name of a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or nominee when voting your shares.

Q.

What if I plan to attend the shareholder meeting in person?

A.

We recommend that you submit your proxy anyway. If you are a holder of record, you may still attend the shareholder meeting and vote in person.

Q:

If my shares are held in “street name” by my broker, will my broker vote my shares for me?

A:

No. We recommend that you contact your broker. Your broker can give you directions on how to instruct the broker to vote your shares. Your broker may not be able to vote your shares unless the broker receives appropriate instructions from you.

Q:

Can I change my vote after I grant my proxy?

A:

Yes. You can change your vote at any time before your proxy is voted at the meeting. You may revoke your proxy any time prior to its exercise by:

 

giving written notice of the revocation to the Corporate Secretary of Transocean-Cayman;

 

appearing at the meeting, notifying the Corporate Secretary of Transocean-Cayman and voting in person;

 

revoking the proxy by telephone or the Internet; or

 

properly completing and executing a later-dated proxy and delivering it to the Corporate Secretary of Transocean-Cayman at or before the meeting.

 

6


 

However, your attendance alone will not revoke your proxy.

If you have instructed a broker to vote your shares, you must follow the procedure provided by your broker to change those instructions.

Q:

Are proxy materials available on the Internet?

A:

Yes.

Important Notice Regarding the Availability of Proxy Materials for

the Shareholders Meeting to be Held on , 2008.

Our Proxy Statement is available at

http://www.deepwater.com/proxymaterials.cfm

Q:

Whom should I call if I have questions about the meeting or the Redomestication?

A:

You should contact either of the following:

Transocean-Cayman:

Gregory S. Panagos

Vice President, Investor Relations

Transocean Inc.

4 Greenway Plaza

Houston, Texas 77046

Fax: (713) 232-7001

Phone: (713) 232-7500

the proxy solicitor:

 

                                         

 

 

Fax: (  

)   

-  

 

Phone: (  

)   

-  

or toll-free (    )      -     

 

7


 

SUMMARY

This summary highlights selected information from this proxy statement. It does not contain all of the information that is important to you. To understand the Redomestication more fully, and for a more complete legal description of the Transaction, you should read carefully the entire proxy statement, including the annexes. The Agreement and Plan of Merger and the Schemes of Arrangement attached as Annex A and Annex B to this proxy statement, respectively, are the legal documents that govern the Transaction. The articles of association and organizational regulations of Transocean-Switzerland, attached as Annex F and Annex G to this proxy statement, respectively, will govern our company after the completion of the Transaction. We encourage you to read those documents.

Parties to the Transaction

Transocean-Cayman. Transocean-Cayman is a leading international provider of offshore contract drilling services for oil and gas wells. As of September 30, 2008, we owned, had partial ownership interests in or operated 137 mobile offshore drilling units. As of this date, our fleet included 39 High-Specification Floaters (Ultra-Deepwater, Deepwater and Harsh Environment semisubmersibles and drillships), 29 Midwater Floaters, 10 High-Specification Jackups, 55 Standard Jackups and four Other Rigs. In addition, we had ten Ultra-Deepwater Floaters contracted for or under construction.

We believe our mobile offshore drilling fleet is one of the most modern and versatile fleets in the world. Our primary business is to contract these drilling rigs, related equipment and work crews primarily on a dayrate basis to drill oil and gas wells. We specialize in technically demanding segments of the offshore drilling business with a particular focus on deepwater and harsh environment drilling services. We also provide oil and gas drilling management services on either a dayrate basis or a completed-project, fixed-price (or “turnkey”) basis, as well as drilling engineering and drilling project management services, and we participate in oil and gas exploration and production activities.

Transocean-Switzerland. Transocean-Switzerland is a newly formed Swiss corporation and is currently wholly owned by Transocean-Cayman. Transocean-Switzerland has only nominal assets and capitalization and has not engaged in any business or other activities other than in connection with its formation and the Transaction. As a result of the Transaction, Transocean-Switzerland will become the parent holding company of the Transocean group, including Transocean-Cayman.

Transocean-Acquisition. Transocean-Acquisition is a company newly organized under the laws of the Cayman Islands for the purpose of merging with Transocean-Cayman in the Transaction, with Transocean-Cayman as the surviving corporation. Transocean-Acquisition is a direct, wholly-owned subsidiary of Transocean-Switzerland. Transocean-Acquisition has only nominal assets and capitalization and has not engaged in any business or other activities other than in connection with its formation and the Transaction.

The principal executive offices of Transocean-Cayman and Transocean-Acquisition are located at 4 Greenway Plaza, Houston, Texas 77046 and at 70 Harbour Drive, Grand Cayman, KY1-1003, Cayman Islands. The telephone number of each party at the U.S. address is (713) 232-7500 and at the Cayman Islands address is (345) 745-4500. The principal executive offices of Transocean-Switzerland are currently located at Transocean Ltd., c/o Reichlin & Hess Rechtsanwälte, Hofstrasse 1A, 6300 Zug, Switzerland, and the telephone number at that address is +41-(0)41-729-1070. The principal executive offices of Transocean-Switzerland are expected to be relocated to Geneva, Switzerland following the completion of the Transaction.

The Redomestication (see page 22)

The Transaction will effectively change our place of incorporation from the Cayman Islands to Zug, Switzerland. In connection with the Transaction, we also plan to relocate our principal executive offices from the Cayman Islands and Houston, Texas to Geneva, Switzerland. Initially, we expect 14 of our officers, including our Chief Executive Officer, will be relocated to our new principal executive offices, along with related support staff. We refer to the Transaction and the relocation of our principal executive offices together as the “Redomestication.”

8


 

The Transaction involves several steps. First, we have formed Transocean-Switzerland. Transocean-Switzerland, in turn, has formed Transocean-Acquisition. Following the shareholders meeting and a hearing of the Grand Court of the Cayman Islands on              , 2008, assuming we have obtained the necessary shareholder and court approvals, Transocean-Acquisition will merge with Transocean-Cayman by way of Schemes of Arrangement, with Transocean-Cayman as the surviving company. In the Transaction, Transocean-Switzerland will issue one share of Transocean-Switzerland in exchange for each share of Transocean-Cayman. Also, Transocean-Switzerland will issue an additional 16 million of its shares (the “Treasury Shares”) to Transocean-Cayman in the Transaction for future use to satisfy Transocean-Switzerland’s obligations to deliver shares in connection with awards granted under our incentive plans, warrants or other rights to acquire shares of Transocean-Switzerland. Transocean-Switzerland will assume Transocean-Cayman’s existing obligation to deliver shares under such incentive plans, warrants or other rights. As a result of the Transaction, Transocean-Cayman will become a direct, wholly-owned subsidiary of Transocean-Switzerland.

After the Transaction, you will continue to own an interest in a parent company that will continue to conduct the same business operations as conducted by Transocean-Cayman before the Transaction. The number of shares you will own in Transocean-Switzerland will be the same as the number of shares you owned in Transocean-Cayman immediately prior to the Transaction, and your relative economic interest in the Transocean group will remain unchanged.

The completion of the Transaction will change the governing law that applies to shareholders of our parent company from Cayman Islands law to Swiss law. There are differences between Cayman Islands law and Swiss law. See “Comparison of Rights of Shareholders” for a summary of some of these differences.

Upon completion of the Redomestication, we will remain subject to the U.S. Securities and Exchange Commission (“SEC”) reporting requirements, the mandates of the Sarbanes-Oxley Act and the applicable corporate governance rules of the New York Stock Exchange, and we will continue to report our financial results in U.S. dollars and under U.S. generally accepted accounting principles (“U.S. GAAP”).

The Transaction will be effected pursuant to the Agreement and Plan of Merger and the Schemes of Arrangement, which are the legal documents that govern the Transaction. Copies of those documents are attached to and are a part of this proxy statement as Annex A and Annex B, respectively.

We anticipate that the Transaction will become effective as soon as practicable following approval of the Grand Court of the Cayman Islands at the hearing on                , 2008, upon our filing of the court order sanctioning the Transaction with the Cayman Islands registrar of companies.

Reasons for the Redomestication (see page 22)

Our planned change of our place of incorporation from the Cayman Islands to Switzerland and relocation of our principal executive offices to Geneva, Switzerland will establish a corporate headquarters that is more centrally located within our area of worldwide operations, will locate Transocean in a country with a stable and developed tax regime, and should improve our ability to maintain a competitive worldwide effective corporate tax rate.

Tax Considerations (see page 31)

Under U.S. tax law, holders of shares of Transocean-Cayman generally will not recognize gain or loss on the exchange of such shares for shares of Transocean-Switzerland in the Transaction. Under Swiss tax law, no tax is due for non-Swiss holders of Transocean-Cayman shares on the exchange of Transocean-Cayman shares for Transocean-Switzerland shares in the Transaction. Please refer to “Material Tax Considerations” for a description of the material U.S. federal income tax and Swiss tax consequences of the Transaction to Transocean-Cayman shareholders. Determining the actual tax consequences of the Transaction to you may be complex and will depend

9


on your specific situation. You are urged to consult your tax adviser for a full understanding of the tax consequences of the Transaction to you.

Rights of Shareholders (see page 52)

Many of the principal attributes of Transocean-Cayman’s ordinary shares and Transocean-Switzerland’s registered shares will be similar. However, there are differences between your rights under Swiss law and under Cayman Islands law. In addition, there are differences between Transocean-Cayman’s memorandum and articles of association and Transocean-Switzerland’s proposed articles of association and organizational regulations. We discuss these differences in detail under “Description of Transocean-Switzerland Shares” and “Comparison of Rights of Shareholders.” Copies of Transocean-Switzerland’s proposed articles of association and organizational regulations (the latter being analogous to bylaws) are attached as Annex F and Annex G to this proxy statement, respectively.

Stock Exchange Listing (see page 29)

Immediately following the Transaction, the shares of Transocean-Switzerland will be listed on the New York Stock Exchange under the symbol “RIG,” the same symbol under which the Transocean-Cayman ordinary shares are currently listed.

Court Approval of the Transaction (see page 25)

The Transaction cannot be completed without the approval of the Grand Court of the Cayman Islands. Subject to shareholders of Transocean-Cayman approving the Transaction, a Grand Court hearing will be required to seek the sanction of the Transaction. At the hearing, the Grand Court may impose such conditions as it deems appropriate in relation to the Transaction but may not impose any material changes without the joint consent of Transocean-Cayman, Transocean-Switzerland and Transocean-Acquisition. In determining whether to exercise its discretion and approve the Transaction, the Grand Court will determine, among other things, whether the Schemes of Arrangement might reasonably be approved by the shareholders of Transocean-Cayman.

Market Price and Dividend Information (see page 79)

On October 9, 2008, the last trading day before the public announcement of the Transaction, the closing price of the Transocean-Cayman ordinary shares on the New York Stock Exchange was $77.67 per share. On              , 2008, the most recent practicable date before the date of this proxy statement, the closing price of the Transocean-Cayman ordinary shares was $      per share.

No Appraisal Rights (see page 28)

Under Cayman Islands law, the shareholders of Transocean-Cayman do not have any right to an appraisal of the value of their shares or payment for them in connection with the Transaction.

Accounting Treatment of the Transaction (see page 29)

10


 

Under U.S. GAAP, the Transaction represents a transaction between entities under common control. Assets and liabilities transferred between entities under common control are accounted for at cost. Accordingly, the assets and liabilities of Transocean-Switzerland will be reflected at their carrying amounts in the accounts of Transocean-Cayman at the effective time of the Transaction.

Shareholders Meeting (see page 73)

Time, Place, Date and Purpose. The shareholders meeting will be held on             , 2008 at             ,                                              time, at the                                                                                                         . At the meeting, Transocean-Cayman’s board of directors will ask the shareholders to vote to approve:

 

the Transaction, which will be effected by the Schemes of Arrangement, in connection with the Agreement and Plan of Merger, pursuant to which Transocean-Cayman would merge with Transocean-Acquisition, and each outstanding ordinary share of Transocean-Cayman would be exchanged for one share of Transocean-Switzerland;

 

a motion to adjourn the meeting to a later date to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the Transaction; and

 

any other matters that properly come before the meeting and any adjournments or postponements of the meeting.

Record Date. Only holders of record of Transocean-Cayman ordinary shares on                , 2008 are entitled to notice of and to vote at the meeting or any adjournment or postponement of the meeting.

Quorum. There is no formal quorum requirement for a meeting of shareholders convened to consider the terms of a scheme of arrangement under Cayman Islands law. Nonetheless, we will not petition the Grand Court of the Cayman Islands to sanction the Transaction unless shareholders holding a majority of the outstanding Transocean-Cayman ordinary shares are present in person or by proxy at the meeting of shareholders (or any adjournments of the meeting of shareholders), which number of shareholders would constitute a quorum for most purposes under Transocean-Cayman’s articles of association. Abstentions and “broker non-votes” will be counted as present for purposes of determining whether there is a quorum in respect of the proposals.

Recommendation of the Board of Directors

The Transocean-Cayman board of directors unanimously recommends that Transocean-Cayman’s shareholders vote “FOR” the Transaction. The Transocean-Cayman board of directors also unanimously recommends that Transocean-Cayman’s shareholders vote “FOR” the adjournment proposal, which is not a condition to the Transaction.

Required Vote (see page 28)

The Transaction requires the affirmative vote of a majority in number of the holders of the Transocean-Cayman ordinary shares present and voting on the proposal at the meeting, whether in person or by proxy, representing 75% or more in value of the ordinary shares present and voting on the proposal at the meeting, whether in person or by proxy. The affirmative vote of holders of at least a majority of the Transocean-Cayman ordinary shares present in person or by proxy at the meeting and entitled to vote on the matter is required to approve the adjournment proposal. See “The Shareholders Meeting—Record Date; Voting Rights; Vote Required for Approval.”

Proxies (see page 74)

11


 

General. A proxy card is being sent to each shareholder as of the record date. If you properly received a proxy card, you may grant a proxy to vote on the proposals by marking your proxy card appropriately, executing it in the space provided, dating it and returning it to us. If you hold your shares in the name of a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or nominee when voting your shares. If you have timely submitted a properly executed proxy card or provided your voting instructions by telephone or on the Internet and clearly indicated your votes, your shares will be voted as indicated.

Revocation. You may revoke your proxy card at any time prior to its exercise by:

 

giving written notice of the revocation to the Corporate Secretary of Transocean-Cayman;

 

appearing at the meeting, notifying the Corporate Secretary of Transocean-Cayman and voting in person;

 

voting again by telephone or the Internet; or

 

properly completing and executing a later-dated proxy and delivering it to the Corporate Secretary of Transocean-Cayman at or before the meeting.

However, your attendance alone will not revoke your proxy.

12


 

Selected Historical Financial Data

The following table presents selected consolidated financial data for Transocean-Cayman. We derived the statement of operations data for each of the years in the five-year period ended December 31, 2007, and the balance sheet data as of December 31, 2007, 2006, 2005, 2004 and 2003, from Transocean-Cayman’s audited consolidated financial statements. We derived the statement of operations data for the six months ended June 30, 2008 and 2007, and the balance sheet data as of June 30, 2008 and 2007, from Transocean-Cayman’s unaudited interim consolidated financial statements. We prepared the unaudited interim consolidated financial statements on the same basis as the audited consolidated financial statements and included all adjustments, consisting of normal recurring adjustments, that we consider necessary for a fair presentation of Transocean-Cayman’s financial position and results of operations for the unaudited interim periods. The historical financial information may not be indicative of Transocean-Switzerland’s future performance. Results of operations for the six months ended June 30, 2008 may not be indicative of the results of operations that may be achieved for the entire year. The data should be read in conjunction with the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Transocean-Cayman’s Annual Report on Form 10-K for the year ended December 31, 2007, and in Transocean-Cayman’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, and Transocean-Cayman’s financial statements, related notes and other financial information incorporated by reference in this proxy statement.

We have included no data for Transocean-Switzerland or Transocean-Acquisition because those entities were not in existence during any of the periods shown below.

 

 

Six months
ended June 30,

 

Years ended December 31,

 

 

 

2008

 

2007

 

2007(a)

 

2006

 

2005(b)

 

2004(c)

 

2003

 

 

 

(In millions, except per share data and percentages)

 

Statement of operations data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenues

 

$

6,212

 

$

2,762

 

$

6,377

 

$

3,882

 

$

2,892

 

$

2,614

 

$

2,434

 

Operating income

 

 

2,890

 

 

1,333

 

 

3,239

 

 

1,641

 

 

720

 

 

328

 

 

240

 

Net income(d)

 

 

2,296

 

 

1,102

 

 

3,131

 

 

1,385

 

 

716

 

 

152

 

 

19

 

Basic earnings per share(e)

 

$

7.22

 

$

5.45

 

$

14.65

 

$

6.32

 

$

3.13

 

$

0.68

 

$

0.08

 

Diluted earnings per share(e)

 

$

7.15

 

$

5.24

 

$

14.14

 

$

6.10

 

$

3.03

 

$

0.67

 

$

0.08

 

Balance sheet data (at end of period):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

34,477

 

$

12,149

 

$

34,364

 

$

11,476

 

$

10,457

 

$

10,758

 

$

11,663

 

Debt due within one year

 

 

2,145

 

 

18

 

 

6,172

 

 

95

 

 

400

 

 

19

 

 

46

 

Long-term debt

 

 

13,134

 

 

3,046

 

 

11,085

 

 

3,203

 

 

1,197

 

 

2,462

 

 

3,612

 

Total shareholders’ equity

 

 

14,965

 

 

7,478

 

 

12,566

 

 

6,836

 

 

7,982

 

 

7,393

 

 

7,193

 

Other financial data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash provided by operating activities

 

$

2,493

 

$

1,261

 

$

3,073

 

$

1,237

 

$

864

 

$

600

 

$

525

 

Cash provided by (used in) investing activities

 

 

(845

)

 

(717

)

 

(5,677

)

 

(415

)

 

169

 

 

551

 

 

(445

)

Cash provided by (used in) financing activities

 

 

(1,913

)

 

(566

)

 

3,378

 

 

(800

)

 

(1,039

)

 

(1,174

)

 

(820

)

Capital expenditures(f)

 

 

1,189

 

 

755

 

 

1,380

 

 

876

 

 

182

 

 

127

 

 

494

 

Operating margin

 

 

47

%

 

48

%

 

51

%

 

42

%

 

25

%

 

13

%

 

10

%


 

(a)

In November 2007, Transocean-Cayman completed its merger with GlobalSantaFe Corporation (“GlobalSantaFe”) and identified Transocean-Cayman as the acquirer in a purchase business combination for accounting purposes. Transocean-Cayman issued approximately 108 million ordinary shares and paid an aggregate amount of $5 billion in cash to GlobalSantaFe shareholders in connection with the merger. The balance sheet data as of December 31, 2007 represents the consolidated statement of financial position of the combined company. The statement of operations and other financial data for the year ended December 31, 2007 include approximately one month of operating results and cash flows for the combined company.

  Immediately prior to its merger with GlobalSantaFe, Transocean-Cayman reclassified each of its outstanding ordinary shares by way of a scheme of arrangement under Cayman Islands law, which was

13


 

accounted for as a reverse stock split and a dividend. As a result of the reclassification, each of Transocean-Cayman’s outstanding ordinary shares was exchanged for 0.6996 Transocean-Cayman ordinary shares and $33.03 in cash, which amounted to approximately $10 billion in the aggregate.

In connection with its reclassification of ordinary shares and its merger with GlobalSantaFe, Transocean-Cayman financed the payments to Transocean-Cayman and GlobalSantaFe shareholders with borrowings under a $15 billion bridge loan facility.

(b)

In May 2005 and June 2005, respectively, Transocean-Cayman completed a public offering and a sale of TODCO common stock pursuant to Rule 144 under the Securities Act (respectively referred to as the “May Offering” and the “June Sale”). After the May Offering, Transocean-Cayman accounted for its remaining investment using the cost method of accounting. As a result of the June Sale, Transocean-Cayman no longer owns any shares of TODCO’s common stock. Transocean-Cayman recorded a gain of $165 million in 2005 related to the disposition of TODCO shares.

(c)

Transocean-Cayman consolidated TODCO in its financial statements as a business segment through December 16, 2004, and that portion of TODCO that Transocean-Cayman did not own was reported as minority interest in its consolidated statements of operations and balance sheet. As a result of the conversion of the TODCO class B common stock into class A common stock, Transocean-Cayman’s ownership and voting interest declined to approximately 22% on that date, and Transocean-Cayman no longer consolidated TODCO in its financial statements but accounted for its remaining investment using the equity method of accounting until the May Offering. Transocean-Cayman recorded a gain of $142 million, net of $167 million of non-cash charges, in 2004 related to the disposition of TODCO shares.

(d)

Net income for the year ended December 31, 2003 includes a gain of $1 million resulting from the cumulative effect of an accounting change with no effect on basic or diluted earnings per share.

(e)

Per share amounts for all periods have been adjusted for the reclassification of Transocean-Cayman’s ordinary shares on November 27, 2007. The reclassification was accounted for as a reverse stock split and a dividend, which requires restatement of historical weighted-average shares outstanding and historical earnings per share for prior periods.

(f)

Capital expenditures are also included in “Cash provided by (used in) investing activities.”

 

14


 

Unaudited Summary Pro Forma Financial Information

Pro forma financial statements for Transocean-Switzerland are not presented in this proxy statement because no significant pro forma adjustments are required to be made to the historical condensed consolidated statement of operations and balance sheet of Transocean-Cayman for the six months ended and as of June 30, 2008 and to the historical consolidated statement of operations of Transocean-Cayman for the year ended December 31, 2007. Those financial statements are included in Transocean-Cayman’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and in its Annual Report on Form 10-K for the year ended December 31, 2007.

As a result of the Transaction, the par value of our shares will increase and cause a corresponding reduction of our additional paid-in capital. The following unaudited summary pro forma financial information presents our consolidated shareholders’ equity as of June 30, 2008, actual, and as adjusted, assuming the Transaction had been completed on June 30, 2008. The pro forma adjustment reflects the completion of the Transaction, including the increase in par value and the corresponding decrease in additional paid-in capital assuming a foreign exchange rate of CHF 1.0190 to $1.00 effective on June 30, 2008. You should read this table in conjunction with Transocean-Cayman’s unaudited interim condensed consolidated financial statements and the notes thereto, which are incorporated by reference in this proxy statement.

 

 

At June 30, 2008

 

 

 

Actual

 

As
Adjusted

 

 

 

(In millions, except share and per share amounts)

 

Shareholders’ equity:

 

 

 

 

 

 

 

Shares, $0.01 and CHF 30.00 par value, actual and as adjusted; 800,000,000 and 502,572,221 authorized, actual and as adjusted; 0 and 167,524,074 conditionally authorized, actual and as adjusted; and 319,044,814 issued and outstanding and 335,048,147 issued and 319,044,814 outstanding, actual and as adjusted(a)

 

$

3

 

$

9,393

 

Additional paid-in capital(b)

 

 

10,907

 

 

1,517

 

Retained earnings

 

 

4,102

 

 

4,102

 

Accumulated other comprehensive loss

 

 

(47

)

 

(47

)

Total shareholders’ equity

 

$

14,965

 

$

14,965

 

 

 

 

 

 

 

 

 


 

(a)

Shares issued, as adjusted, includes (1) 16 million shares to be issued to and held by Transocean-Cayman in connection with the Transaction and (2) 3,333 shares representing the share capital issued to Transocean-Cayman in connection with the formation of Transocean-Switzerland. Shares outstanding, as adjusted, are presented net of these 16 million shares.

(b)

Additional paid-in capital is presented in the table in accordance with U.S. GAAP and is different from qualifying additional paid-in capital presented in our Swiss statutory parent company financial statements. As a result of the Transaction, qualifying additional paid-in capital will represent the amount by which the aggregate market value of the shares of Transocean-Switzerland, determined immediately prior to the effective time of the Transaction, exceeds the aggregate par value of such shares. See “Questions and Answers About the Redomestication—How will qualifying additional paid-in capital for Swiss statutory purposes be determined?” for a discussion of shareholders’ equity under Swiss statutory reporting requirements.

Transaction costs incurred in connection with the Redomestication are not expected to be material and are expensed as incurred.

 

15


 

RISK FACTORS

Before you decide how to vote on the Transaction, you should consider carefully the following risk factors, in addition to the other information contained in this proxy statement and the documents incorporated by reference, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2007, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008 and subsequent filings with the SEC.

The anticipated benefits of moving our principal executive offices to Switzerland may not be realized, and difficulties in connection with moving our principal executive offices could have an adverse effect on us.

In connection with the Redomestication, we plan to relocate our principal executive offices from the Cayman Islands and Houston, Texas to Geneva, Switzerland. Initially we expect that 14 of our officers, including our Chief Executive Officer, will be located at our new principal executive offices, along with related support staff. We may face significant challenges in relocating our executive offices to a different country, including difficulties in retaining and attracting officers, key personnel and other employees and challenges in maintaining principal executive offices in a country different from the country where other employees, including corporate support staff, are located. Employees may be uncertain about their future roles within our organization pending or following the completion of the Redomestication. Management may also be required to devote substantial time to the Redomestication and related matters, which could otherwise be devoted to focusing on ongoing business operations and other initiatives and opportunities. In addition, we may not realize the benefits we anticipate from the Redomestication, including the benefit of moving to a location that is more centrally located within our area of worldwide operations. See “The Redomestication—Background and Reasons for the Redomestication.” Any such difficulties could have an adverse effect on our business, results of operations or financial condition.

Your rights as a shareholder will change as a result of the Transaction.

Because of differences between Swiss law and Cayman Islands law and differences between the governing documents of Transocean-Switzerland and Transocean-Cayman, your rights as a shareholder will change if the Transaction is completed. For a description of these differences, see “Comparison of Rights of Shareholders.”

The market for the Transocean-Switzerland shares may differ from the market for the Transocean-Cayman shares, and Transocean-Switzerland’s shares may be removed as a component of the Standard & Poor’s 500 Index and other indices or certain other funds.

We intend to list the Transocean-Switzerland shares on the New York Stock Exchange under the symbol “RIG,” the same trading symbol as the Transocean-Cayman shares. The market price, trading volume or volatility of the Transocean-Switzerland shares could be different than those of the Transocean-Cayman shares.

Transocean-Cayman’s ordinary shares are currently a component of the Standard & Poor’s 500 Index and other indices. S&P has considered Transocean-Cayman and a number of other “offshore registered companies” domestic companies for purposes of inclusion in the S&P 500. S&P may decide to remove Transocean-Switzerland’s shares as a component of the S&P 500, and, while we are uncertain as to when S&P will make its determination, this determination may not be made until after the shareholders meeting. S&P has removed the shares of another offshore registered company that has recently redomesticated from the Cayman Islands to Switzerland. Similar issues could arise with respect to whether Transocean-Switzerland’s shares will continue to be included as a component in other indices or funds that may impose a variety of qualifications that could be affected by the Redomestication. If Transocean-Switzerland’s shares are removed as a component of the S&P 500 or other indices or no longer meet the qualifications of such funds, institutional investors attempting to track the performance of the S&P 500 or such other indices or the funds that impose those qualifications would likely sell their shares, which could adversely affect the price of the Transocean-Switzerland shares. Any such adverse impact on the price of the Transocean-Switzerland shares could be magnified by the current heightened volatility in the financial markets.

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As a result of the higher par value of the Transocean-Switzerland shares, Transocean-Switzerland will have less flexibility than Transocean-Cayman with respect to certain aspects of capital management.

Upon the completion of the Transaction, the par value of Transocean-Switzerland’s shares will be 30.00 Swiss francs per share. The par value of Transocean-Cayman’s ordinary shares is $0.01 per share. Under Swiss law, Transocean-Switzerland generally may not issue its shares below par value. As of October 7, 2008, the closing price of Transocean-Cayman’s ordinary shares on the New York Stock Exchange was $80.39, and 30.00 Swiss francs was equivalent to $26.34 based on a foreign exchange rate of CHF 1.13915 to $1.00 on such date. In the event Transocean-Switzerland needs to raise common equity capital at a time when the trading price of its shares is below the par value of the shares, Transocean-Switzerland will need to obtain approval of shareholders to decrease the par value of its shares or issue another class of shares with a lower par value. We cannot assure you that Transocean-Switzerland would be able to obtain such shareholder approval. In addition, obtaining shareholder approval would require filing a proxy statement with the SEC and convening a meeting of shareholders, which would delay any capital raising plans. Furthermore, any reduction in par value would decrease Transocean-Switzerland’s par value available for future repayment of share capital not subject to Swiss withholding tax. See “—Transocean-Switzerland may not be able to make distributions or repurchase shares without subjecting you to Swiss withholding tax.”

As a result of increased shareholder approval requirements, Transocean-Switzerland will have less flexibility than Transocean-Cayman with respect to certain aspects of capital management.

Under Cayman Islands law, Transocean-Cayman’s directors may issue, without shareholder approval, any ordinary shares authorized in Transocean-Cayman’s memorandum of association that are not issued or reserved. Cayman Islands law also provides substantial flexibility in establishing the terms of preferred shares. In addition, Transocean-Cayman’s board of directors has the right, subject to statutory limitations, to declare and pay dividends on Transocean-Cayman’s ordinary shares without a shareholder vote. Swiss law allows Transocean-Switzerland’s shareholders to authorize share capital that can be issued by the board of directors without shareholder approval, but this authorization is limited to 50% of the existing registered share capital and must be renewed by the shareholders every two years. Additionally, subject to specified exceptions, Swiss law grants preemptive rights to existing shareholders to subscribe for new issuances of shares. Swiss law also does not provide as much flexibility in the various terms that can attach to different classes of shares. Swiss law also reserves for approval by shareholders many corporate actions over which Transocean-Cayman’s board of directors currently has authority. For example, dividends must be approved by shareholders. While we do not believe that the differences between Cayman Islands law and Swiss law relating to our capital management will have an adverse effect on us, we cannot assure you that situations will not arise where such flexibility would have provided substantial benefits to our shareholders.

The Redomestication will result in additional costs to us, some of which will be incurred whether or not the Redomestication is completed.

The completion of the Redomestication will result in an increase in some of our ongoing expenses and require us to incur some new expenses. Some costs, including those related to employees in our Swiss offices and holding board meetings in Switzerland, are expected to be higher than would be the case if our principal executive offices were not relocated to Switzerland. We also expect to incur new expenses, including the addition of professional fees to comply with Swiss corporate and tax laws. In addition, we will incur certain transaction costs in connection with the Redomestication whether or not the Redomestication is completed. The Redomestication may also result in indirect costs by diverting attention of management and employees from our business and therefore increasing administrative costs and expenses.

Transocean-Switzerland may not be able to make distributions or repurchase shares without subjecting you to Swiss withholding tax.

If Transocean-Switzerland is not successful in its efforts to make distributions, if any, through a reduction of par value or, after January 1, 2011, pay dividends, if any, out of qualifying additional paid-in capital, then any dividends paid by Transocean-Switzerland will generally be subject to a Swiss federal withholding tax at a rate of 35%. The withholding tax must be withheld from the gross distribution and paid to the Swiss Federal Tax Administration. Dividends, if any, paid on Transocean-Cayman’s shares are not currently subject to withholding tax in the Cayman Islands. A U.S. holder that qualifies for benefits under the Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income,

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which we refer to as the “U.S.-Swiss Treaty,” may apply for a refund of the tax withheld in excess of the 15% treaty rate (or for a full refund in case of qualified pension funds). Payment of a capital distribution in the form of a par value reduction is not subject to Swiss withholding tax. However, there can be no assurance that Transocean-Switzerland’s shareholders will approve a reduction in par value, that Transocean-Switzerland will be able to meet the other legal requirements for a reduction in par value, or that Swiss withholding rules will not be changed in the future. In addition, over the long term, the amount of par value available for Transocean-Switzerland to use for par value reductions will be limited. If Transocean-Switzerland is unable to make a distribution through a reduction in par value or, after January 1, 2011, pay a dividend out of qualifying additional paid-in capital, Transocean-Switzerland may not be able to make distributions without subjecting you to Swiss withholding taxes.

Under present Swiss tax law, repurchases of shares for the purposes of capital reduction are treated as a partial liquidation subject to 35% Swiss withholding tax on the difference between the par value and the repurchase price. Transocean-Switzerland may follow a share repurchase process for future share repurchases, if any, similar to a “second trading line” on the SWX in which Swiss institutional investors sell shares to us and are generally able to receive a refund of the Swiss withholding tax. However, if Transocean-Switzerland is unable to use this process successfully, Transocean-Switzerland may not be able to repurchase shares for the purposes of capital reduction without subjecting you to Swiss withholding taxes. Please see “Material Tax Considerations—Swiss Tax Considerations—Consequences to Shareholders of Transocean-Switzerland Subsequent to the Transaction—Repurchases of Shares.”

The Redomestication may not allow us to maintain a competitive worldwide effective corporate tax rate.

We believe that the Redomestication should improve our ability to maintain a competitive worldwide effective corporate tax rate. We cannot give any assurance as to what our effective tax rate will be after the Redomestication, however, because of, among other things, uncertainty regarding future dayrates, where our rigs might be operating and the tax policies of the jurisdictions where we operate. Our actual effective tax rate may vary from this expectation and that variance may be material. Additionally, the tax laws of Switzerland and other jurisdictions could change in the future, and such changes could cause a material change in our effective tax rate.

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CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement and the documents incorporated by reference in this proxy statement contain both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include the information concerning possible or assumed future results of operations of Transocean, including statements about the following subjects:

 

benefits, effects or results of the Redomestication,

 

operations and results after the Redomestication,

 

business strategies,

 

expected financial position,

 

expected results of operations,

 

future cash flows,

 

dividends, share repurchases and other distributions,

 

plans and objectives of management,

 

timing and timeline of the Transaction,

 

tax treatment of the Transaction,

 

accounting treatment of the Transaction,

 

transaction-related expenses,

 

performance of contracts,

 

outcomes of legal proceedings,

 

compliance with applicable laws,

 

adequacy of insurance, and

 

any other statements regarding future growth, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

Forward-looking statements in this proxy statement are identifiable by use of the following words and other similar expressions, among others:

 

“anticipate,”

 

“believe,”

 

“budget,”

 

“could,”

 

“estimate,”

 

“expect,”

 

“forecast,”

 

“intend,”

 

“may,”

 

“might,”

 

“plan,”

 

“predict,”

 

“project,”

 

“schedule,” and

•     “should.”

The following factors could affect our future results of operations and could cause those results to differ materially from those expressed in the forward-looking statements included in this proxy statement or incorporated by reference:

 

an inability to realize expected benefits from the Redomestication or the occurrence of difficulties in connection with the Redomestication;

 

any unanticipated costs in connection with the Redomestication;

 

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an inability to obtain waivers from our lenders in connection with the Transaction;

 

worldwide demand for oil and gas;

 

oil and gas prices;

 

the level of activity in offshore oil and gas exploration, development and production;

 

exploration success by producers;

 

competition and market conditions in the offshore contract drilling industry;

 

the ability to enter into and the terms of future drilling contracts;

 

delay or cost overruns on construction projects;

 

drilling contracts may be terminated due to a number of events, including many beyond our control;

 

risks of international operations and compliance with foreign laws;

 

compliance with or breach of environmental laws;

 

work stoppages by shipyard workers;

 

delays in construction projects, which in some cases may trigger the drilling contract customer’s right to terminate the drilling contract for the unit under construction;

 

risks inherent in turnkey contracts;

 

the availability of qualified personnel;

 

labor relations and wage negotiations with unions;

 

operating hazards;

 

political and other uncertainties inherent in non-U.S. operations, including exchange and currency fluctuations;

 

compliance with the Foreign Corrupt Practices Act;

 

the impact of governmental laws and regulations;

 

the adequacy of sources of liquidity;

 

the availability of adequate insurance at a reasonable cost and risks of uninsured or self-insured losses;

 

changes in the tax laws;

 

the effect of litigation and contingencies; and

 

fluctuations in the value of Transocean shares.

The above factors are in addition to those factors discussed:

 

under “Risk Factors” and the “Background and Reasons for the Redomestication” subsection under “The Redomestication” and elsewhere in this proxy statement; and

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in the documents that we incorporate by reference into this proxy statement, including in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2007 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008, and subsequent SEC filings.

All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and we do not undertake any obligation to publicly update or revise any forward-looking statements except as required by law.

 

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THE REDOMESTICATION

The board of directors has unanimously approved and recommends that you approve the Transaction. The Transaction involves several steps. First, we have formed Transocean-Switzerland. Transocean-Switzerland, in turn, has formed Transocean-Acquisition. Following the shareholders meeting to be held on              , 2008 and a hearing of the Grand Court of the Cayman Islands scheduled for        , 2008, assuming we have obtained the necessary shareholder and court approvals, Transocean-Acquisition will merge with Transocean-Cayman by way of Schemes of Arrangement under Cayman Islands law, with Transocean-Cayman as the surviving company. As a result of the Transaction, Transocean-Cayman will become a direct, wholly-owned subsidiary of Transocean-Switzerland. The Transaction will be effected pursuant to the Agreement and Plan of Merger and the Schemes of Arrangement, which are the legal documents that govern the Transaction. Copies of those documents are attached to and are a part of this proxy statement as Annex A and Annex B, respectively. We encourage you to read those documents carefully.

In the Transaction, Transocean-Switzerland will issue one share of Transocean-Switzerland in exchange for each share of Transocean-Cayman, plus an additional 16 million Treasury Shares that Transocean-Switzerland will issue to Transocean-Cayman in the Transaction for future use to satisfy Transocean-Switzerland’s obligations to deliver shares in connection with awards granted under our incentive plans, warrants or other rights to acquire shares of Transocean-Switzerland. Transocean-Switzerland will assume Transocean-Cayman’s existing obligation to deliver shares under such incentive plans, warrants or other rights. After the Transaction, you will continue to own an interest in a parent company that will continue to conduct the same business operations as conducted by Transocean-Cayman before the Transaction. The number of shares you will own will be the same as the number of shares you owned in Transocean-Cayman immediately prior to the Transaction, and your relative economic interest in the Transocean group will remain unchanged. Immediately after the Transaction, Transocean-Switzerland will have outstanding the number of shares as there were outstanding shares of Transocean-Cayman immediately before the Transaction, plus (1) the Treasury Shares and (2) 3,333 shares representing the share capital issued to Transocean-Cayman in connection with the formation of Transocean-Switzerland (the “Formation Shares”). As of            , 2008, the record date for the shareholders meeting, there were            ordinary shares of Transocean-Cayman outstanding. For a description of the shares of Transocean-Switzerland, see “Description of Transocean-Switzerland Shares.”

In connection with the Transaction, we also plan to relocate our principal executive offices from the Cayman Islands and Houston, Texas to Geneva, Switzerland. Initially, we expect that 14 of our officers, including our Chief Executive Officer, will be relocated to our new principal executive offices, along with related support staff. We refer to the Transaction and the relocation of our principal executive offices together as the “Redomestication.”

Background and Reasons for the Redomestication

Our business is primarily conducted outside of the United States. Our revenues from non-U.S. operations were 81% in 2007, 79% in 2006 and 78% in 2005.

The location of our fleet of mobile offshore drilling units, excluding our four Other Rigs, at September 30, 2008 was:

Number of Units

Location

 

Number of Units

Location

18

Far East

 

7

Other African countries

18

U.K. North Sea

 

5

Norway

17

Middle East

 

3

Caspian Sea

13

U.S. Gulf of Mexico

 

3

Mediterranean

12

India

 

2

Australia

12

Angola

 

2

Trinidad

10

Brazil

 

1

Canada

10

Nigeria

 

 

 

 

 

 

 

 

 

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We also maintain offices, land bases and other facilities outside the U.S. in Grand Cayman, Cayman Islands; Luanda and Cabinda, Angola; Baku, Azerbaijan; Saint Michael, Barbados; Douala, Cameroon; Cairo, Egypt; Bata and Malabo, Equatorial Guinea; Courbevoie, France; Port Gentil, Gabon; Ravenna, Italy; Budapest and Ujlengyel, Hungary; Abidjan, Ivory Coast; Lagos and Port Harcourt, Nigeria; Stavanger, Norway; Doha, Qatar; Aberdeen, Scotland; Perth, Australia; Mumbai, India; Balikpapan and Jakarta, Indonesia; Kuala Lumpur and Miri, Malaysia; Manila, Philippines; Singapore; Okpo, South Korea; Bangkok, Thailand; Vung Tau City and Ho Chi Minh City, Vietnam; Macaé and Rio de Janeiro, Brazil; St. John’s, Newfoundland, Canada; and St. Clair, Trinidad.

Approximately 80% of our employees are located outside the United States, and our workforce represents more than 80 different nationalities.

Our planned change of our place of incorporation from the Cayman Islands to Switzerland and relocation of our principal executive offices to Geneva, Switzerland will establish a corporate headquarters that is more centrally located within our area of worldwide operations, will locate Transocean in a country with a stable and developed tax regime, and should improve our ability to maintain a competitive worldwide effective corporate tax rate. In particular, we believe:

 

Switzerland is more centrally located than our current executive offices to our worldwide operations, in terms of both time zone overlap and travel time. We expect that relocating our executive team to a more central location will permit them to coordinate and interact with worldwide operations during their normal business hours. Thus, the relocation will allow us to better support our worldwide operations and improve executive oversight of these operations.

 

A growing part of our business is located in international offshore areas such as West Africa, the North Sea, the Middle East, India and the Far East. We expect that a substantial portion of our future growth will continue to come from these areas. The Redomestication is intended to position our company to further benefit from these growth opportunities and allow our management to more effectively implement our global strategy and increase our focus on customer development in these areas by positioning our headquarters closer to these areas.

 

Switzerland has numerous tax treaties with many taxing jurisdictions throughout the world. The Cayman Islands has no tax treaties. Switzerland has a developed and stable tax regime. The Cayman Islands generally has no system of direct taxation. We believe that the Redomestication will improve our global tax position and substantially lower our tax risk related to possible tax legislation changes, possible changes in tax treaties and disputes with tax authorities. As such, we believe the Redomestication will improve our ability to maintain a competitive worldwide effective corporate tax rate.

 

It is important to the effective execution of our global strategy to be a multinational company. Currently we have six different nationalities represented in our officer group and over 80 in our global workforce. Geneva is considered one of the most multinational cities in the world, being the location of the headquarters or key offices of the United Nations and many international nongovernmental organizations and companies. We believe that, over time, our relocation to Geneva will enhance our continued progress towards being a multinational company.

In addition to the potential benefits described above, the Redomestication will expose Transocean and its shareholders to some risks. Please see the discussion under “Risk Factors.” Our board of directors has considered both the potential advantages of the Redomestication and these risks and has unanimously approved the Transaction and recommended that the shareholders vote for the Transaction. We cannot assure you, however, that the anticipated benefits of the Redomestication will be realized.

The Agreement and Plan of Merger

There are several steps to the Transaction:

 

Transocean-Cayman has formed Transocean-Switzerland, which, in turn, has formed Transocean-Acquisition;

 
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following the shareholders meeting and a hearing of the Grand Court of the Cayman Islands on              , 2008, assuming we have obtained the necessary shareholder and court approvals, Transocean-Acquisition will merge with Transocean-Cayman by way of Schemes of Arrangement, with Transocean-Cayman surviving as a direct, wholly-owned subsidiary of Transocean-Switzerland; and

 

in the Transaction, each Transocean-Cayman ordinary share will be exchanged for one share of Transocean-Switzerland. In addition, Transocean-Switzerland will issue 16 million Treasury Shares to Transocean-Cayman for future use to satisfy Transocean-Switzerland’s obligation to deliver shares in connection with awards granted under our incentive plans, warrants or other rights to acquire shares of Transocean-Switzerland. Transocean-Switzerland will assume Transocean-Cayman’s existing obligation to deliver shares under such incentive plans, warrants or other rights.

Additional Agreement

Transocean-Switzerland and Transocean-Acquisition will indemnify the executive officers and directors of Transocean-Cayman and its subsidiaries and will maintain directors’ and officers’ liability insurance for those executive officers and directors for six years after the effective time of the Transaction.

Amendment or Termination

The Agreement and Plan of Merger may be amended, modified or supplemented at any time before or after its adoption by the shareholders of Transocean-Cayman. However, after adoption, no amendment, modification or supplement may be made or effected that requires further approval by Transocean-Cayman shareholders without obtaining that approval.

The board of directors of Transocean-Cayman may terminate the Agreement and Plan of Merger and abandon the Transaction at any time prior to its effectiveness without obtaining the approval of Transocean-Cayman shareholders.

Conditions to Consummation of the Transaction

The Transaction will not be completed unless, among other things, the following conditions are satisfied or, if allowed by law, waived:

 

the Transaction is approved by the requisite vote of shareholders of Transocean-Cayman;

 

none of the parties to the Agreement and Plan of Merger is subject to any governmental decree, order or injunction that prohibits the consummation of the Transaction;

 

the Transocean-Switzerland registered shares to be issued pursuant to the Transaction and the articles of association of Transocean-Switzerland, in the form attached as Annex F to this proxy statement, are registered with the commercial register in the Canton of Zug, Switzerland;

 

the requisite court orders sanctioning the Transaction shall have been obtained from the Grand Court of the Cayman Islands and filed with the Registrar of Companies of the Cayman Islands and are effective;

 

the Transocean-Switzerland shares to be issued pursuant to the Transaction are authorized for listing on the New York Stock Exchange, subject to official notice of issuance;

 

Transocean receives an opinion from Baker Botts L.L.P., in form and substance reasonably satisfactory to it, confirming, as of the effective date of the Transaction, the matters discussed under “Material Tax Considerations—U.S. Federal Income Tax Considerations”; and

 

Transocean receives an opinion from PricewaterhouseCoopers AG, in form and substance reasonably satisfactory to it, confirming, as of the effective date of the Transaction, the matters discussed under “Material Tax Considerations—Swiss Tax Considerations.”

 
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Transocean-Cayman is a party to certain credit agreements that require waivers from third-party lenders prior to implementation of the Transaction. See “—Credit Facilities” for more information.

Court Approval of the Transaction

Pursuant to sections 86 and 87 of the Cayman Islands Companies Law (as amended) (the “Companies Law”), the Transaction requires court approval in the Cayman Islands. This requires Transocean-Cayman and Transocean-Acquisition to file separate petitions (the “Petitions”) and summonses for directions with the Grand Court of the Cayman Islands (the “Grand Court”). Prior to the mailing of this proxy statement, Transocean-Cayman obtained directions from the Grand Court providing for the convening of a Transocean-Cayman shareholders meeting and other procedural matters regarding the meeting and the Grand Court proceeding, including a date upon which the Grand Court will hear the Petitions. A copy of the Grand Court’s directions is attached as Annex C. Subject to shareholders of Transocean-Cayman approving the Transaction with the vote required by the Companies Law, a subsequent Grand Court hearing will be required to hear the Petitions and seek the sanction of the Transaction (the “Sanction Hearing”). At the Sanction Hearing, the Grand Court may impose such conditions as it deems appropriate in relation to the Transaction but may not impose any material changes without the joint consent of Transocean-Cayman, Transocean-Switzerland and Transocean-Acquisition. In determining whether to exercise its discretion and approve the Transaction, the Grand Court will determine, among other things, whether the Schemes of Arrangement might reasonably be approved by the shareholders of Transocean-Cayman. If you are a shareholder who wishes to appear or be represented and present evidence or arguments at the Sanction Hearing, you may appear if you have voted at the shareholders meeting or the Grand Court is satisfied that you have a substantial economic interest in the Transaction. In addition, the Grand Court has wide discretion to hear from interested parties. Transocean has agreed that it will not object to the participation by any shareholder in the Grand Court hearing on the grounds that such person does not have a substantial economic interest in the relevant shares. See “The Shareholders Meeting” for more information. In accordance with its terms, the Transaction will become effective as soon as a copy of the Order of the Grand Court sanctioning the Transaction has been delivered to the Registrar of Companies in the Cayman Islands as required by section 86(3) of the Companies Law. See “—Conditions to Consummation of the Transaction” for more information on these conditions.

The Schemes of Arrangement, which would effect the Transaction, are attached as Annex B to this proxy statement and set forth the specific terms of the Transaction. At the shareholders meeting, Transocean-Cayman shareholders will be asked to approve the Schemes of Arrangement. If the shareholders approve the Schemes of Arrangement, then Transocean-Cayman and Transocean-Acquisition will ask the Grand Court to sanction the Schemes of Arrangement. We encourage you to read the Schemes of Arrangement documents in their entirety for a complete description of their terms and conditions.

Once the Transaction is effective, the Grand Court will have exclusive jurisdiction to hear and determine any suit, action or proceeding and to settle any dispute which arises out of or is connected with the terms of the Schemes of Arrangement or their implementation or out of any action taken or omitted to be taken under the Schemes of Arrangement or in connection with the administration of the Schemes of Arrangement. A shareholder who wishes to enforce any rights under the Schemes of Arrangement after such time must notify Transocean-Cayman in writing of its intention at least five business days prior to commencing a new proceeding. After the effective time of the Transaction, no shareholder may commence a proceeding against Transocean-Switzerland or Transocean-Cayman in respect of or arising from the Schemes of Arrangement except to enforce its rights under a scheme where a party has failed to perform its obligations under the scheme.

When under any provision of the Schemes of Arrangement after the effective time of the Transaction a matter is to be determined by Transocean-Cayman, then Transocean-Cayman will have discretion to interpret those matters under the Schemes of Arrangement in a manner that it considers fair and reasonable, and its decisions will be binding on all concerned.

Transocean-Cayman may consent to any modification of the Schemes of Arrangement on behalf of the shareholders which the Grand Court may think fit to approve or impose.

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Federal Securities Law Consequences; Resale Restrictions

The issuance of Transocean-Switzerland shares to Transocean-Cayman’s shareholders in connection with the Transaction will not be registered under the Securities Act of 1933 (the “Securities Act”). Section 3(a)(10) of the Securities Act exempts securities issued in exchange for one or more outstanding securities from the general requirement of registration where the terms and conditions of the issuance and exchange of such securities have been approved by any court of competent jurisdiction, after a hearing upon the fairness of the terms and conditions of the issuance and exchange at which all persons to whom such securities will be issued have a right to appear and to whom adequate notice of the hearing has been given. In determining whether it is appropriate to convene the shareholder scheme meeting convened pursuant to its directions, the Grand Court will consider whether the terms and conditions of the Transaction are fair. The Grand Court has fixed the date for the hearing of the applications to approve the Transaction at               , 2008, at the courthouse in George Town, Grand Cayman, Cayman Islands. The Transocean-Switzerland shares issued to Transocean-Cayman shareholders in connection with the Transaction will be freely transferable, except for restrictions applicable to certain “affiliates” of Transocean-Cayman under the Securities Act, as follows:

 

Persons who were not affiliates of Transocean-Cayman at the date of the Transaction and have not been affiliates within 90 days prior to such date will be permitted to sell any Transocean-Switzerland shares received in the Transaction without regard to Rule 144 under the Securities Act.

 

Persons who were affiliates of Transocean-Cayman at the date of the Transaction or were affiliates within 90 days prior to such date will be permitted to resell any Transocean-Switzerland shares they receive pursuant to the Transaction in the manner permitted by Rule 144. In computing the holding period of the Transocean-Switzerland shares for the purposes of Rule 144(d), such persons will be permitted to “tack” the holding period of their Transocean-Cayman shares held prior to the effective time of the Transaction.

Persons who may be deemed to be affiliates of Transocean-Cayman and Transocean-Switzerland for these purposes generally include individuals or entities that control, are controlled by, or are under common control with, Transocean-Cayman and Transocean-Switzerland, and would not include shareholders who are not executive officers, directors or significant shareholders of Transocean-Cayman and Transocean-Switzerland.

The Agreement and Plan of Merger requires Transocean-Cayman to prepare and deliver to Transocean-Switzerland a list that identifies all persons whom Transocean-Cayman believes may be deemed to be affiliates prior to the completion of the Transaction. Transocean-Cayman is also required, pursuant to the Agreement and Plan of Merger, to use its commercially reasonable best efforts to cause each person whom it identifies on the list as a potential affiliate to deliver, at or prior to the completion of the Transaction, a written agreement that the affiliate will not sell, pledge, transfer or otherwise dispose of any of the Transocean-Switzerland shares issued to the affiliate pursuant to the Transaction unless the sale, pledge, transfer or other disposition meets one of the following criteria:

 

it is made pursuant to an effective registration statement filed under the Securities Act;

 

it is in compliance with Rule 144; or

 

in the opinion of counsel, it is otherwise exempt from the registration requirements of the Securities Act.

Transocean-Cayman has not filed a registration statement with the SEC covering any resales of the Transocean-Switzerland shares to be received by Transocean-Cayman’s shareholders in the Transaction.

Effective Time

If the Transaction is approved by the requisite shareholder vote and by the Grand Court of the Cayman Islands, we anticipate that the Transaction will become effective as soon as practicable following approval of the Grand Court of the Cayman Islands at the hearing scheduled for            , 2008, upon our filing of the court order sanctioning the Transaction with the Cayman Islands Registrar of Companies. We currently expect to complete the Transaction in late 2008 or early 2009.

26


 

In the event the conditions to the Transaction are not satisfied, the Transaction may be abandoned or delayed, even after approval by our shareholders. In addition, the Transaction may be abandoned or delayed for any reason by our board of directors at any time prior to the Transaction becoming effective, even though the Transaction may have been adopted by our shareholders and all conditions to the Transaction may have been satisfied.

Management of Transocean-Switzerland

When the Transaction is completed, the executive officers and directors of Transocean-Cayman immediately prior to the completion of the Transaction are expected to be the executive officers and directors of Transocean-Switzerland. Transocean-Switzerland’s articles of association provide for the same classified board of directors as Transocean-Cayman currently has, and Transocean-Cayman’s directors will carry their terms of office over to the Transocean-Switzerland board of directors.

Interests of Certain Persons in the Redomestication

You should be aware that some of our executive officers have interests in the Redomestication that are different from, or in addition to, the interests of our other shareholders.

We expect to initially provide each of our executive officers who relocates to our principal executive offices in Switzerland the following allowances and reimbursements in connection with the Redomestication:

 

a relocation package for such executive officer that includes, among other things, a lump sum relocation allowance equal to $30,000; temporary housing in Switzerland for up to six months; and standard outbound services, including a “house hunting” trip, tax preparation and financial planning services, home sales assistance, shipment of personal effects and other relocation costs;

 

a housing allowance of CHF 11,000 to 14,000 per month, for five years;

 

a car allowance of CHF 1,000 per month, for five years;

 

a cost of living allowance of 15% of base pay, for five years, capped at a maximum of $75,000 per year;

 

reimbursement or payment of school fees for eligible dependents under age 19; and

 

a home leave allowance equivalent to a full-fare economy round-trip ticket for the employee, spouse and qualifying dependents back to their point of origin which, on average, equates to approximately $21,000 per year per executive and will continue for five years.

The amounts presented above are expected to be reviewed on an annual basis and may be adjusted accordingly based on market conditions. We estimate that, for 2009, assuming each of these executive officers is relocated to Switzerland on January 1, 2009, these amounts will total approximately $242,000 for Robert Long, $329,000 for Gregory Cauthen, $384,000 for Steven Newman, $283,000 for Eric Brown, $299,000 for Arnaud Bobillier and $341,000 for Robert Saltiel, based on current currency exchange rates. Because the actual date that each such executive officer relocates will vary, the actual amounts may vary significantly from these estimates.

We will provide tax equalization to the executive officers on the U.S. payroll so that their tax liability will be equal to their “stay at home” tax liability with respect to their base salary, annual bonus and incentive plan awards. Non-U.S. employees may choose, as an alternative to this U.S. tax equalization program, to be personally responsible for Swiss taxes on their base salary, annual bonus and incentive plan awards. The allowances and reimbursements outlined above would be grossed up to cover Swiss taxes and social security payments. Each of the executive officers will be fully reimbursed for any obligation such officer may have to pay Swiss wealth tax. We estimate that, for 2009, assuming each of these executive officers is relocated to Switzerland on January 1, 2009, the aggregate tax equalization payments will total approximately $1,339,000 for Mr. Long, $361,000 for Mr. Cauthen, $489,000 for Mr. Newman, $352,000 for Mr. Brown, $212,000 for Mr. Bobillier and $266,000 for Mr. Saltiel, based on current currency exchange rates. The estimate for Mr. Bobillier, who is not on the U.S. payroll, assumes that

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he elects to participate in the U.S. tax equalization program. These amounts are only estimates for illustrative purposes, and the actual amount provided will differ based on the value of the bonuses and incentive plan awards received, the applicable effective tax rates, the timing of relocation, financial planning opportunities and other factors. These amounts have been estimated using a share price of $80.39 (the closing price on October 7, 2008) and incentive plan awards outstanding as of such date.

Required Vote; Board Recommendation

The Transaction requires the affirmative vote of a majority in number of the holders of the Transocean-Cayman ordinary shares present and voting on the proposal at the meeting, whether in person or by proxy, representing 75% or more in value of the ordinary shares present and voting on the proposal at the meeting, whether in person or by proxy. The adjournment proposal requires the affirmative vote of holders of at least a majority of the Transocean-Cayman shares present in person or by proxy at the meeting and entitled to vote on the matter. See “The Meeting—Record Date; Voting Rights; Vote Required for Approval.” Our board of directors has unanimously approved the Transaction and recommends that shareholders vote “FOR” approval of both of the proposals.

Regulatory Matters

We are not aware of any other governmental approvals or actions that are required to complete the Transaction other than compliance with U.S. federal and state securities laws and Cayman Islands and Swiss corporate law.

No Appraisal Rights

Under Cayman Islands law, none of the shareholders of Transocean-Cayman has any right to an appraisal of the value of their shares or payment for them in connection with the Transaction.

No Action Required to Exchange Shares

At the effective time of the Transaction, your Transocean-Cayman ordinary shares will be exchanged for Transocean-Switzerland shares without any action on your part. All of Transocean-Cayman’s ordinary shares are issued in uncertificated book-entry form. All of Transocean-Switzerland’s shares will also be issued in uncertificated book-entry form.

Dividend Policy

Transocean does not generally pay cash dividends. Any future declaration and payment of any cash dividends by Transocean-Switzerland following the completion of the Transaction will:

 

depend upon its results of operations, financial condition, cash requirements and other relevant factors;

 

be subject to shareholder approval;

 

be subject to restrictions contained in our credit facilities and other debt covenants; and

 

be subject to restrictions on dividends imposed by Swiss law.

For a description of restrictions on dividends imposed by Swiss law, see “Description of Transocean-Switzerland Shares—Dividends,” “—Repurchases of Registered Shares” and “Material Tax Considerations—Swiss Tax Considerations–Consequences to Shareholders of Transocean-Switzerland Subsequent to the Transaction.”

Share Compensation Plans

If the Transaction is completed, Transocean-Switzerland will adopt and assume Transocean-Cayman’s long-term incentive plan and other employee benefit plans and arrangements, and those plans and arrangements will be amended as necessary to give effect to the Transaction, including to provide (1) that shares of Transocean-Switzerland will be issued, held, available or used to measure benefits as appropriate under the plans and

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arrangements, in lieu of shares of Transocean-Cayman, including upon exercise of any options or share appreciation rights issued under those plans and arrangements; and (2) for the appropriate substitution of Transocean-Switzerland for Transocean-Cayman in those plans and arrangements. Shareholder approval of the Transaction will also constitute shareholder approval of these amendments and the adoption and assumption of the plans and arrangements by Transocean-Switzerland.

Stock Exchange Listing

Transocean-Cayman’s ordinary shares are currently listed on the New York Stock Exchange. There is currently no established public trading market for the shares of Transocean-Switzerland. We intend to make application so that, immediately following the Transaction, the shares of Transocean-Switzerland will be listed on the New York Stock Exchange under the symbol “RIG,” the same symbol under which the Transocean-Cayman ordinary shares are currently listed.

Accounting Treatment of the Transaction

Under U.S. GAAP, the Transaction represents a transaction between entities under common control. Assets and liabilities transferred between entities under common control are accounted for at cost. Accordingly, the assets and liabilities of Transocean-Switzerland will be reflected at their carrying amounts in the accounts of Transocean-Cayman at the effective time of the Transaction.

Treatment of Convertible Debt

If the Transaction is completed, Transocean-Cayman and Transocean-Switzerland will enter into a supplemental indenture to the indenture governing Transocean-Cayman’s 1.625% Series A Convertible Senior Notes due 2037, 1.50% Series B Convertible Senior Notes due 2037 and 1.50% Series C Convertible Senior Notes due 2037 (the “Convertible Notes”) with the trustee under such indenture that provides for the issuance of Transocean-Switzerland shares upon the conversion of the Convertible Notes, instead of Transocean-Cayman ordinary shares.

Treatment of Warrants

If the Transaction is completed, Transocean-Cayman and Transocean-Switzerland will enter into a supplement to the warrant agreement for the warrants to purchase Transocean-Cayman ordinary shares that provides for the delivery of Transocean-Switzerland shares upon the exercise of the warrants, instead of Transocean-Cayman ordinary shares.

Guarantees

If the Transaction is completed, Transocean-Switzerland will guarantee the obligations of Transocean-Cayman under:

 

the indenture governing Transocean-Cayman’s 6.625% Notes due April 2011, 5% Notes due February 2013, 7.375% Senior Notes due April 2018, 8% Debentures due April 2027, 7.45% Notes due April 2027, 7% Senior Notes due June 2028 and 7.5% Notes due April 2031;

 

the indenture governing the Convertible Notes and Transocean-Cayman’s 5.25% Senior Notes due March 2013, 6.00% Senior Notes due March 2018 and 6.80% Senior Notes due March 2038; and

 

the bank credit agreements governing Transocean-Cayman’s 364-day revolving credit facility, 5-year revolving credit facility and term loan facility.

Credit Facilities

Upon the completion of the Transaction, a “change of control” of Transocean-Cayman constituting an event of default may be deemed to have occurred under the terms of the bank credit agreements governing Transocean-Cayman’s 364-day revolving credit facility, five-year revolving credit facility and term loan facility.

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These agreements require acceleration of the borrowings under the facilities upon an event of default. As of September 30, 2008, borrowings of $0, $415 million and $2.0 billion were outstanding under the 364-day revolving credit facility, five-year revolving credit facility and term loan facility, respectively. We are seeking waivers from our lenders in connection with the Transaction, although we may not be able to obtain any or all of the waivers. The current heightened volatility in the credit markets may also make it more difficult for us to obtain these waivers. The failure to obtain some or all of these waivers could have an adverse effect on our ability to complete the Transaction or on our business, results of operations or financial condition after the completion of the Transaction.

Effect of the Redomestication on Potential Future Status as a Foreign Private Issuer

Upon completion of the Redomestication, we will remain subject to SEC reporting requirements, the mandates of the Sarbanes-Oxley Act and the corporate governance rules of the New York Stock Exchange, and we will continue to report our financial results in U.S. dollars and under U.S. GAAP.

We do not currently believe that Transocean-Switzerland will qualify as a “foreign private issuer” within the meaning of the rules promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), upon completion of the Redomestication. The definition of a “foreign private issuer” has two parts—one based on a company’s percentage of U.S. resident shareholders and the other on its business contacts with the U.S. An organization incorporated under the laws of a foreign country qualifies as a foreign private issuer if either part of the definition is satisfied. We do not expect to qualify as a foreign private issuer under the shareholder test because we currently expect that more than 50% of Transocean-Switzerland’s outstanding voting securities will continue to be held by U.S. residents after the completion of the Redomestication. However, under the business contacts test, if it were the case after the Redomestication that (1) more than 50% of Transocean-Switzerland’s assets were located outside the United States, (2) Transocean-Switzerland’s business was not administered principally in the U.S. and (3) a majority of Transocean-Switzerland’s executive officers and directors were neither U.S. citizens nor U.S. residents, then Transocean-Switzerland would qualify as a foreign private issuer. We do not expect that Transocean-Switzerland will meet the requirements of clause (3) of this test upon the completion of the Redomestication, as we believe a majority of Transocean-Switzerland’s executive officers and directors will continue to be U.S. citizens or U.S. residents. However, Transocean-Switzerland may satisfy this element of the test some time in the future and, as a result, qualify for status as a foreign private issuer at such later date. If and when that occurs, Transocean-Switzerland would be exempt from certain requirements applicable to U.S. public companies, including:

 

the rules requiring the filing of Quarterly Reports on Form 10-Q and Current Reports on Form 8-K with the SEC,

 

the SEC’s rules regulating proxy solicitations,

 

the provisions of Regulation FD,

 

the filing of reports of beneficial ownership under Section 16 of the Exchange Act (although beneficial ownership reports may be required under Section 13 of the Exchange Act), and

 

“short-swing” trading liability imposed on insiders who purchase and sell securities within a six-month period.

In addition, Transocean-Switzerland would then be allowed to:

 

file annual reports within six months after the end of a fiscal year,

 

include more limited compensation disclosure in its filings with the SEC,

 

apply accounting principles other than U.S. GAAP to its financial statements, although reconciliation to U.S. GAAP would be required if International Financial Reporting Standards, or IFRS, is not used, and

 

choose which reporting currency to use in presenting its financial statements.

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MATERIAL TAX CONSIDERATIONS

The information presented under the caption “U.S. Federal Income Tax Considerations” below is a discussion of the material U.S. federal income tax consequences to U.S. holders and non-U.S. holders (as defined below) of (1) exchanging Transocean-Cayman shares for Transocean-Switzerland shares in the Transaction, and (2) owning and disposing of Transocean-Switzerland shares received in the Transaction. The information presented under the caption “Swiss Tax Considerations” is a discussion of the material Swiss tax consequences (1) to shareholders resident for tax purposes in a country other than Switzerland of the Transaction and of ownership and disposition of the Transocean-Switzerland shares and (2) to Transocean-Switzerland of the Transaction and subsequent operations. The information presented under the caption “Cayman Islands Tax Considerations” is a discussion of the material Cayman Islands tax consequences of the Transaction.

You should consult your own tax advisor regarding the applicable tax consequences to you of the Transaction and of ownership and disposition of the Transocean-Switzerland shares under the laws of the United States (federal, state and local), Switzerland, the Cayman Islands and any other applicable foreign jurisdiction.

U.S. Federal Income Tax Considerations

Scope of Discussion

This discussion does not generally address any aspects of U.S. taxation other than U.S. federal income taxation, is not a complete analysis or listing of all of the possible tax consequences of the Transaction or of holding and disposing of Transocean-Switzerland shares and does not address all tax considerations that may be relevant to you. Special rules that are not discussed in the general descriptions below may also apply to you. In particular, this discussion deals only with holders that hold their Transocean-Cayman shares and will hold their Transocean-Switzerland shares as capital assets and does not address the tax treatment of special classes of holders, such as:

 

a holder of Transocean-Cayman shares who, at any time within the five year period ending on the date of the Transaction, has actually and constructively owned 10% or more of the total combined voting power of all classes of stock entitled to vote of Transocean-Cayman or who, immediately before the Transaction, actually and constructively owns at least 5% (by vote or value) of the outstanding stock of Transocean-Cayman,

 

a holder of Transocean-Switzerland shares who, immediately after the Transaction, actually and constructively owns at least 5% of either the total voting power or the total value of the stock of Transocean-Switzerland or who, at any time after the Transaction, actually and constructively owns 10% or more of the total combined voting power of all classes of stock entitled to vote of Transocean-Switzerland,

 

a bank or other financial institution,

 

a tax-exempt entity,

 

an insurance company,

 

a person holding shares as part of a “straddle,” “hedge,” “integrated transaction,” or “conversion transaction,”

 

a person holding shares through a partnership or other pass-through entity,

 

a U.S. expatriate,

 

a person who is liable for alternative minimum tax,

 

a broker-dealer or trader in securities or currencies,

 

a U.S. holder whose “functional currency” is not the U.S. dollar,

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a regulated investment company,

 

a real estate investment trust,

 

a trader in securities who has elected the mark-to-market method of accounting for its securities,

 

a holder who received the Transocean-Cayman shares through the exercise of employee stock options or otherwise as compensation or through a tax qualified retirement plan, or

 

a non-corporate holder of Transocean-Switzerland shares who, because of limitations under the U.S. securities laws or other legal limitations, is not free to dispose of those shares without restriction.

This discussion is based on the laws of the United States, including the U.S. Internal Revenue Code of 1986, as amended, which we refer to as the “U.S. Code,” its legislative history, existing and proposed Treasury regulations promulgated thereunder, judicial decisions, published rulings, administrative pronouncements and income tax treaties to which the United States is a party, each as in effect on the date of this proxy statement. These laws may change, possibly with retroactive effect. There can be no assurance that the United States Internal Revenue Service, which we refer to as “IRS,” will not disagree with or will not successfully challenge any of the conclusions reached and described in this discussion.

For purposes of this discussion, a “U.S. holder” is any beneficial owner of Transocean-Cayman shares, or, after the completion of the Transaction, Transocean-Switzerland shares, that for U.S. federal income tax purposes is:

 

an individual citizen or resident alien of the United States,

 

a corporation or other entity taxable as a corporation organized under the laws of the United States or any state thereof including the District of Columbia, or

 

an estate or trust, the income of which is subject to U.S. federal income taxation regardless of its source.

A “non-U.S. holder” of Transocean-Cayman shares, or , after the completion of the Transaction, Transocean-Switzerland shares is a holder, other than an entity or arrangement treated as a partnership for U.S. federal income tax purposes, that is not a U.S. holder. For purposes of this summary, “holder” or “shareholder” means either a U.S. holder or a non-U.S. holder or both, as the context may require.

If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of Transocean-Cayman shares or Transocean-Switzerland shares, the tax treatment of a partner in that partnership will generally depend on the status of the partner and the activities of the partnership. Holders of Transocean-Cayman shares or Transocean-Switzerland shares that are partnerships and partners in these partnerships are urged to consult their tax advisers regarding the U.S. federal income tax consequences to them of the Transaction and the ownership and disposition of the Transocean-Switzerland shares.

In the discussion that follows, except as otherwise indicated, it is assumed, as Transocean believes to be the case, that Transocean-Cayman has not been and will not be a passive foreign investment company before the Transaction and that Transocean-Switzerland will not be a passive foreign investment company after the Transaction. See “—Passive Foreign Investment Company Considerations.” It is also assumed, as Transocean expects to be the case, that Transocean-Switzerland will continue to be a foreign corporation in the future.

U.S. Holders

Consequences of the Transaction. The Transaction, together with an election effective after the Transaction by Transocean-Cayman to be disregarded for U.S. federal tax purposes, will constitute a “reorganization” under Section 368(a)(1)(F) of the U.S. Code, which we refer to as an “F Reorganization.” U.S. holders will generally recognize no gain or loss upon the exchange of Transocean-Cayman shares for Transocean-Switzerland shares in the Transaction. U.S. holders with a loss on their Transocean-Cayman shares will, however, be able to carry over their basis to their Transocean-Switzerland shares, thus preserving the loss. The basis of the

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Transocean-Switzerland shares received in exchange for Transocean-Cayman shares will be equal to the basis of Transocean-Cayman shares exchanged. The holding period of the Transocean-Switzerland shares will include the period those shareholders held their Transocean-Cayman shares. Shareholders who hold their Transocean-Cayman shares with differing bases or holding periods are urged to consult their tax advisors with regard to identifying the bases and holding periods of the particular Transocean-Switzerland shares received in the Transaction.

Taxation of Distributions on the Transocean-Switzerland Shares. The gross amount of a distribution paid with respect to Transocean-Switzerland shares, including the full amount of any Swiss withholding tax on such amount, will be a dividend for U.S. federal income tax purposes to the extent of current or accumulated earnings and profits (as determined for U.S. tax purposes). With respect to non-corporate U.S. holders, certain dividends received in taxable years beginning before January 1, 2011 from a qualified foreign corporation will be subject to U.S. federal income tax at a maximum rate of 15%. As long as the Transocean-Switzerland shares are listed on the New York Stock Exchange or certain other exchanges and/or Transocean-Switzerland qualifies for benefits under the income tax treaty between the United States and Switzerland, Transocean-Switzerland will be treated as a qualified foreign corporation for this purpose. This reduced rate will not be available in all situations, and U.S. holders should consult their own tax advisors regarding the application of the relevant rules to their particular circumstances. Dividends received by a corporate shareholder will not be eligible for the dividends received deduction which is generally allowed to U.S. corporate shareholders on dividends received from a domestic corporation.

To the extent that a distribution exceeds Transocean-Switzerland’s current or accumulated earnings and profits (as determined for U.S tax purposes), it will be treated as a nontaxable return of capital to the extent of the taxpayer’s basis in the shares, and thereafter generally should be treated as a capital gain. Special rules not here described may apply to shareholders who do not have a uniform basis and holding period in all of their Transocean-Switzerland shares, as to which shareholders should consult their own tax advisors.

Subject to complex limitations, Swiss withholding tax will be treated for U.S. tax purposes as a foreign tax that may be claimed as a foreign tax credit against the U.S. federal income tax liability of a U.S. holder. At least a portion of dividends paid by Transocean-Switzerland will be U.S. source income if and to the extent that more than a de minimis amount of the earnings and profits of Transocean-Switzerland out of which the dividends are paid is from sources within the United States. At least a portion of dividends paid by Transocean-Switzerland could also be U.S. source income under certain other circumstances that Transocean considers unlikely to arise. The rules relating to the determination of the foreign tax credit are complex, and you should consult your own tax advisors to determine whether and to what extent a credit would be available. In lieu of claiming a credit, U.S. holders may claim a deduction of foreign taxes paid in the taxable year. Unlike a tax credit, a deduction generally does not reduce U.S. tax on a dollar-for-dollar basis.

Dispositions of Transocean-Switzerland Shares. U.S. holders of Transocean-Switzerland shares generally should recognize capital gain or loss for U.S. federal income tax purposes on the sale, exchange or other disposition of Transocean-Switzerland shares in the same manner as on the sale, exchange or other disposition of any other shares held as capital assets. Under current law, long-term capital gain of non-corporate shareholders is subject to tax at a maximum rate of 15%. However, this reduced rate is scheduled to expire effective for taxable years beginning after December 31, 2010. There are limitations on the deductibility of capital losses.

Passive Foreign Investment Company Considerations. The treatment of U.S. holders of Transocean-Switzerland shares in some cases could be materially different from that described above if, at any time during the U.S. holder’s holding period, Transocean-Cayman or Transocean-Switzerland were a passive foreign investment company. For U.S. tax purposes, a foreign corporation, such as Transocean-Cayman or Transocean-Switzerland, is classified as a passive foreign investment company, which we refer to as a “PFIC,” for any taxable year in which either (1) 75% or more of its gross income is passive income (as defined for U.S. tax purposes) or (2) the average percentage of its assets which produce passive income or which are held for the production of passive income is at least 50%. For purposes of applying the tests in the preceding sentence, the foreign corporation is deemed to own its proportionate share of the assets of and to receive directly its proportionate share of the income of any other corporation of which the foreign corporation owns, directly or indirectly, at least 25% by value of the stock.

Classification of a foreign corporation as a PFIC can have various adverse consequences to shareholders of the corporation who are “United States persons,” as defined in the U.S. Code. These include taxation of gain on a

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sale or other disposition of the shares of the corporation at the maximum ordinary income rates and imposition of an interest charge on gain or on distributions with respect to the shares.

Transocean-Cayman believes that it has not been a PFIC in any prior taxable year and does not expect to be a PFIC in the taxable year in which the Transaction will occur.

Transocean-Switzerland believes that it will not be a PFIC following the Transaction. However, the tests for determining PFIC status are applied annually, and it is difficult accurately to predict future income and assets relevant to this determination. Accordingly, Transocean-Switzerland cannot assure U.S. holders of its shares that it will not become a PFIC.

If Transocean-Switzerland should determine in the future that it is a PFIC, it will endeavor to so notify U.S. holders of Transocean-Switzerland shares, although there can be no assurance that it will be able to do so in a timely and complete manner. U.S. holders of Transocean-Switzerland shares should consult their own tax advisors about the PFIC rules, including the availability of certain elections.

Information Reporting and Backup Withholding on Distributions and Disposition Proceeds with Respect to Transocean-Switzerland Shares. Dividends on Transocean-Switzerland shares paid within the United States or through certain U.S.-related financial intermediaries are subject to information reporting and may be subject to backup withholding (currently at a 28% rate) unless the holder (1) is a corporation or other exempt recipient or (2) provides a taxpayer identification number and satisfies certain certification requirements. Information reporting requirements and backup withholding may also apply to the cash proceeds of a sale of the Transocean-Switzerland shares.

In addition to being subject to backup withholding, if a U.S. holder of Transocean-Switzerland shares does not provide us (or our paying agent) with the holder’s correct taxpayer identification number or other required information, the holder may be subject to penalties imposed by the IRS. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against the holder’s U.S. federal income tax liability, provided that the holder furnishes certain required information to the IRS.

Non-U.S. Holders

Consequences of the Transaction and Subsequent Disposition of the Transocean-Switzerland Shares. In general, a non-U.S. holder of Transocean-Cayman shares will not in any case be subject to U.S. federal income or withholding tax on any gain with respect to the Transaction and will not be subject to U.S. federal income or withholding tax on any gain recognized on a subsequent disposition of the Transocean-Switzerland shares, unless: (1) such gain is effectively connected with the conduct by the holder of a trade or business within the United States and, if a tax treaty applies, is attributable to a permanent establishment or fixed place of business maintained by such holder in the United States, (2) in the case of capital gain of a holder who is an individual, such holder is present in the United States for 183 days or more during the taxable year in which the capital gain is recognized and certain other conditions are met, or (3) such holder is subject to backup withholding.

Taxation of Distributions on the Transocean-Switzerland Shares. A non-U.S. holder generally will not be subject to U.S. federal income tax on dividends received on its Transocean-Switzerland shares, unless the dividends are effectively connected with the holder’s conduct of a trade or business in the United States and, if a tax treaty applies, the dividends are attributable to a permanent establishment or fixed place of business maintained by the holder in the United States or such holder is subject to backup withholding.

Except to the extent otherwise provided under an applicable tax treaty, a non-U.S. holder generally will be taxed in the same manner as a U.S. holder on dividends paid and gains recognized that are effectively connected with the holder’s conduct of a trade or business in the United States. Effectively connected dividends received and gains recognized by a corporate non-U.S. holder may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate (or, if applicable, a lower treaty rate), subject to certain adjustments.

Information Reporting and Backup Withholding on Distributions and Disposition Proceeds with Respect to Transocean-Switzerland Shares. In order not to be subject to backup withholding tax on distributions and disposition proceeds with respect to Transocean-Switzerland shares, a non-U.S. holder may be required to provide a

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taxpayer identification number, certify the holder’s foreign status, or otherwise establish an exemption. Non-U.S. holders of Transocean-Switzerland shares should consult their tax advisers regarding the application of information reporting and backup withholding in their particular situations, the availability of exemptions, and the procedure for obtaining such an exemption, if available. Any amount withheld from a payment to a non-U.S. holder under the backup withholding rules will be allowable as a credit against the holder’s U.S. federal income tax, provided that the required information is furnished to the IRS.

Swiss Tax Considerations

Scope of Discussion

This discussion does not generally address any aspects of Swiss taxation other than federal, cantonal and communal income taxation, federal withholding taxation, and federal stamp duty. This discussion is not a complete analysis or listing of all of the possible tax consequences of the Transaction or of holding and disposing of Transocean-Switzerland shares and does not address all tax considerations that may be relevant to you. Special rules that are not discussed in the general descriptions below may also apply to you.

This discussion is based on the laws of the Confederation of Switzerland, including the Federal Income Tax Act of 2001, the Federal Harmonization of Cantonal and Communal Income Tax Act of 1990, The Federal Withholding Tax Act of 1965, the Federal Stamp Duty Act of 1973, as amended, which we refer to as the “Swiss tax law,” existing and proposed regulations promulgated thereunder, published judicial decisions and administrative pronouncements, each as in effect on the date of this proxy statement or with a known future effective date. These laws may change, possibly with retroactive effect.

For purposes of this discussion, a “Swiss holder” is any beneficial owner of Transocean-Cayman shares, or, after the completion of the Transaction, Transocean-Switzerland shares, that for Swiss federal income tax purposes is:

 

an individual resident of Switzerland or otherwise subject to Swiss taxation under article 3, 4 or 5 of the Federal Income Tax Act of 2001, as amended, or article 3 or 4 of the Federal Harmonization of Cantonal and Communal Income Tax Act of 1990, as amended,

 

a corporation or other entity taxable as a corporation organized under the laws of the Switzerland under article 50 or 51 of the Federal Income Tax Act of 2001, as amended, or article 20 or 21 of the Federal Harmonization of Cantonal and Communal Income Tax Act of 1990, as amended, or

 

an estate or trust, the income of which is subject to Swiss income taxation regardless of its source.

A “non-Swiss holder” of Transocean-Cayman shares, or, after the completion of the Transaction, Transocean-Switzerland shares, is a holder that is not a Swiss holder. For purposes of this summary, “holder” or “shareholder” means either a Swiss holder or a non-Swiss holder or both, as the context may require.

Consequences of the Transaction

Shareholder Tax Consequences

No Swiss tax is due for non-Swiss holders upon the exchange of Transocean-Cayman shares for Transocean-Switzerland shares in the Transaction.

If Swiss holders are beneficial owners of Transocean-Cayman shares or Transocean-Switzerland shares, they are urged to consult their tax advisers regarding the Swiss tax consequences to them of the Transaction.

Swiss Corporate Tax Consequences

Under Swiss tax law as it applies to corporations, the Transaction is considered to be a tax neutral restructuring for Transocean-Cayman, Transocean-Switzerland and Transocean-Acquisition. Therefore, no Swiss

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income taxes will be due with respect to these companies as a result of the Transaction. As a tax neutral restructuring, the Transaction is also exempt from the Swiss withholding tax and issuance stamp tax.

Taxation of Transocean-Switzerland Subsequent to the Transaction

Income Tax

A Swiss resident company is subject to income tax at federal, cantonal and communal levels on its worldwide income. However, a holding company, such as Transocean-Switzerland, is exempt from cantonal and communal income tax and therefore is only subject to Swiss federal income tax. At the federal level, qualifying net dividend income and net capital gains on the sale of qualifying investments in subsidiaries is exempt from federal income tax. Consequently, Transocean-Switzerland expects dividends from its subsidiaries and capital gains from sales of investments in its subsidiaries to be exempt from federal income tax.

Issuance Stamp Tax

Swiss issuance stamp tax is a federal tax levied on the issuance of shares and increases in the equity of Swiss corporations. The applicable tax rate is 1% of the fair market value of the assets contributed to equity. Exemptions are available in tax neutral restructuring transactions. As a result, any future issuance of shares by Transocean-Switzerland may be subject to the issuance stamp tax unless the shares are issued in the context of a merger or other qualifying restructuring transaction.

The issuance stamp tax is also levied on the issuance of certain debt instruments. In such case, the rate would amount to 0.06% to 0.12% of nominal value per year of duration of the instrument (the rate depending on the instrument). No Swiss issuance stamp tax (at the rate described above) would be due on debt instruments issued by non-Swiss subsidiaries of Transocean-Switzerland, if Transocean-Switzerland does not guarantee the debt instruments, or if such a guarantee is provided, the proceeds from the issuance by the non-Swiss subsidiary are not used for financing activities in Switzerland. Although Transocean-Switzerland intends to guarantee debt of its subsidiary Transocean-Cayman, none of the proceeds has been or is expected to be used for financing activities in Switzerland. Consequently, no issuance stamp tax should be due.

Swiss Withholding Tax on Certain Interest Payments

A federal withholding tax is levied on the interest payments of certain debt instruments. In such case, the rate would amount to 35% of the gross interest payment to the debtholders. No Swiss withholding tax would be due on interest payments on debt instruments issued by non-Swiss subsidiaries of Transocean-Switzerland, provided that Transocean-Switzerland does not guarantee the debt instruments, or if such a guarantee is provided, the proceeds from the issuance by the non-Swiss subsidiary are not used for financing activities in Switzerland. Any such withholding tax may be fully or partially refundable to qualified debtholders either based on Swiss domestic tax law or based on existing double taxation treaties. Although, as described in “The Redomestication—Guarantees,” Transocean-Switzerland intends to guarantee certain debt of its subsidiary Transocean-Cayman, none of the proceeds has been or is expected to be used for financing activities in Switzerland. Consequently, no Swiss withholding tax should be due with respect to such obligations. In the event of the imposition of any such withholding tax, Transocean-Cayman would be required under some of its debt obligations to gross up the interest payments to cover the tax.

Consequences to Shareholders of Transocean-Switzerland Subsequent to the Transaction

The tax consequences discussed below are not a complete analysis or listing of all the possible tax consequences that may be relevant to you. You should consult your own tax advisor in respect of the tax consequences related to receipt, ownership, purchase or sale or other disposition of Transocean-Switzerland shares and the procedures for claiming a refund of withholding tax.

Swiss Income Tax on Dividends and Similar Distributions

A non-Swiss holder will not be subject to Swiss income taxes on dividend income and similar distributions in respect of Transocean-Switzerland shares, unless the shares are attributable to a permanent establishment or a

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fixed place of business maintained in Switzerland by such non-Swiss holder. However, dividends and similar distributions are subject to Swiss withholding tax. See “—Swiss Withholding Tax—Distributions to Shareholders.”

Swiss Wealth Tax

A non-Swiss holder will not be subject to Swiss wealth taxes unless the holder’s Transocean-Switzerland shares are attributable to a permanent establishment or a fixed place of business maintained in Switzerland by such non-Swiss holder.

Swiss Capital Gains Tax upon Disposal of Transocean-Switzerland Shares

A non-Swiss holder will not be subject to Swiss income taxes for capital gains unless the holder’s shares are attributable to a permanent establishment or a fixed place of business maintained in Switzerland by such non-Swiss holder. In such case, the non-Swiss holder is required to recognize capital gains or losses on the sale of such shares, which will be subject to cantonal, communal and federal income tax.

Swiss Withholding Tax— Distributions to Shareholders

A Swiss withholding tax of 35% is due on dividends and similar distributions to Transocean-Switzerland shareholders from Transocean-Switzerland, regardless of the place of residency of the shareholder (subject to the exceptions discussed under “—Exemption from Swiss Withholding Tax—Distributions to Shareholders” below). Transocean-Switzerland will be required to withhold at such rate and remit on a net basis any payments made to a holder of Transocean-Switzerland shares and pay such withheld amounts to the Swiss federal tax authorities. Please see “—Refund of Swiss Withholding Tax on Dividends and Other Distributions.”

Exemption from Swiss Withholding Tax—Distributions to Shareholders

Under present Swiss tax law, distributions to shareholders in relation to a reduction of par value are exempt from Swiss withholding tax. Beginning on January 1, 2011, distributions to shareholders out of qualifying additional paid-in capital for Swiss statutory purposes are as a matter of principle exempt from the Swiss withholding tax. The particulars of this general principle are, however, subject to regulations still to be promulgated by the competent Swiss authorities; it will further require that the current draft corporate law bill, which proposes an overhaul of certain aspects of Swiss corporate law, be modified in the upcoming legislative process to reflect the recent change in the tax law. Upon completion of the Transaction, we expect Transocean-Switzerland to have a par value and qualifying additional paid-in capital for Swiss statutory reporting purposes, such that the combination of the two should approximate the market capitalization of Transocean-Cayman immediately prior to the completion of the Transaction. Assuming (1) the Transaction became effective on June 30, 2008, (2) a price of $80.39 per ordinary share of Transocean-Cayman (which was the closing price of the Transocean-Cayman ordinary shares reported on the New York Stock Exchange on October 7, 2008) and (3) a foreign exchange rate of CHF 1.13915 to $1.00 (the rate on October 7, 2008), the aggregate amount of par value and qualifying additional paid-in capital of Transocean-Switzerland’s outstanding shares would be $8.8 billion and $16.8 billion, respectively, after the completion of the Transaction. Assuming the price of Transocean-Cayman’s ordinary shares were $10.00 higher or $10.00 lower than the closing price on October 7, 2008, the aggregate amount of qualifying additional paid-in capital would increase or decrease by $3.2 billion. Consequently, Transocean-Switzerland expects that a substantial amount of any potential future distributions may be exempt from Swiss withholding tax. For a description of how qualifying additional paid-in capital can be distributed under the Swiss Code of Obligations (the “Swiss Code”), as in effect as of the date of this proxy statement, see “Description of Transocean-Switzerland Shares—Dividends and Other Distributions.”

Repurchases of Shares

Under present Swiss tax law, repurchases of shares for the purposes of capital reduction are treated as a partial liquidation subject to the 35% Swiss withholding tax. However, for shares repurchased for capital reduction, the portion of the repurchase price attributable to the par value of the shares repurchased will not be subject to the Swiss withholding tax. Beginning on January 1, 2011, subject to the adoption of implementing regulations and amendments to Swiss corporate law, the portion of the repurchase price attributable to the qualifying additional paid-in capital for Swiss statutory reporting purposes of the shares repurchased will also not be subject to the Swiss

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withholding tax. Transocean-Switzerland would be required to withhold at such rate the tax from the difference between the repurchase price and the related amount of par value and, beginning on January 1, 2011, subject to the adoption of implementing regulations and amendments to Swiss corporate law, the related amount of qualifying additional paid-in capital. Transocean-Switzerland would be required to remit on a net basis the purchase price with the Swiss withholding tax deducted to a holder of Transocean-Switzerland shares and pay the withholding tax to the Swiss federal tax authorities.

With respect to the refund of Swiss withholding tax from the repurchase of shares, see “—Refund of Swiss Withholding Tax on Dividends and Other Distributions” below.

In most instances, Swiss companies listed on the SWX Swiss Exchange, or SWX, carry out share repurchase programs through a “second trading line” on the SWX. Swiss institutional investors typically purchase shares from shareholders on the open market and then sell the shares on the second trading line back to the company. The Swiss institutional investors are generally able to receive a full refund of the withholding tax. Due to, among other things, the time delay between the sale to the company and the institutional investors’ receipt of the refund, the price companies pay to repurchase their shares has historically been slightly higher (but less than 1.0%) than the price of such companies’ shares in ordinary trading on the SWX first trading line.

We do not expect to be able to use the SWX second trading line process to repurchase our shares because we do not intend to list our shares on the SWX. We do, however, intend to follow an alternative process whereby we expect to be able to repurchase our shares in a manner that should allow Swiss institutional market participants selling the shares to us to receive a refund of the Swiss withholding tax and, therefore, accomplish the same purpose as share repurchases on the second trading line at substantially the same cost to us and such market participants as share repurchases on a second trading line.

The repurchase of shares for purposes other than capital reduction, such as to retain as treasury shares for use in connection with stock incentive plans, convertible debt or other instruments within certain periods, will generally not be subject to Swiss withholding tax. However, see “Comparison of Rights of Shareholders” for a discussion on the limitations on the amount of repurchased shares that can be held as treasury shares.

Refund of Swiss Withholding Tax on Dividends and Other Distributions

Swiss Holders. A Swiss tax resident, corporate or individual, can recover the withholding tax in full if such resident is the beneficial owner of the Transocean-Switzerland shares at the time the dividend or other distribution becomes due and provided that such resident reports the gross distribution received on such resident’s income tax return, or in the case of an entity, includes the taxable income in such resident’s income statement.

Non-Swiss Holders. If the shareholder that receives a distribution from Transocean-Switzerland is not a Swiss tax resident, does not hold the Transocean-Switzerland shares in connection with a permanent establishment or a fixed place of business maintained in Switzerland, and resides in a country that has concluded a treaty for the avoidance of double taxation with Switzerland for which the conditions for the application and protection of and by the treaty are met, then the shareholder may be entitled to a full or partial refund of the withholding tax described above. You should note that the procedures for claiming treaty refunds (and the time frame required for obtaining a refund) may differ from country to country.

Switzerland has entered into bilateral treaties for the avoidance of double taxation with respect to income taxes with numerous countries, including the United States, whereby under certain circumstances all or part of the withholding tax may be refunded.

U.S. Residents. The Swiss-U.S. tax treaty provides that U.S. residents eligible for benefits under the treaty can seek a refund of the Swiss withholding tax on dividends for the portion exceeding 15% (leading to a refund of 20%) or a 100% refund in the case of qualified pension funds. Please refer to the discussion under “—U.S. Federal Income Tax Considerations–U.S. Holders–Taxation of Distributions on the Transocean-Switzerland Shares” for applicability of U.S. foreign tax credits for any net withholding taxes paid.

As a general rule, the refund will be granted under the treaty if the U.S. resident can show evidence of:

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beneficial ownership,

 

U.S. residency, and

 

meeting the U.S.-Swiss tax treaty’s limitation on benefits requirements.

The claim for refund must be filed with the Swiss federal tax authorities (Eigerstrasse 65, 3003 Berne, Switzerland), not later than December 31 of the third year following the year in which the dividend payments became due. The relevant Swiss tax form is Form 82C for companies, 82E for other entities and 82I for individuals. These forms can be obtained from any Swiss Consulate General in the United States or from the Swiss federal tax authorities at the address mentioned above. Each form needs to be filled out in triplicate, with each copy duly completed and signed before a notary public in the United States. You must also include evidence that the withholding tax was withheld at the source.

Stamp Duties in Relation to the Transfer of Transocean-Switzerland Shares. The purchase or sale of Transocean-Switzerland shares may be subject to Swiss federal stamp taxes on the transfer of securities irrespective of the place of residency of the purchaser or seller if the transaction takes place through or with a Swiss bank or other Swiss securities dealer, as those terms are defined in the Swiss Federal Stamp Tax Act and no exemption applies in the specific case. If a purchase or sale is not entered into through or with a Swiss bank or other Swiss securities dealer, then no stamp tax will be due. The applicable stamp tax rate is 0.075% for each of the two parties to a transaction and is calculated based on the purchase price or sale proceeds. If the transaction does not involve cash consideration, the transfer stamp duty is computed on the basis of the market value of the consideration.

Cayman Islands Tax Considerations

The Transaction will not result in any income tax consequences under Cayman Islands law to Transocean-Cayman, Transocean-Switzerland, Transocean-Acquisition or their respective shareholders.

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DESCRIPTION OF TRANSOCEAN-SWITZERLAND SHARES

The following description of Transocean-Switzerland’s share capital is a summary. This summary is not complete and is subject to the complete text of Transocean-Switzerland’s proposed articles of association and organizational regulations (the latter being analogous to bylaws) attached as Annex F and Annex G, respectively, to this proxy statement. Except where otherwise indicated, the description below reflects Transocean-Switzerland’s articles of association and organizational regulations as those documents will be in effect upon completion of the Transaction. We encourage you to read those documents carefully.

Capital Structure

Immediately after the Transaction, Transocean-Switzerland will only have one class of shares outstanding, so all references to “voting rights” in this “Description of Transocean-Switzerland Shares” will mean the voting rights of Transocean-Switzerland’s registered shares, par value 30.00 Swiss francs per share, unless another class of shares is subsequently created. Likewise, a “majority of the par value of the registered shares” will mean a majority of the par value of Transocean-Switzerland’s registered shares, par value 30.00 Swiss francs per share.

Issued Share Capital. Immediately prior to the Transaction, the registered share capital of Transocean-Switzerland will amount to 100,000 Swiss francs, comprised of 10,000,000 registered shares with a par value of 0.01 Swiss francs per share. In the Transaction, Transocean-Switzerland will issue one registered share for each Transocean-Cayman ordinary share. Prior to such issuance, the registered shares with a par value of 0.01 Swiss francs per share will be consolidated into registered shares with a par value of 30.00 Swiss francs per share. In addition, Transocean-Switzerland will issue 16 million Treasury Shares to Transocean-Cayman for future use to satisfy Transocean-Switzerland’s obligations to deliver registered shares in connection with awards granted under incentive plans, warrants or other rights to acquire registered shares of Transocean-Switzerland. Transocean-Switzerland will assume Transocean-Cayman’s existing obligation to deliver shares under such incentive plans, warrants or other rights. Upon completion of the Transaction, the registered share capital of Transocean-Switzerland is expected to be approximately 10 billion Swiss francs, comprised of approximately 335 million registered shares with a par value of 30.00 Swiss francs per share, including 16 million Treasury Shares and 3,333 Formation Shares held by Transocean-Cayman.

Authorized Share Capital. Immediately prior to the Transaction, Transocean-Switzerland will not have any share capital authorized for future issuance. Upon completion of the Transaction, the board of directors will be authorized to issue new registered shares at any time during a two-year period and thereby increase the share capital, without shareholder approval, by a maximum amount of 50% of the share capital registered in the commercial register, which is expected to be approximately 5 billion Swiss francs, or approximately 168 million registered shares. After the expiration of the initial two-year period, and each subsequent two-year period, authorized share capital will be available to the board of directors for issuance of additional registered shares only if the authorization is reapproved by shareholders.

The board of directors determines the time of the issuance, the issuance price, the manner in which the new registered shares have to be paid in, the date from which the new registered shares carry the right to dividends and, subject to the provisions of Transocean-Switzerland’s articles of association, the conditions for the exercise of the preemptive rights with respect to the issuance and the allotment of preemptive rights that are not exercised. The board of directors may allow preemptive rights that are not exercised to expire, or it may place such rights or registered shares, the preemptive rights of which have not been exercised, at market conditions or use them otherwise in the interest of Transocean-Switzerland.

In an authorized capital increase, Transocean-Switzerland shareholders would have preemptive rights to obtain newly issued registered shares in an amount proportional to the par value of the registered shares they already hold. However, the board of directors may withdraw or limit these preemptive rights in certain circumstances as set forth in Transocean-Switzerland’s articles of association. For further details on these circumstances, see “—Preemptive Rights and Advance Subscription Rights.”

Conditional Share Capital. Immediately prior to the Transaction, Transocean-Switzerland will not have any conditional share capital. Upon completion of the Transaction, Transocean-Switzerland’s articles of association will provide for a conditional capital that, following the effectiveness of the Transaction, will allow the board of

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directors to authorize the issuance of additional registered shares up to a maximum amount of 50% of the share capital registered in the commercial register (which is expected to be approximately 168 million registered shares) without obtaining additional shareholder approval. These registered shares may be issued through:

 

the exercise of conversion, exchange, option, warrant or similar rights for the subscription of shares granted in connection with bonds, options, warrants or other securities newly or already issued in national or international capital markets or new or already existing contractual obligations convertible into or exercisable or exchangeable for Transocean-Switzerland registered shares or shares of one of its subsidiaries, or any of their respective predecessors; or

 

in connection with the issuance of registered shares, options or other share-based awards to directors, employees, contractors, consultants or other persons providing services to Transocean-Switzerland or one of its subsidiaries.

In connection with the issuance of bonds, notes, warrants or other financial instruments or contractual obligations convertible into or exercisable or exchangeable for Transocean-Switzerland registered shares, the board of directors is authorized to withdraw or limit the advance subscription rights of shareholders in certain circumstances. See “—Preemptive Rights and Advance Subscription Rights” below.

The preemptive rights of shareholders are excluded with respect to registered shares issued to directors, employees, contractors or other persons providing services to Transocean-Switzerland or one of its subsidiaries.

Other Classes or Series of Shares. The board of directors may not create shares with increased voting powers without the affirmative resolution adopted by shareholders holding at least 66 2/3% of the voting rights and a majority of the par value of the registered shares represented at a general meeting. The board of directors may create preferred stock with the vote of a majority of the voting rights represented at a general meeting.

Preemptive Rights and Advance Subscription Rights

Under the Swiss Code, the prior approval of a general meeting of shareholders is generally required to authorize, for later issuance, the issuance of registered shares, or rights to subscribe for, or convert into, registered shares (which rights may be connected to debt instruments or other obligations). In addition, the existing shareholders will have preemptive rights in relation to such registered shares or rights in proportion to the respective par values of their holdings. The shareholders may, with the affirmative vote of shareholders holding 66 2/3% of the voting rights and a majority of the par value of the registered shares represented at the general meeting, withdraw or limit the preemptive rights for valid reasons (such as a merger, an acquisition or any of the reasons authorizing the board of directors to withdraw or limit the preemptive rights of shareholders in the context of an authorized capital increase as described below).

If the general meeting of shareholders has approved the creation of authorized or conditional capital, it thereby delegates the decision whether to withdraw or limit the preemptive and advance subscription rights for valid reasons to the board of directors. Transocean-Switzerland’s articles of association provide for this delegation with respect to Transocean-Switzerland’s authorized and conditional share capital in the circumstances described below under “—Authorized Share Capital” and “—Conditional Share Capital.”

Authorized Share Capital. The board of directors is authorized to withdraw or limit the preemptive rights with respect to the issuance of registered shares from authorized capital if:

 

the issue price of the new registered shares is determined by reference to the then-prevailing market conditions;

 

the registered shares are issued in connection with the acquisition of an enterprise or business or any part of an enterprise or business, the financing or refinancing of any such transactions or the financing of new investment plans of Transocean-Switzerland;

 

the registered shares are issued in connection with the intended broadening of the shareholder constituency of the company in certain financial or investor markets, for the purposes of the

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participation of strategic partners, or in connection with the listing of the registered shares on domestic or foreign stock exchanges;

 

in connection with a placement or sale of registered shares, the grant of an over-allotment option of up to 20% of the total number of registered shares in a placement or sale of registered shares to the initial purchasers or underwriters;

 

for the participation of directors, employees, contractors, consultants and other persons performing services for the benefit of Transocean-Switzerland; or

 

either (1) following a shareholder or group of shareholders acting in concert having acquired in excess of 15% of the share capital recorded in the commercial register without having submitted a takeover proposal to shareholders that is recommended by the board of directors or (2) for purposes of the defense of an actual, pending or threatened unsolicited takeover, in relation to which the board of directors has, upon consultation with an independent financial adviser retained by the board of directors, not recommended acceptance to the shareholders.

Conditional Share Capital. In connection with the issuance of bonds, notes, warrants or other financial instruments or contractual obligations convertible into or exercisable or exchangeable for Transocean-Switzerland registered shares, the preemptive rights of shareholders are excluded and the board of directors is authorized to withdraw or limit the advance subscription rights of shareholders with respect to registered shares issued from Transocean-Switzerland’s conditional share capital if the issuance is for purposes of the acquisition of an enterprise or business, the financing or refinancing of any such transactions, or if the issuance occurs in national or international capital markets or through a private placement.

If the advance subscription rights are withdrawn or limited:

 

the respective financial instruments or contractual obligations will be issued or entered into at market conditions;

 

the exercise price, if any, for the registered shares to be issued will be set with reference to the market conditions prevailing at the date on which the instruments or obligations are issued or entered into; and

 

the instruments or obligations may be converted, exercised or exchanged during a maximum period of 30 years.

The preemptive rights and the advance subscription rights of shareholders are excluded with respect to registered shares issued from Transocean-Switzerland’s conditional share capital to directors, employees, contractors, consultants or other persons providing services to Transocean-Switzerland or any of its subsidiaries.

Dividends

Under Swiss law, dividends may be paid out only if the corporation has sufficient distributable profits from the previous fiscal year, or if the corporation has freely distributable reserves, each as will be presented on the audited annual stand-alone statutory balance sheet. Payments out of the registered share capital (in other words, the aggregate par value of Transocean-Switzerland’s registered share capital) in the form of dividends are not allowed; however, payments out of registered share capital may be made by way of a capital reduction. See “—Reduction of Share Capital” for more information. Qualifying additional paid-in capital may only be paid out as dividends to shareholders following approval by the shareholders of a reclassification of such qualifying additional paid-in capital as freely distributable reserves (to the extent permissible under the Swiss Code). Transocean-Switzerland may seek to reclassify its qualifying additional paid-in capital to freely distributable reserves as early as its first general meeting following completion of the Transaction. The affirmative vote of shareholders holding a majority of the registered shares represented at a general meeting must approve reserve reclassifications and distributions of dividends. The board of directors may propose to shareholders that a dividend be paid but cannot itself authorize the dividend.

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Under the Swiss Code, if Transocean-Switzerland’s general reserves amount to less than 20% of the share capital recorded in the commercial register (i.e., 20% of the aggregate par value of Transocean-Switzerland’s registered capital), then at least 5% of Transocean-Switzerland’s annual profit must be retained as general reserves. The Swiss Code and Transocean-Switzerland’s articles of association permit Transocean-Switzerland to accrue additional general reserves. In addition, Transocean-Switzerland is required to create a special reserve on its stand-alone annual statutory balance sheet in the amount of the purchase price of registered shares it or any of its subsidiaries repurchases, which amount may not be used for dividends or subsequent repurchases.

Swiss companies generally must maintain a separate company, stand-alone “statutory” balance sheet for the purpose of, among other things, determining the amounts available for the return of capital to shareholders, including by way of a distribution of dividends. Transocean-Switzerland’s auditor must confirm that a dividend proposal made to shareholders conforms with the requirements of the Swiss Code and Transocean-Switzerland’s articles of association. Dividends are usually due and payable shortly after the shareholders have passed a resolution approving the payment. Transocean-Switzerland’s articles of association provide that dividends that have not been claimed within five years after the due date become the property of Transocean-Switzerland and are allocated to the general reserves. For information about deduction of the withholding tax from dividend payments, see “Material Tax Considerations—Swiss Tax Considerations.”

Transocean-Switzerland will be required under Swiss law to declare any dividends and other capital distributions in Swiss francs. Transocean-Switzerland intends to make any dividend payments to holders of Transocean-Switzerland shares in U.S. dollars, unless the holders provide notice to our transfer agent, The Bank of New York, that they wish to receive dividend payments in Swiss francs. The Bank of New York will be responsible for paying the U.S. dollars or Swiss francs to registered holders of shares, less amounts subject to withholding for taxes.

Repurchases of Registered Shares

The Swiss Code limits a company’s ability to hold or repurchase its own registered shares. Transocean-Switzerland and its subsidiaries may only repurchase shares if and to the extent that sufficient freely distributable reserves are available, as described above under “–Dividends.” The aggregate par value of all Transocean-Switzerland registered shares held by Transocean-Switzerland and its subsidiaries may not exceed 10% of the registered share capital. However, Transocean-Switzerland may repurchase its own registered shares beyond the statutory limit of 10% if the shareholders have passed a resolution at a general meeting of shareholders authorizing the board of directors to repurchase registered shares in an amount in excess of 10% and the repurchased shares are dedicated for cancellation. Any registered shares repurchased pursuant to such an authorization will then be cancelled at the next general meeting upon the approval of shareholders holding a majority of the registered shares represented at the general meeting. Repurchased registered shares held by Transocean-Switzerland or its subsidiaries do not carry any rights to vote at a general meeting of shareholders but are entitled to the economic benefits generally associated with the shares. For information about Swiss withholding tax and share repurchases, see “Material Tax Considerations—Swiss Tax Considerations.”

Reduction of Share Capital

Capital distributions may also take the form of a distribution of cash or property that is based upon a reduction of Transocean-Switzerland’s share capital recorded in the commercial register. Such a capital reduction requires the approval of shareholders holding a majority of the registered shares represented at the general meeting. A special audit report must confirm that creditors’ claims remain fully covered despite the reduction in the share capital recorded in the commercial register. Upon approval by the general meeting of shareholders of the capital reduction, the board of directors must give public notice of the capital reduction resolution in the Swiss Official Gazette of Commerce three times and notify creditors that they may request, within two months of the third publication, satisfaction of or security for their claims.

General Meetings of Shareholders

The general meeting of shareholders is Transocean-Switzerland’s supreme corporate body. Ordinary and extraordinary shareholders meetings may be held. The following powers will be vested exclusively in the shareholders meeting:

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adoption and amendment of Transocean-Switzerland’s articles of association;

 

election of members of the board of directors and the auditor;

 

approval of the annual business report, the stand-alone statutory financial statements and the consolidated financial statements;

 

payments of dividends and any other distributions of capital to shareholders (excluding share repurchases below 10% of the registered share capital, to the extent that sufficient freely distributable reserves are available);

 

discharge of the members of the board of directors from liability for business conduct during the previous fiscal year to the extent such conduct is known to the shareholders; and

 

any other resolutions that are submitted to a general meeting of shareholders pursuant to law, Transocean-Switzerland’s articles of association or by voluntary submission by the board of directors (unless a matter is within the exclusive competence of the board of directors pursuant to the Swiss Code).

Under the Swiss Code and Transocean-Switzerland’s articles of association, Transocean-Switzerland must hold an annual, ordinary general meeting of shareholders within six months after the end of its fiscal year for the purpose, among other things, of approving the annual financial statements and the annual business report, and the annual election of directors for the class whose term has expired. The invitation to general meetings must be published in the Swiss Official Gazette of Commerce at least 20 calendar days prior to the relevant general meeting of shareholders. The notice of a meeting must state the items on the agenda and the proposals of the board of directors and of the shareholders who demanded that a shareholders meeting be held or that an item be included on the agenda and, in case of elections, the names of the nominated candidates. No resolutions may be passed at a shareholders meeting concerning agenda items for which proper notice was not given. This does not apply, however, to proposals made during a shareholders meeting to convene an extraordinary shareholders meeting or to initiate a special investigation. No previous notification will be required for proposals concerning items included on the agenda or for debates as to which no vote is taken.

Annual general meetings of shareholders may be convened by the board of directors or, under certain circumstances, by the auditor. A general meeting of shareholders can be held anywhere.

Transocean-Switzerland expects to set the record date for each general meeting of shareholders on a date not more than 20 calendar days prior to the date of each general meeting and announce the date of the general meeting of shareholders prior to the record date.

An extraordinary general meeting of Transocean-Switzerland may be called upon the resolution of the board of directors or, under certain circumstances, by the auditor. In addition, the board of directors is required to convene an extraordinary general meeting of shareholders if so resolved by the general meeting of shareholders, or if so requested by shareholders holding an aggregate of at least 10% of the registered shares, specifying the items for the agenda and their proposals, or if it appears from the stand-alone annual statutory balance sheet that half of the company’s share capital and reserves are not covered by the company’s assets. In the latter case, the board of directors must immediately convene an extraordinary general meeting of shareholders and propose financial restructuring measures.

Under Transocean-Switzerland’s articles of association, any shareholder may request that an item be included on the agenda of a general meeting of shareholders. Such shareholder may also nominate one or more directors for election. A request for inclusion of an item on the agenda or a nominee must be in writing and received by Transocean-Switzerland at least 30 calendar days prior to the anniversary date of the proxy statement in connection with Transocean’s last general meeting of shareholders; provided, however, that if the date of the general meeting of shareholders is more than 30 days before or after such anniversary date, such request must instead be made by the tenth day following the date on which Transocean-Switzerland has made public disclosure of the date of the general meeting of shareholders. The request must specify the relevant agenda items and motions, together

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with evidence of the required shares recorded in the share register, as well as any other information as would be required to be included in a proxy statement pursuant to the rules of the SEC.

Under the Swiss Code, a general meeting of shareholders for which a notice of meeting has been duly published may not be adjourned without publishing a new notice of meeting.

Transocean-Switzerland’s annual report and auditor’s report must be made available for inspection by the shareholders at Transocean-Switzerland’s place of incorporation no later than 20 days prior to the meeting. Each shareholder is entitled to request immediate delivery of a copy of these documents free of charge. Shareholders of record will be notified of this in writing.

Voting

Each Transocean-Switzerland registered share carries one vote at a general meeting of shareholders. Voting rights may be exercised by shareholders registered in Transocean-Switzerland’s share register or by a duly appointed proxy of a registered shareholder, which proxy need not be a shareholder. Transocean-Switzerland’s articles of association do not limit the number of registered shares that may be voted by a single shareholder.

Treasury shares, whether owned by Transocean-Switzerland or one of its majority-owned subsidiaries, will not be entitled to vote at general meetings of shareholders.

With respect to the election of directors, each holder of registered shares entitled to vote at the election has the right to vote, in person or by proxy, the number of registered shares held by him for as many persons as there are directors to be elected. Transocean-Switzerland’s articles of association do not provide for cumulative voting for the election of directors.

Pursuant to Transocean-Switzerland’s articles of association, the shareholders generally pass resolutions by the affirmative vote of a majority of the registered shares represented and voting at the general meeting of shareholders (broker nonvotes, abstentions and blank and invalid ballots shall be disregarded), unless otherwise provided by law or Transocean-Switzerland’s articles of association. However, Transocean-Switzerland’s articles of association provide that directors may be elected at a general meeting of shareholders by a plurality of the votes cast by the shareholders present in person or by proxy at the meeting. Transocean-Switzerland’s organizational regulations will have the same majority vote policy in the election of directors as is currently part of the Corporate Governance Guidelines of Transocean-Cayman.

The acting chair may direct that elections be held by use of an electronic voting system. Electronic resolutions and elections are considered equal to resolutions and elections taken by way of a written ballot.

The Swiss Code and/or Transocean-Switzerland’s articles of association require the affirmative vote of at least two-thirds of the voting rights and a majority of the par value of the registered shares, each as represented at a general meeting to approve the following matters:

 

the amendment to or the modification of the purpose of Transocean-Switzerland;

 

the creation of shares with privileged voting rights;

 

the restriction on the transferability of shares and any amendment in relation thereto;

 

the restriction on the exercise of the right to vote and any amendment in relation thereto;

 

an authorized or conditional increase in the nominal share capital;

 

an increase in the nominal share capital (1) through the conversion of capital surplus, (2) through a contribution in kind, or (3) in exchange for an acquisition of assets, or a grant of special privileges;

 

the restriction or withdrawal of preemptive rights;

 

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a change in the place of incorporation of Transocean-Switzerland;

 

the conversion of registered shares into bearer shares and vice versa; and

 

the dissolution of Transocean-Switzerland.

The same supermajority voting requirements apply to resolutions in relation to transactions among corporations based on Switzerland’s Federal Act on Mergers, Demergers, Transformations and the Transfer of Assets (the “Merger Act”), including a merger, demerger or conversion of a corporation (other than a cash-out or certain squeeze-out mergers, in which minority shareholders of the company being acquired may be compensated in a form other than through shares of the acquiring company, for instance, through cash or securities of a parent company of the acquiring company or of another company—in such a merger, an affirmative vote of 90% of the outstanding registered shares is required). Swiss law may also impose this supermajority voting requirement in connection with the sale of “all or substantially all of its assets” by Transocean-Switzerland. See “—Compulsory Acquisitions; Appraisal Rights.”

Transocean-Switzerland’s articles of association require the affirmative vote of at least two-thirds of the registered shares recorded in the commercial register and entitled to vote at a general meeting to approve the following matters:

 

the removal of a member of the board of directors;

 

any changes to Article 14, paragraph 1 specifying advance notice of proposal requirements;

 

any changes to Article 20 specifying supermajority vote requirements;

 

any changes to Article 21 specifying quorum requirements;

 

any changes to Article 22 specifying the number of members of the board of directors;

 

any changes to Article 23 specifying the classification of the board of directors; and

 

any changes to Article 24 specifying the indemnification provisions for directors and officers.

Transocean-Switzerland’s articles of association require the affirmative vote of holders of the number of registered shares of Transocean-Switzerland equal to the sum of (A) 66 2/3% of the number of all registered shares outstanding and entitled to vote at a general meeting, plus (B) a number of registered shares outstanding and entitled to vote at the general meeting that is equal to one-third of the number of registered shares held by an interested shareholder, for Transocean-Switzerland to engage in any business combination with an interested shareholder (as those terms are defined in Transocean-Switzerland’s articles of association) and for the amendment of the provisions in Transocean-Switzerland’s articles of association relating to this shareholder approval requirement.

Quorum for General Meetings

The presence of shareholders, in person or by proxy, holding at least a majority of the registered shares recorded in Transocean-Switzerland’s share register and generally entitled to vote at a meeting, is a quorum for the transaction of most business. Shareholders present, in person or by proxy, holding at least 66 2/3% of the registered shares recorded in the commercial register and generally entitled to vote at a general meeting constitute the required quorum at a general meeting to consider or adopt a resolution to amend, vary, suspend the operation of or cause any of the following provisions of Transocean-Switzerland’s articles of association to cease to apply:

 

Article 18—which relates to proceedings and procedures at general meetings;

 

Article 19(f)—which relates to business combinations with interested shareholders;

 

Article 20—which sets forth the level of shareholder approval required for certain matters;

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Article 21—which sets forth the quorum at a general meeting required for certain matters, including the removal of a member of the board of directors; and

 

Articles 22, 23 and 24—which relate to the election and appointment of directors.

Under the Swiss Code, the board of directors has no authority to waive quorum requirements stipulated in the articles of association.

Inspection of Books and Records

Under the Swiss Code, a shareholder has a right to inspect the share register with regard to his own shares and otherwise to the extent necessary to exercise his shareholder rights. No other person has a right to inspect the share register. The books and correspondence of a Swiss company may be inspected with the express authorization of the general meeting of shareholders or by resolution of the board of directors and subject to the safeguarding of the company’s business secrets. At a general meeting of shareholders, any shareholder is entitled to request information from the board of directors concerning the affairs of the company. Shareholders may also ask the auditor questions regarding its audit of the company. The board of directors and the auditor must answer shareholders’ questions to the extent necessary for the exercise of shareholders’ rights and subject to prevailing business secrets or other material interests of Transocean-Switzerland.

Special Investigation

If the shareholders’ inspection and information rights as outlined above prove to be insufficient, any shareholder may propose to the general meeting of shareholders that specific facts be examined by a special commissioner in a special investigation. If the general meeting of shareholders approves the proposal, Transocean-Switzerland or any shareholder may, within 30 calendar days after the general meeting of shareholders, request the court at Transocean-Switzerland’s registered office to appoint a special commissioner. If the general meeting of shareholders rejects the request, one or more shareholders representing at least 10% of the share capital or holders of registered shares in an aggregate par value of at least 2 million Swiss francs may request the court to appoint a special commissioner. The court will issue such an order if the petitioners can demonstrate that the board of directors, any member of the board or an officer of Transocean-Switzerland infringed the law or Transocean-Switzerland’s articles of association and thereby damaged the company or the shareholders. The costs of the investigation would generally be allocated to Transocean-Switzerland and only in exceptional cases to the petitioners.

Compulsory Acquisitions; Appraisal Rights

Business combinations and other transactions that are binding on all shareholders are governed by the Merger Act. A statutory merger or demerger requires that at least 66 2/3% of the registered shares and a majority of the par value of the registered shares represented at the general meeting of shareholders vote in favor of the transaction. Under the Merger Act, a “demerger” may take two forms:

 

a legal entity may divide all of its assets and transfer such assets to other legal entities, with the shareholders of the transferring entity receiving equity securities in the acquiring entities and the transferring entity dissolving upon deregistration in the commercial register; or

 

a legal entity may transfer all or a portion of its assets to other legal entities, with the shareholders of the transferring entity receiving equity securities in the acquiring entities.

If a transaction under the Merger Act receives all of the necessary consents, all shareholders would be compelled to participate in the transaction. See “—Voting Rights.”

Swiss companies may be acquired by an acquirer through the direct acquisition of the share capital of the Swiss company. With respect to corporations limited by shares, such as Transocean-Switzerland, the Merger Act provides for the possibility of a so-called “cash-out” or “squeeze-out” merger if the acquirer controls 90% of the outstanding registered shares. In these limited circumstances, minority shareholders of the company being acquired may be compensated in a form other than through shares of the acquiring company (for instance, through cash or

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securities of a parent company of the acquiring company or of another company). For business combinations effected in the form of a statutory merger or demerger and subject to Swiss law, the Merger Act provides that if the equity rights have not been adequately preserved or compensation payments in the transaction are unreasonable, a shareholder may request the competent court to determine a reasonable amount of compensation.

In addition, under Swiss law, the sale of “all or substantially all of its assets” by Transocean-Switzerland may require a resolution of the general meeting of shareholders passed by holders of at least two-thirds of the voting rights and a majority of the par value of the registered shares, each as represented at the general meeting of shareholders. Whether or not a shareholder resolution is required depends on the particular transaction, including whether the following test is satisfied:

 

the company sells a core part of its business, without which it is economically impracticable or unreasonable to continue to operate the remaining business;

 

the company’s assets, after the divestment, are not invested in accordance with the company’s statutory business purpose; and

 

the proceeds of the divestment are not earmarked for reinvestment in accordance with the company’s business purpose but, instead, are intended for distribution to shareholders or for financial investments unrelated to the company’s business.

If all of the foregoing apply, a shareholder resolution would likely be required.

Anti-Takeover Provisions

Transocean-Switzerland’s articles of association have provisions that could have an anti-takeover effect. These provisions are intended to enhance the likelihood of continuity and stability in the composition of the board of directors and in the policies formulated by the board of directors, and may have the effect of discouraging actual or threatened changes of control by limiting certain actions that may be taken by a potential acquirer prior to its having obtained sufficient control to adopt a special resolution amending Transocean-Switzerland’s articles of association.

The articles of association provide that Transocean-Switzerland’s board of directors will be divided into three classes serving staggered three-year terms. Under the Swiss Code, directors may at any time, with or without cause, be removed from office by resolution of the shareholders at a general meeting of shareholders, provided that a proposal for such resolution has been put on the agenda for the meeting in accordance with the requirements of the Swiss Code and Transocean-Switzerland’s articles of association. Transocean-Switzerland’s articles of association provide that a decision of the shareholders at a general meeting to remove a director requires the vote of shareholders holding at least 66 2/3% of the registered shares outstanding and entitled to vote at that meeting.

Transocean-Switzerland’s articles of association include a provision that is based on the Delaware law regarding business combinations. This provision provides that, in general, absent the approval of holders of the number of registered shares of Transocean-Switzerland equal to the sum of (A) 66 2/3% of the number of all registered shares outstanding and entitled to vote at a general meeting, plus (B) a number of registered shares outstanding and entitled to vote at the general meeting that is equal to one-third of the number of registered shares held by the interested shareholder, Transocean-Switzerland may not engage in a business combination with an interested shareholder for a period of three years after the time of the transaction in which the person became an interested shareholder.

The shareholder approval requirement for business combinations with interested shareholders does not apply in some cases, including if:

 

Transocean-Switzerland’s board of directors, prior to the time of the transaction in which the person became an interested shareholder, approves (1) the business combination or (2) the transaction as a result of which the shareholder becomes an interested shareholder; or

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upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of the registered shares outstanding and entitled to vote at a general meeting of Transocean-Switzerland at the time the transaction commenced.

As defined in Transocean-Switzerland’s articles of association, an interested shareholder generally includes any person who, together with that person’s affiliates or associates, (1) owns 15% or more of the outstanding voting shares of the company or (2) is an affiliate or associate of the company and owned 15% or more of the outstanding voting shares of the company at any time within the previous three years.

Under Swiss law, there is generally no prohibition of business combinations with interested shareholders. However, in certain circumstances, shareholders and members of the board of directors of Swiss companies, as well as certain persons associated with them, must refund any payments they receive that are not made on an arm’s length basis.

Upon completion of the Transaction, Transocean-Switzerland’s articles of association will include an authorized share capital, according to which the board of directors is authorized, at any time during a maximum two-year period, to issue a number of registered shares up to 50% of the share capital registered in the commercial register and to limit or withdraw the preemptive rights of the existing shareholders in various circumstances, including (1) following a shareholder or group of shareholders acting in concert having acquired in excess of 15% of the share capital registered in the commercial register without having submitted a takeover proposal to shareholders that is recommended by the board of directors or (2) for purposes of the defense of an actual, pending or threatened unsolicited takeover, in relation to which the board of directors has, upon consultation with an independent financial adviser retained by the board of directors, not recommended acceptance to the shareholders.

For other provisions that could be considered to have an anti-takeover effect, in addition to “—Preemptive Rights and Advance Subscription Rights” and “—General Meetings of Shareholders” above, see “—Corporate Governance” below.

Corporate Governance

Transocean-Switzerland’s organizational regulations stipulate the following with respect to the composition of the board of directors and management until November 27, 2009, the second anniversary of Transocean-Cayman’s merger transaction with GlobalSantaFe:

 

the board of directors will consist of 14 directors, an equal number of whom were designated prior to the merger transaction by Transocean-Cayman, whom we refer to as the Transocean designated directors, and by GlobalSantaFe, whom we refer to as the GlobalSantaFe designated directors;

 

the removal, replacement or appointment of a new chairman will require the vote of two-thirds of the entire board of directors;

 

each committee of the board of directors will consist of an equal number of Transocean designated directors and GlobalSantaFe designated directors;

 

the chairman of each of the audit committee and the executive compensation committee of the board of directors will be a GlobalSantaFe designated director;

 

the chairman of each of the corporate governance committee and the finance and benefits committee of the board of directors will be a Transocean designated director;

 

in the event that a Transocean designated director or a GlobalSantaFe designated director dies, resigns, is removed from or otherwise fails to serve on the board of directors, the remaining Transocean designated directors or GlobalSantaFe designated directors, as applicable, may designate a nominee for such director’s replacement; and

 

the removal, replacement or appointment of a new Chief Executive Officer or President and Chief Operating Officer will require the vote of two-thirds of the entire board of directors.

 

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These provisions of the organizational regulations may not be amended without the vote of two-thirds of the entire board of directors.

Legal Name; Formation; Fiscal Year; Registered Office

The legal and commercial name of Transocean-Switzerland is Transocean Ltd.. Transocean-Switzerland was initially formed on August 18, 2008. Transocean-Switzerland is incorporated and domiciled in Zug, Canton of Zug, Switzerland, and operates under the Swiss Code as a stock corporation (Aktiengesellschaft). Transocean-Switzerland is recorded in the Commercial Register of the Canton of Zug with the registration number CH-170.3.032.555-9. Transocean-Switzerland’s fiscal year is the calendar year.

The address of Transocean-Switzerland’s registered office is Transocean Ltd., c/o Reichlin & Hess Rechtsanwälte, Hofstrasse 1A, 6300 Zug, Switzerland, and the telephone number at that address is +41-(0)41-729-1070.

Corporate Purpose

Currently, Transocean-Switzerland is a subsidiary of Transocean-Cayman, and its business purpose is to acquire, hold, manage, exploit and sell, whether directly or indirectly, participations in businesses in Switzerland and abroad, in particular businesses that are involved in the utilization of natural resources, and to provide financing for this purpose. Upon completion of the Transaction, Transocean-Switzerland will become the new holding company of the Transocean group. Transocean-Switzerland’s amended business purpose will be to acquire, hold, manage, exploit and sell, whether directly or indirectly, participations in businesses in Switzerland and abroad, in particular in businesses that are involved in offshore contract drilling services for oil and gas wells, oil and gas drilling management services, drilling engineering services and drilling project management services and oil and gas exploration and production activities, and to provide financing for this purpose. The company may acquire, hold, manage, mortgage and sell real estate and intellectual property rights in Switzerland and abroad.

Duration; Dissolution; Rights upon Liquidation

Transocean-Switzerland’s duration is unlimited. Transocean-Switzerland may be dissolved at any time with the approval of shareholders holding two-thirds of the voting rights and a majority of the par value of the registered shares represented at a general meeting. Dissolution by court order is possible if Transocean-Switzerland becomes bankrupt, or for cause at the request of shareholders holding at least 10% of Transocean-Switzerland’s share capital. Under Swiss law, any surplus arising out of liquidation, after the settlement of all claims of all creditors, will be distributed to shareholders in proportion to the paid-up par value of registered shares held, subject to Swiss withholding tax requirements.

Uncertificated Shares

Transocean-Switzerland is authorized to issue registered shares in certificated or uncertificated form. Transocean-Switzerland currently issues registered shares in uncertificated, book-entry form.

Stock Exchange Listing

Upon the completion of the Transaction, the registered shares will be listed on the New York Stock Exchange and trade under the symbol “RIG.”

No Sinking Fund

The registered shares have no sinking fund provisions.

No Liability for Further Calls or Assessments

The registered shares to be issued in the Transaction will be duly and validly issued, fully paid and nonassessable.

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No Redemption and Conversion

The registered shares are not convertible into shares of any other class or series or subject to redemption either by Transocean-Switzerland or the holder of the shares.

Transfer and Registration of Shares

Transocean-Switzerland has not imposed any restrictions applicable to the transfer of Transocean-Switzerland registered shares. Transocean-Switzerland’s share register will initially be kept by The Bank of New York, which acts as transfer agent and registrar. The share register reflects only record owners of Transocean-Switzerland shares. Swiss law does not recognize fractional share interests.

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COMPARISON OF RIGHTS OF SHAREHOLDERS

Your rights as a shareholder of Transocean-Cayman are governed by Cayman Islands law and Transocean-Cayman’s memorandum and articles of association. After the Transaction, you will become a shareholder of Transocean-Switzerland, and your rights will be governed by Swiss law and Transocean-Switzerland’s articles of association and organizational regulations (the latter being analogous to bylaws).

Many of the principal attributes of Transocean-Cayman’s ordinary shares and Transocean-Switzerland’s registered shares will be similar. However, there are differences between your rights under Swiss law and under the corporate statutory and common law of the Cayman Islands, which is modeled on certain provisions of the corporate statutory law of England and Wales and in respect of which the common law of England and Wales is highly persuasive authority as to questions of Cayman Islands law. In addition, there are differences between Transocean-Cayman’s memorandum and articles of association and Transocean-Switzerland’s articles of association and organizational regulations (the later being analogous to bylaws). Furthermore, the counterparts of some provisions that are included in Transocean-Cayman’s articles of association are included in Transocean-Switzerland’s organizational regulations. As a result, Transocean-Switzerland’s board of directors will be able to amend these provisions without shareholder approval, which Transocean-Cayman’s board of directors is currently unable to do. The following discussion is a summary of material changes in your rights resulting from the Redomestication. This summary is not complete and does not cover all of the differences between Swiss law and Cayman Islands law affecting companies and their shareholders or all the differences between Transocean-Cayman’s memorandum and articles of association and Transocean-Switzerland’s articles of association and organizational regulations. We believe this summary is accurate. It is, however, subject to the complete text of the relevant provisions of the Swiss Code of Obligations, in particular articles 620 through 763 of the Swiss Code, and Switzerland’s Federal Act on Mergers, Demergers, Transformations and the Transfer of Assets (the “Merger Act”), the Companies Law (as amended) of the Cayman Islands (the “Companies Law”), Transocean-Cayman’s memorandum and articles of association and Transocean-Switzerland’s articles of association and organizational regulations. We encourage you to read those laws and documents. Transocean-Switzerland’s articles of association and organizational regulations are attached to this proxy statement as Annex F and Annex G, respectively. For information as to how you can obtain Transocean-Cayman’s memorandum and articles of association, see “Where You Can Find More Information.”

Capitalization

Transocean-Cayman. The authorized share capital of Transocean-Cayman is comprised of 800,000,000 ordinary shares, par value $0.01 per share, and 50,000,000 shares, par value $0.10 per share, which may be designated and created as shares of any other class or series with such rights and powers as determined by the board of directors in accordance with Transocean-Cayman’s articles of association. The board of directors of Transocean-Cayman may authorize the issuance of additional shares up to the amount of the authorized capital without obtaining additional shareholder approval.

Transocean-Switzerland. Upon completion of the Transaction, the registered share capital of Transocean-Switzerland is expected to be approximately 10 billion Swiss francs, comprised of approximately 335 million registered shares with a par value of 30.00 Swiss francs per share. The board of directors may not create shares with increased voting powers without the affirmative resolution adopted by shareholders holding at least 66 2/3% of the voting rights and a majority of the par value of the registered shares represented at a general meeting. The board of directors may create preferred stock with the vote of a majority of both the voting rights and the par value of the registered shares represented at a general meeting. Immediately after the Transaction, Transocean-Switzerland will only have one class of shares outstanding, so all references to “voting rights” in this “Comparison of Rights of Shareholders” will mean the voting rights of Transocean-Switzerland’s registered shares, par value 30.00 Swiss francs per share, unless another class of shares is subsequently created. Likewise, a “majority of the par value of the registered shares” will mean a majority of the par value of Transocean-Switzerland’s registered shares, par value 30.00 Swiss francs per share.

Immediately prior to the Transaction, Transocean-Switzerland will not have any share capital authorized for future issuance. Upon completion of the Transaction, the board of directors will be authorized to issue new registered shares at any time during a two-year period and thereby increase the share capital, without shareholder approval, by a maximum amount of 50% of the share capital registered in the commercial register, which is

 

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expected to be approximately 5 billion Swiss francs, or approximately 168 million registered shares. After the expiration of the initial two-year period, and each subsequent two-year period, authorized share capital will be available to the board of directors for issuance of additional registered shares only if the authorization is reapproved by shareholders.

In an authorized capital increase, Transocean-Switzerland shareholders would have preemptive rights to obtain newly issued registered shares in an amount proportional to the par value of the registered shares they already hold. However, the board of directors may withdraw or limit these preemptive rights in certain circumstances as set forth in Transocean-Switzerland’s articles of association. For further details on these circumstances, see “—Preemptive Rights and Advance Subscription Rights.”

Immediately prior to the Transaction, Transocean-Switzerland will not have any conditional share capital. Upon completion of the Transaction, Transocean-Switzerland’s articles of association will provide for a conditional capital that, following the effectiveness of the Transaction, will allow the board of directors to authorize the issuance of additional registered shares up to a maximum amount of 50% of the share capital registered in the commercial register (which is expected to be approximately 168 million registered shares) without obtaining additional shareholder approval. These registered shares may be issued through:

 

the exercise of conversion, exchange, option, warrant or similar rights for the subscription of shares granted in connection with bonds, options, warrants or other securities newly or already issued in national or international capital markets or new or already existing contractual obligations convertible into or exercisable or exchangeable for Transocean-Switzerland registered shares or shares of one of its subsidiaries, or any of their respective predecessors; or

 

in connection with the issuance of registered shares, options or other share-based awards to directors, employees, contractors, consultants or other persons providing services to Transocean-Switzerland or one of its subsidiaries.

In connection with the issuance of bonds, notes, warrants or other financial instruments or contractual obligations convertible into or exercisable or exchangeable for Transocean-Switzerland registered shares, the board of directors is authorized to withdraw or limit the advance subscription rights of shareholders in certain circumstances. See “—Preemptive Rights and Advance Subscription Rights” below.

The preemptive rights of shareholders are excluded with respect to registered shares issued to directors, employees, contractors or other persons providing services to Transocean-Switzerland or one of its subsidiaries.

Preemptive Rights and Advance Subscription Rights

Transocean-Cayman. Holders of Transocean-Cayman ordinary shares have no preemptive or preferential right to purchase any securities of Transocean-Cayman. As a result, as described below under “—Other Anti-Takeover Measures,” the board of directors may authorize the issuance of securities that could discourage a takeover or other transaction without offering the securities to each holder of Transocean-Cayman ordinary shares.

Transocean-Switzerland. Under the Swiss Code, the prior approval of a general meeting of shareholders is generally required to authorize, for later issuance, the issuance of registered shares, or rights to subscribe for, or convert into, registered shares (which rights may be connected to debt instruments or other obligations). In addition, the existing shareholders will have preemptive rights in relation to such registered shares or rights in proportion to the respective par values of their holdings. The shareholders may, with the affirmative vote of shareholders holding 66 2/3% of the voting rights and a majority of the par value of the registered shares represented at the general meeting, withdraw or limit the preemptive rights for valid reasons (such as a merger, an acquisition or any of the reasons authorizing the board of directors to withdraw or limit the preemptive rights of shareholders in the context of an authorized capital increase as described below).

If the general meeting of shareholders has approved the creation of authorized or conditional capital, it thereby delegates the decision whether to withdraw or limit the preemptive and advance subscription rights for valid reasons to the board of directors. Transocean-Switzerland’s articles of association provide for this delegation with respect to Transocean-Switzerland’s authorized and conditional share capital in the circumstances described below.

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The board of directors is authorized to withdraw or limit the preemptive rights with respect to the issuance of registered shares from authorized capital if:

 

the issue price of the new registered shares is determined by reference to the then-prevailing market conditions;

 

the registered shares are issued in connection with the acquisition of an enterprise or business or any part of an enterprise or business, the financing or refinancing of any such transactions or the financing of new investment plans of Transocean-Switzerland;

 

the registered shares are issued in connection with the intended broadening of the shareholder constituency of the company in certain financial or investor markets, for the purposes of the participation of strategic partners, or in connection with the listing of the shares on domestic or foreign stock exchanges;

 

in connection with a placement or sale of registered shares, the grant of an over-allotment option of up to 20% of the total number of registered shares in a placement or sale of registered shares to the initial purchasers or underwriters;

 

for the participation of directors, employees, contractors, consultants and other persons performing services for the benefit of Transocean-Switzerland; or

 

either (1) following a shareholder or group of shareholders acting in concert having acquired in excess of 15% of the share capital recorded in the commercial register without having submitted a takeover proposal to shareholders that is recommended by the board of directors or (2) for purposes of the defense of an actual, pending or threatened unsolicited takeover, in relation to which the board of directors has, upon consultation with an independent financial adviser retained by the board of directors, not recommended acceptance to the shareholders.

In connection with the issuance of bonds, notes, warrants or other financial instruments or contractual obligations convertible into or exercisable or exchangeable for Transocean-Switzerland registered shares, the preemptive rights of shareholders are excluded and the board of directors is authorized to withdraw or limit the advance subscription rights of shareholders with respect to registered shares issued from Transocean-Switzerland’s conditional share capital if the issuance is for purposes of the acquisition of an enterprise or business, the financing or refinancing of any such transactions, or if the issuance occurs in national or international capital markets or through a private placement.

If the advance subscription rights are withdrawn or limited:

 

the respective financial instruments or contractual obligations will be issued or entered into at market conditions;

 

the exercise price, if any, for the registered shares to be issued will be set with reference to the market conditions prevailing at the date on which the instruments or obligations are issued or entered into; and

 

the instruments or obligations may be converted, exercised or exchanged during a maximum period of 30 years.

The preemptive rights and the advance subscription rights of shareholders are excluded with respect to registered shares issued from Transocean-Switzerland’s conditional share capital to directors, employees, contractors, consultants or other persons providing services to Transocean-Switzerland or any of its subsidiaries. For more information on authorized and conditional capital, see “—Capitalization” above.

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Distributions and Dividends; Repurchases and Redemptions

Transocean-Cayman. Transocean-Cayman is not required to present proposed dividends to its shareholders for approval or adoption. Under Cayman Islands law, the board of directors of Transocean-Cayman may declare the payment of dividends to the ordinary shareholders out of Transocean-Cayman’s:

 

profits available for distribution; or

 

a “share premium account,” which represents the excess of the price paid to Transocean-Cayman on issue of its shares over the par or “nominal” value of those shares, which is similar to the U.S. concept of additional paid-in capital.

However, no dividends may be paid if, after payment, Transocean-Cayman would not be able to pay its debts as they come due in the ordinary course of business. Profits available for distribution are Transocean-Cayman’s accumulated, realized profits so far as not previously utilized through distribution or capitalization, less its accumulated, realized losses so far as not previously written off in a reduction or reorganization of capital.

Under the Companies Law, shares of a Cayman Islands company may be redeemed or repurchased out of profits of the company, out of the proceeds of a new issuance of shares made for that purpose or out of capital (including the share premium account), provided that the company has the ability to pay its debts as they come due in the ordinary course of business. Redeemed or repurchased shares automatically have the status of authorized but unissued shares and may be subsequently issued in accordance with Transocean-Cayman’s memorandum and articles of association.

Under Transocean-Cayman’s articles of association, Transocean-Cayman may, upon the agreement of a shareholder, repurchase all or part of the ordinary shares of such shareholder, whether or not the company has made a similar offer to all or any of the other shareholders. Transocean-Cayman’s ordinary shares are not redeemable.

Transocean-Switzerland. Under Swiss law, dividends may be paid out only if the corporation has sufficient distributable profits from the previous fiscal year, or if the corporation has freely distributable reserves, each as will be presented on the audited annual stand-alone statutory balance sheet. Payments out of the registered share capital (in other words, the aggregate par value of Transocean-Switzerland’s registered share capital) in the form of dividends are not allowed; however, payments out of registered share capital may be made by way of a capital reduction, as described below. Qualifying additional paid-in capital may only be paid out as dividends to shareholders following approval by the shareholders of a reclassification of such qualifying additional paid-in capital as freely distributable reserves (to the extent permissible under the Swiss Code). Transocean-Switzerland may seek to reclassify its qualifying additional paid-in capital to freely distributable reserves as early as its first general meeting following completion of the Transaction. The affirmative vote of shareholders holding a majority of the registered shares represented at a general meeting must approve reserve reclassifications and distributions of dividends. The board of directors may propose to shareholders that a dividend be paid but cannot itself authorize the dividend.

Under the Swiss Code, if Transocean-Switzerland’s general reserves amount to less than 20% of the share capital recorded in the commercial register (i.e., 20% of the aggregate par value of Transocean-Switzerland’s registered capital), then at least 5% of Transocean-Switzerland’s annual profit must be retained as general reserves. The Swiss Code and Transocean-Switzerland’s articles of association permit Transocean-Switzerland to accrue additional general reserves. In addition, Transocean-Switzerland is required to create a special reserve on its stand-alone annual statutory balance sheet in the amount of the purchase price of registered shares it or any of its subsidiaries repurchases, which amount may not be used for dividends or subsequent repurchases.

Swiss companies generally must maintain a separate company, stand-alone “statutory” balance sheet for the purpose of, among other things, determining the amounts available for the return of capital to shareholders, including by way of a distribution of dividends. Transocean-Switzerland’s auditor must confirm that a dividend proposal made to shareholders conforms with the requirements of the Swiss Code and Transocean-Switzerland’s articles of association. Dividends are usually due and payable shortly after the shareholders have passed a resolution approving the payment. Transocean-Switzerland’s articles of association provide that dividends that have not been claimed within five years after the due date become the property of Transocean-Switzerland and are allocated to the

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general reserves. For information about deduction of the withholding tax from dividend payments, see “Material Tax Considerations—Swiss Tax Considerations.”

The Swiss Code limits a company’s ability to hold or repurchase its own registered shares. Transocean-Switzerland and its subsidiaries may only repurchase shares if and to the extent that sufficient freely distributable reserves are available, as described above. The aggregate par value of all Transocean-Switzerland registered shares held by Transocean-Switzerland and its subsidiaries may not exceed 10% of the registered share capital. However, Transocean-Switzerland may repurchase its own registered shares beyond the statutory limit of 10% if the shareholders have passed a resolution at a general meeting of shareholders authorizing the board of directors to repurchase registered shares in an amount in excess of 10% and the repurchased shares are dedicated for cancellation. Any registered shares repurchased pursuant to such an authorization will then be cancelled at the next general meeting upon the approval of shareholders holding a majority of the registered shares represented at the general meeting. Repurchased registered shares held by Transocean-Switzerland or its subsidiaries do not carry any rights to vote at a general meeting of shareholders but are entitled to the economic benefits generally associated with the shares. For information about withholding tax and share repurchases, see “Material Tax Considerations—Swiss Tax Considerations.”

Capital distributions may also take the form of a distribution of cash or property that is based upon a reduction of Transocean-Switzerland’s share capital recorded in the commercial register. Such a capital reduction requires the approval of shareholders holding a majority of the registered shares represented at the general meeting. A special audit report must confirm that creditors’ claims remain fully covered despite the reduction in the share capital recorded in the commercial register. Upon approval by the general meeting of shareholders of the capital reduction, the board of directors must give public notice of the capital reduction resolution in the Swiss Official Gazette of Commerce three times and notify creditors that they may request, within two months of the third publication, satisfaction of or security for their claims.

Transocean-Switzerland will be required under Swiss law to declare any dividends and other capital distributions in Swiss francs. Transocean-Switzerland intends to make any dividend payments to holders of Transocean-Switzerland shares in U.S. dollars, unless the holders provide notice to our transfer agent, The Bank of New York, that they wish to receive dividend payments in Swiss francs. The Bank of New York will be responsible for paying the U.S. dollars or Swiss francs to registered holders of shares, less amounts subject to withholding for taxes.

Shareholder Approval of Business Combinations

Transocean-Cayman. Cayman Islands law provides for a procedure known as a “scheme of arrangement” that allows for business combinations and other transactions that are binding on all shareholders A scheme of arrangement is effected by the relevant Cayman Islands company applying for the consent of the Cayman Islands court to seek, and subsequently obtaining, the approval of holders of ordinary shares (1) representing a majority in number of the shareholders present and voting on the scheme of arrangement, whether in person or by proxy, and (2) representing 75% or more in value of the ordinary shares present and voting on the scheme of arrangement, whether in person or by proxy, in each case excluding any shares held by the acquiring party. If a scheme of arrangement receives the approval of shareholders and is subsequently sanctioned by the Cayman Islands court, all holders of ordinary shares of a company will be bound by the terms of the scheme of arrangement. Transocean’s Cayman Islands counsel, Walkers, has advised that where the statutory procedures have been complied with, the Cayman Islands court is likely to sanction such a scheme of arrangement that has been approved by the requisite votes of shareholders in the absence of bad faith, fraud or unequal treatment of shareholders.

Cayman Islands companies may also engage in a business combination through the direct acquisition by an acquirer of the share capital of the Cayman Islands company. The Companies Law provides that when an offer is made for ordinary shares of a Cayman Islands company and, within four months of the offer, the holders of not less than 90% of those shares accept, the offeror may, for two months after that four-month period, require the remaining ordinary shareholders to transfer their ordinary shares on the same terms as the original offer. In those circumstances, nontendering shareholders will be compelled to sell their shares, unless within one month from the date on which the notice to compulsorily acquire was given to the nontendering shareholder, the nontendering shareholder is able to convince a Cayman Islands court to order otherwise.

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In addition, Transocean-Cayman’s articles of association provide that, in order for it to sell, lease or exchange all or substantially all of its property or assets, other than in transactions with entities it controls, it must first obtain:

 

approval by the board of directors; and

 

approval of the holders of at least a majority of the issued shares generally entitled to vote.

Although Transocean-Cayman’s articles of association contain the provision described above, Cayman Islands law does not impose a separate shareholder approval requirement for a sale of substantially all of a company’s assets.

Transocean-Switzerland. Business combinations and other transactions that are binding on all shareholders are governed by the Merger Act. A statutory merger or demerger requires that at least 66 2/3% of the registered shares and a majority of the par value of the registered shares represented at the general meeting of shareholders vote in favor of the transaction. Under the Merger Act, a “demerger” may take two forms:

 

a legal entity may divide all of its assets and transfer such assets to other legal entities, with the shareholders of the transferring entity receiving equity securities in the acquiring entities and the transferring entity dissolving upon deregistration in the commercial register; or

 

a legal entity may transfer all or a portion of its assets to other legal entities, with the shareholders of the transferring entity receiving equity securities in the acquiring entities.

If a transaction under the Merger Act receives all of the necessary consents, all shareholders would be compelled to participate in the transaction. See “—Voting Rights.”

Swiss companies may be acquired by an acquirer through the direct acquisition of the share capital of the Swiss company. With respect to corporations limited by shares, such as Transocean-Switzerland, the Merger Act provides for the possibility of a so-called “cash-out” or “squeeze-out” merger if the acquirer controls 90% of the outstanding registered shares entitled to vote at a general meeting. In these limited circumstances, minority shareholders of the company being acquired may be compensated in a form other than through shares of the acquiring company (for instance, through cash or securities of a parent company of the acquiring company or of another company). Under the Merger Act, a shareholder has the right to request a court to review the adequacy of the compensation. For more information, see “—Appraisal Rights and Compulsory Acquisitions.”

In addition, under Swiss law, the sale of “all or substantially all of its assets” by Transocean-Switzerland may require a resolution of the general meeting of shareholders passed by holders of at least two-thirds of the voting rights and a majority of the par value of the registered shares, each as represented at the general meeting of shareholders. Whether or not a shareholder resolution is required depends on the particular transaction, including whether the following test is satisfied:

 

the company sells a core part of its business, without which it is economically impracticable or unreasonable to continue to operate the remaining business;

 

the company’s assets, after the divestment, are not invested in accordance with the company’s statutory business purpose; and

 

the proceeds of the divestment are not earmarked for reinvestment in accordance with the company’s business purpose but, instead, are intended for distribution to shareholders or for financial investments unrelated to the company’s business.

If all of the foregoing apply, a shareholder resolution would likely be required.

 

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Special Vote Required for Combinations with Interested Shareholders

Transocean-Cayman. Transocean-Cayman’s articles of association include a provision that is based upon the Delaware law regarding business combinations. This provision provides that, in general, Transocean-Cayman may not engage in a business combination with an interested shareholder for a period of three years after the time of the transaction in which the person became an interested shareholder.

The prohibition on business combinations with interested shareholders does not apply in some cases, including if:

 

Transocean-Cayman’s board of directors, prior to the time of the transaction in which the person became an interested shareholder, approves (1) the business combination or (2) the transaction in which the shareholder becomes an interested shareholder;

 

upon consummation of the transaction that resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of the voting shares of Transocean-Cayman at the time the transaction commenced; or

 

the board of directors and the holders of at least 66 ⅔% of the outstanding voting shares of Transocean-Cayman, excluding shares owned by the interested shareholder, approve the business combination on or after the time of the transaction in which the person became an interested shareholder.

As defined in Transocean-Cayman’s articles of association, an interested shareholder generally includes any person who, together with that person’s affiliates or associates, (1) owns 15% or more of the outstanding voting shares of the company or (2) is an affiliate or associate of the company and owned 15% or more of the outstanding voting shares of the company at any time within the previous three years.

Although Transocean-Cayman’s articles of association contain the provisions described above, under Cayman Islands law there is generally no prohibition on business combinations with interested shareholders.

Transocean-Switzerland. Transocean-Switzerland’s articles of association include a provision that is based on the Delaware law regarding business combinations and in substance corresponds to the business combination provision in Transocean-Cayman’s articles of association. The provision in Transocean-Switzerland’s articles of association provides that, subject to exceptions that in substance correspond to the exceptions in the business combination provision in Transocean-Cayman’s articles of association, absent the approval of holders of the number of registered shares of Transocean-Switzerland equal to the sum of (A) 66 2/3% of the number of all registered shares outstanding and entitled to vote at a general meeting, plus (B) a number of registered shares outstanding and entitled to vote at the general meeting that is equal to one-third of the number of registered shares held by the interested shareholder, Transocean-Switzerland may not engage in a business combination with an interested shareholder for a period of three years after the time of the transaction in which the person became an interested shareholder.

Although Transocean-Switzerland’s articles of association contain the provisions described above, under Swiss law there is generally no prohibition of business combinations with interested shareholders. However, in certain circumstances, shareholders and members of the board of directors of Swiss companies, as well as certain persons associated with them, must refund any payments they receive that are not made on an arm’s length basis.

Other Anti-Takeover Measures

Transocean-Cayman. Transocean-Cayman does not have a shareholder rights plan, but Transocean believes a shareholder rights plan could be implemented under Cayman Islands law. Transocean-Cayman’s articles of association expressly authorize the board of directors to implement, at its sole discretion, the issuance of a preferred share purchase right to be attached to each issued ordinary share with such terms and for such purposes, including the influencing of takeovers, as may be described in a rights agreement between Transocean-Cayman and a rights agent.

 

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The board of directors of Transocean-Cayman is also authorized, without obtaining any vote or consent of the holders of any class or series of shares unless expressly provided by the terms of a class or series, to issue from time to time any other classes or series of shares with the designations and relative powers, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or terms or conditions of redemption as it considers fit. The board of directors could authorize the issuance of preference shares with terms and conditions that could discourage a takeover or other transaction that holders of some or a majority of the ordinary shares might believe to be in their best interests or in which holders might receive a premium for their shares over the then market price of the shares. No preference shares have been established as of the date of this proxy statement.

For other provisions that could be considered to have an anti-takeover effect, in addition to “—Preemptive Rights and Advance Subscription Rights” and “—Special Vote Required for Combinations with Interested Shareholders” above, see “—Special Meetings of Shareholders,” “—Board and Committee Composition; Management,” “—Election of Directors; Staggered Terms of Directors,” “—Removal of Directors,” “—Amendment of Governing Documents” and “—Director Nominations; Proposals of Shareholders” below.

Transocean-Switzerland. Transocean-Switzerland does not have a shareholder rights plan. Rights plans generally discriminate in the treatment of shareholders by imposing restrictions on any shareholder who exceeds a level of ownership interest without the approval of the board of directors. Anti-takeover measures such as rights plans that are implemented by the board of directors would be restricted under Swiss corporate law by the principle of equal treatment of shareholders and the general rule that new shares may only be issued based on a shareholders’ resolution. However, upon completion of the Transaction, Transocean-Switzerland’s articles of association will include an authorized share capital, according to which the board of directors is authorized, at any time during a maximum two-year period, to issue a number of registered shares of up to 50% of the share capital registered in the commercial register and to limit or withdraw the preemptive rights of the existing shareholders in various circumstances, including (1) following a shareholder or group of shareholders acting in concert having acquired in excess of 15% of the share capital registered in the commercial register without having submitted a takeover proposal to shareholders that is recommended by the board of directors or (2) for purposes of the defense of an actual, pending or threatened unsolicited takeover, in relation to which the board of directors has, upon consultation with an independent financial adviser retained by the board of directors, not recommended acceptance to the shareholders.

For other provisions that could be considered to have an anti-takeover effect, in addition to “—Preemptive Rights and Advance Subscription Rights” and “—Special Vote Required for Combinations with Interested Shareholders” above, see “—Special Meetings of Shareholders,” “—Board and Committee Composition; Management,” “—Election of Directors; Staggered Terms of Directors,” “—Removal of Directors,” “—Amendment of Governing Documents” and “—Director Nominations; Proposals of Shareholders” below.

Appraisal Rights and Compulsory Acquisitions

Transocean-Cayman. Neither Cayman Islands law nor Transocean-Cayman’s articles of association specifically provide for appraisal rights. However, in connection with the compulsory transfer of shares to a 90% shareholder of a Cayman company as described under “—Shareholder Approval of Business Combinations,” a minority shareholder may apply to the court within one month of receiving notice of the compulsory transfer objecting to that transfer. In these circumstances, the burden is on the minority shareholder to show that the court should exercise its discretion to prevent the compulsory transfer. Transocean has been advised that the court is unlikely to grant any relief to the minority shareholder in the absence of bad faith, fraud, unequal treatment of shareholders or collusion between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out or otherwise prejudicing minority shareholders.

Transocean-Switzerland. For business combinations effected in the form of a statutory merger or demerger and subject to Swiss law, the Merger Act provides that if the equity rights have not been adequately preserved or compensation payments in the transaction are unreasonable, a shareholder may request a competent court to determine a reasonable amount of compensation.

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Election of Directors; Staggered Terms of Directors

Transocean-Cayman. Transocean-Cayman’s articles of association provide that the number of directors of Transocean-Cayman shall be not less than two or more than 14 plus the number of directors that any class or series of shares other than the ordinary shares may be entitled to elect, voting separately as a class. The board has the exclusive power to set the exact number of directors within that range. The board currently has 14 directors. The Companies Law does not contain provisions specifically related to classified boards of directors. However, Transocean-Cayman’s articles of association provide for a classified board of directors.

With respect to the election of directors, each holder of ordinary shares entitled to vote at the election has the right to vote, in person or by proxy, the number of shares held by him for as many persons as there are directors to be elected and for whose election that holder has a right to vote. Cumulative voting for the election of directors is prohibited by Transocean-Cayman’s articles of association.

Transocean-Cayman’s articles of association provide that directors may be elected at a general meeting by a plurality of the votes cast by the shareholders present in person or by proxy at the meeting. Transocean-Cayman has, however, adopted a majority vote policy in the election of directors as part of its Corporate Governance Guidelines. This policy provides that the board may nominate only those candidates for director who have submitted an irrevocable letter of resignation which would be effective upon and only in the event that (1) such nominee fails to receive a sufficient number of votes from shareholders in an uncontested election and (2) the board accepts the resignation. If a nominee who has submitted such a letter of resignation does not receive more votes cast “for” than “against” the nominee’s election, the corporate governance committee must promptly review the letter of resignation and recommend to the board whether to accept the tendered resignation or reject it. The board must then act on the corporate governance committee’s recommendation within 90 days following the certification of the shareholder vote. The board must promptly disclose its decision regarding whether or not to accept the nominee’s resignation letter.

Transocean-Switzerland. Transocean-Switzerland’s articles of association provide for the same range in the number of directors as Transocean-Cayman. Upon completion of the Transaction, Transocean-Switzerland will have the same directors as Transocean-Cayman. The board has the power to set the exact number of directors within the range, subject to election of the directors by the general meeting of shareholders.

Transocean-Switzerland’s articles of association provide for a classified board of directors. At each annual general meeting, each class of the directors whose term then expires shall be elected to hold office for a three-year term.

With respect to the election of directors, each holder of registered shares entitled to vote at the general meeting has the right to vote, in person or by proxy, the number of registered shares held by him for as many persons as there are directors to be elected. Transocean-Switzerland’s articles of association do not provide for cumulative voting for directors.

Transocean-Switzerland’s articles of association further provide that directors may be elected at a general meeting of shareholders by a plurality of the votes cast by the shareholders present in person or by proxy at the meeting. Transocean-Switzerland’s organizational regulations will have the same majority vote policy in the election of directors as is currently part of the Corporate Governance Guidelines of Transocean-Cayman.

Under the Swiss Code, board members may at any time, with or without cause and with immediate effect, resign from office.

Vacancies on Board of Directors

Transocean-Cayman. Transocean-Cayman’s articles of association provide that a vacancy or a newly created directorship may only be filled by the decision of a majority of the remaining directors.

Transocean-Switzerland. The Swiss Code provides that a vacancy or a newly created directorship as proposed by Transocean-Switzerland’s board of directors may only be filled upon approval by shareholders at a general meeting.

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Removal of Directors

Transocean-Cayman. Transocean-Cayman’s articles of association provide that directors may only be removed by the holders of a majority of the shares who, being entitled to vote on the election of directors, attend and vote in person or by proxy at the relevant meeting, and then only for “cause,” defined as (1) an action by a director involving willful malfeasance, which conduct has a material adverse effect on Transocean-Cayman or (2) conviction of a felony.

Transocean-Switzerland. Under the Swiss Code, directors may at any time, with or without cause, be removed from office by resolution of the shareholders at a general meeting of shareholders, provided that a proposal for such resolution has been put on the agenda for the meeting in accordance with the requirements of the Swiss Code and Transocean-Switzerland’s articles of association. Transocean-Switzerland’s articles of association provide that a decision of the shareholders at a general meeting to remove a director requires the vote of shareholders holding at least 66 2/3% of the registered shares outstanding and entitled to vote at that meeting.

Board and Committee Composition; Management

Transocean-Cayman. Transocean-Cayman’s articles of association stipulate the following with respect to the composition of the company’s board of directors until November 27, 2009, the second anniversary of the company’s merger transaction with GlobalSantaFe Corporation:

 

the board will consist of 14 directors, an equal number of whom were designated prior to the merger transaction by Transocean-Cayman, referred to as the Transocean designated directors, and by GlobalSantaFe, referred to as the GlobalSantaFe designated directors;

 

the removal, replacement or appointment of a new chairman will require the vote of two-thirds of the entire board of directors;

 

each committee of the Board will consist of an equal number of Transocean designated directors and GlobalSantaFe designated directors;

 

the chairman of each of the audit committee and the executive compensation committee of the board will be a GlobalSantaFe designated director;

 

the chairman of each of the corporate governance committee and the finance and benefits committee of the board will be a Transocean designated director;

 

in the event that a Transocean designated director or a GlobalSantaFe designated director dies, resigns, is removed from or otherwise fails to serve on the board of directors, the remaining Transocean designated directors or GlobalSantaFe designated directors, as applicable, may designate such director’s replacement; and

 

the removal, replacement or appointment of a new Chief Executive Officer or President and Chief Operating Officer will require the vote of two-thirds of the entire board of directors.

Transocean-Switzerland. Transocean-Switzerland’s organizational regulations stipulate provisions with respect to board and committee composition and management substantially similar to those of Transocean-Cayman described above. However, under Swiss law, in the event that a Transocean designated director or a GlobalSantaFe designated director dies, resigns, is removed from or otherwise fails to serve on the board, the board of directors will not be able to fill a vacancy on the board on its own. Under Swiss law, the composition of the board of directors is subject to approval by the general meeting of shareholders. As a result, Transocean-Switzerland’s organizational regulations provide that the remaining Transocean designated directors or GlobalSantaFe designated directors, as applicable, may designate a nominee for election by the shareholders at the next general meeting.

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Duties of the Board of Directors

Transocean-Cayman. The Companies Law does not specify the duties of directors. Judicial precedent in the Cayman Islands has defined the duties of a director as being the observance of general standards of loyalty, good faith, and the avoidance of a conflict of duty and self-interest. In the absence of a developed body of Cayman Islands law in this regard, the principles outlined by English common law are highly persuasive in the Cayman Islands courts. The duties of a director of a Cayman Islands company may be summarized as follows:

 

a duty to act in what the directors bona fide consider to be the best interests of the company (and in this regard it should be noted that what is in the best interests of the group (if any) of companies to which the company belongs is not necessarily in the best interests of the company). The interests of the company and the shareholders are distinct. However, in practical terms, there is often an overlap between the interests of the company and its shareholders as a whole;

 

a duty to exercise their powers for the purposes for which they are conferred;

 

a duty of trusteeship of the company’s assets;

 

the duty, where possible, to avoid conflicts of interest and of duty;

 

a duty to disclose personal interest in contracts involving the company;

 

a duty not to make secret profits from the directors’ office; and

 

a duty to act with skill and care.

In recent years the English and Commonwealth common law authorities have moved towards an objective test for the standard of skill and care that should be exercised by directors. It is likely that the Cayman Islands courts will follow these authorities. In consequence, the standard of care required to be met by the director of a Cayman Islands company is that of a reasonably diligent person having both (1) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to that company, and (2) the specific knowledge, skill and experience that such director actually has. In consequence, there is a minimum objective standard based upon the functions given to the director in question but the standard may be raised where the director in question has more knowledge, skill and experience than would normally be expected. In addition, and based on a growing body of judicial precedent in England and the Commonwealth, the responsibilities of directors require that they take reasonable steps to place themselves in a position to guide and monitor the management of the company without relying blindly on the judgment of others. The foregoing notwithstanding, the duty of care is not absolute and it is still proper for directors to delegate management functions, especially in large companies such as Transocean-Cayman.

Transocean-Switzerland. A director of a Swiss company is bound to performance standards as specified in the Swiss Code. Under these standards, a director must act in accordance with the duties imposed by statutory law, in accordance with the company’s articles of association and in the best interest of the company. A director is generally disqualified from participating in a decision that directly affects him. A director must generally safeguard the interest of the company in good faith, adhere to a duty of loyalty and a duty of care and, absent special circumstances, extend equal treatment to all shareholders in like circumstances. The test for the duty of care is primarily objective: a director is required to apply the care a reasonable person would apply under the same circumstances. To some extent, particular skills and functions of a board member may be taken into consideration. The members of the board of directors of Transocean-Switzerland are liable to Transocean-Switzerland, its shareholders and, in bankruptcy, its creditors for damage caused by the violation of their duties.

To the extent that the Swiss Code allows the delegation by the board of directors to executive management, and such delegation is actually made by virtue of Transocean-Switzerland’s organizational regulations, the responsibility of the board of directors is limited to the due election, instruction and supervision of the executive management.

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Indemnification of Directors and Officers; Insurance

Transocean-Cayman. Cayman Islands law does not limit the extent to which a company may indemnify its directors and officers except to the extent that such provision may be held by the Cayman Islands courts to be contrary to public policy. Based on advice from our Cayman Islands counsel, we believe that an indemnity for negligence generally will be enforceable. Similarly, an indemnity for acts or omissions by directors or officers in the performance of their duties that may be considered to be grossly negligent will probably be enforceable. It is less likely that a Cayman Islands court will enforce an indemnity for willful neglect or willful default by a director or officer in the performance of his duties, particularly with respect to matters evidencing bad faith on the part of the relevant director or officer. Indemnity for actions by directors or officers that are considered fraudulent or otherwise criminal will not, except in certain very limited circumstances, be enforceable.

Transocean-Cayman’s articles of association make indemnification of directors and officers and advancement of expenses to defend claims against directors and officers mandatory on the part of Transocean-Cayman to the fullest extent allowed by law.

Cayman Islands law permits the company, or each director or officer individually, to purchase and maintain insurance on behalf of such directors and officers.

Transocean-Switzerland. We believe, based on the interpretation of leading Swiss legal scholars, which is a persuasive authority in Switzerland, that, under Swiss law, the company may indemnify its directors and officers unless the indemnification results from a breach of their duties that constitutes gross negligence or intentional breach of duty of the director or officer concerned. Transocean-Switzerland’s articles of association make indemnification of directors and officers and advancement of expenses to defend claims against directors and officers mandatory on the part of Transocean-Switzerland to the fullest extent allowed by law. Under Transocean-Switzerland’s articles of association, a director or officer may not be indemnified if such person is found, in a final judgment or decree not subject to appeal, to have committed an intentional or grossly negligent breach of his or her statutory duties as a director or officer. Swiss law permits the company, or each director or officer individually, to purchase and maintain insurance on behalf of such directors and officers. Transocean-Switzerland may obtain such insurance from one or more third party insurers or captive insurance companies. Transocean-Switzerland also plans to enter into indemnification agreements with each of its directors and executive officers, upon the completion of the Transaction, that will provide for indemnification and expense advancement and include related provisions meant to facilitate the indemnitee’s receipt of such benefits. The agreements provide that Transocean-Switzerland will indemnify each such director and executive officer if such director or executive officer acted in good faith and reasonably believed he was acting in the best interest of Transocean-Switzerland and, in addition, with respect to any criminal proceeding, he had no reasonable cause to believe that his conduct was unlawful. The agreements provide that expense advancement is provided subject to an undertaking by the indemnitee to repay amounts advanced if it is ultimately determined that he is not entitled to indemnification. The disinterested members of the board of directors of Transocean-Switzerland or an independent counsel will determine whether indemnification payment should be made in any particular instance. In making such determination, the board or the independent counsel, as the case may be, must presume that the indemnitee is entitled to such indemnification, and Transocean-Switzerland has the burden of proof in seeking to overcome such presumption. If the board or the independent counsel determines that the director or executive officer is not entitled to indemnification, the agreements provide that such person is entitled to seek an award in arbitration with respect to his right to indemnification under his agreement.

Limitation on Director Liability

Transocean-Cayman. Cayman Islands law in some circumstances permits a company to limit the liability of a director to the company. The considerations under Cayman Islands law with regard to the limitation of a director’s liability are similar to those that apply to the enforcement of provisions relating to the indemnification of directors discussed above under “—Indemnification of Directors and Officers; Insurance.” In summary, a Cayman Islands court will enforce such a limitation except to the extent that enforcement of the relevant provision may be held to be contrary to public policy. Transocean-Cayman’s articles of association provide that the directors shall have no personal liability to Transocean-Cayman or, if any, to its shareholders for monetary damages for breach of fiduciary duty as a director, except for:

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breaching the duty of loyalty to Transocean-Cayman or, if any, to its shareholders;

 

failing to act in good faith;

 

engaging in intentional misconduct or a known violation of law; or

 

obtaining an improper personal benefit from Transocean-Cayman.

Transocean-Switzerland. Swiss law does not permit a company to exempt any member of its board of directors from any liability for damages suffered by the company, the shareholders or the company’s creditors caused by intentional or negligent violation of that director’s duties. However, the general meeting of shareholders may pass a resolution discharging the members of the board of directors from liability for certain limited actions. Such release is effective only for facts that have been disclosed to the shareholders and only vis-à-vis the company and those shareholders who have consented to the resolution or who acquired shares subsequently with knowledge of the resolution.

Directors’ Conflicts of Interest

Transocean-Cayman. As a matter of the common law applied in the Cayman Islands, the director of a Cayman Islands company should seek to avoid placing himself in a position where there is a conflict, or a possible conflict, between the duties he owes to the company and either his personal interest or other duties that he owes to a third party, and if a director is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company, he must declare the nature and extent of that interest to the other directors at the first opportunity. The duty to avoid conflicting interests extends to contracts with the company, the use of information or opportunities that come to him by virtue of his directorship and actions competing with the company.

This common law duty of a director to avoid conflicts of interest is not breached in respect of matters that have been (1) authorized by the directors generally or (2) authorized by the provisions of the company’s articles of association. Transocean-Cayman’s articles of association specifically provide that no person is disqualified from the office of director or prevented by such office from contracting with the Company, either as vendor, purchaser or otherwise. In addition, such contract or transaction is liable to be avoided, and no such director so contracting or being so interested is liable to account to the company for any profit realized from any such contract or transaction; provided, however, that the director has disclosed his interest in the transaction at the first meeting held to consider the transaction or as soon after the meeting as he becomes interested in the transaction. A director shall be at liberty to vote in respect of any contract or transaction in which he is so interested; provided, however, that the nature of the interest of any director in any such contract or transaction must be disclosed by him at or prior to its consideration and any vote on the matter.

Transocean-Switzerland. Swiss law does not have a general provision on conflicts of interest. However, under the Swiss Code a director is required to safeguard the interests of the company and to adhere to a duty of loyalty and a duty of care. This requirement generally disqualifies a director from participating in decisions directly affecting him. Breach of these principles may also entail personal liability of the directors to the company. In addition, the Swiss Code requires a director to return to the company payments made to a director if such payments are not made on an arm’s length basis or if the recipient of the payment was acting in bad faith.

Shareholders’ Suits

Transocean-Cayman. The Cayman Islands courts have recognized derivative suits by shareholders; however, the consideration of those suits has been limited. In this regard, the Cayman Islands courts ordinarily would be expected to follow English precedent, which would permit a claim to be brought by a minority shareholder, in respect of a cause of action vested in a Cayman Islands company, in the name of and seeking relief on behalf of the company only:

 

in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of a company;

 

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where the act complained of is illegal or alleged to constitute a fraud against the company or against any minority shareholder; or

 

where the act is beyond the corporate power of the company or otherwise requires approval by a greater percentage of the company’s shareholders than actually approved it;

and, in each case, where the act complained of is not capable of subsequent ratification by any majority of the company’s shareholders at a general meeting. The cause of action may be against the director, another person or both.

A shareholder may be permitted to bring an action in his own name against a Cayman Islands company, director or any other person in respect of any direct loss suffered by such shareholder as a result of any negligence, default, breach of duty or breach of trust. In any such action, however, a loss suffered by the company will not be regarded as a direct loss suffered by the individual shareholder. A shareholder may also be permitted to bring an action on the basis that the company’s affairs are being, or have been, conducted in a manner that is unfairly prejudicial to the interests of members generally or to some members in particular.

Transocean-Switzerland. Under Swiss law, each shareholder is entitled to file an action for damage caused to the company. The claim of the shareholder is for performance to the company. If the shareholder, based upon the factual and legal situation, had sufficient cause to file an action, the judge has discretion to impose all costs the plaintiff incurred in prosecuting the action on the company.

Shareholders who suffer a direct loss due to an intentional or negligent breach of a director’s or senior officer’s duties may sue in their personal capacity for monetary compensation.

Shareholder Consent to Action Without Meeting

Transocean-Cayman. Cayman Islands law and Transocean-Cayman’s articles of association provide that shareholders may take action requiring either an ordinary or special resolution without a meeting only by unanimous written consent.

Transocean-Switzerland. Under Swiss corporate law, shareholders are not permitted to act by written consent in lieu of a general meeting of shareholders.

Annual Meetings of Shareholders

Transocean-Cayman. Under Transocean-Cayman’s articles of association, a general meeting of shareholders is required to be held at least annually. Transocean-Cayman’s articles of association provide that at the annual meeting elections will be held for directors whose terms have expired and such other business may be transacted as may properly be brought before such meeting. That meeting can be held anywhere.

Transocean-Switzerland. Under the Swiss Code and Transocean-Switzerland’s articles of association, Transocean-Switzerland must hold an annual, ordinary general meeting of shareholders within six months after the end of its fiscal year for the purpose, among other things, of approving the annual financial statements and the annual business report, and the annual election of directors for the class whose term has expired. The invitation to general meetings must be published in the Swiss Official Gazette of Commerce at least 20 calendar days prior to the relevant general meeting of shareholders. Annual general meetings of shareholders may be convened by the board of directors or, under certain circumstances, by the auditor. A general meeting of shareholders can be held anywhere.

Special Meetings of Shareholders

Transocean-Cayman. Under Transocean-Cayman’s articles of association, an extraordinary general meeting of Transocean-Cayman may be called only by a majority of the board of directors of Transocean-Cayman.

Transocean-Switzerland. An extraordinary general meeting of Transocean-Switzerland may be called upon the resolution of the board of directors or, under certain circumstances, by the auditor. In addition, the board

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of directors is required to convene an extraordinary general meeting of shareholders if so resolved by the general meeting of shareholders, or if so requested by shareholders holding an aggregate of at least 10% of the registered shares, specifying the items for the agenda and their proposals, or if it appears from the stand-alone annual statutory balance sheet that half of the company’s share capital and reserves are not covered by the company’s assets. In the latter case, the board of directors must immediately convene an extraordinary general meeting of shareholders and propose financial restructuring measures. Any shareholder may request that an item be included on the agenda of a general meeting of shareholders. See “—Director Nominations; Proposals of Shareholders” for more information.

Record Dates for Shareholder Meetings

Transocean-Cayman. Transocean-Cayman’s articles of association provide that the record date for any general shareholder meeting may be at most 60 days prior to that meeting.

Transocean-Switzerland. Transocean-Switzerland expects to set the record date for each general meeting of shareholders on a date not more than 20 calendar days prior to the date of each general meeting and announce the date of the general meeting of shareholders prior to the record date.

Director Nominations; Proposals of Shareholders

Transocean-Cayman. Transocean-Cayman’s articles of association require that a shareholder desiring to nominate directors or submit a proposal for consideration by the shareholders at any annual general meeting must give written notice of such intent, which notice must be received by the secretary of Transocean no later than 90 days in advance of the anniversary date of the immediately preceding annual meeting. If the date of the annual general meeting is more than 30 days before or after such anniversary date, such written notice must instead be received by the secretary of Transocean by the close of business on the tenth day following the date on which Transocean first makes public disclosure of the meeting date.

Transocean-Switzerland. Under Transocean-Switzerland’s articles of association, any shareholder may request that an item be included on the agenda of a general meeting of shareholders. Such shareholder may also nominate one or more directors for election. A request for inclusion of an item on the agenda or a nominee must be in writing and received by Transocean-Switzerland at least 30 calendar days prior to the anniversary date of the proxy statement in connection with Transocean’s last general meeting of shareholders; provided, however, that if the date of the general meeting of shareholders is more than 30 days before or after such anniversary date, such request must instead be made by the tenth day following the date on which Transocean-Switzerland has made public disclosure of the date of the general meeting of shareholders. The request must specify the relevant agenda items and motions, together with evidence of the required shares recorded in the share register, as well as any other information as would be required to be included in a proxy statement pursuant to the rules of the SEC.

Adjournment of Shareholder Meetings

Transocean-Cayman. Transocean-Cayman’s articles of association provide that the presiding officer of any shareholder meeting may, with the consent of a majority of the shareholders present and entitled to vote at the meeting, adjourn the meeting. When a general meeting is adjourned for 30 days or more, a new notice of meeting is required.

Transocean-Switzerland. Under the Swiss Code, a general meeting of shareholders for which a notice of meeting has been duly published may not be adjourned without publishing a new notice of meeting.

Voting Rights

Transocean-Cayman. The holders of ordinary shares of Transocean-Cayman are entitled to one vote per share, except as described under “Election of Directors; Staggered Terms of Directors” in connection with the election of directors. For provisions regarding the election of directors, see “Election of Directors; Staggered Terms of Directors” above.

Under Cayman Islands law, some matters, like altering the memorandum or the articles, changing the name of a company, voluntarily winding up a company or resolving to be registered by way of continuation in a

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jurisdiction outside the Cayman Islands, require approval of shareholders by a special resolution. A special resolution is a resolution (1) passed by the holders of two-thirds of the shares voted at a general meeting (at which the applicable quorum is present in person or by proxy) or (2) approved in writing by all shareholders entitled to vote at a general meeting of the company.

There are no limitations imposed by Cayman Islands law or Transocean-Cayman’s articles of association on the right of nonresident shareholders to hold or vote their ordinary shares.

The rights attached to any separate class or series of shares, unless otherwise provided by the terms of the shares of that class or series, may be varied only with the consent in writing of the holders of all of the issued shares of that class or series or by a special resolution passed at a separate general meeting of holders of the shares of that class or series. The necessary quorum for that meeting is the presence in person or by proxy of holders of at least a majority of the shares of that class or series. Each holder of shares of the class or series present, in person or by proxy, will have one vote for each share of the class or series of which he is the holder. Outstanding shares will not be deemed to be varied by the creation or issuance of additional shares that rank in any respect prior to or equivalent with those shares.

Transocean-Switzerland. Each Transocean-Switzerland registered share carries one vote at a general meeting of shareholders. Voting rights may be exercised by shareholders registered in Transocean-Switzerland’s share register or by a duly appointed proxy of a registered shareholder, which proxy need not be a shareholder. Transocean-Switzerland’s articles of association do not limit the number of registered shares that may be voted by a single shareholder.

Treasury shares, whether owned by Transocean-Switzerland or one of its majority-owned subsidiaries, will not be entitled to vote at general meetings of shareholders.

Pursuant to the Swiss Code, registered shareholders have the exclusive right to determine the following matters:

 

adoption and amendment of Transocean-Switzerland’s articles of association;

 

election of members of the board of directors and the auditor;

 

approval of the annual business report, the stand-alone statutory financial statements and the consolidated financial statements;

 

payments of dividends and any other distributions of capital to shareholders (excluding share repurchases below 10% of the registered share capital);

 

discharge of the members of the board of directors from liability for previous business conduct to the extent such conduct is known to the shareholders; and

 

any other resolutions that are submitted to a general meeting of shareholders pursuant to law, Transocean-Switzerland’s articles of association or by voluntary submission by the board of directors (unless a matter is within the exclusive competence of the board of directors pursuant to the Swiss Code).

Pursuant to Transocean-Switzerland’s articles of association, the shareholders generally pass resolutions by the affirmative vote of a majority of the registered shares represented and voting at the general meeting of shareholders (broker nonvotes, abstentions and blank and invalid ballots shall be disregarded), unless otherwise provided by law or Transocean-Switzerland’s articles of association. Transocean-Switzerland’s articles of association provide that directors may be elected at a general meeting of shareholders by a plurality of the votes cast by the shareholders present in person or by proxy at the meeting. See “Election of Directors; Staggered Terms of Directors” for a discussion of voting for the election of directors. The acting chair may direct that elections be held by use of an electronic voting system. Electronic resolutions and elections are considered equal to resolutions and elections taken by way of a written ballot.

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The Swiss Code and/or Transocean-Switzerland’s articles of association require the affirmative vote of at least two-thirds of the voting rights and a majority of the par value of the registered shares, each as represented at a general meeting to approve the following matters:

 

the amendment to or the modification of the purpose of Transocean-Switzerland;

 

the creation of shares with privileged voting rights;

 

the restriction on the transferability of shares and any amendment in relation thereto;

 

the restriction on the exercise of the right to vote and any amendment in relation thereto;

 

an authorized or conditional increase in the nominal share capital;

 

an increase in the nominal share capital (1) through the conversion of capital surplus, (2) through a contribution in kind, or (3) in exchange for an acquisition of assets, or a grant of special privileges;

 

the restriction or withdrawal of preemptive rights;

 

a change in the place of incorporation of Transocean-Switzerland;

 

the conversion of registered shares into bearer shares and vice versa; and

 

the dissolution of Transocean-Switzerland.

The same supermajority voting requirements apply to resolutions in relation to transactions among corporations based on the Merger Act, including a merger, demerger or conversion of a corporation (other than a cash-out or certain squeeze-out mergers, in which minority shareholders of the company being acquired may be compensated in a form other than through shares of the acquiring company, for instance, through cash or securities of a parent company of the acquiring company or of another company—in such a merger, an affirmative vote of 90% of the outstanding registered shares is required). Swiss law may also impose this supermajority voting requirement in connection with the sale of “all or substantially all of its assets” by Transocean-Switzerland. See “—Compulsory Acquisitions; Appraisal Rights” and “—Shareholder Approval of Business Combinations.”

Transocean-Switzerland’s articles of association require the affirmative vote of at least two-thirds of the registered shares recorded in the commercial register and entitled to vote at a general meeting to approve the following matters:

 

the removal of a member of the board of directors;

 

any changes to Article 14, paragraph 1 specifying advance notice of proposal requirements;

 

any changes to Article 20 specifying supermajority vote requirements;

 

any changes to Article 21 specifying quorum requirements;

 

any changes to Article 22 specifying the number of members of the board of directors;

 

any changes to Article 23 specifying the classification of the board of directors; and

 

any changes to Article 24 specifying the indemnification provisions for directors and officers.

Transocean-Switzerland’s articles of association require the affirmative vote of holders of the number of registered shares of Transocean-Switzerland equal to the sum of (A) 66 2/3% of the number of all registered shares outstanding and entitled to vote at a general meeting, plus (B) a number of registered shares outstanding and entitled to vote at the general meeting that is equal to one-third of the number of registered shares held by an interested shareholder, for Transocean-Switzerland to engage in any business combination with an interested shareholder (as

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those terms are defined in Transocean-Switzerland’s articles of association) and for the amendment of the provisions in Transocean-Switzerland’s articles of association relating to this shareholder approval requirement.

Amendment of Governing Documents

Transocean-Cayman. Under the Companies Law, Transocean-Cayman’s memorandum and articles of association may only be amended by a special resolution of its shareholders. Transocean-Cayman’s board of directors may not effect amendments to Transocean-Cayman’s memorandum or articles of association on its own. Cayman Islands law does not have the concept of organizational regulations or similar documents, such as bylaws.

Transocean-Switzerland. Under the Swiss Code and Transocean-Switzerland’s articles of association, Transocean-Switzerland’s articles of association may only be amended by a resolution of its shareholders at a general meeting. See “—Voting Rights.” Other than on the basis of an authorization of the general meeting of shareholders, Transocean-Switzerland’s board of directors may not effect amendments to Transocean-Switzerland’s articles of association on its own. Under Transocean-Switzerland’s articles of association, the board of directors may pass and amend organizational regulations. Under Swiss law, shareholders may not pass or amend organizational regulations but may pass resolutions amending the articles of association to effectively supersede provisions in the organizational regulations.

Quorum Requirements

Transocean-Cayman. The presence of shareholders, in person or by proxy, holding at least a majority of the issued shares generally entitled to vote at a meeting, is a quorum for the transaction of most business. However, different quorums are required in some cases to approve a change in Transocean-Cayman’s articles of association.

Shareholders present, in person or by proxy, holding at least 95% of the issued shares entitled to vote at a meeting constitute the required quorum at a general meeting to consider or adopt a special resolution to amend, vary, suspend the operation of or cause any of the following provisions of Transocean-Cayman’s articles of association to cease to apply:

 

Section 17—which relates to the convening of general meetings;

 

Section 19—which relates to proceedings and procedures at general meetings;

 

Section 21.1—which relates to the election and appointment of directors;

 

Section 26—which requires shareholders to approve the sale, lease or exchange of all or substantially all of Transocean-Cayman’s property or assets; or

 

Section 27—which generally requires shareholders to approve business combinations with interested shareholders.

Notwithstanding the above, the presence of shareholders, in person or by proxy, holding at least a majority of the issued shares entitled to vote at the meeting held to consider or adopt a special resolution in relation to the matters referred to above, is a quorum if:

 

a majority of the board of directors has, at or prior to the meeting, recommended a vote in favor of the special resolution; and

 

in the case of a special resolution to amend, vary, suspend the operation of or disapply Section 27 of the articles, other than a special resolution referred to below, the favorable board of directors’ recommendation is made at a time when a majority of the board of directors then in office were directors prior to any person becoming an interested shareholder during the previous three years or were recommended for election or elected to succeed those directors by a majority of those directors.

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In addition, the presence of shareholders, in person or by proxy, holding at least a majority of the issued shares entitled to vote at a meeting, shall constitute a quorum at a meeting held to consider or adopt a special resolution to delete Section 27 of the articles if:

 

the resolution will not be effective until 12 months after the passing of the resolution; and

 

the restriction in Section 27 of the articles will otherwise continue to apply to any business combination between Transocean-Cayman and any person who became an interested shareholder on or before the passing of the resolution.

Transocean-Switzerland. The presence of shareholders, in person or by proxy, holding at least a majority of the registered shares recorded in Transocean-Switzerland’s share register and generally entitled to vote at a meeting, is a quorum for the transaction of most business. Shareholders present, in person or by proxy, holding at least 66 2/3% of the registered shares recorded in the commercial register and generally entitled to vote at a general meeting constitute the required quorum at a general meeting to consider or adopt a resolution to amend, vary, suspend the operation of or cause any of the following provisions of Transocean-Switzerland’s articles of association to cease to apply:

 

Article 18—which relates to proceedings and procedures at general meetings;

 

Article 19(f)— which relates to business combinations with interested shareholders;

 

Article 20—which sets forth the level of shareholder approval required for certain matters;

 

Article 21—which sets forth the quorum at a general meeting required for certain matters, including the removal of a member of the board of directors; and

 

Articles 22, 23 and 24—which relate to the election and appointment of directors.

Under the Swiss Code, the board of directors has no authority to waive quorum requirements stipulated in the articles of association.

Inspection of Books and Records; Special Investigation

Transocean-Cayman. Shareholders of a Cayman Islands company have no general rights to inspect or obtain copies of the list of shareholders or corporate records of a company (other than the register of mortgages and charges). However, Transocean-Cayman’s articles of association provide that any shareholder may inspect Transocean-Cayman’s books and records for any proper purpose upon written demand under oath. A proper purpose is defined to mean a purpose reasonably related to such person’s interest as a shareholder. The board of directors of Transocean-Cayman may establish procedures or conditions regarding these inspection rights for the following purposes:

 

protecting the interests of Transocean-Cayman;

 

protecting the confidentiality of the information contained in those books and records;

 

the convenience of Transocean-Cayman; or

 

protecting any other interest of Transocean-Cayman that the board of directors deems proper.

While in principle a Cayman Islands court may order an examination of the affairs of a Cayman Islands company, Cayman Islands law does not generally provide for the equivalent of a special investigation under Swiss law.

Transocean-Switzerland. Under the Swiss Code, a shareholder has a right to inspect the share register with regard to his own shares and otherwise to the extent necessary to exercise his shareholder rights. No other person has a right to inspect the share register. The books and correspondence of a Swiss company may be

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inspected with the express authorization of the general meeting of shareholders or by resolution of the board of directors and subject to the safeguarding of the company’s business secrets. At a general meeting of shareholders, any shareholder is entitled to request information from the board of directors concerning the affairs of the company. Shareholders may also ask the auditor questions regarding its audit of the company. The board of directors and the auditor must answer shareholders’ questions to the extent necessary for the exercise of shareholders’ rights and subject to prevailing business secrets or other material interests of Transocean-Switzerland.

In addition, if the shareholders’ inspection and information rights as outlined above prove to be insufficient, any shareholder may propose to the general meeting of shareholders that specific facts be examined by a special commissioner in a special investigation. If the general meeting of shareholders approves the proposal, Transocean-Switzerland or any shareholder may, within 30 calendar days after the general meeting of shareholders, request the court at Transocean-Switzerland’s registered office to appoint a special commissioner. If the general meeting of shareholders rejects the request, one or more shareholders representing at least 10% of the share capital or holders of registered shares in an aggregate par value of at least 2 million Swiss francs may request the court to appoint a special commissioner. The court will issue such an order if the petitioners can demonstrate that the board of directors, any member of the board or an officer of Transocean-Switzerland infringed the law or Transocean-Switzerland’s articles of association and thereby damaged the company or the shareholders. The costs of the investigation would generally be allocated to Transocean-Switzerland and only in exceptional cases to the petitioners.

Transfer and Registration of Shares

Transocean-Cayman. Transocean-Cayman’s board of directors may, in its discretion, decline to register any transfer of any share (subject to any New York Stock Exchange rules governing share transfers). The Transocean-Cayman board of directors may suspend the registration of share transfers for 30 days in any year. Transocean-Cayman’s articles of association expressly provide for the issuance of fractional shares up to three decimal places. The articles also provide for actions which the board may take when shareholders become entitled to fractions of a share (including the sale of fractions of a share or rounding up shares to the nearest whole number).

Transocean-Switzerland. No restrictions apply to the transfer of Transocean-Switzerland registered shares. Transocean-Switzerland’s share register will initially be kept by The Bank of New York, which acts as transfer agent and registrar. The share register reflects only record owners of Transocean-Switzerland shares. Swiss law does not recognize fractional share interests.

Rights upon Liquidation

Transocean-Cayman. Upon the liquidation of Transocean-Cayman, after creditors have been paid the full amounts owing to them and the holders of any issued shares ranking senior to the ordinary shares as to distribution on liquidation or winding-up are entitled to receive have been paid or set aside for payment, then the holders of Transocean-Cayman’s ordinary shares are entitled to receive, pro rata, any remaining assets available for distribution to the holders of ordinary shares. The liquidator may deduct from the amount payable in respect of those ordinary shares any liabilities the holder has to or with Transocean-Cayman. The assets received by the holders of Transocean-Cayman ordinary shares in liquidation may consist in whole or in part of property. That property is not required to be of the same kind for all shareholders.

Transocean-Switzerland. Transocean-Switzerland’s duration is unlimited. Transocean-Switzerland may be dissolved at any time with the approval of shareholders holding two-thirds of the voting rights and a majority of the par value of the registered shares represented at a general meeting. Dissolution by court order is possible if Transocean-Switzerland becomes bankrupt, or for cause at the request of shareholders holding at least 10% of Transocean-Switzerland’s share capital. Under Swiss law, any surplus arising out of liquidation, after the settlement of all claims of all creditors, will be distributed to shareholders in proportion to the paid-up par value of registered shares held, subject to Swiss withholding tax requirements.

Enforcement of Civil Liabilities Against Foreign Persons

Transocean-Cayman. Walkers, our Cayman Islands legal counsel, has advised us that there is doubt as to whether Cayman Islands courts would enforce (1) judgments of U.S. courts obtained in actions against us or other

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persons that are predicated upon the civil liability provisions of the Securities Act or (2) original actions brought against us or other persons predicated upon the Securities Act. There is no treaty between the United States and the Cayman Islands providing for enforcement of judgments, and there are grounds upon which Cayman Islands courts may not enforce judgments of U.S. courts. In general, Cayman Islands courts would not enforce any remedies if they are deemed to be penalties, fines, taxes or similar remedies.

Transocean-Switzerland. Switzerland and the United States do not have a treaty providing for reciprocal recognition and enforcement of judgments in civil and commercial matters. The recognition and enforcement of a judgment of the courts of the United States in Switzerland is governed by the principles set forth in the Swiss Federal Act on Private International Law. This statute provides in principle that a judgment rendered by a non-Swiss court may be enforced in Switzerland only if:

 

the foreign court had jurisdiction pursuant to the Swiss Federal Act on Private International Law;

 

the judgment of such foreign court has become final and non-appealable;

 

no reason for refusal in the sense of Article 27 Swiss Federal Act on Private International Law is given (in particular, but not limited to, the decision does not contravene Swiss public policy); and

 

the court procedures and the service of documents leading to the judgment were in accordance with the due process of law, legal precedent and similar requirements.

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THE SHAREHOLDERS MEETING

We are furnishing this proxy statement to our shareholders in connection with the solicitation of proxies by Transocean-Cayman’s board of directors for use at a meeting of Transocean-Cayman shareholders to consider the Transaction and any adjournment or postponement of the meeting. We are first mailing this proxy statement and accompanying form of proxy to shareholders beginning on or about                  , 2008.

Time, Place and Date

The shareholders meeting will be held on                  , 2008 at            ,                             time, at the                                                                                                             .

Purpose of the Meeting

At the meeting, Transocean-Cayman’s board of directors will ask the shareholders to vote to approve:

 

the Transaction, which will be effected by the Schemes of Arrangement, attached as Annex B to this proxy statement (the “Schemes of Arrangement”), pursuant to which Transocean-Cayman would merge with Transocean-Acquisition, and each outstanding ordinary share of Transocean-Cayman would be exchanged for one share of Transocean-Switzerland and, in addition, Transocean-Switzerland would issue 16 million of Treasury Shares to Transocean-Cayman for future use to satisfy Transocean-Switzerland’s obligation to deliver shares in connection with awards granted under our incentive plans, warrants or other rights to acquire shares of Transocean-Switzerland. Transocean-Switzerland will assume Transocean-Cayman’s existing obligation to deliver shares under such incentive plans, warrants or other rights.

 

a motion to adjourn the meeting to a later date to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the Transaction.

 

any other matters that properly come before the meeting and any adjournments or postponements of the meeting.

Transocean-Cayman’s board of directors has unanimously approved the Transaction and the adjournment proposal and unanimously recommends that you vote “FOR” both of the proposals.

Record Date; Voting Rights; Vote Required for Approval

The board has fixed the close of business on                   , 2008 as the record date for the shareholders meeting.

Only holders of record of Transocean-Cayman ordinary shares on the record date are entitled to notice of and to vote at the meeting or any adjournment or postponement of the meeting. You will not be the holder of record of shares that you hold in “street name.” Instead, the depository (for example, Cede & Co.) or other nominee will be the holder of record of such shares.

On the record date of the shareholders meeting, approximately                     Transocean-Cayman ordinary shares were issued and entitled to be voted at the meeting. Each Transocean-Cayman ordinary share entitles the holder to one vote.

There is no formal quorum requirement for a meeting of shareholders convened to consider the terms of a scheme of arrangement under Cayman Islands law. Nonetheless, we will not petition the Grand Court of the Cayman Islands to sanction the Transaction unless shareholders holding a majority of the outstanding Transocean-Cayman ordinary shares are present in person or by proxy at the meeting of shareholders (or any adjournments of the meeting of shareholders), which number of shareholders would constitute a quorum for most purposes under Transocean-Cayman’s articles of association. Abstentions and “broker non-votes” will be counted as present for purposes of determining whether there is a quorum in respect of the proposals.

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