<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------
NATIONAL-OILWELL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5084 76-0475815
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>
5555 SAN FELIPE
HOUSTON, TEXAS 77056
(713) 960-5100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
PAUL M. NATION
VICE PRESIDENT AND GENERAL COUNSEL
NATIONAL-OILWELL, INC.
5555 SAN FELIPE
HOUSTON, TEXAS 77056
(713) 960-5100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
<TABLE>
<S> <C>
JOHN S. WATSON JAMES M. PRINCE
VINSON & ELKINS L.L.P. ANDREWS & KURTH L.L.P.
2300 FIRST CITY TOWER, 1001 FANNIN 4200 TEXAS COMMERCE TOWER, 600 TRAVIS
HOUSTON, TEXAS 77002-6760 HOUSTON, TEXAS 77002
(713) 758-2222 (713) 220-4200
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<Caption
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PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.01......................... $82,800,000 $28,552
===================================================================================================
</TABLE>
(1) Calculated pursuant to Rule 457(o) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
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* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any state in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* state. *
***************************************************************************
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 29, 1996
PROSPECTUS
4,000,000 SHARES
[NATIONAL OILWELL LOGO]
NATIONAL-OILWELL, INC.
COMMON STOCK
------------------------
All 4,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby (the "Offering") are being sold by National-Oilwell,
Inc. (the "Company"). The initial public offering price is expected to be
between $ and $ per share.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price.
The Company intends to make application to list the Common Stock on the New
York Stock Exchange under the proposed symbol "NAT."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
======================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share.............................. $ $ $
- ------------------------------------------------------------------------------------------------------
Total(3)............................... $ $ $
======================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $700,000.
(3) The Company has granted to the several Underwriters an option, exercisable
within 30 days after the date of this Prospectus, to purchase up to an
additional 600,000 shares of Common Stock at the Price to Public, less
Underwriting Discount, solely to cover over-allotments, if any. If such
option is exercised in full, the Price to Public, Underwriting Discount and
Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York, on or
about , 1996.
------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
SIMMONS & COMPANY
INTERNATIONAL
------------------------
The date of this Prospectus is , 1996.
<PAGE> 3
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information in this Prospectus assumes (i) exercise of
the Warrant to purchase 282,392 shares of Common Stock and, assuming an initial
public offering price of $ per share, (ii) all outstanding shares of the
Company's Class A Common Stock are converted into 1,902,543 shares of Common
Stock on the effective date of the Registration Statement of which this
Prospectus is a part and (iii) the issuance of 340,926 shares of Common Stock in
connection with the Company's Value Appreciation Plans. Prospective purchasers
of the Common Stock should carefully read this entire Prospectus and should
consider, among other things, the matters set forth under "Risk Factors." Unless
otherwise indicated, all information relating to the Company contained in this
Prospectus assumes the over-allotment option described under "Underwriting" is
not exercised. Certain capitalized terms which are used but not defined in this
summary are defined elsewhere in this Prospectus.
THE COMPANY
National-Oilwell, Inc. (the "Company") is a worldwide leader in the design,
manufacture and sale of machinery and equipment and in the distribution of
maintenance, repair and operating ("MRO") products used in oil and gas drilling
and production. The Company designs, manufactures and sells drawworks, mud pumps
and power swivels (also known as "top drives"), which are the major mechanical
components of rigs used to drill oil and gas wells. Many of these components are
designed specifically for applications in offshore, extended reach and deep land
drilling. These components are installed on new drilling rigs and used in the
upgrade, refurbishment and repair of existing drilling rigs. A significant
portion of the Company's business includes the sale of replacement parts for its
own manufactured machinery and equipment. The Company estimates that
approximately 65% of the mobile offshore rig fleet and the majority of the
world's larger land rigs (2,000 horsepower and greater) operating today utilize
drilling machinery manufactured by the Company. In addition, the Company
manufactures and sells a complete line of centrifugal and reciprocating pumps
used in oilfield and industrial applications.
The Company provides distribution services through its network of 113
distribution service centers located near major drilling and production activity
worldwide, but principally in the United States and Canada. These distribution
service centers have historically provided MRO products, including valves,
fittings, flanges, replacement parts and miscellaneous expendable items. As oil
and gas companies and drilling contractors have refocused on their core
competencies and emphasized efficiency initiatives to reduce costs and capital
requirements, the Company's distribution services have evolved to offer
outsourcing and alliance arrangements that include comprehensive procurement,
inventory management and logistics support. These arrangements have resulted in
the Company working more closely with its customers in return for a more
exclusive oilfield distribution arrangement.
The Company's business is dependent on and affected by the level of
worldwide oil and gas drilling and production activity, the aging worldwide rig
fleet which was generally constructed prior to 1982, and the profitability and
cash flow of oil and gas companies and drilling contractors. Drilling activity
has recently increased in the offshore and deeper land markets both of which are
particularly well served by the drilling machinery and equipment manufactured by
the Company. As of June 30, 1996, the worldwide offshore mobile drilling rig
utilization rate was over 90% and the number of active U.S. land rigs had
increased approximately 15% compared to June 30, 1995. As drilling activity has
increased, the Company has experienced increased demand for its manufactured
products and distribution services as existing rigs are upgraded, refurbished
and repaired, new rigs are constructed and expendable parts are used.
The Company's oilfield equipment business and distribution services
business accounted for 56% and 44%, respectively, of the combined earnings
before interest, taxes, depreciation and amortization ("EBITDA") for the six
months ended June 30, 1996.
3
<PAGE> 5
BUSINESS STRATEGY
Beginning in 1993, a new executive and operating team was assembled to
manage the Company's business. In January 1996, that new management team,
together with an investor group led by The Inverness Group Incorporated and
First Reserve Corporation, purchased the business of the Company from its former
owners, USX Corporation and Armco Inc. Since 1993, the business strategy of the
Company has been to enhance its operating performance and build a platform for
growth by focusing on markets in which its product lines are market leaders and
which are believed by management to provide the most significant growth
potential. As part of that strategy, the Company disposed of certain of its
non-core equipment manufacturing businesses and product lines and reengineered
its distribution business during the years 1993 through 1995. Since the
completion of the redirection of the Company's business in 1995, the Company's
performance has improved substantially, with EBITDA before special items
increasing from $6.2 million for the six months ended June 30, 1995 to $15.3
million for the six months ended June 30, 1996.
The Company's current business strategy is to enhance its leading market
positions and operating performance by:
Leveraging Its Market Leading Installed Base. The Company estimates that
approximately 65% of the mobile offshore drilling rigs and the majority of the
world's larger land drilling rigs operating today use drilling machinery
manufactured by the Company. The Company believes this installed base and its
reputation for performance and reliability present substantial opportunities to
capture a significant portion of the increased level of expenditures by its
customers for the construction of new drilling rigs as well as the upgrade and
refurbishment of existing drilling rigs.
Capitalizing on Increasing Demand for Higher Horsepower Drilling Machinery.
The Company believes the advanced age of the existing fleet of drilling rigs,
coupled with increasing drilling activity involving greater water depths and
extended reach, will increase the demand for new drilling rig construction and
the upgrading and capacity enhancement of existing rigs. The Company's higher
horsepower drawworks, mud pumps and power swivels provide, in many cases, the
largest capacities currently available in the industry.
Building on Distribution Strengths. The Company has developed and
implemented integrated information and process systems that are designed for
more effective procurement, inventory management and logistics activities. A
critical element of the Company's strategy has been to regionally centralize its
procurement, inventory and logistics operations, thus gaining cost and inventory
utilization efficiencies while retaining its responsiveness to local markets. In
addition, the strategic integration of the Company's distribution expertise,
extensive distribution network and growing base of customer alliances provides
an increased opportunity for cost effective marketing of the Company's
manufactured equipment.
Capitalizing on Alliance/Outsourcing Trends. As a result of efficiency
initiatives, oil and gas companies and drilling contractors are frequently
seeking alliances with suppliers, manufacturers and service providers, or
outsourcing their procurement, inventory management and logistics requirements
for equipment and supplies in order to achieve cost and capital improvements.
The Company has entered into and is seeking alliance arrangements to better
serve its customers, to better manage its own inventory, to increase the volume
and scope of products sold to the customer without significantly increasing the
Company's overhead costs, and to expand marketing opportunities to sell
equipment manufactured by the Company. The Company believes that it is well
positioned to provide broad procurement, inventory management and other services
as a result of the Company's (i) large and geographically diverse network of
distribution service centers in major oil and gas producing areas, (ii)
purchasing leverage due to the volume of products sold, (iii) breadth of
available product lines and (iv) information systems that offer customers
enhanced online and onsite services.
The Company is a Delaware corporation whose principal executive offices are
located at 5555 San Felipe, Houston, Texas 77056, and its telephone number is
(713) 960-5100. References herein to the Company refer to the predecessor
partnership for periods prior to January 1, 1996 and to National-Oilwell, Inc.
for subsequent periods.
4
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company.......... 4,000,000 shares
Common Stock to be Outstanding After the
Offering................................... 17,590,409 shares(1)
Use of Proceeds.............................. To repay certain outstanding indebtedness,
essentially all of which was incurred to fund
the acquisition of the Company, and for other
general corporate purposes. See "Use of
Proceeds."
Proposed New York Stock Exchange Symbol...... "NAT"
</TABLE>
- ---------------
(1) Subject to adjustment based on the initial public offering price as
described in "Management -- Employee Benefit Plans and Arrangements" and
"Description of Capital Stock -- Common Stock."
5
<PAGE> 7
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION AND OTHER DATA
The summary historical consolidated financial data presented below for the
three years ended December 31, 1995 is derived from the audited consolidated
financial statements of the Company. The summary consolidated financial
information as of June 30, 1996 and for the six months ended June 30, 1996 and
1995 is derived from the Company's unaudited consolidated financial statements
which, in the opinion of management, include all adjustments, consisting only of
normal recurring accruals and adjustments, necessary for the fair presentation
of the financial data for such periods.
The summary unaudited pro forma consolidated financial information is
derived from the Unaudited Pro Forma Condensed Consolidated Financial Statements
of the Company included elsewhere in this Prospectus. The unaudited pro forma
consolidated financial data give effect to (i) the pro forma effect of
completion of the Acquisition and (ii) the adjusted pro forma effect of
completion of the Offering and the application of the estimated net proceeds
therefrom as described elsewhere in this Prospectus. The pro forma financial
data is not necessarily indicative of actual results of operations that would
have occurred during those periods and is not necessarily indicative of future
results of operations. The summary consolidated financial information set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," the Consolidated Financial
Statements of the Company and related Notes thereto and the Unaudited Pro Forma
Condensed Consolidated Financial Statements and related Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ---------------------------------------------
-------------------- PRO FORMA
1996 1995 1995 1995 1994 1993
-------- -------- --------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................. $294,643 $266,443 $545,803 $545,803 $562,053 $627,281
Cost of revenues..................... 254,556 231,556 474,791 474,791 482,423 547,401
-------- -------- --------- -------- -------- --------
Gross profit....................... 40,087 34,887 71,012 71,012 79,630 79,880
Selling, general and
administrative..................... 26,681 30,903 57,231 57,231 64,422 79,391
Special charges (credits)(1)......... -- (7,500) (8,458) (8,458) (13,916) 8,565
-------- -------- --------- -------- -------- --------
Operating income (loss)............ 13,406 11,484 22,239 22,239 29,124 (8,076)
Interest expense -- net.............. (6,418) (1,063) (5,631) (1,261) (4,731) (7,276)
Other income (expense)............... (321) 161 (1,563) (1,401) 528 (240)
-------- -------- --------- -------- -------- --------
Income (loss) before taxes......... 6,667 10,582 15,045 19,577 24,921 (15,592)
Provision for income taxes(2)........ 2,667 1,204 5,523 1,937 1,041 1,871
-------- -------- --------- -------- -------- --------
Net income (loss)............. $ 4,000 $ 9,378 $ 9,522 $ 17,640 $ 23,880 $(17,463)
========= ========= ========= ========= ========= =========
Net income per share(3).............. $ .30 $ .54
========= =========
Common shares outstanding(3)(4)...... 13,249 17,590
========= =========
OTHER DATA:
EBITDA before special items(5)....... $ 15,309 $ 6,156 $ 17,376 $ 17,376 $ 21,235 $ 11,210
Depreciation and amortization........ 1,903 2,172 3,595 3,595 6,027 10,721
Capital expenditures................. 849 2,031 4,764 4,764 3,604 1,967
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
----------------------------
HISTORICAL AS ADJUSTED(6)
---------- --------------
<S> <C> <C>
BALANCE SHEET DATA (UNAUDITED):
Working capital....................................... $125,580 $130,376
Total assets.......................................... 259,481 258,843
Long-term debt, less current maturities............... 118,688 62,243
Stockholders' equity.................................. 33,982 88,018
</TABLE>
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(1) In 1995 and 1994, the Company recorded gains from the sales of certain
non-core equipment manufacturing businesses, product lines and assets, net
of other costs. In 1993, the Company recorded charges primarily related to
the disposal of a product line. See Note 10 to the Consolidated Financial
Statements included elsewhere in this Prospectus.
6
<PAGE> 8
(2) Prior to January 1, 1996, the Company was a general partnership and
therefore not subject to U.S. federal and state income taxes. See Note 9 to
the Consolidated Financial Statements included elsewhere in this Prospectus.
(3) Historical net income (loss) per share and common shares outstanding are not
presented for periods prior to January 1, 1996 because the Company was a
general partnership during these periods.
(4) Common shares outstanding assumes all outstanding shares of Class A Common
Stock are converted into 1,902,543 shares of Common Stock (assuming an
initial public offering price of $ per share) in connection with the
Offering. In addition, the 1995 pro forma shares outstanding includes an
additional 340,926 shares (assuming an initial public offering price of
$ per share) issuable under the Value Appreciation Plans and 4,000,000
shares sold in connection with the Offering.
(5) EBITDA before special items means operating income (loss) plus depreciation
and amortization plus special charges (credits) and is a supplemental
financial measurement used by the Company in the evaluation of its business.
EBITDA before special items is not intended to represent cash flow, an
alternative to net income or any other measure of performance in accordance
with generally accepted accounting principles. Reference is made to the
Consolidated Statements of Cash Flows contained in the Consolidated
Financial Statements of the Company included elsewhere in this Prospectus
for a complete presentation of cash flows from operating, investing and
financing activities prepared in accordance with generally accepted
accounting principles.
(6) Gives effect to the Offering and application of the assumed net proceeds
described under "Use of Proceeds." Also reflects the Offering related
adjustments described on the Unaudited Pro Forma Condensed Consolidated
Balance Sheet.
7
<PAGE> 9
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby.
MARKET CONDITIONS AND OIL AND GAS PRICES
The Company's business is substantially dependent upon the condition of the
oil and gas industry and the industry's willingness to explore for and produce
oil and gas. The degree of such willingness is generally dependent upon the
prevailing view of future product prices, which are influenced by numerous
factors affecting the supply and demand for oil and gas, including the level of
drilling activity, worldwide economic activity, interest rates and the cost of
capital, environmental regulation, tax policies, political requirements of
national governments, coordination by the Organization of Petroleum Exporting
Countries ("OPEC") and the cost of producing oil and gas. Oil and gas prices and
activity have been characterized by significant volatility over the last twenty
years. Since 1986, domestic spot oil prices (West Texas Intermediate) have
ranged from a low of approximately $11 per barrel in July 1986 to a high of
approximately $40 per barrel in October 1991; domestic spot gas prices (Henry
Hub) have ranged from a low of approximately $0.90 per mcf of gas in January
1992 to a high of approximately $2.69 per mcf in June 1996. These price changes
have caused numerous shifts in the strategies of oil and gas companies and
drilling contractors and their expenditure levels and patterns, particularly
with respect to decisions to purchase major capital equipment of the type
manufactured by the Company. No assurance can be given as to the future price
levels of oil and gas or the volatility thereof or that the future price of oil
and gas will be sufficient to support current levels of exploration and
production-related activities. Similarly, while the Company believes that
offshore drillers have recently experienced much higher demand for and cash flow
from their services, any significant reduction in demand for drilling services,
in cash flows of drilling contractors or in rig utilization rates below current
levels could result in a drop in demand for products manufactured and sold by
the Company. See "Business -- General."
COMPETITION
The oilfield products and services industry is highly competitive. The
Company's revenues and earnings can be affected by competitive actions such as
price changes, introduction of new products or improved availability and
delivery. Over the last several years the market for oilfield services and
equipment has experienced overcapacity which has resulted in increased price
competition in many areas of the Company's business. The Company competes with a
large number of companies, some of which may offer more technologically advanced
products or possess greater financial resources than the Company. See
"Business -- Oilfield Equipment" and "Business -- Distribution Services."
POTENTIAL PRODUCT LIABILITY AND WARRANTY CLAIMS
Certain products of the Company are used in potentially hazardous drilling,
completion and production applications that can cause personal injury or loss of
life, damage to property, equipment or the environment and suspension of
operations. The Company maintains insurance coverage in such amounts and against
such risks as it believes to be in accordance with normal industry practice.
Such insurance does not, however, provide coverage for all liabilities
(including liabilities for certain events involving pollution), and there can be
no assurance that such insurance will be adequate to cover all losses or
liabilities that may be incurred by the Company in its operations. Moreover, no
assurance can be given that the Company will, in the future, be able to maintain
insurance at levels it deems adequate and at rates it considers reasonable or
that any particular types of coverage will be available. Litigation arising from
a catastrophic occurrence at a location where the Company's equipment and
services are used may in the future result in the Company's being named as a
defendant in product liability or other lawsuits asserting potentially large
claims. The Company is a party to various legal and administrative proceedings
which have arisen from ongoing and discontinued operations. Although no
assurance can be given with respect to the outcome of these or any other pending
legal and administrative proceedings and the effect such outcomes may have on
the Company, management believes
8
<PAGE> 10
that any ultimate liability resulting from the outcome of such proceedings, to
the extent not otherwise provided for, should not have a material adverse effect
on the Company's consolidated financial position. See "Business -- Operating
Risks and Insurance" and "Business -- Legal Proceedings."
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Many aspects of the Company's operations are affected by political
developments and are subject to both domestic and foreign governmental
regulation, including those relating to oilfield operations, worker safety and
the protection of the environment. In addition, the Company depends on the
demand for its services from the oil and gas industry and, therefore, is
affected by changing taxes, price controls and other laws and regulations
relating to the oil and gas industry generally. The adoption of laws and
regulations curtailing exploration for or production of oil and gas for economic
or other policy reasons could adversely affect the Company's operations. The
Company cannot determine the extent to which its future operations and earnings
may be affected by new legislation, new regulations or changes in existing
regulations. See "Business -- Governmental Regulation and Environmental
Matters."
The Company's operations are affected by numerous foreign, federal, state
and local environmental laws and regulations. The technical requirements of
these laws and regulations are becoming increasingly expensive, complex and
stringent. These laws may impose penalties or sanctions for damages to natural
resources or threats to public health and safety. Such laws and regulations may
also expose the Company to liability for the conduct of or conditions caused by
others, or for acts of the Company that were in compliance with all applicable
laws at the time such acts were performed. Sanctions for noncompliance may
include revocation of permits, corrective action orders, administrative or civil
penalties and criminal prosecution. Certain environmental laws provide for joint
and several liability for remediation of spills and releases of hazardous
substances. In addition, companies may be subject to claims alleging personal
injury or property damage as a result of alleged exposure to hazardous
substances, as well as damage to natural resources. See
"Business -- Governmental Regulation and Environmental Matters."
FOREIGN OPERATIONS
Certain of the Company's revenues result from the sale of products to
customers for ultimate destinations in the Middle East, Africa and other
international markets and are subject to risks of instability of foreign
economies and governments. Furthermore, the Company's sales can be affected by
laws and regulations limiting exports to particular countries.
The Company attempts to limit its exposure to foreign currency fluctuations
by limiting the amount of sales denominated in currencies other than United
States dollars, Canadian dollars and British pounds. The Company has not engaged
in and does not currently intend to engage in any significant hedging or
currency trading transactions designed to compensate for adverse currency
fluctuations among those or any other foreign currencies. See
"Business -- Oilfield Equipment" and "Business -- Distribution Services."
NO PRIOR MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering there has been no public market for the Common Stock.
There can be no assurance that an active public market for the Common Stock will
develop upon completion of the Offering or, if developed, that such market will
be sustained. The initial public offering price of the Common Stock will be
determined through negotiations between the Company and the representatives of
the Underwriters and may bear no relationship to the market prices of the Common
Stock after the Offering. Prices for the Common Stock after the Offering may be
influenced by a number of factors, including the liquidity of the market for the
Common Stock, investor perceptions of the Company and the oil and gas industry
and general economic and other conditions. Sales of substantial amounts of
Common Stock in the public market subsequent to the Offering could adversely
affect the market price of the Common Stock. For information relating to the
factors to be considered in determining the initial public offering price, see
"Underwriting."
9
<PAGE> 11
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the 4,000,000 shares of Common Stock
offered hereby will be freely tradable without restriction or further
registration under the Securities Act of 1933, as amended (the "Securities
Act"), except for shares sold by persons deemed to be "affiliates" of the
Company or acting as "underwriters," as those terms are defined in the
Securities Act. The 1,168,310 shares of Common Stock beneficially owned by Duff
& Phelps/Inverness LLC which were issued on July 15, 1995 are restricted from
resale pursuant to Rule 144 under the Securities Act until after July 15, 1997.
The remaining shares of Common Stock held by the Company's existing stockholders
were issued in 1996 and are restricted from resale pursuant to Rule 144 until
various dates in 1998. The holders of approximately 9,287,046 shares of Common
Stock (assuming an initial public offering price of $ per share) will have
demand registration rights following the expiration of 180 days after the
completion of the Offering. The parties to the Stockholders Agreement have
waived their registration rights with respect to a Registration Statement filed
by the Company with respect to the Offering. See "Certain
Transactions -- Stockholders Agreement." The Company, its executive officers and
directors and all existing stockholders of the Company have agreed not to offer,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant for the sale of,
pledge, or otherwise dispose of or transfer any shares of Common Stock, with
certain exceptions, for a period of 180 days commencing on the date of this
Prospectus without the prior written consent of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") as representative of the Underwriters.
Future sales of shares of Common Stock by existing stockholders and future
option holders could adversely affect the market price of the Common Stock. See
"Shares Eligible for Future Sale" and "Underwriting."
CREDIT FACILITY RESTRICTIONS; ASSET ENCUMBRANCES
The Company will enter into a new five-year Senior Secured Revolving Credit
Facility (the "New Credit Facility") with General Electric Capital Corporation
("GE Capital") effective as of the closing of the Offering. The New Credit
Facility provides for a $120 million revolving loan ("the Revolver"), of which
$25 million may be used for letters of credit. The Revolver is subject to a
borrowing base limitation of 60% of eligible inventory plus 85% of eligible
accounts receivable which would have totaled $108.7 million as of June 30, 1996.
In connection with an acquisition during the first three years of the Revolver
term, the Company can convert a total of $20 million of the Revolver
availability to a term note that would mature contemporaneously with the
Revolver. The New Credit Facility is secured by substantially all of the
Company's assets and contains certain financial covenants and ratios as well as
a limitation on dividends. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
DIVIDENDS
The Company's board of directors does not currently anticipate authorizing
the payment of dividends in the foreseeable future. In addition, the payment of
dividends is limited by the terms of the Company's New Credit Facility. See
"Dividend Policy."
DILUTION
Investors in the Common Stock offered hereby will experience immediate and
substantial dilution in net tangible book value per share of $12.43 (assuming an
initial public offering price of $ per share). See "Dilution."
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Amended and Restated Certificate of Incorporation and Bylaws
contain certain provisions which may have the effect of delaying, deferring or
preventing a change in control of the Company, including a classified board of
directors, the removal of directors from office only for cause, the prohibition
of stockholder action by written consent, advance notice requirements respecting
stockholder nominations for
10
<PAGE> 12
director or any other matter, the number of directors being set by the board of
directors, super majority voting provisions respecting amendments to the
Company's Amended and Restated Certificate of Incorporation and limitation of
persons who may call special stockholders' meetings. The Delaware General
Corporation Law requires super majority voting thresholds to approve certain
"business combinations" between interested stockholders and the Company which
may render more difficult or tend to discourage attempts to acquire the Company.
In addition, the Company's board of directors has the authority to issue shares
of preferred stock ("Preferred Stock") in one or more series and to fix the
rights and preferences of the shares of any such series without stockholder
approval. Any series of Preferred Stock is likely to be senior to the Common
Stock with respect to dividends, liquidation rights and, possibly, voting
rights. The ability to issue Preferred Stock could also have the effect of
discouraging unsolicited acquisition proposals. See "Description of Capital
Stock -- Preferred Stock" and "-- Certain Anti-Takeover and Other Provisions of
the Amended and Restated Certificate of Incorporation."
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $62.5 million (approximately
$72.0 million if the Underwriters' over-allotment option is exercised in full)
assuming an initial public offering price of $ per share, after
deducting the estimated underwriting discount and offering expenses. The Company
will use the net proceeds of the Offering to repay borrowings incurred to
provide funds for the acquisition of the Company in January 1996 under the
credit agreement dated as of December 29, 1995 (the "Credit Facility") and under
a $5 million subordinated note (the "Subordinated Note"), both with GE Capital.
The Company will use approximately $30 million of the estimated net proceeds to
repay the entire principal balance on the term notes portion of the Credit
Facility and the Subordinated Note, and the remaining net proceeds will be used
to repay a portion of the revolving credit portion of the Credit Facility.
As of June 30, 1996, the outstanding indebtedness under the Credit Facility
was $96.1 million, consisting of $70.9 million under a $120 million revolving
credit and letter of credit facility (the "Revolving Credit Facility") and $12.4
million under Term Loan A and $12.8 million under Term Loan B. Borrowings under
the Revolving Credit Facility and Term Loans A and B generally bear interest at
a London Interbank Offered Rate ("LIBOR") plus a margin of 2.75% on the
Revolving Credit Facility, 3.0% on Term Loan A and 3.5% on Term Loan B, or GE
Capital's prime rate plus a margin of 1.5% on the Revolving Credit Facility,
1.75% on Term Loan A and 2.25% on Term Loan B. At June 30, 1996, the effective
interest rates applicable to borrowings under the Revolving Credit Facility and
the Term Loans were 8.54%, 8.72% and 9.28%, respectively. Term Loan A requires
quarterly principal payments of approximately $500,000, with final maturity on
December 31, 2000. Term Loan B requires quarterly principal payments of
approximately $62,500, with final maturity on December 31, 2001. Certain
prepayments of the Term Loans from excess cash flow are also required. The
Revolving Credit Facility has a term that expires on December 31, 2000. The
Subordinated Note bears interest at GE Capital's prime rate plus a margin of
3.0% (11.25% at June 30, 1996) and is due December 31, 2002. Interest payments
are deferred until Term Loans A and B are repaid and certain other operating
performance requirements are satisfied. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." At the closing of the Offering, the Credit Facility will be
replaced with the New Credit Facility.
DIVIDEND POLICY
The Company currently intends to retain earnings to finance the growth and
development of its business and does not anticipate paying a cash dividend on
the Common Stock in the foreseeable future. Any future change in the Company's
dividend policy will be made at the discretion of the board of directors of the
Company and will depend upon the Company's operating results, financial
condition, capital requirements, general business conditions and such other
factors as the board of directors deem relevant. Under certain circumstances,
the New Credit Facility will require the consent of the lenders prior to any
payment of cash dividends on the Common Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Description of Capital Stock."
12
<PAGE> 14
DILUTION
After giving effect to the conversion of all of the outstanding shares of
Class A Common Stock into shares of Common Stock, exercise of the Warrant, the
expense related to and the issuance of Common Stock in connection with the
Company's Value Appreciation Plans, the write-off of deferred financing costs
and the cost of termination of the Management Services Agreement, and assuming
an initial public offering price of $17.00 per share (the midpoint of the
estimated initial public offering price range), the pro forma net tangible book
value (total assets less goodwill and other intangibles less liabilities) of the
Company at June 30, 1996 was $1.31 per share of Common Stock. See "Description
of Capital Stock" and "Management -- Employee Benefit Plans and Arrangements."
After giving effect to the receipt of an assumed $62.5 million of net proceeds
of the Company from the Offering (based on the sale of Common Stock pursuant to
the Offering at an assumed initial public offering price of $17.00 per share and
net of estimated underwriting discounts and commissions and offering expenses),
pro forma net tangible book value per share would have been $4.57 per share of
Common Stock outstanding after the Offering, representing an immediate increase
in net tangible book value of $3.26 per share of Common Stock to the existing
stockholders and an immediate dilution of $12.43 per share to the new investors
purchasing Common Stock in the Offering. The following table illustrates the per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................ $17.00
Net tangible book value per share before adjustments.............. $1.56
Decrease in net tangible book value per share due to:
-- write-off of deferred financing costs and the cost of
termination of the Management Services Agreement............... (.08)
-- effect of Value Appreciation Plans............................. (.17)
-----
Net tangible book value per share before the Offering............. 1.31
Increase in net tangible book value per share attributable to sale
of Common Stock by the Company in the Offering................. 3.26
-----
Pro forma net tangible book value per share after the Offering............. 4.57
------
Dilution in pro forma net tangible book value per share to new investors... $12.43
======
</TABLE>
The following table sets forth, as of June 30, 1996, the number of shares
of Common Stock purchased or to be purchased from the Company, the total
consideration paid or to be paid to the Company and the average price per share
paid or to be paid by existing stockholders, by Value Appreciation Plans
recipients and by new investors, based on the assumed initial public offering
price:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 13,249,483 75.3% $ 30,178,860 29.0% $ 2.28
Value Appreciation Plans
recipients...................... 340,926 2.0 5,795,456 5.6 17.00
---------- ------ ------------ ------
13,590,409 77.3 35,974,316 34.6 2.65
New investors..................... 4,000,000 22.7 68,000,000 65.4 17.00
---------- ------ ------------ ------
Total................... 17,590,409 100.0% $103,974,316 100.0%
========== ====== ============ ======
</TABLE>
13
<PAGE> 15
CAPITALIZATION
The following table sets forth the unaudited consolidated short-term debt
and capitalization of the Company as of June 30, 1996, and as adjusted to give
effect (assuming an initial public offering price of $17.00 per share) to the
conversion of the Class A Common Stock into 1,902,543 shares of Common Stock,
the exercise of the Warrant, the expense related to and the issuance of Common
Stock in connection with the Company's Value Appreciation Plans, the write-off
of deferred financing costs and the cost of termination of the Management
Services Agreement and the Offering and the application of the net proceeds to
the Company therefrom (assumed to be $62.5 million) as described under "Use of
Proceeds." The actual number of shares of Common Stock to be outstanding after
the Offering is dependent upon the per share initial public offering price due
to the terms of conversion of the Class A Common Stock and the issuance of
Common Stock pursuant to the Value Appreciation Plans. See "Description of
Capital Stock" and "Management -- Employee Benefit Plans and Arrangements." This
table should be read in conjunction with the Consolidated Financial Statements
of the Company and related Notes thereto, "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and the Unaudited Pro Forma
Condensed Consolidated Financial Statements and related Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
-----------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(UNAUDITED, DOLLARS IN
THOUSANDS)
<S> <C> <C>
Short-term debt:
Current maturities of long-term debt............................. $ 2,500 $ --
======== =========
Long-term debt (less current maturities):
Revolving Credit Facility........................................ $ 70,865 $ 42,243
Term Notes....................................................... 22,705 --
Subordinated debt................................................ 5,118 --
Seller Notes..................................................... 20,000 20,000
---------- -----------
Total long-term debt..................................... 118,688 62,243
Stockholders' equity:
Class A Common Stock -- par value $.01; 13,288 shares outstanding
(historical), no shares outstanding (as adjusted)............. -- --
Common Stock -- par value $.01; 11,064,548 shares outstanding
(historical), 17,590,409 shares outstanding (as adjusted)..... 111 176
Additional paid-in capital....................................... 30,068 98,341
Notes receivable from officers................................... (500) --
Cumulative translation adjustment................................ 303 303
Retained earnings................................................ 4,000 (10,802)
---------- -----------
Total stockholders' equity.................................. 33,982 88,018
---------- -----------
Total capitalization..................................... $ 152,670 $ 150,261
======== =========
</TABLE>
14
<PAGE> 16
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data for the Company. The selected consolidated financial data as of and for
each of the five years ended December 31, 1995 have been derived from the
audited consolidated financial statements of the Company. The selected
consolidated financial data as of and for each of the six months ended June 30,
1996 and 1995 have been derived from the Company's unaudited consolidated
financial statements which, in the opinion of management, include all
adjustments, consisting only of normal recurring accruals and adjustments,
necessary for the fair presentation of the financial data for such periods. The
results of operations for the six months ended June 30, 1996 should not be
regarded as indicative of the results that may be expected for the full fiscal
year. The following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and related Notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $294,643 $266,443 $545,803 $562,053 $627,281 $569,911 $802,862
Cost of revenues........................ 254,556 231,556 474,791 482,423 547,401 508,006 697,144
-------- -------- -------- -------- -------- -------- --------
Gross profit.......................... 40,087 34,887 71,012 79,630 79,880 61,905 105,718
Selling, general and administrative..... 26,681 30,903 57,231 64,422 79,391 86,943 102,581
Special charges (credits)(1)............ -- (7,500) (8,458) (13,916) 8,565 6,500 24,500
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)............... 13,406 11,484 22,239 29,124 (8,076) (31,538) (21,363)
Interest expense -- net................. (6,418) (1,063) (1,261) (4,731) (7,276) (4,790) (8,153)
Other income (expense).................. (321) 161 (1,401) 528 (240) 941 (277)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before taxes............ 6,667 10,582 19,577 24,921 (15,592) (35,387) (29,793)
Provision for income taxes(2)........... 2,667 1,204 1,937 1,041 1,871 876 677
-------- -------- -------- -------- -------- -------- --------
4,000 9,378 17,640 23,880 (17,643) (36,263) (30,470)
Cumulative benefit of net changes in
accounting principles(3).............. -- -- -- -- -- 1,136 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................. $ 4,000 $ 9,378 $ 17,640 $ 23,880 $(17,463) $(35,127) $(30,470)
======== ======== ======== ======== ======== ======== ========
Common shares outstanding............... 13,249
========
Net income per share.................... $ .30
========
OTHER DATA:
EBITDA before special items(4).......... $ 15,309 $ 6,156 $ 17,376 $ 21,235 $ 11,210 $(12,805) $ 16,157
Depreciation and amortization........... 1,903 2,172 3,595 6,027 10,721 12,233 13,020
Capital expenditures.................... 849 2,031 4,764 3,604 1,967 4,941 19,153
BALANCE SHEET DATA:
Working capital......................... $125,580 $143,026 $177,365 $151,810 $171,632 $179,407 $239,369
Total assets............................ 259,481 262,216 288,578 268,304 343,479 371,883 453,610
Long-term debt, less current
maturities............................ 118,688 -- 9,128 -- 69,816 56,467 94,850
Owners' equity.......................... 33,982 171,242 178,012 161,888 170,676 192,546 235,754
</TABLE>
- ---------------
(1) In 1995 and 1994, the Company recorded gains from the sales of certain
non-core equipment manufacturing businesses, product lines and assets, net
of other costs. In 1993, 1992 and 1991, the Company recorded charges
primarily related to the disposal of manufacturing facilities and a product
line. See Note 10 to the Consolidated Financial Statements included
elsewhere in this Prospectus.
(2) Prior to January 1, 1996, the Company was a general partnership and
therefore not subject to U.S. federal and state income taxes. See Note 9 to
the Consolidated Financial Statements included elsewhere in this Prospectus.
(3) The Company changed its methods of accounting for income taxes and
post-retirement benefits other than pensions effective January 1, 1992.
(4) EBITDA before special items means operating income (loss) plus depreciation
and amortization plus special charges (credits) and is a supplemental
financial measurement used by the Company in the evaluation of its business.
EBITDA before special items is not intended to represent cash flow, an
alternative to net income or any other measure of performance in accordance
with generally accepted accounting principles. Reference is made to the
Consolidated Statement of Cash Flows contained in the Consolidated Financial
Statements of the Company included elsewhere in this Prospectus for a
complete presentation of cash flows from operating, investing and financing
activities prepared in accordance with generally accepted accounting
principles.
15
<PAGE> 17
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet as
of June 30, 1996 and unaudited pro forma condensed consolidated statements of
operations for the six months ended June 30, 1996 and for the year ended
December 31, 1995 give effect to (i) the Pro Forma effect of completion of the
Acquisition and (ii) the Adjusted Pro Forma effect of completion of the Offering
and the application of the estimated net proceeds therefrom as described
elsewhere in this Prospectus, as if each had occurred, in the case of the
balance sheet data, on June 30, 1996, and in the case of the statement of
operations data, on January 1, 1995. The June 30, 1996 balance sheet data has
been adjusted only for the effect of completion of the Offering as the
Acquisition adjustments are already reflected therein.
The following unaudited pro forma condensed consolidated financial data
does not necessarily reflect the actual results that would have been achieved
nor is such data necessarily indicative of future results for the Company. The
following unaudited pro forma condensed consolidated information should be read
in conjunction with the Consolidated Financial Statements and Notes thereto
appearing elsewhere in the Prospectus.
The number of shares of Common Stock outstanding on a pro forma basis is
dependent upon the per share initial public offering price due to the terms of
conversion of the Class A Common Stock and the issuance of Common Stock pursuant
to the Value Appreciation Plans. See "Description of Capital Stock -- Common
Stock" and "Management -- Employee Benefit Plans and Arrangements."
16
<PAGE> 18
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
ADJUSTED
PRO
HISTORICAL OFFERING FORMA
---------- -------- --------
<S> <C> <C> <C>
Current assets:
Cash................................................... $ 4,512 $ $ 4,512
Receivables............................................ 86,282 86,282
Inventories............................................ 121,907 121,907
Other.................................................. 7,073 7,073
---------- -------- --------
Total current assets........................... 219,774 219,774
Property, plant and equipment, net....................... 17,916 17,916
Goodwill................................................. 6,408 6,408
Deferred financing costs................................. 6,916 (6,916)(C) 1,200
1,200 (C)
Other assets............................................. 8,467 1,815 (B) 13,545
3,263 (D)
---------- -------- --------
Total assets................................... $ 259,481 $ (638) $258,843
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt...................... $ 2,500 $ (2,500)(A) $ --
Accounts payable....................................... 67,576 67,576
Other accrued liabilities.............................. 24,118 1,000 (B) 21,822
(2,628)(C)
(668)(D)
---------- -------- --------
Total current liabilities...................... 94,194 (4,796) 89,398
Long-term debt........................................... 118,688 (60,040)(A) 62,243
1,200 (C)
2,898 (D)
(500)(E)
(3)(F)
Other liabilities........................................ 12,617 3,775 (B) 19,184
2,792 (D)
---------- -------- --------
Total liabilities.............................. 225,499 (54,674) 170,825
Stockholders' equity:
Common stock........................................... 111 40 (A) 176
4 (D)
21 (F)
Additional paid-in capital............................. 30,068 62,500 (A) 98,341
5,791 (D)
(18)(F)
Notes receivable from officers......................... (500) 500 (E) --
Cumulative translation adjustment...................... 303 303
Retained earnings...................................... 4,000 (2,960)(B) (10,802)
(4,288)(C)
(7,554)(D)
---------- -------- --------
Total stockholders' equity..................... 33,982 54,036 88,018
---------- -------- --------
Total liabilities and stockholders' equity..... $ 259,481 $ (638) $258,843
======== ======== ========
</TABLE>
17
<PAGE> 19
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (DOLLARS,
EXCEPT PER SHARE AMOUNTS, IN THOUSANDS):
A -- To record the issuance of shares of Common Stock pursuant to the Offering
and the application of the assumed net proceeds of $62,540 (4,000,000
shares at $17.00 per share less underwriting discount and expenses
estimated at $5,460) to repay debt as described under "Use of Proceeds."
B -- To record the expense of $4,775 (after tax cost of $2,960) due to the
termination of the Management Services Agreement as described under
"Certain Transactions" which will be paid in quarterly payments of $250
through March 31, 2001, subject to certain accelerating events.
C -- To record the write-off of $6,916 in deferred financing costs (after tax
cost of $4,288) associated with the Credit Facility that will be replaced
at the time of the Offering and the incurrence of an estimated $1,200 of
deferred financing costs that will result from the New Credit Facility.
D -- To record the effect of the Company's Value Appreciation Plans, based on
the assumed $17.00 per share initial public offering price, of an expense
of $12,183 (after tax cost of $7,554), payable by a cash payment of $2,898,
liability for future cash payments of $3,490 and the issuance of 340,926
shares of restricted Common Stock valued at $5,795 as follows:
<TABLE>
<S> <C> <C>
Retained earnings.................................... $7,554
Deferred tax asset................................... 3,263
Taxes payable........................................ 1,366
Long-term debt.................................. $2,898
Current liability............................... 698
Long-term liability............................. 2,792
Common stock.................................... 4
Paid-in capital................................. 5,791
</TABLE>
E -- To record the mandatory repayment of promissory notes to the Company.
F -- To record the exercise of the Warrant and the conversion of the Class A
Common Stock.
18
<PAGE> 20
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA FOR ADJUSTED
HISTORICAL ACQUISITION ACQUISITION OFFERING PRO FORMA
---------- ----------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues............................ $294,643 $ $ 294,643 $ $294,643
Cost of revenues.................... 254,556 254,556 254,556
-------- ---- -------- ------ --------
Gross profit........................ 40,087 40,087 40,087
Selling, general and
administrative.................... 26,681 26,681 (500)(B) 26,181
Special charges (credits)........... --
-------- ---- -------- ------ --------
Operating income (loss)............. 13,406 13,406 500 13,906
Interest and financial costs, net... (6,418) (650)(A) (7,068) 3,407 (C) (3,661)
Other income (expense).............. (321) (321) (321)
-------- ---- -------- ------ --------
Income (loss) before income taxes... 6,667 (650) 6,017 3,907 9,924
Provision for income taxes.......... 2,667 (247)(D) 2,420 1,485 (D) 3,905
-------- ---- -------- ------ --------
Net income (loss)................... $ 4,000 $(403) $ 3,597 $2,422 $ 6,019
======== ==== ======== ====== ========
Average shares outstanding.......... 13,249 (E) 13,249 (E) 17,590 (F)
======== ======== ========
Net income per share................ $ .30 $ .27 $ .34
======== ======== ========
</TABLE>
- ---------------
A -- To record the estimated increase in interest expense that would have been
incurred related to the Acquisition had the funding of the loans occurred
on January 1, 1996.
B -- To record elimination of management fees as a result of the termination of
the Management Services Agreement in connection with the Offering.
C -- To eliminate interest expense and adjust amortization of deferred
financing costs related to debt that will be repaid with proceeds from the
Offering.
D -- To reflect the income tax expense associated with the above adjustments.
E -- Reflects 11,346,940 shares of Common Stock after exercise of the Warrant
and 1,902,543 shares of Common Stock issuable upon the conversion of the
Class A Common Stock at the assumed $17.00 per share initial public
offering price.
F -- Reflects an additional 340,926 shares of Common Stock issuable under the
Value Appreciation Plans based upon the assumed $17.00 per share initial
public offering price plus the issuance of 4,000,000 shares pursuant to the
Offering.
Note -- The above adjustments do not consider the one-time expenses described at
footnotes B, C and D on the Unaudited Pro Forma Condensed Consolidated Balance
Sheet related to the expense to terminate the Management Services Agreement, the
write-off of financing costs or the expense associated with the Value
Appreciation Plans.
19
<PAGE> 21
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA FOR ADJUSTED
HISTORICAL ACQUISITION ACQUISITION OFFERING PRO FORMA
---------- ----------- ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues.............................. $545,803 $ $ 545,803 $ $545,803
Cost of revenues...................... 474,791 474,791 474,791
-------- -------- -------- ------- --------
Gross profit.......................... 71,012 71,012 71,012
Selling, general and administrative... 57,231 1,000 (A) 58,231 (1,000)(D) 57,231
Special charges (credits)............. (8,458) (8,458) (8,458)
-------- -------- -------- ------- --------
Operating income (loss)............... 22,239 (1,000) 21,239 1,000 22,239
Interest and financial costs, net..... (1,261) (11,556)(B) (12,817) 7,186 (E) (5,631)
Other income (expense)................ (1,401) (162)(C) (1,563) (1,563)
-------- -------- -------- ------- --------
Income (loss) before income taxes..... 19,577 (12,718) 6,859 8,186 15,045
Provision for income taxes............ 1,937 476 (F) 2,413 3,110 (F) 5,523
-------- -------- -------- ------- --------
Net income (loss)..................... $ 17,640 $ (13,194) $ 4,446 $ 5,076 $ 9,522
======== ======== ======== ======= ========
Average shares outstanding............ 13,249 (G) 13,249 (G) 17,590 (H)
======== ======== ========
Net income per share.................. $ 1.33 $ .34 $ .54
======== ======== ========
</TABLE>
- ---------------
A -- To record management fees incurred as a result of the Acquisition.
B -- To record the estimated increase in interest expense and amortization of
deferred financing costs related to the long-term debt that would have
been incurred because of the Acquisition.
C -- To record amortization of goodwill.
D -- To record elimination of management fees as a result of the termination of
the Management Services Agreement in connection with the Offering.
E -- To eliminate interest expense and adjust amortization of deferred
financing costs related to debt that will be repaid with proceeds from the
Offering.
F -- To reflect the income tax expense associated with the above adjustments
and to record the increase in tax expense that would have resulted had the
Company been subject to U.S. federal and state income tax during 1995.
G -- Reflects 11,346,940 shares of Common Stock after exercise of Warrant and
1,902,543 shares of Common Stock issuable upon the conversion of the Class
A Common Stock at the assumed $17.00 per share initial public offering
price.
H -- Reflects an additional 340,926 shares of Common Stock issuable under the
Value Appreciation Plans based upon the assumed $17.00 per share initial
public offering price plus the issuance of 4,000,000 shares pursuant to the
Offering.
Note -- The above adjustments do not consider the one-time expenses
described at footnotes B, C and D on the Unaudited Pro Forma Condensed
Consolidated Balance Sheet related to the expense to terminate the
Management Services Agreement, the write-off of deferred financing costs or
the expense associated with the Value Appreciation Plans.
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<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Effective as of January 1, 1996, all of the Company's operations were
acquired from subsidiaries of Armco Inc. and USX Corporation for $180 million
plus approximately $12 million in transaction costs (the "Acquisition"). The
Acquisition was funded from the sale of $30 million in equity, incurrence of
$114 million of debt and the use of $48 million of acquired cash. In connection
with the Acquisition, all assets and liabilities were recorded at their fair
market values, resulting in no significant change from the historical net
carrying values. The Acquisition resulted in deferred financing costs of $7.7
million and goodwill of $6.5 million. References herein to the Company refer to
the predecessor partnership for periods prior to January 1, 1996 and to
National-Oilwell, Inc. for subsequent periods.
The Company's revenues are directly related to the level of worldwide oil
and gas drilling and production activities and the profitability and cash flow
of oil and gas companies and drilling contractors, which in turn are affected by
current and anticipated prices of oil and gas. While the price of oil and gas is
generally a function of supply and demand, additional influences include costs
of exploration and production, worldwide political and economic influences,
environmental factors and governmental regulation.
As a result of a change in management and a redirection of the Company's
strategy which began in 1993, the Company sold various product lines,
consolidated certain manufacturing facilities and concentrated its operations
within two business segments: Oilfield Equipment and Distribution Services.
RESULTS OF OPERATIONS
The following table and the financial information in the discussion of the
Oilfield Equipment and Distribution Services segments provide certain
information that segregates the results of operations of previously sold product
lines and businesses in order to focus on ongoing operations:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ----------------------------
1996 1995 1995 1994 1993
------ ------ ------ ------ ------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Revenues
Oilfield Equipment.................. $ 81.0 $ 78.9 $146.5 $187.9 $179.7
Distribution Services............... 237.3 203.5 432.3 415.7 450.4
Eliminations........................ (23.7) (16.0) (33.0) (60.0) (67.7)
------ ------ ------ ------ ------
Ongoing Operations............... 294.6 266.4 545.8 543.6 562.4
Disposed Businesses................. -- -- -- 18.5 64.9
------ ------ ------ ------ ------
Total....................... $294.6 $266.4 $545.8 $562.1 $627.3
====== ====== ====== ====== ======
Operating Income
Oilfield Equipment.................. $ 8.1 $ 3.1 $ 7.2 $ 7.0 $ .1
Distribution Services............... 7.3 2.5 9.4 9.0 13.9
Corporate........................... (2.0) (1.6) (2.9) (2.9) (2.3)
------ ------ ------ ------ ------
Ongoing Operations............... 13.4 4.0 13.7 13.1 11.7
Disposed Businesses................. -- -- -- 2.1 (11.2)
Special Charges (Credits)........... -- (7.5) (8.5) (13.9) 8.6
------ ------ ------ ------ ------
Total....................... $ 13.4 $ 11.5 $ 22.2 $ 29.1 $ (8.1)
====== ====== ====== ====== ======
</TABLE>
Oilfield Equipment
The Oilfield Equipment segment designs and manufactures a large line of
proprietary products, including drawworks, mud pumps, power swivels and
reciprocating pumps. A substantial installed base of these products
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<PAGE> 23
results in a recurring replacement parts and maintenance business. In addition,
a full line of drilling pump expendable products are sold for maintenance of the
Company's and other manufacturers' equipment.
Sales of new equipment manufactured by the Company can result in large
fluctuations in volume between periods depending on the size and timing of the
shipment of orders. Individual orders of machinery and equipment by foreign
national oil companies can be particularly large (in excess of $10 million
each). The Company recorded large sales of this nature in each of 1993 and 1994
but has not made similar sales in 1995 or in the first half of 1996.
Revenues and operating profits have been negatively impacted over the last
several years by excess industry capacity that has prevented or reduced price
increases. Accordingly, the Company has concentrated on controlling and reducing
its costs by consolidating operations and streamlining selling and
administrative functions. The Company believes it will benefit from any
increased industry demand as additional activity can be achieved through its
existing facilities.
During the second quarter of 1996, the Company experienced a significant
increase in demand for its capital equipment, especially from offshore drilling
contractors. Sales from orders already received will result in increased capital
equipment revenues in the second half of 1996 as compared to the first six
months. The Company believes that offshore drillers have begun to experience
higher demand for and cash flows from their services that allow them to upgrade
and repair machinery and equipment on existing rigs. Improvements to the
existing fleet have been deferred for many years due to low cash flows caused by
an excess supply of rigs relative to demand, and the need for such upgrades and
repairs may be large. If utilization rates of the offshore mobile rig fleet
remain above 90%, new demand for the construction of rigs could result in a
further increase in demand for machinery and equipment manufactured by the
Company.
Revenues during the first six months of 1996 increased $2.1 million (3%)
over the comparable 1995 period as the increased demand for expendable and
replacement parts more than offset the lack of sales to foreign national oil
companies similar to the total of $9.5 million of such revenues recorded during
the first six months of 1995. Revenues in 1995 were down $41.4 million (22%)
from 1994, in large part due to the absence of $33 million in revenues
associated with an international rig package that was sold in 1994. As compared
to 1993, revenues in 1994 increased $8.2 million (5%) due to increased sales of
drilling capital equipment and related spare parts.
Operating income for the Oilfield Equipment segment increased $5.0 million
in the first half of 1996 as compared to the prior year as a result of higher
revenues, improved product mix and the consolidation in late 1995 of the
Company's United Kingdom manufacturing facility into its Houston location,
thereby resulting in lower costs and a more efficient manufacturing process.
Operating income increased slightly in 1995 in spite of the revenue decline
primarily as a result of the consolidation of facilities and other cost
reduction initiatives. In 1994, operating income increased substantially as
compared to the prior year due to the increase in revenues and the cost
reduction efforts initiated by new management.
Distribution Services
Distribution Services revenues result primarily from the sale of MRO
products from the Company's network of 113 distribution service centers and from
the sale of well casing and production tubing. These products are purchased from
numerous manufacturers and vendors, including the Company's Oilfield Equipment
segment. While the Company has increased revenues and improved its operating
income by entering into alliances and outsourcing arrangements, improvements in
operating results remain primarily dependent on attaining increased volumes of
activity through its distribution service centers while controlling the fixed
costs associated with numerous points of sale. Pricing is a lesser consideration
on operating income from distribution services as most cost increases or
reductions from the Company's suppliers are passed on to the customer.
Revenues for the six months ended June 30, 1996 increased by $33.8 million
(17%) over the comparable 1995 period due to an overall increase in market
activity, including a $14.2 million increase in tubular products sales and a
$19.6 million increase primarily from MRO products sales. Distribution Services'
revenues in 1995
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<PAGE> 24
were ahead of the 1994 level by $16.6 million (4%) due to improved general
market conditions in North America. As compared to 1993, revenues in 1994
decreased $34.7 million (8%), primarily due to significantly lower revenues from
tubular products.
Operating income increased $4.8 million during the first six months of 1996
as compared to the same period in 1995 due to the higher revenue levels.
Operating income increased in 1995 as compared to 1994 by only $0.4 million due
to a change in product mix, as revenues from lower margin tubular products
increased as a percentage of segment revenues. A decrease in operating income of
$4.9 million occurred in 1994 from 1993 as a result of the lower revenues.
Corporate
Corporate charges represent the unallocated portion of centralized and
executive management costs. These costs were $2.9 million in each of 1995 and
1994, up from the 1993 level due to the addition of new executive personnel and
costs necessary to refocus the direction of the Company. Corporate costs were up
$0.5 million during the first six months of 1996 as compared to the first six
months of 1995 due to the expense of the management fee paid pursuant to the
Management Services Agreement that will be terminated in connection with the
Offering.
Special Charges (Credits)
Special charges (credits) primarily relate to the sale of businesses and
product lines in connection with a major restructuring and redirection of the
Company that was completed in 1995. During 1995, the Company recorded gains of
$8.5 million ($7.5 million of which were recorded in the first half of the year)
from the sale of a non-oilfield centrifugal pump and switch valve product line
and from the sale of excess property and equipment of closed manufacturing
facilities in the United Kingdom and Canada. A net gain of $13.9 million was
recorded in 1994 from the sales of several production equipment product lines
offset in part by costs associated with the closure of the United Kingdom
facility. In 1993 the Company recorded a net loss of $8.6 million primarily
representing the loss on the sale of its wellhead business and related assets.
Interest Expense
Interest expense increased substantially during the first half of 1996 due
to debt incurred in connection with the Acquisition. Prior to 1996, interest
expense had declined in each of 1995 and 1994 as compared to the prior year due
to reductions in debt made possible by operating profits and proceeds from the
dispositions of various businesses, product lines and assets that generated over
$75 million in cash.
Income Taxes
Due to its partnership status, the Company was not subject to U.S. federal
or state income taxes prior to 1996 and accordingly the tax provision during
such periods relates to foreign income taxes as computed under Statement of
Financial Accounting Standard ("SFAS") No. 109. Beginning in 1996, the Company
is subject to U.S. federal and state taxes and currently estimates the combined
U.S. federal, state and foreign tax rate will approximate 40% of income before
taxes for 1996 although actual taxes paid may be lower as a result of
realization of deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had working capital of $126 million, a
decrease of $52 million from December 31, 1995, primarily due to the use of cash
in connection with the Acquisition. Working capital had increased by $26 million
at December 31, 1995 from the prior year end primarily due to the retention of
income from operations and proceeds of $6.9 million from the sale of a
non-oilfield pumping product line.
Due to the size of the Company's distribution services business,
significant components of the Company's assets are accounts receivable and
inventories. Accounts receivable increased during the first six months of 1996
due to higher revenues during the period. Inventories also increased due to
higher activity levels. Since
23
<PAGE> 25
1993, the Company has focused significant internal attention and emphasis on
accelerating the collection of accounts receivable and improving the Company's
return on capital employed.
The Company's business has not required large expenditures for capital
equipment. Total capital expenditures were $0.8 million during the first six
months of 1996, $4.8 million in 1995, $3.6 million in 1994 and $2.0 million in
1993. Enhancements to data processing and inventory control systems represent a
large portion of recent capital expenditures. Additional capital expenditures of
as much as $6 million are anticipated over the next three years to further
enhance the Company's information systems. The Company believes it has
sufficient existing manufacturing capacity to meet current and anticipated
demand for its products and services. Significant increases in demand for
oilfield equipment products, to the extent qualified subcontracting and
outsourcing are not available, could result in increases in capital
expenditures.
The Company believes that cash generated from operations and amounts
available under the New Credit Facility will be sufficient to fund operations,
working capital needs, capital expenditure requirements and financing
obligations. The Company also believes any significant increase in capital
expenditures caused by any need to increase manufacturing capacity can be funded
from operations or debt financing.
In connection with the Acquisition, the Company entered into a fully
secured, five-year credit agreement (the "Credit Facility") with GE Capital
which provides for revolving credit borrowings of up to $120 million and
long-term debt of $30 million. At June 30, 1996, borrowings under the revolving
portion of the Credit Facility were $70.9 million, plus the Company had incurred
additional usage of $12.6 million for outstanding letters of credit, leaving
$25.3 million of borrowing availability. The long-term portion of the Credit
Facility was reduced from $30 million to $25.2 million at June 30, 1996,
primarily due to the collection of proceeds from an insurance claim that existed
at the time of the Acquisition. Long-term debt at June 30, 1996 also included a
$5.1 million subordinated note and $20 million of debt financed by the sellers
in connection with the Acquisition, neither of which requires current cash
payments of principal or interest. In connection with the Credit Agreement, GE
Capital received a warrant to purchase 282,392 shares of Common Stock from the
Company for a nominal price (the "Warrant"). Concurrent with the Offering, the
Warrant will be exercised. Debt obligations are more fully described in Note 5
to the Consolidated Financial Statements.
The Company plans to use the net proceeds from the Offering to repay the
$25.2 million in term loans under the Credit Facility and the $5.1 million
subordinated note. The remaining net proceeds will be used to reduce the
revolving credit facility. The Company does not currently plan to repay the $20
million in seller notes from the net proceeds of the Offering. The seller notes
bear interest at 9%, and at the Company's option, interest payments through
January 16, 2003 may be deferred. One-half of the sum of the principal and any
deferred interest is payable on January 16, 2004, and the balance is payable on
January 16, 2005. The notes are subject to prepayment in certain events,
including the sale of significant assets by the Company or the sale by the
stockholders at the time of the Acquisition of more than 50% of their aggregate
shares. Partial prepayments are also required in connection with certain sales
of the Company's stock owned by The Inverness Group Incorporated or First
Reserve Corporation.
Effective as of the closing of the Offering, the Company will enter into a
new five-year senior secured revolving credit facility (the "New Credit
Facility") with GE Capital that will be available for acquisitions and general
corporate purposes. The New Credit Facility provides for a $120 million
revolving loan ("the Revolver"), of which $25 million may be used for letters of
credit. The Revolver is subject to a borrowing base limitation of 60% of
eligible inventory plus 85% of eligible accounts receivable which would have
totaled $108.7 million as of June 30, 1996. In connection with an acquisition
during the first three years of the Revolver term, the Company can convert a
total of $20 million of the Revolver availability to a term note that would
mature contemporaneously with the Revolver. The term note would not be subject
to a borrowing base limitation and would be repayable in quarterly installments
equal to 5% of the outstanding balance.
The Revolver and any term note bear interest at prime plus .75% or LIBOR
plus 2.0%, subject to adjustment based on the Company's total funded debt and
operating profit. Depending on the Company's financial performance, the interest
rate could be prime plus .25%, .75% or 1.25% or LIBOR plus 1.5%, 2.0% or 2.5%.
The New Credit Facility is secured by substantially all of the Company's assets
and contains certain financial covenants and ratios as well as a limitation on
dividends.
24
<PAGE> 26
The Company will pay GE Capital a fee of $ million on the closing of
the New Credit Facility and is obligated to pay an unused facility fee of %
per annum and an agency fee of $ per annum.
The Company may from time to time pursue acquisition opportunities. The
timing, size or success of any acquisition effort and the related potential
capital commitments cannot be predicted. The Company expects to fund future
acquisitions primarily through cash flow from operations and borrowings,
including the unborrowed portion of the New Credit Facility, as well as
issuances of additional equity. There can be no assurance that additional
financing for acquisitions will be available at terms acceptable to the Company.
Inflation has not had a significant effect on the Company's operating
results or financial condition in recent years.
OFFERING RELATED EXPENSES
The Company will incur certain one-time expenses in connection with the
Offering, as follows: (i) the Management Services Agreement will be terminated
at a cost of $4.8 million ($3.0 million after tax) and will be paid in quarterly
installments of $250,000 through March 31, 2001, subject to certain accelerating
events; (ii) the Credit Facility will be replaced by the New Credit Facility,
resulting in the write-off of $6.9 million in deferred financing costs related
to the existing agreement (after tax cost of $4.3 million) and the incurrence of
$1.2 million in deferred financing costs related to the New Credit Facility; and
(iii) expenses and payout under the Company's Value Appreciation Plans. The
Value Appreciation Plans are affected by the final offering price, and assuming
an initial public offering price of $17.00 per share, the Company would incur an
expense of $12.2 million ($7.6 million after tax) and would make a cash payment
at the time of closing of $2.9 million, make future annual cash payments of $.7
million for five years beginning January 17, 1997 and issue 340,926 shares of
restricted Common Stock valued at $5.8 million.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board (the, "FASB")
issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The methodology required by SFAS No. 121 is not materially
different from the Company's past practice and its adoption on January 1, 1996
did not have a material impact on the Company's consolidated financial
statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 establishes alternative methods of accounting and
disclosure for employee stock-based compensation arrangements. The Company has
elected to continue the use of the intrinsic value based method of accounting
for its employee stock option plan which does not result in the recognition of
compensation expense when employee stock options are granted if the exercise
price of the option equals or exceeds the fair market value of the stock at the
date of grant. The Company will provide pro forma disclosure of net income and
earnings per share in the notes to the consolidated financial statements as if
the fair value based method of accounting had been applied.
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Certain
statements contained herein are not based on historical facts, but are
forward-looking statements that are based upon numerous assumptions about future
conditions that could prove not to be accurate. Such forward-looking statements
include, without limitation, the statements regarding the trends in the industry
set forth in the Prospectus Summary and under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's anticipated future financial results and position.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ
25
<PAGE> 27
materially from the Company's expectations are disclosed in this Prospectus,
including but not limited to the matters described in "Risk Factors."
26
<PAGE> 28
BUSINESS
GENERAL
The Company is a worldwide leader in the design, manufacture and sale of
machinery and equipment and in the distribution of MRO products used in oil and
gas drilling and production. The Company designs, manufactures and sells
drawworks, mud pumps and power swivels (also known as "top drives"), which are
the major mechanical components of rigs used to drill oil and gas wells. Many of
these components are designed specifically for applications in offshore,
extended reach and deep land drilling. These components are installed on new
drilling rigs and used in the upgrade, refurbishment and repair of existing
drilling rigs. A significant portion of the Company's business includes the sale
of replacement parts for its own manufactured machinery and equipment. The
Company estimates that approximately 65% of the mobile offshore rig fleet and
the majority of the world's larger land rigs (2,000 horsepower and greater)
operating today utilize drilling machinery manufactured by the Company. In
addition, the Company manufactures and sells a complete line of centrifugal and
reciprocating pumps used in oilfield and industrial applications.
The Company provides distribution services through its network of 113
distribution service centers located near major drilling and production activity
worldwide, but principally in the United States and Canada. These distribution
service centers have historically provided MRO products, including valves,
fittings, flanges, replacement parts and miscellaneous expendable items. As oil
and gas companies and drilling contractors have refocused on their core
competencies and emphasized efficiency initiatives to reduce costs and capital
requirements, the Company's distribution services have evolved to offer
outsourcing and alliance arrangements that include comprehensive procurement,
inventory management and logistics support. These arrangements have resulted in
the Company working more closely with its customers in return for a more
exclusive oilfield distribution arrangement.
The Company's business is dependent on and affected by the level of
worldwide oil and gas drilling and production activity, the aging worldwide rig
fleet which was generally constructed prior to 1982, and the profitability and
cash flow of oil and gas companies and drilling contractors. Drilling activity
has recently increased in the offshore and deeper land markets both of which are
particularly well served by the drilling machinery and equipment manufactured by
the Company. As of June 30, 1996, the worldwide offshore mobile drilling rig
utilization rate was over 90% and the number of active U.S. land rigs had
increased approximately 15% compared to June 30, 1995. As drilling activity has
increased, the Company has experienced increased demand for its manufactured
products and distribution services as existing rigs are upgraded, refurbished
and repaired, new rigs are constructed and expendable parts are used.
The Company's oilfield equipment business and distribution services
business accounted for 56% and 44%, respectively, of the Company's combined
EBITDA for the six months ended June 30, 1996.
BUSINESS STRATEGY
Beginning in 1993, a new executive and operating team was assembled to
manage the Company's business. In January 1996, that new management team,
together with an investor group led by The Inverness Group Incorporated and
First Reserve Corporation, purchased the business of the Company from its former
owners, USX Corporation and Armco Inc. Since 1993, the business strategy of the
Company has been to enhance its operating performance and build a platform for
growth by focusing on markets in which its product lines are market leaders and
which are believed by management to provide the most significant growth
potential. As part of that strategy, the Company disposed of certain of its
non-core equipment manufacturing businesses and product lines and reengineered
its distribution business during the years 1993 through 1995. Since the
completion of the redirection of the Company's business in 1995, the Company's
performance has improved substantially, with EBITDA before special items
increasing from $6.2 million for the six months ended June 30, 1995 to $15.3
million for the six months ended June 30, 1996.
27
<PAGE> 29
The Company's current business strategy is to enhance its leading market
positions and operating performance by:
Leveraging Its Market Leading Installed Base. The Company estimates that
approximately 65% of the mobile offshore drilling rigs and the majority of the
world's larger land drilling rigs operating today use drilling machinery
manufactured by the Company. The Company believes this installed base and its
reputation for performance and reliability present substantial opportunities to
capture a significant portion of the increased level of expenditures by its
customers for the construction of new drilling rigs as well as the upgrade and
refurbishment of existing drilling rigs.
Capitalizing on Increasing Demand for Higher Horsepower Drilling Machinery.
The Company believes the advanced age of the existing fleet of drilling rigs,
coupled with increasing drilling activity involving greater water depths and
extended reach, will increase the demand for new drilling rig construction and
the upgrading and capacity enhancement of existing rigs. The Company's higher
horsepower drawworks, mud pumps and power swivels provide, in many cases, the
largest capacities currently available in the industry.
Building on Distribution Strengths. The Company has developed and
implemented integrated information and process systems that are designed for
more effective procurement, inventory management and logistics activities. A
critical element of the Company's strategy has been to regionally centralize its
procurement, inventory and logistics operations, thus gaining cost and inventory
utilization efficiencies while retaining its responsiveness to local markets. In
addition, the strategic integration of the Company's distribution expertise,
extensive distribution network and growing base of customer alliances provides
an increased opportunity for cost effective marketing of the Company's
manufactured equipment.
Capitalizing on Alliance/Outsourcing Trends. As a result of efficiency
initiatives, oil and gas companies and drilling contractors are frequently
seeking alliances with suppliers, manufacturers and service providers, or
outsourcing their procurement, inventory management and logistics requirements
for equipment and supplies in order to achieve cost and capital improvements.
The Company has entered into and is seeking alliance arrangements to better
serve its customers, to better manage its own inventory, to increase the volume
and scope of products sold to the customer without significantly increasing the
Company's overhead costs, and to expand marketing opportunities to sell
equipment manufactured by the Company. The Company believes that it is well
positioned to provide broad procurement, inventory management and other services
as a result of the Company's (i) large and geographically diverse network of
distribution service centers in major oil and gas producing areas, (ii)
purchasing leverage due to the volume of products sold, (iii) breadth of
available product lines and (iv) information systems that offer customers
enhanced online and onsite services.
OILFIELD EQUIPMENT
The Company's oilfield equipment business consists of the design,
manufacture, sale and service of drilling and pumping products.
Products
The Company's line of drilling machinery and equipment includes drawworks,
mud pumps, power swivels (also known as "top drives"), traveling equipment and
rotary tables. This machinery constitutes the majority of the components
involved in the primary functions of the drilling of oil and gas wells which
consist of pumping fluids and hoisting, supporting and rotating the drill
string. In addition to the manufacture of new drilling equipment and related
spare parts, the Company also refurbishes used drilling machinery and equipment.
The Company also services, refurbishes and manufactures spare parts for a line
of proprietary marine equipment products.
Drilling machinery and equipment can be purchased as individual components
or as a complete drilling rig package. The Company utilizes subcontractors for
certain machine shop and fabrication work.
The Company is also a major designer and manufacturer of centrifugal and
reciprocating pumps and pumping systems, as well as a wide variety of fluid-end
accessories and expendable pump parts for oil and gas
28
<PAGE> 30
drilling and oil production. The Company estimates that over 20,000
reciprocating pumps manufactured by the Company have been installed throughout
the world.
Mission-Fluid King(R) centrifugal pumps are utilized in various oil and gas
drilling applications including drilling mud mixing, low pressure fluid
transport and charging reciprocating pumps. The Company also manufactures and
sells a wide variety of fluid-end accessories for all major manufacturers' pumps
under its Mission-Fluid King(R) brand name. Fluid-end accessories are
expendables consumed on reciprocating mud pumps during the drilling and
production process and include replacement parts such as liners, valves, seats,
pistons, piston rods and packing accessories. These products are typically
replaced at regular intervals and are essential to drilling and production
operations.
Reciprocating pumps are used in a variety of artificial lift, oil transfer
and industrial applications. A sizable aftermarket for repair parts for these
pumps exists and the Company also provides fluid-end expendables under the
Mission-Fluid King(R) name to this market. Most of the pumps sold are
incorporated into systems (which generally consist of a reciprocating pump, a
power source, piping, valves, meters and other fabricated parts installed on a
skid) thereby providing the Company with an opportunity to offer the customer a
complete turnkey package. The Company also sells reciprocating pumps to the
refining, petrochemical, mining and steel industries.
Marketing of Company Products
Substantially all of the Company's drilling machinery, equipment and spare
parts sales, and a large portion of the Company's pumps and parts, are sold
through the Company's direct sales force and through the Company's distribution
service centers. The Company also markets its pumps and parts through
distribution networks not owned by the Company. Sales to foreign state-owned oil
companies are typically made in conjunction with agent or representative
arrangements. During the first half of 1996, management estimates that
approximately 40% of oilfield equipment revenues was from products sold for
delivery to destinations located outside North America.
The Company believes it is able to leverage its position as a manufacturer
of leading oilfield products by marketing those products through the Company's
distribution services business. During 1995, approximately 25% of oilfield
equipment revenues was from products sold through the Company's established
network of distribution service centers. Management believes that the Company
has an advantage over its competitors in the oilfield equipment markets by
virtue of its extensive distribution network making such products readily
available from numerous locations.
Competition
The oilfield equipment industry is highly competitive and the Company's
revenues and earnings can be affected by price changes, introduction of new
products and improved availability and delivery. Over the last several years the
market for oilfield services and equipment has experienced over capacity in some
services and products provided by the Company, which has resulted in increased
price competition in certain areas of the Company's business. The Company
competes with a large number of companies some of which may offer certain more
technologically advanced products or possess greater financial resources than
the Company. Competition for drilling systems and machinery comes from
Continental Emsco Company, Maritime Hydraulics U.S. Inc., Varco International,
Inc. and Dreco Energy Services Ltd. The principal competitors with the Company's
Mission-Fluid King(R) product line are Harrisburg/Woolley, Inc. and Southwest
Oilfield Products, Inc. Competition for the Company's reciprocating pumps comes
primarily from Wheatley-Gaso Inc. and Gardner Denver Machinery Inc.
Manufacturing and Backlog
Sales of the Company's products are made on the basis of written orders and
oral commitments. In accordance with industry practice, such orders and
commitments may not be considered firm backlog and the Company's backlog is
therefore difficult to determine. The Company estimates that the value of its
orders for new oilfield equipment (excluding spare parts orders) was
approximately $26 million as of June 30, 1996 as
29
<PAGE> 31
compared to orders of $8 million as of June 30, 1995. The total level of orders
varies from time to time as work is completed and orders are received.
The Company's principal manufacturing facilities are located in Houston,
Texas and McAlester, Oklahoma. See "-- Facilities." The Company also outsources
the manufacture of parts or purchases components in finished form from qualified
subcontractors.
The Company's manufacturing operations require a variety of components,
parts and raw materials which the Company purchases from multiple commercial
sources. The Company has not experienced nor expects any significant delays in
obtaining deliveries of essential components, parts and raw materials.
Engineering
The Company maintains a staff of engineers and technicians to (i) design
and test new products, components and systems for use in drilling and pumping
applications, (ii) enhance the capabilities of existing products and (iii)
assist the Company's sales organization and customers with special projects. The
Company's product engineering efforts focus on developing technology to improve
the economics and safety of drilling and pumping processes. The Company has
recently developed a 750 ton capacity power swivel to complement its existing
650 ton, 500 ton and 350 ton capacity models. The Company has also introduced a
4,000 horsepower drawworks to increase customer efficiencies when drilling at
extended depths and during horizontal drilling. A disc brake system for
drawworks has been developed which can be operated remotely and provides higher
braking torque capabilities than previous systems. The disc brake system can be
adapted to upgrade drawworks previously sold by the Company.
Patents and Trademarks
The Company owns or has a license to use a number of patents covering a
variety of products. Although in the aggregate these patents are of importance
to the Company, the Company does not consider any single patent to be of a
critical or essential nature. In general, the Company depends on technological
capabilities, manufacturing quality control and application of its expertise
rather than patented technology in the conduct of its business. The Company
enjoys product name brand recognition, principally through its National-
Oilwell(R), National(R), Oilwell(R) and Mission-Fluid King(R) trademarks, and
considers such trademarks to be important to its business.
DISTRIBUTION SERVICES
The Company is a market leader in providing comprehensive services for the
procurement, inventory management and logistics support of oilfield products to
the oil and gas industry. The Company markets and distributes its products and
services through several channels, including its network of oilfield
distribution service centers, a direct sales force and sales representatives and
agents. The Company's distribution services network includes 106 facilities
located throughout the major oil and gas producing regions of the United States
and Canada. In addition, the Company has international distribution service
points in seven locations in the United Kingdom, South America and the Pacific
Rim. The Company's distribution services customers are primarily major and large
independent oil companies and drilling contractors. Since January 1, 1995, the
Company's distribution services business has sold products to approximately
5,000 customers. Due to the nature of its distribution services business, the
Company does not maintain a backlog for such operations.
The Company is able to leverage its position as a leading provider of
distribution services by marketing products manufactured by the Company. For the
twelve month period ended December 31, 1995, approximately $43 million of the
Company's distribution services revenues resulted from the sale of the Company's
oilfield equipment products. Management believes that the Company has a
competitive advantage in the distribution services business by virtue of its
ability to distribute leading products manufactured by the Company's oilfield
equipment business.
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<PAGE> 32
Products
Maintenance, Repair and Operating Supplies and Equipment. The maintenance,
repair and operating supplies and equipment stocked by the Company's
distribution service centers vary by location. Each distribution point generally
offers a complete line of oilfield products including valves, fittings, flanges,
spare parts for oilfield equipment and miscellaneous expendable items. Most
drilling contractors and oil and gas companies typically buy such supplies and
equipment pursuant to non-exclusive contracts, which normally specify a discount
from the Company's list price for each product or product category for a
one-year period. As of June 30, 1996, the Company had approximately 1,300 active
contracts for maintenance, repair and operating supplies and equipment with
customers primarily located in North America. The sales volume of an individual
distribution service center is dependent principally upon the level of oil and
gas exploration and production activity in the area. Because of the strong
service orientation of the distribution services business, Company personnel at
distribution service centers generally provide customers with 24-hour per day
availability.
As a result of efficiency initiatives that are taking place in the oil and
gas industry, drilling contractors and oil and gas companies are more frequently
seeking strategic alliances and outsourcing their procurement and inventory
management requirements. These strategic alliances constitute a growing
percentage of the Company's business and differ from standard agreements for MRO
supplies and equipment in that the Company becomes the customer's primary
supplier of those items. In addition, the Company may assume responsibility for
procurement, inventory management and product delivery for the customer, in some
cases by working directly out of the customer's facilities.
Oil Country Tubular Goods. The Company's tubular business is focused on the
procurement, inventory management and delivery of oil country tubular goods
manufactured by third parties. Tubular goods primarily consist of well casing
and production tubing used in the drilling, completion and production of oil and
gas wells. Well casing is used to line the walls of a wellbore to provide
structural support. Production tubing provides the conduit through which the oil
or gas will be brought to the surface upon completion of the well. Historically,
sales of tubular goods have been concentrated in North America, although the
Company makes occasional sales for shipment to foreign destinations.
Substantially all of the Company's sales of tubular goods are made through the
Company's direct sales force.
In response to customer demands for improved efficiency in tubular
procurement and distribution, the Company has developed strategic alliances
between the Company and its customers. These strategic alliances enable the
Company to more efficiently source tubular goods for its customers, while
decreasing the capital and personnel requirements of the customer. These
alliance relationships currently constitute a majority of the Company's tubular
sales. Since alliances provide additional consistency and predictability to the
procurement process, the Company has also benefitted from improved utilization
of its assets and from an increase in the turnover rate of its tubular
inventory.
Competition
The oilfield distribution services business is highly competitive. The
Company's revenues and earnings can be affected by competitive actions such as
price changes, improved delivery and other actions by competitors. In addition,
there are few barriers to entry for competitors to enter the distribution
services business. The Company's principal competitors in the United States
distribution services business include Continental Emsco Company, Wilson Supply
Company, Red Man Pipe & Supply Co. and McJunkin Corporation. CE Franklin Ltd.
and DOSCO Supply are major competitors of the Company's distribution services
business in the Canadian market. The Company also competes with a number of
regional or local oilfield supply stores in each geographic market. In the
international markets, the Company's distribution services business competes
with some of the above-named competitors as well as a number of regional or
local suppliers. The Company's North American tubular goods distribution
business competes with Vinson Supply Company, Sooner Pipe & Supply Corporation,
Red Man Pipe & Supply Co., Continental Emsco Company and Wilson Supply Company
as well as a number of regional distributors.
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<PAGE> 33
Suppliers
The Company obtains the MRO products it distributes from a number of
suppliers. The Company does not believe that any one supplier of MRO products is
material to the Company. For the year ended December 31, 1995 and for the six
months ended June 30, 1996, the Company purchased approximately 36% and 28%,
respectively, of its tubular requirements from the U.S. Steel Group of USX
Corporation, and its remaining requirements from various suppliers. In
connection with the Acquisition, in January 1996 the Company entered into a five
year distribution agreement with the U.S. Steel Group on an arms length basis on
generally the same terms that existed prior to the Acquisition. The Company is
not obligated to purchase any minimum amount of tubular goods under the
agreement with the U.S. Steel Group. The Company has not experienced and does
not foresee experiencing a shortage in MRO products or tubular goods sold by the
Company.
FACILITIES
The Company owned or leased 121 facilities worldwide as of August 25, 1996,
of which the following are its principal manufacturing and administrative
facilities:
<TABLE>
<CAPTION>
APPROXIMATE
BUILDING SPACE
LOCATION (SQ. FT.) DESCRIPTION STATUS
----------------------------- -------------- ----------------------------------- -------
<S> <C> <C> <C>
Houston, Texas............... 217,000 Manufactures drilling machinery Leased
and equipment
McAlester, Oklahoma.......... 117,000 Manufactures pumps and expendable Owned
parts
Houston, Texas............... 116,000 Administrative offices Leased
</TABLE>
The manufacturing facilities listed above are used in the Company's
oilfield equipment business. The Company also has five satellite repair and
manufacturing facilities that refurbish and manufacture new equipment and parts.
These facilities are strategically located to meet customer needs in Houston,
Texas; Odessa, Texas; New Iberia, Louisiana; Aberdeen, Scotland and Singapore.
The Company believes that the capacity of its manufacturing and repair
facilities is suitable to meet demand for the foreseeable future.
The Company owns or leases approximately 113 distribution service centers
worldwide to operate its distribution services business. No individual facility
is significant to the distribution services business. The Company also leases
space at a number of tubular storage locations for use in its tubular goods
distribution business.
EMPLOYEES
As of August 28, 1996, the Company had a total of 1,384 employees, 1,158 of
whom were salaried and 226 of whom were paid on an hourly basis. Of the
Company's workforce, 316 of the employees are employed by the Company's foreign
subsidiaries and are located outside the United States. As of August 28, 1996,
the Company was a party to one collective bargaining agreement which applied to
six employees located in Singapore. The Company considers its relationship with
its employees to be good.
OPERATING RISKS AND INSURANCE
The Company's operations are subject to the usual hazards inherent in
manufacturing products and providing services for the oil and gas industry.
These hazards can cause personal injury and loss of life, business
interruptions, property and equipment damage and pollution or environmental
damage. The Company maintains comprehensive insurance covering its assets and
operations at levels which management believes to be appropriate and in
accordance with industry practice. However, no assurance can be given that
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<PAGE> 34
insurance coverage will be adequate in all circumstances or against all hazards,
or that the Company will be able to maintain adequate insurance coverage in the
future at commercially reasonable rates or on acceptable terms.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
The Company's operations are subject to regulations by federal, state and
local authorities in the United States and regulatory authorities with
jurisdiction over its foreign operations. Environmental laws and regulations
have changed substantially and rapidly over the last 20 years, placing more
restrictions and limitations on activities that may impact the environment, such
as emissions of pollutants, generation and disposal of wastes and use and
handling of chemical substances. Although compliance with various governmental
laws and regulations has not materially adversely affected the Company's
financial condition or results of operations, no assurance can be given that
compliance with such laws or regulations will not have a material adverse impact
on the Company's business in the future.
The Company has conducted a number of environmental audits of its major
facilities to identify and categorize potential environmental exposures and to
ensure compliance with applicable environmental laws, regulations and permit
requirements. This effort has required and may continue to require operational
modifications to the Company's facilities, including installation of pollution
control devices and cleanups.
The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") imposes liability, without regard to fault or the legality of the
original conduct, on certain classes of persons with respect to the release of a
hazardous substance into the environment. These persons include the owner and
operator of the disposal site or sites where the release occurred and companies
that disposed or arranged for the disposal of the hazardous substances found at
such site. Persons who are or were responsible for releases of hazardous
substances under CERCLA may be subject to joint and several liability for the
costs of cleaning up the hazardous substances that have been released into the
environment and for damages to natural resources, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances released
into the environment.
The Company currently owns or leases, and has in the past owned or leased,
numerous properties that for many years have been used for the manufacture and
storage of products and equipment containing or requiring oil and/or hazardous
substances. Although the Company has utilized operating and disposal practices
that were standard in the industry at the time, hydrocarbons or other wastes may
have been disposed of or released on or under the properties owned or leased by
the Company or on or under other locations where such wastes have been taken for
disposal. In addition, many of these properties have been operated by third
parties whose treatment and disposal or release of hydrocarbons or other wastes
was not under the Company's control. These properties and the wastes disposed
thereon may be subject to CERCLA, the Resource Conservation and Recovery Act and
analogous state laws. Under such laws, the Company would be required to remove
or remediate previously disposed wastes (including wastes disposed of or
released by prior owners or operators), property contamination (including
groundwater contamination) or to perform remedial operations to prevent future
contamination.
The Company and approximately 250 other potentially responsible parties
("PRPs") have received notices from the Environmental Protection Agency (the
"EPA") that each is a PRP under CERCLA in connection with a waste oil recycling
facility operated in the State of Texas by Voda Petroleum. It is alleged that
the Company and its predecessors generated waste which was transported to a site
operated by Voda Petroleum and that Voda Petroleum improperly disposed of the
waste. The EPA has conducted a preliminary assessment of the site and determined
that the contamination consists primarily of oil that is subject to the
requirements of Oil Pollution Act of 1990 ("OPA") which subjects owners of
facilities to strict joint and several liability for all containment and cleanup
costs and certain other damages arising from a spill including, but not limited
to, the costs of responding to a release of oil to surface waters. Liability
under OPA is generally limited to the party responsible for the facility from
which the spill or release actually occurred. The EPA also has determined that a
small portion of the contamination at the site consists of hazardous substances
that are subject to the provisions of CERCLA. The EPA has indicated that it
intends to remediate
33
<PAGE> 35
the Voda site and has established an initial site cleanup estimate of
approximately $2 million. Management of the Company believes that the Company's
liability, if any, to the extent not otherwise provided for, should not have a
material adverse effect on the Company's consolidated financial statements.
Although the Company believes that it is in substantial compliance with
existing laws and regulations, there can be no assurance that substantial costs
for compliance will not be incurred in the future. Moreover, it is possible that
other developments, such as stricter environmental laws, regulations and
enforcement policies thereunder, could result in additional, presently
unquantifiable, costs or liabilities to the Company.
AGREEMENT WITH PREVIOUS OWNERS
The Purchase Agreement entered into among the Company, USX Corporation and
Armco Inc. in connection with the Acquisition of the Company's business from
them provides that the Company will be responsible for (i) all of the
liabilities, including environmental costs, disclosed and undisclosed, created
after April 1, 1987 with respect to the business operations of the predecessor
partnership as they were being conducted on the closing date ("Continuing
Operations"), (ii) disclosed liabilities created after April 1, 1987 with
respect to operations of the Company discontinued or sold prior to the closing
date ("Discontinued Operations"), (iii) disclosed liabilities for environmental
costs for conditions in existence as of April 1, 1987 ("Pre-1987 Environmental
Costs"), (iv) fifty percent of the first $8.0 million of the aggregate of
undisclosed Pre-1987 Environmental Costs and undisclosed liabilities related to
Discontinued Operations and (v) taxes other than United States federal income
taxes.
LEGAL PROCEEDINGS
There are various pending or threatened claims, lawsuits and administrative
proceedings against the Company with respect to commercial, product liability
and employee matters which seek remedies or damages. Although no assurance can
be given with respect to the outcome of these or any other pending legal and
administrative proceedings and the effect such outcomes may have on the Company,
management believes that any ultimate liability resulting from the outcome of
such proceedings, to the extent not otherwise provided for, will not have a
material adverse effect on the Company's consolidated financial statements.
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<PAGE> 36
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the Company's executive officers and directors,
together with their positions and ages.
<TABLE>
<CAPTION>
DIRECTOR'S
NAME AGE POSITION WITH THE COMPANY TERM EXPIRING
- --------------------------------- --- -------------------------------- -------------
<S> <C> <C> <C>
Joel V. Staff(1)................. 52 Chairman of the Board, President 1999
and Chief Executive Officer
C. R. Bearden.................... 50 Executive Vice President, 1998
President of Distribution
Services and Director
Lynn L. Leigh.................... 71 Senior Vice --
President -- Marketing
Steven W. Krablin................ 46 Vice President and Chief --
Financial Officer
James J. Fasnacht................ 41 Vice President and General --
Manager of Pumping Systems
Merrill A. Miller, Jr............ 46 Vice President and General --
Manager of Drilling Systems
Jerry N. Gauche.................. 48 Vice President -- Organizational --
Effectiveness
Paul M. Nation................... 41 Vice President, Secretary and --
General Counsel
W. McComb Dunwoody(1)............ 51 Director 1999
William E. Macaulay(1)(3)........ 51 Director 1999
Howard I. Bull(3)................ 56 Director 1998
James T. Dresher(2).............. 77 Director 1997
James C. Comis III(2)............ 32 Director 1998
Bruce M. Rothstein(2)............ 44 Director 1997
</TABLE>
- ---------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
The Amended and Restated Certificate of Incorporation of the Company
classifies the board of directors into three classes having staggered terms of
three years each. The number of directors is fixed from time to time by
resolution of the board of directors and consists of not less than three
directors. The board of directors is currently set at eight members. The
executive officers named above were elected to serve in such capacities until
the next annual meeting of the board of directors, or until their respective
successors have been duly elected and qualified, or until their earlier death,
resignation, disqualification or removal from office.
Set forth below is a brief description of the business experience of the
executive officers and directors of the Company.
Joel V. Staff has served as the President and Chief Executive Officer of
the Company since July 1993 and Chairman of the Board since January 1996. Prior
to joining the Company, Mr. Staff served as a Senior Vice President of Baker
Hughes Incorporated from October 1983 to May 1993. Mr. Staff also serves as a
director of Destec Energy Inc., an independent power company.
C. R. Bearden has served as Executive Vice President of the Company and
President of Distribution Services since January 1995 and as a Director since
January 1996. Mr. Bearden served in various executive capacities including
President and Chief Executive Officer of Chiles Offshore Corporation from 1979
until that company's 1994 acquisition by a subsidiary of Noble Drilling
Corporation, an offshore drilling contractor, where he served as President and
Chief Operating Officer until joining the Company.
35
<PAGE> 37
Lynn L. Leigh has served as a Senior Vice President since October 1993.
Prior to joining the Company, Mr. Leigh served as the President and Chief
Executive Officer of Hydril Company from January 1992 to July 1993. Prior
thereto, he provided consulting and project management support services to
Grasso Oilfield Services, Inc. from March 1989 to December 1991 and served as
President of Unit Rig and Equipment Company from November 1987 to February 1989.
Mr. Leigh also serves as a director of Global Marine, Inc., a marine drilling
contractor.
Steven W. Krablin has served as Vice President and Chief Financial Officer
since January 1996. Mr. Krablin served in various capacities including Vice
President-Finance and Chief Financial Officer of Enterra Corporation, a
NYSE-listed, international oilfield service company, from 1986 to October 1995.
James J. Fasnacht has served as Vice President and General Manager of
Pumping Systems since November 1993, as Human Resources Manager from 1991 to
November 1993 and in various other capacities since joining the Company in 1979.
Merrill A. Miller, Jr. has served as Vice President and General Manager of
Drilling Systems since July 1996 and as Vice President of Marketing, Drilling
Systems from February 1996 to July 1996. From May 1980 to January 1995, Mr.
Miller served in various capacities including Vice President/U.S. Operations of
Helmerich & Payne International Drilling Co., a drilling contractor.
Jerry N. Gauche has served as Vice President -- Organizational
Effectiveness since joining the Company in January 1994. Prior thereto, Mr.
Gauche was employed by BP Exploration, Inc., an oil and gas exploration and
production company, where he served as General Manager of Central Services from
January 1990 to September 1992 and Director of Public Affairs and Executive
Coordination from May 1988 to December 1989.
Paul M. Nation has served as Secretary and General Counsel of the Company
since 1987 and Vice President since 1994.
W. McComb Dunwoody has served as a Director of the Company since January
1996. Mr. Dunwoody has been Chief Executive Officer since 1981 of The Inverness
Group Incorporated, which sponsors and invests in private equity transactions.
Additionally, he has served as President and Chief Executive Officer of Duff &
Phelps/Inverness LLC since 1994.
William E. Macaulay has served as a Director of the Company since January
1996. Mr. Macaulay has been the President and Chief Executive Officer of First
Reserve Corporation since 1983. Mr. Macaulay serves as a director of Weatherford
Enterra, Inc., an oilfield service company, Maverick Tube Corporation, a
manufacturer of steel pipe and casing, Transmontaigne Oil Company, an oil
products distribution and refining company, and Hugoton Energy Corporation, an
independent oil and gas exploration and production company.
Howard I. Bull has served as a Director of the Company since January 1996.
Since April 1994, Mr. Bull has been President, Chief Executive Officer and a
director of Dal-Tile International, Inc. which is the largest tile manufacturer
and distributor in North America. Prior to joining Dal-Tile International, Inc.,
Mr. Bull spent 10 years with Baker Hughes Incorporated, a worldwide diversified
oil services company, where he became Chief Executive Officer for Baker Hughes
Drilling Equipment Company. Additionally, he served York International
Corporation, a worldwide manufacturer and distributor of air conditioner and
refrigeration equipment, as President of its Applied Systems Division and Air
Conditioning Business Group. Mr. Bull is a director of Marine Drilling
Companies, Inc.
James T. Dresher has served as a Director of the Company since January
1996. Mr. Dresher has been Chairman/Chief Executive Officer and principal owner
of Unidata, Inc., a Denver-based software company, since December 1991 and has
been Chairman and owner of Glenangus, a residential real estate development
company, since 1972. In addition, Mr. Dresher served as Chairman/CEO of York
International Corporation from 1988 to 1993. Prior thereto, Mr. Dresher served
as a director, Chief Financial Officer and Executive Vice President of Baker
International Corporation.
36
<PAGE> 38
James C. Comis III has served as a Director of the Company since January
1996. Mr. Comis has served as Managing Director of Duff & Phelps/Inverness LLC
since August 1994. From August 1990 to August 1994, Mr. Comis was engaged in
sponsoring and investing in private equity transactions with Mr. Dunwoody.
Bruce M. Rothstein has served as a Director of the Company since May 1996.
Mr. Rothstein is Vice President of First Reserve Corporation, which he joined in
1991. Prior to joining First Reserve, he served as Treasurer and Chief
Accounting Officer of Computer Factory, Inc.
COMMITTEES
The Company has the following standing committees of the board of
directors:
Executive Committee. The Executive Committee consists of Messrs. Dunwoody,
Staff and Macaulay, with Mr. Dunwoody serving as Chairman. The Executive
Committee has the full power and authority to exercise all the powers of the
board of directors in the management of the business except the power to fill
vacancies in the board of directors and the power to amend the Bylaws.
Audit Committee. The Audit Committee consists of Messrs. Dresher, Comis and
Rothstein, with Mr. Dresher serving as Chairman. The Audit Committee has
responsibility for, among other things, (i) recommending the selection of the
Company's independent accountants, (ii) reviewing and approving the scope of the
independent accountants' audit activity and extent of non-audit services, (iii)
reviewing with Management and the independent accountants the adequacy of the
Company's basic accounting systems and the effectiveness of the Company's
internal audit plan and activities, (iv) reviewing with Management and the
independent accountants the Company's financial statements and exercising
general oversight of the Company's financial reporting process and (v) reviewing
the Company's litigation and other legal matters that may affect the Company's
financial condition and monitoring compliance with the Company's business ethics
and other policies.
Compensation Committee. The Compensation Committee consists of Messrs. Bull
and Macaulay, with Mr. Bull serving as Chairman. This committee has general
supervisory power over, and the power to grant options under, the Stock Award
and Long-Term Incentive Plan and the Value Appreciation Plans. The Compensation
Committee has responsibility for, among other things, (i) reviewing the
recommendations of the Chief Executive Officer as to appropriate compensation of
the Company's principal executive officers and certain other key personnel and
establishing the compensation of such key personnel and the Chief Executive
Officer, (ii) examining periodically the general compensation structure of the
Company and (iii) supervising the welfare and pension plans and compensation
plans of the Company.
DIRECTOR COMPENSATION
Directors who are full-time employees of the Company do not receive a
retainer or fees for service on the board of directors or on committees of the
board. Members of the board of directors who are not full-time employees of the
Company receive an annual fee of $15,000, a fee of $1,000 for attendance at each
meeting of the board of directors and at each meeting of its committees or any
special committee established by the board, and a fee of $1,000 per day for any
special assignments. The chairmen of the audit and compensation committees
receive a fee of $1,250 for attendance at each meeting of the committee they
chair. In addition, directors of the Company are eligible for grants of stock
options, although no grants have been made, pursuant to the Stock Award and
Long-Term Incentive Plan.
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<PAGE> 39
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
concerning the compensation payable by the Company to its Chief Executive
Officer and its other most highly compensated executive officers for the year
ended December 31, 1995 and includes executive officers who joined the Company
in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND --------------------- ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION
------------------------------------------------- -------- -------- ------------
<S> <C> <C> <C>
Joel V. Staff.................................... $275,016 -- --
Chairman, President and Chief Executive Officer
C. R. Bearden.................................... 215,625 -- --
Executive Vice President
Lynn L. Leigh.................................... 195,000 -- --
Senior Vice President
Steven W. Krablin(1)............................. -- -- --
Vice President and Chief Financial Officer
Merrill A. Miller, Jr.(1) ....................... -- -- --
Vice President
</TABLE>
- ---------------
(1) Messrs. Krablin and Miller joined the Company in January 1996 and February
1996, respectively.
EMPLOYMENT AND COMPENSATION ARRANGEMENTS
Effective as of January 1, 1996, the Company entered into an employment
agreement with each of the executive officers providing for a base salary,
participation in the Company's Incentive Plan and employee benefits as generally
provided to all employees for a continuing term of two years for Mr. Staff and
one year for each of the other executive officers. The Company is not obligated
to pay any amounts pursuant to the employment agreements upon (i) voluntary
termination; (ii) termination for cause (as defined); (iii) death; (iv)
long-term disability; or (v) employee's refusal to accept comparable employment
with a successor corporation. If the employment relationship is terminated by
the Company for any other reason, or by the employee due to an uncorrected
material breach of the employment agreement by the Company, the employee is
entitled to receive his base salary and current year targeted bonus amount
either as a lump sum payment or over the one or two year term, as applicable, as
determined by the employment agreement under the circumstances. The employment
agreements with executive officers provide for the following base salaries for
1996: Joel V. Staff -- $300,000; C. R. Bearden -- $240,000; Lynn L.
Leigh -- $195,000; Steven W. Krablin -- $150,000; and Merrill A. Miller,
Jr. -- $150,000. The executive officers are entitled to bonuses as provided in
the Company's 1996 Employee Incentive Plan. See "-- Employee Benefit Plans and
Arrangements -- Employee Incentive Plan." The named executive officers are also
entitled to certain benefits upon termination pursuant to the Stock Incentive
Plan and Value Appreciation Plans, as described herein. Termination payments to
each of the named executive officers would be as follows: Joel V.
Staff -- $727,500; C. R. Bearden -- $324,000; Lynn L. Leigh -- $263,250; Steven
W. Krablin -- $202,500; and Merrill A. Miller, Jr. -- $202,500. During the
period of employment and for a period after termination of two years for Mr.
Staff and one year for each of the other executive officers, the employees are
generally prohibited from competing or assisting others to compete with the
Company in its existing or recent business, or inducing any other employee to
terminate employment with the Company.
LONG-TERM STOCK INCENTIVE PLAN
In 1996, the Company adopted a Stock Award and Long-Term Incentive Plan
("Stock Incentive Plan"), which provides for the award of restricted stock,
incentive stock options, stock appreciation rights, performance share awards,
stock value equivalent awards or any combination of the above, to certain key
employees of the Company (the "Plan Participants"). Awards are granted to Plan
Participants by the Compensation
38
<PAGE> 40
Committee of the board of directors of the Company. The Stock Incentive Plan
authorizes the issuance of up to an aggregate of 1,941,303 shares of Common
Stock of the Company to the Plan Participants. As of August 28, 1996, 941,303
shares of Common Stock of the Company had been awarded as restricted stock to
seven recipients, each of whom is an executive officer of the Company, pursuant
to Restricted Stock Agreements. Those Restricted Stock Agreements provide for
the purchase of Common Stock of the Company for $.001 per share (the "Restricted
Stock"). Although any of the 941,303 shares of Restricted Stock which are
forfeited can be reawarded to new participants by the Company, any forfeited
shares of Restricted Stock not reawarded as of January 17, 2001 shall
automatically be awarded pro rata among the then existing holders of Restricted
Stock. The Restricted Stock is subject to forfeiture restrictions, which
prohibit the stock from being sold, assigned, pledged, exchanged or otherwise
transferred until the forfeiture restrictions have lapsed. The Restricted Stock
Agreements also provide that the Restricted Stock must be resold to the Company
for $.001 per share if the recipients' employment with the Company is terminated
for any reason prior to the lapse of the forfeiture restrictions. The forfeiture
restrictions lapse each year on 20% of the total number of shares of Restricted
Stock awarded to each Plan Participant and on an additional twenty percent of
the Restricted Stock awarded to a Plan Participant upon an involuntary
termination of employment without cause. The Stock Incentive Plan is
administered by the Compensation Committee.
Under certain circumstances, the accelerated lapsing of the forfeiture
provisions of the Restricted Stock might be deemed an "excess parachute payment"
for purposes of the golden parachute tax provisions of Section 280G of the
Internal Revenue Code. To the extent it is so considered, the Company may be
denied a tax deduction. In addition, the Restricted Stock Agreements provide for
the Company to pay the Plan Participants a bonus which is equal to two-thirds of
the amount of any excess parachute tax payments which may be made by the Plan
Participants (the "Parachute Bonuses"), plus an additional amount equal to the
additional income taxes to be paid by the participants related to the Parachute
Bonuses.
EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS
The following are descriptions of certain of the Company's employee benefit
plans and arrangements under which employees, officers and directors of the
Company may participate.
Employee Incentive Plan. In 1996, the Company established the 1996
National-Oilwell Employee Incentive Plan (the "Employee Incentive Plan") in
which all employees, including executive officers, are eligible to receive cash
bonus payments. The amount of the bonus payment is determined by the Company's
performance objectives based on measures of EBITDA and the ratio of EBITDA to
capital employed. A minimum performance level must be achieved by the Company
before any bonus is earned, and higher levels of achievement are rewarded with
increasing bonus payments based upon an established progression. A participant's
bonus opportunity varies depending upon the level of his or her position. The
maximum bonus opportunity for the President is approximately 65% of annual base
salary and for the other executive officers is approximately 50%. The board of
directors may adjust the award by as much as 25% of the target award.
Value Appreciation and Incentive Plan A. The Company has adopted an
incentive plan, the Value Appreciation and Incentive Plan A ("VAP A"), which
provides for certain key employees of the Company ("VAP A Participants") to
qualify for an award upon the occurrence of certain events, including an initial
public offering. The Company grants VAP A Participants awards in the form of
Value Appreciation Units ("VAUs"), of which a maximum of 80 can be awarded under
VAP A. As of August 26, 1996 there were 27 participants in VAP A, and 63 of the
80 VAUs available had been awarded to those VAP A Participants. In the event of
an initial public offering, the maximum amount to be awarded to VAP A
Participants (the "Maximum VAP A Award"), which assumes all 80 VAUs have been
awarded, is calculated by multiplying the value of the total number of issued
and outstanding shares of Common Stock of the Company immediately prior to the
Offering (valued at the initial public offering price, less underwriters'
discount) times 0.04.
The amount of the award to be distributed to an individual VAP A
Participant (an "Individual Distribution Award") is calculated by multiplying
the Maximum VAP A Award by a fraction, the numerator of which is the number of
VAUs awarded to the individual VAP A Participant, and the denominator of which
is 80. At the time of an initial public offering participants will receive
one-third of their Individual Distribution
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<PAGE> 41
Amount in cash and the remaining two-thirds in restricted Common Stock of the
Company (the "VAP A Stock"), valued at the initial public offering price. The
VAP A Stock is subject to forfeiture restrictions, which prohibit the stock from
being sold, assigned, pledged, exchanged or otherwise transferred until the
forfeiture restrictions have lapsed. The forfeiture restrictions lapse on
one-half of the VAP A Stock on the first anniversary date of the initial public
offering, and on the other one-half of the VAP A Stock on January 17, 1999.
Under certain circumstances, the amounts payable under VAP A might be
deemed an "excess parachute payment" for purposes of the golden parachute tax
provisions of Section 280G of the Internal Revenue Code. To the extent it is so
considered, the Company may be denied a tax deduction. In addition, VAP A
provides for the Company to pay the VAP A Participants a bonus which is equal to
two-thirds of the amount of any excess parachute tax payments which may be made
by the VAP A Participants (the "VAP A Parachute Bonuses"), plus an additional
amount equal to the additional income taxes to be paid by the VAP A Participants
related to the VAP A Parachute Bonuses.
Value Appreciation and Incentive Plan B. The Company has adopted another
incentive plan, the Value Appreciation and Incentive Plan B ("VAP B", and
collectively with VAP A, the "Value Appreciation Plans"), which provides for
certain executive officers of the Company to qualify for an award upon the
occurrence of certain events, including an initial public offering. Only
executive officers who have received an award of restricted stock under the
Company's Stock Incentive Plan as of the date of an initial public offering
("VAP B Participants") participate in VAP B. As of August 26, 1996 there were
seven participants in VAP B. Awards to VAP B Participants consist of a Pool A
Award and a Pool B Award. The total Pool A Award is calculated by multiplying
the value of the total number of issued and outstanding shares of Common Stock
of the Company immediately prior to the public offering (valued at the initial
public offering price, less underwriters' discount) times 0.01. The total Pool B
Award is $3,490,000.
The portion of the Pool A Award to be distributed to an individual VAP B
Participant is calculated by multiplying the Pool A Award by a fraction, the
numerator of which is the number of shares of stock of the Company awarded to
the individual VAP B Participant, and the denominator of which is the total
number of shares of stock of the Company awarded to all VAP B Participants. At
the time of an initial public offering, VAP B Participants will receive
one-third of the Pool A Award in cash and the remaining two-thirds in restricted
Common Stock of the Company (the "VAP B Stock"), valued at the initial public
offering price. The VAP B Stock is subject to forfeiture restrictions, which
prohibit the stock from being sold, assigned, pledged, exchanged or otherwise
transferred until the forfeiture restrictions have lapsed. The forfeiture
restrictions lapse on one-half of the VAP B Stock on the first anniversary date
of the initial public offering, and on the other one-half of the VAP B Stock on
January 17, 1999.
The portion of the Pool B Award to be distributed to an individual VAP B
Participant is calculated by multiplying the Pool B Award by a fraction, the
numerator of which is the number of shares of restricted stock of the Company
awarded to the individual VAP B Participant under the Company's Stock Incentive
Plan, and the denominator of which is the total number of shares of restricted
stock of the Company awarded to all VAP B Participants under the Company's Stock
Incentive Plan. The timing of the distribution of the Pool B Awards is tied to
the date upon which an initial public offering occurs, but if such event occurs
prior to January 1, 1997, the Pool B Award will be paid in five equal
installments on January 17 in 1997, 1998, 1999, 2000 and 2001. Pool B Awards are
payable in cash.
Under certain circumstances, the amounts payable under VAP B might be
deemed an "excess parachute payment" for purposes of the golden parachute tax
provisions of Section 280G of the Internal Revenue Code. To the extent it is so
considered, the Company may be denied a tax deduction. In addition, VAP B
provides for the Company to pay the VAP B Participants a bonus which is equal to
two-thirds of the amount of any excess parachute tax payments which may be made
by the VAP B Participants (the "VAP B Parachute Bonuses"), plus an additional
amount equal to the additional income taxes to be paid by the VAP B Participants
related to the VAP B Parachute Bonuses.
Supplemental Savings Plan. The Supplemental Savings Plan is a non-qualified
deferred compensation plan, which permits certain employees (31 as of June 30,
1996) to defer receipt of regular and/or incentive compensation. Participants
are not entitled to receive any deferred amounts prior to termination of
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employment, at which time payments will be made in a lump sum or in monthly
payments over a prespecified period not to exceed 10 years.
The Supplemental Savings Plan also provides for the Company to make
contributions on behalf of the participants whose contributions to the Company's
Retirement and Thrift Plan are limited by various Internal Revenue Code
regulations. The Supplemental Savings Plan assets are held in a trust whose
assets may be reached by creditors, but which are unavailable to the Company.
Shares of the Company's Common Stock held in trust pursuant to this plan are
voted by a party unaffiliated with the Company or the trustee of the plan.
CERTAIN TRANSACTIONS
STOCKHOLDERS AGREEMENT
The Company and the holders of 100% of the Company's Class A Common Stock
and Common Stock outstanding prior to the Offering have entered into a
Stockholders Agreement dated January 16, 1996, as amended (the "Stockholders
Agreement"). The Stockholders Agreement contains provisions for management of
the Company, voting of shares, election of directors and restrictions on
transfer of shares. Among other things, the Stockholders Agreement provides that
four members of the Company's board of directors would be designated by DPI Oil
Service Partners Limited (of which Duff & Phelps/Inverness LLC serves as the
managing general partner), two members of the board would be designated by
partnerships of which First Reserve Corporation serves as the managing general
partner, and the Chief Executive Officer and Executive Vice President would
serve as the remaining two directors of the Company's eight member board of
directors. All of the existing members of the Company's board of directors were
designated and elected pursuant to the terms of the Stockholders Agreement. The
terms of the Stockholders Agreement concerning rights to designate members of
the board of directors, management of the Company, and restrictions on transfer
of shares all will terminate automatically upon the completion of the Offering.
In addition, the Stockholders Agreement provides the Inverness Investors and the
First Reserve Investors, after the Offering, the right on four occasions to
require the Company to register all or part of their registerable shares under
the Securities Act, and the Company is required to use its best efforts to
effect such registration, subject to certain conditions and limitations. The
Stockholders Agreement also provides all the parties to the Stockholders
Agreement with piggyback registration rights on any offering by the Company of
any of its securities to the public except a registration on Forms S-4 or S-8.
The Company will bear the expenses of all registrations under the Stockholders
Agreement. The parties to the Stockholders Agreement have waived their
registration rights with respect to a Registration Statement filed by the
Company with respect to the Offering.
AGREEMENTS WITH INVERNESS
The Company entered into a Management Services Agreement dated January 16,
1996 (the "Management Services Agreement") with Duff & Phelps/Inverness LLC, a
Connecticut limited liability company ("Inverness"). This agreement will be
terminated and replaced with a Deferred Payment Agreement immediately prior to
the Offering.
The Management Services Agreement provides that Inverness perform
management services as directed by the Company's board of directors, including
(i) assisting executive management; (ii) identifying and negotiating
acquisitions and dispositions for the Company; (iii) negotiating and analyzing
financing alternatives in connection with acquisitions, capital expenditures,
and refinancings; (iv) financial modeling and analysis; (v) assisting in
executive searches and (vi) other services as agreed with the Company's board of
directors.
The Management Services Agreement provides that Inverness receive fees of
$1,000,000 per year, payable quarterly commencing in January 1996 and a
transaction fee in connection with each acquisition or disposition by the
Company of an existing business of 1% of the aggregate transaction value of each
such transaction.
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<PAGE> 43
Prior to the Offering, the Management Services Agreement will be terminated
and replaced by a Deferred Payment Agreement with Duff & Phelps/Inverness LLC
and First Reserve Corporation. Under the terms of the Deferred Payment
Agreement, Duff & Phelps/Inverness LLC will be paid $250,000 in advance
quarterly beginning on the first day of the calendar quarter following the
Offering through December 31, 1999. In addition, Duff & Phelps/Inverness LLC and
First Reserve Corporation will be paid fees aggregating $1,050,000 and $225,000,
respectively, on the first date and to the extent such payment would not be an
event of default under the Seller Notes. The Seller Notes provide that an event
of default would occur if aggregate management or similar fees are paid to Duff
& Phelps/Inverness LLC and First Reserve Corporation in any calendar year in
excess of $1,000,000, or if transaction fees in excess of 1% of the aggregate
transaction value of any merger, acquisition, consolidation or divesture
involving the Company (a "transaction") are paid to Duff & Phelps/Inverness LLC
and/or First Reserve Corporation. If a transaction occurs prior to January 1,
2000, a portion of the $1,275,000 shall be considered, and paid as, a
transaction fee to the extent that such payment does not cause an event of
default under the Seller Notes with respect to the $1,275,000, all amounts
remaining unpaid as of January 1, 2000, shall be considered as a management or
similar fee and shall be payable quarterly in advance in the aggregate amount of
$250,000 (proportionally to Duff & Phelps/Inverness LLC and First Reserve
Corporation) beginning on January 1, 2000, until the remaining unpaid portion of
the $1,275,000 has been paid.
For its assistance in the acquisition of the National-Oilwell partnership
and subsidiaries that the Company acquired in January 1996, Inverness was paid a
transaction fee of $1,800,000.
FIRST RESERVE FEE AGREEMENT
In connection with the acquisition by the Company of the National-Oilwell
partnership and subsidiaries in January 1996, the Company paid First Reserve
Corporation a $1,200,000 transaction fee.
MANAGEMENT NOTES
In connection with the Acquisition, four of the Company's executive
officers issued promissory notes (the "Officer Notes") to the Company in an
aggregate amount of approximately $500,000 in exchange for Class A Common Stock
of the Company. The Officer Notes bear interest until maturity at 1.5% above the
prime interest rate, payable annually, and the principal is due on January 15,
2001 unless extended at the option of the Company. The Officer Notes were issued
by the following executive officers: James J. Fasnacht -- $150,000; Paul M.
Nation -- $199,999; C. R. Bearden -- $100,000; and Lynn L. Leigh -- $49,999. In
accordance with their terms, the Officer Notes will be prepaid immediately prior
to the Offering.
GE CAPITAL FEE
In connection with the acquisition of the National-Oilwell partnerships and
business, GE Capital provided the Credit Facility, Subordinated Note and equity
capital and received transaction fees totalling $4.7 million.
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PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of Common Stock by
(i) each beneficial owner of more than five percent of the Company's Common
Stock, (ii) each director of the Company, (iii) each of the executive officers
of the Company named in the Summary Compensation Table and (iv) all executive
officers and directors of the Company as a group. At June 30, 1996, there were
13,249,483 shares of Common Stock outstanding, after giving effect to the
issuance of 282,392 shares upon the exercise of the Warrant.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING AFTER OFFERING(1)
------------------------- ------------------------
NAME OF BENEFICIAL OWNER SHARES PERCENTAGE SHARES PERCENTAGE
-------------------------------------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
The Inverness Investors(2)............ 5,101,800 38.5% 5,101,800 29.0%
666 Steamboat Road
Greenwich, Connecticut 06830
The First Reserve Investors(3)........ 4,185,247 31.6 4,185,247 23.8
475 Steamboat Road
Greenwich, Connecticut 06830
GE Capital............................ 1,593,902 12.0 1,593,902 9.1
105 W. Madison Street, Suite 1600
Chicago, Illinois 60602
Joel V. Staff......................... 363,075 2.7 387,720 2.2
Staff Trust(4)........................ 528,814 4.0 528,814 3.0
C. R. Bearden......................... 419,697 3.2 436,127 2.5
Steven W. Krablin..................... 171,275 1.3 179,490 1.0
Lynn L. Leigh......................... 154,295 1.2 203,583 1.2
Merrill A. Miller, Jr................. 94,127 * 102,342 *
W. McComb Dunwoody.................... --(5) -- --(5) --
William E. Macaulay................... --(6) -- --(6) --
Howard I. Bull........................ -- -- -- --
James T. Dresher...................... -- -- -- --
James C. Comis III.................... -- -- -- --
Bruce M. Rothstein.................... -- -- -- --
All directors and executive officers
as a group (14 persons)(5)(6)....... 1,839,721 13.9 1,971,159 11.2
</TABLE>
- ---------------
* Less than 1%.
(1) Includes shares of Common Stock issued pursuant to the Company's Value
Appreciation Plans (340,926 shares of Common Stock based on an assumed
initial public offering price of $17.00 per share).
(2) The "Inverness Investors" consist of two limited partnerships, DPI Oil
Service Partners Limited Partnership and DPI Partners II, of which Duff &
Phelps/Inverness LLC, is, in each case, the managing general partner.
(3) The "First Reserve Investors" consist of three limited partnerships, First
Reserve Fund V, Limited Partnership, First Reserve Fund V-2 and First
Reserve Fund V1, Limited Partnership, of which First Reserve Corporation
is, in each case, the managing general partner.
(4) These shares are owned by the trust created by that certain Trust Agreement
dated April 12, 1989 by and among Joel V. Staff and Mary Martha Staff, as
Trustors, and Richard Staff, as Trustee. Mr. Staff does not vote nor
exercise investment power over these shares.
(5) Mr. Dunwoody may be deemed a beneficial owner of shares owned by the
Inverness Investors by reason of his position with Duff & Phelps/Inverness
LLC, which is the managing general partner of the partnerships that are the
record owners of the shares owned by the Inverness Investors. Mr. Dunwoody
disclaims beneficial ownership of these shares.
(6) Mr. Macaulay may be deemed a beneficial owner of shares owned by the First
Reserve Investors by reason of his ownership of the capital stock and
position with First Reserve Corporation, which is the managing general
partner of the partnerships that are the record owners of the shares owned
by the First Reserve Investors. Mr. Macaulay disclaims beneficial ownership
of these shares.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 40,000,000 shares
of common stock and 10,000,000 shares of preferred stock, par value $.01 per
share ("Preferred Stock").
COMMON STOCK
As of June 30, 1996, the Company's outstanding Common Stock consisted of
11,064,548 shares of Common Stock and 13,288 shares of the Company's Class A
Common Stock. All outstanding shares of Class A Common Stock will have been
automatically converted into shares of Common Stock on the effective date of the
Registration Statement of which this Prospectus is a part. Upon completion of
the Offering, 17,590,409 shares of Common Stock will be outstanding after giving
effect to (i) the mandatory conversion of all outstanding shares of Class A
Common Stock into 1,902,543 shares of Common Stock, (ii) the exercise of the
Warrant to purchase 282,392 shares of Common Stock and (iii) the issuance of
340,926 shares of Common Stock under the Company's Value Appreciation Plans
(assuming an initial public offering price of $17.00 per share).
The holders of Common Stock are entitled to one vote per share on all
matters voted on by the stockholders, including the election of directors.
Holders of Common Stock are not entitled to cumulate their votes in elections of
directors. Common stockholders have no preemptive rights or other rights to
subscribe for additional shares.
Upon the effectiveness of the Registration Statement of which this
Prospectus is a part, each share of Class A Common Stock will be automatically
converted into shares of Common Stock pursuant to the Company's Charter. Each
holder of Class A Common Stock will be entitled to receive the number of shares
of Common Stock equal to the Original Cost divided by the net public offering
price per share of the Common Stock being sold in the Offering (143.18 shares
for each share of Class A Common Stock, based on an assumed initial public
offering price of $17.00 per share). Pursuant to the Charter, the number of
shares of Common Stock issuable upon conversion of the Class A Common Stock is
determined by dividing $30,079,200 by the initial public offering price per
share, less underwriting discount. Based on the range of the estimated initial
public offering price of $16.00 per share to $18.00 per share (less estimated
underwriting discount), the total number of shares of Common Stock which will be
issued upon conversion of Class A Common Stock will range from 2,021,452 shares
of Common Stock to 1,796,846 shares of Common Stock. At the conclusion of the
Offering no shares of Class A Common Stock will remain outstanding.
After retirement of the Class A Common Stock upon consummation of the
Offering, holders of Common Stock will have an equal and ratable right to
receive dividends when, as and if declared by the board of directors out of
funds legally available therefor subject only to any payment requirements or
other restrictions imposed by any series of Preferred Stock that may be issued
in the future. See "Dividend Policy."
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
PREFERRED STOCK
The board of directors of the Company, without any action by the
stockholders of the Company, is authorized to issue up to 10,000,000 shares of
Preferred Stock, in one or more series and to determine the voting rights
(including the right to vote as a series on particular matters), preferences as
to dividends and in liquidation and the conversion and other rights of each such
series. There are no shares of Preferred Stock outstanding. See "Certain
Anti-Takeover and Other Provisions of the Amended and Restated Certificate of
Incorporation -- Preferred Stock."
CERTAIN ANTI-TAKEOVER AND OTHER PROVISIONS OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
The Amended and Restated Certificate of Incorporation (the "Charter") and
the Bylaws of the Company contain 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 of the Company and in
the policies formulated by the board of directors and to discourage certain
types of transactions which may
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involve an actual or threatened change of control of the Company. The provisions
are designed to reduce the vulnerability of the Company to an unsolicited
proposal for a takeover of the Company that does not contemplate the acquisition
of all of its outstanding shares or an unsolicited proposal for the
restructuring or sale of all or part of the Company. The provisions are also
intended to discourage certain tactics that may be used in proxy fights. The
board of directors believes that, as a general rule, such takeover proposals
would not be in the best interest of the Company and its stockholders. Set forth
below is a description of such provisions in the Charter and the Bylaws. The
description of such provisions set forth below is intended only as a summary and
is qualified in its entirety by reference to the pertinent sections of the
Charter and the Bylaws, forms of which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part. The board of directors has no
current plans to formulate or effect additional measures that could have an
anti-takeover effect.
Classified Board of Directors. The classification of directors will have
the effect of making it more difficult for stockholders to change the
composition of the board of directors. At least two annual meetings of
stockholders generally will be required to effect a change in a majority of the
board of directors. Such a delay may help ensure that the Company's directors,
if confronted by a stockholder attempting to force a proxy contest, a tender or
exchange offer or an extraordinary corporate transaction, would have sufficient
time to review the proposal as well as any available alternatives to the
proposal and to act in what they believe to be the best interests of the
stockholders. The classification provisions will apply to every election of
directors, however, regardless of whether a change in the composition of the
board of directors would be beneficial to the Company and its stockholders and
whether a majority of the Company's stockholders believes that such a change
would be desirable. Pursuant to the Charter, the provisions relating to the
classification of directors may only be amended by the affirmative vote of
eighty percent of the then outstanding shares of capital stock entitled to vote
thereon ("Voting Stock").
Removal of Directors Only for Cause. Pursuant to the Charter, directors can
be removed from office, only for cause (as defined therein), by the affirmative
vote of eighty percent of the Voting Stock, other than at the expiration of
their term of office. Vacancies on the board of directors may be filled only by
the remaining directors and not by the stockholders.
Number of Directors. The Charter provides that the entire board of
directors will consist of not less than three members, the exact number to be
set from time to time by resolution of the board of directors. Accordingly, the
board of directors, and not the stockholders, has the authority to determine the
number of directors and could delay any stockholder from obtaining majority
representation on the board of directors by enlarging the board of directors and
filling the new vacancies with its own nominees until the next stockholder
election.
No Written Consent of Stockholders. The Charter also provides that any
action required or permitted to be taken by the stockholders of the Company must
be taken at a duly called annual or special meeting of stockholders and may not
be taken by written consent. In addition, special meetings may only be called by
(i) the Chairman of the Board, (ii) the President or (iii) the board of
directors pursuant to a resolution adopted by a majority of the then-authorized
number of directors.
Charter and Bylaws. The Charter provides that the board of directors, by a
majority vote, may adopt, alter, amend or repeal provisions of the Bylaws.
Business Combinations under Delaware Law. The Company is subject to section
203 of the Delaware General Corporation Law ("DGCL"), which prohibits certain
transactions between a Delaware corporation and an "interested stockholder,"
which is defined as a person who, together with any affiliates and/or associates
of such person, beneficially owns, directly or indirectly, 15% or more of the
outstanding voting shares of a Delaware corporation. This provision prohibits
certain business combinations (defined broadly to include mergers,
consolidations, sales or other dispositions of assets having an aggregate value
in excess of 10% of the consolidated assets of the corporation, and certain
transactions that would increase the interested stockholder's proportionate
share ownership in the corporation) between an interested stockholder and a
corporation for a period of three years after the date the interested
stockholder acquired its stock, unless (i) the business combination is approved
by the corporation's board of directors prior to the date the interested
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<PAGE> 47
stockholder acquired shares; (ii) the interested stockholder acquired at least
85% of the voting stock of the corporation in the transaction in which it became
an interested stockholder; or (iii) the business combination is approved by a
majority of the board of directors and by the affirmative vote of two-thirds of
the votes entitled to be cast by disinterested stockholders at an annual or
special meeting.
Preferred Stock. The Charter authorizes the board of directors of the
Company, without any action by the stockholders of the Company, to issue up to
10,000,000 shares of Preferred Stock, in one or more series and to determine the
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and in liquidation and the conversion and other
rights of each such series. Because the terms of the preferred stock may be
fixed by the board of directors of the Company without stockholder action, the
preferred stock could be issued quickly with terms designed to make more
difficult a proposed takeover of the Company or the removal of its management.
The board of directors will make any determination to issue such shares based on
its judgment as to the best interests of the Company and its stockholders.
LIABILITY OF OFFICERS AND DIRECTORS -- INDEMNIFICATION
Delaware law authorizes corporations to limit or eliminate the personal
liability of officers and directors to corporations and their stockholders for
monetary damages for breach of officers' and directors' fiduciary duty of care.
The duty of care requires that, when acting on behalf of the corporation,
officers and directors must exercise an informed business judgment based on all
material information reasonably available to them. Absent the limitations
authorized by Delaware law, officers and directors are accountable to
corporations and their stockholders for monetary damages for conduct
constituting gross negligence in the exercise of their duty of care. Delaware
law enables corporations to limit available relief to equitable remedies such as
injunction or rescission. The Charter limits the liability of officers and
directors of the Company to the Company or its stockholders to the fullest
extent permitted by Delaware law. Specifically, officers and directors of the
Company will not be personally liable for monetary damages for breach of an
officer's or director's fiduciary duty in such capacity, except for liability
(i) for any breach of the officers and directors duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the DGCL, or (iv) for any transaction from which the officer
and director derived an improper personal benefit.
The inclusion of this provision in the Charter may have the effect of
reducing the likelihood of derivative litigation against officers and directors,
and may discourage or deter stockholders or management from bringing a lawsuit
against officers and directors for breach of their duty of care, even though
such an action, if successful, might otherwise have benefitted the Company and
its stockholders. Both the Company's Charter and Bylaws provide indemnification
to the Company's officers and directors and certain other persons with respect
to certain matters to the maximum extent allowed by Delaware law as it exists
now or may hereafter be amended.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, 17,590,409 shares of Common Stock will be
outstanding. The shares of Common Stock sold in the Offering will be freely
tradeable without restriction or further registration under the Securities Act,
except for any shares purchased by an "affiliate" of the Company (as that term
is defined under the Securities Act), which will be subject to the resale
limitations of Rule 144 under the Securities Act. The remaining shares of Common
Stock, which are held by the Company's current stockholders, will be "restricted
securities" (within the meaning of Rule 144) and, therefore, will not be
eligible for sale to the public unless they are sold in transactions registered
under the Securities Act or pursuant to an exemption from registration,
including pursuant to Rule 144 or an offshore transaction pursuant to Regulation
S under the Securities Act. The 1,168,310 shares of Common Stock, beneficially
owned by the Inverness Investors, which were issued on July 15, 1995 are
restricted from resale pursuant to Rule 144 under the Securities Act until July
15, 1997. The remaining shares of Common Stock, held by the Company's existing
stockholders, were issued in 1996 and are restricted from resale under Rule 144
until various dates in 1998. The Stockholders Agreement provides the Inverness
Investors and the First Reserve Investors four demand registrations after the
Offering and provides the parties to the Stockholders Agreement with piggyback
registration rights. Such stockholders have waived their registration rights
with respect to a Registration Statement filed by the Company with respect to
the Offering. See "Certain Transactions -- Stockholders Agreement."
The Company intends to file a registration statement on Form S-8 under the
Securities Act to register the shares of Common Stock reserved or to be
available for issuance pursuant to the Stock Incentive Plan. Shares of Common
Stock issued pursuant to such plan generally will be available for sale in the
open market by holders who are not affiliates of the Company and, subject to the
volume and other limitations of Rule 144, by holders who are affiliates of the
Company.
In general, under Rule 144 as currently in effect, if a minimum of two
years has elapsed since the later of the date of acquisition of the restricted
securities from the issuer or from an affiliate of the issuer, a person (or
persons whose shares of Common Stock are aggregated), including persons who may
be deemed "affiliates" of the Company, would be entitled to sell within any
three-month period a number of shares of Common Stock that does not exceed the
greater of (i) 1% of the then outstanding shares of Common Stock (i.e., 175,900
shares immediately after consummation of the Offering) and (ii) the average
weekly trading volume during the four calendar weeks preceding the date on which
notice of the sale is filed with the Commission. Sales under Rule 144 are also
subject to certain provisions as to the manner of sale, notice requirements, and
the availability of current public information about the Company. In addition,
under Rule 144(k), if a period of at least three years has elapsed since the
later of the date restricted securities were acquired from the Company or the
date they were acquired from an affiliate of the Company, a stockholder who is
not an affiliate of the Company at the time of sale and has not been an
affiliate for at least three months prior to the sale would be entitled to sell
shares of Common Stock in the public market immediately without compliance with
the foregoing requirements under Rule 144. Rule 144 does not require the same
person to have held the securities for the applicable periods. The foregoing
summary of Rule 144 is not intended to be a complete description thereof. The
Commission has proposed an amendment to Rule 144 that would shorten the three-
and two-year holding periods described above to two years and one year,
respectively.
The Company, each of its directors and executive officers and all existing
stockholders have agreed with the Underwriters that they will not offer, sell,
contract to sell, sell any option or contract to purchase any option or contract
to sell, grant any option, right or warrant for the sale of, pledge, or
otherwise dispose of or transfer any shares of Common Stock, with certain
exceptions, for a period of 180 days after the date of this Prospectus without
the prior written consent of Merrill Lynch, as representative of the
Underwriters. See "Underwriting."
Prior to the Offering, there has been no public market for the Common
Stock, and no prediction can be made of the effect, if any, that sales of Common
Stock or the availability of shares for sale will have on the market price
prevailing from time to time. Following the Offering, sales of substantial
amounts of Common
47
<PAGE> 49
Stock in the public market or otherwise, or the perception that such sales could
occur, could adversely affect the prevailing market price for the Common Stock.
UNDERWRITING
Subject to the terms and conditions set forth in the Purchase Agreement
(the "Purchase Agreement") among the Company and each of the underwriters named
below (the "Underwriters"), the Company has agreed to sell to each of the
Underwriters, and each of the Underwriters, for whom Merrill Lynch, Goldman,
Sachs & Co. and Simmons & Company International are acting as representatives
(the "Representatives"), has severally agreed to purchase from the Company the
number of shares of Common Stock set forth below opposite their respective
names. The Underwriters are committed to purchase all of such shares if any are
purchased. Under certain circumstances, the commitments of non-defaulting
Underwriters may be increased as set forth in the Purchase Agreement.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................
Goldman, Sachs & Co. .....................................................
Simmons & Company International...........................................
---------
Total........................................................
========
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public initially at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $ per share.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $ per share on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Company has granted the Underwriters an option, exercisable by the
Representatives, to purchase up to 600,000 additional shares of Common Stock at
the initial public offering price, less the underwriting discount. Such option,
which expires 30 days after the date of this Prospectus, may be exercised solely
to cover over-allotments. To the extent that the Representatives exercise such
option, each of the Underwriters will be obligated, subject to certain
conditions, to purchase approximately the same percentage of the option shares
that the number of shares to be purchased initially by that Underwriter bears to
the total number of shares to be purchased initially by the Underwriters.
Prior to the Offering, there has been no public market for the Common
Stock. There can be no assurance that an active market for the Common Stock will
develop upon completion of the Offering or, if developed, that such market will
be sustained. The initial public offering price of the Common Stock will be
determined through negotiations between the Company and the Representatives and
may bear no relationship to the market prices of the Common Stock after this
offering. Prices for the Common Stock after this offering may be influenced by a
number of factors, including the depth and liquidity of the market for the
Common Stock, investor perceptions of the Company and the oil and gas industry
in general, and general economic and other conditions.
The Company has agreed to indemnify the Underwriters against certain
liabilities including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
48
<PAGE> 50
In connection with the Offering, the Company's directors and officers and
certain of its stockholders have agreed that, during a period of 180 days from
the date of this Prospectus, such holders will not, without the prior written
consent of the Representatives, offer, sell, contract to sell, sell any option
or contract to purchase any option or contract to sell, grant any option, right
or warrant for the sale of, pledge, or otherwise dispose of or transfer any
shares of Common Stock. In addition, the Company will not, without the prior
written consent of Merrill Lynch, as representative of the Underwriters,
directly or indirectly, offer, contract to sell, sell, grant any option with
respect to, pledge, hypothecate or otherwise dispose of any shares of Common
Stock except for (i) sales of the shares of Common Stock offered hereby, (ii)
issuances pursuant to the exercise of outstanding warrants, stock options and
convertible securities, (iii) grants of options or shares of Common Stock
pursuant to the Stock Incentive Plan, (iv) bona fide gifts by stockholders to
certain donees who agree to be bound by a similar agreement, (v) certain
transfers in private transactions to affiliates of such stockholder who agree to
be bound by a similar agreement and (vi) pledges by certain officers in
connection with loans for the repayment of the Officer Notes to the Company.
Goldman, Sachs & Co. was paid ordinary and customary fees by the Company
for its services as syndication agent under the Credit Facility.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Vinson & Elkins L.L.P., Houston, Texas.
Certain legal matters relating to the Common Stock offered hereby will be passed
upon for the Underwriters by Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The consolidated balance sheet of National-Oilwell, Inc. as of January 1,
1996 and the consolidated financial statements of National-Oilwell and
subsidiaries, the predecessor, at December 31, 1995 and 1994 and for each of the
three years in the period ended December 31, 1995, appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has not previously been subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Company has filed with the Securities and Exchange Commission (the "Commission")
a Registration Statement on Form S-1 (the "Registration Statement") under the
Securities Act, with respect to the offer and sale of Common Stock pursuant to
this Prospectus. This Prospectus, filed as a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
or the exhibits and schedules thereto in accordance with the rules and
regulations of the Commission and reference is hereby made to such omitted
information. Statements in this Prospectus as to the contents of any contract,
agreement or other document filed as an exhibit to the Registration Statement
are summaries of the terms of such contracts, agreements or documents and are
not necessarily complete. Reference is made to each such exhibit for a more
complete description of the matters involved and such statements shall be deemed
qualified in their entirety by such reference. The Registration Statement and
the exhibits and schedules thereto may be inspected, without charge, and copies
may be obtained at prescribed rates, at the public reference facilities
maintained by the Commission at its principal office at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 and the regional offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, 14th
Floor, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048. The Registration Statement and other information filed by
the Company with the Commission are also available at the web site of the
Commission at http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements certified by independent auditors and
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial statements.
49
<PAGE> 51
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Auditors....................................................... F-2
Consolidated Balance Sheets as of June 30, 1996 (unaudited), January 1, 1996 and as of
December 31, 1995 and 1994.......................................................... F-3
Consolidated Statements of Operations for the Six Months Ended June 30, 1996 and June
30, 1995 (unaudited) and for the Three Years in the Period Ended December 31,
1995................................................................................ F-4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1996 and June
30, 1995 (unaudited) and for the Three Years in the Period Ended December 31,
1995................................................................................ F-5
Consolidated Statements of Owners' Equity for the Six Months Ended June 30, 1996
(unaudited) and for the Three Years in the Period Ended December 31, 1995........... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 52
REPORTS OF INDEPENDENT AUDITORS
Board of Directors
National-Oilwell, Inc.
We have audited the accompanying consolidated balance sheet of
National-Oilwell, Inc. and subsidiaries as of January 1, 1996. This balance
sheet is the responsibility of the Company's management. Our responsibility is
to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of National-Oilwell, Inc. and
subsidiaries at January 1, 1996, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Houston, TX
August 29, 1996
Partners
National-Oilwell
We have audited the accompanying consolidated balance sheets of
National-Oilwell, a general partnership, and subsidiaries, the Partnership, as
of December 31, 1995 and 1994, and the related consolidated statements of
operations, owners' equity, and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
National-Oilwell, a general partnership, and subsidiaries at December 31, 1995
and 1994, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Houston, Texas
January 31, 1996
F-2
<PAGE> 53
NATIONAL-OILWELL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, JANUARY 1, --------------------
1996 1996 1995 1994
----------- ---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 4,512 $ 17,371 $ 65,452 $ 9,418
Receivables, less allowance of $3,369, $4,015,
$4,015 and $1,023............................ 86,282 77,767 74,986 102,368
Inventories..................................... 121,907 116,107 120,686 124,096
Prepaids and other current assets............... 7,073 6,033 4,543 4,119
-------- -------- -------- --------
Total current assets.................... 219,774 217,278 265,667 240,001
Property, plant and equipment, net................ 17,916 18,936 18,877 22,397
Deferred taxes.................................... 7,759 8,464 1,450 1,959
Goodwill.......................................... 6,408 6,489 -- --
Deferred financing costs.......................... 6,916 7,684 1,089 730
Other assets...................................... 708 788 1,495 3,217
-------- -------- -------- --------
$ 259,481 $ 259,639 $288,578 $268,304
======== ======== ======== ========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Current portion of long-term debt............... $ 2,500 $ 2,250 $ -- $ --
Accounts payable................................ 67,576 67,008 66,665 60,340
Customer prepayments............................ 1,181 7,500 7,500 1,506
Accrued compensation............................ 4,319 3,071 3,071 4,492
Other accrued liabilities....................... 18,618 16,177 11,066 21,853
-------- -------- -------- --------
Total current liabilities............... 94,194 96,006 88,302 88,191
Long-term debt.................................... 118,688 121,128 9,128 --
Insurance reserves................................ 6,456 6,201 6,201 8,524
Other liabilities................................. 6,161 6,935 6,935 9,701
-------- -------- -------- --------
Total liabilities....................... 225,499 230,270 110,566 106,416
Commitments and contingencies
Owners' equity:
Class A common stock -- par value $.01; 13,288
shares issued and outstanding................ -- -- -- --
Common stock -- par value $.01; 11,064,548
shares issued and outstanding................ 111 111 -- --
Additional paid-in capital...................... 30,068 29,608 -- --
Notes receivable from officers.................. (500) (350) -- --
Partners' capital............................... -- -- 185,506 169,784
Cumulative translation adjustment............... 303 -- (7,494) (7,896)
Retained earnings............................... 4,000 -- -- --
-------- -------- -------- --------
Total owners' equity.................... 33,982 29,369 178,012 161,888
-------- -------- -------- --------
$ 259,481 $ 259,639 $288,578 $268,304
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 54
NATIONAL-OILWELL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................ $294,643 $266,443 $545,803 $562,053 $627,281
Cost of revenues........................ 254,556 231,556 474,791 482,423 547,401
-------- -------- -------- -------- --------
Gross profit............................ 40,087 34,887 71,012 79,630 79,880
Selling, general, and administrative.... 26,681 30,903 57,231 64,422 79,391
Special charges (credits)............... -- (7,500) (8,458) (13,916) 8,565
-------- -------- -------- -------- --------
Operating income (loss)................. 13,406 11,484 22,239 29,124 (8,076)
Interest and financial costs............ (6,738) (1,437) (2,358) (5,777) (8,277)
Interest income......................... 320 374 1,097 1,046 1,001
Other income (expense).................. (321) 161 (1,401) 528 (240)
-------- -------- -------- -------- --------
Income (loss) before income taxes....... 6,667 10,582 19,577 24,921 (15,592)
Provision for income taxes.............. 2,667 1,204 1,937 1,041 1,871
-------- -------- -------- -------- --------
Net income (loss)....................... $ 4,000 $ 9,378 $ 17,640 $ 23,880 $(17,463)
======== ======== ======== ======== ========
Weighted average shares outstanding..... 13,249
========
Net income per share.................... $ 0.30
========
Pro forma -- unaudited
Historical income before income
taxes.............................. $ 19,577
Pro forma adjustments other than
income taxes....................... (4,532)
--------
Pro forma income before income
taxes.............................. 15,045
Pro forma provision for income
taxes.............................. 5,523
--------
Pro forma net income.................. $ 9,522
========
Pro forma common shares outstanding... 17,590
========
Pro forma net income per share........ $ 0.54
========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 55
NATIONAL-OILWELL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------
1996 1995 1995 1994 1993
--------- -------- ------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income (loss)....................................... $ 4,000 $ 9,378 $17,640 $ 23,880 $(17,463)
Adjustments to reconcile net income(loss) to net cash
provided (used) by operating activities:
Depreciation and amortization........................ 2,752 2,172 3,595 6,027 10,721
Provision for losses on receivables.................. 304 2,401 2,855 545 1,237
Provision for deferred income taxes.................. 705 316 509 909 893
Gain on sale of assets............................... (192) (513) (662) (910) (867)
Foreign currency transaction (gain) loss............. (57) 102 1,170 54 160
Special charges (credits)............................ -- (7,500) (8,458) (13,916) 8,565
Changes in operating assets and liabilities:
Decrease (increase) in receivables................... (8,795) 9,445 24,583 491 (5,245)
Decrease (increase) in inventories................... (5,804) (2,610) 2,205 12,483 19,558
Decrease (increase) in prepaids and other current
assets............................................. (1,046) (7,877) (4,730) 4,287 (3,453)
Increase (decrease) in accounts payable.............. 582 (12,185) 6,959 7,614 (21,423)
Increase (decrease) in other assets/liabilities,
net................................................ (3,001) 3,055 (3,996) (3,913) (7,172)
--------- -------- ------- --------- --------
Net cash provided (used) by operating
activities.................................... (10,552) (3,816) 41,670 37,551 (14,489)
--------- -------- ------- --------- --------
Cash flow from investing activities:
Purchases of property, plant and equipment.............. (849) (2,031) (4,764) (3,604) (1,967)
Proceeds from sale of assets............................ 272 3,885 6,865 1,731 4,947
Proceeds from disposition of businesses................. -- 6,944 6,944 69,821 --
Acquisition of predecessor company, net of cash
acquired............................................. (106,598) -- -- -- --
Other................................................... -- (218) (218) 251 (108)
--------- -------- ------- --------- --------
Net cash provided (used) by investing
activities.................................... (107,175) 8,580 8,827 68,199 2,872
--------- -------- ------- --------- --------
Cash flow from financing activities:
Principal (payments) on long-term debt.................. (11,318) -- 9,128 (69,842) 13,334
Proceeds from issuance of common stock.................. 30,179 -- -- -- --
Borrowings proceeds from Acquisition debt............... 103,378 -- -- -- --
Principal payments under capital lease obligations...... -- -- -- (911) (996)
Cash distribution to partners........................... -- (1,918) (1,918) (31,000) --
--------- -------- ------- --------- --------
Net cash provided (used) by financing
activities.................................... 122,239 (1,918) 7,210 (101,753) 12,338
--------- -------- ------- --------- --------
Effect of exchange rate losses on cash.................... -- -- (1,673) (595) (154)
Increase in cash and equivalents.......................... 4,512 2,846 56,034 3,402 567
Cash and cash equivalents, beginning of period............ -- 9,418 9,418 6,016 5,449
--------- -------- ------- --------- --------
Cash and cash equivalents, end of period.................. $ 4,512 $ 12,264 $65,452 $ 9,418 $ 6,016
========= ======== ======= ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 56
NATIONAL-OILWELL, INC.
CONSOLIDATED STATEMENTS OF OWNERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A ADDITIONAL NOTES CUMULATIVE
COMMON COMMON PAID-IN RECEIVABLE FROM PARTNERS' TRANSLATION RETAINED
STOCK STOCK CAPITAL OFFICERS CAPITAL ADJUSTMENT EARNINGS TOTAL
------- ------ ---------- --------------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992..................... $ 194,367 $(1,821) $ 192,546
Net loss................. (17,463) -- (17,463)
Translation adjustment... -- (4,407) (4,407)
--------- ------- ---------
Balance at December 31,
1993..................... 176,904 (6,228) 170,676
Net income............... 23,880 -- 23,880
Translation adjustment... -- (1,668) (1,668)
Distribution............. (31,000) -- (31,000)
--------- ------- ---------
Balance at December 31,
1994..................... 169,784 (7,896) 161,888
Net income............... 17,640 -- 17,640
Translation adjustment... -- 402 402
Distribution............. (1,918) -- (1,918)
--------- ------- ---------
Balance at December 31,
1995..................... 185,506 (7,494) 178,012
Issuance of 13,288
shares................. -- $ 30,068 $(500) 29,568
Issuance of 11,064,548
shares................. $111 -- 111
Elimination of partners'
interests.............. (185,506) 7,494 (178,012)
Net income............... $4,000 4,000
Translation adjustment... 303 303
------- ---- ------- ----- --------- ------- ------ ---------
Balance at June 30, 1996
(Unaudited).............. -- $111 $ 30,068 $(500) $ -- $ 303 $4,000 $ 33,982
======= ==== ======= ===== ========= ======= ====== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 57
NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
National-Oilwell, Inc. was formed to acquire National-Oilwell, a general
partnership between National Supply Company, Inc., a subsidiary of Armco Inc.,
and Oilwell, Inc., a subsidiary of USX Corporation, and subsidiaries, (the
"Partnership"). Effective as of January 1, 1996, National-Oilwell, Inc. acquired
the Partnership for a purchase price of $180 million, which approximated book
value (the "Acquisition"). The closing date of the transaction was January 17,
1996, with an effective date of January 1, 1996. The accompanying consolidated
balance sheet as of January 1, 1996 reflects the accounts of National-Oilwell,
Inc. as if the acquisition of the Partnership had occurred on that date. The
transaction was accounted for under the purchase method of accounting and
accordingly all assets and liabilities of the Partnership were recorded at their
fair values resulting in only minimal basis adjustments. The purchase price and
related expenses were financed by new equity, existing cash, a new credit
facility consisting of a revolving credit line totaling $120 million and term
debt of $30 million, a $5 million subordinated note and seller notes of $20
million. Approximately $67 million of the revolving credit line was utilized to
consummate the transaction. The consolidated financial information of the
Partnership, as predecessor, has been included with the consolidated financial
information of National-Oilwell, Inc. and subsidiaries for purposes of
comparability. References herein to the "Company" refer to the Partnership for
periods prior to January 1, 1996 and to National-Oilwell, Inc. for subsequent
periods.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year end. Actual results could differ from those
estimates.
In the opinion of management, the unaudited consolidated financial
statements include all adjustments, consisting solely of normal recurring
adjustments, necessary for a fair presentation of the financial position as of
June 30, 1996, and the results of operations and cash flows for each of the
six-month periods ended June 30, 1996 and 1995. Although management believes the
disclosures in these financial statements are adequate to make the information
presented not misleading, certain information and footnote disclosures normally
included in annual audited financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission. The
results of operations and the cash flows for the six-month period ended June 30,
1996 are not necessarily indicative of the results to be expected for the full
year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, receivables, payables, and debt instruments. Cash equivalents
include only those investments having a maturity of three months or less at the
time of purchase. The carrying values of these financial instruments approximate
their respective fair values.
F-7
<PAGE> 58
NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Inventories consist of (a) oilfield products and oil country tubular goods,
(b) manufactured equipment and (c) spare parts for manufactured equipment.
Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) or average cost methods.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Expenditures for major
improvements which extend the lives of property and equipment are capitalized
while minor replacements, maintenance and repairs are charged to operations as
incurred. Disposals are removed at cost less accumulated depreciation with any
resulting gain or loss reflected in operations. Depreciation is provided using
the straight-line method over the estimated useful lives of individual items.
Intangible Assets
Deferred financing costs are amortized on a straight-line basis over the
five year life of the related debt security and accumulated amortization was
$768,000 at June 30, 1996. Goodwill is amortized on a straight-line basis over
its estimated life of 40 years. The Company's policy is to periodically evaluate
goodwill and all long-lived assets to determine whether there has been any
impairment in value. Accumulated amortization was $81,000 at June 30, 1996.
Foreign Currency
The functional currency for the Company's Canadian, United Kingdom and
Australian subsidiaries is the local currency. The cumulative effects of
translating the balance sheet accounts from the functional currency into the
U.S. dollar at current exchange rates are included in cumulative foreign
currency translation adjustments. The U.S. dollar is used as the functional
currency for the Singapore and Venezuelan subsidiaries. For all operations,
gains or losses from remeasuring foreign currency transactions into the
functional currency are included in income.
Revenue Recognition
Revenue from the sale of products is recognized upon passage of title to
the customer.
Income Taxes
The Company provides for income taxes under the liability method pursuant
to Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and tax
reporting basis of assets and liabilities.
Net Income Per Share
Average shares outstanding includes 11,064,548 issued shares of common
stock, 282,392 shares of common stock pursuant to exercisable warrants and
1,902,543 shares of common stock associated with the conversion of Class A
common stock at an assumed initial public offering price of $17.00 as discussed
at Note 8.
Concentration of Credit Risk
The Company grants credit to its customers which operate primarily in the
oil and gas industry. The Company performs periodic credit evaluations of its
customers' financial condition and generally does not
F-8
<PAGE> 59
NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
require collateral. Receivables are generally due within 30 days. The Company
maintains reserves for potential losses and such losses have historically been
within management's expectations.
Long-Lived Assets
In March 1995, SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, was issued which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and estimated future undiscounted cash
flows indicate the carrying value of those assets may not be recoverable. The
Company implemented SFAS No. 121 on January 1, 1996 and the adoption did not
have a material effect on the financial statements.
3. INVENTORIES
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------
1996 1995 1994
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials and supplies.......................... $ 10,092 $ 11,528 $ 12,486
Work in process..................................... 5,195 4,842 5,112
Finished goods and purchased products............... 106,620 104,316 106,498
--------- -------- --------
$ 121,907 $120,686 $124,096
========= ======== ========
</TABLE>
Foreign inventories were approximately 18%, 21% and 20% of total
inventories at June 30, 1996, December 31, 1995 and December 31, 1994,
respectively.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
ESTIMATED JUNE 30, --------------------
USEFUL LIVES 1996 1995 1994
------------ ----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Land and improvements................... 2-20 Years $ 2,017 $ 2,509 $ 5,718
Buildings............................... 5-31 Years 4,920 10,404 10,772
Machinery and equipment................. 5-12 Years 7,262 31,139 53,886
Computer and office equipment........... 3-10 Years 5,620 19,079 21,366
------- -------- --------
19,819 63,131 91,742
Less accumulated depreciation......... (1,903) (44,254) (69,345)
------- -------- --------
$17,916 $ 18,877 $ 22,397
======= ======== ========
</TABLE>
F-9
<PAGE> 60
NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
Credit Agreement
Revolving Credit Facilities............................... $ 70,865 $ --
Term Loan A............................................... 12,415 --
Term Loan B............................................... 12,790 --
Previous credit agreement................................... -- 9,128
Subordinated Note........................................... 5,118 --
Seller Notes................................................ 20,000 --
--------- ------
121,188 9,128
Less current portion........................................ 2,500 --
--------- ------
$ 118,688 $9,128
========= ======
</TABLE>
Credit Agreement
The Credit Agreement provides for Revolving Credit Facilities totaling
$120,000,000 in the United States, Canada and United Kingdom through December
31, 2000 and replaced the Company's previous credit agreement. In addition to
borrowings, the Revolving Credit Facilities provide for the issuance of letters
of credit, of which $12,600,000 were outstanding at June 30, 1996. Borrowing
availability is determined based on a percentage of eligible accounts receivable
and inventory. The interest rate on the Revolving Credit Facility is prime plus
1.5% or LIBOR plus 2.75% (9.75% and 8.19% at June 30, 1996). A commitment fee of
0.5% is charged on the unused portion.
The Credit Agreement also provides for Term Loan A, payable quarterly
through December 31, 2000 and Term Loan B, payable quarterly through December
31, 2001. Interest rates on the term loans are at prime plus 1.75% and 2.25%,
respectively, or at LIBOR plus 3.0% and 3.5%, respectively. The term loans
require prepayments from certain asset disposal proceeds and from up to 80% of
excess cash flow (as defined).
The Credit Agreement is secured by essentially all assets of the Company
and contains financial covenants regarding minimum net worth, maximum capital
expenditures, minimum current ratio, minimum interest and fixed charge coverage
ratios and a maximum funded debt coverage ratio. The Credit Agreement also
restricts the Company's ability to, among other things, pay dividends, make
acquisitions and investments, incur debt and liens, and change its capital
structure or business.
Subordinated Note
The Subordinated Note bears interest at prime plus 3.0%, is due December
31, 2002 and is secured by a lien on essentially all assets of the Company.
Interest payments are deferred until the aggregate balance outstanding under
Term Loans A and B is $15,000,000 or less and certain other conditions are met.
Mandatory prepayments must be made from 50% of excess cash flow (as defined)
after Term Loans A and B are repaid.
Seller Notes
The Company owes $10,000,000 to each of the two Sellers in connection with
the Acquisition. The notes are subordinate to other existing debt and bear
interest at the rate of 9.0%. At its option, the Company may defer payment of
interest due prior to January 16, 2003. One-half of the sum of the principal and
any deferred interest is payable on January 16, 2004, and the balance is payable
on January 16, 2005. The notes are subject
F-10
<PAGE> 61
NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to prepayment in certain events, including the sale of significant assets by the
Company or the sale by the stockholders at the time of the Acquisition of more
than 50% of their aggregate shares. Partial prepayments are also required in
connection with certain sales of the Company's stock owned by Duff &
Phelps/Inverness LLC or First Reserve Corporation.
Scheduled maturities of long-term debt outstanding at June 30, 1996 are as
follows: six months ending December 31, 1996 -- $1,125,000; years ending
December 31, 1997 -- $3,000,000; 1998 -- $3,250,000; 1999 -- $3,250,000;
2000 -- $75,865,000; 2001 -- $9,130,000.
6. PENSION PLANS
The Company and its consolidated subsidiaries have several pension plans
covering substantially all of its employees. Defined-contribution pension plans
cover most of the U.S. and Canadian employees and are based on years of service
and a percentage of current earnings. For the years ended December 31, 1995,
1994 and 1993, pension expense for defined-contribution plans was $1,512,000,
$1,914,000 and $2,005,000, respectively, and the funding is current.
The Company's subsidiary in the United Kingdom has a defined-benefit
pension plan whose participants are primarily retired and terminated employees
who are no longer accruing benefits. The pension plan assets are invested
primarily in equity securities, United Kingdom government securities, overseas
bonds and cash deposits. The plan assets at fair market value were $32,104,000
at December 31, 1995 and $27,389,000 at December 31, 1994. The projected benefit
obligation was $23,131,000 at December 31, 1995 and $20,630,000 at December 31,
1994. Net periodic pension cost (benefit) recognized as expense (income) for the
years ended December 31, 1995, 1994 and 1993 was $379,000, ($69,000) and
$699,000, respectively.
7. COMMITMENTS AND CONTINGENCIES
Commitments
The Company leases land, buildings and storage facilities, vehicles and
data processing equipment under operating leases extending through various dates
up to the year 2004. Rent expense for the years ended December 31, 1995, 1994
and 1993 was $9,714,000, $8,691,000 and $10,372,000, respectively. The Company's
minimum rental commitments for operating leases at December 31, 1995 were as
follows (in thousands): 1996 -- $6,372; 1997 -- $4,046; 1998 -- $1,796;
1999 -- $1,312; 2000 -- $1,159; thereafter -- $6,096.
Contingencies
The Company is involved in various claims, regulatory agency audits and
pending or threatened legal actions involving a variety of matters. The total
liability on these matters at December 31, 1995 cannot be determined; however,
in the opinion of management, any ultimate liability, to the extent not
otherwise provided for, should not materially affect the financial position,
liquidity or results of operations of the Company.
Environmental
The Company's business is affected both directly and indirectly by
governmental laws and regulations relating to the oilfield service industry in
general, as well as by environmental and safety regulations that specifically
apply to the Company's business. Laws and regulations protecting the environment
have generally become more expansive and stringent in recent years and the
Company believes the trend will continue. Although the Company has not incurred
material costs in connection with its compliance with such laws, there can be no
assurance that other developments, such as stricter environmental laws,
regulations and enforcement policies thereunder, could not result in additional,
presently unquantifiable, costs or liabilities to the Company.
F-11
<PAGE> 62
NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMON STOCK
The Company has authorized 40,000,000 shares, $.01 par value, common stock
and 13,288 shares, $.01 par value, Class A common stock. The Class A common
stock has preference over common stock to receive dividends or any other
distribution until the holders of Class A common stock have received in the
aggregate the original cost of $30,079,200 paid for the Class A shares. Upon the
occurrence of an initial public offering, the Class A common stock converts into
the number of shares of common stock determined by dividing the unreturned
original cost of the Class A common stock by the net public offering price. The
Company has also authorized 10,000,000 shares of $.01 par value preferred stock,
none of which is issued or outstanding.
Seven executive officers of the Company participated in the Acquisition by
acquiring common stock and Class A common stock at fair market value. In
connection therewith, four of the executives issued promissory notes to the
Company for an aggregate of $500,000. Interest on the notes is at 1.5% over
prime and is paid annually. The notes are due on January, 15, 2001 unless
extended at the option of the Company, and are secured by shares of common stock
and Class A common stock. The notes must be prepaid under certain conditions
including the occurrence of a public offering or from cash proceeds from
dividends, distributions or sale of any of the shares. The promissory notes are
reflected in the accompanying balance sheet as a reduction of owners' equity.
The Stock Award and Long-Term Incentive Plan allows grants of incentive
options, nonqualified options, restricted stock, stock appreciation rights,
performance share awards, stock value equivalent awards or any combination of
the above. In connection with the Acquisition, 941,303 shares of restricted
common stock were purchased by executive officers for $.001 per share under this
plan. These shares are subject to restriction on transferability and are not
entitled to receive dividends or distributions. Restrictions lapse annually
regarding 20% of these shares beginning one year from acquisition or in their
entirety upon the occurrence of certain events, including the sale of the
Company. Restrictions will lapse on an additional 20% of those shares upon an
involuntary termination of employment without cause. Any restricted shares may
be repurchased by the Company for $.001 per share upon termination of the
executive officers' employment. On August 27, 1996, the Company's board of
directors approved the amendment and restatement of the plan to authorize the
issuance of up to 1,000,000 additional shares of common stock pursuant to awards
made thereunder. The Company has not made any additional awards pursuant this
plan.
In connection with the Acquisition, the Company entered into a warrant
agreement granting a significant debt holder and stockholder the right to
purchase 282,392 shares of common stock at an exercise price of $.01 per share.
The warrants may be exercised at any time through January 16, 2006. The warrant
agreement also provides for an additional 196,438, 100,815 and 102,586 shares to
be issued on the fifth, sixth and seventh anniversary of the Acquisition date in
the event the $5 million subordinated note has not been repaid on or prior to
such dates.
In January 1996, the Company established Value Appreciation Plans that are
intended to reward participants for enhancing the value of the Company common
stock. If target internal rates of return are achieved as of a triggering event
such as a qualified public offering, the 34 participants will be paid in cash or
common stock over time a percentage of the equity value as of such occurrence.
Based upon an initial public offering price of $17.00 (the midpoint of the range
of offering prices), the Value Appreciation Plans would result in a one-time
charge before taxes of $12.2 million. The Company currently expects to pay $2.9
million of this amount in cash at the time of the Offering, $3.5 million in cash
in five annual installments beginning January 17, 1997 and issue 340,926 shares
of restricted stock. The restrictions will be removed on one-half of the shares
one year after the Offering and on the remaining one-half on January 17, 1999.
F-12
<PAGE> 63
NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES
Prior to 1996, the Company was a partnership for U.S. federal tax purposes
and provided for foreign taxes but did not provide for U.S. federal or state
taxes on its income.
The domestic and foreign components of income before income taxes were as
follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1996 1995 1995 1994 1993
------ ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Domestic............................. $4,702 $ 7,235 $14,194 $22,840 $(16,446)
Foreign.............................. 1,965 3,347 5,383 2,081 854
------ ------- ------- ------- --------
$6,667 $10,582 $19,577 $24,921 $(15,592)
====== ======= ======= ======= ========
</TABLE>
The components of the provision for income taxes consisted of (in
thousands):
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1996 1995 1995 1994 1993
------ ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal............................ $1,090 $ -- $ -- $ -- $ --
State.............................. 99 -- -- -- --
Foreign............................ 773 888 1,428 132 978
------ ------- ------- ------- --------
1,962 888 1,428 132 978
------ ------- ------- ------- --------
Deferred:
Federal............................ 507 -- -- -- --
State.............................. 112 -- -- -- --
Foreign............................ 86 316 509 909 893
------ ------- ------- ------- --------
705 316 509 909 893
------ ------- ------- ------- --------
$2,667 $ 1,204 $ 1,937 $ 1,041 $ 1,871
====== ======= ======= ======= ========
</TABLE>
The difference between the effective tax rate reflected in the provision
for income taxes and the U.S. federal statutory rate was as follows (in
thousands):
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1996 1995 1995 1994 1993
------ ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal income tax at statutory
rate................................ $2,333 $ 3,704 $ 6,852 $ 8,722 $(5,457)
Foreign income tax rate
differential........................ 26 12 184 368 338
U.S. partnership income for which no
tax is provided..................... -- (2,532) (4,968) (7,994) 5,756
Nondeductible expenses................ 341 247 398 293 157
Foreign operating loss for which no
benefit is recognized............... -- 412 1,037 278 2,211
Change in deferred tax valuation
allowance........................... -- (639) (1,577) (809) (1,303)
Other................................. (33) -- 11 183 169
------ ------- ------- ------- -------
$2,667 $ 1,204 $ 1,937 $ 1,041 $ 1,871
====== ======= ======= ======= =======
</TABLE>
F-13
<PAGE> 64
NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------
1996 1995 1994
----------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Book over tax depreciation........................ $ 288 $ 1,153 $ 1,729
Accrued liabilities............................... 9,201 1,205 2,887
Net operating loss carryforwards.................. 6,738 6,780 7,268
Other............................................. 6,620 1,070 508
-------- - ------- -------
Total deferred tax assets................. 22,847 10,208 12,392
Valuation allowance for deferred tax
assets.................................. (13,277) (8,310) (9,887)
--------- ------- -------
9,570 1,898 2,505
--------- ------- -------
Deferred tax liabilities:
Tax over book depreciation........................ 1,569 448 346
Other............................................. 242 -- 200
--------- ------- -------
Total deferred tax liabilities............ 1,811 448 546
--------- ------- -------
Net deferred tax assets................... $ 7,759 $ 1,450 $ 1,959
========= ======= =======
</TABLE>
In connection with the Acquisition, the Company restated its deferred tax
assets and liabilities as of January 1, 1996. The deferred tax valuation
allowance increased (decreased) ($1,577) and $4,967 for the periods ending
December 31, 1995 and June 30, 1996, respectively. The decrease in the valuation
allowance is related to the realization of foreign net operating losses that
were previously deferred. The increase in the valuation allowance is related to
the Company's current estimate of deferred tax assets that may not be realized.
Any future decrease in the valuation allowance recorded at January 1, 1996 will
reduce goodwill. The Company's deferred tax assets are expected to be realized
principally through future earnings.
Undistributed earnings of the Company's foreign subsidiaries amounted to
$9,898,000 at June 30, 1996 and $9,125,000 at December 31, 1995. Those earnings
are considered to be permanently reinvested and, accordingly, no provision for
U.S. federal and state income taxes has been made. Distribution of these
earnings in the form of dividends or otherwise would result in both U.S. federal
taxes (subject to an adjustment for foreign tax credits) and withholding taxes
payable in various foreign countries. Determination of the amount of
unrecognized deferred U.S. income tax liability is not practicable; however,
unrecognized foreign tax credit carryforwards would be available to reduce some
portion of the U.S. liability. Withholding taxes of approximately $910,000 would
be payable upon remittance of all previously unremitted earnings at December 31,
1995.
The Company made income tax payments of $332,000, $557,000 and $392,000
during the years ended December 31, 1995, 1994 and 1993, respectively.
F-14
<PAGE> 65
NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. SPECIAL CHARGES (CREDITS)
Special charges (credits) consist of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- -------- -------
<S> <C> <C> <C>
Sale of product lines and assets....................... $(8,458) $(15,648) $10,000
Employee terminations and other costs.................. -- 3,817 --
Reversal of reserves................................... -- (2,085) (1,435)
------- -------- -------
Total........................................ $(8,458) $(13,916) $ 8,565
======= ======== =======
</TABLE>
Sale of Product Lines and Assets. During the second quarter of 1995 the
Company completed the sale of the Wilson-Snyder centrifugal pump and switch
valve product line. Proceeds of approximately $6.9 million from that sale
resulted in a gain of $5.5 million. In addition, the Company recorded a net gain
of approximately $3.0 million related to the final closure of a facility in the
United Kingdom and the sale of related property and equipment.
During 1994, the Company completed the sales of certain production
equipment product lines not considered part of its core businesses resulting in
a gain of $15.6 million. Proceeds received in 1994 totaled $41.0 million and
were used to reduce debt.
During 1993, the Company implemented a business strategy to focus on its
core businesses and divest marginal or unprofitable product lines. In the fourth
quarter of 1993, the Company recorded a $10.0 million charge for the estimated
loss on the sale of its wellhead business under an asset sales agreement signed
in December 1993. This charge included an $8.5 million writedown of inventories
and property, plant and equipment to estimated net realizable values and $1.5
million for transition and other direct costs of disposal. Proceeds from the
wellhead business sale of $28.7 million were used to reduce debt.
Employee Terminations and Other Costs. In conjunction with the formal
announced shutdown of a manufacturing facility in the United Kingdom, the
Company expensed approximately $3.2 million in 1994 relating to employee
termination benefits. These benefits are calculated pursuant to the terms of the
United Kingdom preexisting employee benefit plan and were paid in the fourth
quarter of 1994 and in 1995. The consolidation of the Company's Houston, Texas
manufacturing operations resulted in lease termination and other costs of $0.6
million which were paid in 1994.
Reversal of Reserves. The reversal of reserves in 1994 and 1993 primarily
relate to an $18.5 million reserve initially recorded in 1991 to accrue for the
estimated loss on the shutdown and disposition of a manufacturing facility and
related machinery and equipment at Garland, Texas. The $1.4 million reversal in
1993 primarily related to excess machinery, equipment and inventory relocation
accruals no longer needed after movement to the Company's other facilities was
completed in 1993. The $2.1 million reversal in 1994 primarily related to excess
accruals for potential demolition and environmental cleanup not required after
the facility was sold.
11. RELATED PARTY TRANSACTIONS
In connection with the Acquisition, the Company entered into a five year
Management Services Agreement with the Company's largest stockholder, Duff &
Phelps/Inverness LLC, whereby the Company would pay $1,000,000 per year for
senior management assistance and other services as agreed. The agreement also
provides that Duff & Phelps/Inverness LLC will receive 1% of the aggregate
transaction value in connection with each acquisition or disposition completed
during the five year period. A management fee of $500,000 was recorded during
the first half of 1996 of which $200,000 was unpaid at June 30, 1996. The
Company and Duff & Phelps/Inverness LLC have agreed to terminate this agreement
upon the date of execution of a definitive underwriting agreement relating to
the anticipated public offering discussed in Note 13.
F-15
<PAGE> 66
NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company paid and recorded as a cost of the Acquisition transaction fees
of $1,800,000 to the Inverness Group, Inc. and $1,200,000 to First Reserve
Corporation, the Company's second largest stockholder. Fees of $4,800,000 were
also paid to General Electric Capital Corporation in connection with the
provision of the Credit Agreement entered into in connection with the
Acquisition.
12. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
The Company's operations consist of the Oilfield Equipment segment and the
Distribution Services segment. The Oilfield Equipment segment designs and
manufactures a variety of oilfield equipment for use in oil and gas drilling,
completion and production activities. The Distribution Services segment
distributes an extensive line of oilfield supplies, oilfield equipment and
tubular products. The Disposed Businesses information includes the results of
operations disposed of in prior years. Intersegment sales and transfers are
accounted for at commercial prices.
Summarized financial information with respect to business segments and
geographic areas is as follows:
Business Segments (in thousands)
<TABLE>
<CAPTION>
OILFIELD DISTRIBUTION DISPOSED
EQUIPMENT(1) SERVICES CORPORATE(2) ELIMINATIONS BUSINESSES(3) TOTAL
------------ ------------ ------------ ------------ ------------- --------
<S> <C> <C> <C> <C> <C> <C>
1995
Revenues from:
Unaffiliated customers...... $113,511 $432,292 $ -- $ -- $ -- $545,803
Intersegment sales.......... 33,006 -- -- (33,006) -- --
-------- -------- -------- --------- --------- --------
Total revenues....... 146,517 432,292 -- (33,006) -- 545,803
Operating income (loss)....... 10,443 9,435 (2,866) -- 5,227 22,239
Capital expenditures.......... 3,540 1,157 67 -- -- 4,764
Depreciation and
amortization................ 1,899 1,662 34 -- -- 3,595
Identifiable assets........... 93,287 128,321 69,761 (2,791) -- 288,578
1994
Revenues from:
Unaffiliated customers...... $127,854 $415,722 $ -- $ -- $ 18,477 $562,053
Intersegment sales.......... 60,041 -- -- (60,041) -- --
-------- -------- -------- -------- --------- --------
Total revenues....... 187,895 415,722 -- (60,041) 18,477 562,053
Operating income (loss)....... 5,314 9,036 (2,898) -- 17,672 29,124
Capital expenditures.......... 1,690 1,832 44 -- 38 3,604
Depreciation and
amortization................ 1,922 2,564 8 -- 1,533 6,027
Identifiable assets........... 99,298 162,170 12,150 (5,314) -- 268,304
1993
Revenues from:
Unaffiliated customers...... $111,948 $450,455 $ -- $ -- $ 64,878 $627,281
Intersegment sales.......... 67,780 -- -- (67,780) -- --
-------- -------- -------- -------- --------- --------
Total revenues....... 179,728 450,455 -- (67,780) 64,878 627,281
Operating income (loss)....... 1,482 13,955 (2,308) -- (21,205) (8,076)
Capital expenditures.......... 899 455 21 -- 592 1,967
Depreciation and
amortization................ 4,380 2,370 2 -- 3,969 10,721
Identifiable assets........... 99,371 188,312 12,402 (10,265) 53,659 343,479
</TABLE>
F-16
<PAGE> 67
NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- ---------------
(1) Operating income/(loss) of the oilfield equipment segment includes special
charges (credits) of $(3,231), $1,732 and $(1,435) for 1995, 1994 and 1993,
respectively.
(2) Corporate identifiable assets in 1995 included $65.5 million of cash and
cash equivalents.
(3) Operating income/(loss) of the disposed businesses includes special charges
(credits) of $(5,227), $(15,648) and $10,000 for 1995, 1994 and 1993,
respectively. Operating results prior to the disposal date for the business
sold in 1995 were immaterial.
Geographic Areas (in thousands)
<TABLE>
<CAPTION>
UNITED UNITED
STATES CANADA KINGDOM OTHER ELIMINATIONS TOTAL
-------- ------- ------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
1995
Revenues from:
Unaffiliated
customers........... $430,671 $59,390 $35,776 $ 19,966 $ -- $545,803
Interarea sales........ 34,416 878 16,285 233 (51,812) --
-------- ------- ------- -------- -------- --------
Total
revenues..... 465,087 60,268 52,061 20,199 (51,812) 545,803
-------- ------- ------- -------- -------- --------
Operating income
(loss)................. 18,707 2,003 (1,383) 2,912 -- 22,239
Export sales of U.S...... -- 1,700 1,539 80,075 -- 83,314
Identifiable assets...... 228,817 23,851 17,789 18,121 -- 288,578
1994
Revenues from:
Unaffiliated
customers........... $442,555 $73,052 $29,708 $ 16,738 $ -- $562,053
Interarea sales........ 26,144 579 9,726 106 (36,555) --
-------- ------- ------- -------- -------- --------
Total
revenues..... 468,699 73,631 39,434 16,844 (36,555) 562,053
-------- ------- ------- -------- -------- --------
Operating income
(loss)................. 27,166 1,872 (314) 400 -- 29,124
Export sales of U.S...... -- 1,436 635 102,265 -- 104,336
Identifiable assets...... 186,634 34,567 32,136 14,967 -- 268,304
1993
Revenues from:
Unaffiliated
customers........... $485,988 $68,766 $49,419 $ 23,108 $ -- $627,281
Interarea sales........ 33,750 552 8,395 961 (43,658) --
-------- ------- ------- -------- -------- --------
Total
revenues..... 519,738 69,318 57,814 24,069 (43,658) 627,281
-------- ------- ------- -------- -------- --------
Operating income
(loss)................. (4,865) (321) (3,980) 1,090 -- (8,076)
Export sales of U.S...... -- 1,386 389 115,464 -- 117,239
Identifiable assets...... 257,597 29,662 39,391 16,829 -- 343,479
</TABLE>
F-17
<PAGE> 68
NATIONAL-OILWELL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. PRO FORMA NET INCOME AND NET INCOME PER SHARE (UNAUDITED)
On August 27, 1996, in anticipation of a proposed initial public offering
of the Company's common stock, the Company's board of directors approved
resolutions to authorize the filing of a Registration Statement on Form S-1 with
the Securities and Exchange Commission. The following table sets forth for the
year ended December 31, 1995: (a) summarized historical consolidated income
statement data and (b) summarized pro forma consolidated income statement data
reflecting the acquisition of the Partnership and the anticipated initial public
offering of the Company's common stock as if each had occurred on January 1,
1995 (in thousands).
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
Revenues....................................................... $ 545,803 $ 545,803
======= =======
Operating income............................................... $ 22,239 $ 22,239
Interest and financial costs, net.............................. 1,261 5,631(A)
Other (income) expense......................................... 1,401 1,563(B)
------- -------
Income (loss) before income taxes.............................. 19,577 15,045
Provision for income taxes..................................... 1,937 5,523(C)
------- -------
Net income..................................................... $ 17,640 $ 9,522(D)
======= =======
Earnings per share............................................. $ 0.54
=======
Average shares outstanding..................................... 17,590
=======
</TABLE>
- ---------------
(A) Increase in interest costs reflects the incremental interest expense
associated with the debt incurred with the acquisition of the partnership,
net of the proceeds of the anticipated initial public offering used to pay
down the acquisition debt, at the Company's 1995 effective interest rate of
9.5%, adjusted for the difference in the amortization of deferred financing
fees associated with the credit facilities.
(B) Increase in other (income) expense reflects the amortization of goodwill
incurred in connection with the acquisition of the Partnership.
(C) Increase in income taxes reflects the provision for U.S. federal and state
income taxes that were previously not recorded because of the partnership
status and as a result of the above pro forma adjustments.
(D) Pro Forma net income does not include the one-time expenses directly
attributable to the anticipated public offering, including (a) triggering
the Company's Value Appreciation Plans discussed in Note 8,(b) the write-off
of deferred financing costs of the existing Credit Agreement that will be
replaced concurrently with the anticipated public offering of $6,916,000
($4,288,000 net of tax) and (c) the termination of the Management Services
Agreement discussed in Note 11 for $4,775,000 ($2,960,000 net of tax).
Pro forma net income per share data is based upon (a) 11,346,940 shares of
common stock and common stock equivalents currently outstanding, (b) the
anticipated initial public offering of 4,000,000 shares of the Company's common
stock and, based upon an initial public offering price of $17.00 per share, (c)
the conversion of the Class A shares into 1,902,543 shares of common stock and
(d) an additional 340,926 shares of common stock issued pursuant to the Value
Appreciation Plans.
F-18
<PAGE> 69
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION
WHERE, OR TO ANY PERSONS TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
Use of Proceeds....................... 12
Dividend Policy....................... 12
Dilution.............................. 13
Capitalization........................ 14
Selected Historical Financial Data.... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 27
Management............................ 35
Certain Transactions.................. 41
Principal Stockholders................ 43
Description of Capital Stock.......... 44
Shares Eligible for Future Sale....... 47
Underwriting.......................... 48
Legal Matters......................... 49
Experts............................... 49
Available Information................. 49
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
================================================================================
4,000,000 SHARES
[NATIONAL-OILWELL, INC. LOGO]
NATIONAL-OILWELL, INC.
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
SIMMONS & COMPANY
INTERNATIONAL
, 1996
================================================================================
<PAGE> 70
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses of the Offering are estimated to be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................... $ 28,552
NASD filing fee........................................................... 8,780
New York Stock Exchange listing fee....................................... 130,000
Blue Sky fees and expenses................................................ 10,000
Printing expenses......................................................... 135,000
Legal fees and expenses................................................... 200,000
Accounting fees and expenses.............................................. 150,000
Transfer Agent fees....................................................... 3,000
Miscellaneous............................................................. 34,668
--------
Total........................................................... $700,000
========
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Sixth, Part II, Section 1 of the Company's Charter, a copy of which
is filed as Exhibit 3.1, and Article VI of the Company's Bylaws, a copy of which
is filed as Exhibit 3.2 to this Registration Statement, each provide that
directors, officers, employees and agents shall be indemnified to the fullest
extent permitted by Section 145 of the DGCL.
Section 145 of the DGCL authorizes, inter alia, a corporation to indemnify
any person ("indemnitee") who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact that such person
is or was an officer or director of such corporation, or is or was serving at
the request of such corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. A
Delaware corporation may indemnify past or present officers and directors of
such corporation or of another corporation or other enterprise at the former
corporation's request, in an action by or in the right of the corporation to
procure a judgment in its favor under the same conditions, except that no
indemnification is permitted without judicial approval if such person is
adjudged to be liable to the corporation. Where an officer or director is
successful on the merits or otherwise in defense of any action referred to
above, or in defense of any claim, issue or matter therein, the corporation must
indemnify him against the expenses (including attorney's fees) which he actually
and reasonably incurred in connection therewith. Section 145 further provides
that any indemnification shall be made by the corporation only as authorized in
each specific case upon a determination by the (i) stockholders, (ii) board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding or (iii) independent counsel if a
quorum of disinterested directors so directs. Section 145 provides that
indemnification pursuant to its provisions is not exclusive of other rights of
indemnification to which a person may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise.
Section 145 of the DGCL also empowers the Company to purchase and maintain
insurance on behalf of any person who is or was an officer or director of the
Company against liability asserted against or incurred by him in any such
capacity, whether or not the Company would have the power to indemnify such
officer or director against such liability under the provisions of Section 145.
The Company intends to purchase and maintain a directors' and officers'
liability policy for such purposes.
II-1
<PAGE> 71
The form of Purchase Agreement filed as Exhibit 1.1 to this Registration
Statement contains certain provisions for indemnification of directors and
officers of the Company and the Underwriters against civil liabilities under the
Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The shares of Class A Common Stock which have been sold by the Company in
the following transactions will be converted into shares of Common Stock.
On July 15, 1995, the Company sold an aggregate of 1,168,310 shares of
Common Stock at $.01 per share to two investors. The Company relied on an
exemption under Section 4(2) of the Securities Act in effecting these
transactions.
On January 16, 1996, the Company sold an aggregate of 8,806,479 shares of
Common Stock at $.01 per share, 753,049 shares of Common Stock at $.001 per
share, an aggregate of 13,085.6 shares of Class A Common Stock at $2,264 per
share to investors and members of management in connection with the closing of
the Acquisition, and the Company issued a warrant to GE Capital to purchase
282,392 shares of Common Stock for $.01 per share in connection with the Credit
Facility. The Company relied on an exemption under Section 4(2) of the
Securities Act in effecting these transactions.
On July 24, 1996, the Company completed the sale of an aggregate of 148,456
shares of Common Stock at $.01 per share, 282,381 shares of Common Stock at
$.001 per share and an aggregate of 202.4 shares of Class A Common Stock at
$2,264 per share to two members of management in connection with certain
transactions which were related to the closing of the Acquisition. The Company
relied on an exemption under Section 4(2) of the Securities Act in effecting
these transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
*1.1 -- Form of Purchase Agreement.
2.1 -- Purchase Agreement by and among Oilwell, Inc., National Supply
Company, Inc., USX Corporation, Armco Inc. and the Company dated
September 22, 1995, as amended.
3.1 -- Amended and Restated Certificate of Incorporation of the Company.
3.2 -- Bylaws of the Company.
*4.1 -- Specimen Common Stock certificate.
*5.1 -- Opinion of Vinson & Elkins L.L.P.
10.1 -- Employment Agreement dated as of January 16, 1996 between Joel V.
Staff and the Company.
10.2 -- Employment Agreement effective as of January 17, 1996 between C. R.
Bearden and the Company, with similar agreements with Lynn L. Leigh,
Jerry N. Gauche, Paul M. Nation, James J. Fasnacht and Steven W.
Krablin, a similar agreement effective as of February 5, 1996 between
and Merrill A. Miller, Jr. and the Company.
10.3 -- Stockholders Agreement among the Company and its stockholders dated
as of January 16, 1996.
10.4 -- Waiver and First Amendment to Stockholders Agreement dated as of July
24, 1996.
10.5 -- Employee Incentive Plan.
10.6 -- Stock Award and Long-Term Stock Incentive Plan.
</TABLE>
II-2
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
10.7 -- First Amendment to Stock Award and Long-Term Stock Incentive Plan.
10.8 -- Value Appreciation and Incentive Plan A.
10.9 -- Value Appreciation and Incentive Plan B.
10.10 -- Restricted Stock Agreement between the Company and Joel V. Staff,
with similar agreements with C. R. Bearden, Jerry N. Gauche, Steven
W. Krablin, Merrill A. Miller, Jr., James J. Fasnacht and Paul M.
Nation.
10.11 -- Management Services Agreement.
10.12 -- Supplemental Savings Plan.
*10.13 -- New Credit Facility.
*10.14 -- Deferred Fee Agreement.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Ernst & Young LLP.
*23.2 -- Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1 hereto).
24.1 -- Powers of Attorney (included in the signature pages of the
Registration Statement).
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
(B) CONSOLIDATED FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted because they are not applicable or the required
information has been provided in the consolidated financial statements or the
notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registration pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes to provide at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contained a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 29th day of August 1996.
NATIONAL-OILWELL, INC.
By: /s/ JOEL V. STAFF
------------------------------------
Joel V. Staff
Chairman of the Board, President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Steven W. Krablin and Paul M. Nation, or either
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and any additional registration statement
pursuant to Rule 462(b), and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and ratifying
and confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------ ---------------
<C> <S> <C>
/s/ JOEL V. STAFF Chairman of the Board, August 29, 1996
- --------------------------------------------- President and Chief
Joel V. Staff Executive Officer (Principal
Executive Officer)
/s/ STEVEN W. KRABLIN Vice President and Chief August 29, 1996
- --------------------------------------------- Financial Officer (Principal
Steven W. Krablin Financial and Accounting
Officer)
/s/ C. R. BEARDEN Director August 29, 1996
- ---------------------------------------------
C. R. Bearden
/s/ JAMES C. COMIS III Director August 29, 1996
- ---------------------------------------------
James C. Comis III
/s/ W. McCOMB DUNWOODY Director August 29, 1996
- ---------------------------------------------
W. McComb Dunwoody
/s/ HOWARD I. BULL Director August 29, 1996
- ---------------------------------------------
Howard I. Bull
/s/ JAMES T. DRESHER Director August 29, 1996
- ---------------------------------------------
James T. Dresher
/s/ WILLIAM E. MACAULAY Director August 29, 1996
- ---------------------------------------------
William E. Macaulay
/s/ BRUCE M. ROTHSTEIN Director August 29, 1996
- ---------------------------------------------
Bruce M. Rothstein
</TABLE>
II-4
<PAGE> 74
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------------------- ------------------------------------------------------------------------
<C> <S>
*1.1 -- Form of Purchase Agreement.
2.1 -- Purchase Agreement by and among Oilwell, Inc., National Supply
Company, Inc., USX Corporation, Armco Inc. and the Company dated
September 22, 1995.
3.1 -- Restated Certificate of Incorporation of the Company.
3.2 -- Bylaws of the Company.
*4.1 -- Specimen Common Stock certificate.
*5.1 -- Opinion of Vinson & Elkins L.L.P.
10.1 -- Employment Agreement dated as of January 16, 1996 between Joel V.
Staff and the Company.
10.2 -- Employment Agreement effective as of January 17, 1996 between C.R.
Bearden and the Company, with similar agreements with Lynn L. Leigh,
Jerry N. Gauche, Paul M. Nation, James J. Fasnacht and Steven W.
Krablin, a similar agreement effective as of February 5, 1996 between
and Merrill A. Miller, Jr. and the Company.
10.3 -- Stockholders Agreement among the Company and its stockholders dated
as of January 16, 1996.
10.4 -- Waiver and First Amendment to Stockholders Agreement dated as of July
24, 1996.
10.5 -- Employee Incentive Plan.
10.6 -- Stock Award and Long-Term Stock Incentive Plan.
10.7 -- First Amendment to Stock Award and Long-Term Stock Incentive Plan.
10.8 -- Value Appreciation and Incentive Plan A.
10.9 -- Value Appreciation and Incentive Plan B.
10.10 -- Restricted Stock Agreement between the Company and Joel V. Staff,
with similar agreements with C.R. Bearden, Jerry N. Gauche, Steven W.
Krablin, Merrill A. Miller, Jr., James J. Fasnacht and Paul M.
Nation.
10.11 -- Management Services Agreement.
10.12 -- Supplemental Savings Plan
*10.13 -- New Credit Facility.
*10.14 -- Deferred Fee Agreement
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Ernst & Young LLP.
*23.2 -- Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1 hereto).
24.1 -- Powers of Attorney (included in the signature pages of the
Registration Statement).
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
================================================================================
PURCHASE AGREEMENT
BY AND AMONG
OILWELL, INC.
(a wholly owned subsidiary of USX Corporation)
NATIONAL SUPPLY COMPANY, INC.
(a wholly owned subsidiary of Armco Inc.)
USX CORPORATION
ARMCO INC.
AND
NOW HOLDINGS, INC.
--------------------------------------------
Dated as of September 22, 1995
--------------------------------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
PURCHASE AND SALE OF THE INTERESTS AND THE SHARES
1.1 PURCHASE AND SALE OF THE INTERESTS AND THE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 DELIVERIES BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 DELIVERIES BY BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
RELATED MATTERS
2.1 ANCILLARY AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
REPRESENTATIONS AND WARRANTIESOF PARENTS AND SELLERS
3.1 ORGANIZATION OF SELLERS; AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 TITLE TO THE INTERESTS AND THE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 ORGANIZATION AND QUALIFICATION OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 PARTNERSHIP INTERESTS AND SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 EQUITY INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 NO VIOLATION; CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.9 TITLE TO ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.10 PATENTS, TRADEMARKS, TRADE NAMES, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.11 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 EMPLOYEE BENEFIT MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.13 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.14 CERTAIN CONTRACTS AND ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.15 COMPLIANCE WITH LAWS, LICENSES ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.16 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.17 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.18 CUSTOMER ACCOUNTS RECEIVABLE; INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.19 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.20 ENVIRONMENTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.21 NO ILLEGAL OR IMPROPER TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.22 PRODUCT LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.23 MISCELLANEOUS OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 ORGANIZATION; AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 NO VIOLATION: CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.4 ACQUISITION OF THE INTERESTS AND SHARES FOR INVESTMENT; SECURITIES ACT . . . . . . . . . . . . . . . 19
4.5 FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.6 BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE V
COVENANTS OF THE PARTIES
5.1 CONDUCT OF THE COMPANY'S BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.3 EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 GOVERNMENT NOTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.6 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.7 SUPPLEMENTAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.8 ACCESS TO BOOKS AND RECORDS FOLLOWING THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.9 NO OTHER BIDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.10 NO COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.11 AGREEMENT CONCERNING EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.12 POTENTIAL ACQUISITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.13 NO RECORDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.14 FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.15 ENVIRONMENTAL STUDY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.16 FACILITY QUESTIONNAIRE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII
CONDITIONS TO OBLIGATIONSOF SELLERS AND PARENTS
7.1 CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
8.1 CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 PROCEDURE AND EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.3 AMENDMENT, MODIFICATION AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE X
FEES AND EXPENSES; SURVIVAL OFREPRESENTATIONS; INDEMNIFICATION
10.1 FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.2 SURVIVAL OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.3 NATIONAL SUPPLY AGREEMENT TO INDEMNIFY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.5 SELLERS' AND PARENTS' LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.6 BUYER'S AGREEMENT TO INDEMNIFY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.7 CONDITIONS OF INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.8 PARENT GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.9 MATTERS DISCLOSED IN DISCLOSURE SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE XI
MISCELLANEOUS
11.1 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.3 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.4 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.5 BINDING EFFECT: ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.6 THIRD-PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.7 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.8 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.10 CERTAIN WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
EXHIBITS:
A Ancillary Agreement Matters
B Form of Assignment of Interests
C Allocation of Purchase Price
D Form of Buyer's Officer's Certificate
E Matters to be Covered by Opinion of Buyer's Legal Counsel
F Form of Compliance Certificate of Sellers and Parents
G Matters to be Covered by Opinions to be Furnished to Buyer
H Real Properties Owned or Leased Originally Contributed Upon Formation
of National-Oilwell and Currently Held by the Partnership
I Properties for which Title Representation Survives Closing
J Names of Management Equity Investors
K Form of Management Investor Certificate
L Form of Subordinated Promissory Note
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<PAGE> 5
PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of September 22, 1995, by and among OILWELL, INC., a Delaware corporation
("Oilwell") and a wholly owned subsidiary of USX CORPORATION, a Delaware
corporation ("USX"), USX, NATIONAL SUPPLY COMPANY, INC., a Delaware corporation
('National Supply") and a wholly owned subsidiary of ARMCO INC., a Ohio
corporation ("Armco"), Armco (Oilwell and National Supply are individually and
collectively referred to herein as "Seller" and "Sellers" and USX and Armco are
individually and collectively referred to herein as "Parent" and "Parents"),
and NOW HOLDINGS, INC., a Delaware corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase from Sellers, and Parents and
Sellers desire to sell to Buyer, all of the partnership interests (the
"Interests"), in National-Oilwell, a Delaware general partnership (the
"Company"), and all of the issued and outstanding capital stock (the "Shares")
of National-Oilwell Pte. Ltd, a Singapore corporation ("NOW Singapore") and
National-Oilwell Pty. Ltd., an Australia corporation ("NOW Australia"), which
shares are beneficially owned by the Company but legally held by Seller, upon
the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants, agreements and conditions contained
herein, and intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE INTERESTS AND THE SHARES
1.1 PURCHASE AND SALE OF THE INTERESTS AND THE SHARES. Upon the
terms and subject to the conditions of this Agreement, at the closing provided
for in Section 1.3 hereof (the "Closing"), Sellers shall sell, assign, transfer
and deliver to Buyer and Buyer shall purchase, acquire and accept from Seller
all of the Interests and the Shares.
1.2 CONSIDERATION. At the Closing, upon the terms and subject to
the conditions of this Agreement, in consideration of the aforesaid sale,
assignment, transfer and delivery of the Interests and the Shares, Buyer shall
pay and/or deliver to Sellers aggregate consideration (the "Purchase Price")
consisting of $160,000,000 in cash, $83,000,000 of which shall be paid to
Oilwell and $77,000,000 of
<PAGE> 6
which shall be paid to National Supply, and $20,000,000 in aggregate original
principal amount of subordinated notes issued by Buyer in the form attached
hereto as Exhibit L, to be split equally into two separate notes in the
original principal amount of $10,000,000 per note, one of which will be issued
to each Seller (such notes being herein collectively referred to as the "Buyer
Notes" and singularly as a "Buyer Note"). The Purchase Price shall be
allocated in accordance with Section 6.1(i) and Exhibit C.
1.3 CLOSING. Subject to the termination provision of Article IX,
the Closing of the transactions contemplated by this Agreement shall take place
at the offices of Vinson & Elkins L.L.P., 1001 Fannin, Houston, Texas, or at
such other location as Buyer shall determine and notify Sellers, at 10 a.m.
local time on the date that is five business days after the date of the
fulfillment of all of the conditions to Closing set forth in Article VII and
Article VIII hereof, or such other date and time as shall be agreed upon in
writing by the parties hereto. The date on which the Closing actually occurs
is referred to herein as the "Closing Date."
1.4 DELIVERIES BY SELLER. At the Closing, Seller shall deliver or
cause to be delivered to Buyer (unless delivered previously) the following:
(a) an assignment of the Interests, duly executed by each
of the Sellers and in substantially the form of Exhibit B hereto, and
any other documents that are necessary to transfer title to the
Interests to Buyer;
(b) stock certificates representing the Shares, duly
endorsed or accompanied by stock powers duly executed in blank or duly
executed instruments of transfer, and any other documents that are
necessary to transfer title to the Shares to Buyer;
(c) the compliance certificate referred to in Subsection
8.1(c) hereof;
(d) the opinions of counsel to Sellers referred to in
Subsection 8.1(d) hereof; and
(e) all other documents, certificates, instruments or
writings required to be delivered by Sellers at or prior to the
Closing pursuant to this Agreement or otherwise reasonably requested
by Buyer in connection herewith.
1.5 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver or
cause to be delivered to Sellers (unless delivered previously) the following:
(a) the cash portion of the Purchase Price payable to the
Sellers as provided in Section 1.2, by wire transfer of immediately
available funds in United States dollars, to respective bank accounts
designated by each Seller not less than two days prior to the Closing;
(b) the Buyer Notes;
(c) the officer's certificate referred to in Subsection
7.1(c) hereof;
(d) the opinion of counsel to Buyer referred to in
Subsection 7.1(d) hereof;
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(e) Releases of Sellers from any obligations under that
certain Credit Agreement dated February 28, 1995, among the Company,
Citibank USA, Inc. and BA Business Credit, Inc. (the "Existing Credit
Agreement"); and
(f) all other documents, certificates, instruments or
writings required to be delivered by Buyer at or prior to the Closing
pursuant to this Agreement or otherwise reasonably requested by
Sellers in connection herewith.
ARTICLE II
RELATED MATTERS
2.1 ANCILLARY AGREEMENT. At the Closing, Sellers and Buyer shall
enter into an agreement concerning the matters set forth in Exhibit A as the
Sellers and Buyer shall mutually agree.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENTS AND SELLERS
Parents and Sellers, jointly and severally, represent and warrant to
Buyer as set forth in this Article III; provided, however, that with respect to
any representations and warranties contained in this Article III that refer to
matters relating to an individual Parent or Seller (i.e., by use of the
singular term "Parent" or "Seller"), each individual Parent or Seller, as the
case may be, shall be deemed to have made the portion of such representation
and warranty that covers matters relating to it on a several (and not joint and
several) basis and shall have no liability with respect to the portion of such
representation and warranty that covers matters relating to any other Parent or
Seller, as the case may be.
3.1 ORGANIZATION OF SELLERS; AUTHORITY. USX and each Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Armco is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio. Each Parent
and Seller has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of each Parent and Seller. This Agreement has
been duly executed and delivered by each Parent and Seller and constitutes a
valid and binding obligation of each Parent and Seller, enforceable against
each Parent and Seller in accordance with its terms.
3.2 TITLE TO THE INTERESTS AND THE SHARES. Except as set forth in
Section 3.2 of the disclosure schedule being delivered by Sellers to Buyer
concurrently herewith (the "Disclosure Schedule"), each
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<PAGE> 8
Seller represents that (i) it has good and valid title to the portion of the
Interests and the Shares reflected as being owned by such Seller in Section 3.2
of the Disclosure Schedule free and clear of all liens, encumbrances, options,
claims, security interests, charges, voting trusts or partners' agreements,
equities, conditional sale or title retention agreements, restrictions or other
burdens and (ii) at Closing, valid title to such portion of the Interests and
the Shares, free and clear of all such liens, encumbrances, options, claims,
security interests, voting trusts or partners' agreements, equities,
conditional sale or title retention agreements, restrictions or other burdens
(including those set forth in Section 3.2 of the Disclosure Schedule), shall
pass to Buyer.
3.3 ORGANIZATION AND QUALIFICATION OF THE COMPANY. The Company is
a general partnership duly formed and validly existing under the laws of the
State of Delaware and has all requisite power and authority to own, lease and
operate its properties and to conduct its business as it is now being
conducted. The Company is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary.
The Company has heretofore delivered to Buyer complete and correct
copies of the partnership agreement of the Company, as currently in effect.
3.4 PARTNERSHIP INTERESTS AND SHARES. Sellers are the holders of
all of the partnership interests in the Company and all of the issued and
outstanding shares of capital stock or other equity interests of NOW Singapore
and NOW Australia. Other than the partnership interests owned by the Sellers,
there are no other interests in the Company granting the holder thereof the
right to receive distributions of cash or property, or allocations of income,
gain, loss or deduction. Such Interests and Shares have not been issued in
violation of, and except for statutory preemption rights are not subject to,
any preemptive or subscription rights. Except for the matters that are the
subject of the waivers referenced in Section 11.10 hereof, there are no
outstanding warrants, options, agreements, convertible or exchangeable
securities or other commitments pursuant to which the Company or a Parent or
Seller is or may become obligated to issue, sell, purchase, return or redeem
any partnership interests in the Company or any shares of capital stock of NOW
Singapore or NOW Australia.
3.5 EQUITY INTERESTS. (a) Except as set forth in Section 3.5 of
the Disclosure Schedule and except for immaterial investments in less than five
percent (5%) of the outstanding stock or other equity interests of other
entities, the Company does not own, directly or indirectly, any capital stock
or other equity interests of any corporation, partnership, joint venture or
other entity. None of such capital stock and equity interests has been issued
in violation of, and except for statutory preemption rights is not subject to,
any preemptive or subscription rights. There are no outstanding warrants,
options,
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<PAGE> 9
agreements, convertible or exchangeable securities or other commitments to
which any of such entities is or may become obligated to issue, sell, purchase,
return or redeem any of such capital stock or equity interests. Except as set
forth in Section 3.5 of the Disclosure Schedule, the Company is the owner of
all of the issued and outstanding capital stock or other equity interests of
each of the Subsidiaries.
(b) Each of the Subsidiaries (as such term is defined below) is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization or incorporation, has all requisite power and
authority to own, lease and operate its properties and to conduct its business
as it is now being conducted, and is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary. The Company has heretofore delivered to Buyer
complete and correct copies of the constituent organizational documents, as
currently in effect, for each of the entities described in Section 3.5 of the
Disclosure Schedule (excluding those entities listed in Section 3.5 of the
Disclosure Schedule that have an asterisk (*) adjacent to their names), and
such entities, together with NOW Australia and NOW Singapore, but excluding
such entities marked with an asterisk (*) in Section 3.5 of the Disclosure
Schedule, are referred to herein individually and collectively as "Subsidiary"
or "Subsidiaries."
3.6 NO VIOLATION; CONSENTS AND APPROVALS. Except as set forth in
Section 3.6 of the Disclosure Schedule, to the knowledge of the Sellers, the
Parents, the Company or any Subsidiary, the execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated
hereby and compliance with the terms hereof will not, conflict with, result in
any violation of or default of, or require any consent or approval of, or
notice to, any private nongovernmental party under, (a) any provision of the
charter or bylaws, or other constituent organizational documents, of any Seller
or the Company or any of the Subsidiaries, (b) any judgment, order or decree,
or statute, law, ordinance, rule or regulation applicable to any Parent,
Seller, the Company, or any Subsidiary or the property or assets of any Parent,
Seller, the Company, or any Subsidiary or (c) any Material Contracts (as such
term is defined in Section 3.14). No consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental entity, authority or
instrumentality, domestic or foreign, is required to be obtained or made by or
with respect to any Parent, Seller, the Company, or any Subsidiary or their
affiliates in connection with the execution and delivery of this Agreement or
the consummation by either Seller of the transactions contemplated hereby,
other than (i) compliance with and filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), if applicable,
(ii) compliance with and filings under Section 13(a) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (iii) compliance
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<PAGE> 10
with and filings under federal or state environmental, tax, employment or
workers compensation statutes, if applicable, (iv) those which may be required
solely by reason of the participation of Buyer or any party other than Parents,
Sellers, the Company or the Subsidiaries in the transactions contemplated
hereby, and (v) foreign ownership, competition or title registration statutes
of Australia, Canada, Singapore, United Kingdom, Venezuela, Malaysia, Brazil
and Thailand, if applicable.
3.7 FINANCIAL STATEMENTS. Section 3.7 of the Disclosure Schedule
sets forth the unaudited balance sheet of the Company as of June 30, 1995 (the
"Balance Sheet"), and the unaudited consolidated operating statements of the
Company and the Subsidiaries for the six-month period ended June 30, 1995, and
the audited consolidated balance sheets and consolidated statements of
operations of the Company and the Subsidiaries as of, and for the three fiscal
years ended, December 31, 1994, December 31, 1993 and December 31, 1992
reported on by Ernst & Young LLP (together, the "Financial Statements"). The
Financial Statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") consistently applied and fairly present the
financial condition and the results of operations of the Company and the
Subsidiaries as at the dates and for the periods indicated. During the period
covered by the Financial Statements, there have been no changes in the
accounting methods, principles or practices followed by the Company or the
Subsidiaries or the depreciation or amortization policies or rates of the
Company or the Subsidiaries, except as disclosed in the notes to the Financial
Statements.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.8 of the Disclosure Schedule and as otherwise contemplated by this
Agreement, during the period from July 1, 1995 to the date hereof, there has
not been:
(a) to the knowledge of Sellers, Parents, the Company or
any Subsidiary, any adverse changes or, any threatened adverse changes
in the consolidated financial condition of the Company and the
Subsidiaries, or in the properties, assets, liabilities, business or
prospects of the Company and the Subsidiaries, which exceed, or which
reasonably could be expected to exceed, in the aggregate $1,000,000,
except normal and usual changes in the ordinary course of business of
the Company and the Subsidiaries consistent with past practices;
(b) any amendment or waiver of the terms of the
Partnership Agreement of the Company;
(c) any approval by the Management Committee of the
Company of any of the actions specified by Section 4.4 of the
Partnership Agreement of the Company;
(d) any action by either or both Partners-as opposed to
actions by the Company through its officers, employees and agents-on
behalf of the Company;
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<PAGE> 11
(e) any amendment of the constituent organizational
documents of NOW Australia or NOW Singapore;
(f) any (i) incurrence or commitment to any capital
expenditures, obligations or liabilities in connection therewith other
than capital expenditures, obligations or liabilities that were
included in the annual capital budget approved by the Management
Committee of the Company or if not so included that do not exceed in
the aggregate $200,000; or (ii) acquisitions by merger, consolidation
or purchase of assets of any person;
(g) to the knowledge of Sellers, Parents, the Company or
any Subsidiary, any physical damage as a result of fire, flood,
explosion or other casualty, destruction or loss (whether or not
covered by insurance) which adversely affects properties or assets of
the Company and the Subsidiaries having an aggregate book value or
market value in excess of $500,000; or
(h) any declaration or payment of any dividends or other
distributions with respect to the partnership interests in the Company
or the Shares.
3.9 TITLE TO ASSETS. (a) Except with respect to the Real
Property Interests (title to which is covered by subparagraph (b) immediately
below), the Company and the Subsidiaries have good and valid title to all
assets reflected on the Balance Sheet or thereafter acquired (except those
since sold or otherwise disposed of in the ordinary course of business and
accounts, bills and notes receivable subsequently collected), and all of their
other assets, tangible and intangible, in each case free and clear of all
mortgages, liens, security interests or encumbrances, other than (i)
mechanics', carriers', workmen's, repairmen's or other like liens arising or
incurred in the ordinary course of business, (ii) liens for taxes, assessments
and other governmental charges which are not due and payable or which may
hereafter be paid without penalty or which are being contested in good faith by
appropriate proceedings and (iii) other imperfections of title or encumbrances,
if any, that do not materially impair the use of the assets to which they
relate in the businesses of the Company and the Subsidiaries as presently
conducted (the mortgages, liens, security interests and encumbrances described
in clauses (i), (ii) and (iii) above are hereinafter referred to collectively
as "Permitted Liens").
(b) Section 3.9(b) of the Disclosure Schedule sets forth a
complete list of all real property owned in fee by the Company or a Subsidiary
and all real property leasehold interests owned by the Company or a Subsidiary
(collectively, the "Real Property Interests"). Except as set forth in Section
3.9(b) of the Disclosure Schedule, the Company and the Subsidiaries have (i)
good and indefeasible title to and the unrestricted right to sell, the Real
Property Interests, in each case free and clear of all mortgages, liens,
security interests, charges, easements, covenants, rights-of-way and other
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<PAGE> 12
encumbrances or restrictions of any nature whatsoever ("Encumbrances"), except
(A) Permitted Liens, (B) all conditions that a physical inspection or survey
would show, (C) all Encumbrances of record, (D) all Encumbrances for public
utilities to provide service to facilities located on such property or to
provide service to adjacent property, whether or not of record, (E) all farming
or grazing agreements, whether or not of record, (F) all zoning or other
governmentally-imposed Encumbrances and (G) unrecorded easements, covenants,
rights of way or other restrictions, none of which unrecorded items materially
impair the use of the property to which they relate in the businesses of the
Company and the Subsidiaries as presently conducted.
(c) Except as set forth in Section 3.9(c) of the Disclosure
Schedule, to the knowledge of the Sellers, the Parents, the Company and the
Subsidiaries, the material buildings, facilities, machinery, equipment and
tools currently used in the ordinary course of business of the Company and the
Subsidiaries have been maintained in accordance with the Company's and the
Subsidiaries' customary maintenance practices and are in a state of repair
(normal wear and tear excepted) which the Company believes to be adequate for
the normal use of such facilities in the ordinary course of their businesses.
The Company and the Subsidiaries have all of the machinery, equipment and tools
which are necessary for the conduct of their businesses as they are now being
conducted.
(d) The property and assets owned and leased by the Company and
the Subsidiaries constitute all of the tangible and intangible property and
assets used in the business operations of the Company and the Subsidiaries as
conducted as of the date of this Agreement. The Company and the Subsidiaries
do not own or lease any property or asset (i) which is not used or held for use
in their businesses and/or is used by any other person or (ii) which is used in
their businesses but use of which is made available to other persons for
matters unrelated to the businesses of the Company and the Subsidiaries.
3.10 PATENTS, TRADEMARKS, TRADE NAMES, ETC. (a) Section 3.10(a)
of the Disclosure Schedule sets forth a complete list of all patents,
registered trademarks, trade names, service marks, assumed names, copyrights
and all applications therefor and all invention disclosures, title and goodwill
of "National-Oilwell" (collectively, the "Intellectual Property") owned, filed
or licensed by the Company and the Subsidiaries and used in or held for use in
the conduct of the businesses of the Company and the Subsidiaries and, with
respect to patents and registered trademarks, all jurisdictions in which such
trademarks are registered. To the knowledge of the Sellers, the Parents, the
Company or any Subsidiary, the Company and the Subsidiaries are not infringing
and have not infringed on any patent, trademark, service mark, trade name or
copyright and have not misappropriated or improperly disclosed any trade secret
or confidential information.
-8-
<PAGE> 13
(b) Except as set forth in Section 3.10(b) of the Disclosure
Schedule, the Company and the Subsidiaries have the full right to use the
Intellectual Property, and all trade secrets and confidential information used
by the Company and the Subsidiaries, in the conduct of their businesses, as
currently conducted, and no claims have been asserted of which the Company or
the Subsidiaries have been given notice by any person with respect to the use
by the Company or the Subsidiaries of the Intellectual Property or any trade
secrets or confidential information used by the Company or any Subsidiary.
3.11 LITIGATION. Except as set forth in Section 3.11 of the
Disclosure Schedule, there is no claim, action, suit, investigation or
proceeding pending or to the knowledge of the Company, the Subsidiaries,
Sellers or Parents threatened against or affecting the Company or the
Subsidiaries before any court, administrative body, tribunal, administrative
board or panel, federal, state, foreign or local. Neither the Company nor any
Subsidiary is aware of any default with respect to any judgment, order, writ,
injunction, decree, award, rule or regulation of any court, arbitrator or
governmental agency or instrumentality applicable to them, or any event that
has occurred which with notice or lapse of time or both would constitute such a
default.
3.12 EMPLOYEE BENEFIT MATTERS. (a) Section 3.12(a) of the
Disclosure Schedule sets forth a complete list of each of the following which
is sponsored, maintained or contributed to by the Company, the Subsidiaries, or
any Seller for the benefit of the employees of the Company and the Subsidiaries
as of the Closing Date:
(i) each "employee benefit plan," as such term is defined
in Section 3(3) of the Employee Retirement Security Act of 1974, as
amended ("ERISA"), including, but not limited to, employee benefit
plans, such as foreign plans, which are not subject to the provisions
of ERISA ("Plan"); and
(ii) each personnel policy, stock option plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan
or arrangement, vacation policy, severance pay plan, policy or
agreement, deferred compensation agreement or arrangement, executive
compensation or supplemental income arrangement, executive perquisite
arrangement, consulting agreement, employment agreement and each other
employee benefit plan, agreement, arrangement, program, practice or
understanding which is not described in Section 3.12(a)(i) ("Benefit
Program or Agreement").
(b) True, correct and complete copies of each of the Plans, and
related trusts, if applicable, including all amendments thereto, have been
furnished to Buyer. There has also been furnished to Buyer, with respect to
each Plan required to file such report and description, the most recent report
on
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<PAGE> 14
Form 5500 and the summary plan description. True, correct and complete copies
or descriptions of all Benefit Programs and Agreements have also been furnished
to Buyer.
(c) Except as otherwise set forth in Section 3.12(c) of the
Disclosure Schedule,
(i) neither the Company nor the Subsidiaries contribute
to or have an obligation to contribute to, and have not at any time
within six years prior to the Closing Date contributed to or had an
obligation to contribute to, a multi-employer plan within the meaning
of Section 3(37) of ERISA;
(ii) the Company, the Subsidiaries and each Seller have
substantially performed all obligations, whether arising by operation
of law or by contract, required to be performed by them in connection
with the Plans and the Benefit Programs and Agreements, and, to the
knowledge of the Company, the Subsidiaries, each Seller and each
Parent, there have been no defaults or violations by any other party
to the Plans or Benefit Programs and Agreements;
(iii) all reports and disclosures relating to the Plans
required to be filed with or furnished to governmental agencies, Plan
participants or Plan beneficiaries have been filed or furnished in
accordance with applicable law in a timely manner, and each Plan and
each Benefit Program or Agreement has been administered in substantial
compliance with all laws applicable thereto and its governing
documents;
(iv) each of the Plans intended to be qualified under
Section 401 of the Code has received a favorable determination letter
from the IRS regarding such qualified status and has not, since
receipt of the most recent favorable determination letter, been
amended or, to the knowledge of the Company, each Seller and each
Parent, operated in a way which would adversely affect such qualified
status;
(v) there are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of the Company,
the Subsidiaries, each Seller and each Parent, threatened against, or
with respect to, any of the Plans or Benefit Programs and Agreements
or their assets;
(vi) all contributions required to be made to the Plans
pursuant to their terms and provisions have been made timely;
(vii) as to any Plan subject to Title IV of ERISA, there
has been no event or condition which presents the risk of Plan
termination, no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code
has been incurred, no reportable event within the meaning of Section
4043 of ERISA (for which the disclosure requirements or the penalties
under applicable regulatory authority promulgated by
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<PAGE> 15
the Pension Benefit Guaranty Corporation ("PBGC") have not been waived) has
occurred, no notice of intent to terminate the Plan has been given under
Section 4041 of ERISA, no proceeding has been instituted under Section 4042 of
ERISA to terminate the Plan, there has been no termination or partial
termination of the Plan within the meaning of Section 411(d)(3) of the Code, no
liability to the PBGC has been incurred, and the assets of the Plan equal or
exceed the actuarial present value of the benefit liabilities, within the
meaning of Section 4041 of ERISA, under the Plan, based upon reasonable
actuarial assumptions and the asset valuation principles established by the
PBGC;
(viii) none of the Plans, nor any trust created thereunder
or with respect thereto, has engaged in any "prohibited transaction"
or "party-in-interest transaction" as such terms are defined in
section 4975 of the Code and Section 406 of ERISA which would subject
the Company or any Subsidiary to a tax or penalty on prohibited
transactions or party-in-interest transactions pursuant to section
4975 of the Code or Section 502(i) of ERISA and no act, omission or
transaction has occurred which would result in imposition on the
Company or any Subsidiary of breach of fiduciary duty liability
damages under Section 409 of ERISA or a civil penalty assessed
pursuant to Section 502(c) or (l) of ERISA;
(ix) to the knowledge of the Company, the Subsidiaries,
each Seller and each Parent, there is no matter pending (other than
routine qualification determination filings) with respect to any of
the Plans before the IRS, the Department of Labor or the PBGC;
(x) each trust funding a Plan, which trust is intended to
be exempt from federal income taxation pursuant to section 501(c)(9)
of the Code, has received a favorable determination letter from the
IRS regarding such exempt status and has not, since receipt of the
most recent favorable determination letter, been amended or, to the
knowledge of the Company, the Subsidiaries, each Seller and each
Parent, operated in a way which would adversely affect such exempt
status;
(xi) with respect to any employee benefit plan, within the
meaning of Section 3(3) of ERISA, which is not set forth in Section
3.12(a) of the Disclosure Schedule but which is sponsored, maintained
or contributed to, or has been sponsored, maintained or contributed to
within six years prior to the Closing Date, by the Company or by any
corporation, trade business or entity under common control with the
Company, within the meaning of section 415(b), (c) or (m) of the Code
or Section 4001 of ERISA, (A) no withdrawal liability, within the
meaning of Section 4201 of ERISA, has been incurred, which withdrawal
liability has not been satisfied, (B) no liability to the PBGC has
been incurred which liability has not been satisfied, (C) no
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<PAGE> 16
accumulated funding deficiency, whether or not waived, within the
meaning of Section 302 of ERISA or section 412 of the Code has been
incurred, and (D) all contributions (including installments) to such
plan required by Section 302 of ERISA and section 412 of the Code have
been timely made;
(xii) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not (A)
require the Company or any Subsidiary to make a larger contribution
to, or pay greater benefits under, any Plan, Benefit Program or
Agreement than it otherwise would or (B) create or give rise to any
additional vested rights or service credits under any Plan, Benefit
Program or Agreement, except as otherwise specifically provided
herein;
(xiii) each nongovernmental Plan outside of the United
States ("Foreign Plan") has no unfunded liabilities, and each Foreign
Plan covers only employees or former employees of the Subsidiaries;
and
(d) Section 3.12(d) of the Disclosure Schedule. sets forth a
complete list of employee benefit plans, arrangements or programs sponsored,
maintained or contributed to by any Parent for the benefit of the employees of
the Company or the Subsidiaries as of the Closing Date.
(e) In connection with the consummation of the transactions
contemplated by this Agreement, no payments have been or will be made under the
Plans, Benefit Programs and Agreements which, in the aggregate, would result in
imposition of the sanctions imposed under sections 280G and 4999 of the Code.
(f) Except as otherwise set forth in Section 3.12(f) of the
Disclosure Schedule, each Plan which is an "employee welfare benefit plan," as
such term is defined in Section 3(1) of ERISA, reserves the right to be
unilaterally amended or terminated in its entirety respecting benefits accrued
thereunder on or after such amendment or termination.
3.13 TAXES. (a) The Company is a partnership for federal income
tax purposes within the meaning of section 7701(a)(2) of the Internal Revenue
Code of 1986, as amended (the "Code") and applicable Treasury Regulations and
is not an association taxable as a corporation within the meaning of section
7701(a)(3) of the Code and applicable Treasury Regulations.
(b) All items of income, gain, loss, deduction and credit or any
other item of the Company or any Subsidiary ("Tax Items") required by law to be
included in any return and report of or with respect to any Tax ("Tax Return")
of the Sellers or Parents that is required to be filed on or before the Closing
Date have been or will be included in such Tax Returns and all Taxes payable
thereunder have been or will be paid by the Sellers or Parents.
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<PAGE> 17
(c) Except as set forth in Section 3.13(c) of the Disclosure
Schedule, all Tax sharing agreements or similar arrangements with respect to or
involving the Company or any Subsidiary have been or will be terminated prior
to the Closing Date, and after the Closing Date the Company and the
Subsidiaries shall not have any obligation under any such agreement for any
past, current or future period;
(d) Except as set forth in Section 3.13(d) of the Disclosure
Schedule, there is no claim against the Company or any Subsidiary for any
Taxes, and no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return of the Company or any Subsidiary. None
of the property of the Company or any Subsidiary is subject to any lien for any
Tax.
(e) Except as set forth in Section 3.13(e) of the Disclosure
Schedule, neither the Company nor any Subsidiary is obligated to take any
action or refrain from taking any action in connection with any agreement with
any Taxing Authority involving an abatement of any Tax.
(f) Except as set forth in Section 3.13(f) of the Disclosure
Schedule, there is not in force any extension of time with respect to the due
date for the filing of any Tax Return of the Company or any Subsidiary or any
waiver or agreement for any extension of time for the assessment or payment of
any Tax of, or with respect to, the Company or any Subsidiary or any Tax Items.
(g) For purposes of this Agreement, "Tax" or "Taxes" shall mean
any tax of any kind, including, without limitation, all income, property,
sales, use, occupation, franchise, excise, value added, employees' income
withholding and social security taxes, and related to such taxes, charges,
fees, levies, penalties or other assessments, imposed by the United States or
by any foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country, or by any other
taxing authority.
3.14 CERTAIN CONTRACTS AND ARRANGEMENTS. Except as set forth in
Section 3.14 of the Disclosure Schedule and except for purchase contracts and
orders for inventory in the ordinary course of business, neither the Company
nor any Subsidiary is, as of the date of this Agreement, a party to or bound by
any of the following (collectively, the "Material Contracts"):
(a) employment agreement or severance agreement that is
not terminable at will by the Company or any Subsidiary;
(b) collective bargaining agreement or other contract
with any labor union;
(c) covenant not to compete (other than pursuant to any
lease, reciprocal easement agreement, development agreement, operating
agreement or construction agreement);
(d) agreement or contract with any Seller or Parent or
any of their respective affiliates (other than the Company NOW
Singapore or NOW Australia) or any officer, director
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<PAGE> 18
or employee of the Company, any Subsidiary, any Seller or any Parent
or any of such affiliates (other than employment and severance
agreements covered by clause (a) above);
(e) agreement or contract under which the Company or any
Subsidiary has borrowed or loaned money, or any note, bond, indenture
or other evidence of indebtedness or any guarantee of indebtedness, in
each case relating to amounts in excess of $100,000 (other than
endorsements for the purpose of collection in the ordinary course of
business);
(f) agreements or contracts under which the Company and
the Subsidiaries have, in the aggregate, sold or agreed to sell
properties and assets having an aggregate net book value of more than
$250,000; or
(g) other agreement, contract, lease, license, commitment
or instrument to which the Company or any Subsidiary is a party which
(i) involves sales of products of the Company and its Subsidiaries, or
purchases by the Company and the Subsidiaries of products and
services, in excess of $100,000, (ii) involves future expenditures in
excess of $200,000, and is not terminable by the Company or the
Subsidiary on 30 days' or fewer notice without penalty, or (iii) is
otherwise material to the business, assets, earnings, properties,
operations or condition, financial or otherwise, of the Company and
the Subsidiaries taken as a whole.
Except as set forth in Section 3.14 of the Disclosure Schedule, to the
knowledge of Sellers, Parents, the Company or any Subsidiary, neither the
Company nor any Subsidiary is in breach of or in default under any Material
Contract. To the knowledge of the Sellers, Parents, the Company or any
Subsidiary, the other parties to each Material Contract have performed in all
material respects all obligations required to be performed by them to date and
are not in default under or in violation of, and no event has occurred which
with notice, lapse of time or both, would constitute a default thereunder.
3.15 COMPLIANCE WITH LAWS, LICENSES ETC. To the knowledge of
Sellers, Parents, the Company or any Subsidiary, the businesses of the Company
and the Subsidiaries are being operated in compliance in all material respects
with all applicable laws, statutes, ordinances, rules, regulations and orders
(collectively, "laws") of all governmental entities, authorities and
instrumentalities, except for (a) ERISA and other laws applicable to the Plans,
which are addressed in Section 3.12 hereof; (b) laws regarding the payment of
Taxes, which are addressed in Section 3.13 hereof; (c) laws regarding
employment and employment practices, which are addressed in Section 3.19
hereof; and (d) Environmental Laws, which are addressed in Section 3.20 hereof.
To the knowledge of Sellers, Parents, the Company or any Subsidiary, the
Company and the Subsidiaries have all material permits, certificates, licenses,
approvals and other authorizations ("Permits") required in connection with the
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<PAGE> 19
current operation of their businesses under applicable laws (other than those
referred to in clauses (a)-(d) above).
3.16 INSURANCE. The Company and the Subsidiaries maintain policies
of fire and casualty, liability and other forms of insurance in such amounts,
with such deductibles and against such risks and losses as are listed in
Section 3.16 of the Disclosure Schedule.
3.17 BROKERS. Neither the Company, nor any Subsidiary, Seller or
Parent, has retained any broker, finder or financial advisor or other person
who is or will be entitled to any brokerage fees, commissions, finders' fees or
financial advisory fees in connection with the transactions contemplated hereby
for which Buyer, the Company or any Subsidiary is or will be liable.
3.18 CUSTOMER ACCOUNTS RECEIVABLE; INVENTORIES. Section 3.18 of
the Disclosure Schedule sets forth certain information with respect to the
accounts receivable and inventories of the Company and the Subsidiaries.
3.19 LABOR MATTERS. Section 3.19 of the Disclosure Schedule sets
forth by number and employment classification the approximate number of
employees employed by the Company and the Subsidiaries as of the date of this
Agreement, and, except as set forth therein, none of said employees are subject
to union or collective bargaining agreements with the Company or any
Subsidiary. Except as set forth in Section 3.19 of the Disclosure Schedule,
(a) to the knowledge of Sellers, Parents, the Company or any Subsidiary, the
Company and the Subsidiaries are in compliance with all applicable laws
respecting employment and employment practices, (b) there is no unfair labor
practice charge or complaint against the Company or any Subsidiary pending or,
to the knowledge of the Company, the Subsidiaries, Sellers or Parents,
threatened, before the National Labor Relations Board or other governmental
agency nor is there any grievance nor any arbitration proceeding arising out of
or under collective bargaining agreements pending or, to the knowledge of the
Company, the Subsidiaries, Sellers or Parents, threatened, with respect to the
businesses of the Company and the Subsidiaries, (c) there is no labor strike,
slowdown or work stoppage pending or threatened against the Company or any
Subsidiary and (d) there is no charge or complaint pending or threatened
against the Company or any Subsidiary before the Equal Employment Opportunity
Commission or any state, local or foreign agency responsible for the prevention
of unlawful employment practices. Neither the Company nor any Subsidiary has
received notice of the intent of any foreign, federal, state or local agency
responsible for the enforcement of labor or employment laws to conduct an
investigation of or relating to the Company or any Subsidiary, and no such
investigation is in progress. No union is known to the Company to be
organizing or attempting to organize any employees of the Company or any
Subsidiary.
3.20 ENVIRONMENTAL. Except as set forth in Section 3.20 of the
Disclosure Schedule:
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(a) Schedule 3.20 of the Disclosure Schedule sets forth a
list of all assessments, studies, reports or appraisals
("Environmental Reports") possessed by the Company, any Subsidiary,
Seller or Parent relating to the environmental condition of any real
property currently or formerly owned or leased by the Company or any
Subsidiary (the "Company Property") or relating to the compliance by
the Company or any Subsidiary with any Environmental Laws.
(b) To the knowledge of Sellers, Parents, the Company or
any Subsidiary, the Company Property and the operations conducted
thereon do not violate in any material respect any Environmental Laws
and there are no conditions existing on or resulting from the
operation of any Company Property that could give rise to any on-site
or off-site remedial obligations under any Environmental Laws.
(c) The Company Property and the operations conducted
thereon by the Company and the Subsidiaries or the operations by any
prior owner or operator of the Company Property, are not subject to
any existing, pending or, to the knowledge of any Seller or Parent,
threatened action, suit, investigation, inquiry or proceeding by or
before any Governmental Authority.
(d) All notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in connection
with the current operation or use of the Company Property, including
without limitation treatment, storage, disposal or release of a
hazardous substance or solid waste into the environment, if any, have
been duly obtained or filed, and the Company and the Subsidiaries are
in compliance with the terms and conditions of all such notices,
permits, licenses and similar authorizations.
(e) To the knowledge of Sellers, Parents, the Company or
any Subsidiary, neither the Company nor any Subsidiary is subject to
any contingent liability in connection with any exposure of any person
or property to or any release or threatened release of any hazardous
substance or solid waste into the environment on or at the Company
Property or from the operations conducted thereon.
(f) For purposes of this Agreement, "Environmental Laws"
shall mean any and all laws, statutes, ordinances, rules, regulations,
orders, or determinations of any Governmental Authority pertaining to
health or the environment in effect on the date of this Agreement in
any and all jurisdictions in which the Company Property is located,
including without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental, Response, Compensation, and Liability Act
of 1989 ("CERCLA"), as amended, the Federal Water Pollution Control
Act, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the
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<PAGE> 21
Safe Drinking Water Act, as amended, the Toxic Substances Control Act,
as amended, the Superfund Amendments and Reauthorization Act of 1986,
as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection laws. The terms
"hazardous substance" and "release" (or "threatened release") have the
meanings specified in CERCLA, and the terms "solid waste" and
"disposal" (or "disposed") have the meanings specified in RCRA;
provided, however, that (i) to the extent the laws of the state in
which the Company Property is located are applicable and establish a
meaning for "hazardous substance," "release," "solid waste" or
"disposal" which is broader than that specified in either CERCLA or
RCRA, such broader meaning shall apply in such state, and (ii) the
terms "hazardous substance" and "solid waste" shall include all oil
and gas exploration and production wastes that may present an
endangerment to public health or welfare or the environment, even if
such wastes are specifically exempt from classification as hazardous
substances or solid wastes pursuant to CERCLA or RCRA or the state
analogues to those statutes. As used herein, "Environmental Laws"
shall not include the Occupational Safety and Health Act of 1970, as
amended (together with any rules and regulations promulgated
thereunder, "OSHA"), it being the intent of the parties that OSHA
shall constitute a "law" within the meaning of the definition of such
term set forth in Section 3.15.
(g) For purposes of this Section 3.20, "Governmental
Authority" shall mean any foreign countries, the United States, the
state, county, city and political subdivisions in which the Company
Property is located or which exercises jurisdiction over any such
Company Property and any court, agency, department, commission, board,
bureau or instrumentality or any of them which exercises jurisdiction
over any such Company Property.
3.21 NO ILLEGAL OR IMPROPER TRANSACTIONS. Neither the Company nor
any Subsidiary has, nor has any director, officer or employee of the Company or
any Subsidiary, directly or indirectly, used funds or other assets of the
Company or any Subsidiary, or made any promise or undertaking in such regards,
for (a) illegal contributions, gifts, entertainment or other expenses relating
to political activity; (b) illegal payments to or for the benefit of
governmental officials or employees, whether domestic or foreign, (c) illegal
payments to or for the benefit of any person, firm, corporation or other
entity, or any director, officer, employee, agency or representative thereof;
or (d) the establishment or maintenance of a secret or unrecorded fund; and
there have been no knowingly false or fictitious entries made in the books or
records of the Company or any Subsidiary.
3.22 PRODUCT LIABILITY. Section 3.22 of the Disclosure Schedule
sets forth a description of the policy of the Company and its Subsidiaries with
respect to the giving of warranties to third parties
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<PAGE> 22
with respect to any products rented or sold by them, excluding any warranties
imposed by the provisions of applicable law.
3.23 MISCELLANEOUS OTHER INFORMATION. Section 3.23 of the
Disclosure Schedule sets forth the following information:
(a) the name and current annual compensation of each
officer, employee and agent of the Company or any Subsidiary to whom
the Company or any Subsidiary has agreed to pay annual compensation
for the current year of at least $100,000 and showing separately for
each such person the amounts paid or payable as salary, bonus payments
and any indirect compensation, and any employment agreement with
respect to each such person, and the name and compensation of each
person to whom the Company or any Subsidiary paid consulting fees as
reflected in the Company's Financial Statements;
(b) the name of each bank in which the Company or any
Subsidiary has an account or safe deposit box, the number of any such
accounts, the name in which the account or box is held and the names
of all persons authorized to draw thereon or to have access thereof;
and
(c) the names of all persons, if any, holding tax or
other powers of attorney from the Company, any Subsidiary, Seller, or
Parent that relate to the Company or any Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers and Parents as
follows:
4.1 ORGANIZATION; AUTHORITY. Buyer is a Corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed
and delivered by Buyer and constitutes a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.
4.2 NO VIOLATION: CONSENTS AND APPROVALS. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, result in any violation of or default of, or require any consent or
approval of, or notice to, any private nongovernmental party under, (a) any
provision of the charter or by-laws of Buyer, (b) any judgment, order or
decree, or material statute, law, ordinance, rule or regulation applicable to
Buyer or the property or assets of Buyer or (c) any note, bond, mortgage,
indenture,
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<PAGE> 23
license, permit, agreement, lease or other instrument or obligation to which
Buyer is a party or by which Buyer may be bound or affected or to which any of
its assets may be subject. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental entity, authority or instrumentality, domestic
or foreign, is required to be obtained or made by or with respect to Buyer or
its affiliates in connection with the execution and delivery of this Agreement
or the consummation by Buyer of the transactions contemplated hereby, other
than (i) compliance with and filings under the HSR Act, if applicable, (ii)
compliance with and filings under state environmental statutes, if applicable,
and (iii) foreign ownership, competition or title registration statutes of
Australia, Canada, Singapore, United Kingdom, Venezuela, Malaysia, Brazil and
Thailand, if applicable. consents or approvals the failure of which to obtain
would not materially impair Buyer's ability to consummate the transactions
contemplated hereby.
4.3 LITIGATION. There is no claim, action, suit or proceeding
pending of which Buyer has received notice by or before any governmental or
regulatory authority, or by or on behalf of any third party, which challenges
the validity of this Agreement or which, if adversely determined, would
adversely affect the ability of Buyer to consummate the transactions
contemplated by this Agreement.
4.4 ACQUISITION OF THE INTERESTS AND SHARES FOR INVESTMENT;
SECURITIES ACT. Buyer is acquiring the Interests and the Shares for investment
purposes only and not with a view toward, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
the Interests or the Shares. Buyer agrees that it will not sell, transfer,
offer for sale, pledge, hypothecate or otherwise dispose of the Interests or
the Shares in violation of any federal, state or other securities law.
4.5 FINANCING. Section 4.5 of the Disclosure Schedule lists the
names and dollar amounts of each corporation, partnership, individual or other
entity that has agreed, committed or given a written expression of interest to
loan money to Buyer to consummate the transaction contemplated herein and to
operate Buyer after the Closing (the "Financing Commitments"). True, complete
and correct copies of the Financing Commitments have been delivered to Seller.
Bain Capital, Inc., Duff & Phelps/ Inverness LLC and Harvard Private Capital
Group, Inc. (the "Investors"), together with their affiliates, have generally
agreed orally to provide $51.5 million (to be allocated between subordinated
debt and equity), and the officers and employees listed in Exhibit J (the
"Management Investors") have orally agreed to be equity investors, in each case
subject to completion of due diligence and evaluation of what has been learned
in due diligence conducted to date or as may be disclosed herein, including,
without limitation, insofar as it relates to the pricing and structure of the
proposed transactions, and satisfactory documentation. All investments of Bain
Capital Inc., Duff & Phelps/Inverness LLC and the Management Investors in Buyer
as of the Closing will be in the form of equity investments.
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<PAGE> 24
4.6 BROKERS. Neither Buyer nor any of its affiliates has retained
a broker, finder or financial advisor or other person who is or will be
entitled to any brokerage fees, commissions, finders' fees or financial
advisory fees in connection with the transactions contemplated hereby for which
any Seller or Parent is or will be liable.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 CONDUCT OF THE COMPANY'S BUSINESS. Except as contemplated by
this Agreement, during the period from the date of this Agreement to the
Closing Date, Sellers shall cause the Company and the Subsidiaries to conduct
their businesses and operations in the ordinary course. Without limiting the
generality of the foregoing, and, except as contemplated by this Agreement,
during the period from the date of this Agreement to the Closing Date, without
the prior written consent of Buyer (which consent shall not be unreasonably
withheld or delayed), Sellers and Parents will not permit the Company or any
Subsidiary to:
(a) create, incur, assume or guarantee any indebtedness
for borrowed money (including, without limitation, obligations in
respect of capital leases), other than borrowings under the Existing
Credit Agreement;
(b) declare, set aside or pay any dividend or other
distribution in respect of the Interests or the Shares, or redeem,
purchase or otherwise acquire for value any of the Company's
partnership interests or the Shares;
(c) issue, sell or deliver any Interests or Shares, any
other equity interest in the Company or any of the Subsidiaries, or
any securities convertible into or exchangeable for Interests or
Shares, or grant or enter into any options, warrants, rights,
agreements or commitments with respect to the issuance of Interests or
Shares, or amend any terms of any such securities or agreements;
(d) incur or commit to any capital expenditures,
obligations or liabilities in connection therewith, other than those
that were included in the annual capital budget approved by the
Management Committee of the Company and that do not exceed $200,000 in
the aggregate;
(e) enter into any lease or other agreement that provides
for an annual payment by the Company in excess of $250,000;
(f) amend, agree to amend or waive the terms of the
Partnership Agreement of the Company;
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<PAGE> 25
(g) amend or agree to amend the constituent
organizational documents of NOW Australia or NOW Singapore;
(h) grant Management Committee approval of any of the
actions specified by Section 4.4 of the Partnership Agreement of the
Company;
(i) take any action by either or both Partners-as opposed
to any actions by the Company through its officers, employees and
agents-on behalf of the Company;
(j) merge or agree to merge or consolidate the Company,
NOW Australia or NOW Singapore with any corporation, partnership or
other entity;
(k) enter into any new contract or agreement between the
Company and the Subsidiaries with any Seller, Parent or affiliate of
either Parent; or
(l) agree, whether in writing or otherwise, to do any of
the foregoing.
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY. (a) During the
period from the date of this Agreement through the Closing Date, Sellers shall
cause the Company and the Subsidiaries to give Buyer and its authorized
representatives (which shall include representatives of those entities
providing financing for the transaction) reasonable access during regular
business hours to all plants, offices, warehouses, facilities, books and
records of the Company and the Subsidiaries as they may reasonably request;
provided, however, (i) that Buyer and its representatives shall take such
action as is deemed necessary in the reasonable judgment of Sellers to schedule
their access and visits through a designated officer of the Company or Sellers
and in such a way as to avoid disrupting the normal business of the Company and
the Subsidiaries, (ii) the Company and the Subsidiaries shall not be required
to take any action which would constitute a waiver of the attorney-client
privilege, (iii) the Company and the Subsidiaries need not supply Buyer with
any information which, in the reasonable judgment of Sellers, the Company and
the Subsidiaries are under legal obligation not to supply and (iv) Buyer shall
not be permitted to perform environmental sampling or testing except pursuant
to the prior written consent of Sellers.
(b) Buyer shall hold and shall cause its affiliates, consultants
and advisors to hold any information that they receive in connection with the
transactions contemplated by this Agreement in strict confidence in accordance
with and subject to the terms of the Non-Disclosure Agreement dated as of
February 15, 1995 by Duff & Phelps/Inverness L.L.C., in favor of the Company,
Sellers and Parents (the "Confidentiality Agreement").
5.3 EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use commercially reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to
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be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement at
the earliest practicable date.
5.4 CONSENTS. Without limiting the generality of Section 5.3
hereof, each of the parties hereto shall use commercially reasonable efforts to
obtain all licenses, permits, authorizations, consents and approvals of all
third parties and governmental authorities necessary in connection with the
consummation of the transactions contemplated by this Agreement prior to the
Closing. Sellers shall not, however, have any obligation to pay any fee to any
third party for the purpose of obtaining any consent or approval or any costs
and expenses of any third party resulting from the process of obtaining such
consent or approval. Each of the parties hereto shall make or cause to be made
all filings and submissions under laws and regulations applicable to it as may
be required for the consummation of the transactions contemplated by this
Agreement. Buyer and Sellers shall coordinate and cooperate with each other in
exchanging such information and assistance as any of the parties hereto may
reasonably request in connection with the foregoing.
5.5 GOVERNMENT NOTIFICATION. Buyer and Sellers shall use
commercially reasonable efforts to obtain all authorizations or waivers
required under the HSR Act, and under any foreign ownership, competition or
title registration statutes of Australia, Canada, Singapore, United Kingdom,
Venezuela, Malaysia, Brazil and Thailand, to consummate the transactions
contemplated hereby, including without limitation, making all filings required
in connection therewith.
5.6 PUBLIC ANNOUNCEMENTS. Sellers and Buyer shall not, and
Sellers shall cause the Company and the Subsidiaries and Parents not to, issue
any written report, statement or press release to the public or otherwise make
any public statement with respect to this Agreement and the transactions
contemplated hereby without prior consultation with and approval of the other
party, except as may be required by law or may be necessary in order to
discharge its disclosure obligations, in which case such party nevertheless
shall advise the other party and discuss the contents of the disclosure before
issuing any such report, statement or press release.
5.7 SUPPLEMENTAL DISCLOSURE. Sellers shall from time to time
prior to the Closing supplement or amend the Disclosure Schedule with respect
to (a) any matter that existed as of the date of this Agreement and should have
been set forth or described in the Disclosure Schedule but was not and (b) any
matter hereafter arising which, if existing as of the date of this Agreement,
would have been required to be set forth or described in the Disclosure
Schedule.
5.8 ACCESS TO BOOKS AND RECORDS FOLLOWING THE CLOSING. Following
the Closing, Buyer shall, and shall cause the Company and the Subsidiaries to,
permit Sellers and their authorized representatives, during normal business
hours and upon reasonable notice, to have reasonable access to,
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and examine and make copies of, all books and records of the Company and the
Subsidiaries which relate to transactions or events occurring prior to the
Closing or transactions or events occurring subsequent to the Closing which are
related to or arise out of transactions or events occurring prior to the
Closing. Buyer agrees that it shall retain all such books and records for a
period of seven years, or for a longer period if required by law, following the
Closing.
5.9 NO OTHER BIDS. Until the first to occur of the Closing or the
termination of this Agreement pursuant to Section IX hereof, the Sellers, the
Parents and the Company shall not, and Sellers, Parents and the Company shall
not authorize or permit any affiliate, officer, director or employee of, or any
investment banker, attorney, accountant or other representative retained by,
Sellers and Parents or the Company to, (a) entertain, encourage, solicit or
initiate any inquiries or the making of any proposal that may reasonably be
expected to lead to any proposal to purchase any of the Interests, and of the
Shares or the Company or (b) participate in any discussions or negotiations, or
provide third parties with any information relating to any such inquiry or
proposal. The Company, Sellers and Parents shall reasonably promptly advise
Buyer of any such inquiries or proposals received by them.
5.10 NO COMPETITION. In consideration of the purchase of the
Interests, and all of the other promises and covenants contained herein, each
of Sellers and Parents agree that for a period commencing upon the Closing and
ending upon the fifth anniversary thereof they shall not directly or
indirectly, alone or with others, engage in any business conducted by the
Company and the Subsidiaries at the Closing, except for (i) those businesses
(other than the Company and the Subsidiaries) owned by Sellers at Closing in
any geographic area in which the Company and the Subsidiaries do business at
Closing in competition with Buyer, the Company or the Subsidiaries, (ii) any
activities by either Parent or its affiliates in the manufacture, distribution
and sale of carbon steel, stainless steel, specialty steel or other products
manufactured by either Parent or its affiliates, including, but not limited to,
the manufacture, sale and distribution of oil country tubular goods, standard
and line pipe or drill pipe, and (iii) any joint venture, partnership or other
contract, agreement or arrangement by Marathon Oil Company, Delhi Gas Pipeline
Corporation or other affiliate of USX for the purchase or use (but not for
resale) of any product or service manufactured, distributed, sole or provided
by Buyer, the Company or any Subsidiary. Further, Sellers and Parents shall
not, unless required by subpoena or other process by any Government Authority,
during such period and in such geographic locations, divulge, communicate, use
to the detriment of Buyer, the Company or the Subsidiaries or for the benefit
of any person or organization, any confidential information or trade secrets of
the Company's and the Subsidiaries' businesses. Nothing herein shall commit
Buyer, the Company or the Subsidiaries, on the one hand, or any Parent, Seller
or affiliate thereof, on the other hand, to engage in any transaction or enter
into any
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agreement or contract other than as contained in or contemplated by any
contract or agreement existing between them as of the Closing Date. The
parties believe this is a reasonable and necessary restriction for purposes of
protecting the goodwill and other business interest purchased by Buyer, which
includes Buyer's expectation of expanding its business throughout the world
without competition from Sellers and Parents for such period; and provided
further, that the parties agree that the world is a reasonable competitive
restriction. Sellers or Parents agree that a breach or violation of this
covenant not to compete by such Seller or Parent shall entitle Buyer, as a
matter of right, to an injunction, without necessity of posting bond, issued by
any court of competent jurisdiction, restraining any further or continued
breach or violation of this covenant. Such right to an injunction shall be
cumulative and in addition to, and not in lieu of, any other remedies to which
Buyer may show itself justly entitled. In the event that a Court should
determine that any restriction herein is unenforceable, the parties, agree that
this Agreement shall nevertheless be enforceable for the maximum term and
maximum geographical area allowable by law. Without limiting the foregoing,
this covenant shall be enforceable by the remedy of specific performance,
injunction, and/or damages. The parties specifically agree that the remedy of
damages alone is inadequate.
5.11 AGREEMENT CONCERNING EMPLOYEES. Sellers and Parents agree
that they shall not directly, or indirectly through a future subsidiary,
affiliate or otherwise, hire, retain, employ or otherwise provide compensation
for or to (a) through the first anniversary of the Closing Date, any employee
of the Company or any Subsidiary who was employed by the Company or any
Subsidiary on the date hereof or the Closing Date or (b) through the third
anniversary of the Closing Date, any officer of the Company or any Subsidiary
who was employed by the Company or such subsidiary or the date hereof or the
Closing Date, in either such case without the prior written consent of Buyer
and excluding benefits due any such person under any pension or employee
benefit plan of either Parent. Buyer agrees that any remedy at law for any
actual or threatened breach of the provisions of this Section 5.11 would be
inadequate and that Buyer shall be entitled to specific performance thereof of
injunctive relief, or both, by temporary or permanent injunction or such other
appropriate judicial remedy, writ or order as may be entered by a court of
competent jurisdiction. Any such remedy shall be in addition to any damages
that Buyer may be legally entitled to recover as a result of any breach by
Sellers or Parents of any provisions of this Section 5.11.
5.12 POTENTIAL ACQUISITION. Buyer shall be permitted to pursue, at
Buyer's cost, the acquisition of Continental Emsco Company utilizing the
management of the Company (without reimbursing the Company for services of such
management personnel). Buyer shall be permitted to disclose to The LTV
Corporation, Continental Emsco Company, SCF Partners of Houston, their
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representatives and such other parties as Sellers may reasonably approve, that
Buyer and Sellers have entered into this Agreement for the acquisition of the
Company.
5.13 NO RECORDING. Prior to the Closing, Buyer shall not record
this Agreement or any memorandum hereof in any real property, intellectual
property or other title registration records.
5.14 FINANCING. Buyer shall use commercially reasonable efforts to
consummate the Financing Commitments. Buyer shall deliver to Sellers copies of
all agreements and commitment letters entered into by Buyer pursuant to the
Financing Commitments and shall keep Sellers informed of material developments
concerning the Financing Commitments. Buyer shall use commercially reasonable
efforts to arrange for Sellers to speak with the other parties to the Financing
Commitments. Parents and Sellers shall use commercially reasonable efforts to
cooperate with Buyer in obtaining the Financing Commitments and consummating
the financings contemplated thereunder.
5.15 ENVIRONMENTAL STUDY. The Company, at its own cost and
expense, shall commission an environmental study of the Company and the
Subsidiaries by IT Corporation (the "Environmental Consultant") as set forth in
an Environmental Consultant's proposal to be reasonably agreed upon by Sellers
and Buyer.. Parents and Sellers shall cooperate and shall cause the Company
and the Subsidiaries to cooperate with Buyer and the Environmental Consultant
in preparation of the environmental study. The Company and the Environmental
Consultant shall provide Sellers and Buyer with copies of all preliminary and
draft reports, an opportunity to comment on preliminary and draft reports
before they become final, and an opportunity to observe the Environmental
Consultant's work. The Environmental Consultant's final written report shall
be deemed to constitute a supplement to Section 3.20 of the Disclosure Schedule
made by Sellers and Parents pursuant to Section 5.7 and shall be treated as
confidential in accordance with the Confidentiality Agreement.
5.16 FACILITY QUESTIONNAIRE. Following the execution of this
Agreement, Sellers may cause the Company and the Subsidiaries to obtain
facility questionnaires as to violations of Environmental Law at any material
facilities of the Company or any Subsidiary, provided that the form of such
questionnaires shall be mutually agreed upon by Sellers and Buyer.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 TAX MATTERS (a) Preparation and Filing of Tax Returns.
(i) With respect to each Tax Return of the Company or any
Subsidiary including a taxable period ending on or before the Closing
Date that is required to be filed after the Closing Date, the Company
shall cause such Tax Return to be prepared, shall cause to be
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included in such Tax Return all Tax Items required to be included
therein, shall cause such Tax Return to be timely filed with the
appropriate taxing authority, and shall pay or cause to be paid the
amount of Taxes shown to be due on such Tax Return.
(ii) With respect to each Tax Return of the Sellers or
Parents including a taxable period ending on or before the Closing
Date that is required to be filed after the Closing Date, Sellers or
Parents shall (A) cause to be included in such Tax Returns all Tax
Items required to be included in such Tax Returns, (B) file timely all
such Tax Returns with the appropriate taxing authorities, and (C) pay
timely all Taxes due with respect to the periods included in such Tax
Returns.
(iii) Any Tax Return to be prepared pursuant to the
provisions of this Section 6.1 shall be prepared in a manner
consistent with practices followed in prior years with respect to
similar Tax Returns, except for changes required by changes in law.
(b) Refunds. If after the Closing Date Sellers or Parents
receives or is credited with a refund of any Tax attributable to the
utilization or carryback of any Tax Item arising after the Closing Date,
Sellers or Parents shall pay to Buyer an amount equal to the amount of such
refund together with any interest received from or credit thereon by the
applicable taxing authority.
(c) Access to Information.
(i) Sellers and Parents shall grant or cause the Company
or any Subsidiary to grant to Buyer (or its designees) access at all
reasonable times to all of the information, books and records relating
to the Company and each Subsidiary within the possession of Sellers,
Parents, the Company or any Subsidiary (including workpapers and
correspondence with taxing authorities), and shall afford Buyer (or
its designees) the right (at Buyer's expense) to take extracts
therefrom and to make copies thereof, to the extent reasonably
necessary to permit Buyer (or its designees) to prepare Tax Returns,
to conduct negotiations with Tax authorities, and to implement the
provisions of, or to investigate or defend any claims between the
parties arising under, this Agreement.
(ii) Buyer shall cause the Company to provide on a timely
basis all state apportionment data reasonably required by Sellers to
prepare Sellers' tax returns. Further, Buyer shall grant or cause the
Company or any Subsidiary to grant to Sellers (or their designees)
access at all reasonable times to all of the information, books and
records relating to the Company or any Subsidiary within the
possession of Buyer, the Company or any Subsidiary (including
workpapers and correspondence with taxing authorities), and shall
afford Seller (or its designees) the right (at Seller's expense) to
take extracts therefrom and to make copies thereof, to the extent
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reasonably necessary to permit Sellers (or their designees) to prepare
Tax Returns, to conduct negotiations with Tax authorities, and to
implement the provisions of, or to investigate or defend any claims
between the parties arising under, this Agreement.
(iii) Each of the parties hereto will preserve and retain
all schedules, workpapers and other documents relating to any Tax
Returns or to any claims, audits or other proceedings affecting the
Company or any Subsidiary until the expiration of the statute of
limitations (including extensions) applicable to the taxable period to
which such documents relate or until the final determination of any
controversy with respect to such taxable period, and until the final
determination of any payments that may be required with respect to
such taxable period under this Agreement.
(d) Sellers' and Parents' Indemnifications. Sellers and Parents
hereby agree to protect, defend, indemnify and hold harmless Buyer, the Company
and any Subsidiary from and against, and agrees to pay, all Taxes imposed and
all costs and expenses (including, without limitation, litigation costs and
reasonable attorneys' and accountants' fees and disbursements) incurred (all
herein referred to as "Tax Losses") as a result of a claim, notice of
deficiency, or assessment by, or any obligation owing to, any taxing authority
for any Taxes of any corporation (other than the Company or any Subsidiary)
that is or was a member of any affiliated group of corporations of which the
Company or any Subsidiary was a member at any time on or prior to the Closing
Date.
(e) Buyer Indemnifications. Buyer agrees to protect, defend,
indemnify and hold harmless Sellers from and against, and agrees to pay, all
Tax Losses incurred as a result of a claim, notice of deficiency, or assessment
by, or any obligation owing to, any taxing authority for any Taxes of the
Company or any Subsidiary attributable to any taxable period after the Closing
Date ("Post-Closing Taxable Period"); and
(f) Indemnification Procedures.
(i) If a claim shall be made by any taxing authority that, if
successful, would result in the indemnification of a party under this
Agreement (referred to herein as the "Tax Indemnified Party"), the Tax
Indemnified Party shall promptly notify the party obligated under this
Agreement to so indemnify (referred to herein as the "Tax Indemnifying
Party") in writing of such fact.
(ii) The Tax Indemnified Party shall take such action in
connection with contesting such claim as the Tax Indemnifying Party
shall reasonably request in writing from time to time, including the
selection of counsel and experts and the execution of powers of
attorney, provided that (A) within 30 days after the notice described
in Section 6.1(f)(i) has been delivered (or such
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earlier date that any payment of Taxes is due by the Tax Indemnified
Party but in no event sooner than five days after the Tax Indemnifying
Party's receipt of such notice), the Tax Indemnifying Party requests
that such claim be contested, (B) the Tax Indemnifying Party shall
have agreed to pay to the Tax Indemnified Party all costs and expenses
that the Tax Indemnified Party incurs in connection with contesting
such claim, including, without limitation, reasonable attorneys' and
accountants' fees and disbursements, and (C) if the Tax Indemnified
Party is requested by the Tax Indemnifying Party to pay the Tax
claimed and sue for a refund, the Tax Indemnifying Party shall have
advanced to the Tax Indemnified Party, on an interest-free basis, the
amount of such claim. The Tax Indemnified Party shall not make any
payment of such claim for at least 30 days (or such shorter period as
may be required by applicable law) after the giving of the notice
required by Section 6.1(f)(i), shall give to the Tax Indemnifying
Party any information reasonably requested relating to such claim, and
otherwise shall cooperate with the Tax Indemnifying Party in good
faith in order to contest effectively any such claim.
(iii) Subject to the provisions of Section 6.1(f)(ii), the
Tax Indemnified Party shall enter into a settlement of such contest
with the applicable taxing authority or prosecute such contest to a
determination in a court or other tribunal of initial or appellate
jurisdiction, all as the Tax Indemnifying Party may request.
(iv) If, after actual receipt by the Tax Indemnified Party
of an amount advanced by the Tax Indemnifying Party pursuant to
Section 6.1(f)(ii)(C), the extent of the liability of the Tax
Indemnified Party with respect to the claim shall be established by
the final judgment or decree of a court or other tribunal or a final
and binding settlement with an administrative agency having
jurisdiction thereof, the Tax Indemnified Party shall promptly repay
to the Tax Indemnifying Party the amount advanced to the extent of any
refund received by the Tax Indemnified Party with respect to the claim
together with any interest received thereon from the applicable taxing
authority and any recovery of legal fees from such taxing authority,
net of any Taxes as are required to be paid by the Tax Indemnified
Party with respect to such refund, interest or legal fees (calculated
at the maximum applicable statutory rate of Tax without regard to any
other Tax Items). Notwithstanding the foregoing, the Tax Indemnified
Party shall not be required to make any payment hereunder before such
time as the Tax Indemnifying Party shall have made all payments or
indemnities then due with respect to the Tax Indemnified Party
pursuant to this Agreement.
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(v) Promptly after a final determination the Tax
Indemnifying Party shall pay to the Tax Indemnified Party the amount
of any Tax Losses to which the Tax Indemnified Party may become
entitled by reason of the provisions of this Section 6.1.
(g) Survival. Anything to the contrary in this Agreement
notwithstanding, the agreements set forth in this Article VI, shall survive the
Closing and shall not terminate until one day after the expiration of the
statute of limitations (including extensions) applicable to any Tax covered by
this Article VI.
(h) Nature of Payments. Any payment from Buyer to Seller pursuant
to this Article VI shall be treated for Tax purposes as an increase in the
purchase price and any payment from Seller to Buyer pursuant to this Section
6.1 shall be treated for Tax purposes as a reduction in the purchase price.
(i) Allocation. The Purchase Price shall be allocated among
the assets of the Company as set forth in Exhibit C. Buyer and Sellers shall
not take any position on any Tax Return that is inconsistent with the
allocation of the Purchase Price as set forth in Exhibit C, and Buyer and
Sellers shall duly prepare and timely file such reports and information returns
as may be required under the Code and any Treasury Regulations thereunder and
any corresponding provisions of applicable state income tax laws to report the
allocation of the Purchase Price among the Shares and the assets of the Company
as set forth in Exhibit C.
ARTICLE VII
CONDITIONS TO OBLIGATIONS
OF SELLERS AND PARENTS
7.1 CONDITIONS. The obligations of Sellers and Parents to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment at or prior to the Closing of each of the following conditions (any
or all of which may be waived in whole or in part by Sellers and Parents):
(a) Representations and Warranties. The representations
and warranties made by Buyer in this Agreement shall be true, complete
and accurate in all material respects as of the date when made and at
and as of the Closing Date, as though such representations and
warranties were made at and as of the Closing Date, except for changes
permitted by the terms of this Agreement.
(b) Performance. Buyer shall have performed and
complied, in all material respects, with all agreements, obligations,
covenants and conditions required by this Agreement to be so performed
or complied with by Buyer at or prior to the Closing.
(c) Officer's Certificate. Buyer shall have delivered to
Sellers a certificate, dated as of the Closing Date, substantially in
the form of Exhibit D hereto, executed by the President
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of Buyer, certifying the fulfillment of the conditions specified in
Subsections 7.1(a) and 7.1(b) hereof.
(d) Opinion of Counsel. Buyer shall have delivered to
Sellers and Parents an opinion of legal counsel to Buyer, dated the
Closing Date, substantially in the form of Exhibit E hereto.
(e) No Injunction. On the Closing Date, there shall not
be in effect any judgment, order, injunction or decree issued by a
court of competent jurisdiction restraining or prohibiting
consummation of the transactions contemplated by this Agreement.
(f) Expiration or Termination of HSR Periods. Any
waiting periods applicable to the transactions contemplated by this
Agreement under the HSR Act shall have expired or been terminated.
(g) Approvals and Consents. On the Closing Date all of
the approvals and consents set forth in Section 3.6 of the Disclosure
Schedule as being required to be obtained prior to Closing, shall have
been obtained.
(h) Environmental Consultant's Report. Sellers shall
have received final copies of the Environmental Consultant's report as
contemplated by Section 5.15 hereof.
(i) Management Investor Certificates. Sellers shall have
received a certificate in substantially the form attached hereto as
Exhibit K from each of the persons listed on Exhibit J.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
8.1 CONDITIONS. The obligations of Buyer to consummate the
transactions contemplated by this Agreement are subject to the fulfillment at
or prior to the Closing of each of the following conditions (any or all of
which may be waived in whole or in part by Buyer):
(a) Representations and Warranties. The representations
and warranties made by Sellers and Parents in this Agreement shall be
true, complete and accurate in all material respects, as of the date
when made and at and as of the Closing Date as though such
representations and warranties were made at and as of the Closing
Date, except for changes permitted by the terms of this Agreement
(provided, however, that for purposes of determining whether this
condition has been satisfied, any supplements or amendments to the
Disclosure Schedule pursuant to Section 5.7 shall be disregarded).
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(b) Performance. Sellers and Parents shall have
performed and complied, in all material respects, with all agreements,
obligations, covenants and conditions required by this Agreement to be
so performed or complied with by Sellers and Parents at or prior to
the Closing.
(c) Compliance Certificate. Sellers and Parents shall
have delivered to Buyer a certificate, dated the Closing Date,
substantially in the form of Exhibit F hereto, executed by
representatives of Sellers and of Parents certifying the fulfillment
of the conditions specified in Subsections 8.1(a) and 8.1(b) hereof.
(d) Opinions of Counsel. Sellers and Parents shall have
delivered to Buyer opinions of legal counsel to Seller and Parent,
dated the Closing Date, substantially in the form of Exhibit G hereto.
(e) No Injunction. On the Closing Date, there shall not
be in effect any judgment, order, injunction or decree issued by a
court of competent jurisdiction restraining or prohibiting
consummation of the transactions contemplated by this Agreement.
(f) Expiration or Termination of HSR Periods. Any
waiting periods applicable to the transactions contemplated by this
Agreement under the HSR Act shall have expired or been terminated.
(g) Financing. Buyer shall have completed financing for
the transactions contemplated by this Agreement substantially on the
terms contemplated by the Financing Commitments or on other terms
reasonably acceptable to Buyer.
(h) Approvals and Consents. On the Closing Date all of
the approvals and consents set forth in Section 3.6 of the Disclosure
Schedule as being required to be obtained prior to Closing, shall have
been obtained.
(i) Title. Buyer and its counsel shall be reasonably
satisfied with the status of title of the Company and the Subsidiaries
to their respective assets, and Buyer shall be able to obtain, at the
Company's expense one or more ALTA form of Owner's Policy of Title
Insurance in form, substance and amount satisfactory to Buyer and its
counsel, ensuring that as of the Closing Buyer, the Company or the
Subsidiaries, as the case may be, have good and marketable title to
the Real Property Interests, subject only to those exceptions
reasonably acceptable to Buyer and its counsel, identified in Section
3.9(b) of the Disclosure Schedule. as requiring title policies as a
condition to closing.
(j) Material Adverse Changes. Except as set forth in
Section 3.8 of the Disclosure Schedule, Buyer shall be satisfied in
its sole discretion that since January 1, 1995, there has been no
material adverse change in the status of the properties, assets,
liabilities, financial condition,
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results of operation, cash flow and prospects of the Company and the
Subsidiaries on a consolidated basis and Buyer shall not have
discovered any other fact or circumstance relating to the business of
the Company and the Subsidiaries that materially adversely affects the
properties, assets, liabilities, financial condition, results of
operation, cash flow or prospects of the Company and the Subsidiaries
on a consolidated basis.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written agreement of Sellers
and Buyer; or
(b) at any time after December 29, 1995, by either
Sellers or Buyer, if the Closing shall not have occurred for any
reason, other than a breach of this Agreement by the terminating
party, which shall extend the termination date until such breach is
cured.
9.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby pursuant to Section 9.1(b) hereof, written notice thereof
shall forthwith be given by the party so terminating to the other parties, and
this Agreement shall terminate, and the transactions contemplated hereby shall
be abandoned, without further action by Sellers, Parents or Buyer. If this
Agreement is terminated pursuant to Section 9.1(a) or (b) hereof:
(a) Buyer shall return all documents, work papers and
other materials (and all copies thereof) received from Sellers,
Parents or the Company relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to
the party furnishing the same, and all confidential information
received by Buyer with respect to the Company and the Subsidiaries
shall be treated in accordance with Section 5.2 hereof and the
Confidentiality Agreement referred to in said Section;
(b) At the option of Sellers, all filings, applications
and other submissions made pursuant to Sections 5.3, 5.4 and 5.5
hereof shall to the extent practicable, be withdrawn from the agency
or other person to which made; and
(c) The obligations provided for in this Section 9.2 and
Section 10.1 hereof, the confidentiality provision contained in
Section 5.2 hereof, the Confidentiality Agreement referred to in said
Section and the Company's obligation to pay for the Environmental
Consultant
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pursuant to Section 5.15 and title insurance pursuant to Section 8.1
shall survive any termination of this Agreement.
9.3 AMENDMENT, MODIFICATION AND WAIVER. This Agreement may be
amended, modified or supplemented at any time by written agreement of the
parties hereto. Any failure of Seller or Buyer to comply with any term or
provision of this Agreement may be waived by the other party at any time by an
instrument in writing signed by or on behalf of such other party, but such
waiver or failure to insist upon strict compliance with such term or provision
shall not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure to comply.
ARTICLE X
FEES AND EXPENSES; SURVIVAL OF
REPRESENTATIONS; INDEMNIFICATION
10.1 FEES AND EXPENSES. Whether or not the transactions
contemplated hereby are consummated pursuant hereto, each of the Sellers,
Parents and Buyer shall pay all fees and expenses incurred by it or on its
behalf in connection with or in anticipation of this Agreement and the
consummation of the transactions contemplated hereby.
10.2 SURVIVAL OF REPRESENTATIONS. The representations and
warranties in this Agreement and in any other document delivered in connection
herewith, other than the representations and warranties contained in Sections
3.1, 3.2, 3.4, 3.5(a), 3.9(a) and (b) (solely with respect to title to the
properties specifically identified in Exhibit I), 3.13(a) and (b), 3.17, 4.1,
4.2, 4.4 and 4.6, as same are made on the date hereof and at Closing pursuant
to the certificates required by Sections 7.1(c) and 8.1(c), (collectively, the
"Surviving Representations"), shall not survive the Closing and shall terminate
on the Closing Date. The Surviving Representations shall survive Closing and
any party claiming a breach thereof shall have the right to assert such claim
at any time following Closing. Accordingly, the parties acknowledge and agree
that, except for the Surviving Representations and without affecting the
liability of any party under the indemnification provisions hereunder,
following Closing no party hereto shall have any liability to any other party
hereto for or on account of the breach by any party of its representations and
warranties hereunder and that prior to Closing, the sole remedy any party shall
have for breach of any representation or warranty of another party shall be to
elect to terminate this Agreement to the extent permitted under Article IX.
10.3 NATIONAL SUPPLY AGREEMENT TO INDEMNIFY. Upon the terms and
conditions hereof, National Supply agrees to indemnify, defend and hold
harmless Buyer and Buyer's shareholders, directors, officers, employees and
agents and, if the Closing occurs, the Company and the Subsidiaries
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<PAGE> 38
and the shareholders, directors, employees and agents of the Company and the
Subsidiaries (collectively, the "Buyer Indemnified Parties"), as follows:
(a) from and against all demands, claims, actions, causes
of action, assessments, losses, damages, liabilities, costs and
expenses (but excluding any consequential damages or lost profits with
respect to any claims, other than claims by third parties, by and
among Buyer Indemnified Parties and Seller Indemnified Parties),
including, without limitation, interest, penalties and reasonable
attorneys' fees (collectively, "Damages") that are attributable to or
result from the breach of any of the Surviving Representations made by
such Seller or its Parent (as provided in the lead-in paragraph to
Article III);
(b) Damages attributable to or resulting from the breach
by (i) such Seller of any covenant or other agreement of Sellers
contained in this Agreement or (ii) the Parent of such Seller of any
covenant or other agreement of such Parent contained in this
Agreement;
(c) fifty percent (50%) of any Damages attributable to or
resulting from any death, personal injury or property damage suffered
by the Company, any Subsidiary, any Seller, either Parent or their
directors, officers, employees or agents that results from or is
attributable to the conduct by Buyer or its representatives or agents
of Buyer's due diligence investigation of the Company and its
Subsidiaries, INCLUDING ANY CLAIMS BASED UPON THE NEGLIGENCE OR
ALLEGED NEGLIGENCE OF ANY OF THE BUYER INDEMNIFIED PARTIES;
(d) subject to the cost sharing set forth in Section 10.5
hereof, fifty percent (50%) of all Damages (which shall include,
without limitation, all costs or expenses incurred in connection with
any necessary studies, reports, sampling, disposal, removal, treatment
or remediation of contamination, mitigation or compensation for
damages to natural resources, site-monitoring and post-closure care
related to a release of hazardous substances or solid waste into the
environment or the violation of any Environmental Laws (such costs and
expenses being"Environmental Costs")) attributable to or resulting
from any acts, omissions or operations of the Company or any
Subsidiary, or their predecessors in interest, and any conditions
existing on any assets or properties of the Company or any Subsidiary,
or their predecessors in interest, in each case prior to April 1,
1987; provided, however, that (i) with respect to the properties
listed on Exhibit H where National Supply is identified as the
"Contributing Party" (and with respect to any activities conducted
thereon), National Supply shall be responsible for one hundred percent
(100%) of such Damages, (ii) such indemnity shall only cover
Environmental Costs if (A) the Environmental Costs are attributable to
or arise out of the violation of an
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<PAGE> 39
Environmental Law with respect to a Company Property or any operations
conducted thereon or any on-site or off-site remedial obligations
under Environmental Laws that result from conditions existing or
operations conducted on any Company Property and (B) such
Environmental Costs do not result from any Governmental Authority
action voluntarily initiated by Buyer or Buyer's successors, except
where Buyer or such successor is obligated to initiate such action
under applicable Environmental Laws, and (iii) such indemnity shall
not cover Environmental Costs that are attributable to environmental
conditions that are disclosed in Section 3.20 of the Disclosure
Schedule;
(e) subject to the cost sharing set forth in Section 10.5
hereof, fifty percent (50%) of any Damages incurred by any Buyer
Indemnified Party arising out of the assets, businesses or properties
owned, leased or operated after April 1, 1987, by the Company or any
Subsidiary, which businesses or properties were disposed of or
discontinued prior to the Closing other than for matters contained in
the Disclosure Schedule; and
(f) any Damages incurred by any Buyer Indemnified Party
arising out of or relating to any pension or employee benefit plan
sponsored by Armco or any affiliate of Armco.
It is agreed that the indemnities set forth in clauses (a)-(f) above constitute
an agreed allocation of liability to National Supply and shall apply WITHOUT
REGARD TO THE NEGLIGENCE OR ALLEGED NEGLIGENCE OF ANY OF THE BUYER INDEMNIFIED
PARTIES.
10.4 OILWELL AGREEMENT TO INDEMNIFY. Upon the terms and conditions
hereof, Oilwell agrees to indemnify, defend and hold harmless Buyer and Buyer's
shareholders, directors, officers, employees and agents and, if the Closing
occurs, the Company, the Subsidiaries and the shareholders, directors,
employees and agents of the Buyer Indemnified Parties as follows:
(a) from and against Damages that are attributable to or
result from the breach of any of the Surviving Representations made by
such Seller or its Parent (as provided in the lead-in paragraph to
Article III);
(b) Damages attributable to or resulting from the breach
by (i) such Seller of any covenant or other agreement of Sellers
contained in this Agreement or (ii) the Parent of such Seller of any
covenant or other agreement of such Parent contained in this
Agreement;
(c) fifty percent (50%) of any Damages attributable to or
resulting from any death, personal injury or property damage suffered
by the Company, any Subsidiary, any Seller, either Parent or their
directors, officers, employees or agents that results from or is
attributable to the conduct by Buyer or its representatives or agents
of Buyer's due diligence investigation of the Company and its
Subsidiaries, INCLUDING ANY CLAIMS BASED UPON THE NEGLIGENCE OR
ALLEGED NEGLIGENCE
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<PAGE> 40
OF ANY OF THE BUYER INDEMNIFIED PARTIES;
(d) subject to the cost sharing set forth in Section 10.5
hereof, fifty percent (50%) of all Damages (which shall include,
without limitation, all Environmental Costs) attributable to or
resulting from any acts, omissions or operations of the Company or any
Subsidiary, or their predecessors in interest, and any conditions
existing on any assets or properties of the Company or any Subsidiary,
or their predecessors in interest, in each case prior to April 1,
1987; provided, however, that (i) with respect to the properties
listed on Exhibit H where Oilwell is identified as the "Contributing
Party" (and with respect to any activities conducted thereon), Oilwell
shall be responsible for one hundred percent (100%) of such Damages,
(ii) such indemnity shall only cover Environmental Costs if (A) the
Environmental Costs are attributable to or arise out of the violation
of an Environmental Law with respect to a Company Property or any
operations conducted thereon or any on-site or off-site remedial
obligations under Environmental Laws that result from conditions
existing or operations conducted on any Company Property and (B) such
Environmental Costs do not result from any Governmental Authority
action voluntarily initiated by Buyer or Buyer's successors, except
where Buyer or such successor is obligated to initiate such action
under applicable Environmental Laws, and (iii) such indemnity shall
not cover Environmental Costs that are attributable to environmental
conditions that are disclosed in Section 3.20 of the Disclosure
Schedule.
(e) subject to the cost sharing set forth in Section
10.5, fifty percent (50%) of any Damages incurred by any Buyer
Indemnified Party arising out of the assets, businesses or properties
owned, leased or operated after April 1, 1987, by the Company or any
Subsidiary, which businesses or properties were disposed of or
discontinued prior to the Closing other than for matters contained in
the Disclosure Schedule; and
(f) any Damages incurred by any Buyer Indemnified Party
arising out of or relating to any pension or employee benefit plan
sponsored by USX or any affiliate of USX.
It is agreed that the indemnities set forth in clauses (a)-(f) above constitute
an agreed allocation of liability to Oilwell and shall apply WITHOUT REGARD TO
THE NEGLIGENCE OR ALLEGED NEGLIGENCE OF ANY OF THE BUYER INDEMNIFIED PARTIES.
10.5 SELLERS' AND PARENTS' LIMITATION OF LIABILITY. Anything in
this Agreement to the contrary notwithstanding, the liability of Sellers to
indemnify the Buyer Indemnified Parties pursuant to Sections 10.3(d) and
10.4(d), to the extent such indemnities cover Environmental Costs that are
attributable to environmental conditions that are not disclosed in Section 3.20
of the Disclosure
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<PAGE> 41
Schedule, and Sections 10.3(e) and 10.4(e) hereof shall not apply to one-half
of any Damages up to $8 million aggregate amount of such Damages that would,
but for this Section 10.5, be covered by such indemnification provisions.
10.6 BUYER'S AGREEMENT TO INDEMNIFY. Upon the terms and subject to
conditions of this Article X, Buyer agrees to indemnify, defend and hold
harmless the Company (only if the Closing does not occur), its Subsidiaries
(only if the Closing does not occur), Sellers, Parents and their respective
officers, directors, employees, agents and representatives (collectively, the
"Seller Indemnified Parties"), at any time after the date of this Agreement,
from and against all Damages suffered or incurred by the Seller Indemnified
Parties that are attributable to or result from:
(a) the breach by Buyer of any Surviving Representations;
(b) the breach of any covenant or agreement of Buyer
contained in this Agreement;
(c) any death, personal injury or property damage
suffered by Buyer or Buyer's officers, directors, employees or agents
that results from or is attributable to the conduct by Buyer or its
representatives or agents of Buyer's due diligence investigation of
the Company and its Subsidiaries, INCLUDING ANY CLAIMS BASED UPON THE
NEGLIGENCE OR ALLEGED NEGLIGENCE OF ANY SELLERS INDEMNIFIED PARTIES;
(d) if the Closing occurs, any act, omission or condition
created after April 1, 1987, arising out of or attributable to the
ownership or operation of the businesses, assets and properties that
are owned by Buyer, the Company or the Subsidiaries on the Closing
Date (the "Continuing Operations"), including, but not limited to the
following matters, in each case solely to the extent same relate to
the Continuing Operations, (i) any product liability or breach of
warranty claim arising out of products manufactured or services sold,
delivered or performed after April 1, 1987, (ii) any new environmental
facilities required to be installed after the Closing, (iii) all costs
of dismantling, cleaning out and disposing of buildings, machinery and
equipment upon complete or partial discontinuance of operations and
(iv) all matters disclosed in the Disclosure Schedule, including
environmental conditions;
(e) to the extent and only to the extent attributable to
matters contained in the Disclosure Schedule, any Damages (which shall
include, without limitation, Environmental Costs) incurred by any
Seller Indemnified Party arising out of businesses, assets or
properties owned, leased or operated after April 1, 1987, by the
Company or any Subsidiary, which businesses or properties were
disposed of or discontinued prior to the Closing; and
(f) to the extent and only to the extent attributable to
the environmental conditions that are disclosed in Section 3.20 of the
Disclosure Schedule, any Environmental Costs incurred
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<PAGE> 42
by any Seller Indemnified Party that are attributable to or result
from any conditions existing as of April 1, 1987, on any assets or
properties contributed to the Company or any Subsidiary by Sellers;
provided, however, that Buyer's indemnity obligation under this Section 10.6
shall not extend to any Tax Losses or Damages for which Sellers have agreed to
indemnify the Buyer Indemnified Parties pursuant to Sections 6.1(d), 10.3 and
10.4 above.
10.7 CONDITIONS OF INDEMNIFICATION. The obligations and
liabilities of Sellers, Parents and Buyer with respect to demands, claims,
actions, causes of action or assessments made by third parties ("Claims") that
are covered by the indemnification provisions of this Agreement shall be
subject to the following terms and conditions:
(a) The indemnified party shall give the indemnifying
party prompt notice of any such Claim, and if the indemnifying party
does not dispute its obligation to indemnify the indemnified party
hereunder and confirms same in writing, the indemnifying party shall
have the right to undertake the defense thereof by representatives
chosen by it;
(b) Unless and until the indemnifying party assumes the
defense of a Claim as provided in subparagraph (a) above, the
indemnified party shall have the right to undertake the defense,
compromise or settlement of such Claim on behalf of and for the
account and risk of the indemnifying party, subject to the right of
the indemnifying party (provided that it does not dispute its
liability to the indemnified party hereunder for such Claim) to assume
the defense of such Claim at any time prior to settlement, compromise
or final determination thereof; and
(c) Anything in this Article X to the contrary
notwithstanding, (i) if there is a reasonable probability that a Claim
may materially and adversely affect the indemnified party other than
as a result of money damages or other money payments, the indemnified
party shall have the right, at its own cost and expense, to
participate in the defense of such Claim, and (ii) the indemnifying
party shall not, without the written consent of the indemnified party,
settle or compromise any Claim or consent to the entry of any judgment
which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the indemnified party of an
unconditional release from all liability in respect to such Claim.
(d) Notwithstanding any provision herein to the contrary,
failure of the indemnified party to give notice required by this
Section 10.7 shall not constitute a waiver of the indemnified party's
right to indemnification or a defense to any indemnification claim by
such indemnified party, except to the extent such failure prejudices
the ability of the indemnifying party to defend against such Claim.
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<PAGE> 43
(e) The indemnified party shall reasonably cooperate with
the indemnifying party, including making available to the indemnifying
party all records, documents, and other things, making available all
employees reasonably necessary to investigate, defend and settle such
matter, access to the Company's or the Subsidiary's properties without
cost to the indemnifying party other than reimbursement of
out-of-pocket expenses actually incurred.
10.8 PARENT GUARANTEE. Armco hereby agrees to unconditionally and
absolutely guarantee the due and punctual performance by National Supply of all
of National Supply's obligations hereunder subject to a maximum amount equal to
the total consideration paid by Buyer to National Supply hereunder; provided,
however that such limitation shall not apply to the obligations of National
Supply under Section 6.1(d). USX hereby agrees to unconditionally and
absolutely guarantee the due and punctual performance by Oilwell of all of
Oilwell's obligations hereunder subject to a maximum amount equal to the total
consideration paid by Buyer to Oilwell hereunder; provided, however, that such
limitation shall not apply to the obligations of Oilwell under Section 6.1(d).
Armco and USX agree that this guarantee shall survive and be enforceable
notwithstanding any merger, dissolution, bankruptcy or insolvency of National
Supply or Oilwell, as the case may be.
10.9 MATTERS DISCLOSED IN DISCLOSURE SCHEDULE. For purposes of
allocating responsibility under the various indemnities contained in this
Article X and notwithstanding anything herein to the contrary, (a) the
disclosure in the Disclosure Schedule of a contract or agreement for the sale
of a business or facility shall only constitute disclosure of matters that are
the subject of a specific lawsuit, claim or demand that is disclosed in the
Disclosure Schedule and of matters specifically reserved in the Company's
financial statements and shall not constitute disclosure of any other lawsuits,
claims or demands that are or have been made pursuant to such contract or
agreement; (b) the sale of products or services arising out of the conduct by
the Company or any Subsidiary of the distribution, tubular, pump, drilling
business and other activities conducted by such entities on the date hereof
shall constitute ongoing activities of the Company and the Subsidiaries (and
not businesses or properties that were "disposed of or discontinued" for
purposes of Sections 10.3(e) and 10.4(e)), even if the Company or a Subsidiary
owns but does not currently operate the facility that manufactured, sold or
distributed the product or service involved ; (c) the manufacture of wellhead
products, sucker rods, hydraulic equipment and pumps, down-hole sucker rod
pumps, ball valves for fluid control and centrifugal pumps, and the threading
of pipe by Total Pipe, shall constitute businesses or properties that were
"disposed of or discontinued" within the meaning of Sections 10.3(e) and
10.4(e), provided that the sale by the Company or any Subsidiary of such items
manufactured by third parties shall, to the extent conducted by the Company or
any Subsidiary on the date hereof, constitute ongoing activities of the Company
and the Subsidiaries.
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<PAGE> 44
ARTICLE XI
MISCELLANEOUS
11.1 FURTHER ASSURANCES. From time to time after the Closing Date,
at the request of the other party hereto and at the expense of the party so
requesting, Sellers, Parents and Buyer shall execute and deliver to such
requesting party such documents and take such other action as such requesting
party may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
11.2 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally,
by mail (certified or registered mail, return receipt requested) or by
facsimile transmission (receipt of which is confirmed):
(a) If to Buyer, to:
Now Holdings, Inc.
5555 San Felipe
Houston, TX 77056
Attention: Joel V. Staff
Chief Executive Officer
with a copy to:
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2500
Houston, TX 77002-6760
Attention: John S. Watson
(b) If to Armco or National Supply, to:
Armco Inc.
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219
Attention: David Harmer
Vice President and Chief Financial Officer
with a copy to:
Gary R. Hildreth, Esquire
General Counsel
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219
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<PAGE> 45
(c) If to USX or Oilwell, to:
USX Corporation
600 Grant Street
Pittsburgh, PA 15219-2749
Attention: C. C. Gedeon
Executive Vice President
Raw Materials and Diversified Businesses
with a copy to:
Robert M. Stanton, Esquire
General Attorney
USX Corporation
600 Grant Street
Pittsburgh, PA 15219-2749
or to such other person or address as any party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been received on the date on which so
hand-delivered, on the third business day following the date on which so mailed
and on the date on which faxed and confirmed, except for a notice of change of
address, which shall be effective only upon receipt thereof.
11.3 ENTIRE AGREEMENT. This Agreement, the Disclosure Schedule and
the exhibits, schedules and other documents referred to herein which form a
part hereof (including, without limitation, the Confidentiality Agreement
referred to in Section 5.2 hereof) contain the entire understanding of the
parties hereto with respect to their subject matter. This Agreement supersedes
all prior agreements and understandings, oral and written, with respect to its
subject matter, including, without limitation the letter dated May 17, 1995.
11.4 SEVERABILITY. Should any provision of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any of the other provisions of this Agreement,
which other provisions shall remain in full force and effect and the
application of such invalid or unenforceable provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall be valid and be enforced to the fullest extent permitted by law.
11.5 BINDING EFFECT: ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, executors, successors and assigns; provided,
however, that prior to Closing, no party hereto may assign its rights or
obligations hereunder to any other person or entity, except that Buyer may (a)
assign its rights and obligations hereunder to an affiliate of Buyer and (b)
grant such security interests and/or effect such collateral assignments as may
be necessary to obtain financing for the transactions contemplated hereunder.
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<PAGE> 46
11.6 THIRD-PARTY BENEFICIARIES. This Agreement is not intended and
shall not be deemed to confer upon or give any person except the parties hereto
and their respective successors and assigns any remedy, claim, liability,
reimbursement, cause of action or other right under or by reason of this
Agreement.
11.7 COUNTERPARTS. This Agreement may be executed simultaneously
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.8 INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, the term "person"
shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof. As used in this Agreement, the term "affiliate"
shall have the meaning set forth in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
11.9 GOVERNING LAW. This Agreement shall be governed by the
internal laws of the State of Delaware, without regard to the principles of
conflicts of law thereof that would require the application of the laws of any
jurisdiction other than Delaware.
11.10 CERTAIN WAIVERS. Each Seller hereby waives its right of first
refusal granted by Section 13.2 of the Partnership Agreement of the Company and
the corresponding right found in the articles of incorporation of the other
partner.
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<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BUYER:
NOW HOLDINGS, INC.
By: /s/ W. MCCOMB DUNWOODY
----------------------------------
Name: W. McComb Dunwoody
--------------------------------
Title: President
-------------------------------
SELLER:
OILWELL INC.
By: /s/ C. C. GEDEON
----------------------------------
Name: C. C. Gedeon
--------------------------------
Title: President
-------------------------------
NATIONAL SUPPLY COMPANY, INC.
By: /s/ GARY R. HILDRETH
----------------------------------
NAME: Gary R. Hildreth
--------------------------------
Title: Vice President
-------------------------------
PARENT:
USX CORPORATION
By: /s/ C. C. GEDEON
----------------------------------
Name: C. C. Gedeon
--------------------------------
Title: Executive Vice President
Raw Materials and Diversified
Business
-------------------------------
ARMCO INC.
By: /s/ DAVID G. HARMER
----------------------------------
NAME: David G. Harmer
--------------------------------
Title: Corporate Vice President
-------------------------------
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<PAGE> 48
EXHIBIT A
ANCILLARY AGREEMENT MATTERS
The following matters shall be addressed in the agreement contemplated
by Section 2.1 of the Purchase Agreement:
1. Responsibility for and administration of post-retirement
pension, life and health plans for Garland employees.
2. Distribution of tubulars from USS.
3. Intellectual property assistance during transition period.
<PAGE> 49
Exhibit B
Form of Assignment of Interests
ASSIGNMENT OF PARTNERSHIP INTEREST
THIS ASSIGNMENT OF PARTNERSHIP INTEREST (this "Assignment") is made and
entered into as of this _____ day of ______________, 1995, and is from [insert
name of seller] ("Assignor"), to NOW Holdings, Inc., a Delaware corporation
("Assignee").
RECITALS
[Assignor] and [National Supply Company, Inc., a Delaware
corporation/Oilwell, Inc., a Delaware corporation], are parties to that certain
Partnership Agreement entered into as of March 31, 1987 (as amended, the
"Partnership Agreement"), pursuant to which such parties created a Delaware
general partnership known as National-Oilwell (the "Partnership").
Assignor desires to transfer and convey to Assignee all of its right,
title and interest in and to the Partnership, including its 50% general partner
interest therein.
NOW, THEREFORE, in consideration of Ten Dollars ($10) and other good
and valuable consideration in hand paid, the receipt and sufficiency of
which are hereby acknowledged, Assignor does hereby assign, transfer and convey
unto Assignee and its successors and assigns all of its right, title and
interest in and to the following (all of which are collectively referred to
herein as the "Partnership Interest"):
(a) the Partnership;
(b) the Partnership Agreement;
(c) Assignor's distributive share of profits, income, distributions,
surplus and cash proceeds of the Partnership;
(d) Assignor's distributive share of specific properties and assets
of the Partnership upon dissolution or otherwise;
(e) any and all other rights of every kind and character in and to
the Partnership and under the Partnership Agreement; and
(f) proceeds and products of any and all of the foregoing,
including monies, profits, income, accounts, general
intangibles, chattel paper, documents, and instruments now or
hereafter existing in connection therewith;
<PAGE> 50
TO HAVE AND TO HOLD the Partnership Interest unto Assignee and its successors
and assigns, forever.
The provisions hereof shall extend to and be binding upon the
respective heirs, legal representatives, successors and assigns of Assignee.
EXECUTED in a number of counterparts, each of which shall have the
force and effect of an original although constituting but one and the same
instrument.
[Insert name of Seller]
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-2-
<PAGE> 51
Exhibit C
ALLOCATION OF PURCHASE PRICE
<TABLE>
<CAPTION>
------------
Purchase
Price
------------------------------------------------
<S> <C>
Interests $
------------------------------------------------
NOW Singapore Shares $
------------------------------------------------
NOW Australia Shares $
------------------------------------------------
Total $180,000,000
------------
</TABLE>
[To be agreed upon by Sellers and Buyer prior to Closing]
<PAGE> 52
Exhibit D
Form of Buyer Officer's Certificate
NOW HOLDINGS, INC.
OFFICER'S CERTIFICATE
The undersigned hereby certifies that he is ________ of NOW Holdings,
Inc., a Delaware corporation ("Holdings"), and that as such he is familiar with
the facts certified herein and is authorized to execute this certificate.
Pursuant to Section 7.1(c) of that certain Purchase Agreement (the "Agreement")
dated as of ______________, 1995, by and among Holdings, Oilwell, Inc., USX
Corporation, Natural Supply Company, Inc., and Armco, Inc., all Delaware
corporations, the undersigned certifies as follows:
1. The representations and warranties of Holdings contained in the
Agreement were true, complete and accurate in all material
respects as of the date of the Agreement and are true, complete
and accurate in all material respects as of the date hereof as
though made on and as of the date hereof, except as to any
changes in facts and circumstances permitted by the Agreement;
and
2. Holdings has performed and complied in all material respects
with all agreements, obligations, covenants and conditions
required by the Agreement to be performed or complied with by it
at or prior to the date hereof pursuant to the terms of the
Agreement.
EXECUTED by the undersigned effective as of the ____ day of _____, 1995.
NOW HOLDINGS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 53
Exhibit E
BUYER'S COUNSEL OPINIONS
The opinion to be given by Buyer's counsel shall contain the following
opinions:
1. Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has
all requisite corporate power and authority to enter into the
Purchase Agreement, consummate the transactions contemplated
thereby and perform its obligations thereunder.
2. The execution, delivery and performance by Buyer of the Purchase
Agreement and the consummation of the transactions contemplated
thereby have been duly authorized by all necessary corporate
action on the part of Buyer.
3. The Purchase Agreement constitutes a valid and binding
obligation of Buyer, enforceable against Buyer in accordance
with its terms.
4. The execution, delivery and performance by Buyer of the Purchase
Agreement will not conflict with, result in any violation or
default of, or require any consent or approval of, or notice to,
any private nongovernmental party under, (a) any provision of
the charter or by-laws of Buyer, (b) any statute, law,
ordinance, rule or regulation or, to the knowledge of such
counsel, any judgment, order or decree, in any such case
applicable to Buyer or the property or assets of Buyer or
(c) to the knowledge of such counsel, any note, bond,
mortgage, indenture, license, permit, agreement, lease or other
instrument or obligation to which Buyer is a party or by which
Buyer may be bound or affected or to which any of its assets may
be subject.
5. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court,
administrative agency or commission or other governmental
entity, authority or instrumentality is required to be obtained
or made by or with respect to Buyer in connection with the
execution and delivery of the Purchase Agreement or the
consummation by Buyer of the transactions contemplated thereby,
other than (a) compliance with and filings under the HSR Act,
if applicable, (b) compliance with and filings under state
environmental statutes, if applicable, and (c) compliance with
and filings under foreign laws, regulations and statues.
The foregoing opinions will be subject to such exceptions and qualifications as
may be reasonable and appropriate.
<PAGE> 54
Exhibit F
Form of Compliance Certificate of Sellers and Parents
[Insert name of Seller or Parent]
OFFICER'S CERTIFICATE
The undersigned hereby certifies that he is __________ of [insert name
of Seller or Parent] ("[Seller/Parent]"), and that as such he is familiar with
the facts certified herein and is authorized to execute this certificate.
Pursuant to Section 8.1(c) of that certain Purchase Agreement (the "Agreement")
dated as of ____________, 1995, by and among NOW Holdings, Inc. and Oilwell,
Inc., USX Corporation, National Supply Company, Inc., and Armco, Inc., all
Delaware corporations, the undersigned certifies as follows:
1. Without limiting the effect of Section 10.2 of the Agreement,
the representations and warranties of [Seller/Parent]
contained in the Agreement were true, complete and accurate in
all material respects as of the date of the Agreement and are
true, complete and accurate in all material respects as of the
date hereof as though made on and as of the date hereof, except
as to any changes in facts and circumstances permitted by the
Agreement; and
2. [Seller/Parent] has performed and complied in all material
respects with all agreements, obligations, covenants and
conditions required by the Agreement to be performed or
complied with by it at or prior to the date hereof pursuant to
the terms of the Agreement.
EXECUTED by the undersigned effective as of the ______ day of
____________, 1995.
[Insert name of Seller or Parent]
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE> 55
Exhibit G
OPINIONS TO BE FURNISHED TO BUYER
A. OPINIONS OF COUNSEL FOR EACH SELLER AND PARENT. The opinion to be given
by [Seller's/Parent's] counsel shall opine as follows:
1. [Seller/Parent] is a corporation duly organized, validly
existing and in good standing under the laws of the State of
____________, and has all requisite corporate power and
authority to enter into the Purchase Agreement, consummate the
transactions contemplated thereby and perform its obligations
thereunder.
2. The execution, delivery and performance by [Seller/Parent] of
the Purchase Agreement and the consummation of the transactions
contemplated thereby have been duly authorized by all necessary
corporate action on the part of [Seller/Parent].
3. The Purchase Agreement constitutes a valid and binding
obligation of [Seller/Parent], enforceable against
[Seller/Parent] in accordance with its terms.
4. The execution, delivery and performance by [Seller/Parent] of
the Purchase Agreement will not conflict with, result in any
violation or default of, or require any consent or approval of,
or notice to, any private nongovernmental party under, (a) any
provision of the charter or by-laws of [Seller/Parent], (b) any
judgment, order or decree, or statute, law, ordinance, rule or
regulation applicable to [Seller/Parent] or the property or
assets of [Seller/Parent] or (c) to the knowledge of such
counsel, any note, bond, mortgage, indenture, license, permit,
agreement, lease or other instrument or obligation to which
[Seller/Parent] is a party or by which [Seller/Parent] may be
bound or affected or to which any of its assets may be subject.
5. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court,
administrative agency or commission or other governmental
entity, authority or instrumentality is required to be obtained
or made by or with respect to [Seller/Parent] in connection with
the execution and delivery of the Purchase Agreement or the
consummation by [Seller/Parent] of the transactions contemplated
thereby, other than (a) compliance with and filings under the
HSR Act, if applicable, (b) compliance with and filings under
Section 13(a) of the Securities Exchange Act of 1934, as
amended, (c) compliance with and filings under state
environmental statutes, if applicable, and (d) compliance with
and filings under foreign laws, regulations and statutes.
6. [Seller] is the owner of one-half of all of the partnership
interests (or other interests granting the owner thereof the
right to receive distributions of cash or property, or
allocations of income, gain, loss or dedication) in the Company
and of one-half of all of the issued and outstanding shares of
capital stock or other equity interests of NOW Singapore and NOW
Australia. Such Interests and Shares have not been issued in
violation of, and except for statutory preemption rights are not
subject to, any preemptive or subscription rights. Except for
the matters that are the subject of the waivers referenced
<PAGE> 56
in Section 11.10 of the Purchase Agreement, there are no
outstanding warrants, options, agreements, convertible or
exchangeable securities or other commitments pursuant to which
the Company or a Parent or Seller is or may become obligated to
issue, sell, purchase, return or redeem any partnership
interests in the Company or any shares of capital stock of NOW
Singapore or NOW Australia.
The foregoing opinions will be subject to such exceptions and qualifications as
may be reasonable and appropriate.
B. OPINIONS OF COMPANY COUNSEL. [To be discussed]
C. OPINIONS OF FOREIGN COUNSEL. The opinions to be given by regular
outside counsel for each of the foreign Subsidiaries (or if no such regular
counsel exists, by counsel reasonably acceptable to Buyer) shall opine as
follows:
1. Such foreign Subsidiary is a corporation or other entity duly
organized, validly existing and in good standing under the laws
of its jurisdiction of formation.
2. The Company is the owner of all of the issued and outstanding
capital stock or other equity interests of such Subsidiary. None
of such capital stock and equity securities has been issued in
violation of, and except for statutory preemption rights is not
subject to, any preemptive or subscription rights. There are no
outstanding warrants, options, agreements, convertible or
exchangeable securities or other commitments to which any of
such entities is or may become obligated to issue, sell,
purchase, return or redeem any of such capital stock or equity
securities.
3. The execution, delivery and performance by Sellers of the
Purchase Agreement will not (a) conflict with or result in any
violation or default of the constituent organizational documents
of such Subsidiary or the statutes, laws, ordinances, rules or
regulations of such foreign jurisdiction or (b) require the
consent or approval of, or any filing with or notice to, any
governmental entity, authority or instrumentality.
The foregoing opinions will be subject to such exceptions and qualifications as
may be reasonable and appropriate.
-2-
<PAGE> 57
EXHIBIT H
Real Properties Owned or Leased Originally Contributed Upon Formation of
National-Oilwell and Currently Held by the Partnership
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ADDRESS CONTRIBUTING PARTY
- -------------------------------------------------------------------------------
<S> <C>
- -------------------------------------------------------------------------------
TAFT, CA PRODUCTION SHOP NATIONAL SUPPLY CO., INC.
530 SUPPLY ROW
- -------------------------------------------------------------------------------
FORT SMITH, AR STORE NATIONAL SUPPLY CO., INC.
6206 HIGHWAY 271 SOUTH
- -------------------------------------------------------------------------------
CORTEZ, CO STORE NATIONAL SUPPLY CO., INC.
24114 COUNTY ROAD G
- -------------------------------------------------------------------------------
FORT LUPTON, CO STORE NATIONAL SUPPLY CO., INC.
1742 DENVER AVENUE
- -------------------------------------------------------------------------------
PLAINVILLE, KS STORE NATIONAL SUPPLY CO., INC.
509 NORTHWEST THIRD STREET
- -------------------------------------------------------------------------------
RUSELL, KS PRODUCTION SHOP NATIONAL SUPPLY CO., INC.
204 WEST WICHITA
- -------------------------------------------------------------------------------
VENICE, LA STORE OILWELL, INC.
HIGHWAY 23 SOUTH
- -------------------------------------------------------------------------------
KALKASKA, MI STORE OILWELL, INC.
104 WEST PARK DRIVE
- -------------------------------------------------------------------------------
BROOKHAVEN, MS STORE OILWELL, INC.
916 HIGHWAY 51 NORTH
- -------------------------------------------------------------------------------
BAKER, MT STORE NATIONAL SUPPLY CO., INC.
916 EAST MONTANA AVENUE
- -------------------------------------------------------------------------------
BILLINGS, MT STORE NATIONAL SUPPLY CO., INC.
504 FOOTE STREET
- -------------------------------------------------------------------------------
CUT BANK, MT STORE NATIONAL SUPPLY CO., INC.
201 EAST RAILROAD STREET
- -------------------------------------------------------------------------------
HOBBS, MN PRODUCTION SHOP NATIONAL SUPPLY CO., INC.
521 S. GRIMES
- -------------------------------------------------------------------------------
DICKINSON, ND STORE NATIONAL SUPPLY CO., INC.
HIGHWAY 22 NORTH
- -------------------------------------------------------------------------------
MOHALL, ND STORE NATIONAL SUPPLY CO., INC.
INDUSTRIAL PARK
- -------------------------------------------------------------------------------
LINDSAY, OK STORE NATIONAL SUPPLY CO., INC.
116 NORTHWEST 7TH STREET
- -------------------------------------------------------------------------------
RATLIFF CITY, OK STORE OILWELL, INC.
HIGHWAY 7 WEST
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 58
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
DENVER CITY, TX STORE & YARD OILWELL, INC.
SITE HIGHWAY 214
- -------------------------------------------------------------------------------
HOUSTON, TX HEADQUARTERS OILWELL, INC.
5555 SAN FELIPE
- -------------------------------------------------------------------------------
LAREDO, TX STORE NATIONAL SUPPLY CO., INC.
2413 BISMARK
- -------------------------------------------------------------------------------
LIBERTY, TX STORE NATIONAL SUPPLY CO., INC.
205 GEORGIA STREET
- -------------------------------------------------------------------------------
MONAHANS, TX STORE OILWELL, INC.
900 SOUTH STOCKTON
- -------------------------------------------------------------------------------
ODESSA, TX PRODUCTION SHOP NATIONAL SUPPLY CO., INC.
3801 WEST LOOP 338
- -------------------------------------------------------------------------------
ROOSEVELT, UT SERVICE CENTER NATIONAL SUPPLY CO., INC.
WEST HIGHWAY 40
- -------------------------------------------------------------------------------
PENNSBORO, WV STORE NATIONAL SUPPLY CO., INC.
PENNSBORO INDUSTRIAL PK ROAD
- -------------------------------------------------------------------------------
BIG PINEY WY STORE NATIONAL SUPPLY CO., INC.
521 WINKELMAN AVENUE
- -------------------------------------------------------------------------------
GILLETTE, WY PRODUCTION SHOP NATIONAL SUPPLY CO., INC.
3388 BIRD DRIVE
- -------------------------------------------------------------------------------
GILLETTE, WY STORE NATIONAL SUPPLY CO., INC.
107 EAST FIRST STREET
- -------------------------------------------------------------------------------
POWELL, WY STORE NATIONAL SUPPLY CO., INC.
887 EAST NORTH STREET
- -------------------------------------------------------------------------------
GRAND PRAIRIE STORE NATIONAL SUPPLY CO., INC.
9701-115 STREET
- -------------------------------------------------------------------------------
RED DEER STORE NATIONAL SUPPLY CO., INC.
105,6660 TAYLOR DRIVE
- -------------------------------------------------------------------------------
SLAVE LAKE STORE OILWELL, INC.
903-3RD STREET N.W.
- -------------------------------------------------------------------------------
ABERDEEN STORE NATIONAL SUPPLY CO., INC.
ABBOTSWELL ROAD
- -------------------------------------------------------------------------------
TAFT, CA PRODUCTION SHOP NATIONAL SUPPLY CO., INC.
530 SUPPLY ROW
- -------------------------------------------------------------------------------
ABERDEEN PUMPING SYSTEMS NATIONAL SUPPLY CO., INC.
ABBOTSWELL ROAD
LEASED LAND, OWNED BUILDING
- -------------------------------------------------------------------------------
TAFT, CA STORE OILWELL, INC.
701 MAIN STREET
- -------------------------------------------------------------------------------
ELLINWOOD, KS STORE OILWELL, INC.
MAIN & SANTA FE
- -------------------------------------------------------------------------------
HARVEY, LA STORE NATIONAL SUPPLY CO., INC.
501 BARK STREET
- -------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 59
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
HOUMA, LA STORE OILWELL, INC.
601 CRESENT BLVD.
- --------------------------------------------------------------------------------
SHREVEPORT, LA STORE OILWELL, INC.
806 NORTH MARKET
- --------------------------------------------------------------------------------
LAUREL, MS STORE OILWELL, INC.
2934 INDUSTRIAL BLVD.
- --------------------------------------------------------------------------------
HOBBS, NM STORE OILWELL, INC.
608 WEST BROADWAY
- --------------------------------------------------------------------------------
SHIDLER, OK STORE NATIONAL SUPPLY CO., INC
HIGHWAY 18 SOUTH
- --------------------------------------------------------------------------------
BIG SPRING, TX STORE NATIONAL SUPPLY CO., INC
207 NORTH GREGG ST.
- --------------------------------------------------------------------------------
PETTUS, TX STORE OILWELL, INC.
HIGHWAY 181
- --------------------------------------------------------------------------------
CHARLESTON, WV STORE & WH OILWELL, INC.
1314 HANSFORD
- --------------------------------------------------------------------------------
OWNED LOCATIONS
- --------------------------------------------------------------------------------
CROSSVILLE, IL STORE NATIONAL SUPPLY CO., INC
HIGHWAY 14 EAST
- --------------------------------------------------------------------------------
GREAT BEND, KS STORE NATIONAL SUPPLY CO., INC
5223 W. 10TH STREET
- --------------------------------------------------------------------------------
LIBERAL, KS STORE OILWELL, INC.
1340 BLUE BELL ROAD
- --------------------------------------------------------------------------------
NEW IBERIA, LA STORE/MFK/SHOP NATIONAL SUPPLY CO., INC
150 SUGARMILL ROAD
- --------------------------------------------------------------------------------
NEW IBERIA, LA STORE NATIONAL SUPPLY CO., INC
1202 JANE STREET
- --------------------------------------------------------------------------------
HOMINY, OK STORE NATIONAL SUPPLY CO., INC
401 W. MAIN STREET
- --------------------------------------------------------------------------------
MCALESTER, OK MFG. PLANT OILWELL, INC.
501 N. GEORGE NIGH EXPRESSWAY
- --------------------------------------------------------------------------------
CORPUS CHRISTI, TX STORE NATIONAL SUPPLY CO., INC
4707 BALDWIN BLVD.
- --------------------------------------------------------------------------------
GARLAND, TX OILWELL, INC.
4040 FOREST LANE
- --------------------------------------------------------------------------------
KILGORE, TX FAB CTR NATIONAL SUPPLY CO., INC
104 POWDERHORN ROAD
- --------------------------------------------------------------------------------
KILGORE, TX SUPPLY STORE NATIONAL SUPPLY CO., INC
102 POWDERHORN ROAD
- --------------------------------------------------------------------------------
ODESSA, TX STORE OILWELL, INC.
1504 EAST SECOND
- --------------------------------------------------------------------------------
SUNDOWN, TX STORE OILWELL, INC.
- --------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 60
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
1011 SOUTH SLAUGHTER STREET
- --------------------------------------------------------------------------------
VICTORIA, TX STORE OILWELL, INC.
3107 EAST HOUSTON HWY.
- --------------------------------------------------------------------------------
CASPER, WY STORE-SALES NATIONAL SUPPLY CO., INC
555 NORTH CENTER
- --------------------------------------------------------------------------------
EVANSTON, WY STORE NATIONAL SUPPLY CO., INC
185 HIGHWAY 30 EAST
- --------------------------------------------------------------------------------
BROOKS STORE, ALBERTA OILWELL, INC.
601 INDUSTRIAL RD.
- --------------------------------------------------------------------------------
EDMONTON STORE/SALES/SERVICE NATIONAL SUPPLY CO., INC
9450 - 45 AVE
- --------------------------------------------------------------------------------
LLOYDMINSTER STORE, ALBERTA OILWELL, INC.
6015 - 53 AVENUE
- --------------------------------------------------------------------------------
FORT ST. JOHN STORE, BRITISH COLUMBIA OILWELL, INC.
9507 ALASKA ROAD
- --------------------------------------------------------------------------------
ESTEVAN STORE, SASKATCHEWAN OILWELL, INC.
316 KENSINGTON AVE.
- --------------------------------------------------------------------------------
ANACO STORE, VENEZUELA NATIONAL SUPPLY CO., INC
KM-98 CARRETERA NEGRA
- --------------------------------------------------------------------------------
MARACAIBO HEADQUARTERS NATIONAL SUPPLY CO., INC
APARTADO 1146, 4001-A
- --------------------------------------------------------------------------------
LONG BEACH, CA HEADQUARTERS NATIONAL SUPPLY CO., INC
2875 JUNIPERO AVE.
- --------------------------------------------------------------------------------
GREAT BEND, KS STORE NATIONAL SUPPLY CO., INC
5223 W. 10TH STREET
- --------------------------------------------------------------------------------
CRESTAR ECKVILLE, RED DEER, ALBERTA NATIONAL SUPPLY CO., INC
#105, 6660 TAYLOR DRIVE
- --------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 61
Exhibit I
PROPERTIES FOR WHICH TITLE
REPRESENTATION SURVIVES CLOSING
Long Beach, CA
Great Bend, KS
New Iberia-Jane Str., LA
New Iberia-Sugarmill, LA
Williston, ND
McAlester, OK
OK City Shore, OK
Corpus Christi, TX
Houston (DEC), TX
Houston Store/MFK, TX
Kilgore Store/Service, TX
Odessa Store/Sales, TX
Casper Store/Sales, WY
Edmonton Sales/Services, ALB CANADA
Estevan, SAS, CANADA
Stockport HQ/Plant, ENGLAND
Aberdeen Mach. Center, SCOTLAND
<PAGE> 62
Exhibit J
NAMES OF MANAGEMENT EQUITY INVESTORS
[To be provided as soon as practicable following signing of Purchase
and Sale Agreement]
<PAGE> 63
Exhibit K
FORM OF MANAGEMENT INVESTOR CERTIFICATE
[Certificate to provide for certification by each management investor
that, except as noted by such officer in an attachment, to the knowledge of
such officer Sellers representations and warranties in Purchase Agreement are
true and correct in all material respects]
<PAGE> 64
EXHIBIT L
SUBORDINATED PROMISSORY NOTE
due , 2004
----------------
$10,000,000 , 1995
------------
For value received the undersigned NOW HOLDINGS, INC., a Delaware
corporation ("Buyer"), promises to pay to the order of [Name of Seller], a
Delaware corporation ("Seller"), the principal sum of Ten Million Dollars
($10,000,000) on the ninth anniversary of the Closing Date and to pay interest,
all as specified herein.
1. Purchase Agreement. This Note is issued pursuant to the
Purchase Agreement dated September 22, 1995 among Seller, [Oilwell, Inc. or
National Supply Company, Inc.], USX Corporation, Armco, Inc. and Buyer (the
"Purchase Agreement"). All terms used herein, which are not otherwise defined,
shall have the meanings given them in the Purchase Agreement.
2. Interest.
(a) The principal amount hereof, including all interest
added to principal in accordance with Section 2(b) hereof, shall bear interest
at the Prevailing Rate. Prevailing Rate shall be nine percent (9%) per annum.
All interest shall be calculated on the basis of a 365 or 366 day year on the
actual days elapsed.
(b) Interest shall be due and payable annually on the
anniversary of the date hereof, provided that prior to the seventh anniversary
of the date hereof unless Buyer shall have provided written notice to Seller,
or other holder hereof ("Holder"), that it elects to pay such interest in cash,
the amount of interest otherwise due or payable shall be added to the
principal amount of this Note in lieu of cash payment.
3. Principal Repayment.
(a) Mandatory Prepayment.
(i) On the eighth anniversary of the date hereof
Buyer shall prepay an amount equal to (a) one half (1/2) of the sum of (i) the
principal amount then outstanding (which outstanding principal amount shall
include all interest added to principal pursuant to Section 2(b)) plus (ii) the
aggregate amount of all optional prepayments made pursuant to Sections 3(a)(iii)
and 3(c) hereof, minus (b) the aggregate amount of all optional prepayments made
pursuant to Sections 3(a)(iii) and 3(c) hereof.
(ii) Buyer shall prepay this Note in its entirety
upon the occurrence of a Change of Control, as hereinafter defined. Change of
Control shall mean any sale, transfer or assignment by the stockholders of
Buyer on the date hereof of more than fifty percent (50%) of the
<PAGE> 65
aggregate Common Stock of Buyer owned by such stockholders, except for (i)
transfers resulting from the death of any individual stockholder; (ii)
repurchases by the Buyer from any stockholder who is or was an employee of
Buyer; (iii) payments or purchases related to transfers of the Senior
Subordinated Debt or (iv) transfers by a stockholder to an affiliate thereof or
to another stockholder (collectively referred to herein as "Permitted
Transfers").
(iii) If Duff & Phelps/Inverness LLC, Bain Capital,
Inc. or any of their respective affiliates sells any shares of common equity of
Buyer owned by them as of the date hereof, other than Permitted Transfers or
transfers for non-cash consideration pursuant to a merger or consolidation that
does not constitute a Change of Control, then, subject to Section 7(c)(ii)
hereof, the Buyer shall prepay this Note in an amount equal to the product
of (i) the outstanding principal amount of this Note, times (ii) the product of
(a) two times the quotient of (x) the number of shares sold or transferred,
divided by (y) the total number of shares of common equity owned by Duff &
Phelps LLC, Bain Capital, Inc. and their respective affiliates on the date
hereof.
(b) Continental Emsco Combination. In the event that a
Continental Emsco Combination, as hereinafter defined, occurs, on the date that
the Continental Emsco Combination is closed Buyer shall prepay Ten Million
Dollars ($10,000,000) or the entire principal amount, whichever is less.
The term "Continental Emsco Combination" shall mean
any purchase, sale, merger, joint venture, partnership, consolidation or other
transaction or series of transactions that results in the acquisition by Buyer,
or an entity controlled by or under common control with Buyer, of the
distribution or drilling businesses currently conducted by the Continental
Emsco Company or its successor, which acquisition shall be deemed to have taken
place upon the acquisition by Buyer, or an entity controlled by or under common
control with Buyer, of (i) 50% or more of the voting equity interests of the
entity that owns such distribution or drilling business such that Buyer, or
such other entity, has control over the management of the business and affairs
of such businesses or (ii) 50% or more of the assets of such distribution or
drilling businesses.
(c) Optional Prepayments. Buyer may at its option prepay at
any time any amounts due hereunder in whole or in part.
4. General Payment Provisions. All payments of principal and
interest hereunder shall be made in immediately available funds to Seller's
account at __________________________ or such other place as the Holder shall
direct. All payments are in United States dollars. In the event that any
payment hereunder shall be required to be made on a Saturday, Sunday or
banking holiday in New York, New York; Houston, Texas; or Pittsburgh,
Pennsylvania such payment shall be made on the next succeeding day which is not
a Saturday, Sunday or banking holiday.
5. Events of Default. The following events shall constitute Events
of Default hereunder:
(a) Buyer shall fail to pay any amount of principal or
interest within five (5) business days when the same is due or payable
hereunder.
-2-
<PAGE> 66
(b) The breach of the covenants set forth in Section 6(b)
and 6(c) hereof.
(c) If Buyer shall (i) commence any voluntary bankruptcy,
insolvency, reorganization or similar proceeding; (ii) make a general assignment
for the benefit of its creditors; (iii) seek a receiver, custodian, trustee or
similar official for itself or for a substantial portion of its property; (iv)
consent to any of the foregoing; or (v) take any corporate action to authorize
any of the foregoing; or
(d) If any involuntary bankruptcy, insolvency,
reorganization or similar proceeding is commenced against Buyer seeking
appointment of a receiver, custodian, trustee or similar official for it or
for a substantial portion of its property and such proceedings is not
dismissed or stayed within one hundred twenty (120) days.
Then, subject to the provisions of Section 7 hereof, upon
written consent from the holders of Bank Debt (as hereinafter defined) and the
holders of Senior Subordinated Debt (as hereinafter defined), the Holder may by
written notice to Buyer declare the entire principal amount hereof together
with all accrued but unpaid interest to be immediately due and payable
(provided, however, in the case of Events of Default (c) and (d) specified
above the entire principal amount hereof together with all accrued but unpaid
interest shall immediately become due and payable without any action by the
Holder, without demand, presentment or dishonor each of which is hereby waived
by Buyer.
6. Covenants
a. Financial Statements. Buyer shall deliver to Seller, or
the Holder, annual and monthly financial statements delivered to the holders of
any Priority Indebtedness, as hereinafter defined.
b. Merger. Buyer shall not merge into or consolidate with
any other corporation or entity unless each of the following conditions are
met: (i) the surviving entity is a corporation, limited liability company or
partnership existing under the laws of the United States or one of the states
thereof; (ii) the surviving entity unconditionally assumes Buyer's obligations
under this Note; (iii) no Event of Default shall exist or be created by such
merger; and (iv) the consolidated net worth of the surviving entity at closing
of the merger is equal to or greater than the consolidated net worth of Buyer
immediately prior to such merger.
c. Restricted Payments. Buyer shall not make any
Restricted Payment, as hereinafter defined. Restricted Payment shall mean any
(i) dividend, distribution or other payment in respect of the common or
preferred stock of Buyer (other than payments solely in the form of common or
preferred stock of Buyer or as permitted by clause (ii); (ii) any redemption,
repurchase or sinking fund payment in respect of Buyer's common or preferred
stock (other than repurchases from employees or former employees); (iii)
any management fee, consulting fee or similar payment in excess of $1 million
per calendar year to Duff & Phelps/Inverness LLC and/or Bain Capital, Inc.
and/or their respective affiliates; or (iv) purchase, redemption, payment,
retirement, defeasance or
-3-
<PAGE> 67
sinking fund payment in relation to any indebtedness for money borrowed of
Buyer which ranks pari passu with or is subordinated to this Note other than
pro rata payments made to the other Seller on its Note.
7. Subordination.
(a) The principal of, interest on and any other amounts or
obligations under this Note; including the distribution of any securities with
respect thereto, are hereby expressly made subordinate and junior in right of
payment, to the extent set forth herein, to the payment in full in cash of all
Priority Indebtedness.
(b) To the extent any payment with respect to the Priority
Indebtedness is determined by a court of competent jurisdiction to be set aside
or required to be paid to a debtor in possession or trustee or any other holder
of any interest, for any reason, including by reason of equitable subordination
or because it is fraudulent or preferential in any respect and an amount equal
to the amount of such payment is actually paid over to such debtor in
possession or other person, then the obligation or part thereof originally
intended to be satisfied shall be deemed to be reinstated and outstanding as if
such payment had not occurred.
(c) Notwithstanding anything herein to the contrary, except
as set forth in this Section 7(c), until the payment in full in cash of the
Priority Indebtedness, no payments may be made by Buyer on account of this
Note, whether for interest or principal or otherwise except that: (i) so long
as no event of Default (or event that with the passage of time, the giving of
notice or both would constitute an Event of Default) has occurred and is
continuing under any Priority Indebtedness Buyer may make the payments
specified in Section 3(b) relating to a Continental Emsco Combination and
mandatory prepayment specified in Section 3(a)(ii) and (ii) other payments may
be made with the written approval of the holders of the Bank Debt (as
hereinafter defined) and the holders of the Senior Subordinated Debt (as
hereinafter defined).
(d) Unless and until payment in full in cash of the
Priority Indebtedness the Holder shall not: (i) demand or sue for any amount
due under this Note, (ii) accelerate the maturity hereunder, (iii) receive or
collect any payment or proceeds hereunder, or (iv) file or join in the filing
of any proceeding instituted against the Buyer or any of its subsidiaries
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a custodian, receiver, trustee or other similar
officer for it or for any substantial part of its property, except that the
Holder may take any of the actions specified in (i), (ii) and (iii) above to the
extent payment hereunder is authorized by Section 7(c) hereof, provided that, if
Holder's authority to take such action is based solely upon Section 7(c)(ii)
above, the Holder shall not take any action until sixty (60) days after the
Holder has sent written notice to all Holders of Priority Indebtedness.
(e) In the event of any bankruptcy, insolvency or
liquidation proceeding, the holders of any Priority Indebtedness shall be
entitled to receive payment in full of all Priority
-4-
<PAGE> 68
Indebtedness before any Holder is entitled to receive any payment or
distribution of any assets or securities of the Buyer.
(f) If the Holder shall have received any payment or
distribution of any assets or securities of the Buyer of any kind or
character, whether in cash, securities or other property, in respect of
principal, interest or other amount on this Note in contravention of this
Section 7, then such payment or assets shall be paid over or delivered
forthwith by the Holder to the holders of the Priority Indebtedness or the
trustee in bankruptcy for application to the payment of the Priority
Indebtedness remaining unpaid, to the extent necessary to pay the Priority
Indebtedness in full, after giving effect to any concurrent payment or
distribution to the holders of the Priority Indebtedness.
(g) No Waiver of Subordination Provisions. (i) No right of
the holder of any Priority Indebtedness to enforce any provision of this Note
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Buyer or the holder of the Priority Indebtedness. (ii)
Without in any way limiting the generality of the foregoing, the holders of
Priority Indebtedness or any of them, may, at any time, and from time to time,
without the consent of, or notice to, the Holder, without incurring any
liabilities to the Holder and without impairing or releasing the subordination
and other benefits provided in this Note (even if any right of subrogation or
other right or remedy of the Holder is affected, impaired or extinguished
thereby) do any one or more of the following:
(A) change the manner, place or terms of payment or change
or extend the time of payment of, or exchange, amend or alter, the
terms of any of the Priority Indebtedness or any guaranty thereof or any
liability of the Buyer or any guarantor, or any liability incurred
directly or indirectly in respect thereof (including, without
limitation, any increase in or extension of the Priority Indebtedness),
or otherwise amend, renew, exchange, extend, modify or supplement in any
manner the Priority Indebtedness, or any liens held by the holders of
the Priority Indebtedness;
(B) sell, exchange, release, surrender, realize upon,
enforce or otherwise deal with in any manner and in any order any part
of the collateral securing the Priority Indebtedness or any liability of
the Buyer;
(C) settle or compromise any Priority Indebtedness or any
other liability of the Buyer or any guarantor or any security therefor
or any liability incurred directly or indirectly in respect thereof and
apply any sums by whomsoever paid and however realized to any liability
(including, without limitation, the Priority Indebtedness) in any manner
or order (provided that nothing herein shall permit amounts collected on
account of the Priority Indebtedness to be applied to any other
liability); and
(D) exercise or delay in or refrain from exercising any
right or remedy against the Buyer or any security or any guarantor,
elect any remedy and otherwise deal freely with the Buyer or its
subsidiaries and the collateral securing the Priority Indebtedness and
any security and any guarantor or any liability of the Buyer or any
-5-
<PAGE> 69
guarantor to the holders of Priority Indebtedness or any liability
incurred directly or indirectly in respect thereof.
(h) "Priority Indebtedness" shall mean any and all
liabilities and obligations, contingent or otherwise, of Buyer under any
presently existing or hereinafter arising loan agreement, credit agreement,
promissory note, obligation, credit facility, lending facility, letter of
credit, surety bond, surety bond facility, performance bond agreement,
debenture, guarantee agreement, performance guaranty agreement, hedging
agreement (whether for principal, premium, interest, fees, attorney's fees and
disbursements, expenses, indemnities or otherwise, the performance and
observation of the covenants, agreements, and obligations of Buyer) and any
deferral, renewal, restructuring, extension, rearrangement, modification,
supplement, substitution and/or replacement thereof entered into by the Buyer
for any reason at any time prior to, or after the date hereof and before-or
after the filing of any bankruptcy, proceeding, including without limitation
the [Bank Financing Commitment and any deferral, renewal, restructuring,
extension, rearrangement, modification, supplement, substitution and/or
replacement thereof] ("Bank Debt") and Harvard Private Capital Group Debt
("Senior Subordinate Debt") specifically excluding, however, any debt payable
to Bain Capital, Inc. and Duff & Phelps/Inverness LLC on the date hereof, other
than deferred fees and expenses, if any.
(i) Until all Priority Indebtedness is paid in full the
Holder waives any rights of subrogation it may have against Buyer.
(j) The provisions of this Section 7 shall not alter or
affect, as between the Buyer and the Holder, the obligations of the Buyer to
pay in full the principal of and interest on the Note, which obligations are
absolute and unconditional.
(k) The Holder of this Note, by its acceptance hereof,
agrees that it shall be bound by the terms and conditions of this Section 7
and, if requested by any holder of any Priority Indebtedness, shall acknowledge
this duty in writing to the holder of the Priority Indebtedness.
8. Notices. All notices hereunder shall be given in the manner
specified in Section 11.2 of the Purchase Agreement to the addresses set forth
in such Section 11.2 with respect to the Buyer and the Seller and in the manner
and to the addresses with respect to the holders of Priority Indebtedness as
shall be provided by the holders of Priority Indebtedness.
9. Amendment and Waiver: Benefits. No provisions hereof may be
amended or modified except in a written instrument signed by both Buyer and the
Holder and approved in writing by the holders of the Bank Debt and the holders
of the Senior Subordinated Debt; other than Section 7, which may only be
amended or modified by a written instrument signed by the Holder, the holders
of the Bank Debt and the holders of the Senior Subordinated Debt. No waiver of
any provision hereof shall operate as a waiver of any other provision hereof or
preclude the Holder to demand strict future compliance with the terms hereof.
It is specifically agreed to and acknowledged, that certain provisions of this
Note are for the benefit of the holders of Priority Indebtedness.
-6-
<PAGE> 70
10. Choice of Law. This note shall be construed under the laws of
the State of Delaware, other than the choice of law provisions thereof that
would require the application of the laws of any jurisdiction other than
Delaware.
11. Assignment. This Note shall not be assigned without the express
acknowledgment of the transferee of this Note of the subordination provisions of
this Note, and shall not be assigned without the prior written consent of Buyer
if in its reasonable opinion Buyer concludes that such assignee is a competitor
of Buyer.
12. Power of Attorney. In the event of any receivership,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization
or arrangement with creditors, adjustment of debt, whether or not pursuant to
bankruptcy laws, the sale of all or substantially all of the assets,
dissolution, liquidation, or any other marshaling of the assets and liabilities
of Buyer, the Holder will at the request of the holders of the Bank Debt, or if
there is no Bank Debt the holders of the Senior Subordinated Debt, file any
claim, proof of claim, proof of interest or other instrument of similar
character necessary to enforce the obligations of Buyer in respect to this Note
and will hold in trust for holders of the Priority Indebtedness and pay over to
Holders of the Bank Debt, or if there is no Bank Debt the holders of the Senior
Subordinated Debt, in the form received (together with any necessary
endorsement), to be applied on the Priority Indebtedness, any and all monies,
dividends or other assets received in any such proceedings on this Note unless
and until the Priority Indebtedness shall be paid in full. In the event that
the Holder shall fail to take any such action requested by the holders of the
Bank Debt, or if there is no Bank Debt the holders of the Senior Subordinated
Debt, the holders of the Bank Debt, or the holders of the Senior Subordinated
Debt as the case may be, may, as attorney-in-fact for the Holder take such
action on behalf of the Holder, and the Holder hereby appoints [Bank Debt
designee's or Senior Subordinated Debt designee, as the case may be] as
attorney-in-fact for the Holder to demand, sue for, collect and receive any and
all such monies, dividends or other assets and give acquittance therefor and to
file any claim, proof of claim, proof of interest or other instrument of
similar character and to take such other proceedings in [Bank Debt designee's
or Senior Subordinated Debt designee, as the case may be] own name or in the
name of the Holder as [Bank Debt designee's or Senior Subordinated Debt
designee, as the case may be] may deem necessary or advisable for the
enforcement of this provision; and the Holder will execute and deliver to [Bank
Debt designee's or Senior Subordinated Debt designee, as the case may be] such
other and further powers of attorney or other instruments as [Bank Debt
designee's or Senior Subordinated Debt designee, as the case may be] may
request in order to accomplish the foregoing.
IN WITNESS WHEREOF, NOW HOLDINGS, Inc. has executed this Note on the
date first written above.
NOW HOLDINGS, INC.
By:
--------------------------------
-7-
<PAGE> 71
NOW HOLDINGS, INC.
666 STEAMBOAT ROAD
GREENWICH, CT 06830
September 22, 1995
USX Corporation
Oilwell, Inc.
600 Grant Street
Pittsburgh, Pennsylvania 15219
Attn: Mr. Robert M. Stanton
Armco Inc.
National Supply Company, Inc.
301 Grant Street, 15th Floor
One Oxford Centre
Pittsburgh, Pennsylvania 15219-1415
Attn: Mr. Gary R. Hildreth
Gentlemen:
Reference is hereby made to that certain Purchase Agreement (the
"Purchase Agreement") of even date herewith among Oilwell, Inc., USX
Corporation, National Supply Company, Inc., Armco Inc. and NOW Holdings, Inc.,
all Delaware corporations. Any capitalized term used herein but not defined
shall have the meaning given such term in the Purchase Agreement.
The purpose of this letter is to set forth the following agreements
among Sellers, Parents and Buyer:
1. Sellers, Parents and Buyer (i) acknowledge that the Disclosure
Schedule contemplated by Section 3.2 of the Purchase Agreement
has not been delivered by Sellers to Buyer concurrently with
the execution of the Purchase Agreement and (ii) agree that
the Disclosure Schedule shall instead be delivered as provided
in this letter;
2. Sellers Parents and Buyer shall use their best efforts to
finalize and agree upon the Disclosure Schedule on or before
October 6, 1995; and
3. Upon the completion of the Disclosure Schedule to the mutual
satisfaction of Sellers, Parents and Buyer, each Seller, each
Parent and Buyer shall acknowledge such agreement in writing
and the Disclosure Schedule shall thereupon be deemed to be
<PAGE> 72
USX Corporation and Armco, Inc.
September 22,1995
Page 2
a part of the Purchase Agreement as fully as if same had been
delivered by Sellers to Buyer on the date hereof.
If you are in agreement with the foregoing, please indicate such
agreement by executing each of the enclosed counterparts of this letter in the
space provided below. This letter may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
BUYER:
NOW HOLDINGS, INC.
By: /s/ W. MCCOMB DUNWOODY
----------------------------------
W. McComb Dunwoody
President
ACCEPTED and AGREED on this
____ day of _______________, 1995 by:
SELLERS: PARENTS:
OILWELL, INC. USX CORPORATION
By: /s/ C. C. GEDEON By: /s/ C. C. GEDEON
----------------------------------- ----------------------------------
C. C. Gedeon C. C. Gedeon
President Executive Vice President
Raw Materials and Business
Development
NATIONAL SUPPLY COMPANY, INC. ARMCO INC.
By: /s/ GARY R. HILDRETH By: /s/ DAVID G. HARMER
----------------------------------- ----------------------------------
Name: Gary R. Hildreth Name: David G. Harmer
--------------------------------- -------------------------------
Title: Vice President Title: Corporate Vice President
-------------------------------- -------------------------------
<PAGE> 73
NOW HOLDINGS, INC.
666 STEAMBOAT ROAD
GREENWICH, CT 06830
September 22, 1995
USX Corporation
Oilwell, Inc.
600 Grant Street
Pittsburgh, Pennsylvania 15219
Attn: Mr. Robert M. Stanton
Armco Inc.
National Supply Company, Inc.
301 Grant Street, 15th Floor
One Oxford Centre
Pittsburgh, Pennsylvania 15219-1415
Attn: Mr. Gary R. Hildreth
Gentlemen:
Reference is hereby made to that certain Purchase Agreement (the
"Purchase Agreement") of even date herewith among Oilwell, Inc., USX
Corporation, National Supply Company, Inc., Armco Inc. and NOW Holdings, Inc.,
all Delaware corporations. Any capitalized term used herein but not defined
shall have the meaning given such term in the Purchase Agreement.
The purpose of this letter is to set forth the following agreements
among Sellers, Parents and Buyer:
1. Sellers, Parents and Buyer (i) acknowledge that the Disclosure
Schedule contemplated by Section 3.2 of the Purchase Agreement
has not been delivered by Sellers to Buyer concurrently with
the execution of the Purchase Agreement and (ii) agree that
the Disclosure Schedule shall instead be delivered as provided
in this letter;
2. Sellers Parents and Buyer shall use their best efforts to
finalize and agree upon the Disclosure Schedule on or before
October 6, 1995; and
3. Upon the completion of the Disclosure Schedule to the mutual
satisfaction of Sellers, Parents and Buyer, each Seller, each
Parent and Buyer shall acknowledge such agreement in writing
and the Disclosure Schedule shall thereupon be deemed to be
<PAGE> 74
USX Corporation and Armco, Inc.
September 22, 1995
Page 2
a part of the Purchase Agreement as fully as if same had been
delivered by Sellers to Buyer on the date hereof.
If you are in agreement with the foregoing, please indicate such
agreement by executing each of the enclosed counterparts of this letter in the
space provided below. This letter may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
BUYER:
NOW HOLDINGS, INC.
By: /s/ W. MCCOMB DUNWOODY
----------------------------------
W. McComb Dunwoody
President
ACCEPTED and AGREED on this
____ day of _______________, 1995 by:
SELLERS: PARENTS:
OILWELL, INC. USX CORPORATION
By: /s/ C. C. GEDEON By: /s/ C. C. GEDEON
----------------------------------- ----------------------------------
C. C. Gedeon C. C. Gedeon
President Executive Vice President
Raw Materials and Business
Development
NATIONAL SUPPLY COMPANY, INC. ARMCO INC.
By: /s/ GARY R. HILDRETH By: /s/ DAVID G. HARMER
----------------------------------- ----------------------------------
Name: Gary R. Hildreth Name: David G. Harmer
--------------------------------- -------------------------------
Title: Vice President Title: Corporate Vice President
-------------------------------- -------------------------------
<PAGE> 75
NOW HOLDINGS, INC.
666 Steamboat Road
Greenwich, Connecticut 06830
November 30, 1995
Mr. C. C. Gedeon
Executive Vice President
Raw Materials and Diversified
Businesses
USX Corporation
600 Grant Street
Pittsburgh, PA 15219-2749
Mr. David G. Harmer
Corporate Vice President
and Chief Financial Officer
Armco, Inc/
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219
Re: Purchase Agreement ("Purchase Agreement") dated September 2,
1995 for the Acquisition of National- Oilwell
Gentlemen:
This letter sets forth agremeents that we have reached with respect to
certain matters contained in the Purchase Agreement as follows:
1. The Disclosure Schedule will not contain any references or
disclosures related to wellhead bolts, the Price Waterhouse tax memorandum, the
Amerada Hess matter involving personal injury to Bobby DeGaugh, matters
relating to a newspaper article referring to employees of the Garland plant,
the Phillips matter or the SST Energy matter.
2. The agreement for distribution of tubular goods referred to in
Exhibit A will be for an initial term of two years, automatically renewable for
one-year terms thereafter, unless either party notifies the other party prior
to one year before the end of the initial term or any renewal term thereafter
that it desires to terminate the agreement. In addition, the distribution
agreement will be assignable by the Buyer.
3. The Sellers will not cause or require the Company and the
Subsidiaries to obtain the facilities questionnaires set forth in Section 5.16
of the Purchase Agreement. We have received copies of the Environmental
Consultant's Report as contemplated by Section 5.15 of the Purchase
<PAGE> 76
Mr. C. C. Gedeon
Mr. David G. Harmer
November 30, 1995
Page 2
Agreement, are satisfied with such reports and desire that no additional
environmental studies or work be done.
4. The only approvals and consents that shall be required to be
obtained prior to Closing as conditions to all parties obligations to
consummate the transactions set forth in the Purchase Agreement shall be those
consents and approvals that Sellers and Parents and Buyers mutually agree shall
be required.
If this letter correctly sets forth our agreement on the matters set
forth herein, please execute three copies of this letter in the spaces provided
below. One copy should be returned to each of the other two parties; the third
copy is for your files.
Very truly yours,
NOW HOLDINGS, INC.
By
-----------------------------
W. McComb Dunwoody
President
ACCEPTED AND AGREED TO:
USX CORPORATION
By
-----------------------------------
C. C. Gedeon
Executive Vice President,
Raw Materials and Diversified
Businesses
ARMCO INC.
By
-----------------------------------
David G. Harmer
Corporate Vice President
and Chief Financial Officer
<PAGE> 77
[ LETTERHEAD OF ARMCO ]
December 4, 1995
W. McComb Dunwoody
President
NOW Holdings, Inc.
666 Steamboat Road
Greenwich, CT 06830
Re: Amendment No. 1 to Purchase Agreement by and among Oilwell,
Inc., National Supply Company, Inc., USX Corporation, Armco
Inc. and NOW Holdings, Inc., dated as of September 22, 1995
Dear Mr. Dunwoody:
This letter will confirm prior discussion and agreement with you and
your representatives and when dully signed and acknowledged by the parties,
will constitute Amendment No. 1 to the subject Purchase Agreement.
Accordingly, the subject Purchase Agreement shall be amended in the
following particular:
A. Section 9.1(b) of Article IX, Termination, Amendment and
Waiver, shall be revised as follows:
(b) at any time after January 17, 1996 by either Sellers
or Buyer, if the Closing shall not have occurred for
any reason, other than a breach of this Agreement by
the terminating party, which shall extend the
termination date until such breach is cured.
Even though the termination date has been extended by this Amendment
No. 1 to January 17, 1996, we currently intend for the Closing to take place on
January 4, 1996, to be effective as of January 1, 1996.
If you concur with the above amendment, please so indicate by signing
in the space provided below and return one executed copy to Armco Inc./National
Supply Company, Inc. and one executed copy to USX Corporation/Oilwell, Inc.,
the original is for your file.
Very truly yours,
Armco Inc. USX Corporation
By By
--------------------------------- -----------------------------------
National Supply Company, Inc. Oilwell, Inc.
By By
--------------------------------- -----------------------------------
ACKNOWLEDGED AND AGREED:
Now Holdings, Inc.
By By
--------------------------------- -----------------------------------
<PAGE> 78
NOW HOLDINGS, INC.
666 STEAMBOAT ROAD
GREENWICH, CONNECTICUT 06830
January 15, 1996
Mr. C.C. Gedeon
Executive Vice President
Raw Materials and Diversified Businesses
USX Corporation
600 Grant Street
Pittsburgh, Pennsylvania 15219-2749
Mr. David G. Harmer
Corporate Vice President and
Chief Financial Officer
Armco, Inc.
One Oxford Centre
301 Grant Street
Pittsburgh, Pennsylvania 15219
Re: Purchase Agreement ("Purchase Agreement") dated September 22,
1995 for the Acquisition of National-Oilwell
Gentlemen:
This letter sets forth agreements that we have reached with respect to
certain matters contained in the Purchase Agreement as follows:
1. The Purchase Agreement reflects that NOW Holdings, Inc., a
Delaware corporation ("Holdings"), is the Buyer. As permitted by Section 11.5
of the Purchase Agreement, Holdings has assigned its rights as Buyer under the
Purchase Agreement to National-Oilwell, Inc., a Delaware corporation ("GP"),
NATOIL, a Delaware corporation ("LP"), and NOW International, Inc., a Delaware
corporation ("International"), and GP, LP and International shall be entitled
to all of the rights of Buyer under the Purchase Agreement and shall assume and
perform all of Buyer's obligations under the Purchase Agreement. In addition,
from and after the closing, the term Buyer shall mean collectively, Holdings,
GP, International and the Company and each of Holdings, GP, International, the
Company shall be entitled to all of the rights of Buyer under the Purchase
Agreement and shall perform all of Buyer's obligations under the Purchase
Agreement.
2. The Purchase Agreement also reflects that Buyer will purchase
from Sellers and Sellers shall assign and transfer to Buyer all of the general
partnership interest in National-Oilwell, a Delaware general partnership. At
the request of Buyer, Sellers have converted National-Oilwell into a Delaware
limited partnership under the name of National-Oilwell, L.P. by executing an
amendment to the Partnership Agreement of National-Oilwell in the form of
Exhibit A attached hereto and by executing and filing with the Delaware
Secretary of State a Certificate of Limited Partnership of National-Oilwell,
L.P. in the form of Exhibit B attached hereto. At closing, Sellers shall
assign and transfer to LP all of their interest as a limited partner in
National-Oilwell, L.P. and
<PAGE> 79
Messrs. Gedeon and Harmer
Page 2
January 15, 1996
admit LP as a limited partner of National-Oilwell, L.P., and shall then assign
and transfer all of their interest as a general partner in National-Oilwell,
L.P. to GP and withdraw as partners from National-Oilwell, L.P. All costs of
filing the Certificate of Limited Partnership shall be borne by Buyer. Buyer
may, at its sole cost, cause the limited partnership to be qualified to do
business in such jurisdictions as the Buyer desires. In the event that the
Closing does not occur, for whatever reason, Buyer shall reimburse Sellers all
costs reasonably incurred in re-establishing the Company as a Delaware general
partnership. The assignments referred to in this paragraph 2 shall be in the
form of Exhibits C-1 through C-4 attached hereto.
3. The Purchase Agreement also reflects that Buyer will purchase
from Sellers and Sellers will assign and transfer to Buyer all of the issued
and outstanding capital stock of National-Oilwell Pty. Ltd., an Australian
corporation ("NOW Australia"), and National-Oilwell Pte. Ltd., a Singapore
corporation ("NOW Singapore"). At closing, Sellers shall assign and transfer
to International all of the issued and outstanding capital stock of NOW
Australia and NOW Singapore.
4. The form of Subordinated Note attached as Exhibit L to the
Purchase Agreement shall be amended to reflect the new structure set forth in
this Letter Agreement and the fact that National-Oilwell, L.P. will be the
Borrower under the debt financing documents. The form of the new Subordinated
Note is attached hereto as Exhibit D.
5. Section 3.3 of the Purchase Agreement is amended and restated
to read in its entirety as set forth below:
"3.3 ORGANIZATION AND QUALIFICATION OF THE COMPANY. Until
the conversion of the Company into a limited partnership, the Company
was (a) a general partnership duly formed and validly existing under
the laws of the State of Delaware and had all requisite power and
authority to own, lease and operate its properties and to conduct its
business as it was being conducted, and (b) duly qualified or licensed
to do business and was in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary. No
representation is made concerning the conversion of the Company into a
limited partnership.
The Company has heretofore delivered to Buyer complete and
correct copies of the partnership agreement of the Company, as
currently in effect."
6. Section 3.6 of the Purchase Agreement shall be amended by
adding the following at the end of the current section:
"For purposes of this Section 3.6, the parties have assumed that,
immediately after the Closing, National-Oilwell, L.P. shall be the
same legal entity as the Company on the date hereof."
7. Sections 3.14(g)(i) and (ii) of the Purchase Agreement are
hereby amended and restated in their entirety as follows:
<PAGE> 80
Messrs. Gedeon and Harmer
Page 3
January 15, 1996
"(i) involves sales of products of the Company and its
Subsidiaries, or purchases by the Company and the Subsidiaries
of products and services, in excess of $500,000, (ii) involves
future expenditures in excess of $200,000 in any one calendar
year, and is not terminable by the Company or the Subsidiary
on 30 days' or fewer notice without penalty, or"
8. The term "Material Contracts" as defined in the Purchase
Agreement shall not include maintenance and repair operating supply contracts
that are cancellable by the Company on less than 90 days notice.
9. Exhibit C to the Purchase Agreement, labelled "Allocation of
Purchase Price", shall be deleted in its entirety and replaced by a new Exhibit
C to the Purchase Agreement in the form attached hereto as Exhibit E.
10. The closing of the transactions contemplated by the Purchase
Agreement shall be effective as of January 1, 1996.
11. Effective as of the Closing, the Asset Transfer Agreement
dated March 31, 1987 between National Supply Company, Inc. and the Company and
the Asset Transfer Agreement dated March 31, 1987 between Oilwell, Inc. And the
Company shall terminate. All representations, warranties, covenants,
indemnifications and other provisions of the Purchase Agreement shall remain in
effect and govern the relationship between the parties.
If this letter correctly sets forth our agreement on the matters set
forth herein, please execute three copies of this letter in the spaces provided
below. One copy should be returned to each of the other two parties; the third
copy is for your files.
Very truly yours,
NOW HOLDINGS, INC.
By: /s/ W. MCCOMB DUNWOODY
------------------------------------
<PAGE> 81
Messrs. Gedeon and Harmer
Page 4
January 15, 1996
ACCEPTED AND AGREED TO:
USX CORPORATION OILWELL, INC.
By: /s/ C. C. GEDEON By: /s/ G. F. HURLEY
-------------------------------- -------------------------------------
C.C. Gedeon Name: G. F. Hurley
Executive Vice President -----------------------------------
Raw Materials and Diversified Title: Vice President & Comptroller
Businesses ----------------------------------
ARMCO INC. NATIONAL SUPPLY COMPANY, INC.
By: /s/ DAVID G. HARMER By: /s/ GARY R. HILDRETH
-------------------------------- -------------------------------------
David G. Harmer Name: Gary R. Hildreth
Corporate Vice President and -----------------------------------
Chief Financial Officer Title: Vice President
----------------------------------
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NOW HOLDINGS, INC.
NOW Holdings, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
A. The name of the Corporation is NOW Holdings, Inc. The
original Certificate of Incorporation of the Corporation was originally filed
with the Secretary of State of the State of Delaware on July 14, 1995, restated
on January 12, 1996 and amended on July 24, 1996.
B. This Amended and Restated Certificate of Incorporation has
been duly adopted in accordance with Sections 242 and 245 of the General
Corporation Law of the State of Delaware (the "DGCL") and, pursuant to such
provisions, this Amended and Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of
Incorporation of the Corporation.
C. The text of the Certificate of Incorporation of the
Corporation is hereby restated and further amended to read in its entirety as
set forth on Exhibit A hereto.
D. Immediately upon the effectiveness of this Amended and
Restated Certificate of Incorporation pursuant to the DGCL (the "Effective
Time"), each issued and outstanding share of the Corporation's Common Shares
("Old Common Shares"), shall automatically, without further action on the part
of the Corporation or any holder of such Old Common Stock, be split and
converted into 11 shares of the Corporation's Common Shares, as constituted
following the Effective Time ("New Common Shares"). The split and conversion
of the Old Common Shares into New Common Shares will be deemed to occur at the
Effective Time regardless of when the certificates representing such Old Common
Shares are physically surrendered to the Corporation or its transfer agent for
exchange into certificates representing New Common Shares. After the Effective
Time, certificates representing the Old Common Shares will, until such shares
are surrendered to the Corporation or its transfer agent for exchange into New
Common Shares, represent the number and class of New Common Shares into which
such Old Common Shares shall have been converted hereunder.
E. Pursuant to Section 103(d) of the DGCL, this Amended and
Restated Certificate of Incorporation shall be effective as of 12:00 p.m.
Eastern Time on August 29, 1996.
<PAGE> 2
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed by the undersigned authorized officers of the
Corporation this 29th day of August, 1996.
NOW HOLDINGS, INC.
By: \s\ Joel V. Staff
---------------------------
Name: Joel V. Staff
-------------------------
Title: Chairman of the Board,
President and CEO
ATTEST:
\s\ Paul M. Nation
- -------------------
-2-
<PAGE> 3
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
NOW HOLDINGS, INC.
FIRST: The name of the Corporation is National-Oilwell, Inc.
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of the registered agent of the Corporation at such
address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful business, act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: CAPITAL STOCK
I. AUTHORIZED SHARES
The total number of shares of stock that the Corporation shall have
authority to issue is, 50,013,288 shares of capital stock, consisting of (i)
40,000,000 shares of common stock, par value $.01 per share ("Common Stock");
(ii) 13,288 shares of Class A Common Stock, par value $.01 per share ("Class A
Common Stock"; the Class A Common Stock and the Common Stock are collectively
referred to as the "Common Shares"); and (iii) 10,000,000 shares of preferred
stock, par value $.01 per share ("Preferred Stock").
The Common Shares shall have the rights, preferences and limitations
set forth below. Capitalized terms used but not otherwise defined in Parts I
or II of this Article Fourth are defined in Part III of this Article Fourth.
II. COMMON SHARES
Except as otherwise provided in this Part II or as otherwise required
by applicable law, all shares of Class A Common Stock and Common Stock shall be
identical in all respects and shall entitle the holders thereof to the same
rights and privileges, subject to the same qualifications, limitations and
restrictions.
SECTION 1. VOTING RIGHTS. Except as otherwise provided in this
Part II or as otherwise required by applicable law, all holders of Class A
Common Stock and Common Stock shall be entitled to one vote per share on all
matters to be voted on by the Corporation's stockholders, the holders of Class
A Common Stock and Common Stock shall vote together as a single class.
-3-
<PAGE> 4
SECTION 2. DISTRIBUTIONS. At the time of each Distribution,
such Distribution shall be made to the holders of Class A Common Stock and
Common Stock in the following priority:
(i) The holders of Class A Common Stock shall be entitled
to receive all or a portion of such Distribution (ratably among such holders
based upon the number of shares of Class A Common Stock held by each such
holder as of the time of such Distribution) equal to the aggregate Unreturned
Original Cost of the outstanding shares of Class A Common Stock as of the time
of such Distribution, and no Distribution or any portion thereof shall be made
under Section 2(ii) below until the entire amount of Unreturned Original Cost
of the outstanding shares of Class A Common Stock as of the time of such
Distribution has been paid in full. The Distributions made pursuant to this
paragraph 2(i) to holders of Class A Common Stock shall constitute a return of
Original Cost of Class A Common Stock.
(ii) After the holders of Class A Common Stock have
received Distributions equal to the entire Original Cost thereof pursuant to
paragraph 2(i) above, holders of Common Shares as a group, shall be entitled to
receive the remaining portion of such Distribution (ratably among such holders
based upon the number of Common Shares held by each such holder as of the time
of such Distribution).
(iii) If the Corporation is a party to a merger or
consolidation in which the stockholders of the Corporation receive Merger
Consideration, all of the Merger Consideration shall be deemed to be a
Distribution for purposes of allocating all of such Merger Consideration
between the holders of Class A Common Stock and the holders of Common Stock
under this Section 2.
SECTION 3. STOCK SPLITS AND STOCK DIVIDENDS. The Corporation
shall not in any manner subdivide (by stock split, stock dividend or otherwise)
or combine (by stock split, stock dividend or otherwise) the outstanding Common
Shares of one class unless the outstanding Common Shares of the other class
shall be proportionately subdivided or combined. All such subdivisions and
combinations shall be payable only in Class A Common Stock to the holders of
Class A Common Stock and in Common Stock to the holders of Common Stock. In no
event shall a stock split or stock dividend constitute a return of Original
Cost.
SECTION 4. CONVERSION. Immediately prior to the Public Offering
Time, each share of Class A Common Stock outstanding immediately prior to the
Public Offering Time shall be, without further action by the Corporation or the
holder thereof, changed and converted into a number of shares of Common Stock
equal to the sum of the Unreturned Original Cost on each such share of Class A
Common Stock as of the Public Offering Time divided by the Net Public Offering
Price. Each certificate representing shares of Class A Common Stock shall
automatically represent from and after the Public Offering Time that number of
shares of Common Stock into which such shares of Class A Common Stock have been
converted pursuant to the preceding sentence. When shares of Class A Common
Stock have been converted pursuant to this Section 4, they shall be irrevocably
canceled and not reissued. Following conversion of all of the shares of Class
A Common Stock, no other shares of Class A Common Stock shall be issued, at any
time, by the Corporation.
SECTION 5. REGISTRATION OF TRANSFER. The Corporation shall keep
at its principal office (or such other place as the Corporation reasonably
designates) a register for the registration of
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Common Shares. Upon the surrender of any certificate representing shares of
any class of Common Shares at such place, the Corporation shall, at the request
of the registered holder of such certificate, execute and deliver a new
certificate or certificates in exchange therefor representing in the aggregate
the number of shares of such class represented by the surrendered certificate,
and the Corporation forthwith shall cancel such surrendered certificate. Each
such new certificate will be registered in such name and will represent such
number of shares of such class as is requested by the holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate. The issuance of new certificates shall be made without charge to
the holders of the surrendered certificates for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
issuance.
SECTION 6. REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder will be
satisfactory) of the ownership and the loss, theft, destruction or mutilation
of any certificate evidencing one or more shares of any class of Common Shares,
and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that if the
holder is a financial institution or other institutional investor its own
agreement will be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
SECTION 7. NOTICES. All notices referred to herein shall be in
writing, shall be delivered personally or by first class mail, postage prepaid,
and shall be deemed to have been given when so delivered or mailed to the
Corporation at its principal executive offices and to any stockholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder).
SECTION 8. AMENDMENT AND WAIVER. No amendment or waiver of any
provision of this Article Fourth shall be effective without the prior written
consent of the holders of a majority of the then outstanding Common Shares
voting as a single class; provided that no amendment as to any terms or
provisions of, or for the benefit of, any class of Common Shares that adversely
affects the powers, preferences or special rights of such class of Common
Shares shall be effective without the prior consent of the holders of a
majority of the then outstanding shares of such affected class of Common
Shares, voting as a single class.
III. DEFINITIONS
"DISTRIBUTION" means each distribution made by the Corporation to
holders of Common Shares, whether in cash, property or securities of the
Corporation or any other entity and whether by dividend, liquidating
distributions or otherwise; provided that neither of the following shall be a
Distribution: (a) any redemption or repurchase by the Corporation of any
Common Shares for any reason or (b) any recapitalization or exchange of any
Common Shares for other securities of the Corporation, or any subdivision (by
stock split, stock dividend or otherwise) or any combination (by stock split,
stock dividend or otherwise) of any outstanding Common Shares.
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"GENERAL CORPORATION LAW" means the General Corporation Law of the
State of Delaware, as amended from time to time.
"MERGER CONSIDERATION" means cash, property or securities of an entity
other than the Corporation received by the stockholders of the Corporation in
any merger or consolidation, valued at the fair market value thereof as
determined by the board of directors of the Corporation.
"NET PUBLIC OFFERING PRICE" means the initial public offering price
per share of Common Stock set forth on the front cover page of the final
prospectus included in the Registration Statement referenced in the definition
of Public Offering Time and in the form first used to confirm sales of the
Common Stock, after deduction for any underwriting discount or commissions, but
without deduction for any expenses, incurred by the Corporation in connection
with the initial public offering.
"ORIGINAL COST" of each share of Class A Common Stock shall be equal
to the amount originally paid for such share when it was issued by the
Corporation (as proportionally adjusted for all stock splits, stock dividends
and other recapitalizations affecting the Class A Common Stock), all such
shares shall be deemed to have an Original Cost equal to $24,900 per share (as
proportionally adjusted for all stock splits, stock dividends and other
recapitalizations affecting the Class A Common Stock).
"PUBLIC OFFERING TIME" means the time the Corporation's Registration
Statement on Form S-1 relating to the initial public offering of its Common
Stock is declared effective under Section 8(a) of the Securities Act of 1933,
as amended, by the Securities and Exchange Commission.
"UNRETURNED ORIGINAL COST" of any share of Class A Common Stock means
an amount equal to the excess, if any, of (a) the Original Cost of such share,
over (b) the aggregate amount of Distributions made by the Corporation that
constitute a return of Original Cost of such share.
IV. PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more
classes or series, the shares of each class or series to have any designations
and powers, preferences, and rights, and qualifications, limitations, and
restrictions thereof as are stated and expressed in this Article IV and in the
resolution or resolutions providing for the issue of such class or series
adopted by the board of directors of the Corporation as hereafter prescribed.
Authority is hereby expressly granted to and vested in the board of
directors of the Corporation to authorize the issuance of the Preferred Stock
from time to time in one or more classes or series, and with respect to each
class or series of the Preferred Stock, to state by the resolution or
resolutions from time to time adopted providing for the issuance thereof the
following:
(i) whether or not the class or series is to have voting
rights, special, or limited, or is to be without voting rights, and
whether or not such class or series is to be entitled to vote as a
separate class either alone or together with the holders of one or
more other classes or series of stock;
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(ii) the number of shares to constitute the class or
series and the designations thereof;
(iii) the preferences and relative, participating,
optional, or other special rights, if any, and the qualifications,
limitations, or restrictions thereof, if any, with respect to any
class or series;
(iv) whether or not the shares of any class or series
shall be redeemable at the option of the Corporation or the holders
thereof or upon the happening of any specified event, and, if
redeemable, the redemption price or prices (which may be payable in
the form of cash, notes, securities, or other property), and the time
or times at which, and the terms and conditions upon which, such
shares shall be redeemable and the manner of redemption;
(v) whether or not the shares of a class or series shall
be subject to the operation of retirement or sinking funds to be
applied to the purchase or redemption of such shares for retirement,
and, if such retirement or sinking fund or funds are to be
established, the periodic amount thereof, and the terms and provisions
relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in
cash, stock of the Corporation, or other property, the conditions upon
which and the times when such dividends are payable, the preference to
or the relation to the payment of dividends payable on any other class
or classes or series of stock, whether or not such dividends shall be
cumulative or noncumulative, and if cumulative, the date or dates from
which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof
which the holders of any class or series thereof shall be entitled to
receive upon the voluntary or involuntary dissolution of, or upon any
distribution of the assets of, the Corporation;
(viii) whether or not the shares of any class or series, at
the option of the Corporation or the holder thereof or upon the
happening of any specified event, shall be convertible into or
exchangeable for the shares of any other class or classes or of any
other series of the same or any other class or classes of stock,
securities, or other property of the Corporation and the conversion
price or prices or ratio or ratios or the rate or rates at which such
conversion or exchange may be made, with such adjustments, if any, as
shall be stated and expressed or provided for in such resolution or
resolutions; and
(ix) any other special rights and protective provisions
with respect to any class or series as may to the board of directors
of the Corporation seem advisable.
The shares of each class or series of the Preferred Stock may vary
from the shares of any other class or series thereof in any or all of the
foregoing respects and in any other manner. The board of directors of the
Corporation may increase the number of shares of the Preferred Stock designated
for any existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The board of directors of the Corporation may decrease
the number of shares of the Preferred Stock designated
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for any existing class or series by a resolution subtracting from such class or
series authorized and unissued shares of the Preferred Stock designated for
such existing class or series, and the shares so subtracted shall become
authorized, unissued, and undesignated shares of the Preferred Stock. The
number of authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the outstanding Common Stock,
without a vote of the holders of the Preferred Stock, or of any series thereof,
unless a vote of any such holder is required pursuant to any Preferred Stock
Series Resolution.
V. NO PREEMPTIVE RIGHTS
No holder of shares of stock of the Corporation shall have any
preemptive or other rights, except such rights as are expressly provided by
contract, to purchase or subscribe for or receive any shares of any class, or
series thereof, of stock of the Corporation, whether now or hereafter
authorized, or any warrants, options, bonds, debentures or other securities
convertible into, exchangeable for or carrying any right to purchase any shares
of any class, or series thereof, of stock; but such additional shares of stock
and such warrants, options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase any shares of any
class, or series thereof, of stock may be issued or disposed of by the board of
directors to such persons, and on such terms and for such lawful consideration,
as in its discretion it shall deem advisable or as to which the Corporation
shall have by binding contract agreed.
VI. REGISTERED OWNER
The Corporation shall be entitled to treat the person in whose name
any share of its stock is registered as the owner thereof for all purposes and
shall not be bound to recognize any equitable or other claim to, or interest
in, such share on the part of any other person, whether or not the Corporation
shall have notice thereof, except as expressly provided by applicable law.
VII. GENERAL
Subject to the foregoing provisions of this Amended and Restated
Certificate of Incorporation, the Corporation may issue shares of its Preferred
Stock and Common Stock from time to time for such consideration (not less than
the par value thereof) as may be fixed by the board of directors of the
Corporation, which is expressly authorized to fix the same in its absolute
discretion subject to the foregoing conditions. Shares so issued for which the
consideration shall have been paid or delivered to the Corporation shall be
deemed fully paid stock and shall not be liable to any further call or
assessment thereon, and the holders of such shares shall not be liable for any
further payments in respect of such shares.
The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase shares of the Corporation's capital
stock of any class or series or other securities of the Corporation, and such
rights and options shall be evidenced by instrument(s) approved by the board of
directors of the Corporation. The board of directors of the Corporation shall
be empowered to set the exercise price, duration, times for exercise, and other
terms of such rights or options;
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provided, however, that the consideration to be received for any shares of
capital stock subject thereto shall not be less than the par value thereof.
FIFTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the Corporation
and of its directors and stockholders:
I. DIRECTORS
The number, classification, and terms of the board of directors of the
Corporation and the procedures to elect directors, to remove directors, and to
fill vacancies in the board of directors shall be as follows:
(a) The number of directors that shall constitute the
whole board of directors shall from time to time be fixed exclusively
by the board of directors by a resolution adopted by a majority of the
whole board of directors serving at the time of that vote. In no
event shall the number of directors that constitute the whole board of
directors be fewer than three. No decrease in the number of directors
shall have the effect of shortening the term of any incumbent
director. Directors of the Corporation need not be elected by written
ballot unless the by-laws of the Corporation otherwise provide.
(b) The board of directors of the Corporation shall be
divided into three classes designated Class I, Class II, and Class
III, respectively, all as nearly equal in number as possible, with
each director then in office receiving the classification that at
least a majority of the board of directors designates. The initial
term of office of directors of Class I shall expire at the annual
meeting of stockholders of the Corporation in 1997, of Class II shall
expire at the annual meeting of stockholders of the Corporation in
1998, and of Class III shall expire at the annual meeting of
stockholders of the Corporation in 1999, and in all cases as to each
director until his successor is elected and qualified or until his
earlier death, resignation or removal. At each annual meeting of
stockholders beginning with the annual meeting of stockholders in
1997, each director elected to succeed a director whose term is then
expiring shall hold his office until the third annual meeting of
stockholders after his election and until his successor is elected and
qualified or until his earlier death, resignation or removal. If the
number of directors that constitutes the whole board of directors is
changed as permitted by this Article V, the majority of the whole
board of directors that adopts the change shall also fix and determine
the number of directors comprising each class; provided, however, that
any increase or decrease in the number of directors shall be
apportioned among the classes as equally as possible.
(c) Vacancies in the board of directors resulting from
death, resignation, retirement, disqualification, removal from office,
or other cause and newly-created directorships resulting from any
increase in the authorized number of directors may be filled by no
less than a majority vote of the remaining directors then in office,
though less than a quorum, who are designated to represent the same
class or classes of stockholders that the vacant position, when
filled, is to represent or by the sole remaining director (but not by
the stockholders except as required by law), and each director so
chosen shall receive the
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classification of the vacant directorship to which he has been
appointed or, if it is a newly-created directorship, shall receive the
classification that at least a majority of the board of directors
designates and shall hold office until the first meeting of
stockholders held after his election for the purpose of electing
directors of that classification and until his successor is elected
and qualified or until his earlier death, resignation, or removal from
office.
(d) A director of any class of directors of the
Corporation may be removed before the expiration date of that
director's term of office, only for cause, by an affirmative vote of
the holders of not less than eighty percent (80%) of the votes of the
outstanding shares of the class or classes or series of stock then
entitled to be voted at an election of directors of that class or
series, voting together as a single class, cast at the annual meeting
of stockholders or at any special meeting of stockholders called by a
majority of the whole board of directors for this purpose.
II. POWER TO AMEND BY-LAWS
The by-laws may be altered or repealed and new by-laws may be adopted
(a) at any annual or special meeting of stockholders if notice of the proposed
alteration, repeal or adoption of the new by-law or by-laws be contained in the
notice of such annual or special meeting by the affirmative vote of a majority
of the stock issued and outstanding and entitled to vote thereat, voting
together as a single class, or (b) by the affirmative vote of a majority of the
members present at any regular meeting of the board of directors, or at any
special meeting of the board of directors, without any action on the part of
the stockholders, if notice of the proposed alteration, repeal or adoption of
the new by-law or by-laws be contained in the notice of such regular or special
meeting.
III. STOCKHOLDERS' ACTION -- SPECIAL MEETINGS
After October 15, 1996, no action required to be taken or that may be
taken at any meeting of common stockholders of the Corporation may be taken
without a meeting, and, after such date, the power of common stockholders to
consent in writing, without a meeting, to the taking of any action is
specifically denied.
Special meetings of the stockholders of the Corporation, and any
proposals to be considered at such meetings, may be called and proposed
exclusively by (i) the Chairman of the Board, (ii) the President or (iii) the
board of directors, pursuant to a resolution approved by a majority of the
members of the board of directors at the time in office, and no stockholder of
the Corporation shall require the board of directors to call a special meeting
of common stockholders or to propose business at a special meeting of
stockholders. Except as otherwise required by law or regulation, no business
proposed by a stockholder to be considered at an annual meeting of the
stockholders (including the nomination of any person to be elected as a
director of the Corporation) shall be considered by the stockholders at that
meeting unless, no later than ninety (90) days before the annual meeting of
stockholders or (if later) ten days after the first public notice of that
meeting is sent to stockholders, the Corporation receives from the stockholder
proposing that business a written notice that sets forth (1) the nature of the
proposed business with reasonable particularity, including the exact text of
any proposal to be presented for adoption, and the reasons for conducting that
business at the annual meeting; (2) with respect to each such stockholder, that
stockholder's name
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and address (as they appear on the records of the Corporation), business
address and telephone number, residence address and telephone number, and the
number of shares of each class of stock of the Corporation beneficially owned
by that stockholder; (3) any interest of the stockholder in the proposed
business; (4) the name or names of each person nominated by the stockholder to
be elected or re-elected as a director, if any; and (5) with respect to each
nominee, that nominee's name, business address and telephone number, and
residence address and telephone number, the number of shares, if any, of each
class of stock of the Corporation owned directly and beneficially by that
nominee, and all information relating to that nominee that is required to be
disclosed in solicitations of proxies for elections of directors, or is
otherwise required, pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (or any provision of law
subsequently replacing Regulation 14A), together with a duly acknowledged
letter signed by the nominee stating his or her acceptance of the nomination by
that stockholder, stating his or her intention to serve as director if elected,
and consenting to being named as a nominee for director in any proxy statement
relating to such election. The person presiding at the annual meeting shall
determine whether business (including the nomination of any person as a
director) has been properly brought before the meeting and, if the facts so
warrant, shall not permit any business (or voting with respect to any
particular nominee) to be transacted that has not been properly brought before
the meeting. Notwithstanding any other provisions of this Amended and Restated
Certificate of Incorporation or any provision of law that might otherwise
permit a lesser or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of the capital stock of the
Corporation required by law or by this Amended and Restated Certificate of
Incorporation, the affirmative vote of the holders of not less than eighty
percent (80%) of the shares of the Corporation then entitled to be voted in an
election of directors, voting together as a single class, shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article
Fifth.
SIXTH: ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS AND
INDEMNIFICATION
I. ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS
No director shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty by such director
as a director, except for liability (a) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (b) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the General Corporation Law of the
State of Delaware, or (d) for any transaction from which the director derived
an improper personal benefit. Any amendment or repeal of this Part I of this
Article Sixth shall be prospective only, and neither the amendment nor repeal
of this Part I of this Article Sixth shall eliminate or reduce the effect of
this Part I of this Article Sixth in respect of any matter occurring, or any
cause of action, suit or claim that, but for this Part I of this Article Sixth
would accrue or arise, prior to such amendment or repeal. If the Delaware
General Corporation Law hereafter is amended to authorize corporate action
further eliminating or limiting the liability of directors, then the liability
of a director of the Corporation, in addition to the limitation on personal
liability provided herein, shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended from time to
time.
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II. INDEMNIFICATION AND INSURANCE
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is
made a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was or
has agreed to become a director or officer of the Corporation or is or was
serving or has agreed to serve at the request of the Corporation as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director or officer, or in any other capacity while
serving or having agreed to serve as a director or officer, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said Law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, excise taxes pursuant to the
Employee Retirement Income Security Act of 1974 or penalties and amounts paid
or to be paid in settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person who
has ceased to serve in the capacity which initially entitled such person to
indemnity hereunder and shall inure to the benefit of his or her heirs,
executors and administrators. The right to indemnification conferred in this
Part II of this Article Sixth shall be a contract right and shall include the
right to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that, if the
Delaware General Corporation Law requires, the payment of such expenses
incurred by a current, former or proposed director or officer in his or her
capacity as a director or officer or proposed director or officer (and not in
any other capacity in which service was or is or has been agreed to be rendered
by such person while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final disposition of a
proceeding shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such indemnified person, to repay all amounts
so advanced if it shall ultimately be determined that such indemnified person
is not entitled to be indemnified under this Part II or otherwise. The
Corporation may, by action of its board of directors, provide indemnification
to employees and agents of the Corporation, individually or as a group, with
the same scope and effect as the foregoing indemnification of directors and
officers.
SECTION 2. RIGHT OF CLAIMANT TO BRING SUIT. If a written claim
from or on behalf of an indemnified party under Section 1 of this Part II is
not paid in full by the Corporation within thirty days after such written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall be entitled to be
paid also the expense of prosecuting such claim. It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standard of conduct which makes
it permissible under the Delaware General Corporation Law for the Corporation
to indemnify the claimant for the amount claimed, but the burden of proving
such defense shall be on the Corporation. Neither the failure of the
Corporation
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(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The right to
indemnification and the advancement and payment of expenses conferred in this
Part II shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of this Amended and Restated
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
SECTION 4. INSURANCE. The Corporation may maintain insurance,
at its expense, to protect itself and any person who is or was serving as a
director, officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
SECTION 5. SAVINGS CLAUSE. If this Part II or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify and hold
harmless each director and officer of the Corporation, as to costs, charges and
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative to the full extent permitted by any
applicable portion of this Part II that shall not have been invalidated and to
the fullest extent permitted by applicable law.
SECTION 6. DEFINITIONS. For purposes of this Part II, reference
to the "Corporation" shall include, in addition to the Corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger prior to (or, in the case of an entity
specifically designated in a resolution of the board of directors, after) the
adoption hereof and which, if its separate existence had continued, would have
had the power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Part II with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
SEVENTH: No contract or transaction between the Corporation and one
or more of its directors, officers, or stockholders or between the Corporation
and any person (as used herein "person" means any corporation, partnership,
association, firm, trust, joint venture, political subdivision, or
instrumentality) or other organization in which one or more of its directors,
officers,
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<PAGE> 14
or stockholders are directors, officers, or stockholders, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
board or any committee thereof which authorizes the contract or transaction, or
solely because his, her, or their votes are counted for such purpose, if: (i)
the material facts as to his or her relationship or interest and as to the
contract or transaction are disclosed or are known to the board of directors or
the committee, and the board of directors or the committee in good faith
authorizes the contract or transaction by the affirmative votes of a majority
of the disinterested directors, even though the disinterested directors be less
than a quorum; or (ii) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by majority vote of the stockholders; or
(iii) the contract or transaction is fair as to the Corporation as of the time
it is authorized, approved, or ratified by the board of directors, a committee
thereof, or the stockholders. Interested directors may be counted in
determining the presence of a quorum at a meeting of the board of directors or
of a committee which authorizes the contract or transaction.
EIGHTH: The Corporation reserves the right to amend, change, or
repeal any provision contained in the Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed by law, and all rights
and powers conferred herein on stockholders, directors, and officers are
subject to this reserved power.
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<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
NOW HOLDINGS, INC.
A Delaware Corporation
Date of Adoption:
July 15,1995
<PAGE> 2
NOW HOLDINGS, INC.
BYLAWS
TABLE OF CONTENTS
<TABLE>
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Article I
Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Article II
Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Quorum; Adjournment of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 4. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 5. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 6. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 7. Stock List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 8. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 9. Voting; Elections; Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 10. Conduct of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 11. Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 12. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Article III
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1. Power; Number; Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. Place of Meetings; Order of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. First Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 8. Vacancies; Increases in the Number of Directors . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 9. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
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Section 10. Action Without a Meeting; Telephone Conference Meeting . . . . . . . . . . . . . . . . . . . . . 6
Section 11. Approval or Ratification of Acts or Contracts by Stockholders . . . . . . . . . . . . . . . . . . 7
Article IV
Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1. Designation; Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2. Procedure; Meetings; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Substitution of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Article V
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. Number, Titles and Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Powers and Duties of the Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6. Powers and Duties of the Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7. Powers and Duties of the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 9. Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 10. Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 11. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 12. Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 13. Action with Respect to Securities of Other Corporations . . . . . . . . . . . . . . . . . . . . 10
Article VI
Indemnification of Directors,Officers, Employees and Agents . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1. Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2. Indemnification of Employees and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3. Right of Claimant to Bring Suit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4. Nonexclusivity of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6. Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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Article VII
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1. Certificates of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4. Regulations Regarding Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. Lost or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Article VIII
Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3. Notice and Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5. Facsimile Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6. Reliance upon Books, Reports and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Article IX
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 5
DELAWARE BYLAWS
OF
NOW HOLDINGS, INC.
Article I
Offices
Section 1. Registered Office. The registered office of the
Corporation required by the General Corporation Law of the State of Delaware to
be maintained in the State of Delaware, shall be the registered office named in
the original Certificate of Incorporation of the Corporation, or such other
office as may be designated from time to time by the Board of Directors in the
manner provided by law. Should the Corporation maintain a principal office
within the State of Delaware such registered office need not be identical to
such principal office of the Corporation.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
Article II
Stockholders
Section 1. Place of Meetings. All meetings of the stockholders shall
be held at the principal office of the Corporation, or at such other place
within or without the State of Delaware as shall be specified or fixed in the
notices or waivers of notice thereof.
Section 2. Quorum; Adjournment of Meetings. Unless otherwise
required by law or provided in the Certificate of Incorporation or these
bylaws, the holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at any meeting of stockholders for the transaction of
business and the act of a majority of such stock so represented at any meeting
of stockholders at which a quorum is present shall constitute the act of the
meeting of stockholders. The stockholders present at a duly organized meeting
may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Notwithstanding the other provisions of the Certificate of
Incorporation or these bylaws, the chairman of the meeting or the holders of a
majority of the issued and outstanding stock, present in person or represented
by proxy, at any meeting of stockholders, whether or not a quorum is present,
shall have the power to adjourn such meeting from time to time, without any
notice other than announcement at the meeting of the time and place of the
holding of the adjourned meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at such meeting. At such
<PAGE> 6
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally called.
Section 3. Annual Meetings. An annual meeting of the stockholders,
for the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, within or without the State of Delaware, on such
date, and at such time as the Board of Directors shall fix and set forth in the
notice of the meeting, which date shall be within thirteen (13) months
subsequent to the later of the date of incorporation or the last annual meeting
of stockholders.
Section 4. Special Meetings. Unless otherwise provided in the
Certificate of Incorporation, special meetings of the stockholders for any
purpose or purposes may be called at any time by the Chairman of the Board (if
any), by the President or by a majority of the Board of Directors, or by a
majority of the executive committee (if any), and shall be called by the
Chairman of the Board (if any), by the President or the Secretary upon the
written request therefor, stating the purpose or purposes of the meeting,
delivered to such officer, signed by the holder(s) of at least ten percent
(l0%) of the issued and outstanding stock entitled to vote at such meeting.
Section 5. Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors of the Corporation
may fix, in advance, a date as the record date for any such determination of
stockholders, which date shall not be more than sixty (60) days nor less than
ten (l0) days before the date of such meeting, nor more than sixty (60) days
prior to any other action.
If the Board of Directors does not fix a record date for any meeting
of the stockholders, the record date for determining stockholders entitled to
notice of or to vote at such meeting shall be at the close of business on the
day next preceding the day on which notice is given, or, if in accordance with
Article VIII, Section 3 of these bylaws notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. If,
in accordance with Section 12 of this Article II, corporate action without a
meeting of stockholders is to be taken, the record date for determining
stockholders entitled to express consent to such corporate action in writing,
when no prior action by the Board of Directors is necessary, shall be the day
on which the first written consent is expressed. The record date for
determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
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<PAGE> 7
Section 6. Notice of Meetings. Written notice of the place, date and
hour of all meetings, and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall be given by or at the direction
of the Chairman of the Board (if any) or the President, the Secretary or the
other person(s) calling the meeting to each stockholder entitled to vote
thereat not less than ten (10) nor more than sixty (60) days before the date of
the meeting. Such notice may be delivered either personally or by mail. If
mailed, notice is given when deposited in the United States mail, postage
prepaid, directed to the stockholder at his address as it appears on the
records of the Corporation.
Section 7. Stock List. A complete list of stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and the number
of shares registered in the name of such stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The stock list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
Section 8. Proxies. Each stockholder entitled to vote at a meeting
of stockholders or to express consent or dissent to a corporate action in
writing without a meeting may authorize another person or persons to act for
him by proxy. Proxies for use at any meeting of stockholders shall be filed
with the Secretary, or such other officer as the Board of Directors may from
time to time determine by resolution, before or at the time of the meeting.
All proxies shall be received and taken charge of and all ballots shall be
received and canvassed by the secretary of the meeting who shall decide all
questions touching upon the qualification of voters, the validity of the
proxies, and the acceptance or rejection of votes, unless an inspector or
inspectors shall have been appointed by the chairman of the meeting, in which
event such inspector or inspectors shall decide all such questions.
No proxy shall be valid after three (3) years from its date, unless
the proxy provides for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power.
Should a proxy designate two or more persons to act as proxies, unless
such instrument shall provide the contrary, a majority of such persons present
at any meeting at which their powers thereunder are to be exercised shall have
and may exercise all the powers of voting or giving consents thereby conferred,
or if only one be present, then such powers may be exercised by that one; or,
if an even number attend and a majority do not agree on any particular issue,
each proxy so attending shall be entitled to exercise such powers in respect of
the same portion of the shares as he is of the proxies representing such
shares.
Section 9. Voting; Elections; Inspectors. Unless otherwise required
by law or provided in the Certificate of Incorporation, each stockholder shall
have one vote for each share of stock
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<PAGE> 8
entitled to vote which is registered in his name on the record date for the
meeting. Shares registered in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the bylaw (or
comparable instrument) of such corporation may prescribe, or in the absence of
such provision, as the Board of Directors (or comparable body) of such
corporation may determine. Shares registered in the name of a deceased person
may be voted by his executor or administrator, either in person or by proxy.
All voting, except as required by the Certificate of Incorporation or
where otherwise required by law, may be by a voice vote; provided, however,
that upon demand therefor by stockholders holding a majority of the issued and
outstanding stock present in person or by proxy at any meeting a stock vote
shall be taken. Every stock vote shall be taken by written ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
All elections of directors shall be by ballot, unless otherwise provided in the
Certificate of Incorporation.
At any meeting at which a vote is taken by ballots, the chairman of
the meeting may appoint one or more inspectors, each of whom shall subscribe an
oath or affirmation to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of his ability.
Such inspector shall receive the ballots, count the votes and make and sign a
certificate of the result thereof. The chairman of the meeting may appoint any
person to serve as inspector, except no candidate for the office of director
shall be appointed as an inspector.
Unless otherwise provided in the Certificate of Incorporation,
cumulative voting for the election of directors shall be prohibited.
Section 10. Conduct of Meetings. The meetings of the stockholders
shall be presided over by the Chairman of the Board (if any), or if he is not
present, by the President, or if neither the Chairman of the Board (if any),
nor President is present, by a chairman elected at the meeting. The Secretary
of the Corporation, if present, shall act as secretary of such meetings, or if
he is not present, an Assistant Secretary shall so act; if neither the
Secretary nor an Assistant Secretary is present, then a secretary shall be
appointed by the chairman of the meeting. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him in order. Unless the chairman of the meeting of
stockholders shall otherwise determine, the order of business shall be as
follows:
(a) Calling of meeting to order.
(b) Election of a chairman and the appointment of a secretary if
necessary.
(c) Presentation of proof of the due calling of the meeting.
(d) Presentation and examination of proxies and determination of a
quorum.
(e) Reading and settlement of the minutes of the previous meeting.
(f) Reports of officers and committees.
(g) The election of directors if an annual meeting, or a meeting
called for that purpose.
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<PAGE> 9
(h) Unfinished business.
(i) New business.
(j) Adjournment.
Section 11. Treasury Stock. The Corporation shall not vote, directly
or indirectly, shares of its own stock owned by it and such shares shall not be
counted for quorum purposes.
Section 12. Action Without Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action permitted or required by law, the
Certificate of Incorporation or these bylaws to be taken at a meeting of
stockholders, may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than a unanimous written consent shall be given by the Secretary to those
stockholders who have not consented in writing.
Article III
Board of Directors
Section 1. Power; Number; Term of Office. The business and affairs
of the Corporation shall be managed by or under the direction of the Board of
Directors, and subject to the restrictions imposed by law or the Certificate of
Incorporation, they may exercise all the powers of the Corporation.
The number of directors which shall constitute the whole Board of
Directors, shall be determined from time to time by resolution of the Board of
Directors (provided that no decrease in the number of directors which would
have the effect of shortening the term of an incumbent director may be made by
the Board of Directors). If the Board of Directors makes no such
determination, the number of directors shall be the number set forth in the
Certificate of Incorporation. Each director shall hold office for the term for
which he is elected, and until his successor shall have been elected and
qualified or until his earlier death, resignation or removal.
Unless otherwise provided in the Certificate of Incorporation,
directors need not be stockholders nor residents of the State of Delaware.
Section 2. Quorum. Unless otherwise provided in the Certificate of
Incorporation, a majority of the total number of directors shall constitute a
quorum for the transaction of business of the Board of Directors and the vote
of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Section 3. Place of Meetings; Order of Business. The directors may
hold their meetings and may have an office and keep the books of the
Corporation, except as otherwise provided by
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<PAGE> 10
law, in such place or places, within or without the State of Delaware, as the
Board of Directors may from time to time determine by resolution. At all
meetings of the Board of Directors business shall be transacted in such order
as shall from time to time be determined by the Chairman of the Board (if any),
or in his absence by the President, or by resolution of the Board of Directors.
Section 4. First Meeting. Each newly elected Board of Directors may
hold its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as
the annual meeting of the stockholders. Notice of such meeting shall not be
required. At the first meeting of the Board of Directors in each year at which
a quorum shall be present, held next after the annual meeting of stockholders,
the Board of Directors shall proceed to the election of the officers of the
Corporation.
Section 5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as shall be designated from
time to time by resolution of the Board of Directors. Notice of such regular
meetings shall not be required.
Section 6. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board (if any), the President
or, on the written request of any two directors, by the Secretary, in each case
on at least twenty-four (24) hours personal, written, telegraphic, cable or
wireless notice to each director. Such notice, or any waiver thereof pursuant
to Article VIII, Section 3 hereof, need not state the purpose or purposes of
such meeting, except as may otherwise be required by law or provided for in the
Certificate of Incorporation or these bylaws.
Section 7. Removal. Any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided that, unless
the Certificate of Incorporation otherwise provides, if the Board of Directors
is classified, then the stockholders may effect such removal only for cause;
and provided further that, if the Certificate of Incorporation expressly grants
to stockholders the right to cumulate votes for the election of directors and
if less than the entire board is to be removed, no director may be removed
without cause if the votes cast against his removal would be sufficient to
elect him if then cumulatively voted at an election of the entire Board of
Directors, or, if there be classes of directors, at an election of the class of
directors of which such director is a part.
Section 8. Vacancies; Increases in the Number of Directors. Unless
otherwise provided in the Certificate of Incorporation, vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office, although
less than a quorum, or a sole remaining director; and any director so chosen
shall hold office until the next annual election and until his successor shall
be duly elected and shall qualify, unless sooner displaced.
If the directors of the Corporation are divided into classes, any
directors elected to fill vacancies or newly created directorships shall hold
office until the next election of the class for
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which such directors shall have been chosen, and until their successors shall
be duly elected and shall qualify.
Section 9. Compensation. Unless otherwise restricted by the
Certificate of Incorporation, the Board of Directors shall have the authority
to fix the compensation of directors.
Section 10. Action Without a Meeting; Telephone Conference Meeting.
Unless otherwise restricted by the Certificate of Incorporation, any action
required or permitted to be taken at any meeting of the Board of Directors, or
any committee designated by the Board of Directors, may be taken without a
meeting if all members of the Board of Directors or committee, as the case may
be consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee. Such consent
shall have the same force and effect as a unanimous vote at a meeting, and may
be stated as such in any document or instrument filed with the Secretary of
State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation,
subject to the requirement for notice of meetings, members of the Board of
Directors, or members of any committee designated by the Board of Directors,
may participate in a meeting of such Board of Directors or committee, as the
case may be, by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in such a meeting shall constitute presence in
person at such meeting, except where a person participates in the meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
Section 11. Approval or Ratification of Acts or Contracts by
Stockholders. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the
stockholders, or at any special meeting of the stockholders called for the
purpose of considering any such act or contract, and any act or contract that
shall be approved or be ratified by the vote of the stockholders holding a
majority of the issued and outstanding shares of stock of the Corporation
entitled to vote and present in person or by proxy at such meeting (provided
that a quorum is present), shall be as valid and as binding upon the
Corporation and upon all the stockholders as if it has been approved or
ratified by every stockholder of the Corporation. In addition, any such act or
contract may be approved or ratified by the written consent of stockholders
holding a majority of the issued and outstanding shares of capital stock of the
Corporation entitled to vote and such consent shall be as valid and as binding
upon the Corporation and upon all the stockholders as if it had been approved
or ratified by every stockholder of the Corporation.
Article IV
Committees
Section 1. Designation; Powers. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, including, if they shall so
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determine, an executive committee, each such committee to consist of one or
more of the directors of the Corporation. Any such designated committee shall
have and may exercise such of the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation as
may be provided in such resolution, except that no such committee shall have
the power or authority of the Board of Directors in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution
of the Corporation, or amending, altering or repealing the bylaws or adopting
new bylaws for the Corporation and, unless such resolution or the Certificate
of Incorporation expressly so provides, no such committee shall have the power
or authority to declare a dividend or to authorize the issuance of stock. Any
such designated committee may authorize the seal of the Corporation to be
affixed to all papers which may require it. In addition to the above such
committee or committees shall have such other powers and limitations of
authority as may be determined from time to time by resolution adopted by the
Board of Directors.
Section 2. Procedure; Meetings; Quorum. Any committee designated
pursuant to Section 1 of this Article shall choose its own chairman, shall keep
regular minutes of its proceedings and report the same to the Board of
Directors when requested, shall fix its own rules or procedures, and shall meet
at such times and at such place or places as may be provided by such rules, or
by resolution of such committee or resolution of the Board of Directors. At
every meeting of any such committee, the presence of a majority of all the
members thereof shall constitute a quorum and the affirmative vote of a
majority of the members present shall be necessary for the adoption by it of
any resolution.
Section 3. Substitution of Members. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of such committee. In
the absence or disqualification of a member of a committee, the member or
members present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of the absent or disqualified
member.
Article V
Officers
Section 1. Number, Titles and Term of Office. The officers of the
Corporation shall be a President, one or more Vice Presidents (any one or more
of whom may be designated Executive Vice President or Senior Vice President), a
Treasurer, a Secretary and, if the Board of Directors so elects, a Chairman of
the Board and such other officers as the Board of Directors may from time to
time elect or appoint. Each officer shall hold office until his successor
shall be duly elected and shall qualify or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided. Any
number of offices may be held by the same person, unless
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the Certificate of Incorporation provides otherwise. Except for the Chairman
of the Board, if any, no officer need be a director.
Section 2. Salaries. The salaries or other compensation of the
officers and agents of the Corporation shall be fixed from time to time by the
Board of Directors.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed, either with or without cause, by the vote of
a majority of the whole Board of Directors at a special meeting called for the
purpose, or at any regular meeting of the Board of Directors, provided the
notice for such meeting shall specify that the matter of any such proposed
removal will be considered at the meeting but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election
or appointment of an officer or agent shall not of itself create contract
rights.
Section 4. Vacancies. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.
Section 5. Powers and Duties of the Chief Executive Officer. The
President shall be the chief executive officer of the Corporation unless the
Board of Directors designates the Chairman of the Board as chief executive
officer. Subject to the control of the Board of Directors and the executive
committee (if any), the chief executive officer shall have general executive
charge, management and control of the properties, business and operations of
the Corporation with all such powers as may be reasonably incident to such
responsibilities; he may agree upon and execute all leases, contracts,
evidences of indebtedness and other obligations in the name of the Corporation
and may sign all certificates for shares of capital stock of the Corporation;
and shall have such other powers and duties as designated in accordance with
these bylaws and as from time to time may be assigned to him by the Board of
Directors.
Section 6. Powers and Duties of the Chairman of the Board. If
elected, the Chairman of the Board shall preside at all meetings of the
stockholders and of the Board of Directors; and he shall have such other powers
and duties as designated in these bylaws and as from time to time may be
assigned to him by the Board of Directors.
Section 7. Powers and Duties of the President. Unless the Board of
Directors otherwise determines, the President shall have the authority to agree
upon and execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Corporation; and, unless the Board of Directors
otherwise determines, he shall, in the absence of the Chairman of the Board or
if there be no Chairman of the Board, preside at all meetings of the
stockholders and (should he be a director) of the Board of Directors; and he
shall have such other powers and duties as designated in accordance with these
bylaws and as from time to time may be assigned to him by the Board of
Directors.
Section 8. Vice Presidents. In the absence of the President, or in
the event of his inability or refusal to act, a Vice President designated by
the Board of Directors shall perform the duties
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of the President, and when so acting shall have all the powers of and be
subject to all the restrictions upon the President. In the absence of a
designation by the Board of Directors of a Vice President to perform the duties
of the President, or in the event of his absence or inability or refusal to
act, the Vice President who is present and who is senior in terms of time as a
Vice President of the Corporation shall so act. The Vice Presidents shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 9. Treasurer. The Treasurer shall have responsibility for
the custody and control of all the funds and securities of the Corporation, and
he shall have such other powers and duties as designated in these bylaws and as
from time to time may be assigned to him by the Board of Directors. He shall
perform all acts incident to the position of Treasurer, subject to the control
of the chief executive officer and the Board of Directors; and he shall, if
required by the Board of Directors, give such bond for the faithful discharge
of his duties in such form as the Board of Directors may require.
Section 10. Assistant Treasurers. Each Assistant Treasurer shall
have the usual powers and duties pertaining to his office, together with such
other powers and duties as designated in these bylaws and as from time to time
may be assigned to him by the chief executive officer or the Board of
Directors. The Assistant Treasurers shall exercise the powers of the Treasurer
during that officer's absence or inability or refusal to act.
Section 11. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors, committees of directors and the
stockholders, in books provided for that purpose; he shall attend to the giving
and serving of all notices; he may in the name of the Corporation affix the
seal of the Corporation to all contracts of the Corporation and attest the
affixation of the seal of the Corporation thereto; he may sign with the other
appointed officers all certificates for shares of capital stock of the
Corporation; he shall have charge of the certificate books, transfer books and
stock ledgers, and such other books and papers as the Board of Directors may
direct, all of which shall at all reasonable times be open to inspection of any
director upon application at the office of the Corporation during business
hours; he shall have such other powers and duties as designated in these bylaws
and as from time to time may be assigned to him by the Board of Directors; and
he shall in general perform all acts incident to the office of Secretary,
subject to the control of the chief executive officer and the Board of
Directors.
Section 12. Assistant Secretaries. Each Assistant Secretary shall
have the usual powers and duties pertaining to his office, together with such
other powers and duties as designated in these bylaws and as from time to time
may be assigned to him by the chief executive officer or the Board of
Directors. The Assistant Secretaries shall exercise the powers of the
Secretary during that officer's absence or inability or refusal to act.
Section 13. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the chief executive
officer shall have power to vote and otherwise act on behalf of the
Corporation, in person or by proxy, at any meeting of security holders of or
with respect to any action of security holders of any other corporation in
which this
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Corporation may hold securities and otherwise to exercise any and all rights
and powers which this Corporation may possess by reason of its ownership of
securities in such other corporation.
Article VI
Indemnification of Directors,
Officers, Employees and Agents
Section 1. Right to Indemnification. Each person who was or is made
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she or a person
of whom he or she is the legal representative, is or was or has agreed to
become a director or officer of the Corporation or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as a director or officer or in any other capacity while serving or
having agreed to serve as a director or officer, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended, (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment) against all
expense, liability and loss (including without limitation, attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as to a person who
has ceased to serve in the capacity which initially entitled such person to
indemnity hereunder and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the board of directors of the Corporation.
The right to indemnification conferred in this Article VI shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if the Delaware General Corporation Law requires, the
payment of such expenses incurred by a current, former or proposed director or
officer in his or her capacity as a director or officer or proposed director or
officer (and not in any other capacity in which service was or is or has been
agreed to be rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in advance of the
final disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such indemnified person, to
repay all amounts so advanced if it shall ultimately be determined that such
indemnified person is not entitled to be indemnified under this Section or
otherwise.
Section 2. Indemnification of Employees and Agents. The Corporation
may, by action of its Board of Directors, provide indemnification to employees
and agents of the Corporation,
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individually or as a group, with the same scope and effect as the
indemnification of directors and officers provided for in this Article.
Section 3. Right of Claimant to Bring Suit. If a written claim
received by the Corporation from or on behalf of an indemnified party under
this Article VI is not paid in full by the Corporation within ninety days after
such receipt, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 4. Nonexclusivity of Rights. The right to indemnification
and the advancement and payment of expenses conferred in this Article VI shall
not be exclusive of any other right which any person may have or hereafter
acquire under any law (common or statutory), provision of the Certificate of
Incorporation of the Corporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 5. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any person who is or was serving as a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section 6. Savings Clause. If this Article VI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify and hold harmless each director
and officer of the Corporation, as to costs, charges and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative to the full extent permitted by any applicable portion of this
Article VI that shall not have been invalidated and to the fullest extent
permitted by applicable law.
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Section 7. Definitions. For purposes of this Article, reference to
the "Corporation" shall include, in addition to the Corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger prior to (or, in the case of an entity
specifically designated in a resolution of the Board of Directors, after) the
adoption hereof and which, if its separate existence had continued, would have
had the power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
Article VII
Capital Stock
Section 1. Certificates of Stock. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
that required by law and the Certificate of Incorporation, as shall be approved
by the Board of Directors. The Chairman of the Board (if any), President or a
Vice President shall cause to be issued to each stockholder one or more
certificates, under the seal of the Corporation or a facsimile thereof if the
Board of Directors shall have provided for such seal, and signed by the
Chairman of the Board (if any), President or a Vice President and the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer certifying
the number of shares (and, if the stock of the Corporation shall be divided
into classes or series, the class and series of such shares) owned by such
stockholder in the Corporation; provided, however, that any of or all the
signatures on the certificate may be facsimile. The stock record books and the
blank stock certificate books shall be kept by the Secretary, or at the office
of such transfer agent or transfer agents as the Board of Directors may from
time to time by resolution determine. In case any officer, transfer agent or
registrar who shall have signed or whose facsimile signature or signatures
shall have been placed upon any such certificate or certificates shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued by the Corporation, such certificate may nevertheless be issued by
the Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue. The stock certificates shall
be consecutively numbered and shall be entered in the books of the Corporation
as they are issued and shall exhibit the holder's name and number of shares.
Section 2. Transfer of Shares. The shares of stock of the
Corporation shall be transferable only on the books of the Corporation by the
holders thereof in person or by their duly authorized attorneys or legal
representatives upon surrender and cancellation of certificates for a like
number of shares. Upon surrender to the Corporation or a transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
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Section 3. Ownership of Shares. The Corporation shall be entitled to
treat the holder of record of any share or shares of capital stock of the
Corporation as the holder in fact thereof and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
Delaware.
Section 4. Regulations Regarding Certificates. The Board of
Directors shall have the power and authority to make all such rules and
regulations as they may deem expedient concerning the issue, transfer and
registration or the replacement of certificates for shares of capital stock of
the Corporation.
Section 5. Lost or Destroyed Certificates. The Board of Directors
may determine the conditions upon which a new certificate of stock may be
issued in place of a certificate which is alleged to have been lost, stolen or
destroyed; and may, in their discretion, require the owner of such certificate
or his legal representative to give bond, with sufficient surety, to indemnify
the Corporation and each transfer agent and registrar against any and all
losses or claims which may arise by reason of the issue of a new certificate in
the place of the one so lost, stolen or destroyed.
Article VIII
Miscellaneous Provisions
Section 1. Fiscal Year. The fiscal year of the Corporation shall be
such as established from time to time by the Board of Directors.
Section 2. Corporate Seal. The Board of Directors may provide a
suitable seal, containing the name of the Corporation. The Secretary shall
have charge of the seal (if any). If and when so directed by the Board of
Directors or a committee thereof, duplicates of the seal may be kept and used
by the Treasurer or by the Assistant Secretary or Assistant Treasurer.
Section 3. Notice and Waiver of Notice. Whenever any notice is
required to be given by law, the Certificate of Incorporation or under the
provisions of these bylaws, said notice shall be deemed to be sufficient if
given (i) by telegraphic, cable or wireless transmission or (ii) by deposit of
the same in a post office box in a sealed prepaid wrapper addressed to the
person entitled thereto at his post office address, as it appears on the
records of the Corporation, and such notice shall be deemed to have been given
on the day of such transmission or mailing, as the case may be.
Whenever notice is required to be given by law, the Certificate of
Incorporation or under any of the provisions of these bylaws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
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Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice unless so required
by the Certificate of Incorporation or the bylaws.
Section 4. Resignations. Any director, member of a committee or
officer may resign at any time. Such resignation shall be made in writing and
shall take effect at the time specified therein, or if no time be specified, at
the time of its receipt by the chief executive officer or Secretary. The
acceptance of a resignation shall not be necessary to make it effective, unless
expressly so provided in the resignation.
Section 5. Facsimile Signatures. In addition to the provisions for
the use of facsimile signatures elsewhere specifically authorized in these
bylaws, facsimile signatures of any officer or officers of the Corporation may
be used whenever and as authorized by the Board of Directors.
Section 6. Reliance upon Books, Reports and Records. Each director
and each member of any committee designated by the Board of Directors shall, in
the performance of his duties, be fully protected in relying in good faith upon
the books of account or reports made to the Corporation by any of its officers,
or by an independent certified public accountant, or by an appraiser selected
with reasonable care by the Board of Directors or by any such committee, or in
relying in good faith upon other records of the Corporation.
Article IX
Amendments
If provided in the Certificate of Incorporation of the Corporation,
the Board of Directors shall have the power to adopt, amend and repeal from
time to time bylaws of the Corporation, subject to the right of the
stockholders entitled to vote with respect thereto to amend or repeal such
bylaws as adopted or amended by the Board of Directors.
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into between
National-Oilwell, L.P. having offices at 5555 San Felipe, Houston, Texas 77056
("Employer"), an indirect subsidiary of NOW Holdings, Inc. ("NOW"), and Joel V.
Staff, an individual currently residing at One Winners Circle, Houston, Texas
77024 ("Employee"), to be effective as of January 1, 1996.
NOW has acquired all of the equity interests in Employer. Employer
presently employs Employee pursuant to an employment agreement dated June 30,
1993. In connection with the acquisition of Employer by NOW, Employer is
desirous of continuing to employ Employee pursuant to the terms and conditions
and for the consideration set forth in this Agreement and of terminating the
existing employment agreement, and Employee is desirous of continuing in the
employ of Employer pursuant to such terms and conditions and for such
consideration set forth in this Agreement and of terminating the existing
employment agreement.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants, and obligations contained herein, Employer, NOW and Employee agree
as follows:
1. EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning January 1, 1996 and continuing throughout the
Term (as defined below) of this Agreement, subject to the terms and conditions
of this Agreement.
1.2. Employee shall serve as Chairman of the Board, President and
Chief Executive Officer of NOW and of the general partner of Employer and as a
director of NOW and of the general partner of the Employer. Employee agrees to
serve in the assigned position and to perform diligently and to the best of
Employee's abilities the duties and services appertaining to such position as
determined by Employer or NOW, as well as such additional or different duties
and services appropriate to such position which Employee from time to time may
be reasonably directed to perform by Employer or NOW. Employee shall at all
times comply with and be subject to such policies and procedures as Employer or
NOW may establish from time to time, including without limitation, the
Statement of Policy on Business Ethics, Statement of Policy Regarding Conflict
of Interest, Antitrust Laws, and Statement of Policy Regarding Improper
Business Payment, all of which are attached hereto as Annex I.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interests of Employer, NOW, or any of their subsidiaries or affiliates, or
requires any significant portion of Employee's business time.
1.4. Employee acknowledges and agrees that Employee owes a
fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of Employer, NOW, or any of their subsidiaries or affiliates and
to do no act which would injure the business, interests, or reputation of
Employer, NOW, or any of their subsidiaries or affiliates. In keeping with
these duties, Employee shall make full disclosure to Employer and to NOW of all
business opportunities pertaining to Employer's business and shall not
appropriate for Employee's own benefit business opportunities concerning the
subject matter of the fiduciary relationship.
<PAGE> 2
2. COMPENSATION AND BENEFITS:
2.1. Employee's initial base salary under this Agreement shall be
$275,000 per annum and shall be paid in bi-weekly installments in accordance
with Employer's standard payroll practice. Employee's base salary may be
increased from time to time by NOW and Employer and, after any such change,
Employee's new level of base salary shall be Employee's base salary for
purposes of this Agreement until the effective date of any subsequent change.
2.2 Employee's participation in bonus plans shall be governed by
the National-Oilwell Management Incentive Program, NOW's Value Appreciation and
Incentive Plan A and NOW's Value Appreciation and Incentive Plan B.
2.3. NOW and Employee shall enter into a separate written
restricted stock agreement pursuant to which Employee shall be granted shares
of restricted common stock of NOW subject to the terms and conditions of NOW's
Stock Award and Long-Term Incentive Plan. The number of shares and terms of
such restrictions shall be as specified in such other written agreement.
2.4. While employed by Employer, Employee shall be allowed to
participate, on the same basis generally as other employees of Employer, in all
general employee benefit plans and programs, including improvements or
modifications of the same, which on the effective date or thereafter are made
available by Employer to all or substantially all of Employer's employees.
Such benefits, plans, and programs may include, without limitation, medical,
health, and dental care, life insurance, disability protection, and pension
plans. Nothing in this Agreement is to be construed or interpreted to provide
greater rights, participation, coverage, or benefits under such benefit plans
or programs than provided to similarly situated employees pursuant to the terms
and conditions of such benefit plans and programs.
2.5. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of NOW, none of the benefits or arrangements
described in this Article 2 shall be secured or funded in any way, and each
shall instead constitute an unfunded and unsecured promise to pay money in the
future exclusively from the general assets of Employer and its subsidiaries and
affiliates.
2.6. Employer may withhold from any compensation, benefits, or
amounts payable under this Agreement all federal, state, city, or other taxes
as may be required pursuant to any law or governmental regulation or ruling.
3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION
PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:
3.1. The term of this Agreement shall be for two years and shall be
automatically extended each day, from January 1, 1996.
3.2. Notwithstanding any other provisions of this Agreement, NOW
and Employer shall have the right to terminate Employee's employment under this
Agreement at any time for any of the following reasons:
<PAGE> 3
(i) For "cause" upon the determination by NOW's Board of Directors
that "cause" exists for the termination of the employment
relationship. As used in this Section 3.2(i), the term
"cause" shall mean (a) Employee has engaged in gross
negligence, gross incompetence or willful misconduct in the
performance of, or Employee's willful refusal without proper
reason to perform, the duties and services required of
Employee pursuant to this Agreement; (b) Employee has been
convicted of a felony involving moral turpitude; or (c)
Employee's material breach of any material provision of this
Agreement or corporate code or policy. It is expressly
acknowledged and agreed that the decision as to whether
"cause" exists for termination of the employment relationship
by Employer is delegated to NOW's Board of Directors for
determination. Employee, if he so requests, after reasonable
notice of such Board of Directors meeting, shall be entitled
to be heard before the Board of Directors. If Employee
disagrees with the decision reached by NOW's Board of
Directors, the dispute will be limited to whether NOW's Board
of Directors reached its decision in good faith;
(ii) for any other reason whatsoever, including termination without
cause, in the sole discretion of NOW's Board of Directors;
(iii) Upon Employee's being offered employment by a successor to all
or a portion of Employee's or NOW's business or assets with
(a) comparable responsibilities, (b) the same or greater base
salary and management incentive plan participations as then in
effect, (c) comparable value for his participations in the
Value Appreciation and Incentive Plans A and B and his
restricted stock that remain subject to forfeiture
restrictions in either restricted stock or stock options, and
(d) comparable severance benefits, and in the same
metropolitan area.
(iv) upon Employee's death; or
(v) upon Employee's becoming incapacitated by accident, sickness,
or other circumstance which in the reasonable opinion of a
qualified doctor approved by NOW's Board of Directors renders
him mentally or physically incapable of performing the duties
and services required of Employee, and which will continue in
the reasonable opinion of such doctor for a period of not less
than 180 days.
The termination of Employee's employment shall constitute a "Termination for
Cause" if made pursuant to Section 3.2(i); the effect of such termination is
specified in Section 3.4. The termination of Employee's employment shall
constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii);
the effect of such termination is specified in Section 3.5. The termination of
Employee's employment shall constitute a "Voluntary Termination" if made
pursuant to Section 3.2(iii), provided that if Employee accepts the employment
contemplated by Section 3.2(iii) such Voluntary Termination will not prevent
the possible application of Section 3.3(ii) or (iii) if the successor employer
terminates Employee's employment by virtue of an Involuntary Termination within
one year after completion of the relevant transaction. The effect of such
termination if a Voluntary Termination is specified in Section 3.4; the effect
of such termination if an Involuntary Termination is specified in Section 3.5.
The effect of the employment relationship being terminated pursuant to
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<PAGE> 4
Section 3.2(iv) as a result of Employee's death is specified in Section 3.7.
The effect of the employment relationship being terminated pursuant to Section
3.2(v) as a result of the Employee becoming incapacitated is specified in
Section 3.8.
3.3. Notwithstanding any other provisions of this Agreement,
Employee shall have the right to terminate the employment relationship under
this Agreement at any time for any of the following reasons:
(i) a material breach by Employer or NOW of any material provision
of this Agreement, including, without limitation, elimination
of Employee's job and his not being offered employment by NOW,
Employer or a successor to all or a portion of Employer's or
NOW's business or assets, with (a) comparable
responsibilities, (b) the same or greater base salary and
management incentive plan participations as then in effect,
(c) comparable value for his participations in the Value
Appreciation and Incentive Plans A and B and his restricted
stock that remains subject to forfeiture restrictions in
either restricted stock or stock options, and (d) comparable
severance benefits and in the same metropolitan area, any of
which remains uncorrected for 30 days following written notice
of such breach by Employee to NOW's Board of Directors;
(ii) (x) NOW or the Employer completes a merger or consolidation, a
sale of all or substantially all of the assets of NOW or the
sale of all of the outstanding Class A Common Stock and Common
Stock of NOW, in each case in which all of the stockholders of
NOW receive in such transaction cash and/or securities that
are publicly traded and have a total market valuation for all
outstanding securities of the same publicly traded class after
the transaction of at least $250 million, and (y) Employee's
employment is terminated after such transaction by virtue of
an Involuntary Termination within one year after the
completion of such transaction;
(iii) (x) NOW completes the sale of assets (which does not
constitute all or substantially all of NOW's assets) having a
gross sales price which exceeds 50% of the consolidated total
capitalization of NOW and its subsidiaries (consolidated total
stockholders' equity plus consolidated total long-term debt as
determined in accordance with generally accepted accounting
principles) as at the end of the last full fiscal quarter
prior to the date such determination is made, (y) the Chief
Executive Officer of NOW shall have voted against any such
sale as a director of NOW and (z) Employee's employment is
terminated after such transaction by virtue of an Involuntary
Termination within one year after the completion of such
transaction;
(iv) any corporation, person or group within the meaning of
Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Act"), other than Duff &
Phelps/Inverness LLC or First Reserve Corporation or their
respective affiliates, becomes the beneficial owner (within
the meaning of Rule 13d-3 under the Act) of voting securities
of NOW or the general partner of Employer representing more
than fifty percent of the total votes eligible to be cast at
any election of directors of NOW or the general partner of
Employer
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<PAGE> 5
and Employee's employment is terminated after such event by
virtue of Involuntary Termination within one year after the
occurrence of such event;
(v) the dissolution of NOW; or
(vi) for any other reason whatsoever, in the sole discretion of
Employee.
The termination of Employee's employment by Employee shall constitute an
"Involuntary Termination" if made pursuant to Section 3.3(i), 3.3(ii),
3.3(iii), 3.3(iv) or 3.3(v); the effect of such termination is specified in
Section 3.5. The termination of Employee's employment by Employee shall
constitute a "Voluntary Termination" if made pursuant to Sections 3.3(vi); the
effect of such termination is specified in Section 3.4.
3.4. Upon a "Voluntary Termination" of the employment relationship
by Employee or a termination of the employment relationship for "Cause" by
Employer or NOW, all future compensation to which Employee is entitled and all
future benefits for which Employee is eligible shall cease and terminate as of
the date of termination. Employee shall be entitled to pro rata salary through
the date of such termination, but Employee shall not be entitled to any bonuses
not yet paid at the date of such termination.
3.5. Upon an Involuntary Termination of the employment relationship
by either Employer or Employee pursuant to Sections 3.2(ii), 3.3(i), 3.3(iii)
or 3.3(iv), Employee shall be entitled, in consideration of Employee's
continuing obligations hereunder after such termination (including, without
limitation, Employee's non-competition obligations), to receive the
compensation specified in Section 2.1, payable bi-weekly, as if Employee's
employment (which shall cease on the date of such Involuntary Termination) had
continued for the full Term (two years) of this Agreement and the bonus equal
to the Target Amount payable under the National-Oilwell Management Incentive
Program in effect for the year in which such termination occurred; provided,
however, that Employee shall be paid a lump sum sufficient to repay any loans
to Employee from NOW or the Employer, with the balance pro-rated and paid
bi-weekly over two years. Upon an Involuntary Termination of the employment
relationship by Employee pursuant to Sections 3.3(ii) or 3.3(v), Employee shall
be entitled, in consideration of Employee's continuing obligations hereunder
after such termination (including, without limitation, Employee's
non-competition obligations), to receive in a lump sum payment the compensation
specified in Section 2.1 as if Employee's employment (which shall cease on the
date of such Involuntary Termination) had continued for the full Term (two
years) of this Agreement and the bonus equal to the Target Amount payable under
the National- Oilwell Management Incentive Program in effect for the year in
which such termination occurred. Employee shall not be under any duty or
obligation to seek or accept other employment following Involuntary Termination
and the amounts due Employee hereunder shall not be reduced or suspended if
Employee accepts subsequent employment. Employee's rights under this Section
3.5 are Employee's sole and exclusive rights against Employer, NOW, or their
subsidiaries or affiliates, and Employer's, NOW's and their subsidiaries' and
affiliates' sole and exclusive liability to Employee under this Agreement, in
contract, tort, or otherwise, for any Involuntary Termination of the employment
relationship.
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<PAGE> 6
3.6. Employee covenants not to sue or lodge any claim, demand or
cause of action against Employer based on Involuntary Termination for any
monies other than those specified in Section 3.5. If Employee breaches this
covenant, Employer, NOW and their subsidiaries' and affiliates' shall be
entitled to recover from Employee all sums expended by Employer, NOW and their
subsidiaries and affiliates (including costs and attorneys fees) in connection
with such suit, claim, demand or cause of action. Employer, NOW and their
subsidiaries and affiliates shall not be entitled to offset any of the amounts
specified in the immediately preceding sentence against amounts otherwise owing
by Employer, NOW and their subsidiaries and affiliates to Employee prior to a
final determination under the terms of the arbitration provisions of this
Agreement that Employee has breached the covenant contained in this Section
3.6.
3.7. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination,
but Employee's heirs, administrators, or legatees shall not be entitled to any
individual bonuses not yet paid to Employee at the date of such termination.
3.8. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his pro rata salary
through the date of such termination, but Employee shall not be entitled to any
individual bonuses not yet paid to Employee at the date of such termination.
3.9. In all cases, the compensation and benefits payable to
Employee under this Agreement upon termination of the employment relationship
shall be reduced and offset by any amounts to which Employee may otherwise be
entitled under any and all severance plans or policies of Employer, NOW, or
their subsidiaries or affiliates or any successor to all or a portion of the
business or assets of NOW or Employer.
3.10. Termination of the employment relationship shall not terminate
those obligations imposed by this Agreement which are continuing in nature,
including, without limitation, Employee's obligations of confidentiality,
non-competition and Employee's continuing obligations with respect to business
opportunities that had been entrusted to Employee by Employer during the
employment relationship.
3.11. This Agreement governs the rights and obligations of Employer
and Employee with respect to Employee's salary and other perquisites of
employment. Except as provided above in Sections 2.4 and 3.5, Employee's
rights and obligations with respect to (i) restricted stock are governed by
NOW's Stock Award and Long-Term Incentive Plan, and (ii) bonus plans are
governed by the National-Oilwell Incentive Program, NOW's Value Appreciation
and Incentive Plan A and NOW's Value Appreciation and Incentive Plan B.
4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:
4.1. Employee shall at all times comply with United States laws
applicable to Employee's actions on behalf of NOW, Employer and their
subsidiaries and affiliates, including specifically, without limitation, the
United States Foreign Corrupt Practices Act, generally codified in 15 USC 78
(FCPA), as the FCPA may hereafter be amended, and/or its successor statutes.
If Employee pleads guilty to or nolo contendre or admits civil or criminal
liability under the FCPA or other applicable United States law, or if a court
finds that Employee has personal civil or criminal liability under the FCPA or
other applicable United States law, or if a court finds that Employee committed
an action
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<PAGE> 7
resulting in any NOW entity having civil or criminal liability or
responsibility under the FCPA or other applicable United States law, such
action or finding shall constitute "cause" for termination under this Agreement
unless NOW's Board of Directors determines that the actions found to be in
violation of the FCPA or other applicable United States law were taken in good
faith and in compliance with all applicable policies of Employer and NOW.
Moreover, to the extent that any NOW entity is found or held responsible for
any civil or criminal fines or sanctions of any type under the FCPA or other
applicable United States law or suffers other damages as a result of Employee's
actions, Employee shall be responsible for, and shall reimburse and pay to such
NOW entity an amount of money equal to, such civil or criminal fines, sanctions
or damages. The rights afforded NOW entities under this provision are in
addition to any and all rights and remedies otherwise afforded by the law.
5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. All information, ideas, concepts, improvements, discoveries,
and inventions, whether patentable or not, which are conceived, made, developed
or acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to NOW's,
Employer's or any of their subsidiaries' or affiliates' businesses, products or
services (including, without limitation, all such information relating to
corporate opportunities, research, financial and sales data, pricing and
trading terms, evaluations, opinions, interpretations, acquisition prospects,
the identity of customers or their requirements, the identity of key contacts
within the customer's organizations or within the organization of acquisition
prospects, or marketing and merchandising techniques, prospective names, and
marks) shall be disclosed to NOW and Employer and are and shall be the sole and
exclusive property of NOW and Employer. Upon termination of Employee's
employment, for any reason, Employee promptly shall deliver the same, and all
copies thereof, to NOW and Employer.
5.2. Employee will not, at any time during or after his employment
by Employer, make any unauthorized disclosure of any confidential business
information or trade secrets of Employer, NOW, or their subsidiaries or
affiliates, or make any use thereof, except in the carrying out of his
employment responsibilities hereunder. NOW and its subsidiaries and affiliates
shall be third party beneficiaries of Employee's obligations under this
Section. As a result of Employee's employment by Employer, Employee may also
from time to time have access to, or knowledge of, confidential business
information or trade secrets of third parties, such as customers, suppliers,
partners, joint venturers, and the like, of Employer, NOW, and their
subsidiaries and affiliates. Employee also agrees to preserve and protect the
confidentiality of such third party confidential information and trade secrets
to the same extent, and on the same basis, as Employer's, NOW's or any of their
subsidiaries' or affiliates' confidential business information and trade
secrets.
5.3. If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models,
manuals, brochures, or the like) relating to Employer's, NOW's or any of their
subsidiaries' or affiliates' businesses, products, or services, whether such
work is created solely by Employee or jointly with others (whether during
business hours or otherwise and whether on Employer's, NOW's or any of their
subsidiaries' or affiliates' premises or otherwise), Employer and NOW shall be
deemed the author of such work if the work is prepared by
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<PAGE> 8
Employee in the scope of his employment; or, if the work is not prepared by
Employee within the scope of his employment but is specially ordered by
Employer, NOW, or any of their subsidiaries or affiliates as a contribution to
a collective work, as a part of a motion picture or other audiovisual work, as
a translation, as a supplementary work, as a compilation, or as an
instructional text, then the work shall be considered to be work made for hire
and Employer, NOW, or any of their subsidiaries or affiliates shall be the
author of the work. If such work is neither prepared by Employee within the
scope of his employment nor a work specially ordered that is deemed to be a
work made for hire, then Employee hereby agrees to assign, and by these
presents does assign, to Employer and NOW all of Employee's worldwide right,
title, and interest in and to such work and all rights of copyright therein.
5.4. Both during the period of Employee's employment by Employer
and thereafter, Employee shall assist Employer, NOW, or any of their
subsidiaries or affiliates and their nominees, at any time, in the protection
of Employer's, NOW's or any of their subsidiaries' or affiliates' worldwide
right, title, and interest in and to information, ideas, concepts,
improvements, discoveries, and inventions, and its copyrighted works, including
without limitation, the execution of all formal assignment documents requested
by Employer, NOW, or any of their subsidiaries or affiliates or their nominees
and the execution of all lawful oaths and applications for applications for
patents and registration of copyright in the United States and foreign
countries.
6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1. As part of the consideration for the compensation and benefits
to be paid to Employee hereunder, and as an additional incentive for Employer
and NOW to enter into this Agreement, Employer, NOW and Employee agree to the
non- competition provisions of this Article 6. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer, NOW or any of their subsidiaries or affiliated companies
are conducting any business as of the date of termination of the employment
relationship or have during the previous twelve months conducted any business:
(i) engage in any business competitive with any line of business
conducted by Employer, NOW, or any of their subsidiaries or
affiliates;
(ii) render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or
indirectly, in any business competitive with any line of
business conducted by Employer, NOW, or any of their
subsidiaries or affiliates;
(iii) induce any employee of Employer or NOW, or any of their
subsidiaries or affiliates to terminate his or her employment
with Employer, NOW, or any of their subsidiaries or
affiliates, or hire or assist in the hiring of any such
employee by person, association, or entity not affiliated with
Employer, NOW or any of their subsidiaries or affiliates.
These non-competition obligations shall apply during Employee's employment and
for a period of two years after termination of employment. After termination
of employment these non-competition obligations shall apply only to businesses
having annual revenues in excess of $20 million competitive
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<PAGE> 9
with any line of business conducted by Employer, NOW, or any of their
subsidiaries having annual revenues in excess of $20 million for the last
fiscal year prior to the time of termination. If Employer, NOW, or any of
their subsidiaries or affiliates abandons a particular aspect of its business,
that is, ceases such aspect of its business with the intention to permanently
refrain from such aspect of its business, then this post-employment
non-competition covenant shall not apply to such former aspect of that
business.
6.2. Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.6 for the remainder of the Term (two years) upon
Involuntary Termination) under this Agreement to justify such restriction.
Employee acknowledges that money damages would not be sufficient remedy for any
breach of this Article 6 by Employee, and Employer, NOW, or any of their
subsidiaries or affiliates shall be entitled to enforce the provisions of this
Article 6 by terminating any payments then owing to Employee under this
Agreement and/or to specific performance and injunctive relief as remedies for
such breach or any threatened breach. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 6, but shall be in addition to
all remedies available at law or in equity to Employer, NOW, or any of their
subsidiaries or affiliates, including, without limitation, the recovery of
damages from Employee and his agents involved in such breach.
6.3. It is expressly understood and agreed that Employer, NOW and
Employee consider the restrictions contained in this Article 6 to be reasonable
and necessary to protect the proprietary information of Employer, NOW and their
subsidiaries and affiliates. Nevertheless, if any of the aforesaid
restrictions are found by a court having jurisdiction to be unreasonable, or
overly broad as to geographic area or time, or otherwise unenforceable, the
parties intend for the restrictions therein set forth to be modified by such
courts so as to be reasonable and enforceable and, as so modified by the court,
to be fully enforced.
7. MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with NOW
or Employer.
7.2. Employee shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing
any oral or written statements about Employer, NOW, or any of their respective
subsidiaries' or affiliates' directors, officers, employees, agents or
representatives that are slanderous, libelous, or defamatory; or that disclose
private or confidential information about Employer, NOW, or any of their
respective subsidiaries' or affiliates' business affairs, officers, employees,
agents, or representatives; or that constitute an intrusion into the seclusion
or private lives of Employer, NOW, or any of their respective subsidiaries' or
affiliates' directors, officers, employees, agents, or representatives; or that
give rise to unreasonable publicity about the private lives of Employer, NOW,
or any of their respective subsidiaries' or affiliates' officers, employees,
agents, or representatives; or that place Employer, NOW, or any of
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<PAGE> 10
their respective subsidiaries' or affiliates' or its officers, employees,
agents, or representatives in a false light before the public; or that
constitute a misappropriation of the name or likeness Employer, NOW, or any of
their respective subsidiaries' or affiliates' or its officers, employees,
agents, or representatives. A violation or threatened violation of this
prohibition may be enjoined.
7.3. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Employer or NOW, to:
NOW Holdings, Inc.
666 Steamboat Road
Greenwich, CT 06830
Attn: W. McComb Dunwoody
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: John S. Watson
If to Employee, to the address shown on the first page hereof.
Either Employer, NOW or Employee may furnish a change of address to the other
in writing in accordance herewith, except that notices of changes of address
shall be effective only upon receipt.
7.4. This Agreement shall be governed in all respects by the laws
of the State of Texas, excluding any conflict-of-law rule or principle that
might refer the construction of the Agreement to the laws of another State or
country.
7.5. No failure by either party hereto at any time to give notice
of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7.6. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association, or entity or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant, or remedy shall be construed in a manner so as to permit
its enforceability under the applicable law to the fullest extent permitted by
law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association, or entity or circumstances
other than those to which they have been held invalid or unenforceable, shall
remain in full force and effect.
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<PAGE> 11
7.7. Any and all claims, demands, cause of action, disputes,
controversies and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement, involving NOW, Employer,
their respective subsidiaries and affiliates and Employee (all of which are
referred to herein as "Claims"), even though some or all of such Claims
allegedly are extra-contractual in nature, whether such Claims sound in
contract, tort or otherwise, at law or in equity, under state or federal law,
whether provided by statute or the common law, for damages or any other relief,
including equitable relief and specific performance, shall be resolved and
decided by binding arbitration pursuant to the Federal Arbitration Act in
accordance with the Commercial Arbitration Rules then in effect with the
American Arbitration Association. In the arbitration proceeding the Employee
shall select one arbitrator, the Employer shall select one arbitrator and the
two arbitrators so selected shall select a third arbitrator. Should one party
fail to select an arbitrator within five days after notice of the appointment
of an arbitrator by the other party or should the two arbitrators selected by
the Employee and the Employer fail to select an arbitrator within ten days
after the date of the appointment of the last of such two arbitrators, any
person sitting as a Judge of the United States District Court of the Southern
District of Texas, Houston Division, upon application of the Employee or the
Employer, shall appoint an arbitrator to fill such space with the same force
and effect as though such arbitrator had been appointed in accordance with the
immediately preceding sentence of this Section 7.7. The decision of a majority
of the arbitrators shall be binding on the Employee, the Employer and NOW and
their respective subsidiaries and affiliates. The arbitration proceeding shall
be conducted in Houston, Texas. Judgment upon any award rendered in any such
arbitration proceeding may be entered by any federal or state court having
jurisdiction.
This agreement to arbitrate shall be enforceable in either federal or
state court. The enforcement of this agreement to arbitrate and all procedural
aspects of this Agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the scope of
the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act.
In deciding the substance of any such Claim, the Arbitrators shall
apply the substantive laws of the State of Texas; provided, however, that the
Arbitrators shall have no authority to award treble, exemplary or punitive type
damages under any circumstances regardless of whether such damages may be
available under Texas law, the parties hereby waiving their right, if any, to
recover treble, exemplary or punitive type damages in connection with any such
Claims.
7.8. This Agreement shall be binding upon and inure to the benefit
of Employer, NOW, their subsidiaries and affiliates and any other person,
association, or entity which may hereafter acquire or succeed to all or a
portion of the business or assets of NOW or Employer by any means whether
direct or indirect, by purchase, merger, consolidation, or otherwise.
Employee's rights and obligations under this Agreement are personal and such
rights, benefits, and obligations of Employee shall not be voluntarily or
involuntarily assigned, alienated, or transferred, whether by operation of law
or otherwise, by Employee without the prior written consent of NOW and
Employer.
7.9. Except as provided in (1) written company policies promulgated
by Employer or NOW dealing with issues such as securities trading, business
ethics, governmental affairs and political contributions, consulting fees,
commissions and other payments, compliance with law, investments and outside
business interests as officers and employees, reporting responsibilities,
administrative
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compliance, and the like, (2) the written benefits, plans, and programs
referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements
contemporaneously or hereafter executed by Employer, NOW and Employee, this
Agreement constitutes the entire agreement of the parties with regard to such
subject matters, and contains all of the covenants, promises, representations,
warranties, and agreements between the parties with respect to such subject
matters and replaces and merges previous agreements and discussions pertaining
to the employment relationship between Employer and Employee. Specifically,
but not by way of limitation, the employment agreement dated June 30, 1993
between Employer and Employee is hereby canceled and Employee hereby
irrevocably waives and renounces all of Employee's rights and claims under such
agreement.
IN WITNESS WHEREOF, Employer, NOW and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated above.
NOW HOLDINGS, INC. NATIONAL-OILWELL, L.P.
By: /s/ W. MCCOMB DUNWOODY By: National-Oilwell, Inc.
---------------------------------- General Partner
Name: W. McComb Dunwoody
Vice Chairman of the Board
This 16th day of January, 1996
By: /s/ W. MCCOMB DUNWOODY
------------------------------------
Name: W. McComb Dunwoody
Vice Chairman of the Board
This 16th day of January, 1996
/s/ JOEL V. STAFF
---------------------------------------
JOEL V. STAFF
This 16th day of January, 1996
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into between
National-Oilwell, L.P. having offices at 5555 San Felipe, Houston, Texas 77056
("Employer"), an indirect subsidiary of NOW Holdings, Inc. ("NOW"), and C. R.
Bearden, an individual currently residing at 2803 Autumn Lake Dr., Katy, Texas
77450 ("Employee"), to be effective as of January 1, 1996.
NOW has acquired all of the equity interests in Employer. Employer
presently employs Employee. In connection with the acquisition of Employer by
NOW, Employer is desirous of continuing to employ Employee pursuant to the
terms and conditions and for the consideration set forth in this Agreement and
of terminating any prior employment agreement or arrangement, and Employee is
desirous of continuing in the employ of Employer pursuant to such terms and
conditions and for such consideration set forth in this Agreement and of
terminating any prior existing employment agreement or arrangement.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants, and obligations contained herein, Employer, NOW and Employee agree
as follows:
1. EMPLOYMENT AND DUTIES:
1.1. Employer agrees to employ Employee, and Employee agrees to be
employed by Employer, beginning January 1, 1996 and continuing throughout the
Term (as defined below) of this Agreement, subject to the terms and conditions
of this Agreement.
1.2. Employee shall serve as Executive Vice President and President
of Oilfield Distribution of NOW and of the general partner of Employer.
Employee agrees to serve in the assigned position and to perform diligently and
to the best of Employee's abilities the duties and services appertaining to
such position as determined by Employer or NOW, as well as such additional or
different duties and services appropriate to such position which Employee from
time to time may be reasonably directed to perform by Employer or NOW.
Employee shall at all times comply with and be subject to such policies and
procedures as Employer or NOW may establish from time to time, including
without limitation, the Statement of Policy on Business Ethics, Statement of
Policy Regarding Conflict of Interest, Antitrust Laws, and Statement of Policy
Regarding Improper Business Payment, all of which are attached hereto as Annex
I.
1.3. Employee shall, during the period of Employee's employment by
Employer, devote Employee's full business time, energy, and best efforts to the
business and affairs of Employer. Employee may not engage, directly or
indirectly, in any other business, investment, or activity that interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interests of Employer, NOW, or any of their subsidiaries or affiliates, or
requires any significant portion of Employee's business time.
1.4. Employee acknowledges and agrees that Employee owes a
fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of Employer, NOW, or any of their subsidiaries or affiliates and
to do no act which would injure the business, interests, or reputation of
Employer, NOW, or any of their subsidiaries or affiliates. In keeping with
these duties, Employee shall make full disclosure to Employer and to NOW of all
business opportunities pertaining to Employer's business and shall not
appropriate for Employee's own benefit business opportunities concerning the
subject matter of the fiduciary relationship.
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2. COMPENSATION AND BENEFITS:
2.1. Employee's initial base salary under this Agreement shall be
$225,000 per annum and shall be paid in bi-weekly installments in accordance
with Employer's standard payroll practice. Employee's base salary may be
increased from time to time by NOW and Employer and, after any such change,
Employee's new level of base salary shall be Employee's base salary for
purposes of this Agreement until the effective date of any subsequent change.
2.2 Employee's participation in bonus plans shall be governed by
the National-Oilwell Management Incentive Program, NOW's Value Appreciation and
Incentive Plan A and NOW's Value Appreciation and Incentive Plan B.
2.3. NOW and Employee shall enter into a separate written
restricted stock agreement pursuant to which Employee shall be granted shares
of restricted common stock of NOW subject to the terms and conditions of NOW's
Stock Award and Long-Term Incentive Plan. The number of shares and terms of
such restrictions shall be as specified in such other written agreement.
2.4. While employed by Employer, Employee shall be allowed to
participate, on the same basis generally as other employees of Employer, in all
general employee benefit plans and programs, including improvements or
modifications of the same, which on the effective date or thereafter are made
available by Employer to all or substantially all of Employer's employees.
Such benefits, plans, and programs may include, without limitation, medical,
health, and dental care, life insurance, disability protection, and pension
plans. Nothing in this Agreement is to be construed or interpreted to provide
greater rights, participation, coverage, or benefits under such benefit plans
or programs than provided to similarly situated employees pursuant to the terms
and conditions of such benefit plans and programs.
2.5. Employer shall not by reason of this Article 2 be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing, any
such incentive compensation or employee benefit program or plan, so long as
such actions are similarly applicable to covered employees generally.
Moreover, unless specifically provided for in a written plan document adopted
by the Board of Directors of NOW, none of the benefits or arrangements
described in this Article 2 shall be secured or funded in any way, and each
shall instead constitute an unfunded and unsecured promise to pay money in the
future exclusively from the general assets of Employer and its subsidiaries and
affiliates.
2.6. Employer may withhold from any compensation, benefits, or
amounts payable under this Agreement all federal, state, city, or other taxes
as may be required pursuant to any law or governmental regulation or ruling.
3. TERM OF THIS AGREEMENT, EFFECT OF EXPIRATION OF TERM, AND TERMINATION
PRIOR TO EXPIRATION OF TERM AND EFFECTS OF SUCH TERMINATION:
3.1. The term of this Agreement shall be for one year and shall be
automatically extended each day, from January 1, 1996.
3.2. Notwithstanding any other provisions of this Agreement, NOW
and Employer shall have the right to terminate Employee's employment under this
Agreement at any time for any of the following reasons:
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(i) For "cause" upon the determination by NOW's Board of Directors
that "cause" exists for the termination of the employment
relationship. As used in this Section 3.2(i), the term
"cause" shall mean (a) Employee has engaged in gross
negligence, gross incompetence or willful misconduct in the
performance of, or Employee's willful refusal without proper
reason to perform, the duties and services required of
Employee pursuant to this Agreement; (b) Employee has been
convicted of a felony involving moral turpitude; or (c)
Employee's material breach of any material provision of this
Agreement or corporate code or policy. It is expressly
acknowledged and agreed that the decision as to whether
"cause" exists for termination of the employment relationship
by Employer is delegated to NOW's Board of Directors for
determination. Employee, if he so requests, after reasonable
notice of such Board of Directors meeting, shall be entitled
to be heard before the Board of Directors. If Employee
disagrees with the decision reached by NOW's Board of
Directors, the dispute will be limited to whether NOW's Board
of Directors reached its decision in good faith;
(ii) for any other reason whatsoever, including termination without
cause, in the sole discretion of NOW's Board of Directors;
(iii) Upon Employee's being offered employment by a successor to all
or a portion of Employee's or NOW's business or assets with
(a) comparable responsibilities, (b) the same or greater base
salary and management incentive plan participantions as then
in effect, (c) comparable value for his participations in the
Value Apreciation and Incentive Plans A and B and his
restricted stock that remains subject to forfeiture
restrictions in either restricted stock or stock options and
(d) comparable severance benefits, and in the same
metropolitan area.
(iv) upon Employee's death; or
(v) upon Employee's becoming incapacitated by accident, sickness,
or other circumstance which in the reasonable opinion of a
qualified doctor approved by NOW's Board of Directors renders
him mentally or physically incapable of performing the duties
and services required of Employee, and which will continue in
the reasonable opinion of such doctor for a period of not less
than 180 days.
The termination of Employee's employment shall constitute a "Termination for
Cause" if made pursuant to Section 3.2(i); the effect of such termination is
specified in Section 3.4. The termination of Employee's employment shall
constitute an "Involuntary Termination" if made pursuant to Section 3.2(ii);
the effect of such termination is specified in Section 3.5. The termination of
Employee's employment shall constitute a "Voluntary Termination" if made
pursuant to Section 3.2(iii), provided that if Employee accepts the employment
contemplated by Section 3.2(iii) such Voluntary Termination will not prevent
the possible application of Section 3.3(ii) or (iii) if the successor employer
terminates Employee's employment by virtue of an Involuntary Termination within
one year after completion of the relevant transaction. The effect of such
termination if a Voluntary Termination is specified in Section 3.4; the effect
of such termination if an Involuntary Termination is specified in Section 3.5.
The effect of the employment relationship being terminated pursuant to
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Section 3.2(iv) as a result of Employee's death is specified in Section 3.7.
The effect of the employment relationship being terminated pursuant to Section
3.2(v) as a result of the Employee becoming incapacitated is specified in
Section 3.8.
3.3. Notwithstanding any other provisions of this Agreement,
Employee shall have the right to terminate the employment relationship under
this Agreement at any time for any of the following reasons:
(i) a material breach by Employer or NOW of any material provision
of this Agreement, including, without limitation, elimination
of Employee's job and his not being offered employment by NOW,
Employer or a successor to all or a portion of Employer's or
NOW's business or assets, with (a) comparable
responsibilities, (b) the same or greater base salary and
management incentive plan participations as then in effect,
(c) comparable value for his participations in the Value
Appreciation and Incentive Plans A and B and his restricted
stock that remains subject to forfeiture restrictions in
either restricted stock or stock options, and (d) comparable
severance benefits and in the same metropolitan area, any of
which remains uncorrected for 30 days following written notice
of such breach by Employee to NOW's Board of Directors;
(ii) (x) NOW or the Employer completes a merger or consolidation, a
sale of all or substantially all of the assets of NOW or the
sale of all of the outstanding Class A Common Stock and Common
Stock of NOW, in each case in which all of the stockholders of
NOW receive in such transaction cash and/or securities that
are publicly traded and have a total market valuation for all
outstanding securities of the same publicly traded class after
the transaction of at least $250 million, and (y) Employee's
employment is terminated after such transaction by virtue of
an Involuntary Termination within one year after the
completion of such transaction;
(iii) (x) NOW completes the sale of assets (which does not
constitute all or substantially all of NOW's assets) having a
gross sales price which exceeds 50% of the consolidated total
capitalization of NOW and its subsidiaries (consolidated total
stockholders' equity plus consolidated total long-term debt as
determined in accordance with generally accepted accounting
principles) as at the end of the last full fiscal quarter
prior to the date such determination is made, (y) the Chief
Executive Officer of NOW shall have voted against any such
sale as a director of NOW and (z) Employee's employment is
terminated after such transaction by virtue of an Involuntary
Termination within one year after the completion of such
transaction;
(iv) any corporation, person or group within the meaning of
Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Act"), other than Duff &
Phelps/Inverness LLC or First Reserve Corporation or their
respective affiliates, becomes the beneficial owner (within
the meaning of Rule 13d-3 under the Act) of voting securities
of NOW or the general partner of Employer representing more
than fifty percent of the total votes eligible to be cast at
any election of directors of NOW or the general partner of
Employer
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and Employee's employment is terminated after such event by
virtue of Involuntary Termination within one year after the
occurrence of such event;
(v) the dissolution of NOW; or
(vi) for any other reason whatsoever, in the sole discretion of
Employee.
The termination of Employee's employment by Employee shall constitute an
"Involuntary Termination" if made pursuant to Section 3.3(i), 3.3(ii),
3.3(iii), 3.3(iv) or 3.3(v); the effect of such termination is specified in
Section 3.5. The termination of Employee's employment by Employee shall
constitute a "Voluntary Termination" if made pursuant to Sections 3.3(vi); the
effect of such termination is specified in Section 3.4.
3.4. Upon a "Voluntary Termination" of the employment relationship
by Employee or a termination of the employment relationship for "Cause" by
Employer or NOW, all future compensation to which Employee is entitled and all
future benefits for which Employee is eligible shall cease and terminate as of
the date of termination. Employee shall be entitled to pro rata salary through
the date of such termination, but Employee shall not be entitled to any bonuses
not yet paid at the date of such termination.
3.5. Upon an Involuntary Termination of the employment relationship
by either Employer or Employee pursuant to Sections 3.2(ii), 3.3(i), 3.3(iii)
or 3.3(iv), Employee shall be entitled, in consideration of Employee's
continuing obligations hereunder after such termination (including, without
limitation, Employee's non-competition obligations), to receive the
compensation specified in Section 2.1, payable bi-weekly, as if Employee's
employment (which shall cease on the date of such Involuntary Termination) had
continued for the full Term (one year) of this Agreement and the bonus equal to
the Target Amount payable under the National-Oilwell Management Incentive
Program in effect for the year in which such termination occurred; provided,
however, that Employee shall be paid a lump sum sufficient to repay any loans
to Employee from NOW or the Employer, with the balance pro-rated and paid
bi-weekly over one year. Upon an Involuntary Termination of the employment
relationship by Employee pursuant to Sections 3.3(ii) or 3.3(v), Employee shall
be entitled, in consideration of Employee's continuing obligations hereunder
after such termination (including, without limitation, Employee's
non-competition obligations), to receive in a lump sum payment the compensation
specified in Section 2.1 as if Employee's employment (which shall cease on the
date of such Involuntary Termination) had continued for the full Term (one
year) of this Agreement and the bonus equal to the Target Amount payable under
the National-Oilwell Management Incentive Program in effect for the year in
which such termination occurred. Employee shall not be under any duty or
obligation to seek or accept other employment following Involuntary Termination
and the amounts due Employee hereunder shall not be reduced or suspended if
Employee accepts subsequent employment. Employee's rights under this Section
3.5 are Employee's sole and exclusive rights against Employer, NOW, or their
subsidiaries or affiliates, and Employer's, NOW's and their subsidiaries' and
affiliates' sole and exclusive liability to Employee under this Agreement, in
contract, tort, or otherwise, for any Involuntary Termination of the employment
relationship.
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3.6. Employee covenants not to sue or lodge any claim, demand or
cause of action against Employer based on Involuntary Termination for any
monies other than those specified in Section 3.5. If Employee breaches this
covenant, Employer, NOW and their subsidiaries' and affiliates' shall be
entitled to recover from Employee all sums expended by Employer, NOW and their
subsidiaries and affiliates (including costs and attorneys fees) in connection
with such suit, claim, demand or cause of action. Employer, NOW and their
subsidiaries and affiliates shall not be entitled to offset any of the amounts
specified in the immediately preceding sentence against amounts otherwise owing
by Employer, NOW and their subsidiaries and affiliates to Employee prior to a
final determination under the terms of the arbitration provisions of this
Agreement that Employee has breached the covenant contained in this Section
3.6.
3.7. Upon termination of the employment relationship as a result of
Employee's death, Employee's heirs, administrators, or legatees shall be
entitled to Employee's pro rata salary through the date of such termination,
but Employee's heirs, administrators, or legatees shall not be entitled to any
individual bonuses not yet paid to Employee at the date of such termination.
3.8. Upon termination of the employment relationship as a result of
Employee's incapacity, Employee shall be entitled to his pro rata salary
through the date of such termination, but Employee shall not be entitled to any
individual bonuses not yet paid to Employee at the date of such termination.
3.9. In all cases, the compensation and benefits payable to
Employee under this Agreement upon termination of the employment relationship
shall be reduced and offset by any amounts to which Employee may otherwise be
entitled under any and all severance plans or policies of Employer, NOW, or
their subsidiaries or affiliates or any successor to all or a portion of the
business or assets of NOW or Employer.
3.10. Termination of the employment relationship shall not terminate
those obligations imposed by this Agreement which are continuing in nature,
including, without limitation, Employee's obligations of confidentiality,
non-competition and Employee's continuing obligations with respect to business
opportunities that had been entrusted to Employee by Employer during the
employment relationship.
3.11. This Agreement governs the rights and obligations of Employer
and Employee with respect to Employee's salary and other perquisites of
employment. Except as provided above in Sections 2.4 and 3.5, Employee's
rights and obligations with respect to (i) restricted stock are governed by
NOW's Stock Award and Long-Term Incentive Plan, and (ii) bonus plans are
governed by the National-Oilwell Incentive Program, NOW's Value Appreciation
and Incentive Plan A and NOW's Value Appreciation and Incentive Plan B.
4. UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS:
4.1. Employee shall at all times comply with United States laws
applicable to Employee's actions on behalf of NOW, Employer and their
subsidiaries and affiliates, including specifically, without limitation, the
United States Foreign Corrupt Practices Act, generally codified in 15 USC 78
(FCPA), as the FCPA may hereafter be amended, and/or its successor statutes.
If Employee pleads guilty to or nolo contendre or admits civil or criminal
liability under the FCPA or other applicable United States law, or if a court
finds that Employee has personal civil or criminal liability under the FCPA or
other applicable United States law, or if a court finds that Employee committed
an action
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resulting in any NOW entity having civil or criminal liability or
responsibility under the FCPA or other applicable United States law, such
action or finding shall constitute "cause" for termination under this Agreement
unless NOW's Board of Directors determines that the actions found to be in
violation of the FCPA or other applicable United States law were taken in good
faith and in compliance with all applicable policies of Employer and NOW.
Moreover, to the extent that any NOW entity is found or held responsible for
any civil or criminal fines or sanctions of any type under the FCPA or other
applicable United States law or suffers other damages as a result of Employee's
actions, Employee shall be responsible for, and shall reimburse and pay to such
NOW entity an amount of money equal to, such civil or criminal fines, sanctions
or damages. The rights afforded NOW entities under this provision are in
addition to any and all rights and remedies otherwise afforded by the law.
5. OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS:
5.1. All information, ideas, concepts, improvements, discoveries,
and inventions, whether patentable or not, which are conceived, made, developed
or acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer (whether during business hours or otherwise
and whether on Employer's premises or otherwise) which relate to NOW's,
Employer's or any of their subsidiaries' or affiliates' businesses, products or
services (including, without limitation, all such information relating to
corporate opportunities, research, financial and sales data, pricing and
trading terms, evaluations, opinions, interpretations, acquisition prospects,
the identity of customers or their requirements, the identity of key contacts
within the customer's organizations or within the organization of acquisition
prospects, or marketing and merchandising techniques, prospective names, and
marks) shall be disclosed to NOW and Employer and are and shall be the sole and
exclusive property of NOW and Employer. Upon termination of Employee's
employment, for any reason, Employee promptly shall deliver the same, and all
copies thereof, to NOW and Employer.
5.2. Employee will not, at any time during or after his employment
by Employer, make any unauthorized disclosure of any confidential business
information or trade secrets of Employer, NOW, or their subsidiaries or
affiliates, or make any use thereof, except in the carrying out of his
employment responsibilities hereunder. NOW and its subsidiaries and affiliates
shall be third party beneficiaries of Employee's obligations under this
Section. As a result of Employee's employment by Employer, Employee may also
from time to time have access to, or knowledge of, confidential business
information or trade secrets of third parties, such as customers, suppliers,
partners, joint venturers, and the like, of Employer, NOW, and their
subsidiaries and affiliates. Employee also agrees to preserve and protect the
confidentiality of such third party confidential information and trade secrets
to the same extent, and on the same basis, as Employer's, NOW's or any of their
subsidiaries' or affiliates' confidential business information and trade
secrets.
5.3. If, during Employee's employment by Employer, Employee creates
any original work of authorship fixed in any tangible medium of expression
which is the subject matter of copyright (such as videotapes, written
presentations on acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions, models,
manuals, brochures, or the like) relating to Employer's, NOW's or any of their
subsidiaries' or affiliates' businesses, products, or services, whether such
work is created solely by Employee or jointly with others (whether during
business hours or otherwise and whether on Employer's, NOW's or any of their
subsidiaries' or affiliates' premises or otherwise), Employer and NOW shall be
deemed the author of such work if the work is prepared by Employee in the scope
of his employment; or, if the work is not prepared by
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Employee within the scope of his employment but is specially ordered by
Employer, NOW, or any of their subsidiaries or affiliates as a contribution to
a collective work, as a part of a motion picture or other audiovisual work, as
a translation, as a supplementary work, as a compilation, or as an
instructional text, then the work shall be considered to be work made for hire
and Employer, NOW, or any of their subsidiaries or affiliates shall be the
author of the work. If such work is neither prepared by Employee within the
scope of his employment nor a work specially ordered that is deemed to be a
work made for hire, then Employee hereby agrees to assign, and by these
presents does assign, to Employer and NOW all of Employee's worldwide right,
title, and interest in and to such work and all rights of copyright therein.
5.4. Both during the period of Employee's employment by Employer
and thereafter, Employee shall assist Employer, NOW, or any of their
subsidiaries or affiliates and their nominees, at any time, in the protection
of Employer's, NOW's or any of their subsidiaries' or affiliates' worldwide
right, title, and interest in and to information, ideas, concepts,
improvements, discoveries, and inventions, and its copyrighted works, including
without limitation, the execution of all formal assignment documents requested
by Employer, NOW, or any of their subsidiaries or affiliates or their nominees
and the execution of all lawful oaths and applications for applications for
patents and registration of copyright in the United States and foreign
countries.
6. POST-EMPLOYMENT NON-COMPETITION OBLIGATIONS:
6.1. As part of the consideration for the compensation and benefits
to be paid to Employee hereunder, and as an additional incentive for Employer
and NOW to enter into this Agreement, Employer, NOW and Employee agree to the
non- competition provisions of this Article 6. Employee agrees that during the
period of Employee's non-competition obligations hereunder, Employee will not,
directly or indirectly for Employee or for others, in any geographic area or
market where Employer, NOW or any of their subsidiaries or affiliated companies
are conducting any business as of the date of termination of the employment
relationship or have during the previous twelve months conducted any business:
(i) engage in any business competitive with any line of business
conducted by Employer, NOW, or any of their subsidiaries or
affiliates;
(ii) render advice or services to, or otherwise assist, any other
person, association, or entity who is engaged, directly or
indirectly, in any business competitive with any line of
business conducted by Employer, NOW, or any of their
subsidiaries or affiliates;
(iii) induce any employee of Employer or NOW, or any of their
subsidiaries or affiliates to terminate his or her employment
with Employer, NOW, or any of their subsidiaries or
affiliates, or hire or assist in the hiring of any such
employee by person, association, or entity not affiliated with
Employer, NOW or any of their subsidiaries or affiliates.
These non-competition obligations shall apply during Employee's employment and
for a period of one year after termination of employment. After termination
of employment these non-competition obligations shall apply only to businesses
having annual revenues in excess of $20 million competitive
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with any line of business conducted by Employer, NOW, or any of their
subsidiaries having annual revenues in excess of $20 million for the last
fiscal year prior to the time of termination. If Employer, NOW, or any of
their subsidiaries or affiliates abandons a particular aspect of its business,
that is, ceases such aspect of its business with the intention to permanently
refrain from such aspect of its business, then this post-employment
non-competition covenant shall not apply to such former aspect of that
business.
6.2. Employee understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the world during the
period provided for above, but acknowledges that Employee will receive
sufficiently high remuneration and other benefits (e.g., the right to receive
compensation under Section 3.6 for the remainder of the Term (one year) upon
Involuntary Termination) under this Agreement to justify such restriction.
Employee acknowledges that money damages would not be sufficient remedy for any
breach of this Article 6 by Employee, and Employer, NOW, or any of their
subsidiaries or affiliates shall be entitled to enforce the provisions of this
Article 6 by terminating any payments then owing to Employee under this
Agreement and/or to specific performance and injunctive relief as remedies for
such breach or any threatened breach. Such remedies shall not be deemed the
exclusive remedies for a breach of this Article 6, but shall be in addition to
all remedies available at law or in equity to Employer, NOW, or any of their
subsidiaries or affiliates, including, without limitation, the recovery of
damages from Employee and his agents involved in such breach.
6.3. It is expressly understood and agreed that Employer, NOW and
Employee consider the restrictions contained in this Article 6 to be reasonable
and necessary to protect the proprietary information of Employer, NOW and their
subsidiaries and affiliates. Nevertheless, if any of the aforesaid
restrictions are found by a court having jurisdiction to be unreasonable, or
overly broad as to geographic area or time, or otherwise unenforceable, the
parties intend for the restrictions therein set forth to be modified by such
courts so as to be reasonable and enforceable and, as so modified by the court,
to be fully enforced.
7. MISCELLANEOUS:
7.1. For purposes of this Agreement the terms "affiliates" or
"affiliated" means an entity who directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with NOW
or Employer.
7.2. Employee shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing
any oral or written statements about Employer, NOW, or any of their respective
subsidiaries' or affiliates' directors, officers, employees, agents or
representatives that are slanderous, libelous, or defamatory; or that disclose
private or confidential information about Employer, NOW, or any of their
respective subsidiaries' or affiliates' business affairs, officers, employees,
agents, or representatives; or that constitute an intrusion into the seclusion
or private lives of Employer, NOW, or any of their respective subsidiaries' or
affiliates' directors, officers, employees, agents, or representatives; or that
give rise to unreasonable publicity about the private lives of Employer, NOW,
or any of their respective subsidiaries' or affiliates' officers, employees,
agents, or representatives; or that place Employer, NOW, or any of
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their respective subsidiaries' or affiliates' or its officers, employees,
agents, or representatives in a false light before the public; or that
constitute a misappropriation of the name or likeness Employer, NOW, or any of
their respective subsidiaries' or affiliates' or its officers, employees,
agents, or representatives. A violation or threatened violation of this
prohibition may be enjoined.
7.3. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Employer or NOW, to:
NOW Holdings, Inc.
666 Steamboat Road
Greenwich, CT 06830
Attn: W. McComb Dunwoody
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: John S. Watson
If to Employee, to the address shown on the first page hereof.
Either Employer, NOW or Employee may furnish a change of address to the other
in writing in accordance herewith, except that notices of changes of address
shall be effective only upon receipt.
7.4. This Agreement shall be governed in all respects by the laws
of the State of Texas, excluding any conflict-of-law rule or principle that
might refer the construction of the Agreement to the laws of another State or
country.
7.5. No failure by either party hereto at any time to give notice
of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
7.6. It is a desire and intent of the parties that the terms,
provisions, covenants, and remedies contained in this Agreement shall be
enforceable to the fullest extent permitted by law. If any such term,
provision, covenant, or remedy of this Agreement or the application thereof to
any person, association, or entity or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant, or remedy shall be construed in a manner so as to permit
its enforceability under the applicable law to the fullest extent permitted by
law. In any case, the remaining provisions of this Agreement or the
application thereof to any person, association, or entity or circumstances
other than those to which they have been held invalid or unenforceable, shall
remain in full force and effect.
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<PAGE> 11
7.7. Any and all claims, demands, cause of action, disputes,
controversies and other matters in question arising out of or relating to this
Agreement, any provision hereof, the alleged breach thereof, or in any way
relating to the subject matter of this Agreement, involving NOW, Employer,
their respective subsidiaries and affiliates and Employee (all of which are
referred to herein as "Claims"), even though some or all of such Claims
allegedly are extra- contractual in nature, whether such Claims sound in
contract, tort or otherwise, at law or in equity, under state or federal law,
whether provided by statute or the common law, for damages or any other relief,
including equitable relief and specific performance, shall be resolved and
decided by binding arbitration pursuant to the Federal Arbitration Act in
accordance with the Commercial Arbitration Rules then in effect with the
American Arbitration Association. In the arbitration proceeding the Employee
shall select one arbitrator, the Employer shall select one arbitrator and the
two arbitrators so selected shall select a third arbitrator. Should one party
fail to select an arbitrator within five days after notice of the appointment
of an arbitrator by the other party or should the two arbitrators selected by
the Employee and the Employer fail to select an arbitrator within ten days
after the date of the appointment of the last of such two arbitrators, any
person sitting as a Judge of the United States District Court of the Southern
District of Texas, Houston Division, upon application of the Employee or the
Employer, shall appoint an arbitrator to fill such space with the same force
and effect as though such arbitrator had been appointed in accordance with the
immediately preceding sentence of this Section 7.7. The decision of a majority
of the arbitrators shall be binding on the Employee, the Employer and NOW and
their respective subsidiaries and affiliates. The arbitration proceeding shall
be conducted in Houston, Texas. Judgment upon any award rendered in any such
arbitration proceeding may be entered by any federal or state court having
jurisdiction.
This agreement to arbitrate shall be enforceable in either federal or
state court. The enforcement of this agreement to arbitrate and all procedural
aspects of this Agreement to arbitrate, including but not limited to, the
construction and interpretation of this agreement to arbitrate, the scope of
the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act.
In deciding the substance of any such Claim, the Arbitrators shall
apply the substantive laws of the State of Texas; provided, however, that the
Arbitrators shall have no authority to award treble, exemplary or punitive type
damages under any circumstances regardless of whether such damages may be
available under Texas law, the parties hereby waiving their right, if any, to
recover treble, exemplary or punitive type damages in connection with any such
Claims.
7.8. This Agreement shall be binding upon and inure to the benefit
of Employer, NOW, their subsidiaries and affiliates and any other person,
association, or entity which may hereafter acquire or succeed to all or a
portion of the business or assets of NOW or Employer by any means whether
direct or indirect, by purchase, merger, consolidation, or otherwise.
Employee's rights and obligations under this Agreement are personal and such
rights, benefits, and obligations of Employee shall not be voluntarily or
involuntarily assigned, alienated, or transferred, whether by operation of law
or otherwise, by Employee without the prior written consent of NOW and
Employer.
7.9. Except as provided in (1) written company policies promulgated
by Employer or NOW dealing with issues such as securities trading, business
ethics, governmental affairs and political contributions, consulting fees,
commissions and other payments, compliance with law, investments and outside
business interests as officers and employees, reporting responsibilities,
administrative
-11-
<PAGE> 12
compliance, and the like, (2) the written benefits, plans, and programs
referenced in Sections 2.2, 2.3 and 2.4, or (3) any signed written agreements
contemporaneously or hereafter executed by Employer, NOW and Employee, this
Agreement constitutes the entire agreement of the parties with regard to such
subject matters, and contains all of the covenants, promises, representations,
warranties, and agreements between the parties with respect to such subject
matters and replaces and merges previous agreements and discussions pertaining
to the employment relationship between Employer and Employee. Specifically,
but not by way of limitation, any other employment agreement or arrangement in
existence as of the date hereof between Employer and Employee is hereby
canceled and Employee hereby irrevocably waives and renounces all of Employee's
rights and claims under any such agreement or arrangement.
IN WITNESS WHEREOF, Employer, NOW and Employee have duly executed this
Agreement in multiple originals to be effective on the date first stated above.
NOW HOLDINGS, INC. NATIONAL-OILWELL, L.P.
By: /s/ W. MCCOMB DUNWOODY By: National-Oilwell, Inc.
--------------------------------- General Partner
Name: W. McComb Dunwoody
Vice Chairman of the Board
This 16th day of January, 1996
By: /s/ W. MCCOMB DUNWOODY
-------------------------------
Name: W. McComb Dunwoody
Vice Chairman of the Board
This 16th day of January, 1996
/s/ C. R. BEARDEN
----------------------------------
C. R. BEARDEN
This 16th day of January, 1996
-12-
<PAGE> 13
[LOGO]
NATIONAL-OILWELL
STATEMENT OF POLICY ON BUSINESS ETHICS
April 15, 1988
Our commitment is to conduct our business governed by the highest standards of
conduct and ethics, and to buy and sell on the basis of value, which is a
combination of quality, service and price. Our reputation as businessmen
committed to these principles is an invaluable asset. Therefore, all Company
business will be conducted in accordance with the letter and spirit of the law
wherever we do business, so that full disclosure of our manner of doing
business will at all times be a matter of pride. In furtherance of the
foregoing:
(1) The following must be observed:
a. The Company's best interest is paramount in all business
decisions.
b. The Company's purchase of goods and services shall be based on
price, quality and service.
c. All financial and other books and records of the Company must
be complete and correct and accurately reflect all assets,
liabilities, and disbursements, not only as to amount, but
also as to their nature and purpose.
d. Company payments shall be made only in accordance with
established Company procedures and only for the purposes
reflected in the Company's records, accounts and supporting
documentation.
e. Gifts and entertainment shall only be in amounts reasonable and
customary (for gifts, not more than $25.00 per person per
year), in accordance with accepted ethical business practices.
(2) The following are improper and are prohibited:
a. Bribes, payoffs, kickbacks or other considerations made to
obtain a commercial advantage;
b. Theft of Company property or the property of others, in any
form;
c. Charging of purchases of personal items to the Company's
account, even though later paid with personal funds;
d. Falsification or misrepresentation of expense accounts or other
business records;
e. Borrowing money from or incurring personal financial
obligations to those with whom the Company does business;
f. Disclosure of confidential or proprietary information about the
Company to others, or use of such information for personal
gain;
<PAGE> 14
NATIONAL-OILWELL
STATEMENT OF POLICY REGARDING CONFLICT OF INTEREST
All employees of National-Oilwell, and its subsidiary
companies, are directed to comply with the following guidelines regarding
conflict of interest.
1. An employee must not, directly or indirectly, seek or accept
any payment, gift or entertainment (except to the extent that such gift or
entertainment is customary in the trade, is reasonable in amount, and is not in
consideration for any improper action by the employee), which may tend to
influence transactions between National-Oilwell and any person or enterprise,
whether or not intended to do so. Furthermore, an employee should not borrow
money from individuals or firms (not including lending institutions) with whom
National-Oilwell does business.
2. An employee must not use his authority or position in
National-Oilwell to influence transactions with, or give favored treatment to,
any other person or enterprise in which he or a member of his immediate family
has a substantial interest, financial or otherwise. An employee must not
participate in any such transactions without the prior approval of his
supervisor to whom any possible conflict of interest has been fully disclosed
by the employee. If any employee or his supervisor has any question on the
substantiality of the interest, the matter should be submitted for
determination to the President of National-Oilwell or his delegated officer.
Note: This policy does not apply to ownership in corporations which
have stock listed or registered on a national stock exchange, or
actively traded over the counter. In addition, an interest of
less than 1% of a security outstanding is not deemed to be
substantial.
3. An employee must not serve or be associated in any capacity
with any person or enterprise which is a competitor of National-Oilwell or,
without the prior approval of the President of National-Oilwell, with a person
or enterprise doing or seeking to do business with National-Oilwell.
4. An employee must not use or disclose, without proper
authorization, to any third party any confidential information, the use or
disclosure of which might be prejudicial to National-Oilwell.
5. An employee should not use company assets for his own personal
benefit.
6. An employee who is a supervisor is expected to bring
National-Oilwell's policy on conflict of interest to the attention of employees
under his immediate supervision who are in a position to influence transactions
to which National-Oilwell is or may be a party.
<PAGE> 15
Page 2
ANTITRUST LAWS
Pricing, Distribution and Technology
Our Antitrust Laws, from the enactment of the Sherman Act in 1890 to the
present, have been designed by Congress and construed by the Courts to promote
free and aggressive competition by the avoidance of collusive restraints on
trade, unfair discrimination between competing concerns, and monopolization.
With this goal of promoting competition in mind, a number of practices have
been prohibited by the Courts, some of which are illegal per se (that is,
regardless of any justification), while other acts are illegal only if they are
found to have an unreasonable impact upon competition.
Violation of the antitrust laws exposes an employee and his company to serious
consequences. For instances, price fixing, market allocations by customers or
territories and bid rigging are deemed to be felonies - an individual may be
imprisoned for up to $1 million. In addition, individuals and companies who
violate the antitrust laws may be liable for treble damages - three times the
damages incurred by a person or business as a result of such violation.
The purpose of this memorandum is to briefly familiarize you with the
prohibitions of our Antitrust Laws and, at the same time, point out permitted
areas of intercorporate cooperation. This memorandum is not intended to be
exhaustive in its treatment of the complex problems arising under the Antitrust
Laws. If questions arise involving the construction and/or application of the
Antitrust Laws to a particular situation, the Legal Department should be
consulted.
A. Relations with Competitors
1. You cannot agree or reach any understanding with your competitors to fix,
maintain or stabilize prices. Contacts with your competitors should be held
to a minimum and discussions or exchanges of information with respect to
prices can constitute evidence of price fixing. Moreover, this general
subject of price fixing includes several variations such as collusive
bidding or bid rigging, agreements affection production, and adoption of
industrywide methods of pricing, e.g., basing point formulas.
Since meetings with competitors are often looked upon suspiciously by the
Justice Department (even where a legitimate reason for such a meeting may
exist), all such meetings where practicable should be avoided unless the
subject matter has been screened by the Legal Department in advance. In the
event of informal contacts with competitors, one should avoid discussions or
comments relating to price, low profitability, price cutting, the need for
stability in pricing, etc. If a competitor persists in such comments, you
should immediately terminate the discussion or leave the meeting. Then
report the situation to your superior in writing to determine whether
further action is necessary to record National-Oilwell's lack of
involvement.
<PAGE> 16
Page 3
6. You can give promotional allowances or services to your customers so
long as they are made available to all competing customers on a
proportionately equal basis.
7. You cannot pay the buyer, or any agent affiliated with him, brokerage or
any commission in lieu of brokerage. Only a bona fide broker or agent of
the seller himself can be paid any such commission.
8. You cannot sell products below cost with the intent of injuring or
destroying competition of a competitor. However, where there is a
legitimate objective, i.e., liquidation of obsolete or perishable
merchandise, or meeting competitive prices (legally), you can sell below
cost. In certain states sales below cost are prohibited or severely
limited. No such sales should be made, therefore, without consulting the
Legal Department.
9. You should exercise great care before refusing to deal with a customer.
Refusing to deal with a customer, even for a just cause, often provokes
antitrust lawsuits. Any termination of a prior significant customer
should receive prior legal review.
C. Relations with Suppliers
1. You cannot knowingly induce or receive a lower price from a supplier
than received by your competitors. However, such lower prices may be
justified by cost savings enjoyed by the supplier or his meeting
competitive prices to you.
2. You cannot purchase from a supplier on the condition or understanding
that purchases by National-Oilwell from such supplier will be based or
conditioned upon sales to such supplier.
D. Permitted Agreements and Arrangements
There exist a number of areas where members of an industry may work together
without running afoul of the Antitrust Laws.
(1) You can engaged jointly in a technical and/or market research program
with competitors or through a trade association. This is a narrow
exception and the Legal Department should be consulted prior to entering
into such an agreement.
<PAGE> 17
NATIONAL-OILWELL
STATEMENT OF POLICY REGARDING IMPROPER BUSINESS PAYMENTS
All employees of National-Oilwell, and its affiliated companies, are directed to
comply with the following guidelines regarding Improper Business Payments.
The following are improper business payments and are prohibited:
(a) Bribes, payoffs, or kickbacks made directly or indirectly to
obtain an advantage in a commercial transactions, or
(b) Gifts, gratuities, entertainment or other similar payments,
except to the extent customary and provided they are reasonable
in amount and not in consideration for any improper action by
the recipient, or
(c) Agency or distributorship commissions or discounts, and
consulting or professional fees, not reasonably related in value
to the services performed, or
(d) Company political contributions, direct or indirect, to any
political candidate, party or campaign within the United States,
either Federal, State, or Local, or to any foreign political
candidate, party or campaign. Company political contributions
outside the United States are prohibited unless a proposed
contribution conforms to all applicable laws and is submitted in
writing and approved by the President of the Company.
Managers of the Company shall insure that all financial and other books and
records relating to their operations are complete and correct and shall enter
on such books all assets, liabilities, payments and disbursements in accordance
with generally accepted accounting practices and policies of the Company, and
such entries shall reflect not only the amounts thereof but also their nature
and purpose.
<PAGE> 1
EXHIBIT 10.3
- --------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT
among
NOW HOLDINGS, INC.
and
its STOCKHOLDERS
Dated as of January 16, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
(Not Part of Agreement)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II. MANAGEMENT AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.1. CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.2. CERTIFICATE OF INCORPORATION; NO CONFLICT
WITH AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.3. MANAGEMENT SERVICES AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.4. STOCK INCENTIVE PLAN AND BONUS PLANS . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.5. LIQUIDITY TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.6. REGISTRATION OF COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.7. ACCESS TO INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE III. CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.1. BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 3.2. REMOVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.3. VACANCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.4. COVENANT TO VOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.5. REPRESENTATION AND COVENANT OF DPI. . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.6. REPRESENTATION OF FIRST RESERVE. . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE IV. TRANSFERS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.1. RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.2. EXCEPTIONS TO RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.3. NO TRANSFER TO COMPETITORS . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.4. ENDORSEMENT OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 4.5. IMPROPER TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE V. PURCHASE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.1. TRANSFERS BY A STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.2. TRANSFER OF OFFERED SECURITIES TO THIRD PARTIES . . . . . . . . . . . . . . . 22
SECTION 5.3. PURCHASE OF OFFERED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.4. WAITING PERIOD WITH RESPECT TO
SUBSEQUENT TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.5. PUTS AND CALLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.6. RIGHT OF FIRST REFUSAL FOR NEW SECURITIES. . . . . . . . . . . . . . . . . . 27
SECTION 5.7. LEGALLY BINDING OBLIGATION; POWER OF
ATTORNEY; PERSONAL RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.8. RIGHT TO JOIN IN SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.9. RIGHTS TO COMPEL SALE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.10. STOCK INCENTIVE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.11. PERMITTED REPURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.1. DEMAND REGISTRATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.2. PIGGYBACK REGISTRATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.3. REGISTRATION PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.4. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 6.5. CONTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.6. RULE 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VII. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 7.1. CERTAIN TERMINATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.1. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.2. AMENDMENT AND MODIFICATION; WAIVER
OF COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.3. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.4. ENTIRE AGREEMENT; GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 8.5. INJUNCTIVE RELIEF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.6. INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.7. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.8. RECAPITALIZATIONS, EXCHANGES, ETC., AFFECTING
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.9. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
-ii-
<PAGE> 4
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of January 16, 1996, among NOW
HOLDINGS, INC., a Delaware corporation (together with its successors and
assigns, the "Company"), DPI OIL SERVICE PARTNERS LIMITED PARTNERSHIP
("DPIOSP"), DPI Partners II ("DPI Partners") FIRST RESERVE FUND V, LIMITED
PARTNERSHIP, FIRST RESERVE FUND V-2, LIMITED PARTNERSHIP and FIRST RESERVE FUND
VI, LIMITED PARTNERSHIP (collectively, the "First Reserve Stockholders"), and
GENERAL ELECTRIC CAPITAL CORPORATION ("GE Capital"), (collectively, together
with their respective successors and assigns, the "Institutional Investors"),
and the individuals and trustees named on the signature page hereof under
"Management Investors" (collectively, together with their respective successors
and assigns, the "Management Investors").
W I T N E S S E T H:
WHEREAS, the Company, as of the date hereof, is authorized by its
Restated Certification of Incorporation (a true and correct copy of which, as
in effect on the date hereof, has been delivered to each Stockholder) to issue
capital stock consisting of (i) 1,200 shares of its Class A Common Stock, par
value $.01 per share (the "Class A Common Stock") and (ii) 1,100,000 shares of
its Common Stock, par value $.01 per share (the "Common Stock"), the shares of
each of such classes of capital stock to have the voting powers, designations,
preferences and relative, participating, optional and other special rights and
the qualifications, limitations and restrictions thereof set forth with respect
thereto in the Certificate of Incorporation;
WHEREAS, on the date hereof (i) an aggregate of 490 shares of Class A
Common Stock and 359,414 shares of Common Stock are owned of record and
beneficially by DPIOSP; (ii) an aggregate of 434 shares of Class A Common Stock
and 318,338 shares of Common Stock are owned of record and beneficially by the
First Reserve Stockholders; (iii) an aggregate of 136 shares of Class A Common
Stock, 99,756 shares of Common Stock and warrants to purchase 25,672 shares of
Common Stock (subject to adjustment) are owned of record and beneficially by GE
Capital; (iv) an aggregate of 34,229 shares of common stock are owned of record
and beneficially by DPI Partners; (v) an aggregate of 129.6 shares of Class A
Common Stock and 163,521 shares of Common Stock are owned of record and
beneficially by the Management Investors; and (vi) no other shares of Class A
Common Stock or Common Stock, or warrants, options, rights or other securities
exercisable for or convertible into Class A Common Stock or Common Stock are
issued or outstanding;
WHEREAS, the parties hereto deem it in their best interests and in the
best interests of the Company to provide consistent and uniform management for
the Company and desire to enter into this Agreement in order to effectuate that
purpose and to set forth their respective rights and obligations in connection
with their investment in the Company; and
<PAGE> 5
WHEREAS, the parties hereto also desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the shares of Class A
Common Stock and Common Stock and of the outstanding options and warrants
therefor, including issued and outstanding shares of Class A Common Stock and
Common Stock as well as shares of Common Stock that may be issued hereafter,
and to provide for certain rights and obligations in respect thereto as
hereinafter provided;
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
ARTICLE I. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following respective meanings:
ADJUSTED BOOK VALUE means (a) in respect of each share of Class A
Common Stock, unreturned Original Cost, and (b) in respect of each share of
Fully Diluted Common Stock an amount equal to the quotient of (x) the
difference of (i) the consolidated stockholders' equity of the Company and its
Subsidiaries (determined in accordance with GAAP) at the end of the last full
fiscal quarter prior to the date such determination is made, and (ii) the
Unreturned Original Cost; divided by (y) the number of shares of Fully Diluted
Common Stock.
AFFILIATE shall mean with respect to any Person, (a) any Person which
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, (b) any Person who
is a director or executive officer (i) of such Person, (ii) of any Subsidiary
of such Person, or (iii) of any Person described in the foregoing clause (a),
or (c) any spouse, parent, sibling, mother-in-law, father-in-law,
brother-in-law, sister-in-law, aunt, uncle, first cousin or direct descendant
of any Person described in the foregoing clause (b). For purposes of this
definition, "control" of a Person shall mean the power, direct or indirect, (i)
to vote or direct the voting of 50% or more of the outstanding shares of voting
Capital Stock of such Person, or (ii) to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
AGREEMENT shall mean this Agreement as in effect on the date hereof
and as hereafter from time to time amended, modified or supplemented in
accordance with the terms hereof.
APPRAISED VALUE shall mean (a) in respect of each share of Class A
Common Stock, the Class A Common Stock Value, and (b) in respect of each share
of Common Stock, the fair market value per share of Common Stock determined by
agreement of the First Reserve Stockholders and DPIOSP (and GE Capital, if GE
Capital is selling or purchasing any Stock pursuant to the provisions of
Sections 2.5 or 5.5(a)) or in the case of a purchase of Common Stock from any
Management Investor, by agreement between the Board of Directors and such
Management Investor or, in either such case if such agreement is not obtained
within 30 days after the relevant determination date, by a
-2-
<PAGE> 6
nationally-recognized investment bank jointly selected by the First Reserve
Stockholders and DPIOSP (and GE Capital, if GE Capital is selling or purchasing
any Stock pursuant to the provisions of Sections 2.5 or 5.5(a)), or by the
Board of Directors if such appraisal relates to Common Stock owned by a
Management Investor. For purposes of determining the Appraised Value, the fair
market value of the Common Stock shall equal the price per share of Common
Stock that could be obtained in an open (non-forced) sale of all of the
outstanding Common Stock, with ample time for marketing and closing and
assigning equal value to each share of Common Stock. The cost of any
investment bank will be borne by the Company and any such investment bank will
be given full access to the books, records, properties and employees of the
Company and its Subsidiaries.
BOARD OF DIRECTORS shall mean the Board of Directors of the Company as
from time to time hereafter constituted.
BONUS PLANS shall mean the Value Appreciation Bonus Plan A and the
Value Appreciation Bonus Plan B described in Section 2.4 as such Plans may
from time to time hereafter be amended, modified or supplemented in accordance
with the terms hereof and thereof.
BORROWER shall mean National-Oilwell, L.P., a Delaware limited
partnership and an indirectly wholly-owned Subsidiary of the Company.
BY-LAWS shall mean the By-Laws of the Company as in effect on the date
hereof and as hereafter amended in accordance with the terms hereof and
thereof.
CALL shall have the meaning specified in Section 5.5.
CAPITAL STOCK shall mean, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated) of such Person's capital stock or equity capital, including,
without limitation, shares of preferred or preference stock, general and
limited partnership interests, and any rights, warrants or options exercisable
for or convertible into such capital stock or equity capital.
CERTIFICATE OF INCORPORATION is defined in the Recitals. Such term
shall also include the Certificate of Incorporation as hereafter from time to
time amended in accordance with the terms thereof and of this Agreement.
CLASS A COMMON STOCK is defined in the Recitals.
CLASS A COMMON STOCK VALUE means the Unreturned Original Cost of each
outstanding share of Class A Common Stock, plus the Appraised Value of one
share of Common Stock.
CLOSING DATE shall have the meaning specified in the Purchase
Agreement.
COMMON STOCK is defined in the Recitals.
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COMMISSION shall mean the Securities and Exchange Commission and any
successor commission or agency having similar powers.
COMPANY is defined in the preamble.
COMPANY SECURITIES shall have the meaning specified in Section 6.1(g).
CONSOLIDATED TOTAL CAPITALIZATION shall mean consolidated total
stockholders' equity plus consolidated total long-term debt of the Company and
its Subsidiaries, all as determined in accordance with GAAP.
DEBT REFINANCING INSTRUMENT shall mean any debt instrument covering
indebtedness incurred to refinance all or any part of the indebtedness under
the Loan Agreement, the Note Purchase Agreement, the GE Subordinated Note, the
Seller Subordinated Notes or the Revolving Term Credit Facility dated December
29, 1995 between National-Oilwell Canada Ltd. and General Electric Capital
Canada Inc.
DISPOSING STOCKHOLDER shall have the meaning specified in Section
5.8(a).
DPI shall mean Duff & Phelps/Inverness LLC, a Connecticut limited
liability company.
DPI PARTNERS is defined in the Preamble.
EXCHANGE ACT shall mean, as of any date, the Securities Exchange Act
of 1934, as amended, or any similar Federal statute then in effect, and a
reference to a particular section thereof shall include a reference to the
comparable section, if any, of such similar Federal statute.
FIRST OFFER PRICE shall have the meaning specified in Section 5.1(a).
FIRST OFFER TERMS shall have the meaning specified in Section 5.1(a).
FIRST RESERVE shall mean First Reserve Corporation, a Delaware
corporation, together with its successors.
FIRST RESERVE STOCKHOLDERS is defined in the Preamble.
FOR CAUSE shall have the meaning specified in the Employment Agreement
with each Management Investor.
FULLY DILUTED COMMON STOCK at any time shall mean all shares of Class
A Common Stock and Common Stock then issued and outstanding plus all shares of
Common Stock issuable upon the exercise of any warrants, options or rights to
acquire Common Stock which are then outstanding, regardless of whether such
warrants, options, other rights are at the time exercisable, but excluding any
shares of Common Stock which may be issuable upon conversion of Class A Common
Stock.
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GAAP means generally accepted accounting principles from time to time
in effect in the United States.
GE CAPITAL is defined in the Preamble.
GE CAPITAL WARRANT shall mean the warrant to purchase Common Stock
dated January 16, 1996, as the same may be amended from time to time.
GE SUBORDINATED NOTE shall mean the Subordinated Note in the original
principal amount of $5,000,000 issued pursuant to the Note Purchase Agreement.
HOLDER REQUEST shall have the meaning specified in Section 6.1(a).
INSTITUTIONAL INVESTOR is defined in the Preamble.
INVESTOR shall mean any of the Institutional Investors and the
Management Investors.
LIQUIDITY TRANSACTION shall have the meaning specified in Section 2.5.
LOAN AGREEMENT shall mean the Credit Agreement dated as of December
29, 1995 between GE Capital, Goldman, Sachs & Co., GECC Capital Markets Group,
Inc. and other lenders, National-Oilwell (UK) Limited and the Borrower, as the
same may be amended from time to time (unless otherwise specified in this
Agreement).
MANAGEMENT INVESTORS shall have the meaning specified in the preamble.
MANAGEMENT SERVICES AGREEMENT shall mean the Management Services
Agreement dated as of January 16, 1996, between Duff & Phelps/Inverness LLC and
the Company, as such agreement may from time to time hereafter be amended,
modified or supplemented in accordance with the terms hereof and thereof.
MATERIAL SUBSIDIARY means a Subsidiary of the Company that owns
"substantial assets" (as defined in Section 2.1).
NASD means the National Association of Securities Dealers, Inc., or
any successor regulatory body exercising similar functions.
NORMAL RETIREMENT shall mean the retirement of an employee pursuant to
the National-Oilwell Retirement Trust and Plan at any time after the third
anniversary of the Closing Date.
NOTE PURCHASE AGREEMENT shall mean the Note Purchase Agreement dated
January 16, 1996 between GE Capital and the Borrower.
NOTICE OF EXERCISE shall have the meaning specified in Section 5.1(b).
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NOTICE OF INTENTION shall have the meaning specified in Section
5.1(a).
OFFERED SECURITIES shall have the meaning specified in Section 5.1(a).
PARENT shall mean, with respect to any Person, any other Person of
which such Person is a direct or indirect Subsidiary.
PERMITTED NUMBER shall have the meaning specified in Section 5.5(b).
PERMITTED TRANSFEREE shall mean, with respect to any Investor, those
Persons to whom transfers of Securities are permitted to be made by such
Investor pursuant to Subsection (a) or (b) of Section 4.2 hereof.
PERSON shall mean an individual or a corporation, association,
partnership, joint venture, organization, business, individual, trust, or any
other entity or organization, including a government or any subdivision or
agency thereof.
PRIME RATE shall mean the Index Rate as defined in the Loan Agreement,
as the Loan Agreement was in effect on the Closing Date, which in no event
shall exceed 10% per annum.
PROPOSED PURCHASER shall have the meaning specified in Section 5.8(b).
PUBLIC OFFERING shall mean a public offering and sale of equity
securities of the Company pursuant to an effective registration statement on
Form S-1 under the Securities Act.
PURCHASE NOTE shall have the meaning specified in Section 5.5(i).
PURCHASE OFFER shall have the meaning specified in Section 5.8(b).
PUT shall have the meaning specified in Section 5.5(a).
QUALIFIED PUBLIC OFFERING shall mean a Public Offering of Common
Stock, at the conclusion of which the aggregate number of issued and
outstanding shares of Common Stock that have been sold to the public pursuant
to one or more effective registration statements under the Securities Act is
equal to at least 20% of the Fully Diluted Common Stock after giving effect to
such sale and the listing of the Common Stock on the New York Stock Exchange,
American Stock Exchange, Nasdaq Stock Market or the National Association of
Securities Dealers, Inc., Automated Quotation System.
REGISTRABLE SECURITIES shall mean the following:
(a) all shares of Common Stock outstanding on the date
hereof or issuable under warrants or options outstanding on the date
hereof;
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(b) any shares of Common Stock issued or issuable by the
Company in respect of any shares of Common Stock referred to in the
foregoing clause (a) by way of a pay-in-kind dividend, stock dividend
or stock split or in connection with a combination or subdivision of
shares, reclassification, recapitalization, merger, consolidation or
other reorganization of the Company; and
(c) all shares of Common Stock issued or issuable upon
the conversion of any of the shares of Class A Common Stock in
accordance with the applicable provisions of the Certificate of
Incorporation.
No holder of shares of Class A Common Stock (or warrants to purchase
shares of Class A Common Stock) shall have any registration rights hereunder
with respect to any shares of Class A Common Stock, but only with respect to
shares of Common Stock into which such shares of Class A Common Stock shall be
converted and, solely for purposes of Article VI of this Agreement, each holder
of shares of Class A Common Stock (or warrants to purchase such shares) which
are to be converted into shares of Common Stock to be sold in connection with
such a registration shall be deemed to be the holder of shares of Common Stock
into which such shares of Class A Common Stock shall be convertible.
As to any particular Registrable Securities that have been issued,
such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of under such registration statement, (ii) they shall have been
distributed to the public pursuant to Rule 144, (iii) they shall have been
otherwise transferred or disposed of, and new certificates therefor not bearing
a legend restricting further transfer shall have been delivered by the Company,
and subsequent transfer or disposition of them shall not require their
registration or qualification under the Securities Act or any similar state law
then in force, or (iv) they shall have ceased to be outstanding.
REGISTRATION EXPENSES shall mean any and all out-of-pocket expenses
incident to the Company's performance of or compliance with Article VI hereof,
including, without limitation, all Commission, stock exchange or NASD
registration and filing fees, all fees and expenses of complying with
securities and blue sky laws (including the reasonable fees and disbursements
of underwriters' counsel in connection with blue sky qualifications and NASD
filings), all fees and expenses of the transfer agent and registrar for the
Registrable Securities, all printing expenses, the fees and disbursements of
counsel for the Company and of its independent public accountants, including
the expenses of any special audits and/or "cold comfort" letters required by or
incident to such performance and compliance, and the reasonable fees and
disbursements of one firm of counsel (other than house counsel) retained by
DPIOSP, and, to the extent the offering includes Registrable Securities owned
by the First Reserve Stockholders, one firm of counsel retained by the First
Reserve Stockholders, and if neither of such counsel is able to represent the
holders of the remaining Registrable Securities in the offering, one firm of
counsel retained by a majority of the remaining Registrable Securities to
represent the remaining holders of Registrable Securities in the offering, but
excluding underwriting discounts and
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commissions and applicable transfer and documentary stamp taxes, if any, which
shall be borne by the seller of the securities in all cases.
RELATED ENTITY shall mean, with respect to any Person, (a) any direct
or indirect Subsidiary of such Person, (b) any Parent of such Person or (c) any
Person which has the same Parent as such Person.
RESTRICTED PAYMENTS LIMITATION shall have the meaning specified in
Section 5.5(g).
SALE PROPOSAL shall have the meaning specified in Section 5.1(a).
SECURITIES shall mean the Stock and the Stock Rights.
SECURITIES ACT shall mean, as of any date, the Securities Act of 1933,
as amended, or any similar Federal statute then in effect, and in reference to
a particular section thereof shall include a reference to the comparable
section, if any, of any such similar Federal statute.
SELLER shall have the meaning specified in Section 5.5(b).
SELLER SUBORDINATED NOTES shall mean the Subordinated Promissory Notes
in the original aggregate principal amount of $20,000,000 issued to National
Supply Company, Inc. and Oilwell, Inc. pursuant to the Purchase Agreement among
USX Corporation, Oilwell, Inc., Armco Inc., National Supply Company, Inc. and
the Company dated September 22, 1995, as amended.
SELLING STOCKHOLDER shall have the meaning specified in Section
5.1(a).
SIGNIFICANT TRANSACTION shall have the meaning specified in Section
2.1(c).
SPOUSE shall have the meaning specified in Section 5.5(e).
SPOUSE CALL shall have the meaning specified in Section 5.5(e).
STOCK with respect to any Person shall mean Capital Stock of such
Person of any class or classes, the holders of which are ordinarily (and not
only upon the happening of a contingency) entitled to vote for the election of
members of the board of directors (or Persons performing similar functions) of
such Person, including, without limitation, the Class A Common Stock and the
Common Stock.
STOCKHOLDER shall mean any one of (i) any Institutional Investor, (ii)
any Management Investor, and (iii) any Permitted Transferee of any such Person,
or of any other Permitted Transferee, who becomes a party to or bound by the
provisions of this Agreement in accordance with the terms hereof.
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STOCK INCENTIVE PLAN shall mean the Stock Award and Long-Term
Incentive Plan as described in Section 2.4, as such Plan may from time to time
hereafter be amended, modified or supplemented in accordance with the terms
hereof and thereof.
STOCK RIGHTS shall mean at any time any and all warrants, options and
other rights outstanding at such time to purchase or otherwise acquire Common
Stock of the Company of any class, whether or not such warrants, options or
rights are exercisable at such time, including, without limitation, the GE
Capital Warrant and all options now outstanding or hereafter granted pursuant
to the Stock Incentive Plan.
SUBSIDIARY shall mean as to any Person a corporation or partnership of
which a majority of the outstanding shares of voting Capital Stock are at the
time owned, directly or indirectly through one or more intermediaries, or both,
by such Person.
THIRD PARTY shall mean, as to any Stockholder, any person other than a
Permitted Transferee of such Stockholder.
UNDERWRITTEN OFFERING shall have the meaning specified in Section
6.1(g).
UNEXERCISED RIGHT shall have the meaning specified in Section 5.5(e).
UNRETURNED ORIGINAL COST shall have the meaning specified in the
Certificate of Incorporation.
ARTICLE II. MANAGEMENT AGREEMENTS
SECTION 2.1. CONDUCT OF BUSINESS.
(a) The parties hereto confirm that it is their intention that the
business and affairs of the Company and its Subsidiaries shall be managed by
its Board of Directors in the best interests of the Company and its
Subsidiaries taken as a whole. In furtherance of the foregoing, each of the
parties hereto agrees that, after the date hereof, except in the case of
transactions expressly contemplated by this Agreement, the Management Services
Agreement, the Stock Incentive Plan, the Bonus Plans, or employment agreements
between the Company and its executive management approved by the Board of
Directors, neither the Company nor any of its Subsidiaries will enter into any
written or oral contract, agreement or other arrangement to engage in business
or enter into any transaction, or will engage in business or enter into any
transaction, with any Stockholder or any Affiliate of a Stockholder (other than
the Company and its Subsidiaries) unless the terms and provisions of such
contract, agreement or other arrangement or the terms on which such business or
transaction is conducted, as the case may be, are fair to the Company or such
Subsidiary and are substantially equivalent to terms that would have been
obtained in an arm's-length relationship. The provisions of this Section
2.1(a) shall be deemed satisfied if the relevant transaction (i) has been
approved by a majority of the Board of Directors voting on such matter,
excluding any director designees of the Stockholder who (or whose Affiliate
has) an interest in the transaction and such interest was disclosed to the
Board of Directors prior to such approval and other directors
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abstaining from such vote or (ii) is a commercial transaction entered into in
the ordinary course of business by the Company or its Subsidiary and such
transaction has been negotiated on arm's length terms between the operating
management or employees of the Company or its Subsidiary and the other party to
the transaction.
(b) Notwithstanding the fact that no vote may be required, or that
a lesser percentage vote may be specified, by law, by the Certificate of
Incorporation or By-Laws, by any agreement with any national securities
exchange or otherwise, except as hereinafter provided in this paragraph (b) or
otherwise in this Agreement, the Company and the Stockholders shall not take or
permit any of the following actions (individually, a "Significant Transaction")
unless otherwise authorized by a vote of at least a majority of the whole Board
of Directors, including the affirmative vote of William E. Macaulay (or a
successor designee of the First Reserve Stockholders) and W. McComb Dunwoody
(or a successor designee of DPIOSP) whether or not there shall be any vacancies
on the Board of Directors:
(i) Any merger or consolidation involving the Company or
any Subsidiary of the Company (other than transactions involving the
merger or consolidation of a wholly-owned Subsidiary of the Company
into the Company or with or into another wholly-owned Subsidiary of
the Company), if such merger or consolidation would involve the
Company or one or more Subsidiaries that in the aggregate own (or,
following such transaction, would own) "substantial assets" under
subparagraph (iii) below.
(ii) Any sale, lease, exchange, transfer or other
disposition, directly or indirectly, in a single transaction or series
of related transactions, of all or substantially all, or a substantial
part, of the assets of the Company or any of its Subsidiaries, or of
any of the outstanding capital stock of any Subsidiary of the Company,
to or with any Person other than to or with the Company or a
wholly-owned Subsidiary of the Company. The term "substantial part"
means assets having a gross fair market value which exceeds 20% of the
Consolidated Total Capitalization of the Company and its Subsidiaries,
as reflected on the consolidated balance sheet of the Company and its
Subsidiaries as at the end of the last full fiscal quarter prior to
the date such determination is made.
(iii) Any purchase, lease, exchange or other acquisition of
assets (including securities) by the Company or any Subsidiary of the
Company, in a single transaction or a series of related transactions,
if such assets constitute or would constitute substantial assets. The
term "substantial assets" means assets having a gross fair market
value which, or assets to be acquired for consideration which, exceeds
20% of the Consolidated Total Capitalization of the Company and its
Subsidiaries, as reflected on the consolidated balance sheet of the
Company and its Subsidiaries as at the end of the last full fiscal
quarter prior to the date such determination is made.
(iv) Any increase or reduction of the number of shares of
any class of the Company's authorized Capital Stock or the creation of
any additional class of
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Capital Stock of the Company, or the issuance or sale of shares of
Capital Stock of the Company or any of its Subsidiaries (or warrants,
options or rights to acquire shares of Capital Stock or securities
convertible into or exchangeable for Capital Stock or any type of debt
instrument which has equity features), except (A) the issuance or sale
of shares of Capital Stock of a wholly-owned Subsidiary of the Company
to the Company or to another wholly-owned Subsidiary of the Company,
(B) the issuance of (and options to purchase), not more than an
aggregate of 85,573 shares of Common Stock to officers and key
employees of the Company and its Subsidiaries pursuant to the Stock
Incentive Plan, and the purchase of such shares upon the exercise of
such options in accordance with the terms thereof and (c) the purchase
of Common Stock upon the exercise of the GE Capital Warrant in
accordance with the terms thereof and (c) the purchase of Common Stock
upon the exercise of the GE Capital Warrant in accordance with the
terms thereof.
(v) Any amendment to or modification or repeal of any
provision of the Certificate of Incorporation or By-Laws of the
Company.
(vi) The dissolution of the Company; the adoption of a
plan of liquidation of the Company or any Subsidiary of the Company
holding "substantial assets" (as defined in subparagraph (iii) above);
any action by the Company or any Subsidiary of the Company to commence
any suit, case proceeding or other action (A) under any existing or
future law of any jurisdiction relating to bankruptcy, insolvency,
reorganization or relief of debtors seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or making a general assignment for the
benefit of its creditors.
(vii) Any redemption, offer to purchase made by the Company
or any of its Subsidiaries or other acquisition of Stock or Stock
Rights of the Company, except (A) the purchase of shares of Class A
Common Stock or Common Stock held by any of the Management Investors
in accordance with Section 5.5 of this Agreement, (B) the purchase or
redemption of stock options or shares of Common Stock issued under the
Stock Incentive Plan, in each case in accordance with the applicable
provisions of the Stock Incentive Plan or (C) the purchase of Class A
Common Stock pursuant to Section 5.11.
(viii) Any amendment of or modification or supplement to the
Management Services Agreement, the Stock Incentive Plan or the Bonus
Plans and any renewal of the Management Services Agreement; provided,
however, that if all of the director designees of DPIOSP are excluded
or abstain from voting with respect to any amendment, modification or
renewal of the Management Services Agreement, the Executive Vice
President serving as a director shall also be excluded or abstain from
voting on such matter; and further provided that no amendment,
modification or supplement to the Stock Incentive Plans or the Bonus
Plans that would materially and adversely change the economic benefits
to the participants in such
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plans shall be approved without the approval of the participants who
are so affected.
(ix) Any grant to any Stockholder or holder of any Stock
or Stock Rights of rights similar to any of the rights granted to the
First Reserve Stockholders in this Agreement that are more favorable
to such Stockholder or holder of Stock or Stock Rights than those
granted to the First Reserve Stockholders in this Agreement;
provided, however, that any Liquidity Transaction described in clause (i) or
(ii) of the definition thereof, whether or not effected pursuant to Section
2.5, together with any issuance of Securities, amendments to the Certificate of
Incorporation and Bylaws, amendments to any other documents and instruments and
other actions in connection therewith shall not be considered "Significant
Transactions" for purposes of this Section 2.1(b), and in the event that DPIOSP
and the Company pursue a Liquidity Transaction, each of the Stockholders shall
use their best efforts to cause a Liquidity Transaction to be effected on such
terms and conditions as are approved by 3 of the 4 members of the Board of
Directors designated by DPIOSP, including, without limitation, removal of
directors and, if necessary, appointment of additional designees of DPIOSP
sufficient to approve the Liquidity Transaction; provided, however, that GE
Capital's best efforts shall not obligate it to take any action or grant any
approval in its capacity as Administrative Agent or Lender under the Loan
Agreement or as holder of the GE Subordinated Note.
SECTION 2.2. CERTIFICATE OF INCORPORATION; NO CONFLICT WITH
AGREEMENT.
(a) Each stockholder hereby acknowledges receipt of a copy of the
Certificate of Incorporation as in effect on the date hereof. The provisions
of the Certificate of Incorporation are hereby approved by, and made a part of
this Agreement among the parties hereto.
(b) Each Stockholder shall vote his shares of Stock, and shall
take all other actions necessary or appropriate, to ensure that the Certificate
of Incorporation and By-Laws of the Company do not, at any time, conflict with
the provisions of this Agreement.
SECTION 2.3. MANAGEMENT SERVICES AGREEMENT. The Stockholders
hereby acknowledge receipt of a copy of the Management Services Agreement and
hereby approve the Management Services Agreement.
SECTION 2.4. STOCK INCENTIVE PLAN AND BONUS PLANS. The Board of
Directors has adopted the Stock Incentive Plan together with the Restricted
Stock Agreement to be entered into in connection therewith, copies of which are
attached hereto as Exhibits A-1 and A-2, and the Bonus Plans, copies of which
are attached hereto as Exhibits B-1 and B-2. Restricted Stock, Stock options
and other rights granted under the Stock Incentive Plan shall be granted to
such persons, in such amounts and on such terms as shall be approved by a
majority of the whole Board of Directors including the Chief Executive Officer.
The persons participating in the Bonus Plans and the amount and other terms of
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such participation shall be approved by a majority of the whole Board of
Directors, including the Chief Executive Officer.
SECTION 2.5. LIQUIDITY TRANSACTION. If the Company has not
completed one of the following Liquidity Transactions within five years after
the date of this Agreement, at any time after the fifth anniversary of the date
of this Agreement, the First Reserve Stockholders, for so long as the total
number of shares of Stock and Stock Rights owned by the First Reserve
Stockholders and their Affiliates is greater than 10% of the Fully Diluted
Common Stock, shall have the right to request that DPIOSP choose one of the
following Liquidity Transactions and that DPIOSP and the Company pursue that
transaction to completion. DPIOSP agrees that upon such request by the First
Reserve Stockholders, DPIOSP shall choose one of the following Liquidity
Transactions and each of DPIOSP and the Company agrees to use its best efforts
to consummate such transaction. No later than 30 days after DPIOSP has
received written notice from the First Reserve Stockholders that they have
determined to exercise their right to require that a Liquidity Transaction be
effected pursuant to this Section 2.5, DPIOSP and the Company shall jointly
provide each of the Stockholders with written notice of the type of Liquidity
Transaction which they have elected to pursue. "Liquidity Transaction" shall
mean any one of the following: (i) a Qualified Public Offering; (ii)(x) a
merger of the Company, a sale of all or substantially all of the assets of the
Company, or a sale of all of the Stock of the Company, (y) in which all of the
Stockholders of the Company receive in such transaction the same consideration
consisting of cash and/or securities that are publicly traded and have a total
market valuation for all outstanding securities of the same publicly traded
class after the transaction of at least $250 million ("Marketable Securities");
or (iii) a purchase for cash by the Company, DPIOSP or a Person or entity
designated by DPIOSP of all of the Stock owned by the First Reserve
Stockholders, and by GE Capital, if so requested by GE Capital as part of the
transaction with the First Reserve Stockholders, at the Appraised Value
thereof, provided that no transaction effected pursuant to clauses (i) or (ii)
shall be consummated with DPIOSP or any Affiliate of DPIOSP. If DPIOSP elects
to pursue a Liquidity Transaction set forth in clause (ii) above, the actions
taken by the Company and DPIOSP shall include the prompt engagement of a
nationally-recognized investment banking firm to seek a purchaser for the
Company and to assist the Company and DPIOSP in the sale process. If DPIOSP
elects to pursue a Liquidity Transaction set forth in clause (iii) above, the
purchase of the shares of Stock owned by the First Reserve Stockholders (and by
GE Capital, if it is a part of the purchase transaction) shall take place as
soon as practical (but in no event later than 90 days) after the determination
of the Appraised Value. If a Liquidity Transaction has not been effected
within six months after DPIOSP's determination of the form of Liquidity
Transaction that will be pursued, the First Reserve Stockholders will have the
option to require that DPIOSP select an alternative form of Liquidity
Transaction to pursue. If the First Reserve Stockholders exercise their right
under this Section 2.5, their designees on the Board of Directors shall be
deemed to have approved the Liquidity Transaction chosen by DPIOSP and no
further approval by the First Reserve Stockholders or their designees on the
Board of Directors shall be deemed necessary pursuant to Section 2.1(b) hereof.
Each of the Company and the Stockholders shall use its best efforts to cause
the consummation of the Liquidity Transaction chosen by DPIOSP.
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SECTION 2.6. REGISTRATION OF COMMON STOCK. In the event of a
Public Offering of Common Stock, each Stockholder shall, at a meeting convened
for the purpose of amending the Certificate of Incorporation, vote to increase
the number of issued and outstanding shares of Common Stock, whether by stock
split, stock dividend or otherwise, or change in its par value or increase the
authorized number of shares of stock, as recommended by a majority of the
members of the Board of Directors designated by DPIOSP in order to facilitate
such Public Offering.
SECTION 2.7. ACCESS TO INFORMATION. The Company will permit
representatives of each of DPIOSP, the First Reserve Stockholders and GE
Capital at their expense to visit and inspect all properties, books and records
of the Company and its Subsidiaries and to discuss the affairs, finances and
accounts of the Company with the principal officers of the Company, its
attorneys and auditors, all at such reasonable times and as often as may
reasonably be requested in order to enable DPIOSP, the First Reserve
Stockholders and GE Capital to reasonably monitor their investments in the
Company. All information obtained by DPIOSP, the First Reserve Stockholders
and GE Capital will be kept confidential and used only for purposes related to
their investments in or loans to the Company.
ARTICLE III. CORPORATE GOVERNANCE
SECTION 3.1. BOARD OF DIRECTORS.
(a) The Stockholders and the Company hereby agree that at all
times after the Closing Date, the Board of Directors of the Company and, unless
otherwise agreed by DPIOSP and the First Reserve Stockholders, the board of
directors (or comparable governance body of any partnership) of each Material
Subsidiary, shall consist entirely of the members described in this Section
3.1(a). On the Closing Date and from time to time thereafter, the Stockholders
shall take all such actions as may be necessary or appropriate to cause the
persons described below to be elected or re-elected as the members of the
Board of Directors and to be maintained in such positions at all times:
(i) 4 persons designated by DPIOSP;
(ii) two of the First Reserve Stockholders shall each
designate one person to serve as a director (i.e. an aggregate of 2
persons will be designated by the First Reserve Stockholders) and the
First Reserve Stockholders shall inform the Company in writing of
which two First Reserve Stockholders have the right to designate a
director;
(iii) the Chief Executive Officer of the Company; and
(iv) the Executive Vice President of the Company
provided, however, that (x) if the total number of shares of Stock and Stock
Rights owned by DPIOSP, DPI, Partners and their respective Affiliates is less
than 20% of the Fully Diluted Common Stock at any time, DPIOSP shall be
entitled to designate three members
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<PAGE> 18
of the Board of Directors, and if such number of shares is less than 10% of the
Fully Diluted Common Stock at any time, DPIOSP shall be entitled to designate
one member of the Board of Directors; and (y) if the total number of shares of
Stock and Stock Rights owned by the First Reserve Stockholders and their
Affiliates is less than 10% of the Fully Diluted Common Stock at any time, the
First Reserve Stockholders shall be entitled to designate one member of the
Board of Directors.
(b) Each Stockholder hereby agrees to vote all shares of Stock
owned or held of record by such Stockholder, at each annual or special meeting
of Stockholders of the Company at which directors of the Company are to be
elected, in favor of, or to take all actions by written consent in lieu of any
such meeting as are necessary to cause, the election or re-election as members
of the Board of Directors of those individuals described in Section 3.1(a), and
to otherwise effect the intent of the provisions of Section 3.1(a).
(c) Each committee of the Board of Directors and, unless otherwise
agreed by DPIOSP and the First Reserve Stockholders, each board of directors
(or comparable governance body of any partnership) of each Material Subsidiary
shall include a number of directors designated by DPIOSP and a number of
directors designated by the First Reserve Stockholders (rounded to the nearest
whole number, but in no event less than one such director) equivalent to the
proportion of directors designated by DPIOSP and directors designated by the
First Reserve Stockholders then serving on the whole Board of Directors or the
whole board of directors of such Material Subsidiary, as applicable. The
committees of the Board of Directors shall consist of an Executive Committee,
an Audit Committee and a Compensation and Strategic Planning Committee each of
which shall, subject to Section 2.1, have functions customarily performed by
such committees. The Executive Committee shall consist of W. McComb Dunwoody,
who shall serve as Chairman, William E. Macaulay, and the Chief Executive
Officer of the Company. The Audit Committee shall consist of two directors
designated by DPIOSP, one of whom shall serve as Chairman, and one director
designated by the First Reserve Stockholders. The Compensation and Strategic
Planning Committee shall consist of one director designated by DPIOSP, who
shall serve as Chairman, one director designated by the First Reserve
Stockholders and the Chief Executive Officer.
(d) The Board of Directors and, unless otherwise agreed by DPIOSP
and the First Reserve Stockholders, the board of directors of each Material
Subsidiary shall follow the following procedures:
(i) Meetings. Meetings of the applicable board of
directors may be held at any time upon the call of at least two
directors, including one designee of DPIOSP by oral, telephonic,
telegraphic or facsimile notice duly given or sent at least one day,
or by written notice sent by express mail at least three days, before
the meeting to each director. Reasonable efforts shall be made to
ensure that each director actually receives timely notice of any
meeting. An annual meeting of the Board of Directors shall be held
without notice immediately following the annual meeting of
stockholders of the Company.
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<PAGE> 19
(ii) Agenda. A reasonably detailed agenda shall be
supplied to each director reasonably in advance of each meeting of the
applicable board of directors, together with other appropriate
documentation with respect to agenda items calling for board action,
to inform adequately directors regarding matters to come before the
board. Any director wishing to place a matter on the agenda for any
meeting of the applicable board of directors may do so by
communicating with the Chairman of the Board sufficiently in advance
of the meeting of the applicable board of directors so as to permit
timely dissemination to all directors of information with respect to
the agenda items.
(e) Each of the First Reserve Stockholders that is not directly
represented on the Board of Directors and Phoenix Home Life Mutual Insurance
Company, so long as it is a partner in DPIOSP or otherwise owns at least 10% of
the Fully Diluted Common Stock shall be entitled to designate a nonvoting
observer to attend meetings of the Board of Directors. In addition GE Capital,
after the repayment of all loans under the Loan Agreement and so long as it
owns at least 10% of the Fully Diluted Common Stock, shall be entitled to
designate a nonvoting observer to attend meetings of the Board of Directors.
The Company shall provide each such observer with the same notice of, and
information regarding, meetings of the Board of Directors as that provided to
directors. Each Such observer shall be provided reasonable access to the
books, records and properties of the Company and shall be provided with a
reasonable opportunity to discuss the business and affairs of the Company with
the officers of the Company, provided that the First Reserve Stockholders,
Phoenix Home Life Mutual Insurance Company and GE Capital shall cause all
information relating to the Company that is provided to such observers to be
held in confidence.
SECTION 3.2. REMOVAL. If a director designated and elected
pursuant to Sectio n 3.1,
(i) has been designated pursuant to Section 3.1(a)(i)
and, during such director's term as director, DPIOSP requests by
written notice to the other Stockholders that such director be
removed;
(ii) has been designated pursuant to Section 3.1(a)(ii)
and, during such director's term as director, the First Reserve
Stockholders request by written notice to the other Stockholders that
such director be removed; or
(iii) has been designated pursuant to Section 3.1(a)(iii)
or 3.1(a)(iv) and during such director's term as director, DPIOSP and
the First Reserve Stockholders request by written notice to the other
Stockholders that such director be removed because he or she no longer
holds such designated office;
then such director shall be removed upon the affirmative vote of the holders of
a majority of the outstanding shares of Stock, and each Stockholder hereby
agrees promptly to vote all shares of Stock owned or held of record by it and
to take all such other actions as may be necessary or appropriate to effect
such removal in accordance with such request.
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<PAGE> 20
SECTION 3.3. VACANCIES. In the event that a vacancy is created on
the Board of Directors at any time by the death, disability, retirement,
resignation or removal of any director or for any other reason there shall
exist or occur any vacancy on the Board of Directors, each Stockholder hereby
agrees to take such actions as will result in the election or appointment as a
director of an individual designated or elected to fill such vacancy and serve
as a director by the Stockholders that had designated or elected (pursuant to
Section 3.1) the director whose death, disability, retirement, resignation or
removal resulted in such vacancy on the Board of Directors (in the manner set
forth in Section 3.1).
SECTION 3.4. COVENANT TO VOTE. Each Stockholder hereby agrees to
take all actions necessary to call, or cause the Company and the appropriate
officers and directors of the Company to call, a special or annual meeting of
Stockholders of the Company and to vote all shares of Stock owned or held of
record by such Stockholder at any such meeting and at any other annual or
special meeting of stockholders in favor of, or take all actions by written
consent in lieu of any such meeting as may be necessary to cause, the election
as members of the Board of Directors of those individuals so designated in
accordance with, and to otherwise effect the intent of, this Article III. In
addition, each Stockholder agrees to vote the shares of Stock owned by such
Stockholder upon any other matter arising under this Agreement submitted to a
vote of the stockholders in such a manner as to implement the terms of this
Agreement.
SECTION 3.5. REPRESENTATION AND COVENANT OF DPI.
(a) DPIOSP is a limited partnership, the sole general partner of
which is DPI. As the sole general partner of DPIOSP, DPI has (subject to any
applicable fiduciary duties) sole authority and discretion to exercise all
rights and remedies of DPIOSP under this Agreement and with respect to DPIOSP's
investment in the Company. DPI is a limited liability company owned 50% each
by Duff & Phelps Capital Markets Co. and The Inverness Group Incorporated, a
corporation solely owned by W. McComb Dunwoody. The Operating Agreement of DPI
provides that W. McComb Dunwoody manages the day-to-day business of DPI, that
major decisions require the approval of Duff & Phelps Capital Markets Co. and
The Inverness Group Incorporated and that upon the occurrence of certain events
all investments of DPI will be managed by The Inverness Group Incorporated.
(b) As long as DPIOSP remains entitled to designate a director of
the Company, DPI, the Inverness Group, Incorporated or their successors will
remain the sole general partner of DPIOSP with (subject to any applicable
fiduciary duties) sole authority and discretion to exercise all rights and
remedies of DPIOSP under this Agreement and with respect to DPIOSP's investment
in the Company.
SECTION 3.6. REPRESENTATION OF FIRST RESERVE.
(a) First Reserve is the sole general partner of each of the First
Reserve Stockholders. As the sole general partner of the First Reserve
Stockholders, First Reserve has (subject to any applicable fiduciary duties)
sole authority and discretion to exercise
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<PAGE> 21
all rights and remedies of the First Reserve Stockholders under this Agreement
and with respect to the First Reserve Stockholders' investment in the Company.
(b) So long as the First Reserve Stockholders remain entitled to
designate a director of the Company, First Reserve or its successor will remain
the general partner of the First Reserve Stockholder with (subject to any
applicable fiduciary duties) sole authority and discretion to exercise all
rights and remedies of the First Reserve Stockholder under this Agreement and
with respect to the First Reserve Stockholder's investment in the Company.
ARTICLE IV. TRANSFERS OF SECURITIES.
SECTION 4.1. RESTRICTIONS ON TRANSFER. Each Stockholder agrees
that it will not, directly or indirectly, offer, sell, transfer, assign or
otherwise dispose of (or make any exchange, gift, assignment or pledge of)
(collectively, for purposes of Articles IV and V hereof only, a "transfer") any
of its shares of Stock or Stock Rights, except as provided in Section 4.2 or in
accordance with Article V or other than in connection with an exercise of any
Stock Right in accordance with its terms or in connection with a conversion of
Class A Common Stock into Common Stock pursuant to the Certificate of
Incorporation. In addition to the other restrictions noted in this Article IV,
each Stockholder agrees that it will not, directly or indirectly, offer, sell,
transfer, assign or otherwise dispose of any of its Securities except as
permitted under the Securities Act and other applicable securities laws.
SECTION 4.2. EXCEPTIONS TO RESTRICTIONS. The provisions of
Section 4.1 (and Article V except as noted below) shall not apply to any of the
following transfers:
(a) From DPIOSP, DPI Partners, the First Reserve Stockholders or
GE Capital, to:
(i) any of their respective Affiliates, provided that
prior to any such transfer the transferring Stockholder and the
transferee agree with the Company and the other Institutional
Investors (pursuant to an agreement in form and substance reasonably
satisfactory to each of the other Institutional Investors) that for as
long as the transferee holds any Securities such transferee shall
remain an Affiliate of the transferring Stockholder or, if such
transferee is to cease being an Affiliate of the transferring
Stockholder, then prior to such change the transferee shall transfer
the Securities back to the transferring Stockholder or an Affiliate of
the Transferring Stockholder,
(ii) any of the partners of DPIOSP, DPI Partners or
members of DPI or;
(iii) in the case of (x) DPIOSP, the First Reserve
Stockholders and GE Capital, up to an aggregate of 3% each of the
Class A Common Stock and Common Stock owned by them on the date
hereof,
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<PAGE> 22
provided, that each such transferee shall agree in a writing in form and
substance reasonably satisfactory to the Company, DPIOSP and the First Reserve
Stockholders to be bound and shall become bound by the terms of this Agreement;
(b) From any Management Investor to (i) such Person's spouse or
children or (ii) any trust solely for such Person's benefit or the benefit of
such Person's spouse or children, provided that such Person acts as trustee and
retains the sole power to direct voting and disposition of such shares;
provided, further that each such Person, including any such trust, shall agree
in a writing in form and substance reasonably satisfactory to the Company,
DPIOSP and the First Reserve Stockholders to be bound and shall become bound by
the terms of this Agreement;
(c) Pursuant to a Public Offering;
(d) Pursuant to a merger of the Company;
(e) A Liquidity Transaction;
(f) A purchase by the Company of Common Stock pursuant to
Restricted Stock Agreements entered into in connection with the grant of
restricted stock under the Stock Incentive Plan; and
(g) Pursuant to Sections 5.1, 5.2, 5.3, 5.5, 5.8, 5.9 and 5.11.
The provisions of this Agreement shall be applied to the shares of
Stock and Stock Rights owned by any Permitted Transferee of a Stockholder in
the same manner and to the same extent as though such Stock or Stock Rights
were owned by such Stockholder; provided, however, that any transferee from an
Institutional Investor, other than an Affiliate of such Institutional Investor,
shall have only those rights, benefits and obligations of GE Capital (other
than those specified in Sections 2.5, 4.2(a)(iii), 5.5(a), 5.9(a) and 6.1(h))
hereunder, and any transferee from a Management Investor shall have only those
rights, benefits and obligations of a Management Investor hereunder, except
that DPIOSP and the First Reserve Stockholders shall have the right to assign
(x) the right to designate one member of the Board of Directors to any
transferee from DPIOSP or the First Reserve Stockholders that acquires Stock or
Stock Rights that amount to more than 10% of the Fully Diluted Common Stock of
the Company (a "10% Transferee"), and (y) the right to participate in one
demand registration pursuant to Section 6.1 to any 10% Transferee.
SECTION 4.3. NO TRANSFER TO COMPETITORS. Notwithstanding any
provision of this Agreement to the contrary, no Stockholder shall transfer any
Stock or Stock Rights to a Person that the Board of Directors has determined in
good faith competes with the Company in any material respects, without the
prior written consent of a majority of the whole Board of Directors of the
Company, provided that this Section shall not prohibit the transfer of Stock or
Stock Rights to any investment fund managed by First Reserve.
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<PAGE> 23
SECTION 4.4. ENDORSEMENT OF CERTIFICATES.
(a) In addition to any other legend which the Company may
reasonably deem advisable under the Securities Act and applicable state
securities laws, the certificates representing all shares of Stock and all
Stock Rights subject to this Agreement shall be endorsed at all times during
the term of this Agreement as follows:
THIS [CERTIFICATE / WARRANT / OPTION] IS SUBJECT TO, AND IS
TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF A STOCKHOLDERS
AGREEMENT DATED AS OF JANUARY 16, 1996, AMONG THE COMPANY, DPI OIL SERVICE
PARTNERS LIMITED PARTNERSHIP, DPI PARTNERS II, FIRST RESERVE FUND V, LIMITED
PARTNERSHIP, FIRST RESERVE FUND V-2, LIMITED PARTNERSHIP, FIRST RESERVE FUND
VI, LIMITED PARTNERSHIP, GENERAL ELECTRIC CAPITAL CORPORATION, AND THE
INDIVIDUALS NAMED IN SCHEDULE I THERETO. A COPY OF THE ABOVE REFERENCED
AGREEMENT WILL BE FURNISHED BY THE COMPANY WITHOUT CHARGE UPON WRITTEN REQUEST
BY ANY STOCKHOLDER TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR
REGISTERED OFFICE.
(b) Except as otherwise expressly provided in this Agreement, all
certificates representing shares of Stock and all certificates or other
instruments representing Stock Rights now or hereafter issued to or acquired by
any of the Stockholders or their successors hereto shall bear the legend set
forth above and such shares of Stock and Stock Rights shall be subject to the
applicable provisions of this Agreement. The obligations of each party hereto
shall be binding upon each transferee to whom shares of Stock or Stock Rights
are transferred by any party hereto (including, without limitation, any Third
Party to whom shares are transferred pursuant to Article V), except in the case
of transfers pursuant to Subsection (c) or (d) of Section 4.2. Prior to
consummation of any transfer, except for transfers pursuant to Subsection (c),
(d) or (e) of Section 4.2, such party shall cause the transferee to execute an
agreement in form and substance reasonably satisfactory to the other parties
hereto, providing that such transferee shall fully comply with the terms of
this Agreement. Prompt notice shall be given to the Company, the First Reserve
Stockholders and DPIOSP by the transferor of any transfer (whether or not to a
Permitted Transferee) of any of its Stock or Stock Rights.
SECTION 4.5. IMPROPER TRANSFER. Any attempt to transfer or
encumber any shares of Stock or any Stock Rights not in accordance with this
Agreement shall be null and void and neither the issuer of such Securities nor
any transfer agent of such Securities shall give any effect to such attempted
transfer or encumbrance in its stock records.
ARTICLE V. PURCHASE RIGHTS.
SECTION 5.1. TRANSFERS BY A STOCKHOLDER.
(a) Except for sales of Securities pursuant to the provisions of
Article VI hereof, transfers permitted by clauses (a) through (e) of Section
4.2 and the provisions of Sections 5.5, 5.8, 5.9 and 5.11, if at any time any
Stockholder shall desire to sell any Securities owned by it (such Stockholder
desiring to sell Securities being referred to herein
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<PAGE> 24
as a "Selling Stockholder"), then such Selling Stockholder shall deliver
written notice of its desire to sell Securities (a "Notice of Intention"),
accompanied by a copy of a proposal relating to such sale (the "Sale
Proposal"), to each of the other Stockholders and to the Company, setting forth
such Selling Stockholder's desire to make such sale (which shall be for cash
only), identifying the Securities proposed to be transferred and stating the
number of shares of Stock proposed to be transferred or the number of shares
covered by Stock Rights proposed to be transferred (the "Offered Securities"),
the cash price or prices per applicable Security at which such Selling
Stockholder proposes to sell the Offered Securities (the "First Offer Price")
and the other terms applicable thereto (the "First Offer Terms").
(b) Upon receipt of the Notice of Intention, the Company and the
other Stockholders shall then have the right to purchase at the First Offer
Price and on the other terms specified in the Sale Proposal all or, subject to
Section 5.1(d), any portion of the Offered Securities in the following order of
priority: (i) if the Selling Stockholder is a Management Investor, the Company
shall have the first right to purchase the Offered Securities, and thereafter,
the other Management Investors shall have the right to purchase the Offered
Securities pro rata on the basis of the respective numbers of shares of Fully
Diluted Common Stock owned by them or represented by Stock Rights owned by them
(or in such other proportion as such Management Investors may unanimously
agree), and thereafter, the other Stockholders shall have the right to purchase
the Offered Securities pro rata among such Stockholders so electing on the
basis of the respective numbers of shares of Fully Diluted Common Stock owned
by such Stockholders or represented by Stock Rights owned by such Stockholders
(or in such other proportion as such Stockholders may agree); or (ii) if the
Selling Stockholder is an Institutional Investor, then the other Institutional
Investors shall have the first right to purchase the Offered Securities pro
rata among those of the Institutional Investors so electing on the basis of the
respective numbers of shares of Fully Diluted Common Stock owned by them or
represented by Stock Rights owned by them (or in such other proportion as such
Institutional Investors may unanimously agree), and thereafter, the Company
shall have the right to purchase the Offered Securities. The rights of the
Stockholders and the Company pursuant to this Section 5.1(b) shall be
exercisable by the delivery of notice to the Selling Stockholder (each a
"Notice of Exercise"), within 30 calendar days from the date of delivery of the
Notice of Intention. The Notice of Exercise shall state the total numbers of
shares of Stock or Stock Rights such Stockholder (or the Company) is willing to
purchase without regard to whether or not other Stockholders purchase any
shares of the Offered Securities. A copy of such Notice of Exercise shall also
be delivered by each Stockholder to the Company and each other Stockholder.
The rights of the Stockholders and the Company pursuant to this Section 5.1(b)
shall terminate if unexercised 30 calendar days after the date of delivery of
the Notice of Intention.
(c) In the event that the Company or any Stockholder exercises its
rights to purchase any or all of the Offered Securities in accordance with
Section 5.1(b), then the Selling Stockholder must sell Offered Securities to
the Company or such Stockholder (as the case may be) within 30 calendar days
from the date of the delivery of the last Notice of Exercise received by the
Selling Stockholder.
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(d) Notwithstanding the foregoing provisions of this Section 5.1,
unless the Selling Stockholder shall have consented to the purchase of less
than all of the Offered Securities, neither the Company nor any Stockholder may
purchase any Offered Securities unless all of the Offered Securities are to be
purchased.
(e) For purposes of this Article V, if the Company or any
Stockholder shall fail to give notice of its election to exercise an option
hereunder within the specified time period, then the Company or such
Stockholder (as the case may be) will be deemed to have waived its rights with
respect thereto on the day after the last day of such period.
(f) Each Stockholder may assign its rights to purchase Offered
Securities hereunder to one or more Affiliates, provided that if such Affiliate
is not already a Stockholder such Affiliate will agree in writing, in form and
substance reasonably satisfactory to the Company, DPIOSP and the First Reserve
Stockholders, to be bound and shall become bound by the terms of this Agreement
as if such Affiliate acquired Securities as a Permitted Transferee.
SECTION 5.2. TRANSFER OF OFFERED SECURITIES TO THIRD PARTIES.
Subject to compliance with Section 5.8, if all notices required to be given
pursuant to Section 5.1 have been duly given and the Stockholders and the
Company determine not to exercise their respective options to purchase the
Offered Securities or determine to exercise their respective options to
purchase less than all of the Offered Securities without receiving the consent
of the Selling Stockholder as required by Section 5.1(d) and the Selling
Stockholder does not desire to sell less than all the Offered Securities, then
the Selling Stockholder shall have the right, for a period of 120 calendar days
from the earlier of (i) the expiration of the applicable option period pursuant
to Section 5.1 with respect to such Sale Proposal or (ii) the date on which
such Selling Stockholder receives notice from other Stockholders and the
Company that they will not exercise in whole or in part the options granted
pursuant to Section 5.1, to sell to any Third Party the Offered Securities
remaining unsold at a price not less than the First Offer Price and on terms
substantially the same as the other First Offer Terms.
SECTION 5.3. PURCHASE OF OFFERED SECURITIES.
(a) The consummation of any purchase and sale pursuant to Section
5.1 shall take place on such date, not later than 30 calendar days after the
expiration of the applicable option period pursuant to Section 5.1 with respect
to such option, as the Selling Stockholder shall select.
(b) Prior to the consummation of any sale pursuant to Section 5.1
or 5.2, the Selling Stockholder shall comply with Section 4.4(b) hereof. Upon
the consummation of any such purchase and sale, the Selling Stockholder shall
deliver certificates and/or other instruments evidencing the Offered Securities
sold duly endorsed, or accompanied by written instruments of transfer in form
satisfactory to the purchaser duly executed, by the Selling Stockholder, free
and clear of any liens, against delivery of the purchase price constituting the
First Offer Price payable in the manner specified in Section 5.1(a). Shares of
Stock or Stock Rights sold pursuant to this Section 5.3 shall remain subject to
all of
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the provisions of this Agreement in the hands of the transferee thereof, and
prior to the completion of such sale such transferee shall agree in a writing
in form and substance reasonably satisfactory to the Company to be bound and
shall become bound by the terms of this Agreement.
SECTION 5.4. WAITING PERIOD WITH RESPECT TO SUBSEQUENT TRANSFERS.
In the event that the Company and the Stockholders do not exercise their
options to purchase the Offered Securities, and the Selling Stockholder shall
not have sold the Offered Securities to a Third Party for any reason before the
expiration, as applicable, of the 120-day period described in Section 5.2, then
such Selling Stockholder shall not give another Notice of Intention pursuant to
Section 5.1 for a period of 90 calendar days after the last day of such 120-day
period.
SECTION 5.5. PUTS AND CALLS.
The Company and each Management Investor (which term, for purpose of
this Section 5.5, shall include all Permitted Transferees thereof as the
context may require) shall be subject to the following purchase and sale
obligations an d rights:
(a) Subject to Section 5.5(f), upon any termination of employment
of a Management Investor by reason of:
(i) death,
(ii) Incapacity pursuant to the terms of the Employment
Agreement between the Management Investor and the
Company;
(iii) Voluntary Termination as that term is defined in the
Employment Agreement between the Management Investor
and the Company at or after Normal Retirement, or
(iv) Involuntary Termination as that term is defined in
the Employment Agreement between the Management
Investor and the Company at any time other than For
Cause,
the Management Investor and his Permitted Transferees or his or their
representative shall be entitled for a period of 120 days following the
effective date of such termination of employment to exercise a put (any such
put, a "Put") to the Company of all of the Stock of such Management Investor or
Permitted Transferees that constitutes shares of Stock subject to this
Agreement by requiring the Company to purchase such Stock at a price per share
equal to (i) if such purchase is consummated prior to the second anniversary
of the Closing Date, the Adjusted Book Value or (ii) if such purchase is
consummated on or after the second anniversary of the Closing Date, the
Appraised Value. A Put shall be exercised by delivery of written notice to the
Company. The purchase shall be consummated within 30 days after receipt of
such notice by the Company. The Company shall have the right to request that
DPIOSP, the First Reserve Stockholders and GE Capital purchase such shares on a
pro rata basis on the terms set forth herein (provided that none of DPIOSP,
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the First Reserve Stockholders or GE Capital will be obligated to purchase any
such shares as a result of such request), and DPIOSP and the First Reserve
Stockholders and GE Capital shall have the right to assign their right to
purchase all or a portion of such shares to any other Stockholder.
(b) (i) Subject to Section 5.5(f), upon the termination of
employment of any Management Investor for any reason, including,
without limitation, death or incapacity, and provided such Management
Investor and his Permitted Transferee shall not have previously
exercised a Put pursuant to Section 5.5(a), the Company shall be
entitled for a period of one year after the effective date of such
termination of employment to exercise a call (any such call, a "Call")
on all of the shares of Stock owned by such Management Investor and
his Permitted Transferees by requiring such Management Investor and
his Permitted Transferees to sell to the Company all of such shares;
provided, however, if a Management Investor's employment is terminated
by reason of an Involuntary Termination and the Management Investor
does not desire to exercise a Put pursuant to Section 5.5(a), the
Company shall defer its Call pursuant to this Section 5.5(b)(i) until
the second anniversary of the date of this Agreement. The Company may
exercise its Call by delivery of written notice to such Management
Investor and his Permitted Transferees. Consummation of the sale
shall occur within 30 days after delivery of such notice, at a
purchase price per share, subject to Section 5.5(b)(ii), and
5.5(b)(iii), determined in accordance with the provisions of Section
5.5(a). The Company shall have the right to request that DPIOSP and
The First Reserve Stockholders purchase such shares on a pro rata
basis on the terms set forth herein (provided that neither DPIOSP nor
the First Reserve Stockholders will be obligated to purchase any such
shares as a result of such request).
(ii) Notwithstanding Section 5.5(b)(i), any purchase by
the Company pursuant to the exercise of any Call as a result of
termination For Cause shall be made at a purchase price per share
equal to (I) if such purchase is consummated prior to the second
anniversary of the Closing Date, the lower of (x) Adjusted Book Value
and (y) the price per share originally paid by such Management
Investor (appropriately adjusted for any stock dividends, splits,
reverse splits, combinations, recapitalizations and the like occurring
after the Closing Date) ("Cost"), or (2) if such purchase is
consummated on or after the second anniversary of the Closing Date,
the lower of (x) Adjusted Book Value and (y) Appraised Value.
(iii) Notwithstanding Section 5.5(b)(i), any purchase by
the Company pursuant to the exercise of any Call as a result of
voluntary termination prior to Normal Retirement shall be for a
purchase price per share equal to (1) if such purchase is consummated
prior to the second anniversary of the Closing Date, the Adjusted Book
Value, or (2) if such purchase is consummated on or after the second
anniversary of the Closing Date and prior to the third anniversary,
Adjusted Book Value as to 75% of such share and Appraised Value as to
25% of such share, or (3) if such purchase is consummated on or after
the third anniversary of the Closing Date and prior to the fourth
anniversary, Adjusted Book Value as to 50% of such share and Appraised
Value as to 50% of such share, or (4) if such
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purchase is consummated on or after the fourth anniversary of the
Closing Date and prior to the fifth anniversary, Adjusted Book Value
as to 25% of such share and Appraised Value as to 75% of such share,
or (5) if such purchase is consummated on or after the fifth
anniversary of the Closing Date, Appraised Value.
(c) If any Management Investor's marital relationship is
terminated by the death of his spouse or divorce and he does not succeed to his
spouse's interest in any Stock, he shall have the option to purchase all such
spouse's interest and the interests of any of her Permitted Transferees in any
shares of Stock, but only to the extent such interests arise from such spouse's
community or marital property rights or from any transfer or series of
transfers pursuant to Section 4.2(b) of this Agreement, and such spouse or the
executor or administrator of her estate and any such Permitted Transferees (any
such spouse, executor, administrator or Permitted Transferee, the "Spouse")
shall be obligated to sell such Stock to such Management Investor. The price
per share at which such Stock shall be purchased shall be determined in
accordance with the provisions of Section 5.5(a). Such option must be
exercised within 90 days after such death or divorce. If such Management
Investor should fail to exercise such option within such 90-day period, the
Spouse shall give prompt written notice of such failure to the Company and each
of the other Management Investors, which notice shall describe the nature of
the above referenced interests of the Spouse in such Stock. The Company shall
be entitled to exercise a call (a "Spouse Call") on all of the shares of such
Stock owned by such Spouse, within 120 days after receiving such notice, by
requiring such Spouse to sell to the Company all of such shares. The Company
may exercise its call by delivery of written notice to such Spouse.
Consummation of the sale shall occur within 30 days after delivery of such
notice at a purchase price per share determined in accordance with the
provisions of Section 5.5(a).
(d) (i) Notwithstanding anything to the contrary in Section
5.5(a), 5.5(b) or 5.5(c), the Company may elect to purchase, pursuant
to a Put, Call or Spouse Call, from the Management Investor, Spouse or
Permitted Transferee otherwise subject thereto (each, a "Seller"), a
number of shares of Stock (the "Permitted Number") which is less than
all of the Stock held by such Seller but as to which, the purchase of
a single additional share, whether for cash or a promissory note of
the Company, would violate applicable law or any provision of the Loan
Agreement, the Note Purchase Agreement, the GE Subordinated Note, the
Seller Subordinated Notes or any Debt Refinancing Instrument.
(ii) If by reason of Section 5.5(d)(i) above the Company
purchases less than all (or none) of the shares of Stock held by a
Seller (provided that the Company shall have purchased the Permitted
Number), then notwithstanding anything to the contrary in Section
5.5(a), 5.5(b) or 5.5(c), the Company may elect, in the case of any
such Call or Spouse Call, and shall elect, in the case of any such
Put, by delivering written notice to such Seller at the time of such
purchase (or, if no such shares are purchased, within 30 days after
delivery of the notice, in accordance with the provisions of Sections
5.5(a), 5.5(b) or 5.5(c), as the case may be, of the Put or Call in
respect of such Seller), to purchase, as soon as it is possible
without violating applicable law or any provision of the Loan
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Agreement, the Note Purchase Agreement, the GE Subordinated Note, the
Seller Subordinated Notes or any Debt Refinancing Instrument, the
remainder of such shares, up to but in no event more than the
Permitted Number at the time of each purchase and each subsequent
purchase necessary to allow purchase of all the shares subject to the
Put or Call. In such event the Company shall deliver to such Seller
as soon as it is possible to purchase such shares a written notice of
such purchase, and such purchase shall be on the terms and subject to
the limitations contained in this Section 5.5 (including Section
5.5(d)(i) above), except that the purchase price to be paid shall be
the price determined with reference to the first notice given
exercising the Put or Call with respect to such Seller, plus interest
thereon at the Prime Rate.
(e) The Board of Directors shall determine whether the Company
will exercise its call rights to purchase a Management Investor's (or a
Spouse's or Permitted Transferee's) Stock pursuant to Sections 5.5(b), 5.5(c)
or 5.5(d) hereof or whether it will request DPIOSP, First Reserve Stockholders
and GE Capital to exercise the Company's rights and obligations to purchase
such Stock. Should the Board of Directors fail to exercise a call on the Stock
as provided in such Sections, or be unable to purchase all of the Stock for
cash pursuant to a Put or Call, (an "Unexercised Right"), each Management
Investor (and his Permitted Transferees) then owning Stock, other than the
Management Investor (and his Permitted Transferees) subject to the call, shall
be entitled to exercise a call (any such call, a "Management Call"), on up to a
pro rata basis (based upon the number of shares of Fully Diluted Common Stock
then beneficially owned), within 10 days after notice by the Company to the
Management Investor that it will not exercise its call or is unable to purchase
all of the Stock for cash pursuant to a Put or a Call. A Management Call shall
be exercised by delivery of written notice to the Company and to the Management
Investor (or Spouse or Permitted Transferee) whose shares were subject to the
Unexercised Right.
(f) The Stock held by each Management Investor in respect of which
the Company has made a loan shall be subject to a pledge agreement with the
Company pursuant to which such Stock shall be pledged as security for the
Company loan. No payment may be made to a Management Investor for any Stock
subject to a put or call under this Section 5.5 unless that Management
Investor's Company loan has been repaid in full. In the event any portion of
the Company Loan (or accrued interest thereon) is outstanding, the purchase
price for any Stock purchased pursuant to a put or call exercised pursuant to
this Section 5.5 shall be paid (by the other Stockholders effecting the
purchase) directly to the Company. The balance of such purchase price, if any,
shall be paid to such selling Management Investor (or Spouse or Permitted
Transferee) or his or her representative.
(g) The purchase price for each share of Stock purchased pursuant
to this Section 5.5 shall be payable in cash, except that if the purchase of
such share for cash by the Company is not prohibited by law but is restricted,
by any provision of the Loan Agreement, the Note Purchase Agreement, the GE
Subordinated Note, the Seller Subordinated Notes or any Debt Refinancing
Instrument and such restriction so allows (such restriction being referred to
herein as a "Restricted Payments Limitation"), then the purchase price shall be
paid in cash to the extent not in violation of such Restricted
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Payments Limitation, and the balance shall be paid by the issuance to the
Management Investor (or Permitted Transferee) of a promissory note of the
Company (the "Purchase Note") if such issuance does not violate any provision
of the Loan Agreement, the Note Purchase Agreement, the GE Subordinated Note,
the Seller Subordinated Notes or any Debt Refinancing Instrument; provided,
however, if the Company exercises its Call pursuant to Section 5.5(b), whether
or not the Company has sufficient cash and whether or not the payment of cash
would be subject to a Restricted Payments Limitation, the Company may elect to
make such payment by issuing a Purchase Note. The Purchase Note shall (1) be
expressly subordinated in right of payment to all indebtedness under the Loan
Agreement, the Note Purchase Agreement, the GE Subordinated Note, the Seller
Subordinated Notes and any Debt Refinancing Instrument; (2) be in the principal
amount equal to the purchase price of all shares of Stock purchased by the
Company from the Management Investor pursuant to this Section 5.5 for which
cash cannot be paid due to a Restricted Payments Limitation; (3) bear simple
interest, payable quarterly from the date of issuance, at the Prime Rate; (4)
pay interest currently, subject to the Restricted Payment Limitations; and (5)
be payable as to principal in five equal annual installments beginning on the
first anniversary of the date of the Purchase Note; provided, however, that
such payments are not restricted by a Restricted Payments Limitation and if
they are so restricted, shall be paid on the date such payments are no longer
so restricted. If all Purchase Notes due and payable at any one time cannot be
paid without violating the Restricted Payments Limitation, then the Purchase
Notes shall be paid in the order in which they were issued; and provided
further that if the full amount of any Purchase Note cannot be paid without
violating the Restricted Payments Limitation, then the Company shall pay, as
soon as it is possible, the maximum amount allowable under the Restricted
Payments Limitation in respect of such Purchase Note.
SECTION 5.6. RIGHT OF FIRST REFUSAL FOR NEW SECURITIES.
(a) The Company hereby grants to the Stockholders a pro rata right
of first refusal to purchase shares of any New Securities (as defined below)
which the Company may, from time to time, propose to sell and issue. Such
right of first refusal shall allow each Stockholder to purchase a pro rata
portion of the shares of Stock or Stock Rights or other securities, as may be
included in the New Securities proposed to be issued. Such pro rata portions
shall be determined by reference to the aggregate number of shares of Fully
Diluted Common Stock held by each Stockholder before the proposed issuance of
New Securities. In the event a Stockholder does not purchase any or all of its
pro rata portion of New Securities, the remaining Stockholders shall have the
right to purchase their respective pro rata portions of such unpurchased New
Securities until all of the New Securities are purchased or until no other
Stockholder desire to purchase any more New Securities, provided, that all such
remaining Stockholders purchasing Stock or Stock Rights, as the case may be,
hereunder shall have held Stock or Stock Rights, respectively, before the
issuance of the New Securities. The right of first refusal granted hereunder
shall terminate if unexercised within thirty (30) days after receipt of the
notice described in Section 5.6(c) below.
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(b) "New Securities" shall mean any authorized but unissued
shares, and any treasury shares, of Capital Stock (including Common Stock) of
the Company and all rights, options or warrants to purchase Capital Stock
(including, without limitation, Stock Rights), and securities of any type
whatsoever that are, or may become, convertible into Capital Stock; provided,
however, that the term "New Securities" does not include (i) shares of Common
Stock issued upon conversion of Class A Common Stock in accordance with Article
Fourth of the Certificate of Incorporation; (ii) shares of Common Stock issued
upon the exercise of Stock Rights or other rights to acquire Stock that are (x)
outstanding on the date hereof (including increases in the "Warrant Stock"
under the terms of the GE Capital Warrant) or (y) issued after the date hereof
in a transaction in which the Stockholders have the right to purchase their
respective pro rata portions of the relevant Stock Rights or other rights
pursuant to Section 5.6(a) hereof, in each such case in accordance with the
terms thereof; (iii) securities issued pursuant to the acquisition of another
corporation or other entity by the Company by merger, purchase of all or
substantially all of the assets or other reorganization; (iv) shares of Stock
issued in connection with any stock split, stock dividend or recapitalization
of the Company; (v) any borrowings, direct or indirect, from financial
institutions or other Persons by the Company, whether or not presently
authorized, including any type of loan or payment evidenced by any type of debt
instrument, provided such borrowings do not have equity features, including
warrants, options or other rights to purchase Capital Stock, and are not
convertible into or exchangeable for Capital Stock of the Company; and (vi)
shares and options to purchase shares of Common Stock issued to employees,
officers or directors of the Company pursuant to the Stock Incentive Plan,
provided that the aggregate number of shares of Common Stock issued pursuant to
the Stock Incentive Plan shall not exceed 85,573.
(c) In the event the Company proposes to undertake an issuance of
New Securities, it shall give each Stockholder written notice of its intention,
describing the number of shares of Stock and/or Stock Rights or other
securities it intends to issue as New Securities, the purchase price therefor
(which shall be payable solely in cash) and the terms upon which the Company
proposes to issue the same. Each Stockholder shall have 30 days from the date
such notice is given to determine whether to purchase all or any portion of the
Stockholder's pro rata share of such New Securities for the purchase price and
upon the terms specified in the Company's notice by giving written notice to
the Company and stating therein the quantity of New Securities to be purchased.
(d) The obligations of the Company under this Section 5.6 shall
terminate immediately prior to any Public Offering pursuant to a firm
commitment underwriting.
SECTION 5.7. LEGALLY BINDING OBLIGATION; POWER OF ATTORNEY;
PERSONAL RIGHTS. Subject to Section 5.1(a), the making of an offer, the giving
or failing to give notice within the stated period, the acceptance of an offer
or the making of a decision or election, in each case as provided in Sections
5.1, 5.6, 5.8, 5.9 or 5.11, shall create a legally binding obligation to buy or
sell, as the case may be, the subject Securities as provided in such Sections
5.1, 5.2, 5.3, 5.5, 5.6, 5.8, 5.9 or 5.11 respectively.
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SECTION 5.8. RIGHT TO JOIN IN SALE.
(a) If any Stockholder or group of Stockholders proposes to sell,
dispose of or otherwise transfer in any single or related series of
transactions any Securities representing more than 10% of the Fully Diluted
Common Stock (each a "Disposing Stockholder") other than to the Company or the
Stockholders pursuant to Section 5.1 hereof, such Disposing Stockholder shall
refrain from effecting, other than to a Permitted Transferee, such transaction
unless, prior to the consummation thereof, each other Stockholder shall have
been afforded the opportunity to join in such sale on a pro rata basis, as
hereinafter provided.
(b) Prior to consummation of any proposed sale, disposition or
transfer of the Securities described in Section 5.8(a), the Disposing
Stockholder shall cause the person or group that proposes to acquire such
shares (the "Proposed Purchaser") to offer (the "Purchase Offer") in writing to
each other Stockholder to purchase shares of Stock and/or Stock Rights owned by
such Stockholder which are the same type, class or series proposed to be sold
by the Disposing Stockholders, such that sum of the number of shares of such
Stock so offered to be purchased and the number of shares of Stock then
represented by the Stock Rights so offered to be purchased from such
Stockholder shall be equal to the product obtained by multiplying the total
number of shares of the same type, class or series of Stock or other Securities
being sold by the Disposing Stockholder then owned by such Stockholder by a
fraction, the numerator of which is the aggregate number of shares of each
type, class or series of Stock or other Securities proposed to be purchased by
the Proposed Purchaser from the Disposing Stockholder or Stockholders and the
denominator of which is the aggregate number of outstanding shares of each
type, class or series of Stock or other Securities that are owned by the
Disposing Stockholder or Stockholders. Such purchase shall be made at the
price per share and on such other terms and conditions as the Proposed
Purchaser has offered to purchase each type, class or series of Stock or other
Securities, as the case may be, to be sold by the Disposing Stockholder or
Stockholders. Each Stockholder shall have 20 days from the date of receipt of
the Purchase Offer in which to accept such Purchase Offer, and the closing of
such purchase shall occur within 30 days after such acceptance or at such other
time as such Stockholder and the Proposed Purchaser may agree. The number of
shares of Stock and/or Stock Rights, as the case may be, to be sold to the
Proposed Purchaser by the Disposing Stockholder or Stockholders shall be
reduced by the aggregate number of shares of Stock and/or Stock Rights, as the
case may be, purchased by the Proposed Purchaser from the other Stockholders
pursuant to the acceptance by them of Purchase Offers in accordance with the
provisions of this Section 5.8(b). In the event that a sale or other transfer
subject to this Section 5.8 is to be made to a Proposed Purchaser who is not a
Stockholder, the Disposing Stockholder shall notify the Proposed Purchaser that
the sale or other transfer is subject to this Section 5.8 and shall ensure that
no sale or other transfer is consummated without the Proposed Purchaser first
complying with this Section 5.8. It shall be the responsibility of each
Disposing Stockholder to determine whether any transaction to which it is a
party is subject to this Section 5.8.
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SECTION 5.9. RIGHTS TO COMPEL SALE.
(a) If DPIOSP, DPI Partners and their respective Affiliates
propose to make a transfer of all their Stock, at any time when DPIOSP, DPI
Partners and their Affiliates own at least 20% of the Fully Diluted Common
Stock, to a Person that is not an Affiliate of DPIOSP nor a Person with respect
to which DPIOSP or any of its Affiliates has a direct or indirect economic
interest, then DPIOSP shall have the right, exercisable as set forth below, to
require all of the other Stockholders (the "Remaining Stockholders") to sell
all of the Stock and Stock Rights then held by such Remaining Stockholders (the
"Transfer Stock") to the proposed transferee (the "Acquiror") for the same
consideration per share of Stock or Stock Right as is being paid to DPIOSP,
which consideration shall consist entirely of cash and/or Marketable Securities
(as defined in Section 2.5) and otherwise on the same terms as are applicable
to DPIOSP. The purchase price for each Stock Right in any such transfer shall
equal the "spread" between the exercise price for such Stock Right and the
purchase price per share of Stock. The terms and conditions other than the
consideration to be received by the Remaining Stockholders for Stock and Stock
Rights sold pursuant to this Section 5.9 shall be as set forth in the
applicable Purchase Agreement between DPIOSP and the Acquiror. Upon the
request of GE Capital, DPIOSP shall provide to GE Capital a fairness opinion of
a nationally-recognized investment banking firm selected by DPIOSP, the fees
and expenses of which shall be paid by the Company, supporting the fairness of
the consideration to be received by the Stockholders, if the proposed
transaction is with any of the First Reserve Stockholders or any Person of
which the First Reserve Stockholders or their Affiliates own 10% or more of the
equity interests.
(b) (i) DPIOSP shall cause the terms of the transfer
to be reduced to writing and shall provide a written notice (the
"Compelled Sale Transfer Notice") of such transfer to the Company and
the Company shall provide such Compelled Sale Transfer Notice to the
Remaining Stockholders. The Compelled Sale Transfer Notice shall
contain written notice of the exercise of DPIOSP's rights pursuant to
Section 5.9(a) hereof, setting forth the consideration to be paid by
the Acquiror for each type of Stock and Stock Right and the other
terms and conditions of the transfer. Within 20 days following the
date of the Compelled Sale Transfer Notice, each of the Remaining
Stockholders shall deliver to DPIOSP (the "Notice Designee"), as the
case may be, certificates representing the Stock and instruments
representing Stock Rights held by such Remaining Stockholder, duly
endorsed, together with all other documents required to be executed in
connection with such transfer or, if such delivery is not permitted by
applicable law, an unconditional agreement to deliver such
certificates pursuant to this Section 5.9(b) at the closing for such
transfer against delivery to such Remaining Stockholder of the
consideration therefor. Such certificates shall be held by DPIOSP in
escrow for the benefit of the appropriate Remaining Stockholder and,
if requested by the Remaining Stockholder, DPIOSP shall execute such
form of escrow agreement as is reasonably satisfactory to DPIOSP and
such Remaining Stockholder and which assures that the relevant Stock
and/or Stock Rights are not considered property of DPIOSP. In the
event that a Remaining Stockholder should fail to deliver such
certificates as aforesaid, the Company shall cause the books and
records of the
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Company to show that such Stock and Stock Rights are bound by the
provisions of this Section 5.9(b) and that such Stock and Stock Rights
shall be transferred only to the Acquiror upon surrender for transfer
by the Remaining Stockholder thereof.
(ii) If, within 150 days (or such longer period not
exceeding 210 days as may be necessary to comply with any applicable
provisions of the Hart Scott Rodino Antitrust Improvements Act or to
obtain other required regulatory approval) after DPIOSP gives the
Compelled Sale Transfer Notice, it has not completed the sale of all
the Transfer Stock, DPIOSP, shall return to each of the Remaining
Stockholders all certificates representing Stock and Stock Rights that
such Remaining Stockholders delivered for sale pursuant hereto, and
all the restrictions on sale or other disposition contained in this
Agreement with respect to such Stock and Stock Rights and the Stock
owned by DPIOSP shall again be in effect.
(iii) Within three business days after the consummation of
the sale of Stock held by DPIOSP and the Remaining Stockholders
pursuant to this Section 5.9, DPIOSP shall give notice thereof to the
Remaining Stockholders, shall remit to each of the Remaining
Stockholders a net amount with respect to the Stock and Stock Rights
of such Remaining Stockholders sold pursuant thereto, after deduction
of a pro rata portion of any related out-of-pocket fees and expenses
payable to Persons other than DPIOSP or any of its Affiliates, and
shall furnish such other evidence of the completion and time of
completion of such sale or other disposition and the terms thereof as
may be reasonably requested by such Remaining Stockholders, provided
that if the cash or the fair market value of the Marketable Securities
payable to any Remaining Stockholder exceeds $5,000,000, such
Remaining Stockholder shall be entitled to have such cash and/or
Marketable Securities (net of any fees and expenses that are to be
deducted in accordance with this Section) paid directly to the
Remaining Stockholder by the Acquiror at the closing of the
transaction.
SECTION 5.10. STOCK INCENTIVE PLAN. Notwithstanding the provisions
of Articles IV and V hereof, the provisions of the Stock Incentive Plan, to the
extent that they are applicable, shall govern the transferability of, and the
rights of the Company to repurchase, any Stock and Stock Rights that may be
issued or granted thereunder.
SECTION 5.11. PERMITTED REPURCHASE. Upon the repayment of all
indebtedness under the Loan Agreement, the Company, upon the request of DPIOSP,
shall repurchase 200 shares of Class A Common Stock at a price of $24,900 per
share from the Stockholders in the amounts specified on Exhibit C attached
hereto.
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ARTICLE VI. REGISTRATION RIGHTS.
SECTION 6.1. DEMAND REGISTRATIONS.
(a) At any time after the first Public Offering, any of DPIOSP,
DPI Partners and the First Reserve Stockholders may request in writing that
the Company effect the registration under the Securities Act of all or part of
their Registrable Securities, specifying in the request the number and types of
Registrable Securities to be registered by each such holder and the intended
method of disposition thereof (such notice is hereinafter referred to as a
"Holder Request"). Unless otherwise agreed by DPIOSP, DPI Partners and the
First Reserve Stockholders, if any of DPIOSP, DPI Partners or the First Reserve
Stockholders desire to require that the Company register Registrable Securities
in accordance with the preceding sentence it will give the other written notice
to such effect at least 30 days prior to issuing a Holder Request and will
include in such Holder Request all Registrable Securities which the other party
(or parties in the case of the First Reserve Stockholders) request. Upon
receipt of such Holder Request, the Company will promptly give written notice
of such requested registration to all other holders of Registrable Securities,
which other holders shall have the right, subject to the provisions of Section
6.1(h) hereof, to include the Registrable Securities held by them in such
registration and thereupon the Company will, as expeditiously as possible, use
its best efforts to effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been
so requested to register by DPIOSP, DPI Partners and the First Reserve
Stockholders; and
(ii) all other Registrable Securities which the Company
has been requested to register by any other holder thereof by written
request given to the Company within 30 calendar days after the giving
of such written notice by the Company,
all to the extent necessary to permit the disposition of the Registrable
Securities so to be registered pursuant to an Underwritten Offering or by such
other method of disposition as DPIOSP, DPI Partners or the First Reserve
Stockholders may specify in the Holder Request; provided, however, that the
Company shall not be obligated to file a registration statement pursuant to any
Holder Request under this Section 6.1(a):
(A) Unless the Company shall have received requests for
such registration with respect to at least 10% of the Fully Diluted
Common Stock;
(B) Other than a registration statement on Form S-3 or a
similar short form registration statement, within a period of 12
months after the effective date of any other registration statement
relating to any registration request under this Section 6.1(a) that
was not effected on Form S-3 (or any similar short form); or
(C) Within the six month period immediately following the
effective date of a registration previously effected by the Company
pursuant to this Section 6.1.
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(b) Notwithstanding the foregoing provisions of Section 6.1(a),
the Company shall not be obligated to file more than an aggregate of four
registration statements pursuant to this Section 6.1.
(c) If the Company proposes to effect a registration requested
pursuant to this Section 6.1 by the filing of a registration statement on Form
S-3 (or any similar short-form registration statement), the Company will comply
with any request by the managing underwriter to effect such registration on
another permitted form if such managing underwriter advises the Company that,
in its opinion, the use of another form of registration statement is of
material importance to the success of such proposed offering.
(d) A registration requested pursuant to Section 6.1(a) will not
be deemed to have been effected unless it has become effective; provided, that,
if after it has become effective, the offering of Registrable Securities
pursuant to such registration is interfered with by any stop order, injunction
or other order or requirement of the Commission or other governmental agency or
court, such registration will be deemed not to have been effected.
(e) The Company will pay all Registration Expenses in connection
with each of the registrations of Registrable Securities effected by it
pursuant to this Section 6.1.
(f) DPIOSP shall have the right to select the investment banker
(or investment bankers) that shall manage the offering (collectively, the
"managing underwriter"), provided, however, that if the First Reserve
Stockholders are selling Securities in such offering such managing underwriter
must be reasonably satisfactory to the First Reserve Stockholders.
(g) Whenever a requested registration pursuant to this Section 6.1
involves a firm commitment underwriting (an "Underwritten Offering"), the only
shares that may be included in such Offering are (i) Registrable Securities,
and (ii) securities of the Company which are not Registrable Securities
included in such Offering upon the written consent of DPIOSP ("Company
Securities").
(h) If a registration pursuant to this Section 6.1 involves an
Underwritten Offering and the managing underwriter shall advise the Company
that, in its judgment, the number of shares proposed to be included in such
Offering should be limited due to market conditions, then the Company will
promptly so advise each holder of Registrable Securities that has requested
registration, and the Company Securities, if any, shall first be excluded from
such Offering to the extent necessary to meet such limitation; and if further
exclusions are necessary to meet such limitation, the shares shall be excluded
in the following order until such limitation has been met: (i) Registrable
Securities requested to be registered pursuant to Section 6.1(a)(ii) held by
Persons other than GE Capital shall be excluded pro rata, based on the
respective numbers of shares of Common Stock as to which registration shall
have been requested by such Persons, and (ii) Registrable Securities requested
to be registered pursuant to Section 6.1(a)(i) and by GE Capital shall be
excluded pro rata, based on the respective numbers of shares of Common Stock as
to which registration has been requested by such holders.
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SECTION 6.2. PIGGYBACK REGISTRATIONS.
(a) If the Company at any time proposes to register any of its
equity or debt securities under the Securities Act (other than a registration
on Form S-4 or S-8 or any successor or similar forms thereto and other than
pursuant to a registration under Section 6.1), whether or not for sale for its
own account, on a form and in a manner that would permit registration of
Registrable Securities for sale to the public under the Securities Act, it will
give written notice to all the holders of Registrable Securities promptly of
its intention to do so, describing such securities and specifying the form and
manner and the other relevant facts involved in such proposed registration
(including, without limitation, (x) whether or not such registration will be in
connection with an underwritten offering of Registrable Securities and, if so,
the identity of the managing underwriter and whether such offering will be
pursuant to a "best efforts" or "firm commitment" underwriting and (y) the
price (net of any underwriting commissions, discounts and the like) at which
the Registrable Securities are reasonably expected to be sold) if such
disclosure is acceptable to the managing underwriter. Upon the written request
of any such holder delivered to the Company within 30 calendar days after the
receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use best efforts to effect the
registration under the Securities Act of all of the Registrable Securities that
the Company has been so requested to register; provided, however, that:
(i) If, at any time after giving such written notice of
its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
register such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable
Securities who made a request as hereinabove provided and thereupon
the Company shall be relieved of its obligation to register any
Registerable Securities in connection with such registration (but not
from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights, of the holders
of the Registrable Securities to request that such registration be
effected as a registration under Section 6.1.
(ii) If such registration involves an Underwritten
Offering, all holders of Registrable Securities requesting some or all
of their Registrable Securities to be included in the Company's
registration must sell that portion of their Registrable Securities to
the underwriters selected by the Company on the same terms and
conditions as apply to the Company.
No registration effected under this Section 6.2 shall relieve the Company of
its obligation to effect registration upon request under Section 6.1.
(b) The Company shall not be obligated to effect any registration
of Registrable Securities under this Section 6.2 incidental to the registration
of any of its securities in
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connection with mergers, acquisitions, exchange offers, dividend reinvestment
plans or stock option or other employee benefit plans.
(c) The Registration Expenses incurred in connection with each
registration of Registrable Securities requested pursuant to this Section 6.2
shall be paid by the Company.
(d) If a registration pursuant to this Section 6.2 involves an
Underwritten Offering and the managing underwriter advises the Company that, in
its opinion, the number of securities proposed to be included in such
registration should be limited due to market conditions, then the Company will
include in such registration (i) first, the securities the Company proposes to
sell, and (ii) second, the number of shares of Common Stock requested to be
included in such registration that, in the opinion of such managing
underwriter, can be sold, such amount to be allocated pro rata among all such
requesting holders on the basis of the class of securities and the relative
number of shares of Registrable Securities, as the case may be, each such
holder has requested to be included in such registration.
(e) In connection with any Underwritten Offering with respect to
which holders of Registrable Securities shall have requested registration
pursuant to this Section 6.2, the Company shall have the right to select the
managing underwriter with respect to the offering; provided that such managing
underwriter is reasonably acceptable to DPIOSP.
SECTION 6.3. REGISTRATION PROCEDURES.
(a) If and whenever the Company is required to use its best
efforts to effect or cause the registration of any Registrable Securities under
the Securities Act as provided in Section 6.1 or 6.2, the Company will, as
expeditiously as possible:
(i) Prepare and, in any event within 60 calendar days
after the end of the period within which requests for registration may
be given to the Company, file with the Commission a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become and remain
effective, provided that the Company may discontinue any registration
of its securities that is being effected pursuant to Section 6.2 at
any time prior to the effective date of the registration statement
relating thereto.
(ii) Prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for
a period as may be requested by the Institutional Investors not
exceeding nine months and to comply with the provisions of the
Securities Act with respect to the disposition of all Securities
covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement, provided,
that before filing a registration statement or prospectus relating to
the sale of Registrable Securities, or any amendments or supplements
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thereto, the Company will furnish to counsel to each holder of
Registrable Securities covered by such registration statement or
prospectus, copies of all documents proposed to be filed, which
documents will be subject to the review of such counsel, and the
Company will give reasonable consideration in good faith to any
comments of such counsel.
(iii) Furnish to each holder of Registrable Securities
covered by the registration statement and to each underwriter, if any,
of such Registrable Securities, such number of copies of a prospectus
and preliminary prospectus for delivery in conformity with the
requirements of the Securities Act, and such other documents, as such
Person may reasonably request, in order to facilitate the public sale
or other disposition of the Registrable Securities.
(iv) Use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as each
seller shall reasonably request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
seller to consummate the disposition of the Registrable Securities
owned by such seller, in such jurisdictions, except that the Company
shall not for any such purpose be required (A) to qualify to do
business as a foreign corporation in any jurisdiction where, but for
the requirements of this Section 6.3(a)(iv), it is not then so
qualified, or (B) to subject itself to taxation in any such
jurisdiction, or (C) to take any action which would subject it to
general or unlimited service of process in any such jurisdiction where
it is not then so subject.
(v) Use its best efforts to cause such Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as
may be necessary to enable the seller or sellers thereof to consummate
the disposition of such Registrable Securities.
(vi) Immediately notify each seller of Registrable
Securities covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act within the appropriate period mentioned in Section
6.3(a)(ii), if the Company becomes aware that the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing, and, at the request of any such seller, deliver a reasonable
number of copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, each prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its security holders,
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in each case as soon as practicable, but not later than 45 calendar
days after the close of the period covered thereby (90 calendar days
in case the period covered corresponds to a fiscal year of the
Company), an earnings statement of the Company which will satisfy the
provisions of Section 11(a) of the Securities Act.
(viii) Use its best efforts in cooperation with the
underwriters to list such Registrable Securities on each securities
exchange as they may reasonably designate.
(ix) In the event the offering is an Underwritten
Offering, use its best efforts to obtain a "cold comfort" letter from
the independent public accountants for the Company in customary form
and covering such matters of the type customarily covered by such
letters as DPIOSP or the First Reserve Stockholders may reasonably
request, in order to effect an underwritten public offering of such
Registrable Securities.
(x) Execute and deliver all instruments and documents
(including in an Underwritten Offering an underwriting agreement in
customary form) and take such other actions and obtain such
certificates and opinions as DPIOSP or the First Reserve Stockholders
may reasonably request in order to effect an underwritten public
offering of such Registrable Securities.
(xi) Make available for inspection by the seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant
to such registration statement and by any attorney, accountant or
other agent retained by any such seller or any such underwriter, all
pertinent financial and other records, pertinent corporate documents
and properties of the Company, and cause all of the Company's
officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
(xii) Obtain for delivery to the underwriter or agent an
opinion or opinions from counsel for the Company in customary form and
in form and scope reasonably satisfactory to such underwriter or agent
and their counsel.
(b) Each holder of Registrable Securities will, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 6.3(a)(vi), forthwith discontinue disposition of the Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 6.3(a)(vi).
(c) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, each holder of Registerable Securities agrees, whether
or not such holder's Registrable Securities are included in such registration,
not to effect any public sale or distribution, including any sale pursuant to
Rule 144 under the Securities Act, of any Registrable Securities, or of any
security convertible into or exchangeable or exercisable
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for any Registrable Securities (other than as part of such Underwritten
Offering), without the consent of the managing underwriter, during a period
commencing seven calendar days before and ending 180 calendar days (or such
lesser number as the managing underwriter shall designate) after the effective
date of such registration.
(d) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, the Company agrees, if so required by the managing
underwriter, not to effect any public sale or distribution of any of its equity
or debt securities, as the case may be, or securities convertible into or
exchangeable or exercisable for any of such equity or debt securities, as the
case may be, during a period commencing seven calendar days before and ending
180 calendar days after the effective date of such registration, except for
such Underwritten Offering or except in connection with a stock option plan,
stock purchase plan, savings or similar plan, or an acquisition, merger or
exchange offer.
(e) If a registration pursuant to Section 6.1 or 6.2 involves an
Underwritten Offering, any holder of Registrable Securities requesting to be
included in such registration may elect, in writing, prior to the effective
date of the registration statement filed in connection with such registration,
not to register such securities in connection with such registration, unless
such holder has agreed with the Company or the managing underwriter to limit
its rights under this Section 6.3.
(f) It is understood that in any Underwritten Offering in addition
to any shares of stock (the "initial shares") the underwriters have committed
to purchase, the underwriting agreement may grant the underwriters an option to
purchase up to a number of additional shares of stock (the "option shares")
equal to 15% of the initial shares (or such other maximum amount as the NASD
may then permit), solely to cover over-allotments. Shares of stock proposed to
be sold by the Company and the other sellers shall be allocated between initial
shares and option securities as agreed or, in the absence of agreement,
pursuant to Section 6.1(h) or 6.2(d), as the case may be. The number of
initial shares and option shares to be sold by requesting holders shall be
allocated pro rata among all such holders on the basis of the relative number
of shares of Registrable Securities each such holder has requested to be
included in such registration.
(g) Notwithstanding anything in this Article VI to the contrary,
in lieu of exercising the GE Capital Warrant prior to or simultaneously with
the filing or the effectiveness of any registration statement filed pursuant to
this Article VI, the holder of the GE Capital Warrant may sell all or a portion
of the GE Capital Warrant to the underwriter of the offering being registered
upon the undertaking of such underwriter to exercise such GE Capital Warrant
before making any distribution pursuant to such registration statement and to
include the Common Stock issued upon such exercise among the securities being
offered pursuant to such registration statement. The Company agrees to cause
such Common Stock to be included among the securities being offered pursuant to
such registration statement to be issued within such time as will permit the
underwriter to make and complete the distribution contemplated by the
underwriting.
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SECTION 6.4. INDEMNIFICATION.
(a) In the event of any registration of any securities of the
Company under the Securities Act pursuant to Section 6.1 or 6.2, the Company
will, and it hereby agrees to, indemnify and hold harmless, to the extent
permitted by law, each seller of any Registrable Securities covered by such
registration statement, each affiliate of such seller and their respective
directors, officers, employees and agents or general and limited partners (and
directors, officers, employees and agents thereof) and, if such seller is a
portfolio or investment fund, its investment advisors or agents, each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act, as follows:
(i) against any and all loss, liability, claim, damage or
expense whatsoever arising out of or based upon an untrue statement or
alleged untrue statement of a material fact contained in any
registration statement (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or arising out of an untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus
or prospectus (or any amendment or supplement thereto) or the omission
or alleged omission therefrom of a material fact necessary in order to
make the statements therein not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense reasonably incurred by
them in connection with investigating, preparing or defending against
any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or mission to the extent that any such expense is not paid
under subparagraph (i) or (ii) above;
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer, employee, agent, general or limited partner, investment advisor or
agent, underwriter or controlling Person and shall survive the transfer of such
securities by such Seller.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 6.1 or 6.2, that the Company shall have received an undertaking
reasonably satisfactory to it from the prospective seller of such Registrable
Securities or any underwriter, to indemnify and hold
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harmless (in the same manner and to the same extent as set forth in Section
6.4(a)) the Company with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such seller or underwriter specifically stating that
it is for use in the preparation of such registration statement, preliminary,
final or summary prospectus or amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such seller. In that event,
the obligations of the Company and such sellers pursuant to this Section 6.4
are to be several and not joint; provided, however, that, with respect to each
claim pursuant to this Section, the Company shall be liable for the full amount
of such claim, and each such seller's liability under this Section 6.4 shall be
limited to an amount equal to the net proceeds (after deducting the
underwriting discount and expenses) received by such seller from the sale of
Registrable Securities held by such seller pursuant to this Agreement.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a
claim referred to in this Section 6.4, such indemnified party will, if a claim
in respect thereof is to be made against an indemnifying party, give written
notice to such indemnifying party of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Section 6.4, except to the extent (not including any such notice of an
underwriter) that the indemnifying party is materially prejudiced by such
failure to give notice. In case any such action is brought against an
indemnified party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may
exist in respect of such claim (in which case the indemnifying party shall not
be liable for the fees and expenses of more than one firm of counsel selected
by DPIOSP or more than one firm of counsel selected by the First Reserve
Stockholders, or more than one firm of counsel for the underwriters in
connection with any one action or separate but similar or related actions), the
indemnifying party will be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that it may wish with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal
or other expenses subsequently incurred by such indemnifying party in
connection with the defense thereof provided that the indemnifying party will
not agree to any settlement without the prior consent of the indemnified party
(which consent shall not be unreasonably withheld) unless such settlement
requires no more than a monetary payment for which the indemnifying party
agrees to indemnify the indemnified party and includes a full, unconditional
and complete release of the indemnified person, provided, however, that the
indemnified party shall be entitled to take control of the defense of any claim
as to which, in the reasonable judgment of the indemnifying party's counsel,
representation of both the indemnifying party and the indemnified party would
be inappropriate under the
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applicable standards of professional conduct due to actual or potential
differing interests between them. In the event that the indemnifying party
does not assume the defense of a claim pursuant to this Section 6.4(c), the
indemnified party will have the right to defend such claim by all appropriate
proceedings, and will have control of such defense and proceedings, and the
indemnified party shall have the right to agree to any settlement without the
prior consent of the indemnifying party. Each indemnified party shall, and
shall cause its legal counsel to, provide reasonable cooperation to the
indemnifying party and its legal counsel in connection with its assuming the
defense of any claim, including the furnishing of the indemnifying party with
all papers served in such proceeding. In the event that an indemnifying party
assumes the defense of an action under this Section 6.4(c), then such
indemnifying party shall, subject to the provisions of this Section 6.4,
indemnify and hold harmless the indemnified party from any and all losses,
claims, damages or liabilities by reason of such settlement or judgment.
(d) The Company and each seller of Registerable Securities shall
provide for the foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority.
SECTION 6.5. CONTRIBUTION. In order to provide for just and
equitable contribution in circumstances under which the indemnity contemplated
by Section 6.4 is for any reason not available or insufficient for any reason
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities referred to therein, the parties required to indemnify by the
terms thereof shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, any seller of Registrable Securities and one or more
of the underwriters, except to the extent that contribution is not permitted
under Section 11(f) of the Securities Act. In determining the amounts which
the respective parties shall contribute, there shall be considered the relative
benefits received by each party from the offering of the Registrable Securities
by taking into account the portion of the proceeds of the offering realized by
each, and the relative fault of each party by taking into account the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and prevent any
statement or omission and any other equitable considerations appropriate under
the circumstances. The Company and each Person selling securities agree with
each other that no seller of Registrable Securities shall be required to
contribute any amount in excess of the amount such seller would have been
required to pay to an indemnified party if the indemnity under Section 6.4(b)
were available. The Company and each such seller agree with each other and the
underwriters of the Registerable Securities, if requested by such underwriters,
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation (even if the underwriters were
treated as one entity for such purpose) or for the underwriters' portion of
such contribution to exceed the percentage that the underwriting discount bears
to the initial public offering price of the Registrable Securities. For
purposes of this Section 6.5, each Person, if any, who controls an underwriter
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as such underwriter, and each director and each officer
of the Company who signed the registration statement, and each
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Person, if any, who controls the Company or a seller of Registrable Securities
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as the Company or a seller of Registrable Securities, as
the case may be.
SECTION 6.6. RULE 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company covenants that it will file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the Commission thereunder (or, if the Company is not required to file such
reports, it will, upon the request of any holder of Registrable Securities, make
publicly available other information) , and it will take such further action as
any holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell shares of Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
ARTICLE VII. TERMINATION.
SECTION 7.1. CERTAIN TERMINATIONS.
(a) Except to the extent specifically provided elsewhere in this
Agreement, the provisions of Articles II, III, IV and V shall terminate on the
date on which any of the following events first occurs: (i) a Qualified Public
Offering, or (ii) the tenth anniversary of the date of this Agreement.
(b) Notwithstanding the foregoing, this Agreement shall in any
event terminate with respect to any Stockholder when such Stockholder no longer
owns any shares of Common Stock or Stock Rights.
ARTICLE VIII. MISCELLANEOUS.
SECTION 8.1. SUCCESSORS AND ASSIGNS. Except as provided in
Section 4.2 and as otherwise provided herein, all of the terms and provisions
of this Agreement shall be binding upon, shall inure to the benefit of and
shall be enforceable by the respective successors and assigns of the parties
hereto. No Stockholder may assign any of its rights hereunder to any Person
other than a transferee that has complied with the requirements of Sections 4.2
and 5.3 (if applicable) as provided therein in all respects. The Company may
not assign any of its rights hereunder to any Person other than an Affiliate of
the Company. If any transferee of any Stockholder shall acquire any shares of
Stock or Stock Rights, in any manner, whether by operation of law or otherwise,
such Stock or Stock Rights shall be held subject to all of the terms of this
Agreement, and by taking and holding such Securities such Person shall be
entitled to receive the benefits of and be conclusively deemed to have agreed
to be bound by and to comply with all of the terms
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and provisions of this Agreement, provided, however, that any transferee, other
than an Affiliate of an Institutional Investor, shall have only those rights,
benefits and obligations of GE Capital (other than those specified in Sections
2.5, 4.2(a)(iii), 5.5(a), 5.9(a) and 6.1(h)) hereunder, and any transferee from
a Management Investor shall have only those rights, benefits and obligations of
a Management Investor hereunder.
SECTION 8.2. AMENDMENT AND MODIFICATION; WAIVER OF
COMPLIANCE.
(a) This Agreement may be amended only by a written instrument
duly executed by (i) DPIOSP, and (ii) First Reserve. No amendment to this
Agreement which adversely affects the rights of GE Capital hereunder may be
effected without the prior written consent of GE Capital. No amendment to this
Agreement which adversely affects the rights of the Management Investors
hereunder may be effected without the prior written consent of Management
Investors holding a majority of the shares of Stock or Stock Rights at the time
held by the Management Investors. In the event of the amendment or
modification of this Agreement in accordance with its terms, the Stockholders
shall cause the Board of Directors of the Company to meet within 30 calendar
days following such amendment or modification or as soon thereafter as is
practicable for the purpose of adopting any amendment to the Certificate of
Incorporation and By-Laws of the Company that may be required as a result of
such amendment or modification to this Agreement, and, if required, proposing
such amendments to the Stockholders entitled to vote thereon, and the
Stockholders agree to vote in favor of such amendments.
(b) Except as otherwise provided in this Agreement, any failure of
any of the parties to comply with any obligation, covenant, agreement or
condition herein may be waived by the party entitled to the benefits thereof
only by a written instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
(c) In the event of any conflict between the provisions of this
Agreement and the provisions of any other agreement, the provisions of this
Agreement shall govern and prevail, except as otherwise provided herein.
SECTION 8.3. NOTICES. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be effective upon
receipt (or refusal of receipt) and shall be in writing and delivered
personally or sent by telex or telecopy (with such telex or telecopy confirmed
promptly in writing sent by first class mail), or first class mail, or other
similar means of communication, a s follows:
(i) If to the Company, addressed to its principal
executive offices to the attention of its Secretary;
(ii) If to a Stockholder other than DPIOSP, DPI Partners
or the First Reserve Stockholders, to the address of such Stockholder
set forth in the stock records of the Company, or to such other
address as any party shall have specified by notice given to the other
parties in the manner specified above; and
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(iii) If to DPIOSP or DPI Partners, to:
DPI Oil Service Partners Limited Partnership
666 Steamboat Road
Greenwich, CT 6830
Attn: W. McComb Dunwoody
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: John S. Watson
(iv) If to the First Reserve Stockholders or to First
Reserve, to:
First Reserve Corporation
475 Steamboat Road
Greenwich, CT 06830
Attn: William E. Macaulay
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attn: Richard Capelouto
or, in each case, to such other address or telex or telecopy number as such
party may most recently designate, in writing to each Stockholder.
All such communications shall be deemed to have been given or made
when so delivered by hand or sent by telex (answer back received) or telecopy,
or if mailed, five business days after being so mailed.
SECTION 8.4. ENTIRE AGREEMENT; GOVERNING LAW.
(a) This Agreement and the other writings referred to herein or
delivered pursuant hereto which form a part hereof contain the entire agreement
among the parties hereto with respect to the subject transactions contemplated
hereby and supersede all prior oral and written agreements and memoranda and
undertakings among the parties hereto with regard to this subject matter. The
Company represents to the Stockholders that the rights granted to the holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted or obligations accepted under any other agreement (including the
Certificate of Incorporation) to which the Company is a party.
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(b) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF THAT WOULD REQUIRE THE APPLICATION
OF THE LAWS OF ANY JURISDICTION OTHER THAN DELAWARE).
SECTION 8.5. INJUNCTIVE RELIEF. The Stockholders acknowledge and
agree that a violation of any of the terms of this Agreement will cause the
Stockholders irreparable injury for which adequate remedy at law is not
available. Therefore, the Stockholders agree that each Stockholder shall be
entitled to an injunction, restraining order or other equitable relief from any
court of competent jurisdiction, restraining any Stockholder from committing
any violations of the provisions of this Agreement.
SECTION 8.6. INSPECTION. For so long as this Agreement shall be
in effect, this Agreement shall be made available for inspection by any
Stockholder at the principal executive offices of the Company.
SECTION 8.7. HEADINGS. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 8.8. RECAPITALIZATIONS, EXCHANGES, ETC., AFFECTING THE
SECURITIES.
(a) The provisions of this Agreement shall apply to the full
extent set forth herein with respect to the Stock and the Stock Rights, and to
any and all equity or debt securities of the Company, the Borrower or any
successors or assigns of the Company (whether by merger, consolidation, sale of
assets, or otherwise) which may be issued in respect of, in exchange for, or in
substitution of, such equity or debt securities and shall be appropriately
adjusted for any stock dividends, splits, reverse splits, combinations,
reclassifications, recapitalizations, reorganizations and the like occurring
after the date hereof.
SECTION 8.9. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
COMPANY:
-------
NOW HOLDINGS, INC.
By: /s/ W. MCCOMB DUNWOODY
-----------------------------------
W. McComb Dunwoody
President
INSTITUTIONAL INVESTORS:
-----------------------
DPI OIL SERVICE PARTNERS LIMITED
PARTNERSHIP
By Duff & Phelps/Inverness LLC
Managing General Partner
By: /s/ W. MCCOMB DUNWOODY
-----------------------------------
W. McComb Dunwoody
President
DPI PARTNERS II
By: /s/ W. MCCOMB DUNWOODY
-----------------------------------
W. McComb Dunwoody
Managing Partner
GENERAL ELECTRIC
CAPITAL CORPORATION
By: /s/ ABIGAL WOLF
-----------------------------------
Title: Authorized Signature
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FIRST RESERVE FUND V, LIMITED
PARTNERSHIP
By: First Reserve Corporation,
as Managing General Partner
By: /s/ BRUCE ROTHSTEIN
-------------------------------------
Bruce Rothstein
Vice President
FIRST RESERVE FUND V-2, LIMITED
PARTNERSHIP
By: First Reserve Corporation,
as Managing General Partner
By: /s/ BRUCE ROTHSTEIN
-------------------------------------
Bruce Rothstein
Vice President
FIRST RESERVE FUND VI, LIMITED
PARTNERSHIP
By: First Reserve Corporation,
as Managing General Partner
By: /s/ BRUCE ROTHSTEIN
-------------------------------------
Bruce Rothstein
Vice President
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<TABLE>
<S> <C>
MANAGEMENT INVESTORS: SPOUSES:
- --------------------
/s/ JOEL V. STAFF /s/ M. M. STAFF
- -------------------------------- ------------------------------------
Joel V. Staff M. M. Staff
/s/ C. R. BEARDEN /s/ MARY R. BEARDEN
- -------------------------------- ------------------------------------
C. R. Bearden Mary R. Bearden
/s/ LYNN L. LEIGH /s/ BETTY BARNETT LEIGH
- -------------------------------- ------------------------------------
Lynn L. Leigh Betty Barnett Leigh
/s/ JERRY N. GAUCHE /s/ CATHY K. GAUCHE
- -------------------------------- ------------------------------------
Jerry N. Gauche Cathy K. Gauche
/s/ PAUL M. NATION /s/ BEVERLY W. NATION
- -------------------------------- ------------------------------------
Paul M. Nation Beverly W. Nation
BANK OF AMERICA TEXAS, N.A. MERRILL LYNCH & CO. C/F
as Trustee of the Trust created Jerry N. Gauche, IRA
pursuant to the National-Oilwell Account Number 795-81K02
Supplemental Savings Plan
By: /s/ GARY L. CHURCH By /s/ ILLEGIBLE
----------------------------- ----------------------------------
Name: Gary L. Church Authorized Signatory
---------------------------
Title: Vice President
--------------------------
/s/ EDGAR J. MARSTON III
-------------------------------------
By: /s/ SHELBY A. BEER Edgar J. Marston III
-----------------------------
Name: Shelby A. Beer Proxy under Agreement dated January
--------------------------- 1996 among the Company, Edgar J.
Title: Vice President Marston III and participants in the
-------------------------- National-Oilwell Supplemental
Savings Plan, as amended and Trust
related thereto
</TABLE>
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EXHIBIT A-1
STOCK AWARD AND LONG-TERM INCENTIVE PLAN
<PAGE> 53
NOW HOLDINGS, INC.
STOCK AWARD AND LONG-TERM INCENTIVE PLAN
I. PURPOSE
The purpose of the NOW Holdings, Inc. Stock Award and Long-Term
Incentive Plan (the "Plan") is to provide a means whereby NOW Holdings, Inc., a
Delaware corporation (the "Company"), and its Subsidiaries may attract able
persons to enter the employ of the Company in key positions and to provide a
means whereby those key employees upon whom the responsibilities of the
successful administration and management of the Company rest, and whose present
and potential contributions to the welfare of the Company are of importance,
can acquire and maintain stock ownership, thereby strengthening their concern
for the long-term welfare of the Company and their desire to remain in its
employ. A further purpose of the Plan is to provide such key employees with
additional incentive and reward opportunities designed to enhance the
profitable growth of the Company over the long term. Accordingly, the Plan
provides for granting Incentive Stock Options, options which do not constitute
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards,
Performance Share Awards, Stock Value Equivalent Awards, or any combination of
the foregoing, as is best suited to the circumstances of the particular
employee as provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan
unless specifically modified by any paragraph:
(a) "AWARD" means, individually or collectively, any Option, Stock
Appreciation Right, Restricted Stock Award, Performance Share Award or Stock
Value Equivalent Award.
(b) "BOARD" means the Board of Directors of NOW Holdings, Inc.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.
(d) "COMMITTEE" means the committee selected by the Board to
administer the Plan in accordance with Paragraph (a) of Article IV of the Plan.
(e) "COMMON STOCK" means the common stock, par value $0.01 per
share, of NOW Holdings, Inc.
(f) "COMPANY" means NOW Holdings, Inc.
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(g) "FAIR MARKET VALUE" means the amount determined by the
Committee in such manner as it deems appropriate.
(h) "HOLDER" means an employee of the Company (or his guardian or
legal representative) who has been granted an Award.
(i) "INCENTIVE STOCK OPTION" means an option within the meaning of
section 422 of the Code to purchase Common Stock.
(j) "NONQUALIFIED OPTION" means an option to purchase Common Stock
which is not an Incentive Stock Option.
(k) "OPTION" means an Award granted under Article VII of the Plan
and includes both Incentive Stock Options and Nonqualified Options.
(l) "OPTION AGREEMENT" means a written agreement between the
Company and an employee with respect to an Option.
(m) "OPTIONEE" means an employee who has been granted an Option.
(n) "PARENT CORPORATION" shall have the meaning set forth in
section 424(e) of the Code.
(o) "PERFORMANCE SHARE AWARD" means an Award granted under Article
X of the Plan.
(p) "PLAN" means the NOW Holdings, Inc. Stock Award and Long-Term
Incentive Plan.
(q) "RESTRICTED STOCK AWARD" means an Award granted under Article
IX of the Plan.
(r) "SPREAD" means, in the case of a Stock Appreciation Right, an
amount equal to the excess, if any, of the Fair Market Value of a share of
Common Stock on the date such right is exercised over the exercise price of
such Stock Appreciation Right.
(s) "STOCK APPRECIATION RIGHT" means an Award granted under
Article VIII of the Plan.
(t) "STOCK APPRECIATION RIGHTS AGREEMENT" means a written
agreement between the Company and an employee with respect to an Award of Stock
Appreciation Rights.
(u) "STOCK VALUE EQUIVALENT AWARD" means an Award granted under
Article XI of the Plan.
(v) "SUBSIDIARY" means a company (whether a corporation,
partnership, joint venture or other form of entity) in which the Company, or a
corporation in which the Company owns a majority of the shares of capital stock
or equity interests, directly or indirectly, except that with
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respect to the issuance of Incentive Stock Options the term "Subsidiary" shall
have the same meaning as the term "subsidiary corporation" as defined in
section 424(f) of the Code.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective upon the date of its adoption by the
Board, provided the Plan is approved by the stockholders of the Company within
twelve months thereafter. Notwithstanding any provision of the Plan or in any
Option Agreement or Stock Appreciation Rights Agreement, no Option or Stock
Appreciation Right shall be exercisable prior to such stockholder approval. No
further Awards may be granted under the Plan after ten years from the date the
Plan is adopted by the Board. Subject to the provisions of Article XIII, the
Plan shall remain in effect until all Options and Stock Appreciation Rights
granted under the Plan have been exercised or expired by reason of lapse of
time, all restrictions imposed upon Restricted Stock Awards have lapsed and all
Performance Share Awards and Stock Value Equivalent Awards have been satisfied.
IV. ADMINISTRATION
(a) COMPOSITION OF COMMITTEE. The Plan shall be administered by
the Committee which shall be appointed by the Board.
(b) POWERS. The Committee shall have sole authority, in its
discretion, to determine which employees of the Company and its Subsidiaries
shall receive an Award, the time or times when such Award shall be made,
whether an Incentive Stock Option, Nonqualified Option or Stock Appreciation
Right shall be granted, the number of shares of Common Stock which may be
issued under each Option, Stock Appreciation Right and Restricted Stock Award,
and the value of each Performance Share Award and Stock Value Equivalent Award.
In making such determinations the Committee may take into account the nature of
the services rendered by the respective employees, their present and potential
contribution to the Company's success and such other factors as the Committee
in its discretion shall deem relevant.
(c) ADDITIONAL POWERS. The Committee shall have such additional
powers as are delegated to it by the other provisions of the Plan. Subject to
the express provisions of the Plan, the Committee is authorized to construe the
Plan and the respective agreements executed thereunder, to prescribe such rules
and regulations relating to the Plan as it may deem advisable to carry out the
Plan, and to determine the terms, restrictions and provisions of each Award,
including such terms, restrictions and provisions as shall be requisite in the
judgment of the Committee to cause designated Options to qualify as Incentive
Stock Options, and to make all other determinations necessary or advisable for
administering the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in any agreement relating to an Award
in the manner and to the extent it shall deem expedient to carry it into
effect. The determinations of the Committee on the matters referred to in this
Article IV shall be final and binding for all purposes and upon all interested
persons and their heirs, successors and personal representatives.
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V. GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS,
RESTRICTED STOCK AWARDS, PERFORMANCE SHARE
AWARDS AND STOCK VALUE EQUIVALENT AWARDS;
SHARES SUBJECT TO THE PLAN
(a) AWARD LIMITS. The Committee may from time to time grant Awards
to one or more employees determined by it to be eligible for participation in
the Plan in accordance with the provisions of Article VI. The aggregate number
of shares of Common Stock that may be issued under the Plan shall not exceed
85,573 shares. Any of such shares which remain unissued and which are not
subject to outstanding Awards at the termination of the Plan shall cease to be
subject to the Plan, but, until termination of the Plan, the Company shall at
all times reserve a sufficient number of shares to meet the requirements of the
Plan. Shares shall be deemed to have been issued under the Plan only to the
extent actually issued and delivered pursuant to an Award. To the extent that an
Award lapses or the rights of its Holder terminate any shares of Common Stock
subject to such Award shall again be available for the grant of an Award. The
aggregate number of shares which may be issued under the Plan shall be subject
to adjustment in the same manner as provided in Article) XII with respect to
shares of Common Stock subject to Options then outstanding. Separate stock
certificates shall be issued by the Company for those shares acquired pursuant
to the exercise of an Incentive Stock Option and for those shares acquired
pursuant to the exercise of a Nonqualified Option.
(b) STOCK OFFERED. The stock to be offered pursuant to the grant
of an Award may be authorized but unissued Common Stock or Common Stock
previously issued and outstanding and reacquired by the Company.
VI. ELIGIBILITY
Awards made pursuant to the Plan may be granted only to individuals
who, at the time of grant, are key employees of the Company or any Parent
Corporation or Subsidiary of the Company. Awards may not be granted to any
director of the Company who is not an employee of the Company or to any member
of the Committee. An Award made pursuant to the Plan may be granted on more
than one occasion to the same person, and such Award may include an Incentive
Stock Option, a Nonqualified Option, an Award of Stock Appreciation Rights, a
Restricted Stock Award, a Performance Share Award, a Stock Value Equivalent
Award or any combination thereof. Each Award shall be evidenced by a written
instrument duly executed by or on behalf of the Company.
VII. OPTIONS
(a) OPTION AGREEMENT. Each Option shall be evidenced by an Option
Agreement between the Company and the Optionee which shall contain such terms
and conditions as may be approved by the Committee. The terms and conditions of
the respective Option Agreements need not be identical. Specifically, an Option
Agreement may provide for the payment of the option price, in whole or in part,
by the delivery of a number of shares of Common Stock (plus cash if necessary)
having a Fair Market Value equal to such option price. Each Option Agreement
shall provide that
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the Option may not be exercised earlier than six months from the date of grant
and shall specify the effect of termination of employment on the exercisability
of the Option.
(b) OPTION PERIOD. The term of each Option shall be as specified by
the Committee at the date of grant.
(c) LIMITATIONS ON EXERCISE OF OPTION. An Option shall be
exercisable in whole or in such installments and at such times as determined by
the Committee.
(d) SPECIAL LIMITATIONS ON INCENTIVE STOCK OPTIONS. To the extent
that the aggregate Fair Market Value (determined at the time the respective
Incentive Stock Option is granted) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by an individual
during any calendar year under all incentive stock option plans of the Company
and its Parent Corporation and Subsidiaries exceeds $100,000, such excess
Incentive Stock Options shall be treated as Nonqualified Options. The Committee
shall determine, in accordance with applicable provisions of the Code, Treasury
Regulations and other administrative pronouncements, which of an Optionee's
Incentive Stock Option will not constitute Incentive Stock Options because of
such limitation and shall notify the Optionee of such determination as soon as
practicable after such determination. No Incentive Stock Option shall be
granted to an individual if, at the time the Option is granted, such individual
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of its Parent Corporation or a Subsidiary,
within the meaning of section 422(b)(6) of the Code, unless (1) at the time
such Option is granted the option price is at least 110% of the Fair Market
Value of the Common Stock subject to the Option and (ii) such Option by its
terms is not exercisable after the expiration of five years from the date of
grant.
(e) OPTION PRICE. The purchase price of Common Stock issued under
each Option shall be determined by the Committee, but such purchase price shall
not be less than the Fair Market Value of Common Stock subject to the Option on
the date the Option is granted.
(f) OPTIONS AND RIGHTS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED
BY OTHER CORPORATION. Options and Stock Appreciation Rights may be granted
under the Plan from time to time in substitution for stock options held by
employees of corporations who become, or who became prior to the effective date
of the Plan, key employees of the Company or of any Subsidiary as a result of a
merger or consolidation of the employing corporation with the Company or such
Subsidiary, or the acquisition by the Company or a Subsidiary of all or a
portion of the assets of the employing corporation, or the acquisition by the
Company or a Subsidiary of stock of the employing corporation with the result
that such employing corporation becomes a Subsidiary.
VIII. STOCK APPRECIATION RIGHTS
(a) STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is the
right to receive an amount equal to the Spread with respect to a share of
Common Stock upon the exercise of such Stock Appreciation Right. Stock
Appreciation Rights may be granted in connection with the grant of an Option,
in which case the Option Agreement will provide that exercise of Stock
Appreciation
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Rights will result in the surrender of the right to purchase the shares under
the Option as to which the Stock Appreciation Rights were exercised.
Alternatively, Stock Appreciation Rights may be granted independently of
Options in which case each Award of Stock Appreciation Rights shall be
evidenced by a Stock Appreciation Rights Agreement between the Company and the
Holder which shall contain such terms and conditions as may be approved by the
Committee. The terms and conditions of the respective Stock Appreciation Rights
Agreements need not be identical. The Spread with respect to a Stock
Appreciation Right may be payable either in cash, shares of Common Stock with a
Fair Market Value equal to the Spread or in a combination of cash and shares of
Common Stock. Upon the exercise of any Stock Appreciation Rights granted
hereunder, the number of shares reserved for issuance under the Plan shall be
reduced only to the extent that shares of Common Stock are actually issued in
connection with the exercise of such Stock Appreciation Right. Each Stock
Appreciation Rights Agreement shall provide that the Stock Appreciation Rights
may not be exercised earlier than six months from the date of grant and shall
specify the effect of termination of employment on the exercisability of the
Stock Appreciation Rights.
(b) EXERCISE PRICE. The exercise price of each Stock Appreciation
Right shall be determined by the Committee, but such exercise price shall not
be less than the Fair Market Value of a share of Common Stock on the date the
Stock Appreciation Right is granted.
(c) EXERCISE PERIOD. The term of each Stock Appreciation Right
shall be as specified by the Committee at the date of grant.
(d) LIMITATIONS ON EXERCISE OF STOCK APPRECIATION RIGHT. A Stock
Appreciation Right shall be exercisable in whole or in such installments and at
such times as determined by the Committee.
IX. RESTRICTED STOCK AWARDS
(a) RESTRICTION PERIOD TO BE ESTABLISHED BY THE COMMITTEE. At the
time a Restricted Stock Award is made, the Committee shall establish a period
of time (the "Restriction Period") applicable to such Award. Each Restricted
Stock Award may have a different Restriction Period, as determined in the
discretion of the Committee. The Restriction Period applicable to a particular
Restricted Stock Award shall not be changed except as permitted by Paragraph
(b) of this Article or by Article XII.
(b) OTHER TERMS AND CONDITIONS. Common Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock certificate registered
in the name of the Holder of such Restricted Stock Award or, at the option of
the Company, in the name of a nominee of the Company. The Holder shall have the
right to receive dividends during the Restriction Period (subject to the terms
of any Restricted Stock Agreement), to vote the Common Stock subject thereto
and to enjoy all other stockholder rights (subject to the terms of any
Restricted Stock Agreement), except that (I) the Holder shall not be entitled
to possession of the stock certificate until the Restriction Period shall have
expired, (ii) the Company shall retain custody of the stock during the
Restriction Period, (iii) the Holder may not sell, transfer, pledge, exchange,
hypothecate or otherwise dispose of the stock during the Restriction Period and
(iv) a breach of the terms and conditions established by the
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Committee pursuant to the Restricted Stock Award shall cause a forfeiture of
the Restricted Stock Award. At the time of such Award, the Committee may, in
its sole discretion, prescribe additional terms, conditions or restrictions
relating to Restricted Stock Awards, including, but not limited to, rules
pertaining to the termination of employment (by retirement, disability, death
or otherwise) of a Holder prior to expiration of the Restriction Period.
(c) PAYMENT FOR RESTRICTED STOCK. A Holder shall be required to
make such payment for Common Stock received pursuant to a Restricted Stock
Award as may be required by law or as the Committee may, in its discretion,
determine to charge the Holder.
(d) MISCELLANEOUS. Nothing in this Article shall prohibit the
exchange of shares issued under the Plan (whether or not then subject to a
Restricted Stock Award) pursuant to a plan of reorganization for stock or
securities in the Company or another corporation a party to the reorganization,
but the stock or securities so received for shares then subject to the
restrictions of a Restricted Stock Award shall become subject to the
restrictions of such Restricted Stock Award. Any shares of stock received as a
result of a stock split or stock dividend with respect to shares then subject
to a Restricted Stock Award shall also become subject to the restrictions of
the Restricted Stock Award.
X. PERFORMANCE SHARE AWARDS
(a) PERFORMANCE PERIOD. The Committee shall establish, with
respect to and at the time of each Performance Share Award, a performance
period over which the performance applicable to the Performance Share Award of
the Holder shall be measured.
(b) PERFORMANCE SHARE AWARDS. Each Performance Share Award may
have a maximum value established by the Committee at the time of such Award.
(c) PERFORMANCE MEASURES. A Performance Share Award may be awarded
to an employee contingent upon future performance of the employee, the Company
or any Subsidiary, division or department thereof by or in which he is employed
during the performance period, the Fair Market Value of Common Stock or the
increase thereof during the performance period, combinations thereof, or such
other provisions as the Committee may determine to be appropriate. The
Committee shall establish the performance measures applicable to such
performance prior to the beginning of the performance period but subject to
such later revisions as the Committee shall deem appropriate to reflect
significant, unforeseen events or changes.
(d) AWARDS CRITERIA. In determining the value of Performance Share
Awards, the Committee may take into account an employee's responsibility level,
performance, potential, other Awards and such other considerations as it deems
appropriate.
(e) PAYMENT. Following the end of the performance period, the
Holder of a Performance Share Award shall be entitled to receive payment of an
amount, not exceeding the maximum value of the Performance Share Award, if any,
based on the achievement of the performance measures for such performance
period, as determined by the Committee in its sole discretion. Payment of a
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Performance Share Award (i) may be made in cash, Common Stock or a combination
thereof, as determined by the Committee in its sole discretion, (ii) shall be
made in a lump sum or in installments as prescribed by the Committee in its
sole discretion and (iii) to the extent applicable, shall be based on the Fair
Market Value of the Common Stock on the payment date. If a payment of cash is
to be made on a deferred basis, the Committee shall establish whether interest
shall be credited, the rate thereof and any other terms and conditions
applicable thereto.
(f) TERMINATION OF EMPLOYMENT. The Committee shall determine the
effect of termination of employment during the performance period on an
employee's Performance Share Award.
XI. STOCK VALUE EQUIVALENT AWARDS
(a) STOCK VALUE EQUIVALENT AWARDS. Stock Value Equivalent Awards
are rights to receive an amount equal to the Fair Market Value of shares of
Common Stock or rights to receive an amount equal to any appreciation or
increase in the Fair Market Value of Common Stock over a specified period of
time, which vest over a period of time as established by the Committee, without
payment of any amounts by the Holder thereof (except to the extent otherwise
required by law) or satisfaction of any performance criteria or objectives.
Each Stock Value Equivalent Award may have a maximum value established by the
Committee at the time of such Award.
(b) AWARD PERIOD. The Committee shall establish, with respect to
and at the time of each Stock Value Equivalent Award, a period over which the
Award shall vest with respect to the Holder.
(c) AWARDS CRITERIA. In determining the value of Stock Value
Equivalent Awards, the Committee may take into account an employee's
responsibility level, performance, potential, other Awards and such other
considerations as it deems appropriate.
(d) PAYMENT. Following the end of the determined period for a
Stock Value Equivalent Award, the Holder of a Stock Value Equivalent Award
shall be entitled to receive payment of an amount, not exceeding the maximum
value of the Stock Value Equivalent Award, if any, based on the then vested
value of the Award. Payment of a Stock Value Equivalent Award (i) shall be made
in cash, (ii) shall be made in a lump sum or in installments as prescribed by
the Committee in its sole discretion and (iii) shall be based on the Fair
Market Value of the Common Stock on the payment date. Cash dividend equivalents
may be paid during, or may be accumulated and paid at the end of, the
determined period with respect to a Stock Value Equivalent Award, as determined
by the Committee. If payment of cash is to be made on a deferred basis, the
Committee shall establish whether interest shall be credited, the rate thereof
and any other terms and conditions applicable thereto.
(e) TERMINATION OF EMPLOYMENT. The Committee shall determine the
effect of termination of employment during the applicable vesting period on an
employee's Stock Value Equivalent Award.
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XII. RECAPITALIZATION OR REORGANIZATION
(a) Except as hereinafter otherwise provided, Options, Stock
Appreciation Rights, Restricted Stock Awards, Performance Share Awards, Stock
Value Equivalent Awards and any agreements evidencing such Awards shall be
subject to adjustment by the Committee at its discretion as to the number and
price of shares of Common Stock or other consideration subject to such Awards
in the event of changes in the outstanding Common Stock by reason of dividends
payable in stock of the Company, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or other
relevant changes in capitalization occurring after the date of the grant of any
such Option or Awards.
(b) The existence of the Plan and the Awards granted hereunder
shall not affect in any way the right or power of the Board or the stockholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of debt or
equity securities having any priority or preference with respect to or
affecting Common Stock or the rights thereof, the dissolution or liquidation of
the Company or any sale, lease, exchange or other disposition of all or any
part of its assets or business or any other corporate act or proceeding.
(c) The shares with respect to which Awards may be granted are
shares of Common Stock as presently constituted, but if, and whenever, prior to
the expiration of an Option theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Common Stock or the payment of a
stock dividend on Common Stock payable in stock of the Company, without receipt
of consideration by the Company, the number of shares of Common Stock with
respect to which such Award may thereafter pertain (I) in the event of an
increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced, and the purchase price per share shall be
proportionately increased.
(d) If the Company recapitalizes or otherwise changes its capital
structure, an Award theretofore granted shall be adjusted to reflect such
recapitalization to the extent appropriate as determined by the Committee.
XIII. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan or alter or amend
the Plan or any part thereof from time to time; provided that no change in any
Award theretofore granted may be made which would impair the rights of the
Holder without the consent of the Holder, and provided, further, that the Board
may not, without approval of the stockholders, amend the Plan:
(a) to increase the aggregate number of shares which may be issued
pursuant to the provisions of the Plan on exercise or
surrender of Options or Stock Appreciation Rights or
pursuant to Restricted Stock Awards or Performance Share
Awards, except as provided in Article XII;
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(b) to change the minimum Option price;
(c) to change the class of employees eligible to receive Awards or
increase materially the benefits accruing to employees
under the Plan;
(d) to extend the maximum period during which Awards may be
granted under the Plan; or
(e) to modify materially the requirements as to eligibility for
participation in the Plan.
XIV. OTHER
(a) NO RIGHT TO AN AWARD. Neither the adoption of the Plan nor any
action of the Board or of the Committee shall be deemed to give an employee any
right to be granted an Option, a Stock Appreciation Right, a Restricted Stock
Award or a Performance Share Award or Stock Value Equivalent Award or any other
rights hereunder except as may be evidenced by an Option Agreement, Stock
Appreciation Rights Agreement, Restricted Stock Agreement or other instrument
evidencing an Award duly executed on behalf of the Company, and then only to
the extent and on the terms and conditions expressly set forth therein. The
Plan shall be unfunded. The Company shall not be required to establish any
special or separate fund or to make any other segregation of funds or assets to
assure the payment of any Award.
(b) NO EMPLOYMENT RIGHTS CONFERRED. Nothing contained in the Plan
or in any Award made hereunder shall (I) confer upon any employee any right
with respect to continuation of employment with the Company or any Subsidiary
or (ii) interfere in any way with the right of the Company or any Subsidiary to
terminate his or her employment at any time.
(c) OTHER LAWS; WITHHOLDING. The Company shall not be obligated to
issue any Common Stock pursuant to any Award granted under the Plan at any time
when the offering of the shares covered by such Award has not been registered
under the Securities Act of 1933 and such other state and federal laws, rules
or regulations as the Company or the Committee deems applicable and, in the
opinion of legal counsel for the Company, there is no exemption from the
registration requirements of such laws, rules or regulations available for the
issuance and sale of such shares. No fractional shares of Common Stock shall be
delivered, nor shall any cash in lieu of fractional shares be paid. The Company
shall have the right to deduct in connection with all Awards any taxes required
by law to be withheld and to require any payments necessary to enable it to
satisfy its withholding obligations. The Committee may permit the Holder of an
Award to elect to surrender, or authorize the Company to withhold, shares of
Common Stock (valued at their Fair Market Value on the date of surrender or
withholding of such shares) in satisfaction of the Company's withholding
obligation.
(d) NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the
Plan shall be construed to prevent the Company or any Subsidiary from taking
any corporate action which is deemed by the Company or such Subsidiary to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Award made under the Plan. No
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employee, beneficiary or other person shall have any claim against the Company
or any Subsidiary as a result of any such action.
(e) RESTRICTIONS ON TRANSFER. An Award shall not be transferable
otherwise than by will or the laws of descent and distribution and shall be
exercisable during the lifetime of the Holder only by such Holder or the
Holder's guardian or legal representative. The Option Agreement, Stock
Appreciation Rights Agreement, Restricted Stock Agreement or other written
instrument evidencing an Award shall specify the effect of the death of the
Holder on the Award.
(f) SEVERABILITY. If any provision of this Plan or an Award shall
be held illegal or invalid for any reason, said illegality or invalidity shall
not affect the remaining provisions thereof; instead, each provision of the
Plan or an Award shall be fully severable and shall be construed and enforced
as if said illegal or invalid provision had never been included therein.
(g) LIMITATION ON ACTIONS. Every right of action by or on behalf
of the Company or by any shareholder against any past, present, or future
member of the Board, the Committee, or any officer or employee of the Company
arising out of or in connection with this Plan shall, regardless of the place
where the action may be brought and regardless of the place of residence of any
such director, Committee member, officer or employee, cease and be barred by
the expiration f three years from the later of: (i) the date of the act or
omission in respect of which such right of action arises or (ii) the first date
upon which there has been made generally available to shareholders an annual
report of the Company and a proxy statement for the annual meeting of
shareholders following the issuance of such annual report, which annual report
and proxy statement alone or together set forth for the related period, the
amount of the allocations. In addition, any and all right of action by any
employee (past, present or future) against the Company or any member of the
Committee arising out of or in connection with this Plan will, regardless of
the place where action may be brought and regardless of the place of residence
of any Committee member, cease and be barred by the expiration of three years
from the date of the act or omission in respect of which such right of action
arises.
(h) GOVERNING LAW. This Plan shall be governed by, and construed
in accordance with, the internal laws of the State of Texas without regard to
the principles of conflicts of law thereof that would require the application
of the laws of any jurisdiction other than Texas, except to the extent that it
implicates matters which are the subject of the General Corporation Law of the
State of Delaware which matters shall be governed by the latter law.
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<PAGE> 64
EXHIBIT A-2
RESTRICTED STOCK AGREEMENT
<PAGE> 65
RESTRICTED STOCK AGREEMENT
AGREEMENT made this 16th day of January, 1996 between NOW Holdings,
Inc., a Delaware corporation (the "Company"), and _____________________________
("Employee").
1. AWARD.
(a) SHARES. Pursuant to the NOW Holdings, Inc. Stock
Award and Long-Term Incentive Plan (the "Plan") and upon payment to the Company
by Employee of $0.01 per share cash, shares (the "Restricted
Shares") of the Company's common stock, par value $0.01 per share ("Stock"),
shall be issued by the Company as hereinafter provided in Employee's name
subject to certain restrictions thereon.
(b) ISSUANCE OF RESTRICTED SHARES. The Restricted Shares
shall be issued upon acceptance hereof by Employee and upon satisfaction of the
conditions of this Agreement.
(c) PLAN INCORPORATED. Employee acknowledges receipt of a
copy of the Plan, and agrees that this award of Restricted Shares shall be
subject to all of the terms and conditions set forth in the Plan, including
future amendments thereto, if any, pursuant to the terms thereof, which Plan is
incorporated herein by reference as a part of this Agreement.
2. RESTRICTED SHARES. Employee hereby accepts the Restricted
Shares when issued and agrees with respect thereto as follows:
(a) FORFEITURE RESTRICTIONS. The Restricted Shares may
not be sold, assigned, pledged, exchanged, hypothecated or otherwise
transferred, encumbered or disposed of to the extent then subject to the
Forfeiture Restrictions (as hereinafter defined), and in the event of
termination of Employee's employment with the Company for any reason, Employee
shall, for no consideration other than payment by the Company to Employee of
$0.01 per share cash, forfeit, effective as of the time of termination of
employment, to the Company all Restricted Shares to the extent then subject to
the Forfeiture Restrictions. It is understood and agreed by Employee that the
Company may from time to time declare dividends on, and make distributions with
respect to, its Common Stock, including without limitation, securities or other
property received by the Company in connection with the sale of a portion of
the Company's business. In the event that Employee is terminated for any reason
prior to the actual payment of such dividend or distribution (and whether
before or after the declaration of, or record date for, such dividend or
distribution and whether before or after completion of such sale of a portion
of the Company's business), Employee will not be entitled to receive any such
dividends or distributions with respect to any Restricted Shares that are
forfeited to the Company as provided herein. If Employee remains an Employee
at the time of actual payment of such dividend or distribution, Employee shall
be entitled to receive such dividends and distributions only with respect to
Restricted Shares
<PAGE> 66
as to which Forfeiture Restriction have lapsed. Any remaining dividends and
distributions with respect to Restricted Shares shall be paid to Employee at
the time of subsequent lapsing of Forfeiture Restriction on such Restricted
Shares. The prohibition against transfer and the obligation to forfeit and
surrender Restricted Shares to the Company upon termination of employment are
herein referred to as "Forfeiture Restrictions." The Forfeiture Restrictions
shall be binding upon and enforceable against any transferee of Restricted
Shares.
(b) LAPSE OF FORFEITURE RESTRICTIONS. The Forfeiture
Restrictions shall lapse as to the Restricted Shares in accordance with the
following schedule provided that Employee has been continuously employed by the
Company from the date of this Agreement through the lapse date:
<TABLE>
<CAPTION>
Percentage of Total
Number of Restricted Shares
as to Which Forfeiture
Lapse Date Restrictions Lapse
---------- ---------------------------
<S> <C>
First Anniversary of the date of this Agreement 20%
Second Anniversary of the date of this Agreement an additional 20%
Third Anniversary of the date of this Agreement an additional 20%
Fourth Anniversary of the date of this Agreement an additional 20%
Fifth Anniversary of the date of this Agreement the final 20%
</TABLE>
In the event of a merger or consolidation of the Company, a sale of
all or substantially all of the assets of the Company, or a sale of all of the
outstanding Class A Common Stock and Common Stock of the Company, in which all
of the stockholders of the Company receive in such transaction cash and/or
securities that are publicly traded and have a total market valuation for all
outstanding securities of the same publicly traded class after the transaction
of at least $250 million ("Acceleration Transaction"), all of the Forfeiture
Restrictions shall lapse immediately prior to the effectiveness of such
transaction.
(c) TAX BONUS. Upon the occurrence of an Acceleration
Transaction, the Company shall pay to the Employee with respect to any
Acceleration Transaction which is subject to the tax imposed under Section 4999
of the Internal Revenue Code of 1986, as amended, (the "Code") a tax bonus as
described in this Paragraph (c). The tax bonus payable to an Employee under
this Paragraph (c) shall be equal to the amount determined by (i) determining
the portion of the Acceleration Transaction which is treated as excess
parachute payments (within the meaning of Section 28OG of the Code or the
corresponding provision of any successor statute) and which is subject to the
tax imposed under Section 4999 of the Code or the corresponding provision of
any
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<PAGE> 67
successor statute (the "Parachute Amount"), (ii) determining the decimal which
expresses the maximum rate of tax imposed under section 4999 of the Code or the
corresponding provision of any successor statute (the "Parachute Tax Rate") and
the maximum statutory rate, expressed as a decimal, of Federal income tax
applicable to the Employee (after reflecting all deductions and adjustments)
applicable to the Employee for the taxable year in which the Acceleration
Transaction occurs (the "Regular Tax Rate"), (iii) multiplying the Parachute
Amount by the Parachute Tax Rate, (iv) multiplying the amount determined in
item (iii) by 2/3 and (v) multiplying the amount determined in item (iv) by a
fraction, the numerator of which is one and the denominator of which is one
minus the Regular Tax Rate.
(d) CERTIFICATES. A certificate evidencing the Restricted
Shares shall be issued by the Company in Employee's name, or at the option of
the Company, in the name of a nominee of the Company, pursuant to which
Employee shall have voting rights and shall be entitled to receive all
dividends unless and until the Restricted Shares are forfeited pursuant to the
provisions of this Agreement. The certificate shall bear a legend as determined
by the committee which administers the Plan (the "Committee") evidencing the
nature of the Restricted Shares, and the Company may cause the certificate to
be delivered upon issuance to the Secretary of the Company or to such other
depository as may be designated by the Committee as a depository for
safekeeping until the forfeiture and surrender occurs or the Forfeiture
Restrictions lapse pursuant to the terms of the Plan and this award. Upon
request of the Committee, Employee shall deliver to the Company a stock power,
endorsed in blank, relating to the Restricted Shares then subject to the
Forfeiture Restrictions. Upon the lapse of the Forfeiture Restrictions without
forfeiture and surrender, the Company shall cause a new certificate or
certificates to be issued without legend in the name of Employee in exchange
for the certificate evidencing the Restricted Shares. Notwithstanding any other
provisions of this Agreement, the issuance or delivery of any shares of Stock
(whether subject to restrictions or unrestricted) may be postponed for such
period as may be required to comply with applicable requirements of any
national securities exchange or any requirements under any law or regulation
applicable to the issuance or delivery of such shares. The Company shall not be
obligated to issue or deliver any shares of Stock if the issuance or delivery
thereof shall constitute a violation of any provision of any law or of any
regulation of any governmental authority or any national securities exchange.
3. STOCKHOLDERS AGREEMENT. Following the lapse of the Forfeiture
Restrictions as to Restricted Shares (whether in whole or in part), the shares
as to which the Forfeiture Restrictions lapsed shall be fully subject to all
provisions of the Stockholders Agreement among NOW Holdings, Inc. and its
Stockholders dated as of January 16, 1996.
4. WITHHOLDING OF TAX. To the extent that the receipt of the
Restricted Shares or the lapse of any Forfeiture Restrictions results in income
to Employee for federal or state income tax purposes, Employee shall deliver to
the Company at the time of such receipt or lapse, as the case may be, such
amount of money or, if the Committee so determines, shares of unrestricted
Stock as the Company may require to meet its obligation under applicable tax
laws or regulations, and, if Employee fails to do so, the Company is authorized
to withhold from any cash or Stock
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<PAGE> 68
remuneration then or thereafter payable to Employee any tax required to be
withheld by reason of such resulting compensation income.
5. STATUS OF STOCK. Employee agrees that the Restricted Shares
will not be sold or otherwise disposed of in any manner which would constitute
a violation of any applicable federal or state securities laws. Employee also
agrees (i) that the certificates representing the Restricted Shares may bear
such legend or legends as the Committee deems appropriate in order to assure
compliance with applicable securities laws, (ii) that the Company may refuse to
register the transfer of the Restricted Shares on the stock transfer records of
the Company if such proposed transfer would in the opinion of counsel
satisfactory to the Company constitute a violation of any applicable securities
law and (iii) that the Company may give related instructions to its transfer
agent, if any, to stop registration of the transfer of the Restricted Shares.
6. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement,
Employee shall be considered to be in the employment of the Company as long as
Employee remains an employee of either the Company, any successor corporation
or a parent or subsidiary corporation (as defined in section 424 of the
Internal Revenue Code of 1986, as amended) of the Company or any successor
corporation or a Subsidiary (as defined in the Plan). Any question as to
whether and when there has been a termination of such employment, and the cause
of such termination, shall be determined by the Committee, and its
determination shall be final.
7. COMMITTEE'S POWERS. No provision contained in this Agreement
shall in any way terminate, modify or alter, or be construed or interpreted as
terminating, modifying or altering any of the powers, rights or authority
vested in the Committee pursuant to the terms of the Plan, including, without
limitation, the Committee's rights to make certain determinations and elections
with respect to the Restricted Shares.
8. BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of any successors to the Company and all persons lawfully
claiming under Employee.
9. SECTION 83(b) ELECTION. As a condition to receiving the
Restricted Shares, Employee agrees to make the election pursuant to Section
83(b) of the Internal Revenue Code of 1986, as amended, to include the excess
of the fair market value of the Restricted Shares as of the date of issuance
over the amount paid by the Employee for such Restricted Shares in gross income
in the year of such issuance.
10. NOTICES. Any notice or other communication required or
permitted to be made or given hereunder will be sufficiently made or given if
sent by certified mail addressed, if to Employee, at his address as set forth
in the Company's regular employment records and, if to Company, addressed to it
at its principal office.
11. GOVERNING LAW. This Plan shall be governed by, and construed
in accordance with, the internal laws of the State of Texas without regard to
the principles of conflicts of law
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<PAGE> 69
thereof that would require the application of the laws of any jurisdiction
other than Texas, except to the extent that it implicates matters which are the
subject of the General Corporation Law of the State of Delaware which matters
shall be governed by the latter law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by an officer thereunto duly authorized, and Employee has executed
this Agreement, all as of the date first above written.
NOW HOLDINGS, INC.
By:
-----------------------------------
James C. Comis III
Senior Vice President-Finance
---------------------------------------
EMPLOYEE
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<PAGE> 70
EXHIBIT B-1
VALUE APPRECIATION BONUS PLAN A
<PAGE> 71
NOW HOLDINGS, INC.
VALUE APPRECIATION AND INCENTIVE PLAN A
I. ESTABLISHMENT AND PURPOSE
(a) ESTABLISHMENT OF THE PLAN. NOW HOLDINGS, INC. (the "Company")
hereby establishes, effective as of January 16, 1996, the NOW HOLDINGS, INC.
VALUE APPRECIATION AND INCENTIVE PLAN A (the "Plan") the terms and provisions
of which are set forth below.
(b) PURPOSES. The purposes of the Plan are to focus Participants,
both as a team and individually, on achieving key strategic and financial
objectives of the Company and its Affiliates, to reward them for enhancing the
value of the Company thereby benefitting its stockholders, to encourage them to
devote their best efforts to the business and operation of the Company, its
subsidiaries and its Affiliates by offering them a reward opportunity based on
individual contributions and corporate performance and to enhance the ability
of the Company to attract and retain employees of outstanding competence and
ability.
II. DEFINITIONS
As used in the Plan, the terms below shall have the following meanings
ascribed to them:
(a) "AFFILIATE" shall have the same meaning as the term
"Affiliate" as defined in the Stockholders Agreement.
(b) "APPRAISED VALUE" shall mean the fair market value of the
Fully Diluted Common Stock as determined in good faith by the Board of
Directors of the Company, supported by the opinion of a nationally recognized
investment banking firm selected by the Board of Directors of the Company. For
purposes of determining the Appraised Value, the fair market value of the Fully
Diluted Common Stock shall equal the price per share of Common Stock that could
be obtained in an open (non-forced) sale of all of the Fully Diluted Common
Stock, with ample time for marketing and closing and assigning equal value to
each share of Fully Diluted Common Stock.
(c) "CAPITAL INVESTMENT" as a given date refers to: (i)
$30,000,000; plus (ii) capital contributions, and all amounts paid for the
purchase of capital stock, by the Stockholders to the Company between January
16,1996 and such date.
(d) "CAPITAL INVESTMENT COMMON STOCK VALUE" refers to the Common
Stock Value, related to 1,200 shares of Class A Common Stock and 880,198 shares
of Common Stock.
(e) "CLASS A COMMON STOCK" refers to the capital stock of the
Company consisting of its Class A common stock, par value $.01 per share.
<PAGE> 72
(f) "COMMITTEE" refers to the Committee appointed by the Board of
Directors of the Company to administer the Plan.
(g) "COMMON STOCK" refers to the capital stock of the Company
consisting of its common stock, par value $.01 per share.
(h) "COMMON STOCK VALUE" refers to (i) in the case of a Sale of
the Company, the aggregate value of the Fully Diluted Common Stock determined
with reference to the per share price for, or the amount per share distributed
to, such Fully Diluted Common Stock as established pursuant to such
transaction, (ii) in the case of a Qualified Public Offering, the aggregate
value of the outstanding Common Stock, including all shares of Common Stock
issuable under outstanding options and warrants, determined with reference the
Net Public Offering Price for such Common Stock as established in such
offering, and (iii) in the case of a Payment Date described in (o)(3) below,
the Appraised Value of the Fully Diluted Common Stock; and all amounts payable
under the NOW Holdings, Inc. Value Appreciation and Incentive Plan B, and in
the case set forth in clause (iii) above reduced by the sum of (1) all
transaction expenses and (2) all amounts payable under the NOW Holdings, Inc.
Value Appreciation and Incentive Plan B.
(i) "COMPANY" refers to NOW Holdings, Inc., a Delaware
corporation, and any successor thereto.
(j) "ELIGIBLE EMPLOYEE" refers to any individual who is a
participant in the NOW Holdings, Inc. Value Appreciation Bonus Plan B and any
other key employee of the Company or of any Affiliate of the Company.
(k) "FULLY DILUTED COMMON STOCK" shall have the same meaning as
the term "Fully Diluted Common Stock" as defined in the Stockholders Agreement.
(l) "IRR AMOUNT" means an amount equal to: (i) if the Payment Date
occurs on or before January 16, 1999, that amount which equals a 35.0% internal
rate of return on the Capital Investment; (ii) if the Payment Date occurs after
January 16, 1999 but on or before January 16, 200 1, that amount which equals a
32.5% internal rate of return on the Capital Investment; or (iii) if the
Payment Date occurs after January 16, 2001, that amount which equals a 30.0%
internal rate of return on the Capital Investment.
(m) "MINIMUM REQUIRED RETURN ON CAPITAL INVESTMENT" means the
minimum amount when applied to the Capital Investment would result in the IRR
Amount being achieved.
(n) "NET PUBLIC OFFERING PRICE" shall have the same meaning as
defined in the Restated Certificate of Incorporation of the Company.
(o) "PARTICIPANT" refers to an Eligible Employee who has been
designated by the Committee pursuant to Article 3 as a Participant in the Plan.
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<PAGE> 73
(p) "PAYMENT DATE" refers to the first to occur of the following:
(1) The closing date of a Sale of the Company.
(2) The closing date of a Qualified Public Offering.
(3) The first date as of which the Stockholders have
received from the Company as dividends, distributions
or for the repurchase of Class A Common Stock, cash
and/or securities that are publicly traded and have a
total market valuation for all outstanding securities
of the same publicly traded class after the
transaction of at least $250 million (valued at the
fair market value thereof as determined by the Board
of Directors of the Company) equal to the Capital
Investment.
provided, however, that an event described above shall not result in a Payment
Date for purposes of the Plan unless the Capital Investment Common Stock Value
on such date equals or exceeds the IRR Amount.
(q) "PLAN TERM" refers to the period that this Plan shall be in
effect and shall be the period of January 16, 1996 to the Payment Date or, if
earlier, the date the Plan is terminated pursuant to Article IX.
(r) "PUBLIC OFFERING" refers to a public offering and sale of
equity securities of the Company pursuant to an effective registration
statement on Form S- I under the Securities Act of 1933, as amended, or any
similar Federal statute then in effect.
(s) "QUALIFIED PUBLIC OFFERING" refers to a Public Offering of
Common Stock, at the conclusion of which the aggregate number of issued and
outstanding shares of Common Stock that have been sold to the public pursuant
to one or more effective registration statements under the Securities Act of
1933, as amended, or any similar Federal statute then in effect is equal to at
least 20% of the Fully Diluted Common Stock after giving effect to such sale.
(t) "SALE OF THE COMPANY" refers to (x) a merger of the Company, a
sale of all or substantially all of the assets of the Company, or a sale of all
of the Class A Common Stock and Common Stock of the Company, (y) in which all
of the stockholders of the Company receive in such transaction the same
consideration consisting of cash and/or securities that are publicly traded and
have a total market valuation for all outstanding securities of the same
publicly traded class after the transaction of at least $250 million.
(u) "STOCKHOLDERS" refers to any person or entity other than the
Company which is a party to the Stockholders Agreement.
(v) "STOCKHOLDERS AGREEMENT" refers to the Stockholders Agreement
Among Now Holdings, Inc and its Stockholders, dated as of January 16, 1996, as
it may be amended thereafter from time-to-time.
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<PAGE> 74
(w) "TOTAL AVAILABLE VALUE APPRECIATION UNITS" means 100 Value
Appreciation Units.
(x) "VALUE APPRECIATION UNIT", means a phantom unit credited to a
Participant under the Plan for purposes of measuring his or her allocable
share, if any, of the aggregate bonus amount payable as of the Payment Date.
III. PARTICIPATION AND VALUE APPRECIATION UNITS
(a) PARTICIPATION DESIGNATION. The Committee may designate
Eligible Employees as Participants in the Plan at any time during the term of
the Plan. It is anticipated that participation in the Plan may vary from time
to time. In selecting Eligible Employees to participate in the Plan, the
Committee shall establish such criteria as it may deem relevant in making such
selection. An Eligible Employee who has been designated by the Committee as a
Participant in the Plan shall have no right of continued participation in the
Plan and may be removed by the Committee as a Participant in the Plan at any
time.
(b) CREDITING OF VALUE APPRECIATION UNITS. Coincident with the
designation of an individual as a Participant in the Plan, the Committee shall
credit to a Participant a number of whole or fractional Value Appreciation
Units. The Committee shall establish such criteria as it may deem relevant in
determining the number of Value Appreciation Units to be assigned to a
Participant. It is anticipated that Participants will be assigned differing
numbers of Value Appreciation Units. At any time during the Plan Term, the
Committee may increase or decrease the number of Value Appreciation Units then
credited to a Participant in its sole discretion, but in no event shall the
aggregate Value Appreciation Units awarded under the Plan exceed the Total
Available Value Appreciation Units.
IV. VALUE APPRECIATION UNIT DISTRIBUTIONS
(a) FORM AND TIME OF DISTRIBUTIONS. Distributions attributable to
a Participant's Value Appreciation Units credited to him or her as of the
Payment Date shall be paid in a lump sum as soon as practicable after the
Payment Date. Distributions attributable to a Participant's Value Appreciation
Units credited to him or her as of the Payment Date shall be paid in cash
except that if the Payment Date results from the occurrence of a Qualified
Public Offering, the Company shall have the right, in its sole discretion, to
effect such distribution in the form of whole shares of Common Stock with the
number of shares of such Common Stock to be distributed to a Participant being
equal to his or her distribution amount as determined pursuant to (b) below
divided by the Net Public Offering Price.
(b) DISTRIBUTION AMOUNT. For any Participant who remains employed
by the Company as of the Payment Date and who is not as of such date a
participant in the NOW Holdings, Inc. Value Appreciation and Incentive Plan B,
the amount of distribution payable as of such date with respect to Value
Appreciation Units credited to him or her as of the Payment Date shall be a
dollar amount equal to the lesser of (i) the product of (a) the Common Stock
Value multiplied by (b) 0.04 and the maximum amount of payments under this
Value Appreciation and Incentive Plan A that would not result in a Capital
Investment Common Stock Value below that Minimum Required Return on
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<PAGE> 75
Capital Investment, multiplied by (ii) a fraction, the numerator of which is
the number of such Participant's Value Appreciation Units as of such date and
the denominator of which is 80. For any Participant who remains employed by the
Company as of the Payment Date and who is as of such date a participant in the
NOW Holdings, Inc. Value Appreciation And Incentive Plan B, the amount of
distribution payable as of such date with respect to Value Appreciation Units
credited to him or her as of the Payment Date shall be a dollar amount equal to
the lesser of (i) the product of (a) the Common Stock Value multiplied by (b)
0.01 and the maximum amount of payments under this Value Appreciation and
Incentive Plan A that would not result in a Capital Investment Common Stock
Value below that Minimum Required Return on Capital Investment, multiplied by
(ii) a fraction, the numerator of which is the number of such Participant's
Value Appreciation Units as of such date and the denominator of which is 20. In
no event shall the aggregate Value Appreciation Units credited to Participants
who are participants in the NOW Holdings, Inc. Value Appreciation and Incentive
Plan B exceed 20.
(c) EXTRAORDINARY EVENT ADJUSTMENTS. If an extraordinary event
outside of the control of the Company occurs which would result in a
substantial distortion from the ordinary operation of the Plan, the Board of
Directors of the Company, in its sole discretion, may make such adjustment to
the operation of the Plan as it determines to be appropriate.
(d) TAX BONUS. In addition to amounts payable under the Plan
pursuant to Paragraph (b) above, the Company shall pay to any Participant with
respect to any distributions under the Plan which are subject to the tax
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended,
(the "Code") a tax bonus as described in this Paragraph (d). The tax bonus
payable to a Participant under this Paragraph (d) shall be equal to the amount
determined by (i) determining the aggregate amounts distributed to the
Participant pursuant to Paragraph (b) above which are treated as excess
parachute payments (within the meaning of Section 28OG of the Code or the
corresponding provision of any successor statute) and which are subject to the
tax imposed under Section 4999 of the Code or the corresponding provision of
any successor statute (the "Parachute Amount"), (ii) determining the decimal
which expresses the maximum rate of tax imposed under section 4999 of the Code
or the corresponding provision of any successor statute (the "Parachute Tax
Rate") and the maximum statutory rate, expressed as a decimal, of Federal
income tax applicable to the Participant (after reflecting all deductions and
adjustments) applicable to the Participant for the taxable year in which he
receives the distributions pursuant to Paragraph (b) above (the" Regular Tax
Rate"), (iii) multiplying the Parachute Amount by the Parachute Tax Rate, (iv)
multiplying the amount determined in item (iii) by 2/3 and (v) multiplying the
amount determined in item (iv) by a fraction, the numerator of which is one and
the denominator of which is one minus the Regular Tax Rate.
VI. TERMINATION OF EMPLOYMENT
In the event that a Participant ceases to be employed with the Company
and its Affiliates for any reason prior to the Payment Date his or her Value
Appreciation Units will be forfeited and he or she will not thereafter be
entitled to any Plan distributions.
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<PAGE> 76
VII. ARBITRATION
Any and all claims, demands, cause of action, disputes, controversies
and other matters in question arising out of or relating to this Agreement, any
provision hereof, the alleged breach thereof, or in any way relating to the
subject matter of this Agreement, involving the Company or an Affiliate thereof
and a Participant (all of which are referred to herein as "Claims"), even
though some or all of such Claims allegedly are extra-contractual in nature,
whether such Claims sound in contract, tort or otherwise, at law or in equity,
under state or federal law, whether provided by statute or the common law, for
damages or any other relief, including equitable relief and specific
performance, shall be resolved and decided by binding arbitration pursuant to
the Federal Arbitration Act in accordance with the Commercial Arbitration Rules
then in effect with the American Arbitration Association. In the arbitration
proceeding the Participant shall select one arbitrator, the Company shall
select one arbitrator and the two arbitrators so selected shall select a third
arbitrator. Should one party fail to select an arbitrator within five days
after notice of the appointment of an arbitrator by the other party or should
the two arbitrators selected by the Participant and the Company fail to select
an arbitrator within ten days after the date of the appointment of the last of
such two arbitrators, any person sitting as a Judge of the United States
District Court of the Southern District of Texas, Houston Division, upon
application of the Participant or the Company, shall appoint an arbitrator to
fill such space with the same force and effect as though such arbitrator had
been appointed in accordance with the immediately preceding sentence. The
decision of a majority of the arbitrators shall be binding on the Participant,
and the Company and their Affiliates. The arbitration proceeding shall be
conducted in Houston, Texas. Judgment upon any award rendered in any such
arbitration proceeding may be entered by any federal or state court having
jurisdiction. This agreement to arbitrate shall be enforceable in either
federal or state court. The enforcement of this agreement to arbitrate and all
procedural aspects of this Agreement to arbitrate, including but not limited
to, the construction and interpretation of this agreement to arbitrate, the
scope of the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act. In deciding
the substance of any such Claim, the Arbitrators shall apply the substantive
laws of the State of Texas; provided, however, that the Arbitrators shall have
no authority to award treble, exemplary or punitive type damages under any
circumstances regardless of whether such damages may be available under Texas
law, the parties hereby waiving their right, if any, to recover treble,
exemplary or punitive type damages in connection with any such Claims.
VIII. ADMINISTRATIVE PROVISIONS
(a) ADMINISTRATIVE GUIDELINES. The Plan shall be implemented and
administered in accordance with such rules, regulations and interpretations as
may be established from time to time by the Committee for the implementation
and administration of this Plan that are not inconsistent with the provisions
thereof.
(b) ADMINISTRATION. The Plan shall be administered by the
Committee which shall have the power and responsibility to take such actions as
may be appropriate or necessary to effectuate orderly administration of the
Plan and to interpret and construe the terms and provisions of the Plan;
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<PAGE> 77
provided, however, that such interpretations and constructions shall be
consistent with the written provisions of the Plan.
(c) LIMITATION OF LIABILITY. The members of the Committee and any
other person acting under the direction of the Committee, shall not be liable
for any act or failure to act hereunder. except for gross negligence or fraud,
and the Company shall indemnify the members of the Committee, and such other
persons against all expenses, fines, judgments, and/or penalties incurred in
connection with any claim or proceeding seeking to impose such liability.
IX. OTHER PROVISIONS
(a) EMPLOYMENT. Nothing in this Plan nor any action taken by the
Company, the Board of Directors of the Company or the Committee under the
provisions hereof shall be construed as a contract of employment between the
Company and a Participant or interfere with or limit in any way the right of
the Company to terminate any such Participant's employment at any time, nor
confer upon any Participant any right to continue in the employ of the Company.
For purposes of the Plan. a Participant will be deemed to be employed by the
Company for so long as he or she is employed by the Company or an Affiliate of
the Company.
(b) NONTRANSFERABILITY. No right or interest of any Participant
under this Plan shall be assignable or transferable, pledged or encumbered in
any manner, or subject to any lien, directly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge and
bankruptcy.
(c) AMENDMENTS AND TERMINATION. The Company at any time and from
time to time, may modify or amend, in whole or in part, any or all of the
provisions of this Plan or suspend or terminate the Plan entirely; provided,
however, that in the event of a termination of the Plan prior to a Payment
Date, each Participant shall be entitled to a Plan distribution in full
satisfaction of all amounts owed under the Plan equal to the distribution
amount or amounts determined pursuant to Paragraph (b) of Article IV above
substituting the date of termination of the Plan for the Payment Date if the
fair market value as determined by the Board of Directors of the Company of the
Common Stock as of such date equals or exceeds the IRR Amount as of such date.
The Plan shall automatically terminate and no further amounts shall be paid
under the Plan following payment of the last amount owed as a result of
occurrence of the Payment Date.
(d) GOVERNING LAW. The Plan shall be construed in accordance with
and governed by the laws of the State of Texas.
(e) WITHHOLDING TAXES. The Company shall have the right to deduct
from all payments under this Plan any federal, state or local taxes required by
law to be withheld with respect to such payments.
(g) NATURE OF PLAN. The Plan shall constitute an unfunded,
unsecured obligation of the Company to make payments of incentive compensation
to certain employees from its general assets in accordance with the Plan.
Accordingly:
-7-
<PAGE> 78
(1) Value Appreciation Units awarded under the Plan and
accounting maintained by the Company merely
constitute mechanisms for measuring such incentive
compensation and do not constitute a property right
or interest in the Company or in any asset owned by
the Company or its subsidiaries;
(2) neither the establishment of the Plan, the awarding
of Value Appreciation Units nor the creation or
maintenance of Plan accounting records shall be
deemed to create an escrow or trust fund of any kind;
and
(3) the Participant and any person claiming under
Participant shall rely solely on the unsecured
promise of the Company set forth herein, and nothing
in the Plan shall be construed to give the
Participant or anyone claiming under the Participant
any right, title, interest or claim in or to any
specific asset, fund, entity, reserve, account, or
property of any kind whatsoever owned by the Company
or any Affiliate of the Company.
EXECUTED this 16th day of January, 1996.
ATTEST: NOW HOLDINGS, INC.
By
- ----------------------------------- -----------------------------------
JAMES C. COMIS, III, SECRETARY JOEL V. STAFF, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
-8-
<PAGE> 79
EXHIBIT B-2
VALUE APPRECIATION BONUS PLAN B
<PAGE> 80
NOW HOLDINGS, INC.
VALUE APPRECIATION AND INCENTIVE PLAN B
I. ESTABLISHMENT AND PURPOSE
(a) ESTABLISHMENT OF THE PLAN. NOW HOLDINGS, INC. (the "Company")
hereby establishes, effective as of January 16, 1996, the NOW HOLDINGS, INC.
VALUE APPRECIATION AND INCENTIVE PLAN B (the "Plan") the terms and provisions
of which are set forth below.
(b) PURPOSES. The purposes of the Plan are to focus Participants,
both as a team and individually, on achieving key strategic and financial
objectives of the Company and its Affiliates, to reward them for enhancing the
value of the Company thereby benefitting its stockholders, to encourage them to
devote their best efforts to the business and operation of the Company, its
subsidiaries and its Affiliates by offering them a reward opportunity based on
individual contributions and corporate performance and to enhance the ability
of the Company and its Affiliates to attract and retain employees of
outstanding competence and ability.
II. DEFINITIONS
As used in the Plan, the terms below shall have the following meanings
ascribed to them:
(a) "AFFILIATE" shall have the same meaning as the term
"Affiliate" as defined in the Stockholders Agreement.
(b) "APPRAISED VALUE" shall mean the fair market value of the
Fully Diluted Common Stock as determined in good faith by the Board of
Directors of the Company, supported by the opinion of a nationally recognized
investment banking firm selected by the Board of Directors of the Company. For
purposes of determining the Appraised Value, the fair market value of the Fully
Diluted Common Stock shall equal the price per share of Common Stock that could
be obtained in an open (non-forced) sale of all of the Fully Diluted Common
Stock, with ample time for marketing and closing and assigning equal value to
each share of Fully Diluted Common Stock.
(c) "AWARD" refers to either a Restricted Stock Award or an Option
as such terms are defined in the NOW Holdings, Inc. Stock Award and Long-Term
Incentive Plan.
(d) "CAPITAL INVESTMENT" as a given date refers to: (i)
$30,000,000; plus (ii) capital contributions, and all amounts paid for the
purchase of capital stock, by the Stockholders to the Company between January
16, 1996 and such date.
(e) "CAPITAL INVESTMENT COMMON STOCK VALUE" refers to the Common
Stock Value, related to 1,200 shares of Class A Common Stock and 880,198 shares
of Common Stock.
(f) "CLASS A COMMON STOCK" refers to the capital stock of the
Company consisting of its Class A common stock, par value $.01 per share.
<PAGE> 81
(g) "Committee" refers to the Committee appointed by the Board of
Directors of the Company to administer the Plan.
(h) "COMMON STOCK" refers to the capital stock of the Company
consisting of its common stock, par value $.01 per share.
(i) "COMMON STOCK VALUE" refers to (i) in the case of a Sale of
the Company, the aggregate value of the Fully Diluted Common Stock determined
with reference to the per share price for, or the amount per share distributed
to, such Fully Diluted Common Stock as established pursuant to such
transaction, (ii) in the case of a Qualified Public Offering, the aggregate
value of the outstanding Common Stock, including all shares of Common Stock
issuable under outstanding options and warrants, determined with reference the
Net Public Offering Price for such Common Stock as established in such
offering, and (iii) in the case of a Payment Date described in (0)(3) below,
the Appraised Value of the Fully Diluted Common Stock; and all amounts payable
under this Plan, and in the case set forth in clause (iii) above reduced by the
sum of (1) all transaction expenses and (2) all amounts payable under this
Plan.
(j) "COMPANY" refers to NOW Holdings, Inc., a Delaware
corporation, and any successor thereto.
(k) "FULLY DILUTED COMMON STOCK" shall have the same meaning as
the term "Fully Diluted Common Stock" as defined in the Stockholders Agreement.
(l) "IRR AMOUNT" means that amount which equals a 25.0% internal
rate of return on the Capital Investment.
(m) "MINIMUM REQUIRED RETURN ON CAPITAL INVESTMENT" means the
minimum amount when applied to the Capital Investment would result in the IRR
Amount being achieved.
(n) "NET PUBLIC OFFERING PRICE" shall have the same meaning as
defined in the Restated Certificate of Incorporation of the Company.
(o) "PARTICIPANT" refers to any key employee of the Company or of
any Affiliate of the Company who has received an Award.
(p) "PAYMENT DATE" refers to the first to occur of the following:
(1) The closing date of a Sale of the Company.
(2) The closing date of a Qualified Public Offering.
(3) The first date as of which the Stockholders have
received from the Company as dividends, distributions
or for the repurchase of Class A Common Stock, cash
and/or securities that are publicly traded and have a
total market valuation for all outstanding
securities of the same publicly traded class after
the transaction of at least $250 million (valued at
the fair market value
-2-
<PAGE> 82
thereof as determined by the Board of Directors of
the Company) equal to the Capital Investment.
provided, however, that an event described above shall not result in a Payment
Date for purposes of the Plan unless the Capital Investment Common Stock Value
on such date equals or exceeds the IRR Amount on such date.
(q) "PLAN TERM" refers to the period that this Plan shall be in
effect and shall be the period of January 16, 1996 to the Payment Date or, if
earlier, the date the Plan is terminated pursuant to Article VIII.
(r) "PUBLIC OFFERING" refers to a public offering and sale of
equity securities of the Company pursuant to an effective registration
statement on Form S-1 under the Securities Act of 1933, as amended, or any
similar Federal statute then in effect.
(s) "QUALIFIED PUBLIC OFFERING" refers to a Public Offering of
Common Stock, at the conclusion of which the aggregate number of issued and
outstanding shares of Common Stock that have been sold to the public pursuant
to one or more effective registration statements under the Securities Act of
1933, as amended, or any similar Federal statute then in effect is equal to at
least 20% of the Fully Diluted Common Stock after giving effect to such sale.
(t) "SALE OF THE COMPANY" refers to (x) a merger of the Company, a
sale of all or substantially all of the assets of the Company, or a sale of all
of the Class A Common Stock and Common Stock of the Company, (y) in which all
of the stockholders of the Company receive in such transaction the same
consideration consisting of cash and/or securities that are publicly traded and
have a total market valuation for all outstanding securities of the same
publicly traded class after the transaction of at least $250 million.
(u) "STOCKHOLDERS" refers to any person or entity other than the
Company which is a party to the Stockholders Agreement.
(v) "STOCKHOLDERS AGREEMENT" refers to the Stockholders Agreement
Among Now Holdings, Inc. and its stockholders, dated as of January 16, 1996, as
it may be amended thereafter from time-to-time.
III. PARTICIPATION
Any employee of the Company or any Affiliate of the Company who has
received an Award shall automatically be a Participant.
IV. DISTRIBUTIONS
(a) FORM AND TIME OF DISTRIBUTIONS. Distributions paid to a
Participant under the Plan as of the Payment Date shall be paid in a lump sum
as soon as practicable after the Payment Date. Plan distributions shall be paid
in cash except that if the Payment Date results from the occurrence of a
Qualified Public Offering, the Company shall have the right, in its sole
discretion, to effect such distributions in the form of whole shares of Common
Stock with the number of shares of such
-3-
<PAGE> 83
Common Stock to be distributed to a Participant being equal to his or her
distribution amount as determined pursuant to (b) below divided by the Net
Public Offering Price.
(b) DISTRIBUTION AMOUNT. The total amount of distribution payable
under the Plan to a Participant with respect to the Payment Date shall be an
amount equal to $3,490,000 multiplied by a fraction, the numerator of which is
the number of shares of Common Stock issued or issuable to such Participant as
of such date under an Award (whether as a restricted stock or as a stock
option), and the denominator of which is the maximum number of shares of Common
Stock that may be issued under the Company's Stock Award and Long-Term
Incentive Plan; provided, however, that the actual amount paid to each
Participant shall be the total amount payable multiplied by a fraction, the
numerator of which is the number of shares of Common Stock under such
Participant's Award as to which forfeiture restrictions have lapsed or options
have vested, and the denominator of which is the total number of shares of
Common Stock under such Participant's Award. Any amounts payable that are not
paid at the Payment Date shall be held by the Company and paid to the
Participant proportionately as forfeiture restrictions lapse or options vest in
the future under the Award. No amounts, however, shall be paid to any
Participant with respect to shares of restricted stock forfeited or unvested
options upon any Participant's termination of employment before or after the
Payment Date.
(c) EXTRAORDINARY EVENT ADJUSTMENTS. If an extraordinary event
outside of the control of the Company occurs which would result in a
substantial distortion from the ordinary operation of the Plan, the Board of
Directors of the Company, in its sole discretion, may make such adjustment to
the operation of the Plan as it determines to be appropriate.
(d) TAX BONUS. In addition to amounts payable under the Plan
pursuant to Paragraph (b) above, the Company shall pay to any Participant with
respect to any distributions under the Plan which are subject to the tax
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended,
(the "Code") a tax bonus as described in this Paragraph (d). The tax bonus
payable to a Participant under this Paragraph (d) shall be equal to the amount
determined by (i) determining the aggregate amounts distributed to the
Participant pursuant to Paragraph (b) above which are treated as excess
parachute payments (within the meaning of Section 280G of the Code or the
corresponding provision of any successor statute) and which are subject to the
tax imposed under Section 4999 of the Code or the corresponding provision of
any successor statute (the "Parachute Amount"), (ii) determining the decimal
which expresses the maximum rate of tax imposed under section 4999 of the Code
or the corresponding provision of any successor statute (the "Parachute Tax
Rate") and the maximum statutory rate, expressed as a decimal, of Federal
income tax applicable to the Participant (after reflecting a deductions and
adjustments) applicable to the Participant for the taxable year in which he
receives the distributions pursuant to Paragraph (b) above (the "Regular Tax
Rate"), (iii) multiplying the Parachute Amount by the Parachute Tax Rate, (iv)
multiplying the amount determined in item (iii) by 2/3 and (v) multiplying the
amount determined in item (iv) by a fraction, the numerator of which is one and
the denominator of which is one minus the Regular Tax Rate.
VI. ARBITRATION
Any and all claims, demands, cause of action, disputes, controversies
and other matters in question arising out of or relating to this Agreement, any
provision hereof, the alleged breach thereof, or in any way relating to the
subject matter of this Agreement, involving the Company or
-4-
<PAGE> 84
an Affiliate thereof and a Participant (all of which are referred to herein as
"Claims"), even though some or all of such Claims allegedly are
extra-contractual in nature, whether such Claims sound in contract, tort or
otherwise, at law or in equity, under state or federal law, whether provided by
statute or the common law, for damages or any other relief, including equitable
relief and specific performance, shall be resolved and decided by binding
arbitration pursuant to the Federal Arbitration Act in accordance with the
Commercial Arbitration Rules then in effect with the American Arbitration
Association. In the arbitration proceeding the Participant shall select one
arbitrator, the Company shall select one arbitrator and the two arbitrators so
selected shall select a third arbitrator. Should one party fail to select an
arbitrator within five days after notice of the appointment of an arbitrator by
the other party or should the two arbitrators selected by the Participant and
the Company fail to select an arbitrator within ten days after the date of the
appointment of the last of such two arbitrators, any person sitting as a Judge
of the United States District Court of the Southern District of Texas, Houston
Division, upon application of the Participant or the Company, shall appoint an
arbitrator to fill such space with the same force and effect as though such
arbitrator had been appointed in accordance with the immediately preceding
sentence. The decision of a majority of the arbitrators shall be binding on the
Participant, and the Company and their Affiliates. The arbitration proceeding
shall be conducted in Houston, Texas. Judgment upon any award rendered in any
such arbitration proceeding may be entered by any federal or state court having
jurisdiction. This agreement to arbitrate shall be enforceable in either
federal or state court. The enforcement of this agreement to arbitrate and all
procedural aspects of this Agreement to arbitrate, including but not limited
to, the construction and interpretation of this agreement to arbitrate, the
scope of the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act. In deciding
the substance of any such Claim, the Arbitrators shall apply the substantive
laws of the State of Texas; provided, however, that the Arbitrators shall have
no authority to award treble, exemplary or punitive type damages under any
circumstances regardless of whether such damages may be available under Texas
law, the parties hereby waiving their right, if any, to recover treble,
exemplary or punitive type damages in connection with any such Claims.
VII. ADMINISTRATIVE PROVISIONS
(a) ADMINISTRATIVE GUIDELINES. The Plan shall be implemented and
administered in accordance with such rules, regulations and interpretations as
may be established from time to time by the Committee for the implementation
and administration of this Plan that are not inconsistent with the provisions
thereof.
(b) ADMINISTRATION. The Plan shall be administered by the
Committee which shall have the power and responsibility to take such actions as
may be appropriate or necessary to effectuate orderly administration of the
Plan and to interpret and construe the terms and provisions of the Plan;
provided, however, that such interpretations and constructions shall be
consistent with the written provisions of the Plan.
(c) LIMITATION OF LIABILITY. The members of the Committee and any
other person acting under the direction of the Committee, shall not be liable
for any act or failure to act hereunder, except for gross negligence or fraud,
and the Company shall indemnify the members of the Committee, and such other
persons against all expenses, fines, judgments, and/or penalties incurred in
connection with any claim or proceeding seeking to impose such liability.
-5-
<PAGE> 85
VIII. OTHER PROVISIONS
(a) EMPLOYMENT. Nothing in this Plan nor any action taken by the
Company, the Board of Directors of the Company or the Committee under the
provisions hereof shall be construed as a contract of employment between the
Company and a Participant or interfere with or limit in any way the right of
the Company to terminate any such Participant's employment at any time, nor
confer upon any Participant any right to continue in the employ of the Company.
(b) NONTRANSFERABILITY. No right or interest of any Participant
under this Plan shall be assignable or transferable, pledged or encumbered in
any manner, or subject to any lien, directly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge and
bankruptcy.
(c) AMENDMENTS AND TERMINATION. The Company at any time and from
time to time, may modify or amend, in whole or in part, any or all of the
provisions of this Plan or suspend or terminate the Plan entirely; provided,
however, that in the event of a termination of the Plan prior to the Payment
Date, each Participant shall be entitled to a Plan distribution in full
satisfaction of all amounts owed under the Plan equal to the distribution
amount or amounts determined pursuant to Paragraph (b) of Article IV above
substituting the date of termination of the Plan for the Payment Date if the
fair market value of the Common Stock as of such date as determined by the
Board of Directors of the Company equals or exceeds the IRR Amount as of such
date. The Plan shall automatically terminate and no further amounts shall be
paid under the Plan following payment of the last amount owed as a result of
the occurrence of the Payment Date.
(d) GOVERNING LAW. This Plan shall be construed in accordance with
and governed by the laws of the State of Texas.
(e) WITHHOLDING TAXES. The Company shall have the right to deduct
from all payments under this Plan any federal, state or local taxes required by
law to be withheld with respect to such payments.
(f) NATURE OF PLAN. The Plan shall constitute an unfunded,
unsecured obligation of the Company to make payments of incentive compensation
to certain employees from its general assets in accordance with the Plan.
Accordingly:
(1) accounting maintained by the Company merely
constitute mechanisms for measuring such incentive
compensation and do not constitute a property right
or interest in the Company or in any asset owned by
the Company or its subsidiaries;
(2) neither the establishment of the Plan, nor the
creation or maintenance of Plan accounting records
shall be deemed to create an escrow or trust fund of
any kind; and
(3) the Participant and any person claiming under
Participant shall rely solely on the unsecured
promise of the Company set forth herein, and nothing
in the Plan shall be construed to give the
Participant or anyone claiming under the
-6-
<PAGE> 86
Participant any right, title, interest or claim in or
to any specific asset, fund, entity, reserve,
account, or property of any kind whatsoever owned by
the Company or any Affiliate of the Company.
EXECUTED this 16th day of January, 1996.
ATTEST: NOW HOLDINGS, INC.
By
- ----------------------------------- -----------------------------------
JAMES C. COMIS, III, SECRETARY JOEL V. STAFF, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
-7-
<PAGE> 87
EXHIBIT C
TO THE STOCKHOLDERS AGREEMENT
<TABLE>
<CAPTION>
INCREMENTAL NUMBER OF
CLASS A COMMON STOCK
INVESTORS SHARES PURCHASED
--------- ---------------------
<S> <C>
DPI OIL SERVICE PARTNERS LIMITED PARTNERSHIP 75.45
FIRST RESERVE CORPORATION
First Reserve Fund VI, Limited Partnership 81.46
First Reserve Fund V, Limited Partnership 3.54
First Reserve Fund V-2, Limited Partnership 3.54
-----
Total First Reserve Corporation 88.55
NATIONAL-OILWELL MANAGEMENT
Joel V. Staff 9.03
C. R. Bearden 3.43
Jerry N. Gauche 2.29
Lynn L. Leigh 2.29
Paul M. Nation 1.49
------
Total National-Oilwell Management 18.51
GECC 16.00
RESERVED FOR ISSUANCE
Total 1.49
------
200.00
</TABLE>
<PAGE> 88
WAIVER AND FIRST AMENDMENT
TO STOCKHOLDERS AGREEMENT
THIS WAIVER AND FIRST AMENDMENT TO STOCKHOLDERS AGREEMENT (this
"Agreement") dated as of July 24, 1996, among NOW HOLDINGS, INC., a Delaware
corporation (together with its successors and assigns, the "Company"), DPI OIL
SERVICE PARTNERS LIMITED PARTNERSHIP ("DPIOSP"), DPI PARTNERS II ("DPI
Partners"), FIRST RESERVE FUND V, LIMITED PARTNERSHIP, FIRST RESERVE FUND V-2,
LIMITED PARTNERSHIP and FIRST RESERVE FUND VI, LIMITED PARTNERSHIP
(collectively, the "First Reserve Stockholders"), GENERAL ELECTRIC CAPITAL
CORPORATION ("GE Capital") (DPIOSP, DPI Partners, the First Reserve
Stockholders and GE Capital, together with their respective successors and
assigns, are collectively referred to herein as the "Institutional Investors"),
the individuals and trustees named on the signature page hereof under
"Original Management Investors" (collectively, together with their respective
successors and assigns, the "Original Management Investors"), and the
individuals and trustees named on the signature page hereof under "New
Management Investors" (collectively, together with their respective successors
and assigns, the "New Management Investors"). The Institutional Investors and
the Original Management Investors are collectively referred to herein as the
"Original Stockholders", and the Original Management Investors and the New
Management Investors are collectively referred to herein as the "Management
Investors".
WITNESSETH:
WHEREAS, the Company and the Original Stockholders are party to that
certain Stockholders Agreement dated as of January 16, 1996 setting forth
certain rights and obligations in connection with the investment in the Company
by the Original Stockholders (the "Stockholders Agreement");
WHEREAS, Joel V. Staff, one of the Original Management Investors,
desires to transfer 22,400 shares of Common Stock and 25,674 shares of
Restricted Common Stock (collectively, the "Staff Stock") to the trusts (the
"Trusts") created by that certain Trust Agreement (the "Trust Agreement") dated
April 12, 1989 by and among Joel V. Staff and Mary Martha Staff, as Trustors,
and Richard Staff, as Trustee, and for this reason desires to obtain the waiver
of the Original Stockholders of certain provisions of the Stockholders
Agreement;
WHEREAS, the Company desires to purchase 8,557 shares of Common Stock
(the "Leigh Stock") issued to Lynn L. Leigh pursuant to the terms of that
certain Restricted Stock Agreement dated as of January 16, 1996 by and between
the Company and Lynn L. Leigh pursuant to the terms of that certain Stock
Purchase Agreement dated as of even date herewith between Lynn L. Leigh and the
Company (the "Stock Purchase Agreement") and for this reason desires to obtain
the waiver of the Original Stockholders of certain provisions of the
Stockholders Agreement;
WHEREAS, the Company desires to issue (a).52 shares of Class A Common
Stock to Bank of America Texas, N.A., as Trustee of the Trust created pursuant
to the National-Oilwell Supplemental Savings Plan ("Bank of America"), (b) 8
shares of Class A Common Stock and 5,868 shares of Common Stock to Steven W.
Krablin, and (c) 9.88 shares of Class A Common Stock and 7,628 shares of Common
Stock to James J. Fasnacht (all of such shares of Class A Common Stock
<PAGE> 89
and Common Stock are herein collectively referred to as the "Management
Stock"), each of which is a New Management Investor, pursuant to those certain
Subscription Agreements dated of even date herewith between the Company and
Steven W. Krablin, James J. Fasnacht and Bank of America, respectively,
(collectively, the "Subscription Agreements") and for this reason desires to
obtain the waiver of the Original Stockholders of certain provisions of the
Stockholders Agreement;
WHEREAS, the Company desires to issue 8,557 shares of Common Stock to
each of Steven W. Krablin, James J. Fasnacht and Merrill A. Miller, Jr.
pursuant to the Stock Award and Long-Term Incentive Plan of the Company, as
permitted pursuant to Section 5.6(b)(vi) and Section 2.1 (b)(iv)(B) of the
Stockholders Agreement;
WHEREAS, the Board of Directors and the stockholders of the Company
have adopted and approved (a) the Stock Award and Long-Term Incentive Plan of
the Company in the form attached hereto as Exhibit A (the "Stock Incentive
Plan"), and (b) the Value Appreciation Bonus Plan A of the Company in the form
attached hereto as Exhibit B and the Value Appreciation Bonus Plan B of the
Company in the form attached hereto as Exhibit C (collectively, the "Bonus
Plans");
WHEREAS, the Stock Incentive Plan and the Bonus Plans attached hereto
more accurately reflect the intentions of the parties to the Stockholders
Agreement as of January 16, 1996 than the forms of Stock Award and Long-Term
Incentive Plan, Value Appreciation Bonus Plan A and the Value Appreciation
Bonus Plan B attached to the Stockholders Agreement;
WHEREAS, the Company, the Institutional Investors, and the Management
Investors desire that all references in the Stockholders Agreement to the Stock
Award and Long-Term Incentive Plan and the Value Appreciation Bonus Plan A and
the Value Appreciation Bonus Plan B attached to the Stockholders Agreement be
deemed to be references to the Stock Incentive Plan and Bonus Plans; and
WHEREAS, the Company and the Original Stockholders are willing to
waive certain provisions of the Stockholders Agreement to allow for (a) the
transfer by Joel V. Staff of the Staff Stock to the Trusts, (b) the transfer by
Lynn L. Leigh of the Leigh Stock to the Company, and (c) the issuance of the
Management Stock to Steven W. Krablin, James J. Fasnacht and Bank of America,
subject to and in accordance with the terms and provisions contained herein;
NOW, THEREFORE, in consideration of the mutual agreements and
understanding set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Terms used in this Agreement that are not defined in this Agreement
and are defined in the Stockholders Agreement shall have the meaning given to
such terms in the Stockholders Agreement.
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<PAGE> 90
ARTICLE 2
WAIVERS
Subject to the execution and delivery of this Agreement by each other
party hereto and the other terms and provisions of this Agreement, each of the
Original Stockholders hereby waives the following provisions of and rights
under the Stockholders Agreement for the limited purposes set forth below:
(a) The restrictions on transfer set forth in Section 4.1 of the
Stockholders Agreement, only insofar as such restrictions on transfer prohibit
the transfer of the Staff Stock to the Trusts and the transfer of the Leigh
Stock to the Company; and
(b) The rights of such Original Stockholder to purchase or receive
any of (i) the Staff Stock, in connection with the transfer of the Staff Stock
from Joel V. Staff to the Trusts, (ii) the Leigh Stock, in connection with the
transfer of the Leigh Stock from Lynn L. Leigh to the Company pursuant to the
Stock Purchase Agreement, and (iii) the Management Stock, in connection with
the transfer of the Management Stock to Steven W. Krablin, James J. Fasnacht
and Bank of America pursuant to the Subscription Agreements, in each case
pursuant to Article V of the Stockholders Agreement.
ARTICLE 3
NEW MANAGEMENT INVESTORS
Each of the New Management Investors shall be deemed to be a
"Management Investor" under the Stockholders Agreement, and each New Management
Investor and all Class A Common Stock and all Common Stock held by such New
Management Investor shall be bound by and have the benefit of all terms and
provisions of the Stockholders Agreement applicable to Management Investors
under the Stockholders Agreement.
ARTICLE 4
STOCK INCENTIVE PLAN AND BONUS PLANS
In order to more fully reflect the intention of the parties at the
time of execution of the Stockholders Agreement, the Stock Incentive Plan and
the Bonus Plans shall replace the Stock Award and Long-Term Incentive Plan and
the Value Appreciation and Bonus Plan A and the Value Appreciation Bonus Plan B
attached to the Stockholders Agreement, respectively, and all references in the
Stockholders Agreement to such Stock Award and Long-Term Incentive Plan and
such Value Appreciation Bonus Plan A and Value Appreciation Bonus Plan B shall
be deemed to refer to the Stock Incentive Plan and the Bonus Plans,
respectively.
-3-
<PAGE> 91
ARTICLE 5
MISCELLANEOUS
5.1 Representations of Joel V. Staff. Joel V. Staff hereby
represents and warrants to each other party hereto that the Trust Agreement has
not been amended or modified in any respect since the execution thereof on
April 12, 1989 and that Richard Staff, brother of Joel V. Staff, is the sole
trustee thereof.
5.2 Successors and Assigns. The terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the
respective successors and assigns of the parties hereto.
5.3 Entire Agreement. This Agreement contains the entire agreement
among the parties hereto with respect to the subject transactions contemplated
hereby and supersedes all prior oral and written agreements and memoranda and
undertakings among the parties hereto with regard to the subject matter hereof.
Except as amended hereby, the Stockholders Agreement is hereby ratified and
confirmed in all respects.
5.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE
(WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF THAT WOULD
REQUIRE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN DELAWARE).
5.5 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
COMPANY:
NOW HOLDINGS, INC.
By: /s/ JOEL V. STAFF
-----------------------------------
Joel V. Staff
President
-4-
<PAGE> 92
INSTITUTIONAL INVESTORS:
DPI OIL SERVICE PARTNERS
LIMITED PARTNERSHIP
By: Duff & Phelps/Inverness LLC
Managing General Partner
By: /s/ W. McCOMB DUNWOODY
-------------------------------
W. McComb Dunwoody
President
DPI PARTNERS II
By: /s/ W. McCOMB DUNWOODY
-----------------------------------
W. McComb Dunwoody
Managing Partner
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ ABIGAIL UBLY
-----------------------------------
Authorized Signature
FIRST RESERVE FUND V, LIMITED
PARTNERSHIP
By: Fiat Reserve Corporation
Managing General Partner
By: /s/ BRUCE ROTHSTEIN
-------------------------------
Bruce Rothstein
Vice President
-5-
<PAGE> 93
FIRST RESERVE FUND V-2, LIMITED
PARTNERSHIP
By: First Reserve Corporation
Managing General Partner
By: /s/ BRUCE ROTHSTEIN
-------------------------------
Bruce Rothstein
Vice President
FIRST RESERVE FUND VI, LIMITED
PARTNERSHIP
By: First Reserve Corporation
Managing General Partner
By: /s/ BRUCE ROTHSTEIN
-------------------------------
Bruce Rothstein
Vice President
ORIGINAL MANAGEMENT
INVESTORS: SPOUSES:
/s/ JOEL V. STAFF /s/ M.M. STAFF
- ------------------------------------ ---------------------------------------
Joel V. Staff M.M. Staff
/s/ C.R. BEARDEN /s/ NANCY R. BEARDEN
- ------------------------------------ ---------------------------------------
C.R. Bearden Nancy R. Bearden
/s/ LYNN L. LEIGH /s/ BETTY BARNETT LEIGH
- ------------------------------------ ---------------------------------------
Lynn L. Leigh Betty Barnett Leigh
/s/ JERRY N. GAUCHE /s/ CATHY K. GAUCHE
- ------------------------------------ ---------------------------------------
Jerry N. Gauche Cathy K. Gauche
/s/ PAUL M. NATION /s/ BEVERLY N. NATION
- ------------------------------------ ---------------------------------------
Paul M. Nation Beverly N. Nation
-6-
<PAGE> 94
BANK OF AMERICA TEXAS, N.A.,
as Trustee of the Trust created
pursuant to the National-Oilwell
Supplemental Savings Plan
By: /s/ GARY L. CHURCH
------------------------------
Name: Gary L. Church
----------------------------
Title: Vice President
---------------------------
By: /s/ ANTHONY BURTON
------------------------------
Name: Anthony Burton
----------------------------
Title: Vice President
---------------------------
MERRILL LYNCH & CO. C/F
Jerry N. Gauche, IRA
Account Number 795-81k02
By: /s/ [ILLEGIBLE]
------------------------------
Authorized Signatory
/s/ EDGAR J. MARSTON III
- ---------------------------------
Edgar J. Marston III
Proxy under Agreement dated January
16, 1996 among the Company, Edgar
J. Marston III and participants in
the National-Oilwell Supplemental
Savings Plan, as amended and Trust
related thereto
NEW MANAGMENT
INVESTORS: SPOUSES:
/s/ STEVEN W. KRABLIN /s/ MARY L. KRABLIN
- ----------------------------------- --------------------------------------
Steven W. Krablin Mary L. Krablin
/s/ JAMES J. FASNACHT
- -----------------------------------
James J. Fasnacht
-7-
<PAGE> 95
/s/ MERRILL A. MILLER, JR. /s/ DIANA SUE MILLER
- ----------------------------------- --------------------------------------
Merrill A. Miller, Jr. Diana Sue Miller
/s/ RICHARD STAFF
- -----------------------------------
Richard Staff, as Trustee of the
Trusts created by that certain
Trust Agreement dated April 12, 1989
BANK OF AMERICA TEXAS, N.A.,
as Trustee of the Trust created
pursuant to the National-Oilwell
Supplemental Savings Plan
By: /s/ GARY L. CHURCH
------------------------------
Name: Gary L. Church
----------------------------
Title: Vice President
---------------------------
By: /s/ ANTHONY BURTON
------------------------------
Name: Anthony Burton
----------------------------
Title: Vice President
---------------------------
/s/ EDGAR J. MARSTON III
- ---------------------------------
Edgar J. Marston III
Proxy under Agreement dated as of
even date herewith among the Company,
Edgar J. Marston III and participants
in the National-Oilwell Supplemental
Savings Plan, as amended and Trust
related thereto
-8-
<PAGE> 1
EXHIBIT 10.4
WAIVER AND FIRST AMENDMENT
TO STOCKHOLDERS AGREEMENT
THIS WAIVER AND FIRST AMENDMENT TO STOCKHOLDERS AGREEMENT (this
"Agreement") dated as of ______________, 1996, among NOW HOLDINGS, INC., a
Delaware corporation (together with its successors and assigns, the "Company"),
DPI OIL SERVICE PARTNERS LIMITED PARTNERSHIP ("DPIOSP"), DPI PARTNERS II ("DPI
Partners"), FIRST RESERVE FUND V, LIMITED PARTNERSHIP, FIRST RESERVE FUND V-2,
LIMITED PARTNERSHIP and FIRST RESERVE FUND VI, LIMITED PARTNERSHIP
(collectively, the "First Reserve Stockholders"), GENERAL ELECTRIC CAPITAL
CORPORATION ("GE Capital") (DPIOSP, DPI Partners, the First Reserve
Stockholders and GE Capital, together with their respective successors and
assigns, are collectively referred to herein as the "Institutional Investors"),
the individuals and trustees named on the signature page hereof under "Original
Management Investors" (collectively, together with their respective successors
and assigns, the "Original Management Investors"), and the individuals and
trustees named on the signature page hereof under "New Management Investors"
(collectively, together with their respective successors and assigns, the "New
Management Investors"). The Institutional Investors and the Original
Management Investors are collectively referred to herein as the "Original
Stockholders", and the Original Management Investors and the New Management
Investors are collectively referred to herein as the "Management Investors".
WITNESSETH:
WHEREAS, the Company and the Original Stockholders are party to that
certain Stockholders Agreement dated as of January 16, 1996 setting forth
certain rights and obligations in connection with the investment in the Company
by the Original Stockholders (the "Stockholders Agreement");
WHEREAS, Joel V. Staff, one of the Original Management Investors,
desires to transfer 22,400 shares of Common Stock and 25,674 shares of
Restricted Common Stock (collectively, the "Staff Stock") to the trusts (the
"Trusts") created by that certain Trust Agreement (the "Trust Agreement") dated
April 12, 1989 by and among Joel V. Staff and Mary Martha Staff, as Trustors,
and Richard Staff, as Trustee, and for this reason desires to obtain the waiver
of the Original Stockholders of certain provisions of the Stockholders
Agreement;
WHEREAS, the Company desires to purchase 8,557 shares of Common Stock
(the "Leigh Stock") issued to Lynn L. Leigh pursuant to the terms of that
certain Restricted Stock Agreement dated as of January 16, 1996 by and between
the Company and Lynn L. Leigh pursuant to the terms of that certain Stock
Purchase Agreement dated as of even date herewith between Lynn L. Leigh and the
Company (the "Stock Purchase Agreement") and for this reason desires to obtain
the waiver of the Original Stockholders of certain provisions of the
Stockholders Agreement;
WHEREAS, the Company desires to issue (a) .52 shares of Class A Common
Stock to Bank of America Texas, N.A., as Trustee of the Trust created pursuant
to the National-Oilwell Supplemental Savings Plan ("Bank of America"), (b) 8
shares of Class A Common Stock and 5,868 shares of Common Stock to Steven W.
Krablin, and (c) 9.88 shares of Class A Common Stock and 7,628 shares of Common
Stock to James J. Fasnacht (all of such shares of Class A Common Stock
<PAGE> 2
and Common Stock are herein collectively referred to as the "Management
Stock"), each of which is a New Management Investor, pursuant to those certain
Subscription Agreements dated of even date herewith between the Company and
Steven W. Krablin, James J. Fasnacht and Bank of America, respectively,
(collectively, the "Subscription Agreements") and for this reason desires to
obtain the waiver of the Original Stockholders of certain provisions of the
Stockholders Agreement;
WHEREAS, the Company desires to issue 8,557 shares of Common Stock to
each of Steven W. Krablin, James J. Fasnacht and Merrill A. Miller, Jr.
pursuant to the Stock Award and Long-Term Incentive Plan of the Company, as
permitted pursuant to Section 5.6(b)(vi) and Section 2.1(b)(iv)(B) of the
Stockholders Agreement;
WHEREAS, the Board of Directors and the stockholders of the Company
have adopted and approved (a) the Stock Award and Long-Term Incentive Plan of
the Company in the form attached hereto as Exhibit A (the "Stock Incentive
Plan"), and (b) the Value Appreciation Bonus Plan A of the Company in the form
attached hereto as Exhibit B and the Value Appreciation Bonus Plan B of the
Company in the form attached hereto as Exhibit C (collectively, the "Bonus
Plans");
WHEREAS, the Stock Incentive Plan and the Bonus Plans attached hereto
more accurately reflect the intentions of the parties to the Stockholders
Agreement as of January 16, 1996 than the forms of Stock Award and Long-Term
Incentive Plan, Value Appreciation Bonus Plan A and the Value Appreciation
Bonus Plan B attached to the Stockholders Agreement;
WHEREAS, the Company, the Institutional Investors, and the Management
Investors desire that all references in the Stockholders Agreement to the Stock
Award and Long-Term Incentive Plan and the Value Appreciation Bonus Plan A and
the Value Appreciation Bonus Plan B attached to the Stockholders Agreement be
deemed to be references to the Stock Incentive Plan and Bonus Plans; and
WHEREAS, the Company and the Original Stockholders are willing to
waive certain provisions of the Stockholders Agreement to allow for (a) the
transfer by Joel V. Staff of the Staff Stock to the Trusts, (b) the transfer by
Lynn L. Leigh of the Leigh Stock to the Company, and (c) the issuance of the
Management Stock to Steven W. Krablin, James J. Fasnacht and Bank of America,
subject to and in accordance with the terms and provisions contained herein;
NOW, THEREFORE, in consideration of the mutual agreements and
understanding set forth herein, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
Terms used in this Agreement that are not defined in this Agreement
and are defined in the Stockholders Agreement shall have the meaning given to
such terms in the Stockholders Agreement.
-2-
<PAGE> 3
ARTICLE 2
WAIVERS
Subject to the execution and delivery of this Agreement by each other
party hereto and the other terms and provisions of this Agreement, each of the
Original Stockholders hereby waives the following provisions of and rights
under the Stockholders Agreement for the limited purposes set forth below:
(a) The restrictions on transfer set forth in Section 4.1 of the
Stockholders Agreement, only insofar as such restrictions on transfer prohibit
the transfer of the Staff Stock to the Trusts and the transfer of the Leigh
Stock to the Company; and
(b) The rights of such Original Stockholder to purchase or receive
any of (i) the Staff Stock, in connection with the transfer of the Staff Stock
from Joel V. Staff to the Trusts, (ii) the Leigh Stock, in connection with the
transfer of the Leigh Stock from Lynn L. Leigh to the Company pursuant to the
Stock Purchase Agreement, and (iii) the Management Stock, in connection with
the transfer of the Management Stock to Steven W. Krablin, James J. Fasnacht
and Bank of America pursuant to the Subscription Agreements, in each case
pursuant to Article V of the Stockholders Agreement.
ARTICLE 3
NEW MANAGEMENT INVESTORS
Each of the New Management Investors shall be deemed to be a
"Management Investor" under the Stockholders Agreement, and each New Management
Investor and all Class A Common Stock and all Common Stock held by such New
Management Investor shall be bound by and have the benefit of all terms and
provisions of the Stockholders Agreement applicable to Management Investors
under the Stockholders Agreement.
ARTICLE 4
STOCK INCENTIVE PLAN AND BONUS PLANS
In order to more fully reflect the intention of the parties at the
time of execution of the Stockholders Agreement, the Stock Incentive Plan and
the Bonus Plans shall replace the Stock Award and Long-Term Incentive Plan and
the Value Appreciation and Bonus Plan A and the Value Appreciation Bonus Plan B
attached to the Stockholders Agreement, respectively, and all references in the
Stockholders Agreement to such Stock Award and Long-Term Incentive Plan and
such Value Appreciation Bonus Plan A and Value Appreciation Bonus Plan B shall
be deemed to refer to the Stock Incentive Plan and the Bonus Plans,
respectively.
-3-
<PAGE> 4
ARTICLE 5
MISCELLANEOUS
5.1 Representations of Joel V. Staff. Joel V. Staff hereby
represents and warrants to each other party hereto that the Trust Agreement has
not been amended or modified in any respect since the execution thereof on
April 12, 1989 and that Richard Staff, brother of Joel V. Staff, is the sole
trustee thereof.
5.2 Successors and Assigns. The terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the
respective successors and assigns of the parties hereto.
5.3 Entire Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to the subject transactions
contemplated hereby and supersedes all prior oral and written agreements and
memoranda and undertakings among the parties hereto with regard to the subject
matter hereof. Except as amended hereby, the Stockholders Agreement is hereby
ratified and confirmed in all respects.
5.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE
(WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF THAT WOULD
REQUIRE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN DELAWARE).
5.5 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
COMPANY:
NOW HOLDINGS, INC.
By:
---------------------------------
Joel V. Staff
President
-4-
<PAGE> 5
INSTITUTIONAL INVESTORS:
DPI OIL SERVICE PARTNERS
LIMITED PARTNERSHIP
By: Duff & Phelps/Inverness LLC
Managing General Partner
By:
------------------------------
W. McComb Dunwoody
President
DPI PARTNERS II
By:
---------------------------------------
W. McComb Dunwoody
Managing Partner
GENERAL ELECTRIC CAPITAL CORPORATION
By:
---------------------------------------
Authorized Signature
FIRST RESERVE FUND V, LIMITED
PARTNERSHIP
By: First Reserve Corporation
Managing General Partner
By:
-------------------------------
Bruce Rothstein
Vice President
-5-
<PAGE> 6
FIRST RESERVE FUND V-2, LIMITED
PARTNERSHIP
By: First Reserve Corporation
Managing General Partner
By:
--------------------------
Bruce Rothstein
Vice President
FIRST RESERVE FUND VI, LIMITED
PARTNERSHIP
By: First Reserve Corporation
Managing General Partner
By:
--------------------------
Bruce Rothstein
Vice President
ORIGINAL MANAGEMENT
INVESTORS: SPOUSES:
- ------------------------------- -----------------------------
Joel V. Staff M.M. Staff
- ------------------------------- -----------------------------
C. R. Bearden Nancy R. Bearden
- ------------------------------- -----------------------------
Lynn L. Leigh Betty Barnett Leigh
- ------------------------------- -----------------------------
Jerry N. Gauche Cathy K. Gauche
- ------------------------------- -----------------------------
Paul M. Nation Beverly N. Nation
-6-
<PAGE> 7
BANK OF AMERICA TEXAS, N.A.,
as Trustee of the Trust created pursuant to the
National-Oilwell Supplemental Savings Plan
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
MERRILL LYNCH & CO. C/F
Jerry N. Gauche, IRA
Account Number 795-81K02
By:
-----------------------------
Authorized Signatory
- --------------------------------
Edgar J. Marston III
Proxy under Agreement dated January
16, 1996 among the Company, Edgar
J. Marston III and participants in
the National-Oilwell Supplemental
Savings Plan, as amended and Trust
related thereto
NEW MANAGEMENT
INVESTORS: SPOUSES:
- -------------------------------- ----------------------------
Steven W. Krablin Mary L. Krablin
- --------------------------------
James J. Fasnacht
-7-
<PAGE> 8
- -------------------------------- ----------------------------
Merrill A. Miller, Jr. Diana Sue Miller
- --------------------------------
Richard Staff, as Trustee of the
Trusts created by that certain
Trust Agreement dated
April 12, 1989
BANK OF AMERICA TEXAS, N.A.,
as Trustee of the Trust created
pursuant to the National-Oilwell S
upplemental Savings Plan
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
- --------------------------------
Edgar J. Marston III
Proxy under Agreement dated as of
even date herewith among the Company,
Edgar J. Marston III and participants
in the National-Oilwell Supplemental
Savings Plan, as amended and Trust
related thereto
-8-
<PAGE> 1
EXHIBIT 10.5
1996 NATIONAL-OILWELL EMPLOYEE INCENTIVE PLAN
The National-Oilwell Employee Incentive Plan's purpose is to encourage the
organization to achieve and surpass the financial performance set forth in the
National-Oilwell* operating plan and to provide employees at all levels an
opportunity to share financially in the success of National-Oilwell.
ELIGIBILITY AND PARTICIPATION
All regular full-time and regular part-time salaried and hourly employees of
National-Oilwell worldwide are eligible for participation in the Plan. If a
participant is terminated during the Plan Year because of (a) a force
reduction, or (b) a break in service because of disability, death, or
retirement, participation will still be allowed, provided the participant was
employed for not less than ninety days during the Plan Year. If a
participant's employment is terminated during the Plan Year for any other
reason (such as voluntary termination or termination for cause) the participant
will be ineligible for the incentive payment.
PAYOUT PERCENTAGE
Incentive awards will be expressed as a percentage of employee's Base Pay for
the Plan Year.
FINANCIAL PERFORMANCE FACTORS
The following financial measurements of National-Oilwell's 1996 performance
will be used to calculate the incentive:
1. Earnings Before Interest, Taxes, Depreciation, and Amortization
(EBITDA).
2. A ratio of EBITDA to Average Working Capital.
PERFORMANCE PERIOD
Incentive payments will be determined by National-Oilwell's financial
performance during the Plan Year (January 1, 1996 to December 31, 1996).
PARTICIPATION LEVELS
Each regular full-time or part-time salaried and hourly employee will
participate in the Plan at one of the following Participation Levels:
Level I President & CEO, Now Holdings, Inc.
Level II Other Leadership Team
Level III Selected Managers
Level IV Other Employees
Managers eligible for Level III have been notified.
*For purposes of this Plan, "National-Oilwell" means NOW Holdings, Inc. and its
subsidiaries, which includes National-Oilwell, L.P., National-Oilwell Canada
Ltd., National Oilwell (U.K.) Limited, National-Oilwell de Venezuela,
National-Oilwell Pty. Ltd., and National-Oilwell Pte Ltd.
<PAGE> 2
TARGET AWARDS
A Target Award has been established for each Participation Level (see Table 1
below) if National-Oilwell attains an EBITDA of $31.2 million and a ratio of
EBITDA to Average Working Capital of 0.237 at the end of the Plan Year.
TABLE 1
TARGET AWARDS
<TABLE>
<CAPTION>
Participation Level Target Award - Payout Percentage
------------------- ----------------------------------
<S> <C>
Level I 42.5%
Level II 35.0%
Level III 20.0%
Level IV 3.50%
</TABLE>
The calculation of the payout percentage at different financial performance
levels is described in the next section entitled "Calculation of Award."
CALCULATION OF AWARD
As indicated above, the payout percentage each participant receives will be
based upon two factors: (1) EBITDA and (2) the ratio of EBITDA to Average
Working Capital. The two tables below show the payout percentage for each
factor at various levels of financial performance. The total payout percentage
each participant will receive is calculated by adding the payout percentage for
the Participation Level in Table 2 to the payout percentage for the
Participation Level in Table 3.
TABLE 2
EBITDA FACTOR PAYOUT SCHEDULE
<TABLE>
<CAPTION>
EBITDA $million Incentive Payout % of Base Pay
--------------- --------------------------------------
<S> <C> <C> <C> <C>
LV I LV II LV III LV IV
25.0 -0- -0- -0- .27
28.1 3.19 2.63 1.65 1.45
31.2 31.90 26.30 15.00 2.62
37.4 47.80 39.40 22.50 5.25
</TABLE>
The formula for calculating the payout at any level of EBITDA between $25
million and $31.2 million for Level IV is: .381 X EBITDA - 9.251.
The formula for calculating the payout at any level of EBITDA between $31.2
million and $37.4 million for Level IV is: .423 X EBITDA - 10.585.
For EBITDA results in excess of $37.4 million during the Plan Year, an
additional payment will be made from a pool equal to 10% of the EBITDA in
excess of $37.4 million, shared by participants of this Plan in amounts
2
<PAGE> 3
equal to the ratio of the individual participant's Plan Year Base Pay to the
Total Plan Participants' Base Pay for the Plan Year.
A graph of the EBITDA payout percentage at different levels of performance is
attached.
(THE ABOVE CALCULATIONS APPLY TO PARTICIPATION LEVEL IV ONLY. SEE ATTACHED
GRAPHS FOR THE CALCULATIONS APPLICABLE TO PARTICIPATION LEVELS I, II AND III.)
TABLE 3
EBITDA/WORKING CAPITAL RATIO FACTOR PAYOUT SCHEDULE
---------------------------------------------------
<TABLE>
<CAPTION>
Ratio Example ($US mil.) Incentive Payout % of Base Pay
----- ------------------ -------------------------------------
<S> <C> <C> <C> <C> <C>
LV I LV II LV III LV IV
.218 EBITDA 31.2 1.06 .87 .50 .08
-----------
Avg. WC 143
.237 EBITDA 36.2 10.60 8.70 5.00 .88
-----------
Avg. WC 153
.245 EBITDA 31.2 15.90 13.10 7.50 1.75
-----------
Avg. WC 127.3
</TABLE>
No additional incentive award calculation is made for ratio results in excess
of .245.
The formula for calculating the payout at any level of ratio between .218 and
.237 for Level IV is:
41.45 X Ratio - 8.948.
The formula for calculating the payout at any level of ratio between .237 and
.245 for Level IV is:
109.375 X Ratio - 25.047.
A graph of the ratio of EBITDA to working capital payout percentage at
different levels of performance is attached.
(THE ABOVE CALCULATIONS APPLY TO PARTICIPATION LEVEL IV ONLY. SEE ATTACHED
GRAPHS FOR THE CALCULATIONS APPLICABLE TO PARTICIPATION LEVELS I, II AND III.)
PAYOUT ADJUSTMENT
The Board of Directors of NOW Holdings, Inc. (the "Board") shall have the
authority in its sole discretion to adjust the incentive payout by an amount
equal to +/- 25% of the total Target Award.
INCENTIVE PLAN ADMINISTRATIVE COMMITTEE
An Incentive Plan Administrative Committee appointed by the CEO of NOW
Holdings, Inc. will oversee the administration of this Plan. The Committee's
responsibilities will include but not be limited to the following: satisfying
disclosure requirements; providing written plan document for distribution to
participants; presenting plan payout calculations to the Board for approval;
approval of additional participants to the Plan during the Plan Year and
determination of any claims or disputes concerning the Plan.
TERMINATION OF PLAN
The Board shall have the authority to terminate the Plan at any time during the
Plan Year in the event of a sale, merger, change of ownership or for any other
reason as determined by the Board in its sole discretion. Participants who
have been eligible for at least 90 days of the Plan Year will receive a pro
rata share of the
3
<PAGE> 4
incentive award based on financial results as of the date of the Plan
termination, as determined in the sole discretion of the Board.
DATE OF PAYMENT
Date of payment of the incentive award will be as soon as practical after the
end of the Plan Year.
CHANGES IN WORKING CAPITAL
In the event of increases or decreases in Working Capital resulting from
mergers, acquisitions or divestitures by National-Oilwell, Plan financial
measures used for calculating the incentive award will be adjusted from the
date of the merger, acquisition or sale in the sole discretion of the Board.
DEFINITIONS
EBITDA means Earnings Before Interest, Taxes, Depreciation, and Amortization
(Net income plus charges for interest, taxes, depreciation and amortization [if
any] of intangible assets) per National-Oilwell audited financial statements
stated in millions of US dollars.
WC means Working Capital defined as total receivables (net of allowance) plus
inventory (net of reserves) less the sum of trade payables, other payables, and
accrued salaries and wages per National-Oilwell audited financial statements
stated in millions of US dollars.
AVERAGE WORKING CAPITAL for Plan purposes is the sum of each of the month-end
working capital amounts in 1996, divided by 12.
BASE PAY is regular earnings for the Plan Year excluding overtime, shift
differential, bonuses, and government-required payments beyond regular
earnings.
PLAN YEAR is January 1, 1996 through December 31, 1996.
RETIREMENT means a voluntary termination on or after a participant's 55th
birthday.
4
<PAGE> 5
[LEVEL I INCENTIVE - EBITDA PORTION GRAPH]
EXPLANATION
If 1996 EBITDA is at least $28.1 million, an incentive will be earned for this
factor. To calculate the payout percent for EBITDA results of $28.1 million up
to and including $31.2 million, use the formula on the lower portion of this
graph. To calculate the payout percent for EBITDA greater than $31.2 million up
to and including $37.4 million, use the upper portion of this graph.
[LEVEL I INCENTIVE - RATIO PORTION GRAPH]
EXPLANATION
If the Ratio of EBITDA to Working Capital is at least .218, an incentive will
be earned for this factor. To calculate the payout percent for Ratio results of
from .218 up to and including .237, use the formula on the lower portion of
this graph. To calculate the payout percent for Ratios greater than .237 up to
and including .245, use the formula on the upper portion of this graph.
EXAMPLE
If EBITDA for 1996 is $33 million, and average working capital is $140 million,
the incentive for EBITDA would be 36.52 calculated as follow:
2.571 X 33 = 84.84 - 48.325 = 36.52%
The incentive for the Ratio of EBITDA to working capital would be 9.97%
calculated as follows:
33/140 = .2357 X 503.29 = 118.625 - 108.654 = 9.97%
The incentive for 1996, subject to Board approval would be the sum of the
EBITDA factor and the Ratio factor multiplied by base pay for the year:
36.52% + 9.97% = 46.49% X base pay = incentive
<PAGE> 6
[LEVEL II INCENTIVE - EBITDA PORTION GRAPH]
EXPLANATION
If 1996 EBITDA is at least $28.1 million, an incentive will be earned for this
factor. To calculate the payout percent for EBITDA results of $28.1 million
up to and including $31.2 million, use the formula on the lower portion of this
graph. To calculate the payout percent for EBITDA greater than $31.2 million up
to and including $37.4 million, use the formula on the upper portion of this
graph.
[LEVEL II INCENTIVE - RATIO PORTION GRAPH]
EXPLANATION
If the Ratio of EBITDA to Working Capital is at least .218, an incentive will
be earned for this factor. To calculate the payout percent for Ratio results of
from .218 up to and including .237, use the formula on the lower portion of
this graph. To calculate the payout percent for Ratios greater than .237 up to
and including .245, use the formula on the upper portion of this graph.
EXAMPLE
If EBITDA for 1996 is $33 million, and average working capital is $140 million,
the incentive for EBITDA would be 30.06% calculated as follows:
2.117 X 33 = 69.86 - 39.8 = 30.06%
The incentive for the Ratio of EBITDA to working capital would be 4.598%
calculated as follows:
33/140 = .2357 X 414.47 = 97.69 - 89.48 = 8.21
The incentive for 1996, subject to Board approval would be the sum of the
EBITDA factor and the Ratio factor multiplied by base pay for the year:
30.06% + 8.22% X base pay = incentive
<PAGE> 7
[GRAPH]
LEVEL III INCENTIVE - EBITDA PORTION
EXPLANATION
If 1996 EBITDA is at least $28.1 million, an incentive will be earned for this
factor. To calculate the payout percent for EBITDA results of $28.1 million up
to and including $31.2 million, use the formula on the lower portion of this
graph. To calculate the payout percent for EBITDA greater than $31.2 million
up to and including $37.4 million, use the formula on the upper portion of this
graph.
[GRAPH]
LEVEL III INCENTIVE - RATIO PORTION
EXPLANATION
If the Ratio of EBITDA to Working Capital is at least .218, an incentive will
be earned for this factor. To calculate the payout percent for Ratio results
of from .218 up to and including .237 use the formula on the lower portion of
this graph. To calculate the payout percent for Ratios greater than .237 up to
and including .245, use the formula on the upper portion of this graph.
EXAMPLE
If EBITDA for 1996 is $33 million, and average working captial is $140 million,
the incentive for EBITDA would be 17.19% calclulated as follows:
1.21 X 33 = 39.93 - 22.74 = 17.19
The incentive for the Ratio of EBITDA to working capital would be 4.598%
calculated as follows:
33/140 = .2357 X 312.5 = 73.656 - 69.0625 = 4.59%
The incentive for 1996, subject to Board approval would be the sum of the
EBITDA factor and the Ratio factor multiplied by base pay for the year;
17.19% + 4.59% = 21.78% X base pay = Incentive
<PAGE> 8
[GRAPH]
LEVEL IV INCENTIVE - EBITDA PORTION
EXPLANATION
If 1996 EBITDA is at least $25 million, an incentive will be earned for this
factor. To calculate the payout percent for EBITDA results of $25 million up to
and including $31.2 million, use the formula on the lower portion of this graph.
To calculate the payout percent for EBITDA greater than $31.2 million up to and
including $37.4 million, use the formula on the upper portion of this graph.
[GRAPH]
LEVEL IV INCENTIVE - RATIO PORTION
EXPLANATION
If the Ratio of EBITDA to Working Capital is at least .218, an incentive will
be earned for this factor. To calculate the payout percent for Ratio results
of from .218 up to and including .237 use the formula on the lower portion of
this graph. To calculate the payout percent for Ratios greater than .237 up to
and including .245, use the formula on the upper portion of this graph.
EXAMPLE
If EBITDA for 1996 is $33 million, and average working captial is $140 million,
the incentive for EBITDA would be 3.374% calclulated as follows:
.423 X 33.0 = 13.959 - 10.585 = 3.374
The incentive for the Ratio of EBITDA to working capital would be 3.374%
calculated as follows:
33/140 = .2357 X 41.45 = 9.770 - 8.948 = 0.822
The incentive for 1996, subject to Board approval would be the sum of the
EBITDA factor and the Ratio factor multiplied by base pay for the year:
3.374% + .822% = 4.196 X base pay = Incentive
<PAGE> 1
EXHIBIT 10.6
NOW HOLDINGS, INC.
STOCK AWARD AND LONG-TERM INCENTIVE PLAN
I. PURPOSE
The purpose of the NOW Holdings, Inc. Stock Award and Long-Term
Incentive Plan (the "Plan") is to provide a means whereby NOW Holdings, Inc., a
Delaware corporation (the "Company"), and its Subsidiaries may attract able
persons to enter the employ of the Company in key positions and to provide a
means whereby those key employees upon whom the responsibilities of the
successful administration and management of the Company rest, and whose present
and potential contributions to the welfare of the Company are of importance,
can acquire and maintain stock ownership, thereby strengthening their concern
for the long-term welfare of the Company and their desire to remain in its
employ. A further purpose of the Plan is to provide such key employees with
additional incentive and reward opportunities designed to enhance the
profitable growth of the Company over the long term. Accordingly, the Plan
provides for granting Incentive Stock Options, options which do not constitute
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock Awards,
Performance Share Awards, Stock Value Equivalent Awards, or any combination of
the foregoing, as is best suited to the circumstances of the particular
employee as provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan
unless specifically modified by any paragraph:
(a) "AWARD" means, individually or collectively, any Option, Stock
Appreciation Right, Restricted Stock Award, Performance Share Award or Stock
Value Equivalent Award.
(b) "BOARD" means the Board of Directors of NOW Holdings, Inc.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.
(d) "COMMITTEE" means the committee selected by the Board to
administer the Plan in accordance with Paragraph (a) of Article IV of the Plan.
(e) "COMMON STOCK" means the common stock, par value $0.01 per
share, of NOW Holdings, Inc.
(f) "COMPANY" means NOW Holdings, Inc.
<PAGE> 2
(g) "FAIR MARKET VALUE" means the amount determined by the
Committee in such manner as it deems appropriate.
(h) "FINAL STOCK AWARD" means an award granted under Article XII
of the Plan.
(i) "HOLDER" means an employee of the Company (or his guardian or
legal representative) who has been granted an Award.
(j) "INCENTIVE STOCK OPTION" means an option within the meaning of
section 422 of the Code to purchase Common Stock.
(k) "NONQUALIFIED OPTION" means an option to purchase Common Stock
which is not an Incentive Stock Option.
(l) "OPTION" means an Award granted under Article VII of the Plan
and includes both Incentive Stock Options and Nonqualified Options.
(m) "OPTION AGREEMENT" means a written agreement between the
Company and an employee with respect to an Option.
(n) "OPTIONEE" means an employee who has been granted an Option.
(o) "PARENT CORPORATION" shall have the meaning set forth in
section 424(e) of the Code.
(p) "PERFORMANCE SHARE AWARD" means an Award granted under
Article X of the Plan.
(q) "PLAN" means the NOW Holdings, Inc. Stock Award and Long-Term
Incentive Plan.
(r) "RESTRICTED STOCK AWARD" means an Award granted under Article
IX of the Plan.
(s) "SPREAD" means, in the case of a Stock Appreciation Right, an
amount equal to the excess, if any, of the Fair Market Value of a share of
Common Stock on the date such right is exercised over the exercise price of
such Stock Appreciation Right.
(t) "STOCK APPRECIATION RIGHT" means an Award granted under
Article VIII of the Plan.
(u) "STOCK APPRECIATION RIGHTS AGREEMENT" means a written
agreement between the Company and an employee with respect to an Award of Stock
Appreciation Rights.
(v) "STOCK VALUE EQUIVALENT AWARD" means an Award granted under
Article XI of the Plan.
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<PAGE> 3
(w) "SUBSIDIARY" means a company (whether a corporation,
partnership, joint venture or other form of entity) in which the Company, or a
corporation in which the Company owns a majority of the shares of capital stock
or equity interests, directly or indirectly, except that with respect to the
issuance of Incentive Stock Options the term "Subsidiary" shall have the same
meaning as the term "subsidiary corporation" as defined in section 424(f) of
the Code.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective upon the date of its adoption by the
Board, provided the Plan is approved by the stockholders of the Company within
twelve months thereafter. Notwithstanding any provision of the Plan or in any
Option Agreement or Stock Appreciation Rights Agreement, no Option or Stock
Appreciation Right shall be exercisable prior to such stockholder approval. No
further Awards may be granted under the Plan after ten years from the date the
Plan is adopted by the Board. Subject to the provisions of Article XIII, the
Plan shall remain in effect until all Options and Stock Appreciation Rights
granted under the Plan have been exercised or expired by reason of lapse of
time, all restrictions imposed upon Restricted Stock Awards have lapsed and all
Performance Share Awards and Stock Value Equivalent Awards have been satisfied.
IV. ADMINISTRATION
(a) COMPOSITION OF COMMITTEE. The Plan shall be administered by
the Committee which shall be appointed by the Board.
(b) POWERS. The Committee shall have sole authority, in its
discretion, to determine which employees of the Company and its Subsidiaries
shall receive an Award, the time or times when such Award shall be made,
whether an Incentive Stock Option, Nonqualified Option or Stock Appreciation
Right shall be granted, the number of shares of Common Stock which may be
issued under each Option, Stock Appreciation Right and Restricted Stock Award,
and the value of each Performance Share Award and Stock Value Equivalent Award.
In making such determinations the Committee may take into account the nature of
the services rendered by the respective employees, their present and potential
contribution to the Company's success and such other factors as the Committee
in its discretion shall deem relevant.
(c) ADDITIONAL POWERS. The Committee shall have such additional
powers as are delegated to it by the other provisions of the Plan. Subject to
the express provisions of the Plan, the Committee is authorized to construe the
Plan and the respective agreements executed thereunder, to prescribe such rules
and regulations relating to the Plan as it may deem advisable to carry out the
Plan, and to determine the terms, restrictions and provisions of each Award,
including such terms, restrictions and provisions as shall be requisite in the
judgment of the Committee to cause designated Options to qualify as Incentive
Stock Options, and to make all other determinations necessary or advisable for
administering the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in any agreement relating to an Award
in the manner and to the extent it shall deem expedient to carry it into
effect. The determinations of the Committee on the matters
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<PAGE> 4
referred to in this Article IV shall be final and binding for all purposes and
upon all interested persons and their heirs, successors and personal
representatives.
V. GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS,
RESTRICTED STOCK AWARDS, PERFORMANCE SHARE
AWARDS AND STOCK VALUE EQUIVALENT AWARDS;
SHARES SUBJECT TO THE PLAN
(a) AWARD LIMITS. The Committee may from time to time grant
Awards to one or more employees determined by it to be eligible for
participation in the Plan in accordance with the provisions of Article VI. The
aggregate number of shares of Common Stock that may be issued under the Plan
shall not exceed 85,573 shares. Any of such shares which remain unissued and
which are not subject to outstanding Awards at the termination of the Plan
shall cease to be subject to the Plan, but, until termination of the Plan, the
Company shall at all times reserve a sufficient number of shares to meet the
requirements of the Plan. Shares shall be deemed to have been issued under the
Plan only to the extent actually issued and delivered pursuant to an Award. To
the extent that an Award lapses or the rights of its Holder terminate any
shares of Common Stock subject to such Award shall again be available for the
grant of an Award. The aggregate number of shares which may be issued under
the Plan shall be subject to adjustment in the same manner as provided in
Article XII with respect to shares of Common Stock subject to Options then
outstanding. Separate stock certificates shall be issued by the Company for
those shares acquired pursuant to the exercise of an Incentive Stock Option and
for those shares acquired pursuant to the exercise of a Nonqualified Option.
(b) STOCK OFFERED. The stock to be offered pursuant to the grant
of an Award may be authorized but unissued Common Stock or Common Stock
previously issued and outstanding and reacquired by the Company.
VI. ELIGIBILITY
Awards made pursuant to the Plan may be granted only to individuals
who, at the time of grant, are key employees of the Company or any Parent
Corporation or Subsidiary of the Company. Awards may not be granted to any
director of the Company who is not an employee of the Company or to any member
of the Committee. An Award made pursuant to the Plan may be granted on more
than one occasion to the same person, and such Award may include an Incentive
Stock Option, a Nonqualified Option, an Award of Stock Appreciation Rights, a
Restricted Stock Award, a Performance Share Award, a Stock Value Equivalent
Award or any combination thereof. Each Award shall be evidenced by a written
instrument duly executed by or on behalf of the Company.
VII. OPTIONS
(a) OPTION AGREEMENT. Each Option shall be evidenced by an Option
Agreement between the Company and the Optionee which shall contain such terms
and conditions as may be approved by the Committee. The terms and conditions
of the respective Option Agreements need
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<PAGE> 5
not be identical. Specifically, an Option Agreement may provide for the
payment of the option price, in whole or in part, by the delivery of a number
of shares of Common Stock (plus cash if necessary) having a Fair Market Value
equal to such option price. Each Option Agreement shall provide that the
Option may not be exercised earlier than six months from the date of grant and
shall specify the effect of termination of employment on the exercisability of
the Option.
(b) OPTION PERIOD. The term of each Option shall be as specified
by the Committee at the date of grant.
(c) LIMITATIONS ON EXERCISE OF OPTION. An Option shall be
exercisable in whole or in such installments and at such times as determined by
the Committee.
(d) SPECIAL LIMITATIONS ON INCENTIVE STOCK OPTIONS. To the extent
that the aggregate Fair Market Value (determined at the time the respective
Incentive Stock Option is granted) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by an individual
during any calendar year under all incentive stock option plans of the Company
and its Parent Corporation and Subsidiaries exceeds $100,000, such excess
Incentive Stock Options shall be treated as Nonqualified Options. The Committee
shall determine, in accordance with applicable provisions of the Code, Treasury
Regulations and other administrative pronouncements, which of an Optionee's
Incentive Stock Option will not constitute Incentive Stock Options because of
such limitation and shall notify the Optionee of such determination as soon as
practicable after such determination. No Incentive Stock Option shall be
granted to an individual if, at the time the Option is granted, such individual
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of its Parent Corporation or a Subsidiary,
within the meaning of section 422(b)(6) of the Code, unless (i) at the time
such Option is granted the option price is at least 110% of the Fair Market
Value of the Common Stock subject to the Option and (ii) such Option by its
terms is not exercisable after the expiration of five years from the date of
grant.
(e) OPTION PRICE. The purchase price of Common Stock issued under
each Option shall be determined by the Committee, but such purchase price shall
not be less than the Fair Market Value of Common Stock subject to the Option on
the date the Option is granted.
(f) OPTIONS AND RIGHTS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED
BY OTHER CORPORATIONS. Options and Stock Appreciation Rights may be granted
under the Plan from time to time in substitution for stock options held by
employees of corporations who become, or who became prior to the effective date
of the Plan, key employees of the Company or of any Subsidiary as a result of a
merger or consolidation of the employing corporation with the Company or such
Subsidiary, or the acquisition by the Company or a Subsidiary of all or a
portion of the assets of the employing corporation, or the acquisition by the
Company or a Subsidiary of stock of the employing corporation with the result
that such employing corporation becomes a Subsidiary.
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<PAGE> 6
VIII. STOCK APPRECIATION RIGHTS
(a) STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is the
right to receive an amount equal to the Spread with respect to a share of
Common Stock upon the exercise of such Stock Appreciation Right. Stock
Appreciation Rights may be granted in connection with the grant of an Option,
in which case the Option Agreement will provide that exercise of Stock
Appreciation Rights will result in the surrender of the right to purchase the
shares under the Option as to which the Stock Appreciation Rights were
exercised. Alternatively, Stock Appreciation Rights may be granted
independently of Options in which case each Award of Stock Appreciation Rights
shall be evidenced by a Stock Appreciation Rights Agreement between the Company
and the Holder which shall contain such terms and conditions as may be approved
by the Committee. The terms and conditions of the respective Stock
Appreciation Rights Agreements need not be identical. The Spread with respect
to a Stock Appreciation Right may be payable either in cash, shares of Common
Stock with a Fair Market Value equal to the Spread or in a combination of cash
and shares of Common Stock. Upon the exercise of any Stock Appreciation Rights
granted hereunder, the number of shares reserved for issuance under the Plan
shall be reduced only to the extent that shares of Common Stock are actually
issued in connection with the exercise of such Stock Appreciation Right. Each
Stock Appreciation Rights Agreement shall provide that the Stock Appreciation
Rights may not be exercised earlier than six months from the date of grant and
shall specify the effect of termination of employment on the exercisability of
the Stock Appreciation Rights.
(b) EXERCISE PRICE. The exercise price of each Stock Appreciation
Right shall be determined by the Committee, but such exercise price shall not
be less than the Fair Market Value of a share of Common Stock on the date the
Stock Appreciation Right is granted.
(c) EXERCISE PERIOD. The term of each Stock Appreciation Right
shall be as specified by the Committee at the date of grant.
(d) LIMITATIONS ON EXERCISE OF STOCK APPRECIATION RIGHT. A Stock
Appreciation Right shall be exercisable in whole or in such installments and at
such times as determined by the Committee.
IX. RESTRICTED STOCK AWARDS
(a) RESTRICTION PERIOD TO BE ESTABLISHED BY THE COMMITTEE. At the
time a Restricted Stock Award is made, the Committee shall establish a period
of time (the "Restriction Period") applicable to such Award. Each Restricted
Stock Award may have a different Restriction Period, as determined in the
discretion of the Committee. The Restriction Period applicable to a particular
Restricted Stock Award shall not be changed except as permitted by Paragraph
(b) of this Article.
(b) OTHER TERMS AND CONDITIONS. Common Stock awarded pursuant to
a Restricted Stock Award shall be represented by a stock certificate registered
in the name of the Holder of such Restricted Stock Award or, at the option of
the Company, in the name of a nominee of the Company. The Holder shall have
the right to receive dividends during the Restriction Period (subject to the
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<PAGE> 7
terms of any Restricted Stock Agreement), to vote the Common Stock subject
thereto and to enjoy all other stockholder rights (subject to the terms of any
Restricted Stock Agreement), except that (i) the Holder shall not be entitled
to possession of the stock certificate until the Restriction Period shall have
expired, (ii) at the discretion of the Company, the Company shall retain
custody of the stock during the Restriction Period, (iii) the Holder may not
sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the stock
during the Restriction Period and (iv) a breach of the terms and conditions
established by the Committee pursuant to the Restricted Stock Award shall cause
a forfeiture of the Restricted Stock Award. At the time of such Award, the
Committee may, in its sole discretion, prescribe additional terms, conditions
or restrictions relating to Restricted Stock Awards, including, but not limited
to, rules pertaining to the termination of employment (by retirement,
disability, death or otherwise) of a Holder prior to expiration of the
Restriction Period.
(c) PAYMENT FOR RESTRICTED STOCK. A Holder shall be required to
make such payment for Common Stock received pursuant to a Restricted Stock
Award as may be required by law or as the Committee may, in its discretion,
determine to charge the Holder.
(d) MISCELLANEOUS. Nothing in this Article shall prohibit the
exchange of shares issued under the Plan (whether or not then subject to a
Restricted Stock Award) pursuant to a plan of reorganization for stock or
securities in the Company or another corporation a party to the reorganization,
but the stock or securities so received for shares then subject to the
restrictions of a Restricted Stock Award shall become subject to the
restrictions of such Restricted Stock Award. Any shares of stock received as a
result of a stock split or stock dividend with respect to shares then subject
to a Restricted Stock Award shall also become subject to the restrictions of
the Restricted Stock Award.
X. PERFORMANCE SHARE AWARDS
(a) PERFORMANCE PERIOD. The Committee shall establish, with
respect to and at the time of each Performance Share Award, a performance
period over which the performance applicable to the Performance Share Award of
the Holder shall be measured.
(b) PERFORMANCE SHARE AWARDS. Each Performance Share Award may
have a maximum value established by the Committee at the time of such Award.
(c) PERFORMANCE MEASURES. A Performance Share Award may be
awarded to an employee contingent upon future performance of the employee, the
Company or any Subsidiary, division or department thereof by or in which he is
employed during the performance period, the Fair Market Value of Common Stock
or the increase thereof during the performance period, combinations thereof, or
such other provisions as the Committee may determine to be appropriate. The
Committee shall establish the performance measures applicable to such
performance prior to the beginning of the performance period but subject to
such later revisions as the Committee shall deem appropriate to reflect
significant, unforeseen events or changes.
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<PAGE> 8
(d) AWARDS CRITERIA. In determining the value of Performance
Share Awards, the Committee may take into account an employee's responsibility
level, performance, potential, other Awards and such other considerations as it
deems appropriate.
(e) PAYMENT. Following the end of the performance period, the
Holder of a Performance Share Award shall be entitled to receive payment of an
amount, not exceeding the maximum value of the Performance Share Award, if any,
based on the achievement of the performance measures for such performance
period, as determined by the Committee in its sole discretion. Payment of a
Performance Share Award (I) may be made in cash, Common Stock or a combination
thereof, as determined by the Committee in its sole discretion, (ii) shall be
made in a lump sum or in installments as prescribed by the Committee in its
sole discretion and (iii) to the extent applicable, shall be based on the Fair
Market Value of the Common Stock on the payment date. If a payment of cash is
to be made on a deferred basis, the Committee shall establish whether interest
shall be credited, the rate thereof and any other terms and conditions
applicable thereto.
(f) TERMINATION OF EMPLOYMENT. The Committee shall determine the
effect of termination of employment during the performance period on an
employee's Performance Share Award.
XI. STOCK VALUE EQUIVALENT AWARDS
(a) STOCK VALUE EQUIVALENT AWARDS. Stock Value Equivalent Awards
are rights to receive an amount equal to the Fair Market Value of shares of
Common Stock or rights to receive an amount equal to any appreciation or
increase in the Fair Market Value of Common Stock over a specified period of
time, which vest over a period of time as established by the Committee, without
payment of any amounts by the Holder thereof (except to the extent otherwise
required by law) or satisfaction of any performance criteria or objectives.
Each Stock Value Equivalent Award may have a maximum value established by the
Committee at the time of such Award.
(b) AWARD PERIOD. The Committee shall establish, with respect to
and at the time of each Stock Value Equivalent Award, a period over which the
Award shall vest with respect to the Holder.
(c) AWARDS CRITERIA. In determining the value of Stock Value
Equivalent Awards, the Committee may take into account an employee's
responsibility level, performance, potential, other Awards and such other
considerations as it deems appropriate.
(d) PAYMENT. Following the end of the determined period for a
Stock Value Equivalent Award, the Holder of a Stock Value Equivalent Award
shall be entitled to receive payment of an amount, not exceeding the maximum
value of the Stock Value Equivalent Award, if any, based on the then vested
value of the Award. Payment of a Stock Value Equivalent Award (I) shall be
made in cash, (ii) shall be made in a lump sum or in installments as prescribed
by the Committee in its sole discretion and (iii) shall be based on the Fair
Market Value of the Common Stock on the payment date. Cash dividend
equivalents may be paid during, or may be accumulated and paid at the end of,
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the determined period with respect to a Stock Value Equivalent Award, as
determined by the Committee. If payment of cash is to be made on a deferred
basis, the Committee shall establish whether interest shall be credited, the
rate thereof and any other terms and conditions applicable thereto.
(e) TERMINATION OF EMPLOYMENT. The Committee shall determine the
effect of termination of employment during the applicable vesting period on an
employee's Stock Value Equivalent Award.
XII. FINAL STOCK AWARDS
(a) NATURE OF FINAL STOCK AWARDS. Final Stock Awards constitute
the issuance as of January 17, 2001 to certain Holders of Restricted Stock
Awards of one or more shares of Common Stock free and clear of any and all
forfeiture restrictions or other encumbrances.
(b) AUTOMATIC GRANT OF FINAL STOCK AWARDS. As of January 17,
2001, there shall be granted Final Stock Awards for a number of shares of
Common Stock equal to the difference as of January 17, 2001 between 85,573
shares of Common Stock and the number of shares of Common Stock theretofore
issued pursuant to Awards granted under the Plan. Such shares of Common Stock
shall be allocated to those individuals who (i) are employed by the Company or
a Parent Corporation or a Subsidiary of the Company as of January 17, 2001 and
(ii) who are or at any time were Holders of Restricted Stock Awards. An
individual entitled to an allocation of a Final Stock Award pursuant to the
preceding sentence shall receive a Final Stock Award for a number of shares of
Common Stock equal to the total number of shares of Common Stock as to which
Final Stock Awards are then being granted multiplied by a fraction, the
numerator of which is the number of shares of Common Stock theretofore issued
to him pursuant to his Restricted Stock Awards as to which forfeiture
restrictions have lapsed and the denominator of which is the total number of
shares of Common Stock theretofore issued pursuant to Restricted Stock Awards
as to which forfeiture restrictions have lapsed to all individuals entitled to
allocations of Final Stock Awards pursuant to the preceding sentence.
XIII. RECAPITALIZATION OR REORGANIZATION
(a) Except as hereinafter otherwise provided, Options, Stock
Appreciation Rights, Restricted Stock Awards, Performance Share Awards, Stock
Value Equivalent Awards and any agreements evidencing such Awards shall be
subject to adjustment by the Committee at its discretion as to the number and
price of shares of Common Stock or other consideration subject to such Awards
in the event of changes in the outstanding Common Stock by reason of dividends
payable in stock of the Company, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or other
relevant changes in capitalization occurring after the date of the grant of any
such Option or Awards.
(b) The existence of the Plan and the Awards granted hereunder
shall not affect in any way the right or power of the Board or the stockholders
of the Company to make or authorize any
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<PAGE> 10
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of debt or equity securities having any priority or preference with
respect to or affecting Common Stock or the rights thereof, the dissolution or
liquidation of the Company or any sale, lease, exchange or other disposition of
all or any part of its assets or business or any other corporate act or
proceeding.
(c) The shares with respect to which Awards may be granted are
shares of Common Stock as presently constituted, but if, and whenever, prior to
the expiration of an Option theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Common Stock or the payment of a
stock dividend on Common Stock payable in stock of the Company, without receipt
of consideration by the Company, the number of shares of Common Stock with
respect to which such Award may thereafter pertain (i) in the event of an
increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced, and the purchase price per share shall be
proportionately increased.
(d) If the Company recapitalizes or otherwise changes its capital
structure, an Award theretofore granted shall be adjusted to reflect such
recapitalization to the extent appropriate as determined by the Committee.
XIV. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan or alter or amend
the Plan or any part thereof from time to time; provided that no change in any
Award theretofore granted may be made which would impair the rights of the
Holder without the consent of the Holder, and provided, further, that the Board
may not, without approval of the stockholders, amend the Plan:
(a) to increase the aggregate number of shares which may be issued
pursuant to the provisions of the Plan on exercise or
surrender of Options or Stock Appreciation Rights or pursuant
to Restricted Stock Awards, Performance Share Awards or Final
Stock Awards, except as provided in Article XIII;
(b) to change the minimum Option price;
(c) to change the class of employees eligible to receive Awards or
increase materially the benefits accruing to employees under
the Plan;
(d) to extend the maximum period during which Awards may be
granted under the Plan; or
(e) to modify materially the requirements as to eligibility for
participation in the Plan.
XV. OTHER
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(a) NO RIGHT TO AN AWARD. Neither the adoption of the Plan nor
any action of the Board or of the Committee shall be deemed to give an employee
any right to be granted an Option, a Stock Appreciation Right, a Restricted
Stock Award or a Performance Share Award or Stock Value Equivalent Award, Final
Stock Award or any other rights hereunder except as may be evidenced by an
Option Agreement, Stock Appreciation Rights Agreement, Restricted Stock
Agreement or other instrument evidencing an Award duly executed on behalf of
the Company, and then only to the extent and on the terms and conditions
expressly set forth therein. The Plan shall be unfunded. The Company shall
not be required to establish any special or separate fund or to make any other
segregation of funds or assets to assure the payment of any Award.
(b) NO EMPLOYMENT RIGHTS CONFERRED. Nothing contained in the Plan
or in any Award made hereunder shall (i) confer upon any employee any right
with respect to continuation of employment with the Company or any Subsidiary
or (ii) interfere in any way with the right of the Company or any Subsidiary to
terminate his or her employment at any time.
(c) OTHER LAWS; WITHHOLDING. The Company shall not be obligated
to issue any Common Stock pursuant to any Award granted under the Plan at any
time when the offering of the shares covered by such Award has not been
registered under the Securities Act of 1933 and such other state and federal
laws, rules or regulations as the Company or the Committee deems applicable
and, in the opinion of legal counsel for the Company, there is no exemption
from the registration requirements of such laws, rules or regulations available
for the issuance and sale of such shares. No fractional shares of Common Stock
shall be delivered, nor shall any cash in lieu of fractional shares be paid.
The Company shall have the right to deduct in connection with all Awards any
taxes required by law to be withheld and to require any payments necessary to
enable it to satisfy its withholding obligations. The Committee may permit the
Holder of an Award to elect to surrender, or authorize the Company to withhold,
shares of Common Stock (valued at their Fair Market Value on the date of
surrender or withholding of such shares) in satisfaction of the Company's
withholding obligation.
(d) NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the
Plan shall be construed to prevent the Company or any Subsidiary from taking
any corporate action which is deemed by the Company or such Subsidiary to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Award made under the Plan. No employee,
beneficiary or other person shall have any claim against the Company or any
Subsidiary as a result of any such action.
(e) RESTRICTIONS ON TRANSFER. An Award shall not be transferable
otherwise than by will or the laws of descent and distribution and shall be
exercisable during the lifetime of the Holder only by such Holder or the
Holder's guardian or legal representative. The Option Agreement, Stock
Appreciation Rights Agreement, Restricted Stock Agreement or other written
instrument evidencing an Award shall specify the effect of the death of the
Holder on the Award.
(f) SEVERABILITY. If any provision of this Plan or an Award shall
be held illegal or invalid for any reason, said illegality or invalidity shall
not affect the remaining provisions thereof; instead,
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<PAGE> 12
each provision of the Plan or an Award shall be fully severable and shall be
construed and enforced as if said illegal or invalid provision had never been
included therein.
(g) LIMITATION ON ACTIONS. Every right of action by or on behalf
of the Company or by any shareholder against any past, present, or future
member of the Board, the Committee, or any officer or employee of the Company
arising out of or in connection with this Plan shall, regardless of the place
where the action may be brought and regardless of the place of residence of any
such director, Committee member, officer or employee, cease and be barred by
the expiration f three years from the later of: (i) the date of the act or
omission in respect of which such right of action arises or (ii) the first date
upon which there has been made generally available to shareholders an annual
report of the Company and a proxy statement for the annual meeting of
shareholders following the issuance of such annual report, which annual report
and proxy statement alone or together set forth for the related period, the
amount of the allocations. In addition, any and all right of action by any
employee (past, present or future) against the Company or any member of the
Committee arising out of or in connection with this Plan will, regardless of
the place where action may be brought and regardless of the place of residence
of any Committee member, cease and be barred by the expiration of three years
from the date of the act or omission in respect of which such right of action
arises.
(h) GOVERNING LAW. This Plan shall be governed by, and construed
in accordance with, the internal laws of the State of Texas without regard to
the principles of conflicts of law thereof that would require the application
of the laws of any jurisdiction other than Texas, except to the extent that it
implicates matters which are the subject of the General Corporation Law of the
State of Delaware which matters shall be governed by the latter law.
Executed this _____ day of _________________, 1996 to supersede and
replace that Plan document which was heretofore adopted by and executed on
behalf of the Company.
ATTEST: NOW HOLDINGS, INC.
By
- --------------------------------- -------------------------------------
JAMES C. COMIS, III, SENIOR VICE JOEL V. STAFF, PRESIDENT AND
PRESIDENT AND ASSISTANT SECRETARY CHIEF EXECUTIVE OFFICER
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<PAGE> 1
EXHIBIT 10.7
FIRST AMENDMENT TO
NOW HOLDINGS, INC.
STOCK AWARD AND LONG-TERM INCENTIVE PLAN
WHEREAS, NOW HOLDINGS, INC. (the "Company") has heretofore adopted the
NOW HOLDINGS, INC. STOCK AWARD AND LONG- TERM INCENTIVE PLAN (the "Plan"); and
WHEREAS, the Company desires to amend the Plan so as to increase the
number of shares of the Company's common stock that may be issued under the
Plan;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of
August 28, 1996:
1. The last sentence of Article I of the Plan shall be deleted
and the following shall be substituted therefor:
"A further purpose of the Plan is to provide a means whereby the
Company may attract able persons serve as directors of the Company and
to provide such directors with incentive and reward opportunities
which are designed to align their interests with the interests of the
shareholders of the Company so as to enhance the profitable growth of
the Company over the long term. To carry out its goals and achieve
its purposes, the Plan provides for the granting of Incentive Stock
Options, Options which do not constitute Incentive Stock Options,
Stock Appreciation Rights, Restricted Stock Awards, Performance Share
Awards, Stock Value Equivalent Awards, or any combination of the
foregoing, as is best suited to the circumstances of a particular
employee or director as provided herein."
2. The following new Paragraphs (d) and (e) shall be added to
Article IV of the Plan:
"(d) SPECIAL BOARD POWERS. The Board shall have the sole
authority, in its discretion, to determine which directors of the
Company who are not employees of the Company shall receive an Award,
the time or times when such Award shall be made, whether a
Nonqualified Option or Stock Appreciation Right shall be granted, the
number of shares of Common Stock which may be issued under each
Option, Stock Appreciation Right and Restricted Stock Award and the
value of each Performance Share Award and Stock Value Equivalent
Award. In any case involving an Award under the Plan to a director of
the Company who is not an employee of the Company, the Board shall
have all of the powers under the Plan that the Committee has under the
Plan with respect to Awards to employees of the Company and its
Subsidiaries.
<PAGE> 2
(e) SELF INTEREST. No member of the Committee or the
Board, as applicable, shall have any right to vote or decide upon any
matter relating solely to himself under the Plan or to vote in any
case in which his individual right to claim any benefit or Award under
the Plan is particularly involved."
3. The second sentence of Paragraph (a) of Article V of the Plan
shall be deleted and the following shall be substituted therefor:
"The Board may from time to time grant Awards to one or more directors
of the Company who are not employees of the Company as determined by
the Board in its discretion. The aggregate number of shares of Common
Stock that may be issued under the Plan shall not exceed 1,941,303
shares (which number shall include those shares which were issued
under the Plan prior to August 28, 1996)."
4. The first two sentences of Article VI of the Plan shall be
deleted and the following shall be substituted therefor:
"Awards made pursuant to the Plan may be granted to employees who, at
the time of grant, are key employees of the Company or any parent
corporation or subsidiary of the Company. Awards other than Incentive
Stock Options may be granted to any director of the Company who is not
an employee of the Company."
5. As amended hereby, the Plan is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, this amendment is executed this 28th day of
August, 1996.
ATTEST: NOW HOLDINGS, INC.
/s/ JAMES C. COMIS, III By /s/ JOEL B. STAFF
- ------------------------------------ -----------------------------------
James C. Comis, III, Senior Vice Joel B. Staff, President and
President and Assistant Secretary Chief Executive Officer
<PAGE> 1
EXHIBIT 10.8
NOW HOLDINGS, INC.
VALUE APPRECIATION AND INCENTIVE PLAN A
I. ESTABLISHMENT AND PURPOSE
(a) ESTABLISHMENT OF THE PLAN. NOW HOLDINGS, INC. (the "Company")
hereby establishes, effective as of January 17, 1996, the NOW HOLDINGS, INC.
VALUE APPRECIATION AND INCENTIVE PLAN A (the "Plan") the terms and provisions
of which are set forth below.
(b) PURPOSES. The purposes of the Plan are to focus Participants,
both as a team and individually, on achieving key strategic and financial
objectives of the Company and its Affiliates, to reward them for enhancing the
value of the Company thereby benefitting its stockholders, to encourage them to
devote their best efforts to the business and operation of the Company, its
subsidiaries and its Affiliates by offering them a reward opportunity based on
individual contributions and corporate performance and to enhance the ability
of the Company to attract and retain employees of outstanding competence and
ability.
II. DEFINITIONS
As used in the Plan, the terms below shall have the following meanings
ascribed to them:
(a) "AFFILIATE" shall have the same meaning as the term
"Affiliate" as defined in the Stockholders Agreement.
(b) "CAPITAL INVESTMENT" as of a given date refers to: (i) the
total capital contributions of $29,717,882.57 of the Stockholders holding
1,189.60 shares of Class A Common Stock and 872,570 shares of Common Stock as
of January 17, 1996; plus (ii) additional capital contributions paid to the
Company by Stockholders for the purchase of both Class A Common Stock and
Common Stock between January 17, 1996 and such date excluding any shares of
Common Stock acquired by an individual pursuant to a restricted stock grant or
a stock option or warrant exercise.
(c) "CAPITAL INVESTMENT STOCK" as of a given date refers to the
outstanding shares of Capital Stock which were acquired by the Stockholders as
a result of Capital Investments.
(d) "CAPITAL INVESTMENT STOCK VALUE" as of a given date refers to
the aggregate value of the Capital Investment Stock.
(e) "CAPITAL STOCK" as of a given date refers to the total of (i)
the outstanding shares of the Company's Class A Common Stock, par value $.01
per share, (ii) the outstanding shares of the Company's Common Stock, par value
$.01 per share and (iii) the shares of Common Stock, which are issuable under
outstanding options and warrants.
<PAGE> 2
(f) "CAPITAL STOCK VALUE" refers as of a given date to the
aggregate value of the Capital Stock. For purposes of determining such
aggregate value, the following rules shall apply: (i) in the case of a Sale
of the Company, such value shall be the total price paid for the Capital Stock;
(ii) in the case of a Qualified Public Offering, such value shall be the
product of the Net Public Offering Price multiplied by the number of shares of
Capital Stock outstanding (or issuable) immediately prior to such Qualified
Public Offering; and (iii) in the case of a Triggering Event described in
(u)(3) below, such value shall be the good faith estimate by the Company's
Board of Directors of the price for Capital Stock that could be obtained in an
open (non-forced) sale of all of the Capital Stock with ample time for
marketing and closing, reduced by all transaction expenses.
(g) "CLASS A COMMON STOCK" refers to the capital stock of the
Company consisting of its Class A common stock, par value $.01 per share.
(h) "COMMITTEE" refers to the Committee appointed by the Board of
Directors of the Company to administer the Plan.
(i) "COMMON STOCK" refers to the capital stock of the Company
consisting of its common stock, par value $.01 per share.
(j) "COMPANY" refers to NOW Holdings, Inc., a Delaware
corporation, and any successor thereto.
(k) "ELIGIBLE EMPLOYEE" refers to any individual who is a key
employee of the Company or of any Affiliate of the Company.
(l) "IRR AMOUNT" means an amount which is equal to: (i) if the
Triggering Event occurs on or before January 17, 1999, the amount of the
Capital Investment plus an amount equal to a 35% compounded annual average
return on the Capital Investment; (ii) if the Triggering Event occurs after
January 17, 1999 but on or before January 17, 2001, the amount of the Capital
Investment plus an amount equal to a 32.5% compounded annual average return on
the Capital Investment; or (iii) if the Triggering Event occurs after January
17, 2001, the amount of the Capital Investment plus an amount equal to a 30%
compounded annual average return on the Capital Investment. For purposes of
computing the IRR Amount as of any given date, the Committee shall take into
consideration the value of dividends or other distributions made by the Company
to the Stockholders between January 17, 1996 and such date.
(m) "NET PUBLIC OFFERING PRICE" shall have the same meaning as
defined in the Restated Certificate of Incorporation of the Company.
(n) "PARTICIPANT" refers to an Eligible Employee who has been
designated by the Committee pursuant to Article 3 as a Participant in the Plan.
(o) "PLAN TERM" refers to the period that this Plan shall be in
effect and shall be the period of January 17, 1996 to the last date on which a
payment is due under this Plan, or, if earlier, the date the Plan is terminated
pursuant to Article IX.
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<PAGE> 3
(p) "PUBLIC OFFERING" refers to a public offering and sale of
equity securities of the Company pursuant to an effective registration
statement on Form S-1 under the Securities Act of 1933, as amended, or any
similar Federal statute then in effect.
(q) "QUALIFIED PUBLIC OFFERING" refers to a Public Offering of
Common Stock, at the conclusion of which the aggregate number of issued and
outstanding shares of Common Stock that have been sold to the public pursuant
to one or more effective registration statements under the Securities Act of
1933, as amended, or any similar Federal statute then in effect is equal to at
least 20% of the Capital Stock after giving effect to such sale.
(r) "SALE OF THE COMPANY" refers to (x) a merger of the Company, a
sale of all or substantially all of the assets of the Company, or a sale of all
of the Class A common stock, par value $.01 per share, of the Company and
Common Stock of the Company, (y) in which all of the stockholders of the
Company receive in such transaction the same consideration consisting of cash
and/or securities that are publicly traded and have a total market valuation
for all outstanding securities of the same publicly traded class after the
transaction of at least $250 million.
(s) "STOCKHOLDERS" refers to any person or entity other than the
Company which is a party to the Stockholders Agreement.
(t) "STOCKHOLDERS AGREEMENT" refers to the Stockholders Agreement
Among Now Holdings, Inc and its Stockholders, dated as of January 17, 1996, as
it may be amended thereafter from time-to-time.
(u) "TRIGGERING EVENT" refers to the first to occur of the
following:
(1) The closing date of a Sale of the Company.
(2) The closing date of a Qualified Public Offering.
(3) The first date as of which the Stockholders have
received from the Company as dividends, distributions
or for the repurchase of Class A Common Stock, liquid
assets equal in aggregate value to the Capital
Investment as of such date. For purposes of this
item (3), liquid assets shall include only cash
and/or securities that are publicly traded and have a
total market valuation for all outstanding securities
of the same publicly traded class after the
transaction of at least $250 million (valued at the
fair market value thereof as determined by the Board
of Directors of the Company).
provided, however, that an event described above shall not result in a
Triggering Event for purposes of the Plan unless the then Capital Investment
Stock Value on such date equals or exceeds the IRR Amount.
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<PAGE> 4
(v) "VALUE APPRECIATION UNIT" means a phantom unit credited to a
Participant under the Plan for purposes of measuring his or her distributions
under the Plan.
III. PARTICIPATION AND VALUE APPRECIATION UNITS
(a) PARTICIPATION. The Committee may designate Eligible Employees
as Participants in the Plan at any time during the term of the Plan. It is
anticipated that participation in the Plan may vary from time to time. In
selecting Eligible Employees to participate in the Plan, the Committee shall
establish such criteria as it may deem relevant in making such selection. An
Eligible Employee who has been designated by the Committee as a Participant in
the Plan shall have no right of continued participation in the Plan and may be
removed by the Committee as a Participant in the Plan at any time prior to a
Triggering Event. An Eligible Employee who has been designated by the
Committee as a Participant in the Plan may be removed by the Committee as a
Participant after a Triggering Event; provided, however, such a Participant
shall receive a Plan distribution calculated in the same manner as the Plan
distribution made to a Participant who is involuntarily terminated without
cause under Article IV, Paragraph (d) below.
(b) CREDITING OF VALUE APPRECIATION UNITS. Coincident with his or
her designation as a Participant in the Plan, the Committee shall credit to a
Participant a number of whole or fractional Value Appreciation Units. The
Committee shall establish such criteria as it may deem relevant in determining
the number of Value Appreciation Units to be assigned to a Participant. It is
anticipated that Participants will be assigned differing numbers of Value
Appreciation Units. At any time prior to a Triggering Event, the Committee may
increase or decrease the number of Value Appreciation Units then credited to a
Participant in its sole discretion, but in no event shall the aggregate Value
Appreciation Units awarded under the Plan exceed 80.
IV. PLAN DISTRIBUTIONS
(a) BASE DISTRIBUTION AMOUNT. For any Participant who is employed
by the Company as of a Triggering Event, the distribution amount determined as
of such date with respect to Value Appreciation Units credited to him or her as
of the Triggering Event (the "Base Distribution Amount") shall be a dollar
amount equal to:
(1) the lesser of (i) the product of the Capital Stock Value
multiplied by 0.04 and (ii) the maximum amount of payments
under the Plan that would not result in a Capital Investment
Stock Value below the IRR Amount; multiplied by
(2) a fraction, the numerator of which is the number of such
Participant's Value Appreciation Units as of such date and
the denominator of which is 80.
(b) FORM AND TIME OF DISTRIBUTIONS. Distributions under the Plan
resulting from a Triggering Event other than a Qualified Public Offering
Triggering Event shall be paid in single lump sum cash payments which are paid
within the 30 day period immediately following the Triggering Event. If the
Triggering Event results from a Qualified Public Offering, the distribution
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<PAGE> 5
to a Participant of the Base Distribution Amount determined pursuant to
Paragraph (a) above shall be paid as follows:
If the Triggering Event occurs on
or before January 17, 1998: One third of the Base Distribution
Amount determined pursuant to
Paragraph (a) above will be paid on
the date of the Triggering Event,
one third of such Base Distribution
Amount will be paid on the first
anniversary of the Triggering Event
and one third of such Base
Distribution Amount will be paid on
January 17, 1999; provided,
however, that any portion of the
Base Distribution Amount paid to a
Participant more than 30 days after
the Triggering Event will be
adjusted as set forth in Paragraph
(c) below.
If the Triggering Event occurs
after January 17, 1998 but on
or before January 17, 1999: One half of the Base Distribution
Amount determined pursuant to
Paragraph (a) above will be paid on
the date of the Triggering Event
and the remaining one half of such
Base Distribution Amount will be
paid on January 17, 1999; provided,
however, that any portion of the
Base Distribution Amount paid to a
Participant more than 30 days after
the Triggering Event will be
adjusted as set forth in Paragraph
(c) below.
If the Triggering Event occurs
after January 17, 1999; All of the Base Distribution Amount
determined pursuant to Paragraph
(a) above will be paid within 30
days after the Triggering Event.
The Company will have an additional 30 days after the scheduled date of a Plan
distribution to calculate and make the required payments under the Plan. A
Participant's Plan distributions resulting from a Qualified Public Offering
Triggering Event shall be paid in cash or in shares of Capital Stock or in a
combination thereof as determined by the Committee.
(c) ADJUSTMENTS TO BASE DISTRIBUTION AMOUNT.
If the Triggering Event occurs before January 17, 1999 and results
from a Qualified Public Offering, the dollar amount of any Base Distribution
Amount not paid within 30 days after the Triggering Event will be adjusted to
an amount equal to:
(1) the per share market price of the Company's publicly traded
Capital Stock as of the date the Participant is scheduled to
receive a payment, divided by the per share
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<PAGE> 6
market price of the Company's publicly traded Capital Stock as
of the date of the Triggering Event; multiplied by
(2) the dollar amount of the Base Distribution Amount which is
scheduled to be paid on such date.
(d) FORFEITURES. If a Participant who was employed by the Company
as of a Triggering Event is later involuntarily terminated by the Company
without cause, or if employment is terminated due to the death of the employee,
any Base Distribution Amounts then remaining payable to him or her pursuant to
Paragraph (b) above shall be paid to him or her within 30 days after the date
of such employment termination; provided, however, that any remaining Base
Distribution Amount payable to the Participant upon such employment termination
will be adjusted as set forth in Paragraph (c) above. If a Participant who was
employed by the Company as of a Triggering Event terminates employment for any
other reason, all Base Distribution Amounts then remaining payable to him or
her pursuant to paragraph (b) above shall be forfeited.
(e) EXTRAORDINARY EVENT ADJUSTMENTS. If an extraordinary event
outside of the control of the Company occurs which would result in a
substantial distortion from the ordinary operation of the Plan, the Board of
Directors of the Company, in its sole discretion, may make such adjustment to
the operation of the Plan as it determines to be appropriate.
(f) TAX BONUS. In addition to amounts payable under the Plan
pursuant to Paragraphs (a) and (b) above, the Company shall pay to any
Participant with respect to any distributions under the Plan which are subject
to the tax imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended, (the "Code") a tax bonus as described in this Paragraph (f). The tax
bonus payable to a Participant under this Paragraph (f) shall be equal to the
amount determined by (I) determining the aggregate amounts distributed to the
Participant pursuant to Paragraphs (a) and (b) above which are treated as
excess parachute payments (within the meaning of Section 280G of the Code or
the corresponding provision of any successor statute) (adjusted, as
appropriate, to reflect any delayed or installment payments) and which are
subject to the tax imposed under Section 4999 of the Code or the corresponding
provision of any successor statute (the "Parachute Amount"), (ii) determining
the decimal which expresses the maximum rate of tax imposed under section 4999
of the Code or the corresponding provision of any successor statute (the
"Parachute Tax Rate") and the maximum statutory rate, expressed as a decimal,
of Federal income tax applicable to the Participant (after reflecting all
deductions and adjustments) applicable to the Participant for the taxable year
in which he receives the distributions pursuant to Paragraphs (a) and (b) above
(the" Regular Tax Rate"), (iii) multiplying the Parachute Amount by the
Parachute Tax Rate, (iv) multiplying the amount determined in item (iii) by
2/3 and (v) multiplying the amount determined in item (iv) by a fraction, the
numerator of which is one and the denominator of which is one minus the Regular
Tax Rate.
VI. TERMINATION OF EMPLOYMENT PRIOR TO TRIGGERING EVENT
In the event that a Participant ceases to be employed with the Company
and its Affiliates for any reason prior to a Triggering Event he or she will
not be entitled to any Plan distributions.
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<PAGE> 7
VII. ARBITRATION
Any and all claims, demands, cause of action, disputes, controversies
and other matters in question arising out of or relating to the Plan, any
provision hereof, the alleged breach thereof, or in any way relating to the
subject matter of the Plan, involving the Company or an Affiliate thereof and a
Participant (all of which are referred to herein as "Claims"), even though some
or all of such Claims allegedly are extra-contractual in nature, whether such
Claims sound in contract, tort or otherwise, at law or in equity, under state
or federal law, whether provided by statute or the common law, for damages or
any other relief, including equitable relief and specific performance, shall be
resolved and decided by binding arbitration pursuant to the Federal Arbitration
Act in accordance with the Commercial Arbitration Rules then in effect with the
American Arbitration Association (the "AAA"). The party requesting
arbitration shall, when filing a claim with the AAA, request that the Houston,
Texas office of the AAA provide a list of potential arbitrators to both
parties. The parties shall thereafter have sixty (60) days to select an
arbitrator from such list, with such selection to be by mutual agreement. If
the parties fail to select an arbitrator within such time by mutual agreement,
then either party may request that the Chief Judge of the U.S. District Court
for the Southern District of Texas appoint an arbitrator, and any such
appointment shall be binding on the parties. The arbitration proceeding shall
be conducted in Houston, Texas. The decision of the arbitrator shall be
binding on the Participant, and the Company and their Affiliates. Judgment
upon any award rendered in any such arbitration proceeding may be entered by
any federal or state court having jurisdiction. This arbitration provision
shall be enforceable in either federal or state court. The enforcement of this
arbitration provision and all procedural aspects thereof, including but not
limited to, the construction and interpretation of this arbitration provision,
the scope of the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act. In deciding
the substance of any Claim, the arbitrator shall apply the substantive laws of
the State of Texas; provided, however, that the arbitrator shall have no
authority to award treble, exemplary or punitive type damages under any
circumstances regardless of whether such damages may be available under Texas
law, the parties hereby waiving their right, if any to recover treble,
exemplary or punitive type damages in connection with any Claims. The
arbitrator may award the costs of arbitration (including without limitation the
fees of the arbitrator and the AAA), as well as any or all attorney's fees, and
any other related costs, in any manner deemed fair, equitable, and reasonable
by the arbitrator based upon the relative merits of the positions espoused by
the respective parties to the arbitration, the relative financial circumstances
of the respective parties to the arbitration and such other considerations as
the arbitrator deems appropriate and relevant.
VIII. ADMINISTRATIVE PROVISIONS
(a) ADMINISTRATIVE GUIDELINES. The Plan shall be implemented and
administered in accordance with such rules, regulations and interpretations as
may be established from time to time by the Committee for the implementation
and administration of this Plan that are not inconsistent with the provisions
thereof.
(b) ADMINISTRATION. The Plan shall be administered by the
Committee which shall have the power and responsibility to take such actions as
may be appropriate or necessary to effectuate
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<PAGE> 8
orderly administration of the Plan and to interpret and construe the terms and
provisions of the Plan; provided, however, that such interpretations and
constructions shall be consistent with the written provisions of the Plan.
(c) LIMITATION OF LIABILITY. The members of the Committee and
any other person acting under the direction of the Committee, shall not be
liable for any act or failure to act hereunder, except for gross negligence or
fraud, and the Company shall indemnify the members of the Committee, and such
other persons against all expenses, fines, judgments, and/or penalties incurred
in connection with any claim or proceeding seeking to impose such liability.
IX. OTHER PROVISIONS
(a) EMPLOYMENT. Nothing in this Plan nor any action taken by the
Company, the Board of Directors of the Company or the Committee under the
provisions hereof shall be construed as a contract of employment between the
Company and a Participant or interfere with or limit in any way the right of
the Company to terminate any such Participant's employment at any time, nor
confer upon any Participant any right to continue in the employ of the Company.
For purposes of the Plan, a Participant will be deemed to be employed by the
Company for so long as he or she is employed by the Company or an Affiliate of
the Company.
(b) NONTRANSFERABILITY. No right or interest of any Participant
under this Plan shall be assignable or transferable, pledged or encumbered in
any manner, or subject to any lien, directly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge and
bankruptcy.
(c) AMENDMENTS AND TERMINATION. The Company at any time and from
time to time, may modify or amend, in whole or in part, any or all of the
provisions of this Plan or suspend or terminate the Plan entirely; provided,
however, that in the event of a termination of the Plan prior to a Triggering
Event, each Participant shall be entitled to a Plan distribution in full
satisfaction of all amounts owed under the Plan equal to the distribution
amount or amounts determined pursuant to Paragraph (b) of Article IV above,
substituting the date of termination of the Plan for the date of a Triggering
Event, if the fair market value as determined by the Board of Directors of the
Company of the Capital Investment Stock as of such date equals or exceeds the
IRR Amount as of such date. In the event of a Plan termination after a
Triggering Event, each Participant shall be entitled to a Plan distribution
calculated in the same manner as the distribution made to a Participant who is
involuntarily terminated by the Company without cause under Article IV,
Paragraph (d) above. The Plan shall automatically terminate and no further
amounts shall be paid under the Plan following payment of the last amount owed
as a result of occurrence of a Triggering Event.
(d) GOVERNING LAW. The Plan shall be construed in accordance with
and governed by the laws of the State of Texas.
(e) WITHHOLDING TAXES. The Company shall have the right to deduct
from all payments under this Plan any federal, state or local taxes required by
law to be withheld with respect to such payments.
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<PAGE> 9
(f) NATURE OF PLAN. The Plan shall constitute an unfunded,
unsecured obligation of the Company to make payments of incentive compensation
to certain employees from its general assets in accordance with the Plan.
Accordingly:
(1) Value Appreciation Units awarded under the Plan and
accounting maintained by the Company merely
constitute mechanisms for measuring such incentive
compensation and do not constitute a property right
or interest in the Company or in any asset owned by
the Company or its subsidiaries;
(2) neither the establishment of the Plan, the awarding
of Value Appreciation Units nor the creation or
maintenance of Plan accounting records shall be
deemed to create an escrow or trust fund of any kind;
and
(3) the Participant and any person claiming under
Participant shall rely solely on the unsecured
promise of the Company set forth herein, and nothing
in the Plan shall be construed to give the
Participant or anyone claiming under the Participant
any right, title, interest or claim in or to any
specific asset, fund, entity, reserve, account, or
property of any kind whatsoever owned by the Company
or any Affiliate of the Company.
EXECUTED this _____ day of __________________, 1996 to supersede and
replace any Plan documents heretofore adopted by and executed on behalf of the
Company.
ATTEST: NOW HOLDINGS, INC.
By
- ------------------------------------------ ------------------------------
JAMES C. COMIS, III, SENIOR VICE PRESIDENT JOEL V. STAFF, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
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<PAGE> 1
EXHIBIT 10.9
NOW HOLDINGS, INC.
VALUE APPRECIATION AND INCENTIVE PLAN B
I. ESTABLISHMENT AND PURPOSE
(a) ESTABLISHMENT OF THE PLAN. NOW HOLDINGS, INC. (the "Company")
hereby establishes, effective as of January 17, 1996, the NOW HOLDINGS, INC.
VALUE APPRECIATION AND INCENTIVE PLAN B (the "Plan") the terms and provisions
of which are set forth below.
(b) PURPOSES. The purposes of the Plan are to focus Participants,
both as a team and individually, on achieving key strategic and financial
objectives of the Company and its Affiliates, to reward them for enhancing the
value of the Company thereby benefitting its stockholders, to encourage them to
devote their best efforts to the business and operation of the Company, its
subsidiaries and its Affiliates by offering them a reward opportunity based on
individual contributions and corporate performance and to enhance the ability
of the Company to attract and retain employees of outstanding competence and
ability.
II. DEFINITIONS
As used in the Plan, the terms below shall have the following meanings
ascribed to them:
(a) "AFFILIATE" shall have the same meaning as the term
"Affiliate" as defined in the Stockholders Agreement.
(b) "AWARD" with respect to a Participant refers to a restricted
stock award granted to such Participant under the NOW Holdings, Inc. Stock
Award and Long-Term Incentive Plan.
(c) "CAPITAL INVESTMENT" as of a given date refers to: (i) the
total capital contributions of $29,717,882.57 of the Stockholders holding
1,189.60 shares of Class A Common Stock and 872,570 shares of Common Stock as
of January 17, 1996; plus (ii) additional capital contributions paid to the
Company by Stockholders for the purchase of both Class A Common Stock and
Common Stock between January 17, 1996 and such date excluding any shares of
Common Stock acquired by an individual pursuant to a restricted stock grant or
a stock option or warrant exercise.
(d) "CAPITAL INVESTMENT STOCK" as of a given date refers to the
outstanding shares of Capital Stock which were acquired by the Stockholders as
a result of Capital Investments.
(e) "CAPITAL INVESTMENT STOCK VALUE" as of a given date refers to
the aggregate value of the Capital Investment Stock.
(f) "CAPITAL STOCK" as of a given date refers to the total of (i)
the outstanding shares of the Company's Class A Common Stock, (ii) the
outstanding shares of the Company's Common
<PAGE> 2
Stock, par value $.01 per share and (iii) the shares of Common Stock, which are
issuable under outstanding options and warrants.
(g) "CAPITAL STOCK VALUE" refers as of a given date to the
aggregate value of the Capital Stock. For purposes of determining such
aggregate value, the following rules shall apply: (i) in the case of a Sale
of the Company, such value shall be the total price paid for the Capital Stock;
(ii) in the case of a Qualified Public Offering, such value shall be the
product of the Net Public Offering Price multiplied by the number of shares of
Capital Stock outstanding (or issuable) immediately prior to such Qualified
Public Offering; and (iii) in the case of a Triggering Event described in
(u)(3) below, such value shall be the good faith estimate by the Company's
Board of Directors of the price for Capital Stock that could be obtained in an
open (non-forced) sale of all of the Capital Stock with ample time for
marketing and closing, reduced by all transaction expenses.
(h) "CLASS A COMMON STOCK" refers to the capital stock of the
Company consisting of its Class A common stock, par value $.01 per share.
(i) "COMMITTEE" refers to the Committee appointed by the Board of
Directors of the Company to administer the Plan.
(j) "COMMON STOCK" refers to the capital stock of the Company
consisting of its common stock, par value $.01 per share.
(k) "COMPANY" refers to NOW Holdings, Inc., a Delaware
corporation, and any successor thereto.
(l) "NET PUBLIC OFFERING PRICE" shall have the same meaning as
defined in the Restated Certificate of Incorporation of the Company.
(m) "PARTICIPANT" refers to any employee of the Company or of any
Affiliate of the Company who participates in the Plan pursuant to Article III.
(n) "PLAN TERM" refers to the period that this Plan shall be in
effect and shall be the period of January 17, 1996 to the last date on which a
payment is due under this Plan or, if earlier, the date the Plan is terminated
pursuant to Article X.
(o) "POOL A IRR AMOUNT" means an amount which is equal to: (i) if
the Triggering Event occurs on or before January 17, 1999, the amount of the
Capital Investment plus an amount equal to a 35% compounded annual average
return on the Capital Investment; (ii) if the Triggering Event occurs after
January 17, 1999 but on or before January 17, 2001, the amount of the Capital
Investment plus an amount equal to a 32.5% compounded annual average return on
the Capital Investment; or (iii) if the Triggering Event occurs after January
17, 2001, the amount of the Capital Investment plus an amount equal to a 30%
compounded annual average return on the Capital Investment. For purposes of
computing the Pool A IRR Amount as of any given date, the
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<PAGE> 3
Committee shall take into consideration the value of dividends or other
distributions made by the Company to the Stockholders between January 17, 1996
and such date.
(p) "POOL B IRR AMOUNT" means an amount which is equal to the
amount of the Capital Investment plus an amount equal to a 25.0% compounded
annual average return on the Capital Investment. For purposes of computing the
Pool B IRR Amount as of any given date, the Committee shall take into
consideration the value of dividends or other distributions made by the Company
to the Stockholders between January 17, 1996 and such date.
(q) "PUBLIC OFFERING" refers to a public offering and sale of
equity securities of the Company pursuant to an effective registration
statement on Form S-1 under the Securities Act of 1933, as amended, or any
similar Federal statute then in effect.
(r) "QUALIFIED PUBLIC OFFERING" refers to a Public Offering of
Common Stock, at the conclusion of which the aggregate number of issued and
outstanding shares of Common Stock that have been sold to the public pursuant
to one or more effective registration statements under the Securities Act of
1933, as amended, or any similar Federal statute then in effect is equal to at
least 20% of the Capital Stock after giving effect to such sale.
(s) "SALE OF THE COMPANY" refers to (x) a merger of the Company, a
sale of all or substantially all of the assets of the Company, or a sale of all
of the Class A common stock, par value $.01 per share, of the Company and
Common Stock of the Company, (y) in which all of the stockholders of the
Company receive in such transaction the same consideration consisting of cash
and/or securities that are publicly traded and have a total market valuation
for all outstanding securities of the same publicly traded class after the
transaction of at least $250 million.
(t) "STOCKHOLDERS" refers to any person or entity other than the
Company which is a party to the Stockholders Agreement.
(u) "STOCKHOLDERS AGREEMENT" refers to the Stockholders Agreement
Among Now Holdings, Inc. and its stockholders, dated as of January 17, 1996, as
it may be amended thereafter from time-to-time.
(v) "TRIGGERING EVENT" refers to the first to occur of the
following:
(1) The closing date of a Sale of the Company.
(2) The closing date of a Qualified Public Offering.
(3) The first date as of which the Stockholders have
received from the Company as dividends, distributions
or for the repurchase of Class A Common Stock, liquid
assets equal in aggregate value to the Capital
Investment as of such date. For purposes of this
item (3), liquid assets shall include only cash
and/or securities that are publicly traded and have a
total market valuation for
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<PAGE> 4
all outstanding securities of the same publicly traded
class after the transaction of at least $250 million
(valued at the fair market value thereof as determined
by the Board of Directors of the Company).
provided, however, that an event described above shall not result in a
Triggering Event for purposes of Article IV of the Plan unless the then Capital
Investment Stock Value on the date of such event equals or exceeds the Pool A
IRR Amount and an event described above shall not result in a Triggering Event
for purposes of Article V of the Plan unless the then Capital Investment Stock
Value on the date of such event equals or exceeds the Pool B IRR Amount.
III. PARTICIPATION
Any employee of the Company or an Affiliate who has been granted an
Award shall be a Plan Participant; provided, however, that (i) no individual
shall become a Plan Participant after a Triggering Event and (ii) except as
specifically provided in the Plan, an individual shall cease to be a
Participant in the Plan for all purposes as of the date he is no longer
employed by the Company or an Affiliate.
IV. POOL A DISTRIBUTIONS
(a) POOL A BASE DISTRIBUTION AMOUNT. For any Participant who is
employed by the Company as of a Pool A Triggering Event, the Pool A base
distribution amount determined as of such date (the "Base Distribution Amount")
shall be a dollar amount equal to:
(1) the lesser of (i) the product of the Capital Stock Value
multiplied by 0.01 and (ii) the maximum amount of payments
under the Plan that would not result in a Capital Investment
Stock Value below the Pool A IRR Amount; multiplied by
(2) a fraction, the numerator of which is the number of shares of
Common Stock issued or issuable to such Participant as of such
date under his Awards, and the denominator of which is the
total number of shares of Common Stock issued or issuable to
all Participants as of such date under their Awards.
(b) FORM AND TIME OF DISTRIBUTIONS. Base Distribution Amount
distributions under the Plan resulting from a Pool A Triggering Event other
than a Qualified Public Offering Pool A Triggering Event shall be paid in
single lump sum cash payments which are paid within the 30 day period
immediately following the Pool A Triggering Event. If the Pool A Triggering
Event results from a Qualified Public Offering, the distribution to a
Participant of the Base Distribution Amount determined pursuant to Paragraph
(a) above shall be paid as follows:
If the Pool A
Triggering Event
occurs on or before
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<PAGE> 5
January 17, 1998: One-third of the Base Distribution
Amount determined pursuant to Paragraph
(a) above will be paid on the date of
the Pool A Triggering Event, one third
of such Base Distribution Amount will be
paid on the first anniversary of the
Pool A Triggering Event and one third of
such Base Distribution Amount will be
paid on January 17, 1999; provided,
however, that any portion of the Base
Distribution Amount paid to a
Participant more than 30 days after the
Pool A Triggering Event will be
adjusted as set forth in Paragraph (c)
below.
If the Pool A
Triggering Event
occurs after January 17,
1998 but on or before One-half of the Base Distribution Amount
January 17, 1999: determined pursuant to Paragraph (a)
above will be paid on the date of the
Pool A Triggering Event and the
remaining one half of such Base
Distribution Amount will be paid on
January 17, 1999; provided, however,
that any portion of the Base
Distribution Amount paid to a
Participant more than 30 days after the
Pool A Triggering Event will be
adjusted as set forth in Paragraph (c)
below.
If the Pool A
Triggering Event
occurs after All of the Base Distribution Amount
January 17, 1999: determined pursuant to Paragraph (a)
above will be paid within 30 days after
the Pool A Triggering Event.
The Company will have an additional 30 days after the scheduled date of a Plan
distribution to calculate and make the required payments under the Plan. A
Participant's Pool A distributions resulting from a Qualified Public Offering
Pool A Triggering Event shall be paid in cash or in shares of Capital Stock or
in a combination thereof as determined by the Committee.
(c) ADJUSTMENTS TO BASE DISTRIBUTION AMOUNT.
If the Pool A Triggering Event occurs before January 17, 1999 and
results from a Qualified Public Offering, the dollar amount of any Base
Distribution Amount not paid within 30 days after the Pool A Triggering Event
will be adjusted to an amount equal to:
(1) the per share market price of the Company's publicly traded
Capital Stock as of the date the Participant is scheduled to
receive a payment, divided by the per share
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<PAGE> 6
market price of the Company's publicly traded Capital Stock as
of the date of the Pool A Triggering Event; multiplied by
(2) the dollar amount of the Base Distribution Amount which is
scheduled to be paid on such date.
(d) FORFEITURES. If a Participant who was employed by the Company
as of a Pool A Triggering Event is later involuntarily terminated by the
Company without cause, or if employment is terminated due to the death of the
employee, any Base Distribution Amounts then remaining payable to him or her
pursuant to Paragraph (b) above shall be paid to him or her within 30 days
after the date of such employment termination; provided, however, that any
remaining Base Distribution Amount payable to the Participant upon such
employment termination will be adjusted as set forth in Paragraph (c) above.
If a Participant who was employed by the Company as of a Pool A Triggering
Event terminates employment for any other reason, all Base Distribution Amounts
then remaining payable to him or her pursuant to paragraph (b) above shall be
forfeited.
V. POOL B DISTRIBUTIONS
(a) POOL B DISTRIBUTION AMOUNT. The total Pool B distribution
amount payable under the Plan with respect to the Pool B Triggering Event shall
be an amount equal to $3,490,000.
(b) TIME AND ALLOCATION OF POOL B DISTRIBUTION AMOUNT. The Pool B
distribution amount described in Paragraph (a) above with respect to the Pool B
Triggering Event shall be paid in installments pursuant to the following
schedule:
If the Pool B
Triggering Event
occurs on or before
January 17, 1997: One-fifth of the Pool B Distribution
amount described pursuant to Paragraph
(a) above will be paid as soon as
practicable after January 17, 1997 and
the remaining portion of such Pool B
distribution amount will be paid in four
equal annual installments on January 17,
1998, January 17, 1999, January 17, 2000
and January 17, 2001.
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<PAGE> 7
If the Pool B
Triggering Event
occurs after
January 17, 1997 but
before January 17, 1998: One-fifth of the Pool B distribution
amount described pursuant to Paragraph
(a) above will be paid as soon as
practicable after the date of the Pool B
Triggering Event and the remaining
portion of such Pool B distribution
amount will be paid in four equal annual
installments on January 17, 1998,
January 17, 1999, January 17, 2000 and
January 17, 2001.
If the Pool B
Triggering Event
occurs on or after
January 17, 1998 but
before January 17, 1999: Two-fifths of the of the Pool B
distribution amount described pursuant
to Paragraph (a) above will be paid as
soon as practicable after the date of
the Pool B Triggering Event and the
remaining portion of such Pool B
distribution amount will be paid in
three equal annual installments on
January 17, 1999, January 17, 2000 and
January 17, 2001.
If the Pool B
Triggering Event
occurs on or after
January 17, 1999 but Three-fifths of the Pool B distribution
before January 17, 2000: amount described pursuant to Paragraph
(a) above will be paid as soon as
practicable after the date of the Pool B
Triggering Event and the remaining
potion of such Pool B distribution
amount will be paid in two equal
installments on January 17, 2000 and
January 17, 2001.
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<PAGE> 8
If the Pool B
Triggering Event
occurs on or after
January 17, 2000 but
before January 17, 2001: Four-fifths of the Pool B distribution
amount described pursuant to Paragraph
(a) above will be paid as soon as
practicable after the date of the Pool B
Triggering Event and the remaining
portion of such Pool B distribution
amount will be paid on January 17,
2001.
If the Pool B
Triggering Event
occurs on or after
January 17, 2001: All of the Pool B distribution amount
described in Paragraph (a) above will be
paid as soon as practicable after the
date of the Pool B Triggering Event.
Amounts payable as of a given date in accordance with the foregoing schedule
will be allocated to those individuals who are Plan Participants as of such
date and each such Plan Participant shall be entitled to a portion of the
payable amount determined by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock issued or issuable
to such Participant as of such date under his Awards, and the denominator of
which is the total number of shares of Common Stock issued or issuable to all
such Participants as of such date under their Awards .
(c) FORM OF POOL B DISTRIBUTIONS. Pool B distributions to a
Participant under the Plan shall be paid in cash except that if the Pool B
Triggering Event results from the occurrence of a Qualified Public Offering,
the Company shall have the right, in its sole discretion, to effect such
distributions in cash or in shares of Capital Stock or in a combination thereof
as determined by the Committee.
(d) FORFEITURES. If a Participant who was employed by the Company
or an Affiliate as of a Pool B Triggering Event is later involuntarily
terminated by the Company or an Affiliate without cause, or if employment is
terminated due to the death of the employee, any Pool B distribution amounts
then remaining payable to him or her pursuant to Paragraph (b) above shall be
paid to him or her as if such Participant continued to be employed by the
Company or an Affiliate. If a Participant who was employed by the Company or
an Affiliate as of a Pool B Triggering Event terminates employment for any
other reason, all Pool B distribution amounts then remaining payable to him or
her pursuant to paragraph (b) above shall be forfeited and the amount of such
remaining Pool B distributions which are so forfeited shall be used to increase
the amounts of Pool B distributions then remaining payable to other
Participants as follows:
(1) The forfeited Pool B distribution amount which would have
otherwise been payable as of a given date to the forfeiting
Participant (the "Distribution Date Forfeiture
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<PAGE> 9
Amount") shall be applied to increase the Pool B distribution
amounts payable as of such date to the Participants entitled
to Pool B distributions as of such date.
(2) The increase in the Pool B distributions for a Participant
entitled to an increase pursuant to item (1) above shall be
determined by multiplying the Distribution Date Forfeiture
Amount by a fraction, the numerator of which is the Pool B
distribution amount payable as of such date to such
Participant and the denominator of which is the total Pool B
distribution amount payable to all Participants as of such
date and then by increasing such Participant's Pool B
distribution amount for such date by the amount so determined.
VI. TAX BONUS
In addition to amounts payable under the Plan pursuant to Articles IV
and V above, the Company shall pay to any Participant with respect to any
distributions under the Plan which are subject to the tax imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended, (the "Code") a
tax bonus as described in this Article VI. The tax bonus payable to a
Participant under this Paragraph (d) shall be equal to the amount determined by
(i) determining the aggregate amounts distributed to the Participant pursuant
to Articles IV and V above which are treated as excess parachute payments
(within the meaning of Section 280G of the Code or the corresponding provision
of any successor statute) (adjusted as appropriate, to reflect any delayed or
installment payments) and which are subject to the tax imposed under Section
4999 of the Code or the corresponding provision of any successor statute (the
"Parachute Amount"), (ii) determining the decimal which expresses the maximum
rate of tax imposed under section 4999 of the Code or the corresponding
provision of any successor statute (the "Parachute Tax Rate") and the maximum
statutory rate, expressed as a decimal, of Federal income tax applicable to
the Participant (after reflecting all deductions and adjustments) applicable to
the Participant for the taxable year in which he receives the distributions
pursuant to Articles IV and V above (the" Regular Tax Rate"), (iii) multiplying
the Parachute Amount by the Parachute Tax Rate, (iv) multiplying the amount
determined in item (iii) by 2/3 and (v) multiplying the amount determined in
item (iv) by a fraction, the numerator of which is one and the denominator of
which is one minus the Regular Tax Rate.
VII. TERMINATION OF EMPLOYMENT PRIOR TO TRIGGERING EVENT
In the event that a Participant ceases to be employed with the Company
and its Affiliates for any reason prior to a Triggering Event he or she will
not be entitled to any Plan distributions resulting under the Plan with respect
to such Triggering Event.
VIII. ARBITRATION
Any and all claims, demands, cause of action, disputes, controversies
and other matters in question arising out of or relating to the Plan, any
provision hereof, the alleged breach thereof, or in any way relating to the
subject matter of the Plan, involving the Company or an Affiliate thereof and a
Participant (all of which are referred to herein as "Claims"), even though some
or all of such
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<PAGE> 10
Claims allegedly are extra-contractual in nature, whether such Claims sound in
contract, tort or otherwise, at law or in equity, under state or federal law,
whether provided by statute or the common law, for damages or any other relief,
including equitable relief and specific performance, shall be resolved and
decided by binding arbitration pursuant to the Federal Arbitration Act in
accordance with the Commercial Arbitration Rules then in effect with the
American Arbitration Association (the "AAA"). The party requesting
arbitration shall, when filing a claim with the AAA, request that the Houston,
Texas office of the AAA provide a list of potential arbitrators to both
parties. The parties shall thereafter have sixty (60) days to select an
arbitrator from such list, with such selection to be by mutual agreement. If
the parties fail to select an arbitrator within such time by mutual agreement,
then either party may request that the Chief Judge of the U.S. District Court
for the Southern District of Texas appoint an arbitrator, and any such
appointment shall be binding on the parties. The arbitration proceeding shall
be conducted in Houston, Texas. The decision of the arbitrator shall be
binding on the Participant, and the Company and their Affiliates. Judgment
upon any award rendered in any such arbitration proceeding may be entered by
any federal or state court having jurisdiction. This arbitration provision
shall be enforceable in either federal or state court. The enforcement of this
arbitration provision and all procedural aspects thereof, including but not
limited to, the construction and interpretation of this arbitration provision,
the scope of the arbitrable issues, allegations of waiver, delay or defenses to
arbitrability, and the rules governing the conduct of the arbitration, shall be
governed by and construed pursuant to the Federal Arbitration Act. In deciding
the substance of any Claim, the arbitrator shall apply the substantive laws of
the State of Texas; provided, however, that the arbitrator shall have no
authority to award treble, exemplary or punitive type damages under any
circumstances regardless of whether such damages may be available under Texas
law, the parties hereby waiving their right, if any to recover treble,
exemplary or punitive type damages in connection with any Claims. The
arbitrator may award the costs of arbitration (including without limitation the
fees of the arbitrator and the AAA), as well as any or all attorney's fees, and
any other related costs, in any manner deemed fair, equitable, and reasonable
by the arbitrator based upon the relative merits of the positions espoused by
the respective parties to the arbitration, the relative financial circumstances
of the respective parties to the arbitration and such other considerations as
the arbitrator deems appropriate and relevant.
IX. ADMINISTRATIVE PROVISIONS
(a) ADMINISTRATIVE GUIDELINES. The Plan shall be implemented and
administered in accordance with such rules, regulations and interpretations as
may be established from time to time by the Committee for the implementation
and administration of this Plan that are not inconsistent with the provisions
thereof.
(b) ADMINISTRATION. The Plan shall be administered by the
Committee which shall have the power and responsibility to take such actions as
may be appropriate or necessary to effectuate orderly administration of the
Plan and to interpret and construe the terms and provisions of the Plan;
provided, however, that such interpretations and constructions shall be
consistent with the written provisions of the Plan.
-10-
<PAGE> 11
(c) LIMITATION OF LIABILITY. The members of the Committee and
any other person acting under the direction of the Committee, shall not be
liable for any act or failure to act hereunder, except for gross negligence or
fraud, and the Company shall indemnify the members of the Committee, and such
other persons against all expenses, fines, judgments, and/or penalties incurred
in connection with any claim or proceeding seeking to impose such liability.
X. OTHER PROVISIONS
(a) EMPLOYMENT. Nothing in this Plan nor any action taken by the
Company, the Board of Directors of the Company or the Committee under the
provisions hereof shall be construed as a contract of employment between the
Company and a Participant or interfere with or limit in any way the right of
the Company to terminate any such Participant's employment at any time, nor
confer upon any Participant any right to continue in the employ of the Company.
(b) NONTRANSFERABILITY. No right or interest of any Participant
under this Plan shall be assignable or transferable, pledged or encumbered in
any manner, or subject to any lien, directly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge and
bankruptcy.
(c) EXTRAORDINARY EVENT ADJUSTMENTS. If an extraordinary event
outside of the control of the Company occurs which would result in a
substantial distortion from the ordinary operation of the Plan, the Board of
Directors of the Company, in its sole discretion, may make such adjustment to
the operation of the Plan as it determines to be appropriate.
(d) AMENDMENTS AND TERMINATION. The Company at any time and from
time to time, may modify or amend, in whole or in part, any or all of the
provisions of this Plan or suspend or terminate the Plan entirely; provided,
however, that in the event of a termination of the Plan prior to a Triggering
Event, each Participant shall be entitled to a Plan distribution in full
satisfaction of all amounts owed under the Plan equal to the distribution
amount or amounts determined pursuant to Paragraphs (b) of Articles IV and V
above, substituting the date of termination of the Plan for the date of a
Triggering Event, if the fair market value as determined by the Board of
Directors of the Company of the Capital Investment Stock as of such date equals
or exceeds the Pool A IRR Amount or the Pool B IRR Amount, as applicable, as of
such date. In the event of a Plan termination after a Triggering Event, each
Participant shall be entitled to a Plan distribution calculated in the same
manner as the distribution made to a Participant who is involuntarily
terminated by the Company without cause. The Plan shall automatically terminate
and no further amounts shall be paid under the Plan following payment of the
last amount owed as a result of occurrence of a Triggering Event.
(e) GOVERNING LAW. This Plan shall be construed in accordance
with and governed by the laws of the State of Texas.
(f) WITHHOLDING TAXES. The Company shall have the right to deduct
from all payments under this Plan any federal, state or local taxes required by
law to be withheld with respect to such payments.
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<PAGE> 12
(g) NATURE OF PLAN. The Plan shall constitute an unfunded,
unsecured obligation of the Company to make payments of incentive compensation
to certain employees from its general assets in accordance with the Plan.
Accordingly:
(1) accounting maintained by the Company merely
constitute mechanisms for measuring such incentive
compensation and do not constitute a property right
or interest in the Company or in any asset owned by
the Company or its subsidiaries;
(2) neither the establishment of the Plan, nor the
creation or maintenance of Plan accounting records
shall be deemed to create an escrow or trust fund of
any kind; and
(3) the Participant and any person claiming under
Participant shall rely solely on the unsecured
promise of the Company set forth herein, and nothing
in the Plan shall be construed to give the
Participant or anyone claiming under the Participant
any right, title, interest or claim in or to any
specific asset, fund, entity, reserve, account, or
property of any kind whatsoever owned by the Company
or any Affiliate of the Company.
EXECUTED this _____ day of ___________________________, 1996, to
supersede and replace any Plan documents heretofore adopted by and executed on
behalf of the Company.
ATTEST: NOW HOLDINGS, INC.
By
- ------------------------------------------- ------------------------------
JAMES C. COMIS, III, SENIOR VICE JOEL V. STAFF, PRESIDENT AND
PRESIDENT AND ASSISTANT SECRETARY CHIEF EXECUTIVE OFFICER
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<PAGE> 1
EXHIBIT 10.10
RESTRICTED STOCK AGREEMENT
AGREEMENT made this 16th day of January, 1996 between NOW HOLDINGS,
INC., a Delaware corporation (the "Company"), and Joel V. Staff ("Employee").
1. AWARD.
(a) SHARES. Pursuant to the NOW Holdings, Inc. Stock
Award and Long-Term Incentive Plan (the "Plan") and upon payment to the Company
by Employee of $0.01 per share cash, 25,674 shares (the "Restricted Shares") of
the Company's common stock, par value $0.01 per share ("Stock"), shall be
issued by the Company as hereinafter provided in Employee's name subject to
certain restrictions thereon.
(b) ISSUANCE OF RESTRICTED SHARES. The Restricted Shares
shall be issued upon acceptance hereof by Employee and upon satisfaction of the
conditions of this Agreement.
(c) PLAN INCORPORATED. Employee acknowledges receipt of
a copy of the Plan, and agrees that this award of Restricted Shares shall be
subject to all of the terms and conditions set forth in the Plan, including
future amendments thereto, if any, pursuant to the terms thereof, which Plan is
incorporated herein by reference as a part of this Agreement.
2. RESTRICTED SHARES. Employee hereby accepts the Restricted
Shares when issued and agrees with respect thereto as follows:
(a) FORFEITURE RESTRICTIONS. The Restricted Shares may
not be sold, assigned, pledged, exchanged, hypothecated or otherwise
transferred, encumbered or disposed of to the extent then subject to the
Forfeiture Restrictions (as hereinafter defined), and in the event of
termination of Employee's employment with the Company for any reason, Employee
shall, for no consideration other than payment by the Company to Employee of
$0.01 per share cash, forfeit, effective as of the time of termination of
employment, to the Company all Restricted Shares to the extent then subject to
the Forfeiture Restrictions. It is understood and agreed by Employee that the
Company may from time to time declare dividends on, and make distributions with
respect to, its Common Stock, including without limitation, securities or other
property received by the Company in connection with the sale of a portion of
the Company's business. In the event that Employee is terminated for any
reason prior to the actual payment of such dividend or distribution (and
whether before or after the declaration of, or record date for, such dividend
or distribution and whether before or after completion of such sale of a
portion of the Company's business), Employee will not be entitled to receive
any such dividends or distributions with respect to any Restricted Shares that
are forfeited to the Company as provided herein. If Employee remains an
Employee at the time of actual payment of such dividend or distribution,
Employee shall be entitled to receive such dividends and distributions only
with respect to Restricted Shares
<PAGE> 2
as to which Forfeiture Restriction have lapsed. Any remaining dividends and
distributions with respect to Restricted Shares shall be paid to Employee at
the time of subsequent lapsing of Forfeiture Restriction on such Restricted
Shares. The prohibition against transfer and the obligation to forfeit and
surrender Restricted Shares to the Company upon termination of employment are
herein referred to as "Forfeiture Restrictions." The Forfeiture Restrictions
shall be binding upon and enforceable against any transferee of Restricted
Shares.
(b) LAPSE OF FORFEITURE RESTRICTIONS. The Forfeiture
Restrictions shall lapse as to the Restricted Shares in accordance with the
following schedule provided that Employee has been continuously employed by the
Company from the date of this Agreement through the lapse date:
<TABLE>
<CAPTION>
Percentage of Total
Number of Restricted Shares
as to Which Forfeiture
Lapse Date Restrictions Lapse
---------- ------------------
<S> <C>
First Anniversary of the date of this Agreement 20%
Second Anniversary of the date of this Agreement an additional 20%
Third Anniversary of the date of this Agreement an additional 20%
Fourth Anniversary of the date of this Agreement an additional 20%
Fifth Anniversary of the date of this Agreement the final 20%
</TABLE>
In the event of a merger or consolidation of the Company, a sale of
all or substantially all of the assets of the Company, or a sale of all of the
outstanding Class A Common Stock and Common Stock of the Company, in which all
of the stockholders of the Company receive in such transaction cash and/or
securities that are publicly traded and have a total market valuation for all
outstanding securities of the same publicly traded class after the transaction
of at least $250 million ("Acceleration Transaction"), all of the Forfeiture
Restrictions shall lapse immediately prior to the effectiveness of such
transaction.
(c) TAX BONUS. Upon the occurence of an Acceleration
Transaction, the Company shall pay to the Employee with respect to any
Acceleration Transaction which is subject to the tax imposed under Section 4999
of the Internal Revenue Code of 1986, as amended, (the "Code") a tax bonus as
described in this Paragraph (c). The tax bonus payable to an Employee under
this Paragraph (c) shall be equal to the amount determined by (i) determining
the portion of the Acceleration Transaction which is treated as excess
parachute payments (within the meaning of Section 280G of the Code or the
corresponding provision of any successor statute) and which is subject to the
tax imposed under Section 4999 of the Code or the corresponding provision of
any
-2-
<PAGE> 3
successor statute (the "Parachute Amount"), (ii) determining the decimal which
expresses the maximum rate of tax imposed under section 4999 of the Code or the
corresponding provision of any successor statute (the "Parachute Tax Rate") and
the maximum statutory rate, expressed as a decimal, of Federal income tax
applicable to the Employee (after reflecting all deductions and adjustments)
applicable to the Employee for the taxable year in which the Acceleration
Transaction occurs (the" Regular Tax Rate"), (iii) multiplying the Parachute
Amount by the Parachute Tax Rate, (iv) multiplying the amount determined in
item (iii) by 2/3 and (v) multiplying the amount determined in item (iv) by a
fraction, the numerator of which is one and the denominator of which is one
minus the Regular Tax Rate.
(d) CERTIFICATES. A certificate evidencing the
Restricted Shares shall be issued by the Company in Employee's name, or at the
option of the Company, in the name of a nominee of the Company, pursuant to
which Employee shall have voting rights and shall be entitled to receive all
dividends unless and until the Restricted Shares are forfeited pursuant to the
provisions of this Agreement. The certificate shall bear a legend as
determined by the committee which administers the Plan (the "Committee")
evidencing the nature of the Restricted Shares, and the Company may cause the
certificate to be delivered upon issuance to the Secretary of the Company or to
such other depository as may be designated by the Committee as a depository for
safekeeping until the forfeiture and surrender occurs or the Forfeiture
Restrictions lapse pursuant to the terms of the Plan and this award. Upon
request of the Committee, Employee shall deliver to the Company a stock power,
endorsed in blank, relating to the Restricted Shares then subject to the
Forfeiture Restrictions. Upon the lapse of the Forfeiture Restrictions without
forfeiture and surrender, the Company shall cause a new certificate or
certificates to be issued without legend in the name of Employee in exchange
for the certificate evidencing the Restricted Shares. Notwithstanding any
other provisions of this Agreement, the issuance or delivery of any shares of
Stock (whether subject to restrictions or unrestricted) may be postponed for
such period as may be required to comply with applicable requirements of any
national securities exchange or any requirements under any law or regulation
applicable to the issuance or delivery of such shares. The Company shall not
be obligated to issue or deliver any shares of Stock if the issuance or
delivery thereof shall constitute a violation of any provision of any law or of
any regulation of any governmental authority or any national securities
exchange.
3. STOCKHOLDERS AGREEMENT. Following the lapse of the Forfeiture
Restrictions as to Restricted Shares (whether in whole or in part), the shares
as to which the Forfeiture Restrictions lapsed shall be fully subject to all
provisions of the Stockholders Agreement among NOW Holdings, Inc. and its
Stockholders dated as of January 16, 1996.
4. WITHHOLDING OF TAX. To the extent that the receipt of the
Restricted Shares or the lapse of any Forfeiture Restrictions results in income
to Employee for federal or state income tax purposes, Employee shall deliver to
the Company at the time of such receipt or lapse, as the case may be, such
amount of money or, if the Committee so determines, shares of unrestricted
Stock as the Company may require to meet its obligation under applicable tax
laws or regulations, and, if Employee fails to do so, the Company is authorized
to withhold from any cash or Stock
-3-
<PAGE> 4
remuneration then or thereafter payable to Employee any tax required to be
withheld by reason of such resulting compensation income.
5. STATUS OF STOCK. Employee agrees that the Restricted Shares
will not be sold or otherwise disposed of in any manner which would constitute
a violation of any applicable federal or state securities laws. Employee also
agrees (i) that the certificates representing the Restricted Shares may bear
such legend or legends as the Committee deems appropriate in order to assure
compliance with applicable securities laws, (ii) that the Company may refuse to
register the transfer of the Restricted Shares on the stock transfer records of
the Company if such proposed transfer would in the opinion of counsel
satisfactory to the Company constitute a violation of any applicable securities
law and (iii) that the Company may give related instructions to its transfer
agent, if any, to stop registration of the transfer of the Restricted Shares.
6. EMPLOYMENT RELATIONSHIP. For purposes of this Agreement,
Employee shall be considered to be in the employment of the Company as long as
Employee remains an employee of either the Company, any successor corporation
or a parent or subsidiary corporation (as defined in section 424 of the
Internal Revenue Code of 1986, as amended) of the Company or any successor
corporation or a Subsidiary (as defined in the Plan). Any question as to
whether and when there has been a termination of such employment, and the cause
of such termination, shall be determined by the Committee, and its
determination shall be final.
7. COMMITTEE'S POWERS. No provision contained in this Agreement
shall in any way terminate, modify or alter, or be construed or interpreted as
terminating, modifying or altering any of the powers, rights or authority
vested in the Committee pursuant to the terms of the Plan, including, without
limitation, the Committee's rights to make certain determinations and elections
with respect to the Restricted Shares.
8. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of any successors to the Company and all persons lawfully
claiming under Employee.
9. SECTION 83(B) ELECTION. As a condition to receiving the
Restricted Shares, Employee agrees to make the election pursuant to Section
83(b) of the Internal Revenue Code of 1986, as amended, to include the excess
of the fair market value of the Restricted Shares as of the date of issuance
over the amount paid by the Employee for such Restricted Shares in gross income
in the year of such issuance.
10. NOTICES. Any notice or other communication required or
permitted to be made or given hereunder will be sufficiently made or given if
sent by certified mail addressed, if to Employee, at his address as set forth
in the Company's regular employment records and, if to Company, addressed to it
at its principal office.
11. GOVERNING LAW. This Plan shall be governed by, and construed
in accordance with, the internal laws of the State of Texas without regard to
the principles of conflicts of law
-4-
<PAGE> 5
thereof that would require the application of the laws of any jurisdiction
other than Texas, except to the extent that it implicates matters which are the
subject of the General Corporation Law of the State of Delaware which matters
shall be governed by the latter law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by an officer thereunto duly authorized, and Employee has executed
this Agreement, all as of the date first above written.
NOW HOLDINGS, INC.
By: /S/ JAMES C. COMIS III
------------------------------------
James C. Comis III
Senior Vice President-Finance
/S/ ILLEGIBLE
---------------------------------------
EMPLOYEE
-5-
<PAGE> 6
Joel V. Staff
One Winners Circle
Houston, TX 77024
Registered Mail
February 13, 1996
District Director
Internal Revenue Service
Austin, TX 73301-0002
Dear Sir:
This letter constitutes an election under Section 83(b) of the Internal Revenue
Code and Regulation Section 1.83-2(c) on behalf of:
Joel V. Staff
One Winners Circle
Houston, TX 77024
Social Security No. ###-##-####
The property with respect to which this election is being made is 25,674 shares
of stock of NOW Holdings, Inc., a Delaware corporation. The shares were
transferred to me January 17, 1996 and the taxable year to which this election
relates is calendar year 1996.
The fair market value of this property at the time of transfer (determined
without regard to any restrictions other than restrictions which by their terms
will never lapse) is $3,080.88 and the purchase price of the property is
$256.74. The property is subject to restrictions which provide for vesting of
the property at 20% per year beginning January 17, 1997. If prior to the
vesting of the property, the undersigned's employment by NOW Holdings, Inc. or
its indirect subsidiary National-Oilwell, L.P. terminates for any reason, the
undersigned must resell the property to NOW Holdings, Inc. for the price of
$256.74.
Copies of this election have been provided to NOW Holdings, Inc., 666 Steamboat
Road, Greenwich, CT 06830 (the person for whom the services are performed). A
copy of the election will be filed with my Federal Income Tax return for 1996.
Very truly yours,
/s/ JOEL V. STAFF
- --------------------------------
Joel V. Staff
JVS:nc
taxelect.doc
<PAGE> 1
EXHIBIT 10.11
MANAGEMENT SERVICES AGREEMENT
This Agreement is made as of January 16, 1996, effective as of January
1, 1996, by and between NOW Holdings, Inc., a Delaware corporation (the
"Company"), and Duff & Phelps/Inverness LLC, a Connecticut limited liability
company ("DPI").
WHEREAS, the Company desires to retain DPI and DPI desires to perform
for the Company and its subsidiaries certain services,
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
1. TERM. This Agreement shall be in effect for an initial term
of five (5) years commencing on the date hereof (the "Term"), and shall be
automatically extended thereafter on a year to year basis unless the Company or
DPI provides written notice of its desire to terminate this Agreement to the
other party 90 days prior to the expiration of the Term or any extension
thereof. This Agreement shall terminate at the time that DPI, DPI Oil Service
Partners Limited Partnership, DPI Partners I, DPI Partners II and their
respective affiliates own in the aggregate less than fifty percent (50%) of the
Class A Common Stock and fifty percent (50%) of the Common Stock of the Company
owned by them at the closing of the Purchase Agreement dated September 22, 1995
relating to the acquisition of National-Oilwell.
2. SERVICES. DPI shall perform or cause to be performed such
services for the Company and its subsidiaries as directed by the Company's
board of directors (the "Board"), which may include, without limitation, the
following:
(a) supporting and assisting executive management;
(b) identification, support, negotiation and analysis of
acquisitions and dispositions by the Company or its subsidiaries;
(c) support, negotiation and analysis of financing
alternatives, including, without limitation, in connection with
acquisitions, capital expenditures and refinancing of existing
indebtedness;
(d) finance functions, including assistance in the
preparation of financial projections, and monitoring of compliance
with financing agreements;
(e) assisting the Board of Directors and management in
the search and hiring of executives; and
<PAGE> 2
(f) other services for the Company and its subsidiaries
upon which the Board and DPI agree.
3. ADVISORY FEES AND TRANSACTION FEES.
(a) Payment to DPI for services rendered in connection
with the performance of services pursuant to this Agreement shall be
$1,000,000 per year ("Advisory Fees") plus reasonable out-of-pocket
expenses of DPI, payable by the Company on a quarterly basis in
advance commencing January 15, 1996.
(b) During the term of this Agreement, DPI shall be
entitled to receive from the Company a transaction fee in connection
with the consummation of each acquisition by the Company of an
additional business or disposition by the Company of an existing
business in an amount equal to 1% of the aggregate transaction value
of such transaction (each such payment, a "Transaction Fee"), which
fee shall be in the amount of $1,800,000 in connection with the
acquisition of National-Oilwell; provided that, DPI may waive the
payment of a Transaction Fee in connection with any acquisition as to
which DPI and the Board mutually agree that a Transaction Fee is not
appropriate; and further provided, that a Transaction Fee of an
aggregate of $1,000,000 shall be paid by the Company to DPI and First
Reserve Corporation (to be allocated two-thirds to DPI and one-third
to First Reserve) upon the consummation of any transaction with
Continental-Emsco or any of its Affiliates that involves at least the
drilling, tubular and distribution segments of the Company's business.
(c) The timing and the amounts of payments to DPI under
this Agreement shall be subject to the terms of the Credit Agreement
dated December 29, 1995 between General Electric Capital Corporation,
Goldman, Sachs & Co., GECC Capital Markets Group, Inc. and other
lenders, National-Oilwell (UK) Limited and a subsidiary of the
Company.
4. PERSONNEL. DPI shall provide and devote to the performance of
this Agreement such time and such partners, employees and agents of DPI as DPI
shall deem appropriate to the furnishing of the services required.
5. LIABILITY. Neither DPI nor any of its affiliates, partners,
employees or agents shall be liable to the Company or its subsidiaries or
affiliate for any loss, liability, damage or expense arising out of or in
connection with the performance of services contemplated by this Agreement,
unless such loss, liability, damage or expense shall be proven to result
directly from gross negligence, willful misconduct or bad faith on the part of
DPI, its affiliates, partners, employees or agents acting within the scope of
their employment or authority.
6. INDEMNITY. The Company and its subsidiaries shall defend,
indemnify and hold harmless DPI, its affiliates, partners, employees and agents
from and against any and all loss, liability, damage, or expenses arising from
any claim (a "Claim") by any person with respect to, or in any way related to,
the performance of services contemplated by this Agreement (including
-2-
<PAGE> 3
attorneys' fees) (collectively, "Claims") resulting from any act or omission of
DPI, its affiliates, partners, employees or agents, other than for Claims which
shall be proven to be the direct result of gross negligence, bad faith or
willful misconduct by DPI, its affiliates, partners, employees or agents. The
Company and its subsidiaries shall defend at its own cost and expense any and
all suits or actions (just or unjust) which may be brought against the Company,
its subsidiaries and DPI, its officers, directors, affiliates, partners,
employees or agents or in which DPI, its affiliates, partners, employees or
agents may be impleaded with others upon any Claim or Claims, or upon any
matter, directly or indirectly, related to or arising out of this Agreement or
the performance hereof by DPI, its affiliates, partners, employees or agents,
except that if such damage shall be proven to be the direct result of gross
negligence, bad faith or willful misconduct by DPI, its affiliates, partners,
employees or agents, then DPI shall reimburse the Company and its subsidiaries
for the costs of defense incurred by the Company and its subsidiaries. THIS
INDEMNITY SHALL APPLY EVEN IF A CLAIM WAS SUSTAINED AS A RESULT OF THE SOLE OR
CONCURRENT ORDINARY NEGLIGENCE OF DPI, ITS AFFILIATES, PARTNERS, EMPLOYEES OR
AGENTS, OR RESULTS FROM THE SOLE OR CONCURRENT LIABILITY OF DPI, ITS
AFFILIATES, PARTNERS, EMPLOYEES OR AGENTS IMPOSED VICARIOUSLY ON DPI, ITS
AFFILIATES, PARTNERS, EMPLOYEES OR AGENTS WITHOUT FAULT, OR RESULTS FROM SOLE
OR CONCURRENT STRICT LIABILITY IMPOSED ON DPI, ITS AFFILIATES, PARTNERS,
EMPLOYEES OR AGENTS WITHOUT FAULT.
7. NOTICES. All notices hereunder shall be in writing and shall
be delivered personally or mailed by United States mail, postage prepaid,
addressed to the parties as follows:
To the Company:
NOW Holdings, Inc.
5555 San Felipe
Houston, TX 77056
Attn: Chief Executive Officer
To DPI:
Duff & Phelps/Inverness LLC
666 Steamboat Road
Greenwich, CT 06830
Attn: W. McComb Dunwoody
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, TX 77002-6760
Attn: John S. Watson
-3-
<PAGE> 4
8. ASSIGNMENT. Neither party may assign any obligations
hereunder to any other party without the prior written consent of the other
party; such consent shall not be unreasonably withheld; provided, however, that
DPI may assign its rights and obligations under this Agreement to any of its
affiliates or successors without the consent of the Company.
9. SUCCESSORS. This Agreement and all the obligations and
benefits hereunder shall inure to the successors and assigns of the parties.
10. COUNTERPARTS. This Agreement may be executed and delivered by
each party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and both of which taken together shall
constitute but one and the same agreement.
11. ENTIRE AGREEMENT; MODIFICATION; GOVERNING LAW. The terms and
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Agreement and supersede all previous
communications, either oral or written, representations or warranties of any
kind whatsoever, except as expressly set forth herein. No modifications of
this Agreement nor waiver of the terms or conditions thereof shall be binding
upon either party unless approved in writing by an authorized representative of
such party. All issues concerning this agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut, without
giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Connecticut or any other jurisdiction) that would
cause the application of the law of any jurisdiction other than the State of
Connecticut.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the date first above written.
NOW HOLDINGS, INC.
By /s/ JOEL V. STAFF
------------------------------------
Joel V. Staff
Chief Executive Officer
DUFF & PHELPS\INVERNESS LLC
By /s/ W. MCCOMB DUNWOODY
------------------------------------
W. McComb Dunwoody
President
-4-
<PAGE> 1
EXHIBIT 10.12
NATIONAL - OILWELL SUPPLEMENTAL SAVINGS PLAN
<PAGE> 2
NATIONAL-OILWELL
SUPPLEMENTAL SAVINGS PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I - DEFINITIONS
Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Basic Deferred Compensation Accrual . . . . . . . . . . . . . . 1.2
Basic Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Beneficiary or Beneficiaries . . . . . . . . . . . . . . . . . . 1.4
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5
Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6
Considered Compensation . . . . . . . . . . . . . . . . . . . . 1.7
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
Deferred Compensation Ledger . . . . . . . . . . . . . . . . . . 1.9
Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.10
Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.11
Employer Matching Contributions . . . . . . . . . . . . . . . 1.12
Employer Retirement Contributions . . . . . . . . . . . . . . 1.13
Excess Aggregate 401(m) Contributions . . . . . . . . . . . . 1.14
Management Committee . . . . . . . . . . . . . . . . . . . . . 1.15
Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.16
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.17
Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . . 1.18
Salary Deferral Contributions . . . . . . . . . . . . . . . . 1.19
Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.20
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.21
Supplemental Matching Accruals . . . . . . . . . . . . . . . . 1.22
Supplemental Retirement Accruals . . . . . . . . . . . . . . . 1.23
Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . 1.24
ARTICLE II - ELIGIBILITY
ARTICLE III - BASIC DEFERRED COMPENSATION ACCRUALS
Basic Deferral Accrual . . . . . . . . . . . . . . . . . . . . . 3.1
Bonus Deferral Accrual . . . . . . . . . . . . . . . . . . . . . 3.2
ARTICLE IV - SUPPLEMENTAL MATCHING ACCRUALS AND SUPPLEMENTAL RETIREMENT
ACCRUALS
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
Supplemental Matching Accruals . . . . . . . . . . . . . . . . . 4.1
Supplemental Retirement Accruals . . . . . . . . . . . . . . . . 4.2
ARTICLE V - ACCOUNTS
Establishing a Member's Account . . . . . . . . . . . . . . . . 5.1
Crediting of the Employer's Contributions . . . . . . . . . . . 5.2
Crediting of Dividends, Distributions and Interest . . . . . . . 5.3
Crediting of Interest on the Portion of the Member's
Account held in the Form of Cash . . . . . . . . . . . . . . . 5.4
ARTICLE VI - MEMBER'S RIGHTS AND BENEFITS
Member's Vested Interest . . . . . . . . . . . . . . . . . . . . 6.1
Time and Form of Benefit Payment . . . . . . . . . . . . . . . . 6.2
Continued Employment . . . . . . . . . . . . . . . . . . . . . . 6.3
ARTICLE VII - ACCOUNTS UNFUNDED
Payments Under This Agreement are the Obligations
of the Employer . . . . . . . . . . . . . . . . . . . . . . . 7.1
Rabbi Trust To Enable Employer to Meet
its Obligations Under the Agreement . . . . . . . . . . . . . 7.2
ARTICLE VIII - ADMINISTRATION
Committee Appointment . . . . . . . . . . . . . . . . . . . . . 8.1
Committee Organization and Voting . . . . . . . . . . . . . . . 8.2
Powers of the Committee . . . . . . . . . . . . . . . . . . . . 8.3
Committee Discretion . . . . . . . . . . . . . . . . . . . . . . 8.4
Reimbursement of Expenses . . . . . . . . . . . . . . . . . . . 8.5
Annual Statement . . . . . . . . . . . . . . . . . . . . . . . . 8.6
ARTICLE IX - AMENDMENT AND/OR TERMINATION
Amendment and/or Termination . . . . . . . . . . . . . . . . . . 9.1
Reversion of Excess Assets . . . . . . . . . . . . . . . . . . . 9.2
ARTICLE X - ADOPTING OF PLAN BY OTHER EMPLOYERS
Adoption Procedure . . . . . . . . . . . . . . . . . . . . . . 10.1
No Joint Venture Implied . . . . . . . . . . . . . . . . . . . 10.2
Expenses to be Shared . . . . . . . . . . . . . . . . . . . . 10.3
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
Transfer of Members . . . . . . . . . . . . . . . . . . . . . 10.4
Single Plan . . . . . . . . . . . . . . . . . . . . . . . . . 10.5
ARTICLE XI - MISCELLANEOUS
Responsibility for Distributions and
Withholding of Taxes . . . . . . . . . . . . . . . . . . . . . 11.1
Limitation of Rights . . . . . . . . . . . . . . . . . . . . . 11.2
Distributions to Incompetents or Minors . . . . . . . . . . . 11.3
Nonalienation of Benefits . . . . . . . . . . . . . . . . . . 11.4
Reliance Upon Information . . . . . . . . . . . . . . . . . . 11.5
Severability . . . . . . . . . . . . . . . . . . . . . . . . . 11.6
Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.7
Gender and Number . . . . . . . . . . . . . . . . . . . . . . 11.8
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 11.9
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 11.10
</TABLE>
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<PAGE> 5
NATIONAL-OILWELL
SUPPLEMENTAL SAVINGS PLAN
WHEREAS, National-Oilwell has adopted a qualified plan known
as the National-Oilwell Retirement and Thrift Plan (the "Basic Plan") for the
benefit of its employees and the employees of a certain affiliated company
which has adopted the Basic Plan; and
WHEREAS, National-Oilwell desires to adopt the
National-Oilwell Supplemental Savings Plan to provide the opportunity for a
select group of management or highly compensated employees to defer
compensation in excess of the amount permitted under the Basic Plan;
NOW, THEREFORE, National-Oilwell hereby adopts the
National-Oilwell Supplemental Savings Plan as follows.
<PAGE> 6
ARTICLE I
DEFINITIONS
The words and phrases defined in this Article shall have the
meaning set out in the definition unless the context in which the word or
phrase appears reasonably requires a broader, narrower or different meaning.
1.1 "ACCOUNT" means the individual account of a Member in
the deferred contribution ledger maintained by the Employer.
1.2 "BASIC DEFERRED COMPENSATION ACCRUAL" means the
portion of a Member's Considered Compensation deferred under this Plan.
1.3 "BASIC PLAN" means the National-Oilwell Retirement
and Thrift Plan, as amended from time to time.
1.4 "BENEFICIARY OR BENEFICIARIES" means the person or
persons or the trust or trusts created for the benefit of a natural person or
persons or the Member's or retired Member's estate, designated by the Member or
retired Member to receive the benefits payable under this Plan upon his death.
1.5 "BENEFITS" means those benefits paid to a Member
under this Plan.
1.6 "COMMITTEE" means the committee composed of the
persons appointed by the Management Committee to administer the Plan.
1.7 "CONSIDERED COMPENSATION" means a Member's Considered
Compensation as defined in the Basic Plan.
1.8 "CODE" means the Internal Revenue Code of 1986, as
amended.
1.9 "DEFERRED COMPENSATION LEDGER" means the ledger
maintained by the Committee for each Member which reflects the amount of
Considered Compensation deferred by the Member under this Plan, the
Supplemental Matching Accrual provided under this Plan, and the amount of
earnings credited on each of these amounts.
1.10 "EMPLOYEE" means an employee of the Employer who is
eligible for and is participating in the Plan.
1.11 "EMPLOYER" means the Sponsor and any other business
organization which has adopted this Plan with respect to its employees who are
Members benefitting under this Plan.
I-1
<PAGE> 7
1.12 "EMPLOYER MATCHING CONTRIBUTIONS" means the matching
contributions made by the Employer to the Basic Plan.
1.13 "EMPLOYER RETIREMENT CONTRIBUTIONS" means the
employer retirement contributions made by the Employer to a Member under the
Basic Plan.
1.14 "EXCESS AGGREGATE 401(M) CONTRIBUTIONS" means a
Member's Excess Aggregate 401 (m) Contributions as defined under the Basic
Plan.
1.15 "MANAGEMENT COMMITTEE" means the Executive Committee
or other body given management responsibility of the Sponsor.
1.16 "MEMBER" means an Employee who is participating in
this Plan.
1.17 "PLAN" means this National-Oilwell Supplemental
Savings Plan, as amended from time to time.
1.18 "PLAN YEAR" means the Plan Year as defined under the
Basic Plan.
1.19 "SALARY DEFERRAL CONTRIBUTIONS" means the portion of
a Member's Considered Compensation which is deferred and contributed to the
Basic Plan on behalf of the Member by the Employer.
1.20 "SPONSOR" means National-Oilwell.
1.21 "STOCK" means that class or classes of NOW Holdings,
Inc. stock that is designated by the Committee.
1.22 "SUPPLEMENTAL MATCHING ACCRUALS" means the accrual
made by the Employer on behalf of the Members pursuant to the provisions of
Section 4.1.
1.23 "SUPPLEMENTAL RETIREMENT ACCRUALS" means the accrual
made by the Employer on behalf of the Members pursuant to the provisions of
Section 4.2.
1.24 "VALUATION DATE" means the date established by the
Committee from time to time for the valuation of the Member's Account. The
valuations must be at least annually.
I-2
<PAGE> 8
ARTICLE II
ELIGIBILITY
Those persons who are designated by the Committee to be
members of a select group of management or highly compensated employees are
eligible to participate in this Plan.
II-1
<PAGE> 9
ARTICLE III
BASIC DEFERRED COMPENSATION ACCRUALS
3.1 BASIC DEFERRAL ACCRUAL. A Member shall be entitled
to defer out of his regular Considered Compensation for the Plan Year a
percentage of Considered Compensation provided he makes his election in writing
prior to the beginning of each Plan Year under the rules and regulations
established by the Committee. In the first year in which an Employee is
eligible to participate in the Plan, the newly eligible Member may make an
election to defer a percentage of his Considered Compensation for services to
be performed subsequent to the election within 30 days after the date the
Employee becomes a Member. Once an election has been made as to the percentage
deferred for a particular Plan Year, it becomes irrevocable for the Plan Year.
3.2 BONUS DEFERRAL ACCRUAL. A Member shall be entitled
to make a separate election to defer any bonus he may be entitled to receive
under rules and regulations established by the Committee. If a Member may be
entitled to receive multiple bonus payments during a Plan Year, the Member must
make separate elections with respect to each possible bonus payment. Once an
election has been made as to the percentage deferred for a particular Plan
Year, it becomes irrevocable for the Plan Year.
3.3 FORM OF DEFERRAL. During each election period, the
Member may also elect the percentage of the amount deferred, if any, to be
deferred in the form of Stock (provided, however, Stock has been made available
to the Member as an option) and the percentage, if any, to be deferred in the
form of cash.
III-1
<PAGE> 10
ARTICLE IV
SUPPLEMENTAL MATCHING ACCRUALS AND
SUPPLEMENTAL RETIREMENT ACCRUALS
4.1 SUPPLEMENTAL MATCHING ACCRUALS. The Employer shall
make an annual Supplemental Matching Accrual equal to (a) a percentage of the
Member's Deferred Compensation Accruals under this Plan, plus (b) an amount
equal to any Employer Matching Contributions which are treated as Excess
Aggregate 401(m) Contributions under the Basic Plan. The Supplemental Matching
Accrual percentage shall be determined in the same manner that the matching
contributions are determined by in the Basic Plan; provided, however, such
Supplemental Matching Accrual, when added to the Member's Employer Matching
Contributions shall not exceed six percent of the Member's Considered
Compensation, adjusted to include the amount of the Member's Deferred
Compensation Accruals under this Plan and on his Considered Compensation that
exceeds the Code Section 404(a)(17) limitation.
4.2 SUPPLEMENTAL RETIREMENT ACCRUALS. For each Plan
Year, the Employer shall make a Supplemental Retirement Accrual on behalf of
each Member who (a) has amounts deferred under Section 3.1 or (b) has
Considered Compensation in excess of the Section 401(a)(17) limitation for the
Plan Year. The amount of the Supplemental Retirement Accrual shall be in an
amount equal to the same percentage the Member received as an Employer
Retirement Contribution under the Basic Plan but only on the amounts he elects
to contribute to this Plan under Section 3.1 and on his Considered Compensation
that exceeds the Code Section 401(a)(17) limitation.
IV-1
<PAGE> 11
ARTICLE V
ACCOUNTS
5.1 ESTABLISHING A MEMBER'S ACCOUNT. The Committee shall
establish a Deferred Compensation Ledger and maintain a Basic Deferred
Compensation Accrual Account, a Supplemental Matching Accrual Account, and a
Supplemental Retirement Accrual Account for each Member. The Accounts shall
reflect the amount of the Employer's obligation to the Member at any given
time.
5.2 CREDITING OF THE EMPLOYER'S CONTRIBUTIONS. The Basic
Deferred Compensation Accruals shall be entered in the Deferred Compensation
Ledger as of the date compensation is withheld from the Member. The
Supplemental Matching Accruals and Supplemental Retirement Accruals shall be
entered in the Deferred Compensation Ledger within a reasonable period
following the close of each Plan Year. If a Member elected his deferral to be
in the form of Stock, the number of shares credited to his Account as Stock
shall be the number of full shares of Stock that could have been purchased with
the dollar amount deferred, without taking into account any brokerage fees,
taxes or other expenses which might be incurred in such a transaction based
upon the fair market value of the Stock on the date the amount would have been
paid to the Member had it not been deferred pursuant to Article III, and any
additional fractional amount shall be credited to the Member's Account in the
form of cash. Fair market value of the Stock shall be determined by the
Committee in its sole discretion.
5.3 CREDITING OF DIVIDENDS, DISTRIBUTIONS AND INTEREST.
When dividends are declared and paid on, or other distributions, whether stock,
property, cash, rights or other, are made with respect to the Stock, those
dividends and other distributions shall be accrued in a Member's Account based
upon the shares of Stock credited to the Member's Account. The dividends or
other distributions in the form of shares of Stock shall be credited to the
Account as additional shares of Stock. The dividends or other distributions or
rights in any other form shall be credited to the Member's Account in the form
of cash. For this purpose, all dividends and distributions not in the form of
shares of Stock shall be credited with interest in accordance with Section 5.4.
5.4 CREDITING OF INTEREST ON THE PORTION OF THE MEMBER'S
ACCOUNT HELD IN THE FORM OF CASH. Each Member shall be awarded by the
Committee an interest factor on his deferred compensation that is held in the
form of cash, to be part of his total deferred compensation under the Plan,
equal to the amount which is deemed to be earned on his bookkeeping Account
established to enable the Employer to determine its obligations under the Plan.
For the purpose of determining the interest to be credited to the Member's
Account that is held in the form of cash under the Plan, the Committee shall
value that portion of his Account that is not held in the form of Stock each
Valuation Date, at its deemed investment's then fair market value, but without
regard to any credits made to the Account after the preceding
V-1
<PAGE> 12
Valuation Date, shall determine the amount of income earned or losses suffered
by that portion of his Account that is not held in the form of Stock, and shall
determine the appreciation or depreciation of that portion of his Account that
is not held in the form of Stock since the preceding Valuation Date. The
Committee shall then determine what a Member's Account that is held in the form
of cash would have earned by multiplying such deemed investment earnings by a
fraction, the numerator of which is the Member's Plan Account that is held in
the form of cash prior to the beginning of that Plan Year reduced by the amount
of distributions from the Member's Account that is held in the form of cash
made to the Member during the Plan Year, and the denominator of which is the
aggregate of all Accounts that are held in the form of cash of all Plan Members
prior to the beginning of that Plan Year reduced by the amount of all
distributions from all Members' Accounts that are held in the form of cash to
all Plan Members during the Plan Year. This amount accrued by the Committee as
additional deferred compensation shall be a part of the Employer's obligation
to the Member and payment of it shall be a general obligation of the Employer.
The determination of interest based on the income and appreciation of the
Member's Account that is held in the form of cash shall in no way affect the
ability of the general creditors of the Employer to reach the assets of the
Employer or the rabbi trust in the event of the insolvency or bankruptcy of the
Employer or place the Members in a secure position ahead of the general
creditors of the Employer.
V-2
<PAGE> 13
ARTICLE VI
MEMBER'S RIGHTS AND BENEFITS
6.1 MEMBER'S VESTED INTEREST. Each Member shall have a
100% vested and nonforfeitable interest in the amounts credited to his Account
which are reflected on the Deferred Compensation Ledger maintained on the books
of the Employer.
6.2 TIME AND FORM OF BENEFIT PAYMENTS. Vested benefits
due under this Plan shall be paid within 90 days after the end of the quarter
in which the Member (a) retires, (b) dies, or (c) otherwise terminates
employment, whichever occurs first. If a Member dies, the Member's Beneficiary
is entitled to receive all amounts credited to the Member's Account. A Member
must elect, prior to becoming a Member, to receive his benefit in either a lump
sum payment or monthly installments over a (i) three year, (ii) five year, or
(iii) 10 year period. This election may not be changed at any time by the
Member. If installment payments are elected by the Member and the Member dies
after he has retired and prior to receiving all installment payments, to which
he is entitled, the remaining installments shall be paid to the Member's
Beneficiary.
Upon a distribution, all shares of Stock credited to the
Member in the Deferred Compensation Ledger, if any, shall be distributed in
kind, whether the distribution is in a lump sum or in installments. If the
distribution of Stock is in installments, all dividends and other property or
rights accumulating on the shares still undistributed will be credited as
provided in Section 5.3 and distributed with the next installment. If there
are periodic installments to be made of the portion, if any, deferred as cash,
income shall accumulate on that portion of the Account as described in Section
5.4 until the balance credited to the cash portion of the Member's Account has
been distributed.
6.3 CONTINUED EMPLOYMENT. Nothing contained herein shall
be construed as conferring upon any Member the right to continue in the employ
of the Employer in any capacity.
VI-1
<PAGE> 14
ARTICLE VII
ACCOUNTS UNFUNDED
7.1 PAYMENTS UNDER THIS AGREEMENT ARE THE OBLIGATION OF
THE EMPLOYER. The Employer will pay the benefits due the Members under this
Plan; however should it fail to do so when a benefit is due, the benefit shall
be paid by the trustee of that certain trust agreement, entered into
contemporaneously with this agreement, to the extent the Employer has
contributed funds to the trust. In any event, to the extent the trust fails to
pay for any reason, the Employer still remains liable for the payment of all
unpaid benefits due under this Plan.
7.2 RABBI TRUST TO ENABLE EMPLOYER TO MEET ITS
OBLIGATIONS UNDER THE AGREEMENT. It is specifically recognized by the Sponsor,
Employer and the Members that each Employer may, but is not required to
contribute any amount it finds desirable to a trust established to accumulate
assets sufficient to fund the obligations of each Employer who is a signatory
to this Plan. However, under all circumstances, the rights of the Members to
the assets held in the trust, if any, shall be no greater than the rights
expressed in this agreement. Nothing contained in the trust agreement which
creates the rabbi trust shall constitute a guarantee by the Sponsor or any
Employer that assets of the Sponsor or any Employer transferred to the trust
will be sufficient to pay any benefits under this Plan or would place the
Member in a secured position ahead of general creditors should the Sponsor or
Employer become insolvent or bankrupt. Any trust agreement used by the Sponsor
or any Employer to accumulate assets to assist in paying its obligations under
this agreement must specifically set out these principles so it is clear in
that trust agreement that the Members in this Plan have no greater rights than
unsecured general creditors of the Sponsor or the Employer in relation to their
benefits under this Plan.
It is specifically recognized by the Sponsor, each Employer
and all Members that this Plan is only a general corporate commitment of each
Employer and that each Member must rely upon the general credit of each
Employer for the fulfillment of its obligations under this Plan. Under all
circumstances the rights of Members to any asset held by the Sponsor and each
Employer will be no greater than the rights expressed in this Plan. Nothing
contained in this Plan will constitute a guarantee by the Sponsor or any
Employer that the assets of the Sponsor and each Employer will be sufficient to
pay any benefits under this Plan or would place the Member in a secured
position ahead of general creditors of the Sponsor or any Employer. Though the
Sponsor may establish or become a signatory to a Rabbi Trust to accumulate
assets to fulfill its obligations, the adoption of this Plan and any such trust
will not create any lien, claim, encumbrance, right, title or other interest of
any kind whatsoever in any Member in any asset held by the Sponsor or any
Employer, contributed to any such trust or otherwise designated to be used for
payment of any of the Sponsor's or any Employer's obligations created in this
agreement. No specific assets of the Sponsor or any Employer have been or will
be set aside, or will in any way be transferred to the trust or will be pledged
in any way for the performance
VII-1
<PAGE> 15
of the Sponsor's or an Employer's obligations under this Plan which would
remove such assets from being subject to the general creditors of the Sponsor
or an Employer.
It is also specially recognized by the Sponsor, each Employer,
and all Members that Benefits payable under this Plan shall not (i) impose any
obligation upon the Basic Plan; (ii) be paid from the trust used to fund the
Basic Plan; or (iii) have any effect whatsoever upon the Basic Plan or the
payment of benefits from the Basic Plan. No Member or his Beneficiary or
Beneficiaries shall have any title to or beneficial ownership in any assets
which the Employer may earmark to pay benefits hereunder.
VII-2
<PAGE> 16
ARTICLE VIII
ADMINISTRATION
8.1 COMMITTEE APPOINTMENT. The Committee shall be
appointed by the Management Committee. Each Committee member will serve until
his or her resignation or removal. The Management Committee shall have the
sole discretion to remove any one or more Committee members and appoint one or
more replacement or additional Committee members from time to time.
8.2 COMMITTEE ORGANIZATION AND VOTING. The Committee
shall select from among its members a chairman who will preside at all of its
meetings and will elect a secretary without regard to whether that person is a
member of the Committee. The secretary will keep all records, documents and
data pertaining to the Committee's supervision and administration of this Plan.
A majority of the members of the Committee will constitute a quorum for the
transaction of business and the vote of a majority of the members present at
any meeting will decide any question brought before the meeting. In addition,
the Committee may decide any question by vote, taken without a meeting, of a
majority of its members. A member of the Committee who is also a Member will
not vote or act on any matter relating solely to himself.
8.3 POWERS OF THE COMMITTEE. The Committee shall have
the exclusive responsibility for the general administration of this Plan
according to the terms and provisions of this Plan and shall have all powers
necessary to accomplish those purposes, including but not by way of limitation
the right, power and authority:
(a) to make rules and regulations for the administration
of this Plan;
(b) to construe all terms, provisions, conditions and
limitations of this Plan;
(c) to correct any defect, supply any omission or
reconcile any inconsistency that may appear in this Plan in the manner
and to the extent it deems expedient to carry this Plan into effect
for the greatest benefit of all parties at interest;
(d) to resolve all controversies relating to the
administration of this Plan, including but not limited to:
(1) differences of opinion arising between the
Sponsor, Employer and/or a Member; and
VIII-1
<PAGE> 17
(2) any question it deems advisable to resolve in
order to promote the uniform administration of this Plan for
the benefit of all parties at interest; and
(e) to delegate by written notice those clerical and
recordation duties of the Committee, as it deems necessary or
advisable for the proper and efficient administration of this Plan.
8.4 COMMITTEE DISCRETION. The Committee in exercising
any power or authority granted under this Plan or in making any determination
under this Plan shall perform or refrain from performing those acts using its
sole discretion and judgment. Any decision made by the Committee or any
refraining to act or any act taken by the Committee in good faith shall be
final and binding on all parties. The Committee's decision shall never be
subject to de novo review; and no final action, ruling, or decision by the
Committee may be set aside unless it is held to have been arbitrary and
capricious by a final judgment of a court having jurisdiction with respect to
the issue.
8.5 REIMBURSEMENT OF EXPENSES. The Committee will serve
without compensation for their services but will be reimbursed by the Sponsor
for all expenses properly and actually incurred in the performance of their
duties under this Plan.
8.6 ANNUAL STATEMENT. The Committee shall cause each
Member to receive an annual statement as soon as administratively feasible
after the conclusion of each Plan Year containing a statement of the Member's
Accounts on the Deferred Compensation Ledger through the end of that Plan Year.
VIII-2
<PAGE> 18
ARTICLE IX
AMENDMENT AND/OR TERMINATION
9.1 AMENDMENT AND/OR TERMINATION. The Sponsor has the
sole right to amend, discontinue or terminate this Plan. Any amendment,
discontinuance or termination may be made by a certified resolution or consent
of the Management Committee, or by an instrument in writing executed by the
appropriate officer of the Sponsor. If the Sponsor should terminate this Plan,
the Employer shall distribute to each Member, within 90 days after the end of
the quarter in which the Plan terminates, the entire amount credited to his
Account as of the end of that quarter.
Each Employer shall be deemed to have adopted any amendment
made by the Sponsor unless the Employer notifies the Committee of its rejection
in writing within 30 days after it receives a copy of the amendment. A
rejection shall constitute a withdrawal from this Plan by that Employer unless
the Sponsor acquiesces in the rejection.
9.2 REVERSION OF EXCESS ASSETS. Upon satisfaction of all
the obligations to a Member under this Plan, the assets, if any, remaining in
the Trust allocated to the account of that Member, shall be paid to the
Employer who employed that particular Member.
IX-1
<PAGE> 19
ARTICLE X
ADOPTION OF PLAN BY OTHER EMPLOYERS
10.1 ADOPTION PROCEDURE. Any business organization which
has adopted the Basic Plan may, with the approval of the Management Committee,
adopt this Plan by:
(a) A certified resolution or consent of the board of
directors of the adopting Employer or an executed adoption instrument
(approved by the board of directors of the adopting Employer) agreeing
to be bound as an Employer by all the terms, conditions and
limitations of this Plan except those, if any, specifically described
in the adoption instrument; and
(b) Providing all information required by the Committee.
10.2 NO JOINT VENTURE IMPLIED. The document which
evidences the adoption of the Plan by an Employer shall become a part of this
Plan. However, neither the adoption of this Plan by an Employer nor any act
performed by it in relation to this Plan shall ever create a joint venture or
partnership relation between it and any other Employer.
10.3 EXPENSES TO BE SHARED. Each Employer shall pay a
proportionate part of the necessary expenses incurred in the administration of
this Plan, as determined by the Sponsor.
10.4 TRANSFER OF MEMBERS. If a Member employed by an
Employer is transferred to the employment of another Employer, he shall
maintain all of his rights and benefits under this Plan from which his service
is transferred, and his participation in this Plan shall be considered
uninterrupted, as if no transfer has been made. If a Member shall be employed
by more than one Employer during the course of his employment, each Employer
employing the Member shall contribute its appropriate share of the cost of
providing the benefits incidental to his employment therewith.
10.5 SINGLE PLAN. This Plan shall be considered a single
plan rather than a group of single plans of each adopting Employers.
X-1
<PAGE> 20
ARTICLE XI
MISCELLANEOUS
11.1 RESPONSIBILITY FOR DISTRIBUTIONS AND WITHHOLDING OF
TAXES. The Committee shall furnish information, to the Employer last employing
the Member, concerning the amount and form of distribution to any Member
entitled to a distribution so that the Employer may make the distribution
required. It will also calculate the deductions from the amount of the benefit
paid under this Plan for any taxes required to be withheld by federal, state or
local government and will cause them to be withheld. If a Member has accrued a
benefit under this Plan while in the service of more than one Employer, each
Employer for which the Member was working will reimburse the disbursing agent
for the amount attributable to the benefit earned while the Member was in the
employment of that Employer if it has not already provided that funding to the
disbursing agent.
11.2 LIMITATION OF RIGHTS. Nothing in this Plan will be
construed:
(a) to give a Member any right with respect to any
benefit except in accordance with the terms of this Plan;
(b) to limit in any way the right of the Employer to
terminate a Member's employment with the Employer at any time;
(c) to evidence any agreement or understanding, expressed
or implied, that the Employer will employ a Member in any particular
position or for any particular remuneration; or
(d) to give a Member or any other person claiming through
him any interest or right under this Plan other than that of any
unsecured general creditor of the Employer.
11.3 DISTRIBUTIONS TO INCOMPETENTS OR MINORS. Should a
Member become incompetent or should a Member designate a Beneficiary who is a
minor or incompetent, the Committee is authorized to pay the funds due to the
parent of the minor or to the guardian of the minor or incompetent or directly
to the minor or to apply those funds for the benefit of the minor or
incompetent in any manner the Committee determines in its sole discretion.
11.4 NONALIENATION OF BENEFITS. No right or benefit
provided in this Plan shall be transferable by the Member except, upon his
death, to a named Beneficiary as provided in this Plan. No right or benefit
under this Plan shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber or charge the same will be void. No right or benefit
under this Plan shall in any manner be liable for or subject
XI-1
<PAGE> 21
to any debts, contracts, liabilities or torts of the person entitled to such
benefits. If any Member or any Beneficiary becomes bankrupt or attempts to
anticipate, alienate, sell, assign, pledge, encumber or charge any right or
benefit under this Plan, that right or benefit will, in the discretion of the
Committee, cease. In that event, the Committee may have the Employer hold or
apply the right or benefit or any part of it to the benefit of the Member or
Beneficiary, his or her spouse, children or other dependents or any of them in
any manner and in any proportion the Committee believes to be proper in its
sole and absolute discretion, but is not required to do so.
11.5 RELIANCE UPON INFORMATION. The Committee shall not
be liable for any decision or action taken in good faith in connection with the
administration of this Plan. Without limiting the generality of the foregoing,
any decision or action taken by the Committee when it relies upon information
supplied it by any officer of the Employer, the Employer's legal counsel, the
Employer's actuary, the Employer's independent accountants or other advisors in
connection with the administration of this Plan will be deemed to have been
taken in good faith.
11.6 SEVERABILITY. If any term, provision, covenant or
condition of this Plan is held to be invalid, void or otherwise unenforceable,
the rest of this Plan shall remain in full force and effect and shall in no way
be affected, impaired or invalidated.
11.7 NOTICE. Any notice or filing required or permitted
to be given to the Committee or a Member shall be sufficient if in writing and
hand delivered or sent by U.S. mail to the principal office of the Sponsor or
to the residential mailing address of the Member. Notice will be deemed to be
given as of the date of hand delivery or if delivery is by mail, as of the date
shown on the postmark.
11.8 GENDER AND NUMBER. If the context requires it, words
of one gender when used in this Plan will include the other genders, and words
used in the singular or plural will include the other.
11.9 GOVERNING LAW. The Plan shall be construed,
administered and governed in all respects by the laws of the State of Texas.
11.10 EFFECTIVE DATE. This Plan shall be operative and
effective as of January 1, 1995.
XI-2
<PAGE> 22
IN WITNESS WHEREOF, the Sponsor has executed this document on
this ________ day of ____________________ , 1994.
NATIONAL-OILWELL
By
-----------------------------------
XI-3
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
National Oilwell (U.K.) Limited
National-Oilwell Canada Ltd.
National-Oilwell Pty Ltd.
National-Oilwell Pte. Ltd.
National-Oilwell International, Inc.
Natoil, Inc.
NOW Oilfield Services, Inc.
National-Oilwell de Venezuela
National-Oilwell, L.P.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated August 29, 1996 related to the consolidated balance
sheet of National-Oilwell, Inc. and subsidiaries, and to the use of our report
dated January 31, 1996 related to consolidated financial statements of
National-Oilwell, a general partnership, and subsidiaries in the Registration
Statement on Form S-1 and related Prospectus for the registration of 4,000,000
shares of common stock.
ERNST & YOUNG LLP
Houston, Texas
August 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED
JUNE 30, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,512
<SECURITIES> 0
<RECEIVABLES> 86,282
<ALLOWANCES> 0
<INVENTORY> 121,907
<CURRENT-ASSETS> 219,774
<PP&E> 17,916
<DEPRECIATION> 0
<TOTAL-ASSETS> 259,481
<CURRENT-LIABILITIES> 94,194
<BONDS> 118,688
<COMMON> 111
0
0
<OTHER-SE> 33,871
<TOTAL-LIABILITY-AND-EQUITY> 259,481
<SALES> 294,643
<TOTAL-REVENUES> 0
<CGS> 254,556
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,738
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