<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Exchange Act Rule 14a-11 or 14a-12
NATIONAL-OILWELL, INC.
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(Name of Registrant as Specified In Its Charter)
NATIONAL-OILWELL, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which the transaction
applies;
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3) Per unit price of other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: (Set forth the
amount on which the filing fee is calculated and state how it
was determined.
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
[NATIONAL-OILWELL, INC. LOGO]
NATIONAL-OILWELL, INC.
5555 SAN FELIPE
HOUSTON, TEXAS 77056
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1997
TO THE STOCKHOLDERS OF NATIONAL-OILWELL, INC.:
Notice is hereby given that the annual meeting of stockholders of
NATIONAL-OILWELL, INC. will be held at the Ritz-Carlton Hotel, 1919 Briar Oaks,
Houston, Texas, at 11:00 A.M., local time, on Wednesday, May 14, 1997, for the
following purposes:
1. To elect a class of two directors, each for a term of three
years and until their successors shall be elected and qualified.
2. To adopt and to approve and ratify the adoption by the board
of directors of the amended and restated National-Oilwell, Inc. Stock
Award and Long-Term Incentive Plan.
3. To transact such other business as may properly come before
the meeting or any adjournments thereof.
Only stockholders of record at the close of business on March 27, 1997
will be entitled to notice of the annual meeting and to vote at the annual
meeting and at any adjournments thereof. A list of the stockholders of
National-Oilwell, Inc. entitled to vote at its annual meeting will be
available for inspection by any stockholder at the company's offices during
normal business hours for the 10 days prior to the meeting, and at the time and
place of the meeting.
PLEASE DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES MAY BE
VOTED IN ACCORDANCE WITH YOUR WISHES AND SO THAT THE PRESENCE OF A QUORUM MAY
BE ASSURED. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IN THE EVENT YOU ATTEND THE MEETING. YOU MAY REVOKE YOUR PROXY AT ANY
TIME BEFORE IT IS VOTED.
By order of the board of directors,
Paul M. Nation
Vice President, General
Counsel and Secretary
Houston, Texas
March 31, 1997
<PAGE> 3
NATIONAL-OILWELL, INC.
5555 SAN FELIPE
HOUSTON, TEXAS 77056
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 1997
This proxy statement and the accompanying form of proxy are furnished on
or about March 31, 1997 in connection with the solicitation of proxies by the
board of directors of National-Oilwell, Inc. (the "Company") to be used at the
annual meeting of stockholders of the Company to be held at the Ritz-Carlton
Hotel, 1919 Briar Oaks, Houston, Texas, at 11:00 A.M., local time, on
Wednesday, May 14, 1997, and at any adjournments thereof.
PURPOSE OF THE MEETING
At the meeting, the Company's stockholders will consider and act upon two
separate matters. As the meeting is an annual meeting of stockholders, the
stockholders will be asked to elect two directors to hold office as provided by
law and the Company's by-laws. The stockholders will also be asked to adopt
and to approve and ratify adoption by the board of directors of the amended and
restated National-Oilwell, Inc. Stock Award and Long-Term Incentive Plan (the
"Stock Plan").
VOTING AT THE MEETING
Stockholders of record at the close of business on March 27, 1997 are
entitled to vote at the meeting. As of that date, there were outstanding
17,874,128 shares of common stock, par value $.01 per share ("Common Stock"),
of the Company. Each share of Common Stock is entitled to one vote on all
matters.
The holders of a majority of the shares entitled to vote, present in
person or represented by proxy, constitute a quorum. Directors are to be
elected by a plurality of the votes cast at the meeting. The affirmative vote
of the holders of a majority of the shares, present in person or represented by
proxy, entitled to vote at the meeting is required to approve the adoption of
the Stock Plan or to take action with respect to any other matter that may
properly be brought before the meeting. Shares cannot be voted at the meeting
unless the holder of record is present in person or by proxy. The enclosed
proxy is a means by which a stockholder may authorize the voting of his or her
shares at the meeting. The shares of Common Stock represented by each properly
executed proxy card will be voted at the meeting in accordance with each
stockholder's direction. Stockholders are urged to specify their choices by
marking the appropriate boxes on the enclosed proxy card; if no choice has been
specified, the shares will be voted as recommended by the board of directors.
If any other matters are properly presented to the meeting for action, the
proxy holders will vote the proxies (which confer discretionary authority to
vote on such matters) in accordance with their best judgment.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect, other than for purposes of determining the presence of a
quorum. Abstentions may be specified on the proposal to approve the adoption
of the Stock Plan (but not for the election of directors). Abstentions will be
considered present and entitled to vote at the meeting, but will not be counted
as votes cast in the affirmative. Abstentions on the proposal to approve the
Stock Plan will have the effect of a negative vote because this proposal
requires the affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote. Brokers that are
member firms of the New York Stock Exchange ("NYSE") and who hold shares in
street name for customers, but have not received instructions from a beneficial
owner, have the authority under the rules of the NYSE to vote those shares with
respect to the election of directors but not with respect to the proposal to
approve the Stock Plan. A failure by brokers to vote those shares will have no
effect on the outcome of the proposal to approve the adoption of the Stock Plan
because such shares will not be considered shares present and entitled to vote
with respect to such matters.
<PAGE> 4
Proxies may be revoked at any time prior to the time that the vote is
taken at the meeting. Proxies may be revoked by filing with the Secretary of
the Company a written revocation or another form of proxy bearing a date later
than the date of the proxy previously furnished. A proxy may also be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not in and of itself constitute revocation of a proxy.
YOUR PROXY VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE,
SIGN AND RETURN THE ACCOMPANYING PROXY REGARDLESS OF WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING.
ELECTION OF DIRECTORS
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 adopted by a vote of a majority of the whole board of
directors serving at the time of that vote, but shall not be less than three.
The board of directors is currently set at eight members.
In January 1996, the Company's executive management team, together with an
investor group led by Inverness/Phoenix LLC and First Reserve Corporation,
purchased the business of the Company from its former owners, USX Corporation
and Armco Inc. On January 16, 1996, the Company and its stockholders entered
into a Stockholders Agreement which provided that, among other things, four
members of the Company's board of directors would be designated by DPI Oil
Service Partners Limited Partnership (of which Inverness/Phoenix 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.
Messrs. Bull, Comis, Dresher and Dunwoody were designated to serve as directors
by DPI Oil Service Partners Limited Partnership. Messrs. Macaulay and Rothstein
were designated to serve as directors by First Reserve Corporation
partnerships. Messrs. Staff and Bearden were designated to serve as directors
because they serve, respectively, as the Company's Chief Executive Officer and
Executive Vice President. On October 29, 1996, the Company became a
publicly-traded company upon completion of an initial public offering (the
"Offering"). The terms of the Stockholders Agreement concerning rights to
designate members of the board of directors terminated automatically upon
completion of the Offering.
James T. Dresher and Bruce M. Rothstein, the two directors whose terms
expire in 1997, have each consented to serve another term and will be presented
to the stockholders for election as directors at the annual meeting. The
remaining six directors will continue to serve in accordance with their prior
election.
At the meeting, proxies in the accompanying form, properly executed, will
be voted for the election of the two nominees, unless authority to do so has
been withheld in the manner specified in the instruction on the proxy or
revoked in the manner previously described. Discretionary authority is reserved
to cast votes for the election of a substitute recommended by the board of
directors should either nominee be unable or unwilling to serve as a director.
The Company believes that all of the nominees will be available to serve.
The two directors are to be elected by a plurality of the votes cast. A
stockholder entitled to vote for the election of directors can withhold
authority to vote for both nominees for director or can withhold authority to
vote for either nominee for director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF NOMINATIONS
The Company's Amended and Restated Certificate of Incorporation provides
that, subject to certain limitations discussed below, nominations of persons
for election to the Board of Directors may be made at any annual meeting of
stockholders (or at any special meeting of stockholders called for the purpose
of electing directors) by any stockholder of the Company (i) who is a
stockholder of record on the date of the giving of the notice and on the record
date for the determination of stockholders entitled to vote at such meeting and
(ii) who complies with the notice procedures set forth below. In addition to
any other applicable requirements, for a nomination to be made by a
stockholder, such stockholder must have given timely notice thereof in proper
written form to the Company.
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To be timely, a stockholder's notice to the Company must be received at
the Company's principal executive offices by the later of (i) ninety days
before the meeting of stockholders or (ii) ten days after the first public
notice of that meeting is sent to stockholders. The Company must receive from
the stockholder a notice that sets forth (i) that stockholder's name and
address (as they appear on the records of the Company), business address and
telephone number, resident address and telephone number, and the number of
shares of each class of stock of the Company beneficially owned by that
stockholder; and (ii) a description of all arrangements or understandings
between such stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nominations are to be
made by such stockholder. The notice must provide with respect to each nominee
(i) that nominee's name, business address and telephone number, and residence
address and telephone number; (ii) the number of shares, if any, of each class
of stock of the Company owned directly or beneficially by that nominee; (iii)
any other information relating to that nominee that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); and (iv) 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.
Notices in respect of nominations for directors must be received by the
Company no later than April 21, 1997.
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS AND REGARDING
CONTINUING DIRECTORS
The information provided herein as to personal background has been
provided by each director and nominee as of March 27, 1997. The periods shown
for service as an employee of the Company by Messrs. Staff and Bearden include
service as an employee of the predecessor partnership to the Company.
================================================================================
NOMINEES FOR ELECTION AT THE 1997 ANNUAL MEETING
FOR TERMS EXPIRING IN 2000
================================================================================
James T. Dresher Mr. 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, he served as
Chairman/CEO of York International Corporation, a
worldwide manufacturer and distributor of air
conditioner and refrigeration equipment, from 1988 to
1993. Prior thereto, Mr. Dresher served as a director,
Chief Financial Officer and Executive Vice President
of Baker International Corporation, a worldwide
diversified oil services company. Age: 77.
Bruce M. Rothstein Mr. Rothstein has served as a Director of the
Company since May 1996. Mr. Rothstein is a Managing
Director 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. Mr. Rothstein serves as a director of
Anker Coal Group, Inc., a producer and marketer of
coal. Age: 44.
================================================================================
DIRECTORS CONTINUING IN OFFICE WITH
TERMS EXPIRING IN 1998
================================================================================
C. R. Bearden Mr. Bearden has served as Executive Vice President of
the Company and President of the Distribution Group
since January 1995 and as a Director since January
1996. Mr. Bearden served in various executive
capacities including President and Chief Executive
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<PAGE> 6
Officer of Chiles Offshore Corporation, an offshore
drilling contractor, from 1979 until that company's
1994 acquisition by a subsidiary of Noble Drilling
Corporation, also an offshore drilling contractor,
where he served as President and Chief Operating
Officer until joining the Company. Age: 50.
Howard I. Bull Mr. 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 manufacturer and distributor of tile 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 also serves as
a director of Marine Drilling Companies, Inc., an
offshore drilling contractor. Age: 56.
James C. Comis III Mr. Comis has served as a Director of the Company
since January 1996. He is a Managing Director of
Inverness Management LLC. Through Inverness
Management LLC and its affiliates, Mr. Comis has been
engaged in sponsoring and investing in private equity
transactions since 1990. Additionally, Mr. Comis has
served as Managing Director of Inverness/Phoenix LLC
since 1994. Age: 32.
================================================================================
DIRECTORS CONTINUING IN OFFICE WITH
TERMS EXPIRING IN 1999
================================================================================
W. McComb Dunwoody Mr. Dunwoody has served as a Director of the Company
since January 1996. He is a Managing Director of
Inverness Management LLC. Through Inverness
Management LLC and its affiliates, Mr. Dunwoody has
been engaged in sponsoring and investing in private
equity transactions since 1981. Additionally, Mr.
Dunwoody has served as President and Chief Executive
Officer of Inverness/Phoenix LLC since 1994 and has
been Chief Executive Officer of The Inverness Group
Incorporated since 1981. Age: 52.
William E. Macaulay Mr. Macaulay has served as a Director of the Company
since January 1996. He has been the President and
Chief Executive Officer of First Reserve Corporation,
a corporate manager of private investments focusing
on the energy and energy-related sectors, 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, Hugoton Energy
Corporation, an independent oil and gas exploration
and production company, Cal Dive International, Inc.,
a provider of subsea services in the Gulf of Mexico,
Phoenix Energy Services, Inc., a diversified energy
service company, Anker Coal Group, Inc., a producer
and marketer of coal, James River Coal Corporation, a
coal producer, and Domain Energy Corporation, an oil
and gas exploration company. Age: 51.
Joel V. Staff Mr. 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, he served as a Senior Vice
President of Baker Hughes Incorporated, a worldwide
diversified oil services company, from October 1983
to May 1993. Mr. Staff also serves as a director of
Destec Energy Inc., an independent power company.
Age: 53.
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ADOPTION, APPROVAL AND RATIFICATION OF THE STOCK AWARD AND LONG-TERM
INCENTIVE PLAN, AS AMENDED AND RESTATED
The purpose of the Stock Plan is to provide a means through which the
Company can attract and retain key employees and directors of outstanding
abilities, whereby such individuals can acquire and maintain stock ownership
thereby increasing their interest in the Company's welfare, and to provide such
individuals with additional incentive and reward opportunities designed to
enhance the profitable growth of the Company over the long-term.
At the meeting, there will be presented to the stockholders a proposal to
adopt and to approve and ratify the adoption by the board of directors of the
amended and restated Stock Plan. The Stock Plan, as amended and restated, will
not be effective unless stockholder approval is obtained.
The Company's board of directors and stockholders adopted the Stock Plan
in January 1996 and an aggregate of 941,303 shares of restricted stock were
issued under the plan from January 1996 through July 1996. In August 1996, the
board of directors adopted amendments to the Stock Plan (i) increasing the
maximum number of shares of Common Stock issued and available for issuance
under the Stock Plan from 941,303 to 1,941,303 and (ii) providing that awards
under the Stock Plan, other than Incentive Stock Options, may be granted to
outside directors of the Company. On February 28, 1997, the board of directors
approved the Stock Plan, as amended and restated, subject to stockholder
approval at the 1997 annual meeting of stockholders. The amended and restated
Stock Plan includes certain amendments to bring the Stock Plan into compliance
with section 162(m) of the Internal Revenue Code (the "Code"). These changes
include the establishment of a maximum number of shares that may be granted to
any individual during the term of the Stock Plan to an amount equal to one-half
of the aggregate number of shares of Common Stock authorized for issuance under
the Stock Plan and the requirement that all grants under the Stock Plan be made
by a committee of two or more "outside directors" as such term is defined in
the Code. In addition, certain restrictions on amendments that were required
under old Rule 16b-3 of the Securities Exchange Act of 1934 have been
eliminated, and the amended and restated Stock Plan provides that an amendment
to the Stock Plan may not be made without stockholder approval if such approval
is required by section 162(m) of the Code.
THE STOCK PLAN, AS AMENDED AND RESTATED, IS SET FORTH IN FULL AS EXHIBIT A
TO THIS PROXY STATEMENT, AND THE DESCRIPTION OF THE STOCK PLAN CONTAINED HEREIN
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO EXHIBIT A.
VOTE REQUIRED FOR APPROVAL
To be approved, the proposal to adopt and to approve and ratify the
amended and restated Stock Plan must receive the vote of a majority of the
shares present, or represented by proxy, and entitled to vote at the meeting,
provided that the total number of votes cast represents a majority of the
shares entitled to vote on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADOPTION,
APPROVAL AND RATIFICATION OF THE STOCK PLAN.
DESCRIPTION OF THE STOCK PLAN
The Stock Plan provides for the grant of incentive stock options ("ISOs"),
non-qualified stock options ("NQSOs"), stock appreciation rights ("SARs"),
restricted stock awards, performance share awards, stock equivalent awards or
any combination of the foregoing, as is best suited to the circumstances of the
particular recipient. Key employees and non- employee directors of the Company
may participate in the Stock Plan, except that non-employee directors may not
receive ISOs.
The Stock Plan authorizes the issuance of up to an aggregate of 1,941,303
shares of Common Stock of the Company to participants in the Stock Plan. As of
March 27, 1997, 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 sale of Common Stock to the participants for $0.01
per share (the "Restricted Stock"). Restricted Stock purchased by the named
executive officers
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<PAGE> 8
was as follows: Mr. Staff - 282,414 shares, Mr. Bearden - 188,254 shares, Mr.
Krablin - 94,127 shares and Mr. Miller - 94,127 shares. 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 $0.01 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 purchased by
each participant beginning on January 17, 1997, and on an additional 20% of the
Restricted Stock purchased by a participant upon an involuntary termination of
employment without cause. Any of the 941,303 shares of Restricted Stock which
are forfeited can be reawarded to new participants by the Company.
The Stock Plan authorizes the issuance of stock options to key employees
and non-employee directors of the Company. Subject to stockholder approval of
the amended and restated Stock Plan, on March 21, 1997, an aggregate of 154,097
non- qualified stock options were granted under the Stock Plan, at an exercise
price of $31.875 per share. Of these options, Mr. Bearden received options to
purchase 7,529 shares, Mr. Krablin received options to purchase 7,529 shares,
Mr. Miller received options to purchase 7,529 shares, all current executive
officers as a group received options to purchase 36,830 shares, Mr. Dresher
received options to purchase 2,000 shares Mr. Rothstein received options to
purchase 2,000 shares and non-employee directors as a group received options to
purchase 12,000 shares.
At March 27, 1997, there were approximately 60 persons eligible and
participating in the Stock Plan, six of whom are non-employee directors of the
Company and seven of whom are executive officers of the Company. As of that
date there were 1,095,400 options and restricted stock awards outstanding under
the Stock Plan and 845,903 shares available for future issuance. The closing
price of the Company's common stock on the New York Stock Exchange on March 27,
1997 was $32.25.
No awards of ISOs, SARs, performance share awards, stock equivalent
awards, or any combination of the foregoing, have been granted under the Stock
Plan as of March 27, 1997. Shares subject to such awards and NQSOs have been
registered with the Securities and Exchange Commission (the "SEC") pursuant to
a Registration Form on S-8, filed with the Securities and Exchange Commission
on November 8, 1996.
The compensation committee of the board has administrative authority over
the Stock Plan. It determines which eligible employees will receive grants of
awards or options, the number of shares of Common Stock subject to each award
or option, when such award or option shall be made, the duration of any
applicable exercise or restriction period, when the options will become
exercisable, and the term, not to exceed ten years in the case of ISOs, during
which the option may be exercised. Additionally, under the proposal, all award
and grant decisions under the Stock Plan shall be made by two or more "outside
directors" as defined in section 162(m) of the Code.
Under the Stock Plan, the exercise price of NQSOs, ISOs and SARs must be
no less than the market price on the date of grant. Outstanding options under
the Stock Plan have been granted at no less than the market price on the date
of grant and generally become exercisable in three equal annual installments
beginning one year after the date of grant and remain exercisable until five
years after the date of grant. The plan has been amended to establish a maximum
number of shares that may be granted to any individual during the term of the
Stock Plan to an amount equal to one-half the aggregate number of shares of
Common Stock authorized for issuance under the Stock Plan.
The Stock Plan contains provisions limiting the period during which
options will remain exercisable in the event of the employee's retirement,
disability or death. Upon termination of employment for any other reason, ISOs
terminate immediately. NQSOs provide for a three-month period after termination
of employment, except for cause, during which options are exercisable. SARs
expire no later than the expiration of the underlying option. Options are only
transferable as a result of death.
The Stock Plan will terminate on July 23, 2006 unless terminated earlier
by the Board or extended by the Board with approval of the stockholders. The
Stock Plan provides that 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 outstanding grant or award may be made which would impair the
rights of the participant without the consent of the participant, and provided,
further that the Board may not, without approval of the stockholders, amend the
Stock Plan to (i) increase the aggregate number of shares of Common Stock which
may be issued under the plan; (ii) change the class of employees eligible to
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<PAGE> 9
receive ISOs under the plan; or (iii) modify materially the requirements as to
eligibility for participation in the plan if such approval is required by
section 162(m) of the Code.
FEDERAL INCOME TAX CONSEQUENCES
ISOs. Stock Plan participants will not be subject to federal income
taxation upon the grant or exercise of ISOs granted under the Stock Plan, and
the Company will not be entitled to a federal income tax deduction by reason of
such grant or exercise. However, the amount by which the fair market value of
the shares at the time of exercise exceeds the option price (or other tax basis
in the shares) is an item of tax preference subject to the alternative minimum
tax applicable to the person exercising the option. A sale of shares acquired
by exercise of an ISO that does not occur within one year after the exercise
and within two years after the grant of the option generally will result in the
recognition of long-term capital gain or loss in the amount of the difference
between the amount realized on the sale and the participant's tax basis in the
shares, assuming that the shares were held as capital assets, and the Company
will not be entitled to any tax deduction in connection therewith.
If such sale occurs within one year from the date of exercise of the
option or within two years from the date of the option grant (a "disqualifying
disposition"), the participant generally will recognize ordinary compensation
income equal to the lesser of (i) the excess of the fair market value of the
shares on the date of exercise of the options over the option price or (ii) the
excess of the amount realized on the sale of the shares over the option price.
Any gain (or loss) realized on a disqualifying disposition in excess of (or
below) the amount treated as ordinary compensation income will be a long-term
or short-term capital gain (or loss), depending upon the length of time the
shares were held. The Company generally will be entitled to a tax deduction on
a disqualifying disposition in the amount of the ordinary compensation income
recognized by the participant at the time the participant recognizes such
income.
NQSOs. There are no federal income tax consequences to the participant or
to the Company upon the grant of an NQSO under the Stock Plan. Upon the
exercise of NQSOs, participants will recognize ordinary compensation income in
an amount equal to the excess of the fair market value of the shares at the
time of exercise over the option price, and the Company generally will be
entitled to a corresponding tax deduction at such time. Upon the sale of shares
acquired by exercise of an NQSO, the participant will have a capital gain or
loss (long-term or short-term depending upon the length of time the shares were
held) in an amount equal to the difference between the participant's basis in
the shares and the amount realized upon the sale.
Restricted Stock Awards. A recipient normally will not recognize taxable
income upon receiving a Restricted Stock Award, and the Company will not be
entitled to a deduction, until such Common Stock is transferable by the
recipient or no longer subject to a substantial risk of forfeiture for federal
tax purposes, whichever occurs earlier. When the Common Stock is either
transferable by the recipient or no longer subject to a substantial risk of
forfeiture, the recipient will recognize ordinary compensation income in an
amount equal to the fair market value of the Common Stock subject to the
Restricted Stock Award (less any amount paid for such shares) at that time, and
the Company ordinarily will be entitled to a deduction in the same amount. A
recipient may, however, elect to recognize ordinary compensation income in the
year the Restricted Stock Award is awarded in an amount equal to the Fair
Market Value of the Common Stock (less any amount paid for such shares) at that
time, determined without regard to the restrictions. In such event, the Company
generally will be entitled to a deduction in the same year. Any gain or loss
recognized by the recipient upon subsequent disposition of the Common Stock
will be capital gain or loss (long-term or short-term depending upon the length
of time the shares were held). If after making the election, any Common Stock
subject to a Restricted Stock Award is forfeited, or if the market value
declines during the Restriction Period, the recipient ordinarily is not
entitled to any tax deduction or tax refund (other than with respect to any
amount paid for the shares).
Under Section 162(m) of the Code, enacted in August 1993, the Company may
be precluded from claiming a federal income tax deduction for total
remuneration in excess of $1,000,000 paid to the chief executive officer or to
any of the other four most highly compensated officers. Total remuneration
would include amounts received upon the exercise of stock options. An exception
exists, however, for "performance-based compensation," including amounts
received upon the exercise of stock options pursuant to a plan approved by
stockholders that meets certain requirements. The amendments to the Stock Plan,
when approved by stockholders, are intended to make grants of Stock Options and
SARs thereunder meet the requirements of "performance-based compensation."
-7-
<PAGE> 10
ACCOUNTING CONSIDERATIONS
There is no charge to the income of the Company in connection with the
grant or exercise of an option under the Stock Plan as long as the option price
is not below the market price on the date of grant. Any tax benefit received by
the Company upon exercise of an NQSO or as a result of a disqualifying
disposition of option shares obtained upon exercise of an ISO is reflected as a
credit to capital in excess of par value and not as income.
Earnings per share may be affected by the Stock Plan by the effect on the
calculation, as prescribed under generally accepted accounting principles, of
the number of outstanding shares of the Company's Common Stock. The calculation
reflects the potential dilutive effect, using the treasury stock method,
assuming the exercise of outstanding stock options. At the time shares are
actually issued as a result of the exercise of stock options, additional
dilution of earnings per share could result.
The assumed value of an SAR (generally, the excess of the market value of
the underlying shares over the option price at the end of each accounting
period) is treated as compensation expense that is accrued over the period that
the SAR is outstanding. A deferred tax asset may also be created if the related
tax deduction occurs in a period later than the one in which the compensation
expense is recognized for accounting purposes.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CHANGE OF CONTROL OF THE COMPANY IN 1996
In April 1987, Armco Inc., an Ohio corporation ("Armco") and USX
Corporation, a Delaware corporation ("USX"), formed National-Oilwell, a
Delaware partnership (the "Partnership"), to consolidate the oilfield equipment
manufacturing and distribution operations of Armco and USX. The Partnership was
owned 50% each by Armco and USX. In 1995 the management team of the
Partnership, together with an Investor group led by Inverness/Phoenix LLC and
First Reserve Corporation, entered into an agreement to acquire the Partnership
(the "Acquisition") from Armco and USX for a consideration of $180 million,
which Acquisition was completed in January 1996 . The purchase price and
related expenses were funded by new equity, existing Partnership cash, a new
credit facility provided by GE Capital Corporation ("GE Capital"), a
subordinated note, and promissory notes to Armco and USX totaling $20 million.
The new equity was provided by Inverness/Phoenix LLC, First Reserve
Corporation, GE Capital and each of the executive officers of the Company,
other than Mr. Miller. Following the Acquisition, 100 percent of the
outstanding stock of the Company was held by Inverness/Phoenix LLC through
investment partnerships of which it is the managing general partner ("the
Inverness Investors"), First Reserve Corporation through investment
partnerships of which it is the managing general partner (the "First Reserve
Investors"), GE Capital and the executive officers of the Company (GE Capital,
the Inverness Investors, the First Reserve Investors and the executive officers
of the Company collectively referred to as the "Investor Group"). On October
29, 1996, the Company became a publicly-traded company through the issuance of
4,600,000 shares of its common stock in an initial public offering. Immediately
following the public offering, the Investor Group owned an aggregate of
13,249,483 shares, or 74.23%, of common stock of the Company.
-8-
<PAGE> 11
PRINCIPAL HOLDERS OF NATIONAL-OILWELL, INC. COMMON STOCK
The following entities were beneficial owners of more than five percent of
Common Stock as of the dates indicated:
<TABLE>
<CAPTION>
Voting Power Investment Power
---------------- ------------------
Shares Percent
Beneficially of
Name and Address Owned Class (1) Sole Shared Sole Shared
---------------- --------- ---------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
5,101,800 28.54% -0- 5,101,800 -0- 5,101,800
Inverness/Phoenix LLC (2)
660 Steamboat Road
Greenwich, CT 06830
First Reserve Corporation (3) 4,185,247 23.42% -0- 4,185,247 -0- 4,185,247
475 Steamboat Road
Greenwich, CT 06830
General Electric Capital 1,593,902 8.92% 1,593,902 -0- 1,593,902 -0-
Corporation (4)
260 Long Ridge Road
Stamford, CT 06927
</TABLE>
- --------------------
(1) On March 27, 1997, there were 17,874,128 shares of Common Stock
outstanding.
(2) As reflected in Schedule 13G filed with the SEC on February 14, 1997.
Represents shares beneficially owned as of December 31, 1996 by the
following partnerships of which, in each case, Inverness/Phoenix LLC is
the managing general partner: DPI Oil Service Partners Limited Partnership
- 4,725,281; and DPI Partners II - 376,519. Inverness/Phoenix LLC, in its
role as managing general partner of the partnerships, has the power to
cause each partnership to dispose of or to vote shares held by each
partnership. Messrs. Comis and Dunwoody, each of whom is a director of the
Company, serve on the investment committee of Inverness/Phoenix LLC, which
committee has sole power to vote and dispose of that company's
investments. See footnote (3) on page 10 of this proxy statement for the
ownership interests of Messrs. Bull and Dresher, each of whom is a
director of the Company, in DPI Oil Service Partners Limited Partnership.
(3) As reflected in Schedule 13G filed with the SEC on February 14, 1997.
Represents shares beneficially owned as of December 31, 1996 by the
following limited partnerships of which, in each case, First Reserve
Corporation is the managing general partner: First Reserve Fund V, Limited
Partnership - 167,415; First Reserve Fund VI, Limited Partnership -
3,850,417; and First Reserve Fund V-2, Limited Partnership - 167,415.
First Reserve Corporation, in its role as managing general partner of the
partnerships, has the power to cause each partnership to dispose of or to
vote shares held by each partnership.
(4) As reflected in Schedule 13G filed with the SEC on February 13, 1997.
-9-
<PAGE> 12
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND OFFICERS
The following table sets forth certain information with respect to shares
of Common Stock beneficially owned by each director and nominee for director of
the Company, by each of the executive officers named in the Summary
Compensation Table and by all current directors and officers of the Company as
a group. This information has been provided by each of the directors and
officers as of March 27, 1997, at the request of the Company. There are no
shares subject to stock options granted under the Stock Plan that are
exercisable within 60 days of March 27, 1997.
<TABLE>
<CAPTION>
Shares Percent
Name of individual beneficially of class
or identity of group owned outstanding(1)
-------------------- ------- --------------
<S> <C> <C> <C>
C. R. Bearden . . . . . . . . . . . . . . . . . . 419,697 (2) 2.35%
Howard I. Bull . . . . . . . . . . . . . . . . . . 0 (3) *
James C. Comis . . . . . . . . . . . . . . . . . . 5,101,800 (4) 28.54%
James T. Dresher . . . . . . . . . . . . . . . . . 0 (3) *
W. McComb Dunwoody . . . . . . . . . . . . . . . . 5,101,800 (4) 28.54%
Merrill A. Miller . . . . . . . . . . . . . . . . 94,127 *
Steven W. Krablin . . . . . . . . . . . . . . . . . 171,275 *
Lynn L. Leigh . . . . . . . . . . . . . . . . . . 154,295 *
William E. Macaulay . . . . . . . . . . . . . . . . 4,185,247 (5) 23.42%
Bruce M. Rothstein . . . . . . . . . . . . . . . . 4,185,247 (5) 23.42%
Joel V. Staff . . . . . . . . . . . . . . . . . . 891,989 (6) 4.99%
All current directors and officers as a group
(14 persons) . . . . . . . . . . . . . . . . . . . 11,655,681 65.21%
</TABLE>
- ------------------
* Denotes ownership of less than one percent of the class outstanding.
(1) At March 27, 1997, there were 17,874,128 shares of Common Stock
outstanding
(2) Includes 269,093 shares that are owned by the C. R. Bearden Family Limited
Partnership.
(3) Messrs. Bull and Dresher have a 5.714% and 4.082% interest, respectively,
in DPI Partners I, a general partnership which holds a limited partnership
interest in DPI Oil Service Partners Limited Partnership. Additionally,
Messrs. Bull and Dresher each hold a limited partnership interest in DPI
Oil Service Partners Limited Partnership, which holds 4,725,281 shares of
the Company's common stock. The interests of Mr. Bull, Mr. Dresher and DPI
Partners I in DPI Oil Service Partners Limited Partnership, after the
return of the original investment plus interest, are approximately 1.3%,
3.3% and 20.0%, respectively. Messrs. Bull and Dresher each disclaim
beneficial ownership of all such shares.
(4) This figure equals all shares beneficially owned by Inverness/Phoenix LLC
of which Messrs. Comis and Dunwoody are principals.
(5) This figure equals all shares beneficially owned by First Reserve
Corporation of which Mr. Macaulay is President and Mr. Rothstein is
Managing Director. Both Messrs. Macaulay and Rothstein disclaim beneficial
ownership of all such shares.
(6) Includes 528,814 shares 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 and disclaims beneficial ownership to
these shares.
MEETINGS AND COMMITTEES OF THE BOARD
During 1996, six meetings of the board of directors of the Company were
held. The Company's by-laws provide that the board of directors, by resolution
adopted by a majority of the board, may designate an Executive Committee and
one or more other committees, with each such committee to consist of one or
more directors.
-10-
<PAGE> 13
Executive Committee. The executive committee has the full power and
authority to exercise all the powers of the board of directors in the
management of the Company except the power to fill vacancies in the board of
directors and the power to amend the Bylaws. The Executive Committee did not
meet during 1996. The current members of the Executive Committee are W. McComb
Dunwoody, committee chairman, William E. Macaulay and Joel V. Staff.
Audit Committee. The audit committee is composed of directors who are not
officers of the Company or any of its subsidiaries. The current members of the
Audit Committee are James T. Dresher, committee chairman, and Howard I. Bull.
The Audit Committee meets periodically with the Company's financial and
accounting officers, management and independent public accountants to review
the scope of auditing procedures, policies relating to internal auditing and
accounting procedures and controls. It also provides general oversight with
respect to the accounting principles employed in the Company's financial
reporting, reviews litigation and other legal matters that may affect the
Company's financial condition and monitors compliance with the Company's
business ethics and other policies. The Audit Committee met once during 1996.
Compensation Committee. The compensation committee is composed of members
of the board who are not officers of the Company or any of its subsidiaries.
This committee has general supervisory power over, and the power to grant
awards under, the Stock Plan. In addition, the compensation committee reviews
the recommendations of the Chief Executive Officer as to appropriate
compensation of the Company's principal executive officers and certain other
key personnel and establishes the compensation of such persons and the Chief
Executive Officer. It also periodically examines the general compensation
structure of the Company and supervises the welfare and pension plans and
compensation plans of the Company. The compensation committee met twice during
1996. Its current members are Howard I. Bull, committee chairman, and James T.
Dresher.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee are Howard I. Bull and James T.
Dresher. From August 1996 through March 20, 1997, the members of the
compensation committee were Howard I. Bull and William E. Macaulay. Mr.
Macaulay is the president of First Reserve Corporation. The Company paid First
Reserve Corporation a transaction fee of $1.2 million in 1996 in connection
with the acquisition of the predecessor partnership of the Company. The Company
and First Reserve Corporation are parties to a Deferred Fee Agreement, under
which the Company will pay First Reserve Corporation an aggregate amount of
$225,000. Joel Staff, an executive officer of the Company, also served on the
compensation committee from January 1996 through August 1996, prior to the
Company's initial public offering.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information regarding each of the Company's
current executive officers. Executive officers of the Company are elected
annually by the board of directors to serve in their respective capacities
until their successors are duly elected and qualified or until their earlier
resignation or removal. The periods shown for service as an employee of the
Company include service as an employee of the Partnership.
Joel V. Staff Mr. 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, a
worldwide diversified oil services company, from
October 1983 to May 1993. Mr. Staff also serves as a
director of Destec Energy Inc., an independent power
company. Age: 53.
C. R. Bearden Mr. Bearden has served as Executive Vice President of
the Company and President of the Distribution Group
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, an offshore
drilling contractor, from 1979 until that company's
1994 acquisition by a subsidiary of Noble Drilling
Corporation, also an offshore drilling contractor,
where he served as President and Chief Operating
Officer until joining the Company. Age: 50.
-11-
<PAGE> 14
Lynn L. Leigh Mr. 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, a manufacturer of oilfield
drilling equipment, 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. From July 1993
to October 1993, Mr. Leigh was self-employed managing
his personal investments. Mr. Leigh also serves as a
director of Global Marine, Inc., a marine drilling
contractor. Age: 71.
Steven W. Krablin Mr. 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, an NYSE-listed, international
oilfield service company, from November 1986 to
January 1996. Age: 46.
James J. Fasnacht Mr. 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. Age: 42.
Merrill A. Miller, Jr. Mr. Miller 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. Prior thereto, Mr. Miller
was President of Anadarko Drilling Company, a
drilling contractor, from January 1995 to February
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.
Age: 46.
Jerry N. Gauche Mr. 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. From October 1992 to January 1994, Mr.
Gauche was self-employed managing his personal
investments. Age: 48.
Paul M. Nation Mr. Nation has served as Secretary and General
Counsel of the Company since 1987 and Vice President
since 1994. Age: 42.
-12-
<PAGE> 15
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth for the years ended December 31, 1995 and
1996 the compensation paid by the Company to its Chief Executive Officer and
four other most highly compensated executive officers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
----------------------------------------
Annual Compensation Awards Payouts
---------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restrict Securities Other
and Compen- ed Stock Underlying LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($)(1) SARs (#) ($)(2) ($)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joel V. Staff 1996 291,352 186,983 -- 2,567 -- 1,675,423 14,512
Chairman, President 1995 275,016 -- -- -- -- -- 11,011
and CEO
C. R. Bearden 1996 234,808 124,278 -- 1,711 -- 1,116,949 17,559(4)
Executive V.P. 1995 215,625 -- -- -- -- -- 7,962
President -
Distribution Services
Lynn L. Leigh 1996 195,000 103,209 -- -- -- 1,256,846(5) 9,242
Sr. Vice President 1995 195,000 -- -- -- -- -- 7,810
Steven W. Krablin 1996 144,231 76,338 -- 856 -- 558,474 --
Vice President and 1995 -- -- -- -- -- -- --
CFO
Merrill A. Miller 1996 135,577 71,758 -- 856 -- 558,474 --
Vice President 1995 -- -- -- -- -- -- --
General Manager -
Drilling Systems
</TABLE>
- -------------------------
(1) The number and value at December 31, 1996 of restricted stockholdings for
the named executive officers are: Mr. Staff - 282,414 shares, $8,683,974;
Mr. Bearden - 188,254 shares, $5,788,639; Mr. Krablin - 94,127 shares,
$2,894,320; and Mr. Miller - 94,127 shares, $2,894,320. Provided that the
executive officer has been continuously employed by the Company until the
lapse date, forfeiture restrictions on the restricted stock will lapse in
20% increments annually beginning on January 17, 1997.
(2) Represents total amounts accrued to the named individuals except for Mr.
Leigh with respect to payments under the Company's Value Appreciation and
Incentive Plan B, which provided for certain executive officers of the
company to qualify for an award upon the occurrence of certain events,
including an initial public offering. Distributions under this plan will be
made in cash and stock until January 17, 2001. Cash distributions made under
the plan as of December 31, 1996 are as follows: Mr. Staff - $209,474; Mr.
Bearden - $139,650; Mr. Krablin - $69,825; and Mr. Miller - $69,825. No
stock distributions have been made under the plan to date.
(3) These amounts include:
(a) The Company's cash contributions for 1996 under the National-Oilwell
Retirement and Thrift Plan, a defined contribution plan, on behalf of Mr.
Staff, $7,113; Mr. Bearden, $7,103; and Mr. Leigh, $7,113.
(b) The Company's cash contributions for 1996 under the National-Oilwell
Supplemental Savings Plan, a defined contribution plan, on behalf of Mr.
Staff, $7,399; Mr. Bearden, $3,194; and Mr. Leigh, $2,129.
(4) Includes a Company paid premium of $7,262 for a term life insurance policy.
(5) Represents total amount accrued to Mr. Leigh under the Company's Value
Appreciation and Incentive Plan A, which provided for certain key employees
of the Company to qualify for an award upon the occurrence of certain
events, including a public offering. Distributions under this plan will be
made in cash and stock until January 17, 1999. At December 31, 1996, Mr.
Leigh had received a cash distribution under this plan in the amount of
$418,949 and had received no stock distribution.
-13-
<PAGE> 16
COMPENSATION OF DIRECTORS
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 (including directors who are not
full- time employees of the Company) are eligible for grants of stock options,
other than ISOs, and other awards under the Stock Plan. On March 21, 1997, each
non-employee director of the Company was granted a non-qualified stock option
to purchase 2,000 shares of the Company's common stock. The option exercise
price per share is equal to the fair market value of a share of common stock on
the date of grant, and the options have a term of five years from the date of
grant.
EMPLOYMENT CONTRACTS
Effective as of January 1, 1996, the Company entered into an employment
agreement with each of the named executive officers, except for Mr. Miller,
whose employment agreement was effective as of February 5, 1996. Each of the
agreements provides for a base salary, participation in the National-Oilwell
Employee Incentive Plan (the "Incentive Plan") and employee benefits as
generally provided to all employees. The agreements provide for the following
base salaries for 1996: Mr. Staff - $300,000; Mr. Bearden - $240,000; Mr. Leigh
- - $195,000; Mr. Krablin - $150,000 and Mr. Miller - $150,000. The agreements
have a continuing term of two years in the case of 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 under the
Incentive Plan either as a lump sum payment or over the one-year term, or
two-year term in the case of Mr. Staff, as determined by the employment
agreement under the circumstances. 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 in its existing or recent business, or
inducing any other employee to terminate employment with the Company.
Upon termination, other than for cause, participants in the Company's
Value Incentive Plans A and B, including each of the named executive officers,
are entitled to any amounts accrued on their behalf for which they have not yet
received a distribution. Each of the named executive officers other than Mr.
Leigh is a recipient to a restricted stock award under the Stock Plan. Under
the terms of the Restricted Stock Agreements pursuant to which the restricted
stock awards were issued, any restricted stock must be resold to the Company
for $0.01 per share if the recipient's employment with the Company is
terminated for any reason prior to the lapse of the forfeiture restrictions.
The forfeiture restrictions lapse each year beginning January 17, 1997, on 20%
of the total number of shares of restricted awarded to each participant and on
an additional twenty percent of the restricted stock awarded to each
participant upon an involuntary termination of employment without cause.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
compensation committee of the Board of Directors. The committee establishes
specific compensation levels for executive officers and other key personnel and
administers the Stock Plan and the Company's Value Appreciation and Incentive
Plans A and B.
The Company's executive officers in 1996 received certain cash and stock
awards under the Company's Value Appreciation Plans and pursuant to restricted
stock agreements. Distributions under these awards will occur through January
2001. These awards were provided primarily in consideration of the executive
officers' assistance and participation in the purchase of the Company's
business from its previous owners and the Company's initial public offering.
These awards were not designed as part of the Company's overall executive
compensation program and were not regarded by the compensation committee as
such, except that continued employment by the Company is a condition to the
lapse of forfeiture restrictions on restricted stock held by that employee.
-14-
<PAGE> 17
The main components of the executive compensation program for 1996 were
base salary and the 1996 Incentive Plan. Salary levels are based on factors
including individual performance and level and scope of responsibility. In
establishing the base salary levels for the executive officers (other than Mr.
Staff) the compensation committee considers the recommendations of Mr. Staff,
to whom these officers report. The compensation committee targets base salary
levels at or below the median industry peer level, which is determined by
consideration of compensation survey reports and salary levels paid by similar
companies in the oilfield service industry. The companies used for comparison
purposes include, but are not limited to, those companies included in the
Company's peer group index.
All employees of the Company, including executive officers, participated
in the Company's 1996 Incentive Plan. The plan is designed to align a portion
of each employee's cash compensation with Company performance. The amount of
the aggregate award under the plan was determined by the Company's performance
objectives based on measures of operating profit and the ratio of operating
profit to capital employed. A minimum performance level had to be achieved by
the Company before any award was earned, and high levels of achievement were
rewarded with increasing payments based upon an established progression. A
participant's award varied depending upon the level of his or her
participation. The maximum award opportunity for the chief executive officer
under the plan was approximately 65% of base salary and for the other executive
officers was approximately 50% of base salary.
Compensation of the Chief Executive Officer. Consistent with all other
executive officers, components of the chief executive officer's compensation
for 1996 included base salary and participation in the 1996 Incentive Plan. Mr.
Staff's base annual salary was increased in 1996 from $275,000 to $300,000. The
committee believes Mr. Staff's base salary level to be below the median
industry peer level. As described above, Mr. Staff was eligible to receive a
bonus equal to approximately 65% of his base salary in 1996 under the Incentive
Plan. The Company achieved its maximum performance targets established by the
plan and, accordingly, Mr. Staff was paid the maximum bonus award possible.
Since the Company's common stock became a publicly-traded security in
October 1996, the compensation committee's focus on the Company's executive
compensation program is to design a compensation package that will attract and
retain key executives focused on the Company's annual growth and long-term
strategy. The committee intends to achieve this objective through payment of a
total compensation package that approximates the industry median but that is
weighted to the value creation performance of the Company. Base pay and cash
incentives are intended to be below the market median while value creation
based incentives, such as stock options, are intended to be above the market
median. Stockholder approval of the Stock Plan is being solicited in connection
with this annual meeting of stockholders.
COMPENSATION COMMITTEE
December 31, 1996
Howard I. Bull, Chairman
William E. Macaulay
-15-
<PAGE> 18
PERFORMANCE GRAPH
The following line graph shows the cumulative total stockholder return on
the Company's common stock from October 29, 1996, the first trading day after
the date it was registered under the Securities Exchange Act of 1934, to
December 31, 1996, and compares it with the cumulative total return over the
same period of the S&P 500 Index and to a self- constructed peer group of
similar companies in the oilfield service industry (which includes BJ Services
Company, Camco International Inc., Cooper Cameron Corporation, Tuboscope Vetco
International Corporation and Varco International Incorporated). The graph
assumes a $100 investment in the Company's common stock based on the initial
per share price to the public of $17.00 and in each index at October 29, 1996
and that all dividends were reinvested. Peer group returns are based on the
market capitalization of each individual company within the peer group at the
beginning of the comparison period.
[GRAPH]
<TABLE>
<CAPTION>
OCT. 29, 1996 DEC. 31, 1996
------------- -------------
<S> <C> <C>
National-Oilwell, Inc. 100 181
Peer Group 100 120
S&P 500 100 108
</TABLE>
-16-
<PAGE> 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FEE AGREEMENTS
In connection with the acquisition of the Partnership, the Company and the
holders of all of the Company's outstanding stock entered into a Stockholders
Agreement dated January 16, 1996, as subsequently amended (the "Stockholders
Agreement"). The Stockholders Agreement provided for, among other things,
management of the Company, voting of shares, election of directors and
restrictions on transfer of shares, which provisions were automatically
terminated upon completion of the Offering. In addition, the Stockholders
Agreement provides the Inverness Investors and the First Reserve Investors the
right on four occasions to require the Company to register all or part of their
registerable shares under the Securities Act of 1933, as amended, and further
provides all parties to the Stockholders Agreement with piggyback registration
rights on any offering by the Company or any of its securities to the public
except a registration on Forms S-4 or S-8.
The Company and Inverness/Phoenix LLC entered into a Management Services
Agreement on January 16, 1996, under which Inverness/Phoenix LLC performed
management services as directed by the Company's board of directors. The
Management Services Agreement provided that Inverness/Phoenix LLC receive fees
of $1 million 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. In addition, First Reserve Corporation was to be paid a
transaction fee in connection with certain acquisitions. The Management
Services Agreement was canceled and replaced with a Deferred Fee Agreement
between the Company, Inverness/Phoenix LLC and First Reserve Corporation
immediately prior to the Offering. Under the terms of the Deferred Fee
Agreement, no future services would be performed for the Company and the prior
contractual payments would be settled by Inverness/Phoenix LLC being paid
$250,000 in advance quarterly beginning on the first day of the calendar
quarter following the Offering through December 31, 1999. In addition,
Inverness/Phoenix 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 payments would not be an event of default under the Company's
promissory notes to Armco and USX, which notes provide that an event of default
will occur if aggregate management or similar fees in excess of $1 million or
acquisition, divestiture or similar transaction fees in excess of 1% of the
aggregate value of any such transaction are paid to Inverness/Phoenix LLC or
First Reserve Corporation. All amounts remaining unpaid under the Deferred Fee
Agreement 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 Inverness/Phoenix LLC and First Reserve
Corporation) beginning on January 1, 2000, until the remaining unpaid portion
has been paid.
For their assistance in the acquisition of the Partnership in January
1996, the Company paid Inverness/Phoenix LLC and First Reserve Corporation
transaction fees of $1.8 million and $1.2 million, respectively. In connection
with the acquisition of the Partnership, GE Capital provided a new credit
facility, a subordinated note, equity capital and received transaction fees
totaling $4.7 million.
MANAGEMENT NOTES
In connection with the acquisition of the Partnership in January 1996,
four of the Company's executive officers issued promissory notes to the Company
in the following amounts: C. R. Bearden - $100,000; James J. Fasnacht -
$150,000; Lynn L. Leigh - $49,999; and Paul M. Nation - $199,999. Each of the
notes provided for interest until maturity at 1.5% above the prime interest
rate, payable annually, and the principal was due on January 15, 2001, unless
extended at the option of the Company. In accordance with their terms, each of
the notes was prepaid immediately prior to the Offering.
CERTAIN BUSINESS RELATIONSHIPS
During 1996 the Company, in the ordinary course of business, purchased
products referred to as "oil country tubular goods" for amounts totaling
approximately $36 million from Maverick Tube Corporation, a company that has
provided a significant volume of goods to the Company for a number of years.
Mr. Macaulay, a director of the Company, is on the board of directors of
Maverick Tube Corporation.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires executive officers and directors
of the Company and persons who own more than 10% of the Company's Common Stock,
to file reports of ownership and changes in ownership with the SEC and the New
York Stock Exchange. Based on its review of the copies of such reports, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during 1996, all Section
16(a) filings were complied with, except that late Form 3 reporting
requirements were filed by each of Messrs. Macaulay and Rothstein and by
Inverness/Phoenix LLC and First Reserve Corporation.
SELECTION OF INDEPENDENT AUDITORS
The board of directors has selected Ernst & Young LLP, the Company's
independent public accountants, to continue in such capacity for the current
year. Representatives of that firm are expected to be present at the annual
meeting with the opportunity to make a statement if they desire to do so and
are expected to be available to respond to appropriate questions.
PROXY SOLICITATION
The cost of soliciting proxies will be paid by the Company. Beacon Hill
Partners, Inc., 90 Broad Street, New York, New York has been employed to
solicit proxies by mail, telephone or personal solicitation for a fee of
approximately $2,500 plus expenses. The Company has also arranged for
reimbursement, at the rates suggested by the New York Stock Exchange, of
brokerage houses, nominees, custodians and fiduciaries for the forwarding of
proxy materials to the beneficial owners of shares held of record. Proxies may
also be solicited by directors, officers and employees of the Company, but such
persons will not be specially compensated for such services.
STOCKHOLDER SUGGESTIONS AND PROPOSALS
FOR THE 1998 ANNUAL MEETING
Consideration of certain matters is required at the annual meeting of
stockholders, such as the election of directors. In addition, pursuant to
applicable regulations of the SEC, stockholders may present resolutions that
are proper subjects for inclusion in the proxy statement and for consideration
at the annual meeting by submitting their proposals to the Company on a timely
basis. In order to be included for the 1998 annual meeting, resolutions should
be addressed to Paul M. Nation, Vice President, General Counsel and Secretary,
National-Oilwell, Inc., 5555 San Felipe, Houston, TX 77056 and must be received
by December 31, 1997.
OTHER MATTERS
The board of directors is not aware of any other matters that may come
before the meeting. However, if any further business should properly come
before the meeting, the persons named in the enclosed proxy will vote upon such
business in accordance with their best judgment.
A copy of the Company's 1996 Annual Report to Stockholders is being
transmitted herewith, but does not constitute part of the proxy solicitation
materials.
By order of the board of directors,
Paul M. Nation
Vice President, General Counsel
and Secretary
Houston, Texas
March 31, 1997
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EXHIBIT A
NATIONAL-OILWELL, INC.
AMENDED AND RESTATED
STOCK AWARD AND LONG-TERM INCENTIVE PLAN
I. PURPOSE
The purpose of the National-Oilwell, Inc. (formerly NOW Holdings,
Inc.) Stock Award and Long-Term Incentive Plan (the "Plan") is to provide a
means whereby National-Oilwell, Inc. (formerly 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 National-Oilwell, 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 National-Oilwell, Inc.
(f) "COMPANY" means National-Oilwell, Inc.
(g) "FAIR MARKET VALUE" means the last reported sale price on the
New York Stock Exchange or such other national securities exchange (or the
Nasdaq National Market) which constitutes the principal trading market for the
Common Stock, on the relevant date or, if there were no trades on that date the
latest preceding date upon which a sale was reported.
(h) "FINAL STOCK AWARD" means an award granted under Article XII
of the Plan.
(i) "HOLDER" means an employee of the Company, a Parent
Corporation or a Subsidiary (or his guardian or legal representative) who has
been granted an Award.
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(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 National-Oilwell, Inc. Stock Award and
Long-Term Incentive Plan, as amended and restated.
(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.
(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.
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IV. ADMINISTRATION
(a) COMPOSITION OF COMMITTEE. The Plan shall be administered and
interpreted by the Committee. The Committee shall consist of two or more
persons appointed by the Board, all of whom shall be "outside directors" as
defined under section 162(m) of the Code and related Treasury regulations.
(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 and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, 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 quality 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.
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
1,941,303 shares. During the term of the Plan, the maximum aggregate number of
shares of Common Stock that shall be subject to Awards under the Plan to any
individual shall not exceed one-half of the aggregate limitation for the Plan
specified in the preceding sentence. 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.
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<PAGE> 24
VI. ELIGIBILITY
Awards made pursuant to the Plan may be granted only to individuals
who, at the time of grant, are key employees or directors 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 provided, however, that effective August 28, 1996,
Awards, other than Incentive Stock Options, may be granted to directors who are
not employees of the Company. 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 or payment through a
broker in accordance with procedures permitted by Regulation T of the Federal
Reserve Board. 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 provided, however, that the term of any
Incentive Stock Option shall not exceed ten years.
(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 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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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 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 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 unless otherwise specified in the
Restricted Stock Agreement (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.
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(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 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
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.
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(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.
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 941,303 shares of
Common Stock and the number of shares of Common Stock issued pursuant to
Restricted Stock Awards granted under the Plan which have not been forfeited to
the Company. 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 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, recapitalization,
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.
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(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 of Common Stock which may be
issued under the Plan, except as provided in Article XIII;
(b) to change the class of employees eligible to receive Incentive Stock
Options under the Plan; or
(c) to modify materially the requirements as to eligibility for participation
in the Plan if such approval is required by section 162(m) of the Code.
XV. 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, 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 LAW; 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.
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<PAGE> 29
(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, 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 stockholder 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 of 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 stockholders an annual
report of the Company and a proxy statement for the annual meeting of
stockholders 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 28th day of February, 1997 to supersede and replace that
Plan document which was theretofore adopted by and executed on behalf of the
Company.
ATTEST:
NATIONAL-OILWELL, INC.
/s/ Paul M. Nation /s/ Joel V. Staff
- --------------------------------- --------------------------------
Paul M. Nation, Vice President, Joel V. Staff, President and,
General Counsel and Secretary Chief Executive Officer
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<PAGE> 30
NATIONAL-OILWELL, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS MAY 14, 1997.
The undersigned hereby appoints Steven W. Krablin and Paul M. Nation or either
of them with full power of substitution, the proxy or proxies of the undersigned
to attend the annual meeting of stockholders of National-Oilwell, Inc. to be
held on Wednesday, May 14, 1997, and any adjournments thereof, and to vote the
shares of stock that the signer would be entitled to vote if personally present
as indicated on the reverse side and, at their discretion, on any other matters
brought before the meeting, and any adjournments thereof, all as set forth in
the March 31, 1997 proxy statement (the "Proxy Statement").
This proxy is solicited on behalf of the board of directors of
National-Oilwell, Inc. The shares represented by this proxy will be voted as
directed by the Stockholder. If no direction is given when the duly executed
proxy is returned, such shares will be voted in accordance with the
recommendations of the board of directors for all nominees and for the proposal
described below (the "Proposal").
<PAGE> 31
[X] PLEASE MARK YOUR VOTE
AS IN THIS EXAMPLE
USING DARK INK ONLY.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR BOTH NOMINEES AND FOR THE
PROPOSAL.
1. The election of directors: James T. Dresher and Bruce M. Rothstein.
[ ] FOR both nominees [ ] WITHHOLD AUTHORITY
listed above. for both nominees listed above.
INSTRUCTION: to withhold authority to vote for any individual nominee, write
the nominees name in the space provided below:
- -----------------------------------
2. The approval, ratification and adoption of the amended and restated
National-Oilwell Stock Award and Long-Term Incentive Plan, as described in
the Proxy Statement.
FOR the proposal [ ]
AGAINST the proposal [ ]
ABSTAIN [ ]
The undersigned acknowledges receipt of the March 31, 1997 Notice of Annual
Meeting and the Proxy Statement, which more particularly describes the matters
referred to herein.
- ------------------------------ ------------------------------------
Signature Signature if held jointly
- ------------------------------ ------------------------------------
Date Date
(Signature(s) should be exactly as name or names appear on this proxy. If stock
is held jointly, each holder should sign. If signing is by attorney, executor,
administrator, trustee or guardian, please give full title.)
PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY.
