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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934)
VARCO INTERNATIONAL, INC.
(NAME OF ISSUER)
VARCO INTERNATIONAL, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK
(TITLE OF CLASS OF SECURITIES)
922126107
(CUSIP NUMBER OF CLASS OF SECURITIES)
RICHARD A. KERTSON
VICE PRESIDENT-FINANCE
VARCO INTERNATIONAL, INC.
743 NORTH ECKHOFF STREET
ORANGE, CALIFORNIA 92668
(714) 978-1900
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
----------------
COPY TO:
LARRY M. MEEKS, ESQ.
PIRCHER, NICHOLS & MEEKS
1999 Avenue of the Stars
Los Angeles, California 90067
(310) 201-8900
----------------
MARCH 24, 1995
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
----------------
CALCULATION OF FILING FEE*
TRANSACTION VALUATION : $42,400,000 AMOUNT OF FILING FEE: $8,480
[_]CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(A)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM
OR SCHEDULE AND THE DATE OF ITS FILING.
AMOUNT PREVIOUSLY PAID: N/A FILING PARTY: N/A
FORM OR REGISTRATION NO.: N/A DATE FILED: N/A
--------
* Based upon purchase of 5,300,000 Shares at the maximum tender offer price,
$8.00 per Share.
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<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The Issuer of the securities to which this Issuer Tender Offer
Statement on Schedule 13E-4 (the "Statement") relates is Varco
International, Inc., a California corporation (the "Company"), and the
address of its principal executive office is 743 North Eckhoff Street,
Orange, California 92668.
(b) This Statement relates to a tender offer by the Company to purchase
5,300,000 shares (or such lesser number of shares as are validly tendered)
of its Common Stock (the "Shares"), at prices, net to the seller in cash,
not greater than $8.00 nor less than $6.75 per Share as specified by
shareholders, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated March 24, 1995 (the "Offer to Purchase"), and in
the related Letter of Transmittal (which together constitute the "Offer"),
copies of which are filed as Exhibits (a)(1) and (a)(2), respectively. The
information set forth in the "Introduction," "Section 1. Number of Shares;
Proration," "Section 8. Interest of Directors and Executive Officers;
Transactions and Arrangements Concerning the Shares," "Section 10. Purpose
of the Offer; Certain Effects of the Offer," and "Section 15. Extension of
the Offer; Termination; Amendments" of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in "Section 7. Price Range of Shares" of
the Offer to Purchase is incorporated herein by reference.
(d) This Statement is being filed by the Issuer.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in "Section 9. Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The information set forth in the "Introduction" and "Section 10. Purpose of
the Offer; Certain Effects of the Offer" of the Offer to Purchase is
incorporated herein by reference.
(a)-(j) The information set forth in the "Introduction," "Section 8.
Interest of Directors and Executive Officers; Transactions and Arrangements
Concerning the Shares," "Section 9. Source and Amount of Funds," "Section
10. Purpose of the Offer; Certain Effects of the Offer," "Section 11.
Certain Information About the Company" and "Section 12. Effects of the
Offer on the Market for Shares; Registration under the Exchange Act" of the
Offer to Purchase is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in "Section 8. Interest of Directors and Executive
Officers; Transactions and Arrangements Concerning the Shares" and in "Schedule
A--Certain Transactions Involving Shares" of the Offer to Purchase is
incorporated herein by reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The information set forth in the "Introduction" and "Section 8. Interest of
Directors and Executive Officers; Transactions and Arrangements Concerning the
Shares" of the Offer to Purchase is incorporated herein by reference.
ITEM 6. PERSONS RETAINED, OR EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "Introduction" and "Section 16. Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
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ITEM 7. FINANCIAL INFORMATION.
(a)-(b) The information set forth in "Section 11. Certain Information
About the Company" of the Offer to Purchase is incorporated herein by
reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) The information set forth in "Section 13. Certain Legal Matters;
Regulatory Approvals" of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in "Section 12. Effects of the Offer on the
Market for Shares; Registration under the Exchange Act" of the Offer to
Purchase is incorporated herein by reference.
(d) Not applicable.
(e) Reference is hereby made to the Offer to Purchase and the related
Letter of Transmittal, copies of which are attached hereto as Exhibits
(a)(1) and (a)(2), respectively, and incorporated in their entirety herein
by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated March 24, 1995
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9
(a)(7) Press Release issued by the Company on March 22, 1995
(a)(8) Letter to the Company's shareholders from Walter B. Reinhold,
Chairman, and George Boyadjieff, President and Chief Executive Officer, of
the Company, dated March 23, 1995
(a)(9) Summary Advertisement dated March 27, 1995
(b)(1) Credit Agreement, dated as of February 25, 1993 among Varco
International, Inc., Citicorp USA, Inc. and Citibank, N.A., incorporated by
reference to Exhibit 4.5 to the Company's annual report on Form 10-K for
the year ended December 31, 1992
(b)(2) First Amendment, dated as of August 3, 1993, to Credit Agreement
included as Exhibit (b)(1) hereto, incorporated by reference to Exhibit 4
to the Company's quarterly report on Form 10-Q for the quarter ended
September 30, 1993
(b)(3) Second Amendment, dated as of September 23, 1993, to Credit
Agreement included as Exhibit (b)(1) hereto, incorporated by reference to
Exhibit 4.6 to the Company's annual report on Form 10-K for the year ended
December 31, 1993
(b)(4) Third Amendment, dated as of December 1, 1993, to Credit Agreement
included as Exhibit (b)(1) hereto, incorporated by reference to Exhibit 4.7
to the Company's annual report on Form 10-K for the year ended December 31,
1993
(b)(5) Fourth Amendment, dated as of May 12, 1994, to Credit Agreement
included as Exhibit (b)(1) hereto, incorporated by reference to Exhibit 4
to the Company's quarterly report on Form 10-Q for the quarter ended June
30, 1994
(b)(6) Fifth Amendment, dated as of October 31, 1994, to Credit Agreement
included as Exhibit (b)(1) hereto, incorporated by reference to Exhibit
4.10 to the Company's annual report on Form 10-K for the year ended
December 31, 1994
(b)(7) Sixth Amendment, dated as of March 17, 1995, to Credit Agreement
included as Exhibit (b)(1) hereto
3
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(c) Agreement dated as of June 11, 1981 among W. B. Reinhold, B. Reinhold, Jr.,
Charlotte Reinhold Lorenz, Baldwin Terry Reinhold and Leo J. Pircher,
incorporated by reference to Exhibit 10.14 to Amendment No. 2 to the
Company's Registration Statement on Form S-1, Registration No. 33-9341
(d) Not applicable
(e) Not applicable
(f) Not applicable
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
VARCO INTERNATIONAL, INC.
Dated: March 24, 1995 /s/ RICHARD A. KERTSON
Name: Richard A. Kertson
Title: Vice President-Finance
4
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<TABLE>
<CAPTION>
PAGE IN
EXHIBIT SEQUENTIALLY
NO. DESCRIPTION NUMBERED COPY
------- ----------- -------------
<C> <S> <C>
(a) (1) Offer to Purchase, dated March 24, 1995
(a) (2) Letter of Transmittal
(a) (3) Notice of Guaranteed Delivery
(a) (4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
(a) (5) Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees
(a) (6) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9
(a) (7) Press Release issued by the Company on March 22, 1995
(a) (8) Letter to the Company's shareholders from Walter B.
Reinhold, Chairman, and George Boyadjieff, President
and Chief Executive Officer, of the Company, dated
March 23, 1995
(a) (9) Summary Advertisement dated March 27, 1995
(b) (1) Credit Agreement, dated as of February 25, 1993 among
Varco International, Inc., Citicorp USA, Inc. and
Citibank, N.A., incorporated by reference to Exhibit
4.5 to the Company's annual report on Form 10-K for
the year ended December 31, 1992
(b) (2) First Amendment, dated as of August 3, 1993, to Credit
Agreement included as Exhibit (b)(1) hereto,
incorporated by reference to Exhibit 4 to the
Company's quarterly report on Form 10-Q for the
quarter ended September 30, 1993
(b) (3) Second Amendment, dated as of September 23, 1993, to
Credit Agreement included as Exhibit (b)(1) hereto,
incorporated by reference to Exhibit 4.6 to the
Company's annual report on Form 10-K for the year
ended December 31, 1993
(b) (4) Third Amendment, dated as of December 1, 1993, to
Credit Agreement included as Exhibit (b)(1) hereto,
incorporated by reference to Exhibit 4.7 to the
Company's annual report on Form 10-K for the year
ended December 31, 1993
(b) (5) Fourth Amendment, dated as of May 12, 1994, to Credit
Agreement included as Exhibit (b)(1) hereto,
incorporated by reference to Exhibit 4 to the
Company's quarterly report on Form 10-Q for the
quarter ended June 30, 1994
(b) (6) Fifth Amendment, dated as of October 31, 1994, to
Credit Agreement included as Exhibit (b)(1) hereto,
incorporated by reference to Exhibit 4.10 to the
Company's annual report on Form 10-K for the year
ended December 31, 1994
(b) (7) Sixth Amendment, dated as of March 17, 1995, to Credit
Agreement included as Exhibit (b)(1) hereto
(c) Agreement dated as of June 11, 1981 among W. B.
Reinhold, B. Reinhold, Jr., Charlotte Reinhold Lorenz,
Baldwin Terry Reinhold and Leo J. Pircher,
incorporated by reference to Exhibit 10.14 to
Amendment No. 2 to the Company's Registration
Statement on Form S-1, Registration No. 33-9341
</TABLE>
<PAGE>
VARCO INTERNATIONAL, INC.
OFFER TO PURCHASE FOR CASH
UP TO 5,300,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE NOT GREATER THAN $8.00
NOR LESS THAN $6.75 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
APRIL 21, 1995, UNLESS THE OFFER IS EXTENDED.
Varco International, Inc., a California corporation (the "Company"), hereby
invites its shareholders to tender shares of its Common Stock (the "Shares")
to the Company at prices, net to the seller in cash, not greater than $8.00
nor less than $6.75 per Share, in increments of $.25, specified by such
shareholders, upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer"). The Company will, upon the terms and subject to the
conditions of the Offer, determine a single per Share price (not greater than
$8.00 nor less than $6.75 per Share) (the "Purchase Price") that it will pay
for Shares properly tendered and not withdrawn pursuant to the Offer, taking
into account the number of Shares so tendered and the prices specified by
tendering shareholders. The Company will select the Purchase Price which will
allow it to purchase 5,300,000 Shares (or such lesser number of Shares as are
properly tendered at prices not greater than $8.00 nor less than $6.75 per
Share) pursuant to the Offer. All Shares properly tendered at prices at or
below the Purchase Price and not withdrawn will be purchased at the Purchase
Price, net to the seller in cash, upon the terms and subject to the conditions
of the Offer, including the proration terms hereof.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
The Shares are listed and principally traded on the New York Stock Exchange,
Inc. (the "NYSE") under the symbol "VRC." On March 22, 1995, the last full
trading day prior to the announcement of the Offer, the closing per Share
sales price as reported on the NYSE Composite Tape was $7.00. Shareholders are
urged to obtain current market quotations for the Shares. See Section 7.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD
BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR
EXECUTIVE OFFICERS INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
----------------
THE DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
----------------
March 24, 1995
<PAGE>
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile copy thereof) in accordance with the instructions in the Letter of
Transmittal, mail or deliver it and any other required documents to Harris
Trust Company of New York, the depositary for the Offer (the "Depositary"), and
either mail or deliver the stock certificates for such Shares to the Depositary
along with the Letter of Transmittal or follow the procedure for book-entry
delivery set forth in Section 3, or (2) request such shareholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such shareholder. A shareholder having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
such shareholder desires to tender such Shares. Shareholders who desire to
tender Shares and whose certificates for such Shares are not immediately
available or who cannot comply with the procedure for book-entry transfer by
the expiration of the Offer must tender such Shares by following the procedures
for guaranteed delivery set forth in Section 3.
SHAREHOLDERS MUST PROPERLY COMPLETE THE LETTER OF TRANSMITTAL, INCLUDING THE
SECTION OF THE LETTER OF TRANSMITTAL RELATING TO THE PRICE AT WHICH THEY ARE
TENDERING SHARES, IN ORDER TO EFFECT A VALID TENDER OF THEIR SHARES. IF A
SHAREHOLDER DESIRES TO TENDER SHARES AT MORE THAN ONE PRICE, SUCH SHAREHOLDER
MUST COMPLETE A SEPARATE LETTER OF TRANSMITTAL FOR EACH PRICE AT WHICH SUCH
SHAREHOLDER IS TENDERING SHARES, EXCEPT THAT THE SAME SHARES CANNOT BE TENDERED
(UNLESS PROPERLY WITHDRAWN PREVIOUSLY IN ACCORDANCE WITH THE TERMS OF THE
OFFER) AT MORE THAN ONE PRICE.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase. Shareholders may also contact their broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING
SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL.
IF GIVEN OR MADE, SUCH RECOMMENDATION, INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<C> <S> <C>
Introduction..................................................... 1
1. Number of Shares; Proration...................................... 2
2. Tenders by Owners of Fewer than 100 Shares....................... 4
3. Procedure for Tendering Shares................................... 4
4. Withdrawal Rights................................................ 7
5. Purchase of Shares and Payment of Purchase Price................. 7
6. Certain Conditions of the Offer.................................. 8
7. Price Range of Shares............................................ 10
8. Interest of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares.............................. 10
9. Source and Amount of Funds....................................... 12
10. Purpose of the Offer; Certain Effects of the Offer............... 13
11. Certain Information About the Company............................ 14
12. Effects of the Offer on the Market for Shares;
Registration under the Exchange Act............................. 17
13. Certain Legal Matters; Regulatory Approvals...................... 17
14. Certain Federal Income Tax Consequences.......................... 18
15. Extension of the Offer; Termination; Amendments.................. 21
16. Fees and Expenses................................................ 22
17. Miscellaneous.................................................... 22
Schedule A--Certain Transactions Involving Shares................ 24
</TABLE>
(i)
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF
VARCO INTERNATIONAL, INC.:
INTRODUCTION
The Company hereby invites its shareholders to tender Shares to the Company
at prices, net to the seller in cash, not greater than $8.00 nor less than
$6.75 per Share, in increments of $.25, specified by such shareholders, upon
the terms and subject to the conditions set forth in the Offer. The Company
will, upon the terms and subject to the conditions of the Offer, determine a
single per Share Purchase Price (not greater than $8.00 nor less than $6.75
per Share) (the "Purchase Price") that it will pay for Shares properly
tendered and not withdrawn pursuant to the Offer, taking into account the
number of Shares so tendered and the prices specified by tendering
shareholders. The Company will select the Purchase Price which will allow it
to purchase 5,300,000 Shares (or such lesser number of Shares as are properly
tendered at prices not greater than $8.00 nor less than $6.75 per Share)
pursuant to the Offer. All Shares properly tendered at prices at or below the
Purchase Price and not withdrawn prior to the Expiration Date (as defined in
Section 1) will be purchased at the Purchase Price, net to the seller in cash,
upon the terms and subject to the conditions of the Offer, including the
proration terms described below. The Company reserves the right, in its sole
discretion, to purchase more than 5,300,000 Shares pursuant to the Offer. See
Sections 1 and 15.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 6.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF
SO, HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD
BE TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR
EXECUTIVE OFFICERS INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER.
Baker Hughes Incorporated ("Baker Hughes") of which James D. Woods, a
director of the Company, is Chairman, President and Chief Executive Officer,
owns 6,346,041 Shares, or approximately 19.0% of the Shares outstanding as of
March 21, 1995. Baker Hughes has represented to the Company that it does not
intend to tender any Shares pursuant to the Offer. If the Company purchases
5,300,000 Shares pursuant to the Offer, Baker Hughes would own approximately
22.6% of the outstanding Shares.
Walter B. Reinhold, Chairman of the Board of the Company, owns 1,140,291
Shares, or approximately 3.4% the Shares outstanding as of March 21, 1995. Mr.
Reinhold has represented to the Company that he does not intend to tender any
Shares pursuant to the Offer. If the Company purchases 5,300,000 Shares
pursuant to the Offer, Mr. Reinhold would own approximately 4.1% of the
outstanding Shares.
If, prior to the Expiration Date (as defined in Section 1), more than
5,300,000 Shares (or such greater number of Shares as the Company may elect to
purchase) are properly tendered at or below the Purchase Price and not
withdrawn, the Company will, upon the terms and subject to the conditions of
the Offer, accept Shares for purchase first from all Odd Lot Owners (as
defined in Section 2) who properly tender all their Shares at or below the
Purchase Price and then on a pro rata basis from all other shareholders whose
Shares are properly tendered at or below the Purchase Price and not withdrawn.
See Sections 1 and 2. The Company will return all Shares not purchased under
the Offer, including Shares tendered and not withdrawn at prices greater than
the Purchase Price and Shares not purchased because of proration. Tendering
shareholders will not be obligated to pay brokerage fees or commissions,
solicitation fees or, subject to Instruction 7 of the Letter of Transmittal,
stock transfer taxes on the Company's purchase of Shares pursuant to the
Offer. In addition, the Company will pay all fees and expenses of Lehman
Brothers (the "Dealer Manager"), Harris Trust Company of New York (the
"Depositary") and Hill & Knowlton (the "Information Agent") in connection with
the Offer. See Section 16.
Over the past several years the Company has generated substantial excess
cash. At December 31, 1994, the Company's cash and cash equivalents and short-
term investments were approximately $38.6 million. The
1
<PAGE>
Company is making the Offer because the Board of Directors believes that, given
the Company's cash and cash equivalents, short-term investments and debt
capacity, the Offer represents the opportunity to return cash to the Company's
shareholders, permitting them to invest it according to their preferences and
objectives. After considering other alternatives, such as retaining the excess
funds for a possible acquisition or paying a cash dividend, the Board of
Directors concluded that the Offer was the preferable alternative for enhancing
shareholder value.
The Offer gives shareholders the opportunity to sell Shares at prices greater
than market prices prevailing prior to announcement of the Offer. The Offer
also provides shareholders who are considering a sale of all or a portion of
their Shares the opportunity to determine the price or prices (not greater than
$8.00 nor less than $6.75 per Share) at which they are willing to sell their
Shares and, if any such Shares are purchased pursuant to the Offer, to sell
those Shares for cash without the usual transaction costs associated with open-
market sales.
As of March 21, 1995, there were 33,385,870 Shares outstanding and 737,682
Shares issuable upon exercise of stock options under the Company's stock option
plans. The 5,300,000 Shares that the Company is offering to purchase represent
approximately 15.9% of the Shares outstanding as of March 21, 1995 and
approximately 15.5% of the fully diluted Shares outstanding as of such date.
The Shares are listed and principally traded on the NYSE under the symbol
"VRC." On March 22, 1995, the last full trading day prior to the announcement
of the Offer, the closing per share sales price as reported on the NYSE
Composite Tape was $7.00. Shareholders are urged to obtain current market
quotations for the Shares. See Section 7.
Shares acquired by the Company pursuant to the Offer will be restored to the
status of authorized and unissued Shares and, therefore, will be available for
subsequent issuance by the Company. The Company has no current plans for
reissuance of the repurchased Shares.
1. NUMBER OF SHARES; PRORATION.
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment and purchase 5,300,000 Shares or such lesser number of
Shares as are properly tendered on or prior to the Expiration Date (and not
withdrawn in accordance with Section 4) at a price (determined in the manner
set forth below) not greater than $8.00 nor less than $6.75 per Share. The term
"Expiration Date" means 12:00 Midnight, New York City time, on Friday, April
21, 1995, unless the Company, in its sole discretion, shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall refer to the latest time and date at which the Offer,
as so extended by the Company, shall expire. See Section 15 for a description
of the Company's right to extend the time during which the Offer is open and to
delay, terminate or amend the Offer. See also Section 6. Subject to the
purchase of Shares properly tendered and not withdrawn by Odd Lot Holders as
set forth in Section 2, if the Offer is oversubscribed, Shares tendered at or
below the Purchase Price prior to the Expiration Date will be subject to
proration. The proration period also expires on the Expiration Date.
The Offer is not conditioned upon any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions. See
Section 6.
The Company will, upon the terms and subject to the conditions of the Offer,
determine the Purchase Price (not greater than $8.00 nor less than $6.75 per
Share) that it will pay for Shares properly tendered pursuant to the Offer,
taking into account the number of Shares so tendered and the prices specified
by tendering shareholders. The Company will select a single per Share Purchase
Price that will allow it to buy 5,300,000 Shares (or such lesser number as are
properly tendered at prices not greater than $8.00 nor less than $6.75 per
Share) pursuant to the Offer.
The Company reserves the right, in its sole discretion, to purchase more than
5,300,000 Shares pursuant to the Offer but the Company does not, in any event,
intend to purchase more Shares than can be purchased for an aggregate purchase
price of $45 million. If (a) the Company (i) increases or decreases the
2
<PAGE>
range of prices at which Shares may be properly tendered, (ii) increases the
number of Shares being sought and any such increase in the number of Shares
being sought exceeds 2% of the outstanding Shares, or (iii) decreases the
number of Shares being sought, and (b) the Offer is scheduled to expire less
than ten business days from and including the date that notice of such increase
or decrease is first published, sent or given in the manner specified in
Section 15, the Offer will be extended for ten business days from and including
the date of such notice. For purposes of the Offer, a "business day" means any
day other than a Saturday, Sunday or Federal holiday and consists of the time
period from 12:01 A.M. through 12:00 Midnight, New York City time.
In accordance with Instruction 5 of the Letter of Transmittal, each
shareholder desiring to tender Shares must specify the price or prices (not
greater than $8.00 nor less than $6.75 per Share in increments of $.25) at
which such shareholder is willing to have such shareholder's Shares purchased
by the Company. All Shares purchased pursuant to the Offer will be purchased at
the Purchase Price, net to the seller in cash. All Shares not purchased
pursuant to the Offer, including Shares tendered at prices greater than the
Purchase Price and Shares not purchased because of proration, will be returned
to the tendering shareholders at the Company's expense as promptly as
practicable (which, in the event of proration, is expected to be approximately
12 NYSE trading days) following the Expiration Date.
If the number of Shares properly tendered at or below the Purchase Price and
not withdrawn prior to the Expiration Date is less than or equal to 5,300,000
Shares (or such greater number of Shares as the Company may elect to purchase
pursuant to the Offer), the Company will, upon the terms and subject to the
conditions of the offer, purchase at the Purchase Price all Shares so tendered
and not withdrawn.
Upon the terms and subject to the conditions of the Offer, in the event that
prior to the Expiration Date more than 5,300,000 Shares (or such greater number
of Shares as the Company elects to purchase) are properly tendered at or below
the Purchase Price and not withdrawn, the Company will accept Shares for
purchase in the following order of priority:
(a) first, all Shares properly tendered at or below the Purchase Price
and not withdrawn prior to the Expiration Date by any Odd Lot Owner (as
defined below) who:
(1) tenders all Shares beneficially owned by such Odd Lot Owner at or
below the Purchase Price (partial tenders will not qualify for this
preference); and
(2) completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery;
and
(b) then, after purchase of all of the foregoing Shares, all other Shares
properly tendered at or below the Purchase Price and not withdrawn prior to
the Expiration Date on a pro rata basis, if necessary (with adjustments to
avoid purchases of fractional Shares).
In the event that proration of tendered Shares is required, the Company will
determine the final proration factor as promptly as practicable after the
Expiration Date. Proration for each shareholder tendering Shares other than Odd
Lot Owners shall be based on the ratio of the number of shares tendered by such
shareholder to the total number of Shares tendered by all shareholders other
than Odd Lot Owners. Although the Company does not expect to be able to
announce the final results of such proration until approximately seven NYSE
trading days after the Expiration Date, it will announce preliminary results of
proration by press release as promptly as practicable after the Expiration
Date. Shareholders may obtain such preliminary information from the Information
Agent and may be able to obtain such information from their brokers or
financial advisors.
As described in Section 14, the number of Shares that the Company will
purchase from a shareholder may affect the federal income tax consequences to
the shareholder of such purchase and therefore may be relevant to a
shareholder's decision whether to tender Shares.
3
<PAGE>
2. TENDERS BY OWNERS OF FEWER THAN 100 SHARES.
The Company, upon the terms and subject to the conditions of the Offer, will
accept for payment, without proration, all Shares properly tendered at or below
the Purchase Price and not withdrawn prior to the Expiration Date by or on
behalf of shareholders who beneficially held, as of the close of business on
March 22, 1995, and continue to own beneficially as of the Expiration Date, an
aggregate of fewer than 100 Shares ("Odd Lot Owners"). See Section 1. To avoid
proration, however, an Odd Lot Owner must properly tender at or below the
Purchase Price all shares that such Odd Lot Owner beneficially owns; partial
tenders will not qualify for this preference. This preference is not available
to holders of 100 or more Shares, even if such holders have separate stock
certificates for fewer than 100 Shares. Any Odd Lot owner wishing to tender all
Shares beneficially owned by such owner free of proration pursuant to this
Offer must complete the section captioned "Odd Lots" in the Letter of
Transmittal and, if applicable, in the Notice of Guaranteed Delivery. See
Section 3. By accepting the Offer, shareholders owning fewer than 100 Shares
would not only avoid the payment of brokerage commissions but would also avoid
any applicable odd lot discounts payable on a sale of their Shares in an NYSE
transaction.
The Company reserves the right, but will not be obligated, to purchase all
Shares properly tendered and not withdrawn by any shareholder who has so
tendered all shares beneficially owned of record and as a result would then own
an aggregate of fewer than 100 Shares.
3. PROCEDURE FOR TENDERING SHARES.
Proper Tender of Shares. For Shares to be properly tendered pursuant to the
Offer:
(a) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees, and any other
documents required by the Letter of Transmittal, must be received on or
before the Expiration Date by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase, and either certificates
for such Shares to be tendered must be transmitted to and received by the
Depositary at one of such addresses or such Shares must be tendered
pursuant to the procedures for book-entry transfer described below (and a
confirmation of such tender received by the Depositary), in each case by
the Expiration Date; or
(b) the tendering shareholder must comply with the guaranteed delivery
procedure set forth below.
As specified in Instruction 5 of the Letter of Transmittal, each shareholder
desiring to tender Shares pursuant to the Offer must properly indicate in the
section captioned "Price (In Dollars) Per Share At Which Shares Are Being
Tendered" on the Letter of Transmittal the price (in multiples of $.25) at
which such shareholder's Shares are being tendered; provided, however, than an
Odd Lot Owner may check the box in the section entitled "Odd Lots" indicating,
that he is tendering all of his Shares at the Purchase Price. SHAREHOLDERS
DESIRING TO TENDER SHARES AT MORE THAN ONE PRICE MUST COMPLETE SEPARATE LETTERS
OF TRANSMITTAL FOR EACH PRICE AT WHICH SUCH SHAREHOLDER IS TENDERING SHARES,
EXCEPT THAT THE SAME SHARES CANNOT BE TENDERED (UNLESS PROPERLY WITHDRAWN
PREVIOUSLY IN ACCORDANCE WITH THE TERMS OF THE OFFER) AT MORE THAN ONE PRICE.
IN ORDER TO PROPERLY TENDER SHARES, ONE AND ONLY ONE PRICE BOX MUST BE CHECKED
IN THE APPROPRIATE SECTION ON EACH LETTER OF TRANSMITTAL.
In addition, Odd Lot Owners who tender all their Shares must complete the
section entitled "Odd Lots" in the Letter of Transmittal and, if applicable, on
the Notice of Guaranteed Delivery in order to qualify for the preferential
treatment available to Odd Lot Owners as set forth in Section 1.
Signature Guarantees and Method of Delivery. No signature guarantee is
required on the Letter of Transmittal (i) if the Letter of Transmittal is
signed by the registered holder of the Shares exactly as the name of the
registered holder appears on the certificate (which term, for purposes of this
Section 3, includes any participant in The Depository Trust Company, the
Midwest Securities Trust Company or the
4
<PAGE>
Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer
Facilities") whose name appears on a security position listing as the holder of
the Shares) tendered therewith, and payment and delivery are to be made
directly to such registered holder at such holder's address shown on the
records of the Company, or (ii) if Shares are tendered for the account of a
bank, broker, dealer, credit union, savings association or other entity that is
a member in good standing of a recognized Medallion Program approved by The
Securities Transfer Association Inc. (each such entity being hereinafter
referred to as an "Eligible Institution"). In all other cases, all signatures
on the Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 1 of the Letter of Transmittal. If a certificate representing
Shares is registered in the name of a person other than the signer of a Letter
of Transmittal, or if payment is to be made, or certificates for Shares not
purchased or tendered are to be issued, to a person other than the registered
holder, the certificate must be endorsed or accompanied by an appropriate stock
power, in either case signed exactly as the name of the registered holder
appears on the certificate, with the signature on the certificate or stock
power guaranteed by an Eligible Institution. In all cases, payment for Shares
tendered and accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of certificates for such Shares (or a timely
confirmation of a book-entry transfer of such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities), a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and any other documents required by the Letter of
Transmittal. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING STOCK
CERTIFICATES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT
THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
Federal Income Tax Backup Withholding. Unless an exemption applies under the
applicable law and regulations concerning "backup withholding" of Federal
income tax, the Depositary will be required to withhold, and will withhold, 31%
of the gross proceeds otherwise payable to a shareholder or other payee
pursuant to the Offer unless the shareholder or other payee provides such
person's tax identification number (social security number or employer
identification number) and certifies that such number is correct. Each
tendering shareholder, other than a noncorporate foreign shareholder, should
complete and sign the main signature form and the Substitute Form W-9 included
as part of the Letter of Transmittal, so as to provide the information and
certification necessary to avoid backup withholding, unless an applicable
exemption exists and is proved in a manner satisfactory to the Company and the
Depositary. Noncorporate foreign shareholders should generally complete and
sign a Form W-8, Certificate of Foreign Status, a copy of which may be obtained
from the Depositary, in order to avoid backup withholding. In the case of any
foreign shareholder, the Depositary will withhold 30% of the purchase price of
Shares purchased from such shareholder in order to satisfy certain Federal
withholding requirements, unless such foreign shareholder proves in a manner
satisfactory to the Company and the Depositary that either: (i) the sale of its
Shares pursuant to the Offer will qualify as a sale or exchange (and not as a
dividend) for Federal income tax purposes (see Section 14), in which case no
withholding will be required, or (ii) the foreign shareholder is eligible,
under a tax treaty, for a reduced rate of withholding with respect to dividend
income, in which case the Depositary will withhold at the reduced treaty rate.
Each shareholder should consult his own tax advisor as to whether such
shareholder is subject to or exempt from Federal income tax withholding.
For a discussion of certain other federal income tax consequences to
tendering shareholders, see Section 14.
Book-Entry Delivery. The Depositary will establish an account with respect to
the Shares at each of the Book-Entry Transfer Facilities for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of the Shares by causing such
facility to transfer such Shares into the Depositary's account in accordance
with such facility's procedure for such transfer. Even though delivery of
Shares may be effected through book-entry transfer into the Depositary's
account at one of the Book-Entry Transfer Facilities, a properly completed and
duly executed Letter of Transmittal (or manually signed facsimile
5
<PAGE>
thereof), with any required signature guarantees and other required documents
must, in any case, be transmitted to and received by the Depositary at one of
its addresses set forth on the back cover of this Offer to Purchase prior to
the Expiration Date, or the guaranteed delivery procedure set forth below must
be followed. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTS TO ONE OF THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates are not immediately available (or
the procedures for book-entry transfer cannot be completed on a timely basis)
or time will not permit all required documents to reach the Depositary by the
Expiration Date, such Shares may nevertheless be tendered provided that all of
the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail, telegram or facsimile
transmission), on or prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery (indicating the price at which
the Shares are being tendered) substantially in the form the Company has
provided with this Offer to Purchase; and
(c) the certificates for all tendered Shares in proper form for transfer
(or confirmation of book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) and any other documents required by the Letter of
Transmittal, are received by the Depositary within five NYSE trading days
after the date the Depositary receives such Notice of Guaranteed Delivery.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the number of Shares
to be accepted, the price to be paid therefor, the form of documents and the
validity, form, eligibility (including the time of receipt) and acceptance for
payment of any tender of Shares will be determined by the Company, in its sole
discretion, which determination shall be final and binding on all parties. The
Company reserves the absolute right to reject any or all tenders it determines
not to be in proper form or the acceptance of or payment for which may be
unlawful. The Company also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in the tender of any
particular Shares. No tender of Shares will be deemed to be properly made until
all defects and irregularities have been cured or waived. None of the Company,
the Dealer Manager, the Depositary, the Information Agent or any other person
is or will be obligated to give notice of any defects or irregularities in
tenders, and none of them will incur any liability for failure to give such
notice.
Rule 14e-4. It is a violation of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), for a person (directly
or indirectly) to tender shares for such person's own account unless, at the
time of tender and at the end of the proration period (including any extension
thereof), the person so tendering (i) has a net long position equal to or
greater than the amount of (x) Shares tendered or (y) other securities
immediately convertible into, exercisable, or exchangeable for the amount of
Shares tendered and will acquire such Shares for tender by conversion, exercise
or exchange of such other securities, and (ii) will cause such Shares to be
delivered in accordance with the terms of the Offer. Rule 14e-4 provides a
similar restriction applicable to the tender or guarantee of a tender on behalf
of another person. The tender of Shares pursuant to any one of the procedures
described above will constitute the tendering shareholder's acceptance of the
terms and conditions of the Offer as well as the tendering shareholder's
representation and warranty that (i) such shareholder has a net long position
in the Shares being tendered within the meaning of Rule 14e-4 and (ii) the
tender of such Shares complies with Rule 14e-4. The Company's acceptance for
payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering shareholder and the Company upon the terms and
subject to the conditions of the Offer, including the tendering shareholder's
representations for purposes of Rule 14e-4.
6
<PAGE>
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, the tender of Shares pursuant
to the Offer is irrevocable. Shares tendered pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by the Company, may also be withdrawn after 12:00
Midnight, New York City time, on May 18, 1995.
For a withdrawal to be effective, the Depositary must timely receive (at one
of its addresses set forth on the back cover of this Offer to Purchase) a
written, telegraphic or facsimile transmission notice of withdrawal. Any such
notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn, the prices(s) at
which they were tendered, and, if different from that of the person who
tendered such Shares, the name of the registered owner of such Shares. If the
certificates have been delivered or otherwise identified to the Depositary,
then, prior to the release of such certificates, the tendering shareholder must
also submit the serial numbers shown on the particular certificates evidencing
the Shares to be withdrawn and the signature on the notice of withdrawal must
be guaranteed by an Eligible Institution (except in the case of Shares tendered
by an Eligible Institution). If Shares have been tendered pursuant to the
procedure for book-entry transfer set forth in Section 3, the notice of
withdrawal must specify the name and the number of the account at the
applicable Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with the procedures of such facility.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Company in its sole discretion,
which determination shall be final and binding on all parties. None of the
Company, the Dealer Manager, the Depositary, the Information Agent or any other
person is or will be obligated to give notice of any defects or irregularities
in any notice of withdrawal, and none of them will incur any liability for
failure to give such notice. Any Shares properly withdrawn will thereafter be
deemed not properly tendered for purposes of the Offer. Withdrawn Shares may,
however, be retendered by the Expiration Date by again following any of the
procedures described in Section 3.
If the Company extends the Offer, is delayed in its purchase of Shares or is
unable to purchase Shares pursuant to the Offer for any reason, then, without
prejudice to the Company's rights under the Offer, the Depositary may, subject
to applicable law, retain on behalf of the Company all tendered Shares, and the
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in this Section 4.
5. PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer, the Company will
determine the Purchase Price it will pay for properly tendered Shares taking
into account the number of Shares tendered and the prices specified by
tendering shareholders and will accept for payment (and thereby purchase)
Shares properly tendered at or below the Purchase Price as promptly as
practicable after the Expiration Date. For purposes of the Offer, the Company
will be deemed to have accepted for payment (as therefore purchased), subject
to proration, Shares which are tendered at or below the Purchase Price and not
withdrawn when, as and if the Company gives oral or written notice to the
Depositary of its acceptance of such Shares for payment pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, the Company will
purchase and pay a single per Share Purchase Price for 5,300,000 Shares
(subject to increase or decrease as provided in Section 1 and Section 15) or
such lesser number of Shares as are properly tendered (and not withdrawn as
permitted in Section 4) at prices not greater than $8.00 nor less than $6.75
per Share, as promptly as practicable after the Expiration Date.
In the event of proration, the Company will determine the proration factor
and pay for those tendered Shares accepted for payment as promptly as
practicable after the Expiration Date. The Company, however, does not expect to
be able to announce the final results of any such proration until approximately
seven NYSE
7
<PAGE>
trading days after the Expiration Date. Certificates for all Shares not
purchased, including all Shares tendered at prices greater than the Purchase
Price and Shares not purchased due to proration, will be returned to the
tendering shareholders (or, in the case of Shares tendered by book-entry
transfer, such Shares will be credited to the account maintained with one of
the Book-Entry Transfer Facilities by the participant therein who so delivered
such Shares) as promptly as practicable after the Expiration Date (which in the
event of proration is expected to be approximately 12 NYSE trading days) or
termination of the Offer without expense to the tendering shareholder.
Payment for Shares purchased pursuant to the Offer will be made by depositing
the aggregate Purchase Price therefor with the Depositary, which will act as
agent for tendering shareholders for the purpose of receiving payment from the
Company and transmitting payment to the tendering shareholders. Notwithstanding
any other provision hereof, payment for Shares accepted for payment pursuant to
the Offer will in all cases be made only after timely receipt by the Depositary
of certificates for such Shares (or a timely confirmation by a Book-Entry
Transfer Facility of book-entry transfer of such Shares to the Depositary), a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) with any required signature guarantees and other required documents.
Under no circumstances will the Company pay interest on the Purchase Price
regardless of any delay in making such payment. In addition, if certain events
occur, the Company may not be obligated to purchase Shares pursuant to the
Offer. See Section 6.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer; provided, however,
that (i) if payment of the Purchase Price is to be made to, or (ii) (in the
circumstances permitted by the Offer) if unpurchased Shares are to be
registered in the name of, any person other than the registered owner, or if
tendered certificates are registered in the name of any person other than the
person signing the Letter of Transmittal, the amount of all stock transfer
taxes, if any (whether imposed on the registered owner or such other person),
payable on account of the transfer to such person will be deducted from the
Purchase Price unless evidence satisfactory to the Company of the payment of
such taxes or exemption therefrom is submitted. See Instruction 7 of the Letter
of Transmittal.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND SIGN
THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL (OR, IN THE CASE
OF A FOREIGN INDIVIDUAL, FORM W-8 OBTAINABLE FROM THE DEPOSITARY) MAY BE
SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS
PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 3.
6. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, and in addition to (and not
in limitation of) the Company's right to extend or amend the Offer at any time
in its sole discretion, the Company shall not be required to accept for payment
or pay for any Shares tendered, and may terminate or amend the Offer, if before
acceptance for payment or payment for any such Shares, any of the following
events shall have occurred (or shall have been determined by the Company to
have occurred) which, in the Company's sole judgment in any such case and
regardless of the circumstances (including any action or omission to act by the
Company) giving rise to such circumstance, makes it inadvisable to proceed with
the Offer or with such purchase or payment:
(a) there shall have been threatened, instituted or pending any action or
proceeding by any government or governmental, regulatory or administrative
agency or authority or tribunal or any other person, domestic or foreign,
or before any court or governmental, regulatory or administrative authority
or agency or tribunal, domestic or foreign, which: (1) challenges the
making of the Offer, the acquisition of Shares pursuant to the Offer or
otherwise relates in any manner to the Offer or (2) in the Company's sole
judgment, could materially affect the business, condition (financial or
other), income, operations or prospects of the Company and its
subsidiaries, taken as a whole, or otherwise materially impair in any way
the contemplated future conduct of the business of the Company or any of
its subsidiaries or materially impair the Offer's contemplated benefits to
the Company; or
8
<PAGE>
(b) there shall have been any action threatened or taken, or approval
withheld, or any statute, rule, regulation, judgment, order or injunction
threatened, proposed, sought, promulgated, enacted, entered, amended,
enforced, issued, or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, by any court or any government or governmental,
regulatory or administrative authority or agency or tribunal, domestic or
foreign, which, in the Company's sole judgment, would or might directly or
indirectly: (1) make the acceptance for payment of, or payment for, some or
all of the Shares illegal or otherwise restrict or prohibit consummation of
the Offer, (2) delay or restrict the ability of the Company, or render the
Company unable, to accept for payment or pay for some or all of the Shares,
(3) materially impair the contemplated benefits of the Offer to the Company
or (4) materially affect the business, condition (financial or other),
income, operations or prospects of the Company and its subsidiaries, taken
as a whole, or otherwise materially impair in any way the contemplated
future conduct of the business of the Company or any of its subsidiaries;
or
(c) there shall have occurred after March 21, 1995: (1) the declaration of
a banking moratorium or any suspension of payments in respect of banks in
the United States, (2) any general suspension of trading in, or limitation
on prices for, securities on any United States national securities exchange
or in the over-the-counter market (excluding any coordinated trading halt
triggered solely as a result of a specified decrease in a market index),
(3) the commencement of a war, armed hostilities or any other national or
international crisis directly or indirectly involving the United States,
(4) any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or any event which, in
the Company's sole judgment, might affect, the extension of credit by banks
or other lending institutions in the United States, (5) any significant
decrease in the market price of the Shares or in the general level of
market prices of equity securities in the United States or abroad, (6) any
change in the general political, market, economic or financial conditions
in the United States or abroad that could, in the Company's sole judgment,
have a material adverse effect on the Company's business operations or
prospects or the trading in the Shares, or (7) in the case of any the
foregoing existing at the time of the commencement of the Offer, in the
Company's sole judgment, a material acceleration or worsening thereof; or
(d) after March 21, 1995, any change shall occur or be threatened in the
business, condition (financial or other), income, operations, or prospects
of the Company and its subsidiaries, taken as a whole, which, in the
Company's sole judgment, is or may be material to the Company or any other
event shall have occurred which, in the Company's sole judgment, materially
impairs the Offer's contemplated benefits; or
(e) after March 21, 1995, any tender or exchange offer for any or all of
the Shares (other than the Offer), or any merger, business combination or
other similar transaction with or involving the Company or any subsidiary,
shall have been proposed, announced or made by any person or entity; or
(f) (i) any person, entity, or "group" (as that term is used in Section
13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire
beneficial ownership of more than 5% of the outstanding Shares (other than
any such person, entity or group which had publicly disclosed such
ownership in a Schedule 13D or Schedule 13G (or amendment thereto) on file
with the Securities and Exchange Commission (the "Commission") prior to
March 21, 1995), (ii) any such person, entity, or group who had filed a
Schedule 13D or Schedule 13G with the Commission prior to March 21, 1995
shall have acquired or proposed to acquire beneficial ownership of an
additional 2% or more of the outstanding Shares, (iii) any new group shall
have been formed which beneficially owns more than 5% of the outstanding
Shares, or (iv) any person, entity or group shall have filed a Notification
and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or made a public announcement reflecting an intent to acquire the
Company or any of its subsidiaries or any of their respective assets or
securities.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances (including any action
or inaction by the Company) giving rise to any such
9
<PAGE>
condition, any such condition may be waived by the Company, in whole or in
part, at any time and from time to time in its sole discretion. The Company's
failure at any time to exercise any of the foregoing rights shall not be deemed
a waiver of any such right; the waiver of any such right with respect to
particular facts and circumstances shall not be deemed a waiver with respect to
any other facts or circumstances; and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time. Any
determination by the Company concerning the events described in this Section 6
and any related judgment by the Company regarding the inadvisability of
proceeding with the acceptance for payment or payment for any tendered Shares
shall be final and shall be binding on all parties.
7. PRICE RANGE OF SHARES.
The Shares are listed and principally traded on the NYSE under the symbol
"VRC." The following table sets forth for the calendar periods indicated the
high and low sales prices per Share on the NYSE Composite Tape as compiled from
published financial sources:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1993:
1st Quarter............................................. $6 5/8 $4 1/8
2nd Quarter............................................. 8 3/8 5 7/8
3rd Quarter............................................. 8 1/2 5 7/8
4th Quarter............................................. 8 3/4 5 3/8
1994:
1st Quarter............................................. 7 5 1/4
2nd Quarter............................................. 7 5 1/8
3rd Quarter............................................. 7 3/8 5 7/8
4th Quarter............................................. 7 3/8 6
1995:
1st Quarter (through March 22).......................... 7 6 1/8
</TABLE>
On March 22, 1995, the last trading day prior to the announcement of the
Offer, the closing per Share sales price as reported on the NYSE Composite Tape
was $7.00. THE COMPANY URGES SHAREHOLDERS TO OBTAIN CURRENT MARKET QUOTATIONS
FOR THE SHARES.
The Company has not paid a dividend on the Shares since 1982, and the Board
of Directors of the Company has no plans to resume the payment of dividends.
8. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE SHARES.
As of March 21, 1995 the Company's directors and executive officers as a
group beneficially owned (including Shares issuable upon exercise of options
and shares owned by Baker Hughes) an aggregate of 8,603,277 Shares
(approximately 25.5% of the outstanding Shares, including Shares issuable upon
the exercise of options). Such ownership includes 417,400 Shares (approximately
1.2% of the outstanding Shares, including Shares issuable upon the exercise of
options) subject to stock options which are held by directors and executive
officers. If the Company purchases 5,300,000 Shares (or approximately 15.9% of
the Shares outstanding at March 21, 1995) pursuant to the Offer and no
executive officer or director tenders Shares pursuant to the Offer, then after
the purchase of Shares pursuant to the Offer, the Company's executive officers
and directors as a group would beneficially own approximately 30.2% of the
outstanding Shares (including Shares issuable upon the exercise of options and
Shares owned by Baker Hughes.) The Company has been advised that no director or
executive officer of the Company intends to tender any Shares pursuant to the
Offer.
Baker Hughes, of which James D. Woods, a director of the Company, is
Chairman, President and Chief Executive Officer, owns 6,346,041 Shares, or
19.0% of the Shares outstanding as of March 21, 1995. Baker Hughes has
represented to the Company that it does not intend to tender any Shares
pursuant to the Offer. If the Company purchases 5,300,000 Shares pursuant to
the Offer, Baker Hughes would own approximately 22.6% of the outstanding
Shares.
10
<PAGE>
Based upon the Company's records and upon information provided to the Company
by its directors, executive officers and affiliates, neither the Company nor
any of its subsidiaries nor, to the best of the Company's knowledge, any of the
directors or executive officers of the Company, nor any associates of any of
the foregoing, has effected any transactions in the Shares during the 40
business day period prior to the date hereof except as disclosed on Schedule A
hereto.
Walter B. Reinhold, Baldwin Reinhold, Jr., the estate of Charlotte Reinhold
Lorenz, deceased, and Baldwin T. Reinhold, the son of Baldwin Reinhold, Jr.,
are parties to an Agreement dated as of June 11, 1981 (the "Shareholders'
Agreement") imposing certain restrictions on transfers of Shares owned by them
at the time the Shareholders' Agreement became effective and any additional
voting securities of the Company issued with respect thereto by way of stock
dividend, stock split or other distribution. Specifically, the Shareholders'
Agreement prohibits any transfer of Shares subject to such Agreement except (1)
any transfer pursuant to a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), (2) the sale by any party of not more
than 20,000 Shares (adjusted to reflect any stock dividends, stock splits or
reverse stock splits) during any 12-month period pursuant to Rule 144
promulgated under the Securities Act, (3) inter vivos gifts provided that the
aggregate value given by any party to any one person during any 12-month period
does not exceed $50,000 ($500,000 in the case of direct or indirect gifts to a
member of the donor's family or the donor's former spouse), (4) bequests or
inter vivos gifts, direct or indirect, to charitable institutions provided that
the aggregate value given by any party to charitable institutions during any
12-month period does not exceed $2,000,000, (5) transfers by will or the laws
of descent and distribution, or (6) transfers with the written consent of the
holders of 80% of the Shares then subject to the Shareholders' Agreement (the
"Requisite Percentage"). Any transferee under clause (3) or (6) above must
agree to be bound by the provisions of the Shareholders' Agreement restricting
transfers unless, in the case of any transfer under clause (6), otherwise
agreed by the parties approving such transfer, and any transferee under clause
(5) above other than a charitable institution is deemed to be bound by such
provisions. The holders of the Requisite Percentage have consented and agreed
that, notwithstanding the provisions thereof, Baldwin T. Reinhold in his
capacity as trustee of a charitable remainder unitrust could sell not more than
100,000 Shares pursuant to Rule 144 during the 12-month period ending January
3, 1996. As of March 21, 1995, Mr. Reinhold had not sold any Shares pursuant to
such consent.
Any tender pursuant to the Offer of Shares subject to the Shareholders'
Agreement will require the consent of the Requisite Percentage. Based upon
information provided to the Company by the parties to the Shareholders'
Agreement, no parties thereto intend to tender any Shares pursuant to the Offer
except as follows: Baldwin T. Reinhold, in his capacity as trustee of a
charitable remainder unitrust, intends to tender 100,000 Shares; Howard Perry
Lorenz in his capacity as executor of the estate of Charlotte Reinhold Lorenz
intends to tender 100,000 Shares; and Mr. Lorenz in his capacity as trustee
under a trust for the benefit of Charlotte L. Llanes, intends to tender 20,000
Shares. Approximately 3,500,000 Shares, or approximately 10.5% of the Shares
outstanding on March 21, 1995, are subject to the Shareholders' Agreement. If
the Company purchases 5,300,000 Shares pursuant to the Offer, the parties to
the Shareholders' Agreement tender Shares as aforesaid, and the Company
purchases all such Shares pursuant to the Offer, the Shares subject to the
Shareholders' Agreement would constitute approximately 11.7% of the outstanding
Shares.
Assuming that the Company purchases 5,300,000 Shares pursuant to the Offer,
Baker Hughes would own approximately 22.6% of the outstanding Shares,
constituting more than 20% thereof and thus resulting in a "Change in Control"
under the "split-dollar" life insurance programs provided by the Company as a
compensation benefit for its executive officers and directors who elect to
defer a portion of their compensation. As a result of the Change in Control,
if, within three years after the Change in Control, a participant terminates
his or her employment for "good reason," then that participant will be entitled
to retain all benefits from the policy. "Good reason" is defined as one of the
following events without the participant's consent: (a) a significant adverse
change in the participants' position or duties, or a change in business
location more than 50 miles from the participant's location prior to a Change
in Control, (b) a reduction in the participant's base salary, or (c) the
elimination or reduction of benefit plans by the Company without providing
substitutes
11
<PAGE>
therefor. Prior to the Change in Control, in the event that a participant
terminated his or her employment for any reason, that participant was required
to pay over to the Company the cash value of the policy and reimburse the
Company for tax payments made by the Company in connection with such policy.
Except as set forth in this Offer to Purchase, neither the Company nor, to
the best of the Company's knowledge, any of its affiliates, directors or
executive officers, or any of the executive officers or directors of its
subsidiaries, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
Offer with respect to any securities of the Company (including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such securities, joint ventures, loan or option
arrangements or calls, guaranties of loans, guaranties against loss or the
giving or withholding of proxies, consents or authorizations).
9. SOURCE AND AMOUNT OF FUNDS.
Assuming that the Company purchases 5,300,000 Shares pursuant to the Offer at
a Purchase Price of $8.00 per Share, the Company expects the maximum aggregate
cost, including all fees and expenses applicable to the Offer, to be
approximately $43.4 million. Approximately $36.5 million of the funds necessary
to purchase the Shares pursuant to the Offer will come from cash and cash
equivalents and short-term investments of the Company. The balance of the funds
will be from borrowings under the Credit Agreement, dated as of February 25,
1993 among the Company, Citicorp USA, Inc. and Citibank, N.A. ("Citibank"), as
amended. Copies of such Credit Agreement, and all amendments thereto are filed
as exhibits to the Schedule 13E-4 and are incorporated herein by reference.
In anticipation of the Offer, the Credit Agreement was amended (as so
amended, the "Amended Credit Agreement") to (a) extend the maturity date from
March 31, 1996 to October 31, 1998; (b) increase the total maximum facility
from $20.0 million (consisting of a letter of credit facility of $10.0 million
and a loan facility of $10.0) to $35.0 million (consisting of the same letter
of credit facility and a loan facility of $25.0 million; and (c) amend certain
covenants in order to permit the Offer to proceed and to take into account the
effect of the consummation of the Offer on certain financial ratios. The amount
available at any time for all advances outstanding under the loan facility is
the lesser of $25.0 million or the "Availability," which is equal to the
"Borrowing Base" less the Company's outstanding "Senior Unsecured Debt" (as
defined). The Borrowing Base, is equal to (i) 75% of Eligible Accounts
Receivable (as defined) plus (ii) 70% of Eligible Inventory (as defined) less
(iii) the prepayment premium which would be payable upon the prepayment in full
of the Company's outstanding 8.95% Senior Notes in the amount of $50.0 million.
There are currently no loans outstanding under the Amended Credit Agreement.
Loans made under the Amended Credit Agreement are, at the Company's option,
either "Base Rate Loans" or "Eurodollar Rate Loans." Base Rate Loans bear
interest at a fluctuating rate equal to 0.50% above the "Base Rate." The Base
Rate is equal to the higher of (a) the rate of interest announced publicly by
Citibank from time to time as its base rate, (b) the sum of (i) 0.50% plus (ii)
a rate based on the interrelationship of (x) the rate of three-month
certificates of deposit of major banks, (y) the Federal Reserve System's
maximum reserve requirement for three-month time deposits and (z) the current
annual assessment rate payable by Citibank to the Federal Deposit Insurance
Corporation and (c) 0.50% plus the rate on overnight Federal funds
transactions. Eurodollar Rate Loans bear interest at the "Eurodollar Rate",
which is equal to the London inter-bank offered rate ("LIBOR") plus 1.50%. The
interest rate for Eurodollar Rate Loans varies with the interest period chosen
by the Company, which may be one, two, or three months. The current rate on
Base Rate Loans would be 9.5% and the current rate for Eurodollar Rate Loans
for a three-month interest period would be approximately 7.7%. The Company also
pays a commitment fee at the rate of 0.375% per annum on the unused portion of
the maximum facility.
The Amended Credit Agreement includes representations and warranties,
covenants, events of default and other terms customary to financings of this
type.
The Company expects to repay the borrowings used to purchase Shares pursuant
to the Offer through, depending on business and market conditions, internally
generated funds, public or private offerings of securities, additional bank
borrowings, or other financings or such combination of the foregoing as the
12
<PAGE>
Company may deem appropriate. Although the Company currently does not have any
specific plans to refinance such borrowings, the Company may replace all or a
portion of the borrowings under the Amended Credit Agreement with other
borrowings, which may include intermediate or long-term borrowings at fixed
rates, which may be higher than the rates under the Amended Credit Agreement.
10. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER.
Over the past several years the Company has generated substantial excess
cash. At December 31, 1994, the Company's cash and cash equivalents and short-
term investments were approximately $38.6 million. The Company is making the
Offer because the Board of Directors believes that, given the Company's cash
and cash equivalents, short-term investments and debt capacity, the Offer
represents the opportunity to return cash to the Company's shareholders,
permitting them to invest it according to their preferences and objectives.
After considering other alternatives, such as retaining the excess funds for a
possible acquisition or paying a cash dividend, the Board of Directors
concluded that the Offer was the preferable alternative for enhancing
shareholder value.
The Offer gives shareholders the opportunity to sell Shares at prices greater
than market prices prevailing prior to announcement of the Offer. The Offer
provides shareholders who are considering a sale of all or a portion of their
Shares the opportunity to determine the price or prices (not greater than $8.00
nor less than $6.75 per Share) at which they are willing to sell their Shares
and, if any such Shares are purchased pursuant to the Offer, to sell those
Shares for cash without the usual transaction costs associated with open-market
sales. The Offer also allows shareholders to sell a portion of their Shares
while retaining a continuing equity interest in the Company if they so desire.
Any shareholders owning an aggregate of less than 100 Shares whose Shares are
purchased pursuant to the Offer not only will avoid any payment of brokerage
commissions, but also will avoid any applicable odd lot discounts payable on
sales of odd lots on the NYSE. To the extent that the purchase of Shares in the
Offer results in a reduction in the number of shareholders of record, the costs
of the Company for services to shareholders may be reduced.
Shareholders whose Shares are not purchased in the Offer will realize an
increase in their percentage ownership interest in the Company and thus, in the
Company's future earnings and assets. Because of the smaller number of Shares
outstanding after consummation of the Offer, increases or decreases in net
earnings will result in proportionately greater increases or decreases in
earnings per Share. See Section 11.
Projected future cash flows, together with credit available under the Amended
Credit Facility, are expected to be adequate for the Company's normal
operations, anticipated capital expenditures and debt service. In addition, the
Company's management believes that, in light of the Company's financial
position, the consummation of the Offer would not foreclose a future
acquisition.
See Section 12 for information regarding certain effects of the Offer on the
market for the Shares.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF
SUCH SHAREHOLDER'S SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH
RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN
THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN
DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER AND
THE PRICE OR PRICES AT WHICH SHARES SHOULD BE TENDERED.
On May 26, 1994, the Company announced that its Board of Directors had
authorized the repurchase of up to one million Shares for an aggregate purchase
price not exceeding $6.0 million (the "Repurchase Program"). As of January 5,
1995, the last date on which the Company purchased Shares pursuant to the
Repurchase Program, the Company had repurchased on the open market 267,200
Shares at an average price of approximately $6.28 per share.
13
<PAGE>
Although the Company has no current plans to acquire additional Shares other
than as disclosed in this Offer to Purchase, the Company may in the future
purchase additional Shares in the open market (pursuant to a resumption of the
Repurchase Program or otherwise), in privately negotiated transactions or
otherwise. Any such purchases may be on the same terms or on terms which are
more or less favorable to shareholders than the terms of the Offer. Rule 13e-4
under the Exchange Act prohibits the Company and its affiliates from purchasing
any Shares, other than pursuant to the Offer, until at least ten business days
after the Expiration Date. Any possible future purchases by the Company will
depend on many factors, including the market price of the Shares, the results
of the Offer, the Company's business and financial position and general
economic and market conditions.
Shares the Company acquires pursuant to the Offer will be returned to the
status of authorized and unissued Shares and will be available for the Company
to issue without further shareholder action (except as required by applicable
law or the rules of NYSE or any other securities exchange on which the Shares
are then listed). Such Shares could be issued without shareholder approval for
such purposes as, among others, the acquisition of other businesses, the
raising of additional capital for use in the Company's business, the
distribution of stock dividends and the implementation of, or the satisfaction
of obligations under, employee benefit plans. Except for the issuance of shares
under current employee benefit plans, the Company has no current plans for
reissuance of the Shares it may acquire pursuant to the Offer or issuance of
any other authorized but unissued shares.
Except as disclosed in this Offer to Purchase, the Company has no present
plans or proposals which relate to or would result in the following: (a) the
acquisition by any person of additional securities of the Company or the
disposition of securities of the Company; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries; (d) any change in the
present Board of Directors or management of the Company, including, but not
limited to any plan or proposal to change the number or the term of office of
directors, or to change any material term of the employment contract of any
executive officer (except for the annual election of directors at the Company's
1995 Annual Meeting of Shareholders); (e) any material change in the present
dividend policy or indebtedness or capitalization of the Company (other than as
described in Section 9 hereof); (f) any other material change in the Company's
corporate structure or business; or (g) any change in the Company's Restated
Articles of Incorporation or By-Laws or any other actions which may impede the
acquisition of control of the Company by any person.
11. CERTAIN INFORMATION ABOUT THE COMPANY.
The Company is a leading manufacturer of products used in the oil and gas
well drilling industry worldwide. The Company is widely recognized for the
development of new technology and equipment to enhance the safety and
productivity of the drilling process.
Operating through five divisions, the Company's principal products are
drilling equipment, drilling rig instrumentation, pressure control equipment
and solids control equipment. Drilling equipment includes integrated systems
for rotating and handling the various sizes and types of pipe used on a
drilling rig ("drilling systems") and specific purpose pipe handling tools,
hoisting equipment and rotary equipment ("oil tools"). Drilling systems are
manufactured and sold by the Varco Drilling Systems Division while oil tools
are manufactured and sold by the Varco BJ Oil Tools Division. Drilling rig
instrumentation products are manufactured, sold and rented by the Martin-
Decker/TOTCO Instrumentation Division. Pressure control equipment is
manufactured and sold by the Shaffer Division, and solids control equipment and
systems are products of the Thule Rigtech Division.
The Company was founded in 1908 and incorporated under the laws of the State
of California in 1911. The Company's principal executive offices are located at
743 North Eckhoff Street, Orange, California 92668, and the Company's telephone
number is (714) 978-1900.
14
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
Set forth below is certain summary consolidated historical financial
information of the Company and its subsidiaries. The historical information at
and for the years ended December 31, 1994 and December 31, 1993 is derived from
the audited consolidated financial statements incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994. This
information should be read in conjunction with, and is qualified in its
entirety by reference to, such audited consolidated financial statements and
their related notes.
VARCO INTERNATIONAL INC.
SUMMARY HISTORICAL FINANCIAL INFORMATION
(in thousands, except per share data and ratios)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1994 1993
-------- --------
<S> <C> <C>
INCOME STATEMENT DATA
REVENUES:
Net sales............................................ $197,956 $171,812
Rental income........................................ 23,487 19,955
Other income......................................... 2,158 1,713
-------- --------
223,601 193,480
COSTS AND EXPENSES:
Cost of sales........................................ 127,752 114,000
Cost of rental income................................ 6,930 5,757
Selling, general and administrative expenses......... 53,458 48,078
Research and development costs....................... 11,438 9,479
Interest expense..................................... 4,766 5,010
Provision for production facility closure............ 340 345
-------- --------
204,684 182,669
-------- --------
Income before income taxes........................... 18,917 10,811
Income taxes......................................... 6,756 3,715
-------- --------
Net income........................................... $ 12,161 $ 7,096
======== ========
Net income per common share.......................... $ .36 $ .21
======== ========
Shares used to calculate earnings per share.......... 33,522 33,400
Ratio of earnings to fixed charges................... 4.82 3.05
<CAPTION>
DECEMBER 31,
------------------
1994 1993
-------- --------
<S> <C> <C>
BALANCE SHEET DATA
Cash, cash equivalents and short-term investments.... $ 38,625 $ 53,306
Other current assets................................. 120,152 99,249
Total current liabilities............................ 46,435 39,314
Working capital...................................... 112,342 113,241
Total assets......................................... 257,641 248,021
Long-term debt....................................... 39,349 49,164
Shareholders' equity................................. 163,728 152,608
Long-term debt to shareholders' equity ratio......... 24.0% 32.2%
Book value per common share.......................... $ 4.91 $ 4.58
</TABLE>
15
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information assumes the Company
repurchases 5,300,000 Shares pursuant to the Offer at prices of $6.75 and $8.00
per Share and incurs fees and expenses of $1.0 million. The pro forma
adjustments assume that the transaction occurred, for the purposes of the
statement of income, as of the first day of the period presented, and for
purposes of the balance sheet, as of its date. The pro forma financial
information should be read in conjunction with the summary consolidated
historical financial information and does not purport to be indicative of the
results which may be obtained in the future or which would actually have been
obtained had the Offer occurred as of the dates indicated.
VARCO INTERNATIONAL INC.
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
(in thousands, except per share data and ratios)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-------------------------------
AT $6.75 AT $8.00
PER PER
HISTORICAL SHARE(A) SHARE(A)
---------- --------- ---------
<S> <C> <C> <C>
INCOME STATEMENT DATA
REVENUES:
Net sales....................................... $197,956 $197,956 $197,956
Rental income................................... 23,487 23,487 23,487
Other income.................................... 2,158 335 335
-------- -------- --------
223,601 221,776 221,776
COSTS AND EXPENSES:
Cost of sales................................... 127,752 127,752 127,752
Cost of rental income........................... 6,930 6,930 6,930
Selling, general and administrative expenses.... 53,458 53,458 53,458
Research and development costs.................. 11,438 11,438 11,438
Interest expense................................ 4,791 4,791 5,387
Provision for production facility closure....... 340 340 340
-------- -------- --------
204,684 204,709 205,305
-------- -------- --------
Income before income taxes...................... 18,917 17,067 16,471
Income taxes.................................... 6,756 6,093 5,880
-------- -------- --------
Net income...................................... $ 12,161 $ 10,974 $ 10,591
======== ======== ========
Net income per common share..................... $ .36 $ .39 $ .38
======== ======== ========
Shares used to calculate earnings per share..... 33,522 28,222 28,222
Ratio of earnings to fixed charges.............. 4.82 4.43 3.96
<CAPTION>
AT DECEMBER 31, 1994
-------------------------------
AT $6.75 AT $8.00
HISTORICAL PER SHARE PER SHARE
---------- --------- ---------
<S> <C> <C> <C>
BALANCE SHEET DATA
Cash, cash equivalents and short-term invest-
ments.......................................... $ 38,625 $ 2,125 $ 2,125
Other current assets............................ 120,152 120,152 120,152
Total current liabilities....................... 46,435 46,435 46,435
Working capital................................. 112,342 75,842 75,842
Total assets.................................... 257,641 221,141 221,141
Long-term debt.................................. 39,349 39,624 46,249
Shareholders' equity............................ 163,728 126,953 120,328
Total long-term debt to shareholders' equity ra-
tio............................................ 24.0% 31.2% 38.4%
Book value per common share..................... $ 4.91 $ 4.53 $ 4.29
</TABLE>
16
<PAGE>
NOTES TO SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
(a) Lower other income and increased interest expense is due to the use of
cash, cash equivalents, short-term investments and variable rate borrowings
sufficient to repurchase the Shares. The reduction in other income assumes
that cash equivalents and short-term investments had earned interest at the
rate of 5%. Additional interest expense assumes a borrowing rate of 9%.
Additional Information. The Company is subject to the informational
requirements of the Exchange Act and in accordance therewith files periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. The Company is required to
disclose in such proxy statements and reports certain information, as of
particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal owners of the
Company's securities and any material interest of such persons in transactions
with the Company. The Company has also filed an Issuer Tender Offer Statement
on Schedule 13E-4 (the "Schedule 13E-4") with the Commission, which includes
certain additional information relating to the Offer.
Such material may be inspected at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and also should be available for inspection and copying at the following
regional offices of the Commission: 7 World Trade Center, Suite 1300, New York,
New York 10048 and Northwestern Atrium Center, 500 West Madison, Suite 1400,
Chicago, Illinois 60661. Reports, proxy materials and other information about
the Company are also available at the offices of the NYSE, 20 Broad Street, New
York, New York 10005. Copies may also be obtained by mail for prescribed rates
from the Commission's Public Reference Room, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Schedule 13E-4 will not be available at the
Commission's regional offices.
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the number
of Shares that might otherwise trade publicly and is likely to reduce the
number of shareholders. Nonetheless, the Company anticipates that there will
still be a sufficient number of Shares outstanding and publicly traded
following the Offer to ensure a continued trading market in the Shares. Based
on the published guidelines of the NYSE, the Company does not believe that its
purchase of Shares pursuant to the Offer will cause its remaining shares to be
delisted from such exchange.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. The Company believes that,
following the repurchase of Shares pursuant to the Offer, the Shares will
continue to be "margin securities" for purposes of the Federal Reserve Board's
margin regulations.
The Shares are registered under the Exchange Act which requires, among other
things, that the Company furnish certain information to its shareholders and to
the Commission and comply with the Commission's proxy rules in connection with
meetings of the Company's shareholders. The Company believes that its purchase
of Shares pursuant to the Offer will not result in the Shares becoming eligible
for deregistration under the Exchange Act.
13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
The Company is not aware of any license or regulatory permit that appears to
be material to its business that might be adversely affected by its acquisition
of Shares as contemplated in the Offer or of any approval or other action by
any government or governmental, administrative or regulatory authority or
agency, domestic or foreign, that would be required for the Company's
acquisition of Shares as contemplated by the
17
<PAGE>
Offer. Should any such approval or other action be required, the Company
currently contemplates that it will seek such approval or other action. The
Company cannot predict whether it may determine that it is required to delay
the acceptance for payment of, or payment for, Shares tendered pursuant to the
Offer pending the outcome of any such matter. There can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that the failure to obtain any such
approval or other action might not result in adverse consequences to the
Company's business. The Company's obligations under the Offer to accept for
payment and pay for Shares are subject to certain conditions. See Section 6.
14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following summary is a general discussion of certain of the United States
Federal income tax consequences of the Offer.
This summary is based upon the Internal Revenue Code of 1986, as amended
through the date hereof (the "Code") and existing final, temporary and proposed
Treasury Regulations, Revenue Rulings and judicial decisions, all of which are
subject to prospective and retroactive legislative, judicial or administrative
changes and interpretation. No ruling as to any matter discussed in this
summary has been requested or received from the Internal Revenue Service (the
"IRS") and the Company has no intention to request or receive any such ruling.
In General. A shareholder's sale of Shares for cash pursuant to the Offer
will be a taxable transaction for Federal income tax purposes, and may also be
a taxable transaction under applicable state, local, foreign or other tax laws.
This summary does not discuss any aspects of state, local, foreign or other tax
laws. Certain shareholders (including insurance companies, tax-exempt
organizations, financial institutions, broker dealers and shareholders who have
acquired their Shares upon the exercise of options or otherwise as
compensation) may be subject to special rules not discussed below. For purposes
of this discussion, shareholders are assumed to hold their Shares as "capital
assets" (within the meaning of Section 1221 of the Code).
Treatment as a Sale or Exchange. Under Section 302 of the Code, a sale of
Shares to the Company pursuant to the Offer will, as a general rule, be treated
as a "sale or exchange" of the Shares (rather than as a distribution by the
Company with respect to the Shares held by the tendering shareholder) for
United States Federal income tax purposes if the receipt of cash upon the sale:
(a) is "substantially disproportionate" with respect to the shareholder; (b) is
in "complete redemption" of the shareholder's interest in the Company; or (c)
is "not essentially equivalent to a dividend" with respect to the shareholder.
These tests (the "Section 302 tests") are explained more fully below.
Notwithstanding the foregoing, the rules on "collapsible corporations" might,
if they applied, cause a shareholder's gain to be ordinary income (rather than
capital gain.) Because of its long operating history, the nature of its assets
and other factors, the Company believes it is not a "collapsible corporation."
If any of the Section 302 tests is satisfied, a tendering shareholder will
recognize capital gain or loss equal to the difference between the amount of
cash received by the shareholder pursuant to the Offer and the shareholder's
tax basis in the Shares sold pursuant to the Offer. If the Shares have been
held for more than one year, the gain or loss will be long-term capital gain or
loss. Therefore, a tendering shareholder may wish to take the various tax bases
and holding periods of his Shares, if such characteristics are not uniform,
into account in determining which Shares to tender.
Constructive Ownership of Stock. In determining whether any of the Section
302 tests is satisfied, a shareholder must take into account not only Shares
actually owned by the shareholder, but also Shares that are considered as being
owned by the shareholder ("constructive ownership") pursuant to Section 318 of
the Code. Under Section 318, a shareholder is deemed to own Shares actually
owned, and in some cases Shares constructively owned, by certain related
individuals and entities in which the shareholder has an interest, or, in the
case of shareholders that are entities, by certain individuals or entities that
have an interest in the shareholder, as well as any Shares the shareholder has
a right to acquire by exercise of an option or by the conversion or exchange of
a security.
18
<PAGE>
The Section 302 Tests. One of the following tests must be satisfied in order
for the sale of Shares pursuant to the Offer to be treated as a sale rather
than as a dividend distribution:
a. Substantially Disproportionate Test. The receipt of cash by a
shareholder will be substantially disproportionate with respect to the
shareholder if the percentage of the outstanding voting stock of the
Company actually and constructively owned by the shareholder immediately
following the exchange of Shares pursuant to the Offer (treating Shares
exchanged pursuant to the Offer as not outstanding) is less than 80% of the
percentage of the outstanding voting stock of the Company actually and
constructively owned by the shareholder immediately before the exchange
(treating Shares exchanged pursuant to the Offer as outstanding).
Shareholders should consult their tax advisors with respect to the
application of the "substantially disproportionate" test to their
particular facts and circumstances.
b. Complete Redemption Test. The receipt of cash by a shareholder will be
in complete redemption of the shareholder's interest if either (i) all of
the stock of the Company that is actually and constructively owned by the
shareholder is sold pursuant to the Offer or (ii) all of the stock of the
Company actually owned by the shareholder is sold pursuant to the Offer and
the shareholder is eligible to waive, and effectively waives, the
attribution of stock of the Company constructively owned by the shareholder
in accordance with the procedures described in Section 302(c)(2) of the
Code. Shareholders considering making such an election should do so in
consultation with their tax advisors.
c. Not Essentially Equivalent to a Dividend Test. Even if the receipt of
cash by a shareholder fails to satisfy the "substantially disproportionate"
test or the "complete redemption" test, such shareholder may nonetheless be
able to satisfy the "not essentially equivalent to a dividend" test. The
receipt of cash by a shareholder will be "not essentially equivalent to a
dividend" if the shareholder's exchange of Shares pursuant to the Offer
results in a "meaningful reduction" of the shareholder's proportionate
interest in the Company. Whether the receipt of cash by a shareholder will
result in a meaningful reduction of the shareholder's proportionate
interest will depend on the shareholder's particular facts and
circumstances. However, in the case of a small minority shareholder, even a
small reduction may satisfy this test where, as expected in the case of the
Offer, payments will not be pro rata with respect to all outstanding
Shares. Shareholders expecting to rely upon the "not essentially equivalent
to a dividend" test should, therefore, consult with tax advisors as to its
application in their particular situation.
Although the issue is not free from doubt, it may be possible for a tendering
shareholder to satisfy one of the above three tests by contemporaneously
selling or otherwise disposing of all or some of the Shares that are actually
owned (or by causing another to sell or otherwise dispose of all or some of the
Shares that are constructively owned) by such shareholder but are not purchased
pursuant to the Offer. Correspondingly, a tendering shareholder may not be able
to satisfy one of the above three tests because of contemporaneous acquisitions
of Shares by such shareholder or by some person or entity whose Shares would be
treated as constructively owned by such shareholder. Shareholders should
consult their tax advisors regarding the tax consequences of such sales or
acquisitions in their particular circumstances.
In the event that the Offer is oversubscribed, the Company's purchase of
Shares pursuant to the Offer will be prorated. Thus, in such case even if all
the Shares actually and constructively owned by a shareholder are tendered
pursuant to the Offer, not all of the Shares will be purchased by the Company,
which in turn may affect the shareholder's ability to satisfy one or more of
the Section 302 tests.
Treatment as a Dividend. If none of the Section 302 tests is satisfied and if
as anticipated (although there can be no assurances) the Company has sufficient
"earnings and profits" (as that term is used in Section 316(a) of the Code), a
tendering shareholder will be treated as having received a dividend includable
in gross income in an amount equal to the entire amount of cash received by the
shareholder pursuant to the Offer. This amount will not be reduced by the
shareholder's tax basis in the Shares exchanged pursuant to the Offer,
19
<PAGE>
and (except as described below for corporate shareholders eligible for the
dividends-received deduction) the shareholder's tax basis in those Shares will
be added to the shareholder's tax basis in his or her remaining Shares. No
assurance can be given that any of the Section 302 tests will be satisfied as
to any particular shareholder, and thus no assurance can be given that any
particular shareholder will not be treated as having received a dividend
taxable as ordinary income. Any cash received for Shares pursuant to the Offer
in excess of the Company's "earnings and profits" will be treated, first, as a
non-taxable return of capital to the extent of the shareholder's basis for such
shareholder's Shares, and, thereafter, as a capital gain to the extent it
exceeds such tax basis.
Corporate Shareholder Dividend Treatment. If a sale of Shares by a
shareholder which is a corporation is treated as a dividend, the corporate
shareholder may be entitled to claim a deduction equal to 70% of the dividend
under Section 243 of the Code, subject to applicable limitations. Corporate
shareholders should, however, consider the effect of Section 246(c) of the
Code, which disallows the 70% dividends-received deduction with respect to
stock that is held for 45 days or less. For this purpose, the length of time a
taxpayer is deemed to have held stock may be reduced by periods during which
the taxpayer's risk of loss with respect to the stock is diminished by reason
of the existence of certain options or other transactions. Moreover, under
Section 246A of the Code, if a corporate shareholder has incurred indebtedness
directly attributable to an investment in Shares, the 70% dividends-received
deduction may be reduced by a percentage generally computed based on the amount
of such indebtedness and the total adjusted tax basis in the Shares. In
addition, in the likely event that the Company does not purchase an equal
percentage of each shareholder's Shares, any amount received by a corporate
shareholder pursuant to the Offer that is treated as a dividend would probably
constitute an "extraordinary dividend" under Section 1059 of the Code. For this
purpose, all dividends received by a shareholder within, and having their ex-
dividend date within, an 85-day period (expanded to a 365-day period in the
case of dividends received in such period that in the aggregate exceed 20% of
the shareholder's adjusted tax basis in the Shares) are aggregated and also
treated as extraordinary dividends. Accordingly, a corporate shareholder would
be required under Section 1059(a) of the Code to reduce its basis (but not
below zero) in its Shares by the non-taxed portion of the dividend (i.e., the
portion of the dividend for which a deduction is allowed), and if such portion
exceeds the shareholder's tax basis for its Shares, to treat the excess as gain
from the sale of such Shares in the year in which a sale or disposition of such
Shares occurs (which, in certain circumstances, may be the year in which Shares
are sold pursuant to the Offer), thereby creating "negative basis" in such
Shares. Even if the purchase of Shares pursuant to the Offer is pro rata with
respect to all shareholders, however, any amount received by a corporate
shareholder could nevertheless be considered an "extraordinary dividend" under
Section 1059 of the Code unless such corporation's stock has been held for more
than two years (excluding periods during which the corporation's risk of loss
with respect to the stock has been diminished by reason of the existence of
certain options or other transactions). Corporate shareholders should consult
their own tax advisors as to the application of Section 1059 of the Code to the
Offer.
Backup Withholding. See Section 3 concerning the potential application of
Federal backup withholding.
Foreign Shareholders. The Company will assume that the exchange is a dividend
as to foreign shareholders and will therefore withhold Federal income tax at a
rate equal to 30% of the gross proceeds paid to a foreign shareholder or his
agent pursuant to the Offer, unless the Depositary determines that a reduced
rate of withholding is available pursuant to a tax treaty or that an exemption
from withholding is applicable because the gross proceeds are effectively
connected with the conduct of a trade or business by the foreign shareholder
within the United States. For this purpose, a foreign shareholder is any
shareholder that is not (a) a citizen or resident of the United States, (b) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or a political subdivision thereof, or (c) an estate
or trust the income of which is subject to United States Federal income
taxation regardless of the source of such income.
Generally, the determination of whether a reduced rate of withholding is
applicable is made by reference to a foreign shareholder's address or to a
properly completed Form 1001 furnished by the shareholder, and
20
<PAGE>
the determination of whether an exemption from withholding is available on the
grounds that gross proceeds paid to a foreign shareholder are effectively
connected with a United States trade or business is made on the basis of a
properly completed Form 4224 furnished by the shareholder. The Depositary will
determine a foreign shareholder's eligibility for a reduced rate of, or
exemption from, withholding by reference to the shareholder's address and any
Forms 1001 or 4224 submitted to the Depositary by a foreign shareholder unless
facts and circumstances indicate that such reliance is not warranted or unless
applicable law requires some other method for determining whether a reduced
rate of withholding is applicable. These forms can be obtained from the
Depositary. See the instructions to the Letter of Transmittal.
A foreign shareholder with respect to whom tax has been withheld may be
eligible to obtain a refund of all or a portion of the withheld tax if the
shareholder satisfies one of the Section 302 tests for capital gain treatment
or is otherwise able to establish that no tax or a reduced amount of tax was
due. Foreign shareholders are urged to consult their own tax advisors regarding
the application of Federal income tax withholding, including eligibility for a
withholding tax reduction or exemption and the refund procedure.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE OFFER MAY VARY DEPENDING UPON,
AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE TENDERING SHAREHOLDER.
NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE, LOCAL OR FOREIGN TAX
CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER. SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF SALES MADE BY THEM PURSUANT TO THE
OFFER AND THE EFFECT OF THE CONSTRUCTIVE STOCK OWNERSHIP RULES MENTIONED ABOVE.
15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS.
The Company expressly reserves the right, at any time or from time to time,
in its sole discretion, to extend the period of time during which the Offer is
open by giving oral or written notice of such extension to the Depositary and
making a public announcement thereof. The Company also expressly reserves the
right, in its sole discretion, to terminate the Offer and not accept for
payment or pay for any Shares not theretofore accepted for payment or paid for
or, subject to applicable law, to postpone payment for Shares upon the
occurrence of any of the conditions specified in Section 6 by giving oral or
written notice of such termination or postponement to the Depositary and making
a public announcement thereof. The Company's reservation of the right to delay
payment for Shares which it has accepted for payment is limited by Rules 13e-
4(f)(2) and 13e-4(f)(5) promulgated under the Exchange Act. Rule 13e-4(f)(2)
requires that the Company permit Shares tendered pursuant to the Offer to be
withdrawn: (i) at any time during that period the Offer remains open; and (ii)
if not yet accepted for payment, after the expiration of forty business days
from the commencement of the Offer. Rule 13e-4(f)(5) requires that the Company
must either pay the consideration offered or return the Shares tendered
promptly after the termination or withdrawal of the Offer. Subject to
compliance with applicable law, the Company further reserves the right, in its
sole discretion, at any time or from time to time to amend the Offer in any
respect, including increasing or decreasing the number of Shares the Company
may purchase or the range of prices it may pay pursuant to the Offer.
Amendments to the Offer may be made at any time or from time to time effected
by public announcement thereof, such announcement, in the case of an extension,
to be issued no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date. Any public announcement
made pursuant to the Offer will be disseminated promptly to shareholders in a
manner reasonably designed to inform shareholders of such change. Without
limiting the manner in which the Company may choose to make a public
announcement, except as required by applicable law, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News service.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules
21
<PAGE>
13e-4(d)(2) and 13e-4(e)(2) promulgated under the Exchange Act. These rules
provide that the minimum period during which an offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer (other than a change in price or a change in percentage of securities
sought) will depend on the facts and circumstances, including the relative
materiality of such terms or information. If (i) the Company increases or
decreases the price to be paid for Shares, or the Company increases the number
of Shares being sought and any such increase in the number of Shares being
sought exceeds 2% of the outstanding Shares, or the Company decreases the
number of Shares being sought and (ii) the Offer is scheduled to expire at any
time earlier than the expiration of a period ending on the tenth business day
from, and including, the date that notice of such increase or decrease is first
published, sent or given, the Offer will be extended until the expiration of
such period of ten business days.
16. FEES AND EXPENSES.
The Company has retained Lehman Brothers as financial advisor and Dealer
Manager in connection with the Offer for which it will receive a fee of
$350,000. The Company has also agreed to reimburse Lehman Brothers for its
reasonable out-of-pocket expenses relating to the Offer, including reasonable
fees and expenses of counsel and to indemnify Lehman Brothers against certain
liabilities in connection with the Offer, including certain liabilities under
the federal securities laws. Lehman Brothers has also rendered various
investment banking and other advisory services to the Company in the past, for
which it has received customary compensation.
The Company has retained Hill & Knowlton as Information Agent and Harris
Trust Company of New York as Depositary in connection with the Offer. The
Information Agent may contact shareholders by mail, telephone, telex, telegraph
and personal interviews, and may request brokers, dealers and other nominee
shareholders to forward materials relating to the Offer to beneficial owners.
The Depositary and the Information Agent will receive reasonable and customary
compensation for their services. The Company will also reimburse the Depositary
and the Information Agent for out-of-pocket expenses, including reasonable fees
and expenses of counsel, and has agreed to indemnify the Depositary and the
Information Agent against certain liabilities in connection with the Offer,
including certain liabilities under the federal securities laws. Neither the
Information Agent nor the Depositary has been retained to make solicitations or
recommendations in connection with the Offer.
The Company will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person (other than Lehman Brothers) for
soliciting any Shares pursuant to the Offer. The Company will, however, on
request through the Information Agent, reimburse such persons for customary
handling and mailing expenses incurred in forwarding materials in respect of
the Offer to the beneficial-owners for which they act as nominees. No such
broker, dealer, commercial bank or trust company has been authorized to act as
the Company's agent for purposes of the Offer. The Company will pay (or cause
to be paid) any stock transfer taxes on its purchase of Shares, except as
otherwise provided in Instruction 7 of the Letter of Transmittal.
The Company is a party to a Note Agreement, dated as of July 1, 1992, as
amended (the "Note Agreement"') with certain institutional investors pursuant
to which the Company issued its 8.95% Senior Notes Due June 30, 1999 (the
"Senior Notes"), in the principal amount of $50,000,000. In order to proceed
with the Offer without violating certain covenants contained in the Note
Agreement, the Company was required to obtain a waiver under, and amendments to
certain financial covenants contained in, the Note Agreement from the holders
of the Senior Notes. In consideration for the waiver and amendments, the
Company paid to the holders of the Senior Notes an aggregate fee of $300,000.
17. MISCELLANEOUS.
The Offer is not being made to, nor will the Company accept tenders from,
holders of Shares in any jurisdiction in which the Offer or its acceptance
would not comply with the securities or Blue Sky laws of
22
<PAGE>
such jurisdiction. The Company is not aware of any jurisdiction in which the
making of the Offer or the tender of Shares would not be in compliance with the
laws of such jurisdiction. However, the Company reserves the right to exclude
holders in any jurisdiction in which it is asserted that the Offer cannot
lawfully be made. So long as the Company makes a good faith effort to comply
with any state law deemed applicable to the Offer, if it cannot do so, the
Company believes that the exclusion of holders residing in such jurisdiction is
permitted under Rule 13e-4(f)(9) promulgated under the Exchange Act. In any
jurisdiction the securities or Blue Sky laws of which require the Offer to be
made by a licensed broker or dealer, the Offer shall be deemed to be made on
the Company's behalf by Lehman Brothers as Dealer Manager or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
VARCO INTERNATIONAL, INC.
March 24, 1995
23
<PAGE>
SCHEDULE A
CERTAIN TRANSACTIONS INVOLVING SHARES
On February 15, 1995, executive officers of the Company were granted options
to purchase Shares pursuant to the Company's 1990 Stock Option Plan at an
exercise price of $6.375 per share as follows: George Boyadjieff, 50,000
Shares; Robert J. Gondek, 20,000 Shares; Richard A. Kertson, 23,529 Shares;
Mark A. Merit, 17,059 Shares; Roger D. Morgan, 21,765 Shares; Donald L.
Stichler, 9,804 Shares; and Michael W. Sutherlin, 20,000 Shares.
Also on February 15, 1995, executive officers of the Company were awarded
Shares under the Company's Stock Bonus Plan as follows: Walter B. Reinhold,
4,313 Shares; George Boyadjieff, 7,160 Shares; Robert J. Gondek, 1,830 Shares;
Richard A. Kertson, 2,510 Shares; Mark A. Merit, 1,516 Shares; Roger D. Morgan,
1,935 Shares; Donald L. Stichler, 1,046 Shares; and Michael W. Sutherlin, 1,778
Shares.
On February 23, 1995, Leo J. Pircher, a director of the Company, in his
capacity as trustee under a charitable remainder trust, sold in open market
transactions 1,700 Shares at a sales price of $6.50 and 1,700 Shares at a sales
price of $6.375.
24
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates for the Shares and any other required documents
should be sent or delivered by each shareholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of its
addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
BY HAND: BY OVERNIGHT COURIER: BY MAIL:
<S> <C> <C>
Receive Window 77 Water Street P.O. Box 1023
77 Water Street--5th Floor 4th Floor Wall Street Station
New York, New York 10005 New York, New York 10005 New York, New York 10268
<CAPTION>
BY FACSIMILE: TELEPHONE NUMBER: TO CONFIRM BY TELEPHONE:
<S> <C> <C>
(212) 701-7636 For Information (212) 701-7624
(212) 701-7640 Call Collect
(212) 701-7624
</TABLE>
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent at the telephone number and
address below. You may also contact the Dealer Manager or your broker, dealer,
commercial bank or trust company for assistance concerning the Offer. To
confirm delivery of your Shares, you are directed to contact the Depositary.
THE INFORMATION AGENT FOR THE OFFER IS:
HILL & KNOWLTON
466 Lexington Avenue, 3rd Floor
New York, New York 10017
(212) 885-0555
(Call Collect)
THE DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
3 World Financial Center
New York, New York 10285
(212) 526-0111
(Call Collect)
<PAGE>
LETTER OF TRANSMITTAL
TO ACCOMPANY SHARES OF COMMON STOCK
OF
VARCO INTERNATIONAL, INC.
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED MARCH 24, 1995
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
APRIL 21, 1995, UNLESS THE OFFER IS EXTENDED.
TO: HARRIS TRUST COMPANY OF NEW YORK, Depositary
<TABLE>
<CAPTION>
BY HAND: BY OVERNIGHT COURIER: BY MAIL:
<S> <C> <C>
Receive Window 77 Water Street P.O. Box 1023
77 Water Street--5th Floor 4th Floor Wall Street Station
New York, New York 10005 New York, New York 10005 New York, New York 10268
<CAPTION>
BY FACSIMILE: TELEPHONE NUMBER: TO CONFIRM BY TELEPHONE:
<S> <C> <C>
(212) 701-7636 For Information (212) 701-7624
(212) 701-7640 Call Collect
(212) 701-7624
</TABLE>
DESCRIPTION OF SHARES TENDERED
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF
CERTIFICATE SHARES REPRESENTED NUMBER OF
NUMBER(S)* BY CERTIFICATE(S) SHARES TENDERED**
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
<S> <C> <C> <C>
TOTAL SHARES
</TABLE>
--------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares
being delivered to the Depositary are being tendered. See
Instruction 4.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER OTHER THAN THAT
LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY (A) IF CERTIFICATES FOR SHARES
(AS DEFINED BELOW) ARE TO BE FORWARDED WITH IT, OR (B) IF A TENDER OF SHARES IS
TO BE MADE BY BOOK-ENTRY TRANSFER TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY
AT THE DEPOSITORY TRUST COMPANY ("DTC"), THE MIDWEST SECURITIES TRUST COMPANY
("MSTC"), OR THE PHILADELPHIA DEPOSITORY TRUST COMPANY ("PDTC") (COLLECTIVELY,
THE "BOOK-ENTRY TRANSFER FACILITIES") PURSUANT TO SECTION 3 OF THE OFFER TO
PURCHASE.
<PAGE>
SHAREHOLDERS WHOSE CERTIFICATES ARE NOT IMMEDIATELY AVAILABLE OR WHO CANNOT
DELIVER THEIR CERTIFICATES FOR SHARES AND ALL OTHER DOCUMENTS THIS LETTER OF
TRANSMITTAL REQUIRES TO THE DEPOSITARY AT OR BEFORE THE EXPIRATION DATE (OR WHO
ARE UNABLE TO COMPLY WITH THE PROCEDURE FOR BOOK-ENTRY TRANSFER ON A TIMELY
BASIS) MUST TENDER THEIR SHARES ACCORDING TO THE GUARANTEED DELIVERY PROCEDURE
SET FORTH IN SECTION 3 OF THE OFFER TO PURCHASE. SEE INSTRUCTION 2. DELIVERY OF
DOCUMENTS TO ONE OF THE BOOK-ENTRY TRANSFER FACILITIES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
[_]The Depository Trust Company
[_]Midwest Securities Trust Company
[_]Philadelphia Depository Trust Company
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution That Guaranteed Delivery: ______________________________
If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer
Facility:
[_]The Depository Trust Company
[_]Midwest Securities Trust Company
[_]Philadelphia Depository Trust Company
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
To Harris Trust Company of New York:
The undersigned hereby tenders to Varco International, Inc., a California
corporation (the "Company"), the above-described shares of the Company's Common
Stock (the "Shares") at the price per Share indicated in this Letter of
Transmittal, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Company's Offer to Purchase dated March 24, 1995,
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which together constitute the "Offer").
Subject to and effective upon acceptance for payment of the Shares tendered
hereby in accordance with the terms of the Offer (including, if the Offer is
extended or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns, and transfers to or upon the
order of the Company all right, title and interest in and to all Shares
tendered hereby or orders the registration of such Shares tendered by book-
entry transfer that are purchased pursuant to the Offer to or upon the order of
the Company and hereby irrevocably constitutes and appoints the Depositary as
attorney-in-fact of the undersigned with respect to such Shares, with full
power of substitution (such power of attorney being an irrevocable power
coupled with interest), to:
(a) deliver certificates for such Shares, or transfer ownership of such
Shares on the account books maintained by a Book-Entry Transfer Facility,
together in either such case with all accompanying evidences of transfer
and authenticity, to or upon the order of the Company, upon receipt by the
Depositary, as the undersigned's agent, of the Purchase Price (as defined
below) with respect to such Shares; and
(b) present certificates for such Shares for cancellation on the
Company's books.
<PAGE>
The undersigned hereby represents and warrants to the Company that:
(a) the undersigned understands that tenders of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and
in the Instructions hereto will constitute the undersigned's acceptance of
the terms and conditions of the Offer, including the undersigned's
representation and warranty that (i) the undersigned has a net long
position in Shares or equivalent securities at least equal to the Shares
tendered within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended, and (ii) such tender of Shares complies
with Rule 14e-4;
(b) when and to the extent the Company accepts the Shares for purchase,
the Company will acquire good, marketable and unencumbered title to them,
free and clear of all security interests, liens, charges, encumbrances,
conditional sales agreements or other obligations relating to their sale or
transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any additional
documents the Depositary or the Company deems necessary or desirable to
complete the assignment, transfer and purchase of the Shares tendered
hereby; and
(d) the undersigned has read and agrees to all of the terms of the Offer.
The names and addresses of the registered owners should be printed, if they
are not already printed above, exactly as they appear on the certificates
representing Shares tendered hereby. The certificate numbers, the number of
Shares represented by such certificates, the number of Shares that the
undersigned wishes to tender and the purchase price at which such Shares are
being tendered should be indicated in the appropriate boxes.
The undersigned understands that the Company will determine a single per
Share price (not greater than $8.00 nor less than $6.75 per Share) (the
"Purchase Price") that it will pay for Shares validly tendered pursuant to the
Offer taking into account the number of Shares so tendered and the prices
specified by tendering shareholders. The undersigned understands that the
Company will select the Purchase Price that will allow it to buy 5,300,000
Shares (or such lesser number of Shares as are validly tendered at prices not
greater than $8.00 nor less than $6.75 per Share) pursuant to the Offer. The
undersigned understands that all Shares validly tendered at prices at or below
the Purchase Price will be purchased at the Purchase Price, net to the seller
in cash, upon the terms and subject to the conditions of the Offer, including
its proration provisions, and that the Company will return all other Shares,
including Shares tendered and not withdrawn at prices greater than the Purchase
Price and Shares not purchased because of proration.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Company may terminate or amend the Offer or may not be
required to purchase any of the Shares tendered hereby or may accept for
payment fewer than all of the Shares tendered hereby. The undersigned
understands that certificate(s) for any Shares not tendered or not purchased
will be returned to the undersigned at the address indicated above, unless
otherwise indicated under the "Special Payment Instructions" or "Special
Delivery Instructions" below. The undersigned recognizes that the Company has
no obligation, pursuant to the "Special Payments Instructions," to transfer any
certificate for Shares from the name of their registered owner, or to order the
registration or transfer of such Shares tendered by book-entry transfer, if the
Company purchases none of the Shares represented by such certificate or
tendered by such book-entry transfer.
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
The check for the Purchase Price for such of the tendered Shares as are
purchased will be issued to the order of the undersigned and mailed to the
address indicated above unless otherwise indicated under the "Special Payment
Instructions" or the "Special Delivery Instructions" below.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned, and any
obligations of the undersigned under this Letter of Transmittal shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ODD LOTS
(SEE INSTRUCTION 8)
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially as of the close of business on March 22, 1995,
an aggregate of fewer than 100 Shares.
The undersigned either (check one box):
[_] was the beneficial owner as of the close of business on March 22, 1995,
of an aggregate of fewer than 100 Shares, or
[_] is a broker, dealer, commercial bank, trust company or other nominee
which:
(a) is tendering, for the beneficial owners thereof, Shares with respect
to which it is the record owner, and
(b) believes, based upon representations made to it by such beneficial
owners, that each such person was the beneficial owner as of the
close of business on March 22, 1995, of an aggregate of fewer than
100 Shares and is tendering all of such Shares.
In addition, the undersigned is tendering Shares either (check one box):
[_] at the Purchase Price (defined above), as the same shall be determined by
the Company in accordance with the terms of the Offer (persons checking
this box need not indicate the price per Share below); or
[_] at the price per Share indicated below under "Price (In Dollars) Per
Share at Which Shares Are Being Tendered" in this Letter of Transmittal.
--------------------------------------------------------------------------------
PRICE (IN DOLLARS) PER SHARE AT WHICH
SHARES ARE BEING TENDERED
(See Instruction 5)
--------------------------------------------------------------------------------
CHECK ONLY ONE BOX.
IF MORE THAN ONE BOX IS CHECKED,
OR IF NO BOX IS CHECKED,
THERE IS NO PROPER TENDER OF SHARES.
--------------------------------------------------------------------------------
[_]$ 6.75 [_]$ 7.00 [_]$ 7.25
[_]$ 7.50 [_]$ 7.75 [_]$ 8.00
--------------------------------------------------------------------------------
IF PORTIONS OF SHARE HOLDINGS ARE BEING TENDERED AT
MORE THAN ONE PRICE, USE A
SEPARATE LETTER OF TRANSMITTAL
FOR EACH PRICE SPECIFIED.
--------------------------------------------------------------------------------
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 9) (SEE INSTRUCTIONS 1, 6, 7 AND 9)
To be completed ONLY if To be completed ONLY if
certificates for Shares not certificates for Shares not
tendered or not purchased and/or tendered or not purchased and/or
the check for the purchase price of the check for the purchase price of
Shares purchased are to be issued Shares purchased are to be sent to
in the name of someone other than someone other than the undersigned,
the undersigned. or to the undersigned at an address
other than that shown above.
Issue check and/or certificate to: Issue check and/or certificate to:
Name _______________________________ Name _______________________________
(Please Print) (Please Print)
Address ____________________________ Address ____________________________
------------------------------------ ------------------------------------
------------------------------------ ------------------------------------
(Include Zip Code) (Include Zip Code)
------------------------------------
(Tax Identification
or Social Security Number)
(See Substitute Form W-9
contained herein)
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
...............................................................
...............................................................
SIGNATURE(S) OF OWNER(S)
Dated: ................................................. , 1995
(Must be signed by registered holder(s) exactly as name(s)
appear(s) on stock certificate(s) or on a security position
listing or by person(s) authorized to become registered
holder(s) by certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, agents, officers of corporations
or others acting in a fiduciary or representative capacity,
please provide the following information. See Instruction 6.)
Name(s)........................................................
........................................................
(PLEASE PRINT)
Capacity (full title)..........................................
Address........................................................
........................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number.................................
Tax Identification or
Social Security No.............................................
(COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature...........................................
Name...........................................................
(PLEASE PRINT)
Title..........................................................
Name of Firm...................................................
Address........................................................
........................................................
(INCLUDE ZIP CODE)
Area Code and Telephone Number.................................
Dated: ................................................. , 1995
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS OF THE OFFER
1.GUARANTEE OF SIGNATURES. NO signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered owner of the
Shares exactly as the name of the registered holder appears on the
certificate(s) (which term, for purposes of this document, shall include any
participant in a Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of Shares) tendered with this Letter of
Transmittal and payment and delivery are to be made directly to such owner
unless such owner has completed either the box entitled "Special Payment
Instructions" or "Special Delivery Instructions" above; or
(b) such Shares are tendered for the account of a bank, broker, dealer,
credit union, savings association or other entity that is a member in good
standing of a recognized Medallion Program approved by The Securities Transfer
Association Inc. (each such entity an "Eligible Institution").
In all other cases, an Eligible Institution must guarantee all signatures on
this Letter of Transmittal. See Instruction 6.
2.DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES: GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used only if certificates are
delivered with it to the Depositary (or such certificates will be delivered
pursuant to a Notice of Guaranteed Delivery previously sent to the Depositary)
or if tenders are to be made pursuant to the procedure for tender by book-entry
transfer set forth in Section 3 of the Offer to Purchase. Certificates for all
physically tendered Shares or confirmation of a book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility of Shares tendered
electronically, together in each case with a properly completed and duly
executed Letter of Transmittal or facsimile of it, and any other documents
required by this Letter of Transmittal, should be mailed or delivered to the
Depositary at the appropriate address set forth herein and must be delivered to
the Depositary on or before the Expiration Date (as defined in the Offer to
Purchase).
Shareholders whose certificates are not immediately available or who cannot
deliver Shares and all other required documents to the Depositary on or before
the Expiration Date, or whose Shares cannot be delivered on a timely basis
pursuant to the procedures for book-entry transfer, may tender their Shares by
or through any Eligible Institution by properly completing (including the price
at which the Shares are being tendered) and duly executing and delivering a
Notice of Guaranteed Delivery (or facsimile thereof) and by otherwise complying
with the guaranteed delivery procedure set forth in Section 3 of the Offer to
Purchase. Pursuant to such procedure, the certificates for all physically
tendered Shares, or book-entry confirmation, as the case may be, as well as a
properly completed and duly executed Letter of Transmittal and all other
documents required by this Letter of Transmittal, must be received by the
Depositary within five New York Stock Exchange, Inc. trading days after receipt
by the Depositary of such Notice of Guaranteed Delivery, all as provided in
Section 3 of the Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a signature guarantee by an Eligible Institution in the form set forth
in such Notice. For Shares to be validly tendered pursuant to the guaranteed
delivery procedure, the Depositary must receive the Notice of Guaranteed
Delivery on or before the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
The Company will not accept any alternative, conditional or contingent
tenders, nor will it purchase any fractional Shares. All tendering
shareholders, by execution of this Letter of Transmittal (or a facsimile
hereof), waive any right to receive any notice of the acceptance of their
tender.
3. INADEQUATE SPACE. If the space provided in the box captioned "Description
of Shares Tendered" is inadequate, the certificate numbers and the number of
Shares should be listed on a separate signed schedule and attached to this
Letter of Transmittal.
<PAGE>
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to shareholders
who tender by book-entry transfer.) If fewer than all of the Shares evidenced
by any certificate are to be tendered, fill in the number of Shares which are
to be tendered in the column entitled "Number of Shares Tendered". In such
case, if any tendered Shares are purchased, a new certificate for the remainder
of the Shares evidenced by the old certificate(s) will be issued and sent to
the registered holders, unless otherwise specified in either the "Special
Payment Instructions" or "Special Delivery Instructions" boxes on this Letter
of Transmittal, as soon as practicable after the Expiration Date. All Shares
represented by the certificate(s) listed and delivered to the Depositary are
deemed to have been tendered unless otherwise indicated.
5. INDICATION OF PRICE AT WHICH SHARES ARE BEING TENDERED. For Shares to be
properly tendered, the shareholder must check the box indicating the price per
Share at which such shareholder is tendering Shares under "Price (In Dollars)
Per Share at Which Shares Are Being Tendered" on this Letter of Transmittal,
provided, however, that an Odd Lot Owner (as defined in Instruction 8) may
check the box above in the section entitled "Odd Lots" indicating that such
shareholder is tendering all Shares at the Purchase Price. ONLY ONE BOX MAY BE
CHECKED. IF MORE THAN ONE BOX IS CHECKED OR IF NO BOX IS CHECKED, THERE IS NO
VALID TENDER OF SHARES (other than pursuant to tenders by Odd Lot holders as
provided herein). A shareholder wishing to tender portions of such
shareholder's Share holdings at different prices must complete a separate
Letter of Transmittal for each price at which such shareholder wishes to tender
each such portion of such shareholder's Shares. The same Shares cannot be
tendered (unless previously properly withdrawn as provided in Section 4 of the
Offer to Purchase) at more than one price.
6. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered owner(s) of the
Shares tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the certificates without any change
whatsoever.
(b) If the Shares are registered in the names of two or more joint owners,
each such owner must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles hereof) as there are different
registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered owner(s) of
the Shares listed and transmitted hereby, no endorsements of certificate(s)
representing such Shares or separate stock powers are required unless payment
is to be made, or the certificates for Shares not tendered or not purchased are
to be issued, to a person other than the registered owner(s). Signatures on
such certificates or stock powers must be guaranteed by an Eligible
Institution. If this Letter of Transmittal is signed by a person other than the
registered owner of the certificates listed, however, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered owner(s) appear(s) on the certificate,
and the signatures on such certificate or stock powers must be guaranteed by an
Eligible Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company of their authority so to act.
7. STOCK TRANSFER TAXES. Except as provided in this Instruction 7, no stock
transfer tax stamps or funds to cover such stamps need accompany this Letter of
Transmittal. The Company will pay or cause to be paid any stock transfer taxes
payable on the transfer to it of Shares purchased pursuant to the Offer. If,
however:
(a) payment of the Purchase Price is to be made to any person(s) other than
the registered owner(s);
(b) shares not tendered or not accepted for purchase are to be registered in
the name of any person(s) other than the registered owner(s); or
(c) tendered certificates are registered in the name(s) of any person(s)
other than the person(s) signing this Letter of Transmittal,
then the Depositary will deduct from the Purchase Price the amount of any stock
transfer taxes (whether imposed on the registered owner, such other person or
otherwise) payable on account of the transfer to such person unless
satisfactory evidence of the payment of such taxes or an exemption from them is
submitted.
<PAGE>
8. ODD LOTS. As described in Section 1 of the Offer to Purchase, if the
Company is to purchase less than all Shares tendered before the Expiration
Date, the Shares purchased first will consist of all Shares tendered by any
shareholder who owned beneficially, as of the close of business on March 22,
1995 and continues to own beneficially as of the Expiration Date, an aggregate
of fewer than 100 Shares and who tenders all of such shareholder's Shares at or
below the Purchase Price (including by not designating a purchase price). This
preference will not be available unless the box captioned "Odd Lots" is
completed.
9. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificates for Shares not
tendered or not purchased and/or checks are to be issued in the name of a
person other than the person signing the Letter of Transmittal or if such
certificates and/or checks are to be sent to someone other than the person
signing the Letter of Transmittal or to the signer at a different address, the
boxes captioned "Special Payment Instructions" and/or "Special Delivery
Instructions" on this Letter of Transmittal should be completed as applicable
and signatures must be guaranteed as described in Instruction 1.
10. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the number of Shares to be accepted, the price to be paid
therefor and the validity, form, eligibility (including time of receipt) and
acceptance for payment of any tender of Shares and its determination shall be
final and binding on all parties. The Company reserves the absolute right to
reject any or all tenders of Shares determined by it not to be in proper form
or the acceptance of or payment for which may be unlawful. The Company also
reserves the absolute right to waive any of the conditions of the Offer or any
defect or irregularity in the tender of any particular Shares and the Company's
interpretation of the terms of the Offer (including these instructions) will be
final and binding on all parties. No tender of Shares will be deemed to be
validly made until all defects and irregularities have been cured or waived.
Unless waived, any defects or irregularities in connection with tenders must be
cured within such time as the Company shall determine. None of the Company, the
Dealer Manager, the Depositary, the Information Agent nor any other person is
or will be obligated to give notice of defects or irregularities in tenders,
nor shall any of them incur any liability for failure to give any such notice.
11. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and request for assistance may be directed to, or additional copies of the
Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of
Transmittal may be obtained from, the Information Agent at the address and
telephone number set forth at the end of this Letter of Transmittal or from
your broker, dealer, commercial bank or trust company.
12. SUBSTITUTE FORM W-9. Each tendering shareholder that is not an exempt
recipient (see "Important Tax Information" below) is required to provide the
Depositary with a correct taxpayer identification number ("TIN") on Substitute
Form W-9 (the "Form W-9") which is provided under "Important Tax Information"
below, and, to certify whether such shareholder is subject to backup
withholding of federal income tax. If a tendering shareholder is subject to
backup withholding, such shareholder must cross out item (2) of the
Certification box of the Form W-9. Failure to provide the information on Form
W-9 may subject the tendering shareholder to 31% Federal income tax withholding
on the payments made to the shareholder or other payee with respect to Shares
purchased pursuant to the Offer. If the tendering shareholder has not been
issued a TIN and has applied for a number or intends to apply for a number in
the near future, such shareholder should write "Applied For" in the space
provided for the TIN in Part I, and sign and date the Form W-9. If "Applied
For" is written in Part I and the Depositary is not provided with a TIN within
sixty (60) days, the Depositary will withhold 31% on all such payments until a
TIN is provided to the Depositary.
13. WITHHOLDING ON FOREIGN SHAREHOLDERS. The Depositary will withhold federal
income taxes equal to 30% of the gross payments payable to a foreign
shareholder unless the Depositary determines that a reduced rate of withholding
or an exemption from withholding is applicable. For this purpose, a foreign
shareholder is any shareholder that is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political
subdivision thereof, or (iii) any estate or trust the income of which is
subject to United States federal income taxation regardless of the source of
such income. The Depositary will determine a shareholder's status as a foreign
shareholder and eligibility for a reduced rate of, or an exemption from,
withholding by reference to the shareholder's address and to any outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding unless facts and circumstances indicate that
reliance is not warranted. A foreign shareholder who has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of, or exemption from, withholding for which such shareholder may be
eligible should consider doing so in order to avoid overwithholding. A foreign
shareholder may be eligible to obtain a refund of tax withheld if such
shareholder meets one of the three tests for capital gain or loss treatment
described in Section 14 of the Offer to Purchase or is otherwise able to
establish that no tax or a reduced amount of tax was due.
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT
(TOGETHER WITH CERTIFICATES FOR SHARES OR CONFIRMATION OF BOOK-ENTRY TRANSFER
AND ALL OTHER REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR BEFORE THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
shareholder's correct TIN on Form W-9 below. If a tendering shareholder is
subject to backup withholding, such shareholder must cross out item (2) on the
certification box of Form W-9. If the Depositary is not provided with the
correct TIN, the Internal Revenue Service may subject the shareholder or other
payee to a $50 penalty. In addition, payments that are made to such shareholder
or other payee with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are considered "exempt recipients" and are not subject to
these backup withholding and reporting requirements. In order for a foreign
individual to qualify as an exempt recipient, the shareholder must submit a
Form W-8, signed under penalties of perjury, attesting to that individual's
exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the shareholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF FORM W-9
To prevent backup withholding on payment made to a shareholder or other payee
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of the shareholder's correct TIN by
completing the form below, certifying that the TIN provided on Form W-9 is
correct (or that such shareholder is awaiting a TIN) and that:
(a) the shareholder has not been notified by the Internal Revenue Service
that the shareholder is subject to backup withholding as a result of failure to
report all interest or dividends; or
(b) the Internal Revenue Service has notified the shareholder that the
shareholder is no longer subject to backup withholding.
The Shareholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Form W-9" for additional guidance on which number to
report.
<PAGE>
PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK
SUBSTITUTE PART I--PLEASE PROVIDE SOCIAL SECURITY
FORM W-9 YOUR TIN IN THE BOX AT NUMBER
RIGHT AND CERTIFY BY OR ____________________________
SIGNING AND DATING BELOW. EMPLOYER
IDENTIFICATION NUMBER
Department of the
Treasury Internal (If awaiting TIN
Revenue Service write "Applied For")
---------------------------------------------------------
Payer's Request for PART II--For Payees exempt from backup
Taxpayer withholding, see the enclosed Guidelines for
Identification Certification of Taxpayer Identification
Number (TIN) Number on Substitute Form W-9 and complete
as instructed therein.
--------------------------------------------------------------------------------
CERTIFICATION--Under the penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer
Identification Number (or a Taxpayer Identification Number has
not been issued to me) and either (a) I have mailed or
delivered an application to receive a Taxpayer Identification
Number to the appropriate Internal Revenue Service ("IRS") or
Social Security Administration office or (b) I intend to mail
or deliver an application in the near future. (I understand
that if I do not provide a Taxpayer Identification Number
within (60) days, 31% of all reportable payments made to me
thereafter will be withheld until I provide a number); and
(2) I am not subject to backup withholding either because I have
not been notified by the IRS that I am subject to backup
withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if
you have been notified by the IRS that you are subject to backup
withholding because of underreporting interest or dividends on your
tax return. However, if after being notified by the IRS that you
were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in
the enclosed Guidelines.)
--------------------------------------------------------------------------------
SIGNATURE ________________________________ DATE _____________________ 1995
--------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
The Information Agent for the Offer is:
HILL AND KNOWLTON
466 Lexington Avenue, 3rd Floor
New York, New York 10017
(212) 885-0555
(call collect)
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
3 World Financial Center
New York, New York 10285
(212) 526-0111
(Call Collect)
<PAGE>
VARCO INTERNATIONAL, INC.
NOTICE OF GUARANTEED DELIVERY
OF SHARES OF COMMON STOCK
OFFER TO PURCHASE FOR CASH
UP TO 5,300,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE NOT GREATER THAN $8.00
NOR LESS THAN $6.75 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
APRIL 21, 1995, UNLESS THE OFFER IS EXTENDED.
This form or a facsimile copy of it must be used to accept the Offer (as
defined below) if:
(a) certificates for Common Stock (the "Shares") of Varco International, Inc.,
a California corporation, are not immediately available; or
(b) the procedure for book-entry transfer cannot be completed on a timely
basis; or
(c) time will not permit the Letter of Transmittal or other required documents
to reach the Depositary before the Expiration Date (as defined in Section 1
of the Offer to Purchase, as defined below).
This form or a facsimile of it, signed and properly completed, may be
delivered by hand, mail, telegram, telex or facsimile transmission to the
Depositary by the Expiration Date. See Section 3 of the Offer to Purchase.
HARRIS TRUST COMPANY OF NEW YORK, DEPOSITARY
<TABLE>
<CAPTION>
BY HAND: BY OVERNIGHT COURIER: BY MAIL:
<S> <C> <C>
Receive Window 77 Water Street P.O. Box 1023
77 Water Street--5th Floor 4th Floor Wall Street Station
New York, New York 10005 New York, New York 10005 New York, New York 10268
<CAPTION>
BY FACSIMILE: TELEPHONE NUMBER: TO CONFIRM BY TELEPHONE:
<S> <C> <C>
(212) 701-7636 For Information (212) 701-7624
(212) 701-7640 Call Collect
(212) 701-7624
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THOSE
LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to Varco International, Inc., at the price per
Share indicated below, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated March 24, 1995 (the
"Offer to Purchase"), and the related Letter of Transmittal (which together
with the Offer to Purchase constitute the "Offer"), receipt of which is hereby
acknowledged, Shares of Common Stock (the "Shares"), pursuant to
the guaranteed delivery procedure set forth in Section 3 of the Offer to
Purchase.
<PAGE>
PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED
--------------------------------------------------------------------------------
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED
(EXCEPT AS PROVIDED IN THE ODD LOTS INSTRUCTIONS BOX BELOW), THERE IS NO PROPER
TENDER OF SHARES.
--------------------------------------------------------------------------------
[_]$ 6.75 [_]$ 7.00 [_]$ 7.25
[_]$ 7.50 [_]$ 7.75 [_]$ 8.00
--------------------------------------------------------------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, USE A SEPARATE NOTICE OF
GUARANTEED DELIVERY FOR EACH PRICE SPECIFIED.
ODD LOTS
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially as of the close of business on March 22, 1995,
an aggregate of fewer than 100 Shares.
The undersigned either (check one box):
[_] was the beneficial owner, as of the close of business on March 22,
1995, of an aggregate of fewer than 100 Shares, or
[_] is a broker, dealer, commercial bank, trust company or other nominee
which:
(a) is tendering, for the beneficial owners thereof, Shares with respect
to which it is the record owner, and
(b) believes, based upon representations made to it by such beneficial
owners, that each such person was the beneficial owner as of the
close of business on March 22, 1995, of an aggregate of fewer than
100 Shares and is tendering all of such Shares.
If you do not wish to specify a purchase price, check the following
box, in which case you will be deemed to have tendered at the Purchase
Price determined by the Company in accordance with the terms of the
Offer (persons checking this box need not indicate the price per Share
in the box entitled "Price (In Dollars) Per Share At Which Shares Are
Being Tendered"). [_]
<PAGE>
PLEASE TYPE OR PRINT
Certificate No(s).
(if available) ____________________ Name(s)_____________________________
____________________________________ ____________________________________
If Shares will be tendered by book-
entry transfer, check one box: ____________________________________
[_] The Depository Trust Company Address(es)_________________________
[_] Midwest Securities Trust Area Code and Tel. No.______________
Company
Sign Here___________________________
[_] Philadelphia Depository Trust
Company
Account Number______________________
Dated_________________________, 1995
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, bank, broker, dealer, credit union, savings association, or
other entity that is a member in good standing of a recognized Medallion
Program approved by The Securities Transfer Association Inc. (each, an
"Eligible Institution"), hereby (i) represents that the undersigned has a net
long position in Shares or equivalent securities within the meaning of Rule
14e-4 promulgated under the Securities Exchange Act of 1934, as amended, at
least equal to the Shares tendered, (ii) represents that such tender of Shares
complies with Rule 14e-4, and (iii) guarantees that either the certificates
representing the Shares tendered hereby in proper form for transfer, or timely
confirmation of the book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company, the Midwest Securities Trust Company
or the Philadelphia Depository Trust Company (pursuant to the procedures set
forth in Section 3 of the Offer to Purchase), together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) with
any required signature guarantee and any other documents required by the Letter
of Transmittal, will be received by the Depositary at one of its addresses set
forth above within five New York Stock Exchange, Inc. trading days after the
date of execution hereof.
________________________________ ________________________________________
Name of Firm Authorized Signature
________________________________ ________________________________________
Address Title
________________________________ Name____________________________________
Zip Code Please Type or Print
Area Code and Tel. No.__________ Date______________________________, 1995
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE
SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
LEHMAN BROTHERS
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
(212) 526-0111
VARCO INTERNATIONAL, INC.
OFFER TO PURCHASE FOR CASH
UP TO 5,300,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE NOT GREATER THAN $8.00
NOR LESS $6.75 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
APRIL 21, 1995, UNLESS THE OFFER IS EXTENDED.
March 24, 1995
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Varco International, Inc., a California corporation (the "Company"), has
appointed us to act as Dealer Manager in connection with its offer to purchase
for cash up to 5,300,000 shares of its Common Stock (the "Shares"), at prices,
not greater than $8.00 nor less than $6.75 per Share, upon the terms and
subject to the conditions set forth in its Offer to Purchase dated March 24,
1995 and in the related Letter of Transmittal (which together constitute the
"Offer"). We enclose the materials listed below relating to the Offer.
The Company will determine a single per Share price (not greater than $8.00
nor less than $6.75 per Share) (the "Purchase Price"), that it will pay for
Shares validly tendered pursuant to the Offer taking into account the number of
Shares so tendered and the prices specified by tendering shareholders. The
Company will select the Purchase Price which will allow it to buy 5,300,000
Shares (or such lesser number of Shares as are validly tendered at prices not
greater than $8.00 nor less than $6.75 per Share) pursuant to the Offer. All
Shares validly tendered at prices at or below the Purchase Price will be
purchased at the Purchase Price, net to the seller in cash, upon the terms and
subject to the conditions of the Offer, including the proration terms thereof.
See Section 1 of the Offer to Purchase.
If, prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase), more than 5,300,000 Shares (or such greater number of Shares as the
Company may elect to purchase) are properly tendered, the Company will, upon
the terms and subject to the conditions of the Offer, accept Shares for
purchase first from Odd Lot Owners (as defined in Section 2 of the Offer to
Purchase) who properly tender their Shares at or below the Purchase Price and
then on a pro rata basis from all other shareholders whose Shares are properly
tendered at or below the Purchase Price.
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS SET FORTH IN THE
OFFER. SEE SECTION 6 OF THE OFFER TO PURCHASE.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1.Offer to Purchase dated March 24, 1995;
2.Letter to Clients which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the Offer;
<PAGE>
3.Letter, dated March 24, 1995, from Walter B. Reinhold, Chairman of the
Board of the Company, and George Boyadjieff, President and Chief Executive
Officer of the Company, to shareholders of the Company;
4.Letter of Transmittal for your use and for the information of your clients
(together with Substitute Form W-9 and guidelines);
5.Notice of Guaranteed Delivery to be used to accept the Offer if Share
certificates and all other required documents cannot be delivered to the
Depositary by the Expiration Date or if the procedure for book-entry transfer
cannot be completed on a timely basis; and
6.Return envelope addressed to Harris Trust Company of New York, the
Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER,
PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, APRIL 21, 1995, UNLESS THE OFFER IS EXTENDED.
No fees or commissions will be payable to brokers, dealers or any other
persons for soliciting tenders of Shares pursuant to the Offer. The Company
will, however, upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding any of the enclosed materials to the
beneficial owners of Shares held by you as a nominee or in a fiduciary
capacity. The Company will pay or cause to be paid any stock transfer taxes
applicable to its purchase of Shares, except as otherwise provided in
Instruction 7 of the Letter of Transmittal.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal and any other required documents should be
sent to the Depositary with either certificate(s) representing the tendered
Shares or confirmation of their book-entry transfer all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
As described in Section 3 of the Offer to Purchase, tenders may be made
without the concurrent deposit of stock certificates or concurrent compliance
with the procedure for book-entry transfer, if such tenders are made by or
through a bank, broker, dealer, credit union, savings association or other
entity that is a member in good standing of a recognized Medallion Program
approved by The Securities Transfer Association Inc. Certificates for Shares
so tendered (or a confirmation of a book-entry transfer of such Shares into
the Depositary's account at one of the "Book-Entry Transfer Facilities"
described in Section 3 of the Offer to Purchase), together with a properly
completed and duly executed Letter of Transmittal and any other documents
required by the Letter of Transmittal, must be received by the Depositary
within five New York Stock Exchange, Inc. trading days after timely receipt by
the Depositary of a properly completed and duly executed Notice of Guaranteed
Delivery.
Any inquiries you may have with respect to the Offer should be addressed to
the Dealer Manager or to the Information Agent at their respective addresses
and telephone numbers set forth on the back cover page of the Offer to
Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, Hill & Knowlton, telephone: (212) 885-0555.
Very truly yours,
Lehman Brothers
<PAGE>
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE COMPANY, THE DEALER MANAGER, THE
INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO
USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION
WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
<PAGE>
VARCO INTERNATIONAL, INC.
OFFER TO PURCHASE FOR CASH
UP TO 5,300,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE NOT GREATER THAN $8.00
NOR LESS THAN $6.75 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON FRIDAY, APRIL 21, 1995, UNLESS THE OFFER IS EXTENDED.
March 24, 1995
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated March 24,
1995 and the related Letter of Transmittal (which together constitute the
"Offer"), in connection with the offer by Varco International, Inc., a
California corporation (the "Company"), to purchase for cash up to 5,300,000
shares of its Common Stock (the "Shares"), at prices not greater than $8.00 nor
less than $6.75 per Share, upon the terms and subject to the conditions of the
Offer.
The Company will determine a single per Share price (not greater than $8.00
nor less than $6.75 per Share) (the "Purchase Price") that it will pay for
Shares validly tendered pursuant to the Offer taking into account the number of
Shares so tendered and the prices specified by tendering shareholders. The
Company will select the Purchase Price which will allow it to purchase
5,300,000 Shares (or such lesser number of Shares as are validly tendered at
prices not greater than $8.00 nor less than $6.75 per Share) pursuant to the
Offer. All Shares validly tendered prior to the Expiration Date (as defined in
Section 1 of the Offer) at prices at or below the Purchase Price will be
purchased at the Purchase Price, net to the seller in cash, upon the terms and
subject to the conditions of the Offer, including the proration terms thereof.
The Company will return all other Shares, including Shares tendered at prices
greater than the Purchase Price and Shares not purchased because of proration.
See Section 1 of the Offer to Purchase.
If, prior to the Expiration Date, more than 5,300,000 Shares (or such greater
number of Shares as the Company may elect to purchase) are validly tendered,
the Company will, upon the terms and subject to the conditions of the Offer,
accept Shares for purchase first from Odd Lot Owners (as defined in Section 2
of the Offer to Purchase) who validly tender their Shares at or below the
Purchase Price and then on a pro rata basis from all other shareholders whose
Shares are validly tendered at or below the Purchase Price.
WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT. AS SUCH, WE ARE
THE ONLY ONES WHO CAN TENDER YOUR SHARES, AND THEN ONLY PURSUANT TO YOUR
INSTRUCTIONS. WE ARE SENDING YOU THE LETTER OF TRANSMITTAL FOR YOUR INFORMATION
ONLY; YOU CANNOT USE IT TO TENDER SHARES WE HOLD FOR YOUR ACCOUNT.
Please instruct us as to whether you wish us to tender any or all of the
Shares we hold for your account on the terms and subject to the conditions of
the Offer.
We call your attention to the following:
1. You may tender Shares at prices (in increments of $.25), not greater than
$8.00 nor less than $6.75 per Share, as indicated in the attached Instruction
Form, net to you in cash.
2. The Offer is not conditioned on any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions set forth
in the Offer.
3. The Offer, proration period and withdrawal rights will expire at 12:00
Midnight, New York City time, on Friday, April 21, 1995, unless the Company
extends the Offer.
<PAGE>
4. The Offer is for up to 5,300,000 Shares, constituting approximately 15.9%
of the Shares outstanding as of March 21, 1995.
5. Tendering shareholders will not be obligated to pay any brokerage
commissions, solicitation fees or, subject to Instruction 7 of the Letter of
Transmittal, stock transfer taxes on the Company's purchase of Shares pursuant
to the Offer.
6. If you owned beneficially as of the close of business on March 22, 1995
and continue to own beneficially as of the Expiration Date, an aggregate of
fewer than 100 Shares and you instruct us to tender on your behalf all such
Shares at or below the Purchase Price before the expiration of the Offer and
check the box captioned "Odd Lots" in the attached Instruction Form, the
Company, upon the terms and subject to the conditions of the Offer, will accept
all such Shares for purchase before proration, if any, of the purchase of other
Shares tendered at or below the Purchase Price.
7. If you wish to tender portions of your Shares at different prices you must
complete a separate Instruction Form for each price at which you wish to tender
each such portion of your Shares. We must submit separate Letters of
Transmittal on your behalf for each price you will accept.
If you wish to have us tender any or all of your Shares please so instruct us
by completing, executing, detaching and returning to us the attached
Instruction Form. An envelope to return your Instruction Form to us is
enclosed. If you authorize us to tender your Shares, we will tender all such
Shares unless you specify otherwise on the attached Instruction Form.
YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO
SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION DATE OF THE OFFER.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON FRIDAY, APRIL 21, 1995, UNLESS THE COMPANY EXTENDS THE
OFFER.
As described in Section 1 of the Offer to Purchase, if before the Expiration
Date more than 5,300,000 Shares (or such greater number of Shares as the
Company elects to purchase) are properly tendered at or below the Purchase
Price, the Company will accept Shares for purchase at the Purchase Price in the
following order of priority:
(a)first, all Shares properly tendered at or below the Purchase Price
prior to the Expiration Date by any Odd Lot Owner who:
(1)tenders all Shares beneficially owned by such Odd Lot Owner at or
below the Purchase Price (partial tenders will not qualify for this
preference); and
(2)completes the section captioned "Odd Lots" on the Letter of
Transmittal and, if applicable on the Notice of Guaranteed Delivery; and
(b)then, after purchase of all of the foregoing Shares, all other Shares
properly tendered at or below the Purchase Price before the Expiration Date
on a pro rata basis, if necessary (with adjustments to avoid purchases of
fractional Shares).
The offer is not being made to, nor will the Company accept tenders from,
holders of Shares in any jurisdiction in which the Offer or its acceptance
would not comply with the securities or Blue Sky laws of such jurisdiction. The
Company is not aware of any jurisdiction in which the making of the Offer or
the tender of Shares would not be in compliance with the laws of such
jurisdictions. However, the Company reserves the right to exclude holders in
any jurisdiction in which it is asserted that the Offer cannot lawfully be
made. So long as the Company makes a good faith effort to comply with any state
law deemed applicable to the Offer, if it cannot do so, the Company believes
that the exclusion of holders residing in such jurisdiction is permitted under
Rule 13e-4(f)(9) promulgated under the Exchange Act. In any jurisdiction the
securities or Blue Sky laws of which require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on the Company's behalf
by Lehman Brothers as Dealer Manager or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
<PAGE>
INSTRUCTION FORM
WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH UP
TO 5,300,000 SHARES OF COMMON STOCK OF VARCO
INTERNATIONAL, INC.AT A PURCHASE PRICE NOT GREATER
THAN $8.00 NOR LESS THAN $6.75 PER SHARE
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated March 24, 1995 and the related Letter of Transmittal (which
together constitute the "Offer"), in connection with the offer by Varco
International, Inc., a California corporation (the "Company"), to purchase for
cash up to 5,300,000 shares of its Common Stock (the "Shares"), at prices not
greater than $8.00 nor less than $6.75 per Share, upon the terms and subject to
the conditions of the Offer.
The Company will determine a single per Share price (not greater than $8.00
nor less than $6.75 per Share (the "Purchase Price") that it will pay for
Shares validly tendered pursuant to the Offer taking into account the number of
Shares so tendered and the prices specified by tendering shareholders. The
Company will select the Purchase Price which will allow it to buy 5,300,000
Shares (or such lesser number of Shares as are validly tendered at prices not
greater than $8.00 nor less than $6.75 per Share) pursuant to the Offer. All
Shares validly tendered at prices at or below the Purchase Price will be
purchased at the Purchase Price, net to the seller in cash, upon the terms and
subject to the conditions of the Offer, including the proration terms thereof.
The Company will return all other Shares, including Shares tendered at prices
greater than the Purchase Price and Shares not purchased because of proration.
See Section 1 of the Offer to Purchase.
The undersigned hereby instruct(s) you to tender to the Company the number of
Shares indicated below or, if no number is indicated, all Shares you hold for
the account of the undersigned, at the price per Share indicated below,
pursuant to the terms and subject to the conditions of the Offer.
<PAGE>
Aggregate number of Shares to be tendered by you for us: Shares*
PRICE (IN DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED
--------------------------------------------------------------------------------
CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED,
THERE IS NO PROPER TENDER OF SHARES.
--------------------------------------------------------------------------------
[_]$6.75 [_]$7.00 [_]$7.25
[_]$7.50 [_]$7.75 [_]$8.00
--------------------------------------------------------------------------------
IF SHARES ARE BEING TENDERED AT MORE THAN ONE PRICE, USE A SEPARATE INSTRUCTION
FORM FOR EACH PRICE SPECIFIED.
ODD LOTS
[_] By checking this box, the undersigned represents that the undersigned
owned beneficially, as of the close of business on March 22, 1995, and
will continue to own beneficially as of the Expiration Date, an
aggregate of fewer than 100 Shares and is instructing the holder to
tender all such Shares.
If you do not wish to specify a purchase price, check the following
box, in which case you will be deemed to have tendered at the Purchase
Price determined by the Company in accordance with the terms of the
offer (persons checking this box need not indicate the price per Share
in the box entitled "Price (In Dollars) Per Share At Which Shares Are
Being Tendered").[_]
SIGNATURE BOX
Signature(s)_______________________________________________________________
Dated______________________________________________________________________
Name(s) and Address(es)____________________________________________________
(Please Print)_____________________________________________________________
___________________________________________________________________________
Area Code and Telephone Number ____________________________________________
Taxpayer Identification or Social Security Number _________________________
---------------------
*Unless otherwise indicated, all of the Shares held for the account of the
undersigned will be tendered.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
-------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
-------------------------------------------
<C> <S>
1. An individual's The individual
account
2. Two or more The actual owner
individuals (joint of the account
account) or, if combined
funds, any one
of the
individuals(1)
3. Custodian account of The minor(2)
a minor (Uniform Gift
to Minors Act)
4. (a) The usual The grantor-
revocable savings trustee(1)
trust account
(grantor is also
trustee)
(b) So-called trust The actual
account that is owner(1)
not a legal or
valid trust under
State law
5. Sole proprietorship The owner(3)
account
-------------------------------------------
<CAPTION>
-------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: EMPLOYER
IDENTIFICATION
NUMBER OF--
-------------------------------------------
<C> <S>
6. A valid trust, The legal entity
estate, or pension (Do not furnish
trust the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(4)
7. Corporate account The corporation
8. Religious, The organization
charitable, or
educational
organization account
9. Partnership The partnership
10. Association, club or The organization
other tax-exempt
organization
11. A broker or The broker or
registered nominee nominee
12. Account with the The public
Department of entity
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
-------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not pro-
vided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends un-
der section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDEN-
TIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend, inter-
est, or other payments to give taxpayer identification numbers to payers who
must report the payments to IRS. IRS uses the numbers for identification pur-
poses. Payers must be given the numbers whether or not recipients are required
to file tax returns. Payers must generally withhold 31% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a tax-
payer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your taxpayer identification number to a payer, you are subject to
a penalty of $50 for each such failure unless your failure is due to reason-
able cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION-- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or im-
prisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE IN-
TERNAL REVENUE SERVICE.
2
<PAGE>
NEWS BUREAU [LOGO OF VARCO INTERNATIONAL, INC.]
-----------
FOR IMMEDIATE RELEASE
VARCO ANNOUNCES DUTCH AUCTION SELF TENDER OFFER
FOR UP TO 5,300,000 COMMON SHARES
ORANGE, CA, MARCH 22, 1995 - Varco International, Inc. (NYSE:VRC) today
announced a "Dutch Auction" cash tender offer for up to 5,300,000 shares of its
Common Stock. The tender offer is expected to commence on Friday, April 21,
1995, and to expire on Friday, April 21, 1995, unless extended. Under the terms
of the offer, the Company will invite shareholders to tender shares at prices
not greater than $8.00 nor less than $6.75 per share, as specified by the
tendering shareholders.
Based upon the number of shares tendered and the prices specified by the
tendering shareholders, the Company will determine the single per share price
within that price range that will allow it to purchase 5,300,000 shares (or such
lesser number of shares as are properly tendered and not withdrawn).
The tender offer is not conditioned upon any minimum number of shares being
tendered but is subject to certain other conditions set forth in the offer
documents to be sent to shareholders. If a greater number of shares than will be
accepted by the Company are properly tendered at or below the price determined
to be payable in the offer and are not withdrawn, shares tendered other than by
qualifying odd-lot holders will be subject to proration.
The Company will fund the purchase of the shares with cash and cash
equivalents, short-term investments and borrowings under the Company's credit
facility with Citicorp, USA and Citibank, N.A. The Company expects to have
approximately $37 million of available cash and cash equivalents and short-term
investments to finance the share purchase. The remaining funds will come from
borrowings.
The Company is not making any recommendations to its shareholders as to
whether or not to tender shares in the offer. The Company has been advised that
none of its directors or executive officers intends to tender any shares
pursuant to the offer. Baker Hughes Incorporated, owner of 19.1% of the shares
outstanding, has represented to the Company that it does not intend to tender
any shares pursuant to the offer.
The tender offer will be made only by the Offer to Purchase and the related
Letter of Transmittal, copies of which will be distributed to the Company's
shareholders. Lehman Brothers is acting as financial advisor and Dealer Manager
in connection with the offer. Information about the offer can be obtained from
the Dealer Manager or Hill and Knowlton, the information agent for the tender
offer, at (212) 885-0555.
Varco International, Inc. is a leader in the design and manufacture of
drilling equipment and machinery and rig instrumentation for oil and gas
drilling worldwide.
<PAGE>
[VARCO LETTERHEAD]
March 24, 1995
To Our Shareholders:
Varco International, Inc. (the "Company") is offering to purchase from its
shareholders up to 5,300,000 shares, or approximately 15.9%, of its outstanding
Common Stock. The price will not be greater than $8.00 nor less than $6.75 per
share. The Company is conducting the offer through a procedure commonly
referred to as a "Dutch auction." This procedure allows you to select the price
within the specified price range at which you are willing to sell your shares
to the Company.
The offer gives shareholders the opportunity to sell their shares at a price
greater than market prices prevailing prior to announcement of the offer. On
March 22, 1995, the last trading day prior to the announcement of the offer,
the closing price for the Common Stock on the New York Stock Exchange Composite
Tape was $7.00 per share. Any shareholder whose shares are purchased in the
offering will receive the total purchase price in cash and will not incur the
usual transaction costs associated with open-market sales. Furthermore, any
shareholders owning an aggregate of less than 100 shares whose shares are
purchased pursuant to the offer, will avoid the applicable odd lot discounts
payable on sales of odd lots on the New York Stock Exchange.
The Company will pay the same per share price (the "Purchase Price") for all
shares the Company purchases. If the number of shares properly tendered is
equal to or less than the number of shares the Company seeks to purchase
through the offer, the Purchase Price will be the highest price specified by a
tendering shareholder.
If tendering shareholders properly tender more than the number of shares the
Company seeks to purchase through the offer, the Company will take into account
the number of shares so tendered and certain other factors (see Section 1 of
the accompanying Offer to Purchase) and select the Purchase Price which will
allow the Company to buy the number of shares that it seeks to purchase through
the offer. In such circumstances, the Company would not purchase the shares of
any tendering shareholder who specified a price per share above the Purchase
Price.
All shares properly tendered at prices at or below the Purchase Price and not
withdrawn on or prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase) will be purchased by the Company at the Purchase Price, net
to the seller in cash, subject to the terms and conditions described in the
Offer to Purchase and the related Letter of Transmittal. Those terms and
conditions include, among other things, provisions relating to possible
proration and the tender of odd lots. All shares which are tendered and not
purchased will be returned promptly to the shareholder.
The offer is explained in detail in the Offer to Purchase and related Letter
of Transmittal. If you wish to tender your shares, the instructions on how to
tender shares are also explained in detail in the accompanying materials. We
encourage you to read these materials carefully before making any decision with
respect to the offer.
Neither the Company nor your Board of Directors makes any recommendation to
any shareholder whether to tender all or any shares.
If you have any questions regarding the offer or need assistance in tendering
your shares, please call Hill & Knowlton, the Information Agent for the offer,
at (212) 885-0555, or Lehman Brothers, the Dealer Manager, at (212) 526-0111.
You may call collect.
Walter B. Reinhold George Boyadjieff
Chairman President and Chief Executive
Officer
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase, dated
March 24, 1995, and the related Letter of Transmittal. Capitalized terms not
defined in this notice are defined in the Offer to Purchase. The Offer is not
being made to, nor will the Company accept tenders from, holders of Shares in
any jurisdictions in which the Offer or its acceptance would violate that
jurisdiction's laws. The Company is not aware of any jurisdiction in which the
making of the Offer or the tender of Shares would not be in compliance with the
laws of such jurisdiction. In those jurisdictions whose laws require that the
Offer be made by a licensed broker or dealer, the Offer shall be deemed to be
made on the Company's behalf by Lehman Brothers or one or more registered
brokers or dealers licensed under the laws of such jurisdictions.
NOTICE OF OFFER TO PURCHASE FOR CASH
BY
VARCO INTERNATIONAL, INC.
UP TO 5,300,000 SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE NOT GREATER THAN $8.00
NOR LESS THAN $6.75 PER SHARE
Varco International, Inc., a California corporation (the "Company"), invites
its shareholders to tender up to 5,300,000 shares of its Common Stock (the
"Shares"), to the Company at prices, net to the seller in cash, not greater
than $8.00 nor less than $6.75 per Share, specified by such shareholders, upon
the terms and subject to the conditions set forth in the Offer to Purchase
dated March 24, 1995 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer").
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS SET FORTH IN THE
OFFER TO PURCHASE. SEE SECTION 6 OF THE OFFER TO PURCHASE.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
APRIL 21, 1995, UNLESS THE OFFER IS EXTENDED.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
SHAREHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES TO TENDER AND THE PRICE OR PRICES AT WHICH SHARES SHOULD BE
TENDERED. THE COMPANY HAS BEEN ADVISED THAT NONE OF ITS DIRECTORS OR EXECUTIVE
OFFICERS INTENDS TO TENDER ANY SHARES PURSUANT TO THE OFFER. BAKER HUGHES
INCORPORATED, OWNER OF APPROXIMATELY 19.0% OF THE SHARES OUTSTANDING, HAS
REPRESENTED TO THE COMPANY THAT IT DOES NOT INTEND TO TENDER ANY SHARES
PURSUANT TO THE OFFER.
The Company will, upon the terms and subject to the conditions of the Offer,
determine a single per Share price that it will pay for Shares (the "Purchase
Price") validly tendered and not withdrawn pursuant to the Offer, taking into
account the number of Shares so tendered and the prices specified by tendering
shareholders. The Company will select the Purchase Price which will allow it to
purchase 5,300,000 Shares (or such lesser number as are validly tendered and
not withdrawn) at prices not greater than $8.00 nor less than $6.75 per Share
pursuant to the Offer. All Shares validly tendered at prices at or below the
Purchase Price and not withdrawn will be purchased at the Purchase Price, net
to the seller in cash, upon the terms and subject to the conditions of the
Offer, including the proration terms described below. For purposes of the
Offer, the Company will be deemed to have accepted for payment (and thereby
purchased), subject to proration, Shares which are properly tendered at or
below the Purchase Price and not withdrawn when, as and if it gives oral or
written notice to the Depositary of its acceptance of such Shares for payment
pursuant to the Offer. In all cases, payment for Shares tendered and accepted
for payment pursuant to the Offer will be made only after timely receipt by the
Depositary of certificates for such Shares (or a timely confirmation
<PAGE>
of a book-entry transfer of such Shares into the Depositary's account at one of
the Book-Entry Transfer Facilities (as defined in the Offer to Purchase)), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by the Letter of Transmittal.
Upon the terms and subject to the conditions of the Offer, in the event that
prior to the Expiration Date more than 5,300,000 Shares (or such greater number
of Shares as the Company may elect to purchase pursuant to the Offer) are
validly tendered at or below the Purchase Price and not withdrawn, the Company
will accept Shares for purchase, in the following order of priority: (a) first,
all Shares properly tendered and not withdrawn by any Odd Lot Owner (as defined
in the Offer) who tenders all such Shares beneficially owned by such Odd Lot
Owner at or below the Purchase Price (partial tenders will not qualify for this
preference) and who completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed Delivery, and (b)
then, after purchase of all of the foregoing Shares, all other Shares properly
tendered at or below the Purchase Price before the Expiration Date (and not
withdrawn) on a pro rata basis, if necessary (with adjustments to avoid
purchases of fractional Shares).
Over the past several years the Company has generated substantial excess
cash. The Company is making the Offer because the Board of Directors believes
that, given the Company's excess cash and cash equivalents, short-term
investments and debt capacity, the Offer represents the opportunity to return
cash to the Company's shareholders, permitting them to invest it according to
their preferences and objectives. The Offer provides shareholders who are
considering a sale of all or a portion of their Shares the opportunity to
determine the price or prices (not greater than $8.00 nor less than $6.75 per
Share) at which they are willing to sell their Shares and, if any such Shares
are purchased pursuant to the Offer, to sell those Shares for cash without the
usual transaction costs associated with open-market sales.
The Company reserves the right, at any time or from time to time, in its sole
discretion, to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Depositary and making a
public announcement thereof. Subject to certain conditions, the Company also
expressly reserves the right to terminate the Offer and not accept for payment
any Shares not theretofore accepted for payment.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment by the
Company, may also be withdrawn after 12:00 Midnight, New York City time, on May
18, 1995. For a withdrawal to be effective, the Depositary must timely receive
a written, telegraphic, telex or facsimile transmission notice of withdrawal.
Such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder (if different from that of the person who tendered such
Shares). If the certificates have been delivered or otherwise identified to the
Depositary, then prior to the release of such certificates, the tendering
shareholder must also submit the serial numbers of the particular certificates
evidencing the Shares to be withdrawn and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution (except in the case of
Shares tendered by an Eligible Institution). If Shares have been tendered
pursuant to the procedure for book-entry transfer set forth in the Offer to
Purchase, the notice of withdrawal must specify the name and number of the
account at the applicable Book-Entry Transfer Facility to be credited with the
withdrawn Shares and otherwise comply with the procedures of such facility.
The Offer to Purchase and the Letter of Transmittal contain important
information, which should be read before shareholders decide whether to accept
or reject the Offer and if accepted, at what price or prices to tender their
Shares. These materials are being mailed to record holders of Shares and are
being furnished to brokers, banks and similar persons whose names, or the names
of whose nominees, appear on the Company's shareholder list (or, if applicable,
who are listed as participants in a clearing agency's security position
listing) for transmittal to beneficial holders of Shares.
<PAGE>
THE INFORMATION REQUIRED TO BE DISCLOSED BY RULE 13E-4(D)(1) UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, IS CONTAINED IN THE OFFER TO
PURCHASE AND IS INCORPORATED BY REFERENCE IN THIS NOTICE.
Copies of the Offer to Purchase and the Letter of Transmittal may be obtained
from the Information Agent or the Dealer Manager and will be furnished at the
Company's expense. Questions and requests for assistance may be directed to the
Information Agent or the Dealer Manager as set forth below.
THE INFORMATION AGENT FOR THE OFFER IS:
HILL AND KNOWLTON
466 Lexington Avenue
3rd Floor
New York, New York 10017
(212) 885-0555
(Call Collect)
THE DEALER MANAGER FOR THE OFFER IS:
LEHMAN BROTHERS
3 World Financial Center
New York, New York 10285
(212) 526-0111
(Call Collect)
March 27, 1995
<PAGE>
SIXTH AMENDMENT
Dated as of March 17, 1995
SIXTH AMENDMENT dated as of March 17, 1995 (this "Amendment") to CREDIT
AGREEMENT dated as of February 25, 1993 (as amended by First Amendment dated as
of August 3, 1993, Second Amendment dated as of September 23, 1993, Third
Amendment dated as of December 1, 1993, Fourth Amendment dated as of May 12,
1994, and Fifth Amendment and Waiver dated as of October 31, 1994, the "Credit
Agreement") among VARCO INTERNATIONAL, INC., a California corporation, CITICORP
USA, INC. and CITIBANK, N.A.
PRELIMINARY STATEMENTS. The parties to the Credit Agreement wish to amend
the Credit Agreement in certain respects as hereinafter set forth. Terms
defined in the Credit Agreement are used in this Amendment as defined in the
Credit Agreement and, except as otherwise indicated, all references to Sections
and Articles refer to the corresponding Sections and Articles of the Credit
Agreement.
The parties hereto therefore agree as follows:
SECTION 1. Amendments. Effective as of the Amendment Effective Date (as
----------
defined in Section 2 hereof), and subject to the satisfaction of the conditions
precedent set forth in Section 2 hereof, the Credit Agreement is hereby amended
as follows:
a. The definition of "Borrowing Base" in Section 1.01 is amended by
--------------
deleting clause (b) and restating it as follows:
(b) seventy percent (70%) of Eligible Inventory
b. The definition of "Change of Control" in Section 1.01 is deleted and
-----------------
restated as follows:
"Change of Control" means the acquisition by any Person (or "group" within
-----------------
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) of beneficial ownership of 20% or more of the common stock of the
Borrower, or the occurrence of any transaction which has in substance the same
effect, except that the term "Change of Control" shall not include the
acquisition by Baker Hughes Incorporated of beneficial ownership of 20% or more
(but not in excess of 25%) of the common stock of the Company solely as a result
of any reduction in the number of outstanding shares of common stock
attributable to the Stock Repurchase Program.
c. The definition of "Consolidated Fixed Charges" in Section 1.01 is
--------------------------
deleted and restated in full as follows:
"Consolidated Fixed Charges" means, for any period, the sum of (a)
--------------------------
Consolidated Interest Expense for such period plus (b) the amount of any
principal payments on Debt (excluding the Subordinated Note, the Subordinated
Debentures and Debt included in clauses (c) or (d) of the definition of "Debt")
required to be paid during such period.
d. The definition of "Loan Maturity Date" in Section 1.01 is deleted and
------------------
restated in full as follows:
"Loan Maturity Date" means October 31, 1998 or the earlier date of
------------------
termination in whole of the Commitments pursuant to Section 2.07 or 6.01.
e. The definition of "Note" in Section 1.01 is deleted and restated in full
----
as follows:
"Note" means the Promissory Note substantially in the form of Exhibit A
----
hereto, made by the Borrower in favor of the Lender to evidence the indebtedness
resulting from the Advances.
<PAGE>
f. The definition of "Stock Repurchase Program" in Section 1.01 is deleted
------------------------
and restated in full as follows:
"Stock Repurchase Program" means the purchase by the Borrower at any time
------------------------
or from time to time during the period commencing May 12, 1994 and ending on
December 31, 1995 of its common stock for an aggregate cost not exceeding
$50,000.000.
g. The definition of "Termination Date" in Section 1.01 is deleted and
----------------
restated in full as follows:
"Termination Date" means December 31, 1998 or the earlier date of
----------------
termination in whole of the Commitments pursuant to Section 2.07 or 6.01.
h. Section 2.01 is deleted and restated as follows:
SECTION 2.01 The Advances. The Lender agrees, on the terms and conditions
------------
hereinafter set forth, to make advances (the "Advances") to the Borrower from
time to time on any Business Day during the period from the date hereof to, but
excluding, the Loan Maturity Date in an amount not to exceed the Availability on
such date and in an aggregate amount not to exceed at any time outstanding
$25,000,000 as such amount may be reduced pursuant to Section 2.07. Each
Advance shall be in an amount not less than $1,000,000 or an integral multiple
of $500,000 in excess thereof, except that a Base Rate Advance may be in an
------
amount equal to the maximum Advance available hereunder. Within the limits set
forth in this Section 2.01, the Borrower may borrow, repay pursuant to Section
2.11 and reborrow under this Section 2.01.
i. Section 4.09 is deleted and restated as follows:
SECTION 4.09 Not a Purpose Credit. The Borrower and its Subsidiaries are
--------------------
not engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation G, U or X issued by the
Board of Governors of the Federal Reserve System), and no proceeds of any
Advance will be used to purchase or carry any margin stock (other than purchases
of common stock of the Borrower not otherwise prohibited by this Agreement) or
to extend credit to others for the purpose of purchasing or carrying any margin
stock.
j. Section 5.01(i) is deleted and restated as follows:
(i) Use of Proceeds. The Borrower will use the proceeds of the Advances
---------------
for the Stock Repurchase Program and for general corporate purposes.
k. Section 5.02(h) is deleted and restated as follows:
(h) Prepayment of Senior Notes. The Borrower will not and will not permit
--------------------------
any of its Subsidiaries to prepay, redeem, defease (whether actually or in
substance) or purchase in any manner (or deposit or set aside funds for the
purpose of any of the foregoing), or make any payment in respect of principal
of, the Senior Notes; provided that nothing herein shall prohibit the payment of
--------
any scheduled principal installments of the Senior Notes.
l. Section 5.02(a) is deleted and restated as follows:
(o) Capital Expenditures. The Borrower will not and will not permit any of
--------------------
its Subsidiaries to make or incur any Capital Expenditures during any fiscal
year if the amount of such Capital Expenditures, when added to the aggregate
amount of all other Capital Expenditures made by the Borrower and its
Subsidiaries on a Consolidated basis during such fiscal year, would exceed 50%
of the sum of Consolidated net income of the Borrower and its Subsidiaries for
such fiscal year, plus any
----
<PAGE>
amount which, in the determination of Consolidated net income for such fiscal
year, has been deducted for depreciation and amortization.
m. Section 5.02(q) is deleted and restated as follows:
(q) Operating Lease Obligations. The Borrower will not and will not permit
---------------------------
any of its Subsidiaries to create or suffer to exist any obligations for the
payment of rental for any property under leases or agreements to lease with a
term of one year or longer (other than Capital Lease Obligations permitted
pursuant to Section 5.02(p)), except for such obligations providing for
aggregate rentals payable during any fiscal year by the Borrower and its
Subsidiaries on a Consolidated basis not exceeding 3% of Consolidated gross
revenues of the Borrower and its Subsidiaries for such fiscal year.
n. Section 5.03(a) is deleted and restated as follows:
(a) Minimum Consolidated Interest Coverage Ratio. At the end of any fiscal
--------------------------------------------
quarter the Borrower will not permit the ratio of its Consolidated EBIT to its
Consolidated Interest Expense to be less than 3.0 to 1 for the four consecutive
fiscal quarter period ending on such date.
o. Section 5.03(b) is deleted and restated as follows:
(b) Minimum Consolidated Fixed Charge Coverage Ratio. At the end of any
------------------------------------------------
fiscal quarter the Borrower will not permit the ratio of Consolidated Cash Flow
to Consolidated Fixed Charges to be less than 1.0 to 1 for the four consecutive
fiscal quarter period ending on such date.
p. Section 5.03(c) is deleted and restated as follows:
(c) Minimum Consolidated Current Ratio. The Borrower will not permit the
----------------------------------
ratio of Consolidated Current Assets to Consolidated Current Liabilities to be
less than 2.2 to 1 as of the last day of any fiscal quarter.
q. Section 5.03(d) is deleted and restated as follows:
(d) Minimum Consolidated Leverage Ratio. The Borrower will not permit the
-----------------------------------
ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth to be
more than (a) 1.5 to 1 at any time prior to January 1, 1996, (b) 1.1 to 1 at
any time from January 1, 1996 to January 1, 1997, and (c) 1.0 to 1 at any time
thereafter.
r. Section 5.03(e) is deleted and restated as follows:
(e) Minimum Consolidated Tangible Net Worth. The Borrower will not permit
---------------------------------------
its Consolidated Tangible Net Worth at any time to fall below an amount equal to
the sum of (x) $72,000,000 plus (y) 75% of Consolidated net income of the
----
Borrower and its Subsidiaries, on a cumulative basis, for each fiscal quarter of
the Borrower in which such Consolidated net income is positive (beginning with
the fiscal quarter ending on March 31, 1995 and including each fiscal quarter of
the Borrower ending thereafter). The cumulative total in clause (x) above shall
not be reduced or affected by any net losses incurred in any fiscal quarter.
s. Exhibit A is deleted and restated in its entirely in the form of Exhibit
A hereto.
SECTION 2. Conditions to Effectiveness: Consent. This Amendment shall be
------------------------------------
effective as of March 17, 1995 (the "Amendment Effective Date"), subject to the
Lender's receipt of: (i) a counterpart of this Amendment executed by the
Borrower, (ii) a promissory note substantially in the form Exhibit A hereto made
by the Borrower in favor of the Lender (the "Replacement Note"), (iii) a
certificate of the Secretary or an Assistant Secretary of the Borrower
attaching a copy of the resolutions of the Board of Directors of the
<PAGE>
Borrower authorizing the execution and delivery of this Amendment and the
Replacement Note and certifying the name and true signature of each officer of
the Borrower executing this Amendment and the Replacement Note on its behalf,
(iv) counterparts of a Consent and Acknowledgment in the form attached as
Exhibit B hereto executed by each Guarantor, (v) evidence satisfactory to the
Lender of the execution and delivery by the Borrower and the holders of at least
66-2/3% in aggregate principal amount of the Senior Notes of a Waiver and Third
Amendment to Note Agreement in the form previously furnished to the Lender (the
"Note Agreement Amendment"), (vi) evidence satisfactory to the Lender of the
execution and delivery by the Borrower and the holders of at least 66-2/3% in
aggregate principal amount of the Senior Notes of the Waiver dated March 8, 1995
in the form previously furnished to the Lender (the "Note Agreement Waiver"),
and (vii) evidence satisfactory to the Lender that the execution of this
Amendment and performance of the Credit Agreement as hereby amended will not
conflict with the Senior Note Agreement and that the covenants of the Senior
Note Agreement have been amended so as to be no more restrictive than the
covenants set forth in Section 5.03 as hereby amended. The Lender and the
Issuing Bank hereby consent to the Note Agreement Amendment and the Note
Agreement Waiver, in each case whether the same is executed and delivered before
or after the execution and delivery of this Amendment.
SECTION 3. Representations and Warranties. The Borrower represents and
------------------------------
warrants as follows as of the date hereof and the Amendment Effective Date: (a)
the Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction indicated at the beginning of this
Amendment; (b) the execution, delivery and performance by the Borrower of this
Amendment and the Replacement Note are within the Borrower's corporate powers,
have been duly authorized by all necessary corporate action and do not
contravene the Borrower's charter or by-laws, or any law or any contractual
restriction binding on or affecting the Borrower; (c) no authorization, approval
or other action by, and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution and delivery by the
Borrower of this Amendment and the Replacement Note or for the performance by
the Borrower of the Credit Agreement as hereby amended; (d) this Amendment, the
Replacement Note and the Credit Agreement as hereby amended constitute the
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms; (e) except as set forth in
the Notice of Default from the Company to the Lender and the Issuing Bank dated
March 8, 1995 (the "Notice of Default"), all representations and warranties of
the Borrower set forth in Article IV are true and correct, as if repeated and
restated in full herein (except to the extent that such representations and
warranties expressly relate solely to an earlier date and then are correct as of
such date); and (f) except as set forth in the Notice of Default, no Default or
Event of Default has occurred and is continuing.
SECTION 4. Reference to and Effect on the Credit Agreement. Upon the
-----------------------------------------------
effectiveness of Section 1 hereof, on and after the Amendment Effective Date,
(a) each reference in the Credit Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import, and each reference in the Note or
the other Loan Documents to "the Credit Agreement," shall mean and be a
reference to the Credit Agreement as amended by this Amendment and (b) each
reference in the Credit Agreement and the other Loan Documents to the Note shall
mean and be a reference to the Replacement Note. Except as specifically amended
above, the Credit Agreement shall continue to be in full force and effect and is
hereby in all respects ratified and confirmed.
SECTION 5. Execution in Counterparts. This Amendment may be executed in
-------------------------
any number of counterparts and by any combination of the parties hereto in
separate counterparts, each of which counterparts shall be an original and all
of which taken together shall constitute one and the same Amendment.
SECTION 6. Governing Law. This Amendment shall be governed by, and
-------------
construed in accordance with the laws of the State of New York.
SECTION 7. Expenses. Each party hereto shall bear its own costs and
--------
expenses (including counsel fees and expenses) in connection with the
preparation, execution and delivery of this Amendment.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
VARCO INTERNATIONAL, INC.
By:__________________________________
Title:_______________________________
CITICORP USA, INC.
By:__________________________________
Vice President
CITIBANK, N.A.
By:__________________________________
Vice President
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$25,000,000 Dated: February 25, 1993
FOR VALUE RECEIVED, the undersigned, Varco International, Inc., a
California corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
Citicorp USA, Inc. (the "Lender") on the Loan Maturity Date (as defined in the
Credit Agreement) the principal amount of $25,000,000 or, if less, the aggregate
principal amount of all Advances made by the Lender to the Borrower pursuant to
the Credit Agreement (as hereinafter defined) outstanding on such date.
The Borrower promises to pay interest on the principal amount of each
Advance from the date of such Advance until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in the
Credit Agreement referred to below.
Both principal and interest are payable in lawful money of the United
States of America to the Lender at the office of Citibank, N.A. located at 399
Park Avenue, New York, New York 10043 in same day funds. Each Advance made by
the Lender to the Borrower, and all payments made on account of the principal
amount thereof, shall be recorded by the Lender and, prior to any transfer
thereof, endorsed on the grid attached hereto which is a part of this Promissory
Note, provided that the failure of the Lender to record or endorse any such
matters shall not affect the validity of this Note or the obligations of the
Borrower under the Credit Agreement.
This Promissory Note is the Note referred to in, and is entitled to the
benefits of, the Credit Agreement dated as of February 25, 1993 (as amended to
the date hereof and as it may be further amended from time to time, the "Credit
Agreement") among the Borrower, the Lender and Citibank, N.A. as Issuing Bank,
and the Guaranties referred to therein and entered into pursuant thereto. The
Credit Agreement, among other things (i) provides for the making of advances
(the "Advances") by the Lender to the Borrower from time to time in an aggregate
amount not to exceed at any time outstanding the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Advance
being evidenced by this Promissory Note, and (ii) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments on account of the principal hereof prior to the
maturity hereof upon the terms and conditions therein specified.
This Promissory Note is delivered in exchange and substitution for the
promissory note of the undersigned dated February 25, 1993 in the principal
amount of $13,000,000.
VARCO INTERNATIONAL, INC.
By:__________________________________
Name:______________________
Title:_______________________
<PAGE>
EXHIBIT B
CONSENT AND ACKNOWLEDGMENT
Each of the undersigned hereby (a) acknowledges receipt of a draft in the
form attached as Annex I hereto of the Sixth Amendment dated as of March 17,
1995 (the "Amendment") to the Credit Agreement dated as of February 25, 1993
among Varco International, Inc., Citicorp USA, Inc. and Citibank, N.A. (as
amended to the date of the Amendment, the "Credit Agreement"), (b) consents to
the terms of the Amendment and (c) confirms and agrees that each Loan Document
executed by the undersigned pursuant to and as defined in the Credit Agreement
is, and shall continue to be, in full force and effect and is hereby ratified
and confirmed in all respects except that, on and after the effective date of
the Amendment, (i) each reference in each such Loan Document to "the Credit
Agreement," "thereunder," "thereof," "therein" or words of like import referring
to the Credit Agreement shall mean and be a reference to the Credit Agreement as
amended by the Amendment and (ii) each reference to the "Note" shall mean and be
a reference to the Replacement Note (as defined in the Amendment). This Consent
and Acknowledgment may be executed by the undersigned in two or more
counterparts, each of which shall be deemed an original.
BEST INDUSTRIES, INC., a Texas corporation
By:____________________________
Richard A. Kertson
Vice President - Finance
MARTIN-DECKER TOTCO, INC., a Texas corporation
By:____________________________
Richard A. Kertson
Vice President
VARCO INTERNATIONAL INC PTE LTD, a corporation
organized under the laws of the Republic of Singapore
By:____________________________
Richard A. Kertson
Director
By:____________________________
George Boyadjieff
Director
VARCO (U.K.) LIMITED, a corporation organized
under the Companies Acts in Scotland
By:____________________________
Name:__________________________
Director
By:____________________________
Name:__________________________
Director
<PAGE>
304774 ALBERTA LTD., a corporation organized
under the laws of the Province of Alberta, Canada
By:____________________________
Richard A. Kertson
Vice President - Finance
VARCO BJ OIL TOOLS B.V., a corporation
organized under the laws of the Netherlands
By:____________________________
Name:__________________________
Managing Director
By:____________________________
Name:__________________________
Managing Director
VARCO SHAFFER, INC., a Texas corporation
By:____________________________
Richard A. Kertson
Vice President - Finance
METROX, INC., a California corporation
By:____________________________
Richard A. Kertson
Vice President
RIG TECHNOLOGY LIMITED
By:____________________________
Richard A. Kertson
Director
By:____________________________
George Boyadjieff
Director
