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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) November 6, 1997
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VARCO INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
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California 1-8158 95-0472620
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
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643 North Eckhoff Street
Orange, California 92868
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (714)978-1900
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Item 5. Other Events.
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On November 6, 1997, Varco International, Inc., a California corporation
the ("Company") issued a press release relating to (1) a two-for-one split of
its Common Stock to be effected as a 100% stock dividend (the "Stock Split"),
payable on December 4, 1997, to shareholders of record on November 20, 1997 and
(2) the adoption by the Board of Directors (the "Board") of the Company of a
Shareholder Rights Plan. The November 6, 1997 press release of the Corporation
is filed herewith as Exhibit 99.1.
On November 6, 1997, the Board of Directors (the "Board") of Varco
International, Inc., a California corporation (the "Company") declared a
dividend of one Preferred Stock purchase right (a "Right") for each outstanding
share of Common Stock (the "Common Shares"), of the Company. The dividend is
payable on November 25, 1997 to shareholders of record on such date (the "Record
Date"), and with respect to Common Shares issued thereafter until the
Distribution Date (as defined below) and, in certain circumstances, with respect
to Common Shares issued after the Distribution Date. Except as set forth below,
each Right, when it becomes exercisable, entitles the registered holder to
purchase from the Company one one-thousandth of a share of Series A
Participating Preferred Stock (the "Preferred Shares") of the Company at an
exercise price of $140.00 per one one-thousandth of a Preferred Share (the
"Exercise Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and Harris Trust Company of California, as Rights Agent (the "Rights
Agent"), dated as of November 6, 1997.
As of November 3, 1997, there were 32,026,464 Common Shares outstanding.
The Stock Split was taken into account in determining the Exercise Price and
other terms and provisions of the Rights and the Rights Agreement and,
accordingly, no adjustment of any kind will be made under the Rights Agreement
as a result of the Stock Split. A sufficient number of Preferred Shares has been
reserved for issuance upon exercise of Rights.
While the distribution of the Rights will not be taxable to shareholders of
the Company, shareholders may, depending upon the circumstances, recognize
taxable income should the Rights become exercisable or upon the occurrence of
certain events thereafter.
The following summary of the principal terms of the Rights Agreement is a
general description only and is subject to the detailed terms and conditions of
the Rights Agreement. A copy of the Rights Agreement including the terms of
Certificate of Determination of the Preferred Shares, form of Rights Certificate
and form of Summary of Rights (the "Summary of Rights") is attached as Exhibit
4.1 to this Report and is incorporated herein by reference.
Rights Evidenced by Common Share Certificates
The Rights will not be exercisable until the Distribution Date. Prior to
the Distribution Date, certificates for the Rights ("Rights Certificates") will
not be sent to shareholders and the Rights will attach to and trade only
together with the Common Shares. Accordingly, Common Share certificates
outstanding on the Record Date will evidence the Rights related thereto, and
Common Share certificates issued after the Record Date will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date
(or earlier redemption or expiration of the Rights), the surrender for transfer
of any certificates for Common Shares, outstanding as of the Record Date, with
or without attaching
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thereto such notation or a copy of the Summary of Rights, will
also constitute the transfer of the Rights associated with the Common Shares
represented by such certificate.
Distribution Date
The Rights will separate from the Common Shares, Rights Certificates will
be issued and the Rights will become exercisable upon the date (the
"Distribution Date") which is the earlier of: (i) the date of public
announcement that an Acquiring Person (as hereinafter defined) has become such
or (ii) the close of business on the tenth business day (or such later date as
may be determined by the Board) following the commencement of a tender or
exchange offer by any person, the consummation of which would result in such
person's becoming an Acquiring Person. Subject to certain exceptions, an
"Acquiring Person" is any person who, together with such person's affiliates or
associates, and without prior approval of the Board, acquires 15% or more of the
outstanding Common Shares other than pursuant to a tender or exchange offer
which is for all outstanding shares and which a majority of the members of the
Board (who are not officers of the Company or Acquiring Persons) determines to
be fair and otherwise in the best interests of the Company and its shareholders
(a "Permitted Offer").
Issuance of Rights Certificates; Expiration of Rights
As soon as practicable following the Distribution Date, separate Rights
Certificates will be mailed to the holders of record of the Common Shares as of
the close of business on the Distribution Date and such separate Rights
Certificates alone will evidence the Rights from and after the Distribution
Date. Unless otherwise determined by resolution of the Board prior to the
issuance thereof, all Common Shares issued prior to the Distribution Date will
be issued with Rights. Common Shares issued after the Distribution Date may be
issued with Rights if such shares are issued (i) upon the conversion of
outstanding convertible debentures or any other convertible securities
outstanding on the date of the Rights Agreement or issued thereafter or (ii)
pursuant to the exercise of stock options or under employee benefit plans or
arrangements. Except as otherwise determined by the Board of Directors, no other
Common Shares issued after the Distribution Date will be issued with Rights. In
addition, no Common Shares issued after the Distribution Date will be issued
with Rights if (i) such issuance would result in (or create a significant risk)
of material adverse tax consequences to the Company or the person to whom such
Rights Certificates would be issued or (ii) such options or plans would not
qualify for otherwise available special tax treatment. The Rights will expire on
November 5, 2007 (the "Final Expiration Date") unless the Rights are earlier
redeemed or exchanged by the Company or expire upon consummation of certain
mergers, as described below.
Initial Exercise of the Rights
Following the Distribution Date, and until one of the further events
described below, holders of the Rights will be entitled to receive, upon
exercise and the payment of $140.00 per Right, one one-thousandth of a Preferred
Share.
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Right to Buy Company Common Shares
Unless the Rights are earlier redeemed, in the event that any person
becomes an Acquiring Person each holder of a Right (other than Rights
beneficially owned by the Acquiring Person, which will thereafter be void) will
thereafter have the right to receive, upon exercise and payment of the Exercise
Price, Common Shares having a value equal to two times the Exercise Price. In
the event that the Company does not have a sufficient number of Common Shares
available or the Board decides that such action is necessary or appropriate and
not contrary to the interests of Rights holders, the Company may substitute
cash, property or other securities for the Common Shares for which the Rights
would otherwise have been exercisable.
Right to Buy Acquiring Company Stock
Similarly, unless the Rights are earlier redeemed, in the event that, after any
person becomes an Acquiring Person, (i) the Company is acquired in a merger or
other business combination transaction, or (ii) 50% or more of the Company's
consolidated assets or earning power are sold each holder of a Right which has
not theretofore been exercised (other than Rights beneficially owned by the
Acquiring Person, which will be void) will thereafter have the right to receive,
upon exercise and payment of the Exercise Price, shares of common stock of the
acquiring company having a value equal to two times the Exercise Price unless
the transaction is a merger, which satisfies certain conditions and is
consummated with a person who acquired shares pursuant to a Permitted Offer, in
which case the Rights will expire.
Exchange Provision
At any time after any person becomes an Acquiring Person and prior to the
acquisition by any person or group of 50% or more of the Company's outstanding
Common Shares, the Board may exchange all or part of the then-outstanding Rights
(other than Rights owned by the Acquiring Person or its affiliates at an
exchange ratio of one Common Share per Right. In the event that the Company does
not have a sufficient number of Common Shares available, the Company may
substitute any combination of cash, property, Common Shares, or other securities
for the Common Shares otherwise issuable.
Redemption
At any time on or prior to the close of business on the earlier of (i) the
date of public announcement that an Acquiring Person has become such (the
"Shares Acquisition Date"), or (ii) the Final Expiration Date of the Rights, the
Company may redeem the Rights in whole, but not in part, at a price of $0.01 per
Right, which redemption shall become effective upon action by the Board.
Adjustments to Prevent Dilution
The Exercise Price payable, and the number of shares of Preferred Shares,
Common Shares or other securities issuable, upon exercise of the Rights are
subject to adjustment
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from time to time to prevent dilution (i) in the event of a stock dividend on,
or a subdivision, combination or reclassification of, the Preferred Shares, (ii)
upon the grant to holders of the Preferred Shares of certain rights or warrants
to subscribe for or purchase Preferred Shares at a price, or securities
convertible into Preferred Shares with a conversion price, less than the then
current market price of the Preferred Shares or (iii) upon the distribution to
holders of Preferred Shares of evidences of indebtedness or assets (excluding
regular quarterly cash dividends) or of subscription rights or warrants (other
than those referred to above).
The number of outstanding Rights and the number of the one-thousandths
(1/1000ths) of a Preferred Share issuable upon exercise of each Right are also
subject to adjustment in the event of a dividend on the Common Shares payable in
Common Shares or a subdivision, combination or reclassification of the Common
Shares.
With certain exceptions, no adjustment in the Exercise Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Exercise Price.
Cash Paid Instead of Issuing Fractional Shares
No fractional portion less than integral multiples of one Common Share will
be issued upon exercise of a Right and in lieu thereof, an adjustment in cash
will be made based on the market price of the Common Shares on the last trading
date prior to the date of exercise.
No Shareholders' Rights Prior to Exercise
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company (other than any rights resulting from
such holder's ownership of Common Shares), including, without limitation, the
right to vote or to receive dividends.
Amendment of Rights Agreement
The provisions of the Rights Agreement may be supplemented or amended by
the Board in any manner prior to the Distribution Date without the approval of
Rights holders. After the Distribution Date, the provisions of the Rights
Agreement may be supplemented or amended by the Company in order to cure any
ambiguity, defect or inconsistency, to make changes which are deemed necessary
or desirable and do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), provided, however, that the
Rights Agreement may not be amended or supplemented to lengthen a time period
relating to when the Rights may be redeemed at a time they are not redeemable or
to lengthen any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of holders of Rights (excluding
any acquiring person).
Rights and Preferences of Preferred Shares
Each Preferred Share is entitled to a dividend equal to 1,000 times the per
share amount of any dividend declared on the Common Shares. In the event of
liquidation, each Preferred Share is entitled to a liquidation preference equal
to accrued and unpaid dividends and distributions plus an amount equal to the
greater of (i) $1,000 per share
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and (ii) 1,000 times the amount to be distributed per Common Share. Each
Preferred Share will have 1,000 votes on all matters submitted to a vote of the
shareholders of the Company. The holders of the Preferred Shares and the holders
of Common Shares will vote together as one class on all matters submitted to
shareholders, except as otherwise required by law and except that a separate
vote of the holders of the Preferred Shares will be required for any material
amendment to the terms of the Preferred Shares. The Preferred Shares are not
redeemable. The foregoing rights of the Preferred Shares are protected by
customary anti-dilution provisions.
Because of the nature of the dividend, liquidation and voting rights of the
Preferred Shares, the value of the one one-thousandth of a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
Common Share.
Certain Anti-takeover Effects
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on the Rights being redeemed or a substantial
number of Rights being acquired. Accordingly, the Rights may have the effect of
rendering more difficult or discouraging an acquisition of the Company deemed
undesirable by the Board. However the Rights should not interfere with any
tender offer or merger approved by the Company (other than with an Acquiring
Person) because the Rights do not become exercisable in the event of a Permitted
Offer or other acquisition approved by the Board.
Item 7. Exhibits.
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4.1 Rights Agreement, dated as of November 6, 1997, between
Varco International, Inc. and Harris Trust Company of
California as Rights Agent, which includes: as Exhibit A
thereto, the Form of Certificate of Determination of Rights,
Preferences, and Privileges of Series A Participating
Preferred Stock of Varco International, Inc.; as Exhibit B
thereto, the Form of Rights Certificate; and, as Exhibit C
thereto, the Summary of Rights, incorporated by reference to
Exhibit 1 to the Corporation's Form 8-A Registration
Statement filed November 13, 1997.
99.1 Press Release issued by the Corporation on November 6, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
VARCO INTERNATIONAL, INC.
By: /s/ RICHARD A. KERTSON
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Richard A. Kertson
Vice President-Finance
Dated: November 12, 1997
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EXHIBIT INDEX
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Exhibit Description Page
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4.1 Rights Agreement, dated as of November
6, 1997, between Varco International,
Inc. and Harris Trust Company of
California as Rights Agent, which
includes: as Exhibit A thereto, the
Form of Certificate of Determination of
Rights, Preferences, and Privileges of
Series A Participating Preferred Stock
of Varco International, Inc.; as
Exhibit B thereto, the Form of Rights
Certificate; and, as Exhibit C thereto,
the Summary of Rights, incorporated by reference
to Exhibit 1 to the Corporation's Form 8-A
Registration Statement filed November 13, 1997.
99.1 Press Release issued by the Corporation
on November 6, 1997.
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EXHIBIT 99.1
[LETTERHEAD OF VARCO INTERNATIONAL, INC.]
ORANGE, CALIFORNIA, NOVEMBER 6, 1997. . . Varco International, Inc.
(NYSE:VRC) announced today that it Board of Directors has declared a two-for-one
stock split of its Common Stock. The stock split is payable on December 4, 1997
to shareholders of record at the close of business on November 20, 1997.
Varco also announced that it has adopted a Shareholder Rights Plan
pursuant to which its Board of Directors has declared a dividend of one
Preferred Stock Purchase Right for each share of the Company's Common Stock.
The dividend is payable on November 25, 1997 to shareholders of record at the
close of business on that date. The Rights will become exercisable only if,
without the prior approval of the Board, a person or group acquires 15% or more
of Varco's Common Stock or announces a tender or exchange offer, the
consummation of which would result in ownership by a person or group of 15% or
more of the Common Stock.
Although the Rights Plan was not adopted in response to any specific
offer or threat of takeover, George Boyadjieff, President and Chief Executive
Officer of Varco, said that "the Rights Plan is similar to rights plans in
effect at a large number of other public companies and is designed to protect
Varco's shareholders from any unfair or coercive takeover attempt."
Each Right will entitle its holder to purchase one one-thousandth of a
share of a new series of the Company's Preferred Stock at an exercise price of
$140.00, which takes the two-for-one stock split into account. If a person or
group acquires 15% or more of the Company's outstanding Common Stock, each Right
will entitle its holder (other than the acquiring person or group) to purchase
at the Right's then-current exercise price, a number of shares of Varco Common
Stock (or in certain circumstances, cash, property or other securities) having a
market value equal to twice the exercise price. In addition, if at any time
after such an acquisition, the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, each outstanding Right will entitle its holder (other than the
acquiring person or group) to purchase, at the Right's then-
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current exercise price, a number of the acquiring person's common shares having
a market value equal to twice the exercise price.
Following the acquisition by a person or group of beneficial ownership
of 15% or more of the Company's Common Stock and prior to an acquisition of 50%
or more of the Common Stock, the Board of Directors may exchange the Rights
(other than Rights owned by the acquiring person or group), in whole or in part,
at an exchange ratio of one share of Common Stock (or in certain circumstances,
cash, property or other securities) per Right.
Prior to the acquisition by a person or group of beneficial ownership
of 15% or more of the Company's Common Stock, the Rights are redeemable for one
cent per Right at the option of the Board of Directors.
The Rights will expire on November 5, 2007 unless previously redeemed
or exchanged. Additional information regarding the Rights Plan is contained in
a "Summary of Rights" which will be distributed to Varco's shareholders of
record as of November 25, 1997. The Rights distribution is not taxable to
shareholders.
Varco International, Inc. is a leader in the design and manufacture of
drilling equipment and machinery and rig instrumentation for oil and gas well
drilling worldwide.
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