IRI INTERNATIONAL CORP, S-1/A, 1997-10-16

IRI INTERNATIONAL CORP
S-1/A, 1997-10-16
OIL & GAS FIELD MACHINERY & EQUIPMENT

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 16, 1997

REGISTRATION NO. 333-35117

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1 TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

IRI INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 3533 75-2044681
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

------------------------

1000 LOUISIANA, SUITE 5900
HOUSTON, TEXAS 77002
(713) 651-8002
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

------------------------

MUNAWAR H. HIDAYATALLAH
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
1000 LOUISIANA, SUITE 5900
HOUSTON, TEXAS 77002
(713) 651-8002
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

------------------------

COPIES TO:

<TABLE>
<C> <C>
WILLIAM F. HENZE II, ESQ. JOSHUA DAVIDSON, ESQ.
JONES, DAY, REAVIS & POGUE BAKER & BOTTS, L.L.P.
599 LEXINGTON AVENUE 910 LOUISIANA
NEW YORK, NEW YORK 10022 HOUSTON, TEXAS 77002
(212) 326-3939 (713) 229-1234
</TABLE>

------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C>
=============================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share.................... $55,200,000 $16,727.27
=============================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 427(o). On September 8, 1997, the Registrant registered
Common Stock with a proposed maximum aggregate offering price of
$234,600,000 and paid a registration fee of $71,090.91. This Registration
Statement is registering an additional $55,200,000 of Common Stock for a
total proposed maximum offering price of $289,800,000

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: one to be
used in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and the other to be used in connection with a concurrent offering
outside the United States and Canada (the "International Prospectus"). The two
prospectuses are identical in all respects except for the front and back cover
pages.

The form of the U.S. Prospectus is included herein. The forms of the
alternate pages for the International Prospectus follow the U.S. Prospectus.
Each of the pages for the International Prospectus included herein is labeled
"Alternate Page for International Prospectus."
<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

Subject to Completion, dated October , 1997

PROSPECTUS
12,000,000 SHARES
[LOGO]
IRI INTERNATIONAL CORPORATION
COMMON STOCK
---------------------------

Of the 12,000,000 shares of common stock, par value $.01 per share (the
"Common Stock"), of IRI International Corporation (the "Company") offered
hereby, 9,000,000 shares are being issued and sold by the Company and 3,000,000
shares are being offered for the account of certain stockholders of the Company
(the "Selling Stockholders"). Of the shares being offered hereby, 9,600,000
shares are being offered initially in the United States and Canada by the U.S.
Underwriters (the "U.S. Offering"), and 2,400,000 shares are being offered
initially outside the United States and Canada by the International Managers
(the "International Offering" and, together with the U.S. Offering, the
"Offering"). The initial public offering price and underwriting discounts and
commissions will be identical for both offerings. See "Underwriting." The
Company will not receive any of the proceeds from the sale of the shares by the
Selling Stockholders.

Prior to the Offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price for the
Common Stock will be between $16.00 and $18.00 per share. See "Underwriting" for
information relating to the factors to be considered in determining the initial
public offering price. The Common Stock has been approved, subject to notice of
issuance, for listing on the New York Stock Exchange (the "NYSE") under the
symbol "IIL."

---------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================

<TABLE>
<S> <C> <C> <C> <C>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................. $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------
Total (3).................. $ $ $ $
=======================================================================================================================
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Managers against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act"). See "Underwriting."

(2) Before deducting offering expenses payable by the Company estimated at
$ .

(3) Each of the Company and the Selling Stockholders have granted the U.S.
Underwriters a 30-day option to purchase up to 720,000 additional shares of
Common Stock on the same terms and conditions as set forth above to cover
over-allotments, if any. Each of the Company and the Selling Stockholders
have granted the International Managers a similar option to purchase up to
180,000 additional shares of Common Stock to cover over-allotments, if any.
If such options (the "Underwriters' Over-Allotment Options") are exercised
in full, the total Price to Public, Underwriting Discounts and Commissions,
Proceeds to Company and Proceeds to Selling Stockholders will be
$ , $ , $ and $ , respectively. See
"Underwriting."
---------------------------

The shares of Common Stock offered by this Prospectus are offered by the
U.S. Underwriters subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
U.S. Underwriters and to certain further conditions. It is expected that
delivery of the shares of Common Stock will be made at the offices of Lehman
Brothers Inc., New York, New York on or about , 1997.

---------------------------
LEHMAN BROTHERS
HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED

CREDIT LYONNAIS SECURITIES (USA) INC.
, 1997
<PAGE> 4

[Diagram and Photos to Come]

------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE
PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK
OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. Unless the context otherwise requires, references in this
Prospectus to the "Company" refer to IRI International Corporation together with
its subsidiaries and its predecessors, including its Bowen Tools Division
("Bowen"), its IRI Division ("IRI") and its wholly-owned subsidiary, Cardwell
International, Ltd. ("Cardwell"). Except as otherwise specified herein, the
information in this Prospectus (i) gives effect to the merger (the "Merger") of
IRI International Corporation into its parent, Energy Services International
Ltd., prior to the consummation of the Offering and the corresponding increase
in the number of outstanding shares of common stock of the Company from 163,600
to 30,000,000 and (ii) assumes that the Underwriters' Over-Allotment Options
will not be exercised. This Prospectus contains certain forward-looking
statements within the meaning of the federal securities laws. Actual results and
the timing of certain events could differ materially from those projected in the
forward-looking statements due to a number of factors, including those set forth
under "Risk Factors" and elsewhere in this Prospectus.

THE COMPANY

The Company is one of the world's largest manufacturers of land-based
drilling and well-servicing rigs and rig component parts for use in the global
oil and gas industry and is principally engaged in the design, manufacture,
service, sale and rental of onshore and offshore oilfield equipment for the
domestic and international markets. Through its IRI and Cardwell operations, the
Company designs and produces rigs to meet the special requirements of its global
clientele for service in remote areas and harsh climatic conditions. Through its
Bowen Tools Division, the Company is a leading manufacturer of downhole fishing
and drilling tools and offers a complete line of oilfield power equipment,
including top drives, power swivels, wireline pressure control equipment and
coiled tubing systems, which complement the Company's drilling and well-
servicing rigs. The Company also manufactures and maintains a significant
inventory of replacement parts for rigs produced by the Company and by others,
enabling it to meet the needs of its customers on a timely basis. As a result of
its diverse product lines and the availability, on a sale or rental basis, of
the products of the Bowen Tools Division, the Company is able to satisfy a wide
range of its customers' special requirements. Through its Specialty Steel
Division, the Company produces premium alloy steel for commercial and military
use and for use in manufacturing oilfield equipment products.

The Company markets its oilfield equipment primarily through its own sales
force and through designated agents and distributors in every major oil and gas
producing region in the world. The Company supplements its marketing efforts by
maintaining 27 domestic sales, parts and service centers in areas of significant
drilling and production operations and 7 international parts and service
centers. The Company's network of service centers in the United States provides
its customers with refurbishment or repair services as well as ready access to
replacement parts for equipment in the field. The Company's worldwide sales and
marketing activities are closely coordinated with and supported by a staff of
more than 70 engineers and design technicians, resulting in a competitive
advantage for the Company to provide its customers with products meeting
customized design specifications for drilling and well-servicing rigs and
associated equipment.

The Company has combined the global recognition of its strong brand names,
the extensive background and experience of its management team in international
markets and its commitment to technological excellence and high quality products
to achieve significant growth in a favorable industry climate. As of June 30,
1997, the Company's backlog was $76.7 million. See "Business -- Drilling and
Well-Servicing Rigs -- Backlog." In the fiscal year ended March 31, 1996, the
nine month period ended December 31, 1996 and the six month period ended June
30, 1997, the Company's revenues were $52.5 million, $62.3 million and $57.8
million, respectively. Operating income for the same periods was $7.6 million,
$9.1 million and $4.2 million, respectively. Giving pro forma effect to the
Acquisitions (as defined below) as if they had been completed as of January 1,
1996, revenues for the year ended December 31, 1996 and the six month period
ended June 30, 1997 would have been $188.4 million and $80.2 million,
respectively. Pro forma operating income for the same periods would have been
$17.9 million and $5.3 million, respectively.

The Company, together with its predecessors, traces its history in the
oilfield equipment industry for nearly 100 years. The Company was formed in 1985
through the combination of Ingersoll-Rand Oilfield Products Company and the
Ideco Division of Dresser Industries, Inc. and was acquired by an affiliate of
the

3
<PAGE> 6

Company's current stockholders in 1994. The Company acquired the business and
operations of Bowen (the "Bowen Acquisition") on March 31, 1997 and Cardwell
(the "Cardwell Acquisition") on April 17, 1997 (together, the "Acquisitions").
See "Recent Developments."

BUSINESS STRATEGY

The Company's business strategy is to continue its significant expansion
and growth as a leader in the design, manufacture, service, sale and rental of
oilfield equipment products by:

Leveraging Strong Brand Names and Leading Market Shares. The Company
manufactures its drilling rigs and well-servicing rigs and component parts under
internationally recognized brand names which include IDECO(R), FRANKS(R),
CARDWELL(TM), CABOT(TM) and IRI(TM). The Company manufactures fishing and
drilling tools, top drives, power swivels and coiled tubing systems under the
BOWEN(R) brand name. The Company believes the leading share of well-servicing
rigs currently operating domestically were manufactured by it, together with its
predecessors. In addition, the Company estimates that rigs manufactured by it,
together with its predecessors, comprise a significant portion of the worldwide
fleet of well-servicing rigs manufactured in North America. BOWEN(R) fishing
tools, considered the industry standard since they were first introduced by S.R.
Bowen in 1930, are estimated by the Company to maintain the leading share of the
worldwide market for such products. Under the BOWEN(R) brand name, the Company
is among the market leaders in power swivels, drilling tools and wireline
equipment. The Company believes it will benefit significantly from increased
demand for oilfield equipment and products as customers seek to obtain new
equipment or replace existing equipment with similarly branded products.

Building on Manufacturing, Engineering and Design Capabilities. The
Company manufactures a substantial portion of the equipment and components for
its rigs, as contrasted with most of its competitors, which primarily assemble
components manufactured by third parties. The Company's integrated design,
engineering and manufacturing process is central to the production of its high
quality products and enables the Company to provide its customers with products
meeting customized design specifications. The Company employs more than 70
people on its engineering and design staff and maintains a research and
development program to develop creative solutions for its customers. Recent
innovations include light-weight mobile drilling rigs, disc brake systems for
drawworks, portable top drives, coiled tubing drilling structures and the V/S
110/130 power swivel. The Company believes its manufacturing, engineering and
design capabilities give it a strategic competitive advantage.

Capitalizing on Strategic Acquisitions. The Company expects to evaluate
and, where feasible, make strategic acquisitions that (i) strengthen the
Company's market shares for existing products, (ii) diversify the Company's
product lines in key business segments or (iii) increase the Company's
geographic diversity. The Company believes that strategic acquisitions should
also enhance profitability by leveraging the Company's existing products,
engineering and design capabilities, sales force or network of parts and service
centers. The Company believes the recent Bowen Acquisition and Cardwell
Acquisition were consistent with these criteria, and the Company will seek to
capitalize on similar opportunities when available.

Emphasizing Recurring Revenue Businesses. The Company intends to focus on
its recurring revenue businesses to mitigate the effects of potential
fluctuations in the worldwide demand for rigs. The Company's replacement parts
business takes advantage of the increased demand for parts required by the aging
worldwide rig fleet, which was generally constructed prior to 1982. The Company
is well positioned to provide replacement parts as a result of the large number
of operating rigs manufactured under the Company's brand names and the
preference of equipment owners to obtain replacement parts fabricated by the
original manufacturer. The Company's rental tool business takes advantage of the
increased number of customers who prefer to rent or lease equipment on a
temporary basis.

Increasing Efficiency and Cost Containment. The Company is in the process
of implementing MRP II, a fully integrated business planning and control system
supported by Baan and Symix software packages designed to increase productivity
and enhance the Company's ability to coordinate design engineering, raw material
orders and deliveries and manufacturing schedules. The Company expects the new
system to increase its ability to process large orders simultaneously and reduce
working capital requirements by shortening cycle

4
<PAGE> 7

times. The MRP II system should enable the Company to improve its profit margins
and respond more effectively to the current strong demand for oilfield equipment
products and services.

RECENT DEVELOPMENTS

On March 31, 1997, the Company acquired substantially all of the assets and
business of Bowen from Air Liquide America Corporation ("Air Liquide") and
established its Bowen Tools Division. Management believes that the acquisition
of Bowen significantly facilitates its acquisition strategy by diversifying into
key product lines that are complementary to the Company's existing product
lines. The Bowen Acquisition brings to the Company an additional brand name long
recognized in the oilfield equipment industry as being associated with
innovative products. BOWEN(R) tools have significant, and in the case of fishing
tools and power-swivels, dominant, market shares. The Company's Bowen Tools
Division will continue to market its products under the BOWEN(R) brand name.

On April 17, 1997, the Company acquired all of the outstanding capital
stock of Cardwell. Cardwell designs and manufactures a full line of land-based
drilling and well-servicing rigs and related components. Management believes
that the acquisition of Cardwell furthers its acquisition strategy by
strengthening its overall market share in the land-based drilling and
well-servicing rig market. Land-based well-servicing rigs manufactured under the
Company's brand names together with those manufactured by Cardwell accounted for
a majority of the number of 1996 sales of such products worldwide. In addition
to the IDECO(R), FRANKS(R), CABOT(TM) and IRI(TM) brand names, the Company will
continue to market land-based drilling and well-servicing rigs under the
CARDWELL(TM) brand name.

The Acquisitions were financed with the proceeds of a $65.0 million Term
Loan (as defined below), of which $64.0 million remained outstanding as of
September 30, 1997, and $31.0 million principal amount of the Company's Senior
Notes (as defined below), all of which remained outstanding as of September 30,
1997. See "Use of Proceeds."

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by:
The Company.................................. 9,000,000 shares
The Selling Stockholders..................... 3,000,000 shares
Total Shares.................................... 12,000,000 shares
Common Stock to be Outstanding after the
Offering........................................ 39,000,000 shares(1)
Use of Proceeds................................... The net proceeds of the Offering received by
the Company will be used to repay in full the
indebtedness incurred in connection with the
Acquisitions and for general corporate
purposes. See "Use of Proceeds."
New York Stock Exchange Symbol.................... "IIL"
</TABLE>

- ---------------

(1) Excludes Common Stock issuable upon exercise of options to purchase Common
Stock granted under the Incentive Plan (as defined below). See
"Management - Stock Options."

RISK FACTORS

See "Risk Factors" for a discussion of certain material factors that should
be considered in connection with an investment in the Common Stock offered
hereby.
5
<PAGE> 8

SUMMARY SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following tables set forth certain summary historical and pro forma
condensed consolidated financial data of the Company. The summary historical
financial data presented below for the period from April 1, 1994 through
September 19, 1994, the period from September 20, 1994 through March 31, 1995,
the year ended March 31, 1996 and the nine month period ended December 31, 1996
are derived from the audited financial statements of the Company included
elsewhere in this Prospectus. The summary historical financial data presented
below for the nine months ended December 31, 1995 are derived from unaudited
financial statements of the Company. The summary historical financial data
presented below for the six month periods ended June 30, 1996 and 1997 are
derived from the unaudited financial statements of the Company included
elsewhere in this Prospectus which, in the opinion of management, include all
adjustments necessary for a fair presentation of the financial data for such
periods.

The summary unaudited pro forma consolidated statements of operations are
derived from the unaudited Pro Forma Condensed Consolidated Statements of
Operations included elsewhere in this Prospectus. The unaudited pro forma
consolidated statements of operations give effect to (i) the Acquisitions and
(ii) the completion of this Offering and the application of the net proceeds to
the Company therefrom as if these transactions occurred on January 1, 1996. The
unaudited as adjusted balance sheet data give effect to the completion of this
Offering and the application of the net proceeds to the Company therefrom as
described under "Use of Proceeds" as if these transactions occurred on June 30,
1997. The pro forma information set forth below is not necessarily indicative of
results that actually would have been achieved as of the dates and for the
periods set forth below or that may be achieved in the future. The summary
financial data set forth below should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
Selected Financial Data, the Financial Statements of the Company and related
notes thereto and the unaudited Pro Forma Condensed Consolidated Financial
Statements and related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------- -------------------------------------------------
HISTORICAL
-------------------------------------------------
PERIOD FROM PERIOD FROM NINE MONTHS
APRIL 1, 1994 SEPTEMBER 20, ENDED
THROUGH 1994 THROUGH YEAR ENDED DECEMBER 31,
SEPTEMBER 19, MARCH 31, MARCH 31, -------------------
1994 1995 1996 1995 1996
------------- ------------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues..................... $16,473 $20,206 $52,506 $39,141 $62,298
Cost of goods sold(1)........ 16,216 14,058 36,877 28,815 44,968
Administrative and selling
expense.................... 2,102 2,305 7,990 5,400 8,220
------- ------- ------- ------- -------
Operating income (loss)...... (1,845) 3,843 7,639 4,926 9,110
Interest expense............. (2,675) (25) (47) -- (615)
Other income
(expense) -- net........... 106 8 371 210 (20)
Income taxes................. -- (263) -- -- (98)
------- ------- ------- ------- -------
Net income (loss)............ $(4,414) $ 3,563 $ 7,963 $ 5,136 $ 8,377
======= ======= ======= ======= =======
Common stock outstanding(2).. 30,000 30,000 30,000 30,000 30,000
======= ======= ======= ======= =======
Income (loss) per common
share(2)................... $ (0.15) $ 0.12 $ 0.27 $ 0.17 $ 0.28
======= ======= ======= ======= =======

<CAPTION>
THE COMPANY
---------------------------------------------
PRO FORMA HISTORICAL PRO FORMA
------------ ----------------- ----------
SIX MONTHS
YEAR ENDED SIX MONTHS
ENDED JUNE 30, ENDED
DECEMBER 31, ----------------- JUNE 30,
1996 1996 1997 1997
------------ ------- ------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATING DATA:
Revenues..................... $188,391 $29,347 $57,785 $80,195
Cost of goods sold(1)........ 126,272 21,149 44,631 57,688
Administrative and selling
expense.................... 44,246 5,295 8,928 17,213
-------- ------- ------- -------
Operating income (loss)...... 17,873 2,903 4,226 5,294
Interest expense............. (1,308) (207) (3,147) (280)
Other income
(expense) -- net........... (72) 213 (490) (303)
Income taxes................. (1,896) -- (168) (850)
-------- ------- ------- -------
Net income (loss)............ $ 14,597 $ 2,909 $ 421 $ 3,861
======== ======= ======= =======
Common stock outstanding(2).. 39,000 30,000 30,000 39,000
======== ======= ======= =======
Income (loss) per common
share(2)................... $ 0.37 $ 0.10 $ 0.01(3) $ 0.10
======== ======= ======= =======
</TABLE>

- ---------------

(1) Amortization of negative goodwill decreased cost of goods sold in all
periods except the period from April 1, 1994 through September 19, 1994
(predecessor period). See Notes to Pro Forma Condensed Consolidated
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- General."

(2) Pursuant to the Merger, the Company increased its issued and outstanding
shares of Common Stock to 30,000,000 and effected the cancellation of all
issued and outstanding shares of its preferred stock (including all accrued
and unpaid dividends thereon). See "Certain Relationships and Related
Transactions -- Corporate Consolidation."

(3) Earnings per common share would be $0.08 for the six months ended June 30,
1997 giving effect on a pro forma basis to the completion of the Offering
and the application of the net proceeds therefrom as if these transactions
occurred on January 1, 1997.

<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................ $ 89,865 $131,657
Total assets............................................... 163,610 199,089
Long-term debt and obligations under capital lease, less
current installments..................................... 100,281 1,031
Shareholders' equity....................................... 25,324 162,803
</TABLE>

6
<PAGE> 9

RISK FACTORS

In addition to the other information contained in this Prospectus, the
following risks and investment considerations should be carefully considered
before purchasing shares of Common Stock offered hereby. Each of the following
factors may have a material adverse effect on the Company's operations,
financial results, financial condition, liquidity, market valuation or market
liquidity in future periods. In addition, this Prospectus contains
forward-looking statements reflecting the Company's current views with respect
to future events and financial performance. Actual results could differ
materially from those expressed in such forward-looking statements due to a
number of factors described in this Prospectus, including those set forth below.

DEPENDENCE ON OIL AND GAS INDUSTRY

The Company's business is substantially dependent upon the condition of the
oil and gas industry and worldwide levels of exploration, development and
production activity, including the number of oil and gas wells being drilled,
the depth and drilling conditions of such wells, the number of well completions
and the level of workover activity. Exploration, development and production
activity is largely dependent on the prevailing view of future oil and natural
gas prices, which have been characterized by significant volatility over the
last 20 years. Oil and natural gas prices are influenced by numerous factors
affecting the supply and demand for oil and gas, including the level of drilling
activity, worldwide economic activity, interest rates and the cost of capital,
environmental regulation, tax policies, political requirements of national
governments, coordination by the Organization of Petroleum Exporting Countries
("OPEC") and the cost of producing oil and gas. Demand for the Company's
products in certain emerging market countries may depend somewhat less on the
prevailing view of future oil and natural gas prices as such countries may
generally place greater emphasis on their need for internal development, energy
self-sufficiency or hard currency earnings. Since 1986, domestic spot oil prices
(West Texas Intermediate) have ranged from a month-end low of approximately
$11.63 per barrel in July 1986 to a month-end high of approximately $40 per
barrel in October 1990; domestic spot gas prices (Henry Hub) have ranged from a
month-end low of approximately $1.19 per Mcf of gas in July 1991 to a month-end
high of approximately $4.41 per Mcf in February 1996. These price changes have
caused numerous shifts in the strategies of oil and gas companies and drilling
contractors and their expenditure levels and patterns, particularly with respect
to decisions to purchase major capital equipment of the type manufactured by the
Company. Any significant reduction in oil and natural gas prices would likely
cause a reduction in exploration, development and production activity which, in
turn, would likely result in a drop in demand for products manufactured and sold
by the Company. No assurance can be given as to the future price levels of oil
and gas or the volatility thereof or that the future price of oil and gas will
be sufficient to support the level of exploration and production-related
activities necessary for the Company to grow or maintain its business. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General."

COMPETITION

The Company's revenues and earnings are affected by a competitive oilfield
equipment industry, the introduction of new or improved products by competitors,
increases in the supply of, or improvements in the deliverability of, competing
products and significant price competition. The Company competes with a number
of entities, some of which may possess greater financial and other resources
than the Company. See "Business -- Competition."

INTEGRATION OF RECENT ACQUISITIONS

The Company recently consummated the Bowen Acquisition and the Cardwell
Acquisition and expects to evaluate and, where feasible, make additional
strategic acquisitions in the future. The Company expects to successfully
integrate the operations and assets of Bowen and Cardwell with those of IRI;
however, there is no guarantee that the Company will not encounter integration
difficulties or that it will extract expected cost savings and margin
enhancements.

7
<PAGE> 10

RISKS OF INTERNATIONAL SALES

For the twelve months ended December 31, 1996, 68% of the Company's
combined historical total revenues (including Bowen and Cardwell revenues for
the periods prior to the Acquisitions) were earned from international sales of
its products, and as of June 30, 1997, approximately 74% of the Company's
backlog consisted of orders from customers outside of North America.
International sales may be subject to risks of instability of certain foreign
economies, currency fluctuations, risks of expropriation and changes in law
affecting international trade and investment. In sales to international markets,
the Company attempts to mitigate certain financial risks by requiring, where
commercially feasible, cash advances, irrevocable letters of credit or similar
credit support arrangements. See "Business -- Drilling and Well-Servicing
Rigs -- Backlog."

SIGNIFICANT CONTRACTS

A significant portion of the Company's revenues has historically been
derived from a limited number of rig manufacturing contracts. For the twelve
month period ended December 31, 1996, 37% of the Company's combined historical
total revenues (including Bowen and Cardwell revenues for the periods prior to
the Acquisitions) were derived from five contracts with five customers. The
cancellation of any significant rig manufacturing contract or failure to replace
such contracts as they are completed could adversely affect future revenues. In
addition, the existence of a limited number of large contracts increases the
effect associated with potential cost overruns.

POTENTIAL PRODUCT LIABILITY AND WARRANTY CLAIMS

Certain products of the Company are used in potentially hazardous drilling,
completion and production applications that can cause personal injury or loss of
life, damage to property, equipment or the environment and suspension of
operations. In addition, claims for loss of oil and gas production and damages
to formations can occur in the workover business. The Company maintains
insurance coverage against such risks in such amounts as it believes to be in
accordance with normal industry practice. See "Business -- Risks and Insurance."
Such insurance does not, however, provide coverage for all liabilities
(including liabilities for certain events involving pollution), and there can be
no assurance that such insurance will be adequate to cover all losses or
liabilities that may be incurred by the Company in its operations. Moreover, no
assurance can be given that in the future the Company will be able to maintain
insurance at levels it deems adequate and at rates it considers reasonable or
that any particular types of coverage will be available. Litigation arising from
a major accident or occurrence at a location where the Company's equipment is
used may, in the future, result in the Company's being named as a defendant in
product liability or other lawsuits asserting potentially large claims. The
Company is a party to various legal and administrative proceedings which have
arisen for ongoing and discontinued operations. See "Business -- Legal
Proceedings." No assurance can be given with respect to the outcome of these or
any other pending legal and administrative proceedings or the effect such
outcomes may have on the Company.

IMPACT OF GOVERNMENTAL REGULATIONS

Many aspects of the Company's operations are affected by political
developments and are subject to both domestic and foreign governmental
regulation, including regulations relating to oilfield operations, worker safety
and the protection of the environment. The technical requirements of these laws
and regulations, particularly those related to the environment, are becoming
increasingly expensive, complex and stringent. In addition, the Company depends
on the demand for its services from the oil and gas industry and, therefore, is
affected by changing taxes, price controls and other laws and regulations
relating to the oil and gas industry generally, such as those curtailing
exploration for or production of oil and gas for economic or other policy
reasons. The Company cannot determine the extent to which its future operations
and earnings may be affected by new legislation, new regulations or changes in
existing regulations. See "Business -- Environmental Matters."

8
<PAGE> 11

RELIANCE ON MANAGEMENT

The Company is dependent on the services of several key management
personnel. The loss of the services of certain of these individuals could have a
material adverse effect on the Company. Except as described under
"Management -- Employment Agreements, Severance Agreements and Change in Control
Agreements," the Company has not entered into employment agreements with any of
its key executives. The Company does not maintain key-man life insurance on any
member of management. See "Management."

CONTROL BY PRINCIPAL STOCKHOLDER

Following the Offering, Hushang Ansary, the Chairman of the Board and the
Chief Executive Officer of the Company, will directly own or have direct voting
control of approximately 47.9% of the outstanding shares of Common Stock
(excluding approximately 7.6% of the outstanding shares of Common Stock owned by
each of his children and assuming exercise of all vested options held by
Directors, officers and certain employees of the Company). See "Security
Ownership of Certain Beneficial Owners and Management." As a result of such
ownership, Mr. Ansary may be able to control the vote on matters submitted to
stockholders, including the election of members of the Company's Board of
Directors. The interests of Mr. Ansary may not always reflect the interests of
other stockholders.

NO ANTICIPATED DIVIDENDS

The Company does not anticipate paying any dividends on the Common Stock in
the foreseeable future following the consummation of the Offering, and in
addition, the payment of dividends is limited by the terms of the Senior
Facility (as defined below). The Company intends to retain earnings to provide
funds for the continued growth and development of the Company's business. See
"Dividend Policy."

NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock. The Common Stock has been approved, subject to notice of issuance, for
listing on the NYSE. However, there can be no assurance that an active public
market for the Common Stock will develop upon completion of the Offering or, if
developed, that such market will be sustained. The initial public offering price
of the Common Stock will be determined through negotiations among the Company,
the Selling Stockholders and the Underwriters and may bear no relationship to
the market prices of the Common Stock after the Offering. For information
relating to the factors to be considered in determining the initial public
offering price, see "Underwriting." Prices for the Common Stock after the
Offering may be influenced by a number of factors, including the liquidity of
the market for the Common Stock, the Company's results of operations, actual or
anticipated announcements of technical innovations or new products and services
by the Company or its competitors, general conditions in the oilfield services
industry and the oil and gas industry and general economic and other conditions.
Sales of substantial amounts of Common Stock in the public market, or the
perception of the availability of shares for sale, following the Offering could
adversely affect the prevailing market price of the Common Stock. Subject to
Rule 144 restrictions, 27,000,000 shares of Common Stock will be eligible to be
sold in the public market within 180 days after the Offering. See "Shares
Eligible for Future Sale." Additionally, the Company has granted to its
Directors, officers and certain of its employees options to purchase 1,955,000
shares of Common Stock, of which options to purchase 628,333 vest on the
effective date of the Offering. See "Management -- Stock Options."

DILUTION

Purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution in the net tangible book value per share of the Common
Stock from the initial public offering price. At an assumed initial public
offering price of $17.00 per share (the mid-point of the filing range), the
dilution to new investors would be $12.67 per share. See "Dilution."

9
<PAGE> 12

THE COMPANY

The Company has combined the global recognition of its strong brand names,
the extensive background and experience of its management team in international
markets and its commitment to technological excellence and high quality products
to achieve significant growth in a favorable industry climate. As of June 30,
1997, the Company's backlog was $76.7 million. See "Business -- Drilling and
Well-Servicing Rigs -- Backlog." In the fiscal year ended March 31, 1996, the
nine month period ended December 31, 1996 and the six month period ended June
30, 1997, the Company's revenues were $52.5 million, $62.3 million and $57.8
million, respectively. Operating income for the same periods was $7.6 million,
$9.1 million and $4.2 million, respectively. Giving pro forma effect to the
Acquisitions as if they had been completed as of January 1, 1996, revenues for
the year ended December 31, 1996 and the six month period ended June 30, 1997
would have been $188.4 million and $80.2 million, respectively. Pro forma
operating income for the same periods would have been $17.9 million and $5.3
million, respectively.

The Company's executive offices are located at 1000 Louisiana, Suite 5900,
Houston, Texas 77002, and its telephone number at that address is (713)
651-8002.

10
<PAGE> 13

USE OF PROCEEDS

Net proceeds to the Company from the Offering, calculated at an assumed
initial public offering price of $17.00 per share, are expected to be
approximately $141.0 million, after deducting underwriting discounts and
commissions and estimated offering expenses. The Company will use a portion of
the net proceeds of the Offering to repay indebtedness outstanding under the
Company's credit facilities, which consist of the Senior Notes, the Term Loan
and the Revolving Credit Facility (each as defined below and collectively, the
"Credit Facilities") as follows:

(i) $31.0 million to redeem the Senior Notes in full;

(ii) $64.0 million to repay in full the principal amount outstanding under
the Term Loan; and

(iii) $15.0 million to repay all amounts anticipated to be outstanding
under the Revolving Credit Facility.

The remaining proceeds to the Company of approximately $31.0 million will
be used for general corporate purposes, which may include, under certain
circumstances, the making of strategic acquisitions. See "Business -- Business
Strategy." Pending the application of the net proceeds of the Offering, such net
proceeds will be invested in short-term, investment grade, interest bearing
instruments. The Company will not receive any proceeds from the sale of Common
Stock by the Selling Stockholders offered hereby.

The Credit Facilities consist of (i) a senior secured credit facility (the
"Senior Facility") and (ii) the Company's outstanding $31.0 million aggregate
principal amount Senior Subordinated Increasing Rate Notes (the "Senior Notes").
In March 1997, pursuant to the Senior Facility, certain financial institutions,
as lenders, Credit Lyonnais New York Branch, as a lender and as administrative
agent, and Lehman Commercial Paper Inc., an affiliate of Lehman Brothers Inc.,
as a lender and as advisor, arranger and syndication agent (collectively, the
"Lenders") provided to the Company a $65.0 million five-year term loan (the
"Term Loan") and a $25.0 million three-year revolving credit facility with a
$20.0 million sublimit for the issuance of letters of credit (the "Revolving
Credit Facility"). As of September 30, 1997, the outstanding indebtedness under
the Term Loan and the Revolving Credit Facility was $64.0 million and $15.0
million, respectively. Absent a default or an event of default (as defined in
the Senior Facility), outstanding borrowings under the Term Loan accrue interest
at a rate per annum equal to one, two, three or six month LIBOR plus 3 1/4% and
outstanding borrowings under the Revolving Credit Facility accrue interest at a
rate per annum equal to one, two, three or six month LIBOR plus 2 3/4%. As of
September 30, 1997, the interest rate applicable to outstanding borrowings under
the Term Loan was 8.94% and the weighted average interest rate applicable to
outstanding borrowings under the Revolving Credit Facility was 8.68%. For a
description of the Senior Facility, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources -- The Senior Facility."

In March 1997, the Company issued the Senior Notes pursuant to a Senior
Subordinated Increasing Rate Note Purchase Agreement (the "Senior Notes
Agreement") to certain investors, as interim lenders, including Strategic
Resource Partners, an affiliate of Lehman Brothers Inc. As of September 30,
1997, the principal amount of the outstanding Senior Notes was $31.0 million. As
of September 30, 1997, the interest rate applicable to the outstanding principal
amounts of the Senior Notes was 12.28%.

DIVIDEND POLICY

The Company does not anticipate paying any dividends on the Common Stock
for the foreseeable future following the consummation of the Offering. The
Company intends to retain earnings to provide funds for the continued growth and
development of the Company's business. Any determination to pay dividends in the
future will be at the discretion of the Board of Directors and will be dependent
upon the Company's results of operations, financial condition, contractual
restrictions and other factors deemed relevant by the Board of Directors. In
addition, the payment of dividends is limited by the terms of the Revolving
Credit Facility. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

11
<PAGE> 14

CAPITALIZATION

The following table sets forth (i) the historical capitalization of the
Company at June 30, 1997 and (ii) the adjusted capitalization of the Company at
June 30, 1997 after giving effect to the Offering, certain changes in its
capital structure effected by the Company in contemplation of the Offering and
the application of the estimated net proceeds therefrom as described under "Use
of Proceeds." The net proceeds to the Company from the Offering (after deduction
of the underwriting discounts and commissions and estimated offering expenses
payable by the Company) are estimated to be approximately $141.0 million,
assuming an initial public offering price of $17.00 per share. The information
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the pro forma financial
information and the financial statements and notes thereto included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current installments of long-term debt and current
obligations under capital lease........................ $ 2,970 $ 220
--------- ---------
Long-term debt and obligations under capital lease (less
current installments):
Obligations under capital lease........................... 468 468
Term Loan................................................. 62,250 --
Revolving Credit Facility................................. 6,000 --
Senior Notes.............................................. 31,000 --
Other..................................................... 563 563
--------- ---------
Total long-term debt...................................... 100,281 1,031
--------- ---------
Shareholders' equity:
Preferred Stock, $1.00 par value, 8,000,000 shares
authorized, 0 issued and outstanding (historical and as
adjusted)(1)........................................... -- --
Common Stock, $.01 par value, 100,000,000 shares
authorized, 30,000,000 issued and outstanding
(historical); 100,000,000 shares authorized, 39,000,000
shares issued and outstanding (as adjusted)(1)......... 300 390
Additional paid-in capital.................................. 4,700 145,283
Retained earnings(2)........................................ 20,324 17,130
--------- ---------
Total shareholders' equity............................. 25,324 162,803
--------- ---------
Total capitalization.............................. $ 128,575 $ 164,054
========= =========
</TABLE>

- ---------------

(1) Pursuant to the Merger, the Company increased its issued and outstanding
shares of Common Stock to 30,000,000, effected the cancellation of all
issued and outstanding shares of its preferred stock (including all accrued
and unpaid dividends thereon) and of its treasury stock. See "Certain
Relationships and Related Transactions -- Corporate Consolidation."

(2) As adjusted reflects a charge of $3.2 million for write-off of deferred debt
issuance costs associated with the Credit Facilities to be repaid with
proceeds of the Offering.

12
<PAGE> 15

DILUTION

"Dilution" means the difference between the initial public offering price
per share of Common Stock and the pro forma tangible book value per share of
Common Stock after giving effect to the Offering. Pro forma net tangible book
value per share represents the amount of tangible assets of the Company, less
total liabilities, divided by the number of shares of Common Stock outstanding.
The pro forma net tangible book value of the Company prior to the Offering at
June 30, 1997 was $28.0 million, or $0.93 per share of Common Stock. Without
taking into account any other changes in pro forma net tangible book value after
June 30, 1997, other than to give effect to the sale of 9,000,000 shares of
Common Stock offered hereby by the Company at an assumed offering price of
$17.00 per share (after deduction of the underwriting discount and other
estimated offering expenses and the application of the estimated net proceeds
therefrom as specified in "Use of Proceeds"), the pro forma net tangible book
value of the Company at June 30, 1997 would have been $169.0 million, or $4.33
per share. This represents an immediate increase in pro forma net tangible book
value of $3.40 per share of Common Stock to existing stockholders and an
immediate dilution of approximately $12.67 per share to new investors purchasing
shares in the Offering. The following table illustrates the per share dilution
to new investors:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $17.00
Pro forma net tangible book value per share as of June 30,
1997...................................................... 0.93
Increase per share attributable to new investors............ 3.40
----
Pro forma net tangible book value per share after the
Offering.................................................. 4.33
------
Dilution per share to new investors......................... $12.67
======
</TABLE>

The following table sets forth on a pro forma basis at June 30, 1997 the
number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by the
existing stockholders (including the Selling Stockholders) and new investors
purchasing shares of Common Stock in the Offering, assuming an initial public
offering price of $17.00 per share.

<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION
----------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT(2) AMOUNT PERCENT PER SHARE
---------- ---------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 30,000,000 77% 5,000,000 3% $ 0.17
New investors................... 9,000,000 23% 153,000,000 97% $17.00
---------- --- ----------- ---
Total.................... 39,000,000 100% 158,000,000 100%
========== === =========== ===
</TABLE>

- ---------------

(1) Does not include 1,955,000 shares of Common Stock issuable pursuant to
options granted to Directors, officers and certain employees of the Company.
See "Management -- Stock Options and Compensation Plans and
Arrangements -- The Incentive Plan."

(2) Sales by the Selling Stockholders in the Offering will reduce the number of
shares of Common Stock held by existing stockholders to 27,000,000 or 69% of
the shares of Common Stock outstanding after the Offering. New investors
will hold 31% of the shares of Common Stock outstanding after the Offering.

13
<PAGE> 16

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following tables set forth (i) the unaudited pro forma condensed
consolidated balance sheet as of June 30, 1997 after giving effect to the
Offering, as if it had occurred on June 30, 1997, and (ii) the unaudited pro
forma condensed consolidated statements of income for the twelve months ended
December 31, 1996 and the six months ended June 30, 1997 after giving effect to
the Bowen Acquisition, the Cardwell Acquisition and the Offering, as if these
transactions had occurred on January 1, 1996. The unaudited pro forma condensed
consolidated balance sheet is based on the unaudited balance sheet of the
Company as of June 30, 1997, included elsewhere in this Prospectus. The
unaudited pro forma condensed consolidated statements of income are based on the
historical Statements of Income of the Company and unaudited financial
information related to the Acquisitions.

The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. The pro forma financial
information does not purport to represent what the Company's financial position
or results of operations would actually have been had the transactions occurred
on the dates set forth above. In addition, the pro forma financial statements
are not necessarily indicative of the results of future operations of the
Company and should be read in conjunction with "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements of the Company and the related notes
thereto included elsewhere in this Prospectus.

14
<PAGE> 17

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA
IRI HISTORICAL ADJUSTMENTS PRO FORMA
CONSOLIDATED FOR THE OFFERING CONSOLIDATED
-------------- ---------------- ------------
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents.......................... $ 2,366 $ 141,042(a) $ 41,408
(102,000)(b)
Accounts receivable................................ 23,073 -- 23,073
Inventories........................................ 84,629 -- 84,629
Other current assets............................... 4,550 -- 4,550
-------- --------- --------
Total current assets....................... 114,618 39,042 153,660
Property, plant and equipment, net................... 38,354 -- 38,354
Excess of cost over fair value of net tangible assets
of businesses acquired, net........................ 5,842 -- 5,842
Other assets......................................... 4,796 (3,194)(b) 1,233
(369)(a)
-------- --------- --------
Total assets............................... $163,610 $ 35,479 $199,089
======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities........... $ 12,187 $ -- $ 12,187
Customer advances and security deposits............ 7,875 -- 7,875
Other liabilities.................................. 1,721 -- 1,721
Current installment of long-term debt and capital
lease........................................... 2,970 (2,750)(b) 220
-------- --------- --------
Total current liabilities.................. 24,753 (2,750) 22,003
Negative goodwill, net............................... 12,076 -- 12,076
Long-term debt and capital lease, less current
installments....................................... 100,281 (99,250)(b) 1,031
Accrued postretirement benefits...................... 1,176 -- 1,176
-------- --------- --------
Total liabilities.......................... 138,286 (102,000) 36,286
-------- --------- --------
Shareholders' equity:
Preferred stock.................................... -- -- --
Common stock....................................... 300 90(a) 390
Additional paid-in capital......................... 4,700 140,583(a) 145,283
Retained earnings.................................. 20,324 (3,194)(b) 17,130
-------- --------- --------
Total shareholders' equity................. 25,324 124,890 162,803
-------- --------- --------
Total liabilities and shareholders'
equity................................... $163,610 $ 35,479 $199,089
======== ========= ========
</TABLE>

15
<PAGE> 18

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA FOR
THE ACQUISITIONS PRO FORMA
IRI CARDWELL BOWEN ------------------ FOR THE PRO FORMA
HISTORICAL HISTORICAL HISTORICAL CARDWELL BOWEN SUBTOTAL OFFERING CONSOLIDATED
---------- ---------- ---------- -------- ------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................... $75,663 $45,871 $66,857 $ -- $ -- $188,391 $ -- $188,391
Cost of goods sold(1)...... 53,030 35,885 36,636 (498)(c) -- 126,272 -- 126,272
1,219(d)
------- ------- ------- ------- ------- -------- ------- --------
Gross profit........... 22,633 9,986 30,221 (721) 62,119 62,119
Administrative and selling
expense.................. 10,810 8,026 25,362 48(d) 44,246 -- 44,246
------- ------- ------- ------- ------- -------- ------- --------
Operating income......... 11,823 1,960 4,859 (769) 17,873 -- 17,873
Other income (expense):
Interest expense......... (662) (646) -- (1,302)(e) (8,823)(e) (11,433) 10,125(f) (1,308)
Interest income.......... 251 116 -- -- -- 367 -- 367
Other, net............... (110) 123 (452) -- -- (439) -- (439)
------- ------- ------- ------- ------- -------- ------- --------
(521) (407) (452) (1,302) (8,823) (11,505) 10,125 (1,380)
------- ------- ------- ------- ------- -------- ------- --------
Income before taxes........ 11,302 1,553 4,407 (2,071) (8,823) 6,368 10,125 16,493
Income taxes............... (98) (407) (1,603) 301(g) 1,462(g) (345) (1,551)(g) (1,896)
------- ------- ------- ------- ------- -------- ------- --------
Net income............. $11,204 $ 1,146 $ 2,804 $(1,770) $(7,361) $ 6,023 $ 8,574 $ 14,597
======= ======= ======= ======= ======= ======== ======= ========
Net income per common
share.................... $ 0.37 $ 0.20 $ 0.37
======= ======== ========
Weighted average shares
outstanding.............. 30,000 30,000 9,000(h) 39,000
======= ======== ======= ========
</TABLE>

- ---------------

(1) Amortization of negative goodwill decreased cost of goods sold. See Notes to
Pro Forma Condensed Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- General."

16
<PAGE> 19

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA FOR
THE ACQUISITIONS PRO FORMA
IRI CARDWELL BOWEN ------------------ FOR THE PRO FORMA
HISTORICAL(2) HISTORICAL(3) HISTORICAL(3) CARDWELL BOWEN SUBTOTAL OFFERING CONSOLIDATED
------------- ------------- ------------- -------- ------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............. $57,785 $5,818 $16,592 $ -- $ -- $80,195 $ -- $80,195
Cost of goods
sold(1)............ 44,631 4,736 8,141 (125)(c) -- 57,668 -- 57,688
305(d)
------- ------ ------- ----- ------- ------- ------- -------
Gross profit....... 13,154 1,082 8,451 (180) -- 22,507 -- 22,507
Administrative and
selling expense.... 8,928 1,016 7,257 12(d) 17,213 -- 17,213
------- ------ ------- ----- ------- ------- ------- -------
Operating income
(loss)........... 4,226 66 1,194 (192) 5,294 5,294
Other income
(expense):
Interest expense... (3,147) (132) -- (365)(e) (2,240)(e) (5,884) 5,604(f) (280)
Interest income.... 79 41 -- -- -- 120 -- 120
Other, net......... (569) 22 124 -- -- (423) -- (423)
------- ------ ------- ----- ------- ------- ------- -------
Income (loss) before
taxes.............. 589 (3) 1,318 (557) (2,240) (893) 5,604 4,711
Income taxes......... (168) -- (493) -- 323(g) (338) (512)(g) (850)
------- ------ ------- ----- ------- ------- ------- -------
Net income (loss).. $ 421 $ (3) $ 825 $(557) $(1,917) $(1,231) $ 5,092 $ 3,861
======= ====== ======= ===== ======= ======= ======= =======
Net income (loss) per
common share....... $ 0.01 $ (0.04) $ 0.10
======= ======= =======
Weighted average
shares
outstanding........ 30,000 30,000 9,000(h) 39,000
======= ======= ======= =======
</TABLE>

- --------------------------------------------------------------------------------

(2) Includes Cardwell and Bowen operations from their acquisition dates of April
17, 1997 and March 31, 1997, respectively.

(3) Represents Cardwell and Bowen pre-acquisition operations from January 1,
1997 to their respective acquisition dates discussed in Note (2) above.

17
<PAGE> 20

NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
GENERAL

The following sets forth the assumptions used in preparing the unaudited
pro forma condensed consolidated financial statements. The pro forma adjustments
are based on estimates made by the Company's management using information
currently available. For purposes of preparing these unaudited pro forma
condensed consolidated financial statements, the allocations of the purchase
prices of the Cardwell Acquisition and the Bowen Acquisition were based on
preliminary purchase price allocations and are subject to change pending the
completion of detailed evaluation and appraisal of the assets acquired and
liabilities assumed.

The pro forma condensed statement of income for the year ended December 31,
1996 does not include $1.6 million of additional cost of sales related to the
purchase price allocation to inventory which is expected to be sold in the year
following the Bowen Acquisition. The pro forma condensed consolidated statement
of operations for the year ended December 31, 1996 does not reflect amortization
of debt acquisition costs ($3.2 million) associated with the Company's
indebtedness assumed to be retired with Offering proceeds as described in (f).

PRO FORMA ADJUSTMENTS
BALANCE SHEET

(a) To record the sale by the Company of 9,000,000 shares of Common Stock
at $17.00 per share in this Offering after deducting estimated
underwriting commissions of $10,327,500 and offering expenses of
$2,000,000, including $369,000 incurred as of June 30, 1997.

(b) To record the reduction of indebtedness and write-off of related
deferred debt issuance costs of the Company through the application of
a portion of the net proceeds to the Company from the Offering.

STATEMENTS OF OPERATIONS

(c) To reverse payments under license agreements for the use of trademark,
patterns and prints purchased by the Company as part of the Cardwell
Acquisition.

(d) To record additional depreciation and amortization expense as a result
of the purchase price allocations of the net assets acquired in the
Acquisitions as follows:

<TABLE>
<CAPTION>
YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
ESTIMATED LIFE 1996 1997
-------------- ------------ ----------
<S> <C> <C> <C>
Additional depreciation of Cardwell
Acquisition property, plant and
equipment.................................. 7 to 30 years $ 48,000 $ 12,000
Amortization of excess of cost over fair
value of Cardwell net tangible assets
acquired................................... 5 years 403,000 101,000
Amortization of excess of cost over fair
value of Cardwell affiliate tangible assets
acquired................................... 5 years 816,000 204,000
---------- --------
$1,267,000 $317,000
========== ========
</TABLE>

(e) To record additional interest expense and related amortization of debt
issuance costs associated with Company indebtedness incurred related to
the Acquisitions. Amortization of debt issuance costs is based on the
interest method. Interest expense was estimated based on the average
90-Day LIBOR as of June 30, 1997 plus the applicable percentage as
specified in the debt agreements.

(f) To record reduction in interest expense and amortization of debt
issuance costs for repayment of Company indebtedness related to the
Acquisitions.

18
<PAGE> 21

(g) To record the income tax related to the effects of the pro forma
adjustments.

(h) To adjust weighted average shares outstanding to reflect issuance of
9,000,000 shares of Common Stock in conjunction with the Offering.

19
<PAGE> 22

SELECTED FINANCIAL DATA

The following table sets forth selected historical financial information
for the Company. The information presented for the period from September 20,
1994 through March 31, 1995, for the year ended March 31, 1996 and the nine
month period ended December 31, 1996 is derived from the audited financial
statements of the Company. The information presented for the period from April
1, 1994 through September 19, 1994 is derived from the audited financial
statements of the Company while owned by Dresser Industries, Inc. and
Ingersoll-Rand Corporation (the "Predecessor"). The information presented as of
and for the years ended March 31, 1993 and 1994 is derived from the unaudited
financial statements of the Company while owned by the Predecessor. The
information for the nine month period ended December 31, 1995 is derived from
the unaudited financial statements of the Company. The information presented as
of June 30, 1997 and for the six month periods ended June 30, 1996 and 1997 is
derived from the unaudited financial statements of the Company, which include
all adjustments that the Company considers necessary for a fair presentation of
the financial position and results of operations for those periods. Operating
results for the six months ended June 30, 1997 are not necessarily indicative of
the results that may be expected for the entire year ending December 31, 1997.
The following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements of the Company, including the notes thereto, included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
----------------------------------- ----------------------------------------------
PERIOD FROM PERIOD FROM NINE MONTHS
YEARS ENDED APRIL 1, 1994 SEPTEMBER 20, ENDED
MARCH 31, THROUGH 1994 THROUGH YEAR ENDED DECEMBER 31,
------------------- SEPTEMBER 19, MARCH 31, MARCH 31, -----------------
1993 1994 1994 1995 1996 1995 1996
-------- -------- ------------- ------------- ---------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue......................... $ 45,547 $ 95,312 $16,473 $20,206 $52,506 $39,141 $62,298
Cost of goods sold(1)........... 46,747 87,073 16,216 14,058 36,877 28,815 44,968
-------- -------- ------- ------- ------- ------- -------
Gross profit (loss)............. (1,200) 8,239 257 6,148 15,629 10,326 17,330
Selling and administrative
expense....................... 5,430 5,027 2,102 2,305 7,990 5,400 8,220
-------- -------- ------- ------- ------- ------- -------
Operating income (loss)......... (6,630) 3,212 (1,845) 3,843 7,639 4,926 9,110
Interest expense................ (7,981) (7,015) (2,675) (25) (47) -- (615)
Other income
(expense) -- net(2)........... (17,257) (617) 106 8 371 210 (20)
Income taxes.................... -- -- -- (263) -- -- (98)
-------- -------- ------- ------- ------- ------- -------
Net income (loss)............... $(31,868) $ (4,420) $(4,414) $ 3,563 $ 7,963 $ 5,136 $ 8,377
======== ======== ======= ======= ======= ======= =======
Weighted average shares
outstanding................... 30,000 30,000 30,000 30,000 30,000 30,000 30,000
======== ======== ======= ======= ======= ======= =======
Income (loss) per common
share......................... $ (1.06) $ (0.15) $ (0.15) $ 0.12 $ 0.27 $ 0.17 $ 0.28
======== ======== ======= ======= ======= ======= =======

<CAPTION>
THE COMPANY
-----------------

SIX MONTHS
ENDED JUNE 30,
-----------------
1996 1997
------- -------

<S> <C> <C>
OPERATING DATA:
Revenue......................... $29,347 $57,785
Cost of goods sold(1)........... 21,149 44,631
------- -------
Gross profit (loss)............. 8,198 13,154
Selling and administrative
expense....................... 5,295 8,928
------- -------
Operating income (loss)......... 2,903 4,226
Interest expense................ (207) (3,147)
Other income
(expense) -- net(2)........... 213 (490)
Income taxes.................... -- (168)
------- -------
Net income (loss)............... $ 2,909 $ 421
======= =======
Weighted average shares
outstanding................... 30,000 30,000
======= =======
Income (loss) per common
share......................... $ 0.10 $ 0.01(3)
======= =======
</TABLE>

<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
-------------------- ----------------------------------------------
MARCH 31,
------------------------------------------ DECEMBER 31, JUNE 30,
1993 1994 1995 1996 1996 1997
-------- -------- ------- ------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................ $(45,343) $(47,776) $33,767 $35,461 $38,658 $ 89,865
Total assets........................................... 97,655 71,200 39,644 46,631 58,671 163,610
Long-term debt and obligation under capital lease, less
current installments................................. -- -- -- -- 522 100,281
Shareholders' equity (deficit)......................... (56,063) (60,483) 8,563 16,526 24,903 25,324
</TABLE>

- ---------------

(2) Other expense for the year ended March 31, 1993 includes a charge of
approximately $17.5 million related to the adoption of Statement of
Financial Accounting Standards No. 106, "Employer's Accounting for
Postretirement Benefits Other than Pensions."

20
<PAGE> 23

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following analysis of the financial condition and results of operations
of the Company should be read in conjunction with the Company's Consolidated
Financial Statements, including the notes thereto, included elsewhere in this
Prospectus.

GENERAL

Introduction

The Company is one of the world's largest manufacturers of land-based
drilling and well-servicing rigs and rig component parts for use in the domestic
and international markets. The Company's revenues are substantially dependent
upon the condition of the oil and gas industry and worldwide levels of
exploration, development and production activity, including the number of oil
and gas wells being drilled, the depth and drilling conditions of such wells,
the number of well completions and the level of workover activity. Exploration,
development and production activity is largely dependent on the prevailing view
of future oil and natural gas prices which have been characterized by
significant volatility over the last 20 years. Oil and natural gas prices are
influenced by numerous factors affecting the supply of and demand for oil and
gas, including the level of drilling activity, worldwide economic activity,
interest rates and the cost of capital, environmental regulation, tax policies,
political requirements of national governments, coordination by OPEC and the
cost of producing oil and gas. Demand for the Company's products in certain
emerging market countries may depend somewhat less on the prevailing view of
future oil and natural gas prices as such countries may generally place greater
emphasis on their need for internal development, energy self-sufficiency or hard
currency earnings.

The Company has achieved significant growth in recent years through the
efforts of its experienced management team and its focus on expanding the
Company's international sales and marketing activities, while also taking
advantage of the favorable industry climate. The Company's revenues were $36.7
million, $52.5 million and $62.3 million, respectively, in the fiscal year ended
March 31, 1995 (which included the results of operations of the Company's
predecessor from April 1, 1994 through September 19, 1994), for the fiscal year
ended March 31, 1996 and for the nine month period ended December 31, 1996.
Operating income for the same periods was $2.0 million, $7.6 million and $9.1
million, respectively. As discussed below, the Company Acquisition (as defined
below) was recorded using the purchase method of accounting, making operating
income for the fiscal year ended March 31, 1995 not comparable to operating
income for later periods.

An important component of the Company's growth strategy has been, and will
continue to be, to evaluate and, where feasible, make strategic acquisitions
that (i) strengthen the Company's market share for existing products, (ii)
diversify the Company's product lines in key business segments or (iii) increase
the Company's geographic diversity. In furtherance of these strategies, the
Company recently acquired the businesses and operations of Bowen and Cardwell.
See "-- Capital Expenditures and Acquisitions."

The Company currently expects that 1997 results will continue to benefit
from the efforts of its experienced management team, the implementation of the
Company's business plan and the favorable industry climate. Results, however,
will be dependent on market conditions, in particular the level of worldwide oil
and gas exploration and production activity. Accordingly, there can be no
assurance as to future results and profitability.

Foreign Exchange Transactions

Sales denominated in currencies other than U.S. dollars are made only by
the Bowen Tools Division. The Company attempts to limit its exposure to foreign
currency fluctuations by limiting the amount of sales denominated in currencies
other than U.S. dollars and by, with the exception of the Company's Canadian
subsidiary, maintaining its cash and cash equivalents in U.S. dollar denominated
accounts and investments (except to the extent needed for local operating
expenses). For the six month period ended June 30, 1997 and the year ended
December 31, 1996, Bowen's Canadian sales (expressed in U.S. dollars) were $1.4
million and $4.2 million, respectively, and all other non-U.S. dollar
denominated sales (expressed in U.S. dollars) were

21
<PAGE> 24

$2.4 million and $9.1 million, respectively. The Company has not engaged in and
does not currently intend to engage in any significant hedging or currency
trading transactions designed to compensate for adverse currency fluctuations
among foreign currencies.

Negative Goodwill

On September 20, 1994, all of the outstanding stock of the Company was
acquired by an affiliate of the Selling Stockholders for $5.0 million in cash
(the "Company Acquisition"). The Company Acquisition was recorded using the
purchase method of accounting and the purchase price allocated to the assets
acquired and liabilities assumed based upon their estimated fair values at the
date of the Company Acquisition. The excess of the fair value of net assets
acquired over the consideration paid was applied against nonmonetary assets
(property, plant and equipment), reducing the balances of these assets at the
date of the Company Acquisition to zero, and the remaining excess of the fair
value of net assets acquired over consideration paid was recorded as negative
goodwill. The purchase price has been allocated to the assets acquired and
liabilities assumed based upon their fair values at the date of the acquisition
as follows (in thousands):

<TABLE>
<S> <C>
Inventories....................................... $ 33,287
Other current assets.............................. 7,743
Current liabilities............................... (7,372)
Accrued retirement benefits....................... (1,821)
Negative goodwill................................. (26,837)
--------
$ 5,000
========
</TABLE>

Negative goodwill is being amortized using the straight-line method over
five years ending September 19, 1999. The comparability of the results of
operations between the years ended March 31, 1995 (which included the results of
operations of the Company's predecessor from April 1, 1994 to September 19,
1994) and March 31, 1996 is affected by, in addition to the amortization of
negative goodwill (which reduces the post-Company Acquisition cost of sales),
the exclusion of depreciation expense related to fixed assets written down to
zero on the Company Acquisition date, both of which have a positive effect on
earnings. See Note 1 to the Consolidated Financial Statements. Amortization of
negative goodwill decreased cost of goods sold by $2.7 million in each of the
six month periods ended June 30, 1997 and June 30, 1996, $4.0 million in each of
the nine month periods ended December 31, 1996 and December 31, 1995, $5.4
million in the year ended March 31, 1996 and $2.7 million for the period from
September 20, 1994 through March 31, 1995.

RESULTS OF OPERATIONS

In June 1997 the Company changed its fiscal year from a March 31 year-end
to a December 31 year-end, effective with the period ended December 31, 1996 in
order to harmonize the fiscal years of IRI, Cardwell and Bowen. The following
discussion of the results of operations of the Company's business units does not
reflect allocation of corporate overhead expense. See note 13 to the Company's
Financial Statements for a presentation of segment information.

Sales of new rigs manufactured by the Company can produce large
fluctuations in revenues depending on the size and the timing of the
construction of orders. Individual orders of rig packages range from $1 million
to $25 million and cycle times for the design, engineering and manufacturing or
rig packages range from six to nine months. These fluctuations may affect the
Company's quarterly revenues and operating income.

RECENT OPERATING RESULTS

The Company's consolidated revenues and operating income for the two month
period ended August 31, 1997 were $36.4 million and $5.3 million, respectively.
In management's opinion, such financial information includes all adjustments
necessary to present fairly the information for the period presented. However,
there can be no assurance that such information is indicative of results for the
year or for any future period.

22
<PAGE> 25

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996

Oilfield Equipment

Revenues and operating income for the oilfield equipment unit were $31.3
million and $2.9 million, respectively, for the six month period ended June 30,
1997, as compared to $22.2 million and $1.8 million, respectively, for the six
month period ended June 30, 1996. For the six month period ended June 30, 1997,
revenues and operating income/(loss) reflect contributions thereto by Cardwell
of $4.8 million and $(0.1) million. The increase in revenues resulted from the
Cardwell Acquisition and increased sales of rig packages by the IRI Division.
Increased operating income resulted from the IRI Division's increased sales in
the period. Gross margin for the six month period ended June 30, 1997 was 20.0%,
as compared to 23.9% for the six month period ended June 30, 1996. This decrease
resulted principally from the inclusion of Cardwell's operations (gross margin
of 8.7%) in the results for the six month period ended June 30, 1997. Cardwell's
comparatively lower gross margin resulted from lower margin rig manufacturing
contracts entered into prior to the date of the Cardwell Acquisition, the
pricing terms of which reflected Cardwell's lower fixed overhead cost structure.
The Company has implemented a uniform pricing policy that the Company believes
will result in higher overall gross margins.

Downhole Tools

The Company acquired the Bowen Tools Division on March 31, 1997 and prior
to such date the Company had no downhole tools unit. Revenues and operating
income for the downhole tools unit were $19.7 million and $1.4 million,
respectively, for the three months ended June 30, 1997, as compared to $16.0
million and $0.1 million, respectively, for the three month period ended June
30, 1996. Increased revenues and operating income at the downhole tools unit was
primarily attributable to increased exploration, production and drilling
activity worldwide. Gross margin for the three month period ended June 30, 1997
was 23.1%, as compared to 17.5% for the three month period ended June 30, 1996.
The increase in gross margin was primarily due to improved pricing, increased
volume and more efficient capacity utilization.

Specialty Steel

Revenues and operating income for the specialty steel unit were $6.8
million and $1.9 million respectively, for the six month period ended June 30,
1997, as compared to $7.1 million and $1.4, respectively, for the six month
period ended June 30, 1996. The decrease in revenues was primarily the result of
reduced demand from a major customer. Gross margin for the six month period
ended June 30, 1997 was 34.8%, as compared to 28.2% for the six month period
ended June 30, 1996. The increase in operating income and gross margin resulted
primarily from reductions in manufacturing downtime and production-related
maintenance costs.

Selling and administrative expenses were $8.9 million for the six month
period ended June 30, 1997 as compared to $5.3 million for the six month period
ended June 30, 1996. The increase was due primarily to the inclusion of Bowen
and Cardwell's selling and administrative expenses of $3.1 million and $0.7
million, respectively, for the 1997 period.

Interest expense increased from $0.2 million for the six month period ended
June 30, 1996 to $3.1 million for the six month period ended June 30, 1997. The
increase in interest expense is a result of (i) borrowings on March 31, 1997
under the Term Loan and the issuance of the Senior Notes on such date to fund
the Acquisitions and (ii) borrowings under the Revolving Credit Facility during
the period to fund working capital requirements of Cardwell.

NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1995

Oilfield Equipment

Revenues and operating income for the oilfield equipment unit were $52.0
million and $7.4 million, respectively, for the nine month period ended December
31, 1996, as compared to $30.6 million and $4.2 million, respectively, for the
nine month period ended December 31, 1995. The increases in revenues and
operating income were primarily attributable to an increase in sales of the
Company's oilfield equipment products to exploration and production companies
and contract drillers. The elevated levels of sales of the Company's products
reflected the increased oil and gas exploration and production activity
worldwide. Gross

23
<PAGE> 26

margin for the nine month period ended December 31, 1996 was 28.3% compared to
24.3% for the nine month period ended December 31, 1995, as a result of price
increases, greater fixed overhead absorption and more efficient capacity
utilization due to increased manufacturing volume.

Specialty Steel

Revenues and operating income for the specialty steel unit were $10.3
million and $2.9 million respectively, for the nine month period ended December
31, 1996, as compared to $8.5 million and $2.2 million, respectively, for the
nine month period ended December 31, 1995. The increases in revenues and
operating income were primarily the result of increased sales to steel service
centers and a major customer. Gross margin for the nine month period ended
December 31, 1996 was 24.9%, as compared to 29.2% for the nine month period
ended December 31, 1995, as a result of higher maintenance costs and
manufacturing downtime in the more recent period.

Selling and administrative expenses were $8.2 million, representing 13.2%
of revenues, for the nine month period ended December 31, 1996 and $5.4 million,
representing 13.8% of revenues, for the nine month period ended December 31,
1995. The higher levels of selling and administrative expense were a consequence
of establishing a corporate headquarters in Houston, Texas, and expanding the
Company's management team and its domestic and international sales force and
related support personnel.

Interest expense was $0.6 million for the nine month period ended December
31, 1996, compared to $0.2 million of interest income for the nine month period
ended December 31, 1995, due to borrowings by the Company under a former credit
facility established in April 1996. The funds borrowed were used by the Company
to fund increased working capital needs necessitated by the increases in the
orders for its oilfield equipment products during the nine month period ended
December 31, 1996.

YEAR ENDED MARCH 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1995

The Company Acquisition was recorded using the purchase method of
accounting and the purchase price was allocated to the assets acquired and
liabilities assumed based upon their estimated fair values at the date of the
acquisition. See "-- General" and Note 1 to the Consolidated Financial
Statements.

Oilfield Equipment

Revenues for the oilfield equipment unit were $40.2 million in the fiscal
year ended March 31, 1996, compared to $27.0 million in the fiscal year ended
March 31, 1995 (which included the results of operations of the Company's
predecessor from April 1, 1994 to September 19, 1994). This increase was due
primarily to an increase in sales of the Company's oilfield equipment products
to exploration and production companies and contract drillers, resulting from
the increase in oil and gas production activities worldwide and management's
focus on expanding the Company's international marketing activities and sales.
As a result of the application of the purchase method of accounting in
connection with the Company Acquisition, operating income, gross margin and
selling and administrative expenses for the fiscal year ended March 31, 1995 are
not comparable to the fiscal year ended March 31, 1996.

Specialty Steel

Revenues for the specialty steel unit were $12.3 million in the fiscal year
ended March 31, 1996, compared to $9.7 million in the fiscal year ended March
31, 1995 (which included the results of operations of the Company's predecessor
from April 1, 1994 to September 19, 1994). This increase was primarily due to
increased sales to a major customer as well as increased military and commercial
sales. As a result of the application of the purchase method of accounting in
connection with the Company Acquisition, operating income and gross margin for
the fiscal year ended March 31, 1995 are not comparable to the fiscal year ended
March 31, 1996.

24
<PAGE> 27

ACCOUNTING POLICIES

In March 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which requires that long-lived assets and certain identifiable intangibles
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The methodology
required by SFAS No. 121 is not materially different from the Company's past
practice, and its adoption on April 1, 1996 did not have a material impact on
the Company's financial position.

In February 1997, the FASB issued SFAS No. 128, "Earnings per Share," which
specifies the computation, presentation and disclosure requirements for earnings
per share for entities with publicly held common stock or potential common
stock. This Statement is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Earlier application is not
permitted. The Company believes the adoption of this statement will not have a
material effect on its financial statements.

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. This Statement is effective for fiscal
years beginning after December 15, 1997. The Company believes the adoption of
this statement will not have a material effect on its financial statements.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This Statement is
effective for financial statements for periods beginning after December 15,
1997. The Company has not determined the effect of adoption of this statement on
its financial statements.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1997, the Company had cash and cash equivalents of $2.4
million, compared to $8.6 million at December 31, 1996. At June 30, 1997, the
Company's working capital was $89.9 million, compared to $38.7 million at
December 31, 1996. The increased working capital at June 30, 1997 was
attributable to the addition of Bowen and Cardwell's working capital which was
acquired using long-term debt. At June 30, 1997, the Company's debt to total
capitalization ratio was approximately 80.3%.

On March 31, 1997, the Company established the Credit Facilities and
borrowed approximately $98 million thereunder, primarily to fund the
Acquisitions. The Credit Facilities replaced a $15 million revolving credit
facility established in April 1996. At September 30, 1997, approximately $1.3
million was available for additional borrowings under the Credit Facilities, and
the weighted average interest rate under the Credit Facilities was 9.8%.

The Credit Facilities consist of the Senior Facility, which includes the
Term Loan and the Revolving Credit Facility, and the Senior Notes. With proceeds
of the Offering, the Company will redeem fully the Senior Notes, repay in full
the outstanding balance of the Term Loan and reduce the outstanding balance of
the Revolving Credit Facility to zero. See "Use of Proceeds."

Management believes that cash flows from operations in conjunction with
borrowings under the Revolving Credit Facility and credit facilities that may be
arranged in the future, if necessary, will be sufficient to meet the Company's
short-term (i.e., less than one year) and long-term liquidity needs. Though
there can be no assurance in this regard, management believes that any credit
facilities arranged in the near future would be on commercially reasonable
terms.

25
<PAGE> 28

The Revolving Credit Facility

The Revolving Credit Facility matures on March 31, 2000, and prior thereto
amounts repaid may be reborrowed.

The Company's obligations under the Revolving Credit Facility are secured
by first priority security interests in substantially all of the assets of the
Company, including all personal property and material real property, the pledge
by the Company of all of the outstanding capital stock of Cardwell and the
pledge by the Company or Cardwell, as the case may be, of 66% of the outstanding
capital stock of each of the Company's direct and indirect foreign subsidiaries.
Such obligations are also guaranteed by Cardwell.

The Revolving Credit Facility contains certain representations and
warranties and covenants customary for facilities of this type, including: (i)
financial maintenance tests consisting of a fixed charge coverage ratio, an
interest coverage ratio, a leverage ratio and a minimum EBITDA test; (ii)
conduct of business, preservation of corporate existence, compliance with laws,
maintenance of properties and insurance, maintenance of interest rate protection
and reporting requirements; and (iii) limitations (subject to certain baskets
and exceptions) on indebtedness, liens, guarantees, mergers and acquisitions,
asset sales, cash dividends, stock repurchases and redemptions, capital
expenditures, leases, investments, loans and advances, optional prepayments of
indebtedness, material amendments to the Company's organizational documents,
transactions with affiliates, changes in the Company's fiscal year, negative
pledge clauses, changes in lines of business and creation of foreign
subsidiaries.

The Revolving Credit Facility contains events of default customary for
facilities of this type, including: (i) the nonpayment of principal, interest or
other amounts due under the Revolving Credit Facility when due; (ii) breaches of
representations and warranties by the Company; (iii) the failure of the Company
to observe certain covenants contained in the Revolving Credit Facility, subject
to applicable cure periods; (iv) the nonpayment of principal or interest on
certain other indebtedness of the Company having an outstanding principal amount
of $1.0 million or more; (v) the occurrence of certain events of insolvency or
bankruptcy involving the Company; (vi) the occurrence of certain events under
ERISA; (vii) a judgment for the payment of money in the amount of $1.0 million
or more being rendered against the Company and not being discharged, stayed or
bonded pending appeal for a period of 60 days; (viii) the failure of any of the
security documents securing the Revolving Credit Facility to be in full force
and effect or to create enforceable security interests; and (ix) certain changes
in control of the Company.

ACQUISITIONS AND CAPITAL EXPENDITURES

On March 31, 1997, the Company acquired substantially all of the assets and
business of Bowen from Air Liquide America Corporation for a purchase price of
approximately $73.1 million, and established its Bowen Tools Division. On April
17, 1997, the Company acquired all of the outstanding capital stock of Cardwell,
a privately owned company, as well as certain assets held by affiliates of
Cardwell, for approximately $12.0 million in cash and partial payment ($3.0
million) of a note payable to one of Cardwell's bank lenders. In addition, the
Company incurred approximately $2.4 million ($1.8 million for Bowen and $0.6
million for Cardwell) of transaction costs in connection with the Acquisitions.
The Acquisitions were financed with the proceeds of the Credit Facilities.

The Acquisitions have been recorded using the purchase method of
accounting, and the results of operations of the acquired companies are included
in the statement of operations of the Company from the date of the respective
closings.

In addition to funds used to finance the Acquisitions, capital expenditures
by the Company, Bowen and Cardwell during the six months ended June 30, 1997
totaled $11.8 million. During the nine month period ended December 31, 1996,
capital expenditures by the Company, Bowen and Cardwell were $6.4 million and
included those relating to information technology hardware and software, the
re-opening of the Company's Beaumont, Texas plant, which had been closed since
1985, and the purchase of machinery and equipment at its Pampa, Texas facility.

26
<PAGE> 29

For the six months ended June 30, 1997, the Company used cash flow in
operations of $8.2 million primarily to increase inventory levels to support
anticipated increases in sales. The Company believes that cash generated from
operations, amounts available under the Revolving Credit Facility and proceeds
from this Offering will be sufficient to fund operations, working capital needs,
capital expenditure requirements and financing obligations.

Ongoing routine capital expenditures for the last two quarters of 1997 are
budgeted at $5.3 million and include approximately $1.2 million for the MRP II
system, $2.1 million for purchases of equipment and fixed assets and $2.0
million for the manufacture of equipment and tools for use in the Bowen Tools
Division's rental operations. For 1998, the Company has budgeted capital
expenditures of $14.7 million, including $5.5 million for the purchase of
equipment and fixed assets and $9.2 million for equipment and tools manufactured
at the Bowen Tools Division for use in its rental operations. Capital
expenditures are expected to be funded with available cash, cash flow from
operations and borrowings under the Revolving Credit Facility.

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BUSINESS

The Company has combined the global recognition of its strong brand names,
the extensive background and experience of its management team in international
markets and its commitment to technological excellence and high quality products
to achieve significant growth in a favorable industry climate. As of June 30,
1997, the Company's backlog was $76.7 million. See "-- Drilling and
Well-Servicing Rigs -- Backlog." In the fiscal year ended March 31, 1996, the
nine month period ended December 31, 1996 and the six month period ended June
30, 1997, the Company's revenues were $52.5 million, $62.3 million and $57.8
million, respectively. Operating income for the same periods was $7.6 million,
$9.1 million and $4.2 million, respectively. Giving pro forma effect to the
Acquisitions as if they had been completed as of January 1, 1996, revenues for
the year ended December 31, 1996 and the six month period ended June 30, 1997
would have been $188.4 million and $80.2 million, respectively. Pro forma
operating income for the same periods would have been $17.9 million and $5.3
million, respectively.

The Company, together with its predecessors, traces its history in the
oilfield equipment industry for nearly 100 years. The Company was founded in
1985 through the combination of Ingersoll-Rand Oilfield Products Company the
Ideco Division of and Dresser Industries, Inc. and was acquired by an affiliate
of the Company's current stockholders in 1994.

BUSINESS STRATEGY

The Company's business strategy is to continue its significant expansion
and growth as a leader in the design, manufacture, service, sale and rental of
oilfield equipment products by:

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manufactured in North America. BOWEN(R) fishing tools, considered the industry
standard since they were first introduced by S.R. Bowen in 1930, maintain the
leading share of the worldwide market for such products. Under the BOWEN(R)
brand name, the Company is among the market leaders in power swivels, drilling
tools and wireline equipment. The Company believes it will benefit significantly
from increased demand for oilfield equipment and products as customers seek to
obtain new equipment or replace existing equipment with similarly branded
products.

Increasing Efficiency and Cost Containment. The Company is in the process
of implementing MRP II, a fully integrated business planning and control system
supported by Baan and Symix software packages designed to increase productivity
and enhance the Company's ability to coordinate design engineering, raw material
orders and deliveries and manufacturing schedules. The Company expects the new
system to increase the Company's ability to process large orders simultaneously
and reduce working capital requirements by shortening cycle times. The MRP II
system should enable the Company to improve its profit margin and respond more
effectively to the current strong demand for oilfield equipment products and
services.

DRILLING AND WELL-SERVICING RIGS

The Company designs, constructs and sells a complete line of drilling and
well-servicing rigs which utilize component parts manufactured by the Company
under the IDECO(R), FRANKS(R), CARDWELL(TM), CABOT(TM) and IRI(TM) brand names.
The sale of drilling and well-servicing rigs accounted for $24.3 million of the
Company's revenues for the six month period ended June 30, 1997.

A drilling rig is used to bore an oil production hole and to install pipe
in order for the continuous extraction of oil to begin. A well-servicing rig
performs services on producing wells in need of service in order to sustain or
accelerate production, including removing the existing wellhead equipment,
installing or pulling up the down-hole pump, installing or pulling up the
existing pipe and reversing this process by installing new pipe and replacing
the down-hole pump and wellhead. A well-servicing rig also handles certain
completion operations that must take place before the oil extraction process can
begin.

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The Company specializes in manufacturing highly mobile rigs that are
designed to meet the specified requirements of its customers, many of whom
demand products suitable for harsh and remote environments, including arctic,
desert and jungle locations. In addition, the Company manufactures offshore
platform well-servicing rigs in modular, easily transported units that allow for
a significant reduction in the time and expense historically associated with
offshore workover operations.

A typical well-servicing rig package consists of a mast, guy wires for
stability, drawworks (or large winch) and multiple motors mounted on a truck
chassis. A drilling rig package is equipped with modules including engines, an
AC/DC converter, rotary table with substructure, mast to support the drill
string, racking for pipe, tools, air compressors and a mud pump system. The
hoisting system, which consists of a mast or derrick, drawworks, crown block,
traveling block and deadline anchor, is used to raise and lower the drill pipe.
Power transmission from electric motors or diesel engines to the drawworks,
rotary table and mud pumps is through a drive group. The mud system, which
consists of separators, degassers, hoppers, valves and pumps, is used to
circulate and clean drilling mud which carries the cuttings from the drill bit
to the surface. The function of a rig, either drilling or well-servicing,
dictates the size of the rig chassis, drawworks and mast, and also determines
the type of equipment necessary for operation.

In addition to the production of complete drilling and well-servicing rigs,
the Company designs, manufactures and sells component products used in the
original construction, modernization or repair of land and offshore rigs under
its IDECO(R), FRANKS(R), CARDWELL(TM), CABOT(TM) and IRI(TM) brand names,
including masts, derricks, substructures and other components used in hoisting,
power transmission, pumping and mud systems.

Products

The Company manufactures a total of 48 standard models of land-based
drilling and well-servicing rigs under the IDECO(R), FRANKS(R), CARDWELL(TM),
CABOT(TM) and IRI(TM) brand names. In addition to the standard models, the
Company manufactures customized drilling and well-servicing rigs to customer
specifications to accommodate, among other things, extreme weather conditions,
moving systems or hook load capacities. The Company's drilling and
well-servicing rigs and component parts fall within the following categories and
classifications:

Land-Based Skid-Mounted Drilling Rigs. Large, high-horsepower and
skid-mounted, these rigs are used primarily for exploration drilling. With the
addition of a moving system, these rigs can be used for multi-well production
pad drilling. The Company manufactures 14 models of skid-mounted rigs under the
IDECO(R) and CARDWELL(TM) brand names ranging from 500 to 3,000 horsepower for
operations at well depths up to 35,000 feet. These rigs are furnished complete
with power, drawworks, mast, mud pumps and mud circulation systems.

Offshore Drilling and Well-Servicing Rigs. The Company manufactures 34
models of offshore drilling and well-servicing rigs under the IDECO(R) and
CARDWELL(TM) brand names. The Company's offshore well-servicing rigs are
specifically engineered and manufactured in module units to be deployable on an
existing offshore production platform using the platform's own pedestal crane.
This innovative design has enhanced the economics of offshore workovers by
eliminating the need for a heavy-lift barge crane, thereby reducing the expense
and eliminating one of the scheduling difficulties historically associated with
offshore platform rig deployment.

Self-Propelled Drilling and Well-Servicing Rigs. These land-based rigs can
be driven from location to location. Each unit utilizes its diesel engines for
both road transportation and rig machinery operation. Highly mobile, this type
of rig is used for well-servicing and shallow drilling and makes up the largest
portion of the land-based rig fleet currently in operation. The Company believes
that the FRANKS(R) well-servicing rig is the most popular mobile rig in the
domestic market and that the Company's IDECO(R), FRANKS(R) and CARDWELL(TM)
brands have the leading share of the domestic market. The Company offers 30
models of self-propelled rigs ranging from 200 horsepower to 900 horsepower.

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Trailer Drilling Rigs. The Company manufactures three models of trailer
drilling rigs designed for medium depth drilling to 16,000 feet, in 1,100, 1,200
and 1,500 horsepower ratings, under its CABOT(TM) brand name. The Company also
manufactures trailer rigs under the IDECO(R) and CARDWELL(TM) brand names. These
rigs are designed to accommodate 500 to 1,000 horsepower mechanical or electric
drawworks and 350,000 to 750,000 pound hook load masts.

Slant Hole Drilling Rigs. The Company's slant hole drilling and
well-servicing rigs are manufactured under the IDECO(R), FRANKS(R) and
CARDWELL(TM) brand names and are available mounted on carriers, trailers,
truck-type carriers and skid units. Carrier-mounted units are typically equipped
with a combination top-head drive and pull-down unit, a platform with hydraulic
slip specially designed for slant mast use, pipe handling equipment to add or
remove pipe and all necessary controls. All units are capable of drilling from 0
degrees (vertical) to 45 degrees.

Heli-Rigs. The Company's heli-rigs are manufactured under the IDECO(R) and
CARDWELL(TM) brand names and consist of drawworks, substructure and a
free-standing cantilever mast in mechanical and electrical units. All components
can be divided into loads of 4,000, 6,000, 8,000 and 16,000 pounds for transport
by helicopter. The drawworks is equipped with rotary drive, assist brakes and
hydraulic make-up and break-out systems. Rig assembly for operations is done at
ground level so no crane is required.

Masts and Derricks. Hoisting systems consist of a mast or derrick,
drawworks, crown block, traveling block and deadline anchor. Masts and derricks
manufactured by the Company are designed to support vertical loads ranging from
60 to 1,000 tons for drilling to depths of more than 35,000 feet. Masts are
generally used on land-based drilling rigs and are manufactured in easily joined
sections so that they are easily transportable. Once at the drilling site, masts
are self-erected or, after assembly, are erected by the drawworks. Derricks are
generally used on offshore drilling rigs and are delivered in pieces for
semi-permanent assembly on the rig.

Substructures. Substructures are rig floors and support structures which
are used on both land and offshore rigs. The Company manufactures substructures
in a wide range of sizes, depending upon the size of mast or derrick chosen, the
drawworks and power transmission system used and the working floor space and
floor height required.

Mud Pumps and Mud Systems. Mud systems are used to contain and treat
drilling mud which is circulated through the drill pipe and drill bits to remove
cuttings from the hole being drilled. The Company manufactures mud system
components and fabricates complete mud systems using components manufactured by
the Company and by others. Mud pumps manufactured by the Company under the
IDECO(R) trade name include duplex and triplex mud pumps.

Drawworks. A drawworks is essentially a large winch used to raise and
lower drill pipe. Drawworks manufactured by the Company under the IDECO(R),
CARDWELL(TM) and CABOT(TM) trade names range in size from 250 to 3,000 input
horsepower and are suitable for drilling to depths up to 35,000 feet.

Drawwork Braking Systems. The Company manufactures drawwork braking
systems under the IRI(TM) and CARDWELL(TM) brand names. The Company's patented
DuraBrake(TM) system features engineered brake blocks which allow for better air
flow, improved flexibility between the brakes and the flange and improved
braking efficiency. The Company believes the DuraBrake(TM) system is one of the
simplest, safest and most affordable drawworks braking systems in the industry.
The Company has also developed and patented a hydraulic actuated disc brake
which eliminates water cooling and hydromatic retardation and is simple to
maintain. This new braking system is being installed on new rigs and is being
retro-fitted on the older rigs with standard band brake systems.

Additional Drilling and Well-Servicing Equipment. Under the CARDWELL(TM),
IDECO(R), VARI-SWIVEL(TM) and HYDRAULIC FLOORMAN(TM) trade names, the Company
manufactures tubing and traveling blocks and power swivels. The Company also
manufactures drive groups that transmit power to the drawworks and mud pumps,
independent rotary drives that transmit power to the rotary table, crown blocks,
traveling blocks and deadline anchors that attach the drilling line to the
hoisting system.

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Competition

The Company's revenues and earnings are affected by the actions of
competitors, including price changes, introduction of new or improved products
and changes in the supply of, and improvements in the deliverability of,
competing products. The Company's principal competitors in the manufacture of
drilling rigs and components are National-Oilwell, Inc., Continental Emsco
Company and Varco International, Inc.

The Company believes that its manufacturing capabilities distinguish it
from certain of its competitors that are believed to subcontract the production
of the majority of their manufactured drilling equipment and rig component parts
to third parties. The Company believes that its ability to control the complete
manufacturing process, and thus product delivery schedules, is a competitive
advantage.

Backlog

Sales of the Company's drilling and well-servicing rigs are made almost
exclusively on the basis of written purchase orders or contracts. The Company
includes in its rig backlog those orders or purchase commitments which
management believes to be reasonably certain of consummation based on industry
practice, the historical relationship between the Company and the customer or
the financial terms of the sale, including cash advances, letters of credit or
similar credit support arrangements. Giving pro forma effect to the Acquisitions
as if they had occurred on January 1, 1996, the Company estimates that the total
value of its rig backlog as of June 30, 1997 and June 30, 1996 was $76.7 million
and $75.9 million, respectively. The Company expects that substantially all of
its backlog at June 30, 1997 will be shipped during the remainder of 1997.
However, no assurance can be given that contracts included in the Company's
backlog will ultimately generate anticipated revenues in the period expected or
otherwise.

The Company attempts to mitigate certain financial risks in sales to
customers by requiring, where commercially feasible, cash advances, irrevocable
letters of credit or similar credit support arrangements. As of June 30, 1997,
the Company has received approximately $7.7 million in cash down payments and
approximately $18.8 million of letters of credit or assignments of letters of
credit to support customer orders.

Raw Materials

The Company's manufacturing operations require a variety of components,
parts and raw materials which the Company purchases from multiple commercial
sources. The Company believes that the loss of any of its suppliers would not
have a material adverse effect on the Company's operations.

FISHING AND DRILLING TOOLS

Through Bowen, the Company designs, manufactures, sells and rents fishing
and drilling tools under the BOWEN(R) brand name. Fishing and drilling tool
sales and rentals accounted for $15.0 million of the Company's revenues for the
three months ended June 30, 1997.

Fishing tools are used in the retrieval of drill bits, drill pipe, tubing,
casings and bottomhole assemblies from a well bore in order to permit normal
drilling operations or production to continue. Bowen fishing tools have been
considered the industry standard since they were first introduced in 1930 by
S.R. Bowen, who pioneered the forerunner of all modern fishing tools, the Bowen
Overshot. Drilling tools are used to assist in drilling operations. The Company
provides certain of its drilling equipment, principally stroking tools such as
jars and bumper subs as well as top drives, to its domestic customers on a
rental basis.

Products

Bowen manufactures a broad range of fishing and drilling tools, including:

External Catch Fishing Tools. Products in this group include releasing and
circulating overshots, sucker rod overshots, overshot accessories, die collars
and impression blocks. These products are primarily used to retrieve tubing,
casing or drill pipe when well bore conditions allow the external diameter to be
engaged. The "Series 150" overshot is a widely used fishing tool that employs an
internal "grapple" with sharp teeth to

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engage the fish while an outer bowl with internal tapers forces the grapple into
the fish with increasing force as pull loads increase.

Internal Catch Fishing Tools. Products in this group include rotary taper
taps, a variety of releasing spears, knuckle joints and packer retrievers. These
products are used to retrieve tubing, casing drill pipe and packers when well
bore conditions allow only the internal diameter of the fish to be engaged. The
ITCO spear is the most widely used internal catch fishing tool and operates much
like the overshot described above except from an internal catch direction.
Packer retrievers are used specifically for catching and retrieving a packer
which must be disengaged from the casing and removed from a well.

Junk Catch Fishing Tools. Products in this group include standard junk
baskets, reverse circulation junk baskets and fishing magnets. These products
are used to retrieve small irregularly shaped bits of debris from the well bore.
A junk basket employs a series of spring loaded "fingers" which flex upward to
allow a bit of debris to enter but will not flex downward to allow it to escape.
Reverse circulation baskets use a series of fluid ports to redirect flow from a
mud pump and "pull" bits of debris into the fingers. A fishing magnet is a
permanent magnet fitted within a housing to allow retrieval of a variety of
metallic debris from a well. These tools are frequently used to "clean" a well
bore so that drilling may continue.

Milling and Cutting Tools. Products in this group include Itcoloy milling
tools, junk subs, ditch magnets, magnet chargers, internal cutters and external
cutters. Milling tools are available in variety of shapes and employ crushed
carbide (Itcoloy) teeth to mill or cut away a fish that cannot otherwise be
retrieved. They may also be used to reshape the top of a fish for retrieval with
an overshot. Ditch magnets and junk subs are employed to catch the cuttings from
milling operations. Internal and external cutters are used to cut pipe for
removal in sections. They are available in both mechanical and hydraulically
operated models.

Accessory Tools. Products in this group include jars, jar intensifiers and
bumper subs. Tools in this group are often referred to as "stroking" tools since
they all operate by telescoping open and closed as they perform their function.
Jars are most often used in conjunction with a fishing tool and provide the
operator with a means of delivering a sharp upward or downward blow to a fish
that is "stuck" in the well bore. The jar intensifier is often used with a jar
as a means of enhancing or "intensifying" the jarring blow. A computer program
developed by Bowen accurately predicts the intensity of the "jarring" blow
delivered to a stuck fish. Jars are available in a wide variety of types and
sizes. Bumper subs may be used to aid in loosening a stuck fish but are most
often used to release a fishing tool from a fish downhole if necessary. Drilling
tools in this category include a drilling jar designed for continuous drilling
operations and the Bowen Cushion Sub. The Cushion Sub is a fluid filled shock
sub which is used near the drilling bit to reduce shock load on the bit and
improve drilling penetration rates. The low spring rates of the fluid spring
make this tool highly desirable.

Repair and Remedial Tools. Products in this group include casing patches,
tubing patches, casing scrapers and tubing and casing rollers. Casing and tubing
patches are devices related to the overshot which allow a portion of damaged
casing or tubing to be replaced downhole without removing the entire string.
They are available in a wide range of sizes, types and pressure ratings. Casing
scrapers employ a series of blades set in a housing to scrape paraffin and scale
from the internal diameter of casing. Rollers are a series of eccentric rollers
mounted on a shaft which are used to "roll" the internal diameter of casing back
to the original size after it has been damaged, possibly by a formation shift.

Competition

In the fishing and drilling tool business, like the rig manufacturing
business, the Company's revenues and earnings can be affected by actions of
competitors, including price changes, the introduction of new products or
improved products and changes in supply of, and improvements in the
deliverability of, competing products. The Company's primary competitors in the
manufacture of fishing tools are Gotco International Inc. and Houston Engineers
Inc. In the drilling tool market, the Company's primary competitors are Houston
Engineers Inc. and Dailey Petroleum Services Corp.

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POWER AND WIRELINE/PRESSURE CONTROL EQUIPMENT

Power Equipment

The Company, through its Bowen Tools Division, has more than 50 years'
experience in the power equipment market, particularly with power-swivel systems
used in well-servicing and drilling applications. Other power equipment products
include top drives, power subs, bucking units, power tongs and coiled tubing
systems. Sales and rentals of power equipment products accounted for $2.5
million of the Company's revenues for the three month period ended June 30,
1997. The Company manufactures power equipment under the BOWEN(R) brand name.

Top drives play a critical role in new drilling and well-servicing
applications, replacing a rig's rotary swivel, kelly and rotary table. Top
drives enable drilling companies to significantly reduce drilling times, lessen
the probability of stuck pipe and improve well control.

The Company's top drive features a fully integrated swivel and pipe
handler, which the Company believes is more compact and lighter than competing
products and can be installed in hours, as opposed to days for similar products.
The Company's top drives are all portable. The portable segment of the top drive
market enjoys the greatest demand since these systems offer customers increased
flexibility. The Company currently manufactures two top drive models: a 350 ton
unit for offshore and heavy-duty land applications and a 120-ton model designed
for the workover rig market. The Company is developing a 250-ton unit for
applications between its 120-ton and 350-ton designs, as well as a high range
unit having a capacity of 450 to 500 tons.

Other products in this group include power tongs, manufactured under the
Peck-O-Matic brand name, grease injection systems and bucking units.

The market for power equipment is very competitive. Competition is based on
product design and quality, ability to meet delivery requirements and pricing.
The Company's principal competitor in this segment is Tesco Drilling Company. In
addition, the Company's power equipment products compete with products
manufactured by Maritime Hydraulics US, Inc., Canadian Rig Ltd. and Varco
International, Inc.

Wireline/Pressure Control Equipment

The Company manufactures products in this group under the BOWEN(R) brand
name. The products include small blowout preventers, unions, tool traps, tool
catchers, lubricator risers, control heads, stuffing boxes and wellhead
adapters. These products are designed to seal around a wireline and control well
pressure during wireline logging operations. Tool traps and tool catchers are
included in a set of pressure control equipment to catch expensive logging tools
which may be inadvertently pulled loose from the logging cable. Many of these
products are also adapted for use in controlling well pressure during coiled
tubing operations. This line of products accounted for $2.2 million of the
Company's revenues for the three month period ended June 30, 1997.

The market for pressure control equipment is very competitive. Competition
is based on product design, quality, ability to meet delivery requirements and
pricing. The Company's principal competitors in the market include Hydrolex,
Inc., Elmar Ltd. and Texas Oil Tools.

REPLACEMENT PARTS AND REFURBISHMENT

The Company manufactures and maintains a significant inventory of
replacement parts and replacement components. The Company also refurbishes older
rigs for its customers. The Company believes that the replacement parts and
refurbishment businesses will grow significantly over the next several years as
a result of increased worldwide rig utilization and the age of the international
rig fleet, which was generally constructed prior to 1982. The Company is well
positioned to provide replacement parts and refurbishment services as a result
of the large number of operating rigs manufactured under the Company's brand
names and the preference of equipment owners to obtain replacement parts and
refurbishment services from the original manufacturer. Replacement parts and
refurbishment accounted for $13.1 million of the Company's revenues for the six
month period ended June 30, 1997.

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SPECIALTY STEEL PRODUCTS

Through its Specialty Steel Division, the Company manufactures premium
specialty steel forgings for commercial and military use and for use in
manufacturing oilfield equipment products. Specialty steel products accounted
for $6.8 million of the Company's revenues for the six month period ended June
30, 1997.

The Company manufactures over 100 different alloys to form forged products
in round, square and rectangular solid, trepanned, counterbored and stepped
forms to meet customer specifications. The Company sells its specialty steel
products primarily to customers in the heavy equipment, aircraft, petroleum and
power generation industries in North America and to the United States military.
Specialty steel products are also sold as feedstock directly to forgers and
extruders. The Division's largest customer accounted for 24% of the Division's
revenue for the nine months ended December 31, 1996. In addition, 13% of
production for 1996 was sold to the government and military sectors.

Raw Materials

Raw materials used to manufacture specialty steel products consist of
premium steel scrap and various alloys, of which the Company believes there is
an adequate supply in the North American market.

Competition

The U.S. specialty steel market is highly competitive due primarily to the
high cost of freight associated with moving small amounts of high tonnage
finished goods. Competitive factors include price, delivery, quality and
service. Steel ingots and billets are commodities and are extremely price
competitive. The Company's major competitors in the specialty steel market are
National Flame and Forge Company Inc., Ellwood Group Inc., Scot Forge Company
Inc., Erie Forge and Steel Inc., First Miss Steel Inc. and British Steel PLC.

ENGINEERING AND PRODUCT DEVELOPMENT

The Company maintains a staff of more than 70 engineers and design
technicians to (i) design and test new products, components and systems for use
in manufacturing and drilling applications, (ii) enhance the capabilities of
existing products and (iii) assist the Company's sales organization and
customers with special requirements and products. The Company intends to
continue its research, engineering and product development programs to develop
proprietary products that are complementary to the Company's existing products,
particularly with respect to harsh environment rigs and equipment. Recent
innovations include (i) light-weight mobile drilling rigs, (ii) disc brake
systems for drawworks, (iii) portable top drives, (iv) coiled tubing drilling
structures and (v) the V/S 110/130 power swivel. The Company's total engineering
and product development expenses for the six month period ended June 30, 1997
was $1.5 million, which includes the Bowen and Cardwell expenses only since the
dates of their respective acquisitions. The Company has budgeted $3.2 million
for engineering and product development expenses for the remainder of the 1997
fiscal year.

MARKETING, SALES AND DISTRIBUTION

The Company markets its oilfield products primarily through its own sales
force and through designated agents and distributors in every major oil and gas
producing region in the world. The Company's customers include international and
domestic drilling contractors and international and domestic oil and gas
exploration and production companies, including foreign state-owned oil and gas
enterprises. The Company supplements its marketing efforts by maintaining 27
domestic sales and service centers in areas of significant drilling and
production operations and 7 international parts and service centers.

See Note 13 to the Financial Statements for financial information related
to the Company's revenues by geographic region.

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INTELLECTUAL PROPERTY

The Company owns or has license to use a number of U.S. and foreign patents
covering a variety of products. Although in the aggregate these patents are of
importance to the Company, the Company does not consider any single patent to be
essential. In general, the Company depends upon product name recognition,
manufacturing quality control and application of its expertise rather than
patented technology in the conduct of its business. The Company enjoys product
brand name recognition, principally through its BOWEN(R), IDECO(R), FRANKS(R),
CABOT(TM), CARDWELL(TM), and IRI(TM) trademarks, and considers such trademarks
to be important to its business.

EMPLOYEES

As of September 30, 1997 the Company employed a total of 1,437 persons, of
whom 30 were employed outside the United States. Approximately 23% of these
employees were salaried and the balance were compensated on an hourly basis.
Approximately 23% of the Company's employees are represented by a union or are
parties to a collective bargaining agreement, which is effective for the period
from July 1997 until July 2000, covers approximately 330 employees and contains
customary provisions with respect to wages, hours and working conditions for
certain production and maintenance employees in the Bowen Tools Division. The
wage rates governing the first year of the contract represented a 4.5% increase
over the rates previously in effect, and the agreement provides for further 3%
increases in each of the second and third year thereof. The Company considers
its relations with its employees to be good.

RISKS AND INSURANCE

The Company's operations are subject to the usual hazards inherent in
manufacturing products and providing services for the oil and gas industry.
These hazards can cause personal injury and loss of life, business
interruptions, property and equipment damage and pollution or environmental
damage. The Company maintains comprehensive insurance covering its assets and
insuring against risks at levels which management believes to be appropriate and
in accordance with industry practice. No assurance can be given, however, that
insurance coverage will be adequate in all circumstances or against all hazards
or risks, or that the Company will be able to maintain adequate insurance
coverage in the future at commercially reasonable rates or on acceptable terms.

The Company's services and products are used in drilling, production and
well-servicing operations which are subject to inherent risks that could result
in property damage, personal injury, suspension of operations or loss of
production. The Company maintains product liability and worker's compensation
insurance. Although the limits of its insurance coverage against an accident are
generally in accordance with industry practice, such insurance may not be
adequate to protect the Company against liability or losses accruing from all
the consequences of such an incident.

ENVIRONMENTAL MATTERS

The manufacture of oilfield equipment and specialty steel products is
subject to a broad range of federal, state and local environmental laws and
regulations, both in the United States and in foreign jurisdictions, including
those governing discharges into the air and water, the handling and disposal of
solid and hazardous wastes, the remediation of soil and groundwater contaminated
by petroleum products or hazardous substances or wastes, and the health and
safety of employees. It has been the Company's policy to eliminate and minimize
generation of wastes at its facilities through plant operations, process design
and maintenance. The Company continually strives to reduce wastes by sending
these materials off-site for recycling and/or reuse. The Company has taken, and
continues to take, into account the requirements of such environmental laws and
regulations in the improvement, modernization, expansion and start-up of its
facilities and believes that it is currently in substantial compliance with such
material laws and regulations. As is the case with most industrial
manufacturers, the Company could incur significant costs related to
environmental compliance. To the extent the Company might incur any such
compliance costs, these costs most likely would be incurred over a number of
years; however, no assurance can be given that future regulatory action
regarding soil or groundwater at the

36
<PAGE> 39

Company's facilities, as well as continued compliance with environmental
requirements, will not require the Company to incur significant costs that may
have a material adverse effect on the Company's financial condition and results
of operations.

The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") imposes liability without regard to fault or the legality of the
original conduct, on certain classes of persons with respect to the release of a
hazardous substance into the environment. These persons include the owner and
operator of the disposal site or sites where the release occurred and companies
that disposed or arranged for the disposal of the hazardous substances found at
such site. Persons who are or were responsible for releases of hazardous
substances under CERCLA may be subject to joint and several liability for the
costs of cleaning up the hazardous substances that have been released into the
environment and for damages to natural resources, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances released
into the environment.

The Company currently owns or leases, and has in the past owned or leased,
numerous properties that for many years have been used for the manufacture and
storage of products and equipment containing or requiring oil and/or hazardous
substances. Although the Company has utilized operating and disposal practices
that were standard in the industry at the time, hydrocarbons or other wastes may
have been disposed of or released on or under the properties owned or leased by
the Company or on or under other locations where such wastes have been taken for
disposal. In addition, many of these properties have been operated by third
parties whose treatment and disposal or release of hydrocarbons or other wastes
was not under the Company's control. These properties and the wastes disposed
thereon may be subject to CERCLA, the Resource Conservation and Recovery Act and
analogous state laws. Under such laws, the Company could be required to remove
or remediate previously disposed wastes (including wastes disposed of or
released by prior owners or operators) or property contamination (including
groundwater contamination) or to perform remedial operations to prevent future
contamination.

Various federal, state and local laws, regulations and ordinances govern
the removal, encapsulation or disturbance of asbestos containing materials
("ACMs"). Such laws and regulations may impose liability for the release of ACMs
and may provide for third parties to seek recovery from owners or operators of
facilities at which ACMs were or are located for personal injury associated with
exposure to ACMs. The Company is aware of the presence of ACMs at its
facilities, but it believes that such materials are in acceptable condition at
this time. The Company believes that any future costs related to remediation of
ACMs at these sites will not be material, either on an annual basis or in the
aggregate, although there can be no assurance with respect thereto.

The Company has sought to reduce the impact of costs arising from or
related to actual or potential environmental conditions at the Bowen Tools
Division facilities caused or created by Bowen or its predecessors in title
through the Company's contractual arrangements with Air Liquide. Pursuant to
such arrangements, Air Liquide and Bowen agreed to indemnify the Company for
such costs. Air Liquide provided the Company with certain environmental
assessments with respect to most of the Bowen properties conveyed to the
Company. In some cases, these initial assessments recommended the performance of
further investigation to evaluate the need for and to determine the extent of
the removal or remediation of hazardous substances required to address
historical operations of Bowen. Air Liquide is conducting a further
environmental review of the Bowen Tools Division facilities to determine the
potential scope of remediation to be conducted at such facilities by Air Liquide
or Bowen. There can be no assurance that Air Liquide or Bowen will meet its
obligations under the indemnification arrangements or that there will not be
future contamination for which the Company might be fully liable and that may
require the Company to incur significant costs that could have a material
adverse effect on the Company's financial condition and results of operations.

Although the Company believes that it is in substantial compliance with
existing laws and regulations, there can be no assurance that substantial costs
for compliance will not be incurred in the future. Moreover, it is possible that
other developments, such as stricter environmental laws, regulations and
enforcement policies thereunder, could result in additional, presently
unquantifiable, costs or liabilities to the Company.

37
<PAGE> 40

FACILITIES

The principal offices and facilities owned or leased by the Company and
their current uses are described in the following table:

<TABLE>
<CAPTION>
FACILITY SIZE PROPERTY SIZE
LOCATION (SQ. FT.) (ACRES) TENANCY USE
-------- ------------- ------------- ------- ---
<S> <C> <C> <C> <C>
Pampa, TX.............. 1,000,000 499 Owned Rig and specialty
steel
manufacturing,
administration and
warehousing
Houston, TX............ 539,700 19 Owned Drilling tool
manufacturing,
administration and
warehousing
Beaumont, TX........... 350,000 10 Owned Rig manufacturing,
administration and
warehousing
El Dorado, KS.......... 139,912 23 Owned Rig manufacturing,
administration and
warehousing
Houston, TX............ 16,249 N/A Leased Executive Offices
Houston, TX............ 50,154 2 Owned Administration
</TABLE>

The Company also owns or leases facilities at 34 domestic and international
locations, substantially all of which are sales, service or warehouse locations.

LEGAL PROCEEDINGS

There are pending or threatened against the Company various claims,
lawsuits and administrative proceedings all arising from the ordinary course of
business with respect to commercial product liability and employee matters which
seek remedies or damages. Although no assurance can be given with respect to the
outcome of these or any other pending legal and administrative proceedings and
the effects such outcomes may have on the Company, management believes that any
ultimate liability resulting from the outcome of such proceedings to the extent
not otherwise provided for will not have a material adverse effect on the
Company's consolidated financial statements.

The Company maintains comprehensive liability insurance. The Company
believes such coverage to be of a nature and amount sufficient to ensure that it
is adequately protected from any material financial loss as a result of such
claims. The Company currently is not the subject of any legal actions for which
it is neither insured nor indemnified and which the Company believes will
individually or in the aggregate have a material adverse effect on the Company's
financial condition or results of operations, nor to the Company's knowledge is
any such litigation threatened.

38
<PAGE> 41

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Company's directors and executive officers, and their ages and
positions with the Company as of the date of this Prospectus, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Hushang Ansary........................... 70 Chairman of the Board and Chief Executive
Officer
Daniel G. Moriarty....................... 63 Vice-Chairman of the Board
Abdallah Andrawos........................ 40 Director and Secretary
Nina Ansary.............................. 31 Director
Frank C. Carlucci........................ 66 Director
Dr. Philip David......................... 65 Director
Munawar H. Hidayatallah.................. 53 Director, Executive Vice President and
Chief Financial Officer
Richard D. Higginbotham.................. 60 Director, President and Chief Operating
Officer -- Bowen Tools Division
John D. Macomber......................... 69 Director
Edward L. Palmer......................... 79 Director
Stephen J. Solarz........................ 56 Director
Gary W. Stratulate....................... 41 Director, President and Chief Operating
Officer -- IRI Division
Arthur C. Teichgraeber................... 41 Director, President and Chief Operating
Officer -- Cardwell International Ltd.
Alexander B. Trowbridge.................. 67 Director
J. Robinson West......................... 50 Director
</TABLE>

Except as described under "-- Compensation Plans and Arrangements," all
executive officers of the Company serve at the pleasure of the Board of
Directors of the Company. Directors are elected at the Company's annual meeting
of stockholders and serve for a one-year term or until their successors are
elected and qualified or until their earlier resignation or removal in
accordance with the Company's Certificate of Incorporation and Bylaws.

HUSHANG ANSARY is an international entrepreneur, investor and
industrialist. He has served as Chairman of the Board of the Company since
September 1994 and was elected to the additional position of Chief Executive
Officer of the Company in March 1997. He has served as Chairman of SunResorts,
Ltd. N.V., a resort company, since 1986 and of Parman Capital Investments Ltd.,
a private investment company, since 1982.

DANIEL G. MORIARTY has been a director of the Company since 1994 and served
as Chief Executive Officer of the Company from 1994 to April 1997, when he was
elected Vice-Chairman of the Board. He served as President of Cooper
Manufacturing, a rig manufacturing division of Allied Production Corp. from 1992
to 1994 and of Smith Energy Services, an oilfield services division of Allied
Production Corp., from 1987 to 1992. From 1982 to 1987, Mr. Moriarty served as
the President and Chief Executive Officer of Leamco Services, Inc. From 1960 to
1982, Mr. Moriarty held various positions with Halliburton Company, rising from
engineer to Vice President of the Central Region.

ABDALLAH ANDRAWOS has been Secretary of the Company since 1994 and a
director of the Company since April 1997. Since 1989 Mr. Andrawos has served as
Secretary and Chief Financial Officer of SunResorts, Ltd. N.V., a resort
company.

39
<PAGE> 42

NINA ANSARY has served as a director of the Company since April 1997. Ms.
Ansary has been a Vice President of Parman Capital Investments Ltd., a private
investment company, since 1994. Prior to 1994 Ms. Ansary was a student. Ms.
Ansary is the daughter of Hushang Ansary and holds a masters degree in political
science from Columbia University.

FRANK C. CARLUCCI has been a director of the Company since 1994. Since
1993, Mr. Carlucci has served as Chairman and partner of The Carlyle Group, a
Washington, D.C. based merchant bank and from 1989 to 1993 served as
Vice-Chairman and partner. Mr. Carlucci serves on the following corporate
boards: BDM International, Mass Mutual Life Insurance Company, General Dynamics
Corporation, Kaman Corporation, Neurogen Corporation, Northern Telecom Ltd.,
Quaker Oats Company, SunResorts, Ltd. N.V., Texas Biotechnology Corporation,
Pharmacia & Upjohn Inc., Ashland Inc. and Westinghouse Electric Corporation. He
is also a Trustee of the Rand Corporation.

DR. PHILIP DAVID has been a director of the Company since 1994. Dr. David
was a consultant to Fairchild Corporation from January 1988 to June 1993 and was
a Professor of Urban Studies and Planning at the Massachusetts Institute of
Technology from 1971 until June 1987. Dr. David is a director of Fairchild
Corporation.

MUNAWAR H. HIDAYATALLAH has been a director and Executive Vice
President -- Corporate Development of the Company since 1994 and the Company's
Chief Financial Officer since April 1997. From 1982 to 1994, Mr. Hidayatallah
served as President and Chief Executive Officer of Crescott Inc., a holding
company with interests in financial services, food processing and franchising,
and from 1992 to 1994, President and Chief Executive Officer of its subsidiary,
Beverly Hills Securities Company.

RICHARD D. HIGGINBOTHAM has been a director of the Company and President
and Chief Operating Officer of the Bowen Tools Division of the Company since
April 1997. Prior to the Bowen Acquisition, Mr. Higginbotham served as President
of Bowen since 1988 and from 1982 to 1988 served as Bowen's Senior Vice
President of Marketing.

JOHN D. MACOMBER has been a director of the Company since 1994. Mr.
Macomber has been a principal of JDM Investment Group, a private investment
company, since 1992. From 1988 to 1992, he was Chairman and President of the
Export-Import Bank of the United States, from 1973 to 1986 he was Chairman of
the Board and Chief Executive Officer of Celanese Corp. and from 1954 to 1973 he
was a managing partner of McKinsey & Co. He is also a director of Bristol-Myers
Squibb Company, The Brown Group, Lehman Brothers Holdings Inc., Pilkington Ltd.,
Textron Inc. and Xerox Corporation. He is also a director and Vice-Chairman of
The Atlantic Council of the United States and a director of the French American
Foundation and the National Executive Services Corp. Mr. Macomber is a trustee
of The Folger Library and a member of the Council on Foreign Relations and the
Bretton Woods Committee. Mr. Macomber is Chairman of the Council for Excellence
in Government and a trustee of the Carnegie Institute of Washington.

EDWARD L. PALMER has been a director of the Company since June 1997. Mr.
Palmer has been President of the Mill Neck Group Inc., a management consulting
firm, since 1982, and prior thereto he served as Chairman of the Executive
Committee and director of Citicorp and Citibank, N.A. He is also director of
Devon Group Inc., Holmes Protection Group Inc. and SunResorts, Ltd. N.V.

STEPHEN J. SOLARZ has been a director of the Company since 1994. Mr. Solarz
has been President of Solarz Associates, an international consulting firm, since
1993. From 1975 to 1993, he was a member of the U.S. House of Representatives,
where he served on the Foreign Affairs, the Merchant Marine and Fisheries, the
Intelligence and the Joint Economic Committees. He is also a director of
Samsonite Corp., Culligan Water Technologies Inc., Geophone Company, L.L.C. and
First Philippine Fund Inc.

GARY W. STRATULATE has been a director of the Company and President and
Chief Operating Officer of its IRI Operations since April 1997. From December
1994 to April 1997, he served as the Executive Vice President of the
International Division of the Company. From June 1991 to May 1994, Mr.
Stratulate was the Chief Operating Officer of Dreco Energy Services Ltd., a
manufacturer of oilfield equipment.

40
<PAGE> 43

ARTHUR C. TEICHGRAEBER has been a director of the Company and President and
Chief Operating Officer of Cardwell since April 1997. Prior to the Cardwell
Acquisition, Mr. Teichgraeber held various positions at Cardwell, rising from
sales engineer to President.

ALEXANDER B. TROWBRIDGE has been a director of the Company since 1994.
Since 1990, Mr. Trowbridge has been the President of Trowbridge Partners, Inc.,
a management consulting firm. He was President of the National Association of
Manufacturers from 1980 through 1989. He is also a director of The Gillette
Company, New England Life Insurance Company, E.M. Warburg-Pincus Counsellors
Fund, Rouse Company, Sun Company, Harris Corporation, Waste Management Inc.,
ICOS Corporation and SunResorts, Ltd. N.V. He is a charter trustee of Phillips
Academy, Andover.

J. ROBINSON WEST has been a director of the Company since 1994. Mr. West is
Chairman of The Petroleum Finance Company, Ltd., a petroleum industry consulting
firm, and served as its President from 1984 to 1996.

COMMITTEES

The Company has the following standing committees of the Board of
Directors:

Executive Committee. The Executive Committee consists of Messrs. Ansary,
Carlucci, Solarz and Moriarty, with Mr. Ansary serving as Chairman. The
Executive Committee has full power and authority to exercise all the powers of
the Board of Directors in the management of the business except the power to
fill vacancies on the Board of Directors and the power to amend the Bylaws and
except as provided by law.

Audit Committee. The Audit Committee consists of Mr. Macomber and Dr.
David, with Mr. Macomber serving as Chairman. The Audit Committee has
responsibility for, among other things, (i) recommending the selection of the
Company's independent accountants, (ii) reviewing and approving the scope of the
independent accountants' audit activity and extent of non-audit services, (iii)
reviewing with management and the independent accountants the adequacy of the
Company's basic accounting systems and the effectiveness of the Company's
internal audit plan and activities, (iv) reviewing with management and the
independent accountants the Company's financial statements and exercising
general oversight of the Company's financial reporting process, (v) reviewing
the Company's litigation and other legal matters that may affect the Company's
financial condition and (vi) monitoring compliance with the Company's business
ethics and other policies.

Compensation Committee. The Compensation Committee consists of Dr. David
and Mr. West, with Dr. David serving as Chairman. The Compensation Committee has
responsibility for (i) reviewing and approving the recommendations of the Chief
Executive Officer as to appropriate compensation of the Company's principal
executive officers, (ii) examining periodically the general compensation
structure of the Company and (iii) supervising the welfare, pension and
compensation plans of the Company.

DIRECTOR COMPENSATION

Directors who are not also officers or employees of the Company are paid
annual fees equal to $30,000 plus $1,000 for each Board of Directors' meeting
(but not committee meeting) attended.

41
<PAGE> 44

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding the
compensation paid to Hushang Ansary, Chairman and Chief Executive Officer, and
each of the five other most highly compensated executive officers of the Company
for the 12 months ended December 31, 1996 (collectively, the "Named Executive
Officers").

SUMMARY COMPENSATION TABLE(1)

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- -----------------------------------
AWARDS
-------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
- --------------------------- -------- -------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Hushang Ansary............. -- -- -- -- -- -- --
Chairman and Chief
Executive Officer
Daniel G. Moriarty......... $145,254 $106,504 -- -- -- -- --
Vice-Chairman of the
Board
Munawar H. Hidayatallah.... $186,750 $121,324 -- -- -- -- --
Executive Vice President
and Chief Financial
Officer
Richard D. Higginbotham.... $135,000 -- -- -- -- -- --
President and Chief
Operating Officer of
Bowen Tools Division
Gary W. Stratulate......... $186,750 $137,500 -- -- -- -- --
President and Chief
Operating Officer of IRI
Division
Arthur C. Teichgraeber..... $100,514 -- -- -- -- -- $498,110(2)
President and Chief
Operating Officer of
Cardwell
</TABLE>

- ---------------
(1) Under rules promulgated by the Securities and Exchange Commission, since the
Company was not a reporting company during the three immediately preceding
fiscal years, only the information with respect to the most recent completed
fiscal year is required to be presented in the Summary Compensation Table.
As a consequence of the change in its fiscal year, the Company's most recent
completed fiscal year is a nine month period. In order to provide
compensation information for a twelve month period, the information provided
in the Summary Compensation Table is for the twelve months ended December
31, 1996.

(2) Consists of license fees paid by Cardwell to Mr. Teichgraeber and to certain
entities directly or indirectly owned by Mr. Teichgraeber.

STOCK OPTIONS

Pursuant to the Incentive Plan (described below under "-- Compensation
Plans and Arrangements -- The Incentive Plan"), in anticipation of the Offering,
the Company granted to its Directors and certain of its officers and employees
an aggregate of 1,955,000 options to purchase shares of Common Stock. Such
options and the terms thereof are described in the following paragraphs.

On June 17, 1997, in anticipation of the Offering, the Company granted
options to purchase 20,000 shares of Common Stock to each of the Directors not
employed by the Company (the "Outside Directors") contingent on the consummation
of the Offering. The options were granted pursuant to the Incentive Plan and are
not intended to qualify as "incentive stock options" (as described below under
"-- Compensation Plans and Arrangements -- The Incentive Plan -- Options"). The
options have an exercise price per share equal to the Offering price per share
and generally have a five-year term. The options are exercisable (i)
cumulatively to the extent of one-half of the shares on the effective date of
the Offering and (ii) cumulatively to the extent

42
<PAGE> 45

of one-quarter of the shares after each of the first two anniversaries of the
effective date of the Offering for so long as the Outside Director remains in
continuous service with the Company. In addition, the options become immediately
exercisable upon an Outside Director's death or disability.

As of December 31, 1996, no stock options or stock appreciation rights had
been granted to the Named Executive Officers. On October , 1997, in
anticipation of the Offering, the Compensation Committee granted certain stock
options to the Named Executive Officers as described in the following tables and
discussion.

OPTION GRANTS IN 1997

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED
ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE EXPIRATION -----------------
NAME GRANTED 1997(1) PRICE(2)(3) DATE 5% 10%
---- ---------- ------------ ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Hushang Ansary........................... 1,000,000 55.71% Offering , 2007 $ $
Price
Daniel G. Moriarty....................... 50,000 2.79 Offering , 2007
Price
Munawar H. Hidayatallah.................. 45,000 2.51 Offering , 2007
Price
Richard D. Higginbotham.................. 35,000 1.95 Offering , 2007
Price
Gary W. Stratulate....................... 40,000 2.23 Offering , 2007
Price
Arthur C. Teichgraeber................... 35,000 1.95 Offering , 2007
Price
</TABLE>

- ---------------

(1) Calculated assuming grants to employees, other than Named Executive
Officers, of options to purchase an aggregate of 590,000 shares of Common
Stock.

(2) As described below, the exercise price as to one-third of the shares covered
by the options is the Offering price, the exercise price as to the second
one-third of the shares covered by the options is the greater of the
Offering price and the fair market value per share on the first anniversary
of the effective date of the Offering, and the exercise price as to the
final one-third of the shares covered by the options is the greater of the
Offering Price and the fair market value per share on the second anniversary
of the effective date of the Offering.

(3) Market price has been assumed to equal the Offering price.

The following table sets forth information regarding the values of the
stock options granted to the Named Executive Officers as of , 1997.

OPTION VALUES AT , 1997

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
NAME , 1997 AT , 1997(1)
---- ---------------------- --------------------
<S> <C> <C>
Hushang Ansary........................................ 1,000,000 $0
Daniel G. Moriarty.................................... 50,000 0
Munawar H. Hidayatallah............................... 45,000 0
Richard D. Higginbotham............................... 35,000 0
Gary W. Stratulate.................................... 40,000 0
Arthur C. Teichgraeber................................ 35,000 0
</TABLE>

- ---------------

(1) Market price has been assumed to equal the Offering price.

43
<PAGE> 46

All of the stock options granted to the Named Executive Officers in 1997
were granted pursuant to the Incentive Plan. The stock options have a ten-year
term and are not intended to qualify as "incentive stock options" (as described
below under "-- Compensation Plans and Arrangements -- The Incentive Plan --
Options"). The stock options granted to each Named Executive Officer are
exercisable cumulatively to the extent of one-third of the shares of Common
Stock covered thereby on the effective date of the Offering ("Tranche A
Shares"), one-third of the shares of Common Stock covered thereby on the first
anniversary of the effective date of the Offering ("Tranche B Shares"), and
one-third of the shares of Common Stock covered thereby on the second
anniversary of the effective date of the Offering ("Tranche C Shares"), for so
long as the Named Executive Officer remains in continuous employment with the
Company or one of its affiliates. In addition, the options become immediately
exercisable upon the Named Executive Officer's death or disability. Once
exercisable, the options have the following exercise prices: Tranche A
Shares -- the Offering Price; Tranche B Shares -- the greater of the Offering
Price and the fair market value per share on the first anniversary of the
effective date of the Offering; Tranche C Shares -- the greater of the offering
price and the fair market value per share on the second anniversary of the
effective date of the Offering.

On October , 1997 in anticipation of the Offering, the Compensation
Committee granted a total of 215,000 stock options to designated senior
employees. All of the stock options granted to the designated senior employees
were granted pursuant to the Incentive Plan. The stock options have a ten-year
term and are not intended to qualify as "incentive stock options" (as described
below under "-- Compensation Plans and Arrangements -- The Incentive
Plan -- Option Rights"). The stock options granted to each designated senior
employee have the same terms and conditions as the stock option granted to the
Named Executive Officers described above.

On October , 1997, in anticipation of the Offering, the Compensation
Committee granted a total of 375,000 stock options to employees of the Company
having at least five years of service with the Company or its predecessors. The
number of stock options granted to each such employee is 500, and such options
are exercisable cumulatively to the extent of 100 shares of Common Stock on the
effective date of the Offering ("Tranche 1 Shares"), 100 shares of Common Stock
on the first anniversary of the effective date of the Offering ("Tranche 2
Shares"), 100 shares of Common Stock on the second anniversary of the effective
date of the Offering ("Tranche 3 Shares"), 100 shares of Common Stock on the
third anniversary of the effective date of the Offering ("Tranche 4 Shares") and
100 shares of Common Stock on the fourth anniversary of the effective date of
the Offering ("Tranche 5 Shares"), for so long as such employee remains in
continuous employment with the Company or one of its affiliates. In addition,
the options become immediately exercisable upon such employees' death or
disability. Once exercisable, the options have the following exercise prices:
Tranche 1 Shares -- the Offering Price; Tranche 2 Shares -- the greater of the
Offering Price and the fair market value per share on the first anniversary of
the effective date of the Offering; Tranche 3 Shares -- the greater of the
Offering Price and the fair market value per share on the second anniversary of
the effective date of the Offering; Tranche 4 Shares -- the greater of the
Offering Price and the fair market value per share on the third anniversary of
the effective date of the Offering; and Tranche 5 Shares -- the greater of the
Offering Price and the fair market value per share on the fourth anniversary of
the effective date of the Offering.

COMPENSATION PLANS AND ARRANGEMENTS

Compensation of Named Executive Officers -- In General

Prior to the Offering, the compensation of the Named Executive Officers was
as approved by the Compensation Committee upon the recommendation of the Chief
Executive Officer and, in the case of Mr. Teichgraeber, in accordance with his
employment agreement with Cardwell. Following the Offering, the compensation of
the Named Executive Officers will continue to be approved by the Compensation
Committee upon the recommendation of the Chief Executive Officer and, in the
case of Mr. Teichgraeber, in accordance with his employment agreement with
Cardwell (described below).

The Incentive Plan

On June 17, 1997, the Company adopted an equity incentive plan (the
"Incentive Plan") to attract and retain qualified officers, directors and other
key employees of, and consultants to, the Company.

44
<PAGE> 47

Shares Available Under the Incentive Plan. Subject to adjustment as
provided in the Incentive Plan, the number of shares of Common Stock that may be
issued or transferred and covered by outstanding awards granted under the
Incentive Plan will not exceed 4,000,000, which may be shares of original
issuance or treasury shares or a combination thereof. Officers, directors and
other key employees of and consultants to the Company ("Participants") may be
selected by the Compensation Committee to receive benefits under the Incentive
Plan.

Options. The Compensation Committee may authorize the grant of rights that
entitle the optionee to purchase Common Stock ("Option Rights") at a price equal
to or greater or less than market value on the date of grant. Subject to
adjustment as provided in the Incentive Plan, no participant will be granted
Option Rights, in the aggregate, for more than 3,000,000 shares during any three
consecutive calendar years. The Compensation Committee may provide that the
option price is payable at the time of exercise (i) in cash, (ii) by the
transfer to the Company of nonforfeitable, unrestricted shares of Common Stock,
(iii) with any other legal consideration the Compensation Committee may deem
appropriate, or (iv) by any combination of the foregoing methods of payment. A
grant may provide for deferred payment of the option price from the proceeds of
sale through a broker on the date of exercise of some or all of the shares of
Common Stock to which the exercise relates if there is then a public market for
the Common Stock. A grant may provide for automatic grant of reload option
rights upon the exercise of Option Rights, including reload option rights, for
shares of Common Stock or any other noncash consideration authorized under the
Incentive Plan, except that the term of any reload option right may not extend
beyond the term of the Option Right originally exercised. The Compensation
Committee has the authority to specify at the time Option Rights are granted
that shares of Common Stock will not be accepted in payment of the option price
until they have been owned by the optionee for a specified period; however, the
Incentive Plan does not require any such holding period and would permit
immediate sequential exchanges of shares of Common Stock at the time of exercise
of Option Rights.

Option Rights granted under the Incentive Plan may be Option Rights that
are intended to qualify as "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
Option Rights that are not intended to so qualify. Any grant may provide for the
payment of dividend equivalents to the optionee on a current, deferred or
contingent basis or may provide that dividend equivalents be credited against
the option price.

No Option Right may be exercised more than 10 years from the date of grant.
Each grant must specify the period of continuous employment with, or continuous
engagement of consulting services by, the Company that is necessary before the
Option Rights will become exercisable and may provide for the earlier exercise
of the Option Rights in the event of a change of control of the Company or other
similar transaction or event. Successive grants may be made to the same optionee
regardless of whether Option Rights previously granted to him or her remain
unexercised.

Transferability. No Option Right is transferable by a participant except
by will or the laws of descent and distribution. Option Rights may not be
exercised during a participant's lifetime except by the participant or, in the
event of the participant's incapacity, by the participant's guardian or legal
representative acting in a fiduciary capacity on behalf of the participant under
state law and court supervision. Notwithstanding the foregoing, the Compensation
Committee, in its sole discretion, may provide for the transferability of
particular awards under the Incentive Plan.

The Compensation Committee may specify at the date of grant that all or any
part of shares of Common Stock that is to be issued or transferred by the
Company upon the exercise of Option Rights shall be subject to further
restrictions on transfer.

Adjustments. The maximum number of shares that may be issued or
transferred under the Incentive Plan, the number of shares covered by
outstanding Option Rights and the option prices or base prices per share
applicable thereto are subject to adjustment in the event of stock dividends,
stock splits, combinations of shares, recapitalizations, mergers,
consolidations, spinoffs, reorganizations, liquidations, issuances of rights or
warrants and similar transactions or events. In the event of any such
transaction or event, the Committee may in its discretion provide in
substitution for any or all outstanding awards under the Incentive Plan such

45
<PAGE> 48

alternative consideration as it may in good faith determine to be equitable in
the circumstances and may require the surrender of all awards so replaced. The
Compensation Committee may also, as it determines to be appropriate in order to
reflect any such transaction or event, make or provide for such adjustments in
the number of shares that may be issued or transferred and covered by
outstanding awards granted under the Incentive Plan and the number of shares
permitted to be covered by awards granted under the plan to any one participant
during any calendar year.

Administration and Amendments. The Incentive Plan will be administered by
the Compensation Committee of the Board (such committee is referred to in this
description of the Incentive Plan as the "Committee"). Following the
consummation of the Offering, the Committee must consist of not less than two
members who are "non-employee directors" within the meaning of Rule 16b-3 and
"outside directors" within the meaning of Section 162(m) of the Code. In
connection with its administration of the Incentive Plan, the Committee is
authorized to interpret the Incentive Plan and related agreements and other
documents. The Committee may make grants to participants under any or a
combination of all of the various categories of awards that are authorized under
the Incentive Plan and may condition the grant of awards on the surrender or
deferral by the participant of the participant's right to receive a cash bonus
or other compensation otherwise payable by the Company to the participant.

The Incentive Plan may be amended from time to time by the Committee, but
without further approval by the shareholders of the Company no such amendment
may cause the Incentive Plan to cease to satisfy any applicable condition of
Rule 16b-3 or cause any award under the Incentive Plan to cease to qualify for
any applicable exception to Section 162(m) of the Code.

Federal Income Tax Consequences. The following is a brief summary of
certain of the federal income tax consequences of certain transactions under the
Incentive Plan based on federal income tax laws in effect on the date of this
Prospectus. This summary is not intended to be exhaustive and does not describe
state or local tax consequences.

In general, (i) no income will be recognized by an optionee at the time a
nonqualified Option Right is granted, (ii) at the time of exercise of a
nonqualified Option Right, ordinary income will be recognized by the optionee in
an amount equal to the difference between the option price paid for the shares
and the fair market value of the shares if they are nonrestricted on the date of
exercise and (iii) at the time of sale of shares acquired pursuant to the
exercise of a nonqualified Option Right, any appreciation (or depreciation) in
the value of the shares after the date of exercise will be treated as either
short-term or long-term capital gain (or loss) depending on how long the shares
have been held.

No income generally will be recognized by an optionee upon the grant or
exercise of an incentive stock option. If shares of Common Stock are issued to
an optionee pursuant to the exercise of an incentive stock option and no
disqualifying disposition of the shares is made by the optionee within two years
after the date of grant or within one year after the transfer of the shares to
the optionee, then upon the sale of the shares any amount realized in excess of
the option price will be taxed to the optionee as long-term capital gain and any
loss sustained will be a long-term capital loss. If shares of Common Stock
acquired upon the exercise of an incentive stock option are disposed of prior to
the expiration of either holding period described above, the optionee generally
will recognize ordinary income in the year of disposition in an amount equal to
any excess of the fair market value of the shares at the time of exercise (or,
if less, the amount realized on the disposition of the shares in a sale or
exchange) over the option price paid for the shares. Any further gain (or loss)
realized by the optionee generally will be taxed as short-term or long-term gain
(or loss) depending on the holding period.

In limited circumstances where the sale of stock that is received as the
result of a grant of an award could subject an officer or director to suit under
Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), the
tax consequences to the officer or director may differ from the tax consequences
described above. In these circumstances, unless a special election has been
made, the principal difference usually will be to postpone valuation and
taxation of the stock received so long as the sale of the stock received could
subject the officer or director to suit under Section 16(b) of the Exchange Act,
but not longer than six months.

46
<PAGE> 49

To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company will be entitled to a corresponding
deduction provided that, among other things, (i) the income meets the test of
reasonableness, is an ordinary and necessary business expense and is not an
"excess parachute payment" within the meaning of Section 280G of the Code and is
not disallowed by the Section 162(m) $1.0 million limitation on certain
executive compensation and (ii) any applicable reporting obligations are
satisfied.

Other Compensation Plans or Programs

The Company does not maintain any other compensation plans or programs that
apply to the Named Executive Officers, other than broad-based retirement plans.

EMPLOYMENT AGREEMENTS, SEVERANCE AGREEMENTS AND CHANGE-IN-CONTROL AGREEMENTS

Mr. Teichgraeber has a five-year employment agreement with Cardwell,
commencing as of April 17, 1997 and ending as of April 16, 2002. Under the
agreement, Mr. Teichgraeber receives an annual base salary of $250,000, subject
to review by Cardwell for increase (but not decrease) at the end of each twelve
month period. Commencing with the twelve month period ending March 31, 1998, Mr.
Teichgraeber also is eligible to receive an annual performance bonus of up to
$600,000. The actual amount of such bonus, if any, is determined by the Company
in its sole discretion. If a Change in Control (as defined in such agreement)
occurs during the term of the agreement and while Mr. Teichgraeber is still
employed by Cardwell, Mr. Teichgraeber is eligible to receive a special change
in control bonus. The actual amount of such bonus, if any, shall be determined
by the Company in its sole discretion. If Mr. Teichgraeber's employment with
Cardwell is terminated during the term of the agreement: (i) by Cardwell for
Cause (as defined in such agreement) or by Mr. Teichgraeber for any reason other
than Good Reason (as defined in such agreement), Mr. Teichgraeber is not
entitled to receive any further compensation or benefits under the agreement;
(ii) by Cardwell for any reason other than Cause or Disability (as defined in
such agreement), Mr. Teichgraeber is entitled to receive a lump sum payment
equal to his then-current base salary for the remainder of the term of the
agreement; or (iii) as a result of his death or by Cardwell as a result of his
Disability, Mr. Teichgraeber is entitled to receive payments equal to his
then-current base salary (less any applicable disability benefits) for a period
of six months. Finally, during the period ending on the later of the effective
date of the termination of Mr. Teichgraeber's employment with Cardwell or the
last day of the term of the agreement, Mr. Teichgraeber is prohibited from
engaging in Competitive Activity (as defined in such agreement) with the
Company, and is prohibited from soliciting any employee of the Company or any of
its affiliates to terminate employment.

No other Named Executive Officer has an employment agreement, severance
agreement or change-in-control agreement with the Company or any affiliate.

47
<PAGE> 50

SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of October 14, 1997 and as adjusted to reflect the
sale of the shares of Common Stock offered hereby by (i) each person that owns
beneficially more than 5% of the Common Stock, (ii) each director and Named
Executive Officer of the Company and (iii) all directors and executive officers
of the Company as a group. For purposes of the table, a person or group of
persons is deemed to have "beneficial ownership" of any shares as of a given
date which such person has the right to acquire within 60 days after such date.

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES OWNED SHARES OWNED
--------------------------- ----------------------
PRIOR TO AFTER PRIOR TO AFTER
OFFERING OFFERING(1) OFFERING OFFERING(1)
---------- ----------- -------- -----------
<S> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Hushang Ansary.............................. 27,300,000(2) 24,913,333(3) 91.0% 62.9%
Daniel G. Moriarty.......................... 0 16,667(3) 0 *
Abdallah Andrawos........................... 0 13,333(3) 0 *
Nina Ansary................................. 3,000,000 3,010,000(3) 10.0% 7.6%
Frank C. Carlucci........................... 1,200,000 1,090,000(3) 4.0% 2.8%
Dr. Philip David............................ 1,500,000 1,360,000(3) 5.0% 3.4%
Munawar H. Hidayatallah..................... 0 15,000(3) 0 *
Richard D. Higginbotham..................... 0 11,667(3) 0 *
John D. Macomber............................ 0 10,000(3) 0 *
Edward L. Palmer............................ 0 10,000(3) 0 *
Stephen J. Solarz........................... 0 10,000(3) 0 *
Gary W. Stratulate.......................... 0 13,333(3) 0 *
Arthur C. Teichgraeber...................... 0 11,667(3) 0 *
Alexander B. Trowbridge..................... 0 10,000(3) 0 *
J. Robinson West............................ 0 10,000(3) 0 *
All Directors and executive officers as
a group (15 persons)...................... 30,000,000(2) 27,495,000(2)(3) 100% 69.4%
CERTAIN OTHER HOLDERS
Nader Ansary................................ 3,000,000 3,000,000 10.0% 7.6%
The Ansary Family Trust..................... 2,850,000(2) 2,850,000(2) 9.5% 7.2%
</TABLE>

- ---------------
* Less than 1%.

(1) Assumes exercise of vested options. See "Management -- Stock Options."

(2) Mr. Ansary, The Ansary Family Trust, a trust controlled by Mr. Ansary for
the benefit, inter alia, of members of his immediate family, and a private
charitable foundation controlled by Mr. Ansary directly own in the aggregate
21,300,000 shares of Common Stock. Includes shares of Common Stock owned by
Nina Ansary and Nader Ansary (Mr. Ansary's daughter and son), of which Mr.
Ansary disclaims beneficial ownership.

(3) Including, in the case of Mr. Ansary, Ms. Ansary, Mr. Carlucci and Mr.
David, and otherwise consisting of, options to purchase shares of Common
Stock granted pursuant to the Incentive Plan. See "Management -- Stock
Options."

SELLING STOCKHOLDERS

The Selling Stockholders consist of Mr. Ansary, Mr. Carlucci and Dr. David,
who are offering 2,730,000, 120,000 and 150,000 shares of Common Stock,
respectively. If the Underwriters' Over-Allotment Options are exercised, Mr.
Ansary, Mr. Carlucci and Dr. David will sell an additional 819,000, 36,000 and
45,000 shares, respectively. See "Security Ownership of Certain Beneficial
Owners and Management." The Company is

48
<PAGE> 51

paying all the expenses of the Offering, including the expenses attributable to
the shares being sold by the Selling Stockholders, other than underwriting
discounts and commissions.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CORPORATE CONSOLIDATION

On October 14, 1997, in anticipation of the Offering, the Company and its
then sole stockholder, Energy Services International Ltd. ("ESI"), merged
pursuant to Section 253 of the Delaware General Corporation Law (the "Merger"),
and ESI, as the surviving entity, changed its name to IRI International
Corporation. As a result of the Merger, the stockholders of ESI became the
stockholders of the Company, the number of issued and outstanding shares of
Common Stock was increased to 30,000,000, all issued and outstanding shares of
the Company's preferred stock (including all accrued and unpaid dividends
thereon) and all shares of treasury stock were cancelled.

OTHER TRANSACTIONS

During the three month period ended March 31, 1997, the Company paid ESI
approximately $450,000 to reimburse ESI for certain administrative services
costs (compensation and related expenses) paid by ESI on behalf of the Company
for services rendered between September 20, 1994 and March 31, 1997.

At December 31, 1996, the Company was owed $158,000 by an affiliate for
services rendered by Company personnel to the affiliate during 1996. Payment was
received in July 1997, and no further services have been rendered.

REGISTRATION RIGHTS AGREEMENT

In connection with the Offering, the Company will enter into a registration
rights agreement with each of the current stockholders (the "Registration Rights
Agreement"). The Registration Rights Agreement will provide for demand
registration rights pursuant to which, upon the request of a holder or holders
(the "Requesting Holders") who are affiliates of the Company or who own at least
10% of the shares of Common Stock subject to such agreement (the "Registrable
Securities"), the Company will file a registration statement under the
Securities Act to register Registrable Securities held by the Requesting Holder
and any other stockholders holding Registrable Securities, provided that at
least 10% of the number of shares of Registrable Securities or aggregate
principal amount of Registrable Securities outstanding at such time is requested
to be registered. In addition, subject to certain conditions and limitations,
the Registration Rights Agreement will provide that holders of Registrable
Securities may participate in any registration by the Company of its shares of
Common Stock in an underwritten offering. The Registration Rights conferred by
the Registration Rights Agreement will be transferable to transferees of the
Registrable Securities covered thereby.

Under the Registration Rights Agreement, the Company is required to pay all
the costs associated with such an offer other than underwriting discounts and
commissions and transfer taxes attributable to the Registrable Securities sold.
In addition, the Company will indemnify the Requesting Holders, and the
Requesting Holders will indemnify the Company, against certain liabilities in
respect of any registration statement or offering covered by the Registration
Rights Agreement.

INDEMNIFICATION AGREEMENTS

In connection with the Offering, the Company will enter into an
indemnification agreement (each, an "Indemnification Agreement") with each of
its directors and executive officers (each, an "Indemnitee"). Each
Indemnification Agreement will provide that the Company will indemnify each
Indemnitee when he or she is involved in any manner or is threatened to be
involved in any proceeding (i) by reason of the fact he or she is or was or had
agreed to become a director or officer of the Company, or is or was serving or
had agreed to serve at the request of the Company as a director, officer,
employee or agent of another entity, or by reason of any action alleged to have
been taken or omitted in such capacity, against all liabilities actually
incurred by the Indemnitee in connection therewith so long as the Indemnitee
acted in good faith and in a manner he or

49
<PAGE> 52

she reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal proceeding, had no reasonable cause
to believe his or her conduct was unlawful or (ii) by or in the right of the
Company to procure a judgment in its favor by reason of the fact that he or she
is or was or had agreed to become a director or officer of the Company, or is or
was serving or had agreed to serve at the request of the Company as a director,
officer, employee or agent of another entity, against all liabilities actually
incurred by the Indemnitee in connection therewith so long as he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the Company, except no indemnification will be made if
the Indemnitee is adjudged to be liable to the Company, unless and only to the
extent a proper court determines that despite the adjudication of liability the
Indemnitee is entitled to indemnity.

The Company will also agree to indemnify each Indemnitee against
liabilities arising from the Indemnitee's alleged or actual negligence or breach
of duty or misstatement made, or acquiesced to, in his or her capacity as an
officer or director of the Company, or while serving at the request of the
Company as a director, officer, employee or agent of another entity.

In the event the Company disputes an Indemnitee's right to indemnification
under an Indemnification Agreement, the Company has agreed to pay all expenses
relating to the Indemnitee's enforcement of its rights under his or her
Indemnification Agreement.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company's Certificate of Incorporation (the "Certificate of
Incorporation") provides that the authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, par value $.01 per share, and
25,000,000 shares of Preferred Stock, par value $1.00 per share (the "Preferred
Stock"). Upon consummation of the Offering, 39,000,000 shares of Common Stock
will be issued and outstanding, and no shares of Preferred Stock will be issued
and outstanding. The summary below is a description summary and is qualified in
its entirety by the provisions of the Certificate of Incorporation.

COMMON STOCK

Except as may otherwise be provided in a Preferred Stock designation, the
holders of shares of Common Stock are entitled to one vote per share on all
matters to be voted on by shareholders and do not have cumulative voting rights.
Subject to preferential rights that may be applicable to any Preferred Stock
outstanding, holders of Common Stock are entitled to receive dividends, if, as
and when declared by the Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share equally and ratably in
assets remaining after payment of liabilities, subject to prior distribution
rights of any outstanding Preferred Stock. Holders of Common Stock have no
preemptive or conversion rights or other subscription rights, and there are no
redemption or sinking fund provisions applicable to the Common Stock.

PREFERRED STOCK

The Board of Directors has the authority, with the approval of the holders
of a majority of the outstanding shares of Common Stock, to issue the Preferred
Stock in one or more series and to fix the number of shares to be included in
any such series and the designations, relative powers, preferences, rights and
qualifications, limitations or restrictions of all shares of each such series.
The issuance of Preferred Stock could decrease the amount of earnings and assets
available for distributions to the holders of Common Stock.

LIMITATIONS OF LIABILITY

Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional conduct
or a knowing violation of law, the approval of an improper

50
<PAGE> 53

payment of a dividend or an improper purchase by the Company of stock or any
transaction from which the director derived an improper personal benefit. The
Certificate of Incorporation provides that, to the full extent permitted by
Delaware law, no director will be personally liable to the Company or its
stockholders for or with respect to any acts or omissions in the performance of
his or her duties as a director of the Company.

TRANSFER AGENT AND REGISTRAR

The Company has appointed Continental Stock Transfer & Trust Co. as the
transfer agent and registrar for the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Offering (assuming the Underwriters'
Over-Allotment Options are not exercised), the Company will have 39,000,000
shares (39,628,333 shares assuming exercise of all vested options) of Common
Stock outstanding. The 12,000,000 shares of Common Stock sold in the Offering
will be freely tradeable by persons other than "affiliates" of the Company
without restriction or limitation under the Securities Act. The remaining
27,000,000 shares are "restricted securities" within the meaning of Rule 144
under the Securities Act (the "Restricted Shares") and may not be sold in the
absence of registration under the Securities Act unless an exemption from
registration is available, including the exemption contained in Rule 144.

In general, under Rule 144, if one year has elapsed since the later of the
date of acquisition of Restricted Shares from the Company or any "affiliate" of
the Company, as that term is defined under the Securities Act, the acquiror or
subsequent holder thereof is entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1% of the Common Stock then
outstanding or the average weekly trading volume of the Common Stock during the
four calendar weeks preceding the date on which notice of the sale is filed with
the Commission. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. If two years have elapsed since the date of
acquisition of Restricted Shares from the Company or from any "affiliate" of the
Company, and the acquiror or subsequent holder thereof is deemed not to have
been an affiliate of the Company at any time during the preceding 90 days
preceding a sale, such person would be entitled to sell such shares in the
public market under Rule 144(k) without regard to the volume limitations, manner
of sale provisions, public information requirements or notice requirements. The
Company, the stockholders of the Company prior to the Offering and the Named
Executive Officers have agreed that, subject to certain limited exceptions, for
a period of 180 days from the date of this Prospectus they will not, without the
prior written consent of Lehman Brothers Inc., sell, contract to sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable for Common Stock. See "Certain Relationships and Related
Transactions -- Registration Rights Agreement."

The Company intends to file a registration statement on Form S-8 under the
Securities Act to register the shares of Common Stock reserved or to be
available for issuance pursuant to the Incentive Plan. Shares of Common Stock
issued pursuant to such plan generally will be available for sale in the open
market by holders who are not affiliates of the Company and, subject to the
volume and other limitations of Rule 144, by holders who are affiliates of the
Company.

Prior to the Offering there has been no public market for the Common Stock.
See "Risk Factors -- No Prior Public Market for Common Stock; Possible
Volatility of Stock Price." The Company can make no predictions as to the
effect, if any, that future sales of Restricted Shares, or the availability of
such Restricted Shares for sale, or the issuance of shares of Common Stock upon
the exercise of options or otherwise, or the perception that such sales or
exercise could occur, will have on the market price prevailing from time to
time. Sales of substantial amounts of Restricted Shares in the public market or
the perception that such sales might occur could have an adverse effect on the
market price of the Common Stock.

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<PAGE> 54

UNDERWRITING

Under the terms of, and subject to the conditions contained in, the U.S.
Underwriting Agreement, the U.S. Underwriters, for whom Lehman Brothers Inc.,
Howard, Weil, Labouisse, Friedrichs Incorporated, Prudential Securities
Incorporated and Credit Lyonnais Securities (USA) Inc. are acting as
representatives (the "Representatives"), have severally agreed to purchase from
the Company and the Selling Stockholders, and the Company and the Selling
Stockholders have agreed to sell to each U.S. Underwriter, the aggregate number
of shares of Common Stock set forth opposite the name of each U.S. Underwriter
below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Lehman Brothers Inc. .......................................
Howard, Weil, Labouisse, Friedrichs Incorporated............
Prudential Securities Incorporated..........................
Credit Lyonnais Securities (USA), Inc. .....................

---------
Total............................................. 9,600,000
=========
</TABLE>

Under the terms of, and subject to the conditions contained in, the
International Underwriting Agreement, the International Managers, for whom
Lehman Brothers International (Europe), Credit Lyonnais Securities, Howard,
Weil, Labouisse, Friedrichs Incorporated and Prudential-Bache Securities (U.K.)
Inc. are acting as representatives (the "Lead Managers"), have severally agreed
to purchase from the Company and the Selling Stockholders, and the Company and
the Selling Stockholders have agreed to sell to each International Manager, the
aggregate number of shares of Common Stock set forth opposite the name of each
International Manager below:

<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
---------------------- ---------
<S> <C>
Lehman Brothers International (Europe)......................
Credit Lyonnais Securities..................................
Howard, Weil, Labouisse, Friedrichs Incorporated............
Prudential-Bache Securities (U.K.) Inc. ....................

---------
Total............................................. 2,400,000
=========
</TABLE>

52
<PAGE> 55

The U.S. Underwriters and the International Managers (collectively, the
"Underwriters") propose to offer the shares to the public at the initial public
offering price set forth on the cover page of this Prospectus, and to certain
selected dealers (who may include the U.S. Underwriters and the International
Managers) at such price, less a selling concession not in excess of $
per share. The U.S. Underwriters and the International Managers may allow, and
such dealers may re-allow, a concession not in excess of $ per share to
certain other Underwriters or to certain other brokers and dealers. After the
initial offering to the public, the offering price and other selling terms may
be changed by the Representatives and the Lead Managers.

The U.S. Underwriting Agreement and the International Underwriting
Agreement (collectively, the "Underwriting Agreements") provide that the
obligations of the several U.S. Underwriters and the International Managers,
respectively, to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by counsel
and certain other conditions. The nature of the U.S. Underwriters' and the
International Managers' obligations is such that, if any of the shares of Common
Stock are purchased by the U.S. Underwriters pursuant to the U.S. Underwriting
Agreement or by the International Managers pursuant to the International
Underwriting Agreement, all the shares of Common Stock agreed to be purchased by
either the U.S. Underwriters or the International Managers, as the case may be,
pursuant to their respective Underwriting Agreements, must be so purchased. The
initial public offering price and underwriting discounts and commissions for the
U.S. Offering and the International Offering are identical. The closing of the
U.S. Offering is a condition to the closing of the International Offering. The
closing of the International Offering is a condition to the closing of the U.S.
Offering.

The Company and the Selling Stockholders have agreed in the Underwriting
Agreements to indemnify the U.S. Underwriters and the International Managers
against certain liabilities, including liabilities under the Securities Act, and
to contribute to payments that the U.S. Underwriters and the International
Managers may be required to make in respect thereof.

Each of the Company and the Selling Stockholders has granted to the U.S.
Underwriters a 30-day option to purchase up to 720,000 additional shares on the
same terms and conditions as set forth above to cover over-allotments, if any.
Each of the Company and the Selling Stockholders has granted to the
International Managers a similar option to purchase up to 180,000 additional
shares to cover over-allotments, if any. To the extent that such options are
exercised, each Underwriter will be committed, subject to certain conditions, to
purchase a number of the additional shares of Common Stock proportionate to such
Underwriter's initial commitment, as indicated in the preceding tables.

The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers (the "Agreement
Between") pursuant to which each U.S. Underwriter has agreed that, as part of
the distribution of the shares of Common Stock (plus any of the shares of Common
Stock to cover over-allotments) offered in the U.S. Offering, (a) it is not
purchasing any of such shares for the account of anyone other than a U.S. or
Canadian Person (as defined below) and (b) it has not offered or sold, and will
not offer, sell, resell or deliver, directly or indirectly, any of such shares
outside the United States or Canada or to anyone other than a U.S. or Canadian
Person. In addition, pursuant to the Agreement Between, each International
Manager has agreed that, as part of the distribution of the shares of Common
Stock (plus any of the shares of Common Stock to cover over-allotments) offered
in the International Offering, (a) it is not purchasing any of such shares for
the account of any U.S. or Canadian Person and (b) it has not offered or sold,
and will not offer, sell, resell or deliver, directly or indirectly, any of such
shares in the United States or Canada or to any U.S. or Canadian Person. Each
International Manager has also agreed that it will offer to sell shares of
Common Stock only in compliance with all relevant requirements of any applicable
laws.

As used herein, "U.S. or Canadian Person" means any resident or citizen of
the United States or Canada, any corporation, partnership or other entity
created or organized in or under the laws of the United States or Canada or any
political subdivision thereof or any estate or trust, the income of which is
subject to United States federal income taxation or Canadian income taxation
regardless of the source of income (other than a foreign branch of any U.S. or
Canadian Person), and includes any United States or Canadian branch of a

53
<PAGE> 56

person who is not otherwise a U.S. or Canadian Person. The term "United States"
means the United States of America (including the District of Columbia) and its
territories, possessions and other areas subject to its jurisdiction. The term
"Canada" means Canada, its provinces, territories and possessions and other
areas subject to its jurisdiction.

The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Underwriting Agreements and the
Agreement Between, including: (i) certain purchases and sales between the U.S.
Underwriters and the International Managers; (ii) certain offers, sales,
resales, deliveries or distributions to or through investment advisors or other
persons exercising investment discretion; (iii) purchases, offers or sales by a
U.S. Underwriter who is also acting as an International Manager or by an
International Manager who also is acting as a U.S. Underwriter; and (iv) other
transactions specifically approved by the Representatives and the Lead Managers.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Managers of such number of shares of Common
Stock as may be mutually agreed upon. Unless otherwise agreed, the price of any
shares of Common Stock so sold shall be the public offering price then in effect
for the shares of Common Stock being sold by the U.S. Underwriters and the
International Managers, less the selling concession allocable to such shares. To
the extent that there are sales between the U.S. Underwriters and the
International Managers pursuant to the Agreement Between, the number of shares
initially available for sale by the U.S. Underwriters or by the International
Managers may be more or less than the amount specified on the cover page of this
Prospectus.

This Prospectus is not, and under no circumstances is to be construed as,
an advertisement or a public offering of shares of Common Stock in Canada or any
province or territory thereof. Any offer or sale of shares of Common Stock in
Canada may only be made pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer or sale is
made.

Each International Manager has represented and agreed that: (i) it has not
offered or sold and, prior to the date six months after the latest closing date,
will not offer or sell any shares of Common Stock to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 (the "1986 Act") with respect to anything done by it in
relation to the shares of Common Stock in, from or otherwise involving the
United Kingdom; and (iii) it has only issued or passed on, and will only issue
or pass on, to any person in the United Kingdom any investment advertisement
(within the meaning of the 1986 Act) relating to the shares of Common Stock if
that person falls within Article II(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on.

No action has been taken or will be taken in any jurisdiction by the
Company, the Selling Stockholders or the Underwriters that would permit a public
offering of shares of Common Stock in any jurisdiction where action for that
purpose is required, other than the United States. Persons into whose possession
this Prospectus comes are required by the Company, the Selling Stockholders and
the Underwriters to inform themselves about, and to observe any restrictions as
to, the offering of shares of Common Stock offered pursuant to the Offering and
the distribution of this Prospectus.

Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the offering price set forth on the cover
page hereof.

The Company, each of its stockholders prior to the Offering and the Named
Executive Officers have agreed, for a period of 180 days from the date of this
Prospectus, not to, directly or indirectly, offer, sell or otherwise dispose of
(or enter into any transaction or device which is designed to, or could be
expected to, result in the disposition by any person at any time in the future
of) any Common Stock of the Company, or

54
<PAGE> 57

sell or grant options, rights or warrants with respect to any Common Stock of
the Company, without the prior written consent of Lehman Brothers Inc. on behalf
of the Representatives and the Lead Managers.

Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price will be negotiated among the Company,
the Selling Stockholders, the Representatives and the Lead Managers. Among the
factors considered in determining the initial public offering price of the
Common Stock, in addition to prevailing market conditions, are recent financial
and operating results of the Company, the proposed capital structure, assets and
liabilities of the Company, estimates of the business potential and earnings
prospects of the Company, the prospects for the industry in which the Company
operates, an assessment of the Company's management, consideration of the above
factors in relation to market valuation of companies in related businesses and
other factors deemed relevant. Additionally, consideration was given to the
general status of the securities markets, the market conditions for new
offerings of securities, the demand for similar securities of publicly traded
companies in related businesses and other relevant factors. The initial public
offering price set forth on the cover page of this Prospectus should not,
however, be considered an indication of the actual value of the Common Stock.
Such price will be subject to change as a result of market conditions and other
factors. There can be no assurance that an active trading market will develop
for the Common Stock or that the Common Stock will trade in the public market
subsequent to the Offering at or above the initial public offering price.

At June 30, 1997, Lehman Commercial Paper Inc. and Strategic Resource
Partners Inc., each an affiliate of Lehman Brothers Inc., in the aggregate owned
10% or more of the outstanding subordinated debt of the Company. As a result of
such ownership, the National Association of Securities Dealers, Inc. ("NASD")
may view the Offering as a participation by Lehman Brothers Inc. in the
distribution in a public offering of securities issued by a company with which
Lehman Brothers Inc. has a conflict of interest. As a result, the Offering is
being made pursuant to the provisions of Rule 2720 of the NASD's Conduct Rules.
Such provisions require, among other things, that the initial public offering
price be no higher than that recommended by a "qualified independent
underwriter," who must participate in the preparation of the registration
statement and the prospectus and who must exercise the usual standards of "due
diligence" with respect thereto. Prudential Securities Incorporated is acting as
a qualified independent underwriter in this Offering, and the initial public
offering price of the shares is not higher than the price recommended by
Prudential Securities Incorporated, which price was determined based on the
factors discussed above. In accordance with such Rule 2720, the U.S.
Underwriters and the International Managers will not make sales of shares of
Common Stock offered hereby to customers' discretionary accounts without the
prior specific written approval of such customers.

In connection with its roles as Advisor, Arranger and Syndication Agent
under the Senior Credit Facility, Lehman Commercial Paper Inc., an affiliate of
Lehman Brothers Inc., was paid customary fees. In connection with its role as an
interim lender under the Senior Notes Agreement, Strategic Resource Partners, an
affiliate of Lehman Brothers Inc., was paid customary fees. Lehman Brothers Inc.
acted as financial advisor to the Company in connection with the Acquisitions,
for which it received customary compensation.

Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase shares of Common Stock. As
an exception to these rules, the Representatives and the Lead Managers are
permitted to engage in certain transactions that stabilize the price of the
Common Stock. Such transactions may consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of the Common Stock.

If the Representatives and Lead Managers create a short position in the
Common Stock in connection with the Offering, (i.e., if they sell more shares of
Common Stock than are set forth on the cover page of this Prospectus), the
Representatives and the Lead Managers may reduce that short position by
purchasing Common Stock in the open market. The Representatives and the Lead
Managers also may elect to reduce any short position by exercising all or part
of the Underwriters' Over-Allotment Options described herein.

The Representatives and the Lead Managers also may impose a penalty bid on
certain Underwriters and selling group members. This means that if the
Representatives or the Lead Managers purchase shares of

55
<PAGE> 58

Common Stock in the open market to reduce such Underwriters' short position or
to stabilize the price of the Common Stock they may reclaim the amount of the
selling concession from the Underwriters and selling group members who sold
those shares as part of the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the Offering.

Neither the Company, the Selling Stockholders nor any of the Underwriters
makes any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the Common
Stock. In addition, neither the Company, the Selling Stockholders nor any of the
Underwriters makes any representation that the Representatives or Lead Managers
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.

The Common Stock has been approved, subject to notice of issuance, for
listing on the NYSE. In order to meet one of the requirements for listing the
Common Stock on the NYSE, the U.S. Underwriters have undertaken to sell lots of
100 or more shares of Common Stock to a minimum of 2,000 beneficial owners.

LEGAL MATTERS

Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company by Jones, Day, Reavis & Pogue, New York, New York
and for the Underwriters by Baker & Botts, L.L.P., Houston, Texas.

EXPERTS

The financial statements of the Company for the period from April 1, 1994
through September 19, 1994 (Predecessor), the period from September 20, 1994
through March 31, 1995, the year ended March 31, 1996 and the nine months ended
December 31, 1996; the financial statements of Bowen Tools, Inc. as of December
31, 1995 and 1996 and for each of the years in the three year period ended
December 31, 1996; and the financial statements of Cardwell International, Ltd.
as of October 31, 1996 and for the ten month period then ended, have been
included herein and in the Registration Statement in reliance upon the reports
of KPMG Peat Marwick LLP, independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus, which is a part of the
Registration Statement, omits certain information contained in the Registration
Statement, and reference is made to the Registration Statement and the exhibits
thereto for further information with respect to the Company and the Common Stock
offered hereby. Statements contained herein concerning the provisions of any
documents are not necessarily complete, and in each instance reference is made
to the copy of such document filed as an exhibit to the Registration Statement.
Each such statement is qualified in its entirety by such reference. The
Registration Statement, including exhibits filed therewith, may be inspected and
copied at the public reference facilities maintained by the Securities and
Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and will also be available for inspection and copying at the regional
offices of the Securities and Exchange Commission located at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may also be obtained from the Public Reference Section of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 upon
payment of the fees prescribed by the Securities and Exchange Commission. The
Securities and Exchange Commission maintains a World Wide Web site on the
Internet at http://www.sec.gov that contains

56
<PAGE> 59

reports, proxy and information statements and other information regarding
registrants that file electronically with the Securities and Exchange
Commission.

The Company will be required to file reports and other information with the
Securities and Exchange Commission pursuant to the Exchange Act. The Company
intends to furnish its stockholders annual reports containing consolidated
financial statements certified by its independent accountants and quarterly
reports containing unaudited condensed consolidated financial statements for
each of the first three quarters of each fiscal year.

57
<PAGE> 60

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IRI INTERNATIONAL CORPORATION
Independent Auditors' Report.............................. F-2
Balance Sheets as of March 31, 1996 and December 31,
1996................................................... F-3
Statements of Operations for the Period from April 1, 1994
through September 19, 1994 (predecessor), Period from
September 20, 1994 through March 31, 1995, Year Ended
March 31, 1996 and Nine Months Ended December 31,
1996................................................... F-4
Statements of Shareholders' Equity for the Period from
April 1, 1994 through September 19, 1994 (predecessor),
Period from September 20, 1994 through March 31, 1995,
Year Ended March 31, 1996 and Nine Months Ended
December 31, 1996...................................... F-5
Statements of Cash Flows for the Period from April 1, 1994
through September 19, 1994 (predecessor), Period from
September 20, 1994 through March 31, 1995, Year Ended
March 31, 1996 and Nine Months Ended December 31,
1996................................................... F-6
Notes to Financial Statements............................. F-7
Consolidated Balance Sheet as of June 30, 1997
(unaudited)............................................ F-18
Consolidated Statements of Operations for the Six Months
Ended June 30, 1996 and 1997 (unaudited)............... F-19
Consolidated Statement of Shareholders' Equity for the Six
Months Ended June 30, 1997 (unaudited)................. F-20
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1996 and 1997 (unaudited)............... F-21
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................ F-22

BOWEN TOOLS, INC. AND SUBSIDIARIES
Independent Auditors' Report.............................. F-25
Consolidated Balance Sheets as of December 31, 1995 and
December 31, 1996...................................... F-26
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995 and 1996....................... F-27
Consolidated Statements of Shareholder's Equity for the
Years Ended December 31, 1994, 1995 and 1996........... F-28
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996....................... F-29
Notes to Consolidated Financial Statements................ F-30
Consolidated Statements of Operations for the Three Months
Ended March 31, 1996 and 1997 (unaudited).............. F-38
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1996 and 1997 (unaudited).............. F-39
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................ F-40

CARDWELL INTERNATIONAL LTD. AND SUBSIDIARIES
Independent Auditors' Report.............................. F-41
Consolidated Balance Sheet as of October 31, 1996......... F-42
Consolidated Statement of Operations for the Ten Months
Ended October 31, 1996................................. F-43
Consolidated Statement of Shareholders' Equity for the Ten
Months Ended October 31, 1996.......................... F-44
Consolidated Statement of Cash Flows for the Ten Months
Ended October 31, 1996................................. F-45
Notes to Consolidated Financial Statements................ F-46
Consolidated Statements of Operations for the Five Months
Ended March 31, 1996 and 1997 (unaudited).............. F-52
Consolidated Statement of Shareholders' Equity for the
Five Months Ended March 31, 1997 (unaudited)........... F-53
Consolidated Statements of Cash Flows for the Five Months
Ended March 31, 1996 and 1997 (unaudited).............. F-54
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................ F-55
</TABLE>

F-1
<PAGE> 61

INDEPENDENT AUDITORS' REPORT

The Board of Directors
IRI International Corporation:

We have audited the accompanying balance sheets of IRI International
Corporation as of March 31, 1996 and December 31, 1996 and the related
statements of operations, shareholders' equity and cash flows for the period
from April 1, 1994 through September 19, 1994 (Predecessor), the period from
September 20, 1994 through March 31, 1995, the year ended March 31, 1996 and the
nine months ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of IRI International
Corporation as of March 31, 1996 and December 31, 1996 and the results of its
operations and its cash flows for the period from April 1, 1994 through
September 19, 1994 (Predecessor), the period from September 20, 1994 through
March 31, 1995, the year ended March 31, 1996 and the nine months ended December
31, 1996 in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Dallas, Texas

June 27, 1997, except as to

note 16, which is as of

October 14, 1997

F-2
<PAGE> 62

IRI INTERNATIONAL CORPORATION

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 7,704 $ 8,635
Accounts receivable, less allowance for doubtful accounts
of $27 at March 31, 1996 and $36 at December 31,
1996................................................... 5,442 8,036
Inventories............................................... 31,155 37,995
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. -- 23
Other current assets...................................... 855 957
------- -------
Total current assets.............................. 45,156 55,646
Property, plant and equipment, net.......................... 775 2,398
Prepaid pension cost........................................ 700 627
------- -------
$46,631 $58,671
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Notes payable............................................. $ -- $ 3,157
Accounts payable.......................................... 4,470 6,790
Accrued liabilities....................................... 3,122 3,530
Customer advances......................................... 1,720 2,607
Other liabilities......................................... 383 760
Current installments of obligation under capital lease.... -- 144
------- -------
Total current liabilities......................... 9,695 16,988
Negative goodwill, less accumulated amortization............ 18,786 14,760
Obligation under capital lease, less current installments... -- 522
Accrued postretirement benefits other than pensions......... 1,624 1,498
------- -------
Total liabilities................................. 30,105 33,768
------- -------
Shareholders' equity:
Preferred stock, $1.00 par value, 25,000,000 shares
authorized, 0 issued and outstanding................... -- --
Common stock, $.01 par value, 100,000,000 shares
authorized, 30,000,000 shares issued and outstanding... 300 300
Additional paid-in capital................................ 4,700 4,700
Retained earnings......................................... 11,526 19,903
------- -------
Total shareholders' equity........................ 16,526 24,903
Commitments and contingencies
------- -------
$46,631 $58,671
======= =======
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE> 63

IRI INTERNATIONAL CORPORATION

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
APRIL 1, SEPTEMBER 20, NINE MONTHS
1994 THROUGH 1994 THROUGH YEAR ENDED ENDED
SEPTEMBER 19, MARCH 31, MARCH 31, DECEMBER 31,
1994 1995 1996 1996
------------- ------------- ---------- ------------
(PREDECESSOR)
<S> <C> <C> <C> <C>
Revenues.................................... $16,473 $20,206 $52,506 $62,298
Cost of goods sold.......................... 16,216 14,058 36,877 44,968
------- ------- ------- -------
Gross profit...................... 257 6,148 15,629 17,330
Selling expense............................. 696 955 3,513 3,026
Administrative expense...................... 1,406 1,350 4,477 5,194
------- ------- ------- -------
Operating income (loss)........... (1,845) 3,843 7,639 9,110
Other income (expense):
Interest income........................... 16 21 371 90
Interest expense.......................... (2,675) (25) (47) (615)
Other, net................................ 90 (13) -- (110)
------- ------- ------- -------
(2,569) (17) 324 (635)
------- ------- ------- -------
Income (loss) before income
taxes........................... (4,414) 3,826 7,963 8,475
Income taxes................................ -- 263 -- 98
------- ------- ------- -------
Net income (loss)................. $(4,414) $ 3,563 $ 7,963 $ 8,377
======= ======= ======= =======
Net income (loss) per common share.......... $ (0.15) $ 0.12 $ 0.27 $ 0.28
======= ======= ======= =======
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE> 64

IRI INTERNATIONAL CORPORATION

STATEMENTS OF SHAREHOLDER'S EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
COMMON PAID-IN EARNINGS SHAREHOLDER'S
STOCK CAPITAL (DEFICIT) EQUITY
------ ---------- --------- -------------
<S> <C> <C> <C> <C>
Balances at April 1, 1994 (predecessor)............ $300 $ 24,060 $(84,843) $(60,483)
Net loss (predecessor)............................. -- -- (4,414) (4,414)
---- -------- -------- --------
Balances at September 19, 1994 (predecessor)....... 300 24,060 (89,257) (64,897)
Acquisition by Energy Services International....... 0 (19,360) 89,257 69,897
---- -------- -------- --------
Balances at September 20, 1994..................... 300 4,700 -- 5,000
Net income......................................... -- -- 3,563 3,563
---- -------- -------- --------
Balances at March 31, 1995......................... 300 4,700 3,563 8,563
Net income......................................... -- -- 7,963 7,963
---- -------- -------- --------
Balances at March 31, 1996......................... 300 4,700 11,526 16,526
Net income......................................... -- -- 8,377 8,377
---- -------- -------- --------
Balances at December 31, 1996...................... $300 $ 4,700 $ 19,903 $ 24,903
==== ======== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE> 65

IRI INTERNATIONAL CORPORATION

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
APRIL 1, SEPTEMBER 20, YEAR NINE MONTHS
1994 THROUGH 1994 THROUGH ENDED ENDED
SEPTEMBER 19, MARCH 31, MARCH 31, DECEMBER 31,
1994 1995 1996 1996
------------- ------------- --------- ------------
<S> <C> <C> <C> <C>
(PREDECESSOR)
Cash flows from operating activities:
Net income (loss)............................. $(4,414) $ 3,563 $ 7,963 $ 8,377
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation............................... 341 6 64 98
Amortization of negative goodwill.......... -- (2,684) (5,367) (4,026)
Change in employee benefit accounts........ 370 (648) (249) (53)
Changes in assets and liabilities:
Accounts receivable...................... (662) 378 72 (2,594)
Inventories.............................. 684 4,175 (2,043) (6,840)
Other current assets..................... (101) 708 (201) (125)
Accounts payable and accrued
liabilities........................... (555) 995 3,580 2,728
Customer advances and other
liabilities........................... 3,957 (2,612) 360 1,264
Intercompany payable..................... 101 -- -- --
------- ------- ------- -------
Net cash provided by (used in)
operations.......................... (279) 3,881 4,179 (1,171)
------- ------- ------- -------
Cash flows used in investing
activities -- purchases of property, plant and
equipment..................................... (109) (128) (717) (911)
------- ------- ------- -------
Cash flows from financing activities:
Payments on capital lease obligation.......... -- -- -- (144)
Proceeds from notes payable................... -- -- -- 3,157
------- ------- ------- -------
Net cash flows provided by financing
activities.......................... -- -- -- 3,013
------- ------- ------- -------
Increase (decrease) in cash and cash
equivalents................................... (388) 3,753 3,462 931
Cash and cash equivalents at beginning of
year.......................................... 877 489 4,242 7,704
------- ------- ------- -------
Cash and cash equivalents at end of year........ $ 489 $ 4,242 $ 7,704 $ 8,635
======= ======= ======= =======
Interest paid................................... $ -- $ 25 $ 47 $ 303
======= ======= ======= =======
Income taxes paid............................... $ -- $ -- $ 263 $ --
======= ======= ======= =======
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE> 66

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS

(1) GENERAL

IRI International Corporation (IRI or Company), a Delaware corporation, was
formed on July 30, 1985, through the combination of Ingersoll-Rand Oilfield
Products company, a wholly-owned subsidiary of Ingersoll-Rand Company,
established August 1, 1980, and the Ideco Division of Dresser Industries, Inc.

The Company manufactures and sells a full line of oil and gas mobile well
servicing and drilling rigs, deep oil and gas skid-mounted drilling rigs,
associated drilling equipment (Oilfield Equipment), and specialty steel products
(Specialty Steel). Most of the Company's customers are located in Asia. Raw
materials are readily available and the Company is not dependent upon a single
or a few suppliers.

On September 20, 1994, all of the outstanding common and preferred stock of
IRI was acquired by Energy Services International (ESI) for cash of $5 million.
The acquisition has been recorded using the purchase method of accounting and
the purchase price has been allocated to the assets acquired and liabilities
assumed based upon their estimated fair values at the date of the acquisition as
follows (in thousands):

The excess of the fair value of net assets acquired over consideration paid
was applied against nonmonetary assets (property, plant and equipment) reducing
the balances at the acquisition date to zero. The remaining excess of the fair
value of net assets acquired over consideration paid was recorded as negative
goodwill and is being amortized using the straight-line method over 5 years.
Negative goodwill amortization of $2.7 million for the period from September 20,
1994 through March 31, 1995, $5.4 million for the year ended March 31, 1996, and
$4.0 million for the nine months ended December 31, 1996 is included in cost of
goods sold in the accompanying statements of operations.

Financial statements previously issued by the Company for the period from
September 20, 1994 through March 31, 1995 and the year ended March 31, 1996 have
been restated to reflect the purchase adjustments arising from the acquisition
of the Company by ESI.

During 1997, the Company elected to change its fiscal year end from March
31 to December 31.

(2) SIGNIFICANT ACCOUNTING POLICIES

(a) Statements of Cash Flows

Cash equivalents of $7.7 million and $8.6 million at March 31, 1996 and
December 31, 1996, respectively, consisted of interest-bearing cash deposits.
For purposes of the statement of cash flows, the Company considers all cash and
short-term investments with original maturities of three months or less to be
cash equivalents.

During the nine months ended December 31, 1996, the Company entered into a
capital lease obligation of $810,000.

(b) Inventories

Inventories are stated at the lower of cost or market. Cost is determined
using standard costs which approximate actual cost on a first-in, first-out
basis.

F-7
<PAGE> 67

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Depreciation of property, plant and equipment is provided over the
estimated service lives of assets principally using the straight-line method.
Maintenance, repairs and minor replacements are charged to operations as
incurred; major repairs, replacements or improvements are capitalized.

(d) Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

(e) Revenue Recognition

During 1996, the Company changed its method for recognizing revenues on
construction contracts from the completed contract method to the
percentage-of-completion method. The change was made to better match recognition
of income on contracts to the related costs incurred as construction progresses.
The accompanying financial statements have been restated to reflect the new
accounting method for all periods presented. The Company continues to utilize
the completed contract method of revenue recognition for tax purposes.

Under the percentage-of-completion method, revenues and profits are
recognized based on the percentage of completion throughout the performance
period of the contract. The percentage-of-completion is calculated based on the
ratio of contract costs incurred to date to total estimated contract costs after
providing for all known or anticipated costs. Costs include material, direct
labor and engineering and manufacturing overhead. Selling expenses and general
and administrative expenses are charged to operations as incurred. The effect of
changes in estimates of contract costs is recorded currently. All remaining
revenue is generally recorded when the equipment is shipped.

Costs and estimated earnings in excess of billings on uncompleted contracts
represent revenues earned under the percentage-of-completion method but not yet
billable under the terms of the contract. Amounts are billable under contracts
generally upon shipment of the products or completion of the contracts. Included
in revenues and cost of goods sold for the nine months ended December 31, 1996
is $764,000 and $741,000, respectively, related to uncompleted contracts
($23,000 net) at December 31, 1996.

(f) Earnings per Common Share

Earnings per common share is based on the net income applicable to common
stock and weighted average common stock outstanding (30,000,000 shares) during
the periods and year presented (See note 16).

(g) Financial Instruments and Credit Risk Concentrations

The Company invests its excess cash in financial instruments, primarily
overnight investments and money market mutual funds. These financial instruments
could potentially subject the Company to concentrations of credit risk; however,
the Company's management considers the financial stability and creditworthiness
of a financial institution before investing the Company's funds. The carrying
amounts of the financial instruments in the accompanying financial statements
(cash, accounts receivable and payables) approximate fair value because of the
short maturities of these instruments. The note payable to bank and capital
lease obligation

F-8
<PAGE> 68

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

bear interest at rates that approximate market rates and, thus the carrying
amount of debt approximates estimated fair value.

A substantial portion of the Company's customers are engaged in the energy
industry. This concentration of customers may impact the Company's overall
exposure to credit risk, either positively or negatively, in that customers may
be similarly affected by changes in economic and industry conditions. The
Company performs ongoing credit evaluations of its customers. The Company
maintains reserves for potential credit losses, and actual losses have
historically been within the Company's expectations. Foreign sales also present
various risks, including risks of war, civil disturbances and governmental
activities that may limit or disrupt markets, restrict the movement of funds or
result in the deprivation of contract rights or the taking of property without
fair consideration. Most of the Company's foreign sales, however, are to large
international companies or are secured by letters of credit or similar
arrangements.

(h) Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

(i) Long-Lived Assets

In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, was issued which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and estimated future undiscounted cash flows indicate the carrying value of
those assets may not be recoverable. The Company implemented SFAS No. 121 on
April 1, 1996 and the adoption did not have a material effect on the financial
statements.

(3) CHANGE IN ACCOUNTING METHOD

As discussed in note 2(e), the Company adopted the percentage of completion
method of accounting for long-term contracts to conform its accounting policies
with industry standards. The accompanying financial statements have been
restated to reflect the new accounting method for all periods presented.

(4) INVENTORIES

A summary of inventories follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
<S> <C> <C>
Raw materials and supplies.................. $22,473 $29,163
Work in process............................. 7,237 7,645
Finished goods.............................. 1,445 1,187
------- -------
Total............................. $31,155 $37,995
======= =======
</TABLE>

F-9
<PAGE> 69

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(5) PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
<S> <C> <C>
Land and land improvements................... $ -- $ 13
Buildings.................................... 203 277
Machinery and equipment...................... 642 2,276
---- ------
845 2,566
Less accumulated depreciation................ (70) (168)
---- ------
Property, plant and equipment,
net.............................. $775 $2,398
==== ======
</TABLE>

Machinery and equipment includes capitalized lease assets of $810,000 at
December 31, 1996.

(6) NOTES PAYABLE

During the year ended March 31, 1996, the Company obtained a $15,000,000
revolving credit facility with a bank available through February 1998. The
facility agreement contains provisions, among others, that restrict incurrence
of indebtedness, guarantees, acquisitions, and distributions to shareholders,
and require the Company to meet specified net worth ratios. Borrowings under the
credit facility bear interest at the prime rate (8.25% at December 31, 1996)
plus an applicable margin. As of December 31, 1996, there was $21,000
outstanding on the line of credit. The line of credit was cancelled on March 31,
1997 in connection with the acquisitions and related financing described in note
14.

At December 31, 1996 the Company had a $3 million unsecured demand note
payable to Towers Financial Services bearing interest at 14% per annum. The note
and accrued interest were paid in January 1997.

(7) SHAREHOLDER'S EQUITY

The Company's authorized capitalization consists of 100,000,000 shares of
common stock, par value $.01 per share, and 80,000 issued and outstanding shares
of preferred stock, par value $1.00 per share, cumulative $10 per annum
dividend. Cumulative unpaid preferred stock dividends at December 31, 1996 were
$9,353,000. The preferred stock has a liquidation value of $1.00 per share, plus
cumulative unpaid dividends, and is senior in liquidation preference to the
common equity of the Company. See note 16 for subsequent event change in capital
structure.

F-10
<PAGE> 70

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(8) INCOME TAXES

Income tax expense (benefit) differs from the amount computed by applying
the statutory rate of 34 percent to income before income taxes as follows (in
thousands):

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM NINE MONTHS
APRIL 1, SEPTEMBER 20, ENDED
1994 THROUGH 1994 THROUGH YEAR ENDED DECEMBER
SEPTEMBER 19, MARCH 31, MARCH 31, 31,
1994 1995 1996 1996
------------- ------------- ---------- ------------
(PREDECESSOR)
<S> <C> <C> <C> <C>
Computed "expected" tax expense
(benefit).......................... $(1,501) $1,301 $ 2,707 $ 2,882
Change in the valuation allowance.... 1,501 (502) (1,046) (1,504)
Amortization of negative goodwill.... -- (896) (1,825) (1,369)
Other................................ -- 360 164 89
------- ------ ------- -------
$ -- $ 263 $ -- $ 98
======= ====== ======= =======
</TABLE>

The income tax expense for the period from September 20, 1994 through March
31, 1995 consists of current federal alternative minimum tax.

The tax effects of temporary differences that give rise to significant
portions of the deferred federal income tax assets and liabilities as of March
31, 1996 and December 31, 1996, are as follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
<S> <C> <C>
Deferred income tax assets:
Basis in inventories................................. $1,587 $1,692
Basis in and depreciation of plant, property and
equipment......................................... 1,432 1,345
Employee benefits.................................... 552 509
Net operating loss carryforwards..................... 3,445 1,800
Other................................................ 395 536
------ ------
Total deferred income tax assets............. 7,411 5,882
Less valuation allowance............................. 7,173 5,669
------ ------
Net deferred income tax assets............... 238 213
Deferred income tax liabilities -- prepaid pension
cost................................................. 238 213
------ ------
Net deferred federal income tax liability.... $ -- $ --
====== ======
</TABLE>

Because of the uncertainty of generating future taxable income, the Company
has provided a valuation allowance for deferred tax assets of $7,173,000 and
$5,669,000 at March 31, 1996 and December 31, 1996, respectively. The valuation
allowance decreased $1,504,000 during the nine months ended December 31, 1996.

Under the Internal Revenue Code of 1986, in general, a change of more than
50% in the composition of a company's equity owners during any three years
results in a limitation on such company's ability to utilize its loss
carryforwards in subsequent years. The Company has undergone such an ownership
change as a result of the sale described in note 1; accordingly, the amount of
the Company's preacquisition net operating loss carryforwards that may be
utilized per year is limited to approximately $300,000 (aggregate $3,600,000
available at December 31, 1996) expiring from 2003 through 2009. To the extent
such carryforwards are not utilized in a year, they may be utilized in
subsequent years. In addition, the Company has $1,694,000 of net operating loss
carryforwards, without limitations, expiring from 2010 through 2011.

F-11
<PAGE> 71

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(9) LEASES

At December 31, 1996, minimum future annual payments required under a
capital lease together with the present value of the net minimum lease payments
and noncancelable operating leases, primarily for repair facilities and offices
and office equipment, were as follows (in thousands):

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
1997.............................................. $ 767 $200
1998.............................................. 367 200
1999.............................................. 311 200
2000.............................................. 259 200
2001.............................................. 186 50
------ ----
Total minimum lease payments............ $1,890 850
======
Less amount representing interest................. 184
----
Present value of minimum lease payments........... $666
====
</TABLE>

Total rental expense was $289,000 for the period April 1, 1994 through
September 19, 1994 (predecessor), $196,000 for the period from September 20,
1994 through March 31, 1995, $546,000 for the year ended March 31, 1996 and
$860,000 for the nine months ended December 31, 1996.

(10) PENSION PLAN

The Company has a noncontributory defined benefit plan, which covers
substantially all employees. Employees with 10 or more years of service are
entitled to pension benefits beginning at normal retirement age (65) based on
years of service and the employees' compensation for the 60 consecutive month
period in which his compensation is the highest. The plan incorporates
provisions for early retirement, the privilege to elect a life annuity,
surviving spouse benefits, and disability benefits.

Employees of the Company who were employees of Ingersoll-Rand Oilfield
Products Company or the Ideco Division of Dresser Industries, Inc., immediately
prior to becoming employees of IRI, are entitled to uninterrupted service tenure
for purposes of retirement benefit calculations. Benefits payable under the IRI
retirement plan are offset by benefits payable under the retirement plans of
Dresser and Ingersoll-Rand Oilfield Products Company.

The Company uses the accrued benefit cost method to compute the annual
contributions to the plan, with minimum and maximum contributions determined on
a cumulative basis and the Company having the flexibility to choose which
contribution to make and which can vary from one period to the next.

The accrued benefit cost includes a normal cost which is computed as the
present value of the pro rata portion for the benefit accrual during the year
being valued and a past service cost which is the present value of that portion
of the projected benefit which has been accrued up to the valuation date. The
unfunded past-service cost may be liquidated over a period of between 10 and 30
years.

F-12
<PAGE> 72

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The funded status and the amounts recognized in the balance sheets as of
March 31, 1996 and December 31, 1996, the date of the latest actuarial
valuation, are as follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested............................................ $(6,613) $(7,231)
Nonvested......................................... (769) (58)
------- -------
Accumulated benefit obligation...................... $(7,382) $(7,289)
======= =======
Projected benefit obligation for service rendered to
date.............................................. (7,382) (7,289)
Plan assets at fair value........................... 7,433 7,321
------- -------
Projected benefit obligation less than plan
assets............................................ 51 32
Unrecognized net gain from past experience different
from that assumed and effects of changes in
assumptions....................................... 649 595
------- -------
Prepaid pension cost................................ $ 700 $ 627
======= =======
</TABLE>

The Plan assets consist primarily of time share real estate notes and fixed
income time deposits.

Net pension cost includes the following components (in thousands):

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
APRIL 1, 1994 SEPTEMBER 20, NINE MONTHS
THROUGH 1994 THROUGH YEAR ENDED ENDED
SEPTEMBER 19, MARCH 31, MARCH 31, DECEMBER 31,
1994 1995 1996 1996
------------- ------------- ---------- ------------
(PREDECESSOR)
<S> <C> <C> <C> <C>
Service cost............................ $ 381 $ 50 $ 108 $ 81
Interest cost........................... 320 257 556 419
Actual return on plan assets............ (274) (274) (565) (270)
Net amortization and deferral........... 34 -- 154 (157)
----- ------ ----- -----
Total pension expense
(income).................... $ 461 $ 33 $ 253 $ 73
===== ====== ===== =====
</TABLE>

As of September 1, 1995, the pension plan was frozen insofar as future
accrual of pension benefits. Because the plan amendment to freeze the plan was
planned in conjunction with the ESI acquisition discussed in note 1, the
resulting curtailment gain was taken into consideration in remeasuring the
Company's projected benefit obligation and the date of the acquisition.

The development of the actuarial present value of the projected benefit
obligation at March 31, 1996 and December 31, 1996 was based upon a weighted
average discount rate of 7.75% and 7.90%, respectively, and an expected
long-term rate of return on assets of 8.0%.

The Pension Benefit Guaranty Corporation provides protection to plan
participants by assuring employees that the fixed commitment of the Company for
funding vested accrued benefits of the plan will be paid up to specified maximum
amounts should the Company be unable to fund the fixed commitment.

The plan is administered by the Pension Committee which is appointed by
IRI's Board of Directors.

(11) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

In addition to the Company's defined benefit pension plan, the Company
sponsors a defined benefit health care plan that provides postretirement medical
benefits to retirees or full-time employees who retire after attaining age 55
with at least 10 years of service as of September 1, 1996. Current retirees
receive benefits for

F-13
<PAGE> 73

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

life while full time employees (future retirees) only receive benefits until age
65. The plan is contributory, with retirees contributing 20% of the health care
cost. The Company's contribution is capped at a 5% annual increase in health
care costs, with the remaining increases to be paid by the employee. The
Company's policy is to fund the cost of medical benefits in amounts determined
at the discretion of management.

Summary information on the Company's plan at March 31, 1996 and December
31, 1996 is as follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Actives employees eligible to retire............... $ 572 $ 594
Retired participants............................... 1,240 1,227
Unamortized gain or loss associated with actuarial
assumption changes and plan amendment.............. (188) (323)
------ ------
Accrued postretirement benefit costs....... $1,624 $1,498
====== ======
</TABLE>

Net period postretirement benefit cost includes the following components
(in thousands):

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
APRIL 1, 1994 SEPTEMBER 20, NINE MONTHS
THROUGH 1994 THROUGH YEAR ENDED ENDED
SEPTEMBER 19, MARCH 31, MARCH 31, DECEMBER 31,
1994 1995 1996 1996
------------- ------------- ---------- ------------
(PREDECESSOR)
<S> <C> <C> <C> <C>
Service cost..................... $247 $ 42 $ 30 $ --
Interest cost.................... 664 138 187 103
Net amortization and deferral.... -- -- -- 2
---- ---- ---- ----
Net periodic
postretirement
benefit cost
(income)............. $911 $180 $217 $105
==== ==== ==== ====
</TABLE>

On August 11, 1995, the plan was amended to terminate all employees from
the plan except those eligible to retire on June 30, 1995 and all current
retirees. In addition under the amended plan, active employees eligible to
retire will, after the age of 65, receive through the retirement plan, 80% of
the cost of medical insurance with a 5% cap over a base year premium of calendar
1996. Because it was expected that the plan would be terminated in conjunction
with the ESI acquisition discussed in note 1, the effects were considered in
measuring the Company's accumulated post retirement benefit obligation as of the
acquisition date.

The discount rate used in determining the accumulated postretirement
benefit obligation was 7.75% at March 31, 1996 and December 31, 1996. The
assumed health care cost trend rate was 10% in 1995 graded down to 5% after 12
years. Because health care cost increases over 5% annually are borne by the
employees, the amounts reported are not affected by increases in the assumed
health care cost trend rate.

(12) RELATED PARTY TRANSACTIONS

ESI charged the Company $450,000 during the nine months ended December 31,
1996 for certain administrative overhead functions performed from September 20,
1994 through December 31, 1996.

The Company has an account receivable from a related party of $158,000 at
December 31, 1996 for services rendered by IRI personnel. The receivable is
expected to be paid during fiscal year 1997.

F-14
<PAGE> 74

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(13) BUSINESS SEGMENTS

The Company operates through two business segments consisting of Oilfield
Equipment and Specialty Steel. The Oilfield Equipment segment is principally
engaged in the design and manufacture of drilling and well servicing rigs and
components for use on land and on offshore drilling platforms. The Company
specializes in providing small truck-mounted rigs to stationary land deep
drilling rigs to meet the functional requirements of customers drilling in
remote and harsh environments. The Company's Specialty Steel segment
manufactures premium carbon, alloy and specialty steel for use in commercial and
military products as well as for the manufacture of oilfield equipment products.
IRI's steel products are also used in the petroleum, aircraft and power
generation industries.

Financial information by industry segment is summarized below (in
thousands).

<TABLE>
<CAPTION>
OILFIELD SPECIALTY CORPORATE
EQUIPMENT STEEL AND OTHER TOTAL
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Period from April 1, 1994 through
September 19, 1994 (predecessor):
Sales to unaffiliated customers....... $12,545 $ 3,928 $ -- $ 16,473
Operating income (loss)............... (671) 232 (1,406) (1,845)
Identifiable assets................... 34,169 5,184 1,677 41,030
Depreciation.......................... 188 136 17 341
Capital expenditures.................. 24 85 -- 109
Period from September 20, 1994 through
March 31, 1995:
Sales to unaffiliated customers....... $14,399 $ 5,807 $ -- $ 20,206
Operating income...................... 1,269 1,240 1,334 3,843
Identifiable assets................... 28,924 5,804 5,402 40,130
Depreciation.......................... 2 2 2 6
Amortization of negative goodwill..... -- -- (2,684) (2,684)
Capital expenditures.................. 23 13 92 128
Year ended March 31, 1996:
Sales to unaffiliated customers....... $40,176 $12,330 $ -- $ 52,506
Operating income...................... 4,141 2,608 890 7,639
Identifiable assets................... 30,979 6,302 9,350 46,631
Depreciation.......................... 40 12 12 64
Amortization of negative goodwill..... -- -- (5,367) (5,367)
Capital expenditures.................. 581 130 6 717
Nine months ended December 31, 1996:
Sales to unaffiliated customers....... $52,029 $10,269 $ -- $ 62,298
Operating income (loss)............... 7,399 2,879 (1,168) 9,110
Identifiable assets................... 40,169 6,956 11,546 58,671
Depreciation.......................... 79 10 9 98
Amortization of negative goodwill..... -- -- (4,026) (4,026)
Capital expenditures.................. 545 218 958 1,721
</TABLE>

F-15
<PAGE> 75

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Export sales by geographic region based upon the ultimate destination in
which equipment or services were sold, shipped or provided to the customer by
the Company were as follows (in thousands):

<TABLE>
<CAPTION>
PERIOD FROM
APRIL 1, 1994 PERIOD FROM NINE MONTHS
THROUGH SEPTEMBER 20, ENDED
SEPTEMBER 19, 1994 THROUGH YEAR ENDED DECEMBER 31,
1994 MARCH 31, 1995 MARCH 31, 1996 1996
------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
Russia............................. $ 2,287 $ 8,674 $26,459 $39,717
Europe (excluding Russia).......... 301 1,141 2,068 151
Asia (excluding Russia)............ 2,638 187 128 72
South America...................... 57 -- -- 634
Africa............................. 2,426 -- 391 --
------- ------- ------- -------
Total export sales....... 7,709 10,002 29,046 40,574
Domestic sales..................... 8,764 10,204 23,460 21,724
------- ------- ------- -------
Total sales.............. $16,473 $20,206 $52,506 $62,298
======= ======= ======= =======
</TABLE>

During the period from April 1, 1994 through September 19, 1994
(preacquisition), one customer constituted 11% of total revenues. During the
period from September 20, 1994 through March 31, 1995, two customers each
accounted for revenues of 12%. For the year ended March 31, 1996, one customer
accounted for 36% of revenues and for the nine months ended December 31, 1996,
two customers accounted for 38% and 14% of revenues, respectively.

(14) ACQUISITIONS

The term loan is payable in increasing amounts over a five-year period and
bears interest at a base rate (as defined) plus 1.5% or the Eurodollar rate plus
3.25%. The interim notes bear interest at LIBOR plus 6.5%, increasing .5% per
three month period if the notes are not repaid within eight months, to a maximum
of 18%. The interim notes mature one year from issuance and at maturity the
holders of the interim notes shall receive warrants representing 5% of the
common stock of ESI. In addition, holders are required to exchange their interim
notes for rollover notes if no event of default has occurred, the Company pays a
3% rollover fee to the holders, the rollover debt registration is declared
effective by the SEC and the shelf registration statement with respect to the
warrants and warrant shares has been declared effective by the SEC. Proceeds
from any public offering or private placement are to be used, subject to certain
agreed exceptions, to redeem the interim notes.

Bowen, headquartered in Houston, Texas, designs, manufactures and markets
fishing tools and drilling, power and wireline/pressure control equipment used
in the drilling and completion of oil and gas wells. Cardwell, headquartered in
El Dorado, Kansas, manufactures and sells drilling rigs, related oilfield
equipment and supplies predominantly to foreign customers.

F-16
<PAGE> 76

IRI INTERNATIONAL CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The acquisitions have been recorded using the purchase method of accounting
and results of operations of the acquired companies will be included in the
statement of operations of IRI from the date of the respective acquisitions.

(15) COMMITMENTS AND CONTINGENCIES

The Company has contract commitments aggregating $14.8 million at December
31, 1996 for the manufacture and delivery of drilling rigs during fiscal year
1997.

At December 31, 1996, the Company was contingently liable for approximately
$7.3 million in letters of credit which guarantee the Company's performance for
payment to third parties in accordance with specified contractual terms and
conditions. These letters of credit are primarily secured by the Company's cash,
accounts receivable and inventory. Management does not expect any material
losses to result from these off-balance-sheet instruments as it anticipates full
performance on the related contracts.

(16) SUBSEQUENT EVENT

On October 14, 1997, the Company merged into ESI. ESI was the surviving
corporation and changed its name to IRI International Corporation. At the time
of the merger, ESI had 100 common shares issued and outstanding, no liabilities
and its sole asset was its investment in the Company. As a result of the merger,
each share of common stock of ESI was converted into 300,000 shares of the
surviving corporation, each treasury share of common stock was cancelled and
each share of preferred stock of the Company, including accrued and unpaid
dividends thereon, was cancelled. The authorized capital stock of the Company
was increased to 100,000,000 common shares and 25,000,000 preferred shares. The
financial statements, including all references to the number of shares of common
and preferred stock and all per share information, have been adjusted to reflect
the merger and the other changes in capital structure on a retroactive basis.

F-17
<PAGE> 77

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

ASSETS

<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents................................. $ 2,366
Accounts receivable, less allowance for doubtful accounts
of $228................................................ 23,073
Inventories (note 2)...................................... 84,629
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 2,508
Other current assets...................................... 2,042
--------
Total current assets.............................. 114,618
--------
Property, plant and equipment, net.......................... 38,354
Excess of cost over fair value of net tangible assets of
businesses acquired, net.................................. 5,842
Prepaid pension cost........................................ 578
Other assets, principally debt issuance costs, net.......... 4,218
--------
$163,610
========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable.......................................... $ 7,162
Accrued liabilities....................................... 5,025
Customer advances and security deposits................... 7,875
Other liabilities......................................... 1,721
Current installments of long-term debt.................... 2,826
Current installments of obligation under capital lease.... 144
--------
Total current liabilities......................... 24,753
Negative goodwill, less accumulated amortization............ 12,076
Long-term debt, less current installments................... 99,813
Obligation under capital lease, less current installments... 468
Accrued postretirement benefits other than pensions......... 1,176
--------
Total liabilities................................. 138,286
--------
Shareholders' equity:
Preferred stock, $1 par value, 25,000,000 shares
authorized, 0 shares issued and outstanding............ --
Common stock, $.01 par value, 100,000,000 shares
authorized, 30,000,000 shares issued and outstanding... 300
Additional paid-in capital................................ 4,700
Retained earnings......................................... 20,324
--------
Total shareholders' equity........................ 25,324
Commitments and contingencies
--------
Total liabilities and shareholders' equity.................. $163,610
========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-18
<PAGE> 78

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Revenues.................................................... $29,347 $57,785
Cost of goods sold.......................................... 21,149 44,631
------- -------
Gross profit...................................... 8,198 13,154
Administrative and selling expense.......................... 5,295 8,928
------- -------
Operating income.................................. 2,903 4,226
------- -------
Other income (expense):
Interest income........................................... 213 79
Interest expense.......................................... (207) (3,147)
Other, net................................................ -- (569)
------- -------
6 (3,637)
------- -------
Income before income taxes........................ 2,909 589
Income taxes................................................ -- 168
------- -------
Net income........................................ 2,909 421
------- -------
Net income per common share................................. $ 0.10 $ 0.01
======= =======
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-19
<PAGE> 79

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED SHAREHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balances at December 31, 1996................... $300 $4,700 $19,903 $24,903
Net income...................................... -- -- 421 421
---- ------ ------- -------
Balances at June 30, 1997....................... $300 $4,700 $20,324 $25,324
==== ====== ======= =======
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-20
<PAGE> 80

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 2,909 $ 421
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation and amortization.......................... 132 1,073
Amortization of negative goodwill...................... (2,684) (2,684)
Change in accrued employee benefits.................... (278) (272)
Changes in assets and liabilities (exclusive of effects
of acquisitions):
Inventory............................................ (6,384) (6,755)
Accounts receivable.................................. 2,107 (1,770)
Other assets......................................... 862 2,054
Accounts payable and accrued expenses, customer
advances and other liabilities...................... (4,738) (244)
------- --------
Net cash used in operations....................... (8,074) (8,177)
------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment................ (336) (1,191)
Acquisition of Bowen assets, net of liabilities assumed... -- (74,978)
Acquisition of Cardwell assets, net of liabilities
assumed................................................ -- (12,565)
------- --------
Net cash used in investing activities............. (336) (88,734)
------- --------
Cash flows from financing activities:
Proceeds from notes payable............................... -- 99,503
Payments on capital lease obligation...................... (77) (54)
Debt issuance costs....................................... -- (3,807)
Payments on notes payable................................. -- (5,000)
------- --------
Net cash flows provided from financing activities......... (77) 90,642
------- --------
Decrease in cash and cash equivalents....................... (8,487) (6,269)
Cash and cash equivalents at beginning of year.............. 12,393 8,635
------- --------
Cash and cash equivalents at end of year.................... $ 3,906 $ 2,366
======= ========
Interest paid............................................... $ 17 $ 81
======= ========
Income taxes paid........................................... $ -- $ --
======= ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-21
<PAGE> 81

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) GENERAL

The accompanying condensed consolidated financial statements of IRI
International Corporation and subsidiaries (the Company) as of June 30, 1997 and
for the six months ended June 30, 1996 and 1997 are unaudited; however, they
include all adjustments (consisting only of normal recurring adjustments) which,
in the opinion of management, are necessary for a fair presentation for such
periods. Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year end. The results of operations for the
interim periods presented are not necessarily indicative of the results to be
expected for the entire year.

Certain footnote disclosures normally included in annual consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been omitted herein. The interim information should be read in
conjunction with the Company's annual financial statements and notes.

(2) INVENTORIES

Inventories consist of the following at June 30, 1997 (in thousands):

<TABLE>
<S> <C>
Raw materials............................................... $39,171
Work in process............................................. 23,425
Finished goods.............................................. 22,033
-------
$84,629
=======
</TABLE>

(3) COMMITMENTS AND CONTINGENCIES

The Company has contract commitments aggregating $93.0 million at June 30,
1997 for the manufacture and delivery of drilling rigs.

At June 30, 1997, the Company was contingently liable for approximately
$9.3 million in letters of credit which guarantee the Company's performance for
payment to third parties in accordance with specified contractual terms and
conditions. These letters of credit are primarily secured by the Company's cash,
accounts receivable and inventory. Management does not expect any material
losses to result from these off-balance-sheet instruments as it anticipates full
performance on the related contracts.

The Company is subject to various claims and legal actions arising in the
ordinary course of business. Management believes that any ultimate liability
resulting from the outcome of such proceedings to the extent not otherwise
provided for in the financial statements will not have a material adverse effect
on the Company's financial condition.

(4) ACQUISITIONS

On March 31, 1997, the Company acquired certain assets and assumed certain
liabilities of Bowen Tools, Inc. ("Bowen"), a wholly owned subsidiary of the
French chemical concern L'Air Liquide, for a total consideration of $73.1
million. On April 17, 1997, the Company also acquired the stock of Cardwell
International Ltd. ("Cardwell"), a privately owned company, as well as certain
assets held by affiliates of Cardwell for approximately $12 million in cash at
closing and partial payment ($3 million) of a note payable to bank. In addition
the Company incurred approximately $2.4 million ($1.8 million for Bowen and $.6
million for Cardwell) of transaction costs in connection with the acquisitions.
The acquisitions were financed through a $65 million senior secured term loan
facility and $31 million of interim senior subordinated increasing rate notes.
The term loan is payable in increasing amounts over a five-year period and bears
interest at a base rate (as defined) plus 1.5% or the Eurodollar rate plus
3.25%. The interim notes bear interest at LIBOR plus 6.5%, increasing .5% per
three month period if the notes are not repaid within eight months, to a maximum
of 18%. The interim notes mature one year from issuance and at maturity the
holders of the interim notes shall receive

F-22
<PAGE> 82

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

warrants representing 5% of the common stock of the Company. In addition,
holders are required to exchange their interim notes for rollover notes if no
event of default has occurred, the Company pays a 3% rollover fee to the
holders, the rollover debt registration is declared effective by the SEC and the
shelf registration statement with respect to the warrants and warrant shares has
been declared effective by the SEC. Proceeds from any public offering or private
placement are to be used, subject to certain agreed exceptions, to redeem the
interim notes.

The acquisitions have been recorded using the purchase method of accounting
and results of operations of the acquired companies have been included in the
statement of operations of IRI from the date of the respective acquisitions.
Based on management's preliminary estimates, the cost of the Bowen and Cardwell
acquisitions have been allocated to the assets acquired and liabilities assumed
based on their respective fair values as follows (in thousands):

<TABLE>
<S> <C>
Current assets.............................................. $ 56,143
Property, plant and equipment............................... 37,647
Excess of cost over fair value of net tangible assets of
businesses acquired, net.................................. 6,096
Other assets................................................ 976
Current liabilities......................................... (13,319)
--------
$ 87,543
========
</TABLE>

The following sets forth selected consolidated financial information for
the Company on a pro forma basis for the six months ended June 30, 1996 and 1997
assuming the Bowen and Cardwell acquisitions had occurred on January 1, 1996 (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Revenues.......................................... $83,300 $80,195
======= =======
Gross profit...................................... $23,829 $22,507
======= =======
Operating income.................................. $ 4,180 $ 5,294
======= =======
Net loss.......................................... $(1,416) $(1,231)
======= =======
Net loss per common share......................... $ (0.05) $ (0.04)
======= =======
</TABLE>

Pro forma adjustments primarily relate to additional interest expense
resulting from debt to finance the acquisitions, additional depreciation and
amortization expense as a result of the purchase price allocations to property,
plant and equipment and excess of cost over net tangible assets purchased and
the related tax effects of these adjustments.

The pro forma information is not necessarily indicative of the results that
actually would have been achieved had such transactions been consummated as of
January 1, 1996, or that may be achieved in the future.

F-23
<PAGE> 83

IRI INTERNATIONAL CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) LONG-TERM DEBT

The Company had debt outstanding at June 30, 1997 as follows (in
thousands):

<TABLE>
<S> <C>
Revolving credit note, due March 31, 2000................... $ 6,000
Senior subordinated note, due March 31, 1998................ 31,000
Senior secured term loan, due in increasing quarterly
payments
beginning June 30, 1997................................... 65,000
Other....................................................... 639
--------
102,639
Less current installments................................... (2,826)
--------
Long-term debt, less current installments................... $ 99,813
========
</TABLE>

The senior secured term loan facility contains provisions that requires the
Company to maintain certain financial ratios commencing June 30, 1997 and
achieve consolidated earnings before interest, taxes, depreciation and
amortization of $25 million by December 31, 1997. The senior secured term loan
facility also limits sales of assets, the incurrence of additional indebtedness,
and restricts payments to shareholders.

(6) RELATED PARTY TRANSACTIONS

F-24
<PAGE> 84

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Bowen Tools, Inc.

We have audited the accompanying consolidated balance sheets of Bowen
Tools, Inc. as of December 31, 1995 and 1996 and the related consolidated
statements of operations, shareholder's equity and cash flows for each of the
years in the three-year period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bowen Tools, Inc. as of
December 31, 1995 and 1996 and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1996 in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Houston, Texas
May 23, 1997

F-25
<PAGE> 85

BOWEN TOOLS, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 1,193 $ 1,656
Accounts receivable, less allowance for doubtful accounts
of $155 and $200 at 1995 and 1996...................... 10,597 13,035
Inventories............................................... 20,706 27,125
Receivable from Parent.................................... 7,053 --
Other assets.............................................. 1,647 1,288
------- -------
Total current assets.............................. 41,196 43,104
------- -------
Property, plant and equipment, net.......................... 29,260 32,604
Shop inventories............................................ 4,456 3,672
Prepaid pension cost........................................ 2,971 3,333
Other assets................................................ 240 196
------- -------
Total assets...................................... $78,123 $82,909
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Bank overdraft............................................ $ 622 $ 1,812
Accounts payable.......................................... 2,882 1,514
Accrued liabilities....................................... 2,462 4,045
Deferred tax liability.................................... 3,183 2,737
Payable to Parent......................................... -- 897
------- -------
Total current liabilities......................... 9,149 11,005
------- -------
Deferred tax liability...................................... 7,080 7,316
Other postretirement benefit obligation..................... 423 457
------- -------
Total liabilities................................. 16,652 18,778
------- -------
Shareholder's equity:
Common stock, $1 par value, 1,000 shares authorized,
issued and outstanding................................. 1 1
Common stock, $2.50 par value, 10,000 shares authorized,
400 shares issued and outstanding...................... 1 1
Capital in excess of par.................................. 39,189 39,189
Retained earnings......................................... 23,015 25,819
Accumulative translation adjustment....................... (735) (879)
------- -------
Total shareholder's equity........................ 61,471 64,131
Commitments and contingencies
------- -------
Total liabilities and shareholder's equity........ $78,123 $82,909
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-26
<PAGE> 86

BOWEN TOOLS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Net sales................................................... $46,785 $45,123 $53,445
Rental tool income.......................................... 10,775 12,587 13,412
------- ------- -------
Net sales......................................... 57,560 57,710 66,857
------- ------- -------
Cost of goods sold.......................................... 32,224 32,282 36,636
------- ------- -------
Gross profit...................................... 25,336 25,428 30,221
------- ------- -------
Operating expenses:
Selling and distribution............................... 15,934 17,492 19,144
General and administrative............................. 4,088 3,476 3,748
Depreciation and amortization.......................... 2,360 1,973 2,470
------- ------- -------
Operating income.................................. 2,954 2,487 4,859
Other income (expense):
Gain (loss) on sale of property and equipment.......... (931) 1,109 40
Other.................................................. 908 177 (492)
------- ------- -------
Income before taxes............................... 2,931 3,773 4,407
Income taxes................................................ 1,113 1,352 1,603
------- ------- -------
Net income........................................ $ 1,818 $ 2,421 $ 2,804
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-27
<PAGE> 87

BOWEN TOOLS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
CAPITAL IN ACCUMULATIVE TOTAL
COMMON EXCESS OF RETAINED TRANSLATION SHAREHOLDER'S
STOCK PAR VALUE EARNINGS ADJUSTMENT EQUITY
------ ---------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1993.............. $2 $39,189 $ 61,409 $ 90 $100,690
Net income............................ -- -- 1,818 -- 1,818
Change in accumulative translation
adjustment.......................... -- -- -- (321) (321)
Dividends to Parent................... -- -- (2,633) -- (2,633)
-- ------- -------- ----- --------
Balances at December 31, 1994.............. 2 39,189 60,594 (231) 99,554
Net income............................ -- -- 2,421 -- 2,421
Change in accumulative translation
adjustment.......................... -- -- -- (504) (504)
Dividends to Parent................... -- -- (40,000) -- (40,000)
-- ------- -------- ----- --------
Balances at December 31, 1995.............. 2 39,189 23,015 (735) 61,471
Net income............................ -- -- 2,804 -- 2,804
Change in accumulative translation
adjustment.......................... -- -- -- (144) (144)
-- ------- -------- ----- --------
Balances at December 31, 1996.............. $2 $39,189 $ 25,819 $(879) $ 64,131
== ======= ======== ===== ========
</TABLE>

See accompanying notes to consolidated financial statements.

F-28
<PAGE> 88

BOWEN TOOLS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 1,818 $ 2,421 $ 2,804
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation........................................... 2,360 1,973 2,470
Deferred income taxes.................................. 42 504 (210)
(Gain) loss on sales of property and equipment......... 931 (1,109) (40)
Gain on sale of rental tools........................... (536) (833) (1,286)
Foreign currency translation........................... 1,058 (475) 72
Changes in assets and liabilities:
Accounts receivable.................................. (1,368) 793 (2,438)
Inventory............................................ 5,193 4,779 (5,635)
Receivable from Parent............................... (5,519) (4,736) 7,053
Other current assets................................. (224) (1,117) 359
Other................................................ (184) (31) 44
Prepaid pension cost................................. (330) (107) (362)
Accounts payable..................................... 449 (118) (1,368)
Other postretirement benefits........................ 26 30 34
Accrued liabilities.................................. 749 (1,180) 1,583
Payable to Parent.................................... -- -- 897
------- ------- -------
Net cash provided by operations................... 4,465 794 3,977
------- ------- -------
Cash flows from investing activities:
Purchases of property, plant and equipment................ (2,993) (3,580) (6,321)
Proceeds on sales of property and equipment............... 842 1,916 1,833
------- ------- -------
Net cash used in investing activities............. (2,151) (1,664) (4,488)
------- ------- -------
Cash flows from financing activities -- change in bank
overdraft................................................. 557 65 1,190
------- ------- -------
Effect of exchange rate changes on cash..................... (1,379) (30) (216)
------- ------- -------
Increase (decrease) in cash................................. 1,492 (835) 463
Cash at beginning of year................................... 536 2,028 1,193
------- ------- -------
Cash at end of year......................................... $ 2,028 $ 1,193 $ 1,656
======= ======= =======
Income taxes paid to Parent................................. $ 524 $ 681 $ 1,364
======= ======= =======
Noncash item -- dividend of receivable from Parent.......... $ 2,633 $40,000 $ --
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-29
<PAGE> 89

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996

(1) ORGANIZATION

(a) General

Bowen Tools, Inc. (the Company) is a wholly-owned subsidiary of Air Liquide
America Corporation (Air Liquide or Parent). The Company was acquired in 1986
and these financial statements reflect Air Liquide's purchase price allocation
to the Company's net assets.

The Company designs, manufactures, and markets fishing tools and drilling,
power, and wireline/pressure control equipment used in the drilling and
completion of oil and gas wells. The Company also rents equipment used in the
drilling and completion of oil and gas wells. The Company has four foreign
locations, which market the Company's products abroad, located in Scotland,
Holland, Singapore, and Canada.

On March 31, 1997, IRI International Corporation, a manufacturer of
drilling rigs and related equipment, acquired virtually all the assets
(excluding the pension asset, cash and cash equivalents and certain fixed
assets) and assumed certain liabilities (excluding intercompany payables and
certain pending litigation) of the Company for approximately $75,000,000.

(b) Risks Associated with the Company's Business

The Company is subject to certain risks inherent in the ownership and
operation of foreign subsidiaries including tax increases, retroactive tax
claims, expropriation, adverse changes in currency values, foreign exchange
controls, import and export regulations, environmental controls and other laws,
regulations or international development that may adversely affect the Company's
subsidiaries. The Company does not maintain political risk insurance.

The availability of a ready market and prices received for the Company's
products depend upon numerous factors beyond the control of the Company
including fluctuating market demand, the price of oil and gas commodities,
competition, governmental regulation and world and economic developments. World
oil and gas markets are highly volatile and shortage or surplus conditions could
substantially affect prices the Company receives for its products.

(2) SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation

The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries and its allocable portion of sales from L'Air
Liquide's Foreign Sales Corporation. All significant intercompany balances and
transactions have been eliminated in consolidation.

(b) Inventories

Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method for all inventories.

Property, plant, and equipment are stated at cost. Depreciation is
principally provided on the straightline method over the estimated useful lives
of the assets (20 years for buildings and improvements; 5-12 years for machinery
and equipment; and 7-12 years for rental tools). Repairs and maintenance,
including rental tool rework costs, are expensed as incurred while betterments
are capitalized.

F-30
<PAGE> 90

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(d) Revenue Recognition

The Company recognizes revenue from product sales upon shipment to the
customer. Revenue is recognized from rentals under operating leases in the month
in which they accrue. The sale of rental tools is considered part of the
Company's normal operations and, accordingly, is included in net sales in the
accompanying consolidated statements of operations.

(e) Shop Inventories

Shop inventories of approximately $4,456,000 (net of an allowance of
$5,342,000) and $3,672,000 (net of an allowance of $4,456,000) at December 31,
1995 and 1996, respectively, represent replacement parts for customers and are
stated at estimated net realizable value.

(f) Currency Translation

The assets and liabilities of the Company's Canadian subsidiary are
translated at current exchange rates, and related revenues and expenses are
translated at average exchange rates for the period. Since the functional
currency of this subsidiary is not the U.S. dollar, the resulting translation
adjustments are recorded as a separate component of shareholder's equity. The
assets and liabilities of the other foreign subsidiaries, where the functional
currency is the U.S. dollar, are translated at current exchange rates for
monetary assets and liabilities and historical exchange rates for non-monetary
items, and related revenues and expenses are translated at an average rate for
the period. Translation gains and losses relating to these subsidiaries are
included in determining net income. Gains and losses resulting from foreign
currency transactions are also included in income.

Translation gains (losses) for the years ended December 31, 1994, 1995 and
1996 were $37,000, $220,000 and ($29,000), respectively. Transaction (losses)
for the same periods were ($37,000), ($429,000) and ($175,000), respectively.

(g) Income Taxes

(h) Long-Lived Assets

In March 1995, SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, was issued which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and estimated future undiscounted cash
flows indicate the carrying value of those assets may not be recoverable. The
Company implemented SFAS No. 121 on January 1, 1994 and the adoption did not
have a material effect on the financial statements.

(i) Research and Development, and Advertising

Research and development, and advertising costs are expensed in the year in
which such costs are incurred. Research and development costs amounted to
approximately $142,000, $143,000 and $159,000 in

F-31
<PAGE> 91

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1994, 1995 and 1996 respectively. Advertising costs amounted to approximately
$234,000, $323,000 and $356,000 in 1994, 1995 and 1996, respectively.

(j) Fair Value of Financial Instruments

The Company defines the fair value of a financial instrument as the amount
at which the instrument could be exchanged in a current transaction between
willing parties. Financial instruments in the accompanying financial statements
include cash, accounts receivable and accounts payable. The carrying value of
financial instruments is considered to approximate fair value due to the short
maturity and characteristics of those instruments.

(k) Earnings Per Share

Earnings per share is not presented for each of the three years ended
December 31, 1996 because it is not meaningful due to the sole ownership of the
Company's stock by Air Liquide.

(l) Use of Estimates

(3) GEOGRAPHIC AREA INFORMATION

The Company is engaged in the business of manufacturing and distributing
fishing and drilling equipment for the oil and gas industry in the United
States, Scotland, Canada, Singapore, Amsterdam and Mexico. Summarized
information regarding the Company's significant operations in different
geographic areas, including domestic and export operations, as of and for the
years ended December 31, 1994, 1995 and 1996 follows:

F-32
<PAGE> 92

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
UNITED UNITED OTHER ADJUSTMENTS
STATES STATES FOREIGN AND
DOMESTIC EXPORT SCOTLAND CANADA OPERATIONS ELIMINATIONS CONSOLIDATED
-------- ------- -------- ------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1995
- ----------------------------
Net sales and rental
tools..................... $30,069 $17,526 $4,052 $3,223 $4,794 $(1,954) $ 57,710
======= ======= ====== ====== ====== ======= ========
Gross profit................ $18,482 $ 3,835 $1,047 $1,529 $2,489 $(1,954) $ 25,428
======= ======= ====== ====== ====== ======= ========
Depreciation and
amortization.............. $ 1,801 $ -- $ 74 $ 45 $ 53 $ -- $ 1,973
======= ======= ====== ====== ====== ======= ========
Selling and distribution.... $13,731 $ 1,736 $ 604 $ 467 $ 954 $ -- $ 17,492
======= ======= ====== ====== ====== ======= ========
G & A expense............... $ 229 $ 1,026 $ 874 $ 174 $1,173 $ -- $ 3,476
======= ======= ====== ====== ====== ======= ========
Net income.................. $ 1,555 $ 698 $ (506) $ 362 $ 312 $ -- $ 2,421
======= ======= ====== ====== ====== ======= ========
Identifiable assets......... $58,867 $ 3,238 $4,386 $2,577 $7,810 $ 1,245 $ 78,123
======= ======= ====== ====== ====== ======= ========
1996
- ----------------------------
Net sales and rental
tools..................... $32,832 $23,275 $4,714 $4,228 $4,413 $(2,605) $ 66,857
======= ======= ====== ====== ====== ======= ========
Gross profit................ $23,053 $ 4,173 $1,864 $1,437 $2,299 $(2,605) $ 30,221
======= ======= ====== ====== ====== ======= ========
Depreciation and
amortization.............. $ 2,077 $ -- $ 121 $ 45 $ 227 $ -- $ 2,470
======= ======= ====== ====== ====== ======= ========
Selling and distribution.... $15,469 $ 1,643 $ 594 $ 556 $ 882 $ -- $ 19,144
======= ======= ====== ====== ====== ======= ========
G & A expense............... $ 298 $ 1,093 $1,077 $ 186 $1,094 $ -- $ 3,748
======= ======= ====== ====== ====== ======= ========
Net income.................. $ 3,937 $ 934 $ 72 $ 370 $ 95 $(2,605) $ 2,803
======= ======= ====== ====== ====== ======= ========
Identifiable assets......... $68,028 $ 4,907 $3,475 $3,488 $4,957 $(1,946) $ 82,909
======= ======= ====== ====== ====== ======= ========
</TABLE>

For the years ending December 31, 1994, 1995 and 1996, three, two and two
customers, respectively, individually accounted for more than 10% of
consolidated sales. Sales to these customers were approximately $19,346,000,
$21,856,000 and $23,011,000 in 1994, 1995, and 1996, respectively. No account
receivable from one customer exceeded 10% of consolidated stockholder's equity
at December 31, 1994, 1995 or 1996.

(4) RELATED PARTY TRANSACTIONS

The Company has a receivable from and a payable to Air Liquide of
approximately $7,053,000 and $897,000 at December 31, 1995 and 1996,
respectively. The amount bears no interest and includes allocations by Air
Liquide for such items as taxes and insurance. Air Liquide does not incur any
general and administrative overhead on behalf of the Company other than certain
insurance which was allocated to the Company.

F-33
<PAGE> 93

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) INVENTORIES

Inventories consist of the following at December 31, 1995 and 1996 (in
thousands):

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Raw materials............................................ $ 3,074 $ 3,321
Work-in-progress......................................... 3,374 5,415
Finished goods........................................... 14,258 18,389
------- -------
$20,706 $27,125
======= =======
</TABLE>

(6) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following at December 31,
1995 and 1996 (in thousands):

<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Land and land improvements.............................. $ 3,615 $ 3,571
Building and improvements............................... 15,454 15,349
Machinery and equipment................................. 6,696 8,843
Rental tools............................................ 12,446 14,772
Construction in progress................................ 1,671 2,256
------- --------
39,882 44,791
Less accumulated depreciation........................... (10,622) (12,187)
------- --------
Net property, plant and equipment............. $29,260 $ 32,604
======= ========
</TABLE>

(7) INCOME TAXES

The components of income tax expense for the years ended December 31, 1994,
1995 and 1996 are as follows (in thousands):

<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current:
Federal...................................... $ 868 $ 459 $1,418
State........................................ 29 13 50
Foreign...................................... 174 376 345
Deferred....................................... 42 504 (210)
------ ------ ------
$1,113 $1,352 $1,603
====== ====== ======
</TABLE>

Income tax expense for the years ended December 31, 1994, 1995 and 1996
differed from the amounts computed by applying the U.S. federal income tax rate
of 35 percent to pretax income from continuing operations as a result of the
following (in thousands):

<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Computed "expected" tax expense................ $1,026 $1,321 $1,542
State taxes, net of federal benefit............ 10 4 18
Foreign operations differences................. 62 13 1
Nondeductible meals and entertainment
expenses..................................... 22 24 37
Other.......................................... (7) (10) 5
------ ------ ------
$1,113 $1,352 $1,603
====== ====== ======
</TABLE>

F-34
<PAGE> 94

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1996 are presented below (in thousands).

<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Deferred income tax assets:
Current:
Accounts receivable and other assets principally due to
allowance for doubtful accounts....................... $ 76 $ 105
Other.................................................. 190 190
------- -------
Total deferred income tax assets.................. 266 295
------- -------
Deferred income tax liabilities:
Current:
Inventories, principally due to LIFO cost method used
for tax purposes and reserve for excess and
obsolete.............................................. 3,449 3,032
Noncurrent:
Property, plant and equipment, principally due to
differences in depreciation and capitalized
interest.............................................. 6,040 6,149
Pension asset.......................................... 1,040 1,167
------- -------
Total deferred income tax liabilities............. 10,529 10,348
------- -------
Net deferred income tax liability........................... $10,263 $10,053
======= =======
</TABLE>

In assessing the reliability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, management believes it is
more likely than not that the Company will realize the benefits of these
deductible differences. There are no deferred taxes provided on the Company's
foreign investments due to their permanent nature and the determination of the
deferred tax attributable to such foreign investments is not practicable.

(8) LEASES

The Company has several noncancelable operating leases for certain office,
shop and warehouse facilities; automobiles; and equipment, that expire over the
next three years. These leases generally contain renewal options for periods
ranging from three to five years and require the Company to pay all executory
costs such as maintenance and insurance. Rental expense for leases during 1994,
1995 and 1996 were approximately $529,000, $594,000 and $628,000, respectively.

Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996
are as follows (in thousands):

F-35
<PAGE> 95

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(9) BENEFIT PLANS

The Company participates in a defined benefit pension plan which covers all
domestic full-time employees of the Company who have completed one year of
service and are at least age 21. The defined benefit plan provides for benefits
based primarily on years of service and the employee's compensation near the
time of retirement. It is the policy of the Company to fund the plan currently
based upon actuarial determination and applicable regulations. The Company made
no contributions during 1994, 1995 and 1996, respectively.

The following table presents the defined benefit pension plan's funded
status as of December 31, 1995 and 1996, reconciled with amounts recognized in
the Company's consolidated balance sheets at December 31, 1995 and 1996 (in
thousands):

<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested benefit obligation................................. $10,515 $ 11,015
======= ========
Accumulated benefit obligation............................ $11,118 $ 11,709
======= ========
Actuarial present value of projected benefit obligation..... (13,343) (14,189)
Plan assets at fair value (equity and fixed income
securities)............................................... 20,447 21,669
------- --------
Projected benefit obligation less than plan assets.......... 7,104 7,480
Unrecognized net gain....................................... (3,389) (3,589)
Prior service cost not yet recognized in net periodic
pension cost.............................................. 316 237
Unrecognized net transition asset........................... (1,060) (795)
------- --------
Prepaid pension cost included in the balance sheet.......... $ 2,971 $ 3,333
======= ========
</TABLE>

Net pension cost for 1994, 1995 and 1996 included the following components
(in thousands):

<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Service cost -- benefits earned during the period..... $ 368 $ 386 $ 428
Interest cost on projected benefit obligation......... 920 966 1,044
Actual return on plan assets.......................... (1,377) (1,270) (1,511)
Net amortization and deferral......................... (328) (186) (323)
------- ------- -------
Net pension cost...................................... $ (417) $ (104) $ (362)
======= ======= =======
</TABLE>

Assumptions used in accounting for the pension plan as of December 31,
1994, 1995 and 1996 were (in thousands):

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Discount rates.............................................. 8.5% 7.0% 8.0%
Rates of increase in compensation levels.................... 6.6 6.6 6.6
Expected long-term rate of return on assets................. 8.0 8.0 7.5
</TABLE>

The assumed rates used above have a significant effect on the amounts
reported. For example, increasing the assumed discount rates by one percentage
point in each year would decrease the projected benefit obligation as of
December 31, 1996 by approximately $2,000,000 and the unrecognized net gain for
the year ended December 31, 1996 by approximately $2,000,000. Increasing the
assumed rate of increase in compensation levels by one percentage point in each
year would increase the projected benefit obligation as of December 31, 1996 by
approximately $1,400,000 and would decrease the unrecognized net gain for the
year ended December 31, 1996 by approximately $1,400,000. Increasing the
expected long-term rate of return on

F-36
<PAGE> 96

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

assets by one percentage point in each year would decrease the unrecognized net
gain for the year ended December 31, 1996 by $200,000.

The Company also has a defined contribution plan which covers most of its
employees. Participants can contribute a percentage of their annual compensation
and receive a 50% matching employer contribution on up to 6% of their annual
compensation. The Company contributed approximately $382,000 and $452,000 for
the years ended December 31, 1995 and 1996, respectively.

(10) OTHER POSTRETIREMENT BENEFIT PLANS

In addition to the Company's defined benefit pension plan and defined
contribution plan, the Company sponsors a defined benefit health care plan that
provides postretirement medical benefits to full-time employees who meet minimum
age and service requirements. The plan is contributory, with retiree
contributions adjusted annually, and contains other cost-sharing features such
as deductibles and coinsurance. The accounting for the plan anticipates future
cost-sharing changes to the written plan that are consistent with the Company's
expressed intent to increase the retiree contribution rate annually for the
expected general inflation rate for that year. The Company's policy is to fund
the cost of medical benefits in amounts determined at the discretion of
management.

The following table presents the plans' funded status reconciled with
amounts recognized in the Company's consolidated balance sheets at December 31,
1995 and 1996 (in thousands):

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees.................................................. $ 52 $ 56
Fully eligible active plan participants................... 87 94
Other active plan participants............................ 284 307
---- ----
423 457
Plan assets at fair value................................... -- --
---- ----
Accumulated postretirement benefit obligation in excess of
plan assets............................................... $423 $457
==== ====
</TABLE>

Net postretirement benefit cost for 1994, 1995 and 1996 include the
following components (in thousands):

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Service cost................................................ $22 $24 $26
Interest cost............................................... 29 32 35
--- --- ---
Net periodic postretirement benefit cost.................... $51 $56 $61
=== === ===
</TABLE>

For measurement purposes, 10.5% and 8.0% annual rates of increase in the
per capita cost of covered benefits (i.e., health care cost trend rate) was
assumed for 1996 for pre-65 and post-65 employees, respectively; the rate was
assumed to decrease gradually to 5.25% by the year 2003 and remain at that level
thereafter. The health care cost trend rate assumption has a significant effect
on the amounts reported. For example, increasing the assumed health care cost
trend rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1996 by $65,000 and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year ended December 31, 1996 by $12,000. A
discount rate of 8.0% was used in accounting for the pension plan as of December
31, 1994, 1995 and 1996.

F-37
<PAGE> 97

BOWEN TOOLS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Net sales................................................... $10,400 $12,349
Rental tool income.......................................... 3,862 4,243
------- -------
Net sales......................................... 14,262 16,592
------- -------
Cost of goods sold.......................................... 6,930 8,141
------- -------
Gross profit...................................... 7,332 8,451
------- -------
Operating expenses:
Selling and distribution.................................. 4,747 5,319
General and administrative................................ 1,102 1,158
Depreciation and amortization............................. 537 780
------- -------
Operating income.................................. 946 1,194
Other income (expense):
Gain (loss) on sale of property and equipment............. 37 (32)
Other..................................................... (199) 156
------- -------
Income before taxes............................... 784 1,318
Income taxes................................................ 301 493
------- -------
Net income........................................ $ 483 $ 825
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-38
<PAGE> 98

BOWEN TOOLS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

(UNAUDITED)

(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 483 $ 825
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation........................................... 537 780
Deferred income taxes.................................. (50) 157
(Gain) loss on sales of property and equipment......... 37 (32)
Foreign currency translation........................... 27 1,750
Changes in assets and liabilities:
Accounts receivable.................................. (2,981) 1,056
Inventory............................................ (3,395) (3,619)
Other current assets................................. 1,118 539
Other................................................ 46 --
Accounts payable..................................... (1,499) 667
Accrued liabilities.................................. 592 (475)
Payable to Parent.................................... 3,938 1,292
------- -------
Net cash provided by (used in) operations......... (1,147) 2,940
------- -------
Cash flows from investing activities:
Purchases of property, plant and equipment................ (966) (2,748)
Proceeds on sales of property and equipment............... 1,427 1,521
------- -------
Net cash provided by (used in) investing
activities....................................... 461 (1,227)
------- -------
Cash flows from financing activities -- change in bank
overdraft................................................. 605 (855)
------- -------
Effect of exchange rate changes on cash..................... (17) (1,658)
------- -------
Decrease in cash............................................ (98) (800)
Cash at beginning of year................................... 1,193 1,656
------- -------
Cash at end of period....................................... $ 1,095 $ 856
======= =======
Income taxes paid to Parent................................. $ 122 $ --
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-39
<PAGE> 99

BOWEN TOOLS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) GENERAL

The accompanying condensed consolidated financial statements of the Company
as of March 31, 1997 and the three months ended March 31, 1996 and 1997 are
unaudited; however, they include all adjustments (consisting only of normal
recurring adjustments) which, in the opinion of management, are necessary for a
fair presentation for such periods. Accounting measurements at interim dates
inherently involve greater reliance on estimates than at year end. The results
of operations for the interim periods presented are not necessarily indicative
of the results to be expected for the entire year.

(2) COMMITMENTS AND CONTINGENCIES

The Company is subject to various claims and legal actions arising in the
ordinary course of business, inclusive of various claims pertaining to the
Company's inactive Sanstorm operations, which previously marketed a line of
blast cleaning equipment and related accessories unrelated to the Company's core
oilfield tool product lines. In the opinion of management, the amount of
liability with respect to these actions and claims is either not material to the
Company's financial statements or, in the case of such claims relating to the
inactive Sanstorm operations, are reasonably provided for by Air Liquide, who
assumed these liabilities upon its acquisition of Bowen and is also a defendant
in such litigation.

(3) ACQUISITION

F-40
<PAGE> 100

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Cardwell International Ltd.:

We have audited the accompanying consolidated balance sheet of Cardwell
International Ltd. and subsidiaries as of October 31, 1996, and the related
consolidated statements of operations and shareholder's equity and cash flows
for the ten months then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cardwell
International Ltd. and subsidiaries as of October 31, 1996, and the results of
their operations and their cash flows for the ten months then ended in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Dallas, Texas
December 6, 1996, except as to note 10,
which is as of April 17, 1997

F-41
<PAGE> 101

CARDWELL INTERNATIONAL LTD.

CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
OCTOBER 31, 1996

<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 432
Letter of credit deposits................................. 1,915
Accounts receivable, less allowance for doubtful accounts
of $21................................................. 574
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 2,109
Inventories............................................... 12,743
Other current assets...................................... 315
Deferred income taxes..................................... 77
-------
Total current assets.............................. 18,165
Property, plant and equipment, net.......................... 1,108
Letter of credit deposits................................... 2,097
Other noncurrent assets..................................... 57
-------
$21,427
=======
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 4,974
Commissions payable....................................... 1,194
Customer advances......................................... 3,047
Income taxes payable...................................... 468
Notes payable to bank..................................... 5,935
Current installments of long-term debt.................... 146
Demand notes payable to related parties................... 1,230
-------
Total current liabilities......................... 16,994
Long-term debt, less current installments................... 340
Deferred income taxes....................................... 51
-------
Total liabilities................................. 17,385
-------
Shareholder's equity:
Class A common stock -- $1 par value; 30,000 shares,
authorized; 3,000 shares issued and outstanding........ 3
Retained earnings......................................... 4,083
-------
4,086
Less treasury stock, 2,000 shares, at cost................ 44
-------
Total shareholder's equity........................ 4,042
-------
Commitments and contingencies
-------
$21,427
=======
</TABLE>

See accompanying notes to consolidated financial statements.

F-42
<PAGE> 102

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
Revenues.................................................... $40,598
Cost of goods sold.......................................... 31,615
-------
Gross profit...................................... 8,983
Administrative and selling expense.......................... 6,836
-------
Operating income (loss)........................... 2,147
-------
Other income (expense):
Interest income........................................... 95
Interest expense.......................................... (532)
Other, net................................................ 76
-------
(361)
-------
Income before income taxes........................ 1,786
Income taxes................................................ 512
-------
Net income........................................ $ 1,274
=======
</TABLE>

See accompanying notes to consolidated financial statements.

F-43
<PAGE> 103

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE TEN MONTHS ENDED OCTOBER 31, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED TREASURY SHAREHOLDER'S
STOCK EARNINGS STOCK EQUITY
------ -------- -------- -------------
<S> <C> <C> <C> <C>
Balances at December 31, 1995............................ $3 $2,809 $(44) $2,768
Net income............................................... -- 1,274 -- 1,274
-- ------ ---- ------
Balances at October 31, 1996............................. $3 $4,083 $(44) $4,042
== ====== ==== ======
</TABLE>

See accompanying notes to consolidated financial statements.

F-44
<PAGE> 104

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TEN MONTHS ENDED OCTOBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
Cash flows from operating activities:
Net income................................................ $ 1,274
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization.......................... 149
Deferred income taxes.................................. (12)
Loss on sale of property and equipment................. 50
Changes in assets and liabilities:
Deposits............................................. (2,052)
Accounts receivable.................................. 2
Costs and estimated earnings in excess of billings on
uncompleted contracts............................... (306)
Inventories.......................................... (8,377)
Other current assets................................. (45)
Accounts payable and accrued liabilities............. 1,488
Commissions payable.................................. 1,037
Customer advances.................................... 2,909
Income taxes payable................................. 536
Other................................................ (96)
--------
Net cash used in operating activities............. (3,443)
--------
Cash flows from investing activities -- purchases of
property, plant and equipment............................. (368)
--------
Cash flows from financing activities:
Payments on long-term debt................................ (20)
Proceeds from notes payable to bank....................... 16,559
Payments on notes payable to bank......................... (13,568)
Proceeds from demand notes payable to related parties..... 4,541
Payments on demand notes payable to related parties....... (3,311)
--------
Net cash provided by financing activities......... 4,201
--------
Increase in cash and cash equivalents....................... 390
Cash and cash equivalents at beginning of year.............. 42
--------
Cash and cash equivalents at end of year.................... $ 432
========
Interest paid............................................... $ 485
========
Income taxes paid........................................... $ 98
========
</TABLE>

See accompanying notes to consolidated financial statements.

F-45
<PAGE> 105

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) GENERAL

Cardwell International, Ltd. and subsidiaries (the Company), incorporated
in 1980, manufactures and sells drilling rigs and related oilfield equipment and
supplies to predominately foreign customers. Raw materials are readily available
and the Company is not dependent upon a single or a few suppliers.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation

The Company consolidates the accounts of its wholly-owned subsidiaries,
Cardwell Manufacturing Co., Ltd., a Canadian company, and Cardwell Exports,
Ltd., a foreign sales corporation. All significant intercompany transactions are
eliminated.

(b) Cash and Cash Equivalents

Cash and cash equivalents consist of short-term, highly liquid investments
with original maturities of three months or less. Cash equivalents consist of
money market accounts at October 31, 1996.

Letter of credit deposits consist of certificates of deposit and other
investments placed with financial institutions as collateral to secure letters
of credit on contract performance guarantees and bid bonds. The Company
classifies deposits between current and long-term based on the investment
maturity date. All investments with a maturity date of less than one year are
classified as current. Deposits are to be returned to the Company upon the
expiration of the performance guarantee or bid bond.

(d) Inventories

Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.

(e) Property and Equipment

Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the following estimated useful lives:

<TABLE>
<S> <C>
Land improvements........................................... 15 years
Buildings................................................... 27-39 years
Machinery and equipment..................................... 7 years
Computer equipment.......................................... 3-7 years
Automotive equipment........................................ 5 years
Furniture, fixtures and other............................... 5-7 years
</TABLE>

Maintenance, repairs and renewals which neither materially add to the value
of the property nor appreciably prolong its life are charged to expense as
incurred. Gains or losses on dispositions of property and equipment are included
in operations.

(f) Revenues

Significant contracts (generally valued at $50,000 or greater) are
accounted for by the Company using the percentage-of-completion revenue
recognition method, whereby revenues and profits are recognized throughout the
performance period of the contract. The percentage-of-completion is calculated
based on the

F-46
<PAGE> 106

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ratio of contract costs incurred to date to total estimated contract costs after
providing for all known or anticipated costs. Costs include material, direct
labor and engineering and manufacturing overhead. Selling expenses and general
and administrative expenses are charged to operations as incurred. The effect of
changes in estimates of contract costs is recorded currently. All remaining
revenues are generally recorded when the equipment is shipped.

Costs and estimated earnings in excess of billings on uncompleted contracts
represent revenues earned under the percentage of completion revenue recognition
method but not yet billable under the terms of the contract. These amounts are
billable based on the terms of the contract which include shipment of the
products or completion of the contracts. Included in revenues and cost of goods
sold for the ten months ended October 31, 1996 is $9,803,000 and $7,694,000,
respectively, related to uncompleted contracts ($2,109,000 net).

For the ten months ended October 31, 1996, approximately 91% of the
Company's revenues were provided by sales to Russian customers. Additionally, 3
customers, each accounting for more than 10% of total revenues, aggregated 79%
of the Company's gross revenues for the ten months ended October 31, 1996.

(g) Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to operating losses and tax credit carryforwards and
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

(h) Financial Instruments

The carrying amounts of the financial instruments in the accompanying
financial statements (cash and cash equivalents, deposits, accounts receivable
and payable) approximate fair value because of the short maturity of these
instruments. Letter of credit deposits approximate fair value because they earn
interest at current market rates. Outstanding borrowings (notes payable to bank,
long-term debt and demand notes payable to related parties) bear interest at
current market rates and thus the carrying amount of debt approximates estimated
fair value.

All of the Company's customers are engaged in the energy industry. This
concentration of customers may impact the Company's overall exposure to credit
risk, either positively or negatively, in that customers may be similarly
affected by changes in economic and industry conditions. The Company performs
ongoing credit evaluations of its customers. The Company maintains reserves for
potential credit losses, and actual losses have historically been within the
Company's expectations. Foreign sales also present various risks, including
risks of war, civil disturbances and governmental activities that may limit or
disrupt markets, restrict the movement of funds or result in the deprivation of
contract rights or the taking of property without fair consideration. Most of
the Company's foreign sales, however, are to larger international companies or
are secured by letters of credit or similar arrangements.

(i) Use of Estimates

F-47
<PAGE> 107

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

(j) Commissions Payable

The Company accrues commissions payable as related revenues are recognized.

(k) Customer Advances

The Company requires customers to make prepayments on certain contracts.
The amount of prepayment varies from contract to contract, but is typically
based on a percentage of the contract price. These prepayments are recorded as
customer advances until the contract has been completed and billed, at which
time the customer advance is offset against accounts receivable.

(3) INVENTORIES

Inventories consist of the following at October 31, 1996 (in thousands):

<TABLE>
<S> <C>
Raw materials............................................... $ 783
Work in process............................................. 7,786
Parts....................................................... 3,791
Used equipment.............................................. 383
-------
$12,743
=======
</TABLE>

(4) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following at October 31, 1996
(in thousands):

<TABLE>
<S> <C>
Land and improvements....................................... $ 70
Buildings................................................... 569
Machinery and equipment..................................... 696
Computer equipment.......................................... 166
Automotive equipment........................................ 129
Furniture, fixtures and other............................... 48
------
1,678
Less accumulated depreciation............................... 570
------
$1,108
======
</TABLE>

(5) NOTE PAYABLE TO BANKS

The Company has a $10,000,000 revolving line of credit with a bank
available for working capital purposes subject to borrowing base limitations.
The net borrowing base was $6,799,000 at October 31, 1996. Notes payable
outstanding under the line of credit as of October 31, 1996 aggregated
$5,935,000. The note is secured by accounts receivable, inventories, property
and equipment and guarantees of the sole stockholder of the Company and a
company wholly-owned by the sole stockholder. The note bears interest at .75%
above prime rate (8.25% at October 31, 1996). Interest is payable monthly and
all unpaid principal and interest are due on October 31, 1997.

F-48
<PAGE> 108

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The note agreement contains covenants which, among other things, restrict
additional borrowings and payment of dividends, and require that the Company
maintain minimum tangible net worth and other minimum financial ratios.

(6) LONG-TERM DEBT

Long-term debt consists of the following at October 31, 1996 (dollars in
thousands):

<TABLE>
<S> <C>
7.75% (interest rate changes to 1.75% over prime on June 3,
1999 and is adjusted each April 1 thereafter) note payable
to bank, payable in monthly installments of $12, including
interest, to June 2, 2004; collateralized by certain real
property and guarantees of the (1) sole stockholder of the
Company, (2) a company wholly-owned by the sole
stockholder of the Company and (3) 75% by the Small
Business Administration................................... $405
10.55% note payable in monthly installments of $1, including
interest, to August 1999; secured by lien on an
automobile................................................ 24
7% note payable, payable in monthly installments of $2,
including interest, to July 1998 -- July 2000............. 57
----
486
Less current installments................................... 146
----
$340
====
</TABLE>

Aggregate installments of long-term debt at October 31, 1996 follow (in
thousands):

<TABLE>
<S> <C>
October 31:
1997...................................................... $146
1998...................................................... 153
1999...................................................... 160
2000...................................................... 27
</TABLE>

(7) INCOME TAXES

Income taxes consist of the following components for the ten-month period
ended October 31, 1996 (in thousands):

<TABLE>
<S> <C>
Current..................................................... $524
Deferred.................................................... (12)
----
$512
====
</TABLE>

Income tax expense for the ten-month period ended October 31, 1996 differs
from the amount computed by applying the U.S. federal tax rate of 34% to income
before income taxes as a result of the following (in thousands):

<TABLE>
<S> <C>
Computed "expected" tax expense............................. $ 607
Nondeductible expenses...................................... 10
Foreign sales corporation exclusion......................... (160)
State taxes, net of federal benefit......................... 54
Other....................................................... 1
-----
$ 512
=====
</TABLE>

F-49
<PAGE> 109

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effect (federal and state) of temporary differences that give rise
to significant portions of the deferred tax assets and deferred tax liabilities
at October 31, 1996 are as follows (in thousands):

<TABLE>
<S> <C>
Current deferred tax assets:
Allowance for doubtful accounts........................... $ 8
Vacation accrual.......................................... 49
Warranty accrual.......................................... 20
---
$77
===
Noncurrent deferred tax liability -- plant and equipment $51
depreciation..............................................
===
</TABLE>

No valuation allowance related to the deferred tax asset was necessary for
any of the periods presented as management believes it is more likely than not
that such deferred tax assets will be realized within the next fiscal year.

(8) LEASES

The Company has operating leases for office facilities, machinery and
equipment and certain automotive equipment. Rental expense on operating leases
was $410,000 for the ten-month period ended October 31, 1996. The following is a
yearly schedule of future minimum rental payments under operating leases as of
October 31, 1996 (in thousands):

<TABLE>
<S> <C>
1997........................................................ $200
1998........................................................ 142
1999........................................................ 62
2000........................................................ 62
2002........................................................ 49
Thereafter.................................................. 140
</TABLE>

(9) RELATED PARTY TRANSACTIONS

The Company leases certain buildings, equipment and automotive equipment
from related parties including management of the Company, members of their
families and companies related by common ownership. Related party rental expense
was $206,000 for the ten months ended October 31, 1996 and is included in
general and administrative expense in the accompanying consolidated statement of
operations.

The Company has license agreements with certain businesses owned by the
President of the Company. The agreements provide for payments of $11,000 and
$2,000 per month plus 4.5% of spare parts sales for the use of trademarks,
patterns and prints used by the Company. Payments under the license agreements
totaled $430,000 for the ten months ended October 31, 1996 and are included in
general and administrative expense in the accompanying consolidated statement of
operations.

Demand notes payable to related parties are unsecured and bear interest at
8% to 15%. Interest expense on these notes aggregated $83,000 for the ten months
ended October 31, 1996.

On certain of the demand notes payable to related parties, the Company pays
a fee in excess of stated interest for the use of the related party's funds. On
contracts awarded to the Company and for which the related party funded the
related bid bond, the Company is required to pay the related lending party a fee
of approximately .5% of the contract price. No fee is required if the contract
is not awarded to the Company. For the ten months ended October 31, 1996 the
Company paid fees of approximately $151,000. Such fees are included in general
and administrative expense in the accompanying consolidated statement of
operations.

F-50
<PAGE> 110

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(10) EXPORT SALES

Export sales by geographic region based upon the ultimate destination in
which equipment or services were sold, shipped, or provided to the customer by
the Company were as follows (in thousands):

<TABLE>
<S> <C>
Russia..................................................... $34,014
South America.............................................. 1,404
Europe (excluding Russia).................................. 423
Asia (excluding Russia).................................... 292
Africa..................................................... 416
-------
Total export sales............................... 36,549
Domestic sales............................................. 4,049
-------
Total Sales...................................... $40,598
=======
</TABLE>

(11) CONTINGENCIES

The Company has contract commitments aggregating $8,670,706 at October 31,
1996 for the manufacture and delivery of drilling rigs during fiscal 1997.

At October 31, 1996, the company had outstanding letters of credit for bid
and performance bonds totaling $6,313,000 of which $2,256,000 is secured by the
Company's bank revolving line of credit (see note 6).

(12) SUBSEQUENT EVENT

On April 17, 1997, all of the outstanding common stock of the Company and
certain assets held by affiliates of the Company were purchased by IRI
International Corporation (IRI) for $12,000,000 in cash. In addition, IRI
partially paid ($3,000,000) of Cardwell's notes payable to bank, and Cardwell
liquidated outstanding letters of credit deposits to pay off the remaining notes
payable to bank ($2,119,000) outstanding prior to the close of the purchase. IRI
assumed the underlying obligations on the bid and performance bonds.

F-51
<PAGE> 111

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FIVE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Revenues.................................................... $21,794 $11,091
Cost of goods sold.......................................... 16,999 9,005
------- -------
Gross profit...................................... 4,795 2,086
Administrative and selling expense.......................... 3,303 2,206
------- -------
Operating income (loss)........................... 1,492 (120)
Other income (expense):
Interest income........................................... 5 62
Interest expense.......................................... (222) (246)
Other, net................................................ 14 70
------- -------
(203) (114)
------- -------
Income (loss) before taxes........................ 1,289 (234)
Income tax expense (benefit)................................ 299 (73)
------- -------
Net income (loss)................................. $ 990 $ (161)
======= =======
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-52
<PAGE> 112

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE FIVE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED TREASURY SHAREHOLDER'S
STOCK EARNINGS STOCK EQUITY
------ -------- -------- -------------
<S> <C> <C> <C> <C>
Balances at October 31, 1996............................. $3 $4,083 $(44) $4,042
Net loss................................................. -- (161) -- (161)
-- ------ ---- ------
Balances at March 31, 1997............................... $3 $3,922 $(44) $3,881
== ====== ==== ======
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-53
<PAGE> 113

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FIVE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 990 $ (161)
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization.......................... 62 70
Deferred income taxes.................................. 51 (111)
Loss on disposal of property and equipment............. -- 5
Changes in assets and liabilities:
Letter of credit deposits............................ 550 997
Accounts receivable.................................. 3,812 (911)
Costs and estimated earnings in excess of billings on
uncompleted contracts............................... (5,748) 1,593
Inventories.......................................... (2,247) 6,510
Other current assets................................. 95 22
Accounts payable and accrued liabilities............. 1,063 (1,776)
Commissions payable.................................. (39) (995)
Customer advances.................................... 2,157 (2,729)
Income taxes payable................................. 180 (407)
Other................................................ 72 13
------- --------
Net cash provided by operating activities......... 998 2,120
------- --------
Cash flows from investing activities -- purchases of
property, plant and equipment............................. (162) (18)
------- --------
Cash flows from financing activities:
Payments on long-term debt................................ (48) (57)
Proceeds from notes payable to bank....................... 7,868 10,665
Payments on notes payable................................. (8,265) (11,910)
Proceeds from demand notes payable to related parties..... 300 86
Payments on demand notes payable to related parties....... (469) (1,135)
------- --------
Net cash used in financing activities............. (614) (2,351)
------- --------
Increase in cash and cash equivalents....................... 222 (249)
Cash and cash equivalents at beginning of period............ 34 432
------- --------
Cash and cash equivalents at end of period.................. $ 256 $ 183
======= ========
Interest paid............................................... $ 262 $ 270
======= ========
Income taxes paid........................................... $ 87 $ 320
======= ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

F-54
<PAGE> 114

CARDWELL INTERNATIONAL LTD.
AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) GENERAL

The accompanying condensed consolidated financial statements of Cardwell
International, Ltd. and subsidiaries (the Company), as of March 31, 1997 and for
the five months ended March 31, 1996 and 1997 are unaudited; however, they
include all adjustments (consisting only of normal recurring adjustments) which,
in the opinion of management, are necessary for a fair presentation for such
periods. Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year end. The results of operations for the
interim periods presented are not necessarily indicative of the results to be
expected for the entire year.

Summarized results from operations for the three months ended March 31,
1996 and 1997 follows (in thousands):

<TABLE>
<CAPTION>
1996 1997
------- ------
<S> <C> <C>
Revenues.................................................... $12,948 $5,818
======= ======
Gross profit................................................ $ 3,196 $1,082
======= ======
Net income (loss)........................................... $ 928 $ (35)
======= ======
</TABLE>

(2) INVENTORIES

Inventories consist of the following at March 31, 1997 (in thousands):

<TABLE>
<S> <C>
Raw materials............................................... $ 752
Work in process............................................. 2,614
Parts....................................................... 2,517
Used equipment.............................................. 350
------
$6,233
======
</TABLE>

(3) COMMITMENTS AND CONTINGENCIES

The Company had contract commitments aggregating $17.9 million at March 31,
1997 for the manufacture and delivery of drilling rigs during the remainder of
fiscal 1997.

At March 31, 1997, the Company had outstanding letters of credit for bid
and performance bonds totaling $3,597,000 of which $3,020,747 is secured by the
Company's bank revolving line of credit.

(4) SUBSEQUENT EVENT

F-55
<PAGE> 115

============================================================

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY U.S. UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY TO ANY PERSONS IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

---------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 7
The Company................................ 10
Use of Proceeds............................ 11
Dividend Policy............................ 11
Capitalization............................. 12
Dilution................................... 13
Pro Forma Financial Data................... 14
Selected Financial Data.................... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 21
Business................................... 26
Management................................. 37
Security Ownership of Certain Beneficial
Owners and Management.................... 44
Selling Stockholders....................... 44
Certain Relationships and Related
Transactions............................. 45
Description of Capital Stock............... 46
Shares Eligible for Future Sale............ 47
Underwriting............................... 48
Legal Matters.............................. 52
Experts.................................... 52
Additional Information..................... 52
Index to Financial Statements.............. F-1
</TABLE>

---------------------------

UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
============================================================
============================================================
12,000,000 SHARES

[LOGO]

IRI INTERNATIONAL
CORPORATION

COMMON STOCK
------------------------
PROSPECTUS
, 1997
------------------------

LEHMAN BROTHERS

HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED

PRUDENTIAL SECURITIES INCORPORATED

CREDIT LYONNAIS
SECURITIES (USA) INC.
============================================================
<PAGE> 116

[Alternate page for International Prospectus]

Subject to Completion, dated October , 1997

PROSPECTUS
12,000,000 SHARES
[LOGO] IRI INTERNATIONAL CORPORATION
COMMON STOCK
---------------------------

Of the 12,000,000 shares of common stock, par value $.01 per share (the
"Common Stock"), of IRI International Corporation (the "Company") offered
hereby, 9,000,000 shares are being issued and sold by the Company and 3,000,000
shares are being offered for the account of certain stockholders of the Company
(the "Selling Stockholders"). Of the shares being offered hereby, 2,400,000
shares are being offered initially outside the United States and Canada by the
International Managers (the "International Offering"), and 9,600,000 shares are
being offered initially in the United States and Canada by the U.S. Underwriters
(the "U.S. Offering" and, together with the International Offering, the
"Offering"). The initial public offering price and underwriting discounts and
commissions will be identical for both offerings. See "Underwriting." The
Company will not receive any of the proceeds from the sale of the shares by the
Selling Stockholders.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================

(1) The Company and the Selling Stockholders have agreed to indemnify the
International Managers and the U.S. Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."

(2) Before deducting offering expenses payable by the Company estimated at
$ .

(3) Each of the Company and the Selling Stockholders have granted the
International Managers a 30-day option to purchase up to 180,000 additional
shares of Common Stock on the same terms and conditions as set forth above
to cover over-allotments, if any. Each of the Company and the Selling
Stockholders have granted to the U.S. Underwriters a similar option to
purchase up to 720,000 additional shares of Common Stock to cover
over-allotments, if any. If such options (the "Underwriters' Over-Allotment
Options") are exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company and Proceeds to Selling
Stockholders will be $ , $ , $ and $ ,
respectively. See "Underwriting."
---------------------------

The shares of Common Stock offered by this Prospectus are offered by the
International Managers subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
International Managers and to certain further conditions. It is expected that
delivery of the shares of Common Stock will be made at the offices of Lehman
Brothers Inc., New York, New York on or about , 1997.

---------------------------
LEHMAN BROTHERS
CREDIT LYONNAIS SECURITIES

HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED
PRUDENTIAL-BACHE SECURITIES
, 1997
<PAGE> 117

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

============================================================

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY INTERNATIONAL
MANAGER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSONS IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 7
The Company................................ 10
Use of Proceeds............................ 11
Dividend Policy............................ 11
Capitalization............................. 12
Dilution................................... 13
Pro Forma Financial Data................... 14
Selected Financial Data.................... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 21
Business................................... 26
Management................................. 37
Security Ownership of Certain Beneficial
Owners and Management.................... 44
Selling Stockholders....................... 44
Certain Relationships and Related
Transactions............................. 45
Description of Capital Stock............... 46
Shares Eligible for Future Sale............ 47
Underwriting............................... 48
Legal Matters.............................. 52
Experts.................................... 52
Additional Information..................... 52
Index to Financial Statements.............. F-1
</TABLE>

---------------------------

[LOGO]

IRI INTERNATIONAL
CORPORATION

COMMON STOCK

------------------------
PROSPECTUS
, 1997
------------------------

LEHMAN BROTHERS

CREDIT LYONNAIS SECURITIES

HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED

PRUDENTIAL-BACHE SECURITIES
============================================================
<PAGE> 118

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses, other than underwriting
discounts and commissions, paid or payable in connection with the issuance and
distribution of the Common Stock being registered hereby:

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $
National Association of Securities Dealers, Inc. Filing
Fee.......................................................
New York Stock Exchange Listing Fee.........................
Printing and Engraving Expenses.............................
Legal Fees and Expenses.....................................
Accounting Fees and Expenses................................
Blue Sky Fees and Expenses..................................
Transfer Agent and Registrar Fees...........................
Miscellaneous Fees and Expenses.............................
-------
Total.............................................
=======
</TABLE>

All amounts are estimated except the Securities and Exchange Commission
Registration Fee, the National Association of Securities Dealers, Inc. Filing
Fee and the New York Stock Exchange Listing Fee.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's Certificate of Incorporation provides that the personal
liability of directors of the Company to the Company is eliminated to the
maximum extent permitted by Delaware law. Under Delaware law, absent these
provisions, directors could be held liable for gross negligence in the
performance of their duty of care, but not for simple negligence. The Company's
Certificate of Incorporation absolves directors of liability for negligence in
the performance of their duties, including gross negligence. However, the
Company's directors remain liable for breaches of their duty of loyalty to the
Company and its stockholders, as well as for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law and
transactions from which a director derives improper personal benefit. The
Company's Certificate of Incorporation also does not absolve directors of
liability under Section 174 of the Delaware General Corporation Law, which makes
directors personally liable for unlawful dividends or unlawful stock repurchases
or redemptions in certain circumstances and expressly sets forth a negligence
standard with respect to such liability.

Under Delaware law, directors, officers, employees, and other individuals
may be indemnified against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement in connection with specified actions,
suits or proceedings, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation -- a "derivative
action") if they acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful. A similar standard of care is applicable in the case of a
derivative action, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with defense or settlement of
such an action and Delaware law requires court approval before there can be any
indemnification of expenses where the person seeking indemnification has been
found liable to the Company.

The Company entered into indemnification agreements with each of its
directors and executive officers. These indemnification agreements provide for,
among other things, (i) the indemnification by the Company of the indemnities
thereunder to the extent described above and (ii) the advancement of attorneys'
fees and other expenses.

II-1
<PAGE> 119

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since September 20, 1994 (the date of the Company Acquisition), the Company
has made the following sales of unregistered securities, all of which were
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof:

On March 31, 1997 the Company issued (i) $31 million aggregate principal
amount of promissory notes pursuant to the Senior Notes Agreement and (ii) a $65
million principal amount promissory note pursuant to the Term Loan.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
**3.1 Certificate of Incorporation of the Company dated July 30,
1985.
**3.2 Certificate of Amendment of Certificate of Incorporation
dated September 1, 1996.
3.2A Form of Restated Certificate of Incorporation of IRI
International Corporation.
**3.3A Certificate of Ownership and Merger of ESI with the Company
filed on October 14, 1997.
**3.4 Form of Certificate of Amendment of Certificate of
Incorporation of the Company.
**3.5 Form of Amended and Restated By-Laws of the Company.
**4.2 Form of Registration Rights Agreement between the Company
and its current stockholders.
*5.1 Opinion of Jones, Day, Reavis & Pogue regarding the legality
of issuance of the Common Stock being registered.
**10.1 Form of Indemnification Agreement among the Company and its
officers and directors.
**10.2 Employment Agreement, dated as of April 17, 1997, between
Cardwell and A.C. Teichgraeber and joined by the Company.
**10.3 Credit Agreement, dated as of March 31, 1997, among ESI, the
Company, the several lenders from time to time parties
thereto, Credit Lyonnais New York Branch and Lehman
Commercial Paper Inc. (the "Credit Agreement").
*10.3A Amendment No. 1 to the Credit Agreement.
10.3B Form of Agreement and Consent to the Credit Agreement.
**10.4 Senior Subordinated Increasing Rate Note Purchase Agreement,
dated as of March 31, 1997, by and among the Company, Energy
Services International Limited and Strategic Resource
Partners Fund ("Senior Note Purchase Agreement").
10.4A Form of Agreement and Consent to the Senior Note Purchase
Agreement.
**10.5 Asset Purchase Agreement, dated as of January 20, 1997, by
and among Bowen Tools, Inc.-Delaware, Bowen, Air Liquide and
the Company.
10.6 Acquisition Agreement, dated as of March 20, 1997, by and
among A.C. Teichgraeber, Teichgraeber Family Limited
Partnership, L.P., Arthur C. Teichgraeber Charitable
Remainder Trust, Greenwood Pipe and Threading Company, EDCO
Drilling Company Inc. and the Company.
**10.7 Equity Incentive Plan of the Company.
**10.8 Form of Nonqualified Stock Option Agreement.
10.9 Collective Bargaining Agreement dated as of July 8, 1997
between Bowen and General Drivers, Warehousemen, Helpers,
Production Maintenance and Service Employees, Local Union
No. 968.
**21 List of Subsidiaries of the Company.
23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Jones, Day, Reavis & Pogue (included in Exhibit
5.1).
</TABLE>

- ---------------

* To be filed by amendment.

II-2
<PAGE> 120

** Previously Filed. (B) FINANCIAL STATEMENT SCHEDULES.

All schedules for which provision is made in the applicable regulations of
the Securities and Exchange Commission are not required under the related
instructions or are inapplicable or the information is contained in the
Financial Statements and therefore have been omitted.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 121

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment no. 1 to registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, in the State of Texas, on October 16, 1997.

IRI INTERNATIONAL CORPORATION

By: /s/ MUNAWAR H. HIDAYATALLAH

------------------------------------

Munawar H. Hidayatallah

Executive Vice President and Chief

Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed below by or on behalf of the
following persons in the capacities indicated as of October 16, 1997:

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <C>
* Chairman of the Board and
- ----------------------------------------------------- Chief Executive Officer
Hushang Ansary

* Vice Chairman of the Board
- -----------------------------------------------------
Daniel G. Moriarty

/s/ MUNAWAR H. HIDAYATALLAH Executive Vice President,
- ----------------------------------------------------- Chief Financial and Accounting Officer
Munawar H. Hidayatallah and Director

* Secretary and Director
- -----------------------------------------------------
Abdallah Andrawos

* President and Chief Operating Officer
- ----------------------------------------------------- of the IRI Division and Director
Gary W. Stratulate

* President and Chief Operating Officer
- ----------------------------------------------------- of the Bowen Tools Division and Director
Richard D. Higginbotham

* President and Chief Operating Officer
- ----------------------------------------------------- of Cardwell International, Ltd. and Director
Arthur C. Teichgraeber

* Director
- -----------------------------------------------------
Nina Ansary

* Director
- -----------------------------------------------------
Frank C. Carlucci
</TABLE>

II-4
<PAGE> 122
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <C>
* Director
- -----------------------------------------------------
Philip David

* Director
- -----------------------------------------------------
John D. Macomber

* Director
- -----------------------------------------------------
Edward L. Palmer

* Director
- -----------------------------------------------------
Stephen J. Solarz

* Director
- -----------------------------------------------------
Alexander B. Trowbridge

* Director
- -----------------------------------------------------
J. Robinson West
</TABLE>

* Executed on behalf of such person by

Munawar H. Hidayatallah as

attorney-in-fact.

II-5
<PAGE> 123

INDEX TO EXHIBITS

- ---------------

* To be filed by amendment.

<PAGE> 1
EXHIBIT 3.2A

RESTATED

CERTIFICATE OF INCORPORATION

IRI INTERNATIONAL CORPORATION

IRI INTERNATIONAL CORPORATION, a corporation organized and
existing under the laws of the State of Delaware certifies that:

The name of the Corporation is IRI International Corporation
(the "Corporation"). The Corporation was originally incorporated under the
name ENERGY SERVICES INTERNATIONAL LTD. The original Certificate of
Incorporation of the Corporation was filed with the Secretary of State of the
State of Delaware on March 24, 1997; and this Restated Certificate of
Incorporation was duly adopted in accordance with the provisions of Sections
241 and 245 of the General Corporation Law of the State of Delaware.

FIRST: The name of the Corporation is IRI International
Corporation (hereinafter referred to as the "Corporation").

SECOND: The registered office and registered agent of the
Corporation is The Prentice-Hall Corporation System, Inc., 229 South Street,
Dover, Kent County, Delaware.

THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.

FOURTH: The total number of shares of all classes of stock
that the Corporation is authorized to issue is 125,000,000 shares, consisting
of 100,000,000 shares of Common Stock, par value $.01 each (hereinafter
referred to as the "Common Stock"), and 25,000,000 shares of Preferred Stock,
par value $1.00 each (hereinafter referred to as the "Preferred Stock").

I. Preferred Stock

The Preferred Stock may be issued in one or more series. The
Board of Directors of the Company (the "Board"), with the approval of the
holders of a majority of the outstanding shares of the Company's Common Stock,
is hereby authorized to authorize the issuance of shares of Preferred Stock in
such series and to fix from time to time before issuance the number of shares
to be included in any such series and the designation, relative powers,
preferences, and rights and qualifications, limitations, or restrictions of all
shares of such series. The authority of
<PAGE> 2
the Board with respect to each such series will include, without limiting the
generality of the foregoing, the determination of any or all of the following:

(a) the number of shares of any series and the
designation to distinguish the shares of such series from the shares
of all other series;

(b) the voting powers, if any, and whether such voting
powers are full or limited in such series;

(d) whether dividends, if any, will be cumulative or
noncumulative, the dividend rate of such series, and the dates and
preferences of dividends on such series;

(e) the rights of such series upon the voluntary or
involuntary dissolution of, or upon any distribution of the assets of,
the Company;

(f) the provisions, if any, pursuant to which the shares
of such series are convertible into, or exchangeable for, shares of
any other class or classes or of any other series of the same or any
other class or classes of stock, or any other security, of the Company
or any other corporation or other entity, and the price or prices or
the rates of exchange applicable thereto;

(g) the right, if any, to subscribe for or to purchase
any securities of the Company or any other corporation or other
entity;

(h) the provisions, if any, of a sinking fund applicable
to such series; and

(i) any other relative, participating, optional, or other
special powers, preferences, rights, qualifications, limitations, or
restrictions thereof;

all as may be determined from time to time by the Board and stated in
the resolution or resolutions providing for the issuance of such
Preferred Stock (collectively, a "Preferred Stock Designation").

II. Common Stock

Except as may otherwise be provided in a Preferred Stock
Designation, the holders of Common Stock will be entitled to one vote on each
matter submitted to a vote at a meeting of stockholders for each share of
Common Stock held of record by such holder as of the record date for such
meeting.

FIFTH: Each person who is or was or had agreed to become a
director or officer of the Corporation, or each such person who is or was
serving or who had agreed to serve at the request of the Board or an officer of
the Corporation as an employee or agent of the

-2-
<PAGE> 3
Corporation or as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including
the heirs, executors, administrators or estate of suchn person), shall be
indemnified by the Corporation to the full extent permitted by the General
Corporation Law of the State of Delaware or any other applicable laws as
presently or hereafter in effect. Without limiting the generality or the
effect of the foregoing, the Corporation may enter into one or more agreements
with any person which provide for indemnification greater or different than
that provided in this Article. Any repeal or modification of this Article
Fifth shall not adversely affect any right or protection existing hereunder
immediately prior to such repeal or modification.

SIXTH: To the full extent permitted by the General
Corporation Law of the State of Delaware or any other applicable laws presently
or hereafter in effect, no Director of the Corporation shall be personally
liable to the Corporation or its stockholders for or with respect to any acts
or omissions in the performance of his or her duties as a Director of the
Corporation. Any repeal or modification of this Article Sixth will not
adversely affect any right or protection of a Director of the Corporation
existing prior to such repeal or modification.

SEVENTH: In furtherance of, and not in limitation of,
the powers conferred by statute, the Board is expressly authorized and
empowered to adopt, amend, or repeal the By-Laws of the Corporation, without
any action on part of the stockholders, but the stockholders may make
additional By-Laws and may amend or repeal any By-Laws whether adopted by them
or otherwise. The Corporation may in its By-Laws confer powers upon the Board
in addition to the foregoing and in addition to the powers and authorities
expressly conferred upon the Board by applicable law.

IN WITNESS WHEREOF, the undesigned has signed this Amended and
Restated Certificate of Incorporation on September __, 1997.

-----------------------------
Hushang Ansary
President

-3-

<PAGE> 1
EXHIBIT 10.3B

AGREEMENT AND CONSENT, dated as of October __, 1997 (this
"Agreement and Consent"), to the CREDIT AGREEMENT, dated as of March 31, 1997,
among ENERGY SERVICES INTERNATIONAL LTD., a Delaware corporation (the
"Parent"), IRI INTERNATIONAL CORPORATION, a Delaware corporation (the
"Borrower"), the several banks and other financial institutions or entities
from time to time parties thereto (the "Lenders"), CREDIT LYONNAIS NEW YORK
BRANCH, as Administrative Agent for the Lenders (in such capacity, the
"Administrative Agent"), LEHMAN COMMERCIAL PAPER INC., as advisor and arranger
with respect to the credit facilities contained therein (the "Arranger"), and
LEHMAN COMMERCIAL PAPER INC., as syndication agent with respect to the credit
facilities contained therein (the "Syndication Agent").

W I T N E S S E T H:

WHEREAS, the Parent owns all of the issued and outstanding
capital stock of the Borrower;

WHEREAS, in connection with an initial public offering of
capital stock, the Parent has determined that it is in the best interest of the
Parent to merge (the "Merger") the Borrower into the Parent with the Parent
being the surviving corporation (the "Surviving Corporation");

WHEREAS, on the effective date of the Merger, the Surviving
Corporation shall be renamed IRI International Corporation;

WHEREAS, the Parent and the Borrower have requested the
Lenders to consent to the Merger;

NOW, THEREFORE, in consideration of the premises and of the
mutual agreement herein contained, the parties hereto agree as follows:
<PAGE> 2
1. Definitions. Unless otherwise defined herein, terms
defined in the Credit Agreement shall be used as so defined.

2. Representations and Warranties of the Parent and the
Borrower. To induce the Administrative Agent and the Lenders to enter into
this Agreement and Consent, the Parent and the Borrower hereby represent and
warrant to the Administrative Agent and each Lender that:

(a) Each of the Parent and the Borrower has the power and
authority and the legal right to make, deliver and perform this Agreement and
Consent and to consummate the Merger. Each of the Parent and the borrower has
taken all necessary action to authorize the execution, delivery and performance
of this Agreement and Consent and the consummation of the Merger.

(b) No material consent or authorization of, filing with,
notice to or other act by or in respect of, any Governmental Authority or any
other Person is required in connection with the Merger, other than the filing
of a Certificate of Ownership and Merger with the Delaware Secretary of State
or with the execution, delivery, performance, validity or enforceability of
this Agreement and Consent. This Agreement and Consent has been duly executed
and delivered on behalf of the Parent and the Borrower. This Agreement and
Consent constitutes, and upon execution of the Assumption Agreement (as defined
below) will constitute, a legal, valid and binding obligation of the Parent and
the Borrower, enforceable against each such party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

(c) The execution, delivery and performance of this
Agreement and Consent and the consummation of the Merger will not violate any
Requirement of Law or Contractual Obligation of the Parent, the Borrower or of
any of their Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on

2
<PAGE> 3
any of their respective properties or revenues pursuant to any such Requirement
of Law or Contractual Obligation.

(d) No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the knowledge
of the Parent or the Borrower, threatened by or against the Parent, the
borrower or any of their Subsidiaries or against any of its or their respective
properties or revenues (a) with respect to any of this Agreement and Consent or
the Merger or (b) which could reasonably be expected to have a Material Adverse
Effect.

(e) At all times prior to the Effective Date (as defined
below), the Parent has been in compliance with Section 7.17 of the Credit
Agreement.

(f) The Merger will not cause a material tax liability to
the Parent or the Borrower.

(g) Since March 31, 1997, there has been no development
or event which has had or could reasonably be expected to have a Material
Adverse Effect.

3. Consent of Lenders to Merger. The Lenders hereby
consent to the Merger and the assumption by the Surviving Corporation as
primary obligor of all of the payment and performance obligations of the
Borrower under the Credit Agreement and the other Loan Document on the
Effective Date.

4. Effective Date. This Agreement and Consent will
become effective as of the date hereof upon:

(i) its execution by the Parent, the Borrower and
the Required Lenders in accordance with the terms of the
Credit Agreement;

(ii) receipt by the Administrative Agent, with copies
for each of the Lenders, of a certificate of the Secretary or
Assistant Secretary of the Surviving Corporation dated the
Effective Date and certifying (A) that attached thereto is a
true and complete copy of

3
<PAGE> 4
the certificate of incorporation and by-laws of the Surviving
Corporation as in effect on the date of such certification;
(B) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of the Surviving
Corporation authorizing the assumption of obligations of the
Borrower under the Credit Agreement and the other Loan
Documents and the execution, delivery and performance in
accordance with their respective terms of any documents
required or contemplated hereunder (such certificate to state
that the resolutions thereby certified have not been amended,
modified, revoked or rescinded and shall be in form and
substance satisfactory to the Administrative Agent); (C) as to
the incumbency and specimen signature of each officer of the
Surviving Corporation executing any document delivered by it
in connection herewith (such certificate to contain a
certification by another officer of the Surviving Corporation
as to the incumbency and signature of the officer signing the
certificate referred to in this paragraph (i); and (D) that
the Merger has become effective in accordance with the law of
the State of Delaware; and

(iii) delivery by the Surviving Corporation of a
written agreement (the "Assumption Agreement") pursuant to
which it assumes as primary obligor all of the payment and
performance obligations of the Borrower under the Credit
Agreement and the other Loan Documents.

5. Representations and Warranties. The Parent and the
Borrower represent and warrant to each Lender that on the date hereof and on
the Effective Date, prior to and after giving effect to the effectiveness of
this Agreement and Consent and the Merger (a) the representations and
warranties made by the Loan Parties in the Loan Documents are true and correct
in all material respects (except to the extent that such representations and
warranties are expressly stated to relate to an earlier date, in which case
such representations and warranties shall have been true and correct in all
material respects on and as of such earlier date) and (b) no Default or Event
of Default has occurred and is continuing.

4
<PAGE> 5

6. Continuing Effect. Except as expressly waived
hereby, the Credit Agreement shall continue to be and shall remain in full
force and effect in accordance with its terms.

7. GOVERNING LAW. THIS AGREEMENT AND CONSENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.

8. Counterparts. This Agreement and Consent may be
executed by the parties hereto in any number of separate counterparts, and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument.

9. Payment of Expenses. The Loan Parties agree to pay
and reimburse the Administrative Agent for all of its out-of-packet costs and
reasonable expenses incurred in connection with this Agreement and Consent,
including, without limitation, the reasonable fees and disbursements of counsel
to the Administrative Agent.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement and Consent to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above written.

ENERGY SERVICES INTERNATIONAL LTD.

By:
--------------------------------
Title:

IRI INTERNATIONAL CORPORATION

By:
--------------------------------
Title:

LEHMAN COMMERCIAL PAPER INC., as
Arranger and as a Lender

By:
--------------------------------
Title:

LEHMAN SYNDICATED LOAN INC., as a
lender

By:
--------------------------------
Title:

<PAGE> 1
EXHIBIT 10.4A

AGREEMENT AND CONSENT, dated as of October __, 1997 (this
"Agreement and Consent"), to the SENIOR SUBORDINATED INCREASING RATE NOTE
PURCHASE AGREEMENT, dated as of March 31, 1997 (the "Note Purchase Agreement"),
among ENERGY SERVICES INTERNATIONAL LTD., a Delaware corporation (the
"Parent"), IRI INTERNATIONAL CORPORATION, a Delaware corporation (the
"Company"), and STRATEGIC RESOURCE PARTNERS FUND, a Delaware statutory business
trust managed by an affiliate of Lehman Brothers Inc. ("Strategic Resource
Partners" and together with any successors and assigns, the "Interim Lenders").

W I T N E S S E T H:

WHEREAS, the Parent owns all of the issued and outstanding
capital stock of the Company;

WHEREAS, in connection with an initial public offering of
capital stock, the Parent has determined that it is in the best interest of the
Parent to merge (the "Merger") the Company into the Parent with the Parent
being the surviving corporation (the "Surviving Corporation");

WHEREAS, on the effective date of the Merger, the Surviving
Corporation shall be renamed IRI International Corporation;

WHEREAS, the Parent and the Company have requested the Interim
Lenders to consent to the Merger;

NOW, THEREFORE, in consideration of the premises and of the
mutual agreement herein contained, the parties hereto agree as follows:

1. Definitions. Unless otherwise defined herein, terms
defined in the Note Purchase Agreement shall be used as so defined.

2. Representations and Warranties of the Parent and the
Company. To induce the Interim Lenders to enter into this Agreement and
Consent, the Parent and the Company hereby represent and warrant to the Interim
Lenders that:

(a) Each of the Parent and the Company has the power and
authority and the legal right to make, deliver and perform this Agreement and
Consent and to consummate the Merger. Each of the Parent and the Company has
taken all necessary action to authorize the execution, delivery and performance
of this Agreement and Consent and the consummation of the Merger.

<PAGE> 2
(b) No material consent or authorization of, filing with,
notice to or other act by or in respect of, any Governmental Entity or any
other Person is required in connection with the Merger, other than the filing
of a Certificate of Ownership and Merger with the Delaware Secretary of State,
or with the execution, delivery, performance, validity or enforceability of
this Agreement and Consent. This Agreement and Consent has been duly executed
and delivered on behalf of the Parent and the Company. This Agreement and
Consent constitutes, and upon execution of the Assumption Agreement (as defined
below) will constitute, a legal, valid and binding obligation of the Parent and
the Company, enforceable against each such party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

(c) The execution, delivery and performance of this
Agreement and Consent and the consummation of the Merger will not have a
Material Adverse Effect and will not result in, or require the creation or
imposition of, any Lien on any assets of the Parent, the Company or any of
their respective Subsidiaries.

(d) No litigation, investigation or proceeding of or
before any arbitrator or Governmental Entity is pending or, to the knowledge of
the Parent or the Company, threatened by or against the Parent, the Company or
any of their Subsidiaries or against any of its or their respective properties
or revenues (a) with respect to any of this Agreement and Consent or the Merger
or (b) which could reasonably be expected to have a Material Adverse Effect.

(e) At all times prior to the Effective Date (as defined
below), the Parent has been in compliance with Section 4.14 of the Note
Purchase Agreement.

(f) The Merger will not cause a material tax liability to
the Parent or the Company.

(g) Since March 31, 1997, there has been no development
or event which has had or could reasonably be expected to have a Material
Adverse Effect.

(h) No Default or Event of Default shall have occurred
and be continuing as of the Effective Date.

(i) The Parent has no significant assets of any kind
other than its interests in the Company. Parent has no liabilities of any
kind, contingent or otherwise, other than ordinary course liabilities
associated with the ongoing maintenance of its corporate existence (which
liabilities do not exceed $1.0 million in the aggregate).

(j) Attached hereto is a copy of the Certificate of
Ownership and Merger that will effect the Merger.

2
<PAGE> 3
(k) The Merger will not have any adverse consequences to
the Interim Lenders, including with respect to either their debt or equity
interests in the Parent and the Company.

(l) On the date hereof and on the Effective Date, prior
to and after giving effect to the effectiveness of this Agreement and Consent
and the Merger the representations and warranties made by each of the Parent
and the Company in the Note Purchase Agreement are true and correct in all
material respects (except to the extent that such representations and
warranties are expressly stated to relate to an earlier date, in which case
such representations and warranties shall have been true and correct in all
material respects on and as of such earlier date).

3. Consent of Interim Lenders to Merger. The Interim
Lenders hereby consent to the Merger and the assumption by the Surviving
Corporation as primary obligor of all of the payment and performance
obligations of the Company under the Note Purchase Agreement and the Related
Documents on the Effective Date.

4. Effective Date. This Agreement and Consent will
become effective as of the date hereof upon:

(i) its execution by the Parent, the Company and
the Interim Lenders signatories hereto in accordance with the
terms of the Note Purchase Agreement;

(ii) receipt by the Interim Lenders of a certificate
of the Secretary or Assistant Secretary of the Surviving
Corporation dated the Effective Date and certifying (A) that
attached thereto is a true and complete copy of the
certificate of incorporation and by-laws of the Surviving
Corporation as in effect on the date of such certification;
(B) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of the Surviving
Corporation authorizing the assumption of obligations of the
Company under the Note Purchase Agreement and the Related
Documents and the execution, delivery and performance in
accordance with their respective terms of any documents
required or contemplated hereunder (such certificate to state
that the resolutions thereby certified have not been amended,
modified, revoked or rescinded and shall be in form and
substance satisfactory to the Strategic Resource Partners);
(C) as to the incumbency and specimen signature of each
officer of the Surviving Corporation executing any document
delivered by it in connection herewith (such certificate to
contain a certification by another officer of the Surviving
Corporation as to the incumbency and signature of the officer
signing the certificate referred to in this paragraph (ii);
and (D) that the Merger has become effective in accordance
with the law of the State of Delaware; and

3
<PAGE> 4
Purchase Agreement and the Related Documents, provided that
the Assumption Agreement shall be satisfactory to Latham &
Watkins, counsel to Strategic Resource Partners, in its sole
discretion.

(iv) the payment in full by check or wire transfer
of the fees and expenses of Latham & Watkins that have accrued
through the date hereof.

5. Continuing Effect. Except as expressly waived
hereby, the Note Purchase Agreement and the Related Documents shall continue to
be and shall remain in full force and effect in accordance with their terms.

6. Interpretation. Following the Effective Date of the
Merger, the Note Purchase Agreement and the Related Documents will continue to
be in full force and effect and the obligations of each of the Parent and the
Company will continue unchanged as obligations of the Surviving Corporation.
This Agreement and Consent is a consent to a single event only and will not
otherwise have any impact on the obligations of the Parent and the Company set
forth in the Note Purchase Agreement and the Related Documents.

7. GOVERNING LAW. THIS AGREEMENT AND CONSENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.

9. Payment of Expenses. The Parent and the Company
agree to pay and reimburse Strategic Resource Partners for all of its
out-of-packet costs and reasonable expenses incurred in connection with this
Agreement and Consent, including, without limitation, the reasonable fees and
disbursements of counsel to Strategic Resource Partners.

ENERGY SERVICES INTERNATIONAL LTD.

By:
---------------------------------
Title:

4
<PAGE> 5
IRI INTERNATIONAL CORPORATION

By:
---------------------------------
Title:

STRATEGIC RESOURCE PARTNERS FUND

By:
---------------------------------
Title:

DAFFODIL & CO.

By:
---------------------------------
Title:

OKGBD & CO.

By:
---------------------------------
Title:

LB I GROUP, INC.

By:
---------------------------------
Title:

BHF-BANK AKTIENGESELLSCHAFT

By:
---------------------------------
Title:

<PAGE> 1
EXHIBIT 10.6

=======================================

ACQUISITION AGREEMENT

BY AND AMONG

A.C. TEICHGRAEBER,

TEICHGRAEBER FAMILY LIMITED PARTNERSHIP, L.P.,

ARTHUR C. TEICHGRAEBER CHARITABLE REMAINDER TRUST,

GREENWOOD PIPE AND THREADING COMPANY,

EDCO DRILLING COMPANY INC.

AND

IRI INTERNATIONAL CORPORATION

DATED AS OF

MARCH 20, 1997

=======================================

<PAGE> 2
TABLE OF CONTENTS
(Not a part of the Agreement)

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. PURCHASE AND SALE OF GREENWOOD AND EDCO ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Purchase and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Acquisition of Teichgraeber Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

3. PAYMENT OF PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Organization; Power; Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Binding Agreement and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.4 No Violation or Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.6 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.7 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.10 Title to and Condition of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.13 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.14 Transactions with Interested Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.15 Employee and Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.16 Customer Accounts Receivable; Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.17 Non-Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.18 Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.19 Sufficiency of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.21 Accounts; Safe Deposit Boxes; Powers of Attorney;
Officers and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.22 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.23 Product warranty and Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.24 Backlog Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>

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<TABLE>
<S> <C> <C>
4.25 Supply Requirement Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.26 Government Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.27 1996 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.28 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.29 Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.30 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.31 CIL's Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.32 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

5. REPRESENTATIONS AND WARRANTIES OF THE BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5. 1 Organization; Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 Binding Agreement and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.4 Financial Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5 Gardner Denver Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.6 Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.7 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.8 Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

6. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Nondisclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.3 Regulatory Filings; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.4 Operation of the Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.5 Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.7 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.8 Other Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.9 Corporate Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.10 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.11 Disclosure Schedule Updates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.12 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.13 CILB Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.14 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

7. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Conditions Precedent to the Obligations of the
Sellers and the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2 Additional Conditions Precedent to the Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2.1 Compliance with Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2.2 Resolutions of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2.3 Delivery of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2.4 Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2.5 Release of Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Additional Conditions Precedent to Obligations of the Buyer . . . . . . . . . . . . . . . . . . . . 32
</TABLE>

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7.3.1 Compliance with Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3.2 Resolutions of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3.3 Delivery of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3.4 Delivery of Bills of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3.5 Delivery of Real Property Deeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3.6 Release of Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3.7 Actual or Threatened Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3.8 Absence of Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3.9 Regulatory Approvals; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3.10 Receipt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3.11 Insurable Title to Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3.12 Certain Records; Director Resignations . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.3.13 Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3.14 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3.15 Intellectual Property Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3.16 Due Diligence Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3.17 CIL's Net Worth as of February 28, 1997 . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3.18 CIL's Net Worth as of the Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3.19 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3.20 Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3.21 Opinion of Sellers' Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

8. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.1 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Documents to be Delivered by the Sellers at Closing . . . . . . . . . . . . . . . . . . . . . 35
8.3 Documents to be Delivered by the Buyer at Closing . . . . . . . . . . . . . . . . . . . . . . 36

9. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.2 Sellers' Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.3 Buyer's Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.4 Defense of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.5 Survival Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.6 Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.7 Adjustment to Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

10. POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1 Limitation on Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.3 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

11. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>

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12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.1 Joint and Several Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.4 Amendments and Waivers and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.5 Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.7 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.9 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.12 Certain Interpretive Matters and Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 45
12.13 Arbitration; Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>

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<PAGE> 6
TABLE OF SCHEDULES
(Not a part of the Agreement)

<TABLE>
<CAPTION>
SCHEDULES TITLE
- --------- -----
<S> <C>
Schedule 2. 1(a) Tangible Personal Property
Schedule 2. 1(b) Gardner Denver Inventory
Schedule 2. 1(d)(i) Owned Real Property
Schedule 2. 1(d)(ii) Leased Real Property
Schedule 2.1(e) Intellectual Property
Schedule 2.1(f) Asset Contracts
Schedule 2.4 Teichgraeber Real Property
Schedule 4.1 Foreign Qualifications
Schedule 4.2 Capitalization
Schedule 4.4(a) Consents
Schedule 4.5 Financial Statements
Schedule 4.6(a) Occurrence of Certain Changes Since October 31, 1996
Regarding CIL
Schedule 4.6(b) Occurrence of Certain Changes Since October 31, 1996 Regarding CIL
Schedule 4.6(c) Occurrence of Certain Changes Since October 31, 1996 Regarding CIL
Schedule 4.7 Contracts
Schedule 4.8(c) Tax Filings
Schedule 4.8(d) Certain Jurisdictions
Schedule 4.8(h) Tax Waivers or Extensions
Schedule 4.8(m) Adjusted Basis
Schedule 4.9(a) CIL Real Property Currently Owned Or Leased
Schedule 4.9(b) Greenwood Real Property
</TABLE>

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<S> <C>
Schedule 4.9(c) Edco Real Property
Schedule 4.9(e) Real Property Previously Owned or Leased
Schedule 4. 10(a) Personal Property
Schedule 4.10(b) Title to Property
Schedule 4. 10(c) Condition of Assets
Schedule 4. 11 Litigation
Schedule 4. 12(a) Compliance With Laws
Schedule 4.12(b) Compliance With Environmental Laws
Schedule 4.12(c) Storage/Disposal of Hazardous Materials
Schedule 4.13 Intellectual Property
Schedule 4.14 Transactions with Interested Persons
Schedule 4.15(a)(i) Employee Benefit Plans
Schedule 4.15(a)(ii) Employee Benefit Arrangements
Schedule 4.15(d) Actions or Claims Related to Employee Benefit Plans or Arrangements
Schedule 4.15(i) Severance and Accelerated Compensation
Schedule 4.15(k) Employee Leaves of Absence
Schedule 4.15(l) Collective Bargaining Agreements
Schedule 4. 15(m) The Companies' Employees
Schedule 4.17 Disposition of Non-Current Assets
Schedule 4.18 Suppliers
Schedule 4.20 Insurance Policies
Schedule 4.21 Accounts; Safe Deposit Boxes; Powers of Attorney; Officers and
Directors
Schedule 4.22 Liabilities
Schedule 4.23(a) Product Warranty Claims
Schedule 4.23(b) Product Liability Claims
Schedule 4.24 Backlog Contracts
</TABLE>

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Schedule 4.25 Supply Requirement Contracts
Schedule 4.26 Government Contracts
Schedule 4.28 Debt Obligations
Schedule 4.29 Contingent Liabilities
Schedule 4.30 Brokerage Commissions
Schedule 5.3 Buyers Consents
Schedule 6.4 Operation of Business
Schedule 6. 12 Guaranties
</TABLE>

vii
<PAGE> 9
TABLE OF EXHIBITS

(Not a part of the Agreement)

<TABLE>
<CAPTION>
EXHIBITS TITLE
- -------- -----
<S> <C>
Exhibit A Restructured Pro Forma EBITDA
Exhibit B Employment Agreement
Exhibit C Assignment Agreements
</TABLE>

viii
<PAGE> 10
TABLE OF DEFINED TERMS
(Not a part of the Agreement)

<TABLE>
<CAPTION>
Page
----
<S> <C>
ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Assignment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Backlog Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Benefit Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Bills of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Buyer's Board Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Buyer's Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Buyer's Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
CERCI-A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
CIL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CIL Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
CIL Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Collective Bargaining Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Competitive Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Confidential Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Consent Decrees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Debt Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Deeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Direct Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Director Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Edco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Edco Board Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Edco Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Employee Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Environmental Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Evidence of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Evidence of Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
FMLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Gardner Denver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>

ix
<PAGE> 11
<TABLE>
<S> <C>
Gardner Denver Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Greenwood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Greenwood Board Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Greenwood Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Guaranty Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Hazardous Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Indemnifiable Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Indemnitee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Indemnity Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Limited Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Limited Partnership Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Limited Partnership Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Notice of Claim for Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Post-Closing Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Pre-Closing Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Receipt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Restructured Pro Forma EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Retained Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Scheduled IP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1445(b)(2) Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Supply Requirement Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
tax returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Teichgraeber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Teichgraeber Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Teichgraeber Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Third Party Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Third Party Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Threat of Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>

x
<PAGE> 12
<TABLE>
<S> <C>
Transfer Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trust Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Trust Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>

xi
<PAGE> 13
ACQUISITION AGREEMENT

THIS ACQUISITION AGREEMENT, made and entered into as of this 20th day
of March, 1997 (this "Agreement") by and among A.C. Teichgraeber, an individual
residing at Rural Route 2, Box 125, Eureka, Kansas 67045 ("Teichgraeber"),
Teichgraeber Family Limited Partnership, L.P., a Kansas limited partnership
(the "Limited Partnership"), Arthur C. Teichgraeber Charitable Remainder Trust
(the "Trust" and with Teichgraeber and the Limited Partnership, collectively,
"ACT"), Greenwood Pipe and Threading Company, a Kansas corporation
("Greenwood"), Edco Drilling Company Inc., a Kansas corporation ("Edco" and
with ACT and Greenwood, collectively, the "Sellers"), and IRI International
Corporation, a Delaware corporation (the "Buyer").

WHEREAS, each of the Limited Partnership and the Trust are the record
and beneficial owner of one half of the issued and outstanding shares of common
stock, par value $1.00 per share, of Cardwell International Ltd., a Kansas
corporation ("CIL") (the "Shares");

WHEREAS, CIL, Greenwood and Edco (collectively, the "Companies") are
engaged in the business of manufacturing, selling and/or servicing oil drilling
and service rigs and equipment (the "Business");

WHEREAS, the Limited Partnership and the Trust desire to sell, assign
and deliver to the Buyer, and the Buyer desires to purchase and accept from the
Limited Partnership and the Trust, the Shares on the terms and subject to the
conditions hereinafter set forth;

WHEREAS, Greenwood and Edco desire to sell, assign and deliver to the
Buyer, and the Buyer desires to purchase and accept from Greenwood and Edco,
certain assets of Greenwood and Edco as described in this Agreement, in each
case on the terms and subject to the conditions hereinafter set forth;

WHEREAS, Teichgraeber desires to sell, assign and deliver to the
Buyer, and the Buyer desires to purchase and accept from Teichgraeber, certain
reel property of Teichgraeber described in this Agreement on the terms and
subject to the conditions hereinafter set forth; and

NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties agree as follows:
<PAGE> 14
1. PURCHASE AND SALE OF SHARES.

1.1 SHARES. On the terms and subject to the conditions
set forth in this Agreement, at the Closing (as hereinafter defined), each of
the Limited Partnership and the Trust will sell, assign and deliver to the
Buyer, and the Buyer will purchase and accept from each of the Limited
Partnership and the Trust, the respective number of Shares owned by each of the
Limited Partnership and the Trust, as set forth opposite each of the Limited
Partnership's and the Trust's name on Schedule 4.2.

2. PURCHASE AND SALE OF GREENWOOD AND EDCO ASSETS

2. 1 PURCHASE AND SALE OF ASSETS. On the terms and subject
to the conditions set forth in this Agreement, Greenwood and Edco will sell,
assign and deliver to the Buyer, and the Buyer will purchase and accept from
Greenwood and Edco, as the case may be, all of Greenwood's and Edco's right,
title and interest in and to the Assets (as hereinafter defined). For purposes
of this Agreement, the term "Assets" means the assets and properties of
Greenwood and Edco described in the following paragraphs (a) through (f):

(a) all of the vehicles, spare parts, tools, dies,
patterns, machinery, equipment, computers, furnishings, furniture, office
supplies and other tangible personal property set forth on Schedule 2.1(a)
hereto;

(b) all Gardner Denver inventory, including, without
limitation, bearings, power swivels and parts, related equipment and the other
inventory set forth on Schedule 2. 1(b) hereto;

(c) all items of inventory relating to the Business,
including, without limitation, raw materials, work-in-process, finished goods,
supplies, spare parts and samples (including any of the aforementioned owned by
Greenwood or Edco but in the possession of manufacturers, suppliers, dealers or
others, or in transit);

(d) the owned real property set forth on Schedule
2.1(d)(i) hereto and the leased reel property set forth on Schedule 2. 1(d)(ii)
hereto (collectively, the "Real Property"), including all buildings located
thereon, any fixtures attached thereto and any transferable Permits (as
hereinafter defined) relating thereto;

(e) all Intellectual Property (as hereinafter defined)
including, without limitation, as set forth on Schedule 2.1(e) hereto, and any
rights to sue for, and remedies against, past, present and

2
<PAGE> 15
future infringements thereof, and rights of priority and protection of
interests therein under the Laws (as hereinafter defined) of all jurisdictions
throughout the world;

(f) all rights under all the contracts, leases, licenses
and other agreements relating to the Assets set forth on Schedule 2.1(f)
hereto.

2.2 EXCLUDED ASSETS. Notwithstanding anything in this
Agreement to the contrary, Greenwood, Edco and the Buyer expressly agree that
neither Greenwood nor Edco is hereunder selling, assigning or delivering to the
Buyer and the Buyer is not purchasing or accepting any of Greenwood's or Edco's
right, title or interest in or to any asset, property, right, contract,
agreement or claim not described in Section 2.1 hereof (collectively, the
"Excluded Assets").

2.3 RETAINED LIABILITIES. Notwithstanding anything in
this Agreement to the contrary, Greenwood and Edco will retain, and the Buyer
will not assume or in any way be liable or responsible for any Liabilities (as
hereinafter defined) of Greenwood and Edco whatsoever (the "Retained
Liabilities"). By way of example, and not by way of limitation, Retained
Liabilities will include:

(a) all Liabilities relating to or arising from the
Excluded Assets; and

(b) all Liabilities relating to or arising from events
occurring prior to the Closing, including any claims with respect to the
Assets.

For purposes of this Agreement, the term "Liabilities" means
any liability, claim, demand, expense, cost, damage, deficiency, obligation or
responsibility, known or unknown, fixed or unfixed, liquidated or unliquidated,
secured or unsecured, accrued, absolute, contingent or otherwise.

2.4 ACQUISITION OF TEICHGRAEBER REAL PROPERTY. On the
terms and subject to the conditions set forth in this Agreement, Teichgraeber
will sell, assign and deliver to the Buyer, and the Buyer will purchase and
accept from Teichgraeber, all of Teichgraeber's right, title and interest in
and to the owned real property set forth on Schedule 2.4 hereto (the
"Teichgraeber Real Property"), including all buildings located thereon, any
fixtures attached thereto and any transferable Permits relating thereto.

3
<PAGE> 16
3. PAYMENT OF PURCHASE PRICE.

3.1 PURCHASE PRICE. The aggregate purchase price for the
Shares, the Assets and the Teichgraeber Real Property shall be $12,000,000 (the
"Purchase Price") payable by the Buyer to the Sellers in accordance with
Section 3.2 hereof.

3.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall
be paid as follows:

(a) $3,000,000 shall be paid by the Buyer to the Limited
Partnership on the Closing Date (as hereinafter defined) by bank wire transfer
of immediately available funds to a bank account designated by the Limited
Partnership.

(b) $3,000,000 shall be paid by the Buyer to the Trust on
the Closing Date by bank wire transfer of immediately available funds to a bank
account designated by the Trust.

(c) $5,225,000 shall be paid by the Buyer to Greenwood on
the Closing Date by bank wire transfer of immediately available funds to a bank
account designated by Greenwood.

(d) $750,000 shall be paid by the Buyer to Edco on the
Closing Date by bank wire transfer of immediately available funds to a bank
account designated by Edco.

(c) $25,000 shall be paid by the Buyer to Teichgraeber on
the Closing Date by bank wire transfer of immediately available funds to a bank
account designated by Teichgraeber.

(f) The Purchase Price shall be allocated by the Buyer
and the Sellers among the Shares, the Assets and the Teichgraeber Real Property
as follows:

(i) $6,000,000 for the Shares;

(ii) $5 ,225 ,000 for that portion of the Assets
purchased from Greenwood;

(iii) $750,000 for that portion of the Assets
purchased from Edco; and

(iv) $25,000 for the Teichgraeber Real Property;
provided, however, that the allocation of $6,000,000 among the

4
<PAGE> 17
Assets and the Teichgraeber Real Property shall be subject to the
results of Buyer's appraisal thereof. It is the intention and
agreement of the parties that the Buyer be able to account for the
acquisition of the Assets and the Teichgraeber Real Property using the
purchase method of accounting.

4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the
Sellers, jointly and severally, represents and warrants to the Buyer as
follows:

4.1 ORGANIZATION; POWER; GOOD STANDING. Each of the
Sellers (other than Teichgraeber) is duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation or
formation, as the case may be, and has the requisite corporate, partnership or
trust, as the case may be, power and authority to own, lease, operate and
otherwise hold its assets owned, leased, operated or otherwise held by it and
to carry on the Business as now being conducted. Each of the Sellers (other
than Teichgraeber) is duly qualified to do business as a foreign corporation,
partnership or trust, as the case may be, in each jurisdiction set forth under
such Seller's name on Schedule 4. 1 and is in good standing under the laws of
each such jurisdiction. There is no other jurisdiction in which the nature of
the business of any of the Sellers (other than Teichgraeber) or the character
or location of any of their assets, properties or operations requires
qualification.

4.2 CAPITALIZATION. Each of the Limited Partnership and
the Trust own free and clear of any mortgages, liens, security interests,
pledges, charges, restrictions or other encumbrances (collectively, "Liens")
the number of Shares listed opposite its name on Schedule 4.2 and has good and
marketable title to such Shares and at Closing will deliver its entire right,
title and interest in and to the Shares to the Buyer. The Shares listed on
Schedule 4.2 represent all of the issued and outstanding shares of capital
stock of CIL and upon the Closing the Buyer will own such Shares free and clear
of any liens. The Shares are duly authorized, validly issued and outstanding,
fully paid and nonassessable. Except as set forth on Schedule 4.2, CIL does
not, directly or indirectly, own (beneficially or of record) any stock or other
ownership interests in, or control, any other entity. Except for the Shares
and except as set forth on Schedule 4.2, there are no shares of capital stock
of CIL authorized, issued or outstanding and there are no outstanding
subscriptions, options, warrants, rights, convertible securities or any other
agreements or commitments of any character relating to the issued or unissued
stock or other securities of CIL obligating CIL to issue,

5
<PAGE> 18
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of CIL or obligating CIL to grant, issue, extend or enter into
any subscription, option. warrant, right. convertible security or other similar
agreement or commitment. Except as set forth on Schedule 4.2, there are no
voting trusts or other agreements or understandings to which CIL, the Limited
Partnership or the Trust is a party with respect to the voting of the capital
stock of CIL.

4.3 BINDING AGREEMENT AND AUTHORITY. Each of the Sellers
(other than Teichgraeber) has the requisite corporate, partnership or trust, as
the case may be, power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. All corporate, partnership
or trust, as the case may be, action required to be taken for the due
authorization of the execution and delivery of this Agreement by each of the
Sellers (other than Teichgraeber) and the performance by each of the Sellers
(other than Teichgraeber) of the obligations hereunder has been duly taken by
each of the Sellers (other than Teichgraeber). This Agreement has been duly
executed and delivered by each of the Sellers and, assuming the due execution
and delivery by the Buyer, constitutes the valid and binding obligation of each
of the Sellers enforceable against each of them in accordance with its terms.

4.4 NO VIOLATION OR BREACH. The execution and delivery
of this Agreement by each of the Sellers do not, and the consummation by each
of them of the transactions contemplated hereby, will not:

(a) require the consent, waiver, approval, license, order
or authorization of, or the registration, declaration or filing of any document
or report with, any person, entity or Governmental Entity (as hereinafter
defined) other than (i) filings under the Hart-Scott-Rodino Antitrust Act of
1976, as amended, and the rules and regulations thereunder (the "HSR Act") and
(ii) as described on Schedule 4.4(a);

(b) with or without the giving of notice or the passage
of time or both, conflict with or violate any domestic or foreign statute, law,
ordinance, rule, regulation, order, judgment, decree or common law obligation
in effect as of the date hereof ("Law") of any domestic or foreign court,
government, governmental agency, authority, entity, instrumentality or
political subdivision thereof ("Governmental Entity") applicable to the Sellers
or CIL;

6
<PAGE> 19
(c) with or without the giving of notice or the passage
of time or both, conflict with or result in any breach or violation of any
provision of, or constitute a default under, or give rise to a right of
termination, cancellation or acceleration of the performance of or the loss of
a material benefit under, any Contract (as hereinafter defined) or Permit, to
which any of the Sellers or CIL is a party or to which any of the Sellers or
CIL or any of their assets are subject, or result in the creation of any Lien
upon any of the assets of any of the Sellers or CIL;

(d) conflict with or violate the Certificate of
Incorporation, as amended (if applicable), or By- Laws of any of the Companies;
or

(e) conflict with or violate the limited partnership
agreement of the Limited Partnership, dated as of September 4, 1996, by and
among The Arthur C. Teichgraeber Revocable Living Trust and The Heidi M.
Teichgraeber Revocable Living Trust, as amended or the trust agreement of the
Trust, dated as of November I 1996, by and among Teichgraeber, grantor. and
Teichgraeber, trustee, as amended.

4.5 FINANCIAL STATEMENTS. Attached as Schedule 4.5 are
the audited balance sheets of CIL as of December 31, 1993, December 31, 1994,
December 31, 1995 and October 31, 1996, and the unaudited balance sheet of CIL
as of December 31, 1996 and the related audited statements of operations and
retained earnings and of cash flows for the periods then ended, or in the case
of the unaudited balance sheet of CIL as of December 31, 1996, for the period
then ended (collectively with their related notes, the "Financial Statements").
The Financial Statements present fairly in all material respects the financial
position of CIL as of their respective dates and the results of their
operations and cash flows for the years then ended, or the period then ended,
in conformity with United States generally accepted accounting principles
("GAAP") consistently applied except as otherwise noted therein, subject, with
respect to the unaudited balance sheet of CIL as of December 31, 1996 and the
related unaudited statements of operations and retained earnings and of cash
flows, to normal, recurring year-end adjustments. For the purposes of this
Agreement, the term "CIL Balance Sheet" means the unaudited balance sheet of
CIL as of December 31, 1996.

4.6 ABSENCE OF CERTAIN CHANGES. (a) Except as set forth
in Schedule 4.6(a), since October 31, 1996, (i) to the knowledge of the
Sellers, there has not been any material adverse change in CIL's relations with
any of its suppliers or customers, (ii) there has not

7
<PAGE> 20
been any material adverse change in the financial position, results of
operations, cash flows, Business or prospects of CIL and (iii) CIL has
conducted its Business in the ordinary course consistent with past practice,
including without limitation, billing, shipping and collection practices,
marketing and sales practices, inventory transactions and payment of accounts
payable;

(b) Without limiting the generality or effect of the
foregoing, except as set forth on Schedule 4.6(b), since October 31, 1996, CIL
has not: (i) declared, set aside or paid any dividend or made any distribution
on or with respect to shares of its capital stock; (ii) made any cash payments
to any Seller or any Affiliate or Subsidiary (each as hereinafter defined) of
any Seller other than pursuant to, and in accordance with the terms of, a
Contract listed on Schedule 4.7; (iii) entered into any agreement or letter of
intent relating to any merger, consolidation, recapitalization or other
business combination or reorganization of CIL; (iv) sold, transferred,
licensed, failed to keep in effect or otherwise disposed of any Intellectual
Property; (v) waived, released, granted or transferred any rights of material
value or modified or changed in any material respect any existing Contract,
other than in the ordinary course of business consistent with past practice;
(vi) failed to continue its existing practices, or to change such practices if
required to comply with applicable Law, relating to repair and maintenance of
the assets owned, leased or otherwise held by CIL; (vii) purchased, sold,
leased or disposed of, or subjected to lien, any assets owned, leased or
otherwise held by CIL other than in the ordinary course of business of the
Business consistent with past practice; (viii) created, incurred or assumed any
indebtedness for borrowed money (other than in the ordinary course of business
consistent with past practice; provided, however, that a loan from a bank or
other financial institution shall not constitute an ordinary course
transaction) unless repaid in full prior to Closing; (ix) assumed, guaranteed,
endorsed or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations or liabilities of any other
person or entity in excess of $25,000, except for endorsements of negotiable
instruments in the ordinary course of business consistent with past practice;
(x) granted any severance or termination pay or benefit in excess of $25,000,
other than in accordance with policies or agreements of CIL in effect on the
date hereof; (xi) adopted, enacted, authorized, ratified, approved, caused or
suffered to exist any material increase in the compensation or benefits of any
employee, former employee, independent contractor, director or former director
of CIL (other than normal periodic increases in the ordinary course of business
that are made in accordance with established policies of CIL

8
<PAGE> 21
or as required pursuant to any Contract listed on Schedule 4.7); (xii) adopted,
enacted, authorized, ratified, approved, caused or suffered to exist any
material amendment, modification, implementation or termination of any Employee
Benefit Plan or Benefit Arrangement (each as hereinafter defined) (other than
any such amendment, modification, implementation or termination required under
applicable Law or the terms of an Employee Benefit Plan or a Benefit
Arrangement or a Collective Bargaining Agreement (as hereinafter defined));
(xiii) adopted, enacted, authorized, ratified, approved, caused or suffered to
exist any material amendment, modification, implementation or termination of
any Collective Bargaining Agreement (other than any such amendment,
modification, implementation or termination required under applicable Law or
under the terms of any Employee Benefit Plan, Benefit Arrangement or Collective
Bargaining Agreement); (xiv) made commitments for any single capital project
which would exceed $25,000 in capital expenditures; (xv) entered into any
employment Contract with respect to the performance of personal services which
is not terminable at will without liability or penalty; (xvi) entered into any
Contract with respect to any of the foregoing or (xvii) undertaken any action
or activity or failed to take any action which would result in any violation or
breach of any representation, warranty or covenant of any of the Sellers
contained herein.

(c) Without limiting the generality or effect of the
foregoing, except as set forth on Schedule 4.6(c), since October 31, 1996, CIL
has not: (i) amended its Certificate of Incorporation or By-Laws; (ii) granted,
sold, assigned or pledged any shares of, or rights of any kind to acquire any
shares of, the capital stock of CIL, or purchased, redeemed or otherwise
acquired any shares of such capital stock; (iii) made any change in any method
of accounting or accounting practice, except as may be required by Law or by
GAAP; (iv) made, changed or revoked any election with respect to taxes except
where the election (A) does not affect CIL; or (B) was consistent with prior
practice and will not adversely affect the Buyer or CIL after the Closing; (v)
entered into any closing or other agreement or settlement with respect to
taxes; (vi) made any loans, advances or capital contributions to or investments
in any person or entity, other than to any supplier or customer as an extension
of credit in the ordinary course of business consistent with past practice;
(vii) entered into any Contact with respect to any of the foregoing.

4.7 CONTRACTS. Except as described on Schedule 4.7, CIL
is not a party to or bound by any contract, agreement, lease commitment or
arrangement or other legally binding contractual right or

9
<PAGE> 22
obligation (collectively ~Contracts") that is of a type described below:

(a) Any employment, severance or consulting Contract, or
any distributorship, agency or manufacturer's representative Contract, that is
not terminable at will by CIL without liability or penalty;

(b) Any Collective Bargaining Agreement with any
collective bargaining group or labor union;

(c) Any indenture, mortgage, loan or credit Contract
under which CIL has borrowed any money or issued any note, bond, indenture or
other evidence of indebtedness for borrowed money, or guaranteed indebtedness
for money borrowed by others, other than such of the foregoing under which CIL
has no current or future obligation or liability;

(d) Any open sales order or contract for more than
$100,000 ("Backlog Contracts");

(e) Any purchase order or requirements contract for more
than $50,00() ("Supply Requirement Contracts");

(f) Any equipment lease requiring annual expenditures of
more than $25,00();

(g) Any vehicle lease requiring annual expenditure of
more than $10,000;

(h) Any Contract with respect to a joint venture or
partnership arrangement;

(i) Any Contract granting a power of attorney;

(j) Any Contract with respect to letters of credit,
surety or other bonds or pursuant to which CIL's assets are or are to be
subjected to a Lien;

(k) Any Contract limiting or restricting the ability of
CIL from entering into or engaging in any market or line of business;

(l) Any Contract including a provision regarding
confidentiality or a covenant not to compete;

10
<PAGE> 23
(m) Any guarantee, indemnity or similar Contract pursuant
to which CIL could (whether or not subject to contingencies) be required to
make payments with respect to or as a result of losses, costs or expenses paid
or incurred by another person or entity;

(n) Any Contract with any Seller or any Affiliate or
Subsidiary of any Seller or to which any officer, director or employee of CIL
is a party;

(o) Any Contract regarding the filing of tax returns (as
hereinafter defined) or relating in whole or in part to the sharing of tax
benefits or liabilities (including tax indemnities);

(p) Any Contract relating to the release, transportation
or disposal of Hazardous Materials (as hereinafter defined) or the clean-up,
abatement or other action in connection with Environmental Conditions (as
hereinafter defined);

(q) Any Contract relating to Intellectual Property;

(r) Any Contract for capital expenditures or the
acquisition or construction of fixed assets which requires future payments in
excess of $25,000; or

(s) Any Contract other than the Contracts listed above
which (i) involves aggregate future payments by or to CIL in excess of $25,000
other than purchase or sales orders entered into in the ordinary course of the
conduct of the Business consistent with past practice or (ii) to the knowledge
of the Sellers, is otherwise material to CIL.

Except as set forth on Schedule 4.7, each Contract listed, referenced to or
described on Schedule 4.7 is a valid and binding obligation of CIL and is in
full force and effect. Except as set forth on Schedule 4.7, CIL has performed
the obligations required to be performed by it through the date hereof under
each of such Contracts and CIL is not (with or without the lapse of time or the
giving of notice or both) in breach or default thereunder. Except as described
on Schedule 4.7, to the knowledge of the Sellers, each other party to any such
Contract is not (with or without the lapse of time or the giving of notice or
both) in breach or default under any such Contract. Except as set forth on
Schedule 4.7, with regard to each Contract, there are no material disputes or
disagreements pending or threatened between CIL and any other party with regard
to such Contracts, nor, to the knowledge of the Sellers, is there a basis for
any such dispute.

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<PAGE> 24
Except as set forth on Schedule 4.4(a), no consent, waiver, approval, license
or authorization of any person, entity or Governmental Entity is required under
any Contract to which CIL is a party or is bound in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.

4.8 TAXES. (a) For purposes of this Agreement, the term
"tax" (including, with correlative meaning, the terms "taxes" and "taxable")
means all federal, state, local, and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise,
alternative minimum, gains, transfer, documentary, stamp, and other taxes,
duties, or assessments of any nature whatsoever, together with all interest,
penalties, and additions imposed with respect to such amounts.

(b) For purposes of this Agreement, the term "tax
returns" means all returns, reports, statements, forms, or other documents or
information required to be filed with a taxing authority with respect to the
taxes of CIL.

(c) Except as set forth on Schedule 4.8(c), CIL has filed
all tax returns that it was required to file (including estimated tax returns),
such tax returns were correct and complete in all respects, and all taxes owed
by CIL (whether or not shown on any tax return) have been paid.

(d) A claim has never been made by an authority in a
jurisdiction where CIL has never filed tax returns that CIL is or may be
subject to taxation by that jurisdiction. Schedule 4.8(d) hereto lists all of
the jurisdictions in which CIL has ever done business, been authorized to do
business, owned or leased property, had employees or customers, employed
capital, or solicited or made sales.

(e) The Financial Statements reflect an adequate reserve
for all taxes payable by CIL accrued through the date of such Financial
Statements. All deficiencies for any taxes that have been proposed, asserted,
or assessed against CIL have been fully paid, or are fully reflected as a
liability in such Financial Statements, or are being contested and an adequate
reserve therefor has been established and is fully reflected in such Financial
Statements.

(f) No deficiency for any taxes has been proposed,
asserted, or assessed with respect to CIL, no audit or other examination of the
tax returns of CIL is currently in progress, and no

12
<PAGE> 25
facts exist that constitute grounds for the assessment of any additional taxes
with respect to CIL.

(g) There are no Liens for taxes (other than for current
taxes not yet due and payable) on the assets of CIL, the Shares, the
Teichgraeber Real Property or any of the Assets.

(h) The federal, state, local, and foreign income tax
returns of CIL have been examined by and settled with the Internal Revenue
Service and other applicable taxing authorities, or the statutes of limitations
with- respect to such years have expired, for all years through 1992. Except as
set forth on Schedule 4.8(h), there has been no waiver or extension of the
statute of limitations for the assessment of any tax for any taxable year, and
CIL currently is not the beneficiary of any extension of time within which to
file any tax returns.

(i) CIL is not a party to, or bound by, any agreement
providing for the allocation or sharing of taxes.

(j) CIL has not filed a consent pursuant to, or agreed to
the application of, Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code").

(k) CIL has not made any payments, is not obligated to
make any payments, and is not a party to any agreement that could obligate it
to make any payments, the deductibility of which would be disallowed (in whole
or in part) under Section 280G of the Code.

(l) None of the Companies has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. No Seller is a foreign person within the meaning of, and no tax is
required to be withheld as a result of the transfer contemplated by this
Agreement pursuant to, Section 1445 or any other provision of the Code or of
any other state, local or foreign laws.

(m) Schedule 4.8(m) hereto sets forth CIL's adjusted
basis in its assets for federal income tax purposes.

CIL has disclosed on its federal income tax returns
all positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Section 6662 of the
Code.

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<PAGE> 26
(o) All taxes that are required by Law to be withheld or
collected by CIL have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity or properly
deposited as required by applicable Law.

(p) CIL (i) has not been a member of an affiliated group
filing a consolidated federal income tax return (other than a group the common
parent of which was one of the Companies), or (ii) does not have any liability
for the taxes of any other person under Treas. Reg. Section 1. 1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by Contract or otherwise.

(q) CIL has not, and with respect to the Assets and the
Teichgraeber Real Property none of the Companies nor Teichgraeber has, executed
or entered into any closing agreement pursuant to Section 7121 of the Code, or
any predecessor provision thereof, or any similar provision of state or local
law.

(r) None of the assets owned by CIL and neither the
Assets nor the Teichgraeber Real Property is property that is required to be
treated as owned by any-other person pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, as in effect immediateLy prior to
the enactment of the Tax Reform Act of 1986, or is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.

(s) The consummation of the transactions contemplated by
this Agreement will not result in any taxes being imposed by the United States,
any state or political subdivision thereof, or any foreign country on the
stockholders of CIL as a result of CIL's ownership of any interest in real
property.

4.9 REAL PROPERTY. (a) Schedule 4.9(a) contains a
complete list and description of all real estate owned by CIL and of all leases
of real property to which CIL is a party or to which it is bound. True and
correct copies of all such leases have previously been delivered by CIL to the
Buyer. The real estate owned and the leaseholds described in Schedule 4.9(a)
represent all of the real estate interests used, owned or occupied by CIL as of
the date hereof. CIL has good and marketable title to such real estate and
leaseholds and has full and exclusive right to the occupation and use of the
real estate interests described on Schedule 4.9(a), subject only to the terms
of the applicable leases. Except as set forth on Schedule 4.9(a), each lease
listed and described on Schedule 4.9(a) is a valid and binding obligation of
CIL and is in full force and effect. Except

14
<PAGE> 27
as set forth on Schedule 4.9(a), CIL has performed the obligations required to
be performed by it through the date hereof under each of such leases and CIL is
not (with or without the lapse of time or the giving of notice or both) in
breach or default thereunder. Except as described on Schedule 4.9(a), each
other party to any such lease, other than CIL, is not (with or without the
lapse of time or the giving of notice or both) in breach or default under any
such lease.

(b) Greenwood has good and marketable title to the Real
Property that Greenwood is Selling to the Buyer pursuant to Section 2.1(d) and
has full and exclusive right to occupation and use of such Real Property.
Except as set forth on Schedule 4.9(b), each lease listed and described on
Schedule 2. 1(d)(ii) under which Greenwood is the lessee is a valid and binding
obligation of Greenwood and is in full force and effect. Except as set forth
on Schedule 4.9(b), Greenwood has performed the obligations required to be
performed by it through the date hereof under each of such leases and Greenwood
is not (with or without the lapse of time or the giving of notice or both) in
breach or default thereunder. Except as described on Schedule 4.9(b), each
other party to any such lease, other than Greenwood, is not (with or without
the lapse of time or the giving of notice or both) in breach or default under
any such lease.

(c) Edco has good and marketable title to the Real
Property that it is selling to the Buyer pursuant to Section 2.1(d) and has
full and exclusive right to the occupation and use of such Real Property.
Except as set forth on Schedule 4.9(c), each lease listed and described on
Schedule 2. 1(d)(ii) under which Edco is the lessee is a valid and binding
obligation of Edco and is in full force and effect. Except as set forth on
Schedule 4.9(c), Edco has performed the obligations required to be performed by
it through the date hereof under each of such leases and Edco is not (with or
without the lapse of time or the giving of notice or both) in breach or default
thereunder. Except as described on Schedule 4.9(c), each other party to any
such lease, other than Edco, is not (with or without the lapse of time or the
giving of notice or both) in breach or default under any such lease.

(d) Teichgraeber has good and marketable title to the
Teichgraeber Real Property and has full and exclusive right to the occupation
and use of such Teichgraeber Real Property.

(e) Attached as Schedule 4.9(e) is a complete list of the
real property previously owned or leased by CIL at any time during the last ten
years.

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<PAGE> 28
4.10 TITLE TO AND CONDITION OF PROPERTIES. (a) Schedule 4.
10(a) lists all of the machinery, equipment, vehicles, tools, office furniture
and other tangible personal property, owned, leased or used by CIL or that are
included in the Assets which have a net book value or replacement cost in
excess of $25,000.

(b) Except as set forth in Schedule 4. 10(b), the
Companies and Teichgraeber have good and marketable title to all of the real
estate and leasehold properties listed under their respective names on
Schedules 4.9(a)-(e) free and clear of all Liens, and the Companies have good
and marketable title to all their personal property and other assets, free and
clear of all liens.

(c) To the knowledge of the Sellers, except as set forth
on Schedule 4. 10(c), the tangible personal property assets owned, leased or
used by CIL or included in the Assets are in useable operating condition,
normal wear and tear excepted; provided, however, the Sellers make no
representations or warranties to the Buyer regarding the condition of such
assets and the Buyer is purchasing such assets "as is, where is."

4.11 Litigation. (a) Except as set forth on Schedule
4.11, there are (i) no claims, suits, investigations, administrative
proceedings, arbitrations or other proceedings (u~gal Proceedings") pending
against CIL, or any judgment, order, writ, injunction or decree of any
Governmental Entity ("Orders") to which CIL is subject and (ii) to the
knowledge of the Sellers, no Legal Proceedings threatened against CIL by any
person, entity or Governmental Entity.

(b) CIL is not in default under, and has not failed to
comply with, the terms of (i) any Orders. (ii) any Contract entered into with
any Governmental Entity to settle any claim of alleged non-compliance with
applicable Law (collectively, "Consent Decrees"), or (iii) any settlement that
is binding upon CIL. Schedule 4. 11 sets forth a list of all Orders, Consent
Decrees and settlements that are binding upon CIL and that remain in effect as
of the date hereof.

4.12 COMPLIANCE WITH LAWS. (a) Except as set forth on
Schedule 4. 12(a), and except with respect to the environmental matters covered
by Section 4. 12(b) and (c), none of the Sellers or CIL is in violation of any
Order or in violation of any Law.

(b) Except as set forth on Schedule 4. 12(b), neither
Teichgraeber (to the extent relating to the Teichgraeber Real Property) nor any
of the Companies has any liability under any

16
<PAGE> 29
Environmental Law (as hereinafter defined) (including without limitation any
obligation to remediate any Environmental Condition) applicable to the
currently or previously owned or leased real property of Teichgraeber (to the
extent relating to the Teichgraeber Real Property) or any of the Companies or
any facilities or operations thereon. Except as set forth in Schedule 4. 12(b),
(i) Teichgraeber (to the extent relating to the Teichgraeber Real Property) and
each of the Companies is in compliance with all Environmental Laws and there
exist no Environmental Conditions with respect to Teichgraeber (to the extent
relating to the Teichgraeber Real Property) or the Companies or any currently
or previously owned or leased properties of Teichgraeber (to the extent
relating to the Teichgraeber Real Property) or any of the Companies or any
facilities or operations thereon; (ii) neither Teichgraeber (to the extent
relating to the Teichgraeber Real Property) nor any of the Companies has
generated, manufactured, refined, transported, treated, stored, handled,
disposed, transferred, produced, or processed any Hazardous Material or any
solid waste, except as in compliance with all applicable Environmental Laws,
nor has any reportable Release or Threat of Release (each as hereinafter
defined) of any Hazardous Material occurred, except as set forth in Schedule
4.12(b); (iii) no Lien has been imposed on any assets of Teichgraeber (to the
extent relating to the Teichgraeber Real Property) or of any of the Companies
by any Governmental Entity at the federal, state, or local level in connection
with the presence of any Hazardous Material; (iv) except as set forth in
Schedule 4. 12(b), neither Teichgraeber (to the extent relating to the
Teichgraeber Real Property) nor any of the Companies has since 1981(A) entered
into or been subject to any Order with respect to Environmental Laws; (B)
received any notice under the citizen suit provision of any Environmental Law;
(C) received any written request for information, notice, demand letter,
administrative inquiry, or formal complaint or claim with respect to any
Environmental Condition; or (D) been subject to or threatened with any
governmental or citizen enforcement action, and there is no state of facts or
events with respect to which there exists a substantial likelihood that any of
the matters described above in Section 4.12(b)(iv)(A)-(D) will he forthcoming;
(v) Teichgraeber (to the extent relating to the Teichgraeber Real Property) and
each of the Companies have currently in effect, and in the name of each
applicable party, all Permits required for the operation and conduct of the
Business, which Permits are listed on Schedule 4. 12(b) and are fully
transferable to the Buyer with the consent of the issuing body to the extent
required by any applicable Law, and each of the Sellers and CIL is in
compliance with all such Permits; (vi) neither Teichgraeber (to the extent
relating to the Teichgraeber Real Property) nor any of the Companies is in
violation

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<PAGE> 30
of or has violated in the past any applicable Laws relating to asbestos, lead
based paints or solvents, and (vii) except to the extent in compliance with
applicable Law, no polychlorinated biphenyls are currently used, stored or have
been disposed at any of the currently or previously owned or leased real
properties of Teichgraeber (to the extent relating to the Teichgraeber Real
Property) or any of the Companies.

(c) Without limiting the generality or effect of the
foregoing, Schedule 4. 12(c) lists or describes (i) all on-site and off-site
locations where Teichgraeber (to the extent relating to the Teichgraeber Real
Property) or any of the Companies has stored, disposed or arranged for the
storage or disposal of any Hazardous Materials and (ii) all underground and
above ground storage tanks located at any of the currently or previously owned
or leased real properties of Teichgraeber (to the extent relating to the
Teichgraeber Real Property) or any of the Companies and the contents of such
tanks. Except with respect to those matters set forth on Schedule 4.12(c), each
of the currently owned and leased real properties of Teichgraeber (to the
extent relating to the Teichgraeber Real Property) and each of the Companies,
all facilities and operations thereon and all alterations and improvements
thereto, comply with any and all Contracts, Permits and Orders of all
Governmental Entities regarding any Environmental Condition.

(d) For purposes of this Agreement, the following terms
have the following meanings:

"ENVIRONMENT" means soil, surface waters, groundwaters, land,
stream sediments, surface or subsurface strata, ambient air or any other
environmental medium.

"ENVIRONMENTAL CONDITION" means any condition with respect to
the Environment on or off-site, or health or safety, whether or not yet
discovered, which has resulted in the past or does result in the future in any
damage, loss, cost, expense, claim, demand, order, or liability to or against
any of the Sellers, CIL or the Buyer by any third party (including, without
limitation, any Government Entity), including without Limitation any condition
resulting from the operation of the Business prior to the date of the Closing
by any of the Sellers or CIL or any activity or operation formerly conducted by
any of the Sellers or CIL.

"ENVIRONMENTAL LAW" means any federal, state or local
environmental or health and safety-related Law, whether existing as of

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<PAGE> 31
the date hereof, previously enforced or subsequently enacted and all rules and
regulations thereunder, including without limitation the Resource Conservation
and Recovery Act (42 U.S.C. 6901 et seq.), as amended, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. 9601 et
seq.), as amended ("CERCLA"), the Federal Clean Water Act (33 U.S.C. 1251 et
seq.), as amended, The Occupational Safety and Health Act (29 U.S.C. 651 et
seq.), as amended, or any other federal, state or local environmental, health
and safety Law, whether existing as of the date hereof, previously enforced or
subsequently enacted.

"HAZARDOUS MATERIAL" means any pollutant, toxic substance,
hazardous waste, hazardous material, hazardous substance or oil as defined in
or regulated pursuant to any Environmental Law.

"PERMIT" means any permit, license, approval, consent,
certificate or authorization issued by a Governmental Entity.

"RELEASE" means any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping into the Environment.

"THREAT OF RELEASE" means a substantial likelihood of a
Release which requires action to prevent or mitigate damage to the Environment
which may result from such Release.

(e) Sellers representations and warranties contained in
Section 4. 12(b) and (c) are made to the knowledge of the Sellers. Solely for
purposes of Section 4. 12(b) and (c), a representation or warranty contained
herein shall be breached if such representation or warranty shall prove to be
incorrect and any Seller either (i) had knowledge (as defined in Section 12.12)
of facts or circumstances which if disclosed would have made the representation
true and correct, or (ii) should have had such knowledge.

4.13 INTELLECTUAL PROPERTY. Schedule 4.13 contains a
complete list of all trade names, trademarks, service marks, registered
copyrights, patents, patent applications, patent drawing, engineering drawings,
technology, computer software that is not commercially available and royalty
rights used in or necessary for the conduct of the Business as of the date
hereof and all licenses pertaining to any of the foregoing (collectively, the
"Scheduled IP", and, together with all trade secrets, unregistered copyrights,
know-how and technology used in or necessary for the conduct of the Business as
of the date hereof, collectively, the "Intellectual

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<PAGE> 32
Property"). No Intellectual Property is used by any of the Companies pursuant
to a license from a third party or is licensed by any of the Companies to a
third party except pursuant to a license listed on Schedule 4.13. Except as set
forth on Schedule 4.13, one or more of the Companies (i) owns free and clear of
all Liens all of the Scheduled IP (other than the Scheduled IP that issued
pursuant to a license disclosed on Schedule 4.13), (ii) has the legal right to
use all of the Scheduled IP that is used pursuant to a license, (iii) owns,
free and clear of all Liens, or has the legal right to use, all of the other
Intellectual Property as it is used as of the date hereof and (iv) has paid all
required filing and registration fees in connection with the Scheduled IP.
Except as set forth on Schedule 4.13, none of the Sellers nor CIL has received
any written notice (that has not been subsequently satisfied or withdrawn) nor
has there been any assertion against any of the Sellers or CIL of any
infringement, dilution, unfair competition or material conflict with the
asserted rights of others in connection with the use by any of the Companies of
any of the Intellectual Property in the conduct of the Business. All of the
patents, copyright registrations and trademark and servicemark registrations
listed in Schedule 4.13 are valid and in full force and effect, are held of
record in the name of one of the Companies free and clear of any Liens, and,
except as set forth in schedule 4.13, are not subject to any pending
cancellation or reexamination proceeding or other proceeding or written claim
challenging their extent or validity. With respect to the Scheduled IP, except
as described on Schedule 4.13, one or more of the Companies is the applicant of
record in all pending patent applications and all applications for trademark,
service mark or copyright registration, and no action of opposition or
interference or final refusal has been received by any of the Companies in
connection with any such application. Except as disclosed on Schedule 4.13,
none of the Companies is a party to or bound by any Contract or Order which
limits the use by any of the Companies of any Intellectual Property.

4.14 TRANSACTIONS WITH INTERESTED PERSONS. Except as set
forth on Schedule 4. 14, CIL has no obligation to indemnify, or to make any
payment of money to, any Seller, any Affiliate or Subsidiary of any Seller or
CIL, or to any person who is or was an officer, partner, director or employee
of CIL or any Affiliate or Subsidiary of CIL, except for salaries for services
rendered and expenses (including employee benefits and other related benefits)
previously incurred in the ordinary course of business consistent with past
practice. Schedule 4. 14 sets forth each Contract to which CIL is a party or is
bound entered into with any Seller, any Affiliate or Subsidiary of any

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<PAGE> 33
Seller or any person who is or was an officer, partner, director or employee of
CIL or any Affiliate or Subsidiary of CIL.

4.15 EMPLOYEE AND EMPLOYEE BENEFIT MATTERS. (a) Schedule
4. 15(a)(i) lists each employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which
covers any current or former employee of any of the Companies and which is or
was maintained or contributed to by any of the Companies or any ERISA Affiliate
(as hereinafter defined) and as to which there may be further liabilities or
obligations by any of the Companies (an "Employee Benefit Plan"). For purposes
of this Agreement, "ERISA Affiliate" means any entity, trade or business
(whether or not incorporated) the employees of which would be treated with the
employees of any of the Companies as employed by a single employer for purposes
of Section 4001(b)(1) of ERISA or Section 414(b)~ (c) or (m) of the Code.
Schedule 4. 15(a)(ii) lists each employment or severance contract or
arrangement, each stock option plan, stock appreciation right plan, executive
compensation practice and other executive perquisite, each plan or arrangement
providing for insurance coverage, severance, termination or similar coverage
and each written compensation policy and practice which covers any current or
former employee, director or agent of any of the Companies, which is or was
maintained or contributed to by any of the Companies or any ERISA Affiliate,
and which is not an Employee Benefit Plan (a "Benefit Arrangement").

(b) Each Employee Benefit Plan (other than a
multiemployer plan) and each Benefit Arrangement complies in all material
respects, and has been operated, administered and, where applicable, amended,
in all material respects, in accordance with its terms and all applicable Laws,
and no "reportable event" (other than those for which the 30-day notice to the
Pension Benefit Guaranty Corporation has been waived) or "prohibited
transaction" (oar than those for which there is an available exemption) (as
such terms are defined in ERISA and the Code, as applicable) has occurred with
respect to any Employee Benefit Plan during the five years preceding the
Closing Date. Each Employee Benefit Plan (other than a multiemployer plan)
intended to qualify under Section 401(a) of the Code has received a
determination letter concluding that such plan so qualifies, and to the
knowledge of the Sellers and CIL, no event has occurred, amendment been adopted
or action been taken which would cause such determination letter to he revoked.

(c) Each of the Companies delivered or made available to
the Buyer complete and correct copies of each Employee Benefit Plan,

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<PAGE> 34
each Benefit Arrangement any trust agreements funding agreements or insurance
contracts relating thereto and, if applicable (i) the most recent actuarial
valuation report, (ii) the last filed Form 5500 or 5500-C and Schedules A and B
thereto, (iii) the summary plan description currently in effect and all
material modifications thereto, (iv) the last financial statements, and (v) the
most recent determination letter issued with respect to each such plan or
arrangement.

(d) Except as set forth on Schedule 4. 15(d), there are
no actions or claims existing or pending (other than routine claims for
benefits) or threatened with respect to any Employee Benefit Plan (other than a
multiemployer plan) or Benefit Arrangement.

(e) All contributions required to be made by any of the
Companies under applicable Law or the terms of any Employee Benefit Plan (other
than a multiemployer plan), Benefit Arrangement or Collective Bargaining
Agreement to each Employee Benefit Plan and each Benefit Arrangement have been
made within the time prescribed by such Law, plan, arrangement or Collective
Bargaining Agreement. There does not exist any accumulated funding deficiency
within the meaning of either Section 412 of the Code or Section 302 of ERISA as
to any Employee Benefit Plan. There has not been issued any waiver of the
minimum funding standards imposed by the Code with respect to any such Employee
Benefit Plan.

(f) No Employee Benefit Plan that is or was subject to
Title IV of ERISA (a "Pension Plan") has been terminated; no proceeding has
been initiated to terminate any Pension Plan; and none of the Companies has
incurred or are reasonably expected to incur any liability, whether to the
Pension Benefit Guaranty Corporation or otherwise, except for required premium
payments, which payments have been made when due, and benefit payments payable
in the ordinary course.

(g) No Employee Benefit Plan or Benefit Arrangement
provides medical or death benefits (whether or not insured) with respect to
current or former employees of any of the Companies beyond their retirement or
other termination of service (other than (i) coverage mandated by Law, provided
solely at the former employee's cost, or (ii) death benefits under any Pension
Plan).

The present value of all "benefit liabilities"
(whether or not vested) (as defined in Section 4001(a)(16) of ERISA) under each
Pension Plan did not exceed as of the most recent plan actuarial

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<PAGE> 35
valuation date, and will not exceed as of the Closing Date, the then current
fair market value of the assets of such plan. For purposes of determining the
present value of benefit liabilities under any such plan, the actuarial
assumptions and methods used under such plan for the most recent plan actuarial
valuation shall be used and all benefits provided under such plan shall be
deemed to be fully vested.

(i) Except as disclosed on Schedule 4.15(i) and except
for any actions (Including, without limitation, with respect to employment,
termination, severance payments or obligations, employee benefits, employee
benefit plans and arrangements (including Employee Benefit Plans, Benefit
Arrangements, Pension Plans and multiemployer plans) and salaries) of the Buyer
with respect to any current or former director, officer, independent contractor
or employee of any of the Companies, the execution of this Agreement and
performance of the transactions contemplated by this Agreement will not
accelerate the time of payment or vesting, or increase the amount of any
compensation due to any current or former officer, employee, independent
contractor or director of any of the Companies.

(j) No Employee Benefit Plan is a "multiple employer
plan" or a "multiemployer plan", within the meaning of the Code or ERISA or the
regulations promulgated thereunder, and none of the Companies, (i) has made any
contributions to or participated in any such multiple employer plan or
multiemployer plan, or (ii) has any liability with respect to any such plan,
which liability has not been fully paid as of the date hereof. As of the
Closing Date, none of the Companies, (i) will have completely or partially
withdrawn from any Employee Benefit Plan which is a multiemployer plan, or (ii)
will be subject to any withdrawal liability as described in Section 4201 of
ERISA for any withdrawal from any Employee Benefit Plan which occurred on or
prior to the Closing Date (including, without limitation, any withdrawal deemed
to have occurred as a result of the transactions contemplated by this
Agreement).

(k) Each of the Companies (except as a result of any
actions taken by the Buyer) (i) is in compliance with all applicable Laws
respecting employment, employment practices, terms and conditions of employment
and wages and hours (including, but not limited to, the Worker Adjustment
Retraining Notification Act, the Americans with Disability Act of 1990 and the
Family and Medical Leave Act of 1993 ("FMLA")), in each case, with respect to
current and former officers, employees, independent contractors and directors
of each of the Companies (ii) has withheld all amounts required by Law or by
agreement to be withheld from the wages, salaries and other payments

23
<PAGE> 36
to such officers, employees, independent contractors and directors of each of
the Companies, (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing, and (iv) is not liable
for any payment to any trust or other fund or to any Governmental Entity, with
respect to unemployment compensation benefits, social security or other
benefits for current and former officers, employees, independent contractors or
directors of each of the Companies. Schedule 4. 15(k) sets forth a list of all
persons who are on leave as of the Closing Date and identifies which persons
are on leave covered by the FMLA and which persons are on leave not covered by
the FMLA.

(l) Schedule 4. 15(l) sets forth each collective
bargaining or labor agreement or memorandum of understanding which covers
current or former employees of each of the Companies (a "Collective Bargaining
Agreement"). Except as set forth on Schedule 4. 15(l) hereto, (i) there is no
union organizational activity currently underway at any of the Companies, (il)
none of the Companies is engaged in or has received any written notice during
the current or preceding year of, any unfair labor practice, and no such
complaint is pending before the National Labor Relations Board or any other
agency having jurisdiction thereof, and (iii) during the immediately preceding
twelve calendar months there has not been any, and there is no threatened,
labor strike, work stoppage or slowdown pending against any of the Companies
and no pending lockout by any of the Companies. Each of the Companies has
satisfied and performed fully its obligations under each Collective Bargaining
Agreement, and under any order, conciliation contract or settlement contract by
which any of the Companies is bound or to which any of the Companies is subject
concerning employment related matters.

(m) Schedule 4. 15(m) sets forth a complete and accurate
list of all persons currently employed by any of the Companies, together with
the amount of the annual compensation (separating base salary and other forms
of compensation) of each such person, the date used as the commencement of
employment and for the vesting of benefits for such person and the accrued
vacation days for such person. The appropriate Company has paid in full to such
employees all wages, commissions, bonuses and other compensation for all
services performed by them to date (other than amounts accrued since the end of
the last pay period) and none of the Companies is subject to any claim for
non-payment or non- performance of any of the foregoing.

4.16 CUSTOMER ACCOUNTS RECEIVABLE; INVENTORIES. (a) All
customer accounts receivable reflected in the CIL Balance Sheet or

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<PAGE> 37
arising thereafter, have arisen from bona fide transactions in the ordinary
course of business with persons or entities other than the Sellers or any
Affiliates or Subsidiaries of the Sellers or CIL. To the knowledge~of the
Sellers, all customer accounts receivable (and interest thereon) reflected on
the CIL Balance Sheet are good and collectible at the aggregate recorded
amounts thereof, net of any applicable reserves for doubtful accounts reflected
on the CIL Balance Sheet. To the knowledge of the Sellers, all customer
accounts receivable (and interest thereon) acquired since December 31, 1996 are
good and collectible at the aggregate recorded amounts thereof, net of any
applicable reserves for doubtful accounts. The Sellers have provided to the
Buyer a true and correct aging of all accounts receivable of CIL as of the
cycle billing dates during the month immediately preceding the date of this
Agreement.

(b) The inventories of CIL are of a quality and quantity
usable and salable during a period consistent with past practices, at customary
gross margins consistent with past practice in the ordinary course of business.
The inventories of CIL are reflected on the CIL Balance sheet and in the books
and records of CIL in accordance with GAAP adjusted on a basis consistent with
the practices and procedures described on Schedule 4.5. Since December 31,
1996, CIL has not discounted inventory except in the ordinary course of
business consistent with past practice.

(c) The inventories of Greenwood are of a quality and
quantity usable and salable during a period consistent with past practices of
CIL in the ordinary course of business. The inventories of Greenwood consist
only of recently acquired Gardner Denver inventories. In the course of its
business, Greenwood has sold these inventories only to CIL and not to outside
customers.

4.17 NON-CURRENT ASSETS. Since October 31, 1996, CIL has
only disposed of non-current assets that were obsolete or that are disclosed on
Schedule 4.17 in the ordinary course of business consistent with past practice;
provided, however, that the aggregate book value as of January 31, 1999 of all
such disposed non-current assets does not exceed in the aggregate $25,000.

4.18 SUPPLIERS. CIL is not involved in any disputes with
any of its suppliers except in the ordinary course of business in respect to
adjustments relating to shipping deficiencies or defective goods. Schedule 4.18
sets forth all suppliers which account for 5% or more of CIL's orders for the
purchase of merchandise during the 12-month period ended as of December 31,
1996 and the amounts paid by CIL

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<PAGE> 38
to such suppliers during such period. CIL has not received notice from, or
otherwise has knowledge of, any such supplier or suppliers accounting
collectively for more than 5 % of such orders to CIL refusing to deal with CIL
as of the date hereof.

4.19 SUFFICIENCY OF ASSETS. The properties and assets
owned by, or currently leased by the Sellers and being sold, assigned and
delivered to the Buyer hereunder comprise all of the properties and assets
currently used by the Companies in the Business and are sufficient for the
operation of the Business on a basis consistent with past practice.

4.20 INSURANCE. Each of the Companies maintains policies
of fire and casualty, liability and other forms of insurance in such amounts,
with such deductibles and against such risks and losses as are reasonable for
the business and assets of the Companies; a list of such insurance policies is
set forth on Schedule 4.20, together with the terms thereof and all deductible
amounts. None of such insurance policies has been cancelled or otherwise
unfavorably terminated and no notice of any such proposed action has been
received by any of the Companies, and such insurance/limits of liability as
were provided in the individual policies remain in full force and effect. True
and complete information detailing the type and amount of coverage of each such
policy has been made available to the Buyer. Except as set forth on Schedule
4.20, no such policies are subject to co-insurance amounts, and no coverages
will terminate as a result of the Closing. None of the Companies has failed to
pay any premium, or taken or failed to take any other action, which would
permit the insurers under any policy listed on Schedule 4.20 to terminate such
insurance.

4.21 ACCOUNTS; SAFE DEPOSIT BOXES; POWERS OF ATTORNEY;
OFFICERS AND DIRECTORS. Schedule 4.21 sets forth (a) a true and correct list
of all bank and savings accounts, certificates of deposit and safe deposit
boxes of CIL and those persons authorized to sign thereon, (b) true and correct
copies of all corporate borrowing, depository and transfer resolutions and
those persons entitled to act thereunder, (c) a true and correct list of all
powers of attorney granted by CIL and those persons authorized to act
thereunder, and (d) a true and correct list of all officers and directors of
CIL.

4.22 LIABILITIES. (a) Except as set forth on Schedule
4.22, CIL has no obligations or liabilities of any nature (whether known,
unknown, accrued, absolute, contingent, unliquidated or otherwise and
regardless of when such liability or obligation was or is asserted) arising out
of any action or inaction prior to the Closing Date, with

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<PAGE> 39
respect to or based upon any transactions, occurrences or events occurring, or
facts or circumstances existing, at or prior to the Closing, except (i) those
liabilities reflected on or fully reserved against on the CIL Balance Sheet, or
(ii) liabilities which have arisen since December 31, 1996 in the ordinary
course of business consistent with past practice. Sellers-representations and
warranties contained in this Section 4.22 are made to the knowledge of the
Sellers. Solely for purposes of this Section 4.22, a representation or warranty
contained herein shall be breached if such representation or warranty shall
prove to be incorrect and any Seller either (i) had knowledge (as defined in
Section 12. 12) of facts or circumstances which if disclosed would have made
the representation true and correct, or (ii) should have had such knowledge.

4.23 PRODUCT WARRANTY AND PRODUCT LIABILITY. (a) Except as set
forth on Schedule 4.23(a), there are no product warranty claims pending or, to
the knowledge of the Sellers or CIL, threatened against CIL for amounts in
excess of $5,000 that are not fully reserved against on the CIL Balance Sheet
and, to the knowledge of the Sellers or CIL, there is no state of facts nor has
there occurred any event that could form the basis for any such product
warranty claim.

(b) Except as set forth on Schedule 4.23(b), there are no product
liability or other tort claims pending or, to the knowledge of the Sellers or
CIL, threatened against CIL. Schedule 4.23(b) sets forth a complete and
accurate summary of product liability claims made against CIL in the past five
years.

4.24 BACKLOG CONTACTS. Except as set forth on Schedule
4.24 hereto, CIL has a reasonable expectation of being able to meet its
obligations under the Backlog Contracts to which it is a party, in accordance
with the terms of such Backlog Contracts.

4.25 SUPPLY REQUIREMENT CONTRACTS. Except as set forth on
Schedule 4.25 hereto, each of the Supply Requirement Contracts is on
commercially reasonable terms and none of the Supply Requirement Contracts
require purchases by CIL in excess of its reasonably expected requirements.

4.26 GOVERNMENT CONTRACTS. Except as set forth on Schedule
4.26, CIL is not a party to any Contract with any Governmental Entity.

4.27 1996 RESULTS. CIL's Restructured Pro Forma EBITDA for
the fiscal year ended December 31, 1996 is not less than $2.6 million. "EBITDA"
means, in respect of CIL, earnings before interest income and

27
<PAGE> 40
expense, taxes based upon or measured by income, depreciation and amortization
as reflected on the financial statements of CIL prepared in accordance with
GAAP, consistently applied. "Restructured Pro Forma EBITDA" means, in respect
of CIL, the EBITDA of CIL increased by those amounts set forth on Exhibit A
attached hereto.

4.28 DEBT. Except as set forth on Schedule 4.28, CIL is
not a party to any indenture, mortgage, loan or credit Contract under which CIL
has borrowed any money or issued any note, bond, indenture or other evidence of
indebtedness for borrowed money, or guaranteed indebtedness for money borrowed
by others, other than such of the foregoing under which CIL has no current or
future obligation or liability (the "Debt Obligations").

4.29 CONTINGENT LIABILITIES. Except as set forth on
Schedule 4.29, CIL is not a party to any Contract with respect to letters of
credit, customer deposits, guaranties of indebtedness, performance bonds, bid
bonds or other bonds (the "Contingent Liabilities").

4.30 BROKERAGE. Except as set forth on Schedule 4.30, none
of the Sellers has made any agreement or taken any other action which might
cause the Buyer to become obligated to pay any broker's fee or commission or
other payment to any other person or entity as a result of the transactions
contemplated hereunder.

4.31 CIL'S NET WORTH. CIL's net worth (determined in
accordance with GAAP, consistently applied) was not less than $4 million as of
December 31, 1996.

4.32 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Sellers contained herein are true and
correct on the date hereof and will be true and correct on the Closing Date
with the same force and effect as if made on and as of the Closing Date.

5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The
Buyer represents and warrants to the Sellers as follows:

5.1 ORGANIZATION; POWER. The Buyer is duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Buyer has the requisite corporate power and authority to own, lease,
operate and otherwise hold its assets owned, leased or otherwise held by it.

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<PAGE> 41
5.2 BINDING AGREEMENT AND AUTHORITY. The Buyer has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. All corporate action
required to be taken for the due authorization of the execution and delivery by
the Buyer of this Agreement and the consummation of the transactions
contemplated hereby have been duly taken by the Buyer. This Agreement has been
duly executed and delivered by the Buyer and, assuming the due execution and
delivery by the Sellers, constitutes the valid and binding obligation of the
Buyer, enforceable against it in accordance with its terms.

5.3 NO DEFAULTS. The execution and delivery of this
Agreement by the Buyer does not, and the consummation by the Buyer of the
factions contemplated hereby will not:

(b) with or without the giving of notice or the passage
of time or both, conflict with or violate any Law of any Governmental Entity;

(c) with or without the giving of notice or the passage
of time or both, conflict with or result in any breach or violation of any
provision of, or constitute a default under, or give rise to a right of
termination, cancellation or acceleration of the performance of or the loss of
a material benefit under, any material contract, commitment, agreement,
understanding, arrangement, Permit or restriction of any kind to which the
Buyer is a party or to which the Buyer or any of their assets are subject or
result in the creation of any Lien upon any of the assets of the Buyer; or

(d) conflict with or violate the Certificate of
Incorporation or By-Laws of the Buyer.

5.4 FINANCIAL OBLIGATIONS. The Buyer is able to meet all
its financial obligations under this Agreement.

5.5 GARDNER DENVER AGREEMENT. The Buyer has received a
copy of the Asset Purchase Agreement, dated as of July 10, 1995, by and between
Edco and Gardner Denver Machinery Inc. ("Gardner Denver"), as amended by the
Amendment to the Asset Purchase Agreement, dated as of

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<PAGE> 42
December 28, 1995, by and between Edco and Gardner Denver, and the Assignment,
dated January 1, 1996, by Edco to Greenwood and the Bill of Sale, dated June 1,
19%, from Edco to Greenwood, (the "Gardner Denver Agreement") and has reviewed
the Gardner Denver Agreement. The Buyer acknowledges that, with resect to the
Gardner Denver inventory and the other assets purchased by Greenwood pursuant
to the Gardner Denver Agreement and being sold to Buyer hereunder, each of the
Sellers makes no greater representations and warranties to the Buyer with
respect thereto than those made by Gardner Denver in the Gardner Denver
Agreement.

5.6 DUE DILIGENCE. The Buyer has performed limited due
diligence and is continuing to perform due diligence in respect of the Assets,
CIL, the Teichgraeber Real Property and the Business.

5.7 BROKERAGE. The Buyer has not made any agreement or
taken any other action which might cause any of the Sellers to become obligated
for any broker's fee or commission as a result of the transactions contemplated
hereunder.

5.8 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Buyer contained herein are true and
correct on the date hereof and will be true and correct on the Closing Date
with the same force and effect as ff made on and as of the Closing Date.

6. COVENANTS.

6.1 ACCESS. Prior to the Closing, upon reasonable notice
from the Buyer to the Sellers, the Sellers will (i) afford to the officers,
employees, attorneys, accountants, bankers or other authorized representatives
of the Buyer reasonable access during normal business hours to the properties,
facilities, books and records of Teichgraeber (to the extent relating to the
Teichgraeber Real Property) and each of the Companies and to the employees,
attorneys, accountants and other authorized representatives of Teichgraeber (to
the extent relating to the Teichgraeber Real Property) and each of the
Companies (collectively, the "Representatives") and (ii) cause the
Representatives to cooperate so as to afford the Buyer a reasonable opportunity
to make such review, examination and investigation of the Companies and the
Teichgraeber Real Property as Buyer may reasonably desire to make. The Buyer
will be permitted to make extracts from or to make copies of such books and
records as may be reasonably necessary. Prior to the Closing, the Sellers will
furnish to the Buyer, or cause to be furnished to the Buyer, such financial and

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<PAGE> 43
operating data and other information pertaining to Teichgraeber (to the extent
relating to the Teichgraeber Real Property) and each of the Companies and the
operation of the Business, past and present, as the Buyer may reasonably
request.

6.2 NONDISCLOSURE. Prior to the Closing, none of the
Buyer, the Sellers nor CIL will, and the Buyer, the Sellers and CIL will
instruct their respective officers, directors, partners, employees, agents,
legal and financial advisors and other representatives not to, disclose to any
other person either the fact that this Agreement has been entered into nor any
of the terms, conditions or other facts with respect to this Agreement or the
transactions contemplated hereby without the prior written consent of the Buyer
(in the case of the Sellers or CIL) or the Sellers (in the case of the Buyer);
provided, however, that nothing herein will prohibit any party from issuing or
causing publication of any press release or public announcement to the extent
that such party determines such action to be required by Law or the regulations
of any stock exchange on which it is listed in which event the party making
such determination will allow the other parties reasonable time to comment on
such release or announcement in advance of its issuance.

6.3 REGULATORY FILINGS; CONSENTS. (a) Within 15 days
hereof, the Buyer and the Sellers will cause such filings to be made as may be
required by the HSR Act with respect to the consummation of the transactions
contemplated by this Agreement. Thereafter, the Buyer and the Sellers will
cause to be filed as promptly as practicable with the United States Federal
Trade Commission and the United States Department of Justice any supplemental
information which may be requested pursuant to the HSR Act with respect to the
consummation of the transactions contemplated by this Agreement. Al' filings
made pursuant to the HSR Act will comply in all material respects with the
requirements of the respective Laws pursuant to which they are made.

(b) Without limiting the generality or effect of Section
6.3(a), each of the parties will (i) use reasonable efforts to comply as
expeditiously as possible with all lawful requests of Governmental Entities for
additional information and documents pursuant to the HSR Act and (ii) not (A)
except as required by any Governmental Entity, extend any waiting period under
the HSR Act or (B)enter into any agreement with any Governmental Entity not to
consummate the transactions contemplated by this Agreement, except with the
prior consent of the other parties hereto.

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(c) Without limiting the generality or effect of Section
6.3(a) and (b), each of the Sellers and the Buyer, to the extent applicable,
will use its reasonable best efforts to obtain the governmental and other
approvals, consents or waivers listed on Schedule 4.4(a).

6.4 OPERATION OF THE BUSINESS. Except as set forth in
Schedule 6.4 or as otherwise consented to by the Buyer in writing, until the
Closing, Teichgraeber, the Limited partnership and the Trust will cause CIL to:

(a) (i) conduct its Business only in the ordinary course
consistent with past practice including without limitation billing, shipping
and collection practices, marketing and sales practices, inventory transactions
and payment of accounts payable, (ii) use its best efforts to preserve and
maintain its relations with its suppliers or customers, and (iii) use its best
efforts to preserve and maintain its financial position, results of operations,
cash flows, Business or prospects;

(b) refrain from doing any of the acts enumerated in
Sections 4.6(b) or 4.6(c).

6.5 SATISFACTION OF CONDITIONS. Without limiting the
generality or effect of any other provision hereof, prior to the Closing, each
of the parties hereto will use their best efforts with due diligence and in
good faith to satisfy promptly all conditions required hereby to be satisfied
by such party prior to the consummation of the transactions contemplated hereby
including without limitation causing all of their respective representations
and warranties to remain true and correct.

6.6 LITIGATION. CIL will promptly notify the Buyer of any
Legal Proceeding which after the date hereof is commenced against CIL or
against any director, officer, employee, consultant or agent thereof with
respect to the affairs of CIL or the Business.

6.7 ACQUISITION PROPOSALS. During the period (the
"Pre-Closing Period") between the date hereof and the earliest to occur of (a)
the Closing and (b)the termination of this Agreement, none of the Sellers nor
CIL will, and each of the Sellers and CIL will instruct their respective
officers, partners, directors, employees, agents, legal or financial advisors
or other representatives not to, solicit, initiate or consider any proposals or
offers from any person or entity relating to, or enter into (or continue) any
discussions, or deliver

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any information, concerning, any acquisition or purchase of all or a material
amount of the assets of, or any securities of, or any merger, consolidation or
other business combination with, any of the Companies (any such transaction, a
"Competitive Transaction"). During the Pre-Closing Period, each of the Sellers
and CIL will promptly notify the Buyer in the event of any proposal or offer in
respect of a Competitive Transaction.

6.8 OTHER TAX MATTERS. (a) Liability for Taxes and Related
Matters.

(i) Sellers' Liability for Taxes. Each of the
Sellers, jointly and severally, shall be liable for and shall
indemnify in accordance with Sections 9.1 through 9.7 the Buyer for
all taxes (including without limitation any obligation to contribute
to the payment of a tax determined on a consolidated, combined or
unitary basis with respect to a group of corporations that includes or
included CIL) imposed on CIL or for which CIL may otherwise be liable
(1) for any taxable year or period that ends on or before the Closing
Date or (2) with respect to any taxable year or period beginning
before and ending after the Closing Date, the portion of such taxable
year or period ending on and including the Closing Date. Except as
set forth in clause (iii) of this Section 6.8(a), Teichgraeber shall
be entitled to any refund of taxes of CIL attributable to such
periods.

(ii) Taxes for Short Taxable Year. Each of the
Sellers and the Buyer shall close the taxable period of CIL as of the
close of business on the Closing Date, unless such action is
prohibited by Law. In any case where applicable Law prohibits CIL
from closing its taxable year on the Closing Date then, for purposes
of clause (i) of this Section 6.8(a), the determination of the taxes
of CIL for the portion of the year or period ending on, and the
portion of the year or period beginning after, the Closing Date shall
be determined on the basis of an interim closing of the books as of
the close of business on

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<PAGE> 46
the Closing Date, except that exemptions, allowances or deductions
that are calculated on an annual basis, such as the deduction for
depreciation, shall be ratably apportioned on a time basis.

(iii) Carryforwards of Losses. The Buyer is free to
cause CIL to elect, where permitted by Law, to carry forward any net
operating loss, net capital loss, charitable contribution or other
item arising before or after the Closing Date that would, absent such
election, be carried back to a taxable period of CIL ending on or
before the Closing Date. The Buyer shall be entitled to any refund of
income taxes paid by CIL before the Closing Date, to the extent that
such refund is attributable to losses or deductions of CIL that accrue
after the Closing Date.

(b) Assistance and Cooperation. After the Closing Date, each
of the Sellers shall:

(i) assist (and cause their respective Affiliates
and Subsidiaries to assist) the Buyer and its Affiliates in preparing
any tax returns or reports which the Buyer and its Affiliates are
responsible for preparing and filing;

(ii) cooperate fully in preparing for any audits of,
or disputes with taxing authorities regarding, any tax returns of CIL;
and

(iii) make available to the Buyer, the Buyer's
Affiliates and to any taxing authority as reasonably requested all
information, records and documents relating to taxes of CIL.

(c) Transfer Taxed. The Sellers shall be liable for, and
shall timely pay, any and all gains, transfer, sales, use, bulk sales,
recording, registration, documentary, stamp, and other taxes that may result
from, or be incurred in connection with, this Agreement. The Sellers shall, at
their own expense, properly complete, sign, and timely file any and all
required tax returns with respect to such taxes and, if required by applicable
Law, the Buyer will join in the execution of any such tax returns.

(d) Survival of Obligations. The obligations of the
parties set forth in this Section 6.8 shall be unconditional and absolute and

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<PAGE> 47
shall remain in effect until the date sixty (60) days after the expiration of
the relevant statute of limitations applicable to the taxes at issue.

6.9 CORPORATE RECORDS. On the Closing Date, the Sellers
will deliver or cause to be delivered to the Buyer at CIL's headquarters (to
the extent they exist) all original agreements, documents, books, records and
files relating to the Business (collectively, the "Records") in the possession
or under the control of any of the Sellers or any of their Affiliates or
Subsidiaries other than CIL (collectively, "Post-Closing Affiliates") to the
extent not in the possession of CIL or the Buyer, subject to the following
exceptions:

(a) The Buyer recognizes that certain Records may contain
only incidental information relating to the Business or may primarily relate to
the Sellers or Post-Closing Affiliates, or the non-Business activities of the
Sellers or the Post-Closing Affiliates, and that the Sellers and the
Post-Closing Affiliates may retain such Records provided, however, that each of
the Sellers shall at the request of the Buyer made at any time specifying the
items needed, deliver appropriately excised copies of such Records; and

(b) The Sellers and the Post-Closing Affiliates may
retain any tax returns and related schedules or work papers, but will promptly
make available to the Buyer or the Buyer's representatives copies of such tax
returns and related schedules o~work papers or information appears on such tax
returns or in related documents which relates to any of the Companies or which
the Buyer reasonably requests to fulfill tax-related or financial obligations
or obligations under this Agreement.

6.10 EMPLOYEES. (a) Each of the Sellers and CIL
acknowledges that the Buyer has no obligation hereunder to offer employment to
any employee of Greenwood or Edco; however, the Buyer shall have the right to
hire such of the employees of Greenwood or Edco as are listed on Schedule
4.15(m) hereto as the Buyer may select.

6.11 DISCLOSURE SCHEDULE UPDATES. The Sellers shall at
least once, and may more than once, amend or supplement the schedules provided
hereunder with respect to any matter coming to the Sellers attention or arising
which, if known to any of them or existing prior to the date of this Agreement,
would have been required to be set forth therein or which is necessary or
desirable to complete or correct any information contained therein or in any
representation and

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<PAGE> 48
warranty rendered inaccurate thereby. The Buyer shall notify the Sellers in
writing within 10 business days after its receipt of the amended or
supplemented schedules whether the Buyer accepts or rejects such amended or
supplemented schedules. If the Buyer rejects such amended or supplemented
schedules, the parties hereto shall endeavor to resolve their disagreement as
to such amended or supplemented schedules. If an agreement is not reached, the
Buyer may elect, subject to Section 6.14 hereunder, to terminate this Agreement
without any liability or further obligation to the Sellers, except for
obligations under Section 6.2, which obligations shall continue until the
second anniversary of the date hereof, and Section 12.7. If the Buyer
accepts the amended or supplemented schedules or fails to notify the Sellers in
writing within 10 business days after its receipt thereof of its acceptance or
rejection thereof, such amended or supplemented schedules shall be deemed, upon
the Closing, to be the schedules to this Agreement for all purposes hereunder,
as if such schedules had been provided on the date hereof.

6.12 GUARANTIES. The Buyer shall cause the guaranties made by
Teichgraeber and identified on Schedule 6. 12 (the "Guaranties") to be
released.

6.13 CIL BALANCE SHEET. As soon as it is available, but in
no event later than March 31, 1997, the Sellers shall deliver to the Buyer an
unaudited balance sheet of CIL as of February 28, 1997, prepared in accordance
with GAAP, consistently applied.

6.14 CONFIDENTIALITY. Prior to the Closing, the Buyer shall
treat confidentially any information that the Sellers furnish to the Buyer in
connection with the transactions contemplated hereby, whether furnished before,
on or after the date of this Agreement, including all notes, analyses,
compilations, studies or other documents furnished by the Sellers to the Buyer
which contain or otherwise reflect such information (collectively, the
"Confidential Material"); provided, however, Confidential Material shall not
include any information which (a) is or becomes generally available to the
public other than as a result of a disclosure by the Buyer or the Buyer's
employees, attorneys, accountants or other representatives of the Buyer
(collectively, the "Buyer's Representatives"), (b) was available to the Buyer
on a non confidential basis prior to its disclosure to the Buyer by the
Sellers, or (c) was or becomes available to the Buyer on a non-confidential
basis from a source other than the Sellers or any of the Sellers' employees,
attorneys, accountants or other representatives of any of the Sellers. The
Buyer agrees that the Confidential Material shall be used solely for the

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<PAGE> 49
purpose of its due diligence review of the Assets, the Teichgraeber Real
Property and CIL and not for any other purpose, and that any of such
information may be disclosed only to the Buyer's Representatives for such same
purpose. The Buyer agrees to inform the Buyer's Representatives of the
confidential nature of such information and shall direct them to treat such
information confidentially and not to use it other than for the purpose
described above. Except as described in the following two sentences, the Buyer
agrees to, and agrees to direct the Buyer's Representatives to, keep such
information strictly confidential and to not disclose such information to any
other person or entity without the prior written consent of CIL. In the event
that the Buyer is requested or required by Law or any Governmental Entity to
disclose any Confidential Material, the Buyer agrees to promptly provide CIL
with notice of such request or requirement so that CIL may have the opportunity
to either seek a protective order or agree to waive compliance with the
provisions of this Section 6.14. Notwithstanding anything contained herein to
the contrary, it is agreed that if the Buyer or any of the Buyer's
Representatives is required by Law or any Governmental Entity to disclose any
Confidential Material, the Buyer may disclose such information without
liability hereunder. The Buyer agrees that it will use the standard of care
with resect to the Confidential Material which it accords its own proprietary
and confidential information of like kind or character and shall not use or
rely on such Confidential Material except for the purpose of its due diligence
review. In addition to any other remedy which may be afforded by Law, the
Buyer acknowledges that any breach or threatened breach of this Section 6.14 by
the Buyer or the Buyer's Representatives may be prohibited by a restraining
order, injunction or other equitable remedy obtained by the Sellers. In the
event that this Agreement is terminated pursuant to Section 11, the Buyer shall
(x) promptly redeliver to CIL, and direct the Buyer's Representatives to
promptly redeliver to CIL, all Confidential Material and all copies, extracts
or other reproductions of all Confidential Material made by Buyer or Buyer's
Representatives and (y)promptly destroy, and direct the Buyer's Representatives
to promptly destroy, all written materials, memoranda, notes and other writings
or recordings prepared by it or the Buyer's Representatives based upon the
Confidential Material.

7. CONDITIONS TO CLOSING.

7.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS AND
THE BUYER. The obligations of each of the Sellers and the Buyer under this
Agreement to consummate the transactions contemplated

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<PAGE> 50
hereby are subject to the satisfaction on or prior to the Closing Date of the
following conditions: (a) there shall not have been entered a preliminary or
permanent injunction, temporary restraining order or other Order or decree in
any jurisdiction, the effect of which restrains or prohibits the Closing, and
(b) the waiting period (and any extension thereof) applicable to the
consummation of the transactions contemplated by this Agreement under the HSR
Act, if any, shall have expired or been terminated.

7.2 ADDITIONAL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
SELLERS. The obligations of the Sellers under this Agreement to consummate the
transactions contemplated hereby are subject to the satisfaction, at or prior to
the Closing, of all of the following conditions, any one or more of which may be
waived at the option of the Sellers in their sole discretion:

7.2.1 COMPLIANCE WITH AGREEMENT. (a) The Buyer
will have performed all obligations and agreements and complied in all material
respects with all covenants contained in this Agreement to be performed or
complied with by it at or prior to the Closing Date, (b)the representations and
warranties of the Buyer contained in this Agreement will be true and correct in
all material respects on the Closing Date with the same force and effect as if
made on the Closing Date and (c) there will have been delivered to the Sellers
a certificate signed by an officer of the Buyer (the "Buyer's Officer's
Certificate"), dated the Closing Date, to the foregoing effect.

7.2.2 RESOLUTIONS OF THE BOARD OF DIRECTORS. The
Sellers will have received from the Buyer certified copies of the resolutions
of the Board of Directors of the Buyer approving this Agreement and authorizing
the consummation of the transactions contemplated hereby (the "Buyer's Board
Resolutions").

7.2.3 DELIVERY OF PURCHASE PRICE. The Buyer will
have delivered to the Sellers the Purchase Price.

7.2.4 EMPLOYMENT AGREEMENT. The Buyer will have
delivered to Teichgraeber the employment agreement, substantially in the form
attached hereto as Exhibit B and dated the Closing Date, by and between the
Buyer and Teichgraeber (the "Employment Agreement").

7.2.5 RELEASE OF GUARANTIES. The Buyer will have
delivered to Teichgraeber releases of the Guaranties (collectively, the
"Guaranty Releases").

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<PAGE> 51
7.3 ADDITIONAL CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
BUYER. The obligations of the Buyer under this Agreement to consummate the
transactions contemplated hereby are subject to the satisfaction, at or prior
to the Closing, of all of the following conditions, any one or more of which
may be waived at the option of the Buyer in its sole discretion:

7.3. 1 COMPLIANCE WITH AGREEMENT. (a) Each of the
Sellers will have performed all obligations and agreements and complied in all
material respects with all covenants contained in this Agreement to be
performed or complied with by it at or prior to the Closing Date, (b)the
representations and warranties of the Sellers contained in this Agreement will
be true and correct in all material respects on the Closing Date with the same
force and effect as if made on the Closing Date, and (c) there will have been
delivered to the Buyer (i) a certificate signed by Teichgraeber (the
"Teichgraeber Certificate"), (ii) a certificate signed by all the general
partners of the Limited Partnership (the "Limited Partnership Certificate");
(iii) a certificate signed by the trustee of the Trust (the "Trust
Certificate"); (iv) a certificate signed by an officer of Greenwood (the
"Greenwood Officer's Certificate"), and (v) a certificate signed by an officer
of Edco (the "Edco Officer's Certificate"), each dated the Closing Date to the
foregoing effect.

7.3.2 RESOLUTIONS OF THE BOARD OF DIRECTORS. The
Buyer will have received from the Limited Partnership, the Trust, Greenwood and
& Co certified copies of the resolutions of (a) of all the general partners of
the Limited Partnership approving this Agreement and authorizing the
consummation of the transactions contemplated hereby (the "Limited Partnership
Resolutions"), (b)the Board of Directors of the Trust approving this Agreement
and authorizing the consummation of the transactions contemplated hereby (the
"Trust Resolutions"), (c) the Board of Directors of Greenwood approving this
Agreement and authorizing the consummation of the transactions contemplated
hereby (the "Greenwood Board Resolutions"), and (d) the Board of Directors of
Edco approving this Agreement and authorizing the consummation of the
transactions contemplated hereby (the "Edco Board Resolutions").

7.3.3 DELIVERY OF STOCK CERTIFICATES. There will
be delivered to the Buyer by the Limited Partnership and the Trust certificates
representing the Shares, duly endorsed in blank for transfer or accompanied by
duly executed stock powers endorsed in blank to the Buyer (the "Share
Certificates").

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<PAGE> 52
7.3.4 DELIVERY OF BILLS OF SALE. There will be
delivered to the Buyer by each of Greenwood and Edco a bill of sale, dated the
Closing Date, each in a form reasonably acceptable to the Buyer (collectively,
the "Bills of Sale").

7.3.5 DELIVERY OF REAL PROPERTY DEEDS. There will be
delivered to the Buyer by each of Greenwood, Edco and Teichgraeber limited or
special warranty deeds, each dated the Closing Date and in a recordable form
reasonably acceptable to the Buyer (collectively, the "Deeds").

7.3.6 RELEASE OF MORTGAGE. The Buyer will have received
evidence reasonably satisfactory to it that the Real Estate Mortgage and
Assignment of Rents and Leases, dated September 14, 1994, by Edco, as
Mortgagor, and R.K. Teichgraeber. as Mortgagee, pertaining to the real
property set forth on Schedule 2. 1(d)(i) has been released and fully
discharged of record (the "Evidence of Release").

7.3.7 ACTUAL OR THREATENED ACTIONS. There will not be any
actual or threatened action or proceeding by or before any court or other
individual, administrative or Governmental Entity which seeks to restrain,
prohibit or invalidate the transactions contemplated by this Agreement, which
could materially adversely affect CIL or the Business after the Closing Date,
or which could deny the Buyer any of the benefits of the transactions
contemplated hereby.

7.3.8 ABSENCE OF MATERIAL ADVERSE CHANGE. There will have
been no materially adverse change in the financial position, cash flows,
Business, properties or prospects of the Companies since October 31, 19%.

7.3.9 REGULATORY APPROVALS; CONSENTS. The Buyer will have
received evidence reasonably satisfactory to it that the governmental and other
approvals, consents or waivers listed on Schedule 4.4(a) shall have been
obtained and be in full force and effect as of the Closing (collectively, the
"Evidence of Consents").

7.3.10 RECEIPT. The Buyer will have received a receipt from
the Sellers for the payment of the Purchase Price (the "Receipt").

7.3.11 INSURABLE TITLE TO REAL PROPERTY. The Buyer will have
received, at its own cost, evidence reasonably satisfactory to it that a
reputable title insurance company has issued at ordinary rates its fee title
insurance policy effective the Closing Date with respect

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<PAGE> 53
to the Real Property and the Teichgraeber Real Property (the "Title
Insurance").

7.3.12 CERTAIN RECORDS; DIRECTOR RESIGNATIONS. The Buyer
will have received CIL's original minute books, stock certificate and corporate
record books (including unissued stock certificates and all cancelled stock
certificates), Certificate of Incorporation and By.Laws and all amendments
thereto (the "CIL Corporate Documents"), and the written resignation of each
director of CIL (collectively, the "Director Resignations").

7.3.13 CERTIFICATION. The Buyer will have received a
certification from each Seller under Section 1445(b)(2) of the Code and the
rules and regulations thereunder, in a form reasonably acceptable to the Buyer,
stating each Seller's taxpayer identification number and that each Seller is
not a foreign person (collectively, the "Section 1445(b)(2) Certificates").

7.3.14 TRANSFER TAXES. The Buyer will have received
properly completed all required transfer, sales, use, bulk sales, excise, stamp
and other similar tax returns duly executed by the appropriate Seller in a form
reasonably acceptable to the Buyer (collectively, the "Transfer Tax Returns"),
together with evidence reasonably satisfactory to the Buyer that the Sellers
shall have paid all transfer, sales, use, bulk sales, excise, stamp and other
similar taxes due or becoming due in connection with the transactions
contemplated hereby.

7.3.15 INTELLECTUAL PROPERTY ASSIGNMENTS. The Buyer will
have received an assignment of all of the Intellectual Property pursuant to
assignment agreements, dated the Closing Date, substantially in the form
attached hereto as Exhibit C (collectively, the "Assignment Agreements").

7.3.16 DUE DILIGENCE REVIEW. The Buyer shall be satisfied,
in its sole discretion, with the results of its due diligence investigation of
the Assets, CIL, the Teichgraeber Real Property and the Business.

7.3.17 CIL'S NET WORTH AS OF FEBRUARY 28, 1997. CIL's net
worth as reflected on the unaudited balance sheet of CIL, prepared in
accordance with GAAP, consistently applied, as of February 28, 1997 delivered
by the Sellers to the Buyer pursuant to Section 6. 13 hereof shall be not less
than $4 million.

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7.3.18 CIL'S NET WORTH AS OF THE CLOSING DATE. The Buyer
shall be satisfied, in its sole discretion, that CIL's net worth (determined in
accordance with GAAP, consistently applied) is not less than $4 million as of
the Closing Date.

7.3.19 DEBT. The Buyer shall be satisfied, in its sole
discretion, that the Debt Obligations do not, in the aggregate, exceed $5
million as of the Closing Date.

7.3.20 CONTINGENT LIABILITIES. The Buyer shall be
satisfied, in its sole discretion, that CIL's obligations under Contingent
Liabilities do not exceed $5.5 million in the aggregate as of the Closing Date,
and CIL's obligations under such Contingent Liabilities are collateralized and
secured by a perfected and first priority lien and security interest on CIL's
cash or cash equivalents in an amount not less than $1,750,000.

7.3.21 OPINION OF SELLERS' COUNSEL. The Buyer will have
received an opinion of Kahrs, Nelson, Fanning, Hite & Kellogg L.L.P., counsel
to the Sellers, satisfactory to the Buyer to the effect that (a) the written
waivers by each of CIL, the Limited Partnership and the Trust of the respective
time periods provided in paragraph Second of Schedule "A" of CIL's Certificate
of Incorporation, as amended, and Article X, Section II of CIL's By-Laws with
respect to their respective options to purchase Shares and (b)the written
elections of each of CIL, the Limited Partnership and the Trust not to exercise
such options to purchase Shares are in each case valid, binding and enforceable
against each of them and are in each case sufficient to bar any and all claims
that CIL, the Limited Partnership or the Trust may now or in the future have
against IRI in connection with the sale of the Shares hereunder to IRI (the
"Opinion").

8. CLOSING.

8.1 TIME AND PLACE. The closing of the purchase and sale of
the Shares, the Assets and the Teichgraeber Real Property (the "Closing") will
take place by the simultaneous exchange of executed original counterparts of
this Agreement, delivery of the Shares, the Bills of Sale, the Deeds and the
Purchase Price (as provided in Section 3.2), together with all documents and
certificates contemplated hereby, at the offices of Jones, Day, Reavis & Pogue,
599 Lexington Avenue, New York, New York on such date or at such other place as
the parties hereto may mutually agree (the "Closing Date").

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<PAGE> 55
8.2 DOCUMENTS TO BE DELIVERED BY THE SELLERS AT CLOSING. The
Sellers will deliver to the Buyer at the Closing the following:

(a) the Teichgraeber Certificate;

(b) the Limited Partnership Certificate;

(d) the Greenwood Officer's Certificate;

(e) the Edco Officer's Certificate;

(f) the Limited Partnership Resolutions;

(g) the Trust Resolutions;

(h) the Greenwood Board Resolutions;

(i) the Edco Board Resolutions;

(j) the Share Certificates;

(k) the Bills of Sale;

(l) the Deeds;

(m) the Evidence of Release;

(n) the Evidence of Consents;

(o) the Receipt;

(p) the CIL Corporate Documents;

(q) the Director Resignations;

(r) the Section 1445(b)(2) Certificates;

(s) the Transfer Tax Returns;

(t) the Assignment Agreements;

(u) the Opinion; and

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(v) such other agreements, documents or instruments
customary for the consummation of the transactions contemplated hereby.

8.3 DOCUMENTS TO BE DELIVERED BY THE BUYER AT CLOSING.
At the Closing the Buyer will deliver to the Sellers the following:

(a) the Buyer's Officer's Certificate;

(b) the Buyer's Board Resolutions;

(d) the Employment Agreement;

(e) the Guaranty Releases; and

(f) such other agreements, documents or instruments
customary for the consummation of the transactions contemplated hereby.

9. INDEMNIFICATION.

9.1 CERTAIN DEFINITIONS. For purposes of this Agreement,
(a) "Indemnity Payment" means any amount of Indemnifiable Losses (as
hereinafter defined) required to be paid pursuant to this Agreement,
(b)"Indemnitee" means any person or entity entitled to indemnification under
this Agreement, (c) "Indemnifying Party" means any person or entity required to
provide indemnification under this Agreement, (d) "Third Party Claim" means any
threat, demand, action, suit, administrative proceeding, investigation or audit
or other proceeding made or brought by any person or entity who or which is not
a party to this Agreement or an Affiliate or Subsidiary of a party to this
Agreement, (e) "Notice of Claim for Indemnity" means a written notice given in
accordance with this Agreement, which if based upon a Third Party Claim against
any Indemnitee, includes copies of all material notices and documents received
by the Indemnitee with respect to such Third Party Claim and indicates the
estimated amount, if reasonably practicable, of the Indemnifiable Loss that has
been or may be sustained by the Indemnitee, or if based upon an alleged breach
of a representation, warranty or covenant contained in this Agreement, which
does not relate to, result from or arise out of a Third Party Claim (a "Direct
Claim"), and which relates to, results from or arises out of an event or
circumstance discovered by the Indemnitee which constitutes a reasonable basis
for the Indemnitee to conclude that

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<PAGE> 57
such event or circumstances will lead to the incurrence of an Indemnifiable
Loss by reason of such alleged breach, whether or not the Indemnifiable Loss is
actually suffered or sustained prior to the expiration of the applicable
survival period, includes in reasonable detail the event or circumstance which
gives rise to the claim for indemnification and indicates the estimate amount,
if reasonably practicable, of the Indemnifiable Loss that has nor maybe
sustained by the indemnitee, and(f) "Indemnifiable Losses" many and all loss,
liability, claim, demand, obligation, damage, deficiency, cost or expense
(including, without limitation, reasonable attorneys' fees and expenses),
including, without limitation, environmental damages, response costs (including
response costs under CERCLA or any comparable state, local or foreign law),
remediation expenses and disbursements incurred by an Indemnitee, and any of
the foregoing relating to, resulting from or arising out of any action, suit,
administrative proceeding, investigation, audit or other proceeding brought by
any person or entity or Governmental Entity and any settlement or compromise
thereof, in each case reduced by the amount of any Third-Party Recovery (as
hereinafter defined).

9.2 SELLERS' INDEMNIFICATION. Subject to Sections 9.4,
9.5, 9.6 and 9.7, the Sellers, jointly and severally, will indemnify, defend
and hold the Buyer, its Affiliates and Subsidiaries, and each of its respective
officers, directors, shareholders, employees, agents and representatives,
harmless from and against any and all Indemnifiable Losses relating to,
resulting from or arising out of (a) any inaccuracy m or breach by any Seller
of any of the representations or warranties of the Sellers contained in this
Agreement; (b)any breach by any Seller of any covenant of the Sellers contained
in this Agreement; and (c) the Retained Liabilities.

9.3 BUYER'S INDEMNIFICATION. Subject to Sections 9.4,
9.5, 9.6 and 9.7, the Buyer will indemnify, defend and hold each Seller, their
respective Affiliates and Subsidiaries, and each of its respective officers,
directors, shareholders, employees, agents and representatives, harmless from
and against any and all Indemnifiable Losses relating to, resulting from or
arising out of (a) any inaccuracy in or breach by the Buyer of any of the
representations or warranties of the Buyer contained in this Agreement; and (b)
any breach by the Buyer of any covenant of the Buyer contained in this
Agreement.

9.4 DEFENSE OF CLAIMS. (a) If any Indemnitee receives
notice of the assertion or commencement of any Third Party Claim against such
Indemnitee with respect to which an Indemnifying Party is

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or may be obligated to provide indemnification under this Agreement, the
Indemnitee will promptly give such Indemnifying Party a Notice of Claim for
Indemnity, which notice will in any event be given not later than 30 calendar
days after receipt of such notice of such Third Party Claim. If a Third Party
Claim is made against an Indemnified Party, the Indemnifying Party will be
entitled to participate in the defense thereof and, if the Indemnifying Party
so chooses, to assume the defense thereof with counsel selected by the
Indemnifying Party. Should the indemnifying Party so elect to assume the
defense of a Third Party Claim, the Indemnifying Party will not be liable to
the Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof. If the Indemnifying
Party assumes such defense, the Indemnified Party will have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Party. The Indemnifying
Party will be liable for the fees and expenses of counsel employed by the
Indemnified Party for any period during which the Indemnifying Party has not
assumed the defense of a Third Party Claim whether or not the Indemnifying
Party ultimately chooses to defend any such Third Party Claim. The parties
hereto will cooperate in the defense of any Third Party Claim whether or not
the Indemnifying Party chooses to defend any such Third Party Claim. Such
cooperation will include the retention and (upon the Indemnifying Party's
request) the provision to the Indemnifying Party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Neither the Indemnified Party
nor the Indemnifying Party will admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the prior written
consent of the other which consent will not be unreasonably withheld.

(b) Any Direct Claim may be asserted by giving the
Indemnifying Party a Notice of Claim for Indemnity.

(c) A failure to give timely notice (other than within
the time survival period specified herein) or to include any specified
information in any notice as provided in this Section 9 will not affect the
rights or obligations of any party hereunder except and only to the extent
that, as a result of such failure, the rights of the Indemnifying Party are
materially prejudiced.

(d) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an Indemnity Payment, is reduced by

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recovery, settlement or otherwise under or pursuant to any insurance coverage,
or pursuant to any claim, recovery, settlement against or with any person or
entity which is not an Affiliate or Subsidiary of the Indemnitee (a "Third
Party Recovery"), the amount of such reduction, in each case less any costs,
expenses, premiums or taxes incurred in connection therewith, together with
interest thereon from the date of payment thereof at the so-called "prime" or
"reference" rate of interest for the relevant period as reported in The Wall
Street Journal, will promptly be repaid by the Indemnitee to the Indemnifying
Party.

(e) Upon the payment in full (or other satisfaction) of
any Indemnifiable Loss hereunder and compliance by the Indemnifying Party with
its obligations under Section 9.2 or 9.3, as the case may be, in respect of
such Indemnifiable Loss, the Indemnifying Party shall, to the extent of such
Indemnity Payment, be subrogated to, and entitled to an assignment of, all of
the rights of the Indemnitee against any third person or entity (other than an
insurance company that provides insurance to the Indemnitee or an Affiliate or
Subsidiary of the Indemnitee) in respect of such Indemnifiable Loss, and the
Indemnitee shall, at the sole cost and expense of the Indemnifying Party,
execute such instruments and shall take such actions that may be reasonably
necessary to evidence and perfect such rights. Any recovery by the Indemnifying
Party in respect of such Indemnifiable Loss in excess of the amount of the
related Indemnity Payment to the Indemnitee shall be promptly paid by the
Indemnifying Party to the Indemnitee upon its receipt by the Indemnifying
Party.

9.5 SURVIVAL PERIOD. Each of the representations and
warranties contained in this Agreement or in any certificate or other
instrument delivered at Closing, will survive the Closing and remain operative
and in full force until the second anniversary of the Closing; provided,
however, the representations and warranties contained in Sections 4.2 shall
survive indefinitely, the representations and warranties contained in Sections
4. 12(b) and (c) shall survive the Closing for five years, and the
representations and warranties contained in Section 4.8 shall survive until the
date sixty (60) days after the expiration of the applicable statute of
limitation. The covenants and agreements contained in this Agreement will
survive the Closing and remain in effect indefinitely.

9.6 LIMITATIONS ON INDEMNIFICATION. (a) No Indemnitee
will be entitled to recovery under Sections 9.2 or 9.3 for an Indemnifiable
Loss unless and until the aggregate amount of claims which may be

47
<PAGE> 60
asserted for Indemnifiable Losses exceeds $125,000, and then only to the extent
of the excess.

(b) Notwithstanding any other provision of the Agreement
to the contrary, the indemnification obligations of the Sellers under Section
9.2 and the Buyer under Section 9.3 will not exceed $5,000,000.

(c) For purposes of this Section 9.6, Indemnifiable
Losses shall not include any individual loss, liability, claim, demand,
obligation, damage, deficiency, cost or expense less than $5,000.

9.7 ADJUSTMENT TO PURCHASE PRICE. Any payments made
pursuant to Sections 9.2 and 9.3 will be treated by the Buyer and the Sellers
as an adjustment to the Purchase Price unless a determination (as defined in
Section 1313 of the Code) with respect to the Indemnitee causes any such
payment not to constitute an adjustment to the Purchase Price for United States
federal income tax purposes.

10. POST-CLOSING COVENANTS.

10.1 LIMITATION ON COMPETITION. (a) For a period beginning
on the Closing Date and ending on the third year anniversary of the Closing
Date, none of the Sellers will, and each of the Sellers will cause their
Affiliates and Subsidiaries not to, directly or indirectly own, manage,
operate, finance, join, control or participate in the ownership, management,
operation, financing or control of, or be associated as an employee,
consultant, director, partner, representative or agent in connection with, any
profit or not-for-profit business or enterprise that competes with the Buyer or
its Affiliates or Subsidiaries in the conduct of the Business in the United
States or elsewhere. Nothing contained herein, however, shall prohibit the
Sellers or any Affiliate or Subsidiary of the Sellers from acquiring and
owning, for investment purposes only, up to five percent (5%) of the
outstanding equity securities of any entity engaged in a business that competes
with the Buyer if such equity securities of any such entity are available to
the general public for purchase on a national securities exchange. In the event
that this Section 10. 1 is determined by any court of competent jurisdiction to
be unenforceable by reason of its extending for too long a period of time or
over too large a geographical area or by reason of its being too extensive in
any other respect or for any other reason, it will be interpreted to extend
only over the longest period of time for which it may be enforceable, and/or
over the largest geographical area as to

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which it may be enforceable and/or to the maximum extent in Ill other aspects
as to which it may be enforceable, all as determined by such court in such
action. Each of the Sellers acknowledges that a breach of this Section 10. 1
will cause irreparable damage to CIL and the Buyer, the exact amount of which
will be difficult or impossible to ascertain, and that CIL's or the Buyer's
remedies at Law for any such breach will be inadequate. Accordingly, each of
the Sellers agrees that upon a breach of this Section 10.1, CIL and the Buyer
will be entitled, in addition to any other legal remedies available to it, to
apply in any court of competent jurisdiction for injunctive relief or any other
appropriate decree of specific performance in order to enjoin such breach or
threatened breach.

(b) For a period beginning on the Closing Date and ending
on the third anniversary of the Closing Date, none of the Sellers will, and
each of the Sellers will cause their Affiliates and Subsidiaries not to,
employ, solicit for employment or endeavor in any way to entice away from
employment by the Buyer or any of its Affiliates or Subsidiaries any person who
is employed by the Buyer or any of its Affiliates or Subsidiaries at any time
after the date hereof and prior to the third anniversary of the Closing Date.

10.2 RECORDS. (a) After the Closing Date, the Buyer will,
and will cause CIL to, and each of the Sellers will, and will cause the
Post-Closing Affiliates to, retain all Records required to be retained pursuant
to obligations imposed by any applicable Law. The Buyer will, and will cause
CIL to, and each of the Sellers will, and will cause the Post-Closing
Affiliates to, use all reasonable efforts to retain all Records for a period of
seven years after the Closing Date. After the end of such seven-year period,
before disposing, or permitting any Post-Closing Affiliate or CIL to dispose,
of any such Records, each of the Sellers or the Buyer, as the case may be, will
use their best efforts to give notice to such effect to the other party and to
give the other party, at such other party's cost and expense, an opportunity to
remove and retain all or any part of such Records as such other party may
elect.

(b) After the Closing Date, upon reasonable notice, each
of the Sellers and the Buyer will give, or cause to be given, to the
representatives, employees, counsel and accountants of the other access, during
normal business hours, to Records relating to periods prior to or including the
Closing Date and will permit such persons to examine and copy such Records, to
the extent reasonably necessary to the other party m connection with tax and
financial reporting matters (including without limitation any tax return
relating to state or

49
<PAGE> 62
local real property transfer or gains taxes), audits, governmental
investigations and other business purposes; provided, however, that nothing
herein will obligate any party to take actions that would unreasonably disrupt
the normal course of its business, violate the terms of any contract to which
it is a party or to which it or any of its assets is subject or grant access to
any of its proprietary, privileged or classified information. Each of the
Sellers and the Buyer will provide or will make available to such party access
to, and assistance from, employees of the other (including with respect to the
Buyer, CIL) whose assistance is reasonably required in connection with the
purposes described in the preceding sentence.

10.3 FURTHER ASSURANCES. At any time or from time to time
after the Closing, each of the Sellers and the Buyer will execute and deliver
such other documents or instruments and take all such further action as may be
reasonably requested by the other in order to evidence the consummation of the
transactions contemplated by this Agreement, including without limitation any
applicable notice, application, disclosure, recordation or remediation pursuant
to any Environmental Laws or any state property transfer Laws.

11. TERMINATION. Subject to Section 6.14 hereof, prior to the
Closing, this Agreement may be terminated and the transactions contemplated
hereby may be abandoned (a) by the mutual consent of the Buyer and the Sellers;
(b)by the Buyer or any of the Sellers if the Closing does not occur on or prior
to April 20, 1997; (c) by the Buyer or the Sellers if any of either of them is
precluded by an Order from consummating the transactions contemplated hereby or
(d) by the Buyer if the Buyer rejects the amended or supplemented schedules
delivered by the Sellers pursuant to Section 6. 11 and a subsequent agreement
between the Buyer and the Sellers is not reached with respect thereto. In the
event of any termination pursuant to this Section 11, no party hereto (or any
of its directors, partners or officers) will have any liability or further
obligation hereunder to any other party hereto, except for obligations under
Section 6.2, which obligations shall continue until the second anniversary of
the date hereof, and Section 12.7. Nothing contained in this Section 11 shall
relieve any party hereto from liability for any breach of this Agreement.

12. MISCELLANEOUS.

12.1 JOINT AND SEVERAL LIABILITY. The Sellers will be jointly
and severally liable for all payments required to be made by the Sellers to the
Buyer or to any Governmental Entity pursuant to the terms of this Agreement.

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12.2 ASSIGNMENT. The Buyer may assign its rights and
obligations under this Agreement to an Affiliate or Subsidiary of the Buyer,
but such assignment will not release the Buyer from its obligations hereunder.
Except as provided in the immediately proceeding sentence, no assignment of
rights or obligations under this Agreement may be made by any party hereto
without the express written consent of the other parties hereto.

12.3 SEVERABILITY. Any provision of this Agreement held to be
invalid under applicable Law will not render this Agreement invalid as a whole
and in such event, such provision will be interpreted so as to best accomplish
the intent of the parties within the limits of applicable Law.

12.4 AMENDMENTS AND WAIVERS AND CONSENTS. No amendment
hereof will be effective unless evidenced by an instrument in writing duly
executed by the parties hereto. Either the Sellers or the Buyer by written
notice to the other may (a) extend the time for performance of any of the
obligations or other actions of the other under this Agreement, (b)waive any
inaccuracies in the representations or warranties of the other contained in
this Agreement, (c) waive compliance with any of the conditions or covenants of
the other contained in this Agreement, or (d) waive or modify performance of
any of the obligations of the other under this Agreement; provided, however,
that neither the Buyer nor the Sellers may, without the prior written consent
of the other parties hereto, make or grant such extension of time, waiver of
inaccuracies or compliance or waiver or modification of performance with
respect to its (or any of its Affiliates' or Subsidiaries') representations,
warranties, conditions or covenants hereunder. Except as provided in the
immediately preceding sentence, no action taken pursuant to this Agreement will
be deemed to constitute a waiver of compliance with any representations,
warranties or covenants contained in this Agreement and will not operate or be
construed as a waiver of any subsequent breach, whether of a similar or
dissimilar nature.

12.5 BENEFIT. This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. This Agreement is not intended nor will it confer upon any other
person any rights or remedies.

12.6 NOTICES. All notices, demands and requests required or
permitted to be given under the provisions of this Agreement will be in writing
and will be deemed duly given when delivered in person or when dispatched by
electronic facsimile transfer (upon confirmation of

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receipt by a facsimile operator, and confirmed in writing by postage prepaid
first class mail simultaneously dispatched) or three business days after having
been dispatched by a nationally recognized overnight courier service or seven
business days after having been deposited in the United States mail, postage
prepaid, addressed as follows:

IF TO THE SELLERS:

A.C. Teichgraeber
Rural Route 2, Box 125
Eureka, Kansas 67045
Fax: (316) 583-5977

Teichgraeber Family Limited Partnership, L.P.
Rural Route 2, Box 125
Eureka, Kansas 67045
Attention: Mr. Arthur C. Teichgraeber
Fax: (316) 583-5977

Arthur C. Teichgraeber Charitable Remainder Trust
Rural Route 2, Box 125
Eureka, Kansas 67045
Attention: Mr. Arthur C. Teichgraeber
Fax: (316) 583-5977

Greenwood Pipe and Threading Company
Rural Route 2, Box 125 Eureka, Kansas 67045
Attention: Mr. Arthur C. Teichgraeber
Fax: (316) 583-5977

Edco Drilling Company Inc.
Rural Route 2, Box 125
Eureka, Kansas 67045
Attention: Mr. Arthur C. Teichgraeber
Fax: (316) 583-5977

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WITH A COPY TO:

Kahrs, Nelson, Fanning, Hite & Kellogg L.L.P.
200 West Douglas Avenue, Suite 600
Wichita, Kansas 67202-3089
Attention: Linda S. Parks, Esq.
Fax: (316) 267-7803

IF TO CIL:

Cardwell International Ltd.
635 North Metcalf Road
P.O. Box 1105
El Dorado, Kansas 67042
Attention: Mr. Arthur C. Teichgraeber, President
Fax: (316) 321-5416

WITH A COPY TO:

IRI International Corporation
First Interstate Bank Plaza
1000 Louisiana, Suite 5900
Houston, Texas 77002
Attention: Mr. Munawar H. Hidayatallah
Fax: (713) 659-1526

IF TO THE BUYER:

IRI International Corporation
First Interstate Bank Plaza
1000 Louisiana, Suite 5900
Houston, Texas 77002
Attention: Mr. Munawar H. Hidayatallah
Fax: (713) 659-1526

WITH A COPY TO:

Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: William F. Henze II, Esq.
Facsimile: (212) 755-7306

or to such other address as any party may designate in writing to the other
party.

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12.7 FEES AND EXPENSES. Except as otherwise provided in
Section 7.3. 11, each party will be obligated to pay its own fees and expenses
incurred with respect to the transactions contemplated by this Agreement.

12.8 HEADINGS. The headings employed in this Agreement
(including the Schedules and Exhibits hereto) are for the convenience of
reference only and do not form a part hereof and are not intended to affect the
meaning or interpretation of this Agreement.

12.9 CONSTRUCTION. This Agreement will be construed and
enforced in accordance with the laws of the State of Kansas, without giving
effect to the conflicts of laws provisions thereof.

12.10 COUNTERPARTS. This Agreement may be executed in
several counterparts, and as so executed will constitute one agreement, binding
on all of the parties hereto.

12.11 ENTIRE AGREEMENT. Each of the representations,
warranties, covenants and agreements of any party hereto contained in this
Agreement or any Schedule or Exhibit hereto or any certificate delivered by or
on behalf of such party pursuant to and which makes reference to this Agreement
will be deemed incorporated and contained in this Agreement and will constitute
representations and warranties of such party. This Agreement (including the
Schedules and Exhibits hereto) supersedes any other agreement, whether written
or oral, that may have been made or entered into by any party or any of their
respective Affiliates or Subsidiaries (or by any director, officer or
representative thereof) with respect to the subject matter hereof. This
Agreement (including the Schedules and Exhibits hereto) constitutes the entire
agreement by and among the parties hereto with respect to the subject matter
hereof and there are no agreements or commitments by or among such parties or
their Affiliates or Subsidiaries with respect to the subject matter hereof
except as expressly set forth herein. The Buyer agrees to notify the Sellers in
writing prior to the Closing of any facts the Buyer uncovers during the course
of its due diligence investigation that may constitute a breach by the Sellers
of any of the Sellers' representations or warranties contained in this
Agreement. Notwithstanding the immediately, preceding sentence, the Buyer shall
have no duty to uncover any such breach of the Sellers representations and
warranties, and no investigation or receipt of information by or on behalf of
the Buyer will diminish or obviate any of the representations, warranties,
covenants or agreements of the Sellers under this Agreement or the conditions
to obligations of the Buyer under this Agreement. No investigation or receipt
of information by or on behalf of the Sellers

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will diminish or obviate any of the representations, warranties, covenants or
agreements of the Buyer under this Agreement or the conditions to obligations
of the Sellers under this Agreement. Any information disclosed on any schedule
hereto shall be deemed to have been disclosed on all schedules hereto.

12.12 CERTAIN INTERPRETIVE MATTERS AND DEFINITIONS. (a) Unless the
context otherwise requires, (i) all references to Sections, Schedules or
Exhibits are to Sections, Schedules or Exhibits of or to this Agreement, (ii)
each term defined in this Agreement has the meaning assigned to it, (iii) "or"
is disjunctive but not necessary exclusive, (iv) words in the singular include
the plural and vice versa, (v) the terms "Affiliate" and "Subsidiary" have the
meanings given to such terms in Rule 405 of the Securities Act of 1933, as
amended; (vi) all references to a "business day" will be to any day other than
a weekend day or a day which is a holiday in the United States and (vii)
"knowledge of the Sellers" means to the best knowledge of Teichgraeber or any
of the officers, partners or trustees, as applicable, of any of the Companies,
the Limited Partnership or the Trust, after due inquiry and (vii) any
information contained on any schedule hereto shall be deemed to be disclosed on
all schedules hereto. All references to "$" or dollar amounts will be to lawful
currency of the United States of America.

(b) No provision of this Agreement will be interpreted in favor
of, or against, any party hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.

12.13 ARBITRATION: EXCLUSIVE REMEDY. Any and all claims, disputes
or controversies involving the Sellers and the Buyer and arising under or in
connection with this Agreement (except those arising under Section 10.1 hereof)
which cannot be resolved amicably by the Sellers and the Buyer shall be
submitted to and finally settled by arbitration as provided in this Section
12.13. There shall be one arbitrator who shall be selected from a list of five
arbitrators who are experienced in the Business, two of whom shall be chosen by
the Buyer, two of whom shall be chosen by Teichgraeber and one of whom shall be
chosen by the American Arbitration Association. The arbitrator shall be
selected from this list pursuant to the following procedure: Teichgraeber and
the Buyer shall each alternately strike one person's name off the list until
there is only one name remaining, which person shall be the arbitrator. The
location of any such arbitration proceedings shall be in the city where the
arbitrator's office is

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located, and such proceedings shall be conducted in accordance with the
Arbitration Rules of the American Arbitration Association currently in effect
unless the parties mutually agree otherwise. The award rendered by the
arbitrator shall be final. An action or proceeding to enforce such award may
be brought in any court of competent jurisdiction.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

---------------------------------------
A.C. Teichgraeber

TEICHGRAEBER FAMILY LIMITED
PARTNERSHIP, L.P.

By: Arthur C. Teichgraeber Revocable
Living Trust, a General Partner

By:
------------------------------------
Name: A.C. Teichgraeber
Title: Trustee

ARTHUR C. TEICHGRAEBER CHARITABLE
REMAINDER TRUST

By:
------------------------------------
Name: A.C. Teichgraeber
Title: Trustee

GREENWOOD PIPE AND THREADING COMPANY

By:
-------------------------------
Name: A.C. Teichgraeber
Title: President

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<PAGE> 69

EDCO DRILLING COMPANY INC.

By:
-------------------------------
Name: A.C. Teichgraeber
Title: President

IRI INTERNATIONAL CORPORATION

By:
-------------------------------
Name: Daniel G. Moriarity
Title: President

By:
-------------------------------
Name: Munawar II, Hidayatallah
Title: Executive Vice President

<PAGE> 1
EXHIBIT 10.9

PREAMBLE

This Agreement is made and entered into on the eighth day of July 1997 by and
between Bowen Tools, with its principal office and place of business in
Houston, Harris County, Texas ("Bowen") and the General Drivers, Warehousemen,
Helpers, Production Maintenance and Service Employees, Local Union No. 968
("Union"). All personal pronouns used in this Agreement shall include the other
genders whether in the masculine or in the feminine or the neuter gender, and
visa versa whenever and as often as may be appropriate.

ARTICLE I - RECOGNITION

Bowen recognizes the Union as the sole collective bargaining agent in respect
to wages, hours and working conditions for the production and maintenance
employees certified as the collective bargaining unit by the National Labor
Relations Board in Case NO. 23-RC 5279.

Excluded are all office clerical, professional and technical employees,
guards, watchmen and supervisors as defined in the National Labor Relations
Act and any and all other employees who do not fall specifically within the
foregoing description.

ARTICLE II - MANAGEMENT RIGHTS

2.1 Bowen retains and shall have the exclusive right to manage each and every
aspect of its business and plants and to decide in each and every question
pertaining to the operation of its business and plants, including, by way of
illustration and not by way of limitation,
the location of plants,
the operation of business and plants,
number of employees,
production schedules,
processes and materials used in production,
introduction of improved methods, facilities and equipment,
subcontracting any part of Bowen's business by reason of economic
feasibility, for meeting delivery dates, and for lack of
in-house equipment capabilities,
changing of existing facilities,
directing the working force including the right to plan, direct and
control operations,
to hire, promote, suspend, or discharge for cause, or during the
probationary period, without cause,
or to relieve employees from duty because lack of work or for other
legitimate reasons.

Bowen also reserves the right to do and perform work with employees,
supervisors, and management personnel from this and other company locations
when bargaining unit personnel are unavailable for such work.

<PAGE> 2
Although not subject to grievance and arbitration, subcontracting is subject to
regulations of the National Labor Relations Act with which Bowen agrees to
comply. In addition, Bowen agrees to subcontract no work to an outside
manufacturer who is also an active employee of Bowen.

2.2 The Union recognizes the right of Bowen to make and enforce reasonable
rules and regulations, and that violation thereof may be just cause for
discipline or discharge of employees. The only question which may be the
subject of a grievance is whether or not the disciplined employee did or did
not engage in the specific conduct which resulted in the disciplinary action.

2.3 Except as expressly provided by specific articles of this Agreement, the
exercise by Bowen of one of its exclusive rights recognized in this Article
shall not be subject to arbitration. This article does not foreclose on the
union's right to grieve and/or arbitrate the alleged violations of other
articles of this Agreement which are not specifically precluded from
arbitration.

ARTICLE III - DISCRIMINATION

3.1 Bowen will not interfere with, restrain or coerce the employees covered by
this Agreement because of membership in, or activity on behalf of, the Union.
Bowen will not discriminate in respect to hire, tenure of employment or any
term or condition of employment against any employee covered by this Agreement
because of membership in, or activity on behalf of, the Union, nor will it
discourage or attempt to discourage membership in the union or attempt to
encourage membership in another union.

3.2 The Union recognizes Section 14B of the Taft Hartley Act which, in brief,
states that union membership is not mandatory in order to secure or hold
employment. Union further agrees it will not coerce, discriminate against,
intimidate or threaten employees because of non-membership in the Union.

3.3 The provisions of the Agreement shall apply to all employees covered by
this Agreement, without discrimination on account of race, color, national
origin, age, sex, creed, veteran's or disability status.

ARTICLE IV - GRIEVANCE PROCEDURE

4.1 It is the mutual intent and desire of the Union and the Company that
employees make an effort to settle their problems or grievances with their
supervisor prior to resorting to the Grievance Procedure, and not pursue
frivolous grievances.

4.2 The term "grievance" shall mean any dispute over the violation of any
express provision of this Agreement. Grievance and arbitration shall not extend
to implied terms of the contract or to any other dispute that is not controlled
by a clear provision of this Agreement.

4.3 The presentation of a grievance by an employee whether individually or
through his steward or chief steward must be made to the appropriate
supervisory employee involved not later than five

<PAGE> 3
(5) working days after the occurrence of the event which causes the individual
or individuals to feel aggrieved.

4.4 Procedure for handling grievances shall be as follows:

(Step 1) The grievance shall be submitted preferably by the employee
to his Plant Superintendent/Department Manager, but may, at the
employee's option, be submitted by the employee and his steward to
said Plant Superintendent/Department Manager who shall render a
decision within five (5) working days. If the employee still feels
aggrieved, he may pursue his grievance to Step 2 provided he does so
within five (5) days of the date of the answer of his Plant
Superintendent/Department Manager.

(Step 2) If the grievance is not satisfactorily settled by the
employee's plant superintendent/department manager, the employee and
his steward may appeal in writing to the vice president of
manufacturing for manufacturing employees, to the director of
manufacturing for production receiving and tool room employees, to the
warehouse/shipping manager for warehouse/shipping employees, and to
the product assurance director for quality control and receiving
employees.

The aforementioned shall have a conference with the employee, and the
steward and shall render a decision in writing within five days after
receipt of the grievance. If the employee still feels aggrieved, he
may pursue his grievance to Step 3 provided he does so within five (5)
days of the date of the answer of the aforementioned.

(Step 3) If the grievance is not satisfactorily settled by the vice
president of manufacturing for manufacturing employees, the director
for production receiving and tool room employees, the
warehouse/shipping manager for warehouse/shipping employees, or the
product assurance director for quality control and receiving
employees, the chief steward may appeal to the appropriate senior vice
president in writing. The senior vice president shall have a
conference with the employee, the chief steward and the steward who
filed the grievance (if not the chief steward) and shall render a
decision within ten (10) days after receipt of the grievance. If the
employee still feels aggrieved, he may pursue his grievance to Step
4 provided he does so within seven (7) days of the date of the answer
of his senior vice president's written reply.

(Step 4) If the grievance is not satisfactorily adjusted, the employee
may, through his union representative, appeal to the director of human
resources of Bowen in writing, who shall render a decision in writing
within ten (10) days after hearing the grievance.

4.5 Time limits shall disregard Saturdays, Sundays and the recognized
holidays; provided, however, that such time limits may be extended at any step
by negotiation between Bowen and the Union.

4.6 General grievances or disputes affecting the employees in the unit as a
whole, and discharge grievances may be initiated by the chief steward directly
at Step 2.

<PAGE> 4
4.7 While a grievance is being processed and until a final decision has been
arrived at, the conditions and relationships existing prior to the grievance
shall remain unchanged.

4.8 When a grievant fails to appear at any scheduled hearing, the Union may
drop the grievance or it may be heard in his/her absence.

4.9 The Company agrees to post on bulletin boards in conspicuous places the
misconduct which will result in suspension and/or termination of employment.
Changes in the definition of such misconduct will also be so posted in a timely
manner to apprise employees prior to the effective date of such change. A copy
of all such postings will be furnished to the chief steward.

Grievances regarding changes in work rules implemented after the effective date
of this Agreement shall be adjusted in accordance with the grievance provision
of this agreement beginning at Step 2 within five (5) days of such posting.

Violation of state of federal law or heinous offenses will not be subject to
the company's posting agreement and the only grievance regarding same shall be
whether or not the disciplined employee did or did not engage in the specific
conduct which resulted in the disciplinary action. The Company will apply
these rules in an even handed manner.

The only question which may be the subject of a grievance involving suspension
or discharge of employees whose misconduct is the violation of a company rule
where the penalty of discharge has been previously specified and announced as
"grounds for discharge" or whose misconduct involves the violation of state or
federal law or heinous offenses is whether or not the disciplined employee did
or did not engage in the specific conduct which resulted in the disciplinary
action.

ARTICLE V - ARBITRATION PROCEDURE

5.1 It the grievance is not satisfactorily settled by the Director of Human
Resources' answer, the Union may within twenty days refer the grievance to be
heard by a representative of the company and a representative of the union, who
will listen to the positions of both the company and the union to attempt
resolution.

The representative for the company will be named by the Director of Human
Resources and may be any employee who is not a party in the grievance and/or
who has not participated in one of the first three steps of the grievance
procedure. The representative for the union will be named by the business
representative of the union and may be any representative of Local 968 who is
not a party in the grievance.

If no agreement is reached by the two representatives, then and only then, may
the union refer the grievance to arbitration. Referral of a grievance by the
union to arbitration must be made within twenty (20) days of the failure of
the representatives of the company and the union to resolve the grievance.

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5.2 Selection of the Arbitrator

The Union will request the Federal Mediation and Conciliation Service (FMCS) to
submit a list of seven (7) arbitrators to the parties. Should the parties be
unable to agree on an arbitrator from this panel, they shall request a second
panel and failing mutual agreement shall alternately strike a name. The
remaining name will be the arbitrator. The same arbitrator shall not hear more
than one (1) grievance unless there is mutual agreement between the parties.

5.3 The Union shall have the authority to withdraw, dismiss or settle any
grievance prior to the decision or award of the arbitration.

(A.) The Arbitrator's decision shall be presented in writing and
shall be conclusive, final and binding on both parties, if, but only if,
the decision and award (1) are based upon the violation of an express
term of this Agreement set forth in the decision and (2) make no award
of money cost or expense against Bowen in the form of backpay or
otherwise, in excess of $6,000, but any such money damage or backpay
obligation in excess of $6,000 of Bowen may be determined by a Texas
court of competent jurisdiction.

(B.) The Arbitrator shall not be empowered to add to, modify, amend,
or otherwise change any provisions of this Agreement.

(C.) In grievances involving discipline or discharge, the Arbitrator
shall not modify the disciplinary action taken by Bowen if the
Arbitrator finds that the disciplined employee engaged in the specific
conduct which resulted in the disciplinary action or discharge.

(D.) Each party shall bear its own expenses with respect to the
preparation and presentation of the matter to the arbitrator, but the
cost or expense of the arbitrator and conference room shall be borne
equally by the Employer and the Union.

ARTICLE VI - SENIORITY

6.1 Each new employee's name shall be placed at the bottom of a seniority
list after the first 90 days of satisfactory full-time employment within the
bargaining unit. In cases where an additional thirty (30) days evaluation may
be needed to determine whether performance is satisfactory, it is agreed that
the probationary period may be extended from ninety (90) to one-hundred-twenty
(120) days. The company agrees to provide written notice of the extension to
the employee and the chief steward of his designee prior to the completion of
the 90th day of employment.

Employees will have no seniority until they have completed ninety (90) [or
one-hundred-twenty (120) as specified above] calendar days of unbroken service
in the bargaining unit; however, after the completion of this time, their
seniority shall be their original starting date in the bargaining unit.

It is understood and agreed that said employees shall be entitled to the job
bidding rights outlined in 6.4 below after six (6) months full-time
employment. Bowen shall have the right to terminate any

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<PAGE> 6
employee for any reason whatsoever, with or without cause, within the ninety
(90) or one-hundred-twenty (120) day probationary period above. It is
understood and agreed that it is not Bowen's intent to use the terms and
conditions of this paragraph to discriminate against Union membershitp.

6.2 Seniority shall consist of all unbroken service in the bargaining unit
covered by this Agreement except as specifically stated above. Breaks in
service shall be as follows:

(A.) If the employee quits or is discharged;

(B.) If the employee fails to return from layoff within three (3)
working days after being notified by certified mail to his last known
address. The "recall" return may be extended with the mutual agreement
of management and the union, but shall not exceed ten working days;

(C.) If the employee has less than one (1) year of seniority and is
laid off, loss of seniority will occur after six (6) months;

If the employee has one or more years seniority and is laid off, loss
of seniority will occur after eighteen (18) months;

(D.) If the employee retires;

(E.) If the employee is promoted outside of the bargaining unit for a
period exceeding six (6) months;

(F.) If the employee fails to report for work upon the completion of
any authorized leave of absence unless prior approval to extend the
leave has been granted by the mangement;

(G.) If an employee on a "Leave of Absence" accepts a job with another
employer;

(H.) If an employee with less than one (1) year of seniority is
disabled more than six consecutive months due to occupational
illness/injury or due to personal illness/injury;

If an employee with one (1) or more uears of seniority is disabled more
than eighteen consecutive months due to occupational illness/injury or
due to personal illness/injury.

6.3 Senority and the ability to perform the work of a job classification shall
be the determining factors in cases of decreases in force, layoff and recall.
Management and the Shop Committee shall confer on disputed decisions, but in
the event of a continued disagreement, management shall have the right to make
the job assignment with the approval of the Senior Vice President. The Union
shall have the right of redress through the grievance procedure.

6.4 In all cases of promotions, shift preference when a vacancy exists,
increases in force and transfers, seniority shall prevail unless there is a
marked difference in ability. From a review of

<PAGE> 7
available production records, available quality records, jobs will be awarded
under the direction of the Director of Human Resources. A copy of all job
postings shall be furnished to the chief steward. Management and the chief
stewards shall confer on disputed decisions, but in the event of a continued
disagreement, mangement shall have the right to make the job assignment. The
Union shall have the right of redress through the grievance procedure.

(A.) All job vacancies shall be posted for three (3) working
days provided however, management shall have the right to
immediately fill such opening on a temporary basis for not more
than sixty (60) days. Such temporary assignment shalll not be
used as qualifying time on job bids. A copy of job vacancy
postings shall be furnished to the chief steward. Management
reserves the right to reassign any employee to another machine
due to work load(s) or due to disabled machines, and this
temporary assignment is not subject to the sixty (60) day
limitation.

(1) Job vacancies shall be filled through the
provisions of this Article whenever feasible in
accordance with the provisions of Section 6.4;

(2) In the filling of job vacancies on a shift in any
classification, first consideration will be given the
employees assigned to comparable machine in the off
shifts on a seniority basis;

(3) Second consideration will be given to employees in
higher job classifications within the bargaining unit;

(4) Next consideration will be given the employees in
the same pay grade;

(5) Employees in the next lower classification shall
be given fourth consideration;

(6) If the opening is not filled by hire within sixty
(60) days of the original bid, it shall be reposted for
bid;

(7) Within a maximum period of ninety (90) days or
one-hundred-twenty (120) days, any employee not able to
produce work of an acceptable quality and quantity in a
new job assignment will be returned to his previous
classification and rate of pay plus any progression
increase he would have received under Article 23.3 In
the event his previous job assignment has been filled,
the employee will be assigned to any job assignment
open within his classification. If there is no job
assignment open within his classification, he will be
offered any available job for which he is qualified
which is open at the rate of pay applicable for the
available job, or he will be placed on layoff status;

(8) Any vacancy created by an employee returning to his
previous classification provided in (7) above will not
be reposted if there were other

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<PAGE> 8
eligible bidders on the original bid to fill the job.
Consideration will be given to other bidders from the
original bid in accordance with (2) through (6) above;

(9) Except in instances where an employee bids from a
higher to a lower classification, any employee who
satisfactorily fills any job vacancy through the
provisions of this Article must remain in the new job
for a period of not less than six (6) months from the
date the job was awarded except as provided in (7)
above or in any job assignment made by Bowen in the
exercise of any of its management rights or as outlined
below:

Manual machinists, welders and inspectors will be
restricted from bidding for twelve (12) months. CNC/NC
machinists will be restricted from bidding for twelve
(12) months. Cellular machinists will be restricted
from bidding for eighteen (18) months.

The 6/12/18-month bidding restrictions will not apply
to new machines, development of additional cells, or
when the employee's same assigned machine or work
center becomes available on the off shift(s).

It is also agreed that any employee demoted to a lower
classification as a result of workforce reductions
and/or recall will be eligible to bid on the machine
from which he was laid off whenever that specific
machine becomes available regardless of time spent
within the lower classification;

(10) Employees whose pay rates are greater than $.50
less than the minimum of the classification bid will be
given consideration only if those bidders within $.50
of the top of the next lower classification are not
acceptable candidates. Any candidate promoted to fill
a vacancy lower than his classification prior to a
workforce reduction will be paid the maximum rather
than the minimum of the intermediate classification;

(11) Pay for jobs awarded under the provisions of this
Article will commence after the completion of an
orientation period not to exceed one week maximum.
Physical reassignment to the job awarded will occur no
later than 30 days of the date of the job award except
with the approval of the employee and the Union, and
pay for the new job will commence not more than thirty
five (35) days of the date of the job award;

(12) In all cases of workforce reductions, when a
marked difference in ability exists, demotions from
higher job classifications to lower job classifications
within the same department or in any other
department(s) where the employee has established
seniority will be implemented by the senior vice
president(s) based on the seniority and ability of
affected employees.

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<PAGE> 9
(B.) Eligibility of Bidders and Order of Consideration

(1) Employees demoted from a job classification as a
result of a reduction in force and on which they
established job classification seniority shall have
prior rights to return to a job classification on which
they have established seniority before other eligible
bidders are considered.

(2) Employees on layoff status who have worked and
established seniority in a job classification in which
a vacancy is bulletined shall be deemed to have bid for
such a vacancy and shall be considered for recall to
such vacancy.

6.5 Bowen shall notify such layoff employee by certified mail to his last
known post office address on file with Bowen to report to work. The employee
shall within (3) work days respond to such call except as provided in Article
6.2, Paragraph B, above. The chief stewards and the business manager of the
Union will receive copies of said letter of notification.

6.6 A complete seniority list of all regular full-time employees listing dates
of seniority shall be posted by Bowen three (3) times a year and any protest by
any employee must be made within thirty (30) days after the date of each such
posting. Seniority of employees with the same starting date will be determined
by alphabetical order. Bowen agrees to furnish the chairman of the shop
committee and the business manager with copies of each such seniority list.

ARTICLE VII - ASSIGNMENT OF OVERTIME

7.1 With due regard for the qualifications of employees and the nature of work
to be done, the supervisors designated by Bowen will make every reasonable
effort to assign overtime work equally among all regular, full-time employees
in each department by shift and job classification. The company agrees to
uniformly administer and maintain records of the accumulation of overtime hours
for bargaining unit employees, and further agrees to make said records
available for review by the union by appointment. Copies of the overtime report
will be furnished to appropriate chief stewards monthly. Records maintenance
will not be subject to grievance and arbitration.

Should any dispute arise over assignment of overtime work, such dispute shall
be subject to the grievance procedure at Step 3.

In no event shall the Company be obligated to pay a monetary penalty under the
terms of this provision.

7.2 Employees who work in excess of their scheduled hours on any day and/or
week shall not be laid off during their respective regular scheduled working
hours as a result of having worked overtime.

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<PAGE> 10
7.3 Employees shall have the right to refuse overtime, but this refusal will be
charged as hours worked in the distribution of future overtime, except as
provided in Paragraph 7.5 below.

7.4 The company will post the overtime records of each department in the
department for review by employees at a time which does not interfere with
their work schedules.

7.5 Except in emergency situations, Bowen will notify an employee of any
overtime the shift before overtime is to be worked or the refusal will not be
charged as overtime hours worked.

ARTICLE VIII - REPORT PAY

8.1 In the event an employee reports to work on his regular shift of scheduled
overtime without having been previously notified not to report, he shall be
given four (4) hours work within his classification or, if necessary, in a
lower classification at his regular rate of pay. If no work is available, the
employee shall receive four (4) hours pay including all premiums.

8.2 An employee shall be deemed as requested to report on his regular shift
unless notified by an authorized employer representative to the contrary at
least three (3) hours before the schedule work time.

8.3 The report pay provisions provided above in Paragraphs 8.1 and 8.2 shall
not apply in the event Bowen is unable to notify the employee by reason of any
cause beyond the reasonable control of Bowen or in the event of plant closings
because of inclement weather. Plant closings because of inclement weather will
be announced through the KPRC radio/televisions network and will provide
whatever advance notice is possible through broadcasting.

ARTICLE IX - CALL IN PLAY

9.1 Any employee who has left Bowen's premises and who is called back to work
after the termination of his regular shift or prior to his regular shift shall
receive either four (4) hours work or four (4) hours pay at the overtime rate;
provided, however, that call in provisions in this section shall not apply when
an employee is called in early and works into his regular shift.

9.2 An employee shall not be required to stand by without pay for a call back
to work after the termination of his regular shift; provided however, that the
terms and conditions of this Article shall not apply to field service personnel
off the premises during an emergency and it is understood and agreed that such
personnel shall be compensated in accordance with past practices.

ARTICLE X - HOURS OF WORK

10.1 A standard work week begins at the start of the day shift on Monday. A
standard week's work is defined as not more than forty (40) hours in any one
week. Premium pay shall be paid for at the following rates:

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<PAGE> 11
10.2 Time and One-Half will be paid for:

(A.) All hours worked over eight (8) in one day, except in cases
where a compressed work week in implemented to comply with Employer Trip
Reduction regulations. Hours worked in excess of those required by any
Employer Trip Reduction regulations will be compensated at time-and-one
half.

(B.) All hours worked in excess of forty (40) hours (for which
overtime has not been previously paid) in and one week.

(C.) All hours worked on Saturday provided 32 straight-time hours
have been accumulated in the first five days of the week and any time
off is excused. The 32 straight-time-hour accumulation may consist of
hours worked, vacation days, holidays, jury-duty days, funeral-pay days
or any 32 straight-time-hour combination thereof.

10.3 Double Time will be paid for:

(A.) All hours worked on Sunday in a department which normally does
not work on Sunday. In departments which must normally operate on
Sunday, double time will be paid only on the seventy (7) consecutive
shift of work in one week.

(B.) All hours worked on the seventh consecutive shift of work in
one week.

10.4 Holiday Pay will be paid for:

In addition to the holiday pay specified in Article XVI below, an employee who
works on a recognized holiday shall be paid time and one half his straight-time
pay rate for all hours worked on the holiday.

10.5 All premium pay shall be calculate for actual time worked.

ATTENDANCE RECORD AND LUNCH PERIOD

All employees will punch a time clock in their respective work area or as
designated by their supervisor upon reporting to work at Bowen's premises and
shall punch out upon completing work. In addition, employees will be required
to punch a time clock documenting the completion of work step processes. A
lunch period of thirty (30) minutes shall be allowed each employee during his
period of duty. This lunch period when assigned shall not be paid for by Bowen.

Employees leaving the Company premises for lunch shall be required to punch the
clock before leaving and again upon their return. Failure to comply with
required time clock procedures will result in disciplinary action and/or
termination of employment.

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<PAGE> 12
ARTICLE XII-ABSENTEEISM AND TARDINESS

In all cases where an employee is unable to report to work at his
scheduled starting time, for any reason, he shall notify his supervisor no
later than three (3) hours after such scheduled starting time.

Absenteeism and tardiness are grounds for disciplinary action including
discharge. Any employee who is absent for three (3) consecutive work days
without notifying his supervisor will be terminated on the basis that he
resigned. Such employee shall be notified by certified letter to his last
known address; also advising him of his appeal his termination if he has a
reasonable explanation for lack of such notice.

ABSENCE OCCURRENCE

(A.) Absence -- If an employee is absent for more than three hours on
a working day, he will be charged with one (1) absence occurrence. If
this one occurrence is for five (5) consecutive day, a statement from
the doctor will be required. If no doctor's statement is furnished, the
fifth day and each succeeding day will be counted as additional absence
occurrences. If this one occurrence is for eight (8) consecutive days,
a disability leave of absence must be arranged. The maximum credit loss
for one (1) day is one (1) credit. For absences due to disability, when
a physician has certified inability to work, a release to return to work
from a physician must be presented before the employee returns to work.

(B.) Tardy or Leave Early -- If an employee is tardy or leaves early
from his regularly schedule shift, he will be charged with one-half
(1/2) absence occurrence, with the following exception: two clock-in
times per calendar month which coincide with shift beginning time will
not be charged tardy.

(C.) Exceptions (Definitions as described in Policy and Procedure
Manual) Unpaid leaves of absence shall be granted in cases of personal
and family illness upon request. Fraud in applying for leaves of
absence or acceptance of other employment shall result in immediate
discharge.

(1) Vacation with supervisor's prior approval
(2) Holiday
(3) Jury Duty/Witness Duty
(4) Military Leave
(5) Leave of Absence Other than Family and Medical
Leave(s) of Absence -- Provided the employee has
requested and been granted a leave of absence at least
eight (8) hours prior to the commencement of his
scheduled work shift. Family and Medical Leave(s) of
Absence will be subject to the provisions and
regulations of the Family and Medical Leave Act of
1993 and will be administered as provided in the text
of same.
(6) Official Union business of Union official or plant
steward -- approval in advance -- not to exceed ten
(10) working days in one calendar year.

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<PAGE> 13
(7) Death in the employee's immediate family (not to exceed three
[3] days).
(8) Occupational injury of occupational illness.
(9) Hospital confinement of an employee
(10) Disciplinary Action
(11) Overtime Refusal (non-scheduled or Saturday which was declined
when offered)
(12) Personal Illness - Provided a written certificate from a
competent medical doctor verifying personal illness is
presented. Only those dates specifically listed by the doctor
will be excused.
(13) Absence when the vicinity of the employee's residence is
declared by the state to be a disaster area or when satisfactory
evidence is presented by the employee in a timely manner which
substantiates inability to report to work due to inclement
weather.
(14) Absence due to incarceration resulting from wrongful arrest,
provided a written statement from a law enforcement
representative is presented.
(15) Absence to attend the funeral of an employee within the same
department provided verification of funeral attended is
presented (not to exceed three[3] hours absence.)

An employee must have properly reported his absence through the existing
call-in procedure and must submit satisfactory evidence to his supervisor on
the first day he returns to work or by the close of his scheduled shift on the
following day that one of these fifteen exceptions applies. If he does not,
the absence will be considered an absence occurrence or occurrences.

EXISTING CALL-IN PROCEDURES

An employee must continue to call prior to or within three (3) hours after the
beginning of his shift. The employee, or an adult member of his family if the
employee is physically unable to do so must contact Bowen's attendance
reporting division at (713) 868-8863 who will notify his supervisor or foreman
as in the past.

EARNED CREDITS

(A) An employee may earn credits toward absence occurrences through
perfect attendance. For each two (2) weeks of perfect
attendance (i.e., no absences, tardiness or leave early), an
employee will be given one (1) credit which can be accumulated
in advance or applied against prior absences occurrences. The
two week period during which an employee may gain a credit need
not be consecutive provided they are in the same calendar month.
The accumulation of credits shall be limited to a maximum of six
(6) at any one time.

(B) For each complete scheduled shift worked on Saturday, or
Saturday shifts of six hours or more (whichever is less), an
employee will receive an additional one-half (1/2) credit if he
has worked at least six (6) hours on the scheduled work day both
preceding and following the Saturday shift. In departments which
must operate seven (7) days a week, this one-half (1/2)
accumulation will be accrued on the sixth consecutive work shift
in any week rather than on Saturday.

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(C) For each complete scheduled shift worked on Sunday, or Sunday
shifts of six hours or more (whichever is less), an employee
will receive an additional one-half (1/2) credit if he has
worked at least six (6) hours on the scheduled work days both
preceding and following the Sunday shift. In departments which
must operate seven (7) days a week, this one-half (1/2)
accumulation will be accrued on the seventh consecutive work shift
in any week rather than on Sunday.

PROCEDURE

As an employee's sum of points in excess of earned credits for absence
occurrences, tardiness or leave early reaches the following levels, action will
be taken as described.

(A) Zero - a written performance rating advising 0 status;
(B) Two - a written performance rating;
(C) Three - a written performance rating with a five day probated
working discipline;
(D) Four - a written performance rating advising the employee that one
additional point will necessitate the termination of his employment;
(E) Five - his employment shall be terminated.

Any employee not present at work to receive notification described above will
receive the applicable performance rating or performance ratings or termination
of employment upon his return to work.

Except for leaves of absence for personal disability, hospital confinement and
light duty assignments, the employment of any employee whose attendance
standing remains at any negative level more than ninety (90) consecutive
calendar days will be terminated.

The duration of leaves of absence during a ninety (90) day period in which
one's attendance standing remains at any negative level will be added to the
ninety (90) day period for the time frame during which employment will be
terminated for negative attendance standings.

EXCESSIVE ABSENTEEISM

Employees whose records indicate excessive absence not covered by the program
will be subject to disciplinary action including termination.

In addition, in any consecutive three (3) calendar month period, any employee
not on a leave of absence whose absentee rate is greater than 24 hours absence
in each of the three (3) months covered, will be placed on thirty (30) days
written notice (with a copy to the Union steward) within five (5) days of the
end of the third month .. or within five (5) days of the end of the period when
24 hours absence is accumulated .. that the continued unimproved attendance
will compel termination.

Within thirty (30) days, if the absentee rate is not less than 12 hours,
employment will terminated. The computation of absentee rate shall not include
vacation, holiday, jury duty,

<PAGE> 15
official union business, death in employee's immediate family (not to exceed
three [3] days), occupational injury or occupational illness, disciplinary
action or overtime refusal (non-scheduled or Saturday which was declined when
offered).

12.2 Except as otherwise specified herein, only time actually worked shall
be compensated.

ATTENDANCE INCENTIVE PROGRAM

For each three months perfect attendance which includes a scheduled shift not
to exceed nine hours and six hours on alternate Saturdays as scheduled or two
Saturdays per month, an employee will accrue one day of sick leave which may be
carried over from one year to the next, but an employee may not take more than
four in any one calendar year. One day of sick leave equals (8) hours
straight-time pay.

Perfect attendance includes the following: two clock-in times per calendar
month which coincide with shift beginning, vacation, holiday, jury duty,
official union business of union steward, death in employee's immediate family
not to exceed three days, and attendance incentive day.

The three months perfect attendance need not be consecutive months.

Pay for unused attendance incentive days will be paid on any payday between
December 15 and December 31 at the employee's written request.

ARTICLE XIII-SAFETY AND SANITATION

13.1 Bowen and the Union agree to establish a Safety Committee consisting of
members of bargaining unit and Bowen representatives.

13.2 Bowen shall maintain an emergency first aid station to care for its
employees in case of injury.

13.3 Bowen shall notify the Safety Committee of all accidents which occur in
the plant within a reasonable time.

13.4 Bowen shall furnish and maintain safe and healthful sanitary
conditions, including washing facilities and toilets. The company will continue
to provide existing locker facilities which are located in shop restrooms. As
locker vacancies become available through attrition, they will be reassigned on
the basis of seniority.

13.5 No employee shall be required to perform repair work on or about moving
or operating machines while in motion or in operation, nor shall any employee
be required to work in areas of a plant or shop where conditions exist that are
detrimental to health, until such conditions have been removed or remedied.

<PAGE> 16
13.6 There shall be at least one person on each shift trained in first aid
and certified.

13.7 Bowen shall from time to time post rules for sanitary maintenance and
for safety practices and from time to time revise such rules. All employees
shall adhere strictly to such rules and failure or refusal to obey such rules
shall be cause for discharge or other appropriate disciplinary action.

13.8 Bowen shall provide all OSHA and/or company required safety equipment
except safety shoes and prescription safety glasses. The cost of company issued
safety glasses will be paid toward the cost of prescription safety glasses when
proof of purchase of prescription safety glasses is presented, but not more
often than twice during the life of the contract.

13.9 A log shall be maintained recording all injuries reported whether
casual or serious. Such log shall be available for inspection at any
reasonable time by a member of the shop committee who has the permission of the
injured employee. Forms available in each department will be used by
employees to report accidents. Except for emergency treatment serious enough
to warrant immediate treatment, no medical treatment will be rendered prior to
an employees completion of the "short form" for accident reporting.

13.10 Any employee whose light duty assignment resulting from occupational
illness/injury extends beyond thirteen (13) weeks will receive the pay of the
classification in which he is working.

ARTICLE XIV-STRIKE AND LOCKOUT

14.1 The Union agrees that during the term of this Agreement neither the
Union, its officers or representatives nor the Company's bargaining employees
will call, sanction or engage in any strike, slowdown, stoppage of work or
suspension of work whatsoever. The Union further agrees that all disputes will
be settled under the grievance procedure of this contract or by a court of
competent jurisdiction as provided above in Article V, Section A. Any bargaining
unit employee who violates the foregoing shall be subject to disciplinary
action, including discharge, as may be deemed appropriate by the Company. The
only question which may be the subject of a grievance is whether or not the
disciplined or discharged employee or employees did or did not actually
participate in a strike, slowdown, stoppage of work or suspension of work.

14.2 The Company shall have the additional right in the event of violation
of this Section to take such disciplinary or discharge action against any
and/or all the participants.

14.3 Bowen agrees that during the terms of this Agreement there shall be no
lockout of employees.

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ARTICLE XV-VACATION

15.1 Vacation eligibility shall be based on the employee's anniversary date
which for purposes of this Agreement shall be defined as the date of the
employee's employment by Bowen.

15.2 All vacation earned must be taken in the year in which they are earned.
If scheduled work requirements permit, and employee may split his vacation into
segments agreed upon by both employee and his supervisor. Final decision in
determining if work requirements permit will be supervisor's judgement. Choice
of available vacation dates will be granted on the basis of seniority except
that Bowen reserves the right to grant or reschedule vacation of any employees
to least affect Bowen's operation.

15.3 Vacations with pay will be granted upon the following terms and
conditions:

(1) All employees who have completed twelve (12) months continuous
service for Bowen and who have worked eighteen hundred (1800)
straight-time hours in the preceding year shall be granted five (5) days
vacation with pay;

(2) All employees who have completed twenty four (24) months
continuous service for Bowen and who have worked eighteen hundred
(1800) straight-time hours in the preceding year shall be granted (10)
days vacation with pay;

(3) All employees who have completed seven (7) years continuous
service for Bowen and who have worked eighteen hundred (1800)
straight-time hours in the preceding year shall be granted fifteen (15)
days vacation with pay;

(4) All employees who have completed twenty (20) years continuous
service for Bowen and who have worked eighteen hundred (1800)
straight-time hours in the preceding year shall be granted twenty (20)
days vacation with pay;

(5) The eighteen hundred (1800) straight-time hour requirement for
full vacation may consist of hours worked, vacation days, holidays, jury
duty days, funeral-pay days of any combination thereof;

(6) In the specific instance where an employee qualifies for four
hundred eighty (480) hours of leave under the Family and Medical Leave
Act, the minimum straight time hour requirement will be reduced to a
sixteen hundred (1600) straight time hour requirement for earning a full
vacation. This reduction applies solely and specifically to absence(s)
provided in the Family and Medical Leave Act.

(7) Vacation pay shall be forty (40) straight-time hours for five (5)
days, eighty (80) straight-time hours for 10 (10) days,
one-hundred-twenty (120) straight-time hours for fifteen (15) days
vacation, and one-hundred-sixty (160) straight-time hours for twenty
(20) days vacation.

(8) If for any reason other than paid vacation, holidays, jury-duty
days or funeral-pay days, less than the minimum eighteen hundred (1800)
straight-time hours (or sixteen

17
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hundred [1600] straight-time hours with FLMA) required for full vacation
eligibility are worked, the amount of vacation pay due will be pro-rated based
on the number of straight-time hours worked, the minimum straight-time hour
requirement and the seniority eligibility, i.e., forty (40), eighty (80), on
hundred twenty (120), or one hundred sixty (160) hours.

15.4 In the event an employee covered by this Agreement voluntarily severs
his connection with Bowen, retires or enters military service, any vacation
credit accrued shall be paid to him. In the event of death of an employee
covered by this Agreement, any vacation credit accrued shall be paid to the
legally recognized representative of the estate of the deceased.

ARTICLE XVI - HOLIDAYS

16.1 The following days shall be recognized as holidays:

NEW YEAR'S DAY January 1
MLK DAY (When Observed)
GOOD FRIDAY Friday before Easter
MEMORIAL DAY Last Monday in May
INDEPENDENCE DAY July 4
LABOR DAY First Monday in September
THANKSGIVING 4th Thursday in November
DAY AFTER THANKSGIVING Friday after Thanksgiving
CHRISTMAS EVE December 24
CHRISTMAS DAY December 25

</TABLE>

16.2 If a holiday should fall on a Saturday, Friday will be considered as
the holiday. If a holiday should fall on a Sunday, Monday will be considered as
the holiday.

16.3 As provided above in Article X, Paragraph 10.4, an employee who works
on a recognized holiday shall receive one day's pay at this regular
straight-time rate plus time-and-one-half for the number of hours worked on the
holiday. The holiday runs from midnight to midnight. No employee will receive
more than one day's holiday for each holiday worked. Employees assigned to work
on a holiday will be required to work holidays at the rate provided above. Each
supervisor shall notify employees required to work on holidays no later than 12
hours preceding the start of the first holiday shift. An employee shall not be
entitled to holiday pay unless he works at least six (6) hours on the day
before the holiday and at least six (6) hours on the day following the holiday;
provided, however, that the foregoing shall not apply if the employee's
absence(s) on the day preceding and/or following the holiday is applicable as
one of the fifteen (15) exceptions to the absence occurrences listed in Article
XII and the employee has worked at least one complete shift in the two week
period preceding the holiday.

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ARTICLE XVII - NOTICES

Bowen will provide space upon which the Union may post official notices
concerning meetings on mutually agreed bulletin boards. In addition, Bowen will
provide limited enclosed bulletin boards upon which the Union may post official
notices concerning meetings. Any other notices or matters to be posted thereon
by the Union must first be submitted to and approved by Bowen.

ARTICLE XVIII - UNION REPRESENTATION

18.1 Representatives designated by the Union may interview employees or
stewards at the shop in legitimate Union business after having obtained
permission of the management. Said representatives shall have such interviews
at times that shall not interfere with the operations of the plant or the work
being performed by the employees and shall comply with all of Bowen's rules and
policies relating to visitors.

18.2 The parties agree to participate in a Labor Management Committee
comprised of bargaining unit employees designated by Teamsters Local 968 and
non-bargaining unit employees designated by the Bowen Tools Director of Human
Resources. The committee shall be composed of an equal number of
representatives from Management and the Union, not to exceed four
representatives each. Each party shall designate one of its members as co-chair
of the committee. The co-chairs shall alternate in running the meeting or they
may agree among themselves on a system to conduct the meetings.

The committee shall meet at least once each ninety (90) days on the first
Tuesday of the first month in each quarter. Each party shall identify at least
seven (7) days in advance, the subjects that they desire to discuss. Any
approved issue brought before the committee may be answered during the meeting,
or it may be answered by correspondence after the meeting. Any approved issue
should be addressed. Once an issue is addressed, the other party may respond,
giving additional information or comments. In each case the issue can be
re-addressed or it may be declared "tabled," not to be discussed again. It is
not the intent of the parties to have the committee operate as a grievance
panel, but to discuss any business between Bowen and the union not set out in
the Bowen Tools/Teamsters Local 968 Labor Agreement.

18.3 There shall be four (4) chief stewards representing the bargaining
unit. Union stewards will be allowed time off with pay to a maximum of nine (9)
hours per month per steward of fifty four (54) hours collectively to process
grievances as prescribed in Article IV after obtaining permission from their
supervisor. Management agrees that such permission shall not be unreasonably
withheld; union representatives recognize and agree that work priorities
supersede requests for representation in instances where no critical issue
exists.

Stewards will also be allowed time off with pay to attend the regularly
scheduled quarterly meetings set forth in Article 18.2, beginning at 2 p.m.

The resolution of problems prior to the grievance procedure as described in
Article 4.1 will not be charged in the accumulation of the fifty-four (54)
hours provided a formal grievance is not filed.

<PAGE> 20
18.4 During the life of this Agreement, in addition to the chief stewards,
the Union may certify up to five (5) stewards in departments and work areas
listed above. In the event of the expansion of the unit due to company growth,
the union may certify one additional steward for each ten percentage of growth.

(A.) Stewards shall be limited to handling of grievances in their
own work area at Step 1 and Step 2, as set forth herein above in
Article IV, and at Steps 3 and 4 if they initiated the grievance.

Any steward who is also the grievant will be represented by
another steward or the chief steward if available.

An employee may select the steward of his choice if the steward is
available and no critical work situation exists.

(B.) Steward shall, upon approval of their respective supervisor or
foreman be granted reasonable time off with pay for the purpose of
handling grievances at Step 1 and Step 2 and such approval shall not be
unreasonably withheld. Time spent by stewards handling grievances shall
be accumulated toward the fifty-four (54) hour maximum allowed per month
for union representation which will be paid by the Company.

18.5 The Union shall furnish Bowen a certified list of stewards and chief
stewards, showing the shift and department or area each steward is appointed to
serve, and shall certify in writing any changes therein promptly after changes
occur. Bowen shall not be required to recognize any steward or chief steward
who has not been so certified, but the Union may certify an alternate for each
chief steward and steward who shall act only in the absence of such steward or
chief steward.

18.6 Accredited representatives of the Union will have access to the plant
during working hours by prior appointment and with permission of the Director
of Human Resources or a designated representative. Such permission will not
be unreasonably withheld.

18.7 Any employee who wishes to discuss a grievance with either a chief
steward or steward as provided above in this Article must first obtain
permission from his supervisor who will grant permission within two hours
depending upon the availability of the person sought.

ARTICLE XIX -- DISCHARGE AND DISCIPLINE

19.1 No employee shall be discharged, demoted or otherwise disciplined
without good and sufficient cause except during the probationary period as
provided above in Article VI. Any employee who has been discharged shall, if he
so requests, be granted an interview with his Union representative before he is
required to leave the plant, provided there is a Union representative working
on the premises.

19.2 In all cases of discharge, demotion or other discipline, the area
steward and/or chief steward shall be notified of the action provided such
steward or chief steward is working on the premises.

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<PAGE> 21
19.3 The company will advise any employee of his/her right to union
representation prior to any discussion concerning performance ratings,
disciplinary action and/or discharge.

19.4 Should there be any dispute between Bowen and the Union concerning the
existence of good and sufficient cause for discharge, demotion or discipline,
such dispute shall be adjusted in accordance with grievance and arbitration
provisions in the Agreement starting with Step 3 within five (5) working days
after such action. The only question which may be the subject of a grievance is
whether or not the disciplined or discharged employee did or did not engage in
the specific conduct which resulted in the disciplinary action or discharge.

Performance ratings which do not necessitate disciplinary suspension and/or
discharge will not be subject to the grievance and/or arbitration procedure
unless and/or until such negative rating escalates to suspension and/or
discharge, and the only question which may be the subject of the grievance is
whether or not the disciplined employee did or did not engage in the specific
conduct which resulted in the disciplinary action.

It is also agreed where feasible, that each supervisor will make an effort to
correct unsatisfactory performance prior to the issuance of a performance
rating, and will not issue performance ratings in an arbitrary or capricious
manner.

ARTICLE XX - SHIFT PREMIUM

A shift bonus of 6% shall be paid to all employees on the second shift and 12%
to all employees on the third shift.

ARTICLE XXI - JURY WITNESS DUTY

Employees kept away from work because of mandatory jury service or subpoenaed
as a witness in any court of record or reporting for mandatory jury service,
shall be paid by the Company for the time lost up to a maximum of eight (8)
hours per day, provided the employee has given three (3) working days advance
notice or the amount of notice allowed the employee by summons if it is less
than three (3) working days, and furnishes evidence of the number of days
served. Pay for service when subpoenaed as a witness shall apply only when the
employee is subpoenaed in a case in which he is not a party. The Company will
request release from jury services only in the event of an emergency.

An employee reporting to work after being released from jury duty or witness
service will be paid for all hours worked at his straight time pay in addition
to the jury/witness pay provided above.

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<PAGE> 22
ARTICLE XXII - FUNERAL LEAVE

In the event of a death in the immediate family, an employee shall be entitled
to time off to attend the funeral, not to exceed three (3) scheduled working
days. He shall be paid for his regular scheduled hours of work at his regular
wage rate.

Immediate family shall include the spouse, children, step-children, parents,
brother, sister, grandparents, parents-in-law, step-parents of the employee.

In the event of a death of an employee's grandchild, current brother-in-law or
current sister-in-law, an employee shall be entitled to time off to attend the
funeral, not to exceed (3) scheduled working days, and he shall be paid his
scheduled hours (not to exceed eight [8] hours) at his regular wage rate on the
date of the funeral.

To receive pay and excused absence(s), the employee must furnish verification
of funeral attended and relationship to the deceased.

ARTICLE XXIII - JOB CLASSIFICATIONS AND RATES OF PAY

23.1 The rates of pay shown in Schedule "A" of this Agreement will become
effective as shown in that schedule.

The rates of pay shown in Schedule "B" of this Agreement will become effective
as shown in that schedule.

The rates of pay shown in Schedule "C" of this Agreement will become effective
as shown in that schedule.

23.2 Present job classifications shall remain unchanged except by mutual
consent during the life of this Agreement.

(A.) Bids for replacements for employees leaving through normal
attrition will be for the same classification as that of the employee
who is leaving.

(B.) Classification vacancies created by the addition of production
capacity and classifications of additional cells will be established
through negotiation with a committee of the union's chief stewards and
management. Said agreement will be signed by the local representative of
the Teamsters' union.

23.3 Employees covered by this Agreement whose attendance is +2 or better,
and who do not have more than 480 hours lost time due to FMLA or 280 hours lost
time for non FMLA absence will be reviewed annually on their anniversary date
of employment and will receive $.25 per hour increase in pay until they reach
the top of their classifications. Bargaining unit employees are eligible for
merit increases in pay, but merit increases will be granted solely at the
discretion of the management and will not be subject to grievance and/or to
arbitration.

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<PAGE> 23

23.4 One employee may be assigned to two machines in the same classification
if sufficient work loads on those two machines do not warrant two employees, or
to two machines simultaneously as historically performed in the past.

23.5 Employees receiving a job bid shall be placed at the minimum rate of
the classification to which they bid or at their rate of pay, whichever is
greater, unless otherwise specified in this Agreement in Article 6.4(a)10.

23.6 Bowen will review promotions and merit increases with appropriate union
representatives at least every six (6) months and will consider complaints
raised on behalf of employees who feel aggrieved as a result of supervisory
action under this Article, but promotions and merit increases outlined above
will not be subject to grievance and/or to arbitration.

ARTICLE XXIV ALTERATION OF AGREEMENT

24.1 No agreement alteration, understanding variation, waiver or
modification of any of the terms, conditions, or covenants contained herein
shall be made by any employee or group of employees with Bowen and in no case
shall it be binding upon the parties hereto unless such agreement is made and
executed in writing between the parties hereto and same has been ratified by
the Union.

24.2 The waiver of any breach of condition of this Agreement by either party
shall not constitute a precedent in the future enforcement of all terms and
conditions herein.

ARTICLE XXV - SAVING CLAUSE

In the event that any federal or state legislation, governmental regulations or
court decisions cause invalidation of any Article or Paragraph of this
Agreement, all other Articles and Paragraphs not so invalidated shall remain in
full force and effect.

ARTICLE XXVI - CAPTIONS

The headings and captions of this Agreement are for convenience and reference
only and shall in no way modify or restrict any of the terms hereof.

ARTICLE XXVII - MAINTENANCE OF BENEFITS

27.1 The company will continue to make available to bargaining unit
employees the "Employee Computer Purchase Plan" throughout the life of this
Agreement. Denials and restrictions governing the Plan by Bowen will not be
subjected to grievance and/or arbitration,

27.2 With the effective date of this Agreement, the company will make
available its "Education Assistance Plan" to bargaining unit employees.
Restrictions and limitations governing the Plan will not be subject to
grievance and/or arbitration.

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<PAGE> 24
27.3 Bowen will continue to contribute 1/2 of the first six percent of an
employee's savings in the "Bowen Tools Savings Plan."

In addition and in replacement of the former "Bowen Tools Defined
Benefit Plan," (Pension Plan), with the effective date of the current
Agreement, the company will make mandatory contributions to a Defined
Contribution Plan (401-k) based on an employee's service with the company, as
shown below:

For those employees with more than one year but less than ten years'
service, the company will contribute 2% of compensation to the
employee's account.

For those employees with ten through nineteen years' service, the
company will contribute 4-1/2% of compensation to the employee's
account.

For those employees with twenty years' service and more, the company
will contribute 6% of compensation to the employee's account.

Employees with a minimum of one year of service on July 8, 1997, will
be fully vested in the Plan as of that date. Employees hired after July
8, 1997, will participate after one year, and will be fully vested
after three (3) years' service.

27.4 Effective January 1998, the company agrees to make available a network
of health and dental maintenance organization services which provide similar, if
not greater, benefits as those now offered employees.

The company agrees to make available a network of point of service/preferred
provider organization services for employees who prefer this option.

Selection of the coverage option will be decided by the employee during any
eligible enrollment period. Prior to January 1998, group meetings will be held
with employees to explain the healthcare options available and to answer
questions regarding participation options.

An employee's contribution for the coverage will be based on the coverage option
selected, but will not exceed $45 per month for a single employee or $125 per
month for an employee with dependent coverage.

Contributions for short term disability coverage will not exceed the current
contribution of $7.15 per month.

Contributions for long term disability coverage will not exceed the current
contribution of $.38 per $100.00 monthly income.

The premium for life insurance for an insured employee valued at one times
annual earnings will be borne by the company.

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<PAGE> 25
Retirees will no longer be considered "active employees" under the plan.

28.4 The company will continue to make available a Flexible Benefit Plan
which allows an employee to pay insurance premiums pre-tax. Pre-tax spending
accounts will also be available for unreimbursed medical expense(s) and
dependent care expense(s). Medical expense and dependent care expense accounts
are subject to the maximums established in the Plan by the IRS and Bowen.
Restrictions and limitations governing the Flexible Benefit Plan will not be
subject to grievance and/or arbitration.

ARTICLE XXVIII - DUES COLLECTION

28.1 Bowen agrees to check off uniform Union dues the first pay period of
each month and remit the same directly to Union provided the Union shall furnish
Bowen an individually signed authorization from each employee upon whose behalf
said deduction is made; provided, however, the said individual authorization
shall be on the form set out below, provided further, however, the said
individual authorization shall be irrevocable and shall not exceed the duration
of this Agreement.

28.2 It is agreed that the form of authorization to be used for dues
collection shall be as follows:

Checkoff Authorization and Assignment

I, the undersigned member, hereby authorize my employer to deduct from my wages
each and every month an amount equal to the monthly dues, initiation fees and
uniform assessments of Local Union 968, and direct such amounts so deducted to
be turned over each month to the Secretary-Treasurer of such Local Union for
and on my behalf.

This authorization is voluntary and is not conditioned on my present or future
membership in the Union.

This authorization and assignment shall be irrevocable for the term of the
applicable contract between the union and the employer or for one year,
whichever is lesser, and shall automatically renew itself for successive yearly
or applicable contract periods thereafter, whichever is lesser, unless I give
written notice to the company and the union at least sixty (60) days, but not
more than seventy-five (75) days before any periodic renewal date of this
assignment of my desire to revoke same.

Signature
----------------------------------------------------------------------

Social Security Number Date
----------------------------------------- -----------

Address
------------------------------------------------------------------------

City State Zip Code
--------------------------- --------------------- ------------

Employer
-----------------------------------------------------------------------

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<PAGE> 26
28.3 In addition, the company agrees to deduct from the pay of employees a
monthly deduction for D.R.I.V.E. provided the Union presents signed
authorization for such deduction to the Employer. No deduction shall be made
which is prohibited by applicable law.

28.4 If an employee is absent on account of sickness or leave of absence or
for any other reason there are no earnings due him on the pay date when dues
are deducted, the deduction will be made the next pay date when he has
sufficient earnings due him.

28.5 When an employee does not have sufficient money due him after
deductions have been made for social security, group insurance or other
deductions required by law, dues will be deducted the next pay day.

28.6 The Union agrees to indemnify and hold Bowen harmless against all
suits, claims or expenses by reason of the Company's reliance on the Union's
dues deductions and/or D.R.I.V.E. deduction authorizations. All complaints of
employees arising out of Union's dues, D.R.I.V.E. deduction, or fees deducted
from their pay check shall be taken up with the Union, not with the
Company.

ARTICLE XXIX - EFFECTIVE DATE AND DURATION

29.1 This Agreement shall be effective as of the 8th day of July, 1997, and
shall continue in full force and effect until midnight of the 7th day of July,
2000. Thereafter this Agreement shall continue in full force and effect from
year to year unless either party hereto shall notify the other in writing not
less than sixty (60) days prior to the expiration of the term of the Agreement
of an intention to modify or terminate this agreement. After receipt of said
notice, negotiations shall commence not later than thirty (30) days before the
expiration date of this Agreement or any renewal thereof.

29.2 The terms of this Agreement shall not be modified or changed in any way
other than by mutual consent of both parties.

29.3 The parties hereto do mutually agree that they and each of them will
respect and observe the conditions enumerated herein during the life of this
contract and the Union further agrees that is will require strict observance of
all conditions herein enumerated from its membership. Bowen agrees that it will
require strict observance of the conditions herein enumerated from all
management personnel.

<PAGE> 1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors
IRI International Corporation:

We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the prospectus.

KPMG PEAT MARWICK LLP

Dallas, Texas

October 15, 1997