<PAGE> 1
- -------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
IRI INTERNATIONAL CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set for the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with proxy materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement no.:
3) Filing party:
4) Date filed:
- -------------------------------------------------------------------------------
<PAGE> 2
IRI INTERNATIONAL CORPORATION
1000 LOUISIANA
SUITE 5900
HOUSTON, TEXAS 77002
May 29, 1998
Dear IRI Stockholder:
You are cordially invited to attend an Annual Meeting of Stockholders of
IRI International Corporation, a Delaware corporation ("IRI" or the "Company"),
to be held at 1000 Louisiana, Suite 5900, Houston, Texas 77002, on June 25,
1998, at 10:00 a.m., local time (including any adjournment or postponement
thereof, the "Annual Meeting"). At the Annual Meeting, you will be asked to
consider and to vote upon proposals with respect to (i) the election of 15
directors to the IRI Board of Directors to hold office until their successors
are duly elected and qualified; (ii) the ratification of appointment of KPMG
Peat Marwick LLP as the Company's independent auditors for its fiscal year
ending December 31, 1998, and (iii) any such other business as may properly come
before the Annual Meeting or any adjournments or postponements thereof.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE ABOVE MENTIONED PROPOSALS ARE IN
THE BEST INTERESTS OF IRI AND ITS STOCKHOLDERS, AND RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF EACH OF THEM.
YOUR VOTE IS VERY IMPORTANT. The presence at the Annual Meeting in person
or by proxy of the holders of a majority of the outstanding shares of Common
Stock of the Company entitled to vote is required to constitute a quorum for the
transaction of business. We hope you will find it convenient to attend the
Annual Meeting in person. Whether or not you plan to attend, please complete,
date, sign and mail promptly the enclosed proxy in the return envelope provided.
If you attend the Annual Meeting you may revoke your proxy and vote your shares
in person, if you so desire.
Sincerely,
/s/ HUSHANG ANSARY
--------------------------------------
Hushang Ansary
Chairman of the Board
and Chief Executive Officer
<PAGE> 3
IRI INTERNATIONAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 25, 1998
To the Stockholders of
IRI International Corporation:
NOTICE IS HEREBY GIVEN THAT an Annual Meeting of Stockholders of IRI
International Corporation, a Delaware corporation ("IRI" or the "Company"), will
be held at 1000 Louisiana, Suite 5900, Houston, Texas 77002, on June 25, 1998,
at 10:00 a.m., local time (the "Annual Meeting"), for the following purposes:
(1) To consider and vote on the election of 15 directors to the IRI
Board of Directors to hold office until their successors are duly elected
and qualified.
(2) To consider and vote on the ratification of appointment of KPMG
Peat Marwick LLP as IRI's independent auditors for its fiscal year ending
December 31, 1998.
(3) To transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on May 27, 1998 as
the record date for holders of Common Stock of the Company entitled to notice
of, and to vote at, the Annual Meeting and any adjournment or postponement
thereof. Stockholders who execute proxies solicited by the Board of Directors of
IRI retain the right to revoke them at any time prior to the meeting; unless so
revoked, the shares of Common Stock of the Company represented by such proxies
will be voted at the Annual Meeting in accordance with the directions given
therein. If a stockholder does not specify a choice on such stockholder's proxy,
the proxy will be voted in favor of the approval of the foregoing proposals. The
proxy is solicited by and on behalf of the Board of Directors of IRI.
In the event that there are not sufficient votes to approve the proposals,
it is expected that the Annual Meeting will be postponed or adjourned in order
to permit further solicitation of proxies by the Company.
Further information regarding the Annual Meeting and each of the proposals
is set forth in the attached Proxy Statement and the attachments thereto. Please
read them carefully.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, WE ASK THAT YOU PLEASE
COMPLETE, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED
POSTPAID ENVELOPE.
THE BOARD OF DIRECTORS OF IRI RECOMMENDS THAT IRI STOCKHOLDERS VOTE TO
APPROVE THE ABOVEMENTIONED PROPOSALS.
By Order of the Board of Directors
/s/ ABDALLAH A. ANDRAWOS
--------------------------------------
Abdallah A. Andrawos
Secretary
May 29, 1998
1000 Louisiana
Suite 5900
Houston, Texas 77002
<PAGE> 4
IRI INTERNATIONAL CORPORATION
1000 LOUISIANA, SUITE 5900, HOUSTON, TEXAS 77002
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 25, 1998
SOLICITATION OF PROXY
The accompanying proxy is solicited on behalf of the Board of Directors of
IRI International Corporation, a Delaware corporation ("IRI" or the "Company"),
for use at the Annual Meeting of Stockholders of the Company to be held at 1000
Louisiana, Suite 5900, Houston, Texas 77002 on June 25, 1998 at 10:00 a.m., and
at any adjournment or adjournments thereof (the "Annual Meeting"). In addition
to solicitation of proxies by mail, proxies may be solicited by personal
interview, telephone or facsimile by officers, directors and other employees of
the Company, who will not receive additional compensation for such services. The
Company may also request brokerage houses, nominees, custodians and fiduciaries
to forward the soliciting material to the beneficial owners of Common Stock held
of record and it will reimburse such persons for forwarding such material at the
rates suggested by the New York Stock Exchange ("NYSE"). The Company will bear
the cost of this solicitation of proxies. Such costs are expected to be nominal.
Proxy solicitation will commence with the mailing of this Proxy Statement and
accompanying form of proxy on or about May 29, 1998.
Any stockholder giving a proxy has the power to revoke the same at any time
prior to its exercise by executing a subsequent proxy or by written notice to
the Secretary of the Company or by attending the Annual Meeting and withdrawing
the proxy.
PURPOSE OF MEETING
As stated in the Notice of Annual Meeting of Stockholders accompanying this
Proxy Statement, the business to be conducted and the matters to be considered
and acted upon at the Annual Meeting are as follows:
1. To elect 15 directors to hold office until their successors are
duly elected and qualified;
2. To ratify the appointment of KPMG Peat Marwick LLP as IRI's
independent auditors for its fiscal year ending December 31, 1998; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
VOTING AT MEETING
The voting securities of the Company consist solely of common stock, par
value $0.01 per share ("Common Stock").
The record date for stockholders entitled to notice of and to vote at the
Annual Meeting is the close of business on May 27, 1998 (the "Record Date"), at
which time the Company had issued and outstanding and entitled to vote at the
Annual Meeting 39,900,000 shares of Common Stock. Stockholders are entitled to
one vote, in person or by proxy, for each share of Common Stock held in their
names on the Record Date.
Stockholders representing a majority of the shares of Common Stock issued
and outstanding and entitled to vote thereat must be present or represented by
proxy to constitute a quorum for the Annual Meeting.
Neither abstentions nor broker non-votes are counted as votes cast on any
matter to which they relate. All shares represented in person or by proxy,
including abstentions and broker non-votes, are considered in determining
whether a quorum has been reached on a particular matter. A broker non-vote will
occur when a
<PAGE> 5
broker who holds shares in nominee form, or "street name," for a customer does
not have the authority under the rules of the NYSE to cast a vote on a
particular matter because the matter is deemed by the NYSE to be
non-discretionary and the broker's customer has not furnished voting
instructions.
The election of directors will require the affirmative vote of a plurality
of the Common Stock present or represented by proxy at the Annual Meeting and
voting thereon. Cumulative voting for directors is not authorized. The
ratification of the appointment of KPMG Peat Marwick LLP as IRI's independent
auditors will require the affirmative vote of a majority of the Common Stock
present or represented by proxy at the Annual Meeting and voting thereon.
SUBMISSION OF PROPOSALS BY STOCKHOLDERS
In order to be eligible for inclusion in the Company's proxy statement and
form of proxy for the 1999 Annual Meeting of Stockholders, any proposal of a
stockholder must be received by the Company at its principal executive offices
in Houston, Texas by February 25, 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of May 27, 1998 by (i) each person that owns
beneficially more than 5% of the Common Stock, (ii) each director and Named
Executive Officer (as defined) 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 on
which such person has the right to acquire such shares within 60 days after such
given date.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF SHARES
DIRECTORS AND EXECUTIVE OFFICERS SHARES OWNED(1) OWNED(1)
-------------------------------- --------------- ----------
<S> <C> <C>
Hushang Ansary.............................................. 24,434,333(2)(3) 59.3%
Daniel G. Moriarty.......................................... 38,834(3) *
Abdallah A. Andrawos........................................ 20,000(4) *
Nina Ansary................................................. 3,016,667(3) 7.3%
Frank C. Carlucci........................................... 1,096,667(3) 2.7%
Dr. Philip David............................................ 1,366,667(3) 3.3%
Munawar H. Hidayatallah..................................... 62,500(3) *
Richard D. Higginbotham..................................... 20,334(3) *
John D. Macomber............................................ 16,667(4) *
Edward L. Palmer............................................ 20,667(3) *
Stephen J. Solarz........................................... 16,667(4) *
Gary W. Stratulate.......................................... 51,666(3) *
Arthur C. Teichgraeber...................................... 51,289(3) *
Alexander B. Trowbridge..................................... 16,667(4) *
J. Robinson West............................................ 16,667(4) *
All directors and executive officers as a group (15
persons).................................................. 30,246,292(2)(3) 73.4%
CERTAIN OTHER HOLDERS
Nader Ansary................................................ 3,000,000 7.3%
The Ansary Family Trust..................................... 2,850,000(2) 6.9%
</TABLE>
- ---------------
* Less than 1%.
(1) Assumes exercise of vested 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
17,751,000 shares of Common Stock. Includes 6,016,667 shares of Common Stock
2
<PAGE> 6
owned by Nina Ansary and Nader Ansary (Mr. Ansary's daughter and son), of which
Mr. Ansary disclaims beneficial ownership.
(3) Including options to purchase shares of Common Stock granted pursuant to the
Incentive Plan (as defined).
(4) Consisting of options to purchase shares of Common Stock granted pursuant to
the Incentive Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), during its most recent fiscal year
and Form 5 and amendments thereto furnished to the Company with respect to its
most recent fiscal year, the Company believes that during such fiscal year no
director, officer, beneficial owner of more than ten percent of any class of
equity securities of the Company failed to file on a timely basis, as disclosed
in the above Forms, reports required by Section 16(a) of the Exchange Act during
the most recent fiscal year or prior fiscal years.
ELECTION OF DIRECTORS
The Board of Directors has nominated the following 15 persons to be elected
at the Annual Meeting to serve until the next annual meeting of stockholders and
until their respective successors shall have been duly elected and qualified:
Hushang Ansary, Daniel G. Moriarty, Abdallah A. Andrawos, Nina Ansary, Frank C.
Carlucci, Dr. Philip David, Munawar H. Hidayatallah, Richard D. Higginbotham,
John D. Macomber, Edward L. Palmer, Stephen J. Solarz, Gary W. Stratulate,
Arthur C. Teichgraeber, Alexander B. Trowbridge and J. Robinson West. All such
persons are presently directors of the Company and are nominees for re-
election.
Information regarding persons nominated for election as directors at the
Annual Meeting is set forth below. A plurality of all votes cast at the Annual
Meeting or any adjournment or postponement thereof is required to elect each of
the nominees as directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF EACH OF THE NOMINEES IDENTIFIED BELOW. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE SO VOTED EXCEPT WHERE AUTHORITY HAS BEEN WITHHELD.
It is presently anticipated that at the first meeting of the Board of
Directors following the Annual Meeting, Mr. Ansary will be re-elected Chairman
of the Board (in addition to being the Company's Chief Executive Officer).
3
<PAGE> 7
The directors and executive officers of the Company, and their ages and
positions with the Company as of the date of May 27, 1998, 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................ 64 Vice-Chairman of the Board
Abdallah A. Andrawos.............. 41 Director and Secretary
Nina Ansary....................... 31 Director
Frank C. Carlucci................. 67 Director
Dr. Philip David.................. 66 Director
Munawar H. Hidayatallah........... 54 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.................. 80 Director
Stephen J. Solarz................. 57 Director
Gary W. Stratulate................ 41 Director, President and Chief Operating
Officer -- IRI Division
Arthur C. Teichgraeber............ 42 Director, President and Chief Operating
Officer -- Cardwell International Ltd.
Alexander B. Trowbridge........... 68 Director
J. Robinson West.................. 51 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. 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 Restated Certificate of Incorporation and the Company's Amended and
Restated Bylaws (the "Company 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 oil field 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 A. 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.
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
4
<PAGE> 8
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 he served as 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 its acquisition by Company, Mr. Higginbotham served as
President of Bowen Tools, Inc. 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 a director of Citicorp and Citibank, N.A. He is also a 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.
ARTHUR C. TEICHGRAEBER has been a director of the Company and President and
Chief Operating Officer of the Company's wholly-owned subsidiary, Cardwell
International, Ltd., since April 1997. Prior to its acquisition by the Company,
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
5
<PAGE> 9
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.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The management of the Company is under the direction of the Board of
Directors. The Board of Directors held four meetings during the Company's fiscal
year ended December 31, 1997. Each director attended at least 75% of the
meetings of the Board of Directors held while he or she was a director, and each
director appointed to serve on one or more committees of the Board of Directors
attended 100% of the meetings of such committee or committees held while he or
she was a member thereof.
The following are the 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 IRI Board in the management of the business except the power to fill
vacancies on the IRI Board and the power to amend the Company 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.
The Board of Directors does not have a nominating committee or any
committee which performs the functions of such a committee.
RATIFICATION OF APPOINTMENT OF THE COMPANY'S INDEPENDENT AUDITORS
The Company is submitting for approval by its stockholders the Board's
selection of KPMG Peat Marwick LLP ("KPMG") as independent auditors to examine
the consolidated financial statements of IRI for the fiscal year ending December
31, 1998. The Audit Committee concurs in this recommendation. KPMG has served as
IRI's independent auditors since September 20, 1994.
If the stockholders do not approve the selection of KPMG to serve as its
independent auditors, the Directors will, under authority of the IRI Bylaws,
appoint other auditors.
Representatives of KPMG will be present at the Annual Meeting. They will
have the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions from the Company's stockholders.
6
<PAGE> 10
The approval of the ratification of the appointment of KPMG as IRI's
independent auditors for 1998 requires the vote of a majority of Company's
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF KPMG AS IRI'S INDEPENDENT AUDITORS FOR ITS FISCAL YEAR ENDING
DECEMBER 31, 1998.
OTHER BUSINESS
The Board of Directors does not know of any business to be presented for
consideration at the Annual Meeting or any adjournment or postponement thereof
other than as stated in the Notice of Annual Meeting. The affirmative vote of
the holders of a majority of the issued and outstanding shares of Common Stock
would be required with respect to any such other matter that is properly
presented and brought to a stockholder vote.
7
<PAGE> 11
EXECUTIVE COMPENSATION
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. Prior to the Company's initial public
offering in November 1997, Mr. Ansary, Mr. Moriarty and Mr. Hidayatallah were
each paid $17,000 and $39,000 in directors' fees for 1997 and 1996,
respectively, and Mr. Higginbotham, Mr. Stratulate and Mr. Teichgraeber were
each paid $8,500 in directors' fees for 1997. None of the aforementioned
directors received any directors' fees subsequent to November 1997.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation paid by the Company 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, 1997 (collectively, the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) COMPENSATION
--------------------------- ---- -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Hushang Ansary....................... 1997 -- -- $17,000 --
Chairman and Chief Executive
Officer 1996 -- -- 39,000 --
Daniel G. Moriarty................... 1997 $202,516 $ 25,000 $17,000 --
Vice-Chairman of the Board 1996 145,254 106,504 39,000 --
Munawar H. Hidayatallah.............. 1997 $316,088 $100,000 $17,000 --
Executive Vice President and 1996 186,750 121,324 39,000 --
Chief Financial Officer
Richard D. Higginbotham.............. 1997 $224,559 $ 25,000 $ 8,500 --
President and Chief Operating 1996 135,000 60,000 -- --
Officer of Bowen Tools Division
Gary W. Stratulate................... 1997 $246,087 $125,000 $ 8,500 --
President and Chief Operating 1996 186,750 137,500 -- --
Officer of IRI Division
Arthur C. Teichgraeber............... 1997 $207,564 $ 50,000 $ 8,500 --
President and Chief Operating 1996 102,870 -- -- $498,110(3)
Officer of Cardwell
</TABLE>
- ---------------
(1) Under rules promulgated by the Securities and Exchange Commission (the
"Commission"), since the Company has not been a reporting company during the
three immediately preceding fiscal years, only the information with respect
to the two most recently completed fiscal years is required to be presented
in the Summary Compensation Table.
(2) Consists of directors' fees received by the Named Executive Officers prior
to the Company's initial public offering in November 1997.
(3) Consists of license fees paid by Cardwell to Mr. Teichgraeber and to certain
entities directly or indirectly owned by Mr. Teichgraeber.
8
<PAGE> 12
Shown below is further information with respect to grants of stock options
during 1997 to the Named Executive Officers:
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES OF
OPTIONS STOCK PRICE APPRECIATION
GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE OR BASE ---------------------------
NAME GRANTED 1997(1) PRICE(2)(3) EXPIRATION DATE 5% 10%
---- --------- ------------ ------------- ----------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Hushang Ansary............... 1,000,000 56.40% $18.00 November 13, 2007 $11,320,103 $28,687,364
Daniel G. Moriarty........... 50,000 2.82 18.00 November 13, 2007 566,005 1,434,368
Munawar H. Hidayatallah...... 45,000 2.54 18.00 November 13, 2007 509,405 1,290,931
Richard D. Higginbotham...... 35,000 1.97 18.00 November 13, 2007 396,204 1,004,058
Gary W. Stratulate........... 40,000 2.26 18.00 November 13, 2007 452,804 1,147,495
Arthur C. Teichgraeber....... 35,000 1.97 18.00 November 13, 2007 396,204 1,004,058
</TABLE>
- ---------------
(1) Calculated assuming grants to employees, other than Named Executive
Officers, of options to purchase an aggregate of 568,000 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 of $18.00 for the Common Stock pursuant
to the Company's initial public offering (the "IPO Price"), the exercise
price as to the second one-third of the shares covered by the options is the
greater of the IPO Price and the fair market value per share on November 13,
1998, and the exercise price as to the final one-third of the shares covered
by the options is the greater of the IPO Price and the fair market value per
share on November 13, 1999.
(3) Market price has been assumed to equal the IPO Price.
The following table sets forth information regarding the value of the stock
options granted on October 14, 1997 to the Named Executive Officers (no other
options were granted to and no options were exercised by any of the Named
Executive Officers in 1997):
OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME DEC. 31, 1997 DEC. 31, 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 be equal to the IPO Price.
STOCK OPTIONS
Pursuant to the Incentive Plan (described below under "-- Compensation
Plans and Arrangements -- The Incentive Plan"), the Company has granted to its
directors and certain of its officers and employees an aggregate of 3,866,000
options to purchase shares of Common Stock. Such options and the terms thereof
are described in the following paragraphs.
On June 17, 1997, 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"). 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
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<PAGE> 13
exercise price per share equal to the IPO 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 November 13, 1997 and (ii) cumulatively to the extent
of one-quarter of the shares after each of November 13, 1998 and 1999 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.
On October 14, 1997, the Compensation Committee granted certain stock
options to the Named Executive Officers as described in the preceding tables and
the following discussion.
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 November 13, 1997 ("Tranche A Shares"), one-third of
the shares of Common Stock covered thereby on November 13, 1998 ("Tranche B
Shares"), and one-third of the shares of Common Stock covered thereby on
November 13, 1999 ("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 IPO Price; Tranche B
Shares -- the greater of the IPO Price and the fair market value per share on
November 13, 1998; Tranche C Shares -- the greater of the IPO Price and the fair
market value per share on November 13, 1999.
On October 14, 1997, the Compensation Committee granted a total of 258,000
stock options to designated senior employees (the "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 -- Options"). 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 14, 1997, the Compensation Committee granted a total of 310,000
stock options to employees of the Company having at least five years of service
with the Company or its predecessors (the "Five-Year Employees" and, together
with the Named Executive Officers, the Outside Directors and the Designated
Senior Employees, the "Grantees"). 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 November 13, 1997 ("Tranche 1 Shares"),
100 shares of Common Stock on November 13, 1998 ("Tranche 2 Shares"), 100 shares
of Common Stock on November 13, 1999 ("Tranche 3 Shares"), 100 shares of Common
Stock on November 13, 2000 ("Tranche 4 Shares") and 100 shares of Common Stock
on November 13, 2001 ("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 employee's death or
disability. Once exercisable, the options have the following exercise prices:
Tranche 1 Shares -- the IPO Price; Tranche 2 Shares -- the greater of the IPO
Price and the fair market value per share on November 13, 1998; Tranche 3
Shares -- the greater of the IPO Price and the fair market value per share on
November 13, 1999; Tranche 4 Shares -- the greater of the IPO Price and the fair
market value per share on November 13, 2000; and Tranche 5 Shares -- the greater
of the IPO Price and the fair market value per share on November 13, 2001.
See "Report of the Compensation Committee on Executive Compensation" for
information with respect to stock options granted during 1998.
10
<PAGE> 14
COMPENSATION PLANS AND ARRANGEMENTS
Compensation of Named Executive Officers -- In General
The compensation of the Named Executive Officers is 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
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.
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. As of March 17, 1998, the
Board of Directors ratified the decision of the Compensation Committee to
increase the number of shares of Common Stock that may be issued or transferred
and covered by outstanding awards granted under the Incentive Plan to 8,000,000
shares. 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 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 ten 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
11
<PAGE> 15
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 Compensation Committee may in its discretion provide
in substitution for any or all outstanding awards under the Incentive Plan such
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"). 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 stockholders 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 the
Company's initial public offering. 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
12
<PAGE> 16
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.
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.
13
<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CORPORATE CONSOLIDATION
On October 14, 1997, 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 and 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 canceled.
OTHER TRANSACTIONS
During the three month period ended March 31, 1997, the Company paid ESI
approximately $450,000 to reimburse ESI for certain administrative service 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 November 1997, the Company entered into a registration rights agreement
with each of the stockholders who held Common Stock prior to the Company's
initial public offering (the "Registration Rights Agreement"). The Registration
Rights Agreement provides 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
are 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 November 1997, the Company entered 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
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
14
<PAGE> 18
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 has agreed 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.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
This report of the Compensation Committee (defined as the "Committee" for
purposes of this discussion) is required by the Commission and shall not be
deemed to be incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act or under
the Exchange Act, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
soliciting material or filed under such acts.
THE COMMITTEE'S FUNCTION
The Committee has responsibility for: (i) reviewing and approving
recommendations of the Chairman of the Board as to appropriate compensation of
the Company's principal executive officers, including the Named Executive
Officers, (ii) examining periodically the general compensation structure of the
Company and (iii) supervising the welfare, pension and compensation plans of the
Company. The Committee consists of Dr. David, the Committee's Chairman, and Mr.
West, each of whom are independent, non-employee directors of the Company.
1997 EXECUTIVE COMPENSATION
The Company's executive compensation program is designed with a goal of
fairly compensating executives for their performance and contribution to the
Company's financial results, as well as providing incentives to attract and
retain key executives, instill a long-term commitment to the Company and develop
a pride and sense of ownership, all in a manner consistent with stockholder
interests. Generally, for fiscal 1997, each executive (other than the Chairman
of the Board) received a compensation package comprised of three elements: (i)
base salary, (ii) annual bonus and (iii) stock options granted pursuant to the
Incentive Plan. Each of the foregoing three elements is reviewed annually and
adjusted in light of the Company's financial and operational performance for the
year, including the attainment of a predetermined financial plan and the
individual executive's contribution to that performance. In addition, the
compensation practices and performances of other corporations which are most
likely to compete with the Company for services of executive officers are
considered.
The Company's executive compensation program for the Chairman of the Board
and the other five most highly compensated executive officers in fiscal 1997 is
shown in the Summary Compensation Table and a summary of the terms of the
Incentive Plan is provided under "Incentive Plan."
During fiscal 1997, the Chairman of the Board's compensation consisted
exclusively of a grant of stock options pursuant to the Incentive Plan. The
Committee views this non-cash based compensation approach for the Chairman of
the Board as a method of further aligning the Chairman of the Board's long-term
interests
15
<PAGE> 19
with those of stockholders. In determining the number of stock options granted
to the Chairman of the Board in 1997, the Committee evaluated the recent
financial performance of the Company and Mr. Ansary's performance as an
executive, including his contributions to the Company. Under Mr. Ansary's
leadership in 1997, the Company completed two significant acquisitions,
consummated an initial public offering and experienced four quarters of record
revenues.
Each of the Named Executive Officers in fiscal 1997 received grants of
stock options under the Incentive Plan. These awards were primarily in
consideration of the executive officers' assistance with the acquisitions
completed in 1997 and the Company's initial public offering. These awards were
not designed as part of the Company's overall executive compensation program and
were not regarded by the Committee as such, except that continued employment
with the Company or one of its affiliates is a condition to the exercise
thereof.
Mr. Teichgraeber, the President and Chief Operating Officer of Cardwell,
was compensated pursuant to the terms of his employment agreement. See
"Employment Agreements."
1998 EXECUTIVE COMPENSATION
During 1998, the Company's executive compensation program will be similar
to its 1997 executive compensation, with similar goals to be attained and
procedures to be utilized by the Committee in the determination of such
compensation. In fiscal 1998, however, Mr. Ansary, in his capacity as Chairman
of the Board, will receive an annual salary of $900,000 and a cash bonus. The
cash bonus will equal four percent of the pretax income of the Company for the
12-month period ending December 31, 1998. In deciding upon Mr. Ansary's
compensation for fiscal 1998, the Committee considered (i) the Company's meeting
of financial and operational goals for 1997, (ii) the Company's successful
initial public offering under his direction and (iii) Mr. Ansary's leadership
during a period of rapid growth.
An additional four percent of the Company's pretax income for such 12-month
period ending December 31, 1998 will be available to be paid in the form of cash
bonuses to employees of the Company upon the recommendation of the Chairman of
the Board of the Company and upon the approval thereof by the Committee. The
Committee determined that the addition of these cash bonuses to employees will
better serve the goals and objectives the Committee seeks to attain when setting
executive compensation than did the executive compensation program for fiscal
1997.
As of March 17, 1998, under the Incentive Plan, the Committee granted
1,933,000 stock options to the Grantees in same amounts as were granted to each
of them on October 14, 1997. The stock options granted to each such director,
executive and employee are exercisable cumulatively to the extent of one-third
of the shares of Common Stock covered thereby on the date of grant, one-third of
the shares of Common Stock covered thereby on the first anniversary of the date
of grant, and one-third of the shares of Common Stock covered thereby on the
second anniversary of the date of grant, for so long as the executive remains in
continuous employment with the Company or one of its affiliates. The options
become immediately exercisable upon the death or disability. If any "person" or
"group," within the meaning of Sections 13(d) and 14(d) of the Exchange Act
acquires 20% or more of the then issued and outstanding Common Stock and as a
result of such acquisition becomes the largest stockholder of the Company, and
within 24 months thereafter a Grantee is terminated involuntarily without cause
(a performance-based termination being understood not to be without cause) or is
constructively terminated involuntarily without cause (i.e., there is a material
decrease in the compensation of the Grantee from his or her compensation
immediately prior to such acquisition), then all of the stock options granted to
such Grantee will become immediately exercisable. The stock options have a
ten-year term and have an exercise price equal to the closing price of the
Common Stock on March 17, 1998.
The executive compensation program for fiscal 1998 is subject to amendment
or modification by the Company during fiscal 1998 as the Committee considers
reasonable and appropriate.
16
<PAGE> 20
POLICY WITH RESPECT TO SECTION 162(m)
Section 162(m) of the Internal Revenue Code limits the tax deduction that
the Company or its subsidiaries can take with respect to the compensation of
certain executive officers, unless the compensation is "performance based." For
compensation to be performance based, it must meet certain criteria, including
being based on pre-determined objective standards approved by the stockholders
of the Company. The Committee intends to take into account the potential
application of Section 162(m) with respect to incentive compensation awards and
other compensation decisions made by it in the future. The Committee has been
advised that none of the Company's executive officers have received compensation
in fiscal 1997 that will result in the loss of a corporate federal income tax
deduction under Section 162(m). In connection with future executive compensation
determinations, including those for fiscal 1998, the Company intends to take
into account the extent to which such compensation will be deductible for
federal income tax purposes, together with such other factors as may be deemed
pertinent under the circumstances.
COMPENSATION COMMITTEE
Dr. Philip David
J. Robinson West
17
<PAGE> 21
SHARE PERFORMANCE GRAPH
The following line graph shows the cumulative total stockholder return on
the Common Stock from November 14, 1997, the first trading day after the date it
was registered under the Exchange Act, to December 31, 1997, and compares it
with the cumulative total return over the same period of the S & P 500 Index and
to a self-constructed peer group of similar companies in the oilfield service
industry (which consists of Cooper Cameron Corporation, National-Oilwell, Inc.,
Tesco Corporation, Tuboscope Inc. and Varco International, Inc.). The graph
assumes a $100 investment in Common Stock based on the initial per share price
to the public of $18.00 and in each index at November 14, 1997, and that all
dividends were reinvested. Peer group returns are based on the market
capitalization of each individual company within the peer group at the beginning
of the comparison period.
<TABLE>
<CAPTION>
Measurement Period IRI International
(Fiscal Year Covered) Corporation S & P 500 Peer Group
<S> <C> <C> <C>
14-Nov-97 100 100 100
31-Dec-97 78 106 81
</TABLE>
CERTAIN FORWARD LOOKING STATEMENTS
This Proxy Statement (including the documents incorporated by reference
herein) contains certain forward-looking statements (as such term is defined in
the Private Securities Litigation Reform Act of 1995) and information relating
to the Company that are based on the beliefs of the management of the Company,
as well as assumptions made by and information currently available to the
management of the Company. When used in this Proxy Statement, the words
"anticipate," "believe," "estimate," "expect," "intend" and similar expressions,
as they relate to the Company or its management, identify forward looking
statements. Such statements reflect the current views of the Company or its
management with respect to future events and are subject to certain risks,
uncertainties and assumptions relating to the operations and results of
operations of the Company and the success of the Company's business plan,
including as a result of the availability, terms and cost of capital resources;
competitive factors and pricing pressures; general economic conditions; the
failure of market demand for the types of entertainment opportunities the
Company provides or plans to provide in the future and for family entertainment
in general to the commensurate with management's expectations or past experience
impact of present and future laws; ongoing need for capital improvements;
changes in operating expenses; adverse changes in governmental rules or
policies; changes in demographics and other factors. Should one or more of these
assumptions prove incorrect, actual results for outcomes may vary materially
from those described herein as anticipated, believed, estimated, expected or
intended. Accordingly, stockholders are cautioned not to place undue reliance on
such forward-looking statements.
18
<PAGE> 22
ADDITIONAL INFORMATION
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file with the
Commission periodic reports and other information relating to its business,
financial condition and other matters. The Company is required to disclose in
such reports certain information, as of particular dates, concerning the
Company's operating results and financial condition, its officers and directors,
the principal holders of the Company's securities, any material interests of
such persons in transactions with the Company and other matters. These reports
and other informational filings required by the Exchange Act should be available
for inspection at the public reference facilities maintained by the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and also should be available for inspection and copying at the regional offices
of the Commission located at Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60611 and 7 World Trade Center, 13th Floor, New York, New York 10048.
The Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. Such reports, proxy and information statements and other
information may be found on the Commission's Web site address,
http://www.sec.gov. Copies of such material may be obtained by mail, upon
payment of the Commission's customary fees, from the Commission's principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Common Stock is listed on the NYSE under the symbol "IIR," and such reports,
proxy statements and other information concerning the Company are available for
inspection at the offices of the NYSE at 20 Broad Street, New York, New York
10005.
A COPY OF THE COMPANY'S 1997 FORM 10-K ANNUAL REPORT, AS AMENDED, IS
AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER OF
CAPITAL STOCK OF THE COMPANY, TO WHOM THIS PROXY STATEMENT IS DELIVERED UPON
WRITTEN OR ORAL REQUEST TO IRI INTERNATIONAL CORPORATION, 1000 LOUISIANA, SUITE
5900, HOUSTON, TEXAS, 77002, ATTENTION: SECRETARY (TELEPHONE NUMBER (713)
651-8002). IN ORDER TO ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO THE ANNUAL
MEETING, REQUESTS SHOULD BE RECEIVED BY JUNE 12, 1998.
May 29, 1998
19
<PAGE> 23
IRI INTERNATIONAL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - JUNE 25, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints, as proxies for the undersigned, HUSHANG
ANSARY and ABDALLAH ANDRAWOS, or any one of them, with full power of
substitution, to vote all shares of the capital stock of IRI International
Corporation (the "Company") which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at 1000 Louisiana,
Suite 5900, Houston, Texas 77002, on June 25, 1998, at 10:00 a.m., local time,
and at any adjournments or postponements thereof, receipt of Notice of which
meeting and the Proxy Statement accompanying the same being hereby acknowledged
by the undersigned, upon the matters described in the Notice of Meeting and
Proxy Statement and upon such other business as may properly come before the
meeting and any adjournments or postponements thereof, hereby revoking any
proxies heretofore given.
EACH PROPERLY EXECUTED PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS
MADE BELOW AND ON THE REVERSE SIDE HEREOF. IF NO SPECIFICATIONS ARE MADE, THE
PROXIES WILL BE VOTED FOR EACH LISTED NOMINEE TO SERVE AS A DIRECTOR AND FOR
PROPOSAL 2.
A VOTE FOR EACH NOMINEE AND FOR PROPOSAL 2 IS RECOMMENDED BY THE BOARD OF
DIRECTORS.
1. Election of Directors (check one box only)
[ ] FOR EACH NOMINEE LISTED BELOW
(except as marked to the contrary below):
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed
below:
HUSHANG ANSARY, DANIEL G. MORIARTY, ABDALLAH ANDRAWOS, NINA ANSARY,
FRANK C. CARLUCCI, DR. PHILIP DAVID, MUNAWAR H. HIDAYATALLAH, RICHARD D.
HIGGINBOTHAM,
JOHN D. MACOMBER, EDWARD L. PALMER, STEPHEN J. SOLARZ, GARY W. STRATULATE,
ARTHUR C. TEICHGRAEBER, ALEXANDER B. TROWBRIDGE and J. ROBINSON WEST
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, CIRCLE THAT
NOMINEE'S NAME IN THE ABOVE LIST)
(continued and to be signed on reverse side)
<PAGE> 24
2. To ratify the selection of KPMG Peat Marwick LLP as independent auditors for
the Company for the fiscal year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated:
-------------------------------- ,
1998
--------------------------------
(SIGNATURE OF STOCKHOLDER)
--------------------------------
(SIGNATURE OF STOCKHOLDER)
NOTE: Please sign your name or
names exactly as set forth
hereon. For jointly owned
shares, each owner should sign.
If signing as attorney,
executor, administrator, trustee
or guardian, please indicate the
capacity in which you are
acting. Proxies executed by
corporations should be signed by
a duly authorized officer and
should bear the corporate seal.
PLEASE DATE AND SIGN THIS PROXY AND MAIL IT PROMPTLY
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
