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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
FORM 10-K
For Annual and Transition Report Pursuant to Sections 13 or 15(d) of
Securities Exchange Act of 1933
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-13086
WEATHERFORD INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2515019
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
515 Post Oak Boulevard, Suite 600, Houston, Texas 77027-3415
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, include area code: (713) 693-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange in which registered
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Common Stock, $1.00 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates
of the registrant as of March 24, 1999, was $2,407,577,415, based upon the
closing price on the New York Stock Exchange as of such date.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Title of Class Outstanding at March 24, 1999
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Common Stock, $1.00 Par Value 97,311,874
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Items 10, 11, 12 and 13 of Part III
will be included in the registrant's definitive proxy statement to be filed
pursuant to Regulation 14A and is incorporated herein by reference.
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PART I
ITEM 1. BUSINESS
Weatherford International, Inc. is one of the world's largest
providers of equipment and services used for the exploration and production of
oil and natural gas. Our operations are conducted in over 50 countries and we
have more than 300 service locations, which are located in substantially all of
the oil and natural gas producing regions in the world. We are among the
leaders in each of our primary markets and our distribution and service network
is one of the most extensive in the industry.
Our products and services are divided into four principal operating
business divisions:
o Completion and Oilfield Services
o Artificial Lift Systems
o Compression Services
o Drilling Products
A discussion follows of our products and services offered, our
strategy for growth and the markets in which we compete. There is also included
a discussion of our recent financial results, the trends affecting our results
and our financial condition. We believe you will find these discussions
informative and helpful to a better understanding of the new Weatherford.
STRATEGY
In May 1998, EVI, Inc. and Weatherford Enterra, Inc. merged to form
the new Weatherford. A principal objective of the merger was to create a larger
integrated oilfield service company that could take advantage of Weatherford's
historical worldwide service infrastructure by adding new products, services
and technology to compete in changing markets. Since the merger, we have
combined various components of the operations of the two companies, added new
technologies to the products and services offered by our Completion and Oilfield
Services Division and Artificial Lift Systems Division and have substantially
expanded our Compression Services Division through a strategic joint venture
with GE Capital Corporation.
Although current market conditions in our industry are depressed and
will likely continue to be depressed through 1999, we see many opportunities
for positioning our company for growth as the industry recovers. In looking to
the future, our strategic focus for growth is as follows:
<TABLE>
<S> <C>
o Invest in technology to provide o Take advantage of secular
customers value-added products growth trends, such as natural
and services that can reduce gas compression, thru-tubing
the cost of exploration and re-entry drilling and
production of oil and gas underbalanced drilling
o Pursue strategic acquisitions o Leverage our worldwide
and combinations for long-term infrastructure to introduce new
growth products and services
o Continually review our asset o Continue our expansion
holdings for ways to maximize internationally
value
o Provide integrated product and
services offerings
</TABLE>
Our long-term objective is to create stockholder value in the form of
asset and income growth through the implementation of this strategy.
Positioning our company for growth in these times is a difficult task,
especially when there is uncertainty as to when the bottom of the cycle will be
reached and a recovery will begin.
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Nevertheless, we believe that to achieve stockholder value, we cannot remain
static and we must pursue new opportunities to enhance new Weatherford's
position in our industry.
SEGMENT AND GEOGRAPHIC DATA
FINANCIAL SEGMENT DATA
When we review the operations of our business divisions we look at
their revenues, operating income, EBITDA (operating income adding back
depreciation and amortization), total assets and capital expenditures. We gauge
how these divisions are performing by comparing their year on year results,
their average gross margins and their returns on total assets.
The following charts set forth those items for each of our operating
business segments for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
COMPLETION
AND OILFIELD ARTIFICIAL COMPRESSION DRILLING
SERVICES LIFT SYSTEMS SERVICES PRODUCTS
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1998
Revenues ............................ $ 848,219 $ 329,196 $ 177,481 $ 655,758
Operating Income (Loss)(1)........... 135,521 (19,223) 17,092 115,433
EBITDA (1) .......................... 230,239 (40) 40,171 147,384
Total Assets ........................ 1,007,399 592,370 388,220 764,807
Capital Expenditures ................ 107,661 20,946 32,465 42,052
1997
Revenues ............................ $ 929,001 $ 249,476 $ 178,897 $ 611,715
Operating Income .................... 215,412 22,792 14,774 120,830
EBITDA .............................. 301,550 31,736 36,440 144,440
Total Assets ........................ 919,198 622,853 441,759 674,388
Capital Expenditures ................ 121,422 20,213 35,705 32,682
1996
Revenues ............................ $ 824,639 $ 150,816 $ 154,503 $ 337,312
Operating Income .................... 146,332 11,667 7,833 42,573
EBITDA .............................. 226,914 17,532 31,387 53,619
Total Assets ........................ 952,445 199,615 414,969 386,245
Capital Expenditures ................ 119,201 8,732 30,392 14,332
</TABLE>
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(1) In 1998 we incurred $195.0 million in merger and other charges relating to
the merger of EVI and Weatherford Enterra on May 27, 1998 and a
reorganization and rationalization of our business to match industry
conditions. Of this charge, $44.9 million, $40.8 million, $1.5 million,
$35.0 million, and $72.8 million relate to Completion and Oilfield
Services, Artificial Lift Systems, Compression Services, Drilling Products
and Corporate.
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GEOGRAPHIC DATA
At the time of the combination of EVI and Weatherford Enterra, a large
portion of our business was concentrated in the United States and Canada. We
also had a strong international presence in all of the oil producing regions of
the world through our Completion and Oilfield Services Division. As the world's
oil reserves have matured and prices declined, international exploration,
development and production has become more dominant.
Following our merger last year, we began a concentrated program to
expand our operations and shift our product sales to the international side by
utilizing the strength of our international service infrastructure to introduce
new and existing products and services in these markets. Among the activities
being pursued by us are:
o The offering of our completion, artificial lift systems and
compression services through our international service locations.
Sales of these products and services had historically been
concentrated in North America.
o The introduction of new technologies and products in the
multi-lateral, thru-tubing, re-entry and underbalanced markets.
We are also reorganizing our operations by reducing our staff and
locations primarily in North America and focusing on growth in those areas which
serve the international markets. We expect that our international revenue and
income will increase over time and our dependence on North American activity
will decline as this strategy is implemented.
The following charts set forth for 1998, 1997 and 1996:
o Our revenues from third party customers in the United States,
Canada, Europe, the Middle East and Africa and all other foreign
locations. Sales in the United States include export sales. Sales
are based on the location of our entity that is selling or
providing the products or services.
o Our long-lived assets located in the United States, Canada,
Europe, the Middle East and Africa and all other foreign
locations.
[REVENUE BY COUNTRY PIE CHART]
<TABLE>
<CAPTION>
AFRICA
UNITED LATIN AND
STATES CANADA AMERICA EUROPE MIDDLE EAST OTHER TOTAL
--------- ----------- ------------ ----------- ----------- ----------- -----------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
1998 ................. $1,181.9 $265.2 $138.8 $167.3 $143.2 $114.3 $2,010.7
1997 ................. 1,205.6 257.5 118.8 149.2 109.1 128.9 1,969.1
1996 ................. 929.0 143.6 74.1 148.1 98.9 73.6 1,467.3
</TABLE>
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<TABLE>
<CAPTION>
[LONG LIVED ASSETS BY COUNTRY PIE CHART]
UNITED LATIN AFRICA AND
STATES CANADA AMERICA EUROPE MIDDLE EAST OTHER TOTAL
------ ------ ------- ------ ----------- ----- ---------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $ 950.6 $306.5 $204.7 $151.4 $59.1 $60.3 $1,732.6
1997 1,060.9 133.3 174.8 143.8 36.7 41.6 1,591.1
1996 784.4 66.3 100.9 145.8 33.4 32.1 1,162.9
</TABLE>
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Looking forward, we expect that Asia, Middle East, North Africa and
Eastern Europe will be the growth markets for our products and services, with
North America and Western Europe declining as a percentage of our total sales
as the oil and gas reserves in those regions mature.
COMPLETION AND OILFIELD SERVICES
Our Completion and Oilfield Services Division provides a wide range of
products and services for the exploration and production of oil and natural
gas. The principal products and services provided by this segment are:
o Fishing and Downhole Services o Well Completion Systems
o Well Installation Services o Equipment Rental
MARKET TRENDS AND OUTLOOK
Our Completion and Oilfield Services Division provides products and
services used by oil and gas companies, drilling contractors and other service
companies to explore for and produce oil and natural gas. We estimate that
around 50% of the products and services offered by this division are used in
the initial drilling and
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completion of oil and gas wells. The remainder of the products and services are
used in connection with the production phases of wells, primarily maintenance
and recompletion.
Historically, our Completion and Oilfield Services Division has
generated much of its revenues from activity in North America, in particular
the United States. With the recent declines in oil prices, activity in North
America has fallen substantially to nearly a 50-year low. As a result of the
decline in this revenue base, we are focusing our future growth in the
international markets using our broad international infrastructure. We are also
pursuing selective consolidation opportunities in the United States as a means
to reduce costs and offer a broader range of services to our customers and to
assist our customers in reducing the costs of exploration and production.
Technology is becoming a more important aspect of our products and
services so that we may provide our customers with more efficient and
cost-effective tools to find and produce oil and gas. During 1998 and 1999
to-date, we invested a substantial amount of our time and resources in building
our technology offerings. We believe that many of the new technological
products and services being offered by us are among the best in the industry
and provide our customers with a means to reduce their costs of exploration and
production through more efficient and accurate tools.
Integrated product offerings are also becoming more important in the
market as customers seek to reduce the number of vendors to perform a single
task on a well. We continue to expand the scope and breadth of our extensive
products and services offerings through selective acquisitions and alliances.
GROWTH STRATEGY
The growth strategy for our Completion and Oilfield Services Division
is to:
o Improve the technology of our products and services to allow our
customers to reduce the costs of exploration and production
o Leverage our worldwide sales and service infrastructure to push
through new products and services
o Focus on secular growth trends such as thru-tubing, re-entry
drilling, underbalanced drilling and intelligent completion and
monitoring
o Take advantage of selective consolidation and acquisition
opportunities to reduce costs and increase market share
o Provide our customers with integrated products and services
o Reduce costs and increase profit margins through the addition of
manufacturing capabilities for our higher margin products
PRODUCTS AND SERVICES OFFERED BY OUR COMPLETION AND OILFIELD SERVICES DIVISION
FISHING AND DOWNHOLE SERVICES
Our Fishing and Downhole Services group provides a wide variety of
downhole services used during the drilling, completion, workover and plugging of
oil and gas wells. These include:
o Fishing Services
o Re-Entry and Thru-Tubing Services
o Downhole Remediation and Other Services
Our downhole services are provided worldwide at more than 300
locations in 50 countries. We believe that our downhole services group is the
largest provider of these services in the world.
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Fishing Services. Our "fishing" services consist of cleaning and
removing obstructions (such as a piece of equipment, a tool, a part of a drill
string or other debris) in a well bore that may become caught during the
drilling, completion and workover of a well or during the well's production
phase. The process of "fishing" requires the use of a wide variety of specialty
and proprietary tools, including fishing jars, milling tools, casing cutters,
overshots, spears and other tools used for retrieving or eliminating the items
within the well. These operations also utilize our proprietary "whipstocks",
which are downhole tools that act as vertical ramps to "sidetrack" an existing
wellbore. We believe we have one of the most comprehensive lines of proprietary
fishing tools in the industry and one of the largest and most experienced teams
of fishing services employees in the industry.
Our fishing services are provided at our various service and
distribution locations throughout the world.
We believe we are one of the largest providers of fishing services in
the United States and the second largest provider in the world. Our principal
competitors are Baker Hughes Incorporated and Smith International, Inc. There
are also a large number of smaller regional competitors.
Re-Entry and Thru-Tubing Services. Our re-entry and thru-tubing group
provides specialized products and services that allow the operator to perform
drilling, completion and remediation functions from existing wellbores.
Re-entry drilling may involve multilateral drilling of newly drilled open holes
or the opening of new sections within an existing wellbore. Re-entry wells are
typically drilled from a directional or horizontal well. Thru-tubing services
consist of the drilling, completion and remediation of a well directly through
an existing wellbore's production tubing. Our re-entry and thru-tubing
operations also utilize our proprietary "whipstocks". Our thru-tubing and
re-entry group grew out of our fishing and downhole services group, which was
among the first to use thru-tubing technology for downhole fishing operations.
This group has expanded on that expertise and technology to provide
state-of-the-art technology for re-entry drilling and multilateral completions.
The use of re-entry and thru-tubing technology substantially reduces
the cost of drilling a well by eliminating the need for the drilling and
completion of a new well bore. Although the rig count declined substantially
during 1998 and is currently at historical lows, re-entry drilling rose by
approximately 10% in 1998 from the previous year. We believe that the
thru-tubing re-entry and multi-lateral re-entry markets will continue to
increase in the coming years as operators seek ways to contain costs by
reducing risks and construction downhole.
Our thru-tubing operations require highly engineered and technically
advanced products that can operate within the confined space of an existing
well bore. Our operations utilize proprietary whipstock mills, high performance
drilling motors and completion tools, including the high performance long
running MacDrill(TM) metal motor, the Radius(TM) short radius motor, the Radius
downhole guidance instrumentation and the thru-tubing inflatable packer
systems.
Our primary competition in the area of re-entry and thru-tubing is
Baker Hughes Incorporated.
Downhole Remediation and Other Services. Our other downhole services
operations include a variety of well maintenance and control services. Among
the services and equipment provided by us are well control equipment used in
critical well situations such as a blow out or high pressure sour gas wells. We
also provide internal casing patch installation, plugging and abandonment
services, pipe recovery wireline services and foam services for underbalanced
wells.
Our primary competitor in the area of downhole remediation is Baker
Hughes Incorporated.
EQUIPMENT RENTAL
Our equipment rental group provides specialized equipment and tools
for the drilling, completion and workover of oil and gas wells. Our rental
equipment allows our customers (primarily operators and drilling contractors)
the ability to have access to inventories of tools and other equipment without
the cost of maintaining that equipment in their own inventory. The rental of
this equipment permits the equipment to be more efficiently used and allows us
to receive value-added returns on the rental of the equipment.
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Among the equipment and tools rented by us are:
o Pressure control equipment such as preventers, high pressure
valves, accumulators, adapters and choke and kill manifolds
o Drill string equipment such as drill pipe, drill collars, tubing
and drilling jars
o Tubular handling equipment such as elevators, spiders, slits,
tongs and kelly spinners
o Fishing and downhole tools such as milling tools, casing cutters,
fishing jars, spears and overshots, stabilizers, power swivels
and bottom hole assemblies
We manufacture many of our rental tools, such as drill pipe, pressure
control equipment and fishing tools.
We conduct our rental operations worldwide. The breadth of our
operations and locations allow us to manage and redeploy our equipment
throughout our worldwide system to locations where the equipment is most
needed.
We believe we are the world's largest provider of oilfield rental tool
equipment. Our primary competitors are Baker Hughes Incorporated, Superior
Energy Services and Offshore Rentals. There are also a number of regional
competitors.
WELL COMPLETION
Our well completion group provides a variety of products and services
used to construct and complete oil and gas wells. The principal products and
services provided by this group are:
o PACKERS - Packers are mechanical or hydraulically actuated devices
that lock into the casing string and provide a seal between the
casing and tubing in the well through an expanding element system.
Packers permit producing formations to be isolated from other
sections of the well bore as well as allow downhole operations,
such as cementing and acidizing, to take place without damaging
the reservoir. We also offer an extensive line of inflatable
casing packers that are used in openhole sections of a wellbore to
isolate a zone with or without the use of cement as well as in
thru-tubing applications.
o LINER HANGERS - Liner hangers allow strings of casing to be
suspended within a wellbore without having to extend the string
to the surface. We offer both production and service liner
hangers. Drilling liners are used to isolate areas within the
well during drilling operations. Production liners are used in
the producing area of the well to support the wellbore and to
isolate various sections of the well. Most directional wells
include one or more liners because of the difficulty of designing
casing programs compatible with high tensile tubulars.
o SAND SCREENS - Sand screens are devices run in the producing
section of a well to prevent sand from reaching the surface or
causing problems with production equipment and pumps.
o INTELLIGENT WELL TECHNOLOGY - Intelligent completion products
allow operators to remotely monitor and control various downhole
components, such as chokes and pumps. These products, when
combined with production packers, permit various sections of a
well to be optimized to improve production. These devices can
also eliminate the need for wireline and coiled tubing because
they can be operated electrically from the surface.
o CEMENTING AND ELASTOMER PRODUCTS -Cementing operations are one of
the most important and expensive phases in the completion of a
well. Our cementing products allow operators to centralize the
casing in the well and control the displacement of cement and
other fluids. We also offer specialty elastomer products that are
designed to remove excess cement from the inside of the casing.
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The market for our well completion products is dependent on the level
of worldwide completion and workover activity. Our completion products are
currently sold primarily in North America and the North Sea. We are actively
pursuing the distribution of our completion products in other regions of the
world through our worldwide infrastructure.
Our competition in the completion market is generally based on price
and product quality. Our principal competitors in the well completion market
are Baker Hughes Incorporated and Halliburton Company. We also compete with
various smaller providers of completion equipment. We believe that we are the
number one provider of oilfield cementation products in the world, the third
largest provider of completion equipment in the United States and the leading
provider of liner hanger equipment in the North Sea market.
WELL INSTALLATION SERVICES
Our well installation services group provides a wide variety of tubular
and completion equipment installation services for the drilling, completion and
workover of an oil and gas well. This group offers an integrated package of
installation services that allows our customers to receive all of their tubular
handling, preparation, inspection, cleaning and wellsite installation needs from
a single source. This group is a leader in rig mechanization technology used for
the installation of tubing and casing and offers various products and services
to improve rig floor operations by reducing staffing requirements and increasing
operational effectiveness and safety standards. They also specialize in high
alloy installation services where metallurgical characteristics call for
specific handling technology. Finally, this group also works with our well
completion group to provide high grade completion equipment installation
services as well as cementation engineering services (consisting of
computer-generated recommendations as to the number and placement of
centralizers during cementation).
We believe that we are one of the largest providers of installation
services in the world. Competition in the market for tubular and completion well
installation services is based on price, experience and quality. We believe that
our ability to provide an integrated package of rig mechanization and high grade
installation services, together with our worldwide infrastructure, provides us
with a competitive advantage. Our primary competitors are Franks International
and BJ Services, Inc. We also compete with a large number of smaller regional
competitors.
The market for well installation services is dependent on the level of
worldwide drilling and well completion activity.
RAW MATERIALS
Our Completion and Oilfield Services Division purchases a wide variety
of materials from a number of sources. Many of the products sold by our
Completion and Oilfield Services Division also are manufactured and provided by
other parties. We do not believe that the loss of any one supplier would have a
material adverse effect on this division.
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ARTIFICIAL LIFT SYSTEMS
Our Artificial Lift Systems Division is a leading provider of
artificial lift systems worldwide. Artificial lift systems are installed in oil
wells that do not have sufficient reservoir pressure to raise the oil to the
surface or that need to supplement the natural reservoir drive in producing oil
from the well. We estimate that 80% of all producing oil wells in the world
require some form of artificial lift. Regionally, we estimate that 90% of the
producing wells in North America are on some form of lift and approximately 70%
of the rest of the world's wells require artificial lift. In addition, as oil
wells mature, artificial lift is generally necessary to supplement or enhance
the flowing pressure of oil from the well. The worldwide market for artificial
lift is estimated to be in excess of $1.2 billion per year, of which 50% has
historically been in North America due to the maturity of the North American
oil fields.
There are five principal types of artificial lift technologies used in
the industry. These forms of lift are:
o Progressing Cavity Pumps o Electrical Submersible Pumps
o Reciprocating Rod Lift o Hydraulic Lift
o Gas Lift
We are the only company in the industry that has the ability to offer
all forms of artificial lift as well as the ability to design optimization
solutions.
MARKET TRENDS AND OUTLOOK
Our Artificial Lift Systems Division was severely affected by the
recent declines in oil prices. These declines were particularly felt in our
North American operations where historically our businesses were located. Since
the merger of EVI and Weatherford Enterra, we have undertaken an aggressive
worldwide marketing program of our artificial lift systems. This program
involves the provision of artificial lift products and services worldwide
utilizing the assistance of the Weatherford international distribution and
service locations. We have recently been awarded a number of international
contracts to manage fields using our artificial lift systems and expect to
continue to pursue additional contracts in the future.
Although we expect that oil production and demand for our products in
North America will not likely return to prior levels as a result of the recent
declines in oil prices and associated reduction in drilling for and production
of oil in North America, we do expect that international demand for our
artificial lift products will continue to increase as the rest of the world's
oil fields mature. As the only fully integrated provider of these systems, we
expect to greatly benefit from the breadth of our product line and expertise.
We also are extending our product offerings in the growing areas of
wellsite optimization. This product offering is driven by our clients' needs
for greater planning of their production. We are currently implementing a
package for production in Venezuela that will transmit real time data from the
well to the operator's office for continuous monitoring. This division is
working with our well completion division on the use of its intelligent
completion and monitoring technology to optimize the production process and
reduce the cost of production.
GROWTH STRATEGY
The growth strategy for our Artificial Lift Systems Division is as
follows:
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<S> <C>
o Invest in and provide technological o Expand our electrical submersible pump
solutions for artificial lift needs business with Electrical Submersible
Pumps, Inc.
o Provide our customers with the right o Reposition and consolidate our
technologies that increase run times, manufacturing and distribution
decrease costs and effectively deliver organization to address the changing
oil production at a given depth, marketplace, in particular, in North
temperature and level of corrosion America
o Provide integrated solution packages to o Position our business for the return
our customers to address all of their cycle in oil production and take
artificial lift needs advantage of the continued maturation of
the world's oilfields
o Expand internationally by leveraging our
international infrastructure
</TABLE>
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PRODUCTS OFFERED BY OUR ARTIFICIAL LIFT SYSTEMS DIVISION
The following is a brief description of each of the forms of
artificial lift offered by us:
PROGRESSING CAVITY PUMPS
A progressing cavity pump is a downhole pump that is controlled by an
above-ground electric system connected to a sucker rod that operates the
downhole pump for the production of oil. These pumps are among the most
efficient to operate and are designed to work in wells of depths up to 6,000
feet and production between 10 to 4,500 barrels of oil per day. We believe that
we are the world's largest provider of progressing cavity pumps and the only
fully integrated provider of these systems. Our principal competitors for
progressing cavity pumps are Robbins & Myers and KUDU.
RECIPROCATING ROD LIFT SYSTEMS
A reciprocating rod lift system is an artificial lift pumping system
that uses an above-ground pumping unit that is connected to a sucker rod and a
downhole pump and uses an up and down suction process to lift the oil from the
reservoir. Reciprocating lift is used primarily for the production of oil from
wells of depths up to 14,000 feet and production rates from 20 to 8,000 barrels
per day. Reciprocating lift systems are generally more expensive to install
than other systems but less costly to operate. We offer a complete package of
products for rod lift applications ranging from traditional pump jacks to the
state-of-the-art RotaFlex(R) long stroke pumping unit, as well as all downhole
components, including the Corod(R) continuous sucker rod, traditional sucker
rods and tubing anchors. We believe we are the world's largest provider of
reciprocating rod lift pump systems and the only fully integrated provider of
these systems. Our principal competitors for rod lift systems are Lufkin
Industries, Dover Industries and Harbinson Fischer.
GAS LIFT SYSTEMS
Gas lift is a form of artificial lift that uses natural gas to lift
oil in a producing reservoir to the surface. The process of gas lift involves
the injection of natural gas into the well through an above-ground injection
system and a series of downhole mandrels and gas lift valves. The gas that is
injected into the system is either produced from and reinjected into the well,
or is injected from nearby gas produced from nearby wells. The injected gas
acts as the lifting agent for the heavier oil. Gas lift systems are used
primarily for offshore wells and those wells that have a high component of gas
in the well or have a gas supply near the well. Gas lift systems are designed
to operate at a depth of up to 15,000 feet with volume up to 20,000 barrels of
oil per day. We believe that we are one of the two largest providers of gas
lift systems in the world, with our principal competitor being Schlumberger
Limited.
ELECTRICAL SUBMERSIBLE PUMPS
An electrical submersible pump is an electric pump and motor that is
placed downhole near the producing reservoir and is driven by an electric motor
controller and supply system above ground. Electrical submersible pumps are
designed to operate at depths of 9,000 to 12,000 feet with volumes from 800 to
20,000 barrels per day. We have historically not been a provider of electrical
submersible pumps to the industry. We recently entered into a long-term
alliance with Electrical Submersible Pumps, Inc., the world's third largest
supplier of electrical submersible pumps, to supply us with our own line of
electrical submersible pumps and to take over distribution of electrical
submersible pumps from Electrical Submersible Pumps, Inc. in selected markets.
We believe that this alliance will be highly beneficial to both our customers
and the customers of Electrical Submersible Pumps, Inc. This alliance also
provides our customers with a complete suite of artificial lift systems. Our
principal competitors for electrical submersible pumps are Baker Hughes
Incorporated and Schlumberger Limited.
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<PAGE> 13
HYDRAULIC LIFT SYSTEMS
Hydraulic lift is a form of oil pumping system that uses an
above-ground surface power unit to operate a downhole hydraulic pump (jet or
piston) to lift oil from the reservoir. These systems are designed for wells at
depths up to 20,000 feet with volumes of up to 15,000 barrels per day.
Hydraulic pumps are well-suited for wells with high volumes and low solids. We
believe that we are the world's largest provider of hydraulic lift systems. Our
principal competitor for hydraulic lift systems is Baker Hughes Incorporated.
RAW MATERIALS
Our Artificial Lift Systems Division purchases a variety of raw
materials for its manufacturing operations. A number of its products are
manufactured utilizing parts and components made by other manufacturers and
suppliers. This division is not dependent upon any single source of supply for
its raw materials and components. The loss of one or more of our suppliers
could, however, disrupt production for some time.
COMPRESSION SERVICES
Our Compression Services Division is one of the world's largest
providers of natural gas compression products and services. The products and
services offered by this division include:
<TABLE>
<S> <C>
o Sales and rental of natural gas o Maintenance and reconditioning
compressors services and select services such as
repair services
o Custom-designed compression systems o Offshore platform installation and
management of compression equipment
o Full service turnkey compression
management
</TABLE>
As of February 1999, our compression business is operated through a
joint venture with GE Capital's Global Compression Services. We own 64% of this
venture and GE Capital owns 36%. We have the right to acquire GE Capital's
interest at any time at a price equal to the greater of a market determined
third party valuation or book value. GE Capital also has the right to require us
to purchase its interest at any time after February 2001 at a market determined
third party valuation and to request a public offering of its interest after
that date, if we have not purchased its interest by that time.
MARKET TRENDS AND OUTLOOK
We believe our compression services operate in a growth market with
significant opportunities. We estimate that over 75% of the operating natural
gas compressors are owned by the exploration and production companies and more
than 75% of the world's natural gas compression services are sold in North
America. We expect international demand to grow significantly in the coming
years as producers of natural gas worldwide continue to grow. We also believe
that demand in North America should increase as natural gas production
continues to grow and our customers seek ways to reduce costs by out-sourcing
their compression needs.
Our compression services are provided primarily to producers of
natural gas and pipeline companies. These services are used by the customer to
compensate for diminished wellhead pressure. Our compressors are either sold or
rented to the client on a term basis ranging from a number of months to years.
Once a compressor has been placed in service, that compressor will generally
remain in place for the life of the reservoir. We also offer field management
services. Our compression services are charged on both a fixed and turnkey
basis.
The compressors marketed by us are generally manufactured by us at our
manufacturing facility located in Corpus Christi, Texas or purchased from third
parties.
12
<PAGE> 14
GROWTH STRATEGY
The growth strategy for our compression business is as follows:
<TABLE>
<S> <C>
o Expand our operations o Place into service the newly
internationally using our worldwide manufactured inventory of high power
infrastructure compressors previously owned by
Global Compression
o Leverage our businesses in locations o Increase our revenues, income and
where we are currently located to market share by offering to our
obtain economies of scale customers the ability to out-source
all of their compression needs
o Pursue higher horsepower projects
that provide for longer term
contracts and higher margins
</TABLE>
COMPRESSOR FLEET
Our Compression Services Division currently has a fleet of over 4,100
compression units with horsepowers ranging from 26 to 3,335 horsepower. The
average horsepower of our compression fleet is approximately 220 horsepower.
The following table sets forth a summary of our compression fleet.
<TABLE>
<CAPTION>
HORSEPOWER SIZE NUMBER OF UNITS TOTAL HORSEPOWER
<S> <C> <C>
0 - 100 2,117 127,592
101 - 200 894 139,362
201 - 500 633 191,409
501 - 800 211 139,198
801 - 1,100 157 157,395
1,101 and over 130 182,429
--------- ---------
TOTALS 4,142 937,385
========= =========
</TABLE>
In addition, we manage over 530 compression units owned by our clients
having an aggregate horsepower of approximately 122,000.
CAPITAL EXPENDITURES
Our compression services operations are by their nature capital
intensive as they require substantial investments in additional compressor
units as our business grows. These capital investments have historically been
financed through existing cash and internally generated cash flow. We expect
that future capital investments by our Compression Services Division will be
financed by the joint venture through debt, sale-leaseback arrangements and
other similar financing structures that are repaid from the cash flows
generated from the compressor units over the projected term of rental of the
equipment. We recently entered into a lease arrangement under which a number of
our compressors were sold to a third party and were then rented back to us over
a five year period. Structures such as this lease should allow us to expand our
compressor fleet and maximize the return on the equity invested in this joint
venture. Compression services does not require a high level of maintenance
capital expenditures.
Because of the high leverage aspect of our compression business, we
gauge the performance of this division primarily by the cash flow it generates
and its operating income and EBITDA. We do this because in the initial years of
financing the acquisition of compressors, there will be high levels of interest
expense or lease expense. Although the net income return on capital from this
business is generally less than other less capital intensive businesses, we
believe the benefits of the steady cash flow from the operations and the less
cyclical nature
13
<PAGE> 15
of the business make this business an important component in our growth. Where
possible, we will attempt to secure our financing on a non-recourse basis.
COMPETITION
Our principal competitors in the compression service business are
Hanover Compression Company and Production Operators Corp., a subsidiary of
Schlumberger Limited. We believe that we are the second largest provider of
natural gas compression services in the world.
DRILLING PRODUCTS
Our Drilling Products Division is the world's leading provider of
drill stem products, including drill pipe, drill collars and heavyweight
tubular products used for the drilling of oil and gas wells. This division is
also a leading provider in North America for engineered connections used for
casing, production tubing and marine conductors and subsea structures. Our
drilling products are designed and engineered for high performance and include
all components of a drill stem from the rig to the drill bit.
The principal products offered by our Drilling Products Division are
as follows:
o Drill pipe o Engineered connections
o Drill collars o High Grade Premium
Tubing and Casing
o Heavyweight drill pipe o Accessories
o Connections for Marine Conductors
and Subsea Structures
MARKET TRENDS AND OUTLOOK
The market conditions for our Drilling Products Division have been
depressed since mid-1998 due to low oil prices and reduced drilling activity.
This decline has affected our Drilling Product Division's operations in two
significant ways:
o The lower rig count has reduced demand for drill stem products.
The reduction in demand is attributable to both the lower number
of drilling rigs requiring drill stem products and an increased
level of stock on hand with our customers as drill stem products
from idle rigs are made available to other rigs.
o The decline in drilling activity has reduced the number of wells
being completed offshore. This reduction in the number of
completed offshore wells also reduces the demand for our premium
casing, liner and production tubing and connections for these
products. The reduced demand for premium tubular products also
affects our accessory products.
We currently expect that the demand for our drill stem products for
1999 could be down as much as 60% from 1998. The utilization of the excess drill
stem products provided by idle rigs may also suppress levels of demand
substantially below requirements for current drilling activity. We expect,
however, that excess stock should, absent any further changes in the drilling
markets, be substantially diminished by the middle of the year 2000. Because the
market conditions for our drilling products is heavily dependent on drilling
activity, which in turn is dependent on the price of oil and gas, the effect of
the current market conditions on our business is extremely difficult to project
and is subject to much uncertainty.
GROWTH STRATEGY
The growth strategy for our Drilling Products Division is as follows:
<TABLE>
<S> <C>
o Lower drill stem cost structure o Introduce new technologies, such as
vacuum insulated tubing and short
radius drill pipe
o Maintain capacity capabilities for o Expand product line and marketing of
recovery subsea conductors and risers
o Add complementary products to o Continue improvements in connector
existing lines technology
</TABLE>
14
<PAGE> 16
PRODUCTS OFFERED BY OUR DRILLING PRODUCTS DIVISION
A description of the principal products offered by our Drilling
Products Division is as follows:
DRILL PIPE
Drill pipe is the principal mechanical tool used to drill for oil and
gas. Our drill pipe is sold primarily to rig contractors and rental companies.
Unlike a drilling rig, drill pipe is a consumable product with a limited
lifespan based on usage. Our drill pipe is designed and manufactured for
extreme environments and incorporates a number of proprietary designs. Our
principal competitors in drill pipe are Omsco, IDPA and various local
manufacturers in foreign countries.
DRILL COLLARS
Drill collars are used to provide weight on a drill bit to assist in
the drilling process. A drill collar is generally located directly above the
drill bit and is machined from a solid steel bar to provide the necessary
weight for a vertical well.
HEAVYWEIGHT DRILL PIPE AND OTHER DRILL STEM PRODUCTS
Our heavyweight drill pipe is a seamless tubular product that is less
rigid than a drill collar. Heavyweight drill collars provide the transition
zone between a drill collar and the drill pipe. Heavyweight drill pipe also
serves to apply weight to a drill bit in a directional well. We also provide
kellys, subs and pupjoints. The principal competitors for heavyweight drill
pipe and other drill stem products are Smith International, Inc., SMFI and
Omsco.
ENGINEERED CONNECTIONS AND PREMIUM TUBULARS
Our premium tubular products consist of premium production tubing,
liners and casing. The term "premium" refers to seamless tubulars with high
alloy chemistry, specific molecular structure and highly engineered
connections. Our premium tubulars are sold both with and without our
proprietary Atlas Bradford(R) connections. Our premium tubulars are used in
particularly harsh environments, such as offshore and deep natural gas wells
where pressure, temperature and corrosive elements are extreme. The principal
competitors for our premium engineered connections are Hydril, Hunting
Interlock and VAM. During 1999, we licensed TAMSA the international rights
to our Atlas Bradford connections.
CONNECTORS FOR CONDUCTORS AND SUBSEA STRUCTURES
Our connections for marine conductors and subsea structures consist of
our XL System proprietary line of connection technology for conductors and
subsea structures. Conductors are the initial support for new wells from which
both downhole and wellhead sections attach. Conductors are typically hammered
in place at the beginning of the drilling process. We use a proprietary wedge
thread technology to connect the conductors. Our primary competition for
conductors and subsea constructors are ABB, DrillQuip and various smaller
companies.
RAW MATERIALS
The following list sets forth the principal raw materials used by our
Drilling Products Division.
<TABLE>
<CAPTION>
Product Raw Material
------- ------------
<S> <C>
Drill pipe Steel billets and seamless green tubing
Drill collars Solid steel bars
Heavyweight drill pipe Heavy walled tubes
Premium tubing and casing Seamless green tubing
</TABLE>
15
<PAGE> 17
Our suppliers for the above raw materials are the major domestic and
international steel mills. We have established relationships with several
domestic and foreign mill sources to provide us with these products. Currently
raw materials for our Mexican and Indian operations are provided by TAMSA in
Mexico. We have a 30 year supply contract with TAMSA in which we have given it
the right to supply these operations as long as the prices are on a competitive
basis and we are not providing those supplies internally. We are also reviewing
other cost-effective long-term supply arrangements for this division.
PROPERTIES
Our operations are conducted in over 50 countries. We currently have
more than 60 manufacturing and over 300 sales, service and distribution
locations throughout the world. We are in the process of consolidating many of
these operations in light of current market conditions.
The following table describes the material manufacturing and other
facilities and principal offices currently owned or leased by us.
<TABLE>
<CAPTION>
FACILITY PROPERTY
SIZE SIZE
LOCATION (SQ. FT) (ACRES) TENURE UTILIZATION
-------- ------- -------- ------ -----------
COMPLETION AND OILFIELD SERVICES:
<S> <C> <C> <C> <C>
Houston, Texas 117,500 16.36 Owned Manufacture of power tongs, power units and
accessories
Pearland, Texas 127,500 57.45 Owned Manufacture of fishing tools, milling tools,
cutters, overshots and whipstocks
Houma, Louisiana 109,800 12.908 Owned Manufacture of mechanical cementing products,
float equipment, stage tools, rubber products
and industrial valves
Hannover, Germany 65,950 3.41 Leased Manufacture of mechanical cementing products,
power tongs, power units and accessories, and
specialized bucking machines
Bryne, Norway 60,000 13.59 Leased Manufacture of liner hanger equipment
Huntsville, Texas 81,700 20.00 Owned Manufacture of downhole packers and
completion systems
Liberal, Kansas 40,000 9.93 Owned Provider of fishing and rental, coiled tubing, and foam
Casper, Wyoming 41,553 9.50 Owned Provider of rental and fishing tools and services
COMPRESSION SERVICES:
Cochrane, Alberta, Canada 41,200 1.90 Owned Package of natural gas compression systems
Corpus Christi, Texas 90,000 61.5 Owned Manufacture of and package of natural gas compression
systems
Yukon, Oklahoma 77,500 15.00 Owned Repair of natural gas compressors
ARTIFICIAL LIFT SYSTEMS:
Woodward, Oklahoma 138,800 53.00 Leased Manufacture of sucker rod pumps
Greenville, Texas 100,000 26.00 Owned Manufacture of sucker rods, couplings,
stabilizer bars and pump parts
Odessa, Texas 99,200 7.20 Owned Manufacture of RotaFlex(R) pumping units
Sao Leopoldo, Brazil 86,100 17.00 Owned Manufacture of progressing cavity pumps
Houston, Texas 81,000 6.50 Owned Manufacture of steel filter screens
Nisku, Alberta, Canada 74,000 8.00 Leased Manufacture of pumpjacks
</TABLE>
16
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C>
Caxias do Sul, Brazil 62,400 6.00 Leased Manufacture of downhole packers and
completion systems
Longview, Texas 47,000 22.10 Owned Manufacture of pump barrels and plungers
Lloydminster, Alberta, Canada 47,000 2.70 Owne Manufacture of progressing cavity pumps
Edmonton, Alberta, Canada 42,000 11.00 Owned Manufacture of progressing cavity pumps and
continuous sucker rods
DRILLING PRODUCTS:
Navasota, Texas 347,000 83.00 Owned Manufacture of drill pipe, premium threaded
casing, liners and tubing
Veracruz, Mexico 303,400 42.00 Owned Manufacture of tool joints
Muskogee, Oklahoma 195,900 108.40 Owned Manufacture of TCA premium casing
Houston, Texas 148,500 20.00 Leased Manufacture of AB connectors
114,200 21.90 Owned Manufacture of API and premium threaded
couplings
82,750 13.50 Owned Manufacture of drill pipe, drill collars,
heavyweights and kellys
54,500 7.00 Owned Premium threading services and manufacture
tubular accessories
Bryan, Texas 160,000 55.30 Owned Manufacture of premium tubing
Edmonton, Alberta, Canada 109,600 10.20 Owned Manufacture of drill pipe, premium threaded
casing, liners and tubing
Houma, Louisiana 85,000 9.40 Owned Manufacture of downhole accessories
Jurong, Singapore 64,000 1.48 Leased Manufacture of drill collars and accessories
CORPORATE:
Houston, Texas 82,000 -- Leased Company's principal offices
</TABLE>
In addition to the above facilities, our Drilling Products Division
has an agreement with Oil Country Tubular Limited pursuant to which OCTL's
manufacturing facility in Narketpally, India is dedicated by OCTL to the
production of drill pipe and other tubular products exclusively for us. This
facility is owned by OCTL and consists of 262,000 square feet located on 60
acres.
The facilities owned by our Compression Services Division are held in
a joint venture that is 64% owned by us.
OTHER BUSINESS DATA
PATENTS
Many areas of our business rely on patents and proprietary technology.
We currently have more than 500 patents. Many of our patents provide us with
competitive advantages in our markets. Although we consider our patents and our
patent protection to be an important part of our business, we do not believe
that the loss of one or more of our patents would have a material adverse
effect on our business.
BACKLOG
With the exception of drill pipe for our Drilling Products Division,
backlog is not material. Our Drilling Products Division had a backlog of drill
pipe as of December 31, 1998, 1997 and 1996, of $89.9 million, $360.0 million
and $170.0 million, respectively. This backlog represented approximately 4.5%,
18.3% and 11.6% of our total company sales for those years. The total backlog
for drill pipe and other drilling products at December 31, 1998, was down to
17
<PAGE> 19
approximately $89.9 million, most of which is expected to be shipped by the
second quarter of 1999. The decline in drill pipe backlog is reflective of
current market conditions. We do not expect that there will be a substantial
backlog for this division during 1999. We also believe that sales for this
division will be materially dependent upon timing and recovery of drilling
activity.
INSURANCE
We currently carry a variety of insurance for our operations. We are
partially self-insured for certain claims in amounts that we believe to be
customary and reasonable. We also maintain political risk insurance to insure
against certain risks while doing business with foreign countries.
Although we believe that we currently maintain insurance coverage that
is adequate for the risks involved, there is always a risk that our insurance
may not be sufficient to cover any particular loss or that our insurance may
not cover all losses. For example, while we maintain product liability
insurance, this type of insurance is limited in coverage and it is possible
that an adverse claim could arise that is in excess of our coverage. Finally,
insurance rates have in the past been subject to wide fluctuation and changes
in coverage could result in increases in our cost or higher deductibles and
retentions.
FEDERAL REGULATION AND ENVIRONMENTAL MATTERS
Our operations are subject to federal, state and local laws and
regulations relating to the energy industry in general and the environment in
particular. Environmental laws have in recent years become more stringent and
have generally sought to impose greater liability on a larger number of
potentially responsible parties. While we are not currently aware of any
situation involving an environmental claim that would likely have a material
adverse effect on our business, it is always possible that an environmental
claim with respect to one or more of our current businesses or a business or
property that one of our predecessors owned or used could arise that could have
a material adverse effect.
We have been recently named by the Environmental Protection Agency
("EPA") as a party to the Casmalia, California landfill Superfund site. We
legally transported certain waste materials to this site between 1980 and 1985.
In 1985, after we had ended transporting materials to the landfill, the EPA
declared the landfill as a Superfund site. We have been requested to participate
in a settlement for the matter by paying approximately $440,000. However, we
dispute the findings of EPA regarding our level of involvement in this matter
and are currently reviewing the proposed settlement and other options we may
have.
Our expenditures during 1998 to comply with environmental laws and
regulations were not material and we currently expect that the cost of
compliance with environmental laws and regulations for 1999 also will not be
material. We also believe that our costs for compliance with environmental laws
and regulations are generally within the same range with those of our
competitors.
EMPLOYEES
As of December 31, 1998, we employed approximately 11,400 employees.
This number of employees was down from approximately 13,800 at the beginning of
1998. The reduction in the number of employees was attributable to the downturn
in the industry and our attempts to control costs. In the first quarter of 1999,
we further reduced headcount an additional 10% from December 31, 1998 levels.
Certain of our operations are subject to union contracts. These
contracts, however, cover only a small number of our employees. We believe that
our relationship with our employees is generally satisfactory.
CORPORATE HISTORY
We are a Delaware corporation that was organized in 1972. Many of our
businesses, including those of Weatherford Enterra, Inc., have been conducted
for more than 50 years.
PRINCIPAL EXECUTIVE OFFICES
Our principal executive offices are located at 515 Post Oak Blvd.,
Suite 600, Houston, Texas 77027. Our telephone number is (713) 693-4000.
18
<PAGE> 20
FORWARD-LOOKING STATEMENTS
This report and our other filings with the Securities and Exchange
Commission and public releases contain statements relating to our future
results, including certain projections and business trends. We believe these
statements constitute "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995.
Certain risks and uncertainties may cause actual results to be
materially different from projected results contained in forward-looking
statements in this report and in our other disclosures. These risks and
uncertainties include, but are not limited to, the following:
A Further Downturn in Market Conditions Could Affect Projected Results.
Any unexpected material changes in oil and gas prices or other market trends
would likely affect the forward-looking information contained in this report.
Our estimates as to future results and industry trends make assumptions
regarding the future prices of oil and gas and their effect on the demand and
pricing of our products and services. In analyzing the market and its impact on
us for 1999, we have made the following assumptions:
o Average prices for oil for most of 1999 will not increase
significantly and will be within the same range of prices as they
were in the fourth quarter of 1998 and the first quarter of 1999.
o Average natural gas prices for 1999 will remain at or near their
current levels.
o World demand for oil will be up only marginally or flat.
o North American and international rig counts will remain at
their current low levels.
o Future growth in the industry will be dependent on technological
advances that can reduce the costs of exploration and production,
and technological improvements in tools used for re-entry,
thru-tubing and extended reach drilling as well as artificial lift
technologies will be important to our future.
These assumptions are based on various macro economic factors, and
actual market conditions could vary materially from those assumed.
A Continuation of the Low Rig Count Could Adversely Affect the
Demand for Our Products and Services. Our operations were materially
affected by the decline in the rig count during 1998 and 1999 to date.
Although the North American and international rig counts are at
historical or near historical lows, a continuation of the rig count at
its current level for a prolonged period of time would adversely
affect our results as demand for oil related products and services
would continue to fall because of the uncertainty relating to the
future prices. In addition, any further material declines in the
current worldwide rig count or drilling activity would likely further
reduce the demand for our drilling products and services. Our
forward-looking statements regarding our drilling products assume
there will not be any further material declines in the worldwide rig
count, in particular the foreign rig count.
Projected Cost Savings Could Be Insufficient. During 1998 and 1999
to date, we implemented a number of programs intended to reduce costs
and align our cost structure with the current market environment. Our
forward-looking statements regarding cost savings and their impact on
our business
19
<PAGE> 21
assume these measures will generate the savings expected. However, if
the markets continue to decline, additional actions may be necessary
to achieve the desired savings.
Weatherford's Success is Dependent upon Technological Advances.
Our ability to succeed with our long-term growth strategy is dependent
on the technological competitiveness of our product and service
offerings. A central aspect of our growth strategy is to enhance the
technology of our products and services, to expand the markets for
many of our products through the leverage of our worldwide
infrastructure and to enter new markets and expand in existing markets
with technologically advanced value-added products. Our
forward-looking statements have assumed only a small amount of
near-term growth from these new products and services.
Unexpected Year 2000 Problems Could Have an Adverse Financial
Impact. We have not fully determined the impact of Year 2000 on our
systems and products. It is possible that unexpected problems
associated with the Year 2000 could arise during the implementation of
our Year 2000 program that could have a material adverse effect on our
business, financial condition and results of operations. We are
currently in the assessment and initial implementation phases of our
Year 2000 program and expect it to be completed by the fourth quarter
of 1999.
Economic Downturn in Asia and South America Could Adversely
Affect Demand for Products and Services. The economic downturn in Asia
has begun to affect the economies in other regions of the world,
including South America and the Former Soviet Union. To date, the
economies in the United States and Europe have not been materially
affected. If the United States or European economies were to begin to
decline or if the economies of South America or Asia were to
experience further material problems, the demand and price for oil and
gas and our products and services could fall further and adversely
affect our revenues and income. We have assumed that a worldwide
recession will not occur as a result of the economic downturn in Asia
and South America. A material decline in the Chinese economy or
devaluation of its currency could cause further deterioration to the
Asian and world economies.
Currency Fluctuations Could Have a Material Adverse Financial
Impact. A material decline in currency rates in our markets could
affect our future results as well as affect the carrying values of our
assets. World currencies have been subject to much volatility. Our
forward-looking statements assume no material impact from changes in
currencies because our financial position is generally dollar based or
hedged. For those revenues denominated in local currency the effect of
foreign currency fluctuations is largely mitigated because local
expenses are denominated in the same currency.
Changes in Global Trade Policies Could Adversely Impact
Operations. Changes in global trade policies in our markets could
impact our operations in these markets. We have assumed that there will
be no material changes in global trading policies.
Unexpected Litigation and Legal Disputes Could Have a Material
Adverse Financial Impact. If we experience unexpected litigation or
unexpected results in our existing litigation having a material effect
on results, the accuracy of the forward-looking statements would be
affected. Our forward-looking statements assume that there will be no
such unexpected litigation or results.
Finally, our future results will depend upon various other risks and
uncertainties, including, but not limited to, those detailed in our other
filings with the Securities and Exchange Commission. For additional information
regarding risks and uncertainties, see our other current year filings with the
Commission under the Securities Exchange Act of 1934, as amended, and the
Securities Act of 1933, as amended. We will generally update our assumptions in
our filings as circumstances require.
20
<PAGE> 22
RISK FACTORS
An investment in our stock and securities involves various risks. When
considering your investment in our company you should carefully consider the
following factors, together with the information described elsewhere in this
report.
Continued Low Prices for Oil Will Adversely Affect the Demand for Our
Products and Services
Low oil prices adversely affect demand throughout the oil and natural
gas industry, including the demand for our products and services. As prices
decline, we are affected in two significant ways. First, the funds available to
our customers for the purchase of goods and services declines. Second,
exploration and drilling activity declines as marginally profitable projects
become uneconomic and either are delayed or eliminated. Accordingly, as long as
oil prices remain low, our revenues and income will be adversely affected.
The current market conditions have affected our business in various
ways. Our artificial lift business which is heavily dependent on North American
production experienced continuous declines in revenue throughout 1998. Our
Drilling Products Division has experienced a significant decline in new orders
of drill pipe and other drill stem products and tubular sales have fallen as
completion activity slowed and tubular distributors reduced inventories. Sales
in 1999 for our drill stem products could be down by more than 50% from 1998.
The level of decline will be dependent on the timing of any increase of drilling
activity and the amount of time it takes for our customers' drill pipe and other
tubular inventories to be reduced. Our completion and oilfield services business
has experienced declines in line with the general reduction in industry
activity, with the greatest declines occurring in the United States markets. Our
compression business has only been marginally affected by the recent declines in
market conditions due to the fact that its business is based on levels of
natural gas development and production, which has been more stable than oil
production.
Our businesses will continue to be affected by industry conditions,
including those conditions and factors described under "Forward-Looking
Statements".
Disruptions in Foreign Operations Could Adversely Affect Our Income
Our operations in certain locations in Latin America, Africa and Far
East are subject to various political and economic conditions existing in such
countries that could disrupt operations. Disruptions may occur in our foreign
operations and losses may occur that will not be covered by insurance.
Drill pipe and other products are manufactured for us by Oil Country
Tubular Limited in India under a long-term exclusive manufacturing arrangement.
Although we have sought to minimize the risks of this operation through a
manufacturing versus ownership arrangement, we are providing OCTL with a
substantial amount of raw materials, inventory and working capital for the
products it manufactures for us. Our Indian operations have been adversely
affected by the downturn of the economies in the eastern hemisphere. Operations
in India are subject to various political and economic risks as well as
financial risks with respect to OCTL. We have recently substantially curtailed
our operations in India and they are expected to continue to be curtailed
through the end of 1999. A termination or complete shutdown of this operation in
light of current market conditions or political factors could have an adverse
effect on our income and results.
Our Products and Services are Subject to Operational Hazards
Our products are used for the exploration and production of oil and
natural gas. These operations are subject to hazards inherent in the oil and
gas industry that can cause personal injury or loss of life, damage to or
destruction of property, equipment, the environment and marine life, and
suspension of operations. These hazards include fires, explosions, craterings,
blowouts and oil spills. Litigation arising from an accident at a location
where our products or services are used or provided may result in our being
named as a defendant in lawsuits asserting potentially large claims.
Our Common Stock has Fluctuated Historically
Historically, and in recent months in particular, the market price of
common stock of companies engaged in the oil and gas industry has been highly
volatile. Likewise, the market price of our common stock has varied
significantly in the past. News announcements and changes in oil and natural
gas prices, changes in the demand for oil and natural gas exploration and
changes in the supply and demand for oil and natural gas have all been factors
that have affected the price of our common stock.
21
<PAGE> 23
REFERENCES TO WEATHERFORD
When we refer to Weatherford and make use of phrases such as "we" and
"us", we are generally referring to Weatherford International, Inc. and its
subsidiaries as a whole or on a division basis depending on the context in
which the statements are made.
ITEM 2. PROPERTIES
See Item 1. Business - Properties on page 16 of this report, which is
incorporated by reference into this item.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, we become the subject of various
claims and litigation. We maintain insurance to cover many of our potential
losses and we are subject to various self-retentions and deductibles with
respect to our insurance.
See Item 1, Business -- Other Business Data -- Federal Regulation and
Environmental Matters on page 18 of this report, which is incorporated by
reference into this item.
Although we are subject to various ongoing items of litigation, we do not
believe that any of the items of litigation that we are currently subject to
will result in any material uninsured losses to us. It is, however, possible
that an unexpected judgment could be rendered against us in the cases in which
we are involved that could be uninsured and beyond the amounts that we
currently have reserved or anticipate incurring for that matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the year ended
December 31, 1998, to a vote of stockholders of the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock is traded on the New York Stock Exchange under the symbol
"WFT". As of March 24, 1999, there were 3,209 stockholders of record. The
following table sets forth, for the periods indicated, the range of high and
low sale prices per share for the Common Stock as reported on the New York
Stock Exchange. These prices have been adjusted for a two-for-one stock split
that occurred in May 1997.
<TABLE>
<CAPTION>
PRICE
---------------------------
HIGH LOW
----------- ------------
<S> <C> <C>
Year ending December 31, 1998
First Quarter.............................................. $ 53 7/8 $ 37 1/2
Second Quarter............................................. 58 7/16 34 3/4
Third Quarter.............................................. 39 15/16 15
Fourth Quarter............................................. 28 3/4 16
Year ending December 31, 1997
First Quarter.............................................. $ 31 7/8 $ 23 7/8
Second Quarter............................................. 45 1/2 28
Third Quarter.............................................. 64 42 1/16
Fourth Quarter............................................. 73 40 1/4
</TABLE>
On March 24, 1999, the closing sales price of our Common Stock as reported
by the New York Stock Exchange was $26 3/4 per share. We have not declared or
paid dividends on our Common Stock since 1984 and we do not anticipate paying
dividends on our Common Stock at any time in the foreseeable future.
In addition to our Common Stock, we currently have outstanding $402.5
million principal amount in 5% Convertible Subordinated Preferred Equivalent
Debentures due 2027. These debentures have the following material terms:
o Mature on November 1, 2027
o Interest rate of 5% per annum, payable February 1, May 1, August 1 and
November 1 of each year
o Are convertible in Common Stock at a conversion price of $80 per share
o May be redeemed at any time on or after November 4, 2000 at redemption
prices set forth in an indenture relating to the debentures
22
<PAGE> 24
o Are subordinated in right of payment of principal and interest on certain
existing and future senior indebtedness
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain restated selected historical
consolidated financial data and should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and
the Consolidated Financial Statements and Notes thereto included elsewhere
herein. The following information may not be deemed indicative of our future
operating results.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------- ------------ ------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues.................................. $ 2,010,654 $ 1,969,089 $ 1,467,270 $ 1,125,803 $ 858,993
Operating Income.......................... 149,048(a) 335,992 169,101 12,120 70,952
Income (Loss) From Continuing
Operations............................ 64,837(a) 196,773 92,161 (8,268) 36,046
Basic Earnings (Loss) Per Share From
Continuing Operations................. 0.67 2.04 1.03 (0.10) 0.53
Diluted Earnings (Loss) Per Share
From Continuing Operations............ 0.66 2.01 1.01 (0.10) 0.53
Total Assets.............................. 2,831,715 2,737,910 2,243,633 1,710,568 1,464,804
Long-Term Debt............................ 229,663 252,322 417,976 416,473 303,854
5% Convertible Subordinated Preferred
Equivalent Debentures................. 402,500 402,500 -- -- --
Stockholders' Equity...................... 1,493,880 1,458,549 1,292,704 958,337 845,287
Cash Dividends Per Share.................. -- -- -- -- --
</TABLE>
(a) Includes $195.0 million, $126.8 million net of tax, of merger and other
charges relating to the merger between EVI and Weatherford Enterra and a
reorganization and rationalization of our business in light of industry
conditions.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
In May 1998, the new Weatherford was created through the merger of EVI, Inc.
and Weatherford Enterra, Inc. This merger was accounted for as a pooling of
interests and our financial statements have been restated to reflect our
businesses on a combined basis. We have also redefined our business segments
into four separate divisions: Completion and Oilfield Services, Artificial Lift
Systems, Compression Services and Drilling Products. Our segment data has been
restated to reflect these four divisions.
The following is a discussion of our results of operations for the last
three years and our current financial position. This discussion should be read
in conjunction with our financial statements that are included with this
report.
Our discussion of our results and financial condition includes various
forward-looking statements about our markets, the demand for our products and
services and our future results. These statements are based on certain
assumptions that we consider to be reasonable. For information about these
assumptions, you should refer to our Section entitled "Forward-Looking
Statements."
MARKET TRENDS AND OUTLOOK
Our businesses serve the oil and gas industry. Certain of our products and
services, such as our drill pipe, tubular installation services and well
completion services, are dependent on the North American and worldwide level of
exploration and development activity. Other products and services, such as our
artificial lift systems and compression services, are dependent on oil and gas
production activity. We currently estimate that between 50% and 60% of our
business is reliant on drilling activity, with the remainder related to
production activity.
The oil and gas industry has been subject to extreme volatility in recent
years due to significant changes in the demand, supply and pricing of oil and
natural gas. In 1997 through early 1998, we experienced a strong increase in
the demand for our products and services due to a worldwide increase in the
demand for oil and shortages of
23
<PAGE> 25
equipment and people to service this demand. During this period, we and our
industry operated at levels that had not been experienced since the early
1980's and many of our businesses operated at full capacity.
Beginning in late 1997, the price of oil began to fall. The reasons for the
decline included the spreading impact of the financial crisis in Asia on the
worldwide demand for oil and an increase in the supply of oil worldwide as new
projects and production came online. Initially, the effects of these changes
were felt only in isolated markets, such as the Canadian and California heavy
oil markets, where drilling and production activity is more sensitive to the
price of oil. Drilling and completion activity in North America then began to
decline due to the greater sensitivity of North American production to prices.
By late 1998, demand throughout the industry had fallen substantially as our
customers' exploration, development and production activities worldwide dropped
in reaction to sharply lower oil prices.
Low oil prices have also affected the economies of various developing
countries, in particular those in Latin America and the former Soviet Union,
that are heavily dependent on oil exports for growth. Many of these countries
are now experiencing declines in their own economies, which in turn has further
affected the worldwide demand and price for oil.
The following chart sets forth certain historical statistics that are
reflective of the current market conditions in which we operate:
SELECTED INDUSTRY DATA
- -------------------------------------------------------------------------------
(1) (2) (3) (3)
NORTH AMERICAN INTERNATIONAL
WTI OIL HENRY HUB GAS RIG COUNT RIG COUNT
- -------------------------------------------------------------------------------
1998 $11.28 $1.945 895 671
- -------------------------------------------------------------------------------
1997 $18.32 $2.264 1,499 819
- -------------------------------------------------------------------------------
1996 $25.39 $2.757 1,195 810
- -------------------------------------------------------------------------------
(1) Price per Barrel as of December 31 - Source: Applied Reasoning, Inc.
(2) Price per MM/BTU as of December 31 - Source: Oil World
(3) Average rig count for December - Source: Baker Hughes Rig Count
The reduction in drilling and production activity impacted our businesses
through lower revenues, pricing pressure and reduced margins. Contributing to
these conditions are the following trends:
o Low oil prices have reduced the funds available to our clients to explore
for and produce oil and gas and have made the exploration and production
of oil reserves in various locations uneconomical.
o Reduced exploration activity has reduced the demand for the products and
services provided by us serving the drilling markets. Our Drilling
Products Division has been the most significantly affected.
o North American activity has declined more than the decline in
international activity due to the maturity of the reserves in North
America and the higher per barrel cost of exploration and production in
North America.
o The capital budgets of our customers have been reduced and delayed
because of industry consolidations and market uncertainties as to future
oil prices.
o Reduced demand for our products and services has resulted in pricing
pressures and reduced margins in most of our markets.
As we enter 1999, there is substantial uncertainty as to when demand will
stop declining and when a recovery will start. Our view is that we are nearing
the bottom of the cycle and that improvements will slowly begin to be felt near
the end of the year. We believe the principal factor behind a recovery will be
a reduction in the supply of oil as production rates decline due to the current
reduction in drilling activity. Recent proposed production cuts by the oil
producing countries may also result in improved market conditions to the extent
those cuts are actually implemented. Increases in worldwide demand could also
speed up the recovery. We do not expect any material improvements in
industry conditions until sometime in 2000.
We expect that in light of current market conditions our revenues, operating
income before special charges and net income from continuing operations before
special charges for 1999 will all be substantially down on a year to year basis
absent a significant turn-around by the third quarter of 1999. The extent of the
decline will be a function of when the market stabilizes and begins to recover.
The extreme volatility of our markets, however, makes predictions regarding
results for 1999 difficult to make.
24
<PAGE> 26
RESULTS OF OPERATIONS
The business environment in which we have operated over the last three years
has experienced extreme changes. Starting in 1996, we began to experience the
first significant improvements in our markets in a number of years. That
improvement continued through 1997 into the first part of 1998, with a material
slow down beginning near the middle of 1998. By the end of 1998, our industry
was in the midst of one of the worse downturns in its history.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
The following charts contain selected financial data comparing our results
for 1998 and 1997:
<TABLE>
<CAPTION>
COMPARATIVE FINANCIAL DATA YEAR ENDED
---------------------------
1998 1997
------------ -----------
(in thousands)
<S> <C> <C>
Revenues.......................................... $ 2,010,654 $1,969,089
Gross Profit...................................... 583,869(a) 580,702
Gross Profit %.................................... 29.0% 29.5%
Selling, General and Administrative
Attributable to Segments........................ $ 266,423 $ 209,476
Corporate General and Administrative.............. 26,980 37,816
Operating Income.................................. 149,048(a) 335,992
Interest Income................................... 2,969 8,329
Interest Expense.................................. 54,497 43,273
Net Income from Continuing Operations............. 64,837(a) 196,773
EBITDA (b)........................................ 319,780(a) 478,923
</TABLE>
(a) Includes $195.0 million, $126.8 million net of tax, of merger and other
charges relating to the merger between EVI and Weatherford Enterra and a
reorganization and rationalization of our business in light of industry
conditions. Of these charges $50.9 million related to the write-off of
inventory and have been classified as cost of products.
(b) EBITDA is calculated by taking operating income and adding back
depreciation and amortization. We have included an EBITDA calculation here
because when we look at the performance of our businesses, we give
consideration to their EBITDA. Calculations of EBITDA should not be viewed as a
substitute to calculations under GAAP, in particular cash flows from
operations, operating income and net income. In addition, EBITDA calculations
by one company may not be comparable to another company.
<TABLE>
<CAPTION>
SALES BY GEOGRAPHIC REGION
YEAR ENDED
-----------------------
1998 1997
------------ --------
<S> <C> <C>
REGION: (a)
U.S................................................. 59% 61%
Canada.............................................. 13% 13%
Europe.............................................. 8% 8%
Latin America....................................... 7% 6%
Africa and Middle East.............................. 7% 5%
Other .............................................. 6% 7%
------- ------
Total........................................... 100% 100%
======= ======
</TABLE>
(a) Sales are based on the region of origination and do not reflect sales by
ultimate destination.
Our results for 1998 reflected the volatile industry in which we competed;
trends and factors affecting our businesses varied depending on the quarter.
Our results for 1998 and 1997 were also affected by the following specific
items:
o Results for 1998 include $195.0 million in pre-tax charges for the merger
between EVI and Weatherford Enterra, Inc. and charges associated with the
downturn in our industry.
o Revenues for the second six months of 1998 declined 14.3% compared to the
same period in 1997 and 17.4% compared to the first half of 1998.
o The increase in the 1998 operating income of $344.0 million, before
charges of $195.0 million, as compared to 1997 operating income
of $336.0 million, reflected the strong demand for our products
in the first half of 1998.
25
<PAGE> 27
o Businesses acquired in 1997 and 1998 contributed $403.5 million in
revenues and $25.9 million in operating income in 1998. Revenues and
operating income in 1997 from the businesses acquired in 1997 were
$166.5 million and $23.3 million.
o Businesses sold in 1997 contributed $76.9 million in revenues in 1997.
Net income for the disposed businesses was $8.3 million in 1997.
o In 1997 we recorded an extraordinary charge of $9.0 million, net of
taxes, related to our acquisition of approximately $120.0 million
principal amount of our 10 1/4% Senior Notes due 2004 and 10 1/4% Senior
Notes due 2004, Series B.
o Our interest charges for 1998 reflected higher levels of debt following
our issuance in November 1997 of $402.5 million principal amount of 5%
Convertible Subordinated Preferred Equivalent Debentures due 2027 and
borrowings used to fund acquisitions.
o Our corporate expenses as a percentage of revenues for 1998 were 1.3% as
compared to 1.9% for 1997. The percentage decrease from 1997 was
primarily attributable to the consolidation savings due to our merger.
o Our effective tax rate on income from continuing operations for 1998 was
34.8% as compared to 35.5% for 1997.
1998 SPECIAL CHARGES
In 1998, we incurred $195.0 million in merger and other charges relating to
the merger between EVI and Weatherford Enterra and a reorganization and
rationalization of our businesses in light of industry conditions. Of these
charges, $120.0 million was incurred in the second quarter at the time of our
merger and with the initial downturn in the industry. A $75.0 million charge was
incurred in the fourth quarter in response to the previously unanticipated
extent of the decline in our industry which resulted in a need for us to make
additional reductions in our operations and align the cost structure of our
business with current demand. The net after-tax effect of these charges was
$126.8 million (or $1.30 per diluted share). Over $171.4 million of these
charges had been realized as of December 31, 1998, with the remainder of the
charges expected to be fully expended by the second quarter of 1999 in
connection with planned activities. During 1999, we will assess whether any
adjustments or reversals to the remaining accrued special charges are necessary.
The following chart summarizes the special charges made by us in 1998:
<TABLE>
<CAPTION>
COMPLETION BALANCE
AND AS OF
OILFIELD ARTIFICIAL COMPRESSION DRILLING DECEMBER 31,
SERVICES LIFT SYSTEMS SERVICES PRODUCTS CORPORATE TOTAL UTILIZED 1998
---------- ------------ ----------- -------- --------- ---------- --------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Merger Transaction Costs(1).... $ -- $ -- $ -- $ -- $ 62,462 $ 62,462 $ 62,462 $ --
Severance and Related
Costs(2)..................... 1,961 5,050 -- -- 600 7,611 -- 7,611
Facility Closures(3)........... 8,969 13,817 -- 5,300 -- 28,086 15,257 12,829
Corporate Related Expenses(4).. -- -- -- -- 8,297 8,297 5,177 3,120
Inventory Write-Off(5)......... 4,830 17,573 -- 28,500 -- 50,903 50,903 --
Write-Down of Assets(6)......... 29,195 4,360 1,500 1,150 1,436 37,641 37,641 --
--------- ---------- ---------- -------- -------- --------- -------- --------
Total ...................... $ 44,955 $ 40,800 $ 1,500 $ 34,950 $ 72,795 $ 195,000 $171,440 $ 23,560
========= ========== ========== ======== ======== ========= ======== ========
</TABLE>
(1) The merger related costs were incurred in the second quarter and included
$32.6 million in severance and termination costs related to approximately
300 employees and former officers and directors, and other employee
benefits related to stock grants, in accordance with Weatherford Enterra's
employment agreements and option plans, and $29.9 million in professional
and financial advisory fees, filing and registration fees, and printing and
mailing costs.
(2) The severance and related costs included in the fourth quarter charges
were $7.6 million for approximately 1,000 employees specifically
identified, with terminations to be completed in the first half of 1999,
in accordance with our announced plan to terminate employees.
(3) The facility and plant closures costs were $15.3 million in the second
quarter, all of which have been incurred by year end. These costs related
primarily to the elimination of duplicated manufacturing, distribution and
service locations following the merger in May. The facility and plant
closures of $12.8 million were accrued in the fourth quarter for the
consolidation and closure of approximately 100 service, manufacturing and
administrative facilities in response to declining market conditions in the
fourth quarter.
26
<PAGE> 28
(4) The corporate related expenses of $5.2 million recorded in the second
quarter and $3.1 million recorded in the fourth quarter were primarily for
the relocation of corporate offices, related lease obligations and the
consolidation of technology centers due to the merger and to align our
corporate cost structure in light of current conditions.
(5) The write-off of inventory was $12.4 million in the second quarter and
$38.5 million in the fourth quarter, which were reported as cost of
products. These charges relate to the write-off of inventory as a result
of the combination of EVI's and Weatherford Enterra's operations, the
rationalization of their product lines, the elimination of certain
products, services and locations due to the merger and as a result of the
decline in market conditions.
(6) The write-down of assets was $24.6 million in the second quarter and $13.0
million in the fourth quarter. These charges primarily relate to the
write-down of equipment and other assets as a result of the combination of
EVI's and Weatherford Enterra's operations, the rationalization of their
product lines, the elimination of certain products, services and locations
due to the merger, the industry downturn, and the specific identification
of assets which are held for sale as a result of the decline in market
conditions.
SEGMENT RESULTS
COMPLETION AND OILFIELD SERVICES
Our Completion and Oilfield Services Division began the first half of
1998 with strong revenue and income growth. By the second half of the year,
this division began to experience reductions in revenue, operating income and
margins as the rig count declined and demand for its products and services
dropped. This division's North American operations have been the most adversely
affected by the downturn. Revenue declines have continued into the first
quarter of 1999. Although we are continuing to reduce our costs in this
division through reductions in personnel, the declines in revenues have
occurred faster than cost reductions. The revenue reduction has also resulted
in manufacturing and operational inefficiencies in this division due to lower
operating levels. While we believe this division is well positioned for growth
as the industry recovers, results for this division for 1999 will be highly
dependent on timing of improvements in the market.
The following chart sets forth additional data regarding the results
of our Completion and Oilfield Services Division for 1998 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
1998 1997
------------ -----------
(in thousands)
<S> <C> <C>
Revenues........................................ $ 848,219 $ 929,001
Gross Profit.................................... 272,390(a) 314,870
Gross Profit %.................................. 32.1% 33.9%
Selling, General and Administrative............. $ 99,423 $ 102,040
Operating Income................................ 135,521(a) 215,412
EBITDA.......................................... 230,239(a) 301,550
</TABLE>
(a) Includes merger and other charges of $45.0 million, which consists of
$9.0 million for facility closures, $29.2 million for the write-down of
equipment, $2.0 million for severance and $4.8 million for the write-
off of inventory. The write-off of inventory has been classified as
cost of products.
Material items affecting the results of our Completion and Oilfield
Services Division for 1998 compared to 1997 were:
o North American revenues for 1998 declined by 22.4% as compared to 1997 due
to an average rig count reduction of 17.4%.
o International revenues increased by 10.0% in 1998 to $432.8 million. The
most significant revenue increases occurred in the African and Middle
Eastern markets.
27
<PAGE> 29
o Businesses sold by us in 1997 contributed $76.9 million in revenues in
1997.
o Gross profit, before charges of $4.8 million, declined in 1998 by 12.0%
as revenue in the second half of 1998 dropped by 10.8% as compared to the
first half of 1998.
o Selling, general and administrative expenses increased as a percentage of
revenues from 11.0% in 1997 to 11.7% in 1998. The increase primarily
reflects a reduced revenue base.
o Operating income, before charges of $45.0 million, declined in 1998 to
$180.5 million from $215.4 million in 1997 primarily due to increased
costs and reduced revenues associated with industry conditions.
ARTIFICIAL LIFT SYSTEMS
Our Artificial Lift Systems Division was the first segment of our
business to be affected by the market downturn. Beginning in late 1997 as oil
prices began to fall, demand for this division's products fell as its customers
reduced and deferred purchases of products used to produce oil, in particular
heavy oil. The decline was most pronounced in Canada, where we had just
purchased various companies that served this market. We believe this division's
business has generally bottomed out and we expect that this division will
realize slight sales and income increases during 1999. However, as long as the
price of oil remains depressed, we do not expect demand for this division's
products to increase significantly. As a result, we do not expect this division
to be a significant contributor to income for 1999. Looking beyond 1999, we
expect that as the world's oilfields mature, demand for this division's
products should increase and it should return to greater profitability.
International activity should begin to increase in 1999 as we leverage our
worldwide distribution network to market the products and services offered.
The following chart sets forth additional data regarding the results
of our Artificial Lift Systems Division for 1998 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
1998 1997
------------ -----------
(in thousands)
<S> <C> <C>
Revenues...................................... $ 329,196 $ 249,476
Gross Profit.................................. 101,972 (a) 69,806
Gross Profit %................................ 31.0% 28.0%
Selling, General and Administrative........... $ 97,968 $ 47,014
Operating Income.............................. (19,223)(a) 22,792
EBITDA........................................ (40)(a) 31,736
</TABLE>
(a) Includes merger and other charges of $40.8 million, primarily
including $13.8 million for facility closures, $17.6 million for
the write-off of inventory, $5.0 million for severance and $4.4
million related to the write-down of equipment. The write-off of
inventory has been classified as costs of products.
Material items affecting the results of our Artificial Lift Systems
Division for 1998 compared to 1997 were:
o The second half of 1998 experienced a decline in revenues of 33.4%
compared to the first half of 1998.
o Revenues in 1998 related to 1997 acquisitions were $189.1 million.
o Gross profit, before charges of $17.6 million, increased to $119.5
million in 1998 from $69.8 million in 1997 due to improved margins from
products sold in the first half of 1998.
o Selling, general and administrative expenses as a percentage of revenues
increased significantly from 18.8% in 1997 to 29.8% in 1998 due to higher
amortization of goodwill and other intangibles relating to the 1997 and
1998 acquisitions for this segment, higher selling costs associated with
the December 1997 acquisitions of distribution entities and system costs
primarily related to Year 2000 compliance costs.
o Operating income, before charges of $40.8 million, was down from $22.8
million in 1997 to $21.6 million in 1998 due to increased selling,
general and administrative expenses and reduced revenues associated with
industry conditions.
28
<PAGE> 30
COMPRESSION SERVICES
Our Compression Services Division was the least affected by the recent
declines in market conditions due to the fact that its business is based on
levels of natural gas development and production, which has been more stable
than oil production. Revenues for 1998 were essentially flat compared to 1997
as we spent a large portion of the year working to position this division for
growth. Gross margins and operating income for this division increased in 1998
as we focused on improving manufacturing and operational efficiencies of this
division's operations.
Looking forward into 1999, we believe that this division is the best
positioned of our operating divisions for growth in 1999 as we expect increased
demand for gas compression services as our customers seek ways to reduce costs.
International demand is also expected to increase as we seek opportunities with
foreign producers through our worldwide infrastructure. We expect this
division's revenues and operating income will also be significantly up for 1999
due to our joint venture with GE Capital described below under the heading
"Acquisitions and Dispositions."
The following chart sets forth additional data regarding the results of
our Compression Services Division for 1998 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
1998 1997
------------ -----------
(in thousands)
<S> <C> <C>
Revenues...................................... $ 177,481 $ 178,897
Gross Profit.................................. 39,656 35,105
Gross Profit %................................ 22.3% 19.6%
Selling, General and Administrative........... $ 21,064 $ 20,331
Operating Income.............................. 17,092(a) 14,774
EBITDA........................................ 40,171(a) 36,440
</TABLE>
(a) Includes merger and other charges of $1.5 million which relates
primarily to specific identification of excess equipment that is held
for sale due to the weakening market conditions.
Material items affecting the results of our Compression Services
Division for 1998 compared to 1997 were:
o Revenues in 1998 were down slightly from 1997. In the second half of 1998
revenues were down approximately 3.2% from the first half of 1998.
o Gross profit as a percentage of revenues increased from 19.6% in 1997
to 22.3% in 1998. This increase reflected an improvement in the design of
the compressor packages sold and operational efficiencies.
o The increase in selling, general and administrative expenses for 1998
compared to 1997 primarily reflects costs associated with the expansion
into international markets.
o Operating income before charges was $18.6 million in 1998 which benefited
from improved margins.
DRILLING PRODUCTS
Our Drilling Products Division has been the most affected by the recent
decline in drilling activity. Although revenues for 1998 were up compared to
1997, the increase was attributable to sales from our backlog and prior price
increases. This division also is expected to continue to have declining
revenues throughout the year as its backlog of drill pipe is reduced
substantially by the end of the second quarter of 1999. We currently expect
that sales of premium connections and tubulars will increase slightly as the
year progresses due to inventory reductions at the distributor level. We do
not, however, anticipate any increase in sales volumes of drill pipe during
1999 unless the rig count increases substantially and do not expect the
increased premium sales to offset the revenue and income losses from the drop
in drill pipe sales. In addition, because of the high fixed costs associated
with the manufacturing operations of this division, we expect this division to
operate at a loss for the first half of 1999. The second half results will be
dependent on the timing of improvements in demand, which we do not expect to
see until later in 1999 or some time in 2000.
29
<PAGE> 31
The following chart sets forth additional data regarding the results of
our Drilling Products Division for 1998 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
1998 1997
------------ -----------
(in thousands)
<S> <C> <C>
Revenues...................................... $ 655,758 $ 611,715
Gross Profit.................................. 169,851(a) 160,921
Gross Profit %................................ 25.9% 26.3%
Selling, General and Administrative........... $ 47,968 $ 40,091
Operating Income.............................. 115,433(a) 120,830
EBITDA........................................ 147,384(a) 144,440
</TABLE>
(a) Includes merger and other charges of $35.0 million, including $5.3 million
for facility closures, $28.5 million for the write-off of inventory and $1.2
million for the write-down of equipment. The write-off of inventory is
classified as cost of products.
Material items affecting the results of our Drilling Products Division
for 1998 compared to 1997 were:
o The increase in revenues for 1998 reflects the benefit of sales from
backlog from 1997 and the first half of 1998.
o Sales in the second half of 1998 decreased by 20.5% as compared to the
first half of 1998.
o Premium tubular revenues declined in the second half of 1998 due to a
decrease in demand as distributors' inventories fell in light of
prevailing market conditions.
o In December 1998, we acquired the company that owned our facility in
Veracruz, Mexico, and canceled the lease associated with that facility. We
also licensed internationally certain of our rights to some of our Atlas
Bradford thread line and recorded $9.0 million in revenues from that
arrangement.
o Improved gross profit, before charges of $28.5 million, significantly
benefited from lower average costs associated with higher production
volumes during the first half of 1998. The second half of 1998 reflected
a shift in the sales mix from higher margin product sales to lower margin
product sales.
o Selling, general and administrative expenses increased as a percentage of
revenues from 6.6% in 1997 to 7.3% in 1998. The increase reflects system
costs primarily associated with Year 2000 compliance costs, as well as
the amortization of goodwill associated with the 1997 acquisitions in
this division.
o Operating income, before charges of $35.0 million, improved from $120.8
million in 1997 to $150.4 million in 1998 due to favorable operating
results in the first half of 1998.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
The following charts contain selected financial data comparing our results
for 1997 and 1996:
<TABLE>
<CAPTION>
COMPARATIVE FINANCIAL DATA YEAR ENDED
---------------------------
1997 1996
----------- ------------
(in thousands)
<S> <C> <C>
Revenues.......................................... $1,969,089 $1,467,270
Gross Profit...................................... 580,702 368,345
Gross Profit %.................................... 29.5% 25.1%
Selling, General and Administrative
Attributable to Segments........................ $ 209,476 $ 162,018
Corporate General and Administrative.............. 37,816 39,304
Operating Income.................................. 335,992 169,101
Interest Income................................... 8,329 4,168
Interest Expense.................................. 43,273 39,368
Net Income from Continuing Operations............. 196,773 92,161
EBITDA(a)......................................... 478,923 290,931
</TABLE>
(a) EBITDA is calculated by taking operating income and adding back
depreciation and amortization. We have included an EBITDA calculation here
because when we look at the performance of our businesses, we give
30
<PAGE> 32
consideration to their EBITDA. Calculations of EBITDA should not be viewed as a
substitute to calculations under GAAP, in particular cash flow from operations,
operating income and net income. In addition, EBITDA calculations by one
company may not be comparable to another company.
<TABLE>
<CAPTION>
SALES BY GEOGRAPHIC REGION
YEAR ENDED
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
REGION: (a)
U.S............................................. 61% 63%
Canada.......................................... 13% 10%
Europe.......................................... 8% 10%
Latin America................................... 6% 5%
Africa and Middle East.......................... 5% 7%
Other........................................... 7% 5%
------- -------
Total......................................... 100% 100%
======= =======
</TABLE>
(a) Sales are based on the region of origination and do not reflect
sales by ultimate destination.
Our results for 1997 reflected a major improvement over 1996 as we saw
improvements in both the domestic and international rig counts and drilling
activity. These improvements resulted in most of our businesses operating at
near full capacity and increased prices as demand for products and services
exceeded supply. The improvements were generally seen in all of our geographic
markets, with North America realizing the greatest increases. Our businesses
also benefited from prior consolidation efforts and market expansions.
In addition to the general effect of substantially better market conditions
in 1997 compared to 1996, our results for 1997 and 1996 were affected by the
specific following items:
o Revenue increases in 1997 reflected the impact of the various
acquisitions made during 1997, the impact of consolidation, restructuring
and higher average sales prices which reflect the strength in our markets
for 1997.
o Acquisitions in 1997 benefited 1997 revenues by $166.5 million and income
from continuing operations by $12.3 million. Acquisitions in 1996
benefited 1997 revenues by $269.2 million and income from continuing
operations by $24.5 million.
o Businesses sold by us in 1997 contributed $76.9 million in revenues in
1997 and $134.3 million in 1996.
o Gross profit as a percentage of revenues increased from 25.1% in 1996 to
29.5% in 1997 due to stronger prices and sales of higher margin products
and services.
o Selling, general and administrative costs attributable to segments as a
percentage of total revenues were flat between 1997 and 1996, despite
increased amortization of intangibles and costs associated with the
assimilation of acquired businesses.
o Our corporate expenses as a percentage of revenues for 1997 were 1.9% as
compared to 2.7% for 1996. The percentage decrease from 1996 was
primarily attributable to the growth in 1997 revenues.
o Our interest charges in 1997 reflected increased indebtedness during 1997
and our $402.5 million principal amount of the Debentures issued in
November 1997.
o Net income for the disposed businesses was $8.3 million in 1997 and $9.6
million in 1996.
o We recorded in 1997 an extraordinary charge of $9.0 million, net of
taxes, related to our acquisition of approximately $120.0 million
principal amount of our 10 1/4% Senior Notes due 2004 and 10 1/4% Senior
Notes due 2004, Series B. We also recorded an extraordinary charge of
$0.7 million, net of taxes, for the early extinguishment of debt in 1996.
o In 1996, we reported income of $7.5 million, net of taxes, from
discontinued operations related to our Mallard Division and a gain of
$66.9 million, net of taxes of $44.6 million, related to the disposition.
In 1997, we benefited from a one-time pre-tax gain of $3.4 million
relating to the sale of Parker Drilling Company common stock received in
connection with the disposition of the Mallard Division.
o Our effective tax rate on income from continuing operations for 1997 was
35.5% as compared to 30.5% for 1996. The 1996 effective rate was
favorably impacted by a $4.0 million tax benefit resulting from a $6.4
million settlement in October 1996 with the United States Internal
Revenue Service in connection with the dissolution in October 1990 of an
oil and gas joint venture.
31
<PAGE> 33
1996 SPECIAL CHARGES
In the fourth quarter of 1996, we adopted a plan to close our Bastrop,
Texas, tool joint manufacturing facility and to combine our two packer
facilities through the closure of one facility in Arlington, Texas. In
connection with these decisions, we incurred a charge of $5.8 million
associated with these closures. Of this charge, $4.3 million related to the
tool joint facility closure and relocation of equipment from this facility and
$1.5 million related to the consolidation of our packer facilities and the
closure of one of the plants. We incurred $3.8 million in 1996 for costs
associated with these actions during 1996, including costs relating to the
relocation of equipment at our Bastrop facility to other facilities. We also
accrued $2.0 million as part of the $5.8 million charge for estimated exit
costs that were incurred in 1997 relating to the closure of our Bastrop and
Arlington facilities. These costs included $0.8 million for severance and
termination costs, $0.9 million for the reduction in the carrying value of our
Bastrop facility in light of the intended disposition of the facility and $0.3
million for the termination of the Arlington lease. Approximately 400 of our
employees were affected by these closures. We had substantially completed the
closure of both the Bastrop and Arlington facilities and incurred substantially
all charges related to the closing of these facilities by the end of the second
quarter of 1997.
SEGMENT RESULTS
COMPLETION AND OILFIELD SERVICES
The following chart sets forth certain data regarding the results of
our Completion and Oilfield Services Division for 1997 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
1997 1996
------------ -----------
(in thousands)
<S> <C> <C>
Revenues...................................... $ 929,001 $ 824,639
Gross Profit.................................. 314,870 233,507
Gross Profit %................................ 33.9% 28.3%
Selling, General and Administrative........... $ 102,040 $ 89,253
Operating Income.............................. 215,412 146,332
EBITDA........................................ 301,550 226,914
</TABLE>
Material items affecting the results of our Completion and Oilfield
Services Division for 1997 compared to 1996 were:
o The increase in revenues primarily reflects increased volume of activity
and improved pricing resulting from a 15% increase in worldwide drilling
activity.
o The increased use of certain drilling techniques, such as re-entry,
multi-lateral, horizontal and directional drilling, were also important
contributors to revenue growth in 1997, particularly in North America.
o U.S. oilfield services revenues increased 33% to $317.7 million, while
the U.S. average rig count increased 21%. Oilfield services revenues in
Canada increased 31% while average Canadian rig count increased 39%.
o International oilfield services revenues (excluding Canada) increased 18%
compared to an average rig count increase of 2%. International revenue
increases were primarily attributable to increased volume of rental and
service activity, some pricing improvement and the introduction of
downhole services into new markets.
32
<PAGE> 34
o Businesses sold by us in 1997 contributed $76.9 million in revenues in
1997 and $134.3 million in 1996.
o Cementation product sales increased 32% over 1996.
o Liner hanger sales and service revenues, which included the results of
Nodeco AS and Aarbakke AS from the date they were acquired in May 1996,
increased 66% in 1997 over 1996.
o Gross profit margin, as a percentage of revenues, increased in 1997 to
33.9% from 28.3% as a result of improved pricing in certain areas and
increased volume.
o Selling, general and administrative expenses for 1997 as a percentage of
revenues were 11.0% compared to 10.8% for 1996.
o Completion products operating income increased $15.7 million, or 67%, from
1996 to 1997, primarily as a result of the increased volume of cementation
product sales, operating efficiencies and the inclusion of the Nodeco
operations for the full year of 1997.
ARTIFICIAL LIFT SYSTEMS
The following chart sets forth certain data regarding the results of our
Artificial Lift Systems Division for 1997 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
1997 1996
------------ -----------
(in thousands)
<S> <C> <C>
Revenues...................................... $ 249,476 $ 150,816
Gross Profit.................................. 69,806 42,028
Gross Profit %................................ 28.0% 27.9%
Selling, General and Administrative........... $ 47,014 $ 30,361
Operating Income.............................. 22,792 11,667
EBITDA........................................ 31,736 17,532
</TABLE>
Material items affecting the results of our Artificial Lift Systems
Division for 1997 compared to 1996 were:
o Revenue growth in our Artificial Lift Systems Division was primarily due
to increased sales of artificial lift equipment in the Canadian and South
American markets, and the effects of acquisitions. During 1997, we
acquired Trico Industries, BMW Monarch, BMW Pump and various small
artificial lift companies. These acquisitions benefited 1997 revenues by
$64.9 million and operating income by $6.8 million.
o Sales of our progressing cavity pump product lines were particularly
strong in Canada and South America where the heavy oil markets improved.
o Gross profit, as a percentage of revenues, increased from 27.9% in 1996
to 28.0% in 1997 as a result of an improvement in this division's
domestic cost structure and the December 1997 acquisitions of Trico
Industries, BMW Pump and BMW Monarch.
o Selling, general and administrative expenses for 1997 as a percentage of
revenues was 18.8% compared to 20.1% for 1996 in spite of higher
amortization and combination expenses related to 1997 acquisitions.
COMPRESSION SERVICES
The following chart sets forth certain data regarding the results of our
Compression Services Division for 1997 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
1997 1996
------------ -----------
(in thousands)
<S> <C> <C>
Revenues...................................... $ 178,897 $ 154,503
Gross Profit.................................. 35,105 29,771
Gross Margin %................................ 19.6% 19.3%
Selling, General and Administrative........... $ 20,331 $ 21,938
Operating Income.............................. 14,774 7,833
EBITDA........................................ 36,440 31,387
</TABLE>
33
<PAGE> 35
Material items affecting the results of our Compression Services
Division for 1997 compared to 1996 were:
o Revenue increases were primarily due to an increase in manufacturing and
packaging revenues of 21% to $78.2 million and an improvement of 12% to
$100.7 million for compressor rental and service revenues.
o Gross profit increased from 19.3% in 1996 to 19.6% in 1997 due to
improvements in manufacturing and packaging operations.
o Selling, general and administrative expenses for 1997, compared to 1996,
declined due to cost reductions.
o Operating income increased due to improved sales, slightly better margins
and lower selling, general and administrative expenses.
DRILLING PRODUCTS
The following chart sets forth certain data regarding the results of our
Drilling Products Division for 1997 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------
1997 1996
------------ -----------
(in thousands)
<S> <C> <C>
Revenues...................................... $ 611,715 $ 337,312
Gross Profit.................................. 160,921 63,039
Gross Margin %................................ 26.3% 18.7%
Selling, General and Administrative........... $ 40,091 $ 20,466
Operating Income.............................. 120,830 42,573
EBITDA........................................ 144,440 53,619
</TABLE>
Material items affecting the results of our Drilling Products Division
for 1997 compared to 1996 were:
o Improved results were primarily due to increased demand for drill pipe and
other drilling tools, strength in premium tubular activity and our
acquisition of TA Industries, Inc., a premium tubular couplings and
accessories manufacturer, in April 1997, and the third quarter 1997
acquisition of XL Systems, Inc., a manufacturer of marine connectors.
o Drill pipe and other drill stem products sales increased to approximately
$283.4 million for 1997 from $181.3 million for 1996. The increase in
demand for drill pipe reflected higher domestic and international
drilling activity, in particular offshore drilling. Revenues from drill
pipe sales also reflected higher pricing of products.
o Premium tubular revenues increased to approximately $307.9 million during
1997 up from approximately $157.8 million for 1996. The increase in
premium tubular revenues reflected strong demand in the Gulf of Mexico
and the acquisition of TA Industries.
o During 1997, our acquisitions of TA Industries, XL Systems and various
small acquisitions benefited 1997 revenues in this division by $96.8
million and benefited its operating income by $16.1 million.
o Gross profit for this division increased as a percentage of revenues from
18.7% in 1996 to 26.3% in 1997 due to increased pricing on our products
and reduced costs resulting from the expansion of our Mexico tool joint
facility. In the third quarter of 1997, the Mexico facility became fully
operational, which benefited operations in the second half of 1997 by
over $3.0 million.
o Selling, general and administrative expenses for 1997, as a percentage of
revenues, was 6.6% compared to 6.1% for 1996 and reflected higher
selling, general and administrative expenses associated with the
operations of TA Industries as well as the increase in the amortization
of goodwill and other intangibles.
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<PAGE> 36
LIQUIDITY AND CAPITAL RESOURCES
Our current sources of capital are current cash, cash generated from
operations and borrowings under bank lines of credit. We believe that the
current reserves of cash and short-term investments, access to our existing
credit line and internally generated cash from operations are sufficient to
finance the projected cash requirements of our current and future operations.
We are continually reviewing acquisitions in our markets. Depending upon the
size, nature and timing of an acquisition, we may need additional capital in
the form of either debt, equity or a combination of both.
The following chart contains information regarding our capital resources and
borrowings and exposures as of and for the years ended 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---------- ------------
(in thousands)
<S> <C> <C>
Cash and Cash Equivalents.............................. $ 40,201 $ 74,211
Borrowings from Revolving Credit Facilities............ 117,279 24,243
Letters of Credit Outstanding.......................... 29,937 27,900
Cumulative Foreign Currency Translation
Adjustment........................................... (76,389) (38,494)
International Assets Hedged (U.S. Dollar Equivalent)... 33,365 36,802
Net Cash Inflows on Forward Exchange Contracts......... 423 5,200
</TABLE>
The reduction in our cash and cash equivalents since December 31, 1997, was
primarily attributable to the acquisition of new businesses for approximately
$138.8 million in cash and capital expenditures for property, plant and
equipment of $205.9 million, offset by net borrowings under revolving credit
facilities of $93.0 million, cash of $100.0 million from a sale and leaseback
that was consummated in the fourth quarter of 1998, and cash flow from
operations of $127.9 million.
BANKING FACILITIES
In May 1998, we put in place a five-year unsecured revolving credit
facility that allows us to borrow up to $250.0 million at any time. The
facility consists of a $200.0 million U.S. credit facility and a $50.0 million
Canadian credit facility. Borrowings under this facility bear interest at a
variable rate based on the U.S. prime rate or LIBOR. Our credit facility
contains customary affirmative and negative covenants, including a maximum debt
to capitalization ratio, a minimum interest coverage ratio, a limitation on
liens and a limitation on asset dispositions.
CONVERTIBLE SUBORDINATED DEBENTURES
In November 1997, we completed a private placement of $402.5 million
principal amount of our 5% Convertible Subordinated Preferred Equivalent
Debentures due 2027. The net proceeds from the Debentures were $390.9 million.
The Debentures bear interest at an annual rate of 5% and are convertible into
Common Stock at a price of $80 per share. We have the right to redeem the
Debentures at any time on or after November 4, 2000, at redemption prices
provided for in the indenture agreement, and are subordinated in right of
payment of principal and interest to the prior payment in full of certain
existing and future senior indebtedness. We also have the right to defer
payments of interest on the Debentures by extending the quarterly interest
payment period on the Debentures for up to 20 consecutive quarters at any time
when we are not in default in the payment of interest.
35
<PAGE> 37
7 1/4% SENIOR NOTES DUE 2006
We have outstanding $200.0 million of publicly traded 7 1/4% Senior Notes
due May 15, 2006. Interest on the 7 1/4% Senior Notes is payable semi-annually
on May 15 and November 15 of each year.
COMPRESSION FINANCING
Our Compression Services Division entered into a sale and leaseback
arrangement in December 1998 where it was provided with the right to sell up to
$200.0 million of compression units through December 1999 and lease them back
over a five year period under an operating lease. Payments under the lease are
calculated based on rate of return on the purchase price and an agreed
valuation of the leased compressors. Under the terms of the lease, our
Compression Services Division may repurchase the equipment at any time.
Weatherford International has provided for a residual value guarantee at the
end of the term of the lease equal to approximately 85.5% of the appraised
value of the compression units under lease.
As of December 31, 1998, our Compression Services Division had sold
compressors under this arrangement having an appraised value of $119.6
million and received cash of $100.0 million and a receivable of $19.6 million.
The receivable is classified in other current assets on the accompanying
Consolidated Balance Sheets as the balance is due on demand. The net book value
of the equipment sold was approximately $77.4 million, resulting in a pre-tax
gain of $42.2 million, which may be deferred until the end of the lease.
CAPITAL EXPENDITURES
Our capital expenditures for property, plant and equipment during 1998
were $205.9 million and primarily related to drill pipe and tubing, fishing
tools, tubular service equipment, compression rental equipment and the
completion of plant expansions in Canada. Much of the 1998 capital expenditures
related to projects initiated at the end of 1997 and early 1998. Capital
expenditures for 1999 are expected to be approximately $105.0 million.
Our compression operations are, by their nature, capital intensive and in
the event of growth require substantial investments in compressor units. These
capital investments have historically been financed through existing cash and
internally generated cash flow. We expect that future capital investments by our
compression division will be financed by our compression joint venture through
debt, sale and leaseback arrangements and other similar financing structures
that are repaid from the cash flows generated from the compressor units over the
projected term of rental of the equipment.
ACQUISITIONS AND DISPOSITIONS
Our company has grown substantially over the years through selective
acquisitions and combinations. The following table summarizes our 1998 and 1997
acquisitions by operating segment:
<TABLE>
<CAPTION>
1998 1997
--------------------------------------- --------------------------------------
CASH/ASSUMED TOTAL CASH/ASSUMED TOTAL
SEGMENT STOCK ($) LIABILITIES CONSIDERATION STOCK ($) LIABILITIES CONSIDERATION
----------------------------- ----------- ------------- ------------- ---------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Completion and Oilfield
Services................... $ -- $ 83,706 $ 83,706 $ -- $ 44,505 $ 44,505
Artificial Lift Systems...... 30,753 72,234 102,987 -- 250,128 250,128
Compression Services......... -- -- -- -- -- --
Drilling Products............ -- 73,923 73,923 47,425 70,696 118,121
--------- ----------- ----------- --------- ----------- -----------
Total...................... $ 30,753 $ 229,863 $ 260,616 $ 47,425 $ 365,329 $ 412,754
========= =========== =========== ========= =========== ===========
</TABLE>
Subsequent to year end, we completed a joint venture with GE Capital
Corporation in which we combined our compression services operations with GE
Capital's Global Compression's services operations. The joint venture, which is
known as Weatherford Global Compression, is the world's second largest provider
of natural gas contract compression services and owns or manages over 4,000
compression units worldwide having more than one million horse power. The pro
forma combined 1998 revenues, operating income and EBITDA for the joint venture
were $256.9 million, $7.3 million and $52.1 million, respectively. We own 64% of
the joint venture and GE Capital owns 36%. We have the right to acquire GE
Capital's interest at anytime at a price equal to a third party market
determined
36
<PAGE> 38
value that is not less than book value. GE Capital also has the right to require
us to purchase its interest at any time after February 2001 at a third party
market determined value as well as request a public offering of its interest
after that date, if we have not purchased its interest by that time.
We also recently completed our acquisition of Christiana Companies, Inc.
for approximately 4.0 million shares of Common Stock and $20.0 million cash. In
the acquisition we acquired through Christiana (1) 4.0 million shares of our
Common Stock, (2) cash, after distribution to the Christiana shareholders, equal
to the amount of Christiana's outstanding tax and other liabilities and (3) a
one-third interest in Total Logistic Control, a refrigerated warehouse, trucking
and logistics company. TLC has a net book value of approximately $8.2 million
and had 1998 revenues of $90.8 million, operating income of $5.8 million and
EBITDA of $12.6 million. We acquired Christiana because it gave us a unique
opportunity to own an interest in TLC for essentially no consideration. We
intend to hold our investment in Christiana as a passive investment.
Our 1998 and 1997 acquisitions, with the exception of our acquisition XL
Systems, Inc. in 1997, which was accounted for as an immaterial pooling of
interests, were accounted for using the purchase method of accounting. The
results of operations of all such acquisitions are included in the Consolidated
Statements of Income from their dates of acquisition. The 1998 and 1997
acquisitions were not material individually nor in the aggregate for each
applicable year.
Some of our acquisitions have resulted in substantial goodwill associated
with their operations, including goodwill of approximately $485.3 million
relating to our acquisitions in 1997 and 1998. The amortization expense for
goodwill and other intangibles during 1998 was $23.4 million.
During 1997 we sold certain non-core businesses. Cash proceeds from these
transactions totaled $68.8 million in 1997.
EXPOSURES
Industry Exposure
Substantially all of our customers are engaged in the energy industry.
This concentration of customers may impact our overall exposure to credit risk,
either positively or negatively, in that customers may be similarly affected by
changes in economic and industry conditions. Many of our customers have slowed
the payment of their accounts in light of current industry conditions and
others have experienced greater financial difficulties in meeting their payment
terms. We perform ongoing credit evaluations of our customers and do not
generally require collateral in support of our trade receivables. We maintain
reserves for potential credit losses, and actual losses have historically been
within our expectations.
Litigation and Environmental Exposure
In the ordinary course of business, we become the subject of various
claims and litigation. We maintain insurance to cover many of our potential
losses and we are subject to various self-retentions and deductibles with
respect to our insurance. Although we are subject to various ongoing items of
litigation, we do not believe that any of the items of litigation that we are
currently subject to will result in any material uninsured losses to us. It is,
however, possible that an unexpected judgment could be rendered against us in
cases in which we could be uninsured and beyond the amounts that we currently
have reserved or anticipate incurring for that matter.
We are also subject to various federal, state and local laws and
regulations relating to the energy industry in general and the environment in
particular. Environmental laws have in recent years become more stringent and
have generally sought to impose greater liability on a larger number of
potentially responsible parties. While we are not currently aware of any
situation involving an environmental claim that would likely have a material
adverse effect on our business, it is always possible that an environmental
claim with respect to one or more of our current businesses or a business or
property that one of our predecessors owned or used could arise that could
involve the expenditure of a material amount of funds.
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<PAGE> 39
International Exposure
Like most multinational oilfield service companies, we have operations in
certain international areas, including parts of the Middle East, North and West
Africa, Latin America, the Asia-Pacific region and the Commonwealth of
Independent States, that are inherently subject to risks of war, political
disruption, civil disturbance and policies that may:
o disrupt oil and gas exploration and production activities;
o restrict the movement of funds;
o lead to U.S. government or international sanctions; and
o limit access to markets for periods of time.
Historically, the economic impact of such disruptions has been temporary,
and oil and gas exploration and production activities have resumed eventually
in relation to market forces. Certain areas, including the CIS, Algeria,
Nigeria, parts of the Middle East, the Asia-Pacific region and Latin America,
have been subjected to political disruption which has negatively impacted
results of operations following such events.
Currency Exposure
A single European currency ("the Euro") was introduced on January 1, 1999,
at which time the conversion rates between legacy currencies and the Euro were
set for 11 participating member countries. However, the legacy currencies in
those countries will continue to be used as legal tender through January 1,
2002. Thereafter, the legacy currencies will be canceled, and the Euro bills
and coins will be used in the 11 participating countries. We are currently
evaluating the effect of the Euro on our consolidated financial statements and
our business operations; however, we do not foresee that the transition to the
Euro will have a significant impact.
Approximately 51% of our net assets are located outside the United States
and are carried on our books in local currencies. Changes in those currencies in
relation to the U.S. dollar result in translation adjustments which are
reflected as accumulated other comprehensive loss in the stockholders' equity on
our balance sheet. In 1998, we recorded a $37.9 million adjustment to our equity
account to reflect the net impact of the decline in various foreign currencies
against the U.S. dollar.
A discussion of our market risk exposures in financial instruments and
additional currency exposures appears below under the heading "Quantitative and
Qualitative Market Risk Disclosure."
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for the reporting of
comprehensive income and its components in a full set of general-purpose
financial statements and is effective for years beginning after December 15,
1997. We adopted SFAS No. 130 in the first quarter of 1998.
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information. SFAS No. 131, effective for years beginning
after December 15, 1997, requires segment information to be reported on a basis
consistent with that used internally for evaluating segment performance and
deciding how to allocate resources to segments. We have adopted SFAS No. 131
and restated our segment information and related disclosures in accordance with
its requirements.
In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures About
Pensions and Other Postretirement Benefits. SFAS No. 132 standardizes
disclosure requirements for pensions and other postretirement benefits. SFAS
No. 132 is effective for years beginning after December 15, 1997. We have
adopted SFAS No. 132 in 1998.
In March 1998, the AICPA issued Statement of Position (SOP) 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use. The
SOP provides guidance with respect to accounting for the various types of costs
incurred for computer software developed or obtained for our use. We adopted
SOP 98-1 in 1998. It did not have a significant effect on our consolidated
results of operations or financial position.
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<PAGE> 40
In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of Start-Up
Activities. We do not capitalize start-up cost; thus, the adoption will not
have a significant effect on our consolidated results of operations or
financial position.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS No. 133 is effective for years beginning after June
15, 1999. We are currently evaluating the impact of SFAS No. 133 on our
consolidated financial statements.
In October 1998, the FASB issued SFAS No. 134, Accounting for
Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise. SFAS No. 134 is not applicable
to us and has no impact on our financial statements.
YEAR 2000 MATTERS
The Year 2000 issue is the risk that information systems, computers,
equipment and products using date-sensitive software or containing computer
chips with two-digit date fields will be unable to correctly process the Year
2000 date change. If not identified and corrected prior to the Year 2000,
failures could occur in our software, hardware, equipment and products and
those of our suppliers, vendors and customers that could result in
interruptions in our business. Any failure could have a material impact on us.
In response to the Year 2000 issue, we have prepared and implemented a plan
("Year 2000 Plan") to assess and remediate significant Year 2000 issues in our:
o information technology systems ("IT"), including computer software and
hardware
o non-information technology systems utilizing date-sensitive software or
computer chips ("Non-IT"), including products, facilities, equipment and
other infrastructures.
Our management information systems department ("MIS Department"), together
with our technical and engineering employees and outside consultants, are
responsible for the implementation and execution of the Year 2000 Plan. Our
Year 2000 Plan is a comprehensive, multi-step process covering our IT and
Non-IT systems. The primary phases of the Year 2000 Plan are:
(1) assessing and analyzing our systems to identify those that are not Year
2000 ready
(2) preparing cost and resource estimates to repair, remediate or replace
all systems that are not Year 2000 ready
(3) developing a Company-wide, detailed strategy to coordinate the repair
or replacement of all systems that are not Year 2000 ready
(4) implementing the strategy to make all systems Year 2000 ready
(5) verifying, testing and auditing the Year 2000 readiness of all systems.
As of the end of 1998, the first phase of the Year 2000 Plan was completed
with respect to the assessment of our IT and Non-IT systems. The second phase
was also completed by the end of 1998. Work is currently underway in the third
phase of the Year 2000 Plan. The third phase will be completed by the end of
the first quarter of 1999, the fourth phase and the fifth and final phase will
be completed by the end of the third quarter of 1999. Any unexpected delays or
problems that prevent us from completing all phases of the Year 2000 Plan in a
timely manner could have a material adverse impact on us.
As part of the Year 2000 Plan, we are currently installing Year 2000 ready
business application systems and expect that these installations will be
complete by the end of the third quarter of 1999. We have retained outside
consultants to assist us with the installation of the new software and with the
assessment of the Year 2000 readiness of our IT systems. We expect to retain
additional consultants to assist us in the remediation and testing phases of
the Year 2000 Plan.
In addition to our assessment and review of our own systems, we have begun
communications with our third-party contractors, such as vendors, service
providers and customers, for the purpose of evaluating their readiness for the
Year 2000 and determining the extent to which we may be affected by the
remediation of their systems, software, applications and products. We expect to
further review and evaluate the Year 2000 programs of our significant
third-party contractors. However, there can be no guarantee that our IT and
Non-IT systems of third-party
39
<PAGE> 41
contractors will be Year 2000 ready or that the failure of any such party to
have Year 2000 ready systems would not result in interruptions in our business
which could have a material adverse impact on us.
In connection with the implementation and completion of the Year 2000 Plan,
we currently expect to incur pretax expenditures of approximately $10.0
million. We have incurred $6.3 million of such expenditures through December
31, 1998, of which, approximately $5.7 million has been incurred in connection
with the replacement of our business application software and approximately
$0.6 million has been incurred in connection with the replacement of certain IT
hardware systems. We intend to continue to fund the Year 2000 Plan expenditures
with working capital and third-party lease financing. Based upon information
currently available, we believe that expenditures associated with achieving
Year 2000 compliance will not have a material impact on operating results.
However, any unanticipated problems relating to the Year 2000 issue that result
in materially increased expenditures could have a material adverse impact on
us.
The expenditures associated with the Year 2000 Plan represent approximately
12% of our MIS Department's budget for 1999. Various other IT projects that are
not related to the Year 2000 issue have been deferred due to the Year 2000
efforts. The effects of these delays are not expected to have a material impact
on the Company.
We have not completed the evaluation of the most likely worst case Year
2000 scenario. We are preparing a contingency plan in response to Year 2000
worst case scenario and we estimate no lost revenues due to Year 2000 issues.
However, there can be no assurance that any contingency plan developed by us
will be sufficient to alleviate or remediate any significant Year 2000 problems
that we may experience.
The above discussion of the our efforts and expectations relating to the
risks and uncertainties associated with the Year 2000 issues and our Year 2000
Plan contain forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. These statements involve predictions and
expectations concerning our ability to achieve Year 2000 compliance, the amount
of costs and expenses related to the Year 2000 issue and the effect the Year
2000 issue may have on business and results of operations. Certain risks and
uncertainties may cause actual results to be materially different from the
projected or expected results, the overall effect of which may have a
materially adverse impact on us. These risks and uncertainties include, but are
not limited to, unanticipated problems and costs identified in all phases of
the Year 2000 Plan, our ability to successfully implement the Year 2000 Plan in
a timely manner and the ability of our suppliers, vendors and customers to make
their systems and products Year 2000 compliant.
40
<PAGE> 42
ITEM 7A. QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURES
We are currently exposed to market risk from changes in foreign currency and
changes in interest rates. A discussion of our market risk exposure in
financial instruments follows.
FOREIGN CURRENCY EXCHANGE RATES
Because we operate in virtually every oil and gas exploration and production
region in the world we conduct a portion of our business in currencies other
than the U.S. dollar. Although most of our international revenues are
denominated in the local currency, the effects of foreign currency fluctuations
are largely mitigated because local expenses of such foreign operations also
generally are denominated in the same currency. The impact of exchange rate
fluctuations during the years ended 1998, 1997 and 1996 did not have a material
effect on reported amounts of revenues or net income.
We enter into forward exchange contracts only as a hedge against certain
existing economic exposures, and not for speculative or trading purposes. These
contracts reduce exposure to currency movements affecting existing assets and
liabilities denominated in foreign currencies, such exposure resulting
primarily from trade receivables and payables and intercompany loans. The
future value of these contracts and the related currency positions are subject
to offsetting market risk resulting from foreign currency exchange rate
volatility. The counterparties to these foreign exchange contracts are
creditworthy multinational commercial banks. We believe that the risk of
counterparty nonperformance is immaterial.
At December 31, 1998 and 1997, we had contracts maturing within the next 60
days to sell $33.4 million and $36.8 million, respectively, in Norwegian
kroner, U.K. pounds sterling, Canadian dollars and Dutch guilders. Our largest
contracts are in Norwegian kroner, $28.8 million and $25.4 million as of
December 31, 1998 and 1997, respectively. Had such respective contracts matured
on December 31, 1998 and 1997, our required cash outlay would have been
minimal.
Settlement of forward exchange contracts resulted in net cash inflows
totaling $0.4 million, $5.2 million and $1.1 million during the years ended
December 31, 1998, 1997, and 1996, respectively. The net cash inflows vary from
year to year due to differences in the forward rate and the spot rate on the
date of settlement. This difference may result in material net inflows and
outflows if the currency is volatile. For instance, we experienced a $5.2
million net cash inflow in 1997, $4.2 million of which related to the Norwegian
kroner, when the difference between the spot rate at the settlement date and
the forward rate related to the kroner was as much as 8%. Although currencies
could fluctuate in the future and result in either a net inflow or outflow, we
believe that this risk is mitigated because we enter into contracts with terms
of 30 to 60 days. However, there can be no assurance that volatility similar to
or greater than that experienced in 1997 could not occur in the future.
INTEREST RATES
We are subject to interest rate risk on our long-term fixed interest rate
debt and, to a lesser extent, variable interest rate borrowings. Our long-term
borrowings primarily consist of the $200.0 million principal of the 7 1/4%
Senior Notes due 2006 and the $402.5 million principal of the 5% Convertible
Subordinated Preferred Equivalent Debentures due 2027. Changes in interest
rates would, assuming all other things being equal, cause the fair market value
of debt with a fixed interest rate to increase or decrease, and thus increase
or decrease the amount required to refinance the debt. As of December 31, 1998
and 1997, the fair value of the Senior Notes approximated the carrying value
and the fair market value of the Debentures was $249.6 million and $368.8
million, respectively. The fair value of the Senior Notes is solely dependent
on changes in prevailing interest rates, whereas the fair value of the
Debentures is dependent on prevailing interest rates and our current stock
price as it relates to the conversion price of $80 per share of our Common
Stock.
We have various other debt instruments but believe that the impact of
changes in interest rates in the near term will not be material to these
instruments.
41
<PAGE> 43
ITEM 8: Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Page
Report of Independent Public Accountants........................... 43
Consolidated Balance Sheets as of December 31, 1998 and 1997....... 44
Consolidated Statements of Income for each of the three years
in the period ended December 31, 1998......................... 45
Consolidated Statements of Stockholders' Equity for each of
the three years in the period ended December 31, 1998......... 46
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1998................... 47
Notes to Consolidated Financial Statements......................... 48
Financial Statement Schedule:
II. Valuation and Qualifying Accounts and Allowances.......... 76
All other schedules are omitted because they are not required or because
the required information is included in the financial statements or notes
thereto.
42
<PAGE> 44
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Weatherford International, Inc.:
We have audited the accompanying consolidated balance sheets of
Weatherford International, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These consolidated financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedule 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 consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Weatherford International, Inc. and subsidiaries as of December 31, 1998 and
1997 and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The Financial Statement
Schedule listed in Part II - Item 8 is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not a required part of
the basic consolidated financial statements. The Financial Statement Schedule
has been subjected to the auditing procedures applied in our audits of the
basic consolidated financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
February 17, 1999
43
<PAGE> 45
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents....................................... $ 40,201 $ 74,211
Accounts Receivable, Net of Allowance for Uncollectible Accounts
of $19,764 in 1998 and $23,473 in 1997......................... 400,886 524,929
Inventories..................................................... 484,822 455,811
Deferred Tax Asset.............................................. 55,003 44,904
Other Current Assets............................................ 101,480 34,221
---------- ----------
1,082,392 1,134,076
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land, Buildings and Other Property.............................. 237,305 228,178
Rental and Service Equipment.................................... 902,939 1,010,065
Machinery and Equipment......................................... 521,674 393,317
---------- ----------
1,661,918 1,631,560
Less: Accumulated Depreciation................................. 823,648 764,747
---------- ----------
838,270 866,813
---------- ----------
GOODWILL, NET.................................................... 811,034 668,475
OTHER ASSETS..................................................... 100,019 68,546
---------- ----------
$2,831,715 $2,737,910
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-Term Borrowings........................................... $ 185,729 $ 24,243
Current Portion of Long-Term Debt............................... 19,346 13,178
Accounts Payable................................................ 135,728 218,810
Accrued Salaries and Benefits................................... 44,558 63,656
Current Tax Liability........................................... 25,312 44,317
Other Accrued Liabilities....................................... 146,168 138,965
---------- ----------
556,841 503,169
---------- ----------
LONG-TERM DEBT................................................... 229,663 252,322
DEFERRED INCOME TAXES AND OTHER.................................. 148,831 121,370
5% CONVERTIBLE SUBORDINATED PREFERRED EQUIVALENT DEBENTURES...... 402,500 402,500
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $1 Par Value, Authorized 250,000 Shares, Issued
103,513 Shares in 1998 and 101,958 Shares in 1997.............. 103,513 101,958
Capital in Excess of Par Value.................................. 1,052,899 1,018,024
Treasury Stock, at Cost......................................... (193,328) (165,287)
Retained Earnings............................................... 607,185 542,348
Accumulated Other Comprehensive Loss ........................... (76,389) (38,494)
---------- ----------
1,493,880 1,458,549
---------- ----------
$2,831,715 $2,737,910
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
44
<PAGE> 46
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Products........................................... $1,250,570 $1,097,823 $ 704,350
Services and Rentals............................... 760,084 871,266 762,920
---------- ---------- ---------
2,010,654 1,969,089 1,467,270
COSTS AND EXPENSES:
Cost of Products................................... 924,133 807,575 550,292
Cost of Services and Rentals....................... 502,652 580,812 548,633
Selling, General and Administrative Attributable to
Segments.......................................... 266,423 209,476 162,018
Corporate General and Administrative............... 26,980 37,816 39,304
Equity in Earnings of Unconsolidated Affiliates.... (2,679) (2,582) (2,078)
Merger Costs and Other Charges..................... 144,097 -- --
---------- ---------- ---------
1,861,606 1,633,097 1,298,169
---------- ---------- ---------
OPERATING INCOME.................................... 149,048 335,992 169,101
OTHER INCOME (EXPENSE):
Interest Income.................................... 2,969 8,329 4,168
Interest Expense................................... (54,497) (43,273) (39,368)
Gain on Sale of Marketable Securities.............. -- 3,352 --
Other, Net......................................... 1,868 561 (1,227)
---------- ---------- ---------
INCOME BEFORE INCOME TAXES.......................... 99,388 304,961 132,674
PROVISION FOR INCOME TAXES.......................... 34,551 108,188 40,513
---------- ---------- ---------
INCOME FROM CONTINUING OPERATIONS................... 64,837 196,773 92,161
INCOME FROM DISCONTINUED OPERATIONS,
NET OF TAXES....................................... -- -- 7,468
GAIN ON DISPOSAL OF DISCONTINUED OPERATIONS,
NET OF TAXES....................................... -- -- 66,924
EXTRAORDINARY CHARGE, NET OF TAXES.................. -- (9,010) (731)
---------- ---------- ---------
NET INCOME.......................................... $ 64,837 $ 187,763 $ 165,822
========== ========== =========
BASIC EARNINGS (LOSS) PER SHARE:
Income From Continuing Operations.................. $ 0.67 $ 2.04 $ 1.03
Income From Discontinued Operations................ -- -- 0.08
Gain on Disposal of Discontinued Operations........ -- -- 0.75
Extraordinary Charge............................... -- (0.09) (0.01)
---------- ---------- ---------
Net Income Per Share............................... $ 0.67 $ 1.95 $ 1.85
========== ========== =========
Basic Weighted Average Shares Outstanding.......... 97,065 96,052 89,842
========== ========== =========
DILUTED EARNINGS (LOSS) PER SHARE:
Income From Continuing Operations.................. $ 0.66 $ 2.01 $ 1.01
Income From Discontinued Operations................ -- -- 0.08
Gain on Disposal of Discontinued Operations........ -- -- 0.74
Extraordinary Charge............................... -- (0.09) (0.01)
---------- ---------- ---------
Net Income Per Share............................... $ 0.66 $ 1.92 $ 1.82
========== ========== =========
Diluted Weighted Average Shares Outstanding........ 97,757 97,562 90,981
========== ========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
45
<PAGE> 47
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS)
---------------------------
CUMULATIVE
FOREIGN UNREALIZED
COMMON STOCK CAPITAL IN CURRENCY GAIN ON TREASURY STOCK TOTAL
----------------- EXCESS OF RETAINED TRANSLATION MARKETABLE ------------------- STOCKHOLDERS'
SHARES $1 PAR PAR VALUE EARNINGS ADJUSTMENT SECURITIES SHARES AMOUNT EQUITY
------- -------- ---------- -------- --------- ------- ------ ----------- ----------
q
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995......... 85,485 $ 85,485 $698,320 $189,838 $(12,784) $ -- (265) $(2,522) $ 958,337
Total Comprehensive Income........... -- -- -- 165,822 1,304 2,381 -- -- 169,507
Shares Issued in Acquisitions........ 2,339 2,339 48,395 -- -- -- -- -- 50,734
Shares Issued Under Employee
Benefit Plans....................... 29 29 1,342 -- -- -- 20 419 1,790
Stock Grants and Options Exercised... 740 740 12,038 -- -- -- (8) (394) 12,384
Issuance of Common Stock............. 6,900 6,900 93,960 -- -- -- -- -- 100,860
Purchase of Treasury Stock for
Executive Deferred Compensation
Plan............................... -- -- -- -- -- -- (44) (908) (908)
------- -------- ---------- -------- --------- ------- ------- ----------- ----------
Balance at December 31, 1996......... 95,493 95,493 854,055 355,660 (11,480) 2,381 (297) (3,405) 1,292,704
Total Comprehensive Income (Loss).... -- -- -- 187,763 (27,014) (2,381) -- -- 158,368
Effect of Immaterial Pooling......... 946 946 (717) (1,075) -- -- -- -- (846)
Replacement Shares (Shares Acquired)
from GulfMark Merger................ 4,471 4,471 142,788 -- -- -- (4,471) (147,259) --
Shares Issued Under Employee
Benefit Plans....................... 11 11 464 -- -- -- -- -- 475
Stock Grants and Options Exercised... 1,037 1,037 12,635 -- -- -- (5) (247) 13,425
Tax Benefit of Options Exercised..... -- -- 8,799 -- -- -- -- -- 8,799
Purchase of Treasury Stock Under
Stock Repurchase Plan............... -- -- -- -- -- -- (275) (11,860) (11,860)
Purchase of Treasury Stock for
Executive Deferred Compensation
Plan .............................. -- -- -- -- -- -- (48) (2,516) (2,516)
------- -------- ---------- -------- --------- ------- ------- ----------- ----------
Balance at December 31, 1997.........101,958 101,958 1,018,024 542,348 (38,494) -- (5,096) (165,287) 1,458,549
Total Comprehensive Income (Loss).... -- -- -- 64,837 (37,895) -- -- -- 26,942
Shares Issued in an Acquisition...... 727 727 30,026 -- -- -- -- -- 30,753
Shares Issued Under Employee
Benefit Plans....................... 12 12 312 -- -- -- -- -- 324
Stock Grants and Options Exercised... 2,115 2,115 40,627 -- -- -- (1,240) (38,215) 4,527
Tax Benefit of Options Exercised..... -- -- 7,760 -- -- -- -- -- 7,760
Purchase of Treasury Stock Under
Stock Repurchase Plan............... -- -- -- -- -- -- (993) (37,585) (37,585)
Purchase of Treasury Stock for
Executive Deferred Compensation
Plan............................... -- -- -- -- -- -- (79) (2,769) (2,769)
Retirement of Treasury Stock.........(1,299) (1,299) (49,229) -- -- -- 1,299 50,528 --
Recognition of Deferred Compensation
Due to Merger....................... -- -- 5,379 -- -- -- -- -- 5,379
------- -------- ---------- -------- --------- ------- ------- ----------- ----------
Balance at December 31, 1998........ 103,513 $103,513 $1,052,899 $607,185 $(76,389) $ -- (6,109) $(193,328) $1,493,880
======= ======== ========== ======== ========= ======= ======= =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
46
<PAGE> 48
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
-------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income......................................................... $ 64,837 $187,763 $ 165,822
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Non-Cash Portion of Merger Costs and Other Charges................ 124,595 -- --
Depreciation and Amortization..................................... 170,732 142,931 121,830
Net Income from Discontinued Operations........................... -- -- (7,468)
Gain on Disposal of Discontinued Operations, Net.................. -- -- (66,924)
Gain on Sale of Assets, Net....................................... (29,292) (20,056) (14,058)
Extraordinary Charge on Prepayment of Debt, Net................... -- 9,010 731
Deferred Income Tax Provision (Benefit) from Continuing Operations (20,503) 35,459 4,138
Provision for Uncollectible Accounts Receivable................... 2,397 13,248 4,608
Change in Assets and Liabilities, Net of Effects of Businesses
Acquired:
Accounts Receivable.............................................. 114,138 (113,009) (63,562)
Inventories...................................................... (73,607) (108,837) (24,680)
Other Current Assets............................................. (39,837) (2,742) 1,547
Accounts Payable................................................. (88,210) 19,216 28,540
Accrued Current Liabilities...................................... (88,143) 7,209 (5,599)
Other Assets..................................................... (1,290) (5,031) (2,697)
Other, Net....................................................... (7,882) (13,019) (22,257)
-------- ------------ ---------
Net Cash Provided by Continuing Operations....................... 127,935 152,142 119,971
Net Cash Provided by Discontinued Operations..................... -- -- 8,294
-------- ------------ ---------
Net Cash Provided by Operating Activities........................ 127,935 152,142 128,265
-------- ------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Businesses, Net of Cash Acquired.................... (138,840) (321,477) (80,077)
Capital Expenditures for Property, Plant and Equipment............. (205,879) (212,992) (172,725)
Proceeds from Sales of Businesses.................................. -- 68,798 326,016
Proceeds from Sales of Property, Plant and Equipment............... 46,727 30,431 20,215
Purchase of Short-Term Investment.................................. (20,742) -- --
Proceeds from Sale and Leaseback of Equipment...................... 100,000 -- --
Acquisitions and Capital Expenditures of Discontinued Operations... -- -- (63,136)
Income Taxes Paid on Disposal of Discontinued Operations........... -- (62,808) --
Proceeds From Sale of Marketable Securities........................ -- 23,352 --
Other, Net......................................................... 589 (6,384) (15,388)
-------- ------------ ---------
Net Cash Provided (Used) by Investing Activities................. (218,145) (481,080) 14,905
-------- ------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Long-Term Debt, Net.................................... -- 390,911 197,824
Issuance of Common Stock, Net...................................... -- -- 100,860
Purchases of Treasury Stock........................................ (40,356) (14,376) (908)
Tender of Senior Notes............................................. -- (119,980) --
Proceeds from Stock Option Exercises............................... 3,932 16,352 14,148
Termination Costs on Retirement of Debt............................ -- (10,752) (1,125)
Borrowings (Repayments) Under Short-Term Borrowings, Net........... 113,036 21,319 (121,656)
Borrowings (Repayments) on Long-Term Debt, Net..................... (19,561) (126,425) (115,761)
Other Financing Activities, Net.................................... 324 (10,111) 4,978
-------- ------------ ---------
Net Cash Provided by Financing Activities........................ 57,375 146,938 78,360
-------- ------------ ---------
Effect of Exchange Rate on Cash.................................... (1,175) (784) (220)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................................ (34,010) (182,784) 221,310
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR...................... 74,211 256,995 35,685
-------- ------------ ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR............................ $ 40,201 $74,211 $ 256,995
======== ============ =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
47
<PAGE> 49
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
On May 27, 1998, EVI, Inc. ("EVI") completed a merger with Weatherford
Enterra, Inc. ("WII") and changed its name to EVI Weatherford, Inc. (together
with its subsidiaries, the "Company") (See Note 2). The merger was accounted
for as a pooling of interests; accordingly, the accompanying financial
statements have been restated to include the results of WII for all periods
presented. Certain reclassifications of prior year balances have been made to
conform such amounts to corresponding 1998 classifications.
NAME CHANGE
At the Company's annual stockholders meeting on September 21, 1998, the
stockholders of the Company approved a name change from EVI Weatherford, Inc.
to Weatherford International, Inc. The Company's common stock, $1.00 par value
("Common Stock"), is listed on the New York Stock Exchange with a new stock
symbol of "WFT".
NATURE OF OPERATIONS
The Company is one of the world's largest providers of oilfield services
and equipment for the oil and gas industry.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Weatherford
International, Inc. and all majority-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in consolidation.
The Company accounts for its 50% or less-owned affiliates using the equity
method.
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 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.
INVENTORIES
Inventories are valued using the first-in, first-out ("FIFO") method and
are stated at the lower of cost or market.
OTHER CURRENT ASSETS
Other current assets are comprised of non-trade receivables, prepaid
expenses, and short-term investments. The net increase from December 31, 1997
to December 31, 1998 primarily reflects the receivable of $19.6 million related
to the December 1998 sale and leaseback of compression equipment (See Note 14)
and the fourth quarter purchase of short-term investments in debt securities
for $20.7 million.
DEBT AND EQUITY SECURITIES
Investments in debt and equity securities are accounted for in accordance
with Statement of Financial Accounting Standards No. 115 ("SFAS No. 115"),
Accounting for Debt and Equity Securities, and accordingly, these investments
are recorded at their fair market value with unrealized gains or losses
recorded as a separate component of stockholders' equity. The Company has
classified these investments in other current assets as available for sale,
with any other than temporary decline in fair value of securities charged to
earnings. In April 1997, the Company sold equity securities, comprised of
approximately 3.1 million shares of Parker Drilling Company ("Parker") common
stock, pursuant to a public offering effected by Parker. As a result, the
Company received net proceeds of approximately $23.4 million and recognized a
pre-tax gain of approximately $3.4 million. (See Note 15).
48
<PAGE> 50
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is carried at cost. Maintenance and repairs
are expensed as incurred. The costs of renewals, replacements and betterments
are capitalized. Depreciation on fixed assets is computed using the
straight-line method over the estimated useful lives for the respective
categories. The Company evaluates potential impairment of property, plant and
equipment and other long-lived assets on an ongoing basis whenever events or
circumstances indicate that carrying amounts may not be recoverable. The
useful lives of the major classes of property, plant and equipment are as
follows:
<TABLE>
<CAPTION>
LIFE
----------------
<S> <C>
Buildings and other property......................... 5 - 45 years
Rental and service equipment......................... 3 - 15 years
Machinery and equipment.............................. 3 - 20 years
</TABLE>
INTANGIBLE ASSETS AND AMORTIZATION
The Company's intangible assets are comprised primarily of goodwill and
identifiable intangible assets, principally patents and technology licenses. The
Company periodically evaluates goodwill and other intangible assets, net of
accumulated amortization, for impairment based on the undiscounted cash flows
associated with the asset compared to the carrying amount of that asset.
Management believes that there have been no events or circumstances which
warrant revision to the remaining useful life or which affect the recoverability
of any intangible assets. Goodwill is being amortized on a straight-line basis
over the lesser of the estimated useful life or 40 years. Other identifiable
intangible assets, included as a component of other assets, are amortized on a
straight-line basis over the years expected to be benefited, ranging from 5 to
15 years.
Amortization expense for goodwill and other intangible assets was
approximately $23.4 million, $15.0 million and $10.8 million for 1998, 1997 and
1996, respectively. Accumulated amortization for goodwill at December 31, 1998
and 1997 was $48.5 million and $30.1 million, respectively.
ENVIRONMENTAL EXPENDITURES
Environmental expenditures that relate to the remediation of an existing
condition caused by past operations, and which do not contribute to current or
future revenues, are expensed. Liabilities for these expenditures are recorded
when it is probable that obligations have been incurred and the costs can be
reasonably estimated. Estimates are based on currently available facts and
technology, presently enacted laws and regulations and the Company's prior
experience in remediation of contaminated sites. Liabilities included $7.3
million and $12.7 million of accrued environmental expenditures at December 31,
1998 and 1997, respectively.
STOCK-BASED COMPENSATION
In 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 123, ("SFAS No. 123"),
Accounting for Stock Based Compensation. The Company has elected not to adopt
the accounting recognition provisions of SFAS No. 123 and, as permitted, has
continued to use the intrinsic value method of accounting established by
Accounting Principles Board Opinion No. 25 ("APB No. 25") to account for its
stock-based compensation programs. Under APB No. 25 no compensation expense is
recognized when the exercise price of an employee stock option is equal to the
market price of Common Stock on the grant date. The Company has adopted SFAS
No. 123 by making the required pro forma disclosures of net earnings and
earnings per share as if the fair value method of accounting under SFAS No. 123
had been applied (See Note 10).
FOREIGN CURRENCY TRANSLATION
The functional currency for most of the Company's international operations
is the applicable local currency. Results of operations for foreign
subsidiaries with functional currencies other than the U.S. dollar are
translated using average exchange rates during the period. Assets and
liabilities of these foreign subsidiaries are translated using the exchange
rates in effect at the balance sheet date, and the resulting translation
adjustments are included as accumulated other comprehensive loss, a component of
stockholders' equity. Currency transaction gains and losses are reflected in
income for the period.
49
<PAGE> 51
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The net decline in the cumulative foreign currency translation adjustment,
as reported in the Consolidated Statements of Stockholders' Equity, from
December 31, 1997 to December 31, 1998 was $37.9 million which primarily
reflects the financial impact of the devaluation of the Canadian and Latin
American currencies as compared to the U.S. dollar.
FOREIGN EXCHANGE CONTRACTS
The Company enters into foreign exchange contracts only as a hedge against
certain existing economic exposures, and not for speculative or trading
purposes. These contracts reduce exposure to currency movements affecting
specific existing assets and liabilities denominated in foreign currencies,
such exposure resulting primarily from trade receivables and payables and
intercompany loans. The future value of these contracts and the related
currency positions are subject to offsetting market risks resulting from
foreign currency exchange rate volatility. The counterparties to the Company's
foreign exchange contracts are creditworthy multinational commercial banks.
Management believes that the risk of counterparty nonperformance is immaterial.
At December 31, 1998 and 1997, the Company had contracts maturing within the
next 60 days to sell $33.4 million and $36.8 million, respectively, in
Norwegian kroner, U.K. pounds sterling, Canadian dollars and Dutch guilders.
Had such respective contracts matured on December 31, 1998 and 1997, the
Company's required cash outlay would have been insignificant.
ACCOUNTING FOR INCOME TAXES
Under Statement of Financial Accounting Standards No. 109 ("SFAS No.
109"), Accounting for Income Taxes, 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.
REVENUE RECOGNITION
The Company recognizes revenue as products are shipped or accepted by the
customer and when service and rentals are provided. Proceeds from customers
for the cost of oilfield rental equipment that is involuntarily damaged or lost
downhole are reflected as revenues.
EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income by the
weighted average number of shares of Common Stock outstanding during the year.
Diluted earnings per common share is computed by dividing net income by the
weighted average number of shares of Common Stock outstanding during the year
adjusted for the dilutive effect of the incremental shares that would have been
outstanding under the Company's stock option and restricted stock plans (See
Note 10). The effect of the 5% Convertible Subordinated Preferred Equivalent
Debentures due 2027 (the "Debentures") on diluted earnings per share is
anti-dilutive and, thus, has no impact.
The following reconciles basic and diluted weighted average shares:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
(in thousands)
Basic weighted average number of shares outstanding.... 97,065 96,052 89,842
Dilutive effect of stock option and restricted stock
plans.................................................. 692 1,510 1,139
------ ------ ------
Dilutive weighted average number of shares outstanding. 97,757 97,562 90,981
====== ====== ======
</TABLE>
NEW REPORTING REQUIREMENTS
In February 1998, the FASB issued Statement of Accounting Standards No.
132 ("SFAS No. 132"), Employers' Disclosures About Pensions and Other
Postretirement Benefits. SFAS No. 132 standardizes disclosure requirements for
pensions and other postretirement benefits. The Company adopted SFAS No. 132
in 1998 (See Note 11).
50
<PAGE> 52
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In March 1998, the AICPA issued Statement of Position (SOP) 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use. The SOP provides guidance with respect to accounting for the
various types of costs incurred for computer software developed or obtained for
the Company's use. The Company has adopted SOP 98-1. The adoption did not
have a significant effect on the consolidated results of operations or
financial position.
In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of
Start-Up Activities. The Company does not capitalize start-up cost; thus, the
adoption will not have a significant effect on the consolidated results of
operations or financial position of the Company.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 130 ("SFAS No. 130"), Reporting Comprehensive Income. SFAS No. 130
establishes standards for the reporting of comprehensive income and its
components in a full set of general-purpose financial statements. The Company
adopted SFAS No. 130 in 1998 and presents comprehensive income in the
accompanying Consolidated Statements of Stockholders' Equity. The primary
adjustments and reclassifications to reflect net income on a comprehensive
income basis for the years presented were foreign currency translation
adjustments and the effect of unrealized and realized gains on marketable
securities.
In June 1998, the FASB issued Statement of Accounting Standards No. 133
("SFAS No. 133"), Accounting for Derivative Instruments and Hedging Activities.
SFAS No. 133 provides a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999. The Company
is currently evaluating the impact of SFAS No. 133 on its consolidated
financial statements.
In October 1998, the FASB issued Statement of Accounting Standards No. 134
("SFAS No. 134"), Accounting for Mortgage-Backed Securities Retained After the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise. SFAS No. 134 is not applicable to the Company and has no impact on
its consolidated financial statements.
2. MERGER AND ACQUISITIONS
In December 1998, the Company acquired the company that owned the
Veracruz, Mexico facility and cancelled the lease associated with that
facility. Total consideration for this transaction was cash of $1.5 million
and a note payable of $48.5 million due in March 1999. The Company also
licensed internationally certain of its rights to some of the Company's Atlas
Bradford thread lines and recorded approximately $9.0 million in revenue
from that arrangement.
On May 27, 1998, EVI completed a merger with WII, merging WII with and
into EVI pursuant to a tax free merger (the "Merger") in which the stockholders
of WII received 0.95 of a share of the Company's Common Stock in exchange for
each outstanding share of WII common stock, approximately 48.9 million shares.
In addition, approximately 1.4 million shares of Common Stock have been
reserved for issuance by the Company for outstanding options under WII's
compensation and benefit plans. The Merger was accounted for as a pooling of
interests.
51
<PAGE> 53
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The separate results of EVI and WII and the combined company were as
follows:
<TABLE>
<CAPTION>
January 1 to
May 27, Year Ended December 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
(in thousands)
Revenues:
EVI............................... $505,549 $ 892,264 $ 478,020
WII............................... 426,422 1,083,965 994,468
Merger adjustments................ (4,963) (7,140) (5,218)
----------- ----------- -----------
Combined.......................... $927,008 $1,969,089 $1,467,270
=========== =========== ===========
Extraordinary Charge, Net of Taxes:
EVI............................... $ -- $ (9,010) $ (731)
WII............................... -- -- --
----------- ----------- -----------
Combined.......................... $ -- $ (9,010) $ (731)
=========== =========== ===========
Net Income (Loss):
EVI............................... $ 54,045 $ 74,685 $ 98,166
WII............................... 48,481 112,900 70,073
Merger adjustments................ (1,033) 178 (2,417)
----------- ----------- -----------
Combined.......................... $101,493 $ 187,763 $ 165,822
=========== =========== ===========
</TABLE>
Merger adjustments include the elimination of intercompany revenues of
$5.0 million, $7.1 million and $5.2 million and cost of sales of $3.4 million,
$5.7 million and $4.2 million for the five months ended May 27, 1998 and years
ended December 31, 1997 and 1996, respectively. Merger adjustments for the
years ended December 31, 1997 and 1996 also include the elimination of expenses
of $1.7 million and a gain of $2.7 million, respectively, recorded by WII on
the sale of Arrow Completion Systems, Inc. to EVI in December 1996.
On February 19, 1998, the Company completed the acquisition of Ampscot
Equipment Ltd. ("Ampscot"), an Alberta corporation, for approximately $57.1
million in cash. Ampscot is a Canadian-based manufacturer of pumping units.
On January 15, 1998, the Company completed the acquisition of Taro
Industries Limited ("Taro"), an Alberta corporation, in which approximately 0.8
million shares of Common Stock have been issued to the shareholders of Taro in
exchange for their shares of Taro stock. Taro is a Canadian provider of well
automation, gas compression, and drilling equipment distribution.
On January 12, 1998, the Company completed the acquisition of the Houston
Well Screen group of companies ("HWS") from Van der Horst Limited, a Singapore
company, for a net purchase price of approximately $27.6 million in cash. The
HWS acquisition includes the purchase of Van der Horst U.S.A., Inc., which is
the holding company of Houston Well Screen Company and of Houston Well Screen
Asia Pte. Ltd., which has operations in Singapore and Indonesia. HWS makes
wedge-wire screen products for use in oil and gas production and other
applications.
On December 3, 1997, the Company completed the acquisition of all of the
outstanding shares of BMW Monarch (Lloydminster) Ltd. ("BMW Monarch") and BMW
Pump Inc. ("BMW Pump") for aggregate consideration of approximately $98.8
million in cash, including a final working capital adjustment, and $14.3
million in assumed debt. BMW Pump is a Canadian-based manufacturer of
progressing cavity pumps, and BMW Monarch is a Canadian supplier of progressing
cavity pumps, as well as, other production related oilfield products.
On December 2, 1997, the Company completed the acquisition of all of the
capital stock of Trico Industries, Inc. ("Trico"), in exchange for $105.0
million in cash and the assumption of $8.7 million of debt. Trico is a
Texas-based manufacturer and distributor of sub-surface reciprocating pumps,
sucker rods, accessories and hydraulic lift systems.
52
<PAGE> 54
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On August 25, 1997, the Company completed the acquisition of XLS Holding,
Inc. ("XL") in a transaction accounted for as a pooling of interests. XL
designs, manufactures and markets high performance connectors for marine
applications such as conductors, risers and offshore structural components. In
connection with the acquisition, the Company issued approximately 0.9 million
shares of Common Stock in exchange for all of the equity interests of XL. As
the effect of this business combination is not significant, prior period
financial statements were not restated.
On May 1, 1997, the Company acquired GulfMark International, Inc.
("GulfMark") pursuant to a merger in which approximately 4.4 million shares of
Common Stock were issued to the stockholders of GulfMark. Prior to the merger,
GulfMark effected a spin-off to its stockholders of its marine transportation
services business. The retained assets of GulfMark that were acquired by the
Company in this transaction consisted of approximately 4.4 million shares of
Common Stock, an erosion control company and certain other miscellaneous
assets. The 4.4 million shares of Common Stock acquired are classified as
"Treasury Stock, at Cost" on the accompanying Consolidated Balance Sheets.
Because the number of shares of Common Stock issued in the GulfMark acquisition
approximated the number of shares of Common Stock held by GulfMark prior to the
acquisition, the GulfMark acquisition had no material effect on the outstanding
number of shares of Common Stock or net equity of the Company.
On April 14, 1997, the Company acquired TA Industries, Inc. ("TA"), a
manufacturer of premium couplings and premium accessories, for approximately
$44.1 million in cash and $19.7 million of assumed debt.
On May 23, 1996, the Company acquired the business and assets of Nodeco
AS, a Norwegian company, and its wholly-owned subsidiary, Aarbakke AS
(collectively, "Nodeco"). Nodeco designs, manufactures, sells, and rents oil
and gas well completion products primarily consisting of liner hanger equipment
and related services, as well as pump packers. The Company paid cash of
approximately $14.4 million and issued 0.7 million shares of its Common Stock.
The Company has also effected various other 1998, 1997, and 1996
acquisitions for a total consideration of approximately $75.1 million, $82.2
million and $61.6 million, respectively.
The acquisitions, with the exception of WII and XL, were accounted for
using the purchase method of accounting. The results of operations of all such
acquisitions and XL are included in the Consolidated Statements of Income from
their respective dates of acquisition. The 1998 and 1997 acquisitions are not
material individually or in the aggregate for each applicable year.
3. MERGER AND OTHER CHARGES
In 1998, the Company incurred $195.0 million in merger and other charges
relating to the merger between EVI and WII and a reorganization and
rationalization of its businesses in light of industry conditions. Of these
charges, $120.0 million was incurred in the second quarter at the time of our
merger and with the initial downturn in the industry. A $75.0 million charge was
incurred in the fourth quarter in response to the previously unanticipated
extent of the decline in the industry which resulted in a need to make
additional reductions in operations and align the cost structure with current
demand. The net after-tax effect of these charges was $126.8 million. Over
$171.4 million of these charges had been realized as of December 31, 1998, with
the remainder of the charges expected to be fully expended by the second quarter
of 1999 in connection with planned activities. During 1999, we will assess
whether any adjustments or reversals to the remaining accrued special charges
are necessary.
The following chart summarizes the special charges made in 1998:
<TABLE>
<CAPTION>
COMPLETION BALANCE
AND AS OF
OILFIELD ARTIFICIAL COMPRESSION DRILLING DECEMBER 31,
SERVICES LIFT SYSTEMS SERVICES PRODUCTS CORPORATE TOTAL UTILIZED 1998
---------- ------------ ----------- -------- --------- ---------- --------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Merger Transaction Costs(1).... $ -- $ -- $ -- $ -- $ 62,462 $ 62,462 $ 62,462 $ --
Severance and Related Costs(2). 1,961 5,050 -- -- 600 7,611 -- 7,611
Facility Closures(3)........... 8,969 13,817 -- 5,300 -- 28,086 15,257 12,829
Corporate Related Expenses(4).. -- -- -- -- 8,297 8,297 5,177 3,120
Inventory Write-Off(5)......... 4,830 17,573 -- 28,500 -- 50,903 50,903 --
Write-Down of Assets(6)......... 29,195 4,360 1,500 1,150 1,436 37,641 37,641 --
--------- ---------- ---------- -------- -------- --------- -------- --------
Total ...................... $ 44,955 $ 40,800 $ 1,500 $ 34,950 $ 72,795 $ 195,000 $171,440 $ 23,560
========= ========== ========== ======== ======== ========= ======== ========
</TABLE>
(1) The merger related costs were incurred in the second quarter and included
$32.6 million in severance and termination costs related to approximately
300 employees and former officers and directors, and other employee
benefits related to stock grants, in accordance with WII's employment
agreements and option plans, and $29.9 million in professional and
financial advisory fees, filing and registration fees, and printing and
mailing costs.
(2) The severance and related costs included in the fourth quarter charges were
$7.6 million for approximately 1,000 employees specifically identified,
with terminations to be completed in the first half of 1999, in accordance
with our announced plan to terminate employees.
(3) The facility and plant closures costs were $15.3 million in the second
quarter, all of which have been incurred by year end. These costs related
primarily to the elimination of duplicated manufacturing, distribution and
service locations following the merger in May. The facility and plant
closures of $12.8 million were accrued in the fourth quarter for the
consolidation and closure of approximately 100 service, manufacturing and
administrative facilities in response to declining market conditions in the
fourth quarter.
(4) The corporate related expenses of $5.2 million recorded in the second
quarter and $3.1 million recorded in the fourth quarter were primarily for
the relocation of corporate offices, related lease obligations and the
consolidation of technology centers due to the Merger and to align our
corporate cost structure in light of current conditions.
(5) The write-off of inventory was $12.4 million in the second quarter and
$38.5 million in the fourth quarter, which were reported as cost of
products. These charges relate to the write-off of inventory as a result of
the combination of EVI's and WII's operations, the rationalization of their
product lines, the elimination of certain products, services and locations
due to the merger and as a result of the decline in market conditions.
(6) The write-down of assets was $24.6 million in the second quarter and $13.0
million in the fourth quarter. These charges primarily relate to the
write-down of equipment and other assets as a result of the combination of
EVI's and WII's operations, the rationalization of their product lines, the
elimination of certain products, services and locations due to the merger,
the industry downturn, and the specific identification of assets which are
held for sale as a result of the decline in market conditions.
53
<PAGE> 55
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company adopted a plan to close its Bastrop, Texas, tool joint
manufacturing facility and to combine its two packer facilities through the
closure of one facility in Arlington, Texas, in the fourth quarter of 1996. In
connection with these decisions, the Company incurred a charge of $5.8 million
associated with these closures. Of this charge, $4.3 million related to the
tool joint facility closure and relocation of equipment from this facility and
$1.5 million related to the consolidation of its packer facilities and the
closure of one of the plants. The Company incurred $3.8 million in 1996 for
costs associated with these actions during 1996, including costs relating to
the relocation of equipment at its Bastrop facility to other facilities. The
Company also accrued $2.0 million as part of the $5.8 million charge for exit
costs that it expected to be incurred in 1997 relating to the closure of its
Bastrop and Arlington facilities. Such costs included $0.8 million for
severance and termination costs, $0.9 million for the reduction in the carrying
value of its Bastrop facility in light of the intended plan of disposition of
the facility and $0.3 million for the termination of the Arlington lease.
Approximately 400 employees were affected by these closures. The closure of
both the Bastrop and Arlington facilities had been substantially completed by
June 1997.
4. CASH FLOW INFORMATION
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Other current assets
at December 31, 1998 and 1997 included cash of approximately $3.2 million and
$3.4 million, respectively, which was restricted as a result of exchange
controls in certain foreign countries or cash collateral requirements for
performance bonds, letters of credit, and customs bonds.
Cash paid during the years ended December 31, 1998, 1997, and 1996 for
interest and income taxes (net of refunds) was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- -------- -------
(in thousands)
<S> <C> <C> <C>
Interest paid.................................... $52,439 $ 43,389 $28,068
Income taxes paid, net of refunds................ 74,359 121,302 21,367
</TABLE>
During the years ended December 31, 1998, 1997, and 1996 there were
noncash investing activities of $2.4 million, $24.4 million, and $1.7 million,
respectively, relating to capital leases.
The following summarizes investing activities relating to acquisitions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
---------- ---------- ---------
(in thousands)
<S> <C> <C> <C>
Fair value of assets, net of cash acquired $ 96,984 $ 212,731 $109,565
Goodwill.................................. 178,616 306,648 95,688
Total liabilities......................... (106,007) (197,902) (74,442)
Common Stock issued....................... (30,753) -- (50,734)
--------- --------- --------
Cash consideration, net of cash acquired.. $ 138,840 $ 321,477 $ 80,077
========= ========= ========
</TABLE>
During the years ended December 31, 1998 and 1997, there were noncash
financing activities of $7.8 million and $8.8 million, respectively, relating to
tax benefits received from the exercise of nonqualified stock options. These
benefits were recorded as a reduction of income taxes payable and an increase to
capital in excess of par value.
54
<PAGE> 56
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INVENTORIES
Inventories by category are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Raw materials, components and supplies.............. $212,863 $238,349
Work in process..................................... 42,650 66,402
Finished goods...................................... 229,309 151,060
-------- --------
$484,822 $455,811
======== ========
</TABLE>
Work in process and finished goods inventories include the cost of
materials, labor, and plant overhead.
6. SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1997
-------- -------
(in thousands)
<S> <C> <C>
Revolving credit facilities with an effective
interest rate of 5.6% at December 31, 1998.............. $117,279 $24,243
Short-term bank loans with effective interest rates
between 5.73% and 6.10%................................. 20,000 --
Short-term payable due March 1999 with an effective
interest rate of 7.00%.................................. 48,450 --
-------- -------
$185,729 $24,243
======== =======
Weighted average interest rate on short-term borrowings
outstanding during the year............................. 5.78% 6.57%
</TABLE>
In June 1996, the Company entered into a new working capital facility and
terminated the Company's prior U.S. working capital facility. This resulted in
an extraordinary charge of approximately $0.7 million, net of taxes of $0.4
million.
In May 1998, the Company entered into a new five year unsecured credit
agreement which provides for borrowings of up to an aggregate of $250.0 million,
consisting of a $200.0 million U.S. credit facility and a $50.0 million Canadian
credit facility, and terminated its existing working capital facilities.
Amounts outstanding under the facility accrue interest at a variable rate based
on either the U.S. prime rate or LIBOR. A commitment fee ranging from 0.09% to
0.20% per annum, depending on the credit ratings assigned to the 7 1/4% Senior
Notes due May 15, 2006 (the "7 1/4% Senior Notes"), is payable quarterly on the
unused portion of the facility. The facility contains customary affirmative and
negative covenants, including a maximum debt to capitalization ratio, a minimum
interest coverage ratio, a limitation on liens, and a limitation on asset
dispositions. As of December 31, 1998, approximately $117.3 million was
outstanding and approximately $1.8 million had been used to support outstanding
letters of credit.
The Company also has various credit facilities available only for stand-by
letters of credit and bid and performance bonds, pursuant to which funds are
available to the Company to secure performance obligations and certain
retrospective premium adjustments under insurance policies. The Company had a
total of $16.8 million of such letters of credit and bid and performance bonds
outstanding at December 31, 1998.
55
<PAGE> 57
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Senior Notes with an effective interest rate of 7.25%,
due 2006............................................... $200,000 $200,000
Industrial Revenue Bonds with variable interest rates,..
between 3.7% and 4.1% at December 31, 1998, due 2002... 11,325 10,840
Foreign bank debt, denominated in foreign currencies.... 9,069 8,152
Capital lease obligations under various agreements...... 9,866 28,376
Other................................................... 18,749 18,132
-------- --------
249,009 265,500
Less: amounts due in one year.......................... 19,346 13,178
-------- --------
Long-term debt.......................................... $229,663 $252,322
======== ========
</TABLE>
The following is a summary of scheduled long-term debt maturities by year
(in thousands):
<TABLE>
<S> <C>
1999.................................................... $19,346
2000.................................................... 7,426
2001.................................................... 4,218
2002.................................................... 11,492
2003.................................................... 3,986
Thereafter.............................................. 202,541
--------
$249,009
========
</TABLE>
The Company has outstanding $200.0 million of 7 1/4% Senior Notes. The 7
1/4% Senior Notes are unsecured obligations of the Company. Interest on the 7
1/4% Senior Notes is payable semi-annually on May 15 and November 15 of each
year. Based on the borrowing rates available to the Company, the fair value of
the 7 1/4% Senior Notes approximates the carrying value at December 31, 1998
and 1997.
In December 1997, the Company completed a cash tender offer and consent
solicitation (the "Tender Offer") relating to the Company's outstanding $120.0
million 10 1/4% Senior Notes due 2004 (the "Senior Notes"). An aggregate of
$119.98 million principal amount of the Senior Notes were validly tendered by
the Company pursuant to the Tender Offer. The prepayment of the Senior Notes
resulted in an extraordinary charge of $9.0 million, net of taxes of $5.6
million, or $0.09 per basic share, for the year ended December 31, 1997. The
extraordinary charge consists of prepayment fees, other professional fees and
the write off of unamortized debt issuance costs.
The contract terms of the Industrial Revenue Bonds require principal and
interest payments to maturity, occurring in December 2002. In connection with
the Industrial Revenue Bonds, the Company has letters of credit of $11.3
million.
In 1997, upon the completion of the expansion of the Veracruz, Mexico,
tool joint manufacturing facility, the Company recorded the obligation of $16.3
million under its lease to reflect the terms thereof. In December 1998, the
lease was terminated in connection with the acquisition of the company that
owned the Veracruz, Mexico facility (See Note 2).
56
<PAGE> 58
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. 5% CONVERTIBLE SUBORDINATED PREFERRED EQUIVALENT DEBENTURES
In November 1997, the Company completed a private placement of $402.5
million principal amount of 5% Convertible Subordinated Preferred Equivalent
Debentures due 2027. The net proceeds from the Debentures were $390.9 million.
The Debentures are convertible at a price of $80 per share of Common Stock. The
Debentures are redeemable by the Company at any time on or after November 4,
2000, at redemption prices described therein, and are subordinated in right of
payment of principal and interest to the prior payment in full of certain
existing and future senior indebtedness of the Company. The Company also has
the right to defer payments of interest on the Debentures by extending the
quarterly interest payment period on the Debentures for up to 20 consecutive
quarters at anytime when the Company is not in default in the payment of
interest. As evidenced by market transactions, the estimated fair value of the
Debentures was $249.6 million and $368.8 million as of December 31, 1998 and
December 31, 1997, respectively.
9. STOCKHOLDERS' EQUITY
AUTHORIZED SHARES
In May 1998, the Company's Restated Certificate of Incorporation was
amended and restated to increase the authorized number of shares of Common
Stock from 80.0 million to 250.0 million.
PREFERRED STOCK
The Company is authorized to issue up to 3.0 million shares of $1.00 par
value preferred stock. As of December 31, 1998, none had been issued.
PUBLIC STOCK OFFERINGS
On July 25, 1996, the Company completed a public offering of 6.9 million
shares of Common Stock. The net proceeds of this offering were approximately
$100.9 million.
STOCK REPURCHASE PLAN
In December 1997, the WII Board of Directors instituted a stock repurchase
program under which up to $100.0 million of WII common stock could be purchased
in open market transactions or in privately negotiated transactions. Pursuant
to this program, WII purchased approximately 0.3 million shares of its common
stock in December 1997. During 1998, WII purchased approximately 1.0 million
shares of its common stock. In connection with the Merger, the stock
repurchase program has been discontinued and the repurchased shares retired.
10. STOCK-BASED COMPENSATION
STOCK OPTION PLANS
The Company has a number of stock option plans pursuant to which
directors, officers and other key employees may be granted options to purchase
shares of Common Stock at the fair market value on the date of grant.
The Company has in effect a 1991 Employee Stock Option Plan ("1991 ESO
Plan"), 1992 Employee Stock Option Plan ("1992 ESO Plan") and a 1998 Employee
Stock Option Plan ("1998 ESO Plan"). Under these plans, options to purchase up
to an aggregate of 8.2 million shares of Common Stock may be granted to
officers and key employees of the Company (including directors who are also key
employees). At December 31, 1998, approximately 2.2 million options were
available for granting under such plans.
The Company maintained a Non-Employee Director Stock Option Plan
("Director Plan"), a non-qualified stock option plan. In 1998, the Director
Plan was terminated to the extent that no additional options will be granted.
57
<PAGE> 59
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock options vest after one to three years and expire after ten to
thirteen years from the date of grant. Information about the above stock option
plans and predecessor plans, for the three years ended December 31, 1998, is
set forth below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER RANGE OF EXERCISE
OF EXERCISE PRICE
SHARES PRICES PER SHARE
---------- ------------------ ---------
<S> <C> <C> <C> <C> <C>
Options outstanding, December 31, 1995..... 2,739,170 $ 4.69 - $24.70 $12.39
Granted................................... 882,218 13.07 - 33.73 19.19
Exercised................................. (597,121) 5.75 - 21.92 12.41
Terminated................................ (358,128) 17.58 - 29.98 20.83
---------
Options outstanding, December 31, 1996..... 2,666,139 4.69 - 33.73 13.61
Granted................................... 741,613 27.81 - 32.19 29.05
Exercised................................. (936,008) 4.69 - 33.73 11.36
Terminated................................ (47,908) 11.49 - 29.98 24.72
----------
Options outstanding, December 31, 1997..... 2,423,836 4.69 - 32.19 19.08
Granted................................... 4,855,423 18.13 - 50.50 20.33
Exercised................................. (1,195,584) 7.11 - 40.76 31.40
Terminated................................ (24,971) 12.67 - 40.76 35.70
----------
Options outstanding, December 31, 1998..... 6,058,704 4.69 - 50.50 18.96
==========
Options exercisable as of December 31, 1998 1,327,446 4.69 - 44.01 16.02
==========
</TABLE>
The 6.1 million options outstanding at December 31, 1998, have a weighted
average remaining contractual life of 10.5 years. The 1.3 million options
exercisable at December 31, 1998, have a weighted average remaining contractual
life of 6.4 years.
PRO FORMA COMPENSATION EXPENSE
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123 and has been determined as if the Company had
accounted for its stock options under the fair value method as provided
therein. The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions: risk-free interest rates of 5.0% to 7.0%,
expected lives of four to seven years, expected volatility of 38% to 52% and no
expected dividends. The weighted average fair value of the options granted in
1998, 1997 and 1996 is $11.97, $14.42 and $10.61, respectively.
Set forth below is a summary of the Company's net income and earnings per
share as reported and pro forma as if the fair value-based method of accounting
defined in SFAS No. 123 had been applied. For purposes of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options' vesting period. The pro forma information for the year ended
December 31, 1998, reflects the pro forma expense associated with the
accelerated vesting of options in connection with the Merger. The pro forma
information is not meant to be representative of the effects on reported net
income for future years, because as provided by SFAS No. 123, only the effects
of awards granted after January 1, 1995, are considered in the pro forma
calculation.
<TABLE>
<CAPTION>
1998 1997 1996
---------------------- ------------------------ ----------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income (in thousands).... $64,837 $55,107 $187,763 $183,281 $165,822 $162,933
Basic earnings per share..... 0.67 0.57 1.95 1.91 1.85 1.81
Diluted earnings per share... 0.66 0.56 1.92 1.88 1.82 1.79
</TABLE>
58
<PAGE> 60
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RESTRICTED STOCK PLANS
WII had a restricted stock plan for certain officers of WII (the
"Restricted Plan") and a restricted stock plan for non-employee directors of
WII (the "Director Restricted Plan"; collectively, the "Restricted Stock
Plans"), pursuant to which shares of Common Stock were granted. Shares granted
under the Restricted Stock Plans are subject to certain restrictions on
ownership and transferability when granted. Restrictions applicable to shares
granted under the Restricted Plan lapse in part based on continued employment
and in part based on Company performance. Restrictions applicable to shares
granted under the Director Restricted Plan were removed in connection with the
Merger and subsequently the plan was terminated. Restrictions related to
certain shares granted under the Restricted Plan were also removed as a result
of the Merger and subsequently the plan was frozen. In 1998, the Company
granted 110,150 shares of restricted stock to directors and officers of the
Company. Of these, 75,000 shares were granted pursuant to a separate agreement
and are not covered under the Restricted Stock Plans.
The compensation related to the restricted stock grants is deferred and
amortized to expense on a straight-line basis over the period of time the
restrictions are in place. The unamortized portion is classified as a
reduction of capital in excess of par value in the accompanying Consolidated
Balance Sheets.
The following table provides a summary of restricted stock activity:
<TABLE>
<CAPTION>
NON-EMPLOYEE
EMPLOYEE DIRECTOR
SHARES SHARES
--------- ------------
<S> <C> <C>
Restricted shares outstanding, December 31, 1995...... 34,332 --
Granted.............................................. 29,450 --
Restrictions removed................................. (35,848) --
-------- -----------
Restricted shares outstanding, December 31, 1996...... 27,934 --
Granted.............................................. 86,489 10,296
Restrictions removed................................. (25,679) --
-------- -----------
Restricted shares outstanding, December 31, 1997...... 88,744 10,296
Granted.............................................. 110,150 --
Restrictions removed................................. (116,294) (10,296)
-------- -----------
Restricted shares outstanding, December 31, 1998...... 82,600 --
======== ===========
Shares available for future grant as of December 31,
1998................................................... -- --
======== ===========
Compensation expense (in thousands):
1998................................................. $ 4,700 $ 352
1997................................................. 1,146 120
1996................................................. 418 --
Deferred compensation at December 31 (in thousands):
1998................................................. $ 1,563 $ --
1997................................................. 3,095 352
</TABLE>
EXECUTIVE DEFERRED COMPENSATION PLAN
In May 1992, the Company's stockholders approved the Executive Deferred
Compensation Stock Ownership Plan (the "EDC Plan"). Under the EDC Plan, a
portion of the compensation for certain key employees of the Company and its
subsidiaries, including officers and employee directors, can be deferred for
payment after retirement or termination of employment.
The Company has established a grantor trust to fund the benefits under the
EDC Plan. The funds provided to such trust are invested by a trustee
independent of the Company primarily in Common Stock of the Company which is
purchased by the trustee on the open market. The assets of the trust are
available to satisfy the claims of all general creditors of the Company in the
event of bankruptcy or insolvency. Accordingly, the Common Stock held by the
trust is included in the accompanying Consolidated Statements of Stockholders'
Equity as "Treasury Stock, at Cost" and reflected as such on the Consolidated
Balance Sheets.
59
<PAGE> 61
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. RETIREMENT AND EMPLOYEE BENEFIT PLANS
The Company has defined contribution plans covering certain of its
employees. Expenses related to these plans totaled $4.4 million, $3.6 million
and $3.7 million in 1998, 1997 and 1996, respectively.
The Company has defined benefit pension plans covering certain U.S. and
international employees. The Company has two U.S. plans, one of which was
terminated in 1998. The other U.S. plan was acquired as part of the Trico
acquisition in December 1997. This plan was frozen on December 31, 1998. With
respect to certain international plans, the Company has purchased irrevocable
annuity contracts to settle certain benefit obligations. During 1998, the
Company terminated one of its international plans. Plan benefits are generally
based on years of service and average compensation levels. The Company's
funding policy is to contribute, at a minimum, the annual amount required under
applicable governmental regulations. Plan assets are invested primarily in
equity and fixed income mutual funds.
60
<PAGE> 62
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pension expense related to the Company's defined benefit pension plans
included the following components:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
(in thousands)
<S> <C> <C> <C>
Service cost--benefits earned during the period $ 822 $ 267 $ 651
Interest cost on projected benefit obligation.. 1,388 386 427
Expected return on plan assets................. (1,213) (391) (466)
Net amortization and deferral.................. (19) 48 213
------ ----- -----
$ 978 $ 310 $ 825
====== ===== =====
</TABLE>
The following table sets forth summaries of the changes in the benefit
obligations and plan assets, the funded status of the Company's defined benefit
pension plans and the assumptions used in computing such information:
<TABLE>
<CAPTION>
U.S. PLANS NON-U.S. PLANS
-------------------- ------------------
1998 1997 1998 1997
--------- --------- ------- ---------
(in thousands, except percentages)
<C> <C> <C> <C> <C>
Change in benefit obligation:
Projected benefit obligations at beginning of year $ 17,601 $ 1,647 $4,261 $ 3,468
Service cost...................................... 634 -- 188 267
Interest cost..................................... 1,244 109 144 277
Plan participants' contributions.................. -- -- -- 104
Actuarial (gain) loss............................. 2,189 (49) 680 285
Settlement/curtailment due to plan termination.... (503) -- -- --
Acquisition....................................... (341) 16,002 -- --
Benefits paid..................................... (3,155) (108) (2,559) (129)
Currency translation adjustment................... -- -- 81 (11)
-------- -------- ------ --------
Projected benefit obligation at end of year....... $ 17,669 $ 17,601 $2,795 $ 4,261
======== ======== ====== ========
Change in plan assets:
Fair value of plan assets at beginning of year.... $ 17,875 $ 1,383 $2,553 $ 2,405
Actual return on plan assets...................... 2,432 70 (103) 3
Employer contribution............................. 1,577 142 -- 112
Plan participants' contributions.................. -- -- -- 104
Acquisition....................................... -- 16,388 -- --
Benefits paid..................................... (3,155) (108) (2,204) (71)
Currency translation adjustment................... -- -- (246) --
-------- -------- ------ --------
Fair value of plan assets at end of year.......... $ 18,729 $ 17,875 $ -- $ 2,553
======== ======== ====== ========
Funded status:
Accumulated benefit obligation less plan assets... $ (1,060) $ (274) $2,034 $ 978
Provision for future salary increases............. -- -- 761 730
-------- -------- ------ --------
(Excess) deficit of plan assets over projected
benefit obligation............................... (1,060) (274) 2,795 1,708
Unrecognized net actuarial gain (loss)............ 234 (457) 267 758
Unrecognized transition obligation................ -- -- (148) (81)
Unrecognized prior year service cost.............. -- 620 (122) (124)
-------- -------- ------ --------
Accrued (prepaid) benefit costs................... $ (826) $ (111) $2,792 $2,261
======== ======== ====== ========
Balance sheet liabilities (assets):
Prepaid benefit costs............................. $ (1,663) $ (386) $ -- $ --
Accrued benefit liabilities....................... 837 275 2,792 2,261
-------- -------- ------ --------
Accrued (prepaid) benefit costs................... $ (826) $ (111) $2,792 $ 2,261
======== ======== ====== ========
Assumed discount rates............................ 5.1%-6.8% 7.3% 5.8% 6.0%-8.0%
Assumed rates of increase in compensation rates... 4.8% 4.0%-4.8% 3.3% 3.7%-5.0%
Assumed expected long-term rate of return
on plan assets................................... 5.5%-8.0% 8.0% -- 8.0%
</TABLE>
61
<PAGE> 63
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. INCOME TAXES
The components of income before income taxes were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- -------- --------
(in thousands)
<S> <C> <C> <C>
Domestic................................... $16,772 $202,297 $ 71,354
Foreign.................................... 82,616 102,664 61,320
------- -------- --------
$99,388 $304,961 $132,674
======= ======== ========
</TABLE>
The Company's income tax provision (benefit) from continuing operations
consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
--------- -------- -------
(in thousands)
<S> <C> <C> <C>
Current
U.S. federal and state income taxes $ 21,743 $ 39,623 $14,801
Foreign............................ 33,311 33,106 21,574
-------- -------- -------
Total Current..................... $ 55,054 $ 72,729 $36,375
-------- -------- -------
Deferred
U.S. federal....................... $(13,187) $ 23,405 $ 2,410
Foreign............................ (7,316) 12,054 1,728
-------- -------- -------
Total Deferred.................... $(20,503) $ 35,459 $ 4,138
-------- -------- -------
$ 34,551 $108,188 $40,513
======== ======== =======
</TABLE>
Total income tax provision (benefit) was recorded as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- -------- --------
(in thousands)
<S> <C> <C> <C>
Income from continuing operations.......... $34,551 $108,188 $40,513
Discontinued operations.................... -- -- 4,022
Gain on disposal of discontinued operations -- -- 44,600
Extraordinary charge....................... -- (5,640) (394)
------- -------- -------
$34,551 $102,548 $88,741
======= ======== =======
</TABLE>
The difference between the tax provision at the statutory federal income
tax rate and the tax provision attributable to income from continuing
operations before income taxes for the three years ended December 31, 1998 is
analyzed below:
<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- -------
(in thousands)
<S> <C> <C> <C>
Statutory federal income tax rate........................... $34,786 $106,736 $46,436
Effect of state income tax (net) and Alternative Minimum Tax 3,420 913 4,228
Effect of non-deductible expenses........................... 9,054 4,259 2,182
Change in valuation allowance............................... -- (8,214) (9,957)
Effect of foreign income tax, net........................... (6,447) 8,214 --
Foreign losses benefited.................................... -- -- (546)
Foreign Sales Corporation benefit........................... (412) (913) 273
Benefit of tax dispute settlement........................... -- -- (3,955)
Effect of acquisitions and dispositions.................... (4,548) -- --
Other....................................................... (1,302) (2,807) 1,852
------- -------- -------
$34,551 $108,188 $40,513
======= ======== =======
</TABLE>
62
<PAGE> 64
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets and liabilities are recognized for the estimated
future tax effects of temporary differences between the tax basis of an asset
or liability and its reported amount in the financial statements. The
measurement of deferred tax assets and liabilities is based on enacted tax laws
and rates currently in effect in each of the jurisdictions in which the Company
has operations.
The change in the valuation allowance in 1997 and 1996 primarily relates
to the utilization of U.S. net operating losses ("NOL") and tax credit
carryforwards and management's assessment that future taxable income will be
sufficient to enable the Company to utilize remaining NOL and tax credit
carryforwards.
Deferred tax assets and liabilities are classified as current or
noncurrent according to the classification of the related asset or liability
for financial reporting. The components of the net deferred tax asset
(liability) were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Domestic and foreign operating losses................... $ 7,852 $ 15,709
Accrued liabilities and reserves........................ 78,532 57,573
Tax credits............................................. 5,568 --
Tax benefit transfer leases acquired.................... 2,776 3,991
Other differences between financial and tax basis....... -- 1,126
Valuation allowance..................................... (4,716) (4,716)
-------- --------
Total deferred tax assets................................ $ 90,012 $ 73,683
-------- --------
Deferred tax liabilities:
Property and equipment.................................. $(59,442) $(56,747)
Unremitted foreign earnings............................. (10,883) (6,532)
Differences between financial and tax basis of inventory (1,530) (12,010)
Goodwill................................................ (20,800) (13,451)
Other differences between financial and tax basis....... -- (4,593)
-------- --------
Total deferred tax liability............................. (92,655) (93,333)
-------- --------
Net deferred tax liability............................... $ (2,643) $(19,650)
======== ========
</TABLE>
At December 31, 1998, the Company had $10.1 million of U.S. net operating
losses which were generated by certain subsidiaries prior to their acquisition.
The use of these pre-acquisition operating losses is subject to limitations
imposed by the Internal Revenue Code and is also restricted to the taxable
income of the subsidiaries generating the losses. These U.S. carryforwards, if
not utilized, will expire between 1999 and 2009.
On October 11, 1996, the Company entered into a $3.9 million tax
settlement plus accrued interest of $2.5 million with the United States
Internal Revenue Service ("I.R.S.") relating to a dispute regarding the tax
impact to the Company upon the dissolution of an oil and gas joint venture in
1990. The tax liability with respect to the dissolution had been previously
provided for as a deferred tax liability in the Company's consolidated
financial statements. This settlement resulted in the Company recognizing a
$4.0 million tax benefit in 1996 due to the elimination of certain previously
accrued deferred taxes that will no longer be required to be paid as a result
of this settlement.
13. DISPUTES, LITIGATION AND CONTINGENCIES
LITIGATION AND OTHER DISPUTES
The Company is aware of various disputes and potential claims and is a
party in various litigation involving claims against the Company, some of which
are covered by insurance. Based on facts currently known, the Company believes
that the ultimate liability, if any, which may result from known claims,
disputes and pending litigation, would not have a material adverse effect on
the Company's consolidated financial position or its results of operations with
or without consideration of insurance coverage.
63
<PAGE> 65
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INSURANCE
The Company is self-insured for employee health insurance claims and for
workers' compensation claims for certain of its employees. The amounts in
excess of the self-insured levels are fully insured. Self-insurance accruals
are based on claims filed and an estimate for significant claims incurred but
not reported. Although the Company believes that adequate reserves have been
provided for expected liabilities arising from its self-insured obligations, it
is reasonably possible that management's estimates of these liabilities will
change over the near term as circumstances develop.
14. COMMITMENTS
SALE AND LEASEBACK OF EQUIPMENT
The Company entered into a sale and leaseback arrangement in December 1998
where it was provided with the right to sell up to $200.0 million of compression
units through December 1999 and lease them back over a five year period under an
operating lease. Payments under the lease are calculated based on a rate of
return on the purchase price and an agreed valuation of the leased compressors.
Under the terms of the lease, the Company may repurchase the equipment at any
time. The Company has provided for a residual value guarantee at the end of the
term of the lease equal to approximately 85.5% of the appraised value of the
compression units under lease.
As of December 31, 1998, the Company had sold compressors under this
arrangement, having an appraised value of $119.6 million, and received cash of
$100.0 million and a receivable of $19.6 million. The receivable is
classified in other current assets on the accompanying Consolidated Balance
Sheets as the balance is due on demand. The net book value of the equipment
sold was approximately $77.4 million, resulting in a pre-tax gain of $42.2
million, which may be deferred until the end of the lease.
The lease agreement calls for quarterly payments. The following table
provides future minimum lease payments (in thousands) under the aforementioned
lease exclusive of any guarantee payments:
<TABLE>
<S> <C>
1999....................................................... $7,491
2000....................................................... 7,491
2001....................................................... 7,491
2002....................................................... 7,491
2003....................................................... 6,867
-------
$36,831
=======
</TABLE>
OTHER OPERATING LEASES
The Company is committed under various other noncancelable operating
leases which primarily relate to office space and equipment.
Future minimum rental commitments under these noncancelable operating
leases are as follows (in thousands):
<TABLE>
<S> <C>
1999........................................................ $21,001
2000........................................................ 16,265
2001........................................................ 11,859
2002........................................................ 8,942
2003........................................................ 6,974
Thereafter.................................................. 34,504
-------
$99,545
=======
</TABLE>
Total rent expense incurred under operating leases was approximately $30.0
million, $27.9 million and $26.4 million for the years ended December 31, 1998,
1997, and 1996, respectively.
64
<PAGE> 66
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OTHER COMMITMENTS
In January 1996, the Company entered into a long-term manufacturing and
sales agreement with Oil Country Tubular, Ltd. ("OCTL") pursuant to which OCTL
manufactures drill pipe and premium tubulars for the Company on an exclusive
basis at OCTL's plant in India.
15. DISCONTINUED OPERATIONS AND DISPOSITIONS
On November 11, 1996, the Company completed the sale of its contract
drilling segment which was comprised of the Mallard Bay contract drilling
division ("Mallard Division") to Parker, in exchange for cash of approximately
$306.9 million and approximately 3.1 million shares of Parker common stock
valued by the Company at approximately $20.0 million. The Company reported a
net gain on the disposal of the Mallard Division of $66.9 million, net of taxes
of $44.6 million.
The results of operations for the Mallard Division are reflected in the
accompanying Consolidated Statements of Income as "Discontinued Operations, Net
of Taxes." Condensed results of the Mallard Division discontinued operations
were as follows:
<TABLE>
<CAPTION>
ELEVEN
MONTHS ENDED
NOVEMBER 11,
1996
--------------
(in thousands)
<S> <C>
Revenues........................................... $81,310
-------------
Income before income taxes......................... 11,490
Provision for income taxes......................... 4,022
--------------
Net income......................................... $ 7,468
==============
</TABLE>
During 1997 and 1996, the Company also sold certain non-core businesses.
Cash proceeds from these transactions totaled $68.8 million and $19.2 million
in 1997 and 1996, respectively.
16. RELATED PARTY TRANSACTIONS
The Company incurred legal fees of $3.1 million, $2.7 million and $2.2
million during 1998, 1997 and 1996, respectively, with a law firm in which a
former director and a current executive officer of the Company were partners.
In 1998, the Company paid Lehman Brothers Inc., an affiliate of Lehman
Brothers Holding Inc., a major stockholder of the Company, approximately
$3.0 million for fees associated with the Merger. In 1997, the Company paid
approximately $2.0 million for dealer management fees associated with the
Tender Offer of the Senior Notes and the Debenture offering. The Company
incurred fees of approximately $6.7 million associated with the Company's
public offering and the disposition of the Mallard Division in 1996. The fee
arrangements associated with these transactions were on terms standard in
the industry.
17. SUBSEQUENT EVENTS
In February 1999, the Company completed a joint venture with GE Capital
Corporation ("GE Capital") in which the Company's compression services
operations were combined with GE Capital's Global Compression Services
operations. The joint venture is known as Weatherford Global Compression. The
Company owns 64% of the joint venture and GE Capital owns 36%. The Company has
the right to acquire GE Capital's interest at anytime at a price equal to the
greater of a market determined third party valuation or book value. GE Capital
also has the right to require the Company to purchase its interest at anytime
after February 2001 at a market determined third party valuation as well as
request a public offering of its interest after that date, if we have not
purchased its interest by that time.
On February 8, 1999, the Company completed the acquisition of Christiana
Companies, Inc. for approximately 4.0 million shares of Common Stock and $20.0
million cash. In the acquisition, the Company acquired through Christiana (1)
4.0 million shares of the Company's Common Stock, (2) cash, after distribution
to the Christiana shareholders, equal to the amount of Christiana's outstanding
tax and other liabilities and (3) a one-third interest in Total Logistic
Control, a refrigerated warehouse, trucking and logistics company. The
4.0 million shares of Common Stock acquired will be classified as treasury
stock. Because the number of shares of Common Stock issued in the Christiana
acquisition approximated the number of shares of Common Stock held by Christiana
prior to the acquisition, the Christiana acquisition had no material effect on
the outstanding number of shares of Common Stock or net equity of the Company.
65
<PAGE> 67
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. SEGMENT INFORMATION
BUSINESS SEGMENTS
The Company is a diversified international energy service and
manufacturing company that provides a variety of services and equipment to the
exploration, production and transmission sectors of the oil and gas industry.
The Company operates in virtually every oil and gas exploration and production
region in the world. In 1998, the Company redefined its business segments into
four separate groups: completion and oilfield services, artificial lift
systems, compression services, and drilling products. The following
information has been restated to reflect this regrouping.
The Company's completion and oilfield services segment provides fishing and
downhole services, well installation services, well completion systems and
equipment rental.
The Company's artificial lift systems segment designs, manufactures, sells
and services a complete line of artificial lift equipment, including progressing
cavity pumps, reciprocating rod lift equipment, gas lift equipment electrical
submersible pumps and hydraulic lift equipment.
The Company's compression services segment manufactures, packages, rents
and sells parts and services for gas compressor units over a broad horsepower
range.
The Company's drilling products segment manufactures drill stem products,
premium engineered connections, premium tubulars and marine and subsea
connectors and related accessories.
66
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WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial information by industry segment for each of the three years
ended December 31, 1998, is summarized below.
<TABLE>
<CAPTION>
COMPLETION
AND OILFIELD ARTIFICIAL COMPRESSION DRILLING
SERVICES LIFT SYSTEMS SERVICES PRODUCTS CORPORATE TOTAL
------------ ------------ -------- -------- --------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
1998
Revenues from unaffiliated
customers................... $ 848,219 $329,196 $177,481 $655,758 $ -- $2,010,654
EBITDA, before merger costs
and other charges (a)....... 275,194 40,760 41,671 182,334 (25,179) 514,780
Merger costs and other
charges (b)................. 44,955 40,800 1,500 34,950 72,795 195,000
Depreciation and amortization 94,718 19,183 23,079 31,951 1,801 170,732
Operating income (loss)...... 135,521 (19,223) 17,092 115,433 (99,775) 149,048
Total assets................. 1,007,399 592,370 388,220 764,807 78,919 2,831,715
Capital expenditures for
property, plant, and
equipment.................. 107,661 20,946 32,465 42,052 2,755 205,879
Non-cash portion of merger
costs and other charges..... 39,481 30,367 1,500 30,500 22,747 124,595
1997
Revenues from unaffiliated
customers................... $ 929,001 $249,476 $178,897 $611,715 $ -- $1,969,089
EBITDA (a) .................. 301,550 31,736 36,440 144,440 (35,243) 478,923
Depreciation and amortization 86,138 8,944 21,666 23,610 2,573 142,931
Operating income (loss)...... 215,412 22,792 14,774 120,830 (37,816) 335,992
Total assets................. 919,198 622,853 441,759 674,388 79,712 2,737,910
Capital expenditures for
property, plant, and
equipment.................. 121,422 20,213 35,705 32,682 2,970 212,992
1996
Revenues from unaffiliated
customers................... $ 824,639 $150,816 $154,503 $337,312 $ -- $1,467,270
EBITDA (a) (c)............... 226,914 17,532 31,387 53,619 (38,521) 290,931
Depreciation and amortization 80,582 5,865 23,554 11,046 783 121,830
Operating income (loss) (c).. 146,332 11,667 7,833 42,573 (39,304) 169,101
Total assets................. 952,445 199,615 414,969 386,245 290,359 2,243,633
Capital expenditures for
property, plant, and
equipment.................. 119,201 8,732 30,392 14,332 68 172,725
</TABLE>
(a) The Company evaluates performance and allocates resources based on
EBITDA, which is calculated as operating income adding back depreciation and
amortization, excluding the impact of merger costs and other charges.
Calculations of EBITDA should not be viewed as a substitute to calculations
under GAAP, in particular operating income and net income. In addition, EBITDA
calculations by one company may not be comparable to another company.
(b) Includes inventory write-downs of $50.9 million which have been
classified as cost of products in the accompanying Consolidated Statements of
Income.
67
<PAGE> 69
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(c) During 1996, the Company incurred a charge of $5.8 million associated
with plant closures. Of this charge, $4.3 million related to the closure of a
tool joint facility within the drilling products segment and $1.5 million
related to the closure of a packer facility within the completion and oilfield
services segment. EBIDTA and operating income for 1996 for the drilling
products and completion and oilfield services segments include accruals
included within the $5.8 million charge of $1.5 million and $0.5 million,
respectively, for such plant closures.
FOREIGN OPERATIONS AND EXPORT SALES
Financial information by geographic segment for each of the three years
ended December 31, 1998, is summarized below. Revenues are attributable to
countries based on the location of the entity selling products. Long-lived
assets are long-term assets excluding deferred tax assets of $16.7 million,
$12.8 million, and $18.9 million for 1998, 1997, and 1996, respectively.
<TABLE>
<CAPTION>
UNITED LATIN
STATES CANADA AMERICA EUROPE AFRICA OTHER TOTAL
---------- ------------- -------------- ------------- ------------ ------------- ---------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Revenues from
unaffiliated customers $1,181,948 $265,229 $138,761 $167,285 $91,307 $166,124 $2,010,654
Long-lived assets...... 950,617 306,490 204,700 151,383 37,758 81,637 1,732,585
1997
Revenues from
unaffiliated customers $1,205,633 $257,478 $118,762 $149,223 $70,037 $167,956 $1,969,089
Long-lived assets...... 1,060,871 133,309 174,845 143,831 15,341 62,874 1,591,071
1996
Revenues from
unaffiliated customers $ 928,956 $143,610 $74,109 $148,094 $72,457 $100,044 $1,467,270
Long-lived assets...... 784,438 66,342 100,901 145,811 14,037 51,382 1,162,911
</TABLE>
MAJOR CUSTOMERS AND CREDIT RISK
Substantially 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 and does not
generally require collateral in support of its trade receivables. 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; 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.
In 1998, 1997, and 1996 there was no individual customer who accounted for
10% of consolidated revenues.
68
<PAGE> 70
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following tabulation sets forth unaudited quarterly financial data for
1998 and 1997.
<TABLE>
<CAPTION>
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
-------- --------- -------- --------- ---------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998
Revenues...................... $570,520 (1) $530,833 $482,454 $426,847 $2,010,654
Gross Profit.................. 186,162 (1) 167,118 (1) (2) 148,259 (1) 82,330 (2) 583,869
Selling, General and
Administrative............... 76,911 (1) 71,629 (1) 69,458 (1) 75,405 293,403
Merger Costs and Other Charges -- 107,647 (1) (2) -- 36,450 (2) 144,097
Operating Income.............. 110,031 (1) (11,373) (1) 79,477 (29,087) 149,048
Net Income.................... 61,143 (14,891) (2) 42,754 (24,169) (2) 64,837
Basic EPS:
Net Income................... $ 0.63 $ (0.15) $ 0.44 $ (0.25) $ 0.67
Diluted EPS:
Net Income................... 0.63 (0.15) 0.44 (0.25) 0.66
1997
Revenues...................... $431,253 $476,999 $509,718 $551,119 $1,969,089
Gross Profit.................. 121,696 (1) 135,840 (1) 153,552 (1) 169,614 (1) 580,702 (1)
Selling, General and
Administrative............... 55,217 (1) 60,678 (1) 61,971 (1) 69,426 (1) 247,292 (1)
Operating Income.............. 66,988 75,705 92,283 101,016 335,992
Income from Continuing
Operations................... 37,903 45,741 53,726 59,403 196,773
Net Income.................... 37,903 45,741 53,726 50,393 (3) 187,763
Basic EPS:
Income from Continuing
Operations.................. $ 0.40 $ 0.48 $ 0.56 $ 0.61 $ 2.04
Net Income................... 0.40 0.48 0.56 0.52 (3) 1.95
Diluted EPS:
Income from Continuing
Operations.................. 0.39 0.47 0.55 0.60 2.01
Net Income................... 0.39 0.47 0.55 0.51 (3) 1.92
</TABLE>
(1) The first, second, and third quarters of 1998 and all quarters of 1997
have been restated from amounts previously reported in the Company's
respective Forms 10-Q and Amendment No. 1 to Form 8-K filed July 21, 1998
to reclassify certain amounts to conform to current year presentation.
(2) The Company incurred $120.0 million and $75.0 million of pre-tax merger and
other costs in the second and fourth quarters of 1998, respectively. The
effect of these charges, net of tax, in the second and fourth quarters was
$78.0 and $48.8 million, respectively. Of these charges, $12.4 million and
$38.5 million related to the write-off of inventory and have been
classified as cost of products in the accompanying Consolidated Statements
of Income.
(3) Includes the extraordinary charge, net of taxes, of approximately $9.0
million related to the repayment of the Senior Notes in the fourth quarter
of 1997.
69
<PAGE> 71
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3), information on directors and
executive officers of the Registrant is incorporated by reference from the
Company's Definitive Proxy Statement to be filed pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3), information on executive compensation
is incorporated by reference from the Company's Definitive Proxy Statement to
be filed pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3), information on security ownership of
certain beneficial owners and management is incorporated by reference from the
Company's Definitive Proxy Statement to be filed pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3), information on certain relationships
and related transactions is incorporated by reference from the Company's
Definitive Proxy Statement to be filed pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report or
incorporated herein by reference:
1. The consolidated financial statements of the Company are
listed on page 42 of this report.
2. The financial statement schedule is listed on page 42 of this
report.
3. The exhibits of the Company are listed below under Item 14(c).
(b) Reports on Form 8-K
1. Current Report on Form 8-K/A filed on December 10, 1998,
amending Current Report on Form 8-K/A filed on July 16, 1998,
and amending Current Report on Form 8-K dated June 15, 1998,
reporting the Company's (i) Management's Discussion and
Analysis of Financial Condition and Results of Operations on
a restated basis and (ii) supplemental restated financial
statements as of December 31, 1997 and 1996 and for the three
years ended December 31, 1997.
2. Current Report on Form 8-K dated October 22, 1998, announcing
the Company's earnings for the quarter ended September 30,
1998.
(c) Exhibits
2.1 Agreement and Plan of Merger dated as of March 4, 1998, by
and between EVI, Inc. and Weatherford Enterra, Inc.
(incorporated by reference to Exhibit No. 2.1 to Amendment
No. 1 to Form 8-K on Form 8-K/A, File 1-13086, filed March 9,
1998).
2.2 Amendment No. 1 dated as of April 17, 1998, to the Agreement
and Plan of Merger dated as of March 4, 1998, by and between
EVI, Inc. and Weatherford Enterra, Inc. (incorporated by
reference to Exhibit No. 2.2 to Form 8-K, File 1-13086, filed
April 21, 1998).
70
<PAGE> 72
2.3 Amendment No. 2 dated as of April 22, 1998, to the Agreement
and Plan of Merger dated as of March 4, 1998, as amended by
and between EVI, Inc. and Weatherford Enterra, Inc.
(incorporated by reference to Exhibit No. 2.3 to Form 8-K,
File 1-13086, filed April 23, 1998).
2.4 Share Purchase Agreement made and entered into as of January
30, 1998, by and among the shareholders of Nika Enterprises
Ltd., an Alberta corporation, listed on the signature pages
thereto and EVI Oil Tools Canada Ltd., an Alberta corporation
(incorporated by reference to Exhibit No. 2.1 to the Form
8-K, File 1-13086, filed March 3, 1998).
2.5 Agreement and Plan of Merger dated as of December 12, 1997,
by and among EVI, Inc., Christiana Acquisition, Inc.,
Christiana Companies, Inc. and C2, Inc. (incorporated by
reference to Exhibit No. 2.1 to Form 8-K, File 1-13086, filed
December 31, 1997).
2.6 Agreement dated as of December 12, 1997, by and among EVI,
Inc., Christiana Companies, Inc., Total Logistic Control, LLC
and C2, Inc. (incorporated by reference to Exhibit No. 2.2 to
Form 8-K, File 1-13086, filed December 31, 1997).
2.7 Letter Agreement dated December 12, 1997, by and among EVI,
Inc., Christiana Acquisition, Inc., Christiana Companies,
Inc. and C2, Inc. (incorporated by reference to Exhibit No.
2.3 to Form 8-K, File 1-13086, filed December 31, 1997).
2.8 Amended and Restated Arrangement Agreement by and between
Taro Industries Limited, and EVI, Inc. and 756745 Alberta
Ltd. and 759572 Alberta Ltd. dated as of December 5, 1997
(incorporated by reference to Exhibit No. 2.4 to Form 8-K,
File 1-13086, filed December 31, 1997).
2.9 Stock Purchase Agreement dated as of October 9, 1997, between
EVI, Inc. and PACCAR Inc. (incorporated by reference to
Exhibit No. 2.1 to Form 8-K, File 1-13086, filed October 21,
1997).
2.10 Stock Purchase Agreement dated as of October 9, 1997, among
certain shareholders of BMW Monarch (Lloydminster) Ltd., the
shareholders of BMW Pump Inc., the shareholder of Makelki
Holdings Ltd., the shareholder of 589979 Alberta Ltd., the
shareholders of 600969 Alberta Ltd., the shareholders of
391862 Alberta Ltd. and EVI, Inc. (incorporated by reference
to Exhibit No. 2.2 to Form 8-K, File 1-13086, filed October
21, 1997).
2.11 Agreement and Plan of Merger dated as of July 16, 1997, as
amended, by and among XLS Holding, Inc., EVI, Inc. and GPXL,
Inc. (incorporated by reference to Exhibit No. 2.1 to Form
8-K, File 1-13086, filed August 26, 1997).
2.12 Stock Purchase Agreement dated as of February 21, 1997, among
Seigo Arai, Kanematsu USA Inc. and Energy Ventures, Inc.
(incorporated by reference to Exhibit No. 2.1 to Form 8-K,
File 1-13086, filed March 17, 1997).
2.13 Agreement and Plan of Merger dated as of December 5, 1996,
among Energy Ventures, Inc., GulfMark Acquisition Co.,
GulfMark International, Inc. and New GulfMark International,
Inc. (incorporated by reference to Exhibit No. 2.2 to Form
8-K, File 1-13086, filed December 26, 1996).
2.14 Agreement and Plan of Distribution dated as of December 5,
1996, by and among GulfMark International, Inc., New GulfMark
International, Inc. and Energy Ventures, Inc. (incorporated
by reference to Exhibit No. 2.3 to Form 8-K, File 1-13086,
filed December 26, 1996).
2.15 First Amendment to Agreement and Plan of Merger dated as of
March 27, 1997, by and among Energy Ventures, Inc., GulfMark
Acquisition Co., GulfMark International, Inc. and GulfMark
Offshore, Inc. (incorporated by reference to Exhibit No. 2.3
to the Registration Statement on Form S-4, as amended (Reg.
No. 333-24133)).
2.16 Stock Purchase Agreement dated as of September 14, 1996, by
and among Parker Drilling Company and Energy Ventures, Inc.
(incorporated by reference to Exhibit 2.1 to Form 8-K, File
1-13086, filed October 3, 1996).
71
<PAGE> 73
2.17 Agreement and Plan of Merger dated as of June 20, 1996
between Energy Ventures, Inc., TCA Acquisition, Inc. and
Tubular Corporation of America (incorporated by reference to
Exhibit No. 2.1 to Form 8-K, File 1-13086, filed June 24,
1996).
2.18 Amendment No. 1 dated as of May 26, 1998, to the Agreement
and Plan of Merger dated as of December 12, 1997 and to the
Agreement dated as of December 12, 1997, by and among EVI,
Inc., Christiana Acquisition, Inc., Christiana Companies,
Inc., C2, Inc. and Total Logistic Control, LLC (incorporated
by reference to Exhibit 2.18 to the Registration Statement on
Form S-4, as amended (Reg. No. 333-58741)).
2.19 Amended and Restated Agreement and Plan of Merger among
Weatherford International, Inc., Christiana Acquisition,
Inc., Christiana Companies, Inc. and C2, Inc. dated as of
October 14, 1998 (incorporated by reference to Exhibit No.
2.19 to the Registration Statement on Form S-4 (Reg. No.
333-65663)).
2.20 Amendment No. 2 to Logistic Purchase Agreement by and among
Weatherford International, Inc., Total Logistic Control, LLC,
Christiana Companies, Inc. and C2, Inc. dated as of October
12, 1998 (incorporated by reference to Exhibit No. 2.20 to
the Registration Statement on Form S-4 (Reg. No. 333-65663)).
2.21 Amendment No. 1 to Amended and Restated Agreement and Plan of
Merger, by and among Weatherford International, Inc.,
Christiana Acquisition, Inc., Christiana Companies, Inc. and
C2, Inc. dated as of January 5, 1999 (incorporated by
reference to Exhibit No. 2.21 to the Registration Statement
on Form S-4 (Reg. No. 333-65663)).
2.22 Amendment No. 3 to Logistic Purchase Agreement, by and among
Weatherford International, Inc., Total Logistic Control, LLC,
Christiana Companies, Inc. and C2, Inc. dated as of January
5, 1999 (incorporated by reference to Exhibit No. 2.22 to the
Registration Statement on Form S-4 (Reg. No. 333-65663)).
+3.1 Amended and Restated Certificate of Incorporation of the
Company.
3.2 Amended and Restated By-Laws of the Company (incorporated by
reference to Exhibit No. 3.2 to Form 8-K, File 1-13086, filed
June 2, 1998).
4.1 See Exhibit Nos. 3.1 and 3.2 for provisions of the Amended
and Restated Certificate of Incorporation and Amended and
Restated By-Laws of the Registrant defining the rights of the
holders of Common Stock.
4.2 Amended and Restated Credit Agreement dated as of May 27,
1998, among EVI Weatherford, Inc., EVI Oil Tools Canada Ltd.,
Chase Bank of Texas, National Association, as U.S.
Administrative Agent, The Bank of Nova Scotia, as
Documentation Agent and Canadian Agent, ABN AMRO Bank, N.V.,
as Syndication Agent, and the other Lenders defined therein,
including the forms of Notes (incorporated by reference to
Exhibit No. 4.1 to the Form 8-K, File 1-13086, filed June 16,
1998).
4.3 Indenture dated May 17, 1996, between Weatherford Enterra,
Inc. and Bank of Montreal Trust Company, as Trustee
(incorporated by reference to Exhibit 4.1 to Weatherford
Enterra, Inc.'s Current Report on Form 8-K, File No. 1-7867,
dated May 28, 1996).
4.4 First Supplemental Indenture dated and effective as of May
27, 1998, by and among EVI Weatherford, Inc., the successor
by merger to Weatherford Enterra, Inc., and Bank of Montreal
Trust Company, as Trustee (incorporated by reference to
Exhibit No. 4.1 to Form 8-K, File 1-13086, filed June 2,
1998).
4.5 Form of Weatherford Enterra, Inc.'s 7 1/4% Notes Due May 15,
2006 (incorporated by reference to Exhibit 4.2 to Weatherford
Enterra, Inc.'s Current Report on Form 8-K, File No. 1-7867,
dated May 28, 1996).
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<PAGE> 74
4.6 Indenture dated March 15, 1994, among Energy Ventures, Inc.,
as Issuer, the Subsidiary Guarantors party thereto, as
Guarantors, and Chemical Bank, as Trustee (incorporated by
reference to Form 8-K, File 1-13086, filed April 5, 1994).
4.7 Specimen 10 1/4% Senior Note due 2004 of Energy Ventures,
Inc. (incorporated by reference to Form 8-K, File 1-13086,
filed April 5, 1994).
4.8 First Supplemental Indenture by and among Energy Ventures,
Inc., Prideco, Inc. and Chemical Bank, as trustee, dated June
30, 1995 (incorporated by reference to Exhibit No. 4.4 to the
Registration Statement on Form S-3 (Reg. No. 33-61933)).
4.9 Second Supplemental Indenture by and among Energy Ventures,
Inc., EVI Arrow, Inc., EVI Watson, Inc. and The Chase
Manhattan Bank, as trustee, dated effective as of December 6,
1996 (incorporated by reference to Exhibit 4.6 to Form 10-K,
File 1-13086, filed March 20, 1997).
4.10 Third Supplemental Indenture by and among EVI, Inc., Ercon,
Inc. and The Chase Manhattan Bank, as trustee, dated
effective as of May 1, 1997 (incorporated by reference to
Exhibit 99.2 to Form 8-K, File 1-13086, filed October 27,
1997).
4.11 Fourth Supplemental Indenture by and among EVI, Inc., XLS
Holding, Inc., XL Systems, Inc. and The Chase Manhattan Bank,
as trustee, dated effective as of August 25, 1997
(incorporated by reference to Exhibit 99.3 to Form 8-K, File
1-13086, filed October 27, 1997).
4.12 Fifth Supplemental Indenture by and between EVI, Inc. and The
Chase Manhattan Bank dated as of December 12, 1997 (including
the Form of Note and Form of Exchange Note) (incorporated by
reference to Exhibit 4.1 to Form 8-K, File 1-13086, filed
December 31, 1997).
4.13 Indenture dated as of October 15, 1997, between EVI, Inc. and
The Chase Manhattan Bank, as Trustee (incorporated by
reference to Exhibit No. 4.13 to the Registration Statement
on Form S-3 (Reg. No. 333-45207)).
4.14 First Supplemental Indenture dated as of October 28, 1997,
between EVI, Inc. and The Chase Manhattan Bank, as Trustee
(including form of Debenture) (incorporated by reference to
Exhibit 4.2 to Form 8-K, File 1-13086, filed November 5,
1997).
4.15 Registration Rights Agreement dated November 3, 1997, by and
among EVI, Inc., Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, Credit
Suisse First Boston Corporation, Lehman Brothers Inc.,
Prudential Securities Incorporated and Schroder & Co. Inc.
(incorporated by reference to Exhibit 4.3 to Form 8-K, File
1-13086, filed November 5, 1997).
4.16 Participation Agreement dated December 8, 1998 by and among
Weatherford Enterra Compression Company, L.P., ABN AMRO Bank
N.V., as Administrative Agent, Arranger and Syndication
Agent, Chase Bank of Texas, National Association, and the
Lessors listed on Schedule I thereto (incorporated by
reference to Exhibit No. 4.16 to the Registration Statement
on Form S-4 (Reg. No. 333-65663)).
4.17 Master Lease Intended as Security dated as of December 8,
1998 between Weatherford Enterra Compression Company, L.P.,
as Lessee, and ABN AMRO Bank N.V., as Administrative Agent
for the Lessors (incorporated by reference to Exhibit No.
4.17 to the Registration Statement on Form S-4 (Reg. No.
333-65663)).
4.18 Guaranty Agreement dated as of December 8, 1998 between
Weatherford International, Inc. and ABN AMRO Bank N.V., as
Administrative Agent for the Lessors (incorporated by
reference to Exhibit No. 4.18 to the Registration Statement
on Form S-4 (Reg. No. 333-65663)).
*10.1 Weatherford Enterra, Inc. Non-Employee Director Stock Option
Plan, as amended and restated (incorporated by reference to
Exhibit 10.1 to Weatherford Enterra Inc.'s Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997 (File No.
1-7867)).
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<PAGE> 75
*10.2 Weatherford Enterra, Inc. 401(k) Savings Plan (incorporated
by reference to Exhibit 4.15 to the Company's Registration
Statement on Form S-8 (Reg. No. 333-53633)).
*10.3 Weatherford International Incorporated 1987 Stock Option
Plan, as amended and restated (incorporated by reference to
Exhibit 10.3 to Weatherford Enterra, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1996 (File No.
1-7867)).
*10.4 Weatherford Enterra, Inc. 1991 Stock Option Plan, as amended
and restated (incorporated by reference to Exhibit 10.4 to
Weatherford Enterra, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1996 (File No. 1-7867)).
*10.5 Weatherford Enterra, Inc. Amended and Restated Employee Stock
Purchase Plan (incorporated by reference to Exhibit 4.19 to
the Company's Registration Statement on Form S-8 (Reg. No.
333-53633)).
*10.6 Weatherford Enterra, Inc. Restricted Stock Incentive Plan, as
amended and restated (incorporated by reference to Exhibit
10.6 to Weatherford Enterra, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1996 (File No. 1-7867)).
*10.7 Amended and Restated Change of Control Agreement with Jon
Nicholson (incorporated by reference to Exhibit 10.1 to
Weatherford Enterra, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1996 (File No. 1-7867)).
*10.8 Change of Control Agreement with Randall D. Stilley
(incorporated by reference to Exhibit 10.1 to Weatherford
Enterra, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 1-17867)).
*10.9 Indemnification Agreements with Robert K. Moses, Jr.
(incorporated by reference to Exhibit 10.10 to Weatherford
Enterra, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1987 (File No. 1-7867)); Philip Burguieres
(incorporated by reference to Exhibit 10.4 to Weatherford
Enterra, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1991 (File No. 1-7867)); William E. Macaulay
(incorporated by reference to Exhibit 10.2 to Weatherford
Enterra, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995 (File No. 1-7867)); Jon Nicholson
(incorporated by reference to Exhibit 10.2 to Weatherford
Enterra, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996 (File No. 1-7867)); and Randall D. Stilley
(incorporated by reference to Exhibit 10.1 to Weatherford
Enterra, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 1-17867)).
*10.10 Employment Agreement dated as of June 15, 1998, between EVI
Weatherford, Inc. and Philip Burguieres (incorporated by
reference to Exhibit No. 10.9 to Form 10-Q, File 1-13086,
filed August 14, 1998).
*10.11 Energy Ventures, Inc. Executive Deferred Compensation Stock
Ownership Plan and related Trust Agreement (incorporated by
reference to Form 10-Q, File 1-13086, filed November 16,
1992).
*10.12 First Amendment to Energy Ventures, Inc. Executive Deferred
Compensation Stock Ownership Plan dated June 28, 1993
(incorporated by reference to Exhibit No. 4.3 to the
Registration Statement on Form S-8 (Reg. No. 33-65790)).
*10.13 Energy Ventures, Inc. Non-Employee Director Deferred
Compensation Plan (incorporated by reference to Form 10-Q,
File 1-13086, filed November 16, 1992).
*10.14 Energy Ventures, Inc. 1991 Non-Employee Director Stock Option
Plan and Form of Agreement (incorporated by reference to Form
10-Q, File 1-13086, filed August 8, 1991).
*10.15 Energy Ventures, Inc. 1992 Employee Stock Option Plan, as
amended (incorporated by reference to Exhibit No. 4.7 to the
Registration Statement on Form S-8 (Reg. No. 333-13531)).
*10.16 Energy Ventures, Inc. Employee Stock Option Plan
(incorporated by reference to Exhibit No. 4.1 to the
Registration Statement on Form S-8 (Reg. No. 33-31662)).
74
<PAGE> 76
*10.17 Form of Stock Option Agreement under the Company's Employee
Stock Option Plan (incorporated by reference to Exhibit No.
4.2 to the Registration Statement on Form S-8 (Reg. No.
33-31662)).
*10.18 Amended and Restated Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit No. 10.1 to Form 10-Q,
File 1-13086, filed August 12, 1995).
*10.19 Employment Agreements with each of Bernard J. Duroc-Danner,
James G. Kiley, Frances R. Powell, John C. Coble and Robert
Stiles (incorporated by reference to Exhibit No. 10.9 to Form
10-K, File 1-13086, filed March 27, 1998).
*10.20 Employment Agreement dated March 16, 1998, between EVI, Inc.
and Curtis W. Huff (incorporated by reference to Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998 (File No. 1-13086)).
+*10.21 Employment Agreements with Donald R. Galletly, E. Lee Colley,
III, Jon R. Nicholson and Randall D. Stilley.
+*10.22 Weatherford International, Inc. 1998 Employee Stock Option
Plan, including form of agreement for officers.
+*10.23 Form of Stock Option Agreement for Non-Employee Directors
dated September 8, 1998.
+*10.24 Form of Warrant Agreement with Robert K. Moses, Jr. dated
September 8, 1998.
+*10.25 Weatherford International, Inc. 401(k) Savings Plan.
10.26 Manufacturing and Sales Agreement dated as of January 1,
1996, by and between Grant Prideco, S.A. and Oil Country
Tubular Limited (incorporated by reference to Exhibit No.
10.34 to Form 10-K, File 1-13086, filed March 20, 1996).
10.27 Amended and Restated Lease Agreement dated May 3, 1996,
between Baker Hughes Oilfield Operations, Inc. and Grant
Prideco, Inc. (incorporated by reference to Exhibit No. 10.14
to Form 10-K, as amended by Form 10-K/A, File 1-13086, filed
March 24, 1997).
10.28 Formation Agreement dated as of February 2, 1999, by and
among Weatherford International, Inc., Weatherford Enterra
Compression Company, L.P., General Electric Capital
Corporation and Global Compression Services, Inc.
(incorporated by reference to Exhibit No. 10.1 to Form 8-K,
File 1-13086, filed February 5, 1999).
10.29 Limited Partnership Agreement of Weatherford Global
Compression Services, L.P. dated as of February 2, 1999, by
and among Weatherford Global Compression Holding, L.L.C.,
Weatherford Enterra Compression Company, L.P. and Global
Compression Services, Inc. (incorporated by reference to
Exhibit No. 10.2 to Form 8-K, File 1-13086, filed February 5,
1999).
10.30 Limited Liability Company Agreement of Weatherford Global
Compression Holding, L.L.C. dated as of February 2, 1999, by
and between Weatherford Enterra Compression Company, L.P. and
Global Compression Services, Inc. (incorporated by reference
to Exhibit No. 10.3 to Form 8-K, File 1-13086, filed February
5, 1999).
10.31 Registration Rights Agreement dated as of February 2, 1999,
among Weatherford Global Compression Services, L.P.,
Weatherford Enterra Compression Company, L.P. and Global
Compression Services, Inc. (incorporated by reference to
Exhibit No. 10.4 to Form 8-K, File 1-13086, filed February 5,
1999).
10.32 The Woodward, Oklahoma lease agreements as amended
(incorporated by reference to Exhibit No. 10.32 to Form 10-K,
File 1-13086, filed March 23, 1995).
+21.1 Subsidiaries of Weatherford International, Inc.
75
<PAGE> 77
+23.1 Consent of Arthur Andersen LLP.
+27.1 Financial Data Schedule.
================================
* Management Contract or Compensatory Plan or Arrangement
+ Filed herewith
As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the
Company has not filed with this Annual Report on Form 10-K certain
instruments defining the rights of holders of long-term debt of the
Company and its subsidiaries, because the total amount of securities
authorized under any of such instruments does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated
basis. The Company agrees to furnish a copy of any of such
instruments to the Securities and Exchange Commission upon request.
We agree to furnish to any requesting stockholder a copy of any of
the above named exhibits upon the payment of our reasonable expenses
of obtaining, duplicating and mailing the requested exhibits. All
requests for copies of exhibits should be made in writing to our
Investor Relations Department at 515 Post Oak Blvd., Suite 600,
Houston, TX 77027.
(d) Financial Statement Schedule
SCHEDULE II
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES COLLECTIONS DEDUCTIONS PERIOD
----------- --------- --------- ----------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998:
Allowance for uncollectible accounts
receivable ............................. $ 23,473 $ 2,397 $ 679 $ (6,785) $ 19,764
YEAR ENDED DECEMBER 31, 1997:
Allowance for uncollectible accounts
receivable ............................. $ 16,824 $ 13,248 $ 112 $ (6,711) $ 23,473
YEAR ENDED DECEMBER 31, 1996:
Allowance for uncollectible accounts
receivable ............................. $ 16,304 $ 4,608 $ 4 $ (4,092) $ 16,824
</TABLE>
All other schedules are omitted because they are not required or because the
information is included in the financial statements or notes thereto.
76
<PAGE> 78
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on March 29, 1999.
WEATHERFORD INTERNATIONAL, INC.
By: /s/ Bernard J. Duroc-Danner
---------------------------------------
Bernard J. Duroc-Danner
President, Chief Executive Officer,
Chairman of the Board and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Bernard J. Duroc-Danner President, Chief Executive Officer, Chairman March 29, 1999
------------------------------------------- of the Board and Director,
Bernard J. Duroc-Danner (Principal Executive Officer and
Principal Financial Officer)
/s/ Frances R. Powell Vice President, Accounting and Controller March 29, 1999
-------------------------------------------- (Principal Accounting Officer)
Frances R. Powell
/s/ David J. Butters Director March 29, 1999
--------------------------------------------
David J. Butters
/s/ Sheldon B. Lubar Director March 29, 1999
--------------------------------------------
Sheldon B. Lubar
/s/ Robert B. Millard Director March 29, 1999
--------------------------------------------
Robert B. Millard
/s/ Robert A. Rayne Director March 29, 1999
--------------------------------------------
Robert A. Rayne
/s/ Philip Burguieres Director March 29, 1999
--------------------------------------------
Philip Burguieres
/s/ William E. Macaulay Director March 29, 1999
--------------------------------------------
William E. Macaulay
/s/ Robert K. Moses, Jr. Director March 29, 1999
--------------------------------------------
Robert K. Moses, Jr.
</TABLE>
77
<PAGE> 79
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------ --------
<S> <C>
2.1 Agreement and Plan of Merger dated as of March 4, 1998, by and
between EVI, Inc. and Weatherford Enterra, Inc. (incorporated by
reference to Exhibit No. 2.1 to Amendment No. 1 to Form 8-K on
Form 8-K/A, File 1-13086, filed March 9, 1998).
2.2 Amendment No. 1 dated as of April 17, 1998, to the Agreement and
Plan of Merger dated as of March 4, 1998, by and between EVI,
Inc. and Weatherford Enterra, Inc. (incorporated by reference to
Exhibit No. 2.2 to Form 8-K, File 1-13086, filed April 21, 1998).
2.3 Amendment No. 2 dated as of April 22, 1998, to the Agreement and
Plan of Merger dated as of March 4, 1998, as amended by and
between EVI, Inc. and Weatherford Enterra, Inc. (incorporated by
reference to Exhibit No. 2.3 to Form 8-K, File 1-13086, filed
April 23, 1998).
2.4 Share Purchase Agreement made and entered into as of January 30,
1998, by and among the shareholders of Nika Enterprises Ltd., an
Alberta corporation, listed on the signature pages thereto and
EVI Oil Tools Canada Ltd., an Alberta corporation (incorporated
by reference to Exhibit No. 2.1 to the Form 8-K, File 1-13086,
filed March 3, 1998).
2.5 Agreement and Plan of Merger dated as of December 12, 1997, by
and among EVI, Inc., Christiana Acquisition, Inc., Christiana
Companies, Inc. and C2, Inc. (incorporated by reference to
Exhibit No. 2.1 to Form 8-K, File 1-13086, filed December 31,
1997).
2.6 Agreement dated as of December 12, 1997, by and among EVI, Inc.,
Christiana Companies, Inc., Total Logistic Control, LLC and C2,
Inc. (incorporated by reference to Exhibit No. 2.2 to Form 8-K,
File 1-13086, filed December 31, 1997).
2.7 Letter Agreement dated December 12, 1997, by and among EVI, Inc.,
Christiana Acquisition, Inc., Christiana Companies, Inc. and C2,
Inc. (incorporated by reference to Exhibit No. 2.3 to Form 8-K,
File 1-13086, filed December 31, 1997).
2.8 Amended and Restated Arrangement Agreement by and between Taro
Industries Limited, and EVI, Inc. and 756745 Alberta Ltd. and
759572 Alberta Ltd. dated as of December 5, 1997 (incorporated by
reference to Exhibit No. 2.4 to Form 8-K, File 1-13086, filed
December 31, 1997).
2.9 Stock Purchase Agreement dated as of October 9, 1997, between
EVI, Inc. and PACCAR Inc. (incorporated by reference to Exhibit
No. 2.1 to Form 8-K, File 1-13086, filed October 21, 1997).
2.10 Stock Purchase Agreement dated as of October 9, 1997, among
certain shareholders of BMW Monarch (Lloydminster) Ltd., the
shareholders of BMW Pump Inc., the shareholder of Makelki
Holdings Ltd., the shareholder of 589979 Alberta Ltd., the
shareholders of 600969 Alberta Ltd., the shareholders of 391862
Alberta Ltd. and EVI, Inc. (incorporated by reference to Exhibit
No. 2.2 to Form 8-K, File 1-13086, filed October 21, 1997).
2.11 Agreement and Plan of Merger dated as of July 16, 1997, as
amended, by and among XLS Holding, Inc., EVI, Inc. and GPXL, Inc.
(incorporated by reference to Exhibit No. 2.1 to Form 8-K, File
1-13086, filed August 26, 1997).
2.12 Stock Purchase Agreement dated as of February 21, 1997, among
Seigo Arai, Kanematsu USA Inc. and Energy Ventures, Inc.
(incorporated by reference to Exhibit No. 2.1 to Form 8-K, File
1-13086, filed March 17, 1997).
2.13 Agreement and Plan of Merger dated as of December 5, 1996, among
Energy Ventures, Inc., GulfMark Acquisition Co., GulfMark
International, Inc. and New GulfMark International, Inc.
(incorporated by reference to Exhibit No. 2.2 to Form 8-K, File
1-13086, filed December 26, 1996).
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------ --------
<S> <C>
2.14 Agreement and Plan of Distribution dated as of December 5, 1996,
by and among GulfMark International, Inc., New GulfMark
International, Inc. and Energy Ventures, Inc. (incorporated by
reference to Exhibit No. 2.3 to Form 8-K, File 1-13086, filed
December 26, 1996).
2.15 First Amendment to Agreement and Plan of Merger dated as of March
27, 1997, by and among Energy Ventures, Inc., GulfMark
Acquisition Co., GulfMark International, Inc. and GulfMark
Offshore, Inc. (incorporated by reference to Exhibit No. 2.3 to
the Registration Statement on Form S-4, as amended (Reg. No.
333-24133)).
2.16 Stock Purchase Agreement dated as of September 14, 1996, by and
among Parker Drilling Company and Energy Ventures, Inc.
(incorporated by reference to Exhibit 2.1 to Form 8-K, File
1-13086, filed October 3, 1996).
2.17 Agreement and Plan of Merger dated as of June 20, 1996 between
Energy Ventures, Inc., TCA Acquisition, Inc. and Tubular
Corporation of America (incorporated by reference to Exhibit No.
2.1 to Form 8-K, File 1-13086, filed June 24, 1996).
2.18 Amendment No. 1 dated as of May 26, 1998, to the Agreement and
Plan of Merger dated as of December 12, 1997 and to the Agreement
dated as of December 12, 1997, by and among EVI, Inc., Christiana
Acquisition, Inc., Christiana Companies, Inc., C2, Inc. and Total
Logistic Control, LLC (incorporated by reference to Exhibit 2.18
to the Registration Statement on Form S-4, as amended (Reg. No.
333-58741)).
2.19 Amended and Restated Agreement and Plan of Merger among
Weatherford International, Inc., Christiana Acquisition, Inc.,
Christiana Companies, Inc. and C2, Inc. dated as of October 14,
1998 (incorporated by reference to Exhibit No. 2.19 to the
Registration Statement on Form S-4 (Reg. No. 333-65663)).
2.20 Amendment No. 2 to Logistic Purchase Agreement by and among
Weatherford International, Inc., Total Logistic Control, LLC,
Christiana Companies, Inc. and C2, Inc. dated as of October 12,
1998 (incorporated by reference to Exhibit No. 2.20 to the
Registration Statement on Form S-4 (Reg. No. 333-65663)).
2.21 Amendment No. 1 to Amended and Restated Agreement and Plan of
Merger, by and among Weatherford International, Inc., Christiana
Acquisition, Inc., Christiana Companies, Inc. and C2, Inc. dated
as of January 5, 1999 (incorporated by reference to Exhibit No.
2.21 to the Registration Statement on Form S-4 (Reg. No.
333-65663)).
2.22 Amendment No. 3 to Logistic Purchase Agreement, by and among
Weatherford International, Inc., Total Logistic Control, LLC,
Christiana Companies, Inc. and C2, Inc. dated as of January 5,
1999 (incorporated by reference to Exhibit No. 2.22 to the
Registration Statement on Form S-4 (Reg. No. 333-65663)).
+3.1 Amended and Restated Certificate of Incorporation of the Company.
3.3 Amended and Restated By-Laws of the Company (incorporated by
reference to Exhibit No. 3.2 to Form 8-K, File 1-13086, filed
June 2, 1998).
4.1 See Exhibit Nos. 3.1 and 3.2 for provisions of the Amended and
Restated Certificate of Incorporation and Amended and Restated
By-Laws of the Registrant defining the rights of the holders of
Common Stock.
4.2 Amended and Restated Credit Agreement dated as of May 27, 1998,
among EVI Weatherford, Inc., EVI Oil Tools Canada Ltd., Chase
Bank of Texas, National Association, as U.S. Administrative
Agent, The Bank of Nova Scotia, as Documentation Agent and
Canadian Agent, ABN AMRO Bank, N.V., as Syndication Agent, and
the other Lenders defined therein,
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------ --------
<S> <C>
including the forms of Notes (incorporated by reference to
Exhibit No. 4.1 to the Form 8-K, File 1-13086, filed June 16,
1998).
4.3 Indenture dated May 17, 1996, between Weatherford Enterra, Inc.
and Bank of Montreal Trust Company, as Trustee (incorporated by
reference to Exhibit 4.1 to Weatherford Enterra, Inc.'s Current
Report on Form 8-K, File No. 1-7867, dated May 28, 1996).
4.4 First Supplemental Indenture dated and effective as of May 27,
1998, by and among EVI Weatherford, Inc., the successor by merger
to Weatherford Enterra, Inc., and Bank of Montreal Trust Company,
as Trustee (incorporated by reference to Exhibit No. 4.1 to Form
8-K, File 1-13086, filed June 2, 1998).
4.5 Form of Weatherford Enterra, Inc.'s 7 1/4% Notes Due May 15, 2006
(incorporated by reference to Exhibit 4.2 to Weatherford Enterra,
Inc.'s Current Report on Form 8-K, File No. 1-7867, dated May 28,
1996).
4.6 Indenture dated March 15, 1994, among Energy Ventures, Inc., as
Issuer, the Subsidiary Guarantors party thereto, as Guarantors,
and Chemical Bank, as Trustee (incorporated by reference to Form
8-K, File 1-13086, filed April 5, 1994).
4.7 Specimen 10 1/4% Senior Note due 2004 of Energy Ventures, Inc.
(incorporated by reference to Form 8-K, File 1-13086, filed April
5, 1994).
4.8 First Supplemental Indenture by and among Energy Ventures, Inc.,
Prideco, Inc. and Chemical Bank, as trustee, dated June 30, 1995
(incorporated by reference to Exhibit No. 4.4 to the Registration
Statement on Form S-3 (Reg. No. 33-61933)).
4.9 Second Supplemental Indenture by and among Energy Ventures, Inc.,
EVI Arrow, Inc., EVI Watson, Inc. and The Chase Manhattan Bank,
as trustee, dated effective as of December 6, 1996 (incorporated
by reference to Exhibit 4.6 to Form 10-K, File 1-13086, filed
March 20, 1997).
4.10 Third Supplemental Indenture by and among EVI, Inc., Ercon, Inc.
and The Chase Manhattan Bank, as trustee, dated effective as of
May 1, 1997 (incorporated by reference to Exhibit 99.2 to Form
8-K, File 1-13086, filed October 27, 1997).
4.11 Fourth Supplemental Indenture by and among EVI, Inc., XLS
Holding, Inc., XL Systems, Inc. and The Chase Manhattan Bank, as
trustee, dated effective as of August 25, 1997 (incorporated by
reference to Exhibit 99.3 to Form 8-K, File 1-13086, filed
October 27, 1997).
4.12 Fifth Supplemental Indenture by and between EVI, Inc. and The
Chase Manhattan Bank dated as of December 12, 1997 (including the
Form of Note and Form of Exchange Note) (incorporated by
reference to Exhibit 4.1 to Form 8-K, File 1-13086, filed
December 31, 1997).
4.13 Indenture dated as of October 15, 1997, between EVI, Inc. and The
Chase Manhattan Bank, as Trustee (incorporated by reference to
Exhibit No. 4.13 to the Registration Statement on Form S-3 (Reg.
No. 333-45207)).
4.14 First Supplemental Indenture dated as of October 28, 1997,
between EVI, Inc. and The Chase Manhattan Bank, as Trustee
(including form of Debenture) (incorporated by reference to
Exhibit 4.2 to Form 8-K, File 1-13086, filed November 5, 1997).
4.15 Registration Rights Agreement dated November 3, 1997, by and
among EVI, Inc., Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation, Credit Suisse First
Boston Corporation, Lehman Brothers Inc., Prudential Securities
Incorporated and Schroder & Co. Inc. (incorporated by reference
to Exhibit 4.3 to Form 8-K, File 1-13086, filed November 5,
1997).
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------ --------
<S> <C>
4.16 Participation Agreement dated December 8, 1998 by and among
Weatherford Enterra Compression Company, L.P., ABN AMRO Bank
N.V., as Administrative Agent, Arranger and Syndication Agent,
Chase Bank of Texas, National Association, and the Lessors listed
on Schedule I thereto (incorporated by reference to Exhibit No.
4.16 to the Registration Statement on Form S-4 (Reg. No.
333-65663)).
4.17 Master Lease Intended as Security dated as of December 8, 1998
between Weatherford Enterra Compression Company, L.P., as Lessee,
and ABN AMRO Bank N.V., as Administrative Agent for the Lessors
(incorporated by reference to Exhibit No. 4.17 to the
Registration Statement on Form S-4 (Reg. No. 333-65663)).
4.18 Guaranty Agreement dated as of December 8, 1998 between
Weatherford International, Inc. and ABN AMRO Bank N.V., as
Administrative Agent for the Lessors (incorporated by reference
to Exhibit No. 4.18 to the Registration Statement on Form S-4
(Reg. No. 333-65663)).
*10.1 Weatherford Enterra, Inc. Non-Employee Director Stock Option
Plan, as amended and restated (incorporated by reference to
Exhibit 10.1 to Weatherford Enterra Inc.'s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997 (File No. 1-7867)).
*10.2 Weatherford Enterra, Inc. 401(k) Savings Plan (incorporated by
reference to Exhibit 4.15 to the Company's Registration Statement
on Form S-8 (Reg. No. 333-53633)).
*10.3 Weatherford International Incorporated 1987 Stock Option Plan, as
amended and restated (incorporated by reference to Exhibit 10.3
to Weatherford Enterra, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1996 (File No. 1-7867)).
*10.4 Weatherford Enterra, Inc. 1991 Stock Option Plan, as amended and
restated (incorporated by reference to Exhibit 10.4 to
Weatherford Enterra, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1996 (File No. 1-7867)).
*10.5 Weatherford Enterra, Inc. Amended and Restated Employee Stock
Purchase Plan (incorporated by reference to Exhibit 4.19 to the
Company's Registration Statement on Form S-8 (Reg. No.
333-53633)).
*10.6 Weatherford Enterra, Inc. Restricted Stock Incentive Plan, as
amended and restated (incorporated by reference to Exhibit 10.6
to Weatherford Enterra, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1996 (File No. 1-7867)).
*10.7 Amended and Restated Change of Control Agreement with Jon
Nicholson (incorporated by reference to Exhibit 10.1 to
Weatherford Enterra, Inc.'s Annual Report on Form 10-K for the
year ended December 31, 1996 (File No. 1-7867)).
*10.8 Change of Control Agreement with Randall D. Stilley (incorporated
by reference to Exhibit 10.1 to Weatherford Enterra, Inc.'s
Annual Report on Form 10-K for the year ended December 31, 1997
(File No. 1-17867)).
*10.9 Indemnification Agreements with Robert K. Moses, Jr.
(incorporated by reference to Exhibit 10.10 to Weatherford
Enterra, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1987 (File No. 1-7867)); Philip Burguieres
(incorporated by reference to Exhibit 10.4 to Weatherford
Enterra, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1991 (File No. 1-7867)); William E. Macaulay
(incorporated by reference to Exhibit 10.2 to Weatherford
Enterra, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995 (File No. 1-7867)); Jon Nicholson
(incorporated by reference to Exhibit 10.2 to Weatherford
Enterra, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1996 (File No. 1-7867)); and Randall D. Stilley
(incorporated by reference to Exhibit 10.1 to Weatherford
Enterra, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 1-17867)).
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------ --------
<S> <C>
*10.10 Employment Agreement dated as of June 15, 1998, between EVI
Weatherford, Inc. and Philip Burguieres (incorporated by
reference to Exhibit No. 10.9 to Form 10-Q, File 1-13086, filed
August 14, 1998).
*10.11 Energy Ventures, Inc. Executive Deferred Compensation Stock
Ownership Plan and related Trust Agreement (incorporated by
reference to Form 10-Q, File 1-13086, filed November 16, 1992).
*10.12 First Amendment to Energy Ventures, Inc. Executive Deferred
Compensation Stock Ownership Plan dated June 28, 1993
(incorporated by reference to Exhibit No. 4.3 to the Registration
Statement on Form S-8 (Reg. No. 33-65790)).
*10.13 Energy Ventures, Inc. Non-Employee Director Deferred Compensation
Plan (incorporated by reference to Form 10-Q, File 1-13086, filed
November 16, 1992).
*10.14 Energy Ventures, Inc. 1991 Non-Employee Director Stock Option
Plan and Form of Agreement (incorporated by reference to Form
10-Q, File 1-13086, filed August 8, 1991).
*10.15 Energy Ventures, Inc. 1992 Employee Stock Option Plan, as amended
(incorporated by reference to Exhibit No. 4.7 to the Registration
Statement on Form S-8 (Reg. No. 333-13531)).
*10.16 Energy Ventures, Inc. Employee Stock Option Plan (incorporated by
reference to Exhibit No. 4.1 to the Registration Statement on
Form S-8 (Reg. No. 33-31662)).
*10.17 Form of Stock Option Agreement under the Company's Employee Stock
Option Plan (incorporated by reference to Exhibit No. 4.2 to the
Registration Statement on Form S-8 (Reg. No. 33-31662)).
*10.18 Amended and Restated Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit No. 10.1 to Form 10-Q, File
1-13086, filed August 12, 1995).
*10.19 Employment Agreements with each of Bernard J. Duroc-Danner, James
G. Kiley, Frances R. Powell, John C. Coble and Robert Stiles
(incorporated by reference to Exhibit No. 10.9 to Form 10-K, File
1-13086, filed March 27, 1998).
*10.20 Employment Agreement dated March 16, 1998, between EVI, Inc. and
Curtis W. Huff (incorporated by reference to Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 (File No. 1-13086)).
+*10.21 Employment Agreements with Donald R. Galletly, E. Lee Colley, III,
Jon R. Nicholson and Randall D. Stilley.
+*10.22 Weatherford International, Inc. 1998 Employee Stock Option Plan,
including form of agreement for officers.
+*10.23 Form of Stock Option Agreement for Non-Employee Directors dated
September 8, 1998.
+*10.24 Form of Warrant Agreement with Robert K. Moses, Jr. dated
September 8, 1998.
+*10.25 Weatherford International, Inc. 401(k) Savings Plan.
10.26 Manufacturing and Sales Agreement dated as of January 1, 1996, by
and between Grant Prideco, S.A. and Oil Country Tubular Limited
(incorporated by reference to Exhibit No. 10.34 to Form 10-K,
File 1-13086, filed March 20, 1996).
10.27 Amended and Restated Lease Agreement dated May 3, 1996, between
Baker Hughes Oilfield Operations, Inc. and Grant Prideco, Inc.
(incorporated by reference to Exhibit No. 10.14 to Form 10-K, as
amended by Form 10-K/A, File 1-13086, filed March 24, 1997).
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
NUMBER EXHIBITS
- ------ --------
<S> <C>
10.28 Formation Agreement dated as of February 2, 1999, by and among
Weatherford International, Inc., Weatherford Enterra Compression
Company, L.P., General Electric Capital Corporation and Global
Compression Services, Inc. (incorporated by reference to Exhibit
No. 10.1 to Form 8-K, File 1-13086, filed February 5, 1999).
10.29 Limited Partnership Agreement of Weatherford Global Compression
Services, L.P. dated as of February 2, 1999, by and among
Weatherford Global Compression Holding, L.L.C., Weatherford
Enterra Compression Company, L.P. and Global Compression
Services, Inc. (incorporated by reference to Exhibit No. 10.2 to
Form 8-K, File 1-13086, filed February 5, 1999).
10.30 Limited Liability Company Agreement of Weatherford Global
Compression Holding, L.L.C. dated as of February 2, 1999, by and
between Weatherford Enterra Compression Company, L.P. and Global
Compression Services, Inc. (incorporated by reference to Exhibit
No. 10.3 to Form 8-K, File 1-13086, filed February 5, 1999).
10.31 Registration Rights Agreement dated as of February 2, 1999, among
Weatherford Global Compression Services, L.P., Weatherford
Enterra Compression Company, L.P. and Global Compression
Services, Inc. (incorporated by reference to Exhibit No. 10.4 to
Form 8-K, File 1-13086, filed February 5, 1999).
10.32 The Woodward, Oklahoma lease agreements as amended (incorporated
by reference to Exhibit No. 10.32 to Form 10-K, File 1-13086,
filed March 23, 1995).
+21.1 Subsidiaries of Weatherford International, Inc.
+23.1 Consent of Arthur Andersen LLP.
+27.1 Financial Data Schedule.
</TABLE>
================================
* Management Contract or Compensatory Plan or Arrangement
+ Filed herewith
As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Company has
not filed with this Annual Report on Form 10-K certain instruments
defining the rights of holders of long-term debt of the Company and its
subsidiaries, because the total amount of securities authorized under any
of such instruments does not exceed 10% of the total assets of the
Company and its subsidiaries on a consolidated basis. The Company agrees
to furnish a copy of any of such instruments to the Securities and
Exchange Commission upon request.
<PAGE> 1
EXHIBIT 3.1
EVI WEATHERFORD, INC.
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
EVI Weatherford, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
does hereby certify:
FIRST: That the Board of Directors of the Company, at a special meeting
duly held on August 7, 1998, unanimously adopted resolutions proposing and
declaring advisable the following amendment to the Amended and Restated
Certificate of Incorporation of the Company and directed that such amendment be
considered at the next annual meeting of stockholders of the Company:
To amend Article 1 of the Amended and Restated Certificate of
Incorporation in its entirety to read as follows:
"1. The name of the Corporation is Weatherford
International, Inc."
SECOND: That at the annual meeting of stockholders of the Company duly
called and held on September 21, 1998, in accordance with Section 222 of the
General Corporation Law of the State of Delaware, the holders of a majority of
the shares of Common Stock of the Company entitled to vote on such amendment
voted in favor of such amendment.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate to be signed
by Bernard J. Duroc-Danner, its Chairman of the Board, President and Chief
Executive Officer, this 21st day of September, 1998.
EVI WEATHERFORD, INC.
By: /s/ Bernard J. Duroc-Danner
--------------------------------
Bernard J. Duroc-Danner
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 2
CERTIFICATE OF MERGER
MERGING
WEATHERFORD ENTERRA, INC.,
A DELAWARE CORPORATION,
INTO
EVI, INC.,
A DELAWARE CORPORATION
Pursuant to the provisions of Section 251(c) of the General Corporation
Law of the State of Delaware (the "DGCL"), the undersigned corporation submits
the following Certificate of Merger for the purpose of effecting a merger under
the DGCL.
1. The name and state of incorporation of each of the constituent
corporations are as follows:
Name of Corporation State of Incorporation
------------------------- ----------------------
Weatherford Enterra, Inc. Delaware
EVI, Inc. Delaware
2. An agreement and plan of merger (the "Merger Agreement") has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with Section 251 of the DGCL.
3. The name of the surviving corporation is EVI, Inc.
4. Pursuant to the terms of the Merger Agreement, the restated certificate
of incorporation of the surviving corporation shall be amended and restated and
is attached hereto as Annex A in its entirety.
5. The executed Merger Agreement is on file at the principal place of
business of the surviving corporation, located at 5 Post Oak Park, Suite 1760,
Houston, Texas 77027.
6. A copy of the Merger Agreement will be furnished by the surviving
corporation, on request and without cost, to any stockholder of any constituent
corporation.
Dated as of the 27th day of May, 1998.
EVI, INC.
/s/ Bernard J. Duroc-Danner
-----------------------------------------
Bernard J. Duroc-Danner
President and
Chief Executive Officer
<PAGE> 3
ANNEX A
-------
EVI WEATHERFORD, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
1. The name of the Corporation is EVI Weatherford, Inc.
2. The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of the Corporation's registered
agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted by
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.
4. The total number of shares of stock of all classes which the
Corporation has authority to issue is Two Hundred and Fifty-Three Million
(253,000,000) shares, of which Two Hundred and Fifty Million (250,000,000)
shares shall be Common Stock, with a par value of one dollar ($1.00) per share
("Common Stock"), and Three Million (3,000,000) shares shall be Preferred
Stock, with a par value of one dollar ($1.00) per share ("Preferred Stock").
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions of the shares of each class of
stock are as follows:
PREFERRED STOCK
Preferred Stock may be issued from time to time by the Board
of Directors as shares of one or more series. Subject to the
provisions hereof and the limitations prescribed by law, the Board
of Directors is hereby vested with the authority and is expressly
authorized, prior to issuance, by adopting resolutions providing
for the issuance of, or providing for a change in the number of,
shares of any particular series and, if and to the extent from
time to time required by law, by filing a certificate pursuant to
the General Corporation Law (or other law hereafter in effect
relating to the same or substantially similar subject matter), to
establish or change the number of shares to be included in each
such series and to fix the designation and relative powers,
preferences and rights and the qualifications and limitations or
restrictions thereof relating to the shares of each such series.
The vested authority of the Board of Directors with respect to
each series shall include, but not be limited to, the
determination of the following:
(a) the distinctive serial designation of such
series and the number of shares constituting such
series (provided that the aggregate number of shares
constituting all series of Preferred Stock shall not
exceed Three Million (3,000,000));
A-1
<PAGE> 4
(b) the annual dividend rate, if any, on shares
of such series and the preferences, if any, over any
other series (or of any other series over such series)
with respect to dividends, and whether dividends shall
be cumulative and, if so, from which date or dates;
(c) whether the shares of such series shall be
redeemable and, if so, the terms and conditions of
such redemption, including the date or dates upon and
after which such shares shall be redeemable, and the
amount per share payable in case of redemption, which
amount may vary under different conditions and at
different redemption dates;
(d) the obligation, if any, of the Corporation to
purchase or redeem shares of such series pursuant to a
sinking fund or purchase fund and, if so, the terms of
such obligation;
(e) whether shares of such series shall be
convertible into, or exchangeable for, shares of stock
of any other class or classes or any stock of any
series of the same class or any other class or classes
or any evidences of indebtedness and, if so, the terms
and conditions of such conversion or exchange,
including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment, if
any;
(f) whether the shares of such series shall have
voting rights, in addition to the voting rights
provided by law, and if so, the terms of such voting
rights, including, without limitation, whether such
shares shall have the right to vote with the Common
Stock on issues on an equal, greater or lesser basis;
(g) the rights of the shares of such series in
the event of a voluntary or involuntary liquidation,
dissolution, winding up or distribution of assets of
the Corporation;
(h) whether the shares of such series shall be
entitled to the benefit of conditions and restrictions
upon (i) the creation of indebtedness of the
Corporation or any subsidiary, (ii) the issuance of
any additional stock (including additional shares of
such series or of any other series) or (iii) the
payment of dividends or the making of other
distributions on the purchase, redemption or other
acquisition by the Corporation or any subsidiary of
any outstanding stock of the Corporation; and
(i) any other relative rights, powers,
preferences, qualifications, limitations or
restrictions thereof relating to any such series.
A-2
<PAGE> 5
Except where otherwise set forth in the resolution or
resolutions adopted by the Board of Directors providing for the
issuance of any series of Preferred Stock, the number of shares
comprising such series may be increased or decreased (but not
below the number of shares then outstanding) from time to time by
like action of the Board of Directors. The shares of Preferred
Stock of any one series shall be identical with the other shares
in such series in all respects except as to the dates from and
after which dividends thereon shall cumulate, if cumulative.
Shares of any series of Preferred Stock which have been
redeemed (whether through the operation of a sinking fund or
otherwise) or purchased by the Corporation, or which, if
convertible or exchangeable, have been converted into or exchanged
for shares of stock of any other class or classes shall have the
status of authorized and unissued shares of Preferred Stock and
may be reissued as a part of the series of which they were
originally a part or may be reclassified and reissued as part of a
new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors or as part of any other
series of Preferred Stock, all subject to the conditions or
restrictions on issuance set forth in the resolution or
resolutions adopted by the Board of Directors providing for the
issuance of any series of Preferred Stock and to any filing
required by law.
Subject to the rights of any outstanding shares of any series
of Preferred Stock, this Restated Certificate of Incorporation may
be amended from time to time in a manner that would solely modify
or change the relative powers, preferences and rights and the
qualifications and limitations or restrictions of any issued
shares of any series of Preferred Stock then outstanding with the
only required vote or consent for approval of such amendment being
the affirmative vote or consent of the holders of a majority of
the outstanding shares of the series of Preferred Stock so
affected provided that the powers, preferences and rights and the
qualification and limitations or restrictions of such series after
giving effect to such amendment are no greater than the powers,
preferences and rights and the qualifications and limitations or
restrictions permitted to be fixed and determined by the Board of
Directors with respect to the establishment of any new series of
shares of Preferred Stock pursuant to the authority vested in the
Board of Directors by this Article 4. Approval of any such
amendment by the holders of the Common Stock shall not be required
and any such amendment shall be deemed not to have affected the
holders of the Common Stock adversely.
The number of authorized shares of Preferred Stock may be
increased or decreased by the affirmative vote of the holders of a
majority of the stock of the Corporation entitled to vote without
the separate vote of holders of Preferred Stock as a class.
COMMON STOCK
Subject to all of the rights of the Preferred Stock, and
except as may be expressly provided with respect to the Preferred
Stock herein, by law or by the Board of Directors pursuant to this
Article 4:
A-3
<PAGE> 6
(a) dividends may be declared and paid or set
apart for payment upon Common Stock out of any assets
or funds of the Corporation legally available for the
payment of dividends and may be payable in cash, stock
or otherwise;
(b) the holders of Common Stock shall have the
exclusive right to vote for the election of directors
and on all other matters requiring stockholder action,
each share being entitled to one vote; and
(c) upon the voluntary or involuntary
liquidation, dissolution or winding up of the
Corporation, the net assets of the Corporation shall
be distributed pro rata to the holders of Common Stock
in accordance with their respective rights and
interests to the exclusion of the holders of the
Preferred Stock.
5. The Corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized:
To authorize and cause to be executed mortgages and liens
upon the real and personal property of the Corporation.
To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper
purpose and to abolish any such reserve in the manner in which it
was created.
By a majority vote of the whole board, to designate one or
more committees. Any such committee, to the extent provided in the
resolution of the board of directors, or in the by-laws of the
Corporation, shall have and may exercise all the powers and
authority of the board of directors in the management of the
business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or
authority in reference to amending the certificate of
incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as
provided in Section 151(a) of the Delaware General Corporation
Law, fix any of the preferences or rights of such shares relating
to dividends, redemption, dissolution, any distribution of assets
of the Corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes, or any other
series of the same or any other class or classes of stock of the
Corporation), adopting an agreement of merger or consolidation
under Section 251 or 252 of the Delaware General Corporation Law,
recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation
or a revocation of a dissolution, or amending the bylaws of the
Corporation; and, unless the resolution, bylaws or certificate of
incorporation expressly so provides, no such committee shall have
the
A-4
<PAGE> 7
power or authority to declare a dividend, to authorize the
issuance of stock or to adopt a certificate of ownership and
merger pursuant to Section 253 of the Delaware General Corporation
Law.
When and as authorized by the stockholders in accordance with
statute, to sell, lease or exchange all or substantially all of
the property and assets of the Corporation, including its good
will and its corporate franchises, upon such terms and conditions
and for such consideration, which may consist in whole or in part
of money or property including shares of stock in, and/or other
securities of, any other corporation or corporations, as its board
of directors shall deem expedient and for the best interest of the
Corporation.
7. Elections of directors need not be by written ballot unless the by-laws
of the Corporation shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the Corporation.
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions
of Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
8. All of the powers of the Corporation, insofar as the same may be
lawfully vested by this Restated Certificate of Incorporation in the Board of
Directors of the Corporation, are hereby conferred upon the Board of Directors
of the Corporation.
In furtherance and not in limitation of the foregoing provisions of this
Article 8, and for the purpose of the orderly management of the business and
the conduct of the affairs of the Corporation, the Board of Directors of the
Corporation shall have the power to adopt, amend or repeal from time to time
any provision of the by-laws of the Corporation (including, without limitation,
by-laws governing the conduct of, and the matters which may properly be brought
before, meetings of the stockholders and by-laws specifying the manner and
extent to which prior notice shall be given of the submission of proposals to
be submitted at any meeting of stockholders or of nominations of
A-5
<PAGE> 8
elections of directors to be held at any such meeting) by the vote of a
majority of the entire Board of Directors, subject to the right of the
stockholders of the Corporation entitled to vote thereon to adopt, amend or
repeal by-laws of the Corporation. In addition to any requirements of law and
any other provision of this Restated Certificate of Incorporation or any
resolution or resolutions of the Board of Directors adopted pursuant to Article
4 of this Restated Certificate of Incorporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this Restated Certificate of
Incorporation or any such resolution or resolutions), the affirmative vote of
the holders of 80% or more of the combined voting power of the then outstanding
shares of stock of all classes and series of stock the holders of which are
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to adopt, amend, alter or repeal any provision
of the by-laws.
9. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
10. To the fullest extent that the General Corporation Law of the State of
Delaware as it exists on the date hereof and as it may hereafter be amended
permits the limitation or elimination of the liability of directors, no
director of the Corporation shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of
such director occurring prior to such amendment or repeal.
A-6
<PAGE> 1
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") by and between Weatherford
International, Inc., a Delaware corporation (the "Company"), and Donald R.
Galletly (the "Executive"), effective September 8, 1998.
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") has
previously determined that it is in the best interests of the Company and its
stockholders to retain the Executive and to induce the employment of the
Executive for the long term benefit of the Company;
WHEREAS, the Board does not contemplate the termination of the
Executive during the term hereof and the Board and the Executive expect that the
Executive will be retained for at least the three year period contemplated
herein; and
WHEREAS, to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment.
(a) The Company hereby agrees that the Company or an
affiliated company will continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement, during the Employment Period (as
defined below).
(b) The "Employment Period" shall mean the period commencing
on the Effective Date (as defined below) and ending on the third anniversary of
the date hereof; provided, however, that commencing on the date one year after
the date hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Employment Period shall be
automatically extended so as to terminate three year(s) after such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Employment Period shall not be so extended.
The Effective Date shall be September 8, 1998.
2. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting requirements,
authority, duties and responsibilities) shall be Vice President -
Communication and Investor Relations or similar position and (B) the
Executive's services shall be performed primarily at the Company's
principal executive offices in Houston, Texas or other locations less
than 35 miles from such location.
<PAGE> 2
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company and,
to the extent necessary to discharge the responsibilities assigned to
the Executive hereunder, to use the Executive's reasonable best efforts
to perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach
at educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary of $200,000 ("Annual Base
Salary"), which shall be paid at a monthly rate. During the Employment
Period, the Annual Base Salary shall be reviewed no more than 12 months
after the last salary increase awarded to the Executive prior to the
date hereof and thereafter at least annually; provided, however, that a
salary increase shall not necessarily be awarded as a result of such
review. Any increase in Annual Base Salary may not serve to limit or
reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase. The
term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. The Executive shall be eligible
for an annual bonus (the "Annual Bonus") for each fiscal year ending
during the Employment Period on the same basis as other executive
officers under the Company's executive officer annual incentive
program. Each such Annual Bonus shall be paid no later than the end of
the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to
defer the receipt of such Annual Bonus pursuant to a Company sponsored
deferred compensation plan in effect.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices, policies and
programs applicable generally to the Executive's peer executives of the
Company and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction
is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and
programs as in effect on the date hereof. As used in this Agreement,
the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may
be, shall be eligible to participate in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided
2
<PAGE> 3
by the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable
generally to the Executive's peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices,
policies and programs provide the Executive with benefits which are
less favorable, in the aggregate, than such plans, practices, policies
and programs in effect for the Executive on the date hereof.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with the
most favorable policies, practices and procedures of the Company and
its affiliated companies in effect for the Executive on the date
hereof.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits (including, without
limitation, financial planning services and payment of related
expenses, as appropriate) in accordance with the most favorable plans,
practices, programs and policies of the Company in effect on the date
hereof.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of the Company
and its affiliated companies in effect for the Executive on the date
hereof.
3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 10(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the Company on a
full-time basis for 180 calendar days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive by the
Board or the Chief Executive Officer of the Company which specifically
identifies the manner in which the
3
<PAGE> 4
Board or Chief Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act, or failure to act, on
the part of the Executive shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the Chief
Executive Officer or of a senior officer of the Company or based upon the advice
of counsel for the Company shall be conclusively presumed to be done, or omitted
to be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive during the Employment Period for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 2(a) of this Agreement,
or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 2(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than as provided in Section
2(a)(i)(B) hereof or the Company's requiring the Executive to travel on
Company business to a substantially greater extent than required for
the performance of the Executive's position, it being understood that
travel will be a necessary part of the job;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
4
<PAGE> 5
(v) any failure by the Company to comply with and
satisfy Section 9(c) of this Agreement.
For purposes of this Section 3(c), any good faith
determination of "Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination during the
Employment Period by the Company for Cause, or by the Executive for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 10(b) of the Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 30 days after the giving of
such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if the Executive's employment is terminated by
the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be;
(ii) if the Executive's employment is terminated by
the Company other than for Cause, death or Disability, the Date of
Termination shall be the date on which the Company notifies the
Executive of such termination; and
(iii) if the Executive's employment is terminated by
reason of death or Disability, the Date of Termination shall be the
date of death of the Executive or the Disability Effective Date, as the
case may be.
4. Obligations of the Company Upon Termination.
(a) Good Reason; Other than For Cause, Death or Disability.
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause, death or Disability, or the Executive shall
terminate employment for Good Reason:
(i) The Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate
of the following amounts:
(A) the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the higher of (I) the
highest Annual Bonus received by the Executive over the
preceding three year period and (II) the Annual Bonus paid or
payable, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal
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<PAGE> 6
year consisting of less than 12 full months or during which
the Executive was employed for less than 12 full months), for
the most recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as the
"Highest Annual Bonus", it being agreed that for any
termination prior to the Executive receiving his first Annual
Bonus under this Agreement, the Annual Bonus shall be an
amount equal to the Annual Bonus the Executive would have
received for the year ended December 31, 1997, had the
Executive then been employed and received a bonus on the same
basis as the other similarly situated vice presidents of the
Company for such year, but shall exclude the sign on bonus
previously paid to the Executive) and (y) a fraction, the
numerator of which is the number of days in the current fiscal
year through the Date of Termination, and the denominator of
which is 365, and (3) any compensation previously deferred by
the Executive under a plan sponsored by the Company (together
with any accrued interest or earnings thereon), and any
accrued vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described in clauses
(1), (2) and (3) shall be hereinafter referred to as the
"Accrued Obligations"), and
(B) an amount equal to three times the sum
of (i) the then current Annual Base Salary of the Executive
and (ii) the Highest Annual Bonus, and
(C) an amount equal to the total of the
employer matching contributions credited to the Executive
under the Company's 401(k) Savings Plan (the "401(k) Plan") or
any other deferred compensation plan during the 12-month
period immediately preceding the month of the Executive's Date
of Termination multiplied by three, such amount to be grossed
up so that the amount the Executive actually receives after
payment of any federal or state taxes payable thereon equals
the amount first described above.
(ii) For a period of three years from the Executive's
Date of Termination (the "Remaining Contract Term") or such longer
period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family equal to those which would have
been provided to them in accordance with the plans, programs, practices
and policies described in Section 2(b)(iv) of this Agreement if the
Executive's employment had not been terminated; provided, however, that
with respect to any of such plans, programs, practices or policies
requiring an employee contribution, the Executive shall continue to pay
the monthly employee contribution for same, and provided further, that
if the Executive becomes reemployed by another employer and is eligible
to receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility;
(iii) The Company shall, at its sole expense as
incurred, provide the Executive with outplacement services, the scope
and provider of which shall be selected by the Executive in his sole
discretion;
(iv) With respect to all options to purchase Common
Stock held by the Executive pursuant to a Company stock option plan on
or prior to the Date of Termination,
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<PAGE> 7
irrespective of whether such options are then exercisable, the
Executive shall have the right, during the 60-day period after the Date
of Termination, to elect to surrender all or part of such options in
exchange for a cash payment by the Company to the Executive in an
amount equal the number of shares of Common Stock subject to the
Executive's option multiplied by the difference between (x) and (y)
where (x) equals the purchase price per share covered by the option and
(y) equals the highest reported sale price of a share of Common Stock
in any transaction reported on the New York Stock Exchange during the
60-day period prior to and including the Executive's Date of
Termination. Such cash payments shall be made within 30 days after the
date of the Executive's election; provided, however, that if the
Executive's Date of Termination is within six months after the date of
grant of a particular option held by the Executive and the Executive is
subject to Section 16(b) of the Securities Exchange Act of 1934, as
amended, any cash payments related thereto shall be made on the date
which is six months and one day after the date of grant of such option
to the extent necessary to prevent the imposition of the disgorgement
provisions under Section 16(b). Notwithstanding the foregoing, if any
right granted pursuant to the foregoing would make any change of
control transaction ineligible for pooling of interests accounting
treatment under APB No. 16 that but for this Section 4(a)(iv) would
otherwise be eligible for such accounting treatment, the Executive
shall receive shares of Common Stock with a Fair Market Value equal to
the cash that would otherwise be payable hereunder in substitution for
the cash, provided that any such shares of Common Stock so granted to
the Executive shall be registered under the Securities Act of 1933, as
amended; any options outstanding as of the Date of Termination and not
then exercisable shall become fully exercisable as of the Executive's
Date of Termination, and to the extent the Executive does not elect to
surrender same for a cash payment (or the equivalent number of shares
of Common Stock) as provided above, such options shall remain
exercisable for one year after the Executive's Date of Termination or
until the stated expiration of the stated term thereof, whichever is
shorter; restrictions applicable to any shares of Common Stock granted
to the Executive by the Company shall lapse, as of the date of the
Executive's Date of Termination;
(v) All country club memberships, luncheon clubs and
other memberships which the Company was providing for the Executive's
use at the time Notice of Termination is given shall, to the extent
possible, be transferred and assigned to the Executive at no cost to
the Executive (other than income taxes owed), the cost of transfer, if
any, to be borne by the Company;
(vi) The Company shall either transfer to the
Executive ownership and title to the Executive's company car at no cost
to the Executive (other than income taxes owed) or, if the Executive
receives a monthly car allowance in lieu of a Company car, pay the
Executive a lump sum in cash within 30 days after the Executive's Date
of Termination equal to the Executive's annual car allowance multiplied
by three;
(vii) All benefits under the EDC and the 401(k) Plan
and any other similar plans, including any stock options held by the
Executive, not already vested shall be 100% vested, to the extent such
vesting is permitted under the Code (as defined below);
(viii) To the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy or
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<PAGE> 8
practice or contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits"); and
(ix) The foregoing payments are intended to
compensate the Executive for a breach of the Company's obligations and
place Executive in substantially the same position had the employment
of the Executive not been so terminated as a result of a breach by the
Company.
(b) Death. If Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiaries, as applicable, in a lump sum in cash
within 30 days after the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 4(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of the Executive's peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to death benefits, if any, in effect on the date hereof or, if more favorable,
those in effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days after the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
4(c) shall include, without limitation, and the Executive shall be entitled
after the Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable benefits generally provided by the Company and
its affiliated companies to the Executive's disabled peer executives and/or
their families in accordance with such plans, programs, practices and policies
relating to disability, if any, in effect generally on the date hereof or, if
more favorable, those in effect at the time of the Disability.
(d) Cause; Other Than for Good Reason. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive, other than the
obligation to pay to the Executive (x) his or her Annual Base Salary through the
Date of Termination, (y) the amount of any compensation previously deferred by
the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
after the Date of Termination subject to such other options or restrictions as
provided by law.
5. Other Rights. Except as provided hereinafter, nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify,
8
<PAGE> 9
nor, shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Except as provided hereinafter, amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement. It is expressly agreed by the Executive that
he or she shall have no right to receive, and hereby waives any entitlement to,
any severance pay or similar benefit under any other plan, policy, practice or
program of the Company. In addition, if the Executive has an employment or
similar agreement with the Company at the Date of Termination, he or she agrees
that he or she shall have the right to receive all of the benefits provided
under this Agreement or such other agreement, whichever one, in its entirety,
the Executive chooses, but not both agreements, and when the Executive has made
such election, the other agreement shall be superseded in its entirety and shall
be of no further force and effect. The Executive also agrees that to the extent
he or she may be eligible for any severance pay or similar benefit under any
laws providing for severance or termination benefits, such other severance pay
or similar benefit shall be coordinated with the benefits owed hereunder, such
that the Executive shall not receive duplicate benefits.
6. Payments.
(a) No Rights of Offset. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others.
(b) No Mitigation Required. In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expense which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Executive of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereto (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
7. Certain Additional Payments by the Company.
(a) Although this Agreement is not being entered into in
connection with or contingent upon a change of control of the Company, anything
in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 7) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are
9
<PAGE> 10
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 7(a), if it shall be
determined that the Executive is entitled to a Gross-Up Payment, but that the
Executive, after taking into account the Payments and the Gross-Up Payment,
would not receive a net after-tax benefit of at least $50,000 (taking into
account both income taxes and any Excise Tax) as compared to the net after-tax
proceeds to the Executive resulting from an elimination of the Gross-Up Payment
and a reduction of the Payments, in the aggregate, to an amount (the "Reduced
Amount") such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination shall be made
by Arthur Andersen LLP or, as provided below, such other certified public
accounting firm as may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days after the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 7, shall be paid by the Company to the
Executive within five days after the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 7(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment (or an additional Gross-Up
Payment) in the event the IRS seeks higher payment. Such notification shall be
given as soon as practicable, but no later than ten business days after the
Executive is informed in writing of such claim, and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect
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to such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claims; provided, however, that the
Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
costs and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Section 7(c), the Company shall
control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim and sue for
a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issues raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 7(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 7(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days
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after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any of its
affiliated companies, provided that it shall not apply to information which is
or shall become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement), information
that is developed by the Executive independently of such information, or
knowledge or data or information that is disclosed to the Executive by a third
party under no obligation of confidentiality to the Company. After termination
of the Executive's employment with the Company, the Executive shall not, without
the prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 8 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and shall not
be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
10. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICT OF LAWS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the Executive: Donald R. Galletly
Weatherford International, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
If to the Company: Weatherford International, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027-3415
Attention: Bernard J. Duroc-Danner
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 3(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Don Galletly
----------------------------------------
Don Galletly
WEATHERFORD INTERNATIONAL, INC.
By /s/ Bernard J. Duroc-Danner
--------------------------------------
Name: Bernard J. Duroc-Danner
----------------------------------
Title: President and CEO
----------------------------------
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EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") by and between Weatherford
International, Inc., a Delaware corporation (the "Company"), and E. Lee Colley
(the "Executive"), effective December 19, 1998.
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") has
previously determined that it is in the best interests of the Company and its
stockholders to retain the Executive and to induce the employment of the
Executive for the long term benefit of the Company;
WHEREAS, the Board does not contemplate the termination of the
Executive during the term hereof and the Board and the Executive expect that the
Executive will be retained for at least the three year period contemplated
herein; and
WHEREAS, to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment.
(a) The Company hereby agrees that the Company or an
affiliated company will continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement, during the Employment Period (as
defined below).
(b) The "Employment Period" shall mean the period commencing
on the Effective Date (as defined below) and ending on the third anniversary of
the date hereof; provided, however, that commencing on the date one year after
the date hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Employment Period shall be
automatically extended so as to terminate three year(s) after such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Employment Period shall not be so extended.
The Effective Date shall be December 19, 1998.
2. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting requirements,
authority, duties and responsibilities) shall be Vice President -
Artificial Lift Services or other executive officer and (B) the
Executive's services shall be performed primarily at the Company's
principal executive offices in Houston, Texas or other locations less
than 35 miles from such location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable
<PAGE> 15
attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it
shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary of $225,000.00 ("Annual
Base Salary"), which shall be paid at a monthly rate. During the
Employment Period, the Annual Base Salary shall be reviewed no more
than 12 months after the last salary increase awarded to the Executive
prior to the date hereof and thereafter at least annually; provided,
however, that a salary increase shall not necessarily be awarded as a
result of such review. Any increase in Annual Base Salary may not serve
to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such
increase. The term Annual Base Salary as utilized in this Agreement
shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. The Executive shall be eligible
for an annual bonus (the "Annual Bonus") for each fiscal year ending
during the Employment Period on the same basis as other executive
officers under the Company's executive officer annual incentive
program. Each such Annual Bonus shall be paid no later than the end of
the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to
defer the receipt of such Annual Bonus pursuant to a Company sponsored
deferred compensation plan in effect.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices, policies and
programs applicable generally to the Executive's peer executives of the
Company and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction
is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and
programs as in effect on the date hereof. As used in this Agreement,
the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may
be, shall be eligible to participate in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided
by the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death
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and travel accident insurance plans and programs) to the extent
applicable generally to the Executive's peer executives of the Company
and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than such plans, practices,
policies and programs in effect for the Executive on the date hereof.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with the
most favorable policies, practices and procedures of the Company and
its affiliated companies in effect for the Executive on the date
hereof.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits (including, without
limitation, financial planning services and payment of related
expenses, as appropriate) in accordance with the most favorable plans,
practices, programs and policies of the Company in effect on the date
hereof.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of the Company
and its affiliated companies in effect for the Executive on the date
hereof.
3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 10(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the Company on a
full-time basis for 180 calendar days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive by the
Board or the Chief Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the
Executive's duties, or
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(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act, or failure to act, on
the part of the Executive shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the Chief
Executive Officer or of a senior officer of the Company or based upon the advice
of counsel for the Company shall be conclusively presumed to be done, or omitted
to be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive during the Employment Period for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 2(a) of this Agreement,
or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 2(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than as provided in Section
2(a)(i)(B) hereof or the Company's requiring the Executive to travel on
Company business to a substantially greater extent than required for
the performance of the Executive's position, it being understood that
travel will be a necessary part of the job;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 9(c) of this Agreement.
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For purposes of this Section 3(c), any good faith
determination of "Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination during the
Employment Period by the Company for Cause, or by the Executive for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 10(b) of the Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 30 days after the giving of
such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if the Executive's employment is terminated by
the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be;
(ii) if the Executive's employment is terminated by
the Company other than for Cause, death or Disability, the Date of
Termination shall be the date on which the Company notifies the
Executive of such termination; and
(iii) if the Executive's employment is terminated by
reason of death or Disability, the Date of Termination shall be the
date of death of the Executive or the Disability Effective Date, as the
case may be.
4. Obligations of the Company Upon Termination.
(a) Good Reason; Other than For Cause, Death or
Disability. If, during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause, death or Disability, or the
Executive shall terminate employment for Good Reason:
(i) The Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate
of the following amounts:
(A) the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the higher of (I) the
highest Annual Bonus received by the Executive over the
preceding three year period and (II) the Annual Bonus paid or
payable, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year
consisting of less than 12 full months or during which the
Executive was employed for less than 12 full months), for the
most recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as the
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"Highest Annual Bonus", and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365,
and (3) any compensation previously deferred by the Executive
under a plan sponsored by the Company (together with any
accrued interest or earnings thereon), and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2) and (3)
shall be hereinafter referred to as the "Accrued
Obligations"), and
(B) an amount equal to three times the sum
of (i) the then current Annual Base Salary of the Executive
and (ii) the Highest Annual Bonus, and
(C) an amount equal to the total of the
employer matching contributions credited to the Executive
under the Company's 401(k) Savings Plan (the "401(k) Plan") or
any other deferred compensation plan during the 12-month
period immediately preceding the month of the Executive's Date
of Termination multiplied by three, such amount to be grossed
up so that the amount the Executive actually receives after
payment of any federal or state taxes payable thereon equals
the amount first described above.
(ii) For a period of three years from the Executive's
Date of Termination (the "Remaining Contract Term") or such longer
period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family equal to those which would have
been provided to them in accordance with the plans, programs, practices
and policies described in Section 2(b)(iv) of this Agreement if the
Executive's employment had not been terminated; provided, however, that
with respect to any of such plans, programs, practices or policies
requiring an employee contribution, the Executive shall continue to pay
the monthly employee contribution for same, and provided further, that
if the Executive becomes reemployed by another employer and is eligible
to receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility;
(iii) The Company shall, at its sole expense as
incurred, provide the Executive with outplacement services, the scope
and provider of which shall be selected by the Executive in his sole
discretion;
(iv) With respect to all options to purchase Common
Stock held by the Executive pursuant to a Company stock option plan on
or prior to the Date of Termination, irrespective of whether such
options are then exercisable, the Executive shall have the right,
during the 60-day period after the Date of Termination, to elect to
surrender all or part of such options in exchange for a cash payment by
the Company to the Executive in an amount equal the number of shares of
Common Stock subject to the Executive's option multiplied by the
difference between (x) and (y) where (x) equals the purchase price per
share covered by the option and (y) equals the highest reported sale
price of a share of Common Stock in any transaction reported on the New
York Stock Exchange during the 60-day period prior to and including the
Executive's Date of Termination. Such cash payments shall be made
within 30 days after the date of the Executive's election; provided,
however, that if the
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Executive's Date of Termination is within six months after the date of
grant of a particular option held by the Executive and the Executive is
subject to Section 16(b) of the Securities Exchange Act of 1934, as
amended, any cash payments related thereto shall be made on the date
which is six months and one day after the date of grant of such option
to the extent necessary to prevent the imposition of the disgorgement
provisions under Section 16(b). Notwithstanding the foregoing, if any
right granted pursuant to the foregoing would make any change of
control transaction ineligible for pooling of interests accounting
treatment under APB No. 16 that but for this Section 4(a)(iv) would
otherwise be eligible for such accounting treatment, the Executive
shall receive shares of Common Stock with a Fair Market Value equal to
the cash that would otherwise be payable hereunder in substitution for
the cash, provided that any such shares of Common Stock so granted to
the Executive shall be registered under the Securities Act of 1933, as
amended; any options outstanding as of the Date of Termination and not
then exercisable shall become fully exercisable as of the Executive's
Date of Termination, and to the extent the Executive does not elect to
surrender same for a cash payment (or the equivalent number of shares
of Common Stock) as provided above, such options shall remain
exercisable for one year after the Executive's Date of Termination or
until the stated expiration of the stated term thereof, whichever is
shorter; restrictions applicable to any shares of Common Stock granted
to the Executive by the Company shall lapse, as of the date of the
Executive's Date of Termination;
(v) All country club memberships, luncheon clubs and
other memberships which the Company was providing for the Executive's
use at the time Notice of Termination is given shall, to the extent
possible, be transferred and assigned to the Executive at no cost to
the Executive (other than income taxes owed), the cost of transfer, if
any, to be borne by the Company;
(vi) The Company shall either transfer to the
Executive ownership and title to the Executive's company car at no cost
to the Executive (other than income taxes owed) or, if the Executive
receives a monthly car allowance in lieu of a Company car, pay the
Executive a lump sum in cash within 30 days after the Executive's Date
of Termination equal to the Executive's annual car allowance multiplied
by three;
(vii) All benefits under the EDC and the 401(k) Plan
and any other similar plans, including any stock options held by the
Executive, not already vested shall be 100% vested, to the extent such
vesting is permitted under the Code (as defined below);
(viii) To the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits"); and
(ix) The foregoing payments are intended to
compensate the Executive for a breach of the Company's obligations and
place Executive in substantially the same position had the employment
of the Executive not been so terminated as a result of a breach by the
Company.
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(b) Death. If Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiaries, as applicable, in a lump sum in cash
within 30 days after the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 4(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of the Executive's peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to death benefits, if any, in effect on the date hereof or, if more favorable,
those in effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days after the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
4(c) shall include, without limitation, and the Executive shall be entitled
after the Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable benefits generally provided by the Company and
its affiliated companies to the Executive's disabled peer executives and/or
their families in accordance with such plans, programs, practices and policies
relating to disability, if any, in effect generally on the date hereof or, if
more favorable, those in effect at the time of the Disability.
(d) Cause; Other Than for Good Reason. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive, other than the
obligation to pay to the Executive (x) his or her Annual Base Salary through the
Date of Termination, (y) the amount of any compensation previously deferred by
the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
after the Date of Termination subject to such other options or restrictions as
provided by law.
5. Other Rights. Except as provided hereinafter, nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Except as provided hereinafter, amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement. It is expressly agreed by the Executive that he or she shall have no
right to receive, and hereby waives any entitlement to, any severance pay or
similar benefit under any other plan, policy, practice or program of the
Company.
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In addition, if the Executive has an employment or similar agreement with the
Company at the Date of Termination, he or she agrees that he or she shall have
the right to receive all of the benefits provided under this Agreement or such
other agreement, whichever one, in its entirety, the Executive chooses, but not
both agreements, and when the Executive has made such election, the other
agreement shall be superseded in its entirety and shall be of no further force
and effect. The Executive also agrees that to the extent he or she may be
eligible for any severance pay or similar benefit under any laws providing for
severance or termination benefits, such other severance pay or similar benefit
shall be coordinated with the benefits owed hereunder, such that the Executive
shall not receive duplicate benefits.
6. Payments.
(a) No Rights of Offset. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others.
(b) No Mitigation Required. In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expense which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Executive of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereto (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
7. Certain Additional Payments by the Company.
(a) Although this Agreement is not being entered into in
connection with or contingent upon a change of control of the Company, anything
in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 7) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 7(a), if it shall be determined that the
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Executive is entitled to a Gross-Up Payment, but that the Executive, after
taking into account the Payments and the Gross-Up Payment, would not receive a
net after-tax benefit of at least $50,000 (taking into account both income taxes
and any Excise Tax) as compared to the net after-tax proceeds to the Executive
resulting from an elimination of the Gross-Up Payment and a reduction of the
Payments, in the aggregate, to an amount (the "Reduced Amount") such that the
receipt of Payments would not give rise to any Excise Tax, then no Gross-Up
Payment shall be made to the Executive and the Payments, in the aggregate, shall
be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination shall be made
by Arthur Andersen LLP or, as provided below, such other certified public
accounting firm as may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days after the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 7, shall be paid by the Company to the
Executive within five days after the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 7(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment (or an additional Gross-Up
Payment) in the event the IRS seeks higher payment. Such notification shall be
given as soon as practicable, but no later than ten business days after the
Executive is informed in writing of such claim, and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including without limitation,
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accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claims; provided, however, that the
Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
costs and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Section 7(c), the Company shall
control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim and sue for
a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issues raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 7(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 7(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies,
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provided that it shall not apply to information which is or shall become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement), information that is developed by the
Executive independently of such information, or knowledge or data or information
that is disclosed to the Executive by a third party under no obligation of
confidentiality to the Company. After termination of the Executive's employment
with the Company, the Executive shall not, without the prior written consent of
the Company or as may otherwise be required by law or legal process, communicate
or divulge any such information, knowledge or data to anyone other than the
Company and those designated by it. In no event shall an asserted violation of
the provisions of this Section 8 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and shall not
be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
10. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICT OF LAWS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: Lee Colley
Weatherford International, Inc.
515 Post Oak Blvd.
Houston, Texas 77027
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If to the Company: Weatherford International, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027-3415
Attention: Bernard J. Duroc-Danner
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 3(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ E. LEE COLLEY
------------------------------------
E. Lee Colley
WEATHERFORD INTERNATIONAL, INC.
By /s/ Bernard J. Duroc-Danner
--------------------------------
Name: Bernard J. Duroc-Danner
------------------------------
Title: President and CEO
------------------------------
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EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") by and between Weatherford
International, Inc., a Delaware corporation (the "Company"), and Jon Nicholson
(the "Executive"), effective December 31, 1998.
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") has
previously determined that it is in the best interests of the Company and its
stockholders to retain the Executive and to induce the employment of the
Executive for the long term benefit of the Company;
WHEREAS, the Board does not contemplate the termination of the
Executive during the term hereof and the Board and the Executive expect that the
Executive will be retained for at least the three year period contemplated
herein; and
WHEREAS, to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment.
(a) The Company hereby agrees that the Company or an
affiliated company will continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement, during the Employment Period (as
defined below).
(b) The "Employment Period" shall mean the period commencing
on the Effective Date (as defined below) and ending on the third anniversary of
the date hereof; provided, however, that commencing on the date one year after
the date hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Employment Period shall be
automatically extended so as to terminate three year(s) after such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Employment Period shall not be so extended.
The Effective Date shall be December 31, 1998.
2. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting requirements,
authority, duties and responsibilities) shall be Vice President - Human
Resources or other executive officer and (B) the Executive's services
shall be performed primarily at the Company's principal executive
offices in Houston, Texas or other locations less than 35 miles from
such location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable
<PAGE> 28
attention and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it
shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B)
deliver lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary of $210,000.00 ("Annual
Base Salary"), which shall be paid at a monthly rate. During the
Employment Period, the Annual Base Salary shall be reviewed no more
than 12 months after the last salary increase awarded to the Executive
prior to the date hereof and thereafter at least annually; provided,
however, that a salary increase shall not necessarily be awarded as a
result of such review. Any increase in Annual Base Salary may not serve
to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such
increase. The term Annual Base Salary as utilized in this Agreement
shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. The Executive shall be eligible
for an annual bonus (the "Annual Bonus") for each fiscal year ending
during the Employment Period on the same basis as other executive
officers under the Company's executive officer annual incentive
program; provided, however the Annual Bonus for the years 1998, 1999,
and 2000 shall be at least $105,000.00. Each such Annual Bonus shall be
paid no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless
the Executive shall elect to defer the receipt of such Annual Bonus
pursuant to a Company sponsored deferred compensation plan in effect.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices, policies and
programs applicable generally to the Executive's peer executives of the
Company and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction
is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and
programs as in effect on the date hereof. As used in this Agreement,
the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may
be, shall be eligible to participate in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided
by the Company and its affiliated companies (including, without
limitation, medical,
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<PAGE> 29
prescription, dental, disability, salary continuance, employee life,
group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to the Executive's peer
executives of the Company and its affiliated companies, but in no event
shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate,
than such plans, practices, policies and programs in effect for the
Executive on the date hereof.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with the
most favorable policies, practices and procedures of the Company and
its affiliated companies in effect for the Executive on the date
hereof.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits (including, without
limitation, financial planning services and payment of related
expenses, as appropriate) in accordance with the most favorable plans,
practices, programs and policies of the Company in effect on the date
hereof.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of the Company
and its affiliated companies in effect for the Executive on the date
hereof.
3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 10(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the Company on a
full-time basis for 180 calendar days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive by the
Board or the Chief Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the
Executive's duties, or
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<PAGE> 30
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act, or failure to act, on
the part of the Executive shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the Chief
Executive Officer or of a senior officer of the Company or based upon the advice
of counsel for the Company shall be conclusively presumed to be done, or omitted
to be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive during the Employment Period for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 2(a) of this Agreement,
or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 2(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than as provided in Section
2(a)(i)(B) hereof or the Company's requiring the Executive to travel on
Company business to a substantially greater extent than required for
the performance of the Executive's position, it being understood that
travel will be a necessary part of the job;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 9(c) of this Agreement.
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<PAGE> 31
For purposes of this Section 3(c), any good faith
determination of "Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination during the
Employment Period by the Company for Cause, or by the Executive for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 10(b) of the Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 30 days after the giving of
such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if the Executive's employment is terminated by
the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be;
(ii) if the Executive's employment is terminated by
the Company other than for Cause, death or Disability, the Date of
Termination shall be the date on which the Company notifies the
Executive of such termination; and
(iii) if the Executive's employment is terminated by
reason of death or Disability, the Date of Termination shall be the
date of death of the Executive or the Disability Effective Date, as the
case may be.
4. Obligations of the Company Upon Termination.
(a) Good Reason; Other than For Cause, Death or Disability.
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause, death or Disability, or the Executive shall
terminate employment for Good Reason:
(i) The Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate
of the following amounts:
(A) the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the higher of (I) the
highest Annual Bonus received by the Executive over the
preceding three year period and (II) the Annual Bonus paid or
payable, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year
consisting of less than 12 full months or during which the
Executive was employed for less than 12 full months), for the
most recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as the
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<PAGE> 32
"Highest Annual Bonus", and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365,
and (3) any compensation previously deferred by the Executive
under a plan sponsored by the Company (together with any
accrued interest or earnings thereon), and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2) and (3)
shall be hereinafter referred to as the "Accrued
Obligations"), and
(B) an amount equal to three times the sum
of (i) the then current Annual Base Salary of the Executive
and (ii) the Highest Annual Bonus, and
(C) an amount equal to the total of the
employer matching contributions credited to the Executive
under the Company's 401(k) Savings Plan (the "401(k) Plan") or
any other deferred compensation plan during the 12-month
period immediately preceding the month of the Executive's Date
of Termination multiplied by three, such amount to be grossed
up so that the amount the Executive actually receives after
payment of any federal or state taxes payable thereon equals
the amount first described above.
(ii) For a period of three years from the Executive's
Date of Termination (the "Remaining Contract Term") or such longer
period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family equal to those which would have
been provided to them in accordance with the plans, programs, practices
and policies described in Section 2(b)(iv) of this Agreement if the
Executive's employment had not been terminated; provided, however, that
with respect to any of such plans, programs, practices or policies
requiring an employee contribution, the Executive shall continue to pay
the monthly employee contribution for same, and provided further, that
if the Executive becomes reemployed by another employer and is eligible
to receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility;
(iii) The Company shall, at its sole expense as
incurred, provide the Executive with outplacement services, the scope
and provider of which shall be selected by the Executive in his sole
discretion;
(iv) With respect to all options to purchase Common
Stock held by the Executive pursuant to a Company stock option plan on
or prior to the Date of Termination, irrespective of whether such
options are then exercisable, the Executive shall have the right,
during the 60-day period after the Date of Termination, to elect to
surrender all or part of such options in exchange for a cash payment by
the Company to the Executive in an amount equal the number of shares of
Common Stock subject to the Executive's option multiplied by the
difference between (x) and (y) where (x) equals the purchase price per
share covered by the option and (y) equals the highest reported sale
price of a share of Common Stock in any transaction reported on the New
York Stock Exchange during the 60-day period prior to and including the
Executive's Date of Termination. Such cash payments shall be made
within 30 days after the date of the Executive's election; provided,
however, that if the
6
<PAGE> 33
Executive's Date of Termination is within six months after the date of
grant of a particular option held by the Executive and the Executive is
subject to Section 16(b) of the Securities Exchange Act of 1934, as
amended, any cash payments related thereto shall be made on the date
which is six months and one day after the date of grant of such option
to the extent necessary to prevent the imposition of the disgorgement
provisions under Section 16(b). Notwithstanding the foregoing, if any
right granted pursuant to the foregoing would make any change of
control transaction ineligible for pooling of interests accounting
treatment under APB No. 16 that but for this Section 4(a)(iv) would
otherwise be eligible for such accounting treatment, the Executive
shall receive shares of Common Stock with a Fair Market Value equal to
the cash that would otherwise be payable hereunder in substitution for
the cash, provided that any such shares of Common Stock so granted to
the Executive shall be registered under the Securities Act of 1933, as
amended; any options outstanding as of the Date of Termination and not
then exercisable shall become fully exercisable as of the Executive's
Date of Termination, and to the extent the Executive does not elect to
surrender same for a cash payment (or the equivalent number of shares
of Common Stock) as provided above, such options shall remain
exercisable for one year after the Executive's Date of Termination or
until the stated expiration of the stated term thereof, whichever is
shorter; restrictions applicable to any shares of Common Stock granted
to the Executive by the Company shall lapse, as of the date of the
Executive's Date of Termination;
(v) All country club memberships, luncheon clubs and
other memberships which the Company was providing for the Executive's
use at the time Notice of Termination is given shall, to the extent
possible, be transferred and assigned to the Executive at no cost to
the Executive (other than income taxes owed), the cost of transfer, if
any, to be borne by the Company;
(vi) The Company shall either transfer to the
Executive ownership and title to the Executive's company car at no cost
to the Executive (other than income taxes owed) or, if the Executive
receives a monthly car allowance in lieu of a Company car, pay the
Executive a lump sum in cash within 30 days after the Executive's Date
of Termination equal to the Executive's annual car allowance multiplied
by three;
(vii) All benefits under the EDC and the 401(k) Plan
and any other similar plans, including any stock options held by the
Executive, not already vested shall be 100% vested, to the extent such
vesting is permitted under the Code (as defined below);
(viii) To the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits"); and
(ix) The foregoing payments are intended to
compensate the Executive for a breach of the Company's obligations and
place Executive in substantially the same position had the employment
of the Executive not been so terminated as a result of a breach by the
Company.
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<PAGE> 34
(b) Death. If Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiaries, as applicable, in a lump sum in cash
within 30 days after the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 4(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of the Executive's peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to death benefits, if any, in effect on the date hereof or, if more favorable,
those in effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days after the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
4(c) shall include, without limitation, and the Executive shall be entitled
after the Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable benefits generally provided by the Company and
its affiliated companies to the Executive's disabled peer executives and/or
their families in accordance with such plans, programs, practices and policies
relating to disability, if any, in effect generally on the date hereof or, if
more favorable, those in effect at the time of the Disability.
(d) Cause; Other Than for Good Reason. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive, other than the
obligation to pay to the Executive (x) his or her Annual Base Salary through the
Date of Termination, (y) the amount of any compensation previously deferred by
the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
after the Date of Termination subject to such other options or restrictions as
provided by law.
5. Other Rights. Except as provided hereinafter, nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Except as provided hereinafter, amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement. It is expressly agreed by the Executive that he or she shall have no
right to receive, and hereby waives any entitlement to, any severance pay or
similar benefit under any other plan, policy, practice or program of the
Company.
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<PAGE> 35
In addition, if the Executive has an employment or similar agreement with the
Company at the Date of Termination, he or she agrees that he or she shall have
the right to receive all of the benefits provided under this Agreement or such
other agreement, whichever one, in its entirety, the Executive chooses, but not
both agreements, and when the Executive has made such election, the other
agreement shall be superseded in its entirety and shall be of no further force
and effect. The Executive also agrees that to the extent he or she may be
eligible for any severance pay or similar benefit under any laws providing for
severance or termination benefits, such other severance pay or similar benefit
shall be coordinated with the benefits owed hereunder, such that the Executive
shall not receive duplicate benefits.
6. Payments.
(a) No Rights of Offset. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others.
(b) No Mitigation Required. In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expense which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Executive of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereto (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
7. Certain Additional Payments by the Company.
(a) Although this Agreement is not being entered into in
connection with or contingent upon a change of control of the Company, anything
in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 7) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 7(a), if it shall be determined that the
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<PAGE> 36
Executive is entitled to a Gross-Up Payment, but that the Executive, after
taking into account the Payments and the Gross-Up Payment, would not receive a
net after-tax benefit of at least $50,000 (taking into account both income taxes
and any Excise Tax) as compared to the net after-tax proceeds to the Executive
resulting from an elimination of the Gross-Up Payment and a reduction of the
Payments, in the aggregate, to an amount (the "Reduced Amount") such that the
receipt of Payments would not give rise to any Excise Tax, then no Gross-Up
Payment shall be made to the Executive and the Payments, in the aggregate, shall
be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination shall be made
by Arthur Andersen LLP or, as provided below, such other certified public
accounting firm as may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days after the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 7, shall be paid by the Company to the
Executive within five days after the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 7(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment (or an additional Gross-Up
Payment) in the event the IRS seeks higher payment. Such notification shall be
given as soon as practicable, but no later than ten business days after the
Executive is informed in writing of such claim, and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including without limitation,
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accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claims; provided, however, that the
Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
costs and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Section 7(c), the Company shall
control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim and sue for
a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issues raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 7(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 7(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies,
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provided that it shall not apply to information which is or shall become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement), information that is developed by the
Executive independently of such information, or knowledge or data or information
that is disclosed to the Executive by a third party under no obligation of
confidentiality to the Company. After termination of the Executive's employment
with the Company, the Executive shall not, without the prior written consent of
the Company or as may otherwise be required by law or legal process, communicate
or divulge any such information, knowledge or data to anyone other than the
Company and those designated by it. In no event shall an asserted violation of
the provisions of this Section 8 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and shall not
be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
10. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICT OF LAWS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) This Agreement supersedes the Change of Control Agreement
between Executive and Weatherford Enterra, Inc., dated August 16, 1996, which
shall be of no further effect.
(c) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the Executive: Jon Nicholson
Weatherford International, Inc.
515 Post Oak Blvd.
Houston, Texas 77027
If to the Company: Weatherford International, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027-3415
Attention: Bernard J. Duroc-Danner
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(e) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 3(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Jon Nicholson
--------------------------------------
Jon Nicholson
WEATHERFORD INTERNATIONAL, INC.
By /s/ Bernard J. Duroc-Danner
------------------------------------
Name: Bernard J. Duroc-Danner
--------------------------------
Title: President and CEO
--------------------------------
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EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") by and between Weatherford
International, Inc., a Delaware corporation (the "Company"), and Randall D.
Stilley (the "Executive"), effective December 31, 1998.
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") has
previously determined that it is in the best interests of the Company and its
stockholders to retain the Executive and to induce the employment of the
Executive for the long term benefit of the Company;
WHEREAS, the Board does not contemplate the termination of the
Executive during the term hereof and the Board and the Executive expect that the
Executive will be retained for at least the three year period contemplated
herein; and
WHEREAS, to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment.
(a) The Company hereby agrees that the Company or an
affiliated company will continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement, during the Employment Period (as
defined below).
(b) The "Employment Period" shall mean the period commencing
on the Effective Date (as defined below) and ending on the third anniversary of
the date hereof; provided, however, that commencing on the date one year after
the date hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Employment Period shall be
automatically extended so as to terminate three year(s) after such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Employment Period shall not be so extended.
The Effective Date shall be December 31, 1998.
2. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting requirements,
authority, duties and responsibilities) shall be Senior Vice President
- President, Completion & Oilfield Services or other executive officer
and (B) the Executive's services shall be performed primarily at the
Company's principal executive offices in Houston, Texas or other
locations less than 35 miles from such location.
<PAGE> 41
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company and,
to the extent necessary to discharge the responsibilities assigned to
the Executive hereunder, to use the Executive's reasonable best efforts
to perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or teach
at educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary of $300,000.00 ("Annual
Base Salary"), which shall be paid at a monthly rate. During the
Employment Period, the Annual Base Salary shall be reviewed no more
than 12 months after the last salary increase awarded to the Executive
prior to the date hereof and thereafter at least annually; provided,
however, that a salary increase shall not necessarily be awarded as a
result of such review. Any increase in Annual Base Salary may not serve
to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such
increase. The term Annual Base Salary as utilized in this Agreement
shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. The Executive shall be eligible
for an annual bonus (the "Annual Bonus") for each fiscal year ending
during the Employment Period on the same basis as other executive
officers under the Company's executive officer annual incentive
program; provided, however, the Annual Bonus for the years 1998, 1999,
2000 shall be at least $200,000. Each such Annual Bonus shall be paid
no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless
the Executive shall elect to defer the receipt of such Annual Bonus
pursuant to a Company sponsored deferred compensation plan in effect.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices, policies and
programs applicable generally to the Executive's peer executives of the
Company and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction
is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and
programs as in effect on the date hereof. As used in this Agreement,
the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may
be, shall be eligible to participate in and shall
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<PAGE> 42
receive all benefits under welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent
applicable generally to the Executive's peer executives of the Company
and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than such plans, practices,
policies and programs in effect for the Executive on the date hereof.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with the
most favorable policies, practices and procedures of the Company and
its affiliated companies in effect for the Executive on the date
hereof.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits (including, without
limitation, financial planning services and payment of related
expenses, as appropriate) in accordance with the most favorable plans,
practices, programs and policies of the Company in effect on the date
hereof.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of the Company
and its affiliated companies in effect for the Executive on the date
hereof.
3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 10(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the Company on a
full-time basis for 180 calendar days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive by the
Board or the Chief Executive Officer of the Company which specifically
identifies the manner in which the
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<PAGE> 43
Board or Chief Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act, or failure to act, on
the part of the Executive shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the Chief
Executive Officer or of a senior officer of the Company or based upon the advice
of counsel for the Company shall be conclusively presumed to be done, or omitted
to be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive during the Employment Period for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 2(a) of this Agreement,
or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 2(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than as provided in Section
2(a)(i)(B) hereof or the Company's requiring the Executive to travel on
Company business to a substantially greater extent than required for
the performance of the Executive's position, it being understood that
travel will be a necessary part of the job;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
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<PAGE> 44
(v) any failure by the Company to comply with and
satisfy Section 9(c) of this Agreement.
For purposes of this Section 3(c), any good faith
determination of "Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination during the
Employment Period by the Company for Cause, or by the Executive for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 10(b) of the Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 30 days after the giving of
such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if the Executive's employment is terminated by
the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be;
(ii) if the Executive's employment is terminated by
the Company other than for Cause, death or Disability, the Date of
Termination shall be the date on which the Company notifies the
Executive of such termination; and
(iii) if the Executive's employment is terminated by
reason of death or Disability, the Date of Termination shall be the
date of death of the Executive or the Disability Effective Date, as the
case may be.
4. Obligations of the Company Upon Termination.
(a) Good Reason; Other than For Cause, Death or Disability.
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause, death or Disability, or the Executive shall
terminate employment for Good Reason:
(i) The Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate
of the following amounts:
(A) the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the higher of (I) the
highest Annual Bonus received by the Executive over the
preceding three year period and (II) the Annual Bonus paid or
payable, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal
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<PAGE> 45
year consisting of less than 12 full months or during which
the Executive was employed for less than 12 full months), for
the most recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as the
"Highest Annual Bonus", and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365,
and (3) any compensation previously deferred by the Executive
under a plan sponsored by the Company (together with any
accrued interest or earnings thereon), and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2) and (3)
shall be hereinafter referred to as the "Accrued
Obligations"), and
(B) an amount equal to three times the sum
of (i) the then current Annual Base Salary of the Executive
and (ii) the Highest Annual Bonus, and
(C) an amount equal to the total of the
employer matching contributions credited to the Executive
under the Company's 401(k) Savings Plan (the "401(k) Plan") or
any other deferred compensation plan during the 12-month
period immediately preceding the month of the Executive's Date
of Termination multiplied by three, such amount to be grossed
up so that the amount the Executive actually receives after
payment of any federal or state taxes payable thereon equals
the amount first described above.
(ii) For a period of three years from the Executive's
Date of Termination (the "Remaining Contract Term") or such longer
period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family equal to those which would have
been provided to them in accordance with the plans, programs, practices
and policies described in Section 2(b)(iv) of this Agreement if the
Executive's employment had not been terminated; provided, however, that
with respect to any of such plans, programs, practices or policies
requiring an employee contribution, the Executive shall continue to pay
the monthly employee contribution for same, and provided further, that
if the Executive becomes reemployed by another employer and is eligible
to receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility;
(iii) The Company shall, at its sole expense as
incurred, provide the Executive with outplacement services, the scope
and provider of which shall be selected by the Executive in his sole
discretion;
(iv) With respect to all options to purchase Common
Stock held by the Executive pursuant to a Company stock option plan on
or prior to the Date of Termination, irrespective of whether such
options are then exercisable, the Executive shall have the right,
during the 60-day period after the Date of Termination, to elect to
surrender all or part of such options in exchange for a cash payment by
the Company to the Executive in an amount equal the number of shares of
Common Stock subject to the Executive's option multiplied by the
difference between (x) and (y) where (x) equals the purchase price per
share covered by the option and (y) equals the highest reported sale
price of a share of Common Stock in
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<PAGE> 46
any transaction reported on the New York Stock Exchange during the
60-day period prior to and including the Executive's Date of
Termination. Such cash payments shall be made within 30 days after the
date of the Executive's election; provided, however, that if the
Executive's Date of Termination is within six months after the date of
grant of a particular option held by the Executive and the Executive is
subject to Section 16(b) of the Securities Exchange Act of 1934, as
amended, any cash payments related thereto shall be made on the date
which is six months and one day after the date of grant of such option
to the extent necessary to prevent the imposition of the disgorgement
provisions under Section 16(b). Notwithstanding the foregoing, if any
right granted pursuant to the foregoing would make any change of
control transaction ineligible for pooling of interests accounting
treatment under APB No. 16 that but for this Section 4(a)(iv) would
otherwise be eligible for such accounting treatment, the Executive
shall receive shares of Common Stock with a Fair Market Value equal to
the cash that would otherwise be payable hereunder in substitution for
the cash, provided that any such shares of Common Stock so granted to
the Executive shall be registered under the Securities Act of 1933, as
amended; any options outstanding as of the Date of Termination and not
then exercisable shall become fully exercisable as of the Executive's
Date of Termination, and to the extent the Executive does not elect to
surrender same for a cash payment (or the equivalent number of shares
of Common Stock) as provided above, such options shall remain
exercisable for one year after the Executive's Date of Termination or
until the stated expiration of the stated term thereof, whichever is
shorter; restrictions applicable to any shares of Common Stock granted
to the Executive by the Company shall lapse, as of the date of the
Executive's Date of Termination;
(v) All country club memberships, luncheon clubs and
other memberships which the Company was providing for the Executive's
use at the time Notice of Termination is given shall, to the extent
possible, be transferred and assigned to the Executive at no cost to
the Executive (other than income taxes owed), the cost of transfer, if
any, to be borne by the Company;
(vi) The Company shall either transfer to the
Executive ownership and title to the Executive's company car at no cost
to the Executive (other than income taxes owed) or, if the Executive
receives a monthly car allowance in lieu of a Company car, pay the
Executive a lump sum in cash within 30 days after the Executive's Date
of Termination equal to the Executive's annual car allowance multiplied
by three;
(vii) All benefits under the EDC and the 401(k) Plan
and any other similar plans, including any stock options held by the
Executive, not already vested shall be 100% vested, to the extent such
vesting is permitted under the Code (as defined below);
(viii) To the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits"); and
(ix) The foregoing payments are intended to
compensate the Executive for a breach of the Company's obligations and
place Executive in substantially the same position
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had the employment of the Executive not been so terminated as a result
of a breach by the Company.
(b) Death. If Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be paid
to the Executive's estate or beneficiaries, as applicable, in a lump sum in cash
within 30 days after the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 4(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of the Executive's peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to death benefits, if any, in effect on the date hereof or, if more favorable,
those in effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days after the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
4(c) shall include, without limitation, and the Executive shall be entitled
after the Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable benefits generally provided by the Company and
its affiliated companies to the Executive's disabled peer executives and/or
their families in accordance with such plans, programs, practices and policies
relating to disability, if any, in effect generally on the date hereof or, if
more favorable, those in effect at the time of the Disability.
(d) Cause; Other Than for Good Reason. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive, other than the
obligation to pay to the Executive (x) his or her Annual Base Salary through the
Date of Termination, (y) the amount of any compensation previously deferred by
the Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
after the Date of Termination subject to such other options or restrictions as
provided by law.
5. Other Rights. Except as provided hereinafter, nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor, shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company or any of its affiliated
companies. Except as provided hereinafter, amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance
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<PAGE> 48
with such plan, policy, practice or program or contract or agreement. It is
expressly agreed by the Executive that he or she shall have no right to receive,
and hereby waives any entitlement to, any severance pay or similar benefit under
any other plan, policy, practice or program of the Company. In addition, if the
Executive has an employment or similar agreement with the Company at the Date of
Termination, he or she agrees that he or she shall have the right to receive all
of the benefits provided under this Agreement or such other agreement, whichever
one, in its entirety, the Executive chooses, but not both agreements, and when
the Executive has made such election, the other agreement shall be superseded in
its entirety and shall be of no further force and effect. The Executive also
agrees that to the extent he or she may be eligible for any severance pay or
similar benefit under any laws providing for severance or termination benefits,
such other severance pay or similar benefit shall be coordinated with the
benefits owed hereunder, such that the Executive shall not receive duplicate
benefits.
6. Payments.
(a) No Rights of Offset. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others.
(b) No Mitigation Required. In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expense which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Executive of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereto (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
7. Certain Additional Payments by the Company.
(a) Although this Agreement is not being entered into in
connection with or contingent upon a change of control of the Company, anything
in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 7) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including without limitation, any income taxes (and any interest
and penalties
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<PAGE> 49
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 7(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Executive, after taking into account the Payments
and the Gross-Up Payment, would not receive a net after-tax benefit of at least
$50,000 (taking into account both income taxes and any Excise Tax) as compared
to the net after-tax proceeds to the Executive resulting from an elimination of
the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an
amount (the "Reduced Amount") such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive
and the Payments, in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination shall be made
by Arthur Andersen LLP or, as provided below, such other certified public
accounting firm as may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days after the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change of Control, the
Executive shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 7, shall be paid by the Company to the
Executive within five days after the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 7(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment (or an additional Gross-Up
Payment) in the event the IRS seeks higher payment. Such notification shall be
given as soon as practicable, but no later than ten business days after the
Executive is informed in writing of such claim, and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
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<PAGE> 50
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claims; provided, however, that the
Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
costs and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Section 7(c), the Company shall
control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim and sue for
a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issues raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 7(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 7(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or
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<PAGE> 51
any of its affiliated companies, and their respective businesses, which shall
have been obtained by the Executive during the Executive's employment by the
Company or any of its affiliated companies, provided that it shall not apply to
information which is or shall become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement),
information that is developed by the Executive independently of such
information, or knowledge or data or information that is disclosed to the
Executive by a third party under no obligation of confidentiality to the
Company. After termination of the Executive's employment with the Company, the
Executive shall not, without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 8 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and shall not
be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
10. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICT OF LAWS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) This Agreement supersedes the Change of Control Agreement
between Executive and Weatherford Enterra, Inc., dated January 5, 1998, which
shall be of no further effect.
(c) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the Executive: Randall D. Stilley
Weatherford International, Inc.
515 Post Oak Blvd.
Houston, Texas 77027
If to the Company: Weatherford International, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027-3415
Attention: Bernard J. Duroc-Danner
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(d) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(e) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 3(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Randall D. Stilley
-----------------------------------
Randall D. Stilley
WEATHERFORD INTERNATIONAL, INC.
By /s/ Bernard J. Duroc-Danner
---------------------------------
Name: Bernard J. Duroc-Danner
-----------------------------
Title: President and CEO
-----------------------------
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<PAGE> 1
EXHIBIT 10.22
WEATHERFORD INTERNATIONAL, INC.
1998 EMPLOYEE STOCK OPTION PLAN
<PAGE> 2
WEATHERFORD INTERNATIONAL, INC.
1998 EMPLOYEE STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
-------
<S> <C> <C>
ARTICLE I - PLAN
Purpose.................................................. 1.1
Effective Date of Plan................................... 1.2
ARTICLE II - DEFINITIONS
Affiliate................................................ 2.1
Board of Directors....................................... 2.2
Code..................................................... 2.3
Committee................................................ 2.4
Company.................................................. 2.5
Disinterested Person..................................... 2.6
Employee................................................. 2.7
Fair Market Value........................................ 2.8
Nonqualified Option...................................... 2.9
Option................................................... 2.10
Option Agreement......................................... 2.11
Plan..................................................... 2.12
Stock.................................................... 2.13
ARTICLE III - ELIGIBILITY
ARTICLE IV - GENERAL PROVISIONS RELATING TO OPTIONS
Authority to Grant Options............................... 4.1
Dedicated Shares......................................... 4.2
Non-Transferability...................................... 4.3
Requirements of Law...................................... 4.4
Changes in the Company's Capital Structure............... 4.5
ARTICLE V - OPTIONS
Type of Option........................................... 5.1
Option Price............................................. 5.2
Duration of Options...................................... 5.3
Amount Exercisable....................................... 5.4
</TABLE>
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<TABLE>
<S> <C>
Exercise of Options...................................... 5.5
Exercise Following Termination of Employment............. 5.6
Substitution Options..................................... 5.7
No Rights as Stockholder................................. 5.8
ARTICLE VI - ADMINISTRATION
ARTICLE VII - AMENDMENT OR TERMINATION OF PLAN
ARTICLE VIII - MISCELLANEOUS
No Establishment of a Trust Fund......................... 8.1
No Employment Obligation................................. 8.2
Forfeiture............................................... 8.3
Tax Withholding.......................................... 8.4
Written Agreement........................................ 8.5
Indemnification of the Committee and the Board of
Directors................................................ 8.6
Gender................................................... 8.7
Headings................................................. 8.8
Other Compensation Plans................................. 8.9
Other Options or Awards.................................. 8.10
Governing Law............................................ 8.11
</TABLE>
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<PAGE> 4
ARTICLE I.
PLAN
1.1 PURPOSE. This Plan is a plan for certain employees of the Company and
its Affiliates and is intended to advance the best interests of the Company,
its Affiliates, and its stockholders by providing those persons who have
substantial responsibility for the management and growth of the Company and its
Affiliates with additional incentives and an opportunity to obtain or increase
their proprietary interest in the Company, thereby encouraging them to continue
in the employ of the Company or any of its Affiliates.
1.2 EFFECTIVE DATE OF PLAN. This Plan is effective September 8, 1998.
ARTICLE II.
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set
out in these definitions throughout this Plan, unless the context in which any
such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
2.1 "AFFILIATE" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company if,
at the time of the action or transaction, each of the corporations other than
the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.
The term "subsidiary corporation" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if, at
the time of the action or transaction, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
2.2 "BOARD OF DIRECTORS" means the board of directors of the Company.
2.3 "CODE" means the Internal Revenue Code of 1986, as amended.
2.4 "COMMITTEE" means the Compensation Committee of the Board of Directors
or such other committee designated by the Board of Directors.
2.5 "COMPANY" means Weatherford International, Inc.
2.6 "EMPLOYEE" means a person employed by the Company or any Affiliate to
whom an Option is granted.
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<PAGE> 5
2.7 "EXECUTIVE OFFICER" means a "officer" of the Company as defined in
Rule 16a-1 under the Securities Exchange Act of 1934.
2.8 "FAIR MARKET VALUE" of the Stock as of any date means (a) the closing
sales price of the Stock on that date on the principal securities exchange on
which the Stock is listed; or (b) if the Stock is not listed on a securities
exchange, the closing sales price of the Stock on that date as reported on the
New York Stock Exchange; or (c) if the Stock is not listed on the New York
Stock Exchange, the average of the high and low bid quotations for the Stock on
that date as reported by the National Quotation Bureau Incorporated; or (d) if
none of the foregoing is applicable, an amount at the election of the Committee
equal to the (x) the average between the closing bid and ask prices per Share
of Stock on the last preceding date on which those prices were reported or (y)
that amount as determined by the Committee in its sole discretion.
2.9 "NONQUALIFIED OPTION" means an option granted under this Plan which is
not intended to satisfy the requirements of Section 422 of the Code.
2.10 "OPTION" means a Nonqualified Option granted under this Plan to
purchase shares of Stock.
2.11 "OPTION AGREEMENT" means the written agreement which sets out the
terms of an Option.
2.12 "PLAN" means the Weatherford International, Inc. 1998 Employee Stock
Option Plan, as set out in this document and as it may be amended from time to
time.
2.13 "STOCK" means the common stock of the Company, $1.00 par value (or
such other par value as may be designated by act of the Company's stockholders)
or, in the event that the outstanding shares of common stock are later changed
into or exchanged for a different class of stock or securities of the Company
or another corporation, that other stock or security.
ARTICLE III.
ELIGIBILITY
The individuals who shall be eligible to receive Nonqualified Options
shall be all employees of the Company or any of its Affiliates. Grants will
be made to such of those employees who are eligible to participate as the
Committee shall determine from time to time. The Board of Directors may
designate one or more individuals who shall not be eligible to receive any
Option under this Plan or under other similar plans of the Company.
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ARTICLE IV.
GENERAL PROVISIONS RELATING TO OPTIONS
4.1 AUTHORITY TO GRANT OPTIONS. The Committee may grant to those
employees of the Company or any of its Affiliates, as it shall from time to
time determine, Options under the terms and conditions of this Plan. Subject
only to any applicable limitations set out in this Plan, the number of shares
of Stock to be covered by any Option to be granted to an employee of the
Company or any of its Affiliates shall be as determined by the Committee.
4.2 DEDICATED SHARES. The total number of shares of Stock with respect to
which Options may be granted under the Plan shall be 5,000,000 shares. The
shares of Stock that may be issued to employees who are not Executive Officers
may be either treasury shares or authorized but unissued shares. The shares of
Stock that may be issued to Executive Officers may be treasury shares or, if
necessary to permit the issuance of shares upon the exercise of an Option to an
Executive Officer, subject to the receipt of all necessary approvals by the
stockholders of the Company, authorized but unissued shares. The number of
shares stated in this Section 4.2 shall be subject to adjustment in accordance
with the provisions of Section 4.5.
In the event that any outstanding Option shall expire or terminate for any
reason or any Option is surrendered, the shares of Stock allocable to the
unexercised portion of that Option may again be subject to an Option under the
Plan.
4.3 NON-TRANSFERABILITY. Options shall not be transferable by the
Employee otherwise than by will or under the laws of descent and distribution
or pursuant to a domestic relations order, and shall be exercisable, during the
Employee's lifetime, only by the Employee
4.4 REQUIREMENTS OF LAW.
(a) In the event the shares issuable on exercise of an Option are not
registered under the Securities Act of 1933, the Company may imprint on the
certificate for such shares the following legend or any other legend which
counsel for the Company considers necessary or advisable to comply with the
Securities Act of 1933:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 or under the
securities laws of any state and may not be sold or transferred
except upon such registration or upon receipt by the
Corporation of an opinion of counsel satisfactory to the
Corporation, in form and substance satisfactory to the
Corporation, that registration is not required for such sale or
transfer."
The Company may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the Securities Act of 1933 (as now in effect or as
hereafter amended) and, in the event any shares are so registered, the Company
may remove any legend on certificates representing such shares. The Company
shall not be obligated to take any other affirmative action in order to cause
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<PAGE> 7
the exercise of an Option or the issuance of shares pursuant thereto to comply
with any law or regulation of any governmental authority.
(b) The Company shall (i) reserve a number of authorized but unissued
shares of Stock sufficient to satisfy its obligations hereunder and (ii) shall
reserve or acquire such number of treasury shares of Stock as may be necessary
from time to time to allow any vested Options that are required to be satisfied
with treasury shares to be exercised.
4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital adjustment of, or the payment of a dividend in capital stock or
other equity securities of the Company on, its Common Stock, or other increase
or reduction of the number of shares of the Common Stock without receiving
consideration therefor in money, services, or property, or the reclassification
of its Common Stock, in whole or in part, into other equity securities of the
Company, then (a) the number, class and per share price of shares of stock
subject to outstanding Options hereunder shall be appropriately adjusted (or in
the case of the issuance of other equity securities as a dividend on, or in a
reclassification of, the Common Stock, the Options shall extend to such other
securities) in such a manner as to entitle an optionee to receive, upon
exercise of an Option, for the same aggregate cash consideration, the same
total number and class or classes of shares (or in the case of a dividend of,
or reclassification into, other equity securities, such other securities) he
would have held after such adjustment if he had exercised his Option in full
immediately prior to the event requiring the adjustment, or, if applicable, the
record date for determining stockholders to be affected by such adjustment; and
(b) the number and class of shares then reserved for issuance under the Plan
(or in the case of a dividend of, or reclassification into, other equity
securities, such other securities) shall be adjusted by substituting for the
total number and class of shares of stock then received, the number and class
or classes of shares of stock (or in the case of a dividend of, or
reclassification into, other equity securities, such other securities) that
would have been received by the owner of an equal number of outstanding shares
of Common Stock as a result of the event requiring the adjustment. Comparable
rights shall accrue to each optionee in the event of successive subdivisions,
consolidations, capital adjustments, dividends or reclassifications of the
character described above.
If the Company shall distribute to all holders of its shares of Common
Stock (including any such distribution made to non-dissenting stockholders in
connection with a consolidation or merger in which the Company is the surviving
corporation and in which holders of shares of Common Stock continue to hold
shares of Common Stock after such merger or consolidation) evidences of
indebtedness or cash or other assets (other than cash dividends payable out of
consolidated retained earnings not in excess of, in any one year period, the
greater of (a) in an amount per share of Common Stock equal to $1.00 per share
of Common Stock (as the same may be adjusted from time
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<PAGE> 8
to time by the Board of Directors to reflect the effect of changes in
capitalization) and (b) two times the aggregate amount of dividends per share
paid during the preceding calendar year and dividends or distributions payable
in shares of Common Stock or other equity securities of the Company described
in the immediately preceding paragraph, but including stock or other securities
of any corporation or other entity owned by the Company), then in each case the
Option Price shall be adjusted by reducing the Option Price in effect
immediately prior to the record date for the determination of stockholders
entitled to receive such distribution by the fair market value, as determined
in good faith by the Board of Directors of the Company (whose determination
shall be described in a statement filed in the Company's corporate records and
be available for inspection by any holder of an Option) of the portion of the
evidence of indebtedness or cash or other assets so to be distributed
applicable to one share of Common Stock; provided that in no event shall the
Option Price be less than the par value of a share of Common Stock. In the
event such adjustment would result in the Option Price being less than the par
value of a share of Common Stock but for the foregoing proviso, the terms of
the Option shall be appropriately adjusted so as to maintain the economic value
of the Option, including through an adjustment to the number of shares of
Common Stock subject to the Option and through a provision allowing the holder
of the Option to receive the evidence of indebtedness or cash or other assets
so to be distributed applicable to one share of Common Stock for each share of
Common Stock that may be purchased on the exercise of the Option. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of the distribution retroactive to the record date
for the determination of the stockholders entitled to receive such
distribution. In addition, in the event the Company distributes shares or
other securities of a subsidiary corporation or other entity to the holders of
the Common Stock, the Board of Directors may, in lieu of the adjustment
provided above, either (i)make provision allowing the holder of the Option to
receive the shares or securities of the corporation or entity that are subject
to the distribution in addition to the shares of the Common Stock subject to
the Option or (ii) adjust the exercise price and number of shares subject to
the Option in a manner deemed appropriate to maintain the economic value of the
Option. In the case of an adjustment pursuant to clause (i), separate option
agreements covering each security may be used, with the Option Price to be
allocated between the securities. Comparable adjustments shall be made in the
event of successive distributions of the character described above.
If the Company shall make a tender offer for, or grant to all of its
holders of its shares of Common Stock the right to require the Company or any
subsidiary of the Company to acquire from such stockholders shares of, Common
Stock, at a price in excess of the Fair Market Value (a "Put Right") or the
Company shall grant to all of its holders of its shares of Common Stock the
right to acquire shares of Common Stock for less than the Fair Market Value (a
"Purchase Right") then, in the case of a Put Right, the Option Price shall be
adjusted by multiplying the Option Price in effect immediately prior to the
record date for the determination of stockholders entitled to receive such Put
Right by a fraction, the numerator of which shall be the number of shares of
Common Stock then outstanding minus the number of shares of Common Stock which
could be purchased at the Fair Market Value for the aggregate amount which
would be paid if all Put Rights are exercised and the denominator of which is
the number of shares of Common Stock which would be outstanding if all Put
Rights are exercised; and, in the case of a Purchase Right, the Option Price
shall be adjusted by multiplying the Option Price in effect immediately prior
to the record date for the determination of the stockholders entitled to
receive such Purchase Right by a fraction, the numerator of which shall be the
number of shares of Common Stock then outstanding plus the number of shares of
Common
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<PAGE> 9
Stock which could be purchased at the Fair Market Value for the aggregate
amount which would be paid if all Purchase Rights are exercised and the
denominator of which is the number of shares of Common Stock which would be
outstanding if all Purchase Rights are exercised. In addition, the number of
shares subject to the Option shall be increased by multiplying the number of
shares then subject to the Option by a fraction which is the inverse of the
fraction used to adjust the Option Price. Notwithstanding the foregoing, if
any such Put Rights or Purchase Rights shall terminate without being exercised,
the Option Price and number of shares subject to the Option shall be
appropriately readjusted to reflect the Option Price and number of shares
subject to the Option which would have been in effect if such unexercised
Rights had never existed. Comparable adjustments shall be made in the event of
successive transactions of the character described above.
If there is a merger of one or more corporations or entities with or into
the Company in which the Company is not the sole survivor or there is an
exchange, conversion or modification to the ownership of the then outstanding
shares of Common Stock of the Company, a consolidation of the Company and any
one or more corporations or entities, a statutory share or interest exchange in
which all of the Common Stock is acquired or any other similar business
combination with respect to the Company in which the Common Stock is acquired
by a third party, each optionee, at no additional cost, shall be entitled to
receive, upon any exercise of his Option, in lieu of the number of shares as to
which the Option shall then represent the right to purchase, the number and
class of shares of stock or other securities, assets or other property,
including cash, to which the optionee would have been entitled to receive or
continue to hold pursuant to the terms of the agreement of merger,
consolidation, share or interest exchange or other similar transaction if at
the time of such merger, consolidation, share or interest exchange such
optionee had been a holder of a number of shares of Common Stock equal to the
number of shares as to which the Option shall then represent the right to
purchase. Comparable rights shall accrue to each optionee in the event of
successive mergers, consolidations, share or interest exchanges or other
transactions of the character described above.
If a corporate transaction described in Section 424(a) of the Code which
involves the Company is to take place and there is to be no surviving
corporation or entity while an Option remains in whole or in part unexercised,
it may be cancelled by the Board of Directors as of the effective date of any
such corporate transaction but before the date each optionee shall be provided
with a notice of such cancellation and each optionee shall have the right to
exercise such Option in full (without regard to any limitations on exercise set
forth in or imposed by the option agreement pursuant to which such Option was
granted as contemplated by Paragraph 9 of the Plan) to the extent it is then
still unexercised during a 30-day period preceding the effective date of such
corporate transaction.
In the event (i) the Company were to distribute to its stockholders or
otherwise divest of a majority of the stock of a subsidiary corporation that is
the principal employer of the Employee and (ii) following such distribution or
divestment the stock of the subsidiary corporation or any parent corporation of
such subsidiary corporation is listed or authorized for listing on a national
securities exchange or authorized for quotation on the NASDAQ national market
(or successor market), the Board of Directors may, but shall not be required
to, adjust the terms of the Option to provide that such Option shall only
represent a right to purchase shares in such subsidiary corporation or parent
corporation and the number of shares and exercise price will be appropriately
adjusted so as to
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<PAGE> 10
maintain the economic value of the Option. This adjustment would be in lieu of
any adjustment that might otherwise be required under this Section 4.5 for that
transaction.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
then subject to outstanding Options.
ARTICLE V.
OPTIONS
5.1 TYPE OF OPTION. All Options granted under this Plan shall constitute
Nonqualified Options.
5.2 OPTION PRICE. The price at which shares of Stock may be purchased
under a Nonqualified Option shall not be less than the aggregate par value of
the shares of Stock on the date the Option is granted. The Committee in its
discretion may provide that the price at which shares of Stock may be purchased
under a Nonqualified Option may be more or less than 100% of Fair Market Value
on the date of grant.
5.3 DURATION OF OPTIONS. Unless otherwise provided in an Option
Agreement, no Option shall be exercisable after one day less than 10 years from
the date the Option becomes first exercisable.
5.4 AMOUNT EXERCISABLE. Each Option may be exercised by an Employee from
time to time, in whole or in part, after three years from the date of grant, in
the manner and subject to the conditions the Committee, in its sole discretion,
may provide in the Option Agreement, as long as the Option is valid and
outstanding under the terms of this Plan. Unless otherwise provided in an
Option Agreement, (a) in the case of death or disability within three years of
the date of grant, while the optionee is an Employee, each Option shall become
immediately exercisable as described in Section 5.6, and (b) in the case of
retirement by an Employee within three years of the date of grant, each Option
shall become exercisable as described in Section 5.6.
5.5 EXERCISE OF OPTIONS. An optionee may exercise such optionee's Option
by delivering to the Company a written notice stating (i) that such optionee
wishes to exercise such Option on the date such notice is so delivered, (ii)
the number of shares of stock with respect to which such Option is to be
exercised, (iii) the address to which the certificate representing such shares
of stock should be mailed, and (iv) the social security number of such
optionee. In order to be effective, such written notice shall be accompanied
by (i) payment of the Option price of such shares of stock and (ii) payment of
an amount of money necessary to satisfy any withholding tax liability that may
result from the exercise of such Option. Each such payment shall be made by
cashier's check drawn on a national banking association and payable to the
order of the Company in United States dollars.
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<PAGE> 11
Unless otherwise provided in an Option Agreement, if, at the time of
receipt by the Company of such written notice, (i) the Company has unrestricted
surplus in an amount not less than the Option price of such shares of stock,
(ii) all accrued cumulative preferential dividends and other current
preferential dividends on all outstanding shares of preferred stock of the
Company have been fully paid, (iii) the acquisition by the Company of its own
shares of stock for the purpose of enabling such optionee to exercise such
Option is otherwise permitted by applicable law and without any vote or consent
of any stockholder of the Company, and (iv) there shall have been adopted, and
there shall be in full force and effect, a resolution of the Board of Directors
of the Company authorizing the acquisition by the Company of its own shares of
stock for such purpose, then such optionee may deliver to the Company, in
payment of the Option price of the shares of stock with respect to which such
Option is exercised, (x) certificates registered in the name of such optionee
that represent a number of shares of stock legally and beneficially owned by
such optionee (free of all liens, claims and encumbrances of every kind) and
having a fair market value on the date of receipt by the Company of such
written notice that is not greater than the Option price of the shares of stock
with respect to which such Option is to be exercised, such certificates to be
accompanied by stock powers duly endorsed in blank by the record holder of the
shares of stock represented by such certificates, with the signature of such
record holder guaranteed by a national banking association (or in lieu of such
certificates, other arrangements for the transfer of such shares to the Company
which are satisfactory to the Company), and (y) if the Option price of the
shares of stock with respect to which such Option is to be exercised exceeds
such fair market value, a cashier's check drawn on a national banking
association and payable to the order of the Company in an amount, in United
States dollars, equal to the amount of such excess plus the amount of money
necessary to satisfy any withholding tax liability that may result from the
exercise of such Option. Notwithstanding the provisions of the immediately
preceding sentence, the Committee, in its sole discretion, may refuse to accept
shares of stock in payment of the Option price of the shares of stock with
respect to which such Option is to be exercised and, in that event, any
certificates representing shares of stock that were received by the Company
with such written notice shall be returned to such optionee, together with
notice by the Company to such optionee of the refusal of the Committee to
accept such shares of stock. Unless otherwise provided in the Option
Agreement, the Company, upon approval of the Committee and in its sole
discretion, upon the request of the optionee, may retain shares of Common Stock
which would otherwise be issued upon exercise of an Option to satisfy any
withholding tax liability that may result from the exercise of such Option,
which shares shall be valued for such purpose at their then Fair Market Value.
If, at the expiration of seven business days after the delivery to such
optionee of such written notice from the Company, such optionee shall not have
delivered to the Company a cashier's check drawn on a national banking
association and payable to the order of the Company in an amount, in United
States dollars, equal to the Option Price of the shares of stock with respect
to which such Option is to be exercised, such written notice from the optionee
to the Company shall be ineffective to exercise such Option.
As promptly as practicable after the receipt by the Company of (i) such
written notice from the optionee, (ii) payment, in the form required by the
foregoing provisions of this Paragraph 5.5, of the Option Price of the shares
of stock with respect to which such Option is to be exercised, and (iii)
payment, in the form required by the foregoing provisions of this Section, of
an amount of money necessary to satisfy any withholding tax liability that may
result from the exercise of such Option,
a certificate representing the number of shares of stock with respect to which
such Option
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<PAGE> 12
has been so exercised, reduced, to the extent applicable by the number of
shares retained by the Company as provided above to pay any required
withholding tax, such certificate to be registered in the name of such
optionee, provided that such delivery shall be considered to have been made
when such certificate shall have been mailed, postage prepaid, to such optionee
at the address specified for such purpose in such written notice from the
optionee to the Company.
5.6 EXERCISE FOLLOWING TERMINATION OF EMPLOYMENT. Unless it is expressly
provided otherwise in the Option Agreement or other written agreement with the
Employee that provides otherwise, Options shall terminate as follows:
SEVERANCE OF EMPLOYMENT. If the Employee severs employment from the
Company and all Affiliates prior to three years from the date such Options were
granted, for any reason, with or without cause, other than for death,
retirement under the then established rules of the Company, or severance for
disability, all such Options shall terminate and be immediately forfeited, and
not be exercisable. If the Employee severs employment from the Company and all
Affiliates for any reason, with or without cause, other than for death,
retirement under the then established rules of the Company, or severance for
disability on or after three years from the date such Options were granted, the
Options shall continue in effect until the date such Options are otherwise due
to expire in accordance with Section 5.3, unless it is expressly provided
otherwise in the Option Agreement or other written agreement with the Employee
that provides otherwise. Whether authorized leave of absence or absence on
military or government service shall constitute severance of the employment of
the Employee shall be determined by the Committee at that time.
In determining the employment relationship between the Company and the
Employee, employment by any Affiliate shall be considered employment by the
Company, as shall employment by a corporation issuing or assuming a stock
option in a transaction to which Section 424(a) of the Code applies, or by a
parent corporation or subsidiary corporation of the corporation issuing or
assuming a stock option (and for this purpose, the phrase "corporation issuing
or assuming a stock option" shall be substituted for the word "Company" in the
definitions of parent corporation and subsidiary corporation in Section 2.1,
and the parent-subsidiary relationship shall be determined at the time of the
corporate action described in Section 424(a) of the Code).
DEATH. If the Employee dies prior to three years from the date such
Options were granted, the Options shall continue in effect until 10 years
following the date of the Employee's death, unless it is expressly provided
otherwise in the Option Agreement. If the Employee dies on or after three years
from the date such Options were granted, the Option shall continue in effect
until the date the Option is otherwise due to expire in accordance with Section
5.3, unless it is expressly provided otherwise in the Option Agreement. After
the death of the Employee, the Employee's executors, administrators or any
persons to whom his Option may be transferred by will or by the laws of descent
and distribution shall have the right, at any time prior to the Option's
expiration to exercise it.
RETIREMENT. If the Employee shall be retired in good standing from the
employ of the Company under the then established rules of the Company, prior to
three years from the date such Options were granted, the Employee shall vest in
the number of Options determined by multiplying the number of Options granted
to the Employee by a fraction, the numerator of which is the
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<PAGE> 13
Employee's total whole years of service since the Options were granted and the
denominator of which is three. With respect to these vested Options, the
Options shall be exercisable until 10 years following the date of the
Employee's retirement in accordance with this Section 5.6, unless it is
expressly provided otherwise in the Option Agreement. If the Employee shall be
retired in good standing from the employ of the Company under the then
established rules of the Company on or after three years from the date such
Options were granted, such Options shall continue until the date the Options
are otherwise due to expire in accordance with Section 5.3, unless it is
expressly provided otherwise in the Option Agreement.
DISABILITY. If the Employee shall be severed from the employ of the
Company for disability prior to three years from the date such Options were
granted, the Options shall be immediately exercisable and continue in effect
until 10 years following the date he severed from the employ of the Company for
disability, unless it is expressly provided otherwise in the Option Agreement.
If the Employee shall be severed from the employ of the Company for disability
on or after three years from the date such Options were granted, the Options
shall continue in effect until the date the Options are otherwise due to expire
in accordance with Section 5.3, unless it is expressly provided otherwise in
the Option Agreement.
5.7 SUBSTITUTION OPTIONS. Options may be granted under this Plan from time
to time in substitution for stock options held by employees of other
corporations who are about to become employees of the Company, or whose
employer is about to become a parent or subsidiary corporation of the Company,
conditioned upon the employee becoming an employee of the Company or a parent
or subsidiary corporation of the Company, as a result of the merger or
consolidation of the Company with another corporation, or the acquisition by
the Company of substantially all the assets of another corporation, or the
acquisition by the Company of at least 50% of the issued and outstanding stock
of another corporation as the result of which it becomes a subsidiary of the
Company. The terms and conditions of the substitute Options so granted may
vary from the terms and conditions set forth in this Plan to such extent as the
Board of Directors of the Company at the time of grant may deem appropriate to
conform, in whole or in part, to the provisions of the stock options in
substitution for which they are granted.
5.8 NO RIGHTS AS STOCKHOLDER. No Employee shall have any rights as a
stockholder with respect to Stock covered by his Option until the date a stock
certificate is issued for the Stock.
ARTICLE VI.
ADMINISTRATION
This Plan shall be administered by the Committee. All questions of
interpretation and application of this Plan and Options shall be subject to the
determination of the Committee. A majority of the members of the Committee
shall constitute a quorum. All determinations of the Committee shall be made
by a majority of its members. Any decision or determination reduced to writing
and signed by a majority of the members shall be as effective as if it had been
made by a majority vote at a meeting properly called and held. In carrying out
its authority under this Plan, subject to the express terms of any outstanding
Option or other agreement with an Employee, the
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<PAGE> 14
Committee shall have full and final authority and discretion, including but not
limited to the following rights, powers and authorities, to:
1. determine the Employees to whom and the time or
times at which Options will be made,
2. determine the number of shares and the purchase
price of Stock covered in each Option, subject to the
terms of this Plan,
3. determine the terms, provisions and conditions
of each Option, which need not be identical,
4. accelerate the time at which any outstanding
Option may be exercise,
5. define the effect, if any, on an Option of the
death, disability, retirement, or termination of
employment of the Employee,
6. prescribe, amend and rescind rules and
regulations relating to administration of this Plan, and
7. make all other determinations and take all other
actions deemed necessary, appropriate, or advisable for
the proper administration of this Plan.
The actions of the Committee in exercising all of the rights, powers, and
authorities set out in this Article and all other Articles of this Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive
and binding on all parties.
ARTICLE VII.
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend, terminate or suspend this
Plan at any time, in its sole and absolute discretion subject to the rights of
holders of outstanding Options at the time of such amendment, termination or
suspension..
ARTICLE VIII.
MISCELLANEOUS
8.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside nor
shall a trust fund of any kind be established to secure the rights of any
Employee under this Plan. All Employees shall at all times rely solely upon
the general credit of the Company for the payment of any benefit which becomes
payable under this Plan.
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<PAGE> 15
8.2 NO EMPLOYMENT OBLIGATION. The granting of any Option shall not
constitute an employment contract, express or implied, nor impose upon the
Company or any Affiliate any obligation to employ or continue to employ any
Employee. The right of the Company or any Affiliate to terminate the
employment of any person shall not be diminished or affected by reason of the
fact that an Option has been granted to him.
The decision of the Committee as to the cause of the Employee's discharge,
the damage done to the Company or an Affiliate, and the extent of the
Employee's competitive activity shall be final. No decision of the Committee,
however, shall affect the finality of the discharge of the Employee by the
Company or an Affiliate in any manner.
8.3 TAX WITHHOLDING. The Company or any Affiliate shall be entitled to
deduct from other compensation payable to each Employee any sums required by
federal, state, or local tax law to be withheld with respect to the grant or
exercise of an Option. In the alternative, the Company may require the
Employee (or other person exercising the Option) to pay the sum directly to the
employer corporation. If the Employee (or other person exercising the Option)
is required to pay the sum directly, payment in cash or by check of such sums
for taxes shall be delivered within 10 days after the date of exercise . The
Company shall have no obligation upon exercise of any Option until payment has
been received, unless withholding (or offset against a cash payment) as of or
prior to the date of exercise is sufficient to cover all sums due with respect
to that exercise. The Company and its Affiliates shall not be obligated to
advise an Employee of the existence of the tax or the amount which the employer
corporation will be required to withhold. The Company may also allow for the
retention of shares of Stock issuable upon the exercise of Options to satisfy
such withholding.
8.4 WRITTEN AGREEMENT. Each Option shall be embodied in a written Option
Agreement which shall be subject to the terms and conditions of this Plan and
shall be signed by the Employee and the Company. The Option Agreement may
contain any other provisions that the Committee in its discretion shall deem
advisable.
8.5 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. With
respect to administration of this Plan, the Company shall indemnify each
present and future member of the Committee and the Board of Directors against,
and each member of the Committee and the Board of Directors shall be entitled
without further act on his part to indemnity from the Company for, all expenses
(including attorney's fees, the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his being or having been a member of the Committee
and/or the Board of Directors, whether or not he continues to be a member of
the Committee and/or the Board of Directors at the time of incurring the
expenses--including, without limitation, matters as to which he shall be
finally adjudged in any action, suit or proceeding to have been found to have
been negligent in the performance of his duty as a member of the Committee of
the Board of Directors. However, this indemnity shall not include any expenses
incurred by any member of the Committee and/or the Board of Directors in
respect of matters as to which he shall be finally adjudged in any action, suit
or proceeding to have been guilty of gross negligence or willful misconduct in
the performance of his duty as a member of the Committee or the Board of
Directors. In addition, no right of indemnification under this Plan shall be
available to or enforceable
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<PAGE> 16
by any member of the Committee and the Board of Directors unless, within 60
days after institution of any action, suit or proceeding, he shall have offered
the Company, in writing, the opportunity to handle and defend same at its own
expense. This right of indemnification shall inure to the benefit of the
heirs, executors or administrators of each member of the Committee and the
Board of Directors and shall be in addition to all other rights to which a
member of the Committee and the Board of Directors may be entitled as a matter
of law, contract, or otherwise.
8.6 GENDER. If the context requires, words of one gender when used in
this Plan shall include the others and words used in the singular or plural
shall include the other.
8.7 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of this Plan and shall
not be used in construing the terms of this Plan.
8.8 OTHER COMPENSATION PLANS. The adoption of this Plan shall not affect
any other stock option, incentive or other compensation or benefit plans or
arrangements, including any employment, change of control or severance
agreements, in effect with or for the Company or any Affiliate, nor shall this
Plan preclude the Company from establishing any other forms of incentive or
other compensation for employees of the Company or any Affiliate.
8.9 OTHER OPTIONS. The grant of an Option shall not confer upon the
Employee the right to receive any future or other Options under this Plan,
whether or not Options may be granted to similarly situated Employees, or the
right to receive future Options upon the same terms or conditions as previously
granted.
8.10 GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Delaware.
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<PAGE> 17
WEATHERFORD INTERNATIONAL, INC.
1998 EMPLOYEE STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Under the terms and conditions of the Weatherford International, Inc.
1998 Employee Stock Option Plan (the "Plan"), a copy of which is attached hereto
and incorporated in this Agreement by reference, Weatherford International, Inc.
(the "Company") grants to ______ (the "Optionee") the option to purchase
_________ shares of the Company's Common Stock, $1.00 par value, at the price of
$ per share, subject to adjustment as provided in the Plan (the "Option") as
follows:
1. Grant. (a) The Company hereby grants to the Optionee the Option
effective as of September 8, 1998 (the "Date of Grant"). The Company and the
Optionee agree that the Option shall be subject to the terms of this Agreement
and the Plan. The Company and Optionee further agree that this Agreement,
together with the Plan and the Employment Agreement with the Optionee dated
__________, 1998 (the Employment Agreement"), sets forth the complete terms of
the Option as in effect on the date hereof. To the extent the terms of this
Agreement and the Option vary with the terms of the Plan, the terms of this
Agreement and the Option shall prevail and this Agreement shall be deemed an
amendment to the Plan to the extent necessary to permit the grant of the Option.
(b) Subject to the terms and conditions of this Agreement and the Plan,
the Option provides the Optionee with the option to purchase _____ shares of
Common Stock at a price of $____________ per share (the "Option Price").
(c) The Option is subject to the terms and provisions of the Plan,
which are hereby incorporated herein by reference. The Option shall also be
subject to the terms of the Employment Agreement; provided that the Optionee
agrees that as of the date of this Agreement there does not exist Good Reason
(as defined in the Employment Agreement) for the Optionee to terminate the
Optionee's employment.
(d) The Option is considered to be a non-statutory option and is not
intended to be an incentive stock option within the meaning of Section 422(b) of
the Internal Revenue Code of 1986, as amended (the "Code").
(e) Subject to earlier vesting in the event of a "Change in Control" as
provided in Section 1(f) hereof, or in the event of termination of employment
(i) by the Optionee for Good Reason (as defined in the Employment Agreement),
(ii) by the Company for any reason other than Cause (as defined in the
Employment Agreement) or (iii) due to death, disability or retirement within
three years from the date of the grant of the Option as provided for in Section
6 hereof, the Option shall be exercisable following three years from the date of
grant of the Option. No Option however, shall be exercisable after one day less
than 10 years from the date the option becomes first exercisable.
(f) Notwithstanding the provisions of Section 1(e) hereof, the Option
shall be exercisable with respect to all of the shares subject to the Option
upon the occurrence of a Change in Control
<PAGE> 18
(as defined herein). For purposes of this Agreement, a Change in Control shall
mean the occurrence of one or more of the following events: (i) any "person",
including a "group", as those terms are used in Section 13(d)(3) of the
Securities Exchange Act of 1934, other than an affiliate of the Company as of
the Date of Grant, becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding voting securities; (ii) the Company is merged
or consolidated with or into another corporation and immediately after giving
effect to the merger or consolidation either (A) less than 65% of the
outstanding voting securities of the surviving or resulting entity are then
beneficially owned in the aggregate by (x) the stockholders of the Company
immediately prior to such merger or consolidation or (y) if a record date has
been set to determine the stockholders of the Company entitled to vote on such
merger or consolidation, the stockholders of the Company as of such record date,
or (B) the Board of Directors, or similar governing body, of the surviving or
resulting entity does not have as a majority of its members the persons
specified in clause (iii)(A) and (B) below; (iii) if at any time the following
do not constitute a majority of the Board of Directors of the Company (or any
successor entity referred to in clause (ii) above): (A) persons who are
directors of the Company on the Date of Grant and (B) persons who, prior to
their election as a director of the Company (or successor entity if applicable),
were nominated, recommended or endorsed by a formal resolution of the Board of
Directors of the Company; (iv) persons who are directors of the Company as of
the beginning of any calendar year cease to constitute a majority of the members
of the Board of Directors at any time during that calendar year; or (v) the
Company transfers all or substantially all of its assets as contemplated by
Delaware corporate law on a consolidated basis to another corporation or entity
which is a less than a 50% owned subsidiary of the Company.
2. Changes in The Company's Capital Structure. (a) The existence of the
Option shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure of its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
(b) The number of shares of Common Stock subject to the Option, the
Option Price and the securities issuable and other property payable upon
exercise of the Option shall be subject to adjustment as provided in the Plan.
3. Exercise of Options. The Option may be exercised from time to time
as to the total number of shares that may then be issuable upon the exercise
thereof or any portion thereof in the manner and subject to the limitations
provided for in the Plan and in Section 1 hereof.
4. Assignment. The Option may not be transferred or assigned in any
manner by the Optionee except by will or the laws of descent and distribution or
pursuant to a qualified domestic order, and shall be exercisable during the
Employee's lifetime only by the Employee or an assignee pursuant to a qualified
domestic order.
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<PAGE> 19
5. Requirement of Law. If required at any time by the Committee, the
Option may not be exercised until the Optionee has delivered an investment
letter to the Company. In addition, specifically in connection with the
Securities Act of 1933 (as now in effect or hereafter amended), upon exercise of
the Option, the Company shall not be required to issue the underlying shares
unless the Committee has received evidence satisfactory to it to the effect that
the Optionee will not transfer such shares except pursuant to a registration
statement in effect under such Act or unless an opinion of counsel satisfactory
to the Committee has been received by the Company to the effect that such
registration is not required. Any determination in this connection by the
Committee shall be final, binding and conclusive. In the event the shares
issuable on exercise of the Option are not registered under the Securities Act
of 1933, the Company may imprint on the certificate for such shares the
following legend or any other legend which counsel for the Company considers
necessary or advisable to comply with Securities Act of 1933:
The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities
laws of any state and may not be sold or transferred except upon such
registration or upon receipt by the Corporation of an opinion of
counsel satisfactory to the Corporation, in form and substance
satisfactory to the Corporation, that registration is not required for
such sale or transfer.
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933. The Company
shall not be obligated to take any other affirmative action in order to cause
the exercise of the Option or the issuance of shares of Common Stock pursuant
thereto to comply with any law or regulation of any governmental authority.
6. Termination. The Option, to the extent it shall not previously have
been exercised, shall terminate as follows:
(a) If the employment of the Optionee with the Company and its
Affiliates is terminated (i) by the Company for any reason other than Cause (as
defined in the Employment Agreement) or (ii) by the Optionee for Good Reason (as
defined in the Employment Agreement), the Option shall continue in effect until
one day less than ten years following the date of the Optionee's date of
termination of employment. If the Optionee elects to terminate the Optionee's
employment relationship with the Company and its Affiliates prior to three years
for any reason other than Good Reason, death, retirement under the then
established rules of the Company or disability, such Options shall terminate and
be immediately forfeited and not be exercisable. In addition, if the employment
of the Optionee is terminated by the Company for Cause prior to three years from
the date such Options were granted, all such Options shall terminate and be
immediately forfeited and not be exercisable.
(b) DEATH. If the Optionee dies prior to three years from the date such
Options were granted, the Options shall continue in effect until one day less
than 10 years following the date of the Optionee's death. If the Optionee dies
on or after three years from the date such Options were granted, the Option
shall continue in effect until one day less than 10 years after the date the
Option became first exercisable. After the death of the Optionee, the Optionee's
executors, administrators or any persons to whom his Option may be transferred
by will or by the laws of descent and distribution shall have the right, at any
time prior to the Option's expiration to exercise it.
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<PAGE> 20
(c) RETIREMENT. If the Optionee shall be retired in good standing from
the employ of the Company under the then established rules of the Company, prior
to three years from the date such Options were granted, the Optionee shall vest
in the number of Options determined by multiplying the number of Options granted
to the Optionee by a fraction, the numerator of which is the Optionee's total
whole years of service since the Options were granted and the denominator of
which is three. With respect to these vested Options, the Options shall be
exercisable until one day less than 10 years following the date of the
Optionee's retirement. If the Optionee shall be retired in good standing from
the employ of the Company under the then established rules of the Company on or
after three years from the date such Options were granted, such Options shall
continue until one day less than 10 years after the date the Option became first
exercisable.
(d) DISABILITY. If the Optionee shall be severed from the employ of the
Company for disability prior to three years from the date such Options were
granted, the Options shall be immediately be exercisable and continue in effect
until one day less than 10 years following the date he severed from the employ
of the Company for disability. If the Optionee shall be severed from the employ
of the Company for disability on or after three years from the date such Options
were granted, the Options shall continue in effect until one day less than ten
years after the date the Option became first exercisable.
7. Amendment. This Agreement may not be changed, amended or modified
except by an agreement in writing signed on behalf of each of the parties
hereto.
8. No Rights as a Stockholder. The Optionee shall not have any rights
as a stockholder with respect to any shares of Common Stock issuable upon the
exercise of the Option until the date of issuance of the stock certificate or
certificates representing such shares following the Optionee's exercise of the
Option pursuant to its terms and conditions and payment for such shares. Except
as otherwise provided in the Plan, no adjustment shall be made for dividends or
other distributions made with respect to the Common Stock the record date for
the payment of which is prior to the date of issuance of the stock certificate
or certificates representing such shares following the Employee's exercise of
the Option.
9. Governing Law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware. Any invalidity
of any provision of this Agreement shall not affect the validity of any other
provision.
10. Notices. All notices, demands, requests or other communications
hereunder shall be in writing and shall be deemed to have been duly made or
given if mailed by registered or certified mail, return receipt requested. Any
such notice mailed to the Company shall be addressed to its principal executive
office at 5 Post Oak Park, Suite 1760, Houston, Texas 77027-3415, and any notice
mailed to the Optionee shall be addressed to the Employees's residence address
as it appears on the books and records of the Company or to such other address
as either party may hereafter designate in writing to the other.
11. Employment Obligation. The granting of the Option by the Company to
the Optionee shall not impose upon the Company any obligation to employ or
continue to employ the Optionee; and the right of the Company to terminate the
employment of the Optionee with the Company shall
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<PAGE> 21
not be diminished or affected by reason of the grant of the Option to the
Optionee pursuant to this Agreement.
12. Binding Effect. This Agreement shall, except as otherwise provided
to the contrary in this Agreement or in the Plan, inure to the benefit of and
bind the successors and assigns of the Company. This Agreement shall, except as
otherwise provided to the contrary in this Agreement, inure to the benefit of
and bind the heirs, executors, administrators and legal representatives of the
Optionee.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
as of the day and year first above mentioned.
WEATHERFORD INTERNATIONAL, INC.
By:
------------------------------------
Name:
--------------------------------
Title:
--------------------------------
---------------------------------------
Optionee
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<PAGE> 1
EXHIBIT 10.23
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made as of September
8, 1998, between WEATHERFORD INTERNATIONAL, INC., a Delaware corporation
("Weatherford"), and _______________ (the "Non-Employee Director").
W I T N E S S E T H:
WHEREAS, the Non-Employee Director serves on the Board of Directors of
Weatherford and Weatherford desires to have the Non-Employee Director remain as
a director and desires to encourage stock ownership by the Non-Employee
Director;
WHEREAS, Weatherford has, as an inducement, determined to grant to the
Non-Employee Director the option set forth in this Agreement in order that the
Non-Employee Director may obtain an interest in the stock ownership of
Weatherford;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Weatherford and the
Non-Employee Director hereby agree as follows:
1. Grant.
(a) Weatherford hereby grants to the Non-Employee Director an option
(the "Option") effective on September 8, 1998 (the "Date of Grant") to purchase
60,000 shares of Weatherford Common Stock, $1.00 par value per share ("Common
Stock"), having an exercise price equal to the closing sale price of the Common
Stock on the New York Stock Exchange, Inc. on September 8, 1998. Weatherford and
the Non-Employee Director agree that the Option shall be subject to the terms of
this Agreement. Weatherford and the Non-Employee Director further agree that
this Agreement sets forth the complete terms of the Option as in effect on the
date hereof.
(b) No Option shall be exercisable after the expiration of 10 years
from the date the Option becomes first exercisable.
(c) Subject to the terms and conditions of this Agreement, the Option
provides the Non- Employee Director with the option to purchase 60,000 shares of
Common Stock at a price of $18.125 per share (the "Option Price").
(d) The Option shall be considered to be a non-statutory option that is
not intended to be an incentive stock option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
(e) Subject to earlier vesting in the event of (i) a "Change in
Control" as provided in Section 1(g) hereof, or (ii) in the event the
Non-Employee Director dies, retires or incurs a disability while serving as a
Non-Employee director of Weatherford as provided for in Section 6, the Option
shall become exercisable following three years from the date hereof.
<PAGE> 2
(f) Notwithstanding the provisions of Section 1(e) hereof, the Option
shall be exercisable with respect to all of the shares subject to the Option
upon the occurrence of a Change in Control (as defined herein). For purposes of
this Agreement, a Change in Control shall mean the occurrence of one or more of
the following events: (i) any "person", including a "group", as those terms are
used in Section 13(d)(3) of the Securities Exchange Act of 1934, other than an
affiliate of Weatherford as of the Date of Grant, becomes the beneficial owner,
directly or indirectly, of securities of Weatherford representing 30% or more of
the combined voting power of Weatherford's then outstanding voting securities;
(ii) Weatherford is merged or consolidated with or into another corporation and
immediately after giving effect to the merger or consolidation either (A) less
than 65% of the outstanding voting securities of the surviving or resulting
entity are then beneficially owned in the aggregate by (x) the stockholders of
Weatherford immediately prior to such merger or consolidation or (y) if a record
date has been set to determine the stockholders of Weatherford entitled to vote
on such merger or consolidation, the stockholders of Weatherford as of such
record date, or (B) the Board of Directors, or similar governing body, of the
surviving or resulting entity does not have as a majority of its members the
persons specified in clause (iii)(A) and (B) below; (iii) if at any time the
following do not constitute a majority of the Board of Directors of Weatherford
(or any successor entity referred to in clause (ii) above): (A) persons who are
directors of Weatherford on the Date of Grant and (B) persons who, prior to
their election as a director of Weatherford (or successor entity if applicable),
were nominated, recommended or endorsed by a formal resolution of the Board of
Directors of Weatherford; (iv) persons who are directors of Weatherford as of
the beginning of any calendar year cease to constitute a majority of the members
of the Board of Directors at any time during that calendar year; or (v)
Weatherford transfers all or substantially all of its assets as contemplated by
Delaware corporate law on a consolidated basis to another corporation or entity
which is a less than a 50% owned subsidiary of Weatherford.
(g) The Non-Employee Director may exercise the Option by delivering to
Weatherford a written notice stating (i) that he wishes to exercise the Option
on the date such notice is so delivered, (ii) the number of shares of stock with
respect to which the Option is to be exercised, (iii) the address to which the
certificate representing such shares of stock should be mailed, and (iv) the
social security number of the Non-Employee Director. In order to be effective,
such written notice shall be accompanied by payment of the purchase price of
such shares of stock. Each such payment shall be made by cashier's check drawn
on a national banking association and payable to the order of Weatherford in
United States dollars.
If, at the time of receipt by Weatherford of such written notice, (i)
Weatherford has unrestricted surplus in an amount not less than the Option Price
of such shares of stock, (ii) all accrued cumulative preferential dividends and
other current preferential dividends on all outstanding shares of preferred
stock of Weatherford have been fully paid, (iii) the acquisition by Weatherford
of its own shares of stock for the purpose of enabling the Non-Employee Director
to exercise the Option is otherwise permitted by applicable law and without any
vote or consent of any stockholder of Weatherford, and (iv) there shall have
been adopted, and there shall be in full force and effect, a resolution of the
Board of Directors of Weatherford authorizing the acquisition by Weatherford of
its own shares of stock for such purpose, then the Non-Employee Director may
deliver to Weatherford, in payment of the Option Price of the shares of stock
with respect to which the Option is exercised, (x) certificates registered in
the name of the Non-Employee Director that represent a number of shares of stock
legally and beneficially owned by the Non-Employee Director (free of all
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<PAGE> 3
liens, claims and encumbrances of every kind) and having a fair market value on
the date of receipt by Weatherford of such written notice that is not greater
than the Option Price of the shares of stock with respect to which the Option is
to be exercised, such certificates to be accompanied by stock powers duly
endorsed in blank by the record holder of the shares of stock represented by
such certificates, with the signature of such record holder guaranteed by a
national banking association (or in lieu of such certificates, other
arrangements for the transfer of such shares to Weatherford which are
satisfactory to Weatherford), and (y) if the Option Price of the shares of stock
with respect to which the Option is to be exercised exceeds such fair market
value, a cashier's check drawn on a national banking association and payable to
the order of Weatherford in an amount, in United States dollars, equal to the
amount of such excess. Notwithstanding the provisions of the immediately
preceding sentence, the Board of Directors, in its sole discretion, may refuse
to accept shares of stock in payment of the Option Price for the shares of stock
with respect to which the Option is to be exercised and, in that event, any
certificates representing shares of stock that were received by Weatherford with
such written notice shall be returned to the Non-Employee Director, together
with notice by Weatherford to the Non-Employee Director of the refusal of the
Board of Directors to accept such shares of stock. If, at the expiration of
seven business days after the delivery to the Non- Employee Director of such
written notice from Weatherford, the Non-Employee Director shall not have
delivered to Weatherford a cashier's check drawn on a national banking
association and payable to the order of Weatherford in an amount, in United
States dollars, equal to the Option Price of the shares of stock with respect to
which the Option is to be exercised, such written notice from the Non- Employee
Director to Weatherford shall be ineffective to exercise the Option.
As promptly as practicable after the receipt by Weatherford of (i) such
written notice from the Non-Employee Director and (ii) payment, in the form
required by the foregoing provisions of this Section 1(g) of the Option Price of
the shares of stock with respect to which the Option is to be exercised, a
certificate representing the number of shares of stock with respect to which the
Option has been so exercised, such certificate to be registered in the name of
the Non-Employee Director, provided that such delivery shall be considered to
have been made when such certificate shall have been mailed, postage prepaid, to
the Non-Employee Director at the address specified for such purpose in such
written notice from the Non-Employee Director to Weatherford.
2. Changes in Weatherford's Capital Structure. The existence of this
Agreement shall not affect in any way the right or power of Weatherford or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in Weatherford's capital structure or its
business, or any merger or consolidation of Weatherford, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or the dissolution or liquidation of Weatherford,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
If Weatherford shall effect a subdivision or consolidation of shares or
other capital adjustment of, or the payment of a dividend in capital stock or
other equity securities of Weatherford on, its Common Stock, or other increase
or reduction of the number of shares of the Common Stock without receiving
consideration therefor in money, services, or property, or the reclassification
of its Common Stock, in whole or in part, into other equity securities of
Weatherford, then (a) the number, class and per share price of shares of stock
subject to the Option shall be appropriately
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<PAGE> 4
adjusted (or in the case of the issuance of other equity securities as a
dividend on, or in a reclassification of, the Common Stock, the Option shall
extend to such other securities) in such a manner as to entitle the Non-Employee
Director to receive, upon exercise of the Option, for the same aggregate cash
consideration, the same total number and class or classes of shares (or in the
case of a dividend of, or reclassification into, other equity securities, such
other securities) the Non-Employee Director would have held after such
adjustment if the Non-Employee Director had exercised the Option in full
immediately prior to the event requiring the adjustment, or, if applicable, the
record date for determining stockholders to be affected by such adjustment; and
(b) the number and class of shares then reserved for issuance under this
Agreement (or in the case of a dividend of, or reclassification into, other
equity securities, such other securities) shall be adjusted by substituting for
the total number and class of shares of stock then received, the number and
class or classes of shares of stock (or in the case of a dividend of, or
reclassification into, other equity securities, such other securities) that
would have been received by the owner of an equal number of outstanding shares
of Common Stock as a result of the event requiring the adjustment. Comparable
rights shall accrue to the Non- Employee Director in the event of successive
subdivisions, consolidations, capital adjustments, dividends or
reclassifications of the character described above.
If Weatherford shall distribute to all holders of its shares of Common
Stock (including any such distribution made to non-dissenting stockholders in
connection with a consolidation or merger in which Weatherford is the surviving
corporation and in which holders of shares of Common Stock continue to hold
shares of Common Stock after such merger or consolidation) evidences of
indebtedness or cash or other assets (other than cash dividends payable out of
consolidated retained earnings not in excess of, in any one year period, the
greater of (a) in an amount per share of Common Stock equal to $1.00 per share
of Common Stock (as the same may be adjusted from time to time by the Board of
Directors of Weatherford to reflect the effect of changes in capitalization) and
(b) two times the aggregate amount of dividends per share paid during the
preceding calendar year and dividends or distributions payable in shares of
Common Stock or other equity securities of Weatherford described in the
immediately preceding paragraph, but including stock or other securities of any
corporation or other entity owned by Weatherford), then in each case the Option
Price shall be adjusted by reducing the Option Price in effect immediately prior
to the record date for the determination of stockholders entitled to receive
such distribution by the fair market value, as determined in good faith by the
Board of Directors of Weatherford (whose determination shall be described in a
statement filed in Weatherford's corporate records and be available for
inspection by any holder of the Option) of the portion of the evidence of
indebtedness or cash or other assets so to be distributed applicable to one
share of Common Stock; provided that in no event shall the Option Price be less
than the par value of a share of Common Stock. In the event such adjustment
would result in the Option Price being less than the par value of a share of
Common Stock but for the foregoing proviso, the terms of the Option shall be
appropriately adjusted so as to maintain the economic value of the Option,
including through an adjustment to the number of shares of Common Stock subject
to the Option and through a provision allowing the Non-Employee Director to
receive the evidence of indebtedness or cash or other assets so to be
distributed applicable to one share of Common Stock for each share of Common
Stock that may be purchased on the exercise of the Option. Such adjustment shall
be made whenever any such distribution is made, and shall become effective on
the date of the distribution retroactive to the record date for the
determination of the stockholders entitled to receive such distribution. In
addition, in the event Weatherford distributes shares or other securities of a
subsidiary corporation or other entity to the holders of the Common
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<PAGE> 5
Stock, the Board of Directors may, in lieu of the adjustment provided above,
make provision allowing the Non-Employee Director to receive the shares or
securities of the corporation or entity that are subject to the distribution.
Comparable adjustments shall be made in the event of successive distributions of
the character described above.
If Weatherford shall make a tender offer for, or grant to all of its
holders of its shares of Common Stock the right to require Weatherford or any
subsidiary of Weatherford to acquire from such stockholders shares of, Common
Stock, at a price in excess of the Fair Market Value (a "Put Right") or
Weatherford shall grant to all of its holders of its shares of Common Stock the
right to acquire shares of Common Stock for less than the Fair Market Value (a
"Purchase Right") then, in the case of a Put Right, the Option Price shall be
adjusted by multiplying the Option Price in effect immediately prior to the
record date for the determination of stockholders entitled to receive such Put
Right by a fraction, the numerator of which shall be the number of shares of
Common Stock then outstanding minus the number of shares of Common Stock that
could be purchased at the Fair Market Value for the aggregate amount that would
be paid if all Put Rights are exercised and the denominator of which is the
number of shares of Common Stock that would be outstanding if all Put Rights are
exercised; and, in the case of a Purchase Right, the Option Price shall be
adjusted by multiplying the Option Price in effect immediately prior to the
record date for the determination of the stockholders entitled to receive such
Purchase Right by a fraction, the numerator of which shall be the number of
shares of Common Stock then outstanding plus the number of shares of Common
Stock that could be purchased at the Fair Market Value for the aggregate amount
which would be paid if all Purchase Rights are exercised and the denominator of
which is the number of shares of Common Stock that would be outstanding if all
Purchase Rights are exercised. In addition, the number of shares subject to the
Option shall be increased by multiplying the number of shares then subject to
the Option by a fraction which is the inverse of the fraction used to adjust the
Option Price. Notwithstanding the foregoing, if any such Put Rights or Purchase
Rights shall terminate without being exercised, the Option Price and number of
shares subject to the Option shall be appropriately readjusted to reflect the
Option Price and number of shares subject to the Option that would have been in
effect if such unexercised Rights had never existed. Comparable adjustments
shall be made in the event of successive transactions of the character described
above.
In the event of a merger of one or more corporations or entities with
or into Weatherford in which Weatherford is not the sole survivor or there is an
exchange, conversion or modification to the ownership of the then outstanding
shares of Common Stock of Weatherford, a consolidation of Weatherford and any
one or more corporations or entities, a statutory share or interest exchange in
which all of the Common Stock is acquired or any other similar business
combination with respect to Weatherford in which the Common Stock is acquired by
a third party, the Non-Employee Director, at no additional cost, shall be
entitled to receive, upon any exercise of the Option, in lieu of the number of
shares as to which the Option shall then represent the right to purchase, the
number and class of shares of stock or other securities, assets or other
property, including cash, to which the Non-Employee Director would have been
entitled to receive or continue to hold pursuant to the terms of the agreement
of merger, consolidation, share or interest exchange or other similar
transaction if at the time of such merger, consolidation, share or interest
exchange the Non-Employee Director had been a holder of a number of shares of
Common Stock equal to the number of shares as to which the Option shall then
represent the right to purchase. Comparable rights shall accrue to
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<PAGE> 6
the Non-Employee Director in the event of successive mergers, consolidations,
share or interest exchanges or other transactions of the character described
above.
If a corporate transaction described in Section 424(a) of the Code
which involves Weatherford is to take place and there is to be no surviving
corporation while the Option remains in whole or in part unexercised, it shall
be cancelled by the Board of Directors of Weatherford as of the effective date
of any such corporate transaction but before the date the Non-Employee Director
shall be provided with a notice of such cancellation and the Non-Employee
Director shall have the right to exercise the Option in full (without regard to
any limitations on exercise set forth in or imposed by this Agreement) to the
extent it is then still unexercised during a 30-day period preceding the
effective date of such corporate transaction.
For purposes of this Section 2, Fair Market Value per share of Common
Stock shall mean the closing price of a share of Common Stock as reported by the
principal national securities exchange on which the Common Stock is then listed
if the Common Stock is then listed on a national securities exchange, or the
average bid and asked prices of a share of Common Stock as reported in the
NASDAQ listing if the Common Stock is not then listed on a national securities
exchange, on the trading day immediately preceding the first trading day on
which, as a result of the establishment of a record date or otherwise, the
trading price reflects that an acquiror of Common Stock in the public market
will not participate in or receive the payment of any applicable dividend or
distribution.
Except as hereinbefore expressly provided, the issue by Weatherford of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of Weatherford convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to the Option.
3. Exercise of Options. The Option may be exercised from time to time
as to the total number of shares that may then be issuable upon the exercise
thereof or any portion thereof in the manner and subject to the limitations
provided for in Section 1 hereof.
4. Assignment. The Option may not be transferred or assigned in any
manner by the Non-Employee Director.
5. Requirement of Law.
(a) In the event the shares issuable on exercise of the Option are not
registered under the Securities Act of 1933, Weatherford may imprint on the
certificate for such shares the following legend or any other legend which
counsel for Weatherford considers necessary or advisable to comply with
Securities Act of 1933:
The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities
laws of any state and may not be sold or transferred except upon such
registration or upon receipt by the Corporation of an
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<PAGE> 7
opinion of counsel satisfactory to the Corporation, in form and
substance satisfactory to the Corporation, that registration is not
required for such sale or transfer.
Weatherford may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933. Weatherford
shall not be obligated to take any other affirmative action in order to cause
the exercise of the Option or the issuance of shares of Common Stock pursuant
thereto to comply with any law or regulation of any governmental authority.
(b) Weatherford shall reserve or acquire such number of shares of
Common Stock as may be necessary from time to time to allow the Option to be
exercised.
6. Termination. The Option, to the extent it shall not previously have
been exercised, shall terminate as follows:
(a) If the Non-Employee Director ceases to serve on the Board of
Directors of Weatherford prior to three years from the date hereof, for any
reason, with or without cause, other than for death, retirement under the then
established rules of the Board of Directors, or for disability, the Option shall
terminate and be immediately forfeited, and not be exercisable. If the
Non-Employee Director ceases to serve on the Board of Directors of Weatherford
after three years from the date hereof, the Option shall continue in effect
until September 8, 2011.
(b) If the Non-Employee Director dies prior to three years from the
date hereof, the Option shall be immediately exercisable and continue in effect
until 10 years following the date of his death. If the Non-Employee Director
dies on or after three years from the date hereof, the Option shall continue in
effect until September 8, 2011. After the death of the Non-Employee Director,
his executors, administrators or any persons to whom his Option may be
transferred by will or by the laws of descent and distribution shall have the
right, at any time prior to the Option's expiration to exercise it.
(c) If the Non-Employee Director shall retire from the Board of
Directors of Weatherford under the then established rules of the Board of
Directors of Weatherford, prior to three years from the date hereof, the
Non-Employee Director shall only be entitled to exercise the Option for a number
of shares determined by multiplying the number of shares subject to the Option
by a fraction, the numerator of which is the total whole years of service of the
Non-Employee Director as a director of Weatherford from the date hereof and the
denominator of which is three. With respect to the portion of the Option that
may be so exercised it shall be exercisable until 10 years following the date of
the Non-Employee Director's retirement. If the Non-Employee Director shall
retire from the Board of Directors of Weatherford on or after three years from
the date hereof, the Option shall continue until September 8, 2011.
(d) If the Non-Employee Director shall cease to be a director of
Weatherford due to disability prior to three years from the date hereof, the
Option shall be immediately exercisable and continue in effect until 10 years
following the date the Non-Employee Director ceases to be a director of
Weatherford due to disability. If the Non-Employee Director shall cease to be a
director of Weatherford due to disability on or after three years from the date
hereof, the Option shall continue in effect until September 8, 2011.
-7-
<PAGE> 8
7. Amendment. This Agreement may not be changed, amended or modified
except by an agreement in writing signed on behalf of each of the parties
hereto.
8. No Rights as a Stockholder. The Non-Employee Director shall not have
any rights as a stockholder with respect to any shares of Common Stock issuable
upon the exercise of the Option until the date of issuance of the stock
certificate or certificates representing such shares following the Non-Employee
Director's exercise of the Option pursuant to its terms and conditions and
payment for such shares. Except as otherwise provided in this Agreement, no
adjustment shall be made for dividends or other distributions made with respect
to the Common Stock the record date for the payment of which is prior to the
date of issuance of the stock certificate or certificates representing such
shares following the Non-Employee Director's exercise of the Option.
9. Governing Law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware. Any invalidity
of any provision of this Agreement shall not affect the validity of any other
provision.
10. Notices. All notices, demands, requests or other communications
hereunder shall be in writing and shall be deemed to have been duly made or
given if mailed by registered or certified mail, return receipt requested. Any
such notice mailed to Weatherford shall be addressed to its principal executive
office at 515 Post Oak Blvd., Suite 600, Houston, Texas 77027, and any notice
mailed to the Non-Employee Director shall be addressed to the Non-Employees
Director's residence address as it appears on the books and records of
Weatherford or to such other address as either party may hereafter designate in
writing to the other.
11. No Rights to Continue as Director. The granting of the Option by
Weatherford to the Non-Employee Director shall not impose upon Weatherford any
obligation to retain the Non- Employee Director on the Board of Directors of the
Weatherford.
12. Binding Effect. This Agreement shall, except as otherwise provided
to the contrary in this Agreement, inure to the benefit of and bind the
successors and assigns of Weatherford. This Agreement shall, except as otherwise
provided to the contrary in this Agreement, inure to the benefit of and bind the
heirs, executors, administrators, legal representatives and assigns of the Non-
Employee Director.
-8-
<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
as of the day and year first above mentioned.
WEATHERFORD INTERNATIONAL, INC.
By:
---------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
------------------------------------------
Non-Employee Director
-9-
<PAGE> 1
EXHIBIT 10.24
WARRANT
THIS WARRANT (this "Warrant") is made as of September 8, 1998, between
WEATHERFORD INTERNATIONAL, INC., a Delaware corporation ("Weatherford"), and
Robert K. Moses, Jr. (the "Holder").
W I T N E S S E T H:
WHEREAS, Weatherford has granted to the Holder the right to purchase
stock as set forth in this Warrant;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Weatherford and the
Holder hereby agree as follows:
1. Grant. (a) Weatherford hereby grants to the Holder a warrant
effective on September 8, 1998 (the "Date of Grant") to purchase 60,000 shares
of Weatherford Common Stock, $1.00 par value ("Common Stock") having an exercise
price equal to the closing sale price of the Common Stock on the New York Stock
Exchange, Inc. on September 8, 1998. Weatherford and the Holder agree that the
Warrant shall be subject to the terms of this Warrant. Weatherford and the
Holder further agree that this Warrant sets forth the complete terms of the
Warrant as in effect on the date hereof.
(b) No Warrant shall be exercisable after the expiration of 10 years
from the date the Warrant becomes first exercisable.
(c) Subject to the terms and conditions hereof, this Warrant provides
the Holder with the right to purchase 60,000 shares of Common Stock at a price
of $18.125 per share (the "Warrant Price").
(d) Subject to earlier vesting in the event of (i) a "Change in
Control" as provided in Section 1(g) hereof, or (ii) in the event the Holder
dies, retires or incurs a disability while serving as a director of Weatherford
as provided for in Section 6, the Warrant shall become exercisable following
three years from the date of grant of the Warrant.
(e) Notwithstanding the provisions of Section 1(e) hereof, the Warrant
shall be exercisable with respect to all of the shares subject to this Warrant
upon the occurrence of a Change in Control (as defined herein). For purposes of
this Warrant, a Change in Control shall mean the occurrence of one or more of
the following events: (i) any "person", including a "group", as those terms are
used in Section 13(d)(3) of the Securities Exchange Act of 1934, other than an
affiliate of Weatherford as of the Date of Grant, becomes the beneficial owner,
directly or indirectly, of securities of Weatherford representing 30% or more of
the combined voting power of Weatherford's then outstanding voting securities;
(ii) Weatherford is merged or consolidated with or into another corporation and
immediately after giving effect to the merger or consolidation either (A) less
than 65% of the outstanding voting securities of the surviving or resulting
entity are then beneficially
<PAGE> 2
owned in the aggregate by (x) the stockholders of Weatherford immediately prior
to such merger or consolidation or (y) if a record date has been set to
determine the stockholders of Weatherford entitled to vote on such merger or
consolidation, the stockholders of Weatherford as of such record date, or (B)
the Board of Directors, or similar governing body, of the surviving or resulting
entity does not have as a majority of its members the persons specified in
clause (iii)(A) and (B) below; (iii) if at any time the following do not
constitute a majority of the Board of Directors of Weatherford (or any successor
entity referred to in clause (ii) above): (A) persons who are directors of
Weatherford on the Date of Grant and (B) persons who, prior to their election as
a director of Weatherford (or successor entity if applicable), were nominated,
recommended or endorsed by a formal resolution of the Board of Directors of
Weatherford; (iv) persons who are directors of Weatherford as of the beginning
of any calendar year cease to constitute a majority of the members of the Board
of Directors at any time during that calendar year; or (v) Weatherford transfers
all or substantially all of its assets as contemplated by Delaware corporate law
on a consolidated basis to another corporation or entity which is a less than a
50% owned subsidiary of Weatherford.
(f) The Holder may exercise this Warrant by delivering to Weatherford a
written notice stating (i) that the Holder wishes to exercise this Warrant on
the date such notice is so delivered, (ii) the number of shares of stock with
respect to which this Warrant is to be exercised, (iii) the address to which the
certificate representing such shares of stock should be mailed, and (iv) the
social security number or the Holder. In order to be effective, such written
notice shall be accompanied by payment of the purchase price of such shares of
stock. Each such payment shall be made by cashier's check drawn on a national
banking association and payable to the order of Weatherford in United States
dollars.
If, at the time of receipt by Weatherford of such written notice, (i)
Weatherford has unrestricted surplus in an amount not less than the Warrant
Price of such shares of stock, (ii) all accrued cumulative preferential
dividends and other current preferential dividends on all outstanding shares of
preferred stock of Weatherford have been fully paid, (iii) the acquisition by
Weatherford of its own shares of stock for the purpose of enabling the Holder to
exercise this Warrant is otherwise permitted by applicable law and without any
vote or consent of any stockholder of Weatherford, and (iv) there shall have
been adopted, and there shall be in full force and effect, a resolution of the
Board of Directors of Weatherford authorizing the acquisition by Weatherford of
its own shares of stock for such purpose, then the Holder may deliver to
Weatherford, in payment of the Warrant Price for the shares of stock with
respect to which this Warrant is exercised, (x) certificates registered in the
name of the Holder that represent a number of shares of stock legally and
beneficially owned by the Holder (free of all liens, claims and encumbrances of
every kind) and having a fair market value on the date of receipt by Weatherford
of such written notice that is not greater than the Warrant Price for the shares
of stock with respect to which this Warrant is to be exercised, such
certificates to be accompanied by stock powers duly endorsed in blank by the
record holder of the shares of stock represented by such certificates, with the
signature of such record holder guaranteed by a national banking association (or
in lieu of such certificates, other arrangements for the transfer of such shares
to Weatherford which are satisfactory to Weatherford), and (y) if the Warrant
Price of the shares of stock with respect to which this Warrant is to be
exercised exceeds such fair market value of the shares used to exercise this
Warrant, a cashier's check drawn on a national banking association and payable
to the order of Weatherford in an amount, in United States dollars, equal to the
amount of such excess. Notwithstanding the provisions of the immediately
-2-
<PAGE> 3
preceding sentence, the Board of Directors, in its sole discretion, may refuse
to accept shares of stock in payment of the Warrant Price for the shares of
stock with respect to which this Warrant is to be exercised and, in that event,
any certificates representing shares of stock that were received by Weatherford
with such written notice shall be returned to the Holder, together with notice
by Weatherford to the Holder of the refusal of the Board of Directors to accept
such shares of stock. If, at the expiration of seven business days after the
delivery to the Holder of such written notice from Weatherford, the Holder shall
not have delivered to Weatherford a cashier's check drawn on a national banking
association and payable to the order of Weatherford in an amount, in United
States dollars, equal to the price for the shares of stock with respect to which
this Warrant is to be exercised, such written notice from the Holder to
Weatherford shall be ineffective to exercise this Warrant.
As promptly as practicable after the receipt by Weatherford of (i) such
written notice from the Holder and (ii) payment, in the form required by the
foregoing provisions of this Section 1(g) of the Warrant Price for the shares of
stock with respect to which this Warrant is to be exercised, a certificate
representing the number of shares of stock with respect to which this Warrant
has been so exercised, such certificate to be registered in the name of the
Holder, provided that such delivery shall be considered to have been made when
such certificate shall have been mailed, postage prepaid, to the Holder at the
address specified for such purpose in such written notice from the Holder to
Weatherford.
2. Changes in Weatherford's Capital Structure. The existence of this
Warrant shall not affect in any way the right or power of Weatherford or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in Weatherford's capital structure or its
business, or any merger or consolidation of Weatherford, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or the dissolution or liquidation of Weatherford,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
If Weatherford shall effect a subdivision or consolidation of shares or
other capital adjustment of, or the payment of a dividend in capital stock or
other equity securities of Weatherford on, its Common Stock, or other increase
or reduction of the number of shares of the Common Stock without receiving
consideration therefor in money, services, or property, or the reclassification
of its Common Stock, in whole or in part, into other equity securities of
Weatherford, then (a) the number, class and per share price of shares of stock
subject to the unexercised portion of this Warrant shall be appropriately
adjusted (or in the case of the issuance of other equity securities as a
dividend on, or in a reclassification of, the Common Stock, this Warrant shall
extend to such other securities) in such a manner as to entitle the Holder to
receive, upon exercise of this Warrant, for the same aggregate cash
consideration, the same total number and class or classes of shares (or in the
case of a dividend of, or reclassification into, other equity securities, such
other securities) the Holder would have held after such adjustment if the Holder
had exercised this Warrant in full immediately prior to the event requiring the
adjustment, or, if applicable, the record date for determining stockholders to
be affected by such adjustment; and (b) the number and class of shares then
reserved for issuance under this Warrant (or in the case of a dividend of, or
reclassification into, other equity securities, such other securities) shall be
adjusted by substituting for the total number and class of
-3-
<PAGE> 4
shares of stock then received, the number and class or classes of shares of
stock (or in the case of a dividend of, or reclassification into, other equity
securities, such other securities) that would have been received by the owner of
an equal number of outstanding shares of Common Stock as a result of the event
requiring the adjustment. Comparable rights shall accrue to the Holder in the
event of successive subdivisions, consolidations, capital adjustments, dividends
or reclassifications of the character described above.
If Weatherford shall distribute to all holders of its shares of Common
Stock (including any such distribution made to non-dissenting stockholders in
connection with a consolidation or merger in which Weatherford is the surviving
corporation and in which holders of shares of Common Stock continue to hold
shares of Common Stock after such merger or consolidation) evidences of
indebtedness or cash or other assets (other than cash dividends payable out of
consolidated retained earnings not in excess of, in any one year period, the
greater of (a) in an amount per share of Common Stock equal to $1.00 per share
of Common Stock (as the same may be adjusted from time to time by the Board of
Directors of Weatherford to reflect the effect of changes in capitalization) and
(b) two times the aggregate amount of dividends per share paid during the
preceding calendar year and dividends or distributions payable in shares of
Common Stock or other equity securities of Weatherford described in the
immediately preceding paragraph, but including stock or other securities of any
corporation or other entity owned by Weatherford), then in each case the Warrant
Price shall be adjusted by reducing the Warrant Price in effect immediately
prior to the record date for the determination of stockholders entitled to
receive such distribution by the fair market value, as determined in good faith
by the Board of Directors of Weatherford (whose determination shall be described
in a statement filed in Weatherford's corporate records and be available for
inspection by any holder of this Warrant) of the portion of the evidence of
indebtedness or cash or other assets so to be distributed applicable to one
share of Common Stock; provided that in no event shall the Warrant Price be less
than the par value of a share of Common Stock. In the event such adjustment
would result in this Warrant Price being less than the par value of a share of
Common Stock but for the foregoing proviso, the terms of this Warrant shall be
appropriately adjusted so as to maintain the economic value of this Warrant,
including through an adjustment to the number of shares of Common Stock then
subject to this Warrant and through a provision allowing the Holder to receive
the evidence of indebtedness or cash or other assets so to be distributed
applicable to one share of Common Stock for each share of Common Stock that may
be purchased on the exercise of this Warrant. Such adjustment shall be made
whenever any such distribution is made, and shall become effective on the date
of the distribution retroactive to the record date for the determination of the
stockholders entitled to receive such distribution. In addition, in the event
Weatherford distributes shares or other securities of a subsidiary corporation
or other entity to the holders of the Common Stock, the Board of Directors may,
in lieu of the adjustment provided above, make provision allowing the Holder to
receive the shares or securities of the corporation or entity that are subject
to the distribution. Comparable adjustments shall be made in the event of
successive distributions of the character described above.
If Weatherford shall make a tender offer for, or grant to all of its
holders of its shares of Common Stock the right to require Weatherford or any
subsidiary of Weatherford to acquire from such stockholders shares of, Common
Stock, at a price in excess of the Fair Market Value (a "Put Right") or
Weatherford shall grant to all of its holders of its shares of Common Stock the
right to acquire shares of Common Stock for less than the Fair Market Value (a
"Purchase Right") then, in
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<PAGE> 5
the case of a Put Right, the Warrant Price shall be adjusted by multiplying the
Warrant Price in effect immediately prior to the record date for the
determination of stockholders entitled to receive such Put Right by a fraction,
the numerator of which shall be the number of shares of Common Stock then
outstanding minus the number of shares of Common Stock which could be purchased
at the Fair Market Value for the aggregate amount which would be paid if all Put
Rights are exercised and the denominator of which is the number of shares of
Common Stock which would be outstanding if all Put Rights are exercised; and, in
the case of a Purchase Right, the Warrant Price shall be adjusted by multiplying
the Warrant Price in effect immediately prior to the record date for the
determination of the stockholders entitled to receive such Purchase Right by a
fraction, the numerator of which shall be the number of shares of Common Stock
then outstanding plus the number of shares of Common Stock which could be
purchased at the Fair Market Value for the aggregate amount which would be paid
if all Purchase Rights are exercised and the denominator of which is the number
of shares of Common Stock which would be outstanding if all Purchase Rights are
exercised. In addition, the number of shares subject to this Warrant shall be
increased by multiplying the number of shares then subject to this Warrant by a
fraction which is the inverse of the fraction used to adjust the Warrant Price.
Notwithstanding the foregoing, if any such Put Rights or Purchase Rights shall
terminate without being exercised, the Warrant Price and number of shares
subject to this Warrant shall be appropriately readjusted to reflect the Warrant
Price and number of shares then subject to this Warrant which would have been in
effect if such unexercised rights had never existed. Comparable adjustments
shall be made in the event of successive transactions of the character described
above.
In the event of a merger of one or more corporations or entities with
or into Weatherford in which Weatherford is not the sole survivor or there is an
exchange, conversion or modification to the ownership of the then outstanding
shares of Common Stock of Weatherford, a consolidation of Weatherford and any
one or more corporations or entities, a statutory share or interest exchange in
which all of the Common Stock is acquired or any other similar business
combination with respect to Weatherford in which the Common Stock is acquired by
a third party, the Holder, at no additional cost, shall be entitled to receive,
upon any exercise of this Warrant, in lieu of the number of shares as to which
this Warrant shall then represent the right to purchase, the number and class of
shares of stock or other securities, assets or other property, including cash,
to which the Holder would have been entitled to receive or continue to hold
pursuant to the terms of the agreement of merger, consolidation, share or
interest exchange or other similar transaction if at the time of such merger,
consolidation, share or interest exchange the Holder had been a holder of a
number of shares of Common Stock equal to the number of shares as to which this
Warrant shall then represent the right to purchase. Comparable rights shall
accrue to the Holder in the event of successive mergers, consolidations, share
or interest exchanges or other transactions of the character described above.
If a corporate transaction described in Section 424(a) of the Code
which involves Weatherford is to take place and there is to be no surviving
corporation while this Warrant remains in whole or in part unexercised, it shall
be cancelled by the Board of Directors of Weatherford as of the effective date
of any such corporate transaction but before the date the Holder shall be
provided with a notice of such cancellation and the Holder shall have the right
to exercise this Warrant in full (without regard to any limitations on exercise
set forth in or imposed by this Warrant) to the extent it is then still
unexercised during a 30-day period preceding the effective date of such
corporate transaction.
-5-
<PAGE> 6
For purposes of this Section 2, Fair Market Value per share of Common
Stock shall mean the closing price of a share of Common Stock as reported by the
principal national securities exchange on which the Common Stock is then listed
if the Common Stock is then listed on a national securities exchange, or the
average bid and asked prices of a share of Common Stock as reported in the
NASDAQ listing if the Common Stock is not then listed on a national securities
exchange, on the trading day immediately preceding the first trading day on
which, as a result of the establishment of a record date or otherwise, the
trading price reflects that an acquiror of Common Stock in the public market
will not participate in or receive the payment of any applicable dividend or
distribution.
Except as hereinbefore expressly provided, the issue by Weatherford of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of Weatherford convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to this Warrant.
3. Exercise of Warrants. This Warrant may be exercised from time to
time as to the total number of shares that may then be issuable in the manner
and subject to the limitations provided for in Section 1 hereof.
4. Assignment. This Warrant may be transferred or assigned in any
manner by the Holder.
5. Requirement of Law.
(a) In the event the shares issuable on exercise of this Warrant are
not registered under the Securities Act of 1933, Weatherford may imprint on the
certificate for such shares the following legend or any other legend which
counsel for Weatherford considers necessary or advisable to comply with
Securities Act of 1933:
The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities
laws of any state and may not be sold or transferred except upon such
registration or upon receipt by the Corporation of an opinion of
counsel satisfactory to the Corporation, in form and substance
satisfactory to the Corporation, that registration is not required for
such sale or transfer.
Weatherford may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933. Weatherford
shall not be obligated to take any other affirmative action in order to cause
the exercise of the Warrant or the issuance of shares of Common Stock pursuant
thereto to comply with any law or regulation of any governmental authority.
(b) Weatherford shall reserve or acquire such number of shares of
Common Stock as may be necessary from time to time to allow this Warrant to be
exercised.
-6-
<PAGE> 7
6. Termination. This Warrant, to the extent it shall not previously
have been exercised, shall terminate as follows:
(a) If Mr. Moses ceases to serve on the Board of Directors of
Weatherford prior to three years from the date hereof, for any reason, with or
without cause, other than for death, retirement under the then established rules
of the Board of Directors, or for disability, this Warrant shall terminate and
be immediately forfeited, and not be exercisable. If Mr. Moses ceases to serve
on the Board of Directors of Weatherford after three years from the date hereof,
this Warrant shall continue in effect until September 8, 1999.
(b) If Mr. Moses dies prior to three years from the date hereof, this
Warrant shall be immediately exercisable and continue in effect until 10 years
following the date of his death. If Mr. Moses dies on or after three years from
the date hereof, this Warrant shall continue in effect until September 8, 2011.
After the death of Robert Moses, his executors, administrators or any persons to
whom this Warrant may be transferred by will or by the laws of descent and
distribution or otherwise assigned shall have the right, at any time prior to
this Warrant's expiration to exercise it.
(c) If Mr. Moses shall retire from the Board of Directors of
Weatherford under the then established rules of the Board of Directors of
Weatherford prior to three years from the date hereof, the Holder shall only be
entitled to exercise this Warrant for a number of shares determined by
multiplying the number of shares subject to this Warrant by a fraction, the
numerator of which is the total whole years of service of Mr. Moses as a
director of Weatherford from the date hereof and the denominator of which is
three. With respect to the portion of this Warrant that may be so exercised it
shall be exercisable until 10 years following the date of Mr. Moses' retirement.
If Mr. Moses shall retire from the Board of Directors of Weatherford on or after
three years from the date hereof, this Warrant shall continue until September 8,
2011.
(d) If Mr. Moses shall cease to be a director of Weatherford due to
disability prior to three years from the date hereof, this Warrant shall be
immediately exercisable and continue in effect until 10 years following the date
Mr. Moses ceases to be a director of Weatherford due to disability. If Mr. Moses
shall cease to be a director of Weatherford due to disability on or after three
years from the date hereof, this Warrant shall continue in effect until
September 8, 2011.
7. Amendment. This Warrant may not be changed, amended or modified
except by an agreement in writing signed on behalf of each of the parties
hereto.
8. No Rights as a Stockholder. The Holder shall not have any rights as
a stockholder with respect to any shares of Common Stock issuable upon the
exercise of this Warrant until the date of issuance of the stock certificate or
certificates representing such shares following the Holder's exercise of this
Warrant pursuant to its terms and conditions and payment for such shares. Except
as otherwise provided in this Warrant, no adjustment shall be made for dividends
or other distributions made with respect to the Common Stock the record date for
the payment of which is prior to the date of issuance of the stock certificate
or certificates representing such shares following the Holder's exercise of this
Warrant.
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<PAGE> 8
9. Governing Law. The validity, construction and performance of this
Warrant shall be governed by the laws of the State of Delaware. Any invalidity
of any provision of this Warrant shall not affect the validity of any other
provision.
10. Notices. All notices, demands, requests or other communications
hereunder shall be in writing and shall be deemed to have been duly made or
given if mailed by registered or certified mail, return receipt requested. Any
such notice mailed to Weatherford shall be addressed to its principal executive
office at 515 Post Oak Blvd., Suite 600, Houston, Texas 77027, and any notice
mailed to the Holder shall be addressed to the Holder's address as it appears on
the books and records of Weatherford or to such other address as either party
may hereafter designate in writing to the other.
11. No Rights to Continue as Director. The granting of this Warrant by
Weatherford to Mr. Moses shall not impose upon Weatherford any obligation to
retain Mr. Moses on the Board of Directors of the Weatherford.
12. Binding Effect. This Warrant shall, except as otherwise provided to
the contrary in this Warrant, inure to the benefit of and bind the successors
and assigns of Weatherford. This Warrant shall, except as otherwise provided to
the contrary in this Warrant, inure to the benefit of and bind the heirs,
executors, administrators, legal representatives and assigns of the Holder.
IN WITNESS WHEREOF, this Warrant has been duly executed and delivered
as of the day and year first above mentioned.
WEATHERFORD INTERNATIONAL, INC.
By:
--------------------------------------
Name:
----------------------------------
Title:
----------------------------------
-----------------------------------------
ROBERT K. MOSES, JR.
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<PAGE> 1
EXHIBIT 10.25
WEATHERFORD INTERNATIONAL, INC.
401(k) SAVINGS PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
<S> <C>
ARTICLE I - DEFINITIONS
Account ............................................................ 1.1
Active Service ..................................................... 1.2
Actual Contribution Ratio .......................................... 1.3
Actual Deferral Percentage ......................................... 1.4
Actual Deferral Ratio .............................................. 1.5
Affiliated Employer ................................................ 1.6
Aggregate Accounts ................................................. 1.7
Aggregation Group .................................................. 1.8
Annual Additions ................................................... 1.9
Annual Compensation ................................................ 1.10
Beneficiary ........................................................ 1.11
Board of Directors ................................................. 1.12
Code ............................................................... 1.13
Committee .......................................................... 1.14
Considered Compensation ............................................ 1.15
Contribution ....................................................... 1.16
Contribution Percentage ............................................ 1.17
Determination Date ................................................. 1.18
Direct Rollover ......................................................... 1.19
Disability ......................................................... 1.20
Distributee ............................................................. 1.21
Eligible Retirement Plan ................................................ 1.22
Eligible Rollover Distribution .......................................... 1.23
Employee ........................................................... 1.24
Employer or Employers .............................................. 1.25
ERISA .............................................................. 1.26
Excess 401(k) Contributions ........................................ 1.27
Excess Aggregate 401(m) Contributions .............................. 1.28
Excess Deferral ......................................................... 1.29
Five Percent Owner ................................................. 1.30
Former Member ........................................................... 1.31
Highly Compensated Employee ........................................ 1.32
Hour of Service .................................................... 1.33
Key Employee ....................................................... 1.34
Limitation Year ......................................................... 1.35
Member ............................................................. 1.36
Non-Highly Compensated Employee .................................... 1.37
Non-Key Employee ................................................... 1.38
Period of Service .................................................. 1.39
</TABLE>
i-
<PAGE> 3
<TABLE>
<S> <C>
Period of Severance ................................................ 1.40
Plan ............................................................... 1.41
Plan Year .......................................................... 1.42
Qualified Nonelective Employer Contribution ........................ 1.43
Regulation ......................................................... 1.44
Retirement Age ..................................................... 1.45
Rollover Contribution .............................................. 1.46
Section 401(k) Contributions ....................................... 1.47
Section 401(m) Contributions ....................................... 1.48
Service ............................................................ 1.49
Severs Service ..................................................... 1.50
Sponsor ............................................................ 1.51
Top-Heavy Plan ..................................................... 1.52
Transferred ........................................................ 1.53
Trust .............................................................. 1.54
Trustee ............................................................ 1.55
Trust Fund ......................................................... 1.56
USERRA ............................................................. 1.57
Valuation Date ..................................................... 1.58
ARTICLE II - ACTIVE SERVICE
When Active Service Begins ......................................... 2.1
Aggregation of Service ............................................. 2.2
Eligibility Computation Periods .................................... 2.3
Periods of Service of Less Than One Year ........................... 2.4
Service Prior to Severance ......................................... 2.5
Service After Severance ............................................ 2.6
Periods of Severance Due to Child Birth or Adoption ................ 2.7
Transfers .......................................................... 2.8
Employment Records Conclusive ...................................... 2.9
Coverage of Certain Previously Excluded Employees .................. 2.10
Military Service ................................................... 2.11
ARTICLE III - ELIGIBILITY RULES
Eligibility Requirements ........................................... 3.1
Eligibility Upon Reemployment ...................................... 3.2
Frozen Participation ............................................... 3.3
ARTICLE IV - CONTRIBUTIONS AND THEIR LIMITATIONS
PART A. CONTRIBUTIONS
Employee After Tax Contributions ................................... 4.1
</TABLE>
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Rollover Contributions and Direct Transfers ........................ 4.2
Salary Deferral Contributions ...................................... 4.3
Employer Matching Contributions .................................... 4.4
Employer Discretionary Contributions ............................... 4.5
Restoration Contributions .......................................... 4.6
Excluded Members ................................................... 4.7
Qualified Nonelective Employer Contribution ........................ 4.8
Top-Heavy Contribution ............................................. 4.9
Contributions Required on Return From Military Service ............. 4.10
Deadline for Payment of Contributions .............................. 4.11
PART B. LIMITATIONS APPLICABLE TO CONTRIBUTIONS
Limitations Based Upon Deductibility and the Maximum
Allocation Permitted to a Member's Account ......................... 4.11
Dollar Limitation on Salary Deferral Contributions ................. 4.12
Limitation Based Upon Actual Deferral Percentage ................... 4.13
Limitation Based Upon Contribution Percentage ...................... 4.14
Alternative Limitation Based Upon Actual Deferral
Percentage and Contribution Percentage ............................. 4.15
PART C. CORRECTION PROCEDURES FOR ERRONEOUS CONTRIBUTIONS
Excess Deferral Fail Safe .......................................... 4.16
Actual Deferral Percentage Fail Safe For Plan Years Beginning
After December 31, 1996 ........................................... 4.17
Contribution Percentage Fail Safe For Plan Years Beginning
After December 31, 1996 ........................................... 4.18
Alternative Limitation Fail Safe ................................... 4.19
Income Allocable to Excess 401(k) and Aggregate
401(m) Contributions ............................................... 4.20
Return of Contributions for Mistake, Disqualification or
Disallowance of Deduction .......................................... 4.21
ARTICLE V - PARTICIPATION
PART A. ALLOCATIONS
Allocation of Employee Contributions ............................... 5.1
Allocation of Rollover Contributions and Direct Transfers .......... 5.2
Allocation of Salary Deferral Contributions ........................ 5.3
Allocation of Employer Matching Contributions ...................... 5.4
Allocation of Employer Discretionary Contributions ................. 5.5
Allocation of Restoration Contributions ............................ 5.6
Allocation of Contribution to Excluded Members ..................... 5.7
</TABLE>
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Allocation of Qualified Nonelective Employer Contributions ......... 5.8
Allocation of Top-Heavy Contributions .............................. 5.9
Effect of Transfers Upon Allocations ............................... 5.10
Application of Forfeitures ......................................... 5.11
Scheduled Allocation of Income or Losses and
Appreciation or Depreciation ....................................... 5.12
Interim Allocation of Income or Losses and
Appreciation or Depreciation ....................................... 5.13
PART B. LIMITATION ALLOCATIONS
PART C. INVESTMENT OF TRUST FUNDS
ARTICLE VI - DISTRIBUTIONS AND FORFEITURES
PART A. DISTRIBUTIONS
Valuation of Accounts for Distributions ............................ 6.1
Distribution on Death .............................................. 6.2
Distribution on Retirement ......................................... 6.3
Distribution on Disability ......................................... 6.4
Distribution on Severance From Service ............................. 6.5
Distributions on Issuance of a Qualified Domestic Relations Order .. 6.6
Forfeiture on Severing Service With All Affiliated Employers ....... 6.7
Forfeiture by Lost Members or Beneficiaries; Escheat ............... 6.8
PART B. FORM, ADJUSTMENTS AND TIME OF DISTRIBUTION
Form of Distributions .............................................. 6.9
Adjustment of Value of Distribution ................................ 6.10
Normal Time for Distribution ....................................... 6.11
Time Limit For Distribution ........................................ 6.12
Protected Benefits ................................................. 6.13
ARTICLE VII - WITHDRAWALS AND LOANS
Valuation of Accounts for Withdrawals and Loans ................... 7.1
Minimum Loan Amount ............................................... 7.2
Withdrawals of Employee After Tax and Rollover Accounts ........... 7.3
Withdrawal for Financial Hardship ................................. 7.4
Withdrawals On or After Age 59 1/2 ................................ 7.5
Loans ............................................................. 7.6
</TABLE>
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ARTICLE VIII - GENERAL PROVISIONS APPLICABLE TO FILING A CLAIM, DISTRIBUTIONS
TO MINORS AND NO DUPLICATION OF BENEFITS
<TABLE>
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Claims Procedure ......................................... 8.1
No Duplication of Benefits ............................... 8.2
Distributions to Disabled or Minors ...................... 8.3
ARTICLE IX - TOP-HEAVY REQUIREMENTS
Application .............................................. 9.1
Top-Heavy Test ........................................... 9.2
Vesting Restrictions if Plan Becomes Top-Heavy ........... 9.3
Minimum Contribution if Plan Becomes Top-Heavy ........... 9.4
Coverage Under Multiple Top-Heavy Plans .................. 9.5
Restrictions if Plan Becomes Super-Top-Heavy ............. 9.6
ARTICLE X - ADMINISTRATION OF THE PLAN
Appointment, Term of Service & Removal ................... 10.1
Powers ................................................... 10.2
Organization ............................................. 10.3
Quorum and Majority Action ............................... 10.4
Signatures ............................................... 10.5
Disqualification of Committee Member ..................... 10.6
Disclosure to Members .................................... 10.7
Standard of Performance .................................. 10.8
Liability of Committee and Liability Insurance ........... 10.9
Exemption from Bond ...................................... 10.10
Compensation ............................................. 10.11
Persons Serving in Dual Fiduciary Roles .................. 10.12
Administrator ............................................ 10.13
Standard of Judicial Review of Committee Actions ......... 10.14
ARTICLE XI - TRUST FUND AND CONTRIBUTIONS
Funding of Plan .......................................... 11.1
Incorporation of Trust ................................... 11.2
Authority of Trustee ..................................... 11.3
Allocation of Responsibility ............................. 11.4
ARTICLE XII - ADOPTION OF PLAN BY OTHER EMPLOYERS
Adoption Procedure ....................................... 12.1
No Joint Venture Implied ................................. 12.2
All Trust Assets Available to Pay All Benefits ........... 12.3
</TABLE>
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Qualification a Condition Precedent to Adoption
and Continued Participation .............................. 12.4
ARTICLE XIII - AMENDMENT AND WITHDRAWAL OR TERMINATION
PART A. AMENDMENT
Right to Amend ........................................... 13.1
Limitation on Amendments ................................. 13.2
Each Employer Deemed to Adopt Amendment Unless Rejected .. 13.3
Amendment Applicable Only to Members Still Employed
Unless Amendment Specifically Provides Otherwise ......... 13.4
Mandatory Amendments ..................................... 13.5
PART B. WITHDRAWAL OR TERMINATION
Withdrawal of Employer ................................... 13.6
Termination of Plan ...................................... 13.7
100% Vesting Required on Partial or Complete Termination
or Complete Discontinuance ............................... 13.8
Distribution Upon Termination ............................ 13.9
ARTICLE XIV - SALE OF EMPLOYER OR SUBSTANTIALLY ALL OF ITS ASSETS
Continuance Permitted Upon Sale or Transfer of Assets ..... 14.1
Distributions Upon Disposition of Assets or a Subsidiary .. 14.2
ARTICLE XV - MISCELLANEOUS
Plan Not An Employment Contract ........................... 15.1
Benefits Provided Solely From Trust ....................... 15.2
Anti-Alienation Provision ................................. 15.3
Requirements Upon Merger or Consolidation of Plans ........ 15.4
Gender and Number ......................................... 15.5
Severability .............................................. 15.6
Governing Law; Parties to Legal Actions ................... 15.7
</TABLE>
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WEATHERFORD INTERNATIONAL, INC.
401(K) SAVINGS PLAN
Weatherford International, Inc. has entered into the following Agreement:
WITNESSETH:
WHEREAS, Weatherford International, Inc. has heretofore adopted a
qualified profit sharing plan with a 401(k) feature and exempt trust for the
exclusive benefit of its employees and their beneficiaries; and
WHEREAS, it has been determined that the plan should now be completely
amended, restated and continued without a gap or lapse in coverage, time or
effect which would cause any Member to become fully vested or entitled to
distribution, in order to (a) effect numerous technical changes for the benefit
of eligible employees and beneficiaries, and (b) to ensure the plan's
qualification under the applicable provisions of the Internal Revenue Code of
1986, as amended, and the Employee Retirement Income Security Act of 1974, as
amended; and
WHEREAS, it is intended that other business organizations may adopt this
plan and its related trust for the exclusive benefit of their employees and
their employees' beneficiaries;
NOW, THEREFORE, this Agreement is entered into in order to set forth the
terms of that profit sharing plan with a 401(k) feature which are as follows:
<PAGE> 9
ARTICLE I.
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set
out in the definition unless the context in which the word or phrase appears
reasonably requires a broader, narrower or different meaning.
1.1 "ACCOUNT" means all ledger accounts pertaining to a Member which are
maintained by the Committee to reflect the Member's interest in the Trust Fund.
The Committee shall establish the following Accounts and any additional
Accounts that the Committee considers necessary to reflect the entire interest
of the Member in the Trust Fund. Each of the Accounts listed below and any
additional Accounts established by the Committee shall reflect the
Contributions or amounts transferred to the Trust Fund, if any, and the
appreciation or depreciation of the assets in the Trust Fund and the income
earned or loss incurred on the assets in the Trust Fund attributable to the
Contributions and/or other amounts transferred to the Account.
(a) Employee After Tax Contribution Account - The Member's after tax
contributions, if any.
(b) Salary Deferral Contribution Account - The Member's before tax
contributions, if any.
(c) Employer Matching Contribution Account - The Employer's matching
contributions allocated to the Member, if any.
(d) Employer Discretionary Contribution Account - The Employer's
discretionary contributions, if any.
(e) Qualified Nonelective Employer Contribution Account - The
Employer's Qualified Nonelective Employer Contributions allocated to the
Member, if any.
(f) Rollover Account - Funds transferred from another qualified plan
or IRA Account for the benefit of a Member.
(g) Grant Plan Prior Plan Account
(h) Prideco Plan Prior Plan Account
(i) Enerpro Plan Prior Plan Account
(j) TCA Plan Prior Plan Account
(k) Tube-Alloy Plan Prior Plan Account
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(l) XL Systems Plan Prior Plan Account
(m) Weatherford Plan Prior Plan Account (this Prior Plan Account
refers to assets attributable to a merger into the Weatherford Enterra,
Inc. 401(k) Savings Plan by Total Energy Service Company).
1.2 "ACTIVE SERVICE" means the Periods of Service which are counted for
either eligibility or vesting purposes as calculated under Article II.
1.3 "ACTUAL CONTRIBUTION RATIO" means for an Employee the ratio of Section
401(m) Contributions actually paid into the Trust on behalf of the Employee for
a Plan Year to the Employee's Annual Compensation earned while the Employee was
a Member for the same Plan Year.
1.4 "ACTUAL DEFERRAL PERCENTAGE" means for a specified group of Employees
for a Plan Year the average of the ratios (calculated separately for each
Employee in the group) of the sum of Section 401(k) Contributions actually paid
into the Trust on behalf of each Employee for that Plan Year to the Employee's
Annual Compensation earned while the Employee was a Member for the same Plan
Year.
1.5 "ACTUAL DEFERRAL RATIO" means for an Employee the ratio of Section
401(k) Contributions actually paid into the Trust on behalf of the Employee for
a Plan Year to the Employee's Annual Compensation earned while the Employee was
a Member for the same Plan Year.
1.6 "AFFILIATED EMPLOYER" means the Employer and any employer which is a
member of the same controlled group of corporations within the meaning of
section 414(b) of the Code, which is a trade or business (whether or not
incorporated) which is under common control within the meaning of section
414(c) of the Code, which is a member of an affiliated service group within the
meaning of section 414(m) of the Code with the Employer, or which is required
to be aggregated with the Employer under section 414(o) of the Code. For
purposes of the limitation on allocations contained in Part B of Article V, the
definition of Affiliated Employer is modified by substituting the phrase "more
than 50 percent" in place of the phrase "at least 80 percent" each place the
latter phrase appears in section 1563(a)(1) of the Code.
1.7 "AGGREGATE ACCOUNTS" means the total of all Account balances derived
from Employer Contributions and Employee Contributions.
1.8 "AGGREGATION GROUP" means (a) each plan of the Employer or any
Affiliated Employer in which a Key Employee is a Member and (b) each other plan
of the Employer or any Affiliated Employer which enables any plan in (a) to
meet the requirements of either section 401(a)(4) or 410 of the Code. Any
Employer may treat a plan not required to be included in the Aggregation Group
as being a part of the group if the group would continue to meet the
requirements of sections 401(a)(4) and 410 of the Code with that plan being
taken into account.
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1.9 "ANNUAL ADDITIONS" means the sum of the following amounts credited on
behalf of a Member for the Limitation Year: (a) Employer Contributions, (b)
Employee After Tax Contributions, and (c) forfeitures. Excess 401(k)
Contributions and Excess Aggregate 401(m) Contributions for a Plan Year are
treated as Annual Additions for that Plan Year even if they are corrected
through distribution or recharacterization. Excess Deferrals that are timely
distributed as set forth in Section 4.12 shall not be treated as Annual
Additions.
1.10 "ANNUAL COMPENSATION" means the Employee's wages from the Affiliated
Employers as defined in section 3401(a) of the Code for purposes of federal
income tax withholding at the source (but determined without regard to any
rules that limit the remuneration included in wages based on the nature or
location of the employment or the services performed) modified by including
elective contributions under a cafeteria plan described in section 125 of the
Code and elective contributions to any plan qualified under section 401(k),
408(k), or 403(b) of the Code. However, for purposes of Part B of Article V of
the Plan, effective for Limitation Years beginning before January 1, 1998,
"Annual Compensation" does not include any salary deferral contributions to a
plan qualified under section 401(k) of the Code or any amount that is deferred
at the election of the Employee and is not includable in the gross income of
the Employee by reason of section 125 of the Code. Except for purposes of Part
B of Article V of the Plan, Annual Compensation in excess of $150,000.00 (as
adjusted by the Secretary of Treasury) shall be disregarded. If the Plan Year
is ever less than 12 months the $150,000.00 limitation (as adjusted by the
Secretary of Treasury) will be prorated by multiplying the limitation by a
fraction, the numerator of which is the number of months in the Plan Year, and
the denominator of which is 12. For purposes of determining an Employee's
Actual Contribution Ratio or Actual Deferral Ratio, Annual Compensation shall
include only compensation earned during the portion of the Plan Year that the
Employee was eligible to participate in the Plan.
1.11 "BENEFICIARY" or Beneficiaries means the person or persons, or the
trust or trusts created for the benefit of a natural person or persons or the
Member's or Former Member's estate, designated by the Member or Former Member
to receive the benefits payable under this Plan upon his death.
1.12 "BOARD OF DIRECTORS" means the board of directors, the executive
committee or other body given management responsibility for the Sponsor.
1.13 "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
1.14 "COMMITTEE" means the committee appointed by the Sponsor to
administer the Plan.
1.15 "CONSIDERED COMPENSATION" means as to each Employee, that Employee's
Annual Compensation (wages subject to withholding modified by including
elective contributions under a cafeteria plan described in section 125 of the
Code and elective contributions to any plan qualified under section 401(k),
408(k) or 403(b) of the Code). For purposes of any Employer Matching
Contribution, and any Employer Discretionary Contribution, Considered
Compensation shall exclude the following items (even if includable in gross
income): overtime pay, foreign service premiums, position allowances or
location coefficient payments, call-in premiums, bonuses, sales commissions,
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reimbursements or other expense allowances, fringe benefits (cash and
non-cash), moving expenses, deferred compensation, welfare benefits, amounts
includable in gross income as a result of an exercise of a stock option or a
stock appreciation right, and other items not part of the Employee's base pay.
Considered Compensation in excess of $150,000.00 (as adjusted by the Secretary
of Treasury) shall be disregarded. If the Plan Year is ever less than 12
months the $150,000.00 limitation (as adjusted by the Secretary of Treasury)
will be prorated by multiplying the limitation by a fraction, the numerator of
which is the number of months in the Plan Year, and the denominator of which is
12.
1.16 "CONTRIBUTION" means the total amount of contributions made under the
terms of this Plan. Each specific type of Contribution shall be designated by
the type of contribution made as follows:
(a) Employee After Tax Contribution - After tax contributions made
by the Employee.
(b) Salary Deferral Contribution - Contributions made by the
Employer under the Employee's salary deferral agreement.
(c) Employer Matching Contribution - Matching contributions made by
the Employer.
(d) Employer Discretionary Contribution - Contributions made by the
Employer on a discretionary basis.
(e) Qualified Nonelective Employer Contribution - Qualified
Nonelective Employer Contributions made by the Employer as a means of
passing the actual deferral percentage test of section 401(k) of the Code
or the actual contribution percentage test of section 401(m) of the Code.
(f) Rollover Contribution - Contributions made by a Member which
consist of any part of an Eligible Rollover Distribution (as defined in
section 402 of the Code) from a qualified employee trust described in
section 401(a) of the Code or an IRA Rollover Account.
1.17 "CONTRIBUTION PERCENTAGE" means for a specified group of Employees
for a Plan Year the average of the ratios (calculated separately for each
Employee in the group) of the sum of Section 401(m) Contributions actually paid
into the Trust on behalf of each Employee for that Plan Year to the Employee's
Annual Compensation earned while the Employee was a Member for that Plan Year.
1.18 "DETERMINATION DATE" means for a given Plan Year the last day of the
preceding Plan Year or in the case of the first Plan Year the last day of that
Plan Year.
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1.19 "DIRECT ROLLOVER" means a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
1.20 "DISABILITY" means a mental or physical disability which, in the
opinion of a physician selected by the Committee, will prevent the Member from
earning a reasonable livelihood with any Affiliated Employer and which can be
expected to result in death or which has lasted or can be expected to last for
a continuous period of not less than 12 months and which: (a) was not
contracted, suffered or incurred while the Member was engaged in, or did not
result from having engaged in, a felonious criminal enterprise; (b) did not
result from alcoholism or addiction to narcotics; and (c) did not result from
an injury incurred while a member of the Armed Forces of the United States for
which the Member receives a military pension.
1.21 "DISTRIBUTEE" means an Employee or former Employee, and in addition,
the Employee's or former Employee's surviving spouse or the Employee's or
former Employee's spouse or former spouse who is the alternate payee under a
qualified domestic relations order, as defined in section 414(p) of the Code,
with regard to the interest of the spouse or former spouse.
1.22 "ELIGIBLE RETIREMENT PLAN" means an individual retirement account
described in section 408(a) of the Code, an individual retirement annuity
described in section 408(b) of the Code, an annuity plan described in section
403(a) of the Code, or a qualified trust described in section 401(a) of the
Code, that accepts the Distributee's Eligible Rollover Distribution. However,
in the case of an Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement account or individual
retirement annuity.
1.23 "ELIGIBLE ROLLOVER DISTRIBUTION" as defined in section 402 of the
Code means any distribution of all or any portion of the balance to the credit
of the Distributee, except that an Eligible Rollover Distribution does not
include: (a) any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or
life expectancy) of the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee's Beneficiary, or for a
specified period of ten years or more; (b) any distribution to the extent the
distribution is required under section 401(a)(9) of the Code; and (c) the
portion of any distribution that is not includable in gross income (determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities). For any distribution after December 31, 1999, an
Eligible Rollover Distribution also does not include any hardship distribution
described in section 401(k)(2)(B)(i)(IV) of the Code.
If the Plan accepts a Rollover Contribution which the Trustee reasonably
concludes is qualified under this Section of the Plan, and subsequently it is
determined that such distribution was not qualified, the Trustee shall
distribute the amount of such rollover distribution, plus earnings thereon, to
the Member in compliance with applicable Regulations.
1.24 "EMPLOYEE" means all common law employees of each Employer exclusive
of the following classifications: (a) employees working outside of the United
States unless the Committee elects to cover or continue to cover them in this
Plan and (b) all leased employees who are required to be treated as common law
employees under section 414(n) of the Code unless the Plan's qualified
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status is dependent upon coverage of the leased employees. Independent
contractors are not common law employees and are therefore not within the
defined term "Employee" as used in this Plan. The determination of whether a
person is within an excluded class or is an independent contractor shall be
made by the Committee in its sole discretion as granted in Article X. However,
if either one or more individuals who are classified as leased employees or
independent contractors are later determined to be in fact common law employees
of an Employer, they are nevertheless to be excluded as a classification unless
the Plan's qualified status is dependent upon the coverage of that
classification of persons.
1.25 "EMPLOYER" or "EMPLOYERS" means the Sponsor and any other business
organization which has adopted this Plan.
1.26 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
1.27 "EXCESS 401(K) CONTRIBUTIONS" means, with respect to any Plan Year,
the excess of (a) the aggregate amount of Section 401(k) Contributions actually
paid into the Trust on behalf of Highly Compensated Employees for the Plan Year
over (b) the maximum amount of those contributions permitted under the
limitations set out in the first sentence of Section 4.13 of the Plan.
1.28 "EXCESS AGGREGATE 401(M) CONTRIBUTIONS" means, with respect to any
Plan Year, the excess of (a) the aggregate amount of Section 401(m)
Contributions actually paid into the Trust on behalf of Highly Compensated
Employees for the Plan Year over (b) the maximum amount of those contributions
permitted under the limitations set out in the first sentence of Section 4.14
of the Plan.
1.29 "EXCESS DEFERRAL" means that part, if any, of the Salary Deferral
Contribution of a Member for his taxable year which, when added to the amounts
he deferred under other plans or arrangements described in sections 401(k),
408(k) and 403(b) of the Code, exceeds the deferral dollar limitation permitted
by section 402(g) of the Code.
1.30 "FIVE PERCENT OWNER" means an Employee who is a 5-percent owner as
defined in section 416(i) of the Code.
1.31 "FORMER MEMBER" means a person who was at one time a Member who
received allocations of Contributions and who is no longer a Member under the
Plan, but still has an Account balance in the Plan.
1.32 "HIGHLY COMPENSATED EMPLOYEE" means, effective for Plan Years
beginning after December 31, 1996, an Employee or an employee of an Affiliated
Employer who: (a) during the Plan Year or the preceding Plan Year was at any
time a Five Percent Owner or (b) for the preceding year had Annual Compensation
in excess of $80,000.00 (as adjusted from time to time by the Secretary of the
Treasury) and was in the group consisting of the top 20 percent of the
Employees when ranked on the basis of Annual Compensation paid during the
preceding year. A former Member will be treated as a Highly Compensated
Employee if he was a Highly Compensated
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Employee when he Severed Service or he was a Highly Compensated Employee at any
time after attaining age 55. Non-resident aliens who receive no earned income
from the employer which constitutes income from sources within the United
States are excluded.
1.33 "HOUR OF SERVICE" means each hour for which an Employee is paid or
entitled to payment for the performance of duties with an Affiliated Employer.
1.34 "KEY EMPLOYEE" means an Employee or former or deceased Employee or
Beneficiary of an Employee who at any time during the Plan Year or any of the
four preceding Plan Years is (a) an officer of an Employer or any Affiliated
Employer having an Annual Compensation greater than 50% of the annual addition
limitation of section 415(b)(1)(A) of the Code for the Plan Year, (b) one of
the 10 employees having an Annual Compensation from an Employer or any
Affiliated Employer of greater than 100% of the annual addition limitation of
section 415(c)(1)(A) of the Code for the Plan Year and owning or considered as
owning (within the meaning of section 318 of the Code) the largest interest in
an Employer or any Affiliated Employer, treated separately, (c) a Five Percent
Owner of an Employer or any Affiliated Employer, treated separately, or (d) a
1% owner of an Employer or any Affiliated Employer, treated separately, having
Annual Compensation from an Employer or any Affiliated Employer of more than
$150,000.00, as adjusted. For this purpose no more than 50 employees or, if
lesser, the greater of three employees or 10% of the employees shall be treated
as officers. Section 416(i) of the Code shall be used to determine percentage
of ownership. For the purpose of the test set out in (b) above, if two or more
employees have the same interest in an Employer, the employee with the greater
Annual Compensation from the Employer shall be treated as having the larger
interest.
1.35 LIMITATION YEAR" means the year used for purposes of applying the
limitations under section 415 of the Code. The Limitation Year shall be the
Plan Year unless the Employer affirmatively, by resolution, designates another
limitation year.
1.36 "MEMBER" means the person or persons employed by an Employer who are
eligible to participate in this Plan.
1.37 "NON-HIGHLY COMPENSATED EMPLOYEE" means any Employee who is not a
Highly Compensated Employee.
1.38 "NON-KEY EMPLOYEE" means any Employee who is not a Key Employee.
1.39 "PERIOD OF SERVICE" means a period of employment with an Affiliated
Employer which commences on the day on which an Employee performs his initial
Hour of Service or performs his initial Hour of Service upon returning to the
employ of an Affiliated Employer, whichever is applicable, and ends on the date
the Employee Severs Service.
1.40 "PERIOD OF SEVERANCE" means the period of time which commences on the
date an Employee Severs Service and ends on the date the Employee again
performs an Hour of Service.
1.41 "PLAN" means this Plan, including all subsequent amendments.
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1.42 "PLAN YEAR" means the calendar year. The Plan Year shall be the
fiscal year of this Plan.
1.43 "QUALIFIED NONELECTIVE EMPLOYER CONTRIBUTION" means the Employer's
Contribution, if any, made as a means of passing the Actual Deferral Percentage
test or the Contribution Percentage test.
1.44 "REGULATION" means the Internal Revenue Service regulation specified,
as it may be changed from time to time.
1.45 "RETIREMENT AGE" means normally 65 years of age. Once a Member has
attained his Retirement Age he shall be 100% vested at all times.
1.46 "ROLLOVER CONTRIBUTION" means the amount contributed by a Member to
his Account in this Plan which consists of any part or all of an Eligible
Rollover Distribution.
1.47 "SECTION 401(K) CONTRIBUTIONS" means the sum of Salary Deferral
Contributions made on behalf of the Member during the Plan Year and Qualified
Nonelective Employer Contributions that the Employer elects to have treated as
Section 401(k) Contributions pursuant to section 401(k)(3)(D)(ii) of the Code
to the extent that those contributions are not used to enable the Plan to
satisfy the minimum contribution requirements of section 416 of the Code.
1.48 "SECTION 401(M) CONTRIBUTIONS" means the sum of Employer Matching
Contributions and Employee After Tax Contributions made on behalf of the Member
during the Plan Year and Qualified Nonelective Employer Contributions that the
Employer elects to have treated as Section 401(m) Contributions pursuant to
section 401(m)(3)(B) of the Code to the extent that those contributions are not
used to enable the Plan to satisfy the minimum contribution requirements of
section 416 of the Code.
1.49 "SERVICE" means the period or periods that a person is paid or is
entitled to payment for performance of duties with an Affiliated Employer.
1.50 "SEVERS SERVICE" means the earlier of the following events: (a) the
Employee's quitting, retiring, dying or being discharged, (b) the completion of
a period of 365 continuous days in which the Employee remains absent from
Service (with or without pay) for any reason other than quitting, retiring,
dying or being discharged, such as vacation, holiday, sickness, disability,
leave of absence, layoff or any other absence or (c) the second anniversary of
the commencement of a continuous period of absence occasioned by the reason of
the pregnancy of the Employee, the birth of a child of the Employee, the
placement of a child with the Employee in connection with the adoption of the
child by the Employee or the caring for the child for a period commencing
immediately after the child's birth or placement.
1.51 "SPONSOR" means Weatherford International, Inc. or any other
organization which assumes the primary responsibility for maintaining this Plan
with the consent of the last preceding Sponsor.
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<PAGE> 17
1.52 "TOP-HEAVY PLAN" means any plan which has been determined to be
top-heavy under the test described in Article IX of this Plan.
1.53 "TRANSFERRED" means an Employee's termination of employment with one
Employer and his contemporaneous commencement of employment with another
Employer.
1.54 "TRUST" means the one or more trust estates created to fund this
Plan.
1.55 "TRUSTEE" means collectively one or more persons or entities with
trust powers which have been appointed by the initial Sponsor and have accepted
the duties of Trustee and any and all successor or successors appointed by the
Sponsor or successor Sponsor.
1.56 "TRUST FUND" means all of the trust estates established under the
terms of this Plan to fund this Plan, whether held to fund a particular group
of Accounts or held to fund all of the Accounts of Members, collectively.
1.57 USERRA: means the Uniformed Services Employment And Reemployment
Rights Act of 1994 which was enacted on October 13, 1994 as Public Law 103-353
and which amended Chapter 43 of Title 38 of the United States Code.
1.58 "VALUATION DATE" means the day or days each Plan Year selected by the
Committee on which the Trust Fund is to be valued which cannot be less frequent
than annual. One or more Accounts may have different Valuation Dates from
other Accounts. The Valuation Date must be announced to all Members and Former
Members who have Account Balances and shall remain the same until changed by
the Committee and announced to the Members.
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<PAGE> 18
ARTICLE II.
ACTIVE SERVICE
2.1 WHEN ACTIVE SERVICE BEGINS. For purposes of eligibility and vesting,
Active Service begins when an Employee first performs an Hour of Service for an
Affiliated Employer or an employer the stock or assets of which were or are
acquired by an Employer or Affiliated Employer without regard to whether a
predecessor plan was maintained, limited to five years of past service credit.
Once an Employee has begun Active Service for purposes of eligibility or
vesting and Severs Service he shall recommence Active Service for those
purposes when he again performs an Hour of Service for an Affiliated Employer.
2.2 AGGREGATION OF SERVICE. When determining an Employee's Active
Service, all Periods of Service, whether or not completed consecutively, shall
be aggregated on a per day basis. Thirty days shall be counted as one month
and 12 months shall be counted as one year. For purposes of eligibility and
vesting, only full years of Active Service shall be counted, any fractional
year shall be dropped.
2.3 ELIGIBILITY COMPUTATION PERIODS. For the purpose of determining
eligibility and vesting, the initial period shall begin on the day the Employee
first performs an Hour of Service and each future year shall begin on the
anniversary of that date.
2.4 PERIODS OF SERVICE OF LESS THAN ONE YEAR. If an Employee performs an
Hour of Service within 12 months after he Severs Service, the intervening
Period of Severance shall be counted as a Period of Service.
2.5 SERVICE PRIOR TO SEVERANCE. If the Employee was covered by the Plan
or a predecessor qualified plan on December 31, 1984, any Period of Service
occurring before the first Plan Year beginning after that date shall be
disregarded if that Service would have been disregarded under the rules
applicable to breaks in service at that time under the Plan or a predecessor
qualified plan prior to that date. Any Period of Service occurring during or
after the first Plan Year beginning after December 31, 1984 shall be governed
by the following rules. If an Employee Severs Service at a time when he does
not have any vested right to amounts credited to his Employer Matching
Contribution Account or Employer Discretionary Contribution Account and the
Period of Severance continues for a continuous period of five years or more,
the Period of Service completed by the Employee before the Period of Severance
shall not be taken into account if his Period of Severance equals or exceeds
his Period of Service, whether or not consecutive, completed before the Period
of Severance. In addition if a Member incurs a Period of Severance of five
consecutive years, the Members years of Credited Service for vesting completed
after that Period of Severance shall be disregarded in determining the Member's
vested interest in that portion of his Accounts derived from Employer
Contributions on his behalf prior to the Period of Severance.
2.6 SERVICE AFTER SEVERANCE. If an Employee's Period of Severance
continues for a continuous period of five years or more, the Period of Service
completed by the Employee after that
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<PAGE> 19
Period of Severance shall not be taken into account in determining the
Employee's vested interest in amounts contributed to his Employer Matching
Contribution Account, and earnings thereon, attributable to Service before that
Period of Severance.
2.7 PERIODS OF SEVERANCE DUE TO CHILD BIRTH OR ADOPTION. If the period of
time between the first anniversary of the first day of an absence from Service
by reason of the pregnancy of the Employee, the birth of a child of the
Employee, the placement of a child with the Employee in connection with the
adoption of the child by the Employee or for purposes for caring for the child
for a period beginning immediately after the birth or placement and the second
anniversary of the first day of the absence occurs during or after the first
Plan Year beginning after December 31, 1984, it shall neither be counted as a
Period of Service nor of Severance.
2.8 TRANSFERS. If an Employee is Transferred from one Employer to
another, his Active Service shall not be interrupted and he shall continue to
be in Active Service for purposes of eligibility, vesting and allocation of
Contributions and/or forfeitures. If an Employee is transferred to the service
of an Affiliated Employer that has not adopted the Plan he shall not have
Severed Service; however, even though he shall continue to be in Active Service
for eligibility and vesting purposes he shall not receive any allocation of
Contributions or forfeitures.
2.9 EMPLOYMENT RECORDS CONCLUSIVE. The employment records of the Employer
shall be conclusive for all determinations of Active Service.
2.10 COVERAGE OF CERTAIN PREVIOUSLY EXCLUDED EMPLOYEES. Any Employee who
is no longer excludable because he or she is no longer included in a unit of
Employees covered by a collective bargaining agreement between the Employees'
representative and the Employer where retirement benefits were the subject of
good faith bargaining shall immediately become eligible for membership if he
meets the eligibility requirements. All his Service with any Affiliated
Employer that would have been counted had he not been previously excluded shall
now be counted as Active Service for eligibility and vesting purposes.
2.11 MILITARY SERVICE. A Member who leaves the employ of an Employer to
enter the armed services of the United States and is covered by USERRA shall
not be deemed to have broken his continuous employment if he is reemployed
under USERRA. And, the Member shall be awarded Active Service upon
reemployment for each period served by him in the uniformed services for
eligibility, vesting and benefit accrual purposes.
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<PAGE> 20
ARTICLE III.
ELIGIBILITY RULES
3.1 ELIGIBILITY REQUIREMENTS. Except as otherwise provided for in this
Plan, each Employee shall be eligible to participate in this Plan beginning on
the first day the Employee completes an Hour of Service. However, no Employee
shall be eligible to participate in this Plan for purposes of sharing in
Employer Matching Contributions or Employer Discretionary Contributions until
the first day he completes one year of Active Service. An Employee employed as
a temporary or part-time employee shall not be eligible to commence
participation in the Plan until the first day the temporary or part-time
employee completes one year of Active Service. A "temporary" or "part-time"
Employee (as defined by the Committee) is an Employee who is not expected to be
credited with one year of Active Service commencing on his first day of
employment. Employees who are included in a unit of Employees covered by a
collective bargaining agreement between the Employees' representative and the
Employer, shall be excluded, even if they have met the requirements for
eligibility, if there has been good faith bargaining between the Employer and
the Employees' representative pertaining to retirement benefits and the
agreement does not require the Employer to include such Employees in this Plan.
In addition, any Employee who is a non-resident alien with no United States
source income or an individual participating in a retirement plan maintained by
the Employer or an Affiliated Employer outside the United States shall likewise
be ineligible to participate in the Plan.
3.2 ELIGIBILITY UPON REEMPLOYMENT. If an Employee Severs Service with the
Employer for any reason after fulfilling the eligibility requirements but prior
to the date he initially begins participating in the Plan, the Employee shall
be eligible to begin participation in this Plan on the day he first completes
an Hour of Service upon his return to employment with an Employer. Once an
Employee has become eligible to be a Member, his eligibility shall continue
until he Severs Service. A former Member shall be eligible to recommence
participation in this Plan on the first day he completes an Hour of Service
upon his return to employment with an Employer.
3.3 FROZEN PARTICIPATION. An employee employed by an Affiliated Employer,
which has not adopted this Plan, cannot actively participate in this Plan even
though he accrues Active Service. Likewise, if an Employee: (a) is
transferred from an Employer to an Affiliated Employer which has not adopted
this Plan, (b) is a Member of this Plan when he is excluded from this Plan
because he becomes excluded under the provisions of a collective bargaining
agreement or because he becomes a leased employee or an independent contractor
and he has not had a complete termination of his contractual relationship with
all Affiliated Employers, (c) is a non-resident alien with no United States
source income, (d) participates in a retirement plan maintained by the Employer
or an Affiliated Employer outside the United States, or (e) is a Member of the
Plan when he is employed outside the United States and is not designated by the
Committee to continue to be eligible to participate, his participation becomes
inactive. Under these circumstances, the Member's Account becomes frozen: he
cannot contribute to the Plan nor can he share in the allocation of any
Employer Contribution or forfeitures for the frozen period. However, his
Accounts shall continue to share in any appreciation or depreciation of the
Trust Fund and in any income earned or losses incurred by
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<PAGE> 21
the Trust Fund during the frozen period of time. Once the contract or
contracts of an independent contractor, who has a frozen Account, have expired
with all Affiliated Employers in a good-faith and complete termination of the
contractual relationship and no renewal is expected or once an employee who has
a frozen Account terminates his employment with all Affiliated Employers, he
shall have Severed Service for purposes of distribution of benefits.
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<PAGE> 22
ARTICLE IV.
CONTRIBUTIONS AND THEIR LIMITATIONS
PART A. CONTRIBUTIONS
4.1 EMPLOYEE AFTER TAX CONTRIBUTIONS. The Committee may permit Employee
After Tax Contributions to be made by Members from time to time. If the
Committee permits Contributions by Members, the opportunity must be made
available to all Members on a nondiscriminatory basis. If the Committee
decides to stop all Contributions by Members, the Contributions to the
effective date of the announcement shall be retained in the Trust Fund subject
to the right of withdrawal described under this Plan.
Employee After Tax Contributions are limited to an amount which, when
added to the other amounts required to be taken into consideration, will not
exceed the limit set by section 415 of the Code and will meet the Contribution
Percentage test described in section 401(m) of the Code.
Changes in the rate of Employee After Tax Contributions and suspension of
those Contributions shall be permitted under any uniform method determined from
time to time by the Committee.
4.2 ROLLOVER CONTRIBUTIONS AND DIRECT TRANSFERS. The Committee may permit
Rollover Contributions by Members and/or direct transfers to or from another
qualified plan on behalf of Members from time to time. If Rollover
Contributions and/or direct transfers to or from another qualified plan are
permitted, the opportunity to make those Contributions must be made available
to all Members on a nondiscriminatory basis. For this purpose, all Employees
of an Employer who are in a classification which may participate in this Plan
shall be considered to be Members of the Plan even though they may not have met
the eligibility requirements. However, they shall not be entitled to elect to
have Salary Deferral Contributions or Employee After Tax Contributions or share
in any Employer Contribution unless and until they have met the requirements
for eligibility and allocation.
A Rollover Contribution shall not be accepted unless it is directly rolled
over to this Plan in a roll over described in section 401(a)(31) of the Code
and the property is acceptable to the Trustee. A direct transfer of assets
from another qualified plan in a transfer subject to the requirements of
section 414(l) of the Code shall not be accepted if it was at any time part of
the plan which contained a right, feature or benefit not contained in this Plan
unless the Committee, in its sole discretion, agrees to continue to provide
that right, feature or benefit to that portion of the Member's Account.
Rollover Contributions shall have no effect upon the amount permitted to
be allocated to a Member's Account under section 415 of the Code, or the amount
contributed to the Plan by a Member under Section 4.1.
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<PAGE> 23
4.3 SALARY DEFERRAL CONTRIBUTIONS. Each Employer shall contribute for
each Plan Year the amount by which the Member's Considered Compensation is
reduced as a result of a salary deferral agreement, not to exceed 16% of the
amount of the Member's Considered Compensation for the Plan Year less the
amount of the Member's Employee After Tax Contribution, if any, as set by the
Committee from time to time in a nondiscriminatory manner and announced to the
Members.
The election to have Salary Deferral Contributions made, the ability to
change the rate of Salary Deferral Contributions, the right to suspend Salary
Deferral Contributions, and the manner of commencing new Salary Deferral
Contributions shall be permitted under any uniform method determined from time
to time by the Committee.
4.4 EMPLOYER MATCHING CONTRIBUTIONS. Each Employer shall contribute for
each Plan Year an amount, in cash or in common stock of the Sponsor (the number
of shares to be determined using the closing sales price on the business day
preceding the day of the contribution), at the sole discretion of the Board of
Directors, equal to 50% of the Salary Deferral Contribution (modified to
exclude those items in the second sentence of Section 1.15 of the Plan) made by
each Member after the date he completes one year of Active Service, but not
more than 6% of the Member's Considered Compensation.
4.5 EMPLOYER DISCRETIONARY CONTRIBUTIONS. Each Employer shall contribute
for each Plan Year an amount, if any, in cash or in common stock of the Sponsor
(the number of shares to be determined using the closing sales price on the
business day preceding the day of the contribution), at the sole discretion of
the Board of Directors, which is designated by the Board of Directors to be the
Employer Discretionary Contribution for the Plan Year.
4.6 RESTORATION CONTRIBUTIONS. Each Employer shall contribute for each
Plan Year an amount, which when added to previously unapplied and unallocated
forfeitures, shall equal the amounts which were not vested and therefore
forfeited by Members who have previously terminated but who have now become
entitled to have their forfeited amounts restored plus an amount equal to the
value of all forfeited benefits for Members who formerly could not be located,
but have now filed a claim.
4.7 EXCLUDED MEMBERS. The Sponsor shall contribute an amount determined
by the Sponsor if at any time it discovers one or more Employees have been
erroneously excluded from participation or a clerical error has caused one or
more Members to not be credited with his or their proper allocation of Employer
Contributions. The amount of the contribution will equal (i) the average
deferral percentage for the employee's compensation group (either highly
compensated or nonhighly compensated), (ii) an amount that would have been
allocated to such excluded Employee or Member as a matching contribution based
on the amount contributed in (i) above if such contribution was otherwise made,
and (iii) an amount that would have been allocated to such excluded Employee or
Member as an Employer Discretionary Contribution, if such a contribution was
otherwise made. Any amount contributed under (i) of this provision will be
deemed a "qualified nonelective contribution" under Section 1.401(k)-1(g)(7) of
the Regulations and is subject to all conditions required by the Regulations in
order for them to be used in the Actual Deferral Percentage
IV-2
<PAGE> 24
test. Amounts contributed under (ii) and (iii) of this provision are subject
to the vesting schedule set forth in Section 6.5.
4.8 QUALIFIED NONELECTIVE EMPLOYER CONTRIBUTION. Each Employer concerned
shall contribute for a given Plan Year an amount, if any, which is designated
by the Board of Directors to be the Qualified Nonelective Employer Contribution
for the Plan Year.
A Member's right to benefits derived from Qualified Nonelective Employer
Contributions made to the Plan on his behalf shall be nonforfeitable. In no
event will Qualified Nonelective Employer Contributions be distributed before
Salary Deferral Contributions may be distributed.
4.9 TOP-HEAVY CONTRIBUTION. Each Employer concerned shall contribute for
a given Plan Year an amount which is equal to the amount, if any, necessary to
fulfill the Top-Heavy Plan requirements found in Article IX if the Plan is
determined to be a Top-Heavy Plan.
4.10 CONTRIBUTIONS REQUIRED ON RETURN FROM MILITARY SERVICE. If a Member
leaves the employ of an Employer to enter the armed services of the United
States and is covered by USERRA and is reemployed under USERRA, the Employer
shall make a contribution equal to the amount of the Employer Discretionary
Contributions which would have been allocated to the Member's Account if he had
remained in the employ of the Employer for the period of time he was covered by
USERRA. In addition, the Member may make additional "catch up" Salary Deferral
Contributions during a period beginning on his date of reemployment and ending
on the earlier of (a) three times the period of his qualified military service
and (b) five years equal to the maximum amount he could have made and the
Employer must make the appropriate Employer Matching Contributions. The
Employer shall not make any contribution for lost earnings or failure to share
in forfeitures.
4.11 DEADLINE FOR PAYMENT OF CONTRIBUTIONS. The Employee After Tax
Contributions and the Salary Deferral Contributions are to be paid to the
Trustee in installments. The installment for each payroll period is to be paid
as of the end of the payroll period and shall be paid as soon as
administratively feasible but in any event not later than the time prescribed
by law for filing the Employer's federal income tax return (including
extensions) for its taxable year which ends with or next follows the end of the
Plan Year for which the Contribution is to be made. The Employer's
Contribution for a Plan Year must be paid into the Trust Fund in one or more
installments not later than the time prescribed by law for filing the
Employer's federal income tax return (including extensions) for its taxable
year for which it is to take the deduction. If the Contribution is paid after
the last day of the Employer's taxable year but prior to the date it files its
tax return (including extensions), it shall be treated as being received by the
Trustee on the last day of the taxable year if (a) the Employer notifies the
Trustee in writing that the payment is being made for that taxable year or (b)
the Employer claims the Contribution as a deduction on its federal income tax
return for the taxable year.
PART B. LIMITATIONS APPLICABLE TO CONTRIBUTIONS
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<PAGE> 25
4.12 LIMITATIONS BASED UPON DEDUCTIBILITY AND THE MAXIMUM ALLOCATION
PERMITTED TO A MEMBER'S ACCOUNT. Notwithstanding any other provision of this
Plan, no Employer shall make any contribution that would be a nondeductible
contribution within the meaning of section 4972 of the Code or that would cause
the limitation on allocations to each Member's Account within the meaning of
section 415 of the Code to be exceeded. For a further description of the
limitation on allocations and the corrections permitted, see Part B of Article
V.
4.13 DOLLAR LIMITATION ON SALARY DEFERRAL CONTRIBUTIONS. The maximum
Salary Deferral Contribution that a Member may elect to have made on his behalf
during the Member's taxable year may not, when added to the amounts deferred
under other plans or arrangements described in sections 401(k), 408(k) and
403(b) of the Code exceed $10,000 (as adjusted by the Secretary of Treasury).
For purposes of applying the requirements of Section 4.13 and Article IX,
Excess Deferrals shall not be disregarded merely because they are Excess
Deferrals or because they are distributed in accordance with this Section.
However, Excess Deferrals made to the Plan on behalf of Non-Highly Compensated
Employees are not to be taken into account under Section 4.13.
4.14 LIMITATION BASED UPON ACTUAL DEFERRAL PERCENTAGE. The Actual
Deferral Percentage for eligible Highly Compensated Employees for any Plan Year
must bear a relationship to the Actual Deferral Percentage for all other
eligible Employees for the preceding Plan Year which meets either of the
following tests:
(a) the Actual Deferral Percentage of the eligible Highly
Compensated Employees is not more than the Actual Deferral Percentage of
all other eligible Employees multiplied by 1.25; or
(b) the excess of the Actual Deferral Percentage of the eligible
Highly Compensated Employees over that of all other eligible Employees is
not more than two percentage points, and the Actual Deferral Percentage
of the eligible Highly Compensated Employees is not more than the Actual
Deferral Percentage of all other eligible Employees multiplied by two.
For the initial Plan Year of this Plan and for the initial Plan Year of
any Employer which adopts this Plan as its separate plan, the amount taken into
account as the Actual Deferral Percentage of Non-highly Compensated Employees
for the preceding Plan Year shall be (a) three percent or (b) if the Employer
makes an election under this subclause (b), the Actual Deferral Percentage of
Non-highly Compensated Employees for the first Plan year.
For purposes of this test an eligible Employee is an Employee who is
directly or indirectly eligible to make Salary Deferral Contributions for all
or part of the Plan Year. A person who is suspended from making Salary
Deferral Contributions because he has made a withdrawal is an eligible
Employee. If no Salary Deferral Contributions are made for an eligible
Employee, the Actual Deferral Ratio that shall be included for him in
determining the Actual Deferral Percentage is zero.
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<PAGE> 26
If this Plan and any other plan or plans which include cash or deferred
arrangements are considered as one plan for purposes of section 401(a)(4) or
410(b) of the Code, the cash or deferred arrangements included in this Plan and
the other plans shall be treated as one plan for these tests. If any Highly
Compensated Employee is a Member of this Plan and any other cash or deferred
arrangements of the Employer, when determining the deferral percentage of the
Employee, all of the cash or deferred arrangements are treated as one. If the
Employer elects to apply section 410(b)(4)(B) of the Code in determining
whether the Plan meets the requirements of section 401(k)(3)(A)(i) of the Code,
the Employer may, in determining whether the arrangement meets the requirements
of section 401(k)(3)(A)(ii), exclude from consideration all eligible Employees
(other than Highly Compensated Employees) who are not 21 years of age or have
not completed one year of Active Service by the end of the Plan Year.
The Actual Deferral Percentages are to be calculated and the provisions of
this Section are to be applied, separately, for each Employer which constitutes
a separate controlled group or affiliated service group.
A Salary Deferral Contribution will be taken into account under the Actual
Deferral Percentage test of Code section 401(k) and this Section for a Plan
Year only if it relates to Annual Compensation that either would have been
received by the Employee in the Plan Year (but for the deferral election) or is
attributable to services performed by the employee in the Plan Year and would
have been received by the Employee within 2 1/2 months after the close of the
Plan Year (but for the deferral election). In addition, a Section 401(k)
Contribution will be taken into account under the Actual Deferral Percentage
test of Code section 401(k) and this Section for a Plan Year only if it is
allocated to an Employee as of a date within that Plan Year. For this purpose
of a Section 401(k) Contribution is considered allocated as of a date within a
Plan Year if the allocation is not contingent on participation or performance
of services after that date and the Section 401(k) Contribution is actually
paid to the Trust no later than 12 months after the Plan Year to which the
Section 401(k) Contribution relates.
Failure to correct Excess 401(k) Contributions by the close of the Plan
Year following the Plan Year for which they were made will cause the Plan's
cash or deferred arrangement to be disqualified for the Plan Year for which the
Excess 401(k) Contributions were made and for all subsequent years during which
they remain in the Trust. Also, the Employer will be liable for a 10% excise
tax on the amount of Excess 401(k) Contributions unless they are corrected
within 2 1/2 months after the close of the Plan Year for which they were made.
4.15 LIMITATION BASED UPON CONTRIBUTION PERCENTAGE. The Contribution
Percentage for eligible Highly Compensated Employees for any Plan Year must not
exceed the greater of the following:
(a) the Contribution Percentage for all other eligible Employees for
the preceding Plan Year multiplied by 1.25; or
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<PAGE> 27
(b) the lesser of the Contribution Percentage for all other eligible
Employees for the preceding Plan Year multiplied by two, or the
Contribution Percentage for all other eligible Employees for the
preceding Plan Year plus two percentage points.
For the initial Plan Year of this Plan and for the initial Plan Year of
any Employer which adopts this Plan as its separate plan, the amount taken into
account as the Contribution Percentage of Non-highly Compensated Employees for
the preceding Plan Year shall be (a) three percent or (b) if the Employer makes
an election under this subclause (b), the Contribution Percentage of Non-highly
Compensated Employees for the first Plan Year.
For purposes of this test an eligible Employee is an Employee who is
directly or indirectly eligible to make Employee After Tax Contributions or to
receive an allocation of Employer Matching Contributions under the Plan for all
or part of the Plan Year. A person who is suspended from making Employee After
Tax Contributions because he has made a withdrawal, a person who would be
eligible to receive an allocation of Employer Matching Contributions but for
his election not to participate, and a person who would be eligible to receive
an allocation of Employer Matching Contributions but for the limitation on his
Annual Additions imposed by section 415 of the Code, are all eligible
Employees.
If no Section 401(m) Contributions are made on behalf of an eligible
Employee, the Actual Contribution Ratio that shall be included for him in
determining the Contribution Percentage is zero. If this Plan and any other
plan or plans to which Section 401(m) Contributions are made are considered as
one plan for purposes of section 401(a)(4) or 410(b) of the Code, this Plan and
those plans are to be treated as one. The Actual Contribution Ratio of a
Highly Compensated Employee who is eligible to participate in more than one
plan of an Affiliated Employer to which employee or matching contributions are
made is calculated by treating all the plans in which the Employee is eligible
to participate as one plan. However, plans that are not permitted to be
aggregated under Regulation section 1.410(m)-1(b)(3)(ii) are not aggregated for
this purpose.
A Matching Employer Contribution will be taken into account under this
Section for a Plan Year only if (a) it is allocated to the Employee's Account
as of a date within the Plan Year, (b) it is paid to the Trust no later than
the end of the 12 month period beginning after the close of the Plan Year, and
(c) it is made on behalf of an Employee on account of his Salary Deferral
Contributions for the Plan Year.
If the Employer elects to apply section 410(b)(4)(B) of the Code in
determining whether the Plan meets the requirements of section 410(b) of the
Code, the Employer may, in determining whether the arrangement meets the
requirements of section 401(m)(2) of the Code exclude from consideration all
eligible Employees (other than Highly Compensated Employees) who are not 21
years of age or have not completed one year of Active Service by the end of the
Plan Year.
The Contribution Percentage shall be calculated and the provisions of this
Section applied, separately, for each Employer which constitutes a separate
controlled group or affiliated service group.
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<PAGE> 28
At the election of the Employer, a Member's Salary Deferral Contributions,
and Qualified Nonelective Employer Contributions made on behalf of the Member
during the Plan Year shall be treated as Section 401(m) Contributions that are
Employer Matching Contributions provided that the conditions set forth in
Regulation section 1.401(m)-1(b)(5) are satisfied. Salary Deferral
Contributions may not be treated as Employer Matching Contributions for
purposes of the Contribution Percentage test unless the contributions,
including those taken into account for purposes of the test, satisfy the Actual
Deferral Percentage test set forth in Section 4.13. Salary Deferral
Contributions and Qualified Nonelective Employer Contributions may not be taken
into account for purposes of the test to the extent that those contributions
are taken into account in determining whether any other contributions satisfy
the Actual Deferral Percentage test set forth in Section 4.13. Finally, Salary
Deferral Contributions and Qualified Nonelective Employer Contributions may be
taken into account for purposes of the test only if they are allocated to the
Employee's Account as of a date within the Plan Year being tested within the
meaning of Regulation section 1.401(k)-1(b)(4).
Failure to correct Excess Aggregate 401(m) Contributions by the close of
the Plan Year following the Plan Year for which they were made will cause the
Plan to fail to be qualified for the Plan Year for which the Excess Aggregate
401(m) Contributions were made and for all subsequent years during which they
remain in the Trust. Also, the Employer will be liable for a 10% excise tax on
the amount of Excess Aggregate 401(m) Contributions unless they are corrected
within 2 1/2 months after the close of the Plan Year for which they were made.
4.16 ALTERNATIVE LIMITATION BASED UPON ACTUAL DEFERRAL PERCENTAGE AND
CONTRIBUTION PERCENTAGE. If the second alternative permitted in Sections 4.13
and 4.14 is used for both the Actual Deferral Percentage test and the
Contribution Percentage test the following additional limitation on Salary
Deferral Contributions shall apply. The Actual Deferral Percentage plus the
Contribution Percentage of the eligible Highly Compensated Employees cannot
exceed the greater of (a) or (b), where:
(a) is the sum of:
(i) 1.25 times the greater of the Actual Deferral Percentage
or the Contribution Percentage of the eligible Non-Highly
Compensated Employees for the preceding Plan Year, and
(ii) the lesser of (x) two percentage points plus the lesser
of the Actual Deferral Percentage or the Contribution Percentage of
the eligible Non-Highly Compensated Employees for the preceding
Plan Year or (y) two times the lesser of the Actual Deferral
Percentage or the Contribution Percentage of the group of eligible
Non-Highly Compensated Employees for the preceding Plan Year, and
(b) is the sum of:
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<PAGE> 29
(i) 1.25 times the lesser of the Actual Deferral Percentage or
the Contribution Percentage of the eligible Non-Highly Compensated
Employees for the preceding Plan Year, and
(ii) the lesser of (x) two percentage points plus the greater
of the Actual Deferral Percentage or the Contribution Percentage of
the eligible Non-Highly Compensated Employees for the preceding
Plan Year or (y) two times the greater of the Actual Deferral
Percentage or the Contribution Percentage of the group of eligible
Non-Highly Compensated Employees for the preceding Plan Year.
PART C. CORRECTION PROCEDURES FOR ERRONEOUS CONTRIBUTIONS
4.17 EXCESS DEFERRAL FAIL SAFE. As soon as practical after the close of
each Plan Year, the Committee shall determine if there would be any Excess
Deferrals. If there would be an Excess Deferral by a Member, the Excess
Deferral as adjusted by any earnings or losses, will be distributed to the
Member no later than April 15 following the Member's taxable year in which the
Excess Deferral was made. The income allocable to the Excess Deferrals for the
taxable year of the Member shall be determined by any reasonable method for
computing the income allocable to Excess Deferrals, provided that the method
does not violate section 401(a)(4) of the Code, is used consistently for all
Members and for all corrective distributions under the Plan for the Plan Year,
and is used by the Plan for allocating income to Members' accounts.
4.18 ACTUAL DEFERRAL PERCENTAGE FAIL SAFE FOR PLAN YEARS BEGINNING AFTER
DECEMBER 31, 1996. As soon as practicable after the close of each Plan Year,
the Committee shall determine whether the Actual Deferral Percentage for the
Highly Compensated Employees would exceed the limitation. If the limitation
would be exceeded for a Plan Year, before the close of the following Plan Year
(a) the amount of Excess 401(k) Contributions for that Plan Year (and any
income allocable to those Contributions as calculated in the specific manner
required by Section 4.20) shall be distributed, or (b) to the extent provided
in regulations issued by the Secretary of the Treasury, and permitted by the
Committee, the Employee may elect to treat the amount of the Excess 401(k)
Contributions as an amount distributed to the Employee and then contributed by
the Employee to the Plan as an Employee After Tax Contribution, provided the
recharacterized amounts shall remain subject to the same rules and restrictions
to which the Salary Deferral Contributions are subjected, or (c) the Employer
may make a Qualified Nonelective Employer Contribution which it elects to have
treated as a Section 401(k) Contribution.
The amount of Excess 401(k) Contributions to be distributed shall be that
amount of the Salary Deferral Contributions by or on behalf of those Highly
Compensated Employees with the largest Salary Deferral Contributions as is
equal to the Excess 401(k) Contributions, taken ratably from each Account,
based solely on those Salary Deferral Contributions for the Plan Year. This
initial distribution shall not reduce those Accounts affected below the next
highest level of Salary Deferral Contributions. If any further reduction is
necessary the same process is to be repeated at the next highest level of
Salary Deferral Contributions by or on behalf of the Highly Compensated
Employees, and if necessary repeated in successively lower levels of Salary
Deferral Contributions until the cash or deferred arrangement satisfies the
Actual Deferral Percentage test.
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<PAGE> 30
Qualified Nonelective Employer Contributions shall be treated as Section
401(k) Contributions only if: (a) the conditions described in Regulation
section 1.401(k)-1(b)(5) are satisfied and (b) they are allocated to Members'
Accounts as of a date within that Plan Year and are actually paid to the Trust
no later than the end of the 12 month period immediately following the Plan
Year to which the contributions relate. If the Employer makes a Qualified
Nonelective Employer Contribution that it elects to have treated as a Section
401(k) Contribution, the Contribution will be in an amount necessary to satisfy
the Actual Deferral Percentage test and will be allocated first to those
Non-Highly Compensated Employees who had the lowest Actual Deferral Ratio. The
Excess 401(k) Contributions of Highly Compensated Employees will not be
recharacterized to the extent that the recharacterized amounts would exceed the
Contribution Percentage as determined prior to applying the Contribution
Percentage limitations.
Excess 401(k) Contributions may not be recharacterized after 2 1/2 months
after the close of the Plan Year to which the recharacterization relates. The
amount of recharacterized Excess 401(k) Contributions, in combination with
Employee After Tax Contributions actually made by the Member, may not exceed
the maximum amount of Employee After Tax Contributions (determined without
regard to Section 4.14) that the Member could have made under the provisions of
the Plan in effect on the first day of the Plan Year in the absence of
recharacterization. Any distributions of the Excess 401(k) Contributions for
any Plan Year are to be made to Highly Compensated Employees on the basis of
the amount of contributions by, or on behalf of, each Highly Compensated
Employee. The amount of Excess 401(k) Contributions to be distributed or
recharacterized for any Plan Year must be reduced by any excess Salary Deferral
Contributions previously distributed for the taxable year ending in the same
Plan Year.
4.19 CONTRIBUTION PERCENTAGE FAIL SAFE FOR PLAN YEARS BEGINNING AFTER
DECEMBER 31, 1996. If the limitation would be exceeded for any Plan Year,
before the close of the following Plan Year any one or more of the following
corrective actions shall be taken, as determined by the Committee in its sole
discretion: (a) the amount of the Excess Aggregate 401(m) Contributions for
that Plan Year (and any income allocable to those Contributions as calculated
in the specific manner required by Section 4.20) shall be distributed or
forfeited (to the extent not vested), or (b) the Employer may make a Qualified
Nonelective Employer Contribution which it elects to have treated as a Section
401(m) Contribution. Any distributions of the Excess Aggregate 401(m)
Contributions for any Plan Year are to be made to Highly Compensated Employees
on the basis of the respective portions of the amounts attributable to each of
them. Forfeitures of Excess Aggregate 401(m) Contributions may not be
allocated to Members whose contributions are reduced under this Section.
4.20 ALTERNATIVE LIMITATION FAIL SAFE. As soon as practicable after the
close of each Plan Year, the Committee shall determine whether the alternative
limitation would be exceeded. If the limitation would be exceeded for any Plan
Year, before the close of the following Plan Year the Actual Deferral
Percentage or Contribution Percentage of the eligible Highly Compensated
Employees, or a combination of both, shall be reduced by distributions made in
the manner described in the Regulations. These distributions shall be in
addition to and not in lieu of distributions required for Excess 401(k)
Contributions and Excess Aggregate 401(m) Contributions.
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<PAGE> 31
4.21 INCOME ALLOCABLE TO EXCESS 401(K) AND AGGREGATE 401(M) CONTRIBUTIONS.
The income allocable to Excess 401(k) Contributions and Excess Aggregate
401(m) Contributions for the Plan Year shall be determined by any reasonable
method for computing the income allocable to Excess 401(k) Contributions and
Excess Aggregate 401(m) Contributions, provided that the method does not
violate section 401(a)(4) of the Code, is used consistently for all Members and
for all corrective distributions under the Plan.
4.22 RETURN OF CONTRIBUTIONS FOR MISTAKE, DISQUALIFICATION OR DISALLOWANCE
OF DEDUCTION. Subject to the limitations of section 415 of the Code, the
assets of the Trust shall not revert to any Employer or be used for any purpose
other than the exclusive benefit of the Members and their Beneficiaries and the
reasonable expenses of administering the Plan except:
(a) any Contribution made because of a mistake of fact shall be
repaid to the Employer within one year after the payment of the
Contribution;
(b) any Contribution conditioned upon the Plan's initial
qualification under section 401 of the Code or the initial qualification
of an Employer's adoption of the Plan, if later, shall be repaid to the
Employer within one year after the date of denial of the initial
qualification of the Plan or of its adoption by the Employer; and
(c) any and all Employer Contributions are conditioned upon their
deductibility under section 404 of the Code; therefore, to the extent the
deduction is disallowed, the Contributions shall be repaid to the
Employer within one year after the disallowance.
The Employer has the exclusive right to determine if a Contribution or any
part of it is to be repaid or is to remain as a part of the Trust Fund except
that the amount to be repaid is limited, if the Contribution is made by mistake
of fact or if the deduction for the Contribution is disallowed, to the excess
of the amount contributed over the amount that would have been contributed had
there been no mistake or over the amount disallowed. Earnings which are
attributable to any excess contribution cannot be repaid. Losses attributable
to an excess contribution must reduce the amount that may be repaid. All
repayments of mistaken Contributions or Contributions which are disallowed are
limited so that the balance in a Member's Account cannot be reduced to less
than the balance that would have been in the Member's Account had the mistaken
amount or the amount disallowed never been contributed.
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<PAGE> 32
ARTICLE V.
PARTICIPATION
PART A. ALLOCATIONS
5.1 ALLOCATION OF EMPLOYEE CONTRIBUTIONS. The Committee shall allocate
each Member's Employee After Tax Contributions made on his behalf to his
Employee After Tax Contribution Account as of the date they are contributed.
5.2 ALLOCATION OF ROLLOVER CONTRIBUTIONS AND DIRECT TRANSFERS. If
Rollover Contributions and/or direct transfers are permitted, the Committee
shall allocate each Member's Rollover Contribution and/or direct transfers to
his Rollover Account as of the date it is contributed or transferred.
5.3 ALLOCATION OF SALARY DEFERRAL CONTRIBUTIONS. The Committee shall
allocate the Salary Deferral Contributions, if any, made on behalf of each
Member to his Salary Deferral Contribution Account, as of the date they are
contributed.
5.4 ALLOCATION OF EMPLOYER MATCHING CONTRIBUTIONS. The Committee shall,
as of the end of each month, allocate the Employer Matching Contributions made
on behalf of each Member to his Employer Matching Contribution Account if the
Member has completed one year of Active Service credit.
5.5 ALLOCATION OF EMPLOYER DISCRETIONARY CONTRIBUTIONS. The Committee
shall, as of the end of each Plan Year, allocate the Employer Discretionary
Contribution, if any, among the Members who have completed one year of Active
Service and who are employed by one of the Employers or Affiliated Employers at
the end of the Plan Year and are employed at the time that the Contribution is
made based upon each Member's Considered Compensation paid by the Employer as
compared to the Considered Compensation of all Members employed by the Employer
or Affiliated Employer and eligible for the allocation; provided, however, for
this purpose, Considered Compensation shall be each Member's annualized
Considered Compensation as determined on the date for which the Employer
Discretionary Contribution is actually contributed to the Plan.
5.6 ALLOCATION OF RESTORATION CONTRIBUTIONS. The Committee shall, as of
the end of each Plan Year, allocate the previously unapplied and unallocated
forfeitures and the Employer Contribution, if any, which are required to
restore the nonvested portion of the Employer Accounts of Members who had
previously forfeited that nonvested portion on the date they terminated
employment but who qualified for the restoration of that amount during the Plan
Year and allocate the previously unapplied and unallocated forfeitures and the
Employer Contribution, if any, which are required to restore the Accounts of
those Members whose distributions were forfeited because of the Committee's
inability to contact the Members previously but who have filed a claim for
their Accounts during the Plan Year. The Committee shall establish and
maintain a separate subaccount for the amount allocated to an Account in order
to restore a previously forfeited amount.
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<PAGE> 33
5.7 ALLOCATION OF CONTRIBUTION TO EXCLUDED MEMBERS. The Sponsor shall
allocate the Employer Contribution, if any, made on behalf of any one or more
Members to correct an error as to qualification for participation or in
Contributions, allocations or distributions to the persons concerned and in the
amount necessary to correct the error.
5.8 ALLOCATION OF QUALIFIED NONELECTIVE EMPLOYER CONTRIBUTIONS. The
Committee shall, as of the end of the Plan Year, allocate the Qualified
Nonelective Employer Contribution, if any, among the Non-Highly Compensated
Employees as set forth in Section 4.17 or 4.18, whichever is applicable.
5.9 ALLOCATION OF TOP-HEAVY CONTRIBUTIONS. The Committee shall, as of the
end of the Plan Year, allocate the Employer Contribution, if any, which is
necessary to fulfill the Top-Heavy Plan requirements found in Article IX if the
Plan is determined to be a Top-Heavy Plan.
5.10 EFFECT OF TRANSFERS UPON ALLOCATIONS. If a Member has been
Transferred during the Plan Year, the Member shall be entitled to have
allocated to him a portion of the Employer Matching Contribution based upon his
Salary Deferral Contributions made while he was an Employee of each Employer
and the Employer Discretionary Contribution based upon his Considered
Compensation for the Plan Year earned from all of the Employers for which an
Employer Discretionary Contribution was made.
5.11 APPLICATION OF FORFEITURES. Amounts forfeited for any reason shall
first be allocated under Section 5.6 to restore previously forfeited Accounts
which are to be restored under the terms of this Plan and if any amount remains
after that allocation, it shall be used to reduce the future Employer Matching
Contributions.
5.12 SCHEDULED ALLOCATION OF INCOME OR LOSSES AND APPRECIATION OR
DEPRECIATION. The Trustee shall value the Trust Fund on its Valuation Date at
its then fair market value, but without regard to any Contributions made to the
Plan after the preceding Valuation Date, shall determine the amount of income
earned or losses suffered by the Trust Fund and shall determine the
appreciation or depreciation of the Trust Fund since the preceding Valuation
Date. The Committee shall then allocate as of the Valuation Date the income
earned or losses suffered and the appreciation or depreciation in the assets of
the Trust Fund for the period since the last preceding Valuation Date. The
allocation shall be among the Members and former Members who have undistributed
Account balances based upon their Account balances in each of the various
investment funds or accounts, if more than one, as of the last Valuation Date
reduced, as appropriate, by amounts used from the investment fund or account to
make a withdrawal or distribution or any other transaction which is properly
chargeable to the Member's Account during the period since the last Valuation
Date. The Committee, by resolution, may elect in lieu of the allocation method
described above to use a unit allocation method, a separate account method or
any other equitable method if it announces the method of allocation to the
Members prior to the beginning of the period during which it is first used.
5.13 INTERIM ALLOCATION OF INCOME OR LOSSES AND APPRECIATION OR
DEPRECIATION. If at any time in the interval between Valuation Dates, one or
more withdrawals or one or more distributions are to be made and the Committee
determines that an interim allocation is necessary
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to prevent discrimination against those Members and former Members who are not
receiving funds, the Trustee is to perform a valuation of a portion or all of
the Trust Fund as of a date selected by the Committee which is administratively
practical and near the date of withdrawals or distributions in the same manner
as it would if it were a scheduled Valuation Date. That date may be before or
after any particular distribution or withdrawal. The Committee shall then
allocate as of that date any income or loss and any appreciation or
depreciation to the various Accounts of each of the Members in the same manner
as it would if it were a scheduled Valuation Date. Then without regard to the
language in Section 6.1, all withdrawals or distributions made after that date
and prior to the next Valuation Date, even though the event causing it occurred
earlier, shall be based upon the Accounts as adjusted by the interim valuation.
PART B. LIMITATION ALLOCATIONS
The Annual Additions that may be credited to an individual Member's
Accounts under this Plan and any other qualified defined contribution plan
maintained by an Affiliated Employer for a Limitation Year shall not exceed the
lesser of (a) $30,000.00 (as adjusted by the Secretary of Treasury), or (b) 25%
of the Member's Annual Compensation for the Limitation Year. The Plan will be
operated in compliance with section 415 of the Code and its Regulations, the
terms of which are incorporated in this Plan. Thus, if the Employer maintains
a defined benefit plan in which the Member participates, the combined limits
provided in section 415(e) apply through December 31, 1999.
If Annual Additions are made in excess of the limitations contained in
this Part B, to the maximum extent permitted by law, those excess Annual
Additions shall be attributed to this Plan.
If an excess Annual Addition attributed to this Plan is held or
contributed as a result of the application of forfeitures, reasonable error in
estimating a Member's Annual Compensation, reasonable error in calculating the
maximum Salary Deferral Contribution that may be made for a Member under
section 415 of the Code or because of other facts and circumstances which the
Commissioner of Internal Revenue finds to be justified, the excess Annual
Addition shall be corrected as follows:
(a) first, the excess Annual Addition shall be reduced to the extent
necessary by distributing to the Member all Employee After Tax
Contributions, if any, and then Salary Deferral Contributions together
with their earnings. These distributed amounts are disregarded for
purposes of the testing and limitations contained in Article IV;
(b) second, if the Member is still employed by the Employer at the
end of the Plan Year, any remaining excess funds shall be placed in an
unallocated suspense account to be applied to reduce future Employer
Contributions for that Member for as many Plan Years as are necessary to
exhaust the suspense account in keeping with the amounts which would
otherwise be allocated to that Member's Account; and
(c) third, if the Member is not employed by the Employer at the end
of the Plan Year, the remaining excess funds shall be placed in an
unallocated suspense account to
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<PAGE> 35
reduce future Employer Contributions for all remaining Members for as
many Plan Years as are necessary to exhaust the suspense account.
If the Plan terminates prior to the exhaustion of the suspense account,
the remaining amount shall revert to the Employer.
PART C. INVESTMENT OF TRUST FUNDS
The Committee may: (a) maintain commingled and/or separate Trusts, (b)
establish separate investment funds and/or (c) permit individual investments,
some or all of which are directed by the Committee or selected by the Members
or former Members for any portion or all of their Accounts. Once the Committee
has selected or changed the mode of investments, it shall establish rules
pertaining to its administration, including but not limited to: selection of
forms, rules for making selections effective, establishing the frequency of
permitted changes, the minimum percentage in any investment, and all other
necessary or appropriate regulations.
The Committee may direct the Trustee to hold funds in cash or near money
awaiting investment or to sell assets and hold the proceeds in cash or near
money awaiting reinvestment when establishing, using or changing investment
modes. For this purpose the funds may be held in cash or invested in short
term investments such as certificates of deposit, U.S. Treasury bills, savings
accounts, commercial paper, demand notes, money market funds, any common,
pooled or collective funds which the Trustee or any other corporation may now
have or in the future may adopt for short term investments and any other
similar assets which may be offered by the federal government, national or
state banks (whether or not serving as Trustee) or any savings and loan
association.
No Plan funds attributable to Employee after Tax Contributions, or Salary
Deferred Contributions shall be invested in securities (other than interests in
the Plan) of any Employer or any company directly or indirectly controlling,
controlled by or under common control with an Employer (within the meaning of
the Securities Act of 1933, as amended), until an appropriate registration
statement under the Securities Act of 1933, as amended, has become effective
covering the interests in the Plan and the securities issued by one of the
entities described above or counsel for the Sponsor or the Committee gives an
opinion that such an investment can be made without the described registration
process.
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<PAGE> 36
ARTICLE VI.
DISTRIBUTIONS AND FORFEITURES
PART A. DISTRIBUTIONS
6.1 VALUATION OF ACCOUNTS FOR DISTRIBUTIONS. For the purpose of making a
distribution, a Member's Accounts shall be his Accounts as valued as of the
Valuation Date which is coincident with or next preceding the event which
caused the distribution, adjusted only for Contributions, distributions and
withdrawals, if any, made between the Valuation Date and that event.
6.2 DISTRIBUTION ON DEATH. If a Member dies, the Member's spouse or
designated Beneficiary or Beneficiaries is entitled to receive 100% of the
remaining amount in all of his Accounts as of the day he dies. Each Member has
the right to designate and to revoke the designation of his Beneficiary or
Beneficiaries. Each designation or revocation must be evidenced by a written
document in the form required by the Committee, signed by the Member and filed
with the Committee. If no designation is on file at the time of a Member's
death or if the Committee determines that the designation is ineffective, the
designated Beneficiary shall be the Member's spouse, if living, or if not, the
executor, administrator or other personal representative for administration and
distribution as part of the Member's estate.
If a Member is considered to be married under local law, the Member's
designation of any Beneficiary, other than the Member's spouse, shall not be
valid unless the spouse acknowledges in writing that he or she understands the
effect of the Member's beneficiary designation and consents to it. The consent
must be to a specific Beneficiary. The written acknowledgment and consent must
be filed with the Committee, signed by the spouse, and witnessed by a Plan
representative or a notary public. However, if the spouse cannot be located or
there exist other circumstances as described in sections 401(a)(11) and
417(a)(2) of the Code, the requirement of the Member's spouse's acknowledgment
and consent may be waived.
6.3 DISTRIBUTION ON RETIREMENT. A Member may retire at any time on or
after he attains his Retirement Age. If a Member retires, he is entitled to
receive 100% of all of his Accounts as of the day he retires.
6.4 DISTRIBUTION ON DISABILITY. If a Member's employment with an Employer
is terminated (which for this purpose, shall include the Member's receipt of
long term disability payments from the Employer) and the Committee determines
he is suffering from a Disability, he is entitled to receive 100% of all of his
Accounts as of the day he terminated because of his Disability.
6.5 DISTRIBUTION ON SEVERANCE FROM SERVICE. If a Member Severs Service
with all Affiliated Employers for any reason other than death, retirement or
disability, he is entitled to receive (a) 100% of all of his Accounts, except
his Employer Matching Contribution Account, if any, and
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<PAGE> 37
(b) that percentage of his Employer Matching Contribution Account, if any, as
shown in the vesting schedule below, as of the day he severs employment.
<TABLE>
<CAPTION>
PERCENTAGE OF AMOUNT VESTED IN ACCOUNTS
CONTAINING EMPLOYER MATCHING
COMPLETED YEARS OF ACTIVE SERVICE AND DISCRETIONARY CONTRIBUTIONS
<S> <C>
Less than one years .................................... 0%
One years but less than two years ...................... 20%
Two years but less than three years .................... 40%
Three years but less than four years.................... 60%
Four years but less than five years .................... 80%
Five years or more ..................................... 100%
</TABLE>
Notwithstanding the above vesting schedule, any plan that merges into this Plan
shall retain its prior vesting schedule solely with respect to the assets
merged into this Plan unless the merger agreement sets forth otherwise.
6.6 DISTRIBUTION ON ISSUANCE OF A QUALIFIED DOMESTIC RELATIONS ORDER. If
the Committee determines that a judgment, decree or order relating to child
support, alimony payments or marital property rights of the spouse, former
spouse, child or other dependent of the Member is a qualified domestic
relations order which complies with a state's domestic relations law or
community property law and section 414(p) of the Code or is a domestic
relations order entered before January 1, 1985, the Committee may direct the
Trustee to distribute the awarded property to the person named in the award but
only in the manner permitted under this Plan. To be a qualified domestic
relations order, the order must clearly specify: (a) the name and last known
mailing address of the Member and each alternate payee under the order, (b) the
amount or percentage of the Member's benefits to be paid from the Plan to each
alternate payee or the manner in which the amount or percentage can be
determined, (c) the number of payments or periods for which the order applies,
(d) the plan to which the order applies, and (e) all other requirements set
forth in section 414(p) of the Code. If a distribution is made at a time when
the Member is not fully vested, a separate subaccount shall be created for the
remaining portion of each Account which was not fully vested. That subaccount
shall then remain frozen: that is, no further contributions nor any
forfeitures shall be allocated to the subaccount; however, it shall receive its
proportionate share of trust appreciation or depreciation and income earned on
or losses incurred by the Trust Fund. To determine the Member's vested
interest in each subaccount at any future time, the Committee shall add back to
the subaccount at that time the amount that was previously distributed under
the qualified domestic relations order, shall multiply the reconstituted
subaccount by the vesting percentage, and shall then subtract the amount that
was previously distributed. The remaining amount is the Member's vested
interest in the subaccount at that time.
6.7 FORFEITURE ON SEVERING SERVICE WITH ALL AFFILIATED EMPLOYERS. If as a
result of Severing Service with all Affiliated Employers a former Member
receives a distribution of his entire vested interest in his Account, the
nonvested amount in his Account is immediately forfeited. However, if the
Member is reemployed, all of his Accounts containing Employer Contributions
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(unadjusted for subsequent gains or losses) shall be restored if he repays to
the Trustee that portion of the distribution which was derived from Employer
Contributions within five years of the date of distribution. A former Member
who received no distribution upon his Severing Service with all Affiliated
Employers because he had no vested interest shall be treated as if he received
a distribution of his entire vested interest and that interest was less than
$5,000.00.
If a former Member who has a vested interest in his Account received no
distribution or a distribution of less than the full amount of his entire
vested interest as a result of his Severing Service with all Affiliated
Employers the nonvested amount in his Account is immediately forfeited
following five consecutive one-year Periods of Severance.
A distribution shall be treated as if it were made as a result of Severing
Service with all Affiliated Employers if it is made not later than the end of
the second Plan Year following the Plan Year in which the former Member Severs
Service.
6.8 FORFEITURE BY LOST MEMBERS OR BENEFICIARIES; ESCHEAT. If a person who
is entitled to a distribution cannot be located during a search period of 60
days after the Trustee has initially attempted making payment, that person's
Account shall be forfeited. However, if at any time prior to the termination
of this Plan and the complete distribution of the Trust Fund, the Former Member
or Beneficiary files a claim with the Committee for the forfeited benefit, that
benefit shall be reinstated (without adjustment for trust income or losses
during the forfeited period) effective as of the date of the receipt of the
claim. As soon as appropriate following the Employer's Contribution of the
reinstated amount, it shall be paid to the former Member or Beneficiary in a
single sum.
PART B. FORM, ADJUSTMENTS AND TIME OF DISTRIBUTION
6.9 FORM OF DISTRIBUTIONS. Distributions shall be made only in cash
unless an asset held in the Trust cannot be sold by distribution date or can
only be sold at less than its appraised value, in which event part or all of
the distribution may be made in kind. Also, a Member (or his designated
beneficiary or legal representative, in the case of a deceased Member) may
elect to have those portions of his Accounts that are invested in shares of
common stock of the Sponsor distributed in full shares with any remaining
balance (including factional shares) distributed in cash. Except with respect
to Plan mergers or Plan transfers from other qualified plans that require
optional forms of payment, all distributions shall be made in one lump sum
payment or, as a Direct Rollover if the Distributee elects, at the time and in
the manner prescribed by the Committee, to have any portion or all of the
Eligible Rollover Distribution paid directly to an Eligible Retirement Plan
named by the Distributee.
All protected Section 411(d)(6) benefits attributable to any plan merger
or plan to plan transfer are hereby incorporated into this Plan by reference.
Specifically, but not by way of limitation, the following reflect certain plan
mergers and/or plan transfers whose Section 411(d)(6) protected benefits are
hereby incorporated into the Plan:
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<PAGE> 39
(a) GRANT PLAN PRIOR PLAN ACCOUNT
A Member who has a Grant Plan Prior Plan Account may elect in writing
to have his Grant Plan Prior Plan Account distributed in periodic
installments (no more frequently than monthly) over the life expectancy of
the Participant, the life expectancy of the Participant's spouse or
designated Beneficiary, a period certain not extending beyond the life
expectancy of the Participant, or a period certain not extending beyond the
life expectancy of the Participant and his spouse or designated
Beneficiary.
(b) PRIDECO PLAN PRIOR PLAN ACCOUNT
A Member may elect in writing to have his Prideco Plan Prior Plan
Account distributed in periodic installments either monthly, quarterly or
annually over a fixed reasonable period of time, not exceeding the life
expectancy of the Participant, or the joint life and last survivor
expectancy of the Participant and his Beneficiary.
(c) ENERPRO PLAN PRIOR PLAN ACCOUNT
A Member may elect in writing to have his Enerpro Plan Prior Plan
Account distributed as follows:
i. periodic installments either monthly, quarterly,
semiannually or annually over a fixed period, not
exceeding the life expectancy of the Member, or the joint
life and last survivor expectancy of the Member and his
Beneficiary, and
ii. a qualified joint and survivor annuity, if the Member is
married, and a life annuity if single, at the time the
benefit is payable. The spousal consent requirements, as
provided in the Enerpro Plan or as hereafter amended by
law, shall be applicable for distributions from an
Enerpro Plan Prior Plan Account. In order for a Member to
elect a distribution from the Enerpro Plan Prior Plan
Account other than the qualified joint survivor annuity
(if married) or the single life annuity (if single), the
Member must waive the applicable annuity (with spousal
consent, if married). The Member shall be allowed to
waive the 30-day notice provision (in accordance with
applicable Treasury regulations), which would otherwise
be required by the Enerpro Plan.
(d) TCA PLAN ACCUMULATION
A Member may elect in writing to have his TCA Plan Prior Plan
Account distributed in the following form:
VI-4
<PAGE> 40
If the Member is married, a qualified joint and 50% survivor annuity
("QJSA"), unless a 75% or 100% survivor annuity is elected, and a life
annuity if single, at the time the benefit is payable. The QJSA shall be
equal in value to the single life annuity. The spousal consent
requirements, as provided in the TCA Plan or as hereafter amended by law or
this Plan, shall be applicable for distributions from the TCA Plan Prior
Plan Account. In order for a Member to elect a distribution from the TCA
Plan Prior Plan Account other than the qualified joint survivor annuity (if
married) or the single life annuity (if single), the Member must waive the
applicable annuity (with spousal consent, if married). With the required
spousal consent, the Member may elect a different form of annuity or a
single lump sum distribution. The Member shall be allowed to waive the
30-day notice provision (in accordance with applicable Treasury
regulations), which would otherwise be required by the TCA Plan. Subject to
the spousal consent requirements, a Participant may withdraw funds from his
Voluntary Contribution account while employed, but may not make more than
one withdrawal in each six-month period.
(e) TUBE ALLOY PLAN ACCUMULATION
A Member may elect in writing to have his Tube-Alloy Plan Prior Plan
Account distributed in as follows: payments over a period certain either
monthly, quarterly, semiannually, or annually in cash installments. In
order to provide such installments, the Committee may direct that the
Member's interest in the Plan be segregated and invested separately, and
that the funds in the segregated account be used for the payment of the
installments. The period over which such payment is to be made shall not
extend beyond the Member's life expectancy (or the life expectancy of the
Member and his designated Beneficiary.
(f) XL SYSTEMS PLAN PRIOR PLAN ACCOUNT
A Member may elect in writing to have his XL Systems Plan Prior Plan
Account distributed in a form other than described in previous Sections of
this Article. If he so elects, his XL Systems Plan Prior Plan Account may
be distributed in accordance with the methods described below, and any
portion of his account exceeding his XL Systems Plan Prior Plan Account
shall be payable in accordance with the other provisions of this Article
VI. The forms of distribution for a Participant's XL Systems Plan Prior
Plan Account are:
If the Member is married, a qualified joint and 50% survivor annuity
("QJSA"), unless a 75% or 100% survivor annuity is elected, and a life
annuity if single, at the time the benefit is payable as provided in the XL
Systems Plan at the time of merger into this Plan. The spousal consent
requirements, as provided in the XL Systems Plan or as hereafter amended by
law or this Plan, shall be applicable for distributions from the XL Systems
Plan Prior Plan Account. In order for a Member to elect a distribution
from the XL Systems Plan Prior Plan Account other than the qualified joint
survivor annuity (if married) or the single life annuity (if single), the
VI-5
<PAGE> 41
Member must waive the applicable annuity (with spousal consent, if
married). With the required spousal consent, the Member may elect a
different form of annuity, periodic installment payments, or a single lump
sum distribution. The Member shall be allowed to waive the 30-day notice
provision (in accordance with applicable Treasury regulations), which would
otherwise be required by the XL Systems Plan.
Upon the death of Member prior to retirement, his account balance shall be
100% vested and the spouses's death benefit shall equal 50% of such
account, and shall be distributed as provided in the XL Systems Plan at the
time of merger into this Plan, subject to the revisions thereto.
(g) WEATHERFORD PLAN PRIOR PLAN ACCOUNT
A Member may elect in writing to have his Weatherford Plan Prior Plan
Account distributed as follows:
If the Member is married, a qualified joint and 50% survivor annuity
("QJSA"), and a life annuity if single, at the time the benefit is payable.
The QJSA shall be equal in value to the single life annuity. The spousal
consent requirements, as provided in the Weatherford Plan or as hereafter
amended by law or this Plan, shall be applicable for distributions from the
Weatherford Plan Prior Plan Account. In order for a Member to elect a
distribution from the Weatherford Plan Prior Plan Account other than the
QJSA (if married) or the single life annuity (if single), the Member must
waive the applicable annuity (with spousal consent, if married). With the
required spousal consent, the Member may elect a single lump sum
distribution. The Member shall be allowed to waive the 30-day notice
provision (in accordance with applicable Treasury regulations), which would
otherwise be required by the Weatherford Plan.
6.10 ADJUSTMENT OF VALUE OF DISTRIBUTION. Any Account held for
distribution past one or more Valuation Dates shall continue to share in the
appreciation or depreciation of the Trust Fund and in the income earned or
losses incurred by the Trust Fund until the last Valuation Date which occurs
with or next precedes the date distribution is made.
6.11 NORMAL TIME FOR DISTRIBUTION. The following rules shall normally
govern the time for distribution unless Section 6.12 requires an earlier
distribution. Prior to making a distribution, the Committee (or its designated
representative) must furnish such Member with a benefit notice. The benefit
notice must explain the optional forms of benefit in the Plan, including the
material features and relative values of those options, the Member's right to
defer distribution until he attains Retirement Age, and relevant information
concerning the direct rollover option described in Section 6.9. The notice
must also inform the Member of his right to consider whether or not to elect a
distribution for 30 days after receiving the notice. Notwithstanding any other
provision of this Section 6.11, or of this Plan, a Member and his or her spouse
may waive the 30-day waiting period provided in this Section for making an
election of benefits by affirmatively electing a form of distribution in a
manner that satisfies the applicable Regulation, but that waiver shall not
affect the
VI-6
<PAGE> 42
requirement that the information required by this Section be provided the
Member no more than 90 days before his annuity starting date. If the benefit
to be distributed to the Member is or is deemed to be $5,000.00 or less, the
benefit should be distributed within one year after the Member becomes entitled
to the benefit. Also, if it is or is deemed to be greater than $5,000.00 and
the Member consents to the distribution, the benefit should be distributed or
begin to be distributed within one year after the Member becomes entitled to
the benefit. If, however, the benefit to be distributed is or is deemed to be
greater than $5,000.00 and the Member fails to consent to the distribution, the
distribution shall not be made without the Member's consent until he attains
normal Retirement Age or age 62, whichever is later. In any event, if the
Member dies, the surviving spouse may require payments to begin within a
reasonable time.
6.12 TIME LIMIT FOR DISTRIBUTION. All distributions must comply with
sections 401(a)(9) and 401(a)(14) of the Code and their regulations. Thus, the
distribution must be made no later than the EARLIER of the date required by
subsection (a) or (b) if the Member has not died.
(a) Section 401(a)(9): Commencing January 1, 1999, each Member must
begin receiving a distribution under the Plan on or before April 1st of
the calendar year following the later of the calendar year in which the
Member retires or attains age 70 1/2 in the amount required by section
401(a)(9) of the Code and its Regulations. Until that date, a Member may
elect to begin receiving distributions or receive his distribution on the
April 1st of the calendar year following the calendar year in which he
attains age 70 1/2 even though he has not retired, in the amount required
by section 401(a)(9) of the Code and its Regulations. However, if the
Member is a Five Percent Owner in the Plan Year ending in the calendar
year in which he attains 70 1/2, distribution must begin April 1st of the
following calendar year regardless of whether he remains employed by the
Employer or an Affiliated Employer. Without regard to the above rules,
if a Member made a designation before January 1, 1984, which complied
with section 401(a)(9) of the Code before its amendment by the Tax Reform
Act of 1984, the distribution does not have to be made until the time
described in the designation, if later.
(b) Section 401(a)(14): The distribution must be made to the Member
on or before the 60th day after the latest of the end of the Plan Year in
which the Member attains his Retirement Age, attains the 10th anniversary
of the year in which he began participation or terminates employment with
all Affiliated Employers unless the Member consents to a later time.
If the Member has died and a portion of the Member's Account is payable to
a designated Beneficiary the payment must be made not later than one year after
the Member's death. If the surviving spouse is the Beneficiary, the payment
may be delayed so as to be made on the date on which the Member would have
attained age 70 1/2. If payment is postponed and the surviving spouse dies
before payment is made, the surviving spouse shall be treated as the Member for
purposes of this paragraph.
VI-7
<PAGE> 43
6.13 PROTECTED BENEFITS. No provision of this Plan shall reduce or
eliminate any benefit protected by section 411(d)(6)of the Code.
VI-8
<PAGE> 44
ARTICLE VII
WITHDRAWALS AND LOANS
7.1 VALUATION OF ACCOUNTS FOR WITHDRAWALS AND LOANS. For the purpose of
withdrawals and loans, a Member's Account shall be his Accounts as valued as of
the Valuation Date which is coincident with or next preceding the request for
the withdrawal or loan adjusted only for Contributions, distributions,
withdrawals and loans, if any, made between the Valuation Date and that event.
7.2 MINIMUM WITHDRAWAL AMOUNT. Each withdrawal must be in an amount equal
to or in excess of $500.
7.3 WITHDRAWALS OF EMPLOYEE AFTER TAX AND ROLLOVER ACCOUNTS. A Member is
entitled at any time to receive a withdrawal from his Employee After Tax
Contribution and/or Rollover Account after giving 15 days written notice to the
Committee. The withdrawal cannot be more than the balance of the Account.
Each withdrawal of Employee After Tax Contributions contributed after December
31, 1986 shall include a pro rata share of income earned on those
Contributions. Pre-1987 Employee After Tax Contributions shall be withdrawn
first until they are exhausted.
7.4 WITHDRAWAL FOR FINANCIAL HARDSHIP. A Member is entitled to receive a
withdrawal from his Salary Deferral Contribution Account (exclusive of income
earned after December 31, 1988), Employer Matching Contribution Account,
Employer Discretionary Contribution Account, Rollover Account, or his Qualified
Nonelective Contribution Account in the event of an immediate and heavy
financial need incurred by the Member and the Committee's determination that
the withdrawal is necessary to alleviate that hardship. A Member, however must
first take a hardship withdrawal from his Employer Matching Contribution
Account, Employer Discretionary Account, Rollover Account or his Qualified
Nonelective Contribution Account prior to receiving a hardship withdrawal from
his Salary Deferral Contribution Account.
(a) Approval Reasons for Hardship: A distribution shall be made on
account of financial hardship only if the distribution is for: (i)
expenses for medical care described in section 213(d) of the Code
previously incurred by the Member, the Member's spouse, or any
dependents of the Member (as defined in section 152 of the Code) or
necessary for these persons to obtain medical care described in section
213(d) of the Code, (ii) costs directly related to the purchase
(excluding mortgage payments) of a principal residence for the Member,
(iii) payment of tuition, related educational fees and room and board
expenses, for the next 12 months of post-secondary education for the
Member, his or her spouse, children, or dependents (as defined in
section 152 of the Code), (iv) payments necessary to prevent the
eviction of the Member from his principal residence or foreclosure on
the mortgage of the Member's principal residence, or (v) any other event
added to this list by the Commissioner of Internal Revenue.
VII-1
<PAGE> 45
(b) Maximum Distribution Permitted: A distribution to satisfy an
immediate and heavy financial need shall not be made in excess of the
amount of the immediate and heavy financial need of the Member and the
Member must have obtained all distributions, other than hardship
distributions, and all nontaxable (at the time of the loan) loans
currently available under all plans maintained by the Employer. The
amount of a Member's immediate and heavy financial need includes any
amounts necessary to pay any federal, state or local income taxes or
penalties reasonably anticipated to result from the financial hardship
distribution.
(c) Conditions Placed on Participation in Plan and other Fringe
Benefits:. The Member's hardship distribution shall terminate his or
her right to make any Employee After Tax Contributions or to have the
Employer make any Salary Deferral Contributions on his or her behalf
until the next time Employee After Tax Contributions and Salary Deferral
Contributions are permitted after the lapse of 12 months following the
hardship distribution and his or her timely filing of a written request
to resume his or her Employee After Tax Contributions or Salary Deferral
Contributions. Even then, if the Member resumes Contributions in his
next taxable year he cannot have the Employer make any Salary Deferral
Contributions in excess of the limit in section 402(g) of the Code for
that taxable year reduced by the amount of Salary Deferral Contributions
made by the Employer on the Member's behalf during the taxable year of
the Member in which he received the hardship distribution.
In addition, for 12 months after he receives a hardship
distribution from this Plan the Member is prohibited from making
elective contributions and employee contributions to all other qualified
and nonqualified plans of deferred compensation maintained by the
Employer, including stock option plans, stock purchase plans and cash or
deferred arrangements that are part of cafeteria plans described in
section 125 of the Code. However, the Member is not prohibited from
making mandatory employee contributions to a defined benefit plan, or
contributions to a health or welfare benefit plan, including one that is
part of a cafeteria plan within the meaning of section 125 of the Code.
7.5 WITHDRAWALS ON OR AFTER AGE 59 1/2. A Member who is at least age 59
1/2 is entitled to withdraw his vested interest in all of his Accounts.
7.6 LOANS. The Committee may direct the Trustee to make loans to Members
(and Beneficiaries who are "parties in interest" within the meaning of ERISA)
who have a vested interest in the Plan. Loans may not be made to any
shareholder-employee (as defined in section 1379 of the Code as in effect
before the enactment of the Subchapter S Revision Act of 1982) or any
owner-employee (as defined in section 401(c)(3) of the Code or a member of the
family of either (as defined in section 267(c)(4) of the Code. The Loan
Committee established by the Committee will be responsible for administering
the Plan loan program. All loans will comply with the following requirements:
(a) All loans will be made solely from the Member's or
Beneficiary's Account.
VII-2
<PAGE> 46
(b) Loans will be available on a nondiscriminatory basis to all
Beneficiaries who are "parties in interest" within the meaning of ERISA,
and to all Members.
(c) Loans will not be made for less than $1,000.
(d) The maximum amount of a loan may not exceed the lesser of (i)
$50,000 reduced by the person's highest outstanding loan balance from
the Plan during the preceding one year period, or (ii) one-half of the
present value of the person's vested Account balance under the Plan
determined as of the date on which the loan is approved by the Loan
Committee. If determining whether a loan would exceed these limits, all
loans under all plans of the Employer and all Affiliated Employers which
are outstanding or which have not been repaid at least one year before
must be taken into consideration.
(e) Any loan from the Plan will be evidenced by a note or notes
(signed by the person applying for the loan) having such maturity,
bearing such rate of interest, and containing such other terms as the
Loan Committee will require by uniform and nondiscriminatory rules
consistent with this Section and proper lending practices. When
required by law, the borrowing person must be supplied with all
documents required by the truth-in-lending laws and any other applicable
federal or state statute.
(f) All loans will bear a reasonable rate of interest which will be
established by the Loan Committee. In determining the proper rate of
interest to be charged, at the time any loan is made or renewed, the
Loan Committee may contact one or more of the banks in the geographic
location in which the Member or Beneficiary resides to determine what
interest rate the banks would charge for a similar loan taking into
account the collateral offered.
(g) Each loan will be fully secured by a pledge of the borrowing
person's vested Account balance. No more than 50% of the person's
vested Account balance (determined immediately after the origination of
the loan) will be considered as security for any loan.
(h) Generally, the term of the loan will not be more than five
years. The Loan Committee may agree to a longer term only if the term
is otherwise reasonable and the proceeds of the loan are to be used to
acquire a dwelling which will be used within a reasonable time
(determined at the time the loan is made) as the principal residence of
the borrowing person.
(i) The loan agreement will require level amortization over the
term of the loan and repayment through salary withholding except in the
case of a loan to a person who is not employed by the Employer.
(j) A Member may not make a withdrawal if the remaining balance of
the Member's Account would be less than the outstanding loan balance or
the withdrawal would violate any security requirements of the loan. No
distribution may be made to a Member until all loans to him have been
paid in full. If a Member has an outstanding loan
VII-3
<PAGE> 47
from the Plan at the time he terminates employment with all Affiliated
Employers, the outstanding loan principal balance and any accrued but
unpaid interest will become immediately due in full. The Member will
have the right to immediately pay the Trustee that amount. If the
Member fails to repay the loan, the Trustee will foreclose on the loan
and the Member will be deemed to have received a Plan distribution of
the amount foreclosed upon. The Trustee will not foreclose upon a
Member's Salary Deferral Contributions Account or Qualified Nonelective
Employer Contributions Account until the Member has terminated
employment with all Affiliated Employers.
(k) If a Beneficiary defaults on his loan, the Trustee will
foreclose on the loan and the Beneficiary will be deemed to have
received a Plan distribution of the amount foreclosed upon.
(l) No amount that is pledged as collateral for a Plan loan to a
Participant will be available for withdrawal before he has fully repaid
his loan.
(m) All interest payments made pursuant to the terms of the loan
agreement will be credited to the borrowing person's Account and will
not be considered as general earnings of the Trust Fund to be allocated
to other Members. All expenses or losses incurred because of the loan
shall be charged to the borrowing person's Account.
(n) Payment of any loan made by a Member shall be suspended while a
Member is in qualified military service and is covered by USERRA.
(o) The Committee is authorized to establish written guidelines
which, if and when adopted, shall become part of this Plan and shall
establish a procedure for applying for loans, the basis on which loans
will be approved or denied, limitations (if any) on the types and
amounts of loans offered, and any other matters necessary or appropriate
to administering this Section.
VII-4
<PAGE> 48
ARTICLE VIII
GENERAL PROVISIONS APPLICABLE TO
FILING A CLAIM, DISTRIBUTIONS TO MINORS AND
NO DUPLICATION OF BENEFITS
8.1 CLAIMS PROCEDURE. When a benefit is due, the Member or Beneficiary
should submit his claim to the person or office designated by the Committee to
receive claims. Under normal circumstances, a final decision shall be made as
to a claim within 90 days after receipt of the claim. If the Committee
notifies the claimant in writing during the initial 90 day period, it may
extend the period up to 180 days after the initial receipt of the claim. The
written notice must contain the circumstances necessitating the extension and
the anticipated date for the final decision. If a claim is denied during the
claims period, the Committee must notify the claimant in writing. The denial
must include the specific reasons for it, the Plan provisions upon which the
denial is based, and the claims review procedure. If no action is taken during
the claims period, the claim is treated as if it were denied on the last day of
the claims period.
If a Member's or Beneficiary's claim is denied and he wants a review, he
must apply to the Committee in writing. That application may include any
comment or argument the claimant wishes to make. The claimant may either
represent himself or appoint a representative, either of whom has the right to
inspect all documents pertaining to the claim and its denial. The Committee
may schedule any meeting with the claimant or his representative that it finds
necessary or appropriate to complete its review.
The request for review must be filed within 60 days after the denial. If
it is not, the denial becomes final. If a timely request is made, the
Committee must make its decision, under normal circumstances, within 60 days of
the receipt of the request for review. However, if the Committee notifies the
claimant prior to the expiration of the initial review period, it may extend
the period of review up to 120 days following the initial receipt of the
request for a review. All decisions of the Committee must be in writing and
must include the specific reasons for their action and the Plan provisions on
which their decision is based. If a decision is not given to the claimant
within the review period, the claim is treated as if it were denied on the last
day of the review period.
8.2 NO DUPLICATION OF BENEFITS. There shall be no duplication of benefits
under this Plan. Without regard to any other language in this Plan, all
distributions and withdrawals are to be subtracted from a Member's Account as
of the date of the distribution or withdrawal. Thus, if the Member has
received one distribution or withdrawal and is ever entitled to another
distribution or withdrawal, the prior distribution or withdrawal is to be taken
into account.
8.3 DISTRIBUTIONS TO DISABLED OR MINORS. If the Committee determines that
any person to whom a payment is due is a minor or is unable to care for his
affairs because of a physical or mental disability, it shall have the authority
to cause the payments to be made to an ancestor, descendant, spouse, or other
person the Committee determines to have incurred, or to be expected
VIII-1
<PAGE> 49
to incur, expenses for that person or to the institution which is maintaining
or has custody of the person unless a prior claim is made by a qualified
guardian or other legal representative. The Committee and the Trustee shall
not be responsible to oversee the application of those payments. Payments made
pursuant to this power shall be a complete discharge of all liability under the
Plan and Trust and the obligations of the Employer, the Trustee, the Trust Fund
and the Committee.
VIII-2
<PAGE> 50
ARTICLE IX.
TOP-HEAVY REQUIREMENTS
9.1 APPLICATION. The requirements described in this Article shall apply
to each Plan Year that this Plan is determined to be a Top-Heavy Plan under the
test set out in the following Section.
9.2 TOP-HEAVY TEST. If on the Determination Date the Aggregate Accounts
of Key Employees in the Plan exceeds 60% of the Aggregate Accounts of all
Employees in the Plan, this Plan shall be a Top-Heavy Plan for that Plan Year.
In addition, if this Plan is required to be included in an Aggregation Group
and that group is a top-heavy group, this Plan shall be treated as a Top-Heavy
Plan. An Aggregation Group is a top-heavy group if on the Determination Date
the sum of (a) the present value of the cumulative accrued benefits for Key
Employees under all defined benefit plans in the Aggregation Group which
contains this Plan plus (b) the total of all of the accounts of Key Employees
under all defined contribution plans included in the Aggregation Group (which
contains this Plan) is more than 60% of a similar sum determined for all
employees covered in the Aggregation Group which contains this Plan.
In applying the above tests, the following rules shall apply:
(a) In determining the present value of the accumulated accrued
benefits for any Employee or the amount in the account of any Employee,
the value or amount shall be increased by all distributions made to or
for the benefit of the Employee under the Plan during the five year
period ending on the Determination Date.
(b) All rollover contributions made after December 31, 1983 by the
Employee to the Plan shall not be considered by the Plan for either
test.
(c) If an Employee is a Non-Key Employee under the Plan for the
Plan Year but was a Key Employee under the Plan for another prior Plan
Year, his account shall not be considered.
(d) Benefits shall not be taken into account in determining the
top-heavy ratio for any Employee who has not performed services for the
Employer during the last five-year period ending upon the Determination
Date.
9.3 VESTING RESTRICTIONS IF PLAN BECOMES TOP-HEAVY. If a Member has at
least one Hour of Service during a Plan Year when the Plan is a Top-Heavy Plan
he shall either vest under each of the normal vesting provisions of the Plan or
under the following vesting schedule, whichever is more favorable:
IX-1
<PAGE> 51
<TABLE>
<CAPTION>
PERCENTAGE OF AMOUNT VESTED
IN ACCOUNTS CONTAINING
COMPLETED YEARS OF ACTIVE SERVICE EMPLOYER CONTRIBUTIONS
<S> <C>
Less than two years ................................. 0%
Two years but less than three years ................ 20%
Three years but less than four years ............... 40%
Four years but less than five years ................ 60%
Five years but less than six years ................. 80%
Six years or more ................................. 100%
</TABLE>
If the Plan ceases to be a Top-Heavy Plan, this requirement shall no longer
apply. After that date the normal vesting provisions of the Plan shall be
applicable to all subsequent Contributions by the Employer.
9.4 MINIMUM CONTRIBUTION IF PLAN BECOMES TOP-HEAVY. If this Plan is a
Top-Heavy Plan and the normal allocation of the Employer Contribution and
forfeitures is less than 3% of any Non-Key Employee Member's Annual
Compensation, the Committee, without regard to the normal allocation
procedures, shall allocate the Employer Contribution and the forfeitures among
the Members who are in the employ of the Employer at the end of the Plan Year
(even if the Member has less than 501 Hours of Service in the Plan Year), in
proportion to each Member's Annual Compensation as compared to the total Annual
Compensation of all Members for that Plan Year until each Non-Key Employee
Member has had an amount equal to the lesser of (i) the highest rate of
Contribution applicable to any Key Employee, or (ii) 3% of his Annual
Compensation allocated to his Account. At that time, any more Employer
Contributions or forfeitures shall be allocated under the normal allocation
procedures described earlier in this Plan. Salary Deferral Contributions and
Employer Matching Contributions made on behalf of Key Employees are included in
determining the highest rate of Employer Contributions. Salary Deferral
Contributions made on behalf of Non-Key Employees shall not be included in
determining the minimum contribution required under this Section. Employer
Matching Contributions and amounts that may be treated as Section 401(k)
Contributions or Section 401(m) Contributions, other than Qualified Nonelective
Employer Contributions, made on behalf of Non-Key Employees may not be included
in determining the minimum contribution required under this Section to the
extent that they are treated as Section 401(m) Contributions or Section 401(k)
Contributions for purposes of the Actual Deferral Percentage test or the
Contribution Percentage test.
In applying this restriction the following rules shall apply:
(a) Each Employee who is eligible for membership (without regard to
whether he has made mandatory contributions, if any are required, or
whether his compensation is less than a stated amount) shall be entitled
to receive an allocation under this Section.
(b) All defined contribution plans required to be included in the
Aggregation Group shall be treated as one plan for purposes of meeting
the 3% maximum. This required aggregation shall not apply if this Plan
is also required to be included in an Aggregation
IX-2
<PAGE> 52
Group which includes a defined benefit plan and this Plan enables that
defined benefit plan to meet the requirements of sections 401(a)(4) or
410 of the Code.
9.5 COVERAGE UNDER MULTIPLE TOP-HEAVY PLANS. If this Plan is a Top-Heavy
Plan, it must meet the vesting and benefit requirements described in this
Article without taking into account contributions or benefits under Chapter 2
of the Code (relating to tax on self-employment income), Chapter 21 of the Code
(relating to Federal Insurance Contributions Act), Title II of the Social
Security Act or any other Federal or State law.
If a Non-Key Employee is covered by both a Top-Heavy defined contribution
plan and a defined benefit plan, he shall receive the defined benefit minimum,
offset by the benefits provided under the defined contribution plan.
9.6 RESTRICTIONS IF PLAN BECOMES SUPER-TOP-HEAVY. If the Plan is
determined to be a Top-Heavy Plan, the number "1.00" must be substituted for
the number "1.25" when applying the limitations of section 415 of the Code to
this Plan, unless the Plan would not be a Top-Heavy Plan if "90%" were
substituted for "60%" and the Employer Contribution for the Plan Year for each
Non-Key Employee, who is a Member, is not less than 4% of the Member's Annual
Compensation.
IX-3
<PAGE> 53
ARTICLE X.
ADMINISTRATION OF THE PLAN
10.1 APPOINTMENT, TERM OF SERVICE & REMOVAL. The Board of Directors shall
appoint a Committee to administer this Plan. The members shall serve until
their resignation, death or removal. Any member may resign at any time by
mailing a written resignation to the Board of Directors. Any member may be
removed by the Board of Directors, with or without cause. Vacancies may be
filled by the Board of Directors from time to time.
10.2 POWERS. The Committee is a fiduciary. It has the exclusive
responsibility for the general administration of the Plan and Trust, and has
all powers necessary to accomplish that purpose, including but not limited to
the following rights, powers, and authorities:
(a) to make rules for administering the Plan and Trust so long as
they are not inconsistent with the terms of the Plan;
(b) to construe all provisions of the Plan and Trust;
(c) to correct any defect, supply any omission, or reconcile any
inconsistency which may appear in the Plan or Trust;
(d) to select, employ, and compensate at any time any consultants,
actuaries, accountants, attorneys, and other agents and employees the
Committee believes necessary or advisable for the proper administration
of the Plan and Trust; any firm or person selected may be a disqualified
person but only if the requirements of section 4975(d) of the Code have
been met;
(e) to determine all questions relating to eligibility, Active
Service, Compensation, allocations and all other matters relating to the
amount of benefits and any one or more Members' or Former Members'
entitlement to benefits and to determine when it is required under the
Plan to treat a Former Member as a Member;
(f) to determine all controversies relating to the administration of
the Plan and Trust, including but not limited to any differences of
opinion arising between an Employer and the Trustee or a Member or Former
Member, or any combination of them and any questions it believes
advisable for the proper administration of the Plan and Trust;
(g) to direct or to appoint an investment manager or managers who
can direct the Trustee in all matters relating to the investment,
reinvestment and management of the Trust Fund;
(h) to direct the Trustee in all matters relating to the payment of
Plan benefits;
X-1
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(i) to delegate any clerical or recordation duties of the Committee
as the Committee believes is advisable to properly administer the Plan
and Trust; and
(j) to make any other determination of any fact or any decision as
to any aspect of the administration of the Plan and Trust that is
appropriate in its general administration of the Plan and Trust.
10.3 ORGANIZATION. The Committee may select, from among its members, a
chairman, and may select a secretary. The secretary need not be a member of
the Committee. The secretary shall keep all records, documents and data
pertaining to its administration of the Plan and Trust.
10.4 QUORUM AND MAJORITY ACTION. A majority of the Committee constitutes
a quorum for the transaction of business. The vote of a majority of the
members present at any meeting shall decide any question brought before that
meeting. In addition, the Committee may decide any question by a vote, taken
without a meeting, of a majority of its members.
10.5 SIGNATURES. The chairman, the secretary and any one or more of the
members of the Committee to which the Committee has delegated the power shall
each, severally, have the power to execute any document on behalf of the
Committee, and to execute any certificate or other written evidence of the
action of the Committee. The Trustee, after it is notified of any delegation
of power in writing, shall accept and may rely upon any document executed by
the appropriate member or members as representing the action of the Committee
until the Committee files a written revocation of that delegation of power with
the Trustee.
10.6 DISQUALIFICATION OF COMMITTEE MEMBER. A member of the Committee who
is also a Member of this Plan shall not vote or act upon any matter relating
solely to himself.
10.7 DISCLOSURE TO MEMBERS. The Committee shall make available to each
Member and Beneficiary for his examination those records, documents and other
data required under ERISA, but only at reasonable times during business hours.
No Member or Beneficiary has the right to examine any data or records
reflecting the compensation paid to any other Member or Beneficiary. The
Committee is not required to make any other data or records available other
than those required by ERISA.
10.8 STANDARD OF PERFORMANCE. The Committee and each of its members: (a)
shall use the care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man, acting in a like capacity and familiar with such
matters, would use in conducting his business as the administrator of the Plan,
(b) shall, when exercising its power to direct investments, diversify the
investments of the Plan so as to minimize the risk of large losses, unless
under the circumstances it is clearly prudent not to do so, and (c) shall
otherwise comply with the provisions of this Plan and ERISA.
10.9 LIABILITY OF COMMITTEE AND LIABILITY INSURANCE. No member of the
Committee shall be liable for any act or omission of any other member of the
Committee, the Trustee, any investment manager appointed by the Committee
X-2
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or any other agent appointed by the Committee unless required by the terms of
ERISA or another applicable state or federal law under which liability cannot
be waived. No member of the Committee shall be liable for any act or omission
of his own unless required by ERISA or another applicable state or federal law
under which liability cannot be waived.
If the Committee directs the Trustee to do so, it may purchase out of the
Trust Fund insurance for the members of the Committee, for any other
fiduciaries appointed by the Committee and for the Trust Fund itself to cover
liability or losses occurring because of the act or omission of any one or more
of the members of the Committee or any other fiduciary appointed under this
Plan. But, that insurance must permit recourse by the insurer against the
members of the Committee or the other fiduciaries concerned if the loss is
caused by breach of a fiduciary obligation by one or more members of the
Committee or other fiduciary.
10.10 EXEMPTION FROM BOND. No member of the Committee is required to give
bond for the performance of his duties unless required by a law which cannot be
waived.
10.11 COMPENSATION. The Committee shall serve without compensation but
shall be reimbursed by the Employer for all expenses properly incurred in the
performance of their duties unless the Sponsor elects to have those expenses
paid from the Trust Fund. Each Employer shall pay that part of the expense as
determined by the Committee in its sole judgment.
10.12 PERSONS SERVING IN DUAL FIDUCIARY ROLES. Any person, group of
persons, corporations, firm or other entity, may serve in more than one
fiduciary capacity with respect to this Plan, including serving as both Trustee
and as a member of the Committee.
10.13 ADMINISTRATOR. For all purposes of ERISA, the administrator of the
Plan is the Sponsor. The administrator has the final responsibility for
compliance with all reporting and disclosure requirements imposed under all
applicable federal or state laws and regulations.
10.14 STANDARD OF JUDICIAL REVIEW OF COMMITTEE ACTIONS. The Committee has
full and absolute discretion in the exercise of each and every aspect of the
rights, power, authority and duties retained or granted it under the Plan,
including without limitation, the authority to determine all facts, to
interpret this Plan, to apply the terms of this Plan to the facts determined,
to make decisions based upon those facts and to make any and all other
decisions required of it by this Plan, such as the right to benefits, the
correct amount and form of benefits, the determination of any appeal, the
review and correction of the actions of any prior administrative committee, and
the other rights, powers, authority and duties specified in this Article and
elsewhere in this Plan. Notwithstanding any provision of law, or any explicit
or implicit provision of this document, any action taken, or finding,
interpretation, ruling or decision made by the Committee in the exercise of any
of its rights, powers, authority or duties under this Plan shall be final and
conclusive as to all parties, including without limitation all Members, Former
Members and Beneficiaries, regardless of whether the Committee or one or more
of its members may have an actual or potential conflict of interest with
respect to the subject matter of the action, finding, interpretation, ruling or
decision. No final action, finding, interpretation, ruling or decision of the
Committee shall be subject to de novo review in any judicial proceeding. No
final action, finding, interpretation, ruling or decision of the Committee may
X-3
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be set aside unless it is held to have been arbitrary and capricious by a final
judgment of a court having jurisdiction with respect to the issue.
X-4
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ARTICLE XI.
TRUST FUND AND CONTRIBUTIONS
11.1 FUNDING OF PLAN. This Plan shall be funded by one or more separate
Trusts. If more than one Trust is used, each Trust shall be designated by the
name of the Plan followed by a number assigned by the Committee at the time the
Trust is established.
11.2 INCORPORATION OF TRUST. Each Trust is a part of this Plan. All
rights or benefits which accrue to a person under this Plan shall be subject
also to the terms of the agreements creating the Trust or Trusts and any
amendments to them which are not in direct conflict with this Plan.
11.3 AUTHORITY OF TRUSTEE. Each Trustee shall have full title and legal
ownership of the assets in the separate Trust which, from time to time, is in
his separate possession. No other Trustee shall have joint title to or joint
legal ownership of any asset in one of the other Trusts held by another
Trustee. Each Trustee shall be governed separately by the trust agreement
entered into between the Employer and that Trustee and the terms of this Plan
without regard to any other agreement entered into between any other Trustee
and the Employer as a part of this Plan.
11.4 ALLOCATION OF RESPONSIBILITY. To the fullest extent permitted under
section 405 of ERISA, the agreements entered into between the Employer and each
of the Trustees shall be interpreted to allocate to each Trustee its specific
responsibilities, obligations and duties so as to relieve all other Trustees
from liability either through the agreement, Plan or ERISA, for any act of any
other Trustee which results in a loss to the Plan because of his act or failure
to act.
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ARTICLE XII.
ADOPTION OF PLAN BY OTHER EMPLOYERS
12.1 ADOPTION PROCEDURE. Any business organization may, with the approval
of the Board of Directors, adopt this Plan by:
(a) adopting a resolution or executing a consent of the board of
directors of the adopting Employer or executing an adoption instrument
(approved by the board of directors of the adopting Employer) agreeing to
be bound as an Employer by all the terms, conditions and limitations of
this Plan except those, if any, specifically described in the adoption
instrument; and
(b) providing all information required by the Committee and the
Trustee.
An adoption may be retroactive to the beginning of a Plan Year if these
conditions are complied with on or before the last day of that Plan Year.
12.2 NO JOINT VENTURE IMPLIED. The document which evidences the adoption
of the Plan by an Employer shall become a part of this Plan. However, neither
the adoption of this Plan and its related Trust Fund by an Employer nor any act
performed by it in relation to this Plan and its related Trust Fund shall ever
create a joint venture or partnership relation between it and any other
Employer.
12.3 ALL TRUST ASSETS AVAILABLE TO PAY ALL BENEFITS. The Accounts of
Members employed by the Employers which adopt this Plan shall be commingled for
investment purposes. All assets in the Trust Fund shall be available to pay
benefits to all Members employed by any Employer which is an Affiliated
Employer with the first Employer.
12.4 QUALIFICATION A CONDITION PRECEDENT TO ADOPTION AND CONTINUED
PARTICIPATION. The adoption of this Plan and the Trust or Trusts used to fund
this Plan by a business organization is contingent upon and subject to the
express condition precedent that the initial adoption meets all statutory and
regulatory requirements for qualification of the Plan and the exemption of the
Trust or Trusts and that the Plan and the Trust or Trusts that are applicable
to it continue in operation to maintain their qualified and exempt status. In
the event the adoption fails to initially qualify and be exempt, the adoption
shall fail retroactively for failure to meet the condition precedent and the
portion of the Trust Fund applicable to the adoption shall be immediately
returned to the adopting business organization and the adoption shall be void
ab initio. In the event the adoption as to a given business organization later
becomes disqualified and loses its exemption for any reason, the adoption shall
fail retroactively for failure to meet the condition precedent and the portion
of the Trust Fund allocable to the adoption by that business organization shall
be immediately spun off, retroactively as of the last date for which the Plan
qualified, to a separate Trust for its sole benefit and an identical but
separate Plan shall be created, retroactively effective as of the last date the
Plan as adopted by that business organization qualified, for the benefit of the
Members covered by that adoption.
XII-1
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ARTICLE XIII.
AMENDMENT AND WITHDRAWAL OR TERMINATION
PART A. AMENDMENT
13.1 RIGHT TO AMEND. The Sponsor has the sole right to amend this Plan.
An amendment may be made by adopting a resolution or executing a consent of the
Board of Directors, or by the appropriate officer of the Sponsor executing an
amendment document.
13.2 LIMITATION ON AMENDMENTS. No amendment shall:
(a) vest in an Employer any interest in the Trust Fund;
(b) cause or permit the Trust Fund to be diverted to any purpose
other than the exclusive benefit of the present or future Members and
their Beneficiaries except under the circumstances described in Section
4.21;
(c) decrease the Account of any Member or eliminate an optional form
of payment as to amounts then accrued;
(d) increase substantially the duties or liabilities of the Trustee
without its written consent; or
(e) change the vesting schedule to one which would result in the
nonforfeitable percentage of the Account derived from Employer
Contributions (determined as of the later of the date of the adoption of
the amendment or of the effective date of the amendment) of any Member
being less than the nonforfeitable percentage computed under the Plan
without regard to the amendment. If the Plan's vesting schedule is
amended, if the Plan is amended in any other way that affects the
computation of the Member's nonforfeitable percentage, or if the Plan is
deemed amended by an automatic change to or from a Top-Heavy vesting
schedule, each Member with at least three years of Service may elect,
within a reasonable period after the adoption of the amendment or the
change, to have the nonforfeitable percentage computed under the Plan
without regard to the amendment or the change. The election period shall
begin no later than the date the amendment is adopted or deemed to be
made and shall end no later than the latest of the following dates: (1)
60 days after the date the amendment is adopted or deemed to be made, (2)
60 days after the date the amendment becomes effective, or (3) 60 days
after the day the Member is issued written notice of the amendment.
13.3 EACH EMPLOYER DEEMED TO ADOPT AMENDMENT UNLESS REJECTED. Each Employer
shall be deemed to have adopted any amendment made by the Sponsor unless the
Employer notifies the Committee of its rejection in writing within 30 days after
it is notified of the amendment. A
XIII-1
<PAGE> 60
rejection shall constitute a withdrawal from this Plan by that Employer
unless the Sponsor acquiesces in the rejection.
13.4 AMENDMENT APPLICABLE ONLY TO MEMBERS STILL EMPLOYED UNLESS AMENDMENT
SPECIFICALLY PROVIDES OTHERWISE. No benefit for any person who died, retired,
became disabled or separated shall be affected by a subsequent amendment unless
the amendment specifically provides otherwise and the person consents to its
application. Instead, those persons who died, retired, became disabled or
separated prior to the execution of an amendment shall be entitled to the
benefit as adjusted from time to time as was provided by the Plan at the time
the person first became entitled to his benefit.
13.5 MANDATORY AMENDMENTS. The Contributions of each Employer to this
Plan are intended to be:
(a) deductible under the applicable provisions of the Code;
(b) except as otherwise prescribed by applicable law, exempt from
the Federal Social Security Act;
(c) except as otherwise prescribed by applicable law, exempt from
withholding under the Code; and
(d) excludable from any Employee's regular rate of pay, as that term
is defined under the Fair Labor Standards Act of 1938, as amended.
The Sponsor shall make any amendment necessary to carry out this
intention, and it may be made retroactively.
PART B. WITHDRAWAL OR TERMINATION
13.6 WITHDRAWAL OF EMPLOYER. An Employer may withdraw from this Plan and
its related Trust Fund if the Sponsor does not acquiesce in its rejection of an
amendment or by giving written notice of its intent to withdraw to the
Committee. The Committee shall then determine the portion of the Trust Fund
that is attributable to the Members employed by the withdrawing Employer and
shall notify the Trustee to segregate and transfer those assets to the
successor Trustee or Trustees when it receives a designation of the successor
from the withdrawing Employer.
A withdrawal shall not terminate the Plan and its related Trust Fund with
respect to the withdrawing Employer, if the Employer either appoints a
successor Trustee or Trustees and reaffirms this Plan and its related Trust
Fund as its new and separate plan and trust intended to qualify under section
401(a) of the Code, or establishes another plan and trust intended to qualify
under section 401(a) of the Code.
The determination of the Committee, in its sole discretion, of the portion
of the Trust Fund that is attributable to the Members employed by the
withdrawing Employer shall be final and binding
XIII-2
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upon all parties. The Trustee's transfer of those assets to the designated
successor Trustee shall relieve the Trustee of any further obligation,
liability or duty to the withdrawing Employer, the Members employed by that
Employer and their Beneficiaries, and the successor Trustee or Trustees.
13.7 TERMINATION OF PLAN. The Sponsor may terminate this Plan and its
related Trust Fund with respect to all Employers by executing and delivering to
the Committee and the Trustee, a notice of termination, specifying the date of
termination. Any Employer may terminate this Plan and its related Trust Fund
with respect to itself by executing and delivering to the Trustee a notice of
termination, specifying the date of termination. Likewise, this Plan and its
related Trust Fund shall automatically terminate with respect to any Employer
if there is a general assignment by that Employer to or for the benefit of its
creditors, or a liquidation or dissolution of that Employer without a
successor. Upon the termination of this Plan as to an Employer, the Trustee
shall, subject to the provisions of Section 13.9, distribute to each Member
employed by the terminating Employer the amount certified by the Committee to
be due the Member.
The Employer should apply to the Internal Revenue Service for a
determination letter with respect to its termination, and the Trustee should
not distribute the Trust Funds until a determination is received. However,
should it decide that a distribution before receipt of the determination letter
is necessary or appropriate it should retain sufficient assets to cover any tax
that may become due upon that determination.
13.8 100% VESTING REQUIRED ON PARTIAL OR COMPLETE TERMINATION OR COMPLETE
DISCONTINUANCE. Without regard to any other provision of this Plan, if there
is a partial or total termination of this Plan or there is a complete
discontinuance of the Employer's Contributions, each of the affected Members
shall immediately become 100% vested in his Account as of the end of the last
Plan Year for which a substantial Employer Contribution was made and in any
amounts later allocated to his Account. If the Employer then resumes making
substantial Contributions at any time, the appropriate vesting schedule shall
again apply to all amounts allocated to each affected Member's Account
beginning with the Plan Year for which they were resumed.
13.9 DISTRIBUTION UPON TERMINATION. A Member may receive a distribution
on account of termination of this Plan if neither the Employer nor any
Affiliated Employer establishes or maintains a successor plan within the period
ending 12 months after all assets are distributed from the Plan. A successor
plan for this purpose is any other defined contribution plan except: (a) an
employee stock ownership plan as defined in sections 4975(e) or 409 of the
Code, (b) a simplified employee pension plan as defined in section 408(k) of
the Code, or (c) or a defined contribution plan in which fewer than 2% of the
Members of this Plan were eligible to participate during the 24 month period
beginning 12 months before the time of this Plan's termination. Any
distribution on account of the termination of this Plan, must be made only in
the form of a lump sum payment or a Direct Rollover, as elected by the Member.
If a Member is given the opportunity but fails to make an election as to the
form of distribution, he shall be deemed to have elected a lump sum
distribution.
XIII-3
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ARTICLE XIV
SALE OF EMPLOYER OR SUBSTANTIALLY ALL OF ITS ASSETS
14.1 CONTINUANCE PERMITTED UPON SALE OR TRANSFER OF ASSETS. An Employer's
participation in this Plan and its related Trust Fund shall not automatically
terminate if it consolidates or merges and is not the surviving corporation,
sells substantially all of its assets, is a party to a reorganization and its
Employees and substantially all of its assets are transferred to another
entity, liquidates, or dissolves, if there is a successor organization.
Instead, the successor may assume and continue this Plan and its related Trust
Fund by executing a direction, entering into a contractual commitment or
adopting a resolution providing for the continuance of the Plan and its related
Trust Fund. Only upon the successor's rejection of this Plan and its related
Trust Fund or its failure to respond to the Employer's, the Sponsor's or the
Trustee's request that it affirm its assumption of this Plan within 90 days of
the request shall this Plan automatically terminate. In that event the
appropriate portion of the Trust Fund shall be distributed exclusively to the
Members or their Beneficiaries as soon as administratively feasible. If there
is a disposition to an unrelated entity of substantially all of the assets used
by the Employer in a trade or business or a disposition by the Employer of its
interest in a subsidiary, the Employer may make a lump sum distribution from
the Plan if it continues the Plan after the disposition; but the distribution
can only be made for those Members who continue employment with the acquiring
entity.
14.2 DISTRIBUTIONS UPON DISPOSITION OF ASSETS OR A SUBSIDIARY. A Member
employed by an Employer that is a corporation is entitled to receive a lump sum
distribution of his interest in his Accounts in the event of the sale or other
disposition by the Employer of at least 85% of all of the assets used by the
Employer in a trade or business to an unrelated corporation if (a) the Employer
continues to maintain the Plan after the disposition and (b) in connection with
the disposition the Member is transferred to the employ of the corporation
acquiring the assets.
A Member employed by an Employer that is a corporation is entitled to
receive a lump sum distribution of his interest in his Accounts in the event of
the sale or other disposition by the Employer of its interest in a subsidiary
(within the meaning of section 409(d)(3) of the Code) to an unrelated entity or
individual if (a) the Employer continues to maintain the Plan after the
disposition and (b) in connection with the disposition the Member continues
employment with the subsidiary.
The selling Employer is treated as continuing to maintain the Plan after
the disposition only if the purchaser does not maintain the Plan after the
disposition. A purchaser is considered to maintain the Plan if it adopts the
Plan, becomes an employer whose employees accrue benefits under the Plan, or if
the Plan is merged or consolidated with, or any assets or liabilities are
transferred from the Plan to a plan maintained by the purchaser in a
transaction subject to section 414(l)(1) of the Code.
XIV-1
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An unrelated corporation, entity or individual is one that is not required
to be aggregated with the selling Employer under section 414(b), (c), (m), or
(o) of the Code after the sale or other disposition.
If a Member's Account balance is or is deemed to be $5,000.00 or less
determined under the rules set out in Section 6.11, the Committee will direct
the Trustee to pay to the Member a lump sum cash distribution of his Account
balance as soon as administratively practicable following the disposition and
any Internal Revenue Service approval of the distribution that the Committee
deems advisable to obtain.
If it is or is deemed to be more than $5,000.00 at the date of the
disposition, he may elect (a) to receive a lump sum cash distribution of his
Account balance as soon as administratively practicable following the
disposition and receipt of any Internal Revenue Service approval of the
distribution that the Committee deems advisable to obtain, or (b) he may elect
to defer receipt of his vested Account balance until the first day of the month
coincident with or next following the date that he attains age 65. In the
manner and at the time required under Department of Treasury regulations, the
Committee will provide the Member with a notice of his right to defer receipt
of his Account balance.
However, no distribution shall be made to a Member under this Section
after the end of the second calendar year following the calendar year in which
the disposition occurred. In addition, no distribution shall be made under
this Section unless it is a lump sum distribution within the meaning of section
402(d)(4) of the Code, without regard to subparagraphs (A)(i) through (iv),
(B), and (F) of that section.
XIV-2
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ARTICLE XV.
MISCELLANEOUS
15.1 PLAN NOT AN EMPLOYMENT CONTRACT. The adoption and maintenance of
this Plan and its related Trust Fund is not a contract between any Employer and
its Employees which gives any Employee the right to be retained in its
employment. Likewise, it is not intended to interfere with the rights of any
Employer to discharge any Employee at any time or to interfere with the
Employee's right to terminate his employment at any time.
15.2 BENEFITS PROVIDED SOLELY FROM TRUST. All benefits payable under this
Plan shall be paid or provided for solely from the Trust Fund. No Employer
assumes any liability or responsibility to pay any benefit provided by the
Plan.
15.3 ANTI-ALIENATION PROVISION. No principal or income payable or to
become payable from the Trust Fund shall be subject: to anticipation or
assignment by a Member or by a Beneficiary to attachment by, interference with,
or control of any creditor of a Member or Beneficiary, or to being taken or
reached by any legal or equitable process in satisfaction of any debt or
liability of a Member or Beneficiary prior to its actual receipt by the Member
or Beneficiary. An attempted conveyance, transfer, assignment, mortgage,
pledge, or encumbrance of the Trust Fund, any part of it, or any interest in it
by a Member or Beneficiary prior to distribution shall be void, whether that
conveyance, transfer, assignment, mortgage, pledge, or encumbrance is intended
to take place or become effective before or after any distribution of Trust
assets or the termination of this Trust Fund itself. The Trustee shall never
under any circumstances be required to recognize any conveyance, transfer,
assignment, mortgage, pledge or encumbrance by a Member or Beneficiary of the
Trust Fund, any part of it, or any interest in it, or to pay any money or thing
of value to any creditor or assignee of a Member or Beneficiary for any cause
whatsoever. The prohibitions against the alienation of a Member's Account shall
not apply to:
(a) qualified domestic relations orders or domestic relations
orders entered into prior to January 1, 1985, or
(b) any offset of a Member's Account under the Plan that the
Member is ordered to pay to the Plan if (i) the order arises under
a judgment of conviction of a crime involving the Plan, a civil
judgment (including a consent decree) is entered by a court in
connection with a violation (or alleged violation) of part 4 of
subtitle B of title I of ERISA, or is pursuant to a settlement
agreement between the Secretary of Labor and the Member, or
between the Pension Benefit Guaranty Corporation and the Member,
in connection with a violation (or alleged violation) of part 4 of
such subtitle by a fiduciary or any other person, (ii) the
judgment, order, decree or settlement agreement expressly provides
for the offset of all or a part of the amount ordered or required
to be paid to the Plan against the Member's Account balance under
the Plan, and (iii) in a case in which the survivor annuity
requirements of Section 401(a)(11) of the Code apply with respect
to distributions, the requirements of Section 401(a)(13)(C)(iii)
of the Code are satisfied.
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15.4 REQUIREMENTS UPON MERGER OR CONSOLIDATION OF PLANS. This Plan shall
not merge or consolidate with or transfer any assets or liabilities to any
other plan unless each Member would (if the Plan then terminated) receive a
benefit immediately after the merger, consolidation, or transfer which is equal
to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation, or transfer (if the Plan had then
terminated).
15.5 GENDER AND NUMBER. If the context requires it, words of one gender
when used in this Plan shall include the other genders, and words used in the
singular or plural shall include the other.
15.6 SEVERABILITY. Each provision of this Agreement may be severed. If
any provision is determined to be invalid or unenforceable, that determination
shall not affect the validity or enforceability of any other provision.
15.7 GOVERNING LAW; PARTIES TO LEGAL ACTIONS. The provisions of this Plan
shall be construed, administered, and governed under the laws of the State of
Texas and, to the extent applicable, by the laws of the United States. The
Trustee or any Employer may at any time initiate a legal action or proceeding
for the settlement of the account of the Trustee, or for the determination of
any question or for instructions. The only necessary parties to that action or
proceeding are the Trustee and the Employer concerned. However, any other
person or persons may be included as parties defendant at the election of the
Trustee and the Employer.
IN WITNESS WHEREOF, Weatherford International, Inc. has caused this
Agreement to be executed this 30th day of December, 1998, in multiple
counterparts, each of which shall be deemed to be an original, to be effective
the 1st day of January, 1999, except for those provisions which have an earlier
effective date provided by law, or as otherwise provided under applicable
provisions of this Plan.
WEATHERFORD INTERNATIONAL, INC.
By: /s/ Jon R. Nicholson
----------------------------------------
Vice President - Human Resources
-------------------------------------------
Title
XV-2
<PAGE> 1
Exhibit 21.1
WEATHERFORD INTERNATIONAL, INC.
SUBSIDIARY LIST
<TABLE>
<CAPTION>
Jurisdiction
<S> <C>
708621 Alberta Ltd. Alberta
721260 Alberta Ltd. Alberta
A-1 Bit & Tool Co., B.V. Netherlands
Aarbakke AS Norway
Aarbakke Eindom AS Norway
Algerian Oilfield Services S.p.A. Algeria
Ampscot Overseas Petroleum Equipment Co., LLC Oman
Anbert Cilindros S.A.I.C. Argentina
Ancil S.A.I.C. Argentina
Baktexas Azerbajan
BEI Technology, Inc. Texas
Calumet Petroleum Services, Inc. Venezuela
CanaRoss Limited Russia
Channelview Real Property Inc. Delaware
Citra Grant Prideco Marketing Ltd. Jersey Islands
CRC-Evans Automatic Welding, Inc. Texas
CRC-Evans Pipeline International (UK) Limited U.K.
CRC-Evans Services Limited U.K.
Dongying Shengli-Highland Company Ltd. China
Drill Tube International, Inc. Texas
EMI-Electro Magnetica Ispezioni Italia S.r.l. Italy
Energy Ventures (Cyprus) Ltd. Cyprus
Energy Ventures Far East Limited Hong Kong
Energy Ventures Foreign Sales Corp. Barbados
Energy Ventures Mid East, Inc. Cayman Islands
Enerpro de Mexico, S.A. de C.V. Mexico
Enterra Cyprus Limited Cyprus
Enterra (U.K.) Limited U.K.
Enterra Compression Company Delaware
Enterra Compression Investment Company Delaware
Enterra International Limited U.K.
Enterra Oilfield Rentals Limited Hong Kong
Enterra Patco Oilfield Products, Inc. Texas
Enterra Rental and Fishing Company Delaware
Ercon, Inc. Delaware
European Material Inspection (EMI) B.V. Netherlands
EVI (Barbados), SRL Barbados
EVI Arrow, Inc. Delaware
EVI Brasil Comercia Ltda. Brazil
EVI Cayman Ltd. Cayman Islands
EVI Christiana, Inc. Wisconsin
EVI de Peru, SRL Peru
EVI de Venezuela, S.A. Venezuela
</TABLE>
1
<PAGE> 2
<TABLE>
<S> <C>
EVI France SAS France
EVI International, Inc. Delaware
EVI do Brasil Comercio e Servicos Ltda. Brazil
EVI Oil Tools Ltd. U.K.
EVI Watson Packers, Inc. Delaware
EVI Weatherford, Inc. Delaware
Grant Prideco (Singapore) Pte. Ltd. Singapore
Grant Prideco Limited U.K.
Grant Prideco S.A. de C.V. Mexico
Grant Prideco, Inc. Delaware
Grant Prideco, S.A. Switzerland
Grant Tubular Finishing Ltd. Hungary
Griffin Legrand Limited Partnership Alberta
Houston Well Screen Asia Pte. Ltd. Singapore
Houston Well Screen Company Texas
Immobiliaria Industrial de Veracruz, S.A. de C.V. Mexico
Keltic Oil Tools Limited U.K.
Kobe International Ltd. Bahamas
KSP Logistics Co. Ltd. Thailand
Legrand International (1977) Ltd. Barbados
McAllister Petroleum Services (Cyprus) Limited Cyprus
McMurry-Macco (UK) Lmited U.K.
Nodeco A/S Norway
Nodeco Ltd. U.K.
Oil Field Rental Holdings Limited U.K.
Oiltools Weatherford Limited British Virgin Islands
Pacific Pump & Supply, Inc. California
PETCO Fishing & Rental Tools (UK) Ltd. U.K.
Petroleum Equipment Supply Company Louisiana
PhlipCo, Inc. Delaware
Prideco de Venezuela, S.A. Venezuela
Prideco Europe Limited U.K.
Pridecomex Holding, S.A. de C.V. Mexico
PT Hawes Utama Indonesia Indonesia
PT Weatherford Indonesia Indonesia
SBS Drilling-and Production Systems GmbH & Co. KG Austria
SBS Drilling-and Production-Systems Ltd. Cayman Islands
Schoeller-Bleckmann Motovilithinskije Sucker Rod Gmbh Austria
ServiciosTec LDC Cayman Islands
Subsurface Technology AS Norway
SubTech International, Inc. Delaware
TA Industries, Inc. Delaware
TF de Mexico, S.A. de C.V. Mexico
Tech Line Oil Tools (Europe) A/S Norway
Tech Line Oil Tools Inc. Delaware
Technical Oil Services Ltd. British Virgin Islands
Texas Arai, Inc. Delaware
Trico Industries, Inc. California
Tube-Alloy Capital Corporation Texas
Tube-Alloy Corporation Louisiana
Tube-Alloy Corporation International Texas
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
Van der Horst U.S.A., Inc. Delaware
Venstar Ltd. U.K.
Venstar, Inc. Delaware
Weatherford (Malaysia) Sdn. Bhd. Malaysia Jt. Venture
Weatherford (Saudi Arabia) Ltd. Saudi Arabia
Weatherford (Thailand) Ltd. Thailand
Weatherford (UK) Ltd. U.K.
Weatherford/Al-Rushaid Ltd. Saudi Arabia
Weatherford Ampscot Ltd. Alberta
Weatherford/Lamb, Inc. Delaware
Weatherford Abu Dhabi, Ltd. Cayman Islands
Weatherford Artificial Lift Systems, Inc. Delaware
Weatherford Asia Pacific Pte. Ltd. Singapore
Weatherford Australia Pty. Ltd. Australia
Weatherford BMW Ltd. Alberta
Weatherford Canada Ltd. Canada
Weatherford Colombia Ltd. British Virgin Islands
Weatherford Compression Canada Ltd. Alberta
Weatherford de Mexico S.A. de C.V. Mexico
Weatherford East Europe Service GmbH Germany
Weatherford Enterra Compression Company, L.P. Delaware
Weatherford Enterra S.A. Argentina
Weatherford Espana, S.A. Spain
Weatherford Eurasia B.V. The Netherlands
Weatherford Eurasia Ltd. United Kingdom
Weatherford Foreign Sales Corporation Barbados
Weatherford France, S.A. France
Weatherford Global Compression (Australia) Limited Australia
Weatherford Global Compression Foreign Sales Corporation Barbados
Weatherford Global Compression Holding, L.L.C. Delaware
Weatherford Global Compression Services, L.L.C. Delaware
Weatherford Holding GmbH Germany
Weatherford Holding U.S., Inc. Delaware
Weatherford Industria e Comercio Ltda. Brazil
Weatherford KSP Company Limited Thailand
Weatherford Latin America, Inc. Panama
Weatherford Latin America, S.A. Venezuela
Weatherford Management, Inc. Delaware
Weatherford Mauritius Limited Africa
Weatherford Mediterranea S.p.A. Italy
Weatherford Nigeria Ltd. Nigeria
Weatherford Norge A/S Norway
Weatherford PC Pump Ltd. Alberta
Weatherford Oil Tool GesmbH Austria
Weatherford Oil Tool GmbH Germany
Weatherford Oil Tool Middle East Ltd. British Virgin Islands
Weatherford Oil Tool Nederland B.V. Netherlands
Weatherford Overseas Products, Ltd. Cayman Islands
Weatherford Overseas Services, Ltd. Cayman Islands
Weatherford QAF Sdn. Bhd. Brunei
Weatherford Services (West Africa) Ltd. Nigeria
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
Weatherford Services, Ltd. Bermuda
Weatherford Services, S.A. Panama
Weatherford Trinidad Limited Trinidad
Weatherford U.S., L.P. Louisiana
Weatherford, Inc. Panama
West Coast International Oilfield Rentals, B.V. Netherlands
WEUS Holding, Inc. Delaware
WI Products & Equipment, Inc. Cayman Islands
WII Rental Company Delaware
Worldwide Leasing LDC Cayman Islands
XL Systems International, Inc. Delaware
XL Systems, Inc. Texas
XLS Holding, Inc. Texas
XLS Systems Antilles N.V. Netherlands
XLS Systems Europe, B.V. Netherlands
</TABLE>
4
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated February 17, 1999, included in this Form 10-K
into Weatherford International, Inc.'s previously filed Registration Statement
File Nos. 33-31662, 33-56384, 33-56386, 33-65790, 33-64349, 333-13531,
333-39587, 333-44345, 333-45207 and 333-53633.
ARTHUR ANDERSEN LLP
Houston, Texas
March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of income and is
qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1998 JAN-01-1998 JAN-01-1998 JAN-01-1998
<PERIOD-END> DEC-31-1998 SEP-30-1998 JUN-30-1998 MAR-31-1998
<CASH> 40,201 48,542 66,527 42,500
<SECURITIES> 0<F1> 0<F1> 0<F1> 0<F1>
<RECEIVABLES> 420,650 482,642 528,613 562,116
<ALLOWANCES> 19,764 21,319 20,882 25,300
<INVENTORY> 484,822 552,609 529,069 499,387
<CURRENT-ASSETS> 1,082,392 1,177,276 1,197,553 1,179,902
<PP&E> 1,661,918 900,616 872,045 886,351
<DEPRECIATION> 823,648 0 0 0
<TOTAL-ASSETS> 2,831,715 2,924,220 2,922,306 2,909,445
<CURRENT-LIABILITIES> 556,841 635,018 649,196 604,041
<BONDS> 632,163 647,052 649,463 655,027
0<F1> 0<F1> 0<F1> 0<F1>
0<F1> 0<F1> 0<F1> 0<F1>
<COMMON> 103,513 103,461 103,021 101,507
<OTHER-SE> 1,390,367 1,420,049 1,392,440 1,410,835
<TOTAL-LIABILITY-AND-EQUITY> 2,831,715 2,924,220 2,922,306 2,909,445
<SALES> 1,250,570 975,987 674,917 360,456
<TOTAL-REVENUES> 2,010,654 1,583,807 1,101,353 570,520
<CGS> 924,133 679,006 467,459 251,252
<TOTAL-COSTS> 1,426,785 1,082,268 748,073 384,358
<OTHER-EXPENSES> 0<F1> 0<F1> 0<F1> 0<F1>
<LOSS-PROVISION> 0<F1> 0<F1> 0<F1> 0<F1>
<INTEREST-EXPENSE> 54,497 40,482 25,759 12,011
<INCOME-PRETAX> 99,388 140,829 75,052 97,962
<INCOME-TAX> 34,551 51,823 28,800 36,819
<INCOME-CONTINUING> 64,837 89,006 46,252 61,143
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0<F1> 0<F1> 0<F1> 0<F1>
<NET-INCOME> 64,837 89,006 46,252 61,143
<EPS-PRIMARY> 0.67 0.92 0.48 0.63
<EPS-DILUTED> 0.66 0.91 0.47 0.63
<FN>
<F1>This amount is not disclosed in the financial statements and thus a value of
zero has been shown for purposes of this financial data schedule.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of income and
is qualified in its entirety by reference to such statements.
</LEGEND>
<RESTATED>
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS 6-MOS 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1997 SEP-30-1997 JUN-30-1997 MAR-31-1997 DEC-31-1996
<CASH> 74,211 53,221 88,205 133,743 256,995
<SECURITIES> 0<F1> 0<F1> 0<F1> 0<F1> 0<F1>
<RECEIVABLES> 548,402 485,879 442,480 455,680 406,457
<ALLOWANCES> 23,473 19,772 18,956 18,835 16,824
<INVENTORY> 455,811 402,987 393,029 346,535 320,933
<CURRENT-ASSETS> 1,134,076 1,003,250 976,517 1,018,852 1,061,780
<PP&E> 1,631,560 1,577,282 1,493,339 1,470,354 1,473,816
<DEPRECIATION> 764,747 0 0 0 741,804
<TOTAL-ASSETS> 2,737,910 2,365,313 2,236,197 2,204,684 2,243,633
<CURRENT-LIABILITIES> 503,169 451,502 398,258 388,612 440,541
<BONDS> 654,822 378,875 367,208 400,257 417,976
0<F1> 0<F1> 0<F1> 0<F1> 0<F1>
0<F1> 0<F1> 0<F1> 0<F1> 0<F1>
<COMMON> 101,958 101,892 100,447 95,634 95,493
<OTHER-SE> 1,356,591 1,319,495 1,267,613 1,227,968 1,197,211
<TOTAL-LIABILITY-AND-EQUITY> 2,737,910 2,365,313 2,236,197 2,204,684 2,243,633
<SALES> 1,097,823 770,973 480,177 219,979 704,350
<TOTAL-REVENUES> 1,969,089 1,417,970 908,252 431,253 1,467,270
<CGS> 807,575 571,276 360,192 165,357 550,292
<TOTAL-COSTS> 1,388,387 1,006,882 650,716 309,557 1,098,925
<OTHER-EXPENSES> 0<F1> 0<F1> 0<F1> 0<F1> 0<F1>
<LOSS-PROVISION> 0<F1> 0<F1> 0<F1> 0<F1> 0<F1>
<INTEREST-EXPENSE> 43,273 31,273 21,148 10,545 39,368
<INCOME-PRETAX> 304,961 211,767 128,983 58,621 132,674
<INCOME-TAX> 108,188 74,397 45,339 20,718 40,513
<INCOME-CONTINUING> 196,773 137,370 83,644 37,903 92,161
<DISCONTINUED> 0 0 0 0 74,392
<EXTRAORDINARY> (9,010) 0 0 0 (731)
<CHANGES> 0<F1> 0<F1> 0<F1> 0<F1> 0<F1>
<NET-INCOME> 187,763 137,370 83,644 37,903 165,822
<EPS-PRIMARY> 1.95 1.43 0.88 0.40 1.85
<EPS-DILUTED> 1.92 1.41 0.86 0.39 1.82
<FN>
<F1>This amount is not disclosed in the financial statements and thus a value of
zero has been shown for purposes of this financial data schedule.
</FN>
</TABLE>
