<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ________ to ________
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 (I.R.S. Employer
incorporation or organization) Identification No.)
515 Post Oak Blvd., Suite 600, Houston, Texas 77027-3415
(Address of principal executive offices) (Zip Code)
(713) 693-4000
(Registrant's telephone number, include area code)
____________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Title of Class Outstanding at May 8, 2000
-------------- --------------------------
Common Stock, par value $1.00 108,492,876
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents........................................... $ 27,551 $ 44,361
Accounts Receivable, Net of Allowance for Uncollectible
Accounts of $20,971 and $19,882, Respectively..................... 385,649 352,139
Inventories......................................................... 401,029 364,607
Other Current Assets................................................ 128,271 108,042
------------- -------------
942,500 869,149
------------- -------------
PROPERTY, PLANT AND EQUIPMENT, AT COST,
NET OF ACCUMULATED DEPRECIATION..................................... 878,236 898,996
GOODWILL, NET.......................................................... 1,009,429 991,679
NET ASSETS OF DISCONTINUED OPERATIONS.................................. 568,323 553,861
DEFERRED TAX ASSET..................................................... 66,028 66,077
OTHER ASSETS........................................................... 135,530 134,027
------------- -------------
$ 3,600,046 $ 3,513,789
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-Term Borrowings and Current Portion of Long-Term Debt......... $ 394,262 $ 322,767
Accounts Payable.................................................... 131,672 117,530
Accrued Salaries and Benefits....................................... 50,337 55,586
Other Current Liabilities........................................... 162,762 170,197
------------- -------------
739,033 666,080
------------- -------------
LONG-TERM DEBT......................................................... 224,483 226,603
MINORITY INTEREST...................................................... 198,965 198,597
DEFERRED INCOME TAXES AND OTHER........................................ 197,900 186,611
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 120,379 and 120,200 Shares, Respectively................... 120,379 120,200
Capital in Excess of Par Value...................................... 1,534,546 1,526,648
Treasury Stock, at Cost............................................. (310,547) (309,963)
Retained Earnings................................................... 592,845 586,310
Accumulated Other Comprehensive Loss................................ (100,058) (89,797)
------------- -------------
1,837,165 1,833,398
------------- -------------
$ 3,600,046 $ 3,513,789
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
1
<PAGE> 3
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------------------------
2000 1999
-------------- -------------
<S> <C> <C>
REVENUES:
Products.............................................................. $ 178,789 $ 116,891
Services and Rentals.................................................. 216,593 148,450
-------------- -------------
395,382 265,341
COSTS AND EXPENSES:
Cost of Products...................................................... 126,193 81,122
Cost of Services and Rentals.......................................... 154,799 102,553
Selling, General and Administrative Attributable to Segments.......... 78,973 60,918
Corporate General and Administrative.................................. 8,578 5,572
Equity in Earnings of Unconsolidated Affiliates....................... (834) (454)
-------------- -------------
OPERATING INCOME........................................................ 27,673 15,630
OTHER INCOME (EXPENSE):
Interest Income....................................................... 617 1,505
Interest Expense...................................................... (13,022) (10,000)
Other, Net............................................................ 970 (936)
-------------- -------------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST........................ 16,238 6,199
PROVISION FOR INCOME TAXES ............................................. (5,682) (1,699)
-------------- -------------
INCOME BEFORE MINORITY INTEREST......................................... 10,556 4,500
MINORITY INTEREST EXPENSE, NET OF TAX................................... (563) (738)
-------------- -------------
INCOME FROM CONTINUING OPERATIONS....................................... 9,993 3,762
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX........................... (3,458) (1,224)
-------------- -------------
NET INCOME.............................................................. $ 6,535 $ 2,538
============== =============
BASIC EARNINGS (LOSS) PER SHARE:
Income From Continuing Operations..................................... $ 0.09 $ 0.04
Loss From Discontinued Operations..................................... (0.03) (0.01)
-------------- -------------
NET INCOME PER SHARE.................................................... $ 0.06 $ 0.03
============== =============
DILUTED EARNINGS (LOSS) PER SHARE:
Income From Continuing Operations..................................... $ 0.09 $ 0.04
Loss From Discontinued Operations..................................... (0.03) (0.01)
-------------- -------------
NET INCOME PER SHARE.................................................... $ 0.06 $ 0.03
============== =============
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic................................................................. 108,752 97,315
============== =============
Diluted............................................................... 111,318 98,007
============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
2
<PAGE> 4
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
------------------------------------
2000 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................................................ $ 6,535 $ 2,538
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Depreciation and Amortization...................................... 48,414 39,049
Loss from Discontinued Operations.................................. 3,458 1,224
Minority Interest Expense, Net of Tax.............................. 563 738
Deferred Income Tax Provision ..................................... 1,411 3,363
Gain on Sales of Property, Plant and Equipment..................... (416) (2,270)
Change in Operating Assets and Liabilities, Net of Effects
of Businesses Acquired........................................... (93,627) (27,775)
------------- -------------
Net Cash Provided (Used) by Continuing Operations................ (33,662) 16,867
Net Cash Used by Discontinued Operations......................... (16,706) (33,685)
------------- -------------
Net Cash Used by Operating Activities............................ (50,368) (16,818)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Businesses, Net of Cash Acquired....................... (16,975) (27,049)
Capital Expenditures for Property, Plant and Equipment................ (39,019) (28,666)
Acquisitions and Capital Expenditures of
Discontinued Operations............................................ (5,056) (4,106)
Proceeds from Sales of Property, Plant and Equipment.................. 5,138 5,810
Proceeds from Sale and Leaseback of Equipment......................... 17,025 --
------------- -------------
Net Cash Used by Investing Activities............................ (38,887) (54,011)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on Short-Term Debt, Net.................................... 74,589 68,218
Repayments of Long-Term Debt, Net..................................... (4,284) (521)
Proceeds from Exercise of Stock Options............................... 2,647 --
Acquisition of Treasury Stock......................................... (615) (1,170)
Other, Net............................................................ 108 112
------------- -------------
Net Cash Provided by Financing Activities........................ 72,445 66,639
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS............................... (16,810) (4,190)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........................ 44,361 34,131
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.............................. $ 27,551 $ 29,941
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest Paid......................................................... $ 10,638 $ 6,715
Income Taxes Paid, Net of Refunds..................................... 4,965 10,638
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
3
<PAGE> 5
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------------------------
2000 1999
--------------- -----------------
<S> <C> <C>
Net Income............................................................. $ 6,535 $ 2,538
Other Comprehensive Loss:
Foreign Currency Translation Adjustment.............................. (10,261) (14,274)
--------------- -----------------
Comprehensive Loss..................................................... $ (3,726) $ (11,736)
=============== =================
</TABLE>
The accompanying notes are an integral part of these consolidated
condensed financial statements.
4
<PAGE> 6
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. GENERAL
The consolidated condensed financial statements included herein are
unaudited; however, they include all adjustments of a normal recurring nature
which, in the opinion of management, are necessary to present fairly the
Consolidated Condensed Balance Sheet of Weatherford International, Inc. (the
"Company") at March 31, 2000, the Consolidated Condensed Statement of Income for
the three months ended March 31, 2000 and 1999, the Consolidated Condensed Cash
Flows for the three months ended March 31, 2000 and 1999 and the Consolidated
Statements of Comprehensive Loss for the three months ended March 31, 2000 and
1999. Although the Company believes that the disclosures in these financial
statements are adequate to make the interim information presented not
misleading, certain information relating to the Company's organization and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted in this Form 10-Q pursuant to such rules and regulations. These
financial statements should be read in conjunction with the audited consolidated
financial statements for the year ended December 31, 1999 and notes thereto
included in the Company's Annual Report on Form 10-K. The results of operations
for the three month period ended March 31, 2000 are not necessarily indicative
of the results expected for the full year.
In October 1999, the Board of Directors of the Company approved a plan to
distribute all of the outstanding shares of common stock of its wholly owned
subsidiary, Grant Prideco, Inc. (the "Spin-off"), to holders of the Company's
common stock, $1.00 par value ("Common Stock"). These shares were distributed at
the close of business on April 14, 2000 to stockholders of record as of March
23, 2000. In connection with and prior to the Spin-off, the Company transferred
its drilling products businesses to Grant Prideco, Inc. ("Grant Prideco"). As a
result, the accompanying financial statements reflect the operations of Grant
Prideco as discontinued operations (See Note 4).
Certain reclassifications of prior year balances have been made to conform
such amounts to corresponding 2000 classifications.
2. INVENTORIES
Inventories by category are as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------- -------------
(in thousands)
<S> <C> <C>
Raw materials, components and supplies........................... $ 144,704 $ 159,380
Work in process.................................................. 54,844 34,089
Finished goods................................................... 201,481 171,138
------------- -------------
$ 401,029 $ 364,607
============= =============
</TABLE>
Work in process and finished goods inventories include the cost of
material, labor and plant overhead.
3. BUSINESS COMBINATIONS
On January 12, 2000, the Company's Compression Services Division acquired
Singapore-based Gas Services International Limited ("GSI") for a total of
approximately $20.2 million. The acquisition is intended to expand this
division's platform of full service capabilities in the Asia-Pacific and Middle
Eastern markets. GSI's main business units include compressor package rental,
maintenance and service, and floating production storage and offloading
platforms. In addition to Singapore, GSI has service locations in Indonesia and
the United Arab Emirates.
5
<PAGE> 7
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
The Company also effected various other acquisitions during the three
months ended March 31, 2000 for total consideration of approximately $10.0
million, of which $5.2 million was paid in cash and assumed debt and $4.8
million was paid in the form of shares of Common Stock.
On August 31, 1999, the Company completed the acquisition of Dailey
International Inc. ("Dailey") pursuant to a pre-negotiated plan of
reorganization in bankruptcy. Under the terms of the acquisition, the Company
issued a total of approximately 4.3 million shares of Common Stock to the Dailey
noteholders and stockholders. Because the Company held Senior Notes of Dailey,
which the Company acquired prior to the bankruptcy at a discount, the total
purchase price for Dailey, excluding assumed liabilities of Dailey that were not
impaired in the bankruptcy, was approximately $185.0 million.
The acquisitions discussed above were accounted for using the purchase
method of accounting. Results of operations for acquisitions accounted for as
purchases are included in the accompanying consolidated condensed financial
statements since the date of acquisition. The purchase price was allocated to
the net assets acquired based upon their estimated fair market values at the
date of acquisition. The balances included in the Consolidated Condensed Balance
Sheets related to the acquisitions are based upon preliminary information and
are subject to change when final asset and liability valuations are obtained.
Material changes in the preliminary allocations are not anticipated by
management.
The following presents the consolidated financial information for the
Company on a pro forma basis assuming the Dailey acquisition had occurred on
January 1, 1999. All other 1999 and 2000 acquisitions are not material
individually nor in the aggregate with same year acquisitions, therefore, pro
forma information is not presented. The pro forma information set forth below is
not necessarily indicative of the results that actually would have been achieved
had such transactions been consummated as of January 1, 1999, or that may be
achieved in the future.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, 1999
---------------------------
(in thousands, except
per share amounts)
<S> <C>
Revenues........................................................................... $293,155
Loss from continuing operations.................................................... (5,079)
Net loss........................................................................... (6,303)
Basic loss per common share:
Loss from continuing operations............................................... (0.05)
Net loss...................................................................... (0.06)
Diluted loss per common share:
Loss from continuing operations............................................... (0.05)
Net loss...................................................................... (0.06)
</TABLE>
4. DISCONTINUED OPERATIONS
In October 1999, the Board of Directors of the Company approved a plan to
spinoff Grant Prideco through a distribution by the Company to its stockholders
of one share of stock of Grant Prideco for each share of Common Stock held by
the Company's stockholders. The distribution was completed as of the close of
business on April 14, 2000.
6
<PAGE> 8
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
The results of operations for Grant Prideco are reflected in the
accompanying Consolidated Condensed Statements of Income as discontinued
operations, net of taxes. Condensed results of Grant Prideco were as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
--------------------------
2000 1999
------------ ------------
(in thousands)
<S> <C> <C>
Revenues..................................................................... $ 107,145 $ 88,493
------------ ------------
Income (loss) before interest
allocation and income taxes............................................. (1,015) 653
Interest allocation.......................................................... (2,500) (1,812)
(Provision) benefit for income taxes......................................... 937 (65)
------------ ------------
Net loss before Spin-off-related
costs................................................................... (2,578) (1,224)
Spin-off-related costs, net of taxes......................................... (880) --
------------ ------------
Net loss..................................................................... $ (3,458) $ (1,224)
============ =============
</TABLE>
In connection with the Spin-off, Grant Prideco issued an unsecured
subordinated note to the Company in the amount of $100.0 million. The $100.0
million obligation bears interest at an annual rate equal to 10.0%. Interest
payments are due quarterly, and principal and all unpaid interest is due no
later than March 31, 2002. Under the terms of the note, Grant Prideco is
required to repay this note with the proceeds of any debt or equity financing,
excluding financing under a credit facility or any equity issued in connection
with a business combination. The indebtedness of Grant Prideco to the Company is
subordinated to the working capital obligations of Grant Prideco to its banks.
The Drilling and Intervention Services Division and Artificial Lift
Division of the Company purchase drill pipe and other related products from
Grant Prideco. These purchases have been eliminated in the accompanying
consolidated condensed financial statements. The amount purchased for the three
months ended March 31, 2000 was $6.8 million and for the three months ended
March 31, 1999 was $6.0 million. These purchases represent Grant Prideco's cost.
The results from discontinued operations include a management fee charged
to Grant Prideco of $0.5 million for the three months ended March 31, 2000 and
$0.3 million for the three months ended March 31, 1999. The fee is based on the
time devoted to Grant Prideco for accounting, tax, treasury and risk management
services.
Grant Prideco was charged $1.4 million of costs related to the Company's
information systems function in the three months ended March 31, 1999. There
were no charges for the comparable period of 2000. Information systems charges
were based on direct support provided, equipment usage and number of system
users.
Agreements Between the Company and Grant Prideco
In connection with the Spin-off, Grant Prideco and the Company entered into
a tax allocation agreement (the "Tax Allocation Agreement"). Under the terms of
the Tax Allocation Agreement, Grant Prideco, is responsible for all taxes and
associated liabilities relating to the historical businesses of Grant Prideco.
The Tax Allocation Agreement also requires that any tax liabilities associated
with the Spin-off shall be paid by Grant Prideco subject to certain exceptions
relating to changes in control of the Company. The Tax Allocation Agreement
further provides that in the event there is a tax liability associated with the
historical operations of Grant Prideco that is offset by a tax benefit of the
Company, the Company will apply the tax benefit against such tax liability and
will be reimbursed for the value of such tax benefit when and as the Company
would have been able to otherwise utilize that tax benefit for its own
businesses.
7
<PAGE> 9
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
The Company entered into a transition services agreement with Grant Prideco
for a period of one year from the Spin-off date. Under the agreement, the
Company has agreed to provide certain services requested by Grant Prideco. The
fee for these services is based on a cost-plus 10% basis. Under this agreement,
transition services include accounting services, tax services, finance services,
employee benefit services, information systems services, risk management
services and may include any other similar services.
The Company has also entered into a preferred customer agreement with Grant
Prideco pursuant to which the Company agreed, for a three year period, to
purchase at least 70% of its requirements of drill stem products from Grant
Prideco. The price for those products will be at a price not greater than that
which Grant Prideco sells to its best similarly situated customers. The Company
is entitled to apply against its purchases a drill stem credit granted to it in
the amount of $30.0 million, subject to a limitation of the application of the
credit to no more than 20% of any purchase.
5. SHORT-TERM DEBT
The Company's unsecured credit agreement 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. As of March 31, 2000, the
Company had $70.0 million available under this agreement. Amounts outstanding
under the facility accrue interest at the U.S. prime rate or a variable rate
based on LIBOR. A commitment fee ranging from 0.09% to 0.20% per annum,
depending on the senior unsecured credit ratings assigned by Standard and Poor's
and Moody's Investor Service to the Company, 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.
The Company also engages in unsecured short-term borrowings with various
institutions pursuant to uncommitted facilities and bid note arrangements. At
March 31, 2000, the Company had $189.1 million in unsecured short-term
borrowings outstanding under these arrangements.
6. SALE AND LEASEBACK OF EQUIPMENT
The Compression Services Division has entered into various sale and
leaseback arrangements under which it has sold $256.8 million of compression
units and has a right to sell up to another $93.2 million of compression units.
Under these arrangements, legal title to the compression units are sold to third
parties and leased back to the division under a five year operating lease with a
market-based purchase option.
As of December 31, 1999, the Compression Services Division had sold
compressors under these arrangements having appraised values and received cash
of $239.8 million. During the three months ended March 31, 2000, the Compression
Services Division sold additional compressors having an appraised value equal to
the cash received of $17.0 million. The sales resulted in an additional pretax
deferred gain of approximately $3.9 million, classified as Deferred Income Taxes
and Other on the accompanying Consolidated Condensed Balance Sheets, which may
be deferred until the end of the lease.
The Company has guaranteed certain of the obligations of the joint venture
with respect to the sale of $200.0 million of the compression units. The
remaining sales by the joint venture were done on a non-recourse basis to the
Company and recourse is limited solely to the assets of the joint venture.
The following table provides future minimum lease payments (in thousands)
under the aforementioned lease as of March 31, 2000:
<TABLE>
<S> <C>
Remainder of 2000....................................................... $ 13,525
2001.................................................................... 18,175
2002.................................................................... 18,175
2003.................................................................... 17,476
2004.................................................................... 5,513
2005.................................................................... 142
--------------
$ 73,006
==============
</TABLE>
8
<PAGE> 10
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
7. 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 period. Diluted
earnings per common share is computed by dividing net income by the weighted
average number of shares of Common Stock outstanding during the period adjusted
for the dilutive effect of the incremental shares that would have been
outstanding under the Company's stock option and restricted stock plans. The
effect of the Company's 5% Convertible Subordinated Preferred Equivalent
Debentures due 2027 (the "Debentures") on diluted earnings per share is
anti-dilutive and thus is not included in the calculation.
The following reconciles basic and diluted weighted average shares
outstanding:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-----------------------------
2000 1999
---------- ---------
(in thousands)
<S> <C> <C>
Basic weighted average shares outstanding............................. 108,752 97,315
Dilutive effect of stock option and restricted stock plans............ 2,566 692
--------- ----------
Dilutive weighted average shares outstanding.......................... 111,318 98,007
========= ==========
</TABLE>
8. SUPPLEMENTAL CASH FLOW INFORMATION
The following summarizes investing activities relating to acquisitions
integrated into the Company's continuing operations for the periods shown:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------------------
2000 1999
-------------- --------------
(in thousands)
<S> <C> <C>
Fair value of assets, net of cash acquired........................... $ 9,983 $ 274,546
Goodwill............................................................. 30,307 30,386
Total liabilities, including minority interest....................... (18,476) (277,883)
Common stock issued.................................................. (4,839) --
-------------- --------------
Cash consideration, net of cash acquired............................. $ 16,975 $ 27,049
============== ==============
</TABLE>
9. 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. The Company currently divides its business into four separate segments:
drilling and intervention services, completion systems, artificial lift systems
and compression services.
The Company's drilling and intervention services segment provides fishing
and rental services, well installation services, cementing products and
underbalanced drilling and specialty pipeline services.
The Company's completion systems segment provides completion products and
systems including packers, sand control, flow control, liner hangers, inflatable
packers and intelligent well technology.
9
<PAGE> 11
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
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, gas lift, electrical submersible pumps and
hydraulic lift. This segment also offers well optimization and remote monitoring
and control services.
The Company's compression services segment packages, rents and sells parts
and services for gas compressor units over a broad horsepower range.
Financial information by industry segment for each of the three months
ended March 31, 2000 and 1999, is summarized below. The accounting policies of
the segments are the same as those of the Company.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------------------
2000 1999
------------ ------------
(in thousands)
<S> <C> <C>
Revenues from unaffiliated customers
Drilling and Intervention Services .................................. $ 187,529 $ 142,634
Completion Systems .................................................. 47,621 22,653
Artificial Lift Systems ............................................. 100,217 57,471
Compression Services ................................................ 60,015 42,583
--------- ---------
$ 395,382 $ 265,341
========= =========
EBITDA (a)
Drilling and Intervention Services .................................. $ 56,853 $ 46,028
Completion Systems .................................................. 1,336 (2,715)
Artificial Lift Systems ............................................. 14,172 3,991
Compression Services ................................................ 11,553 12,584
Corporate ........................................................... (7,827) (5,209)
--------- ---------
$ 76,087 $ 54,679
========= =========
Depreciation and amortization
Drilling and Intervention Services .................................. $ 26,009 $ 23,856
Completion Systems .................................................. 6,451 2,427
Artificial Lift Systems ............................................. 5,874 4,835
Compression Services ................................................ 9,329 7,568
Corporate ........................................................... 751 363
--------- ---------
$ 48,414 $ 39,049
========= =========
Operating income (loss)
Drilling and Intervention Services .................................. $ 30,844 $ 22,172
Completion Systems .................................................. (5,115) (5,142)
Artificial Lift Systems ............................................. 8,298 (844)
Compression Services ................................................ 2,224 5,016
Corporate ........................................................... (8,578) (5,572)
--------- ---------
$ 27,673 $ 15,630
========= =========
</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, income from continuing
operations and net income. In addition, EBITDA calculations by one company
may not be comparable to another company.
10
<PAGE> 12
WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
As of March 31, 2000, total assets, excluding net assets of discontinued
operations, were $1,104.1 million for Drilling and Intervention Services, $446.8
million for Completion Systems, $632.1 million for Artificial Lift Systems,
$681.9 million for Compression Services and $166.8 million for Corporate.
As of December 31, 1999, total assets, excluding net assets of discontinued
operations, were $1,117.9 million for Drilling and Intervention Services, $424.5
million for Completion Systems, $615.9 million for Artificial Lift Systems,
$662.7 million for Compression Services and $138.9 million for Corporate.
10. RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB No. 101"), Revenue Recognition in Financial
Statements, to provide guidance on the recognition, presentation and disclosure
of revenue in financial statements. SAB No. 101, with an effective date of
January 1, 2000, is required to be applied by June 30, 2000. The Company is
currently evaluating the impact of SAB No. 101, but does not anticipate that
application of this bulletin will have a material impact on its financial
position or results of operations.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("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. In June 1999 the FASB issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of SFAS No. 133, amending the effective date of SFAS No. 133 to
years beginning after June 15, 2000. The Company is currently evaluating the
impact of SFAS No. 133 on its consolidated condensed financial statements.
11. SUBSEQUENT EVENTS
On April 14, 2000, the Company completed the Spin-off of Grant Prideco.
Each of the Company's stockholders received one share of Grant Prideco common
stock for each share of the Company's stock held by such stockholders as of the
close of business on March 23, 2000.
11
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Our business is conducted through four business segments: (1) Drilling and
Intervention Services, (2) Completion Systems, (3) Artificial Lift Systems and
(4) Compression Services. We also have historically operated a Drilling Products
segment that manufactured and sold drill pipe and other drill stem products and
premium tubulars and connections. The operations of this segment were conducted
through our Grant Prideco division.
On April 14, 2000, we distributed to our stockholders all of the
outstanding shares of Grant Prideco, Inc., which at the time of the distribution
held substantially all of the operating assets used in our Drilling Products
segment. As a result of this distribution, our Drilling Products Division is
presented as a discontinued operation in the accompanying financial statements.
The following is a discussion of our results of operations for the three
months ended March 31, 2000 and 1999. This discussion should be read in
conjunction with our financial statements that are included with this report and
our financial statements and related Management's Discussion and Analysis of
Financial Condition and Results of Operations for the year ended December 31,
1999 included in our Annual Report on Form 10-K.
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 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. All of our businesses are
affected by changes in the worldwide demand and the price of oil and natural
gas. Certain of our products and services, such as our fishing and rental
services, our well installation services and our well completion services, are
dependent on the 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
40% and 50% of our continuing operations are primarily reliant on drilling
activity, with the remainder focused on production and reservoir enhancement
activity.
In 1999, the price of oil hit a low of $11.07 per barrel and the North
American and international rig counts reached historical lows of 534 and 556,
respectively. During the second half of 1999, the price of oil increased due to
demand and supply imbalances and members of the Organization of Petroleum
Exporting Countries reducing production in compliance with production quotas.
These conditions have resulted in world oil prices increasing over the past two
quarters and trading in the $20 to $30 a barrel range.
The following chart sets forth certain historical statistics that are
reflective of the market conditions in which we operate:
<TABLE>
<CAPTION>
HENRY HUB NORTH AMERICAN INTERNATIONAL
WTI OIL (1) GAS (2) RIG COUNT (3) RIG COUNT (3)
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
March 31, 2000.................... $ 26.90 $ 2.945 1,190 584
December 31, 1999................. 25.60 2.329 1,177 575
March 31, 1999.................... 14.66 2.013 747 613
</TABLE>
(1) Price per barrel of West Texas Intermediate crude oil as of March 31 and
December 31 - Source: Applied Reasoning, Inc.
(2) Price per MM/BTU as of March 31 and December 31 - Source: Oil World
(3) Average rig count for the applicable month - Source: Baker Hughes Rig Count
Our Artificial Lift Systems Division, which tracks very closely the United
States and Canadian rig counts, was the first to benefit from the price
improvements as many production projects were reinstated in light of the higher
prices of oil, in particular heavy oil in Canada. Natural gas activity in Canada
also increased significantly due to new pipelines and higher demand. Our
12
<PAGE> 14
Drilling and Intervention Services Division was the next to benefit from the
improved activity in North America, in particular in its fishing and rental and
cementation businesses. Our international activity, which generally lags North
American activity by around six months, remained depressed during the first
quarter of 2000, but has begun to show initial signs of recovery.
Looking forward to the remainder of 2000, we expect that demand for our
products and services will steadily improve as the year progresses, with the
strongest improvement expected in the second half of this year. The timing of
improvements in our operations will be dependent upon the segment of the
industry involved. In general, we expect the recovery to affect our businesses
as follows:
DRILLING AND INTERVENTION SERVICES. This division is expected to see
quarter on quarter improvements throughout the year in both revenue and
profitability, with the strongest growth expected to occur in the second half of
the year as the international markets strengthen. The anticipated improvements
in this division during the second quarter are expected to be partially offset
by seasonal declines in Canada, which contributed around 10% of revenues and 20%
of operating profits for the division in the first quarter. Results for the full
year will be heavily dependent on the continued recovery in the North American
markets and the timing and strength of the recovery outside North America.
COMPLETION SYSTEMS. Our Completion Systems Division is expected to continue
to experience revenue growth throughout the year as it increases its sales and
service infrastructure and manufacturing capabilities. Like our other divisions,
we expect that the revenues and income for this division for the second quarter
will be reduced by the seasonal downturn in Canada. The profitability of this
division will also be reliant on increased drilling activity, particularly in
the international markets, and the division's ability to successfully market its
new products. In addition, we expect that results will be impacted throughout
the year by relatively high selling, general and administrative expenses while
the division positions itself for growth by expanding its sales, service and
engineering operations worldwide. Accordingly, we currently expect that this
division will operate at a loss during the second quarter and begin realizing
an operating profit in the second half of the year.
ARTIFICIAL LIFT SYSTEMS. We expect that our Artificial Lift Systems
Division will continue to see improvements on a year on year basis in North
American revenues as well as improvements in margins as a result of cost
containment, pricing and higher throughput in our plants. This division,
however, will be affected by the normal seasonal downturn in Canada in the
second quarter. Canadian sales represented around 50% of this division's sales
and operating profit during the first quarter. As a result, second quarter
results for this division are expected to be down from the first quarter, with
the amount of the decline to be dependent on the extent of the slowdown in
Canada. Results for the remainder of the year will be heavily dependent on the
United States and Canadian rig counts and heavy oil production in Canada.
COMPRESSION SERVICES. Our Compression Services Division, which is less
affected by day-to-day market factors, experienced a decline in operating profit
and profitability in the first quarter as we began implementing a reorganization
of its operations. This division was also affected by start-up and
administrative costs associated with the expansion of its operations outside of
North America. We currently expect that the reorganization of this division
should be complete by the end of the second quarter and that benefits from this
reorganization and the division's international operations should begin to be
realized by the second half of the year.
Overall, the level of market improvements for our businesses in 2000 will
be heavily dependent on whether oil and natural gas prices can remain at or
about their present levels and the impact that the recent commodity price
increases will have on customer spending. Recent improvements in North America
may be partially offset by a slower recovery in the international markets and
second quarter results will be affected by lower seasonal activity in Canada.
Although we believe that the activity levels in our industry have bottomed out
and are recovering, the extent of the recovery is difficult to predict in light
of the volatile nature of our business. In this regard, the strength of the
recovery will be dependent on many external factors such as compliance with OPEC
quotas, world economic conditions and weather conditions. The extreme volatility
of our markets makes predictions regarding future results difficult.
13
<PAGE> 15
RESULTS OF CONTINUING OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1999
The following charts contain selected financial data comparing our results
for the three months ended March 31, 2000 and March 31, 1999:
<TABLE>
<CAPTION>
COMPARATIVE FINANCIAL DATA THREE MONTHS ENDED
MARCH 31,
-------------------------------
2000 1999
------------- --------------
(in thousands, except
percentages and per share
data)
<S> <C> <C>
Revenues............................................................ $395,382 $ 265,341
Gross Profit........................................................ 114,390 81,666
Gross Profit %...................................................... 28.9% 30.8%
Selling, General and Administrative
Attributable to Segments.......................................... $ 78,973 $ 60,918
Corporate General and Administrative................................ 8,578 5,572
Operating Income.................................................... 27,673 15,630
Income from Continuing Operations................................... 9,993 3,762
Income from Continuing Operations Excluding
Goodwill Amortization, Net of Taxes............................... 18,035 8,036
EBITDA (a).......................................................... 76,087 54,679
Income per Diluted Share from Continuing Operations................. 0.09 0.04
Income per Diluted Share from Continuing Operations
Excluding Goodwill Amortization, Net of Taxes..................... 0.16 0.08
</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
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, income from continuing
operations and net income. In addition, EBITDA calculations by one
company may not be comparable to another company.
<TABLE>
<CAPTION>
SALES BY GEOGRAPHIC REGION
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
----------- ------------
<S> <C> <C>
REGION: (a)
U.S.................................................................... 45% 43%
Canada................................................................. 23% 16%
Europe................................................................. 8% 14%
Latin America.......................................................... 9% 9%
Africa................................................................. 5% 8%
Middle East............................................................ 3% 4%
Other.................................................................. 7% 6%
----------- ------------
Total.............................................................. 100% 100%
=========== ============
</TABLE>
(a) Sales are based on the region of origination and do not reflect sales by
ultimate destination.
14
<PAGE> 16
Our results for the three months ended March 31, 2000 reflected the
improved market conditions in which we were operating. These conditions had the
following effects on our results:
o First quarter 2000 consolidated revenues improved 49.0% over the first
quarter 1999 as a result of improved North American revenues and the impact
of our 1999 acquisitions. Our first quarter 2000 revenues in North America
were $113.9 million higher than they were in the first quarter of 1999.
International revenues increased 14.9% from first quarter 1999 levels.
o The gross profit percentage decreased 6.2% from the first quarter of 1999
to the first quarter of 2000. This decline reflects the pricing pressures
experienced during 1999, which continued into the first quarter of 2000,
and the lower activity in the higher margin international markets.
o Selling, general and administrative expenses decreased as a percentage of
revenues from 23.0% in the first quarter of 1999 to 20.0% in the first
quarter of 2000. The decrease primarily reflects a higher revenue base,
offset by the initial costs relating to new product lines and businesses,
and a $5.3 million increase in goodwill and intangible amortization.
o Operating income increased 77.1% from the first quarter of 1999 due to
improved market conditions and our efforts to reduce costs and improve
efficiencies during the recent industry downturn. The acquisitions made by
us late in the third quarter 1999 also contributed to the increase in
operating income.
o Our effective tax rate for the first quarter of 2000 was 35.0%, as compared
to 27.4% for the first quarter 1999, due to the mix between foreign and
U.S. tax attributes for 2000.
SEGMENT RESULTS
DRILLING AND INTERVENTION SERVICES
Our Drilling and Intervention Services Division experienced improvements in
revenue and operating income as the increase in the North American rig count
positively impacted the demand for its products and services. Demand in
international markets declined significantly during 1999. The decline in demand
has carried into the first quarter 2000, resulting in continued pricing
pressures and reduced volumes. Our Drilling and Intervention Services Division's
revenue and operating income were positively impacted by its 1999 acquisitions,
including Dailey and Williams Tool.
Within our Drilling and Intervention Services Division, all of the product
lines reported gains in revenues. Our fishing and rental and cementation lines
showed the greatest improvements, due to stronger demand in North America.
The following chart sets forth data regarding the results of our Drilling
and Intervention Services Division for the first quarters of 2000 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
------------- -------------
(in thousands, except
percentages)
<S> <C> <C>
Revenues........................................................... $187,529 $142,634
Gross Profit....................................................... 58,986 45,432
Gross Profit %..................................................... 31.5% 31.9%
Selling, General and Administrative................................ $28,976 $23,714
Operating Income................................................... 30,844 22,172
EBITDA............................................................. 56,853 46,028
</TABLE>
Other material items affecting the results of our Drilling and Intervention
Services Division for the first quarter of 2000 compared to the first quarter of
1999 were:
o Our North American revenues for the first quarter of 2000 improved by 90.3%
over the comparable period of 1999. Acquisitions completed in the latter
half of 1999 and a 46.1% increase in the North American rig count
contributed to these improvements. Our international revenues, excluding
Canada, decreased by 9.9% from the first quarter of 1999 due to the
international rig count reduction of 9.0%. The most significant revenue
decrease occurred in Europe where revenues declined 24.3% from prior year
levels.
15
<PAGE> 17
o Gross profit as a percentage of revenues remained relatively flat year over
year due to lower activity levels in the higher margin international
markets.
o Selling, general and administrative expenses decreased slightly as a
percentage of revenues from 16.6% in the first quarter of 1999 to 15.5% in
the first quarter of 2000. The decrease primarily reflects a higher revenue
base partially offset by an increase of $2.3 million in goodwill
amortization expense.
o Operating income increased $8.7 million in the first quarter of 2000 as
compared to first quarter of 1999 primarily due to improved market
conditions in North America and the impact of 1999 acquisitions.
o United States activity was the biggest contributor to the earnings of our
Drilling and Intervention Services Division for the quarter, with the
United States having contributed around 45% of the division's revenues and
over two-thirds of its field operating profits. Canada also contributed
around 10% of the division's revenues and 20% of field operating profits.
COMPLETION SYSTEMS
Our Completion Systems Division has shown steady improvements since the
first quarter of 1999. We significantly changed the composition of this division
in 1999 through our acquisitions of Petroline Wellsystems Limited and Cardium
Tool Services. These acquisitions, together with a major expansion of our Nodeco
liner hanger product line into the United States in 1999, have expanded our
businesses into higher margin premium completion markets worldwide and have
added sand control and flow control to our completion product and service
offerings.
The following chart sets forth data regarding the results of our Completion
Systems Division for the first quarters of 2000 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
------------- -------------
(in thousands, except
percentages)
<S> <C> <C>
Revenues............................................................... $ 47,621 $ 22,653
Gross Profit........................................................... 8,661 2,810
Gross Profit %......................................................... 18.2% 12.4%
Selling, General and Administrative.................................... $ 13,776 $ 7,952
Operating Loss......................................................... (5,115) (5,142)
EBITDA................................................................. 1,336 (2,715)
</TABLE>
Other material items affecting the results of our Completion Systems
Division for the first quarter of 2000 compared to first quarter of 1999 were:
o Revenues more than doubled in the first quarter of 2000 as compared to the
first quarter of 1999. This improvement was mostly seen in the packers and
liner hangers product lines. The increase is due to the expansion of the
distribution of our core products and the new product offerings generated
by our 1999 acquisitions.
o Gross profit as a percentage of revenues increased 46.8% primarily due to
higher gross margin percentages from our 1999 acquisitions and improved
manufacturing efficiencies.
o Selling, general and administrative as a percentage of revenue decreased
from 35.1% in the first quarter of 1999 to 28.9% in the same period in
2000. The decrease is primarily due to the higher revenue base, partially
offset by an increase of $2.7 million in goodwill and intangible
amortization.
o Our research and development expenses for our Completion Services Division
were approximately $2.2 million, or 4.7% of sales during the quarter.
Goodwill and intangible amortization for the quarter was $3.3 or 7.0% of
revenues. These two items of expense are expected to be relatively flat for
the remainder of the year and decline as a percentage of revenues as
revenues increase.
o Our manufacturing consolidation in Europe and Canada, as well as the growth
and development of the expandable product line, are ongoing. We expect
these efforts to be substantially complete by the end of the second
quarter.
16
<PAGE> 18
o During the quarter, we began the relocation of our Norway manufacturing
facility to Scotland. This relocation has resulted in certain delays and
inefficiencies in manufacturing that are expected to continue into the
second quarter.
ARTIFICIAL LIFT SYSTEMS
Operating results from our Artificial Lift Systems Division are heavily
dependent on oil production activity. Revenues for this division increased
approximately 74% from first quarter 1999 levels, primarily in response to
improved activity levels in North American markets, in particular Canada. This
division has also seen increased sales in the Latin American markets from first
quarter 1999 levels as its artificial lift products have begun to penetrate
those markets utilizing our worldwide infrastructure.
Looking forward into the second quarter we expect that revenues in our
Artificial Lift Systems Division will be down approximately 15% due to seasonal
trends. The magnitude of this decline is dependent on the length of the 'spring
break-up' in Canada and the degree of the recovery in the United States and the
international markets.
The following chart sets forth data regarding the results of our Artificial
Lift Systems Division for the first quarters of 2000 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
------------- -------------
(in thousands, except
percentages)
<S> <C> <C>
Revenues............................................................ $ 100,217 $ 57,471
Gross Profit........................................................ 34,355 21,395
Gross Profit %...................................................... 34.3% 37.2%
Selling, General and Administrative................................. $ 26,057 $ 22,239
Operating Income (Loss)............................................. 8,298 (844)
EBITDA.............................................................. 14,172 3,991
</TABLE>
Other material items affecting the results of our Artificial Lift Systems
Division as reflected above for the first quarter of 2000 compared to the first
quarter of 1999 were:
o The first quarter of 2000 experienced an increase in revenues of 74.4%
compared to the first quarter of 1999 primarily as a result of recent
improvements in North American markets. The most significant improvement
was in Canada where revenues were up 128.8% from first quarter 1999 levels
as compared to the Canadian rig count increase of 61.2% period over period.
o Gross profit as a percentage of revenues decreased from 37.2% in the first
quarter of 1999 to 34.3% in the first quarter of 2000 primarily due to
increased sales of lower margin ancilliary products associated with
progressing cavity pumps in Canada.
o Selling, general and administrative expenses decreased as a percentage of
revenues from 38.7% in the first quarter of 1999 to 26.0% in the first
quarter of 2000 due to cost reductions previously implemented and a higher
revenue base.
o Operating income as a percentage of revenues improved to 8.3% for the first
quarter of 2000 as compared to a loss in the first quarter of 1999, due to
cost reductions and the higher revenue base.
COMPRESSION SERVICES
The Compression Services Division reported revenues of $60.0 million for
the quarter compared to $42.6 million for the first quarter of 1999. Operating
income declined to $2.2 million in the first quarter of 2000 from $5.0 million
in the first quarter of 1999. The decline in operating income for the quarter
was primarily attributable to higher costs related to the reorganization of the
division during the quarter, start-up costs associated with international
expansion, including GSI, and lower average margins due to product mix. We are
currently in the process of reducing the cost structure in this division and
focusing its operations on higher margin sales.
17
<PAGE> 19
The following chart sets forth data regarding the results of our
Compression Services Division for the first quarters of 2000 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
2000 1999
------------- -------------
(in thousands, except
percentages)
<S> <C> <C>
Revenues............................................................ $ 60,015 $ 42,583
Gross Profit........................................................ 12,388 12,029
Gross Profit %...................................................... 20.6% 28.2%
Selling, General and Administrative................................. $ 10,164 $ 7,013
Operating Income.................................................... 2,224 5,016
EBITDA.............................................................. 11,553 12,584
Lease Expense....................................................... 4,497 1,595
EBITDAR (a)......................................................... 16,050 14,179
Minority Interest, Net of Taxes..................................... 542 971
</TABLE>
(a) EBITDAR is calculated by taking operating income and adding back
depreciation, amortization and lease expense. We have included an EBITDAR
calculation here because when we look at the performance of this division,
we give consideration to its EBITDAR. Calculations of EBITDAR should not be
viewed as a substitute to calculations under GAAP, in particular cash flows
from operations, operating income, income from continuing operations and
net income. In addition, EBITDAR calculations by one company may not be
comparable to another company.
Other material items affecting the results of our Compression Services
Division for the first quarter of 2000 as compared to the comparable period in
1999 were:
o The increase in revenues primarily reflects the inclusion of the joint
venture for the entire quarter, $3.4 million in revenues from the YPF
contract and $5.6 million of incremental revenues from the January 2000
acquisition of GSI.
o Gross profit as a percentage of revenues decreased 27.0% due to lower
margins on equipment sales worldwide and lower margins on rental
contracts due to pricing pressures primarily in the United States.
Another contributing factor to the decrease in gross profit percentage
is the change in product mix from the higher margin rental services to
the lower margin equipment sales.
o The increase in selling, general and administrative expenses primarily
reflects costs associated with the reorganization of this division
which commenced in the first quarter of 2000. We expect the
reorganization to be complete by the end of the second quarter.
o During the quarter, we acquired GSI and began start-up operations for
the Middle East. The selling, general and administrative costs
associated with GSI for the first quarter were approximately $0.8
million, with little profit attributable to that unit due to the
start-up nature of operations. GSI, however, has commenced operations
in Oman in the second quarter and has a large construction contract
slated to begin later in the year.
o During 1999, our Compression Services Division financed a substantial
portion of its growth through the use of sale and leaseback
arrangements. The payments under these leases are charged as a direct
operating expense and reduce the operating income and margins of the
division. However, EBITDAR, which excludes the effect of these leases,
was up from the first quarter of 1999, yet remained relatively flat
from the fourth quarter of 1999.
DISCONTINUED OPERATIONS
Our discontinued operations consist of our Grant Prideco drilling products
division. Results from discontinued operations were as follows:
o We had a loss from discontinued operations, net of taxes, for the three
months ended March 31, 2000, of $3.5 million and a loss from
discontinued operations, net of taxes, for the three months ended March
31, 1999 of $1.2 million.
18
<PAGE> 20
o Included in the loss from discontinued operations for the three months
ended March 31, 2000 are $0.9 million, net of taxes, of estimated
transaction costs and the estimated net loss from discontinued
operations through the distribution date.
LIQUIDITY AND CAPITAL RESOURCES
Our current sources of capital are current reserves of 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 lines 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 require 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 March 31, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
---------------- ----------------
(in thousands)
<S> <C> <C>
Cash and Cash Equivalents........................................ $ 27,551 $ 44,361
Short-Term Borrowings and Current Portion of Long-Term Debt...... 394,262 322,767
Letters of Credit Outstanding.................................... 28,188 27,791
Cumulative Foreign Currency Translation Adjustment............... (100,058) (89,797)
International Assets (Liabilities) Hedged (U.S. Dollar
Equivalent)................................................. (15,718) 14,745
</TABLE>
The net reduction in our cash and cash equivalents since December 31, 1999,
was primarily attributable to the following:
o Borrowings, net of repayments, on long-term debt and short-term
facilities of $70.3 million.
o Proceeds from the sale and leaseback of compression units of $17.0
million.
o Capital expenditures of property, plant and equipment from continuing
operations of $39.0 million, including $13.3 million for Compression
Services subject to sale and leaseback arrangements.
o Acquisition of new businesses for continuing operations of
approximately $17.0 million in cash, net of cash acquired.
o Cash outflows from operating activities associated with our continuing
operations of $33.7 million.
o Capital expenditures of property, plant and equipment from
discontinued operations of $5.1 million and cash outflows from
operating activities of discontinued operations of $16.7 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. As of March 31, 2000, $70.0 million was available under the
credit facility. Borrowings under this facility bear interest at the U.S. prime
rate or a variable rate based on the 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.
We have unsecured short-term borrowings with various institutions pursuant
to uncommitted lines of credit facilities and bid note arrangements. At March
31, 2000, we had $189.1 million in unsecured short-term borrowings outstanding
under these arrangements.
19
<PAGE> 21
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 Debentures bear interest at an annual rate of 5% and
are convertible into Common Stock. The original conversion was at a price of $80
per share; however, under the terms of the Debentures, the conversion rate for
the Debentures was adjusted to $53.34 per share following our spin-off of Grant
Prideco. The adjustment factor for the conversion rate was based on the average
market price of our common stock on a pre-spin basis and the fair market value
of the Grant Prideco common stock distributed.
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. The
Debentures 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.
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.
COMPRESSION FINANCING
Our Compression Services Division has entered into various sale and
leaseback arrangements where it has sold $256.8 million of compression units and
has a right to sell up to another $93.2 million of compression units. Under
these arrangements, legal title to the compression units are sold to third
parties and leased back to the division under a five-year operating lease with a
market-based purchase option.
As of December 31, 1999, our Compression Services Division had sold
compressors under these arrangements having appraised values and received cash
of $239.8 million. During the three months ended March 31, 2000, our Compression
Services Division sold additional compressors for which it received cash equal
to the appraised value of $17.0 million. The sales resulted in an additional
pretax deferred gain of approximately $3.9 million, which may be deferred until
the end of the lease.
Our Compression Services Division continues to review potential projects
for expansion of its operations both domestically and internationally. Depending
on the size of these projects, we expect that the financing of the projects will
be funded with the joint venture's cash flow from operations, proceeds from its
sale and leaseback arrangements or new project or similar type financings.
GRANT PRIDECO NOTE
In connection with our spin-off of Grant Prideco, we received from Grant
Prideco an unsecured subordinated note to us in the amount of $100.0 million.
The $100.0 million obligation to us bears interest at an annual rate equal to
10.0%. Interest payments are payable to us quarterly, and principal and all
unpaid interest is due no later than March 31, 2002. Under the terms of the
note, Grant Prideco is required to repay this note with the proceeds of any debt
or equity financing, excluding financing under a credit facility or any equity
issued in connection with a business combination. The indebtedness of Grant
Prideco to us is subordinated to the working capital obligations of Grant
Prideco to its banks. We understand that Grant Prideco currently intends to
repay the obligations within 12 months from the completion of the spin-off,
pursuant to an anticipated public or private debt financing. Grant Prideco's
ability to repay this indebtedness, and the timing thereof is subject to its
discretion and will be dependent upon market conditions.
CAPITAL EXPENDITURES
Our capital expenditures for property, plant and equipment for our
continuing operations during the three months ended March 31, 2000 were $39.0
million and primarily related to compression and other rental equipment, fishing
tools and tubular service equipment. Included within these capital expenditures
for the three months ended March 31, 2000 was $13.3 million for our Compression
Services Division which primarily related to our U.S. operations. Capital
expenditures for 2000 are expected to be approximately $110.0 million, excluding
capital expenditures for our compression operations that are financed by sale
and leaseback arrangements. Our depreciation expense during the first quarter
was $37.7 million. We currently expect depreciation for the year to be
approximately $200.0 million.
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Our compression operations are, by their nature, capital intensive and
require substantial investments in compressor units. Capital expenditures will
be based on contract needs and the timing of new projects entered into by our
compression joint venture. We expect that future capital investments 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
On January 12, 2000, our Compression Services Division acquired
Singapore-based GSI for a total of approximately $20.2 million. The acquisition
expands this division's platform of full service capabilities in the
Asia-Pacific and Middle Eastern markets. GSI's main business units include
compressor package rental, maintenance and service, and floating production
storage and offloading platforms. In addition to Singapore, GSI has service
locations in Indonesia and the United Arab Emirates.
During the three months ended March 31, 2000 we also completed two
acquisitions for our Artificial Lift Systems Division and another acquisition
for our Compression Services Division for total consideration of $5.2 million.
We also acquired a minority-held interest in one of our subsidiaries of our
Completion Systems Division for shares of our common stock valued at $4.8
million.
Some of our acquisitions have resulted in substantial goodwill associated
with their operations, including the addition of goodwill of approximately $30.3
million during the three months ended March 31, 2000, relating to our
acquisitions. The amortization expense for goodwill and other intangibles during
the three months ended March 31, 2000 was $10.7 million.
NEW ACCOUNTING PRONOUNCEMENTS
In December 1999 the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101 ("SAB No. 101"), Revenue Recognition, to provide
guidance on the recognition, presentation and disclosure of revenue in financial
statements. SAB No. 101, which is effective January 1, 2000, is required to be
applied by June 30, 2000. We are currently evaluating the impact of SAB No. 101,
but do not anticipate that application of this bulletin will have a material
impact on our financial position or results of operations.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("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. In June 1999, the FASB issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of SFAS No. 133, amending the effective date of SFAS No. 133 to
years beginning after June 15, 2000. We are currently evaluating the impact of
SFAS No. 133 on our consolidated financial statements.
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 recent industry conditions and others
have experienced greater financial difficulties in meeting their payment terms.
Recently, payment trends have improved. 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 generally,
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,
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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 which would be likely to 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.
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 that 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 45.9% of our net assets from continuing operations 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 section on our balance sheet. We recorded a
$10.3 million adjustment to our equity account for the three months ended March
31, 2000 primarily to reflect the net impact of the decline in European
currencies against the U.S. dollar.
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.
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<PAGE> 24
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 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 provided by us. Any
unexpected material changes in oil and gas prices or other market trends
that would impact drilling activity would likely affect the forward-looking
information contained in this report. The oil and gas industry is extremely
volatile and subject to change based on political and economic factors
outside our control.
Our estimates as to future results and industry trends are based on
assumptions regarding the future prices of oil and gas, the North American
and international rig counts and their effect on the demand and pricing of
our products and services. In analyzing the market and its impact on us for
2000, we have made the following assumptions:
o The recent increase in the price of oil will result in
improvements to our businesses in 2000, with the strongest
improvements expected to occur in the second half of 2000.
o Oil prices will average between $20 and $30 per barrel for West
Texas Intermediate crude.
o Average natural gas prices for 2000 will remain at or near their
current levels.
o World demand for oil will be up only slightly.
o Drilling activity will increase slightly beyond normal demand as
oil companies seek to replace and produce reserves that were not
replaced or produced in 1999.
o North American and international rig counts will improve, with
increases in the international rig count following the North
American rig count increase by around six months. In 2000, we
expect the average rig count for North America to be around 1,200
and the international rig count to average around 650.
o Pricing for many of our products and services should increase
steadily during the year. Pricing will be subject to market
conditions and continued pricing pressures in selected markets
and product lines.
o Demand for compression services will remain relatively flat for
the remainder of the year with improvements to be based on new
contracts.
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 macroeconomic factors, and
actual market conditions could vary materially from those assumed.
A Future Reduction in the 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. Although the North
American rig count has improved slightly from its historical low in 1999, a
decline in the North American and international rig counts would adversely
affect our results. Our forward-looking statements regarding our drilling
products assume an improvement in the rig count in 2000 and that there will
not be any material declines in the worldwide rig count, in particular the
domestic rig count. Our statements also assume an increase in the
international markets to occur by mid 2000.
Projected Cost Savings Could Be Insufficient. During 1998 and 1999, 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 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 in part
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. Such technological advances include our underbalanced
drilling technology and our expandable sand screen technology. Our
forward-looking statements have assumed gradual growth from these new
products and services through 2000.
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<PAGE> 25
Economic Downturn Could Adversely Affect Demand for Products and
Services. The economic downturn that began in Asia in 1997 affected the
economies in other regions of the world, including South America and the
former Soviet Union, and contributed to the decline in the price of oil and
the level of drilling activity. Although the economy in the United States
also has experienced one of its longest periods of growth in recent
history, the continued strength of the United States economy cannot be
assured. 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 again adversely affect our revenues and income.
We have assumed that a worldwide recession or a material downturn in the
United States economy will not occur.
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.
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.
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<PAGE> 26
PART II. OTHER INFORMATION
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
During the quarter ended March 31, 2000, we issued an aggregate of 125,881
shares of our common stock as follows:
o On February 3, 2000, we issued 125,881 shares of our common stock
to the minority stockholders and phantom stockholder of SubTech
International, Inc. in connection with the acquisition by our
Completion Systems Division of their interest in SubTech.
These shares were issued in a transaction not involving a public offering
and were exempt from registration pursuant to Section 4(2) of the Securities Act
of 1933.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
*10.1 Employment Agreement with Mark E. Hopmann and Gary L. Warren.
*10.2 Amended and Restated Employment Agreement dated January 28, 2000
between Curtis W. Huff and Weatherford International, Inc.
*10.3 Amended and Restated Employment Agreement dated January 28, 2000
between Bruce F. Longaker and Weatherford International, Inc.
*10.4 Weatherford International, Inc. Executive Deferred Compensation
Stock Ownership Plan and related Trust Agreement.
*10.5 Weatherford International, Inc. Deferred Compensation Plan for
Non-Employee Directors.
*10.6 Amendment to Stock Option Programs.
10.7 Form of Amendment to Stock Option Agreements dated September 8,
1998 for Non-Employee Directors (incorporated by reference to
Exhibit 4.17 to the Registration Statement on Form S-8 (Reg. No.
333-36598)).
10.8 Form of Amendment to Warrant Agreement dated September 8, 1998
with Robert K. Moses Jr. (incorporated by reference to Exhibit
4.18 to the Registration Statement on Form S-8 (Reg. No.
333-36598)).
10.9 Distribution Agreement, dated as of March 22, 2000, between
Weatherford International, Inc. and Grant Prideco, Inc.
(incorporated by reference to Exhibit 2.1 to Registration
Statement on Form S-3 of Grant Prideco, Inc. (Reg. No.
333-35272)).
10.10 Subordinated Promissory Note to Weatherford International, Inc.
(incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-3 of Grant Prideco, Inc. (Reg. No.
333-35272)).
*10.11 Tax Allocation Agreement, dated as of April 14, 2000, between
Weatherford International, Inc. and Grant Prideco, Inc.
*10.12 Transition Services Agreement, dated as of April 14, 2000
between Weatherford International, Inc. and Grant Prideco, Inc.
*10.13 Preferred Supplier Agreement, dated as of March 22, 2000 between
Weatherford International, Inc. and Grant Prideco, Inc.
*27.1 Financial Data Schedule
- ---------------
* Filed herewith
(b) Reports on Form 8-K:
1) Current Report on Form 8-K dated March 6, 2000, announcing the record date
for the Company's proposed spin-off to stockholders of its Grant Prideco
drilling products division and the revised number of shares to be issued in
the spin-off.
2) Current Report on Form 8-K dated February 11, 2000, announcing the filing
by Grant Prideco of a registration statement in connection with the
spin-off and Grant Prideco's year end results.
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<PAGE> 27
3) Current Report on Form 8-K dated January 31, 2000, announcing the Company's
earnings for the fourth quarter and year ended December 31, 1999, and
including the results of its Grant Prideco drilling products division as
discontinued operations.
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<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Weatherford International, Inc.
By: /s/ Curtis W. Huff
----------------------------------
Curtis W. Huff
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
/s/ Lisa W. Rodriguez
----------------------------------
Lisa W. Rodriguez
Controller
(Principal Accounting Officer)
Date: May 12, 2000
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<PAGE> 29
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
*10.1 Employment Agreement with Mark E. Hopmann and Gary L. Warren.
*10.2 Amended and Restated Employment Agreement dated January 28, 2000
between Curtis W. Huff and Weatherford International, Inc.
*10.3 Amended and Restated Employment Agreement dated January 28, 2000
between Bruce F. Longaker and Weatherford International, Inc.
*10.4 Weatherford International, Inc. Executive Deferred Compensation
Stock Ownership Plan and related Trust Agreement.
*10.5 Weatherford International, Inc. Deferred Compensation Plan for
Non-Employee Directors.
*10.6 Amendment to Stock Option Programs.
10.7 Form of Amendment to Stock Option Agreements dated September 8,
1998 for Non-Employee Directors (incorporated by reference to
Exhibit 4.17 to the Registration Statement on Form S-8 (Reg. No.
333-36598)).
10.8 Form of Amendment to Warrant Agreement dated September 8, 1998
with Robert K. Moses Jr. (incorporated by reference to Exhibit
4.18 to the Registration Statement on Form S-8 (Reg. No.
333-36598)).
10.9 Distribution Agreement, dated as of March 22, 2000, between
Weatherford International, Inc. and Grant Prideco, Inc.
(incorporated by reference to Exhibit 2.1 to Registration
Statement on Form S-3 of Grant Prideco, Inc. (Reg. No.
333-35272)).
10.10 Subordinated Promissory Note to Weatherford International, Inc.
(incorporated by reference to Exhibit 4.1 to Registration
Statement on Form S-3 of Grant Prideco, Inc. (Reg. No.
333-35272)).
*10.11 Tax Allocation Agreement, dated as of April 14, 2000, between
Weatherford International, Inc. and Grant Prideco, Inc.
*10.12 Transition Services Agreement, dated as of April 14, 2000
between Weatherford International, Inc. and Grant Prideco, Inc.
*10.13 Preferred Supplier Agreement, dated as of March 22, 2000 between
Weatherford International, Inc. and Grant Prideco, Inc.
*27.1 Financial Data Schedule
- ---------------
* Filed herewith
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into and
effective as of October 4, 1999, by and between Weatherford International, Inc.,
a Delaware corporation (the "Company"), and Mark E. Hopmann (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Employee on the terms set
forth below to provide services to the Company, and the Employee is willing to
accept such employment and provide such services on the terms set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the parties hereto do hereby agree:
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) "Cause" shall mean:
(i) the willful and continued failure of the Employee to
perform substantially the Employee'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 Employee by the Company
which specifically identifies the manner in which the Employee has not
substantially performed the Employee's duties, or
(ii) the willful engaging by the Employee in illegal conduct
or gross misconduct which is materially and demonstrably injurious to
the Company.
No act, or failure to act, on the part of the Employee shall be
considered "willful" unless it is done, or omitted to be done, by the
Employee in bad faith or without reasonable belief that the Employee'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 Employee in good faith and in
the best interests of the Company.
(b) "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20 percent or more of either (A) the then
outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection
(i), the following acquisitions shall not constitute a Change of
Control:
(A) any acquisition directly from the Company,
<PAGE> 2
(B) any acquisition by the Company,
(C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or
(D) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and (C) of
subsection (iii) of this Section 1(b); or
(ii) Individuals, who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual was a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Corporate Transaction") in each case,
unless, following such Corporate Transaction, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Corporate
Transaction beneficially own, directly or indirectly, more than 60
percent of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any corporation resulting from such
Corporate Transaction or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Corporate
Transaction) beneficially owns, directly or indirectly, 20 percent or
more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Corporate Transaction or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Corporate Transaction and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Corporate
Transaction were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Corporate Transaction; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(c) "Good Reason" shall mean the occurrence of any of the following
after a Change of Control of the Company:
(i) the assignment to the Employee of any duties inconsistent
in any material respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a) of this Agreement, or
any other
2
<PAGE> 3
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 Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3(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 Employee;
(iii) the Company's requiring the Employee to be based at any
office or location other than as provided in Section 3(a) hereof or the
Company's requiring the Employee to travel on Company business to a
substantially greater extent than required to perform the Employee's
duties hereunder;
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 10(c) of this Agreement.
(d) "Board" shall mean the Board of Directors of the Company.
2. Employment Period. The Company hereby agrees that the Company or an
affiliated company will continue the Employee in its employ, and the Employee
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement, for the period commencing on the
date hereof and ending on October 31, 2001 (the "Employment Period"); provided,
however, if there is a Change of Control prior to October 31, 2001, the
Employment Period shall be extended for two years after the Change of Control.
3. Terms of Employment.
(a) Position and Duties. The Employee shall serve as President of the
Company's Completion Division or such other principal division of the Company to
which the Employee may be assigned. During the Employment Period, the Employee's
services shall be performed principally at the Company's principal executive
offices in Houston, Texas or other locations less than 35 miles from such
principal executive offices; provided, however, the Employee may be required to
travel on a reasonable basis in a manner consistent with the duties of the
Employee.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Employee
shall receive an annual base salary of $200,004 ("Annual Base Salary"),
which shall be paid at a monthly rate. During the Employment Period, the
Annual Base Salary shall be reviewed from time to time on the same basis as
similarly situated employees; 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 Employee 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.
3
<PAGE> 4
(ii) Annual Bonus. The Employee shall be eligible for an annual
bonus for each fiscal year ending during the Employment Period on the same
basis as other similarly situated employees under the Company's annual
incentive programs.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Employee shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to similarly situated employees of the Company and its
affiliated companies. 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
Employee and/or the Employee'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 and travel accident insurance plans and programs) to
the extent applicable generally to similarly situated employees of the
Company and its affiliated companies. The Employee understands and agrees
that he will be responsible for all applicable employee contributions under
such plans, practices, policies and programs.
(v) Fringe Benefits. During the Employment Period, the Employee
shall be entitled to (A) a $600 per month car allowance and (B) such other
fringe benefits as in effect generally at any time thereafter with respect
to similarly situated employees of the Company and its affiliated
companies.
(vi) Vacation. During the Employment Period, the Employee shall
be entitled to at least 3 weeks paid vacation.
(vii) Deferred Compensation Plan. During the Employment Period,
the Employee shall be entitled to continue to participate in any deferred
compensation or similar plans in which similarly situated employees
participate.
4. Termination of Employment.
(a) Death or Disability. The Employee's employment shall terminate
automatically upon the Employee's death during the Employment Period. If the
Company determines in good faith that the Disability of the Employee has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Employee written notice in accordance with
Section 11(b) of this Agreement of its intention to terminate the Employee's
employment. In such event, the Employee's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Employee from the Employee'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 Employee or the
Employee's legal representative.
(b) Cause. The Company may terminate the Employee's employment during
the Employment Period for Cause.
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(c) Good Reason. Following a Change of Control during the Employment
Period, the Employee's employment may be terminated by the Employee during the
Employment Period for Good Reason upon 30 days prior written notice as long as
the cause of such Good Reason is not remedied.
(d) Without Cause. The Company may terminate the Employee's employment
during the Employment Period at any time without Cause subject to the Company's
obligation to pay to the Employee the compensation provided for in Section 5(e),
if such termination was not preceded by a Change of Control of the Company, or
Section 5(f), if such termination was preceded by a Change of Control of the
Company.
(e) By Employee other than Good Reason. The Employee may terminate the
Employee's employment with the Company for any reason other than for Good Reason
upon 30 days prior written notice to the Company.
(f) Notice of Termination. Any termination during the Employment Period
by the Company for Cause, or by the Employee for Good Reason, shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 11(b) of this 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 Employee'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, in the case of a notice by the Company, shall be not more than 30
days after the giving of such notice). The failure by the Employee 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 Employee or the Company, respectively, from asserting such fact or
circumstance in enforcing the Employee's or the Company's rights hereunder.
(g) Date of Termination. "Date of Termination" shall mean:
(i) if the Employee's employment is terminated by the Company for
Cause, or by the Employee 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 Employee'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 Employee of such termination;
(iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of
the Employee or the Disability Effective Date, as the case may be; and
(iv) if the Employee's employment is terminated by the Employee,
the Date of Termination shall be the earlier to occur of (A) the last day
that the Employee reports to work for the Company and (B) the date which is
30 days from the Employee's notice of termination.
5. Obligations of the Company Upon Termination.
(a) Death. If the Employee's employment is terminated by reason of the
Employee's death during the Employment Period, the Employee's employment shall
terminate automatically without further obligations to the Employee's legal
representatives under this Agreement, other than for payment of Accrued
Obligations (as defined below) and the rights provided in Section 6. Accrued
Obligations shall be paid to the
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<PAGE> 6
Employee's estate or beneficiaries, as applicable, in a lump sum in cash within
30 days after the Date of Termination.
(b) Disability. If the Employee's employment is terminated by reason of
the Employee's Disability during the Employment Period, the Employee's
employment shall terminate without further obligations to the Employee under
this Agreement, other than for payment of Accrued Obligations and the rights
provided in Section 6. Accrued Obligations shall be paid to the Employee in a
lump sum in cash within 30 days after the Date of Termination.
(c) Cause. If the Employee's employment is terminated for Cause during
the Employment Period, the Employee's employment shall terminate without further
obligations to the Employee, other than the obligation to pay to the Employee
his Annual Base Salary through the Date of Termination and the rights provided
in Section 6.
(d) Termination by Employee. If the Employee voluntarily terminates his
employment during the Employment Period for any reason other than for Good
Reason, the Employee's employment shall terminate without further obligations to
the Employee, other than for payment of Accrued Obligations and the rights
provided in Section 6. In such case, all Accrued Obligations shall be paid to
the Employee 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.
(e) Other than For Cause, Death or Disability Not Preceded by Change of
Control. If, during the Employment Period, the Company terminates the Employee's
employment other than for Cause, death or Disability and such termination was
not preceded by a Change of Control of the Company during the Employment Period:
(i) The Company shall pay to the Employee in a lump sum in cash
within 30 days after the Date of Termination the sum of the Employee's
Annual Base Salary through the Date of Termination to the extent not
theretofore paid plus any expense reimbursements payable in accordance with
the Company's policies (the sum of the amounts described in this clause (i)
shall be hereinafter referred to as the "Accrued Obligations");
(ii) The Company shall continue to pay to the Employee the then
current Annual Base Salary of the Employee through the longer of (A)
October 31, 2001 and (B) one year following the Date of Termination, on the
same basis that such Annual Base Salary was paid prior to the termination
of employment; and
(iii) Each stock option granted to Employee under the Weatherford
International, Inc. 1998 Employee Stock Option Plan that is not fully
vested on the Date of Termination will be exercisable for a number of
shares equal to (A) the number of shares subject to such option multiplied
by (B) a fraction, the numerator of which is the number of full months in
the period commencing on the date of grant of the option and ending on the
Date of Termination, and the denominator of which is 36.
(f) Good Reason or Other than For Cause, Death or Disability in the
Event of a Change of Control. If, during the Employment Period, the Company
terminates the Employee's employment other than for Cause, death or Disability,
or the Employee terminates employment for Good Reason, and such termination was
preceded by a Change of Control of the Company during the Employment Period:
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<PAGE> 7
(i) The Company shall pay to the Employee 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 Employee'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 Employee over the preceding three year period and (II)
the Annual Bonus that would be payable in respect of the current
fiscal year, 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 Employee 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;
(B) an amount equal to two times the sum of (i) the
then current Annual Base Salary of the Employee and (ii) the Highest
Annual Bonus;
(C) an amount equal to (1) the total of the employer
basic and matching contributions credited to the Employee under the
Company's 401(k) Savings Plan (the "401(k) Plan") and any other
deferred compensation plan during the 12-month period immediately
preceding the month of the Employee's Date of Termination multiplied
by (2) a fraction, the numerator of which is the number of days from
the Date of Termination through the then scheduled expiration of the
Employment Period, and the denominator of which is 365, such amount to
be grossed up so that the amount the Employee actually receives after
payment of any federal or state taxes payable thereon equals the
amount first described above; and
(D) the total amount of all other fringe benefits
received by Employee on an annualized basis multiplied by a fraction,
the numerator of which is the number of days from the Date of
Termination through the then scheduled expiration of the Employment
Period, and the denominator of which is 365.
(ii) From the Employee's Date of Termination through the
then scheduled expiration of the Employment Period, 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 Employee and/or the
Employee's family equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described in
Section 3(b)(iv) of this Agreement if the Employee'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
Employee shall continue to pay the monthly employee contribution for same,
and provided further, that if the Employee becomes re-employed 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) All benefits and amounts under the Company's deferred
compensation plan and the 401(k) Plan and any other similar plans,
including any stock options held by the Employee, not already vested shall
be 100% vested.
(iv) To the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Employee any other amounts or
benefits required to be paid or provided or which
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<PAGE> 8
the Employee is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies.
6. Other Rights. Except as provided herein, nothing in this Agreement shall
prevent or limit the Employee'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 Employee may qualify, nor shall anything herein
limit or otherwise affect such rights as the Employee 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
Employee 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 Employee that the Employee 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 Employee has any other employment or similar
agreement with the Company at the Date of Termination, the Employee agrees that
he shall have the right to receive all of the benefits provided under this
Agreement or such other agreement, whichever one, in its entirety, the Employee
chooses, but not both agreements, and when the Employee has made such election,
the other agreement shall be superseded in its entirety and shall be of no
further force and effect. The Employee also agrees that to the extent he 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 Employee
shall not receive duplicate benefits.
7. Full Settlement.
(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
Employee or others.
(b) No Mitigation Required. In no event shall the Employee be obligated
to seek other employment or take any other action by way of mitigation of the
amounts payable to the Employee under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not the Employee obtains other
employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Employee 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 Employee 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").
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<PAGE> 9
8. Certain Additional Payments by the Company.
(a) 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 Employee (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 8) (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 Employee 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 Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee 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 Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 8(a), if it shall be determined that the Employee is
entitled to a Gross-Up Payment, but that the Employee, after taking into account
the Payments and the Gross-Up Payment, would not receive a net after-tax benefit
of at least $1,000 (taking into account both income taxes and any Excise Tax) as
compared to the net after-tax proceeds to the Employee 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 Employee and the Payments, in the aggregate, shall be reduced to the Reduced
Amount.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, 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 Employee (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Employee within 15
business days after the receipt of notice from the Employee 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 Employee 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 8, shall be paid by the Company to the Employee 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 Employee. 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 8(c) and the Employee 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 Employee.
(c) The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service (the "IRS") 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
Employee 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 Employee 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
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<PAGE> 10
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Employee in writing prior to the expiration of such period
that it desires to contest such claim, the Employee 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 to
effectively 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 Employee 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 8(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
Employee to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Employee 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
Employee to pay such claim and sue for a refund, the Company shall advance
the amount of such payment to the Employee, on an interest-free basis and
shall indemnify and hold the Employee 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 Employee 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 Employee shall be entitled to settle or contest, as the case may
be, any other issues raised by the IRS or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by the
Company pursuant to Section 8(c), the Employee becomes entitled to receive any
refund with respect to such claim, the Employee shall (subject to the Company's
complying with the requirements of Section 8(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 Employee of an amount
advanced by the Company pursuant to Section 8(c), a determination is made that
the Employee shall not be entitled to any refund with respect to such claim and
the Company does not notify the Employee 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.
9. Confidential Information. The Employee 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 Employee
during
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the Employee'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 Employee or representatives of the Employee
in violation of this Agreement). After termination of the Employee's employment
with the Company, the Employee 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. The Employee shall assign to the Company all
patents and intellectual property developed, conceived or invented alone by him
or with others at any time during which the Employee was employed by the Company
or any of its affiliates.
10. Successors.
(a) This Agreement is personal to the Employee and shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Employee'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.
11. 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 Employee: Mark E. Hopmann
Rt. 1, Box 258
Alvin, Texas 77511
If to the Company: Weatherford International, Inc.
515 Post Oak Blvd., Suite 600
Houston, Texas 77027
Attention: General Counsel
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.
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(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 Employee'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 Employee or the Company may have hereunder shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
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IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/s/ Mark E. Hopmann
--------------------------------------------
Mark E. Hopmann
WEATHERFORD INTERNATIONAL, INC.
By: /s/ Curtis W. Huff
-----------------------------------------
Curtis W. Huff
Senior Vice President and General Counsel
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EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into and effective
as of October 4, 1999, by and between Weatherford International, Inc., a
Delaware corporation (the "Company"), and Gary L. Warren (the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Employee on the terms set forth
below to provide services to the Company, and the Employee is willing to accept
such employment and provide such services on the terms set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the parties hereto do hereby agree:
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) "Cause" shall mean:
(i) the willful and continued failure of the Employee to perform
substantially the Employee'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
Employee by the Company which specifically identifies the manner in which the
Employee has not substantially performed the Employee's duties, or
(ii) the willful engaging by the Employee in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
No act, or failure to act, on the part of the Employee shall be
considered "willful" unless it is done, or omitted to be done, by the Employee
in bad faith or without reasonable belief that the Employee'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 Employee in good
faith and in the best interests of the Company.
(b) "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20 percent or more of either (A) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock") or (B)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control:
(A) any acquisition directly from the Company,
<PAGE> 15
(B) any acquisition by the Company,
(C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or
(D) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and (C) of subsection
(iii) of this Section 1(b); or
(ii) Individuals, who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual was a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of
the Company (a "Corporate Transaction") in each case, unless, following
such Corporate Transaction, (A) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction beneficially own, directly
or indirectly, more than 60 percent of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any corporation resulting from such Corporate
Transaction or any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Corporate Transaction) beneficially
owns, directly or indirectly, 20 percent or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Corporate Transaction and (C) at least a
majority of the members of the board of directors of the corporation
resulting from such Corporate Transaction were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Corporate Transaction; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(c) "Good Reason" shall mean the occurrence of any of the following
after a Change of Control of the Company:
(i) the assignment to the Employee of any duties inconsistent in
any material respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a) of this Agreement, or any
other
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<PAGE> 16
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 Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3(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 Employee;
(iii) the Company's requiring the Employee to be based at any
office or location other than as provided in Section 3(a) hereof or the
Company's requiring the Employee to travel on Company business to a
substantially greater extent than required to perform the Employee's duties
hereunder;
(iv) any purported termination by the Company of the Employee's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 10(c) of this Agreement.
(d) "Board" shall mean the Board of Directors of the Company.
2. Employment Period. The Company hereby agrees that the Company or an
affiliated company will continue the Employee in its employ, and the Employee
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement, for the period commencing on the
date hereof and ending on October 31, 2001 (the "Employment Period"); provided,
however, if there is a Change of Control prior to October 31, 2001, the
Employment Period shall be extended for two years after the Change of Control.
3. Terms of Employment.
(a) Position and Duties. The Employee shall serve as President of the
Company's Drilling and Intervention Services Division or such other principal
division of the Company to which the Employee may be assigned. During the
Employment Period, the Employee's services shall be performed principally at the
Company's principal executive offices in Houston, Texas or other locations less
than 35 miles from such principal executive offices; provided, however, the
Employee may be required to travel on a reasonable basis in a manner consistent
with the duties of the Employee.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Employee
shall receive an annual base salary of $225,000 ("Annual Base Salary"),
which shall be paid at a monthly rate. During the Employment Period, the
Annual Base Salary shall be reviewed from time to time on the same basis as
similarly situated employees; 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 Employee 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.
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<PAGE> 17
(ii) Annual Bonus. The Employee shall be eligible for an annual
bonus for each fiscal year ending during the Employment Period on the same
basis as other similarly situated employees under the Company's annual
incentive programs.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Employee shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to similarly situated employees of the Company and its
affiliated companies. 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
Employee and/or the Employee'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 and travel accident insurance plans and programs) to
the extent applicable generally to similarly situated employees of the
Company and its affiliated companies. The Employee understands and agrees
that he will be responsible for all applicable employee contributions under
such plans, practices, policies and programs.
(v) Fringe Benefits. During the Employment Period, the Employee
shall be entitled to (A) a $600 per month car allowance and (B) such other
fringe benefits as in effect generally at any time thereafter with respect
to similarly situated employees of the Company and its affiliated
companies.
(vi) Vacation. During the Employment Period, the Employee shall
be entitled to at least 3 weeks paid vacation.
(vii) Deferred Compensation Plan. During the Employment Period,
the Employee shall be entitled to continue to participate in any deferred
compensation or similar plans in which similarly situated employees
participate.
(c) Termination of Prior Agreement. The Employee acknowledges and
agrees that this Agreement is being executed in replacement of the Employee's
existing Change of Control Agreement. As a result, the Employee and the Company
agree that the Change of Control Agreement dated as of August 16, 1996, between
the Employee and Weatherford Enterra, Inc., is hereby terminated and of no
further force and effect.
4. Termination of Employment.
(a) Death or Disability. The Employee's employment shall terminate
automatically upon the Employee's death during the Employment Period. If the
Company determines in good faith that the Disability of the Employee has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Employee written notice in accordance with
Section 11(b) of this Agreement of its intention to terminate the Employee's
employment. In such event, the Employee's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Employee from the Employee'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
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<PAGE> 18
to be total and permanent by a physician selected by the Company or its insurers
and acceptable to the Employee or the Employee's legal representative.
(b) Cause. The Company may terminate the Employee's employment during
the Employment Period for Cause.
(c) Good Reason. Following a Change of Control during the Employment
Period, the Employee's employment may be terminated by the Employee during the
Employment Period for Good Reason upon 30 days prior written notice as long as
the cause of such Good Reason is not remedied.
(d) Without Cause. The Company may terminate the Employee's
employment during the Employment Period at any time without Cause subject to the
Company's obligation to pay the Employee the compensation provided for in
Section 5(e), if such termination was not preceded by a Change of Control of the
Company, or Section 5(f), if such termination was preceded by a Change of
Control of the Company.
(e) By Employee other than for Good Reason. The Employee may
terminate the Employee's employment with the Company for any reason other than
for Good Reason upon 30 days prior written notice to the Company.
(f) Notice of Termination. Any termination during the Employment
Period by the Company for Cause, or by the Employee for Good Reason, shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 11(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 Employee'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, in the case of a notice by the Company, shall be not more than 30
days after the giving of such notice). The failure by the Employee 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 Employee or the Company, respectively, from asserting such fact or
circumstance in enforcing the Employee's or the Company's rights hereunder.
(g) Date of Termination. "Date of Termination" shall mean:
(i) if the Employee's employment is terminated by the Company
for Cause, the date of receipt of the Notice of Termination or any later
date specified therein, as the case may be;
(ii) if the Employee'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 Employee of such termination;
(iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of
the Employee or the Disability Effective Date, as the case may be; and
(iv) if the Employee's employment is terminated by the Employee,
the Date of Termination shall be the earlier to occur of (A) the last day
that the Employee reports to work for the Company and (B) the date which is
30 days from the Employee's notice of termination.
5. Obligations of the Company Upon Termination.
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<PAGE> 19
(a) Death. If the Employee's employment is terminated by reason of
the Employee's death during the Employment Period, the Employee's employment
shall terminate automatically without further obligations to the Employee's
legal representatives under this Agreement, other than for payment of Accrued
Obligations (as defined below) and the rights provided in Section 6. Accrued
Obligations shall be paid to the Employee's estate or beneficiaries, as
applicable, in a lump sum in cash within 30 days after the Date of Termination.
(b) Disability. If the Employee's employment is terminated by reason
of the Employee's Disability during the Employment Period, the Employee's
employment shall terminate without further obligations to the Employee under
this Agreement, other than for payment of Accrued Obligations and the rights
provided in Section 6. Accrued Obligations shall be paid to the Employee in a
lump sum in cash within 30 days after the Date of Termination.
(c) Cause. If the Employee's employment is terminated for Cause
during the Employment Period, the Employee's employment shall terminate without
further obligations to the Employee, other than the obligation to pay to the
Employee his Annual Base Salary through the Date of Termination and the rights
provided in Section 6.
(d) Termination by Employee. If the Employee voluntarily terminates
his employment during the Employment Period for any reason other than for Good
Reason, the Employee's employment shall terminate without further obligations to
the Employee, other than for payment of Accrued Obligations and the rights
provided in Section 6. In such case, all Accrued Obligations shall be paid to
the Employee 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.
(e) Other than For Cause, Death or Disability Not Preceded by a
Change of Control. If, during the Employment Period, the Company terminates the
Employee's employment other than for Cause, death or Disability and such
termination was not preceded by a Change of Control of the company during the
Employment Period:
(i) The Company shall pay to the Employee in a lump sum in cash
within 30 days after the Date of Termination the sum of the Employee's
Annual Base Salary through the Date of Termination to the extent not
theretofore paid plus any expense reimbursements payable in accordance with
the Company's policies (the sum of the amounts described in this clause (i)
shall be hereinafter referred to as the "Accrued Obligations");
(ii) The Company shall continue to pay to the Employee the then
current Annual Base Salary of the Employee through the longer of (A)
October 31, 2001 and (B) one year following the Date of Termination, on the
same basis that such Annual Base Salary was paid prior to the termination
of employment; and
(iii) Each stock option granted to Employee under the Weatherford
International, Inc. 1998 Employee Stock Option Plan that is not fully
vested on the Date of Termination will be exercisable for a number of
shares equal to (A) the number of shares subject to such option multiplied
by (B) a fraction, the numerator of which is the number of full months in
the period commencing on the date of grant of the option and ending on the
Date of Termination, and the denominator of which is 36.
(f) Good Reason or Other than For Cause, Death or Disability in the
Event of a Change of Control. If, during the Employment Period, the Company
terminates the Employee's employment other than
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<PAGE> 20
for Cause, death or Disability, or the Employee terminates employment for Good
Reason, and such termination was preceded by a Change of Control of the Company
during the Employment Period:
(i) The Company shall pay to the Employee 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 Employee'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 Employee over the preceding three year period and (II)
the Annual Bonus that would be payable in respect of the current
fiscal year, 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 Employee 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;
(B) an amount equal to two times the sum of (i) the then
current Annual Base Salary of the Employee and (ii) the Highest Annual
Bonus;
(C) an amount equal to (1) the total of the employer basic
and matching contributions credited to the Employee under the
Company's 401(k) Savings Plan (the "401(k) Plan") and any other
deferred compensation plan during the 12-month period immediately
preceding the month of the Employee's Date of Termination multiplied
by (2) a fraction, the numerator of which is the number of days from
the Date of Termination through the then scheduled expiration of the
Employment Period, and the denominator of which is 365, such amount to
be grossed up so that the amount the Employee actually receives after
payment of any federal or state taxes payable thereon equals the
amount first described above; and
(D) the total amount of all other fringe benefits received
by Employee on an annualized basis multiplied by a fraction, the
numerator of which is the number of days from the Date of Termination
through the then scheduled expiration of the Employment Period, and
the denominator of which is 365.
(ii) From the Employee's Date of Termination through the then
scheduled expiration of the Employment Period, 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 Employee and/or the
Employee's family equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described in
Section 3(b)(iv) of this Agreement if the Employee'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
Employee shall continue to pay the monthly employee contribution for same,
and provided further, that if the Employee becomes re-employed 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) All benefits and amounts under the Company's deferred
compensation plan and the 401(k) Plan and any other similar plans,
including any stock options held by the Employee, not already vested shall
be 100% vested.
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<PAGE> 21
(iv) To the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Employee any other amounts or benefits
required to be paid or provided or which the Employee is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies.
6. Other Rights. Except as provided herein, nothing in this Agreement
shall prevent or limit the Employee'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 Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee 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
Employee 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 Employee that the Employee 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 Employee has any other employment or similar
agreement with the Company at the Date of Termination, the Employee agrees that
he shall have the right to receive all of the benefits provided under this
Agreement or such other agreement, whichever one, in its entirety, the Employee
chooses, but not both agreements, and when the Employee has made such election,
the other agreement shall be superseded in its entirety and shall be of no
further force and effect. The Employee also agrees that to the extent he 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 Employee
shall not receive duplicate benefits.
7. Full Settlement.
(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
Employee or others.
(b) No Mitigation Required. In no event shall the Employee be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Employee under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Employee
obtains other employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Employee 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 Employee 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").
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<PAGE> 22
8. Certain Additional Payments by the Company.
(a) 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 Employee (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 8) (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 Employee 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 Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee 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 Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 8(a), if it shall be determined that the Employee is
entitled to a Gross-Up Payment, but that the Employee, after taking into account
the Payments and the Gross-Up Payment, would not receive a net after-tax benefit
of at least $1,000 (taking into account both income taxes and any Excise Tax) as
compared to the net after-tax proceeds to the Employee 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 Employee and the Payments, in the aggregate, shall be reduced to the Reduced
Amount.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, 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 Employee (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Employee within 15
business days after the receipt of notice from the Employee 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 Employee 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 8, shall be paid by the Company to the Employee 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 Employee. 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 8(c) and the Employee 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 Employee.
(c) The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service (the "IRS") 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
Employee 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 Employee 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
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<PAGE> 23
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Employee in writing prior to the expiration of such period
that it desires to contest such claim, the Employee 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 to
effectively 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 Employee 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 8(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
Employee to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Employee 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
Employee to pay such claim and sue for a refund, the Company shall advance
the amount of such payment to the Employee, on an interest-free basis and
shall indemnify and hold the Employee 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 Employee 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 Employee shall be entitled to settle or contest, as the case may
be, any other issues raised by the IRS or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 8(c), the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 8(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 Employee
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Employee shall not be entitled to any refund with respect to
such claim and the Company does not notify the Employee 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.
9. Confidential Information. The Employee 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 Employee
during
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<PAGE> 24
the Employee'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 Employee or representatives of the Employee
in violation of this Agreement). After termination of the Employee's employment
with the Company, the Employee 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. The Employee shall assign to the Company all
patents and intellectual property developed, conceived or invented alone by him
or with others at any time during which the Employee was employed by the Company
or any of its affiliates.
10. Successors.
(a) This Agreement is personal to the Employee and shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Employee'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.
11. 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 Employee: Gary L. Warren
1903 Valleria Ct.
Sugar Land, TX 77479
If to the Company: Weatherford International, Inc.
515 Post Oak Blvd., Suite 600
Houston, Texas 77027
Attention: General Counsel
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.
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(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 Employee'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 Employee or the Company may have hereunder shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
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<PAGE> 26
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/s/ Gary L. Warren
---------------------------------------------
Gary L. Warren
WEATHERFORD INTERNATIONAL, INC.
By: /s/ Curtis W. Huff
-----------------------------------------
Curtis W. Huff
Senior Vice President and General Counsel
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EXHIBIT 10.2
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (this "Agreement") by and
between Weatherford International, Inc., a Delaware corporation (the "Company"),
and Curtis W. Huff (the "Executive"), dated January 28, 2000.
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;
WHEREAS, the Company and the Executive entered into an Employment Agreement
dated March 16, 1998 (the "Employment Agreement");
WHEREAS, the Company and the Executive desire to amend and restate in its
entirety the Employment Agreement as set out in this Agreement; 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
Effective Date; provided, however, that commencing on the date one year after
the Effective Date, 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 June 15, 1998.
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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 Executive Vice
President, Chief Financial Officer, General Counsel and Corporate
Secretary, (B) the Executive's services shall be performed at the
Company's principal executive offices in Houston, Texas or other
locations less than 35 miles from such location and (C) the Executive
will report directly to the Company's Chief Executive Officer.
(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. In addition, the Company
has asked the Executive to serve as an executive officer of Grant
Prideco, Inc. on a part-time basis following the Company's spin-off of
Grant Prideco. The service by the Executive as a Vice President and as
Interim General Counsel of Grant Prideco following its spin-off will
be expressly permitted and not a violation of this Agreement. It is
also expressly understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the date
hereof, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the date
hereof shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive shall
receive an annual base salary of $350,000 ("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
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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 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
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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, payment of club dues, a car allowance or
use of an automobile 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.
(viii) Restricted Stock and Options. Effective as of the Effective
Date, the Executive was granted 75,000 shares of the Company's Common
Stock, $1.00 par value ("Common Stock"). Such shares are subject to
four year vesting on the basis of 18,750 shares of Common Stock on
each anniversary of the Effective Date; provided, however, if the
employment of the Executive under this Agreement is terminated prior
to the shares being fully vested for any reason other than by the
Company for Cause or Disability, the death of the Executive or by the
Executive for any reason other than for Good Reason, such shares shall
become vested on the termination date. Until the shares of Common
Stock so granted are vested, the Executive may not transfer, pledge or
dispose of the unvested shares. The Executive, however, may vote any
unvested shares and be entitled to receive any dividends or
distributions (other than noncash distributions, which shall be
subject to the same vesting restrictions as the shares of Common Stock
for which such distributions were received). The Company may also hold
the unvested shares until they have vested. The Executive may elect to
deliver shares of Common Stock (valued at their then current market
price) to the Company in satisfaction of any withholding obligation
the Company may have on the vesting of such shares. Such shares shall
be subject to accelerated vesting as provided in Section 4(a). Such
shares shall also be subject to accelerated vesting on a change of
control as defined in the Company's form of stock option agreement,
with the merger on May 27, 1998 of Weatherford Enterra, Inc. with and
into the Company not resulting in any acceleration of such vesting.
Effective as of the Effective Date, the Executive also received
options under the Company's stock option plan to purchase an aggregate
of 100,000 shares of Common Stock at an exercise price per share equal
to the closing sale price of a share of Common Stock on the Effective
Date, which options are subject to three year vesting on the basis of
one-third of the shares per year, with the merger on May 27, 1998 of
Weatherford Enterra, Inc. not resulting in any acceleration of such
vesting. In connection with the Company's spin-off of its Grant
Prideco drilling products division, the above restricted stock and
options will be adjusted to represent shares
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and options to purchase stock of the Company and Grant Prideco, Inc.
as provided in the distribution agreement relating to the spin-off.
For purposes of vesting of such stock and options, the Executive will
not be required to be employed by Grant Prideco and the employment
with the Company will be sufficient for purposes of vesting. In
addition, Executive may for purposes of withholding deliver to the
Company shares of Grant Prideco common stock to satisfy the
withholding on the Common Stock.
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
(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
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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 immediately prior to
the date hereof;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement;
(v) in the event of a merger, consolidation or other business
combination of the Company in which the Company's securities cease to
be publicly traded, the assignment to the Executive of any position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities that are not (A) at or with the
ultimate parent company of the entity surviving or resulting from such
merger, consolidation or other business combination and (B)
substantially similar to the
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Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities as contemplated
by Section 2(a); or
(vi) 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:
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(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 "Highest Annual Bonus", it being agreed that for purposes of
determining the Highest Annual Bonus, the Executive will be deemed
to have received a bonus of 100% of his Annual Base Salary for the
year ended December 31, 1998) 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
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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 to 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 in substitution for the cash payment a number of shares
of Common Stock determined by dividing the amount of cash that would
otherwise be payable to the Executive hereunder by the average closing
sales price of the Common Stock, as reported by the New York Stock
Exchange, for the ten trading days immediately prior to the date such
payment is due to be made (rounding up to the nearest whole number),
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
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exercisable for one year after the Executive's Date of Termination or
until the stated expiration of the stated term thereof, whichever is
longer;
(v) 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;
(vi) 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;
(vii) 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;
(viii) All benefits under the Company's Executive Deferred
Compensation Plan and the 401(k) Plan and any other similar plans,
including any stock options or restricted stock held by the Executive,
not already vested shall be 100% vested, to the extent such vesting is
permitted under the Code (as defined below);
(ix) 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
(x) 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
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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 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 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 agrees that he 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
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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 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. Full Settlement.
(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
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<PAGE> 13
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 Internal Revenue Service 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:
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<PAGE> 14
(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
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<PAGE> 15
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, 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.
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<PAGE> 16
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:
<TABLE>
<S> <C>
If to the Executive: Curtis W. Huff
Weatherford International, Inc.
515 Post Oak Blvd., Suite 600
Houston, Texas 77027
If to the Company: Weatherford International, Inc.
515 Post Oak Blvd., Suite 600
Houston, Texas 77027
Attention: Bernard J. Duroc-Danner
</TABLE>
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)-(vi) 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.
(f) This Agreement constitutes the entire agreement and understanding
between the parties relating to the subject matter hereof and supersedes all
prior agreements between the parties relating to the subject matter hereof,
including, without limitation, the Employment Agreement.
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<PAGE> 17
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/ Curtis W. Huff
-------------------------------------
Curtis W. Huff
WEATHERFORD INTERNATIONAL, INC.
By /s/ Bernard J. Duroc-Danner
----------------------------------
Bernard J. Duroc-Danner
Chairman of the Board, President and
Chief Executive Officer
17
<PAGE> 1
EXHIBIT 10.3
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (this "Agreement") by
and between Weatherford International, Inc., a Delaware corporation (the
"Company"), and Bruce F. Longaker, Jr. (the "Executive"), dated January 28,
2000.
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;
WHEREAS, the Company and the Executive entered into an Employment
Agreement dated March 1, 1999 (the "Employment Agreement");
WHEREAS, the Company and the Executive desire to amend and restate in
its entirety the Employment Agreement as set out in this Agreement; 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
Effective Date; provided, however, that commencing on the date one year after
the Effective Date, 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 April 1, 1999.
<PAGE> 2
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 Executive Vice President
of the Company and President of the Company's Global Compression Services
Division, (B) the Executive's services shall be performed primarily at the
Company's offices in Houston, Texas or other locations less than 35 miles
from such location, provided that the Executive acknowledges and agrees
that he will be required to travel on a reasonable basis to the offices of
the Company's Global Compression Services Division in the Dallas, Texas
area, (C) the Executive shall oversee the Company's Information Technology
Department and (D) the Executive will report directly to the Company's
Chief Executive Officer.
(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. Each such Annual
Bonus shall be paid no later than the end of the third month of
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<PAGE> 3
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. Effective as of March 1, 1999, the Executive was granted an option
to purchase 100,000 shares of Common Stock, $1.00 par value, at $18.125 per
share under the terms of the Company's 1998 Employee Stock Option Plan.
(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 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
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<PAGE> 4
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
(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
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<PAGE> 5
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;
(v) in the event of a merger, consolidation or other business
combination of the Company in which the Company's securities cease to be
publicly traded, the assignment to the Executive of any position (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities that are not (A) at or with the ultimate parent company of
the entity surviving or resulting from such merger, consolidation or other
business combination and (B) substantially similar to the Executive's
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities as contemplated by Section 2(a); or
(vi) any failure by the Company to comply with and satisfy
Section 9(c) of this Agreement.
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<PAGE> 6
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
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<PAGE> 7
three year period (provided that for the first three years of this
Agreement, the Annual Bonus for purposes of this Section shall be not
less than 50% of the Executive's Annual Base Salary) 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 "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;
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<PAGE> 8
(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 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 in substitution for the cash payment
a number of shares of Common Stock determined by dividing the amount of
cash that would otherwise be payable to the Executive hereunder by the
average closing sales price of the Common Stock, as reported by the New
York Stock Exchange, for the ten trading days immediately prior to the date
such payment is due to be made (rounding up to the nearest whole number),
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 longer;
(v) 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;
(vi) 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;
(vii) 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)
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<PAGE> 9
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;
(viii) All benefits under the Company's Executive Deferred
Compensation Plan 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);
(ix) 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
(x) 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
9
<PAGE> 10
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 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 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 agrees that he 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 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. Full Settlement.
(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.
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<PAGE> 11
(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 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
11
<PAGE> 12
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 Internal Revenue Service 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, 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
12
<PAGE> 13
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, 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,
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<PAGE> 14
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: Bruce F. Longaker, Jr.
Weatherford International, Inc.
515 Post Oak Blvd., Suite 600
Houston, Texas 77027
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If to the Company: Weatherford International, Inc.
515 Post Oak Blvd., Suite 600
Houston, Texas 77027
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)-(vi) 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.
(f) This Agreement constitutes the entire agreement and understanding
between the parties relating to the subject matter hereof and supersedes all
prior agreements between the parties relating to the subject matter hereof,
including, without limitation, the Employment Agreement.
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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/ Bruce F. Longaker, Jr.
--------------------------------------
Bruce F. Longaker, Jr.
WEATHERFORD INTERNATIONAL, INC.
By /s/ Bernard J. Duroc-Danner
------------------------------------
Bernard J. Duroc-Danner
Chairman of the Board, President and
Chief Executive Officer
16
<PAGE> 1
EXHIBIT 10.4
WEATHERFORD INTERNATIONAL, INC.
EXECUTIVE DEFERRED COMPENSATION
STOCK OWNERSHIP PLAN
<PAGE> 2
WEATHERFORD INTERNATIONAL, INC.
EXECUTIVE DEFERRED COMPENSATION
STOCK OWNERSHIP PLAN
WHEREAS, Energy Ventures, Inc. and certain of its subsidiaries
previously adopted the Energy Ventures, Inc. Executive Deferred Compensation
Stock Ownership Plan (the "Plan") effective January 1, 1992;
WHEREAS, on May 27, 1998, Weatherford Enterra, Inc. was merged into
EVI, Inc. and the name of the surviving entity, EVI Weatherford, Inc., was
subsequently changed to Weatherford International, Inc.;
WHEREAS, as a consequence of the above-referenced transaction it is
necessary to make certain conforming changes in the terms of the Plan;
NOW, THEREFORE, effective September 28, 1999, the name of the Plan is
changed to "Weatherford International, Inc. Executive Deferred Compensation
Stock Ownership Plan" and Weatherford International, Inc. hereby adopts the
amendment and restatement of the Plan, the terms of which are set forth in this
Agreement.
<PAGE> 3
WEATHERFORD INTERNATIONAL, INC.
EXECUTIVE DEFERRED COMPENSATION
STOCK OWNERSHIP PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
-------
<S> <C> <C>
ARTICLE I -- DEFINITIONS
Account................................................................................................1.1
Basic Benefit..........................................................................................1.2
Beneficiary............................................................................................1.3
Board of Directors.....................................................................................1.4
Code...................................................................................................1.5
Committee..............................................................................................1.6
Common Stock...........................................................................................1.7
Company................................................................................................1.8
Company Match..........................................................................................1.9
Compensation..........................................................................................1.10
Deferral..............................................................................................1.11
Deferred Compensation Ledger..........................................................................1.12
Disability............................................................................................1.13
ERISA.................................................................................................1.14
Grant Spin-Off........................................................................................1.15
Grant Stock...........................................................................................1.16
Participant...........................................................................................1.17
Plan..................................................................................................1.18
Plan Year.............................................................................................1.19
Retirement............................................................................................1.20
Sponsor...............................................................................................1.21
Subsidiary............................................................................................1.22
Trustee...............................................................................................1.23
Year of Service.......................................................................................1.24
ARTICLE II - ELIGIBILITY
ARTICLE III - DEFERRALS AND BENEFIT ACCRUALS
Basic Benefit Accrual..................................................................................3.1
Deferral Election......................................................................................3.2
Company Match Accrual..................................................................................3.3
Reduction of Accruals..................................................................................3.4
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE IV - ACCOUNT
Establishing a Participant's Account...................................................................4.1
Basic Benefit Account..................................................................................4.2
Deferral Account.......................................................................................4.3
Company Match Account..................................................................................4.4
Gauge for Determining Benefits.........................................................................4.5
Adjustments for the Grant Spin-Off.....................................................................4.6
ARTICLE V - VESTING
Deferrals..............................................................................................5.1
Basic Benefit and Company Match........................................................................5.2
ARTICLE VI - DISTRIBUTIONS
Death..................................................................................................6.1
Disability.............................................................................................6.2
Retirement.............................................................................................6.3
Termination Prior to Death, Disability or Retirement...................................................6.4
Forfeiture for Cause...................................................................................6.5
Responsibility for Distributions and
Withholding of Taxes.................................................................................6.6
Distribution Determination Date........................................................................6.7
ARTICLE VII - ADMINISTRATION
Committee Appointment..................................................................................7.1
Committee Organization and Voting......................................................................7.2
Powers of the Committee................................................................................7.3
Committee Discretion...................................................................................7.4
Annual Statements......................................................................................7.5
Reimbursement of Expenses..............................................................................7.6
ARTICLE VIII - ADOPTION BY SUBSIDIARIES
Procedure for and Status After Adoption................................................................8.1
Termination of Participation by Adopting Subsidiary....................................................8.2
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE IX - AMENDMENT AND/OR TERMINATION
Amendment or Termination of the Plan...................................................................9.1
No Retroactive Effect on Awarded Benefits..............................................................9.2
Effect of Termination..................................................................................9.3
ARTICLE X - PAYMENT
Payments Under This Agreement Are the Obligation
of the Company......................................................................................10.1
Payments May Be Made to a Rabbi Trust.................................................................10.2
Participants Must Rely Only on the General
Credit of the Company..............................................................................10.3
Plan Unfunded.........................................................................................10.4
ARTICLE XI - MISCELLANEOUS
Limitation of Rights..................................................................................11.1
Distribution to Minor or Incapacitated Person.........................................................11.2
Nonalienation of Benefits.............................................................................11.3
Reliance Upon Information ............................................................................11.4
Severability..........................................................................................11.5
Notice................................................................................................11.6
Gender and Number.....................................................................................11.7
Governing Law.........................................................................................11.8
</TABLE>
iii
<PAGE> 6
ARTICLE I
DEFINITIONS
1.1 "ACCOUNT" means all ledger accounts pertaining to a
Participant which are maintained by the Committee to reflect the amount of
deferred compensation due the Participant. The Committee shall establish the
following Accounts and any additional Accounts that the Committee considers
necessary.
(a) Deferral Account - The Participant's deferral, if any,
between one percent and 7 1/2 percent of his Compensation.
(b) Basic Benefit Account - The Company's accrual of 7 1/2
percent of Compensation for each Participant, or such lesser amount as
the Committee establishes pursuant to Section 3.4.
(c) Company Match Account - The Company's match equal to 100
percent of the Participant's Deferral, if any, or such lesser amount as
the Committee establishes pursuant to Section 3.4.
1.2 "BASIC BENEFIT" means the accrual made by the Company for
the benefit of a Participant equal to 7 1/2 percent of the Participant's
Compensation, or such lesser amount as the Committee establishes pursuant to
Section 3.4.
1.3 "BENEFICIARY" means a person or entity designated by the
Participant under the terms of the Plan to receive any amounts distributed under
the Plan upon the death of the Participant.
1.4 "BOARD OF DIRECTORS" means the Board of Directors of the
Sponsor.
1.5 "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
I-1
<PAGE> 7
1.6 "COMMITTEE" means the persons who are from time to time
serving as members of the committee administering the Plan.
1.7 "COMMON STOCK" means the common stock, $1.00 par value, of
the Sponsor.
1.8 "COMPANY" means the Sponsor and any Subsidiary that adopts
the Plan.
1.9 "COMPANY MATCH" means the 100 percent match which the
Company accrues with respect to the amount deferred during a Plan Year by a
Participant under the Plan, or such lesser amount as the Committee establishes
pursuant to Section 3.4.
1.10 "COMPENSATION" means remuneration paid to a Participant
by the Company during the portion of the Plan Year in which he is eligible to
participate in the Plan, or that would have been paid to a Participant during
such portion of the Plan Year by the Company but for the Participant's election
to make a Deferral under the Plan or his deferrals under a cash or deferred
arrangement described in section 401(k) of the Code or a cafeteria plan
described in section 125 of the Code, including and limited to regular base pay,
merit and incentive bonuses (other than bonuses paid by the Company with respect
to services for a predecessor employer that has not adopted the Plan or with
respect to services performed by the Participant prior to his employment by the
Company, as determined by the Committee in its sole discretion), commissions,
short-term disability pay, vacation pay paid while the Participant is employed
by the Company, vacation pay paid upon a Participant's termination of
employment, and retention bonuses. Compensation does not include sign-on
bonuses, foreign service premiums or bonuses, position allowances, location
coefficient payments, housing allowances, car allowances, goods and services
allowances, tax gross-up payments, hypothetical tax payments, expense
reimbursements, travel allowances or bonuses, cash and non-cash fringe benefits,
severance pay, relocation allowances or expense reimbursements, deferred
compensation (such as income as a result of the exercise of a stock option or
stock
I-2
<PAGE> 8
appreciation right), or benefits under any pension plan or welfare plan as
defined in ERISA (whether or not paid under a program that is subject to
regulation under ERISA). Notwithstanding the foregoing, Compensation does
include car allowances paid to a Participant by the Company prior to April 1,
2000.
1.11 "DEFERRAL" means the amount of Compensation deferred
under a deferral election made by a Participant under Section 3.2.
1.12 "DEFERRED COMPENSATION LEDGER" means the ledger
maintained by the Committee for each Participant which reflects the amount of
Compensation deferred by the Participant under the Plan, the Company Basic
Benefit and the Company Match provided under the Plan, and the amount of
earnings and losses credited on each of these amounts.
1.13 "DISABILITY" means a physical or mental condition that
prevents the Participant from earning a reasonable livelihood with any Company,
Grant Prideco, Inc. and any subsidiary of Grant Prideco, Inc. and which was not
the result of having engaged in a felonious criminal enterprise, alcoholism,
addiction to narcotics or service in the U.S. Armed Forces. The Committee's
determination of a Participant's Disability shall be in its sole discretion and
shall be final.
1.14 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
1.15 "GRANT SPIN-OFF" means the distribution by the Sponsor to
its stockholders of all the outstanding shares of stock of Grant Prideco, Inc.
1.16 "GRANT STOCK" means the common stock, $.01 par value, of
Grant Prideco, Inc.
1.17 "PARTICIPANT" means an employee of a Company who is
eligible for and is participating in the Plan.
I-3
<PAGE> 9
1.18 "PLAN" means the Weatherford International, Inc.
Executive Deferred Compensation Stock Ownership Plan set out in this document,
as amended from time to time.
1.19 "PLAN YEAR" means a one year period which coincides with
the calendar year.
1.20 "RETIREMENT" means the retirement of a Participant from
any Company covered by the Plan, Grant Prideco, Inc. and any subsidiary of Grant
Prideco, Inc. on or after attaining age 60 under its retirement policy.
1.21 "SPONSOR" means Weatherford International, Inc., the
sponsor of the Plan, or any successor of Weatherford International, Inc. into
which Weatherford International, Inc. is merged or consolidated.
1.22 "SUBSIDIARY" means any domestic wholly owned subsidiary
of the Sponsor.
1.23 "TRUSTEE" means collectively or individually one or more
corporations with trust powers which have been appointed by the Sponsor and have
accepted the duties of trustee of the Weatherford International, Inc. Executive
Deferred Compensation Stock Ownership Trust, and all successors appointed by the
Sponsor.
1.24 "YEAR OF SERVICE" means 365 days of employment with the
Sponsor or a Subsidiary. Employment with Grant Prideco, Inc. and its affiliates
up to the fifth anniversary of the effective date of the distribution by the
Sponsor to its stockholders of all the outstanding shares of stock of Grant
Prideco, Inc. shall be treated as employment with the Sponsor.
I-4
<PAGE> 10
ARTICLE II
ELIGIBILITY
The employees eligible to participate in the Plan include the
key employees of the Sponsor and each Subsidiary, who are in a select group of
management or are highly compensated employees, as determined by the Committee
from time to time. The Committee shall notify each Participant of his
eligibility to participate in the Plan. Except as specified below, each
Participant in the Plan during a Plan Year shall continue to participate in the
Plan unless the Committee shall have notified the Participant prior to the
beginning of the next Plan Year that he will not participate in the Plan for
that Plan Year. The Committee may at any time during a Plan Year on 60 days'
notice to a Participant advise the Participant that he shall not participate in
the Plan after the expiration of such notice period. A former participant who
has been notified that he will no longer participate in the Plan, but who
remains in the employ of the Company, shall retain the balance in his Accounts
under the terms of the Plan, but shall not make additional deferrals under
Section 3.2 or receive any additional allocations to his Accounts under Sections
4.2 and 4.4 during the periods in which he is not an eligible Participant in the
Plan.
II-1
<PAGE> 11
ARTICLE III
DEFERRALS AND BENEFIT ACCRUALS
3.1 BASIC BENEFIT ACCRUAL. Subject to Section 3.4, the Company
shall accrue an amount for the benefit of each Participant equal to 7 1/2
percent of the Participant's Compensation for the Plan Year.
3.2 DEFERRAL ELECTION. A Participant may elect, within 30 days
of notification that he is eligible to participate in the Plan, and not less
than six months prior to the effective date of the first deferral, and
thereafter not later than June 30 preceding the next Plan Year, the percentage,
if any, of his Compensation that is to be deferred under the Plan. A Participant
may defer a minimum of one percent but not more than 7 1/2 percent of his
Compensation for the Plan Year. A Participant may only defer Compensation that
has not yet been paid to him. Prior to the election period the Committee shall
notify all eligible Participants of their right to make a deferral election.
Once an election has been made as to the percentage to be deferred, it becomes
irrevocable for the Plan Year. The election to defer a percentage of
Compensation shall be effective only upon the timely receipt by the Committee of
the Participant's percentage deferral election on such form as will be
determined by the Committee from time to time. Except with respect to the
election by a newly eligible Participant as described above, if the Committee
fails to receive a properly filed election form on or prior to June 30 of the
year immediately preceding the Plan Year to which the election applies, revoking
or modifying a prior election, the prior election shall remain in effect. If a
timely election form is not received, the Participant shall be deemed to have
elected not to defer any part of his Compensation for that Plan Year. An
election to defer for one Plan Year shall remain effective for subsequent Plan
Years until modified or revoked in accordance with this Section 3.2.
III-1
<PAGE> 12
3.3 COMPANY MATCH ACCRUAL. Subject to Section 3.4, the Company
shall award each Participant who elects to defer a portion of his Compensation
under the Plan with an amount equal to 100 percent of the amount that is
deferred by him.
3.4 REDUCTION OF ACCRUALS. The Committee may reduce the
percentage of the Basic Benefit accrual and/or the Company Match accrual upon
written notice to a Participant. Such reduction shall apply only as to Plan
Years following such notice, or in the case of a new Participant, beginning on
the date that the Participant first receives credit under Section 3.1, 3.2 or
3.3.
III-2
<PAGE> 13
ARTICLE IV
ACCOUNT
4.1 ESTABLISHING A PARTICIPANT'S ACCOUNT. The Committee shall
establish an Account for each Participant in a special Deferred Compensation
Ledger which shall be maintained by the Company. The Account shall reflect the
amount of the Company's obligation to the Participant at any given time.
4.2 BASIC BENEFIT ACCOUNT. The Basic Benefit shall be credited
to each Participant's Basic Benefit Account as of the last day of each month of
each Plan Year for the accrual attributable to Compensation paid during that
month.
4.3 DEFERRAL ACCOUNT. The amount deferred by a Participant, if
any, shall be credited to each Participant's Deferral Account as of the last day
of each month in which the Participant would have received the amount deferred
but for his election to defer.
4.4 COMPANY MATCH ACCOUNT. The Company Match shall be credited
to each Participant's Company Match Account coincident with the allocation of
the Participant's Deferral to the Participant's Deferral Account.
4.5 GAUGE FOR DETERMINING BENEFITS. Except as specified in
Section 4.6, the Basic Benefit, Deferral and Company Match described in Sections
4.2, 4.3 and 4.4, shall be deemed to be credited in non-monetary units equal to
the number of whole shares of Common Stock which could have been purchased at a
price equal to the average closing sale price of a share of Common Stock during
the calendar month for which the credit is made as reported by the principal
national securities exchange on which the Common Stock is then listed if the
Common Stock is listed on a national securities exchange or the average of the
bid and asked price of a share of Common Stock
IV-1
<PAGE> 14
during such month as reported in the National Association of Securities Dealers
Automated Quotation National Market System (or successor system) listing if the
Common Stock is not then listed on a national securities exchange, provided that
if no such closing price or quotes are so reported during that month or if, in
the discretion of the Committee, another means of determining the fair market
value of the Common Stock for such month shall be necessary and advisable, the
Committee may provide for another means of determining such value, and in
monetary units for any amount which is less than the value of a whole share. Any
monetary unit credited to an Account will be added to the next such amount
credited to the Account and converted into a non-monetary unit as quickly as
possible. The value of each unit credited to an Account and therefore the
ultimate value of the deferred compensation payable to each Participant will
increase or decrease in proportion to the change in the value of a share of
Common Stock between the date of the initial crediting of a unit and the date
that the unit is valued for distribution under Article VI of the Plan.
4.6 ADJUSTMENTS FOR THE GRANT SPIN-OFF. Following the Grant
Spin-Off, the Committee shall credit to a Participant's Account one non-monetary
unit equal to one share of Grant Stock for every one non-monetary unit equal to
one share of Common Stock that is deemed to be credited to his Account as of the
date of the Grant Spin-Off or subsequently credited to his Account for
Compensation earned through the date of the Grant Spin-Off.
IV-2
<PAGE> 15
ARTICLE V
VESTING
5.1 DEFERRALS. A Participant shall have a 100 percent
nonforfeitable interest in his Deferrals under the Plan at all times. A
Participant will also have a 100 percent nonforfeitable interest in any increase
in the Deferral as a result of the rise in the value of the non-monetary units
after his Deferral has been initially credited.
5.2 BASIC BENEFIT AND COMPANY MATCH. Upon his Retirement,
death or Disability while employed with the Company, a Participant will have a
100 percent nonforfeitable interest in the Basic Benefit and Company Match
credited to his Account together with any increase in the accruals as a result
of the rise in the value of the non-monetary units after they have been
initially credited, except for the events of forfeiture described in Section
6.5. In addition, a Participant's interest in the Basic Benefit and Company
Match credited to his Account together with any increase in the accruals as a
result of the rise in the value of the non-monetary units after they have been
initially credited shall vest at the rate set out in the vesting schedule below,
except for events of forfeiture described in Section 6.5 and upon termination of
the Plan as provided in Section 9.3.
<TABLE>
<CAPTION>
Completed Years of Service
With the Company Beginning
January 1 of the Plan Year the Employee
First Becomes a Participant Percentage Vested
--------------------------------------- -----------------
<S> <C>
Less than one year...............................................................0
One but less than two...........................................................20
Two but less than three.........................................................40
Three but less than four........................................................60
Four but less than five.........................................................80
Five or more...................................................................100
</TABLE>
V-1
<PAGE> 16
ARTICLE VI
DISTRIBUTIONS
6.1 DEATH. Upon the death of a Participant, the Participant's
Beneficiary or Beneficiaries shall receive the value of the amounts credited to
the Participant's Accounts in the Deferred Compensation Ledger determined under
Section 6.7, and the distribution shall be made in shares of Common Stock.
Notwithstanding the foregoing, to the extent that shares of Grant Stock are
deemed credited to the Participant's Account, the Committee may cause shares of
Grant Stock to be distributed to his Beneficiary or Beneficiaries. The
distribution shall be made within 30 days after the Participant's death.
Each Participant, upon notification of his participation in
the Plan, shall file with the Committee a designation of one or more
Beneficiaries to whom distributions otherwise due the Participant shall be made
in the event of his death prior to the distribution of the amount credited to
his Accounts in the Deferred Compensation Ledger. The designation will be
effective upon receipt by the Committee of a properly executed form which the
Committee has approved for that purpose. The Participant may from time to time
revoke or change any designation of Beneficiary by filing another approved
Beneficiary designation form with the Committee. If there is no valid
designation of Beneficiary on file with the Committee at the time of the
Participant's death, or if all of the Beneficiaries designated in the last
Beneficiary designation have predeceased the Participant or otherwise ceased to
exist, the Beneficiary will be the Participant's spouse, if the spouse survives
the Participant, or otherwise the Participant's estate. Any Beneficiary
designation which designates any person or entity other than the Participant's
spouse must be consented to in writing by the spouse in a form acceptable to the
Committee in order to be effective.
VI-1
<PAGE> 17
6.2 DISABILITY. Upon the Disability of a Participant, the
Participant shall receive the value of the amounts credited to the Participant's
Accounts in the Deferred Compensation Ledger determined under Section 6.7, and
the distribution shall be made in shares of Common Stock. Notwithstanding the
foregoing, to the extent that shares of Grant Stock are deemed credited to the
Participant's Account, the Committee may cause shares of Grant Stock to be
distributed to him. The distribution shall be made within 30 days after the
Participant becomes disabled.
6.3 RETIREMENT. Upon the Retirement of a Participant on or
after attaining age 60, the Participant shall receive the value of the amounts
credited to his Accounts in the Deferred Compensation Ledger determined under
Section 6.7, and the distribution shall be made in shares of Common Stock.
Notwithstanding the foregoing, to the extent that shares of Grant Stock are
deemed credited to the Participant's Account, the Committee may cause shares of
Grant Stock to be distributed to him. The distribution shall be made within 30
days after the Participant's Retirement.
6.4 TERMINATION PRIOR TO DEATH, DISABILITY OR RETIREMENT. Upon
a Participant's termination from the employ of the Company prior to death,
Disability or Retirement, he shall receive the portion of the amount credited to
his Accounts in the Deferred Compensation Ledger, determined under Section 6.7,
which is vested under Sections 5.1 and 5.2, and the distribution shall be made
in shares of Common Stock. Notwithstanding the foregoing, to the extent that
shares of Grant Stock are deemed credited to the Participant's Account, the
Committee may cause shares of Grant Stock to be distributed to him. The
distribution shall be made within 30 days after the Participant's termination.
Any amounts not then vested shall be forfeited. A Participant who continues to
be employed by Grant Prideco, Inc or a subsidiary of Grant Prideco, Inc.
following the Grant Spin-Off shall not be treated as having terminated from the
employ of the Company until he terminates from the employ of Grant Prideco, Inc.
and its subsidiaries.
VI-2
<PAGE> 18
6.5 FORFEITURE FOR CAUSE. If the Committee finds, after full
consideration of the facts presented on behalf of both the Company and a former
Participant, that the Participant was discharged by the Company for fraud,
embezzlement, theft, commission of a felony, proven dishonesty in the course of
his employment by the Company which damaged the Company, or for disclosing trade
secrets of the Company, the entire amount credited to his Basic Benefit Account
and Company Match Account in the Deferred Compensation Ledger shall be forfeited
even though it may have been previously vested under Section 5.2. The decision
of the Committee as to the cause of a former Participant's discharge and the
damage done to the Company shall be final. No decision of the Committee shall
affect the finality of the discharge of the Participant by the Company in any
manner.
6.6 RESPONSIBILITY FOR DISTRIBUTIONS AND WITHHOLDING OF TAXES.
The Committee shall furnish information to the Company last employing the
Participant concerning the amount and form of distribution to any Participant
entitled to a distribution so that the Company may make or cause the rabbi trust
to make the distribution required. It will also calculate the deductions from
the amount of the benefit paid under the Plan for any taxes required to be
withheld by federal, state or local government and will cause them to be
withheld and paid to the appropriate authority. If a Participant has deferred
compensation under the Plan while in the service of more than one Company, each
Company for which the Participant worked shall pay the amount attributable to
the period the Participant was in the service of that Company, except to the
extent the Company paid an amount to the Trust which was paid the Participant.
6.7 DISTRIBUTION DETERMINATION DATE. For purposes of all
distributions described in this Article VI, the determination date for valuing
the amounts credited to a Participant's Accounts shall be the day which triggers
the beginning of the 90-day period described in Section 6.1, 6.2, 6.3
VI-3
<PAGE> 19
or 6.4, as applicable. For purposes of all distributions in Common Stock and
Grant Stock described in this Article VI, the determination date shall be the
date of the actual distribution of the Common Stock or Grant Stock to the
Participant or his Beneficiary, and the number of shares issued shall be equal
to the vested non-monetary units allocated to the Participant's Accounts.
VI-4
<PAGE> 20
ARTICLE VII
ADMINISTRATION
7.1 COMMITTEE APPOINTMENT. The Committee consisting of not less
than two members shall be appointed by the Board of Directors. Each Committee
member shall serve until his or her resignation or removal. The Board of
Directors shall have the sole discretion to remove any one or more Committee
members and appoint one or more replacement or additional Committee members from
time to time.
7.2 COMMITTEE ORGANIZATION AND VOTING. The Committee shall
select from among its members a chairman who shall preside at all of its
meetings and shall elect a secretary without regard to whether that person is a
member of the Committee. The secretary shall keep all records, documents and
data pertaining to the Committee's supervision and administration of the Plan. A
majority of the members of the Committee shall constitute a quorum for the
transaction of business and the vote of a majority of the members present at any
meeting shall decide any question brought before the meeting. In addition, the
Committee may decide any question by a vote, taken without a meeting, of a
majority of its members. A member of the Committee who is also a Participant
shall not vote or act on any matter relating solely to himself.
7.3 POWERS OF THE COMMITTEE. The Committee shall have the
exclusive responsibility for the general administration of the Plan according to
the terms and provisions of the Plan and shall have all powers necessary to
accomplish those purposes, including but not by way of limitation the right,
power and authority:
(a) to make rules and regulations for the administration of
the Plan;
VII-1
<PAGE> 21
(b) to construe all terms, provisions, conditions and
limitations of the Plan;
(c) to correct any defect, supply any omission or reconcile
any inconsistency that may appear in the Plan in the manner and to the
extent it deems expedient to carry the Plan into effect;
(d) to designate the persons eligible to become Participants;
(e) to determine all controversies relating to the
administration of the Plan, including but not limited to:
(1) differences of opinion arising between the
Company and a Participant; and
(2) any question it deems advisable to determine in
order to promote the uniform administration of the Plan for
the benefit of all parties at interest; and
(f) to delegate by written notice those clerical and
recordation duties of the Committee, as it deems necessary or advisable
for the proper and efficient administration of the Plan.
7.4 COMMITTEE DISCRETION. The Committee in exercising any
power or authority granted under the Plan or in making any determination under
the Plan shall perform or refrain from performing those acts using its sole
discretion and judgment. Any decision made by the Committee or any refraining to
act or any act taken by the Committee in good faith shall be final and binding
on all parties and shall not be subject to de novo review.
7.5 ANNUAL STATEMENTS. The Committee shall cause each
Participant to receive an annual statement as soon as administratively feasible
after the conclusion of each Plan Year containing a statement of the
Participant's Accounts in the Deferred Compensation Ledger through the end of
that Plan Year. The statement shall include a report of the Basic Benefit, the
Participant Deferral and Company Match, if any, and the number of units
allocated to the Accounts for that Plan Year.
VII-2
<PAGE> 22
7.6 REIMBURSEMENT OF EXPENSES. The Committee shall serve
without compensation for their services but shall be reimbursed by the Sponsor
for all expenses properly and actually incurred in the performance of their
duties under the Plan.
VII-3
<PAGE> 23
ARTICLE VIII
ADOPTION BY SUBSIDIARIES
8.1 PROCEDURE FOR AND STATUS AFTER ADOPTION. Any Subsidiary
may, with the approval of the Committee, adopt the Plan by appropriate action of
its board of directors. The terms of the Plan will apply separately to each
Subsidiary adopting the Plan and its Participants in the same manner as is
expressly provided for the Sponsor and its Participants except that the powers
of the Board of Directors and the Committee under the Plan shall be exercised by
the Board of Directors alone. The Sponsor and each Subsidiary adopting the Plan
shall bear the cost of providing plan benefits for its own Participants. It is
intended that the obligation of the Sponsor and each Subsidiary with respect to
its Participants shall be the sole obligation of the Company that is employing
the Participant and shall not bind any other Company.
8.2 TERMINATION OF PARTICIPATION BY ADOPTING SUBSIDIARY. Any
Subsidiary that adopts the Plan may, by appropriate action of its board of
directors, terminate its participation in the Plan. The Committee may, in its
discretion, also terminate a Subsidiary's participation in the Plan at any time.
The termination of the participation in the Plan by a Subsidiary shall not,
however, affect the rights of any Participant who is working or has worked for
the Subsidiary as to amounts and/or units previously standing to his credit in
his Accounts in the Deferred Compensation Ledger.
VIII-1
<PAGE> 24
ARTICLE IX
AMENDMENT AND/OR TERMINATION
9.1 AMENDMENT OR TERMINATION OF THE PLAN. The Board of
Directors may amend or terminate the Plan at any time by an instrument in
writing without the consent of any adopting Company or any Participant; provided
however, the amount of the Basic Benefit Accrual specified in Section 3.1 may
not be amended more than once every six months other than to comport with
changes to the Code or the Employee Retirement Income Security Act, or the rules
thereunder.
9.2 NO RETROACTIVE EFFECT ON AWARDED BENEFITS. No amendment
shall affect the rights of any Participant to the amounts and/or units then
standing to his credit in his Accounts in the Deferred Compensation Ledger.
However, the Board of Directors shall retain the right at any time to change in
any manner the method of calculating all Basic Benefits to be accrued in the
future, all amounts deferred by a Participant and all amounts matched by the
Company and the gauge to be used to determine future increases or decreases in
amounts accrued or deferred after the date of the amendment, if it has been
announced to the Participants.
9.3 EFFECT OF TERMINATION. If the Plan is terminated, all
amounts of Basic Benefits accrued by the Company, deferred by Participants and
matched by the Company and credited to a Participant's Accounts shall
immediately vest as if the Participant were entitled to and did retire on the
date the Plan terminated. Distribution would then commence in accordance with
Section 6.3. However, the forfeiture provisions of Section 6.5 would continue to
apply until the actual date of distribution.
IX-1
<PAGE> 25
ARTICLE X
PAYMENT
10.1 PAYMENTS UNDER THIS AGREEMENT ARE THE OBLIGATION OF THE
COMPANY. The Company shall be liable for all benefits due the Participants under
the Plan.
10.2 PAYMENTS MAY BE MADE TO A RABBI TRUST. It is specifically
recognized by both the Company and the Participants that under all
circumstances, the rights of the Participants to the assets held in the trust,
if any, shall be no greater than the rights expressed in this agreement. Nothing
contained in the trust agreement which creates the trust shall constitute a
guarantee by any Company that the amounts transferred by it to the trust shall
be sufficient to pay any benefits under the Plan or would place the Participant
in a secured position ahead of judgment and/or general creditors should the
Company become insolvent or bankrupt. Any trust agreement prepared under the
Plan must specifically set out these principles so it is clear in that trust
agreement that the Participants in the Plan are only unsecured general creditors
of the Company in relation to their benefits under the Plan.
10.3 PARTICIPANTS MUST RELY ONLY ON THE GENERAL CREDIT OF THE
COMPANY. It is also specifically recognized by both the Company and the
Participants that the Plan is only a general corporate commitment and that each
Participant must rely upon the general credit of the Company for the fulfillment
of its obligations under the Plan. Under all circumstances the rights of
Participants to any asset held by the Company shall be no greater than the
rights expressed in this agreement. Nothing contained in this agreement shall
constitute a guarantee by the Company that the assets of the Company will be
sufficient to pay any benefits under the Plan or would place the Participant in
a secured position ahead of general creditors and judgment creditors of the
Company.
X-1
<PAGE> 26
Although the Company has established or become a signatory to a rabbi trust to
accumulate assets to fulfill its obligations under the Plan, the maintenance of
the Plan and the rabbi trust shall not create any lien, claim, encumbrance,
right, title or other interest of any kind in any Participant in any asset held
by the Company, contributed to any trust created, or otherwise be designated to
be used for payment of any of its obligations created in this agreement. No
specific assets of the Company have been or will be set aside, or will be
transferred to the trust or will be pledged for the performance of the Company's
obligations under the Plan which would remove those assets from being subject to
the general creditors and judgment creditors of the Company.
10.4 PLAN UNFUNDED. It is intended that the Plan shall be
unfunded for tax purposes and for purposes of Title I of ERISA.
X-2
<PAGE> 27
ARTICLE XI
MISCELLANEOUS
11.1 LIMITATION OF RIGHTS. Nothing in the Plan will be
construed:
(a) to give any employee of any Company any right to be
designated a Participant in the Plan;
(b) to give a Participant any right with respect to the Basic
Benefit accrued, the Deferral, or the Company Match accrued except in
accordance with the terms of the Plan;
(c) to limit in any way the right of the Company to terminate
a Participant's employment with the Company at any time;
(d) to evidence any agreement or understanding, expressed or
implied, that the Company will employ a Participant in any particular
position or for any particular remuneration; or
(e) to give a Participant or any other person claiming through
him any interest or right under the Plan other than that of any
unsecured general creditor of the Company.
11.2 DISTRIBUTION TO MINOR OR INCAPACITATED PERSON. If the
Committee determines that any person to whom a payment is due is a minor or
unable to care for his affairs because of physical or mental disability, it
shall have the authority to cause his payments under the Plan to be made to his
parent, legal guardian, spouse, brother, sister or other person whom the
Committee determines. The Committee 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 the obligations of the
Company and the Committee.
11.3 NONALIENATION OF BENEFITS. No right or benefit provided in
the Plan shall be transferable by the Participant except, upon his death, to a
named Beneficiary as provided in the Plan. No right or benefit under the Plan
shall be subject to anticipation, alienation, sale, assignment,
XI-1
<PAGE> 28
pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber, or charge the same shall be void. No right or benefit
under the Plan shall in any manner be liable for or subject to any debts,
contracts, liabilities or torts of the person entitled to such benefits. If any
Participant or any Beneficiary becomes bankrupt or attempts to anticipate,
alienate, sell, assign, pledge, encumber or charge any right or benefit under
the Plan, that right or benefit shall, in the discretion of the Committee,
cease. In that event, the Committee may have the Company hold or apply the right
or benefit or any part of it to the benefit of the Participant or Beneficiary,
his or her spouse, children or other dependents or any of them in any manner and
in any proportion the Committee believes to be proper in its sole and absolute
discretion, but is not required to do so.
11.4 RELIANCE UPON INFORMATION. The Committee shall not be
liable for any decision or action taken in good faith in connection with the
administration of the Plan. Without limiting the generality of the foregoing,
any decision or action taken by the Committee when it relies upon information
supplied it by any officer of the Company, the Company's legal counsel, the
Company's independent accountants or other advisors in connection with the
administration of this Plan shall be deemed to have been taken in good faith.
11.5 SEVERABILITY. If any term, provision, covenant or condition
of the Plan is held to be invalid, void or otherwise unenforceable, the rest of
the Plan shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
11.6 NOTICE. Any notice or filing required or permitted to be
given to the Committee or a Participant shall be sufficient if in writing and
hand delivered or sent by U.S. mail to the principal office of the Company or to
the residential mailing address of the Participant. Notice shall be deemed to be
given as of the date of hand delivery or if delivery is by mail, as of the date
shown on the postmark.
XI-2
<PAGE> 29
11.7 GENDER AND NUMBER. If the context requires it, words of one
gender when used in the Plan will include the other genders, and words used in
the singular or plural will include the other.
11.8 GOVERNING LAW. The Plan will be construed, administered and
governed in all respects by the laws of the State of Texas.
IN WITNESS WHEREOF, the Company caused this Agreement to be
executed effective as of September 28, 1999.
WEATHERFORD INTERNATIONAL, INC.
By: /s/ Curtis W. Huff
-----------------------------------------
Curtis W. Huff
Executive Vice President, Chief Financial
Officer, General Counsel and Secretary
The Subsidiaries listed on Exhibit A have
adopted the Plan.
<PAGE> 30
EXHIBIT A
WEATHERFORD INTERNATIONAL, INC.
EXECUTIVE DEFERRED COMPENSATION
STOCK OWNERSHIP PLAN
The following subsidiaries have adopted the Plan:
Dailey International, Inc.
EVI Arrow, Inc.
Weatherford Management, Inc.
EVI Watson Packers, Inc.
Grant Prideco, Inc.
Texas Arai, Inc.
Trico Industries, Inc.
Tube-Alloy Corporation
Weatherford Artificial Lift Systems, Inc.
Weatherford Completion and Oilfield Services, Inc.
Weatherford Global Compression Company, L.P.
Weatherford International, Inc.
Weatherford U.S., L.P.
XL Systems, Inc.
Petroline Wellsystems (USA), L.L.C.
<PAGE> 31
WEATHERFORD INTERNATIONAL, INC.
EXECUTIVE DEFERRED COMPENSATION
STOCK OWNERSHIP TRUST
<PAGE> 32
WEATHERFORD INTERNATIONAL, INC.
EXECUTIVE DEFERRED COMPENSATION
STOCK OWNERSHIP TRUST
This agreement made and entered into by and between
Weatherford International, Inc. and Bank One, Texas, NA, located in Houston,
Harris County, Texas, as trustee (the "Trustee").
W I T N E S S E T H :
WHEREAS, effective January 1, 1992, Energy Ventures, Inc. and
certain of its subsidiaries adopted the Energy Ventures, Inc. Executive Deferred
Compensation Stock Ownership Plan (the "Plan") and established the Energy
Ventures, Inc. Executive Deferred Compensation Stock Ownership Trust (the
"Trust") to assist employers in meeting their obligations under the Plan;
WHEREAS, on May 27, 1998, Weatherford Enterra, Inc. was merged
into EVI, Inc. and the name of the surviving entity, EVI Weatherford, Inc., was
subsequently changed to Weatherford International, Inc.;
WHEREAS, effective May 27, 1998, the name of the Plan was
changed to Weatherford International, Inc. Executive Deferred Compensation Stock
Ownership Plan; and
WHEREAS, Weatherford International, Inc. and the Trustee
desire to amend and restate the Trust;
NOW, THEREFORE, effective April 1, 2000, the name of the Trust
is changed to "Weatherford International, Inc. Executive Deferred Compensation
Stock Ownership Trust" and Weatherford International, Inc. and the Trustee
hereby adopt the amendment and restatement of the Trust, the terms of which are
set forth in this agreement.
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WEATHERFORD INTERNATIONAL, INC.
EXECUTIVE DEFERRED COMPENSATION
STOCK OWNERSHIP TRUST
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - DEFINITIONS
Board of Directors...............................................................................1.1
Code.............................................................................................1.2
Committee........................................................................................1.3
Company Stock....................................................................................1.4
Employer.........................................................................................1.5
Equitable Share..................................................................................1.6
Participant......................................................................................1.7
Plan.............................................................................................1.8
Plan Year........................................................................................1.9
Sponsor.........................................................................................1.10
Subsidiary......................................................................................1.11
Trust...........................................................................................1.12
Trustee.........................................................................................1.13
ARTICLE II - ESTABLISHMENT OF TRUST
Purpose..........................................................................................2.1
Irrevocable Subject to Certain Exceptions........................................................2.2
ARTICLE III - CONTRIBUTIONS AND PLAN ADMINISTRATION
Employer Contributions...........................................................................3.1
Establishing Contribution Accounts for Participants..............................................3.2
Valuation of Trust; Allocation of Gains and Losses
to Participants' Accounts......................................................................3.3
ARTICLE IV - POWERS, DUTIES AND RESPONSIBILITIES
OF THE TRUSTEE
General Responsibilities.........................................................................4.1
Investment Responsibility of Trustee.............................................................4.2
Powers of Trustee Relating to Management of Trust Assets.........................................4.3
Payment and Distribution Powers of Trustee.......................................................4.4
Reliance Upon Representations of Trustee.........................................................4.5
Waiver of Bond, Inventory, Return and Report to Court............................................4.6
</TABLE>
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<TABLE>
<S> <C>
Negation of Trustee Engaging in Business Enterprise..............................................4.7
Trustee's Power to Withhold For Payment of Taxes.................................................4.8
Trustee Not Required to Prepare Returns or Reports...............................................4.9
ARTICLE V - NOTICES AND DIRECTIONS
Proper Notice to Trustee.........................................................................5.1
Trustee's Reliance On Notice By Committee and Employer...........................................5.2
Notice To Trustee of Employer's Insolvency.......................................................5.3
ARTICLE VI - TRUSTEE'S FEE AND EXPENSE
ARTICLE VII - LIABILITY OF THE TRUSTEE
Trustee Generally Not Liable When
Acting in Good Faith...........................................................................7.1
Trustee Generally Not Liable For Act or Omission
at Direction of Committee......................................................................7.2
No Co-Fiduciary Liability........................................................................7.3
Indemnification of Trustee.......................................................................7.4
When Determining Course of Action Trustee May Rely
Upon Committee.................................................................................7.5
ARTICLE VIII - SETTLEMENT OF THE ACCOUNTS OF THE TRUSTEE
Trustee's Maintenance of Records.................................................................8.1
Trustee's Rendering of Accounting to Committee...................................................8.2
ARTICLE IX - ACTION, RESIGNATION, REMOVAL AND
SUBSTITUTION OF TRUSTEE
Appointment of Trustee...........................................................................9.1
Resignation of Trustee...........................................................................9.2
Removal of Trustee...............................................................................9.3
No Vacancy in Office of Trustee..................................................................9.4
Appointment of Successor Trustee.................................................................9.5
Vesting of Rights, Titles, Powers in
Successor Trustee..............................................................................9.6
Continuance of Corporate Trustee Through Merger..................................................9.7
</TABLE>
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<TABLE>
<S> <C>
ARTICLE X - ADOPTION BY SUBSIDIARIES
Application of Trust to Adopting Subsidiary.....................................................10.1
Adoption of Single Trust........................................................................10.2
Termination of Adoptions........................................................................10.3
ARTICLE XI - AMENDMENT AND TERMINATION
The Sponsor's Right to Amend....................................................................11.1
Amendments Necessary to Comply With State or Federal
Statutes......................................................................................11.2
Termination of Trust............................................................................11.3
Continuance of Trust When the Sponsor Consolidates,
Merges or Sells Substantially All of Its Assets...............................................11.4
ARTICLE XII - MISCELLANEOUS
No Employment Commitment........................................................................12.1
Non-Alienation of Benefits......................................................................12.2
Gender and Number of Words......................................................................12.3
Texas Law Applicable............................................................................12.4
Severability of Agreement.......................................................................12.5
</TABLE>
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ARTICLE I
DEFINITIONS
1.1 "BOARD OF DIRECTORS" means the Board of Directors of the
Sponsor.
1.2 "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
1.3 "COMMITTEE" means the persons who are from time to time
serving as members of the committee administering the Plan.
1.4 "COMPANY STOCK" means the common stock, $1.00 par value,
of the Sponsor.
1.5 "EMPLOYER" means the Sponsor and any Subsidiary that
adopts the Plan and the Trust.
1.6 "EQUITABLE SHARE" means the proportionate part of the
Trust held for the benefit of Participants of a particular Employer. Each
Employer's proportionate part of the Trust shall be determined at any given time
by multiplying the total assets in the Trust by a fraction the numerator of
which is the total of the accounts earned by Participants while employed by the
Employer and the denominator of which is the total of the accounts earned by all
Participants at that time.
1.7 "PARTICIPANT" means an employee of an Employer who is
eligible for and is participating in the Plan.
1.8 "PLAN" means the Weatherford International, Inc. Executive
Deferred Compensation Stock Ownership Plan.
1.9 "PLAN YEAR" means the calendar year.
1.10 "SPONSOR" means Weatherford International, Inc., the
sponsor of the Plan.
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1.11 "SUBSIDIARY" means any wholly owned subsidiary of the
Sponsor.
1.12 "TRUST" means the Weatherford International, Inc.
Executive Deferred Compensation Stock Ownership Trust.
1.13 "TRUSTEE" means Bank One, Texas, NA, which is serving as
trustee under this agreement or any successor entity or successor entities as
shall be appointed pursuant to this agreement upon the resignation or removal of
the previous entity serving as trustee under this agreement.
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ARTICLE II
ESTABLISHMENT OF TRUST
2.1 PURPOSE. The Trust was previously established by the
Sponsor and the Trustee, and adopted by each Employer, for the sole purpose of
creating a trust to provide for the payment of deferred compensation to the
Participants. The maintenance of the Trust shall never be construed to raise the
Employer's obligation to the Participants above that of a general corporate
obligation under which the Participant must rely upon the general credit of the
Employer for benefits accrued under the Plan. Participants and their
beneficiaries shall have no preferred claim on, or any beneficial ownership
interest in, any assets of the Trust. Any rights created under the Plan and the
Trust shall be mere unsecured contractual rights of Participants and their
beneficiaries against an Employer. Any assets held by the Trust will be subject
to the claims of the Employer's judgment creditors and/or general creditors
under federal and state law in the event of insolvency, as defined in Section
5.3 herein. The Trust is intended to be a multiple grantor trust of which the
Employers are grantors within the meaning of subpart E, part I, subchapter J,
Chapter 1, subtitle A of the Code, and shall be construed accordingly.
2.2 IRREVOCABLE SUBJECT TO CERTAIN EXCEPTIONS. Subject only to
the exceptions in this Section, all contributions to, all assets held in, and
all earnings of the Trust are solely and irrevocably dedicated, to the payment
of (a) the deferred compensation described in the Plan for the benefit of the
Participants and (b) the reasonable expenses of administering the Trust until
the liabilities under the Plan have been satisfied in full, at which time the
Trust shall terminate as provided in Section 11.3. However, the Equitable Share
of the Trust for an individual Employer shall be subject to judgment creditors
and/or general creditors of that Employer if that Employer
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becomes insolvent (as defined in Section 5.3). To that end if the Trustee
receives notice from any Employer pursuant to Section 5.3, the Trustee shall
suspend payment of all benefits to Participants who earned benefits through
employment with that Employer and shall hold that Employer's Equitable Share of
the Trust for the benefit of that Employer's judgment creditors and/or general
creditors as the case may be. Further, if the Trustee receives written
allegations of an Employer's insolvency from any other source, the Trustee shall
suspend the payment of all benefits under the Plan to Participants who earned
benefits through employment with that Employer and shall hold all of that
Employer's Equitable Share of the Trust for the benefit of that Employer's
general creditors, and must determine within 30 days whether that Employer is
solvent. However, the Trustee shall resume payments, including any benefits
suspended, if it determines that Employer is solvent. In the case of the
Trustee's actual knowledge of a levy on the Equitable Share of any Employer in
the Trust by a judgment creditor or the Trustee's actual knowledge of or
determination of any Employer's insolvency, the Trustee shall deliver the
Equitable Share of that Employer in the Trust as directed by a court of
competent jurisdiction.
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ARTICLE III
CONTRIBUTIONS AND PLAN ADMINISTRATION
3.1 EMPLOYER CONTRIBUTIONS. Any Employer may contribute to the
Trust on its own behalf, in cash, amounts to assist the Employer in meeting its
obligations under the Plan for the Participants employed by the Employer at the
time and in the manner determined by it.
3.2 ESTABLISHING CONTRIBUTION ACCOUNTS FOR PARTICIPANTS. The
Employer shall, at the time of its contribution, notify the Committee as to the
Participant for whom the contribution is made so that the Committee may maintain
separate records for the accounts of the Participants.
3.3 VALUATION OF TRUST; ALLOCATION OF GAINS AND LOSSES TO
PARTICIPANTS' ACCOUNTS. The Trustee shall provide to the Committee, at intervals
agreed upon by them, but no less often than once each Plan Year, a statement of
the number of shares of Company Stock and the value of the Trust assets held in
the Trust as a whole and the Trust income and losses, if any.
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ARTICLE IV
POWERS, DUTIES AND RESPONSIBILITIES
OF THE TRUSTEE
4.1 GENERAL RESPONSIBILITIES. The Trustee, has the exclusive
responsibility for all of the Trust assets and all the powers necessary to
receive, hold, preserve, protect, conserve, manage and invest the Trust assets
as provided generally in this agreement and to pay all costs and expenses. The
Trustee shall be responsible only for the sums actually received by it as
Trustee.
4.2 INVESTMENT RESPONSIBILITY OF TRUSTEE. Except as set forth
in this Section, the Trustee is required to invest the Trust assets exclusively
in Company Stock. When the Trustee receives amounts to be invested, those
amounts may be held uninvested in cash or invested in short term investments
such as certificates of deposit with the Trustee, U. S. Treasury bills, savings
accounts with the Trustee, commercial paper or other similar assets which may be
offered by the Trustee until the Trustee determines in its sole discretion to
purchase Company Stock in a prudent and orderly manner. All dividends on Company
Stock and all other income earned on Trust assets will be held by the Trustee
and used to purchase Common Stock for the accounts from which it is generated.
4.3 POWERS OF TRUSTEE RELATING TO MANAGEMENT OF TRUST ASSETS.
Subject to the requirements of Sections 4.1 and 4.2, the following powers,
duties and obligations relating to the receipt, preservation, conservation,
protection, management, investment and reinvestment of both principal and income
and disposition of the Trust created by this agreement, as the Trust may be
composed from time to time, in addition to all of the powers, duties and
obligations of the Trustee under common law and the Texas Trust Code until the
situs of the Trust is removed to another state in which event the laws of the
state of the situs of the Trust will then govern:
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(a) to keep any and all securities and other property in its
name provided that its fiduciary capacity is disclosed;
(b) to vote, either in person or by proxy, any share of stock
held as a part of the assets of the Trust, upon receipt of, and solely
in accordance with, written instructions provided by the Employer;
(c) to collect the principal and income of the Trust as the
same may become due and payable and to give binding receipt therefor;
(d) to take any action, whether by legal proceeding,
compromise, or otherwise, as the Trustee in its sole discretion deems
to be in the best interest of the Trust if there is a default in the
payment of any principal or income of the Trust at any time;
(e) to invest, sell and reinvest Trust assets in any assets it
selects within the limits described in Sections 4.1 and 4.2; and
(f) to employ such accountants, lawyers, brokers, or other
agents as the Trustee deems advisable in administering the Trust.
The Trustee shall not be required to take any legal action to collect, preserve
or maintain any Trust property unless it has been indemnified either by the
Trust or by the Employers with respect to any expenses or losses to which it may
be subjected by taking that action. Any property acquired by the Trustee through
the enforcement or compromise of any claim or claims it has as Trustee shall
become a part of the Trust assets.
4.4 PAYMENT AND DISTRIBUTION POWERS OF TRUSTEE. The Trustee
has the following powers relating to payments and distributions to be made from
the Trust:
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(a) pursuant to the terms of the Plan, to distribute Company
Stock held in connection with a Participant's Account, or to sell that
Company Stock and pay the amount due the Participant in cash, as
directed by the Committee under the terms of the Plan;
(b) pursuant to the terms of Sections 2.2 and 5.3 to pay,
distribute and deliver to any judgment creditor and/or general
creditor, as the case may be, who qualified for it those sums
determined to be due by the appropriate authority;
(c) to pay out of the Trust all taxes of any nature levied,
assessed or imposed upon the Trust, all reasonable expenses of
administering the Trust, including but not limited to, counsel fees,
and the Trustee's compensation; and
(d) pursuant to the terms of Section 11.3, to convey, assign
and deliver upon termination of the Trust, the assets remaining in the
Trust.
4.5 RELIANCE UPON REPRESENTATIONS OF TRUSTEE. All persons
dealing with the Trustee are entitled to rely upon the representations of the
Trustee as to its authority and are released from any duty to inquire into its
authority for taking or omitting any action or to verify that any money paid or
other property delivered to the Trustee is used by the Trustee for trust
purposes. Any action of the Trustee under the Trust created by this agreement
shall be conclusive evidence of the facts recited in it. All persons shall be
fully protected when acting or relying upon any notice, resolution, instruction,
direction, order, certificate, opinion, letter, telegram or other document
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believed by those persons to be genuine, to have been signed by the Trustee, and
to be the act of the Trustee.
4.6 WAIVER OF BOND, INVENTORY, RETURN AND REPORT TO COURT. The
Trustee shall not be required to give bond or other security for the faithful
performance of its duties unless required by a law which cannot be waived; and
the Trustee shall not be required to make any inventory, return, or report to
any court unless required by a law which cannot be waived.
4.7 NEGATION OF TRUSTEE ENGAGING IN BUSINESS ENTERPRISE.
Without regard to any other provision of this agreement and any powers given to
the Trustee in this agreement, the Trustee shall have no power that could give
the Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
4.8 TRUSTEE'S POWER TO WITHHOLD FOR PAYMENT OF TAXES. If
required by the Employer, and subject to the Trustee's receipt of written
instructions and all required information from the Employer, the Trustee shall
withhold any federal, state or local taxes that may be required to be withheld
with respect to the payment of benefits from the Trust, and shall pay amounts
withheld to the appropriate taxing authorities.
4.9 TRUSTEE NOT REQUIRED TO PREPARE RETURNS OR REPORTS. The
Trustee shall not be required to prepare, file, or distribute any tax return or
other report required by a governmental agency under state or federal law. All
such returns or reports shall be the obligation of the Sponsor.
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ARTICLE V
NOTICES AND DIRECTIONS
5.1 PROPER NOTICE TO TRUSTEE. The Trustee shall not be bound
by any certificate, notice, resolution, consent, order, information or other
communication unless and until it has been received at a location which is
mutually agreeable to the parties and is in writing, signed by a person
designated pursuant to Section 5.2.
5.2. TRUSTEE'S RELIANCE ON NOTICE BY COMMITTEE AND EMPLOYER.
The Trustee, in all matters pertaining to its management, investment and
distribution of the Trust, when it acts in good faith, may rely upon any such
notice, resolution, instruction, direction, order, certificate, opinion, letter,
telegram or other document believed by the Trustee to be genuine, to have been
signed by a proper representative of the Committee or other party permitted to
issue a direction to it. In this connection, each Employer and the Committee
shall furnish to the Trustee the name and signature of the person or persons who
are entitled to act on behalf of the Employer when communicating with or
directing the Trustee on matters relating to the Trust.
5.3 NOTICE TO TRUSTEE OF EMPLOYER'S INSOLVENCY. In the event
of a levy by a judgment creditor or in the event of an Employer's insolvency
during the term of the Trust, that Employer's board of directors and chief
executive officer must give written notice to the Trustee within a reasonable
time not to exceed three days of the levy or of a finding of insolvency, as the
case may be. For this purpose "insolvency" means the earliest of the Employer
becoming subject to proceedings as a debtor under the federal Bankruptcy Code,
the general assignment by that Employer to or for the benefit of its creditors,
or the inability of the Employer to pay its debts as they mature.
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ARTICLE VI
TRUSTEE'S FEE AND EXPENSE
The Trustee shall receive such compensation for services
rendered as is agreed upon from time to time between the Trustee and the
Sponsor. Likewise, the Trustee shall be reimbursed for expenses properly and
actually incurred in the performance of its duties under this agreement. The
Trustee's compensation and the expenses of the Trust shall be paid by the
Sponsor, which will then recharge the appropriate amount to each Employer.
Should the Sponsor fail to pay the Trustee, the Trustee is authorized to charge
that compensation and expenses to the Trust.
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ARTICLE VII
LIABILITY OF THE TRUSTEE
7.1 TRUSTEE GENERALLY NOT LIABLE WHEN ACTING IN GOOD FAITH.
The Trustee shall not be liable to the Trust or to any person having a
beneficial interest in the Trust for any losses or decline in value which may be
incurred upon the Company Stock or any other investment of the Trust, or for
failure of the Trust to produce any or greater earnings, interest, or profits,
so long as the Trustee acts in good faith and in compliance with Section 4.2.
7.2 TRUSTEE GENERALLY NOT LIABLE FOR ACT OR OMISSION AT
DIRECTION OF COMMITTEE. The Trustee shall not be liable for any act or omission
by it because of a direction of the Committee, an Employer or agent appointed by
either of them except to the extent required by any applicable state or federal
law, which liability cannot be waived. When the Trustee has made any payment out
of the Trust at the direction of the Committee, an Employer or any agent
appointed by either of them, it shall not be responsible for the correctness of
the amount of the payment to the recipient, or the method by which it is paid.
The Trustee is also protected in relying upon any certificate, notice,
resolution, consent, order, or other communication purporting to have been
signed on behalf of the Committee, an Employer or an agent appointed by either
of them which it believes to be genuine, without any obligation on the part of
the Trustee to ascertain whether or not the provisions of this agreement are
being fulfilled.
7.3 NO CO-FIDUCIARY LIABILITY. The Trustee shall not be liable
for the actions of any other fiduciary or the failure of any other fiduciary to
take action in a given situation.
7.4 INDEMNIFICATION OF TRUSTEE. Each Employer shall, to the
extent that the loss, liability, claim cost or expense is allocable to the
Employer's Equitable Share, indemnify and hold
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harmless the Trustee from any loss, liability, claim, cost or expense (including
attorney's fees, court costs, and other costs in defending a lawsuit) arising
out of its acting as Trustee of the Trust except for any loss, liability, claim
or expense that results from the Trustee's bad faith or gross negligence. For
this purpose, a loss, liability, claim cost or expense that affects or relates
to the entire Trust shall be allocable to each Equitable Share on a pro-rata
basis. The Sponsor shall guarantee each Employer's obligation to indemnify the
Trustee pursuant to this Section 7.4.
7.5 WHEN DETERMINING COURSE OF ACTION TRUSTEE MAY RELY UPON
COMMITTEE. If at any time the Trustee is in doubt concerning the course which it
should follow in connection with any matter relating to the administration of
the Trust, it may request the advice of the Committee and be protected in
relying upon the written advice or direction given by the Committee.
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ARTICLE VIII
SETTLEMENT OF THE ACCOUNTS
OF THE TRUSTEE
8.1 TRUSTEE'S MAINTENANCE OF RECORDS. The Trustee shall keep
all records necessary in the conduct of the Trust. The Trustee's books and
records of the Trust assets are open to inspection by the Committee and
Employers at all reasonable times during business hours of the Trustee.
8.2 TRUSTEE'S RENDERING OF ACCOUNTING TO COMMITTEE. Within 90
days after the close of each Plan Year, or such other times as requested by the
Committee and as of the date of the removal or resignation of the Trustee, the
Trustee must render to the Committee an accounting and report of the Trust
assets for the Plan Year or other period that is applicable since the previous
accounting. The report is to reflect the transactions for the period covered,
the cost of the various lots of Company Stock purchased and the cost of the
other assets and investments purchased, the number of shares of Company Stock
held by the Trust, and the fair market value of the Company Stock and other
assets held in the Trust and the same information as to the account of each
Participant as of the end of the Plan Year or any other date as is applicable.
The report is to be open for inspection for 90 days after its receipt by the
Committee, and if objections are not filed within that period of time, it is
assumed that the report is approved. That approval shall constitute a full and
complete discharge and release to the Trustee by each Employer, all of the
Participants and all other persons having or claiming any interest in the Trust.
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ARTICLE IX
ACTION, RESIGNATION, REMOVAL AND SUBSTITUTION
OF TRUSTEE
9.1 APPOINTMENT OF TRUSTEE. One entity may serve as Trustee,
as determined from time to time by the Board of Directors. The Trustee shall
serve until a successor Trustee is named by the Board of Directors or its
resignation or removal, in which event the Board of Directors shall name a
successor Trustee.
9.2 RESIGNATION OF TRUSTEE. The Trustee or any successor
Trustee may resign as Trustee at any time by filing with the Committee its
written resignation. No resignation shall take effect until 60 days from the
date of notice unless prior to that time a successor Trustee has been appointed
and it has accepted the office.
9.3 REMOVAL OF TRUSTEE. The Trustee or any successor Trustee
may be removed by the Committee at any time. No removal shall take effect until
60 days from the date of notice unless prior to that time a successor Trustee
has been appointed and it has accepted the office, and the Trustee consents to
the earlier date.
9.4 NO VACANCY IN OFFICE OF TRUSTEE. Any vacancy in the office
of Trustee created by the resignation or removal of the Trustee shall not
terminate the Trust. Upon removal or resignation of the Trustee, the Board of
Directors must appoint a successor Trustee.
9.5 APPOINTMENT OF SUCCESSOR TRUSTEE. The appointment of a
successor Trustee shall be accomplished by the delivery to the resigning or
removed Trustee, as the case may be, of a written appointment of the successor
Trustee by the Board of Directors and the written acceptance of the appointment
by the successor Trustee. Any successor Trustee must be one or more entities
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authorized and empowered to conduct a trust business in the state of the situs
of the Trust. This agreement shall then be applicable to each successor Trustee.
9.6 VESTING OF RIGHTS, TITLES, POWERS IN SUCCESSOR TRUSTEE.
Any successor Trustee, after acknowledging acceptance of this agreement, the
Trust assets and the accounting of the retiring Trustee, shall be vested with
all the estates, titles, rights, powers, duties, and discretions granted to the
retiring Trustee. The retiring Trustee must execute and deliver all assignments
or other instruments necessary or advisable for the transfer of all Trust assets
as are reasonably required by the successor Trustee.
9.7 CONTINUANCE OF CORPORATE TRUSTEE THROUGH MERGER. Any
corporation into which any corporate Trustee or any successor corporate Trustee
may be merged or consolidated, or any corporation resulting from any merger or
consolidation to which any corporate Trustee or any successor corporate Trustee
may be a party, or any corporation to which all or substantially all of the
trust business of any corporate Trustee or any successor corporate Trustee may
be transferred, shall be a successor of the Trustee under this agreement without
the filing of any instrument or the performance of any other act.
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ARTICLE X
ADOPTION BY SUBSIDIARIES
10.1 APPLICATION OF TRUST TO ADOPTING SUBSIDIARY. Any
Subsidiary may, with the approval of the Committee, adopt the Trust by
appropriate action of its board of directors. The terms of the Trust shall apply
separately to each Subsidiary adopting the Trust and to its Participants in the
same manner as is expressly provided for the Sponsor and its Participants except
that the powers of the Board of Directors and the Committee under the Plan and
the Trust shall be exercised by the Board of Directors of the Sponsor alone.
10.2 ADOPTION OF SINGLE TRUST. The adoption of the Trust by
any Subsidiary will not cause a separate Trust to be established, but the
Equitable Share of each Subsidiary in the Trust assets will remain the property
of that Subsidiary. Though assets of the Trust will be commingled for investment
purposes, the Committee shall maintain sufficient records to determine the
Equitable Share of each Employer. Only the Equitable Share of each Employer
shall be available to provide Plan benefits for the Participants who are
employed by that Employer. It is intended that the obligation of the Sponsor and
each Subsidiary with respect to its Participants shall be the sole obligation of
the Employer that employed the Participant during a given period of time.
10.3 TERMINATION OF ADOPTIONS. Any Subsidiary adopting the
Trust may, by appropriate action of its board of directors terminate its
participation in the Plan. The Committee may, in its discretion, also terminate
a Subsidiary's participation in the Plan and the Trust at any time. The
termination of the participation in the Trust by a Subsidiary shall not,
however, affect the rights of any Participant who is working or has worked for
the Subsidiary with regard to benefits previously accrued by the Participant
under the Plan, to the extent assets are held in the Trust for the
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benefit of Participants who accrued benefits while employed by the Employer,
without their consent. The Trust though ordered to terminate shall not finally
terminate until all Plan benefits accrued to the date of termination under the
Plan have been paid under the conditions, at the time and in the form then
provided in the Plan. On completion of all payments, any then remaining portion
of the Equitable Share of the Employer shall revert to that Employer and its
participation in the Trust shall then be formally terminated, at the direction
of the Committee.
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ARTICLE XI
AMENDMENT AND TERMINATION
11.1 THE SPONSOR'S RIGHT TO AMEND. The Sponsor shall have the
sole right to amend this agreement. An amendment must be made by an executed
written agreement setting forth the nature of the amendment and its effective
date. No amendment shall make this agreement nor the Trust created by this
agreement revocable or shall divert the assets held in the Trust created by this
agreement from the purposes set out in Section 2.2. Each Employer, other than
the Sponsor, shall be deemed to have adopted any amendment made by the Sponsor.
No amendment shall increase the duties of the Trustee without its written
consent.
11.2 AMENDMENTS NECESSARY TO COMPLY WITH STATE OR FEDERAL
STATUTES. The Sponsor agrees to make any amendment to this agreement as may be
necessary to maintain compliance with the various federal and state laws and any
amendment may be made retroactively.
11.3 TERMINATION OF TRUST. The Trust shall not terminate until
the date on which Participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan. Upon the termination of the Trust,
any assets remaining in the Trust shall be returned to the Employers in the
ratio of their Equitable Shares, at the direction of the Committee. Upon written
approval of Participants or beneficiaries entitled to payment of benefits
pursuant to the terms of the Plan, the Sponsor may terminate the Trust prior to
the time all benefit payments under the Plan have been made. All assets in the
Trust at termination shall be returned to the Employers in the ratio of their
Equitable Shares, at the direction of the Committee.
XI-1
<PAGE> 55
11.4 CONTINUANCE OF TRUST WHEN THE SPONSOR CONSOLIDATES,
MERGES OR SELLS SUBSTANTIALLY ALL OF ITS ASSETS. The Trust created by this
agreement shall not terminate in the event the Sponsor consolidates or merges
and is not the surviving corporation, sells substantially all of its assets, is
a party to a reorganization in which its employees and substantially all of its
assets are transferred to another entity, liquidates or dissolves whether or not
there is a successor corporation. (If there is a successor corporation, it shall
be subject to all the rights and obligations of the Sponsor under the Trust.)
Instead, the Trust shall continue until all Employers have fulfilled their
obligations under Sections 6.3 and 9.3 of the Plan to their Participants, and as
set forth in Section 2.2, at which time it shall automatically terminate using
the procedure described in Section 11.3.
XI-2
<PAGE> 56
ARTICLE XII
MISCELLANEOUS
12.1 NO EMPLOYMENT COMMITMENT. The adoption and maintenance of
the Trust created under this agreement shall not be deemed to be a contract
between any Employer and the Participants employed by it which gives the
Participants the right to be retained in the employment of the Employer, to
interfere with the rights of the Employer to discharge its Participants at any
time, or to interfere with the Participants' rights to terminate their
employment at any time.
12.2 NON-ALIENATION OF BENEFITS. No benefits payable or to
become payable from the Trust created by this agreement shall be subject: to
anticipation or assignment by the Participants or other persons entitled to
receive benefits under the Trust; to attachment by, interference with, or
control of any creditors of the Participants or other persons entitled to
receive benefits under the Trust; or to being taken or reached by any legal or
equitable process in satisfaction of any debt or liability of the Participants
prior to their actual receipt by the Participants or other persons entitled to
receive benefits under the Trust. Any attempted conveyance, transfer,
assignment, mortgage, pledge, or encumbrance of the Trust, any part of it, or
any interest in it by a Participant, or any person entitled to obtain benefits
under the Trust, 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 the Trust itself. The Trustee shall never under any circumstances
be required to recognize any conveyance, transfer, assignment, mortgage, pledge
or encumbrance by a Participant, or other person entitled to receive benefits
under the Trust, of the Trust created under this agreement, any part of it, or
any interest in
XII-1
<PAGE> 57
it, or to pay any money or thing of value to any creditor or assignee of a
Participant, or other person entitled to receive benefits under the Trust, for
any cause whatsoever.
12.3 GENDER AND NUMBER OF WORDS. If the context requires it,
words of one gender shall include the other genders, and words used in the
singular or the plural shall include the other.
12.4 TEXAS LAW APPLICABLE. The provisions of this agreement
shall be construed, according to the laws of the State of Texas.
12.5 SEVERABILITY OF AGREEMENT. Each provision of this
agreement is severable and if any provision is found to be void or against
public policy, it shall not affect the validity of any other provision hereof.
XII-2
<PAGE> 58
IN WITNESS WHEREOF, the Sponsor and the Trustee have caused
this agreement to be executed effective as of April 1, 2000.
WEATHERFORD INTERNATIONAL, INC.
By: /s/ Curtis W. Huff
-----------------------------------------
Curtis W. Huff
Executive Vice President, Chief Financial
Officer, General Counsel and Secretary
BANK ONE, TEXAS, NA
By: /s/ Marshall J. Franklin
------------------------------------------
Name: Marshall J. Franklin
----------------------------------------
Title: Senior Vice President
---------------------------------------
<PAGE> 1
EXHIBIT 10.5
WEATHERFORD INTERNATIONAL, INC.
DEFERRED COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
1. DEFINITIONS.
(a) "ADMINISTRATIVE COMMITTEE" means a committee consisting of the duly
elected Corporate Secretary of the Company or, in the event the Secretary is a
Participant, one or more other persons appointed by the Board to administer the
Plan who are not Participants.
(b) "BOARD" means the Board of Directors of the Company.
(c) "COMPANY" means Weatherford International, Inc., a Delaware
corporation.
(d) "COMPENSATION" means any retainer, meeting, committee fee or any
similar fee or compensation to which a Non-Employee Director is entitled for
services performed for the Company.
(e) "CREDITED SHARES" mean the shares of the Company's common stock, $1.00
par value, which, for accounting purposes only, are to be credited to a
Participant's Share Account from time to time. At no time shall Credited Shares
be considered as actual shares of common stock and a Participant shall have no
rights as a stockholder with respect to the Credited Shares.
(f) "DEFERRED AMOUNT" means Compensation deferred by a Participant under
the Plan together with all dividends or other amounts credited to a
Participant's Share Account or Grant Account pursuant to the provisions of the
Plan, including the value of any Credited Shares in the Participant's Share
Account and any Grant Shares in the Participant's Grant Account.
(g) "GRANT ACCOUNT" means each account being administered for the benefit
of a Participant pursuant to Section 6.
(h) "GRANT SHARES" means the shares of common stock of Grant Prideco, Inc.,
$.01 par value, which, for accounting purposes only, are to be credited to a
Participant's Grant Share Account. At no time shall Grant Shares be considered
as actual shares of common stock of Grant Prideco, Inc. and a Participant shall
have no rights as a stockholder with respect to the Grant Shares.
(i) "GRANT SPIN-OFF" means the distribution by the Company to its
stockholders of all the outstanding shares of stock of Grant Prideco, Inc.
<PAGE> 2
(j) "MARKET VALUE" means with respect to the Company's common stock, the
mean between the high and low sales price per share (or average last bid and
asked price if applicable) of the Company's common stock or Grant Prideco,
Inc.'s common stock, as applicable, as reported by (i) the automated quotation
system of the National Association of Securities Dealers if such common stock is
not then listed on a national securities exchange or (ii) the principal national
securities exchange on which such common stock is listed if such common stock is
so listed, in each case as of the last trade day of each calendar month.
(k) "NON-EMPLOYEE DIRECTOR" means any duly elected or appointed member of
the Board who is not an employee of the Company or of any subsidiary of the
Company.
(l) "PARTICIPANT" means any Non-Employee Director who elects hereunder to
defer payment by the company of a portion of the Compensation to which he or she
may be entitled.
(m) "PLAN" means Weatherford International, Inc. Deferred Compensation Plan
for Non-Employee Directors.
(n) "SHARE ACCOUNT" means each account being administered for the benefit
of a Participant pursuant to Section 5.
2. ADMINISTRATION.
The Plan shall be administered by the Administrative Committee which shall
have the authority to construe and interpret the Plan, and to establish or adopt
rules, regulations and forms relating to the administration of the Plan. The
Administrative Committee shall have no authority to add to, delete from or
modify the terms of the Plan without the prior approval of the Board. All
actions and determinations by the Board with respect to the Plan shall be
required to be approved by a majority of the members thereof that are not then
participating in the Plan and who have not participated in the Plan during the
12-month period immediately preceding such action. Neither the Administrative
Committee nor any member of the Board shall be liable for any act or
determination made in good faith.
3. ELECTION TO DEFER COMPENSATION.
(a) Each Non-Employee Director may from time to time execute and deliver to
the Secretary an appropriate election form designating a portion of the
Non-Employee Director's future Compensation to be deferred under the Plan up to
a maximum of 7.5 percent of such Compensation. Any election shall be applicable
only to designated Compensation earned on or after the first day of the month
next following the month in which the election form is received by the
Administrative Committee and until the effective date of any revocation thereof.
Each such election must also irrevocably fix a date upon which the distributions
to the Participant under the Plan are to be made
2
<PAGE> 3
or begin as provided in Section 7, which date shall be a date not less than one
year after the effective date of the election.
(b) In the event a Participant elects to defer a portion of his
Compensation under the Plan that is equal to or greater than five percent of his
Compensation, the Company shall, during the period during which the
Participant's Compensation is being deferred, make an additional credit to the
Participant's Share Account in an amount equal to the sum of (i) 7.5 percent of
the Participant's Compensation during the period during which the Participant's
Compensation is being deferred and (ii) a percentage of such Compensation equal
to the percentage of Compensation then being deferred by the Participant under
the Plan up to a maximum of 7.5 percent of the Participant's Compensation.
(c) Each election to defer payment of Compensation by a Participant shall
continue in effect until revoked in writing upon not less than six months' prior
notice. No revocation shall be effective with respect to any Deferred Amount
credited with respect to Compensation prior to the effective date of the new
election. The amount, if any, of the Company's additional credit to a
Participant's Share Account shall be adjusted effective as of the effective date
of each new election under the Plan by a Participant.
4. ACCOUNTING.
(a) The Company shall establish on its books appropriate bookkeeping
accounts for each Participant that will accurately reflect the Deferred Amount
of each Participant, including the number of Credited Shares in the
Participant's Share Account and the number of Grant Shares in the Participant's
Grant Account.
(b) The Administrative Committee shall furnish each Participant with a
statement of the Deferred Amount, including the number of Credited Shares in the
Participant's Share Account and the number of Grant Shares in the Participant's
Grant Account, as of the end of each calendar year promptly following the end of
each calendar year.
5. SHARE ACCOUNT.
(a) Each Share Account shall consist of the cash amounts credited in
respect of a specific election to defer Compensation and the Credited Shares
into which prior credited amounts in the Share Account have been converted.
Except as provided in this Section 5, any cash amount credited to a Share
Account in a calendar month shall be converted, as of the end of that calendar
month, into the maximum whole number of Credited Shares that the amount so
credited would have purchased at the then Market Value.
(b) As of the end of the calendar month during which the Company pays any
dividend on its common stock, either in cash or property other than its common
stock, each Share Account shall be credited with an amount equal to the cash
dividend per share or the cash value per share (as
3
<PAGE> 4
conclusively determined by the Board) of the dividend in property other than its
common stock, times the Credited Shares in the Share Account on the dividend
record date. The amount so credited will be converted into the maximum whole
number of Credited Shares that the amount so credited could have purchased at
the then Market Value. If the Company pays any stock dividend, the Share Account
shall be credited, as of the end of the calendar month during which the stock
dividend is paid, with a number of Credited Shares equal to the number of shares
or fraction of a share of common stock paid per share of common stock as a
dividend times the Credited Shares in the Share Account on the dividend record
date.
(c) If any distribution other than a dividend is made on, or with respect
to, the Company's common stock, or in the event of a stock split,
recapitalization, merger, consolidation or other adjustment of the Company's
common stock, an appropriate adjustment shall be made to the number of Credited
Shares in a Share Account or to the cash credited to the Share Account on the
same basis as would have been made had the Credited Shares then actually been
issued and outstanding on the record date. The Board shall resolve any questions
as to the appropriateness of any such adjustment, including, but not limited to,
values and exchange ratios, and its determination shall be binding and
conclusive.
(d) All conversions into Credited Shares under Sections 5(a) through (c)
shall be made in full shares. Amounts not so converted shall be reflected as
credited cash in a Share Account and shall be added to any additional amounts of
credited cash subsequently available for conversion; provided, however, that in
the event the Share Account reflects only credited cash and interest thereon as
provided in Section 5(e), the cash value of such account shall not be converted
into Credited Shares.
(e) In the event the Company's common stock is at any time not publicly
traded so as to permit the determination of the Market Value of the Credited
Shares, such value shall be determined based on such factors and criteria as the
Board shall determine in good faith to be appropriate under the circumstances.
In the event the Company's common stock shall have been converted into or
exchanged for cash, securities (other than the Company's common stock) or other
property by virtue of a merger, consolidation, share exchange, reclassification
or other similar transaction, the value of such cash, securities and other
property received by the holders of the Company's common stock per share of
common stock shall be fixed as the cash value for each Credited Share in each
Participant's Share Account and such cash value shall be credited in such Share
Account and thereafter remain credited in the Participant's Share Account until
distributed and such account shall thereafter be credited by an amount equal to
the interest that would have been earned thereon at an annual rate equal to the
published prime lending rate at the beginning of each calendar quarter at Chase
Bank of Texas, National Association computed quarterly until the cash value of
such account shall be distributed as provided in Section 7. In such event, no
further deferrals of Compensation may be made by the Participant under the Plan
and no further additional credits shall be made by the Company as provided in
Section 3(b) and any cash credits in the Share Account shall not thereafter be
converted into Credited Shares.
4
<PAGE> 5
(f) When a distribution is to commence pursuant to Section 7, a stock
certificate(s) representing the Credited Shares in the Share Account on the last
business day of the month preceding the date distribution is to commence, and
the amount of any credited cash in such Share Account will be distributed as
provided in Section 7, provided that all cash in the Share Account shall be
distributed at the time of the first distribution of stock representing Credited
Shares.
6. GRANT ACCOUNT.
(a) Following the Grant Spin-Off, the Committee shall credit to a
Participant's Account one non-monetary unit equal to one share of Grant Stock
for every one non-monetary unit equal to one share of Common Stock that is
deemed to be credited to his Account as of the date of the Grant Spin-Off or
subsequently credited to his Account for Compensation earned through the date of
the Grant Spin-Off.
(b) As of the end of the calendar month during which Grant Prideco, Inc.
pays any dividend on its common stock, either in cash or property other than its
common stock, a Participant's Grant Account shall be credited with an amount
equal to the cash dividend per share or the cash value per share (as
conclusively determined by the Board) of the dividend times the Grant Shares in
the Grant Account on the dividend record date. The amount so credited will be
converted into the maximum whole number of Grant Shares that the amount so
credited could have purchased at the then Market Value. If Grant Prideco, Inc.
pays any stock dividend, the Grant Account shall be credited, as of the end of
the calendar month during which the stock dividend is paid, with a number of
Grant Shares equal to the number of shares or fraction of a share of common
stock paid per share of common stock as a dividend times the Grant Shares in the
Grant Account on the dividend record date.
(c) If any distribution other than a dividend is made on, or with respect
to, the Grant Prideco, Inc.'s common stock, or in the event of a stock split,
recapitalization, merger, consolidation or other adjustment of Grant Prideco,
Inc.'s common stock, an appropriate adjustment shall be made to the number of
Grant Shares in a Grant Account or to the cash credited to the Grant Account on
the same basis as would have been made had the Grant Shares then actually been
issued and outstanding on the record date. The Board shall resolve any questions
as to the appropriateness of any such adjustment, including, but not limited to,
values and exchange ratios, and its determination shall be binding and
conclusive.
(d) All conversions into Grant Shares under Sections 6(a) through (c) shall
be made in full shares. Amounts not so converted shall be reflected as credited
cash in a Grant Account and shall be added to any additional amounts of credited
cash subsequently available for conversion; provided, however, that in the event
the Grant Account reflects only credited cash and interest thereon as provided
in Section 6(e), the cash value of such account shall not be converted into
Grant Shares.
5
<PAGE> 6
(e) In the event Grant Prideco, Inc.'s common stock is at any time not
publicly traded so as to permit the determination of the Market Value of the
Grant Shares, such value shall be determined based on such factors and criteria
as the Board shall determine in good faith to be appropriate under the
circumstances. In the event Grant Prideco, Inc.'s common stock shall have been
converted into or exchanged for cash, securities (other than Grant Prideco,
Inc.'s common stock) or other property by virtue of a merger, consolidation,
share exchange, reclassification or other similar transaction, the value of such
cash, securities and other property received by the holders of Grant Prideco,
Inc.'s common stock per share of common stock shall be fixed as the cash value
for each Grant Share in each Participant's Grant Account and such cash value
shall be credited in such Grant Account and thereafter remain credited in the
Participant's Grant Account until distributed and such account shall thereafter
be credited by an amount equal to the interest that would have been earned
thereon at an annual rate equal to the published prime lending rate at the
beginning of each calendar quarter at Chase Bank of Texas, National Association
computed quarterly until the cash value of such account shall be distributed as
provided in Section 7.
(f) When a distribution is to commence pursuant to Section 7, a stock
certificate(s) representing the Grant Shares in the Grant Account on the last
business day of the month preceding the date distribution is to commence, and
the amount of any credited cash in such Grant Account will be distributed as
provided in Section 7, provided that all cash in the Grant Account shall be
distributed at the time of the first distribution of stock representing Grant
Shares.
7. DISTRIBUTION.
(a) Except in the case of the death of a Participant, distribution shall
commence as of the first day of the calendar quarter coincident with or next
following the date irrevocably specified by the Participant in the applicable
election to defer.
(b) Except in the case of the death of the Participant, distribution(s) of
stock certificate(s) representing the number of shares in the Share Account and
the Grant Account shall be either in the form of a single distribution of shares
or in approximately equal quarterly installments over a period not to exceed ten
years as irrevocably selected by the Participant in the applicable election to
defer. In the event the Participant elects to receive the deferred compensation
of shares of stock through quarterly installments, the undistributed Credited
Shares and Grant Shares shall accrue dividends when paid which will be connected
to additional Credited Shares and Grant Shares in accordance with Plan terms.
Cash in the Share Account and the Grant Account representing fractured shares
shall be distributed at the time of the next distribution of Credited Shares and
Grant Shares.
(c) In the event of the Participant's death prior to the date specified for
his distribution or after distribution to the Participant has commenced but
before full distribution has been made, the number of the then remaining shares
in the Share Account and the Grant Account shall be paid in a single
distribution to the beneficiary or contingent beneficiary designated in the
applicable election to defer, or to the estate of the deceased Participant if
there is no surviving beneficiary or contingent
6
<PAGE> 7
beneficiary. In either such event the single distribution shall be made as of
the first day of the calendar quarter following the Participant's date of death.
A Participant may change the beneficiary or contingent beneficiary from time to
time with respect to any election to defer by filing with the Administrative
Committee a notice of change of beneficiary. No change shall be effective unless
received by the Administrative Committee prior to the date of the Participant's
death.
8. MISCELLANEOUS.
(a) The Board may amend or terminate the Plan at any time; provided,
however, (i) no amendment may be made that would accelerate or change the date
of distribution with respect to Compensation theretofore deferred, and (ii) any
amendment or termination of the Plan shall not affect the rights of Participants
or beneficiaries to payment, in accordance with Section 7, of amounts credited
to Participants' account hereunder at the time of such amendment or termination.
(b) The Plan does not create a trust in favor of a Participant, his
designated beneficiary or beneficiaries, or any other person claiming on his
behalf, and the obligation of the Company is solely a contractual obligation to
make payments due hereunder. In this regard, the balance in any account shall be
considered a liability of the Company and the Participant's right thereto shall
be the same as any unsecured general creditor of the Company. Neither the
Participant nor any other person shall acquire any right, title, or interest in
or to any Deferred Amount outstanding under the Plan other than the actual
payment of such Deferred Amount in accordance with the terms of the Plan.
(c) No right or benefit under the Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be
void. No right or benefit hereunder shall in any manner be liable for or subject
to the debts, contracts, liabilities or torts of the person entitled to such
benefit. If any Participant or beneficiary shall become bankrupt or attempt to
anticipate, alienate, sell, assign, pledge, encumber or charge any right or
benefit hereunder, then such right or benefit shall in the discretion of a
majority of the Board, excluding the affected Participant, cease and terminate;
and in such event, the Company may hold or apply the same or any part thereof
for the benefit of the Participant or his beneficiary, his spouse, children or
other dependents, at any time and in such proportion as a majority of the Board,
excluding the affected Participant, may deem proper. Any statement to the
contrary notwithstanding, the Company may apply any Deferred Amount to satisfy,
in whole or in part, any indebtedness of a Participant to the Company.
(d) The terms of the Plan shall be binding upon the heirs, executors,
administrators, personal representatives, successors and assigns of all parties
in interest.
(e) The headings have been inserted for convenience only and shall not
affect the meaning or interpretation of the Plan.
7
<PAGE> 8
(f) Each Participant shall submit to the Administrative Committee his
current mailing address. It shall be the duty of each Participant to notify the
Administrative Committee of any change of address. In the absence of such
notice, the Administrative Committee shall be entitled for all purposes to rely
on the last-known address of the Participant.
(g) Any amount payable to or for the benefit of a minor, an incompetent
person or other person incapable of receipting therefor shall be deemed paid
when paid to such person's guardian or to the party providing or reasonably
appearing to provide for the care of such person, and such payment shall fully
discharge the Company and the Board with respect thereto.
(h) Nothing in the Plan or any amendment thereto shall give a Participant,
or any beneficiary of a Participant, a right not specifically provided therein.
Nothing in the Plan or any amendment thereto shall be construed as giving a
Participant the right to be retained as a member of the Board.
(i) If the context requires it, words of one gender when used in the Plan
will include the other gender, and words used in the singular or plural will
include the other.
(j) The Plan will be construed, administered and governed in all respects
by the laws of the State of Texas.
IN WITNESS WHEREOF, the Company caused this Agreement to be executed this
13th day of April, 2000.
WEATHERFORD INTERNATIONAL, INC.
By: /s/ CURTIS W. HUFF
---------------------------------------------
Curtis W. Huff
Executive Vice President, Chief Financial
Officer, General Counsel and Secretary
8
<PAGE> 1
EXHIBIT 10.6
AMENDMENT TO STOCK OPTION PROGRAMS
WHEREAS, the Board of Directors of Weatherford International, Inc. (the
"Company") has approved of the distribution to the Company's stockholders of all
of the stock of Grant Prideco, Inc. (the "Spin-Off") pursuant to the terms and
conditions set forth in the Distribution Agreement by and between the Company
and Grant Prideco, Inc. (the "Distribution Agreement");
NOW, THEREFORE, the Company agrees as follows:
(1) Effective as of the Distribution Date as defined in the Distribution
Agreement (the "Distribution Date"), the Energy Ventures, Inc. Employees' Stock
Option Plan, the Energy Ventures, Inc. 1992 Employee Stock Option Plan, the
Weatherford Enterra, Inc. 1991 Stock Option Plan, Taro Industries Limited Stock
Option Plan and the Weatherford International, Inc. 1998 Employee Stock Option
Plan are hereby amended by adding to each the following provisions:
Notwithstanding any other provision of the Plan, the per-share exercise
price of each option granted under the Plan prior to September of 1998 shall be
adjusted pursuant to the application of the following formula: E (W-G)/W where E
is the original exercise price of the option; W is the market value per share of
Weatherford International, Inc.'s common stock, $1.00 par value ("WII Common
Stock"), as of the close of market on the last trading day before
"when-distributed" trading begins as reported by the New York Stock Exchange
("NYSE"); and G is the market value of a share of Grant Prideco, Inc. common
stock, $.01 par value ("GP Common Stock") determined initially by taking the
average of the high and low trading prices on the NYSE on the first full trading
date after "when-distributed" trading begins; and, following 30 consecutive
trading days after "when-distributed" trading begins, for options outstanding on
such date, the average of the last sales price per share of GP Common Stock on
the NYSE for each of the 30 consecutive trading days beginning on the date
"when-distributed" trading begins. Notwithstanding any other provision of the
Plan, if an optionee continues to be an employee of Grant Prideco, Inc. or any
of its affiliates (a "Grant Company") after the date as of which the
distribution by Weatherford International, Inc. to its stockholders of the stock
of Grant Prideco, Inc. is effective (the "Distribution Date"), he shall not be
deemed to terminate employment with Weatherford International, Inc. or its
subsidiaries within the meaning of the Plan until he is no longer an employee of
any Grant Company.
Further, notwithstanding any other provision of the Plan, each option
granted under the Plan after August 31, 1998 to an optionee who continues to be
an employee of a Grant Company after the Distribution Date shall be canceled
upon the Distribution Date.
Further, notwithstanding any other provision of the Plan, any option
granted under the Plan after August 31, 1998 to an optionee who remains an
employee of Weatherford International, Inc.
<PAGE> 2
or any of its subsidiaries or other affiliates, other than a Grant Company,
after the Distribution Date shall be adjusted as follows. The number of shares
of WII Common Stock for which such an option will be exercisable and the
exercise price for such option will be determined as provided in the following
formula:
The adjusted exercise price for the option will equal E (W-G)/W
The number of shares of WII Common Stock subject to the
adjusted option will equal NE/Pw
Where E = The original exercise price of the option;
N = The original number of shares of WII Common Stock subject to
the option;
G = The market value of a share of GP Common
Stock (a) initially based on the average of the high and low
trading prices on the NYSE on the first full trading date
after "when-distributed" trading begins, and (b) following 30
consecutive trading days after "when-distributed" trading
begins, for options remaining outstanding on such date, the
average of the last sales price per share of GP Common Stock
on the NYSE for each of the 30 consecutive trading days
beginning on the date "when-distributed" trading begins; and
W = The market value per share of WII Common Stock as of the close
of market on the last trading day before "when-distributed"
trading begins as reported by the NYSE; and
Pw = The adjusted exercise price of the option determined in
accordance with the formula set forth above.
(2) Effective as of the Distribution Date, the Energy Ventures, Inc.
Amended and Restated Non-Employee Director Stock Option Plan and the Energy
Ventures, Inc. 1991 Non-Employee Director Stock Option Plan are hereby amended
by adding thereto the following provisions:
Notwithstanding any other provision of the Plan, the per-share exercise
price of each option granted under the Plan shall be adjusted pursuant to the
application of the following formula: E (W-G)/W where E is the original exercise
price of the option; W is the market value per share of Weatherford
International, Inc. common stock, $1.00 par value, as of the close of market on
the last trading day before "when-distributed" trading begins as reported by the
New York Stock Exchange ("NYSE"); and G is the market value of a share of Grant
Prideco, Inc. common stock, $.01 par value ("GP Common Stock") determined
initially by taking the average of the high and low trading prices on the NYSE
on the first full trading date after "when-distributed" trading begins; and,
following 30 consecutive trading days after "when-distributed" trading begins,
for options outstanding on such date, the average of the last sales price per
share of GP Common Stock on the NYSE for each of the 30 consecutive trading days
beginning on the date "when-distributed" trading begins.
2
<PAGE> 3
(3) Effective as of the Distribution Date, each option agreement and
warrant agreement entered into by the Company after August 31, 1998 with respect
to an optionee who remains an employee of the Company or any of its subsidiaries
or other affiliates other than Grant Prideco, Inc. or any of its subsidiaries or
other affiliates after the Distribution Date or who remains a non-employee
director of Weatherford International, Inc. after the Distribution Date is
hereby amended by adding thereto the following provisions:
Further, notwithstanding any other provision of this Agreement, the option
granted hereunder shall be adjusted as follows: The number of shares of
Weatherford International, Inc. common stock, $1.00 par value ("WII Common
Stock"), for which such an option will be exercisable and the exercise price for
such option will be determinated as provided in the following formula:
The adjusted exercise price for the option will equal E (W-G)/W
The number of shares of WII Common Stock subject to the
adjusted option will equal NE/Pw
Where E = The original exercise price of the option;
N = The original number of shares of WII Common Stock subject to
the option;
G = The market value of a share of GP Common Stock (a) initially
based on the average of the high and low trading prices on the
NYSE on the first full trading date after "when-distributed"
trading begins, and (b) following 30 consecutive trading days
after "when-distributed" trading begins, for options remaining
outstanding on such date, the average of the last sales price
per share of GP Common Stock on the NYSE for each of the 30
consecutive trading days beginning on the date
"when-distributed" trading begins; and
W = The market value per share of WII Common Stock as of the close
of market on the last trading day before "when-distributed"
trading begins as reported by the NYSE; and
Pw = The adjusted exercise price of the option determined in
accordance with the formula set forth above.
(4) Effective as of the Distribution Date, each option agreement entered
into by the Company before September 1, 1998 with respect to an optionee who
remains an employee of the Company or any of its subsidiaries or other
affiliates other than Grant Prideco, Inc. or any of its
3
<PAGE> 4
subsidiaries or other affiliates after the Distribution Date is hereby amended
by adding thereto the following provisions:
Notwithstanding any other provision of this Agreement, the per-share
exercise price of the option granted hereunder shall be adjusted pursuant to the
application of the following formula: E (W-G)/W where E is the original exercise
price of the option; W is the market value per share of Weatherford
International, Inc.'s common stock, $1.00 par value ("WII Common Stock"), as of
the close of market on the last trading day before "when-issued" trading begins
as reported by the New York Stock Exchange ("NYSE"); and G is the market value
of a share of Grant Prideco, Inc. common stock, $.01 par value ("GP Common
Stock") determined initially by taking the average of the high and low trading
prices on the NYSE on the first full trading date after "when-distributed"
trading begins; and, following 30 consecutive trading days after
"when-distributed" trading begins, for options outstanding on such date, the
average of the last sales price per share of GP Common Stock on the NYSE for
each of the 30 consecutive trading days beginning on the date "when-distributed"
trading begins.
IN WITNESS WHEREOF, the Company has caused this Amendment to Stock Option
Programs to be executed by its duly authorized officer.
WEATHERFORD INTERNATIONAL, INC.
DATE: APRIL 13, 2000 BY: /s/ CURTIS W. HUFF
----------------------------------------
Curtis W. Huff
Executive Vice President, Chief Financial
Officer, General Counsel and Secretary
4
<PAGE> 1
EXHIBIT 10.11
TAX ALLOCATION AGREEMENT
BY AND BETWEEN
WEATHERFORD INTERNATIONAL, INC.
AND
GRANT PRIDECO, INC.
APRIL 14, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Grant Group............................................................................................-2-
2. Tax Returns............................................................................................-2-
3. Obligation for Payment of Taxes........................................................................-4-
4. No Weatherford Tax Payments............................................................................-5-
5. Grant Tax Payments.....................................................................................-5-
6. Tax Credits; Deferred Intercompany Gains...............................................................-7-
7. Grant Tax Carryovers; Payment by Grant.................................................................-7-
8. Tax Audits.............................................................................................-8-
9. Proposed Adjustments...................................................................................-8-
10. Notice of Settlement or Compromise.....................................................................-9-
11. Grant's Right to Contest...............................................................................-9-
12. Subsequent Adjustments or Refunds.....................................................................-10-
13. Grant Spin-Off Tax Indemnity..........................................................................-10-
14. Future Actions........................................................................................-11-
15. Combined, Consolidated or Unitary Basis Returns.......................................................-11-
16. Earnings and Profits Information......................................................................-11-
17. Tax Interpretation....................................................................................-12-
18. Consistent Tax Treatment..............................................................................-12-
19. Retention of Records..................................................................................-12-
20. Expenses..............................................................................................-13-
21. Definitions...........................................................................................-13-
"After-Tax Basis".....................................................................................-13-
"Agreed Rate".........................................................................................-13-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
"Code"................................................................................................-13-
"Distribution Agreement"..............................................................................-13-
"Grant" .............................................................................................-13-
"Grant Group".........................................................................................-13-
"Interim Period"......................................................................................-13-
"Returns".............................................................................................-14-
"Ruling" .............................................................................................-14-
"Short Period"........................................................................................-14-
"Spin-Off"............................................................................................-14-
"Spin-Off Date".......................................................................................-14-
"Spin-Off Tax"........................................................................................-14-
"Tax Authority".......................................................................................-14-
"Taxes" .............................................................................................-14-
"Transfer Tax"........................................................................................-15-
"Weatherford".........................................................................................-15-
"Weatherford Group"...................................................................................-15-
"WEI".................................................................................................-15-
22. Notices...............................................................................................-15-
23. Binding Effect; Successors............................................................................-15-
24. Severability..........................................................................................-16-
25. Entire Agreement......................................................................................-16-
26. Governing Law.........................................................................................-17-
27. Arbitration...........................................................................................-17-
EXHIBIT A - MEMBERS OF THE GRANT GROUP
</TABLE>
-ii-
<PAGE> 4
EXHIBIT 10.11
TAX ALLOCATION AGREEMENT
THIS TAX ALLOCATION AGREEMENT, made and entered into as of the 14th day
of April, 2000, by and between WEATHERFORD INTERNATIONAL, INC., a Delaware
corporation ("Weatherford"), and GRANT PRIDECO, INC., a Delaware corporation
("Grant").
W I T N E S S E T H:
WHEREAS, Weatherford is the common parent of an affiliated group of
corporations (hereinafter referred to as the "Weatherford Group") within the
meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), which affiliated group includes (x) corporations owned by Weatherford
(formerly known as EVI, Inc.) and (y) corporations owned by Weatherford Enterra,
Inc., a Delaware corporation ("WEI"), on May 27, 1998, the date on which WEI
merged with and into Weatherford, and (z) corporations acquired by Weatherford
or other members of the Weatherford Group subsequent to May 27, 1998, and the
members of the Weatherford Group have heretofore joined in filing consolidated
Federal income Tax Returns;
WHEREAS, prior to May 27, 1998, Weatherford and its eligible
subsidiaries joined in filing consolidated Federal income Tax Returns as an
affiliated group and WEI and its eligible subsidiaries joined in filing
consolidated Federal income Tax Returns as an affiliated group;
WHEREAS, Grant and its subsidiaries have been members of the
Weatherford Group;
WHEREAS, on or about April 12, 2000, certain assets associated with the
drilling products business conducted by the Weatherford Group, including the
stock of certain subsidiaries included in the Weatherford Group and engaged in
the drilling products business, will be contributed to the capital of Grant or
otherwise acquired by Grant or one or more of its subsidiaries;
WHEREAS, Weatherford, on or about April 14, 2000 (the "Spin-Off Date"),
will distribute to its stockholders all of the outstanding stock of Grant (the
"Spin-Off"), and thereafter Grant and
-1-
<PAGE> 5
its subsidiaries will no longer be members of the Weatherford Group for Federal
income Tax purposes; and
WHEREAS, the parties desire to provide for the sharing of the Federal,
state, local and foreign income Tax liabilities and benefits accrued prior to
the Spin-Off between Weatherford and its subsidiaries and Grant and its
subsidiaries;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant Group. For purposes of this Agreement, the "Grant Group" shall
mean (i) Grant, (ii) Grant's subsidiaries, and (iii) those corporations and
other entities whose stock or ownership interests will be contributed to Grant
prior to the Spin-Off Date, all of such subsidiaries of Grant and such
corporations and other entities being listed on Exhibit A attached hereto.
Unless otherwise specified, whenever items of income, gain, loss, deduction,
credit, or other Tax attributes of Grant are referred to in this Agreement, the
reference shall be to the collective amounts of such items for the Grant Group.
2. Tax Returns. Weatherford shall prepare and file or cause to be
prepared and filed timely all appropriate Returns in respect of Grant and the
other members of the Grant Group that (i) are required to be filed on or before
the Spin-Off Date; or (ii) are required to be filed after the Spin-Off Date that
(A) are required to include, on a consolidated, combined or unitary basis, the
operations of Grant or any other member of the Grant Group for any Tax period or
portion thereof ending on or before the Spin-Off Date; or (B) are required to be
filed by Grant or any other member of the Grant Group on a separate return basis
for any Tax period ending on or before the Spin-Off Date. To the extent
requested by Weatherford, Grant shall participate in the filing of and shall
file any required Returns with respect to any Tax period that ends on or before
the Spin-Off Date. Grant shall prepare or cause to be prepared the schedules in
respect of Grant and other members of the
-2-
<PAGE> 6
Grant Group containing the information necessary for Weatherford to prepare any
consolidated, combined or unitary Returns. If Weatherford, after consulting with
Grant, files any such consolidated, combined or unitary Return using information
with respect to Grant and the other members of the Grant Group that is different
from the information prepared and furnished by Grant and Weatherford and Grant
thereafter are unable to resolve such difference, such difference shall
constitute a claim for purposes of Paragraph 27 of this Agreement. Grant shall
also prepare or cause to be prepared and shall file or cause to be filed all
other Returns required of Grant or any other members of the Grant Group, or in
respect of its or any of their activities, for any Tax period ending after the
Spin-Off Date that includes the operations of Grant or any other member of the
Grant Group prior to the Spin-Off Date. The parties hereto will, to the extent
permitted by applicable law, elect with the relevant Tax Authority to treat for
all purposes the Spin-Off Date as the last day of a Tax period of Grant and the
other members of the Grant Group, and such period shall be treated as a "Short
Period" for purposes of this Agreement. In any case where applicable law does
not permit Grant to treat the Spin-Off Date as the last day of a Short Period,
then for purposes of this Agreement, the portion of such Taxes that is
attributable to the operations of Grant and the other members of the Grant Group
for such Interim Period (as defined below) shall be (i) in the case of Taxes
that are not based in whole or in part on income or gross receipts, the total
amount of such Taxes for the period in question multiplied by a fraction, the
numerator of which is the number of days in the Interim Period, and the
denominator of which is the total number of days in the entire period in
question, and (ii) in the case of Taxes that are based in whole or in part on
income or gross receipts, the Taxes that would be due with respect to the
Interim Period, if such Interim Period were a Short Period. "Interim Period"
means with respect to any Taxes imposed on Grant or any other members of the
Grant Group for which the Spin-Off Date is not the last day of a Short Period,
the
-3-
<PAGE> 7
period of time beginning on the first day of the actual Tax period that includes
(but does not end on) the Spin-Off Date and ending on and including the Spin-Off
Date. Any franchise Tax shall be allocated to the Tax period or portion thereof
during which the right to do business obtained by the payment of such franchise
Tax relates, regardless of whether such franchise Tax is measured by income,
operations, assets or capital relating to another Tax period.
3. Obligation for Payment of Taxes. Weatherford shall be entitled to
receive from Grant amounts calculated in accordance with Paragraphs 5, 7 and 12
hereof. Except as otherwise provided in Paragraph 5, the amounts, if any, that
Grant shall be obligated to pay Weatherford pursuant to Paragraph 5, with
respect to Tax periods of the Weatherford Group ending on or prior to the Spin-
Off Date, shall be paid (i) within 120 days after the Spin-Off Date where the
Taxes were paid by Weatherford on or before the Spin-Off Date and shall include
interest thereon calculated for the period from the Spin-Off Date to the date of
payment at a per annum rate of interest (computed on the basis of the actual
number of days elapsed (including the Spin-Off Date but excluding the payment
date) over a year of 365 or 366 days, as the case may be) equal to 10 percent,
or (ii) within 30 days after the date of payment where the Taxes are paid by
Weatherford after the Spin-Off Date. This initial settlement shall be based on
the Returns as they have been filed and shall include any amendments of or
adjustments to such Returns that have been finally settled. Except as otherwise
provided in Paragraph 5, any amounts that Grant shall be obligated to pay
Weatherford pursuant to Paragraph 5 with respect to Tax periods of the
Weatherford Group ending after the Spin-Off Date shall be paid within 30 days
after filing of the Returns for such Tax periods. In the event of an adjustment
to the amount of payment for any Tax period as determined under Paragraph 12,
Weatherford shall be entitled to receive from Grant such payment within 30 days
after payment of a deficiency to or receipt of a refund from the Tax Authority.
In the event of an adjustment under
-4-
<PAGE> 8
Paragraph 12 resulting in no additional payment to or receipt of a refund from
the Tax Authority, settlement shall be made within 30 days after filing of the
amended Return or final settlement of the adjustment. In the event that Grant is
delinquent in paying to Weatherford any amount due pursuant to this Paragraph 3,
including any interest accrued thereon pursuant to this Paragraph 3, or
Paragraph 7 hereof, such unpaid amount shall bear interest from the original due
date until paid at a per annum rate equal to the lesser of (a) 12 percent and
(b) the maximum lawful non-usurious rate of interest, if any, which under
applicable law Weatherford is permitted to charge Grant thereon from time to
time.
4. No Weatherford Tax Payments. Except as otherwise provided in
Paragraph 12 hereof, Weatherford shall not be obligated to pay Grant for any Tax
credits of the Grant Group or any losses or deductions of the Grant Group used
by the Weatherford Group to reduce its Federal income Tax liability or Federal
taxable income for any Tax period ending on or before the Spin-Off Date. For
purposes of these computations, the allocation of Tax attributes to the Grant
Group and absorption thereof by the Weatherford Group for each Tax period shall
be determined in accordance with the Treasury Regulations under ss.1502 of the
Code, applied in a manner consistent with practices and methods followed in
reporting the Federal income Tax liability of the Weatherford Group for such Tax
periods. In any instance where a Tax attribute must be characterized, the
characterization prescribed by the aforementioned Treasury Regulations will
control.
5. Grant Tax Payments. For each Tax period of the Weatherford Group
which includes income of the Grant Group, Grant shall be obligated to pay
Weatherford an amount equal to the product of (i) the net taxable income of the
Grant Group included in the consolidated Federal income Tax Return of the
Weatherford Group for such period, multiplied by (ii) the highest marginal
statutory Federal corporate income Tax rate applicable to such income for such
period; provided,
-5-
<PAGE> 9
however, that no payment shall be required pursuant to this Paragraph 5 to the
extent such payments have previously been made by the Grant Group to members of
the Weatherford Group other than the Grant Group under any Tax sharing agreement
or arrangement (whether written or oral) or any other similar system of payments
with respect to Federal income Taxes of the Weatherford Group in existence prior
to the Spin-Off Date, including, but not limited to, any estimated Tax payments.
For purposes of these computations, the allocation of Tax attributes to the
Weatherford Group and absorption thereof by the Grant Group for each Tax period
shall be determined in accordance with the Treasury Regulations under ss.1502 of
the Code, applied in a manner consistent with practices and methods followed in
reporting the Federal income Tax liability of the Weatherford Group for such Tax
periods. In any instance where a Tax attribute must be characterized, the
characterization prescribed by the aforementioned Treasury Regulations will
control. To the extent, if any, that the amount of Taxes Weatherford is required
to pay with respect to the net taxable income of the Grant Group for a Tax
period is less than the amount calculated as owed by Grant to Weatherford under
this Paragraph 5, the amount owed by Grant to Weatherford shall be (i) reduced
to the extent that such difference is attributable to Tax benefits of the
Weatherford Group used which would have otherwise expired unused but for the
fact that the Grant Group had net taxable income for such Tax period, or (ii)
deferred to the extent such difference is attributable to Tax benefits of the
Weatherford Group used which would have otherwise carried forward to a
subsequent year or years but for the fact that the Grant Group had net taxable
income for such Tax period. In the event an amount otherwise payable by Grant to
Weatherford is deferred pursuant to clause (ii) of the immediately preceding
sentence, such amount shall be paid by Grant to Weatherford within 30 days after
the filing of the Tax Return for the Tax period in which such Tax benefits of
the Weatherford Group previously used would have been used. Any amount payable
by Grant to Weatherford pursuant to
-6-
<PAGE> 10
the immediately preceding sentence shall not be greater than the amount of Tax
paid by Weatherford as a consequence of the Tax benefits of the Weatherford
Group previously having been used to offset taxable income of the Grant Group.
6. Tax Credits; Deferred Intercompany Gains. For purpose of the
calculations under this Agreement, any loss of Tax credits resulting from or
attributable to the transfer of assets to Grant or any other member of the Grant
Group in connection with the Spin-Off shall be ignored and all calculations
shall be made as though all such tax credits were available for use by the
Weatherford Group. In the event any deferred intercompany gain attributable to
assets transferred to Grant or any other members of the Grant Group by other
members of the Weatherford Group is recognized by the Weatherford Group by
reason of the Spin-Off, such deferred intercompany gain, if any, shall be deemed
to be a gain of the Grant Group for its taxable year ending on the Spin-Off Date
for purposes of all calculations under this Agreement, including the calculation
of Taxes owed by Grant to Weatherford pursuant to Paragraphs 3 and 5 hereof.
7. Grant Tax Carryovers; Payment by Grant. Notwithstanding anything in
this Agreement to the contrary, with respect to items of loss or other Tax
benefits apportioned to and carried over by the Grant Group after the Spin-Off
(under the Treasury Regulations governing Federal consolidated income Tax
Returns) and regardless of whether such Tax benefits (x) are used by the Grant
Group to reduce its Federal income Tax liability after the Spin-Off or (y)
expire unused by the Grant Group, Grant shall pay to Weatherford an amount equal
to any such item of loss or other Tax benefit multiplied by the highest marginal
statutory Federal corporate income Tax rate in effect on the Spin-Off Date. Any
payment due from Grant to Weatherford pursuant to this Paragraph 7 shall be
payable on the earlier of 30 days after (x) the date of filing of the Return
which includes such item of loss or other Tax benefit or (y) the end of the Tax
year in which such item of loss or
-7-
<PAGE> 11
other Tax benefit expires unused. Weatherford agrees to cooperate with Grant in
determining the amount of such items of loss or other Tax benefits apportioned
to and carried over by the Grant Group after the Spin-Off.
8. Tax Audits. In the event of an audit by any Tax Authority of a
Return filed by Weatherford for any Tax period ending prior to or on the
Spin-Off Date (or any Tax period thereafter in which a carryforward of the Grant
Group's Tax benefits is used), Weatherford shall give Grant timely and
reasonable notice of such audit proceedings and Grant shall have the right to
participate in any such audit; provided, however, that Weatherford shall have
the full power and authority to control such audit. In connection with any such
audit, Grant will provide all necessary information and other assistance
reasonably requested by Weatherford with respect to issues concerning the
activities of the Grant Group. All communications with any such Tax Authority
and its employees concerning any such audit will be made by Weatherford unless
otherwise agreed between the parties hereto. In connection with its
participation in any audit, Grant shall be given reasonable notice of all
material meetings, investigations, field examinations and similar events and
copies of all relevant material correspondence between the Tax Authority
conducting the audit and Weatherford.
9. Proposed Adjustments. Weatherford shall give prompt notice to Grant
of any adjustment or adjustments proposed by any Tax Authority relating to the
activities of the Grant Group for any Tax period ending prior to or on the
Spin-Off Date. After consulting with Grant, Weatherford shall determine in its
sole discretion the nature of all action to be taken to contest such proposed
adjustment, including whether any such action shall initially be contested by
way of judicial or administrative proceedings, or both, whether any such
proposed adjustment shall be contested by resisting payment thereof or by paying
the same and seeking a refund thereof, and if Weatherford shall undertake to
contest such proposed adjustment, the court or other judicial body
-8-
<PAGE> 12
before which such action will be commenced. Weatherford shall have full control
over any contest or administrative proceeding pursuant to this Paragraph, but
Grant, at its expense and subject to approval by Weatherford, which approval
shall not be unreasonably withheld, may participate in any proceedings
contesting any proposed adjustment relating to the activities of the Grant
Group.
10. Notice of Settlement or Compromise. Weatherford shall give prompt
notice to Grant of any proposal made to it at the time of an audit or otherwise,
to settle or compromise issues relating to the Tax liabilities of the Grant
Group for any Tax period ending prior to or on the Spin-Off Date. Weatherford
will not accept or offer any settlement or compromise of such issues without the
consent of Grant, and such consent shall not be unreasonably withheld. If, in
Weatherford's opinion, Grant unreasonably withholds such consent, Weatherford
shall have the right to settle or compromise such issues on the basis contained
in the notice to Grant. If Grant thereafter desires to dispute such settlement
or compromise, Grant's claim with respect thereto shall constitute a claim for
purposes of Paragraph 27 of this Agreement.
11. Grant's Right to Contest. Should Weatherford decline or cease to
contest any proposed adjustment relating to the activities of the Grant Group
for any Tax period ending prior to or on the Spin-Off Date, Weatherford shall so
notify Grant. Grant, at its expense and upon providing reasonable assurances to
Weatherford of Grant's ability to pay any Taxes resulting from any such proposed
adjustment, may contest such proposed adjustment; but in no event shall Grant be
permitted to accept or offer any settlement or compromise that would require the
settlement or compromise of issues relating to the Tax liabilities of members of
the Weatherford Group other than the Grant Group.
12. Subsequent Adjustments or Refunds. With respect to any Tax period
of the Weatherford Group for which Weatherford received from Grant a payment
pursuant to Paragraph 5,
-9-
<PAGE> 13
Paragraph 7 or this Paragraph 12, if the filing of an amended income Tax Return,
final determination of any adjustment made by any Tax Authority or the receipt
of a refund by Weatherford occurs with respect to such period and such event
would cause a difference in the amount of payment required for such period as
previously calculated pursuant to Paragraph , Paragraph 7 or this Paragraph 12,
Weatherford shall give Grant prompt notice of such difference and Weatherford
shall be obligated to pay or entitled to receive from Grant the amount of such
difference. Any amount required to be paid pursuant to this Paragraph 12 shall
include any interest imposed by or received from the Tax Authority if the
adjustment results in the payment of Tax to or receipt of Tax from the Tax
Authority.
13. Grant Spin-Off Tax Indemnity. Notwithstanding any other provision
of this Agreement to the contrary, Grant shall be liable for, shall pay and
shall indemnify and hold Weatherford and the other members of the Weatherford
Group harmless, on an After-Tax Basis, against (A) any Transfer Taxes and other
Taxes which may be imposed or assessed as a result of the contribution by
Weatherford to the capital of Grant or the acquisition (by sale or purchase or
otherwise) by Grant or one or more of the other members of the Grant Group of
assets associated with the drilling products business conducted by the
Weatherford Group, including the stock of certain subsidiaries included in the
Weatherford Group and engaged in the drilling products business, (B) any Taxes
resulting from the recognition of deferred intercompany gains as contemplated by
Paragraph 6 hereof and (C) any Spin-Off Tax. In determining the amount of, and
the time of payment of, any such Transfer Taxes, other Taxes or Spin-Off Tax
owed by Grant to Weatherford, the principles set forth in the last three
sentences of Paragraph 5 shall apply.
14. Future Actions. Grant agrees that, during the three-year period
following the Spin- Off, it will not engage in any transaction that could
adversely affect the tax treatment of the Spin-Off
-10-
<PAGE> 14
without the prior written consent of Weatherford, which consent may be withheld
in Weatherford's discretion, unless Grant delivers to Weatherford a supplemental
ruling from the Internal Revenue Service or a tax opinion acceptable to
Weatherford of nationally recognized tax counsel to the effect that the proposed
transaction would not adversely affect the tax treatment of the Spin-Off.
Weatherford agrees to cooperate with and provide reasonable assistance to Grant
in the event that Grant requests a supplemental ruling from the Internal Revenue
Service.
15. Combined, Consolidated or Unitary Basis Returns. The parties
acknowledge that certain state, local or foreign Tax Authorities may require, or
one of the parties may desire, to file amended or original state, local or
foreign income Tax Returns on a combined, consolidated or unitary basis. Such
filing may result in an aggregate decrease in the state, local or foreign income
Tax of both parties; however, one party may suffer a Tax increase compared to
its state, local or foreign income Tax liability calculated on a separate
company basis, while the other party enjoys a Tax decrease. In any such event,
the parties intend that the required calculations for determining which party
owes Taxes to the other with respect thereto be made by utilizing the principles
set forth in Paragraphs 3, 4, 5, 7 and 12 hereof.
16. Earnings and Profits Information. The parties agree to share such
information as is necessary to properly allocate the earnings and profits of the
Grant Group in accordance with the Code and Treasury Regulations for Tax periods
prior to or ending on the Spin-Off Date. After the Spin-Off, Weatherford agrees
to provide Grant and Grant's independent auditors with such information as is
necessary to verify amounts received or receivable or paid or payable by Grant
under this Agreement. Grant agrees to make available to Weatherford, upon
request, all Federal, state, local and foreign Tax Returns, work papers and
other documents pertaining to the activities of the Grant Group prior to the
Spin-Off.
-11-
<PAGE> 15
17. Tax Interpretation. For all Tax purposes and notwithstanding any
other provision of this Agreement, to the extent permitted by applicable law,
the parties hereto shall treat any payment made pursuant to this Agreement as a
capital contribution or dividend distribution, as the case may be, immediately
prior to the Spin-Off Date and, accordingly, as not includible in the taxable
income of the recipient. If it is finally determined that the receipt or accrual
of any payment made under this Agreement is taxable to the recipient, the payor
shall pay to the recipient, on an After-Tax Basis, an amount equal to any
increase in the Taxes of the recipient as a result of receiving the payment from
the payor.
18. Consistent Tax Treatment. To the extent that assets are assigned,
sold, transferred or conveyed by a member of the Weatherford Group to Grant or
another member of the Grant Group in contemplation of the Spin-Off and any such
transaction is treated as a sale for Tax purposes, the aggregate purchase price
shall be allocated among the assets assigned, sold, transferred or conveyed as
determined by Weatherford in its sole discretion. Each of Weatherford and Grant
agrees to report and, where applicable, to cause the members of their respective
groups to report, the purchase prices of such assets as determined by
Weatherford.
19. Retention of Records. Each party hereto agrees, to the extent
potentially relevant to the other party, to (1) retain records, documents,
accounting and other information (including computer data) necessary for the
preparation and filing of all Returns or the audit of such Returns, and (2) give
to the other party reasonable access to such records, documents, accounting
data, Returns and related books and records and other information (including
computer data) and to its personnel (insuring their cooperation) and premises,
for purposes of the review or audit of such Returns to the extent relevant to an
obligation or liability of a party under this Agreement.
-12-
<PAGE> 16
20. Expenses. Each party will bear its own expenses in complying with
this Agreement, including but not limited to the cost of employee work hours.
The sharing of fees and expenses of nonemployees and independent contractors
mutually engaged by the parties shall be agreed upon before such persons are
engaged.
21. Definitions.
(a) "After-Tax Basis" means, with respect to any payment, an
amount calculated by taking into account the Tax consequences of the receipt of
such payment, as well as any Tax benefit associated with the liability giving
rise to the payment, in each case calculated on a present value basis using the
Agreed Rate.
(b) "Agreed Rate" means the annual rate of interest quoted,
from time to time, by Chase Bank of Texas, N.A. in Houston, Texas as its prime
rate of interest for the purpose of determining the interest rates charged by it
for United States dollar commercial loans made in the United States.
(c) "Code" has the meaning set forth in the first recital
hereof.
(d) "Distribution Agreement" means that certain Distribution
Agreement dated as of March 22, 2000, by and between Weatherford and Grant, as
the same may be amended or otherwise modified from time to time pursuant to the
terms thereof.
(e) "Grant" has the meaning set forth in the preamble hereto.
(f) "Grant Group" has the meaning set forth in Section 1
hereof.
(g) "Interim Period" has the meaning set forth in Section 2
hereof.
(h) "Returns" means all returns, declarations, reports,
statements and other documents required to be filed in respect of Taxes, and the
term "Return" means any one of the foregoing Returns.
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<PAGE> 17
(i) "Ruling" means the private letter ruling to be issued by
the Internal Revenue Service with respect to the Spin-Off and relating to the
tax consequences associated with the distribution of all outstanding shares of
Grant common stock.
(j) "Short Period" has the meaning set forth in Section 2
hereof.
(k) "Spin-Off" has the meaning set forth in the fifth recital
hereof.
(l) "Spin-Off Date" has the meaning set forth in the fifth
recital hereof.
(m) "Spin-Off Tax" means any Tax to which Weatherford or any
member of the Weatherford Group is subject as a result of the application of any
provision of the Code to the Spin- Off, including without limitation, Section
311(b), Section 355(c)(2), Section 355(e) or Section 361(c)(2) of the Code (or
any corresponding or similar provision of state, local or foreign law), other
than any such Tax which results solely from the fact that one or more persons
acquire after the Spin- Off Date directly or indirectly stock representing a
50-percent or greater interest in Weatherford and such acquisition is subject to
Section 355(e) of the Code.
(n) "Tax Authority" means the United States Internal Revenue
Service or any other comparable state, local or foreign governmental authority.
(o) "Taxes" means all federal, state, local, foreign and other
taxes, duties, levies, imposts, customs or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, profit share, license, value added,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, premium, property, windfall profits, or other taxes, of any kind
whatsoever, together with any interest, penalties, additions to tax, fines or
other additional amounts imposed thereon or related thereto, and the term "Tax"
means any one of the foregoing Taxes.
-14-
<PAGE> 18
(p) "Transfer Tax" means any excise, sales, use, transfer,
documentary, filing, recordation or other similar tax or fee, together with any
interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties.
(q) "Weatherford" has the meaning set forth in the preamble
hereto.
(r) "Weatherford Group" has the meaning set forth in the first
recital hereto.
(s) "WEI" has the meaning set forth in the first recital
hereto.
22. Notices. All notices and other communications to be given or made
hereunder shall be in writing and shall be (a) personally delivered with signed
receipt obtained acknowledging delivery; (b) transmitted by postage prepaid
registered mail, return receipt requested (air mail if international); or (c)
transmitted by facsimile; to a party at the address set out below (or at such
other address as it may have provided notification for the purposes hereof to
the other party hereto in accordance with this Section).
If to Grant: Grant Prideco, Inc.
1450 Lake Robbins Drive, Suite 600
The Woodlands, Texas 77380
Fax number: (281) 297-8569
Attention: President
If to Weatherford: Weatherford International, Inc.
515 Post Oak Boulevard, Suite 600
Houston, Texas 77027
Fax number: (713) 693-4484
Attention: General Counsel
23. Binding Effect; Successors. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto and any
successor, by merger, acquisition of substantially all of a party's assets or
otherwise, to either of the parties hereto (including but not limited to any
successor of Weatherford or Grant succeeding to the Tax attributes of
Weatherford or Grant under Section 381 of the Code), to the same extent as if
such successor had been an original
-15-
<PAGE> 19
party to this Agreement. In addition, in the event of an acquisition of
substantially all of the assets of Grant in which gain or loss is not
recognized, in whole or in part, for Federal income Tax purposes, Grant shall
ensure that any purchaser of such assets shall assume the obligations set forth
in this Agreement.
24. Severability. Any provision of this Agreement that is determined by
arbitration as provided herein or a court of competent jurisdiction to be
invalid, illegal or unenforceable shall be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provision of this Agreement invalid, illegal or unenforceable, so long as the
material purposes of this Agreement can be determined and effectuated. Should
any provision of this Agreement be so declared invalid, illegal or
unenforceable, the parties shall agree on a valid provision to substitute for
it.
25. Entire Agreement. This Agreement, including the exhibit and other
writings referred to herein or delivered pursuant hereto and the Distribution
Agreement, as well as the other agreements entered into by and between
Weatherford and Grant in connection with the Spin-Off, constitutes the entire
agreement between Weatherford and Grant with respect to the subject matter
hereof and supersedes all other agreements, representations, warranties,
statements, promises and undertakings, whether oral or written, with respect to
the subject matter hereof, including, without limitation, any and all Tax
sharing agreements or arrangements (whether oral or written) between Weatherford
and the other members of the Weatherford Group (other than the Grant Group) on
the one hand and Grant and the other members of the Grant Group on the other
hand, that require payments or indemnities to be made with respect to Taxes.
This Agreement may not be amended, altered or modified except by a writing
signed by duly authorized officers of Weatherford and Grant.
-16-
<PAGE> 20
26. Governing Law. All questions arising out of this Agreement and the
rights and obligations created herein, or its validity, existence,
interpretation, performance or breach, shall be governed by and construed in
accordance with the internal laws of the State of Texas, without regard to or
the application of the rules of conflicts of laws set forth in such laws.
27. Arbitration. The parties agree that any claim arising out of or
related to this Agreement shall be governed by the dispute resolution,
arbitration and choice of forum provisions set forth in Section 8.3 of the
Distribution Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
WEATHERFORD INTERNATIONAL, INC.
By: /s/ Curtis W. Huff
-----------------------------------------
Curtis W. Huff
Executive Vice President, Chief Financial
Officer, General Counsel and Secretary
GRANT PRIDECO, INC.
By: /s/ John C. Coble
-----------------------------------------
John C. Coble
President
-17-
<PAGE> 21
EXHIBIT A
MEMBERS OF THE GRANT GROUP
<TABLE>
<CAPTION>
%
Name Incorporation Jurisdiction Controlled
- ------------------------------------------------------------------------ ------------------------------ -------------
<S> <C> <C>
- ------------------------------------------------------------------------ ------------------------------ -------------
Channelview Real Property, Inc. Delaware 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Citra Grant Prideco Marketing Ltd. Jersey Islands 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Drill Tube International, Inc. Texas 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Enerpro de Mexico, S.A. de C.V. Mexico 100
- ------------------------------------------------------------------------ ------------------------------ -------------
EVI Oil Tools Ltd. Scotland 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Grant Austria, Inc. Delaware 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco (Singapore) Pte Ltd. Singapore 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco Canada Ltd. Alberta, Canada 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco de Venezuela, S.A. Venezuela 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco Holding, L.L.C. Delaware 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco Limited Scotland 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco Technology, Inc. Delaware 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco U.S., L.L.C. Delaware 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco, Inc. Delaware 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco, L.P. Delaware 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco, S.A. Switzerland 99
- ------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco, S.A. de C.V. Mexico 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Inmobiliaria Industrial de Veracruz, S.A. de C.V. Mexico 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Jiangsu Shuguang Grant Prideco Tubular Company Peoples Republic of China 21.48
- ------------------------------------------------------------------------ ------------------------------ -------------
Petro-Drive, Inc. Louisiana 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Petroleum Equipment Supply Company Louisiana 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Pridecomex Holding, S.A de C.V. Mexico 100
- ------------------------------------------------------------------------ ------------------------------ -------------
PT H-Tech Oilfield Equipment Indonesia 54.03
- ------------------------------------------------------------------------ ------------------------------ -------------
TA Industries, Inc. Delaware 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Texas Arai, Inc. Delaware 100
- ------------------------------------------------------------------------ ------------------------------ -------------
TF de Mexico, S.A de C.V. Mexico 95.36
- ------------------------------------------------------------------------ ------------------------------ -------------
Tube Alloy Capital Corporation Texas 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Tube Alloy Corporation Louisiana 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Tube Alloy Corporation International Texas 100
- ------------------------------------------------------------------------ ------------------------------ -------------
Voest-Alpine Middle East Free Establishment Zone United Arab Emirates 50
- ------------------------------------------------------------------------ ------------------------------ -------------
Voest-Alpine South America, S.A. Venezuela 50
- ------------------------------------------------------------------------ ------------------------------ -------------
Voest-Alpine Stahlrohr Kindberg GmbH Austria 50
- ------------------------------------------------------------------------ ------------------------------ -------------
Voest-Alpine Stahlrohr Kindberg GmbH & Co. KG Austria 51
- ------------------------------------------------------------------------ ------------------------------ -------------
Weatherford Mauritius Limited Mauritius 100
- ------------------------------------------------------------------------ ------------------------------ -------------
XL Systems International, Inc. Delaware 100
- ------------------------------------------------------------------------ ------------------------------ -------------
XL Systems, Inc. Texas 100
- ------------------------------------------------------------------------ ------------------------------ -------------
XLS Holding, Inc. Texas 100
- ------------------------------------------------------------------------ ------------------------------ -------------
XLS Systems Antilles, N.V. Netherlands Antilles 100
- ------------------------------------------------------------------------ ------------------------------ -------------
XLS Systems Europe, B.V. Netherlands 100
- ------------------------------------------------------------------------ ------------------------------ -------------
</TABLE>
-18-
<PAGE> 1
EXHIBIT 10.12
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement (this "Agreement") is entered into as of
April 14, 2000, between Weatherford International, Inc., a Delaware corporation
("Weatherford"), and Grant Prideco, Inc., a Delaware corporation, on behalf of
itself and each of its Affiliates (collectively, "Grant Prideco").
W I T N E S S E T H
WHEREAS, Weatherford and Grant Prideco are parties to the Distribution
Agreement and other related agreements; and
WHEREAS, Weatherford and Grant Prideco desire for Weatherford and its
Affiliates to provide certain services to Grant Prideco;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Weatherford and Grant Prideco, each on behalf of itself and its
Affiliates, hereby covenant and agree as follows:
ARTICLE I
DEFINITIONS
All capitalized terms or other defined terms used but not defined in this
Agreement are used in this Agreement with the following meanings:
"AFFILIATE" means, with respect to Weatherford or Grant Prideco, any
Person, that directly or indirectly, is in control of, is controlled by,
controls or is under common control of Weatherford or Grant Prideco, as the case
may be. For purposes of this definition, control shall include the ownership of
50% or more of the legal or beneficial interest in any Person or the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise. A
Person who is an Affiliate shall only be considered an Affiliate for so long as
that Person meets the definition of an Affiliate. An officer, director, general
partner, managing member or trustee of a Person or Affiliate of such Person
shall not be considered to be an Affiliate unless such Person is under the
direct or indirect control or common control of Weatherford or Grant Prideco, as
the case may be. For purposes of clarity, neither Weatherford nor Grant Prideco
shall be considered to be an Affiliate of the other, nor shall National Oilwell,
Grey Wolf Inc. or any other company in which a director or officer of
Weatherford is also a director, officer or shareholder be considered an
Affiliate of Weatherford unless Weatherford itself controls such company.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in Houston, Texas are authorized or required to
close.
"CLOSING DATE" shall mean the effective date of the Distribution Agreement
or such other date as the parties shall agree to in writing.
<PAGE> 2
"DISTRIBUTION AGREEMENT" shall mean that certain Distribution Agreement
dated as of March 20, 2000, by and between Weatherford and Grant Prideco, as the
same may be amended or otherwise modified from time to time pursuant to the
terms thereof.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"PERSON" shall mean an individual, partnership, corporation, business
trust, limited liability company, limited liability partnership, joint stock
company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.
ARTICLE II
WEATHERFORD SERVICES
2.1 SERVICES. Weatherford agrees to provide, or cause its Affiliates to
provide, the services described below to Grant Prideco:
(a) Treasury Services. Weatherford will provide, or cause to be
provided, the treasury services set forth on ANNEX A (the "Treasury Services").
Weatherford will allocate to Grant Prideco a proportional amount of the costs
and expenses of Weatherford's Treasury Department to the extent they relate to
matters associated with the Treasury Services. Grant Prideco agrees to pay
Weatherford for such proportional amount and for all additional costs, fees,
expenses, penalties, taxes and interest incurred by Weatherford relating to the
provision of the Treasury Services.
(b) Insurance and Risk Management Services. Weatherford will provide,
or cause to be provided, the insurance and risk management services set forth on
ANNEX B (the "Insurance and Risk Management Services"). Weatherford will
allocate to Grant Prideco a proportional amount of the costs and expenses of
Weatherford's Risk Management Department to the extent they relate to matters
associated with the Insurance and Risk Management Services. Grant Prideco agrees
to pay Weatherford for such proportional amount and for all additional costs,
fees, expenses, penalties, taxes and interest incurred by Weatherford relating
to the provision of the Insurance and Risk Management Services. Grant Prideco
shall be solely responsible for, and shall reimburse Weatherford for, the amount
of any retentions, deductibles or any other payments for any claims relating to
Grant Prideco.
(c) Tax Services. Weatherford will provide general tax supervision and
oversight and assistance relating to the tax accounting of Grant Prideco,
including assistance with the preparation and filing of the state, federal and
foreign tax returns and assistance with the maintenance of tax records
(collectively, the "Tax Services"). Weatherford will allocate to Grant Prideco a
proportional amount of the costs and expenses of Weatherford's Tax Department to
the extent they relate to matters associated with the Tax Services, including
the costs of the preparation and filing of state, federal and foreign tax
returns. Grant Prideco agrees to pay Weatherford for such proportional amount
and for all additional costs, fees, expenses, penalties, taxes and interest
incurred by Weatherford relating to the provision of the Tax Services.
2
<PAGE> 3
(d) Management Information Systems Services. Weatherford will provide
the management information system services set forth on ANNEX C (the "MIS
Services"). Weatherford will allocate to Grant Prideco a proportional amount of
the costs and expenses of Weatherford's MIS Department to the extent they relate
to matters associated with the MIS Services. Grant Prideco agrees to pay
Weatherford for such proportional amount and for all additional costs, fees,
expenses, penalties, taxes and interest incurred by Weatherford relating to the
provision of the MIS Services.
(e) Accounting Services. Weatherford will make its Accounting
Department available to Grant Prideco on a reasonable basis (the "Accounting
Services", and, collectively with the Treasury Services, the Insurance and Risk
Management Services, the Legal Services, the Tax Services and the MIS Services,
the "Services"). Weatherford will allocate to Grant Prideco a proportional
amount of the costs and expenses of Weatherford's Accounting Department to the
extent they relate to matters associated with the Accounting Services. Grant
Prideco agrees to pay Weatherford for such proportional amount and for all
additional costs, fees and expenses incurred by Weatherford relating to the
provision of the Accounting Services.
2.2 EARLY TERMINATION OF SERVICES. With respect to any Service (or portion
thereof) that Grant Prideco no longer requires Weatherford (or its Affiliates)
to perform, Grant Prideco shall promptly notify Weatherford that such Service
(or portion thereof) is no longer required, and 30 Business Days following
receipt by Weatherford of such notice, such Service (or portion thereof) will no
longer be provided by Weatherford (or its Affiliates) under this Agreement and
Weatherford will have no further obligation with respect thereto.
2.3 MANAGEMENT FEE AND REIMBURSEMENT. Weatherford will prepare and submit
to Grant Prideco a monthly statement of account and invoice setting forth in
reasonable detail the amounts owed by Grant Prideco for the Services pursuant to
this Agreement for the immediately preceding month and the method and basis of
their calculation. In consideration for Weatherford's agreement to provide and
administer the Services under this Agreement, Grant Prideco also agrees to pay
to Weatherford a management fee equal to 10% of the total amount of the
proportional amount of the costs and expenses of the various Weatherford
departments allocated to Grant Prideco. Such management fee shall be added to
each monthly statement of account and invoice sent to Grant Prideco. Grant
Prideco agrees to pay to Weatherford, by wire transfer in immediately available
U.S. funds, all amounts owed and due under this Agreement within 30 days of
receipt of such monthly statement of account and invoice. Interest at the rate
of 10% per annum, compounded monthly, will accrue and will be payable with
respect to any amounts due and not paid by Grant Prideco until such amounts, and
any interest thereon, have been paid.
2.4 ADJUSTMENTS. All costs, expenses and fees associated with the Services
are subject to change and adjustment based upon changes in Weatherford's
internal cost structure and the cost of outside services utilized by
Weatherford.
2.5 TERM AND TERMINATION. Subject to the provisions of Section 2.2 hereof,
the term of this Agreement shall commence on the Closing Date and shall continue
until, and terminate on, the first anniversary following the Closing Date. The
termination of this Agreement shall not release (i) either party from its
liability to the other party under this Agreement arising from a
3
<PAGE> 4
breach of this Agreement, (ii) either party from its rights and obligations
under Article III or (iii) Grant Prideco from its payment obligations under
Sections 2.1 and 2.3.
ARTICLE III
ALLOCATION OF LIABILITY; RELATIONSHIP; DELEGATION OF DUTY
3.1 WAIVER AND INDEMNIFICATION. GRANT PRIDECO HEREBY WAIVES ANY AND ALL
CLAIMS AGAINST WEATHERFORD, ITS AFFILIATES AND THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS (THE "WEATHERFORD PARTIES") FOR DAMAGES RESULTING
FROM PERFORMANCE OF, ERROR OR DELAY IN PERFORMANCE, ATTEMPTING TO PERFORM OR
FAILING TO PERFORM, ANY RESPONSIBILITIES HEREUNDER, OR ANY DAMAGES OF ANY KIND
RELATED THERETO, INCLUDING CLAIMS ARISING AS A RESULT OF THE EXPRESS NEGLIGENCE
OF SUCH PERSONS UNLESS SUCH DAMAGES RESULTED FROM THE WILLFUL MISCONDUCT OF SUCH
PERSONS. FURTHER, GRANT PRIDECO HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD THE
WEATHERFORD PARTIES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES,
CAUSES OF ACTION AND LEGAL LIABILITIES ARISING OUT OF, IN CONNECTION WITH, OR AS
AN INCIDENT TO, THIS AGREEMENT OR ANY ACT OR OMISSION IN THE PERFORMANCE BY SUCH
PERSONS OF THEIR RESPONSIBILITIES HEREUNDER, INCLUDING DAMAGES, CAUSES OF ACTION
AND LEGAL LIABILITIES ARISING AS A RESULT OF THE NEGLIGENCE OF SUCH PERSONS,
UNLESS SUCH DAMAGES RESULTED FROM THE WILLFUL MISCONDUCT OF SUCH PERSONS SEEKING
INDEMNIFICATION.
3.2 LIMITATION ON WARRANTIES AND CONSEQUENTIAL DAMAGES. NONE OF THE
WEATHERFORD PARTIES MAKES ANY WARRANTIES OR REPRESENTATIONS REGARDING SERVICES
PROVIDED PURSUANT TO THIS AGREEMENT OTHER THAN THOSE EXPRESSED IN THIS AGREEMENT
AND NONE OF THE WEATHERFORD PARTIES MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. SUCH SERVICES ARE
FURNISHED ON AN "AS IS" BASIS, AND NONE OF THE WEATHERFORD PARTIES ASSUMES ANY
RESPONSIBILITY FOR ANY DAMAGE OR LOSS (INCLUDING, WITHOUT LIMITATION, ANY
CONSEQUENTIAL, EXEMPLARY OR SPECIAL DAMAGES OR LOST PROFITS) ARISING OUT OF,
RESULTING FROM OR CAUSED BY SERVICES FURNISHED.
3.3 EXPRESS NEGLIGENCE. THE INDEMNITIES SET FORTH IN THIS ARTICLE III ARE
INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS
TERMS AND SCOPE THEREOF NOTWITHSTANDING TEXAS' EXPRESS NEGLIGENCE RULE OR ANY
SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF
THE SIMPLE OR GROSS NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE) OR
OTHER FAULT OR STRICT LIABILITY OF ANY OF THE WEATHERFORD PARTIES.
4
<PAGE> 5
3.4 INDEPENDENT CONTRACTOR. UNLESS OTHERWISE AGREED BY THE PARTIES WITH
RESPECT TO LEGAL SERVICES, IN PERFORMING THE SERVICES HEREUNDER, GRANT PRIDECO
AND WEATHERFORD ACKNOWLEDGE AND AGREE THAT THE WEATHERFORD PARTIES AND THEIR
REPRESENTATIVES SHALL BE CONSIDERED INDEPENDENT CONTRACTORS WITH RESPECT TO
GRANT PRIDECO AND SHALL UNDER NO CIRCUMSTANCES BE DEEMED TO BE EMPLOYEES,
AGENTS, PARTNERS OR JOINT VENTURERS OF GRANT PRIDECO. ADDITIONALLY, WEATHERFORD
SHALL HAVE THE AUTHORITY AND RESPONSIBILITY TO SELECT THE MEANS, MANNER AND
METHOD OF PERFORMING THE SERVICES REQUIRED TO BE CAUSED TO BE PERFORMED BY IT
HEREUNDER.
3.5 DELEGATION OF DUTY. In the performance of their respective obligations
under this Agreement, Weatherford and its Affiliates may act directly or through
agents, counsel (in-house or outside) or other persons, may delegate the
performance of functions and may consult with agents, counsel (in-house or
outside) and other persons. None of Weatherford or any of its Affiliates will be
liable for the default or misconduct of any persons employed, consulted or
engaged thereby. Weatherford and its Affiliates will be entitled to conclusively
rely for all purposes upon any notice, document, correspondence, request or
directive received by it from Grant Prideco, or any officer or director of Grant
Prideco, and shall not be obligated to inquire (a) as to the authority or power
of any person executing or presenting any such notice, document, correspondence,
request or directive, or (b) as to the truthfulness of any statements set forth
therein.
ARTICLE IV
MISCELLANEOUS
4.1 AUDIT RIGHT. Upon reasonable prior written request, Grant Prideco
shall have the right to audit Weatherford's calculations, and schedules thereto,
of the costs and expenses for the services provided hereunder. Upon the request
of Grant Prideco, Weatherford shall provide Grant Prideco with copies of
invoices relating to any third party costs and expenses relating to the
Services.
4.2 COMPLETE AGREEMENT; AMENDMENT. This Agreement, including the Annexes
and other writings referred to herein or delivered pursuant hereto, constitutes
the entire agreement between Weatherford and Grant Prideco with respect to the
subject matter hereof and supersedes all other agreements, representations,
warranties, statements, promises and understandings, whether oral or written,
with respect to the subject matter hereof. This Agreement may not be amended,
altered or modified except by a writing signed by duly authorized officers of
Weatherford and Grant Prideco.
4.3 NOTICES. All notices under this Agreement must be in writing and
delivered by personal service; certified or registered mail, postage prepaid,
return receipt requested; nationally-recognized overnight courier, courier
charges prepaid; or facsimile transmission
5
<PAGE> 6
(followed by telephone confirmation of receipt), to Weatherford or Grant
Prideco, as applicable, at the addresses herein set forth.
<TABLE>
<S> <C>
The addresses for notices are as follows:
Weatherford International, Inc.
515 Post Oak Boulevard, Suite 600
Houston, Texas 77027
Attention: General Counsel
Facsimile: (713) 693-4484
Confirm: (713) 693-4102
Grant Prideco, Inc.
1450 Lake Robbins Dr., Suite 600
The Woodlands, Texas 77380
Attention: President
Facsimile: (281) 297-8569
Confirm: (281) 297-8500
With a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Attention: Charles L. Strauss
Facsimile: (713) 651-5246
Confirm: (713) 651-5535
</TABLE>
All notices, demands and requests will be effective upon actual receipt or, in
the case of delivery by facsimile transmission, the completion of such
transmission during the normal business hours of the recipient. Rejection or
other refusal to accept or the inability to deliver because of changed address
of which no notice was given as provided herein will be deemed to be receipt of
the notice, demand or request sent. By giving to the other party at least 10
Business Days' written notice thereof, a party and its respective permitted
successors and permitted assigns will have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
for notices and each will have the right to specify as its address for notices
any other address within the United States of America.
4.4 SEVERABILITY. Any provision hereof that is prohibited or unenforceable
in any jurisdiction will, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction.
4.5 ASSIGNMENT; OTHER BENEFITS. This Agreement will be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and
6
<PAGE> 7
permitted assigns. Neither party to this Agreement may assign its rights under
this Agreement without the prior written consent of the other party; provided,
however, Weatherford may assign any of its rights and obligations under this
Agreement to any Weatherford Affiliate, of which Weatherford beneficially owns
or controls at least 50% of the equity or other interests of such Affiliate,
without the consent of Grant Prideco.
4.6 GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the internal laws of the State of Texas, without reference to
or the application of the rules of conflicts of laws set forth in such laws.
4.7 WAIVER. No consent or waiver, express or implied, by a party hereto to
or of any breach or default by the other party hereto in the performance by such
other party of its obligations hereunder will be deemed or construed to be a
consent or waiver to or of any other breach or default in the performance by
such other party of the same or any other obligations of such other party
hereunder. Failure on the part of a party to complain of any act or failure to
act of the other party or to declare the other party in default, irrespective of
how long such failure continues, will not constitute a waiver by such party of
its rights hereunder. The giving of consent by a party in any one instance will
not limit or waive the necessity to obtain such party's consent in any future
instance.
4.8 TERMINOLOGY. All personal pronouns used in this Agreement, whether used
in the masculine, feminine or neuter gender, will include all other genders; and
the singular will include the plural and vice versa. The headings of the
Articles and Sections of this Agreement are included for convenience only and
will not be deemed to constitute part of this Agreement or to affect the
construction hereof or thereof.
4.9 FORCE MAJEURE. Except for the obligation of Grant Prideco to make
payments hereunder when due and the indemnification obligations arising
hereunder, neither party shall be liable for delays in performance or for
non-performance, directly occasioned or caused by Force Majeure. Force Majeure
means any event beyond the reasonable control of the party claiming to be
affected thereby, including, without limitation, acts of God, storms, floods,
war, fire, strikes, lockouts or differences with workers, acts of the public
enemy, insurrections, riots or rules or regulations of any Governmental
Authority asserting jurisdiction or control, compliance with which makes
continuance of operations impossible. Inability of either party to secure funds
shall not be regarded as Force Majeure. Upon the occurrence of Force Majeure,
the party affected shall give prompt notice thereof to the other party and
shall, at its cost and expense, do all things reasonable to remove or mitigate
its effect.
4.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will for all purposes be deemed an original, but all
of which together will constitute one and the same agreement.
4.11 FURTHER ASSURANCES. Each party hereto agrees to do all acts and things
and to make, execute and deliver such written instruments, as will from time to
time be reasonably required to carry out the terms and provisions of this
Agreement.
7
<PAGE> 8
4.12 ARBITRATION. The parties hereto agree that any claim arising out of or
related to this Agreement shall be governed by the dispute resolution,
arbitration and choice of forum provisions set forth in Section 8.3 of the
Distribution Agreement.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth in the introduction to this Agreement.
WEATHERFORD INTERNATIONAL, INC.
By: /s/ Curtis W. Huff
-----------------------------------
Curtis W. Huff
Executive Vice President, Chief Financial
Officer, General Counsel and Secretary
GRANT PRIDECO, INC.
By: /s/ John C. Coble
-----------------------------------
John C. Coble
President
9
<PAGE> 10
ANNEX A
TREASURY SERVICES
Letters of Credit
Weatherford Treasury will continue to maintain certain letters of credit that
are outstanding as of the date of this Agreement, a list of which is attached
hereto. As such letters of credit are required to be renewed, Grant Prideco
shall be required to cause replacement letters of credit to be issued; provided,
however, if the circumstances under which the letters of credit were initially
issued prohibit Weatherford or Grant Prideco from having a replacement letter of
credit issued, Weatherford shall cause such letters of credit to be renewed at
Grant Prideco's sole expense. Grant Prideco also shall cause there to be issued
to Weatherford within 90 days following the Closing Date a letter of credit from
a financial institution acceptable to Weatherford backing up any liability that
Weatherford may have with respect to any letter of credit issued by Weatherford
or any of its affiliates for Grant Prideco or any of its affiliates.
Guarantees
There are certain guarantees outstanding as of the date of this Agreement, a
list of which is attached hereto. As such leases with underlying guarantees are
required to be renewed, Grant Prideco shall be required to cause a replacement
guarantee to be issued, except for the SGD 6,500,000 line of credit in the name
of Grant Prideco (Singapore) Pte. Ltd. with Standard Chartered Bank, in which
Weatherford will release its guarantee not sooner than 60 days following the
Closing Date.
Miscellaneous
Other miscellaneous treasury services historically provided by Weatherford on
behalf of Grant Prideco that may be reasonably requested by Grant Prideco and
not unduly burdensome on Weatherford.
A-1
<PAGE> 1
EXHIBIT 10.13
PREFERRED SUPPLIER AGREEMENT
<PAGE> 2
PREFERRED SUPPLIER AGREEMENT
This Agreement dated March 22, 2000, by and between Grant Prideco,
Inc., a Delaware corporation ("Grant Prideco"), and Weatherford International,
Inc., a Delaware corporation ("Weatherford"), will become effective on the
Distribution Date, as defined in the Distribution Agreement dated of even date
herewith by and between Weatherford and Grant Prideco.
WITNESSETH:
WHEREAS, Weatherford wishes to enter into a long term supply contract
with Grant Prideco for the purchase by Weatherford and its Affiliates (as
defined below) of Drill Stem Products (as defined below) on the terms and
subject to the conditions set forth herein; and
WHEREAS, Grant Prideco and its Affiliates manufacture and produce
Drill Stem Products and desire to supply Weatherford and its Affiliates with
Drill Stem Products on the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, Weatherford and Grant Prideco, each on behalf of
itself and its Affiliates, hereby agree as follows:
ARTICLE 1. DEFINITIONS
(a) "AFFILIATE" means, with respect to Weatherford or Grant
Prideco, any Person that, directly or indirectly, is in
control of, is controlled by, controls or is under common
control of Weatherford or Grant Prideco, as the case may be.
For purposes of this definition, control shall include the
ownership of 50% or more of the legal or beneficial interest
in any Person or the power to direct or cause the direction
of the management and policies of such Person, whether
through the ownership of voting securities, by contract or
otherwise. A Person who is an Affiliate shall only be
considered an Affiliate for so long as that Person meets the
definition of an Affiliate. An officer, director, general
partner, managing member or trustee of a Person or Affiliate
of such Person shall not be considered to be an Affiliate
unless such Person is under the direct or indirect control or
common control of Weatherford or Grant Prideco, as the case
may be. For purposes of clarity, neither Weatherford nor
Grant Prideco shall be considered to be an Affiliate of the
other, nor shall National Oilwell, Grey Wolf Inc. or any
other company in which a director or officer of Weatherford
is also a director, officer or shareholder be considered an
Affiliate of Weatherford unless Weatherford itself controls
such company.
(b) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in Houston,
Texas are authorized or required to close.
(c) Unless the context otherwise requires, "BUYER" means
Weatherford and its Affiliates.
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<PAGE> 3
(d) "DRILL STEM CREDITS" mean those Drill Stem Products purchase
credits that have been granted to Weatherford and its
Affiliates by Grant Prideco in the amount of $30 million
pursuant to Section 6.6.
(e) "DRILL STEM EXPENDITURES" mean, in respect of any period, the
dollar amount of purchases made by Weatherford and its
Affiliates of Drill Stem Products from Persons that are not
Affiliated with Weatherford at the time of purchase. Drill
Stem Expenditures shall include (i) charges for coating and
commissions and procurement charges that may be paid by
Weatherford and its Affiliates for the purchase of the Drill
Stem Products and (ii) any import or export duties paid by
Weatherford or its Affiliates in respect of the original
purchase and delivery of the Drill Stem Products. Drill Stem
Expenditures shall exclude (i) rebates, refunds, discounts
provided to Weatherford and its Affiliates in respect of any
Drill Stem Product purchase (other than the Drill Stem
Credits) and (ii) charges for, fees, taxes, shipping,
shipping insurance and other similar charges and expenses.
(f) "DRILL STEM PRODUCTS" mean (i) drill pipe, (ii) heavyweight
drill pipe, (iii) drill collars and (iv) drill stem
accessories (including, without limitation, pup joints,
thread protectors, lift subs, lift plugs, rotary plugs and
rotary kellys).
(g) "DRILL STEM PURCHASE OBLIGATION" means the obligation of
Weatherford and its Affiliates to purchase Drill Stem
Products as provided in Section 2.1.
(h) "EVENT OF FORCE MAJEURE" shall mean any circumstance not
within the reasonable control of the party affected and that,
despite the exercise of reasonable diligence, such party is
unable to prevent, avoid or remove. Events of Force Majeure
shall include without limitation: (i) acts of God; (ii)
expropriation, confiscation or requisitioning of facilities
or compliance with any law, decree, regulation, order,
directive or request of any governmental authority or
person(s) purporting to act therefor that affects to a degree
not presently existing the supply, availability or use of
materials, equipment or labor; (iii) acts or inaction on the
part of any governmental authority or person purporting to
act therefor; (iv) acts of war or the public enemy whether
war be declared or not; (v) public disorders, insurrection,
rebellion, sabotage, riots or violent demonstrations; (vi)
explosions, fires, earthquakes or other natural calamities;
and (vii) strikes or lockouts or other industrial action by
workers or employees of the Supplier.
(i) "GOVERNMENTAL AUTHORITY" shall mean any nation or government,
any state or other political subdivision thereof and any
entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
(j) "PERSON" shall mean an individual, partnership, corporation,
business trust, limited liability company, limited liability
partnership, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other
entity of whatever nature.
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<PAGE> 4
(k) Unless the context otherwise requires, "SUPPLIER" means Grant
Prideco and its Affiliates.
ARTICLE 2. PURCHASE AND SUPPLY COMMITMENT
SECTION 2.1 WEATHERFORD'S PURCHASE OBLIGATION
(a) Weatherford agrees that during the term of this Agreement it and
its Affiliates shall purchase from Grant Prideco or one of its Affiliates at
least 70% of Weatherford's and its Affiliates' total purchases of Drill Stem
Products for each calendar year during the term of this Agreement beginning
with the year 2000. Compliance with this obligation shall be based on the
dollar amount of Drill Stem Expenditures made by Weatherford and its Affiliates
during the applicable year, subject to the exceptions provided below.
(b) Except for those orders that are needed on an expedited basis or
as may otherwise be agreed to by Grant Prideco, Weatherford agrees that all
firm orders for Drill Stem Products by Weatherford and its Affiliates shall be
placed in writing with Grant Prideco or one of its Affiliates no later than 120
days prior to the required delivery date unless industry practice at the time
of the order has changed and shorter or longer periods become standard, in
which case the delivery period shall be adjusted accordingly. Notwithstanding
the foregoing, Grant Prideco shall provide for shorter delivery times if
requested by Weatherford and such requested delivery periods are not shorter
than those offered by Grant Prideco to its best similarly situated customers
for similar orders. Weatherford shall consult with Grant Prideco on at least a
quarterly basis with respect to Weatherford's anticipated Drill Stem Product
requirements for the following two quarters. No deposits shall be required to
be placed by Weatherford or its Affiliates with respect to any order. Grant
Prideco or the Affiliate with whom the order is placed shall either accept or
reject such order within three Business Days of receiving the order. All
acceptances or rejections shall be required to be in writing. All confirmations
of acceptances shall be pursuant to the terms of this Agreement and the terms
may not be modified through the confirmation unless signed in writing by
Weatherford or the Affiliate placing the order. All confirmations of acceptance
shall provide to Weatherford or such Affiliate the expected delivery date.
Unless otherwise instructed in writing by Grant Prideco, all orders by
Weatherford shall be directed to Randall Edwards, Houston, Texas.
(c) In calculating the percentage of Drill Stem Products purchased by
Weatherford and its Affiliates, there shall be excluded from the calculation
any Drill Stem Expenditures for Drill Stem Products to the extent such Drill
Stem Products (i) are purchased by Weatherford or one of its Affiliates for an
unAffiliated third party, (ii) are not required to be purchased from Grant
Prideco or its Affiliates under Section 2.1(e), or (iii) are acquired in
connection with the acquisition of another company or substantially all of the
operating assets of another company or division thereof provided that such
acquisition is not effected as a means to circumvent the provisions of this
Agreement.
(d) Unless otherwise agreed to by Weatherford, all Drill Stem Products
shall be manufactured at Grant Prideco facilities approved by Weatherford and
utilizing raw materials sourced from mills approved by Weatherford from time to
time. Unless otherwise reasonably objected to by Weatherford, mills in the
United States and Western Europe that are owned or controlled by Grant Prideco
or with which it is affiliated shall be deemed approved by Weatherford.
-3-
<PAGE> 5
(e) Weatherford and its Affiliates shall not be required to purchase
any particular Drill Stem Products, and Weatherford's purchase obligation under
this Section 2.1 shall not apply, under the following circumstances:
(i) Grant Prideco is unable to assure Weatherford and
its Affiliates of the delivery of that Drill Stem
Product at the location required by Weatherford or
an Affiliate of Weatherford within the time period
required by Weatherford or such Affiliate;
(ii) The purchase of that Drill Stem Product by
Weatherford or its Affiliate would constitute a
violation of law or regulation;
(iii) Grant Prideco is unable to assure Weatherford and
its Affiliate that such Drill Stem Product meets the
product specification and technical requirements of
Weatherford or such Affiliate;
(iv) Weatherford or its Affiliate reasonably requires the
Drill Stem Product on an expedited basis and Grant
Prideco is unable to provide the Drill Stem Product
within the time required, provided Weatherford or
such Affiliate provides Grant Prideco with such
reasonable opportunity as may be practical under the
circumstances to satisfy such requirement;
(v) There is a local content requirement for such Drill
Stem Product in the market or location in which such
Drill Stem Product is to be used;
(vi) There is a requirement by the rental customer of
Weatherford or its Affiliate for a Drill Stem
Product manufactured by another company and
Weatherford or such Affiliate does not already have
in inventory such Drill Stem Product that could be
used for such customer without unreasonable cost or
delay;
(vii) Grant Prideco or one of its Affiliates does not
accept and confirm the order for the Drill Stem
Product within the time period required in Section
2.1(b), provided that Weatherford or such Affiliate
that placed the order places an order for such Drill
Stem Product with another manufacturer within ten
days after the date on which Grant Prideco and its
Affiliates were required to accept or reject the
order; or
(viii) If at the time of the purchase or the placement of
the order for the purchase, Grant Prideco is in
material breach of this Agreement.
(f) Weatherford agrees to cause its Affiliates to comply with the
terms of this Agreement and to purchase from Grant Prideco and its Affiliates
Drill Stem Products as provided herein.
(g) In the event Weatherford and its Affiliates do not purchase the
required amount of Drill Stem Products from Grant Prideco and its Affiliates
during any calendar year, Weatherford shall be required to pay to Grant Prideco
an amount of cash equal to the product of (x) the amount of Drill Stem
Expenditures paid by Weatherford and its Affiliates to third parties during the
calendar
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<PAGE> 6
year for Drill Stem Products that would have been required to have been paid to
Grant Prideco and its Affiliates to comply with the Drill Stem Purchase
Obligation for that year (with the calculation to be based on an assumption
that the Drill Stem Expenditures paid to the other parties were paid to Grant
Prideco and its Affiliates) and (y) 40%. The payment to be made by Weatherford
in such case shall be paid no later than 120 days following the end of the
calendar year for which the payment is to be made, with interest thereon from
January 1 of the year following the year for which the payment relates to the
date of payment. Interest shall be at an annual rate of 8% compounded
quarterly.
SECTION 2.2 GRANT PRIDECO'S SUPPLY OBLIGATION
(a) Grant Prideco agrees to use its commercially reasonable efforts to
provide directly or through one or more of its Affiliates Weatherford's and its
Affiliates' requirements of Drill Stem Products as provided in Section 2.1.
(b) Grant Prideco agrees that such Drill Stem Products shall be
provided to Weatherford and its Affiliates on delivery and pricing terms equal
to or better than those provided to Grant Prideco's and its Affiliates' best
rental tool customer or customers that are purchasing the Drill Stem Products
for rental purposes (but taking into account any expedited delivery
requirements, special order requests or unusual delivery requirements that
reasonably should increase pricing and taking into account order quantity) for
the same or similar Drill Stem Products. Weatherford shall not be obligated to
provide any deposits, letters of credit or similar items to obtain such terms
and shall not be obligated to purchase any minimum quantities or amounts to be
eligible for such terms other than, subject to the provisions of Section 2.1,
the obligation provided herein that at least 70% of Weatherford's and its
Affiliates' total purchases of Drill Stem Products are purchased from Grant
Prideco and its Affiliates during each calendar year during the term of this
Agreement beginning with the year 2000. Weatherford and its Affiliates shall be
entitled to apply any Drill Stem Credits held by them against the purchase
price of any Drill Stem Products to be purchased by them from Grant Prideco and
its Affiliates subject to a maximum of 20% of the purchase price of any Drill
Stem Products being satisfied with a Drill Stem Credit.
(c) Grant Prideco agrees to purchase used drill pipe from Weatherford
and its Affiliates from time to time to the extent Grant Prideco and its
Affiliates are then offering to customers the right to trade in or sell used
drill pipe to Grant Prideco and its Affiliates. The terms of such purchases
shall be terms at least as good as the terms offered to Grant Prideco's and its
Affiliates' best rental tool customer or customers that are purchasing the
Drill Stem Products for rental purposes (but taking into account any expedited
delivery requirements, special order requests or unusual delivery requirements
that reasonably should increase pricing and taking into account order
quantity). Grant Prideco and its Affiliates may prorate purchases to the extent
limitations are placed on the quantities to be purchased by it.
(d) Grant Prideco agrees to cause its Affiliates to comply with the
terms of this Agreement and to supply Weatherford and its Affiliates with Drill
Stem Products as provided herein.
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<PAGE> 7
SECTION 2.3 COMPLIANCE REPORT
(a) Grant Prideco shall be entitled to obtain on request an annual
certificate of Weatherford, signed by the Chief Financial Officer or Chief
Accounting Officer of Weatherford, certifying Weatherford's and its Affiliates'
compliance with the terms of this Agreement and setting forth (i) the total
Drill Stem Expenditures during such calendar year and (ii) the amount of Drill
Stem Expenditures made by Weatherford and its Affiliates from (x) Grant Prideco
and its Affiliates and (y) other parties. This certificate may be requested
within 60 days following the end of the calendar year to which it relates and
must be provided to Grant Prideco within 120 days following the end of the
calendar year to which it relates.
(b) Weatherford shall be entitled to obtain on request an annual
certificate of Grant Prideco, signed by the Chief Financial Officer or Chief
Accounting Officer of Grant Prideco, certifying Grant Prideco's and its
Affiliates' compliance with the terms of this Agreement. This certificate may
be requested within 60 days following the end of the calendar year to which it
relates and must be provided to Weatherford within 120 days following the end
of the calendar year to which it relates.
SECTION 2.4 ADDITIONAL PRODUCTS
Weatherford and Grant Prideco agree to discuss from time to time the
addition to this Agreement of other products manufactured by Grant Prideco and
its Affiliates, including rental tubulars and casing. Neither party shall be
obligated to agree to such additions, and the addition of other products to
this Agreement will be subject to the parties agreeing in writing in their sole
discretion on the specific products, pricing, delivery and specifications of
the products to be so added.
ARTICLE 3. TERMS
Unless otherwise agreed in writing with respect to any particular
purchase order for Drill Stem Products, the following terms shall apply to
sales of Drill Stem Products by a Supplier to a Buyer during the term of this
Agreement.
SECTION 3.1 PAYMENT
Payment of the price for the Drill Stem Product shall be made in U.S.
Dollars (or through utilization of Drill Stem Credits) in accordance with
payment terms offered to its best rental tool customers (excluding payment
terms associated with warranty claims, disputed claims, workouts, isolated
promotional sales, sales of slow moving inventory and other similar
situations).
SECTION 3.2 DELIVERY PERIODS
All periods for delivery of Drill Stem Products shall commence on the
date on which the applicable purchase order is delivered by Buyer and shall be
not less than 120 days, unless industry practice changes and shorter or longer
periods become standard, in which case the delivery period shall be adjusted
accordingly. Notwithstanding the foregoing, Grant Prideco shall provide for
shorter
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<PAGE> 8
delivery times if requested by Weatherford and such requested delivery periods
are not shorter than those offered by Grant Prideco to its best rental tool
customers for similar orders.
SECTION 3.3 WARRANTY
All Drill Stem Products sold to Weatherford and its Affiliates
pursuant to this Agreement shall be sold subject to Grant Prideco's and its
Affiliates then standard warranty provided to its customers for the Drill Stem
Product sold. To the extent Grant Prideco or its Affiliates provides to certain
of its customers a more favorable warranty for Drill Stem Products (other than
in connection with isolated sales or tenders), Grant Prideco and its Affiliates
shall provide such more favorable warranty to Weatherford and its Affiliates
for such Drill Stem Products of the type and nature to which such more
favorable warranty is provided.
SECTION 3.4 FORCE MAJEURE
(a) The parties' failure to perform their obligations under a purchase
contract shall not be deemed a breach of the obligation arising from the
purchase contract if such failure is caused by or the result of an Event of
Force Majeure.
(b) Immediately following the date of commencement of any Event of
Force Majeure, if either party desires to invoke such Event of Force Majeure as
a cause for delay in the performance of any obligation under the purchase
contract, it shall advise the other party in writing of such date and the
nature and expected duration of such Event of Force Majeure. Within a
reasonable time following the date of termination of such Event of Force
Majeure, the party having invoked such Event of Force Majeure as a cause for
such delay shall submit to the other party reasonable proof of the nature of
such delay. The parties shall thereupon consult with one another concerning the
effect of such delay upon the relevant schedule of delivery and the schedule of
delivery shall be equitably adjusted by the parties to take into account such
effect and the ability of the affected party to avoid or minimize overall
delays resulting from the Event of Force Majeure. Both parties shall make all
reasonable efforts to prevent and reduce to a minimum and mitigate the effect
of any delay occasioned by any Event of Force Majeure including recourse to
alternate acceptable sources of Drill Stem Products.
SECTION 3.5 RESOLUTION OF DISPUTES
All disputes, controversies or claims arising out or in connection
with any purchase agreement for Drill Stem Products, including any questions as
to the existence, validity, termination, discharge, breach or enforceability of
the purchase agreement arising thereunder, shall be finally settled by the
procedures outlined in Section 5.2.
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<PAGE> 9
ARTICLE 4. TERM; TERMINATION
SECTION 4.1 DURATION
(a) This Agreement shall become effective as of the date hereof and,
subject to earlier termination as provided in Section 4.2 or extension as
provided in Section 4.1(b), shall continue in effect until March 31, 2003.
(b) This Agreement shall automatically be extended for a period of one
year if neither party provides the other party with written notice of its
desire for this Agreement not to be so extended on or prior to March 31, 2003.
Thereafter, this Agreement shall be extended for successive one-year periods
unless a party provides notice to the other party of its desire that this
Agreement not be so extended on or prior to March 31 of the year in which the
Agreement is to otherwise terminate.
SECTION 4.2 RIGHT TO TERMINATE
The parties may terminate this Agreement for the reasons and as
provided in this section.
(a) Default
If a party fails to observe or perform any of its material
promises, agreements or undertakings under this Agreement, and fails to remedy
any such breach within 120 days of notice to do so from the other party, then
the aggrieved party may, upon expiration of the 120-day notice period, give
written notice of termination of this Agreement either forthwith or at a future
date designated by the aggrieved party.
(b) Bankruptcy, Liquidation
If either of the parties shall become voluntarily or
involuntarily the subject of proceedings under any bankruptcy or insolvency
law, or other law or procedure for the relief of financially distressed
debtors, or is unable, or admits in writing its inability, to pay its debts as
they mature, or takes or suffers any action for its liquidation or dissolution
other than in the context of a merger of consolidation, or has a receiver or
liquidator appointed for all or any part of its assets and, in the event any
act of the aforesaid character is involuntary, the consequences thereof are not
cured within 60 days, the party not affected by such circumstances may give to
the affected party written notice of its decision immediately to terminate this
Agreement. In the event that such notice is not given for any reason, the
affected party shall remain fully responsible for its obligations set forth in
this Agreement at the times required.
SECTION 4.3 SURVIVAL
The provisions of Articles 5 and 6 shall survive any termination of
this Agreement.
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<PAGE> 10
ARTICLE 5. GOVERNING LAW; DISPUTES
SECTION 5.1 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Texas, without regard to or the application
of the rules of conflicts of laws set forth in such laws.
SECTION 5.2 RESOLUTION OF DISPUTES
(a) In the event there shall exist any dispute or controversy with
respect to this Agreement or any matter relating hereto or the transactions
contemplated hereby, the parties hereto agree to seek to resolve such dispute
or controversy by mutual agreement. If the parties hereto are unable to resolve
such dispute or controversy by agreement within 90 days following notice by any
party hereto of the nature of such dispute or controversy setting forth in
reasonable detail the circumstances and basis of such dispute or controversy,
the parties agree that such dispute or controversy be resolved by binding
arbitration pursuant to the provisions of this Section 5.2 and in accordance
with the then-current Commercial Arbitration Rules of the American Arbitration
Association. If a party elects to submit such matter to arbitration, such party
shall provide notice to the other party of its election to do so, which notice
shall name one arbitrator. Within 10 Business days after the receipt of such
notice, the other party shall provide written notice to the electing party
naming a second arbitrator. The two arbitrators so appointed shall name a third
arbitrator, or failing to do so, a third arbitrator shall be appointed pursuant
to the Commercial Arbitration Rules of the American Arbitration Association.
(b) All arbitration proceedings shall be held in Houston, Texas.
(c) Each arbitrator selected to act hereunder shall be qualified by
education and experience to pass on the particular question in dispute and
shall be independent and not Affiliated with any of the parties hereto or an
associate thereof. A person associated or affiliated with the legal counsel for
either of the parties or their Affiliates will not be considered independent.
(d) The arbitrators shall resolve all disputes in controversy in
accordance with the Texas substantive law. All statutes of limitations that
would otherwise be applicable shall apply to any arbitration proceeding. The
arbitrators shall not be authorized to order any equitable remedies and shall
only be empowered to make monetary awards and determinations with respect to
compliance by a party and its Affiliates in accordance with the terms hereof.
(e) The arbitrators appointed pursuant to this Section 5.2 shall
promptly hear and determine (after due notice and hearing and giving the
parties reasonable opportunity to be heard) the questions submitted, and shall
endeavor to render their decision within 60 days after appointment of the third
arbitrator or as soon as practical thereafter. If within such period a decision
is not rendered by the board or a majority thereof, new arbitrators may be
named and shall act hereunder at the election of either party in like manner as
if none had previously been named.
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<PAGE> 11
(f) The decision of the arbitrators, or a majority thereof, made in
writing, shall absent manifest error be final and binding upon the parties
hereto as to the questions submitted, and each party shall abide by such
decision.
(g) The cost of the arbitration shall be borne by the parties thereto
as unanimously determined by the arbitrators.
(h) NOTWITHSTANDING THE AGREEMENT BY THE PARTIES TO ARBITRATION,
EITHER PARTY MAY SEEK FROM A COURT OF COMPETENT JURISDICTION INJUNCTIVE AND
OTHER EQUITABLE RELIEF IN AID OF ARBITRATION. EACH PARTY HERETO ON ITS OWN
BEHALF AND ON BEHALF OF ITS AFFILIATES IRREVOCABLY AGREES THAT ANY SUCH RELIEF
SHALL FIRST BE SOUGHT IN FEDERAL OR STATE COURT IN HARRIS COUNTY, TEXAS.
ARTICLE 6. MISCELLANEOUS
SECTION 6.1 ASSIGNMENT
This Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
duly permitted assigns. Neither Weatherford or any of its Affiliates nor Grant
Prideco or any of its Affiliates may assign their rights and/or obligations
under this Agreement other than with the express written consent of the other
party. Nothing in this Section 6.1 shall be deemed to prohibit a merger,
consolidation or conversion of Weatherford or Grant Prideco or a sale of all or
substantially all of the business operations of Weatherford or Grant Prideco as
long as the successor to the obligations of Weatherford or Grant Prideco
assumes Weatherford's or Grant Prideco's, as the case may be, obligations
hereunder.
SECTION 6.2 WAIVER
The failure of either party to insist upon strict adherence to any
term of this Agreement on any occasion shall not be considered a waiver of any
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be made in writing.
SECTION 6.3 NOTICES
All notices and other communications (other than communications in the
ordinary course of business relating to purchases and sales of Drill Stem
Products) to be given or made hereunder shall be in writing and shall be (a)
personally delivered with signed receipt obtained acknowledging delivery; (b)
transmitted by postage prepaid registered mail, return receipt requested (air
mail if international); or (c) transmitted by facsimile; to a party at the
address set out below (or at such other address as it may have provided
notification for the purposes hereof to the other party hereto in accordance
with this Section).
-10-
<PAGE> 12
If to Supplier: Grant Prideco, Inc.
1450 Lake Robbins Drive, Suite 600
The Woodlands, Texas 77380
Fax number: (281) 297-8569
Attention: President
If to Buyer: Weatherford International, Inc.
515 Post Oak Boulevard, Suite 600
Houston, TX 77027
Fax Number: (713) 693-4484
Attention: General Counsel
With a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
Fax number: (713) 651-5246
Attention: Charles L. Strauss
SECTION 6.4 SEVERABILITY
Any provision of this Agreement that is determined by arbitration as
provided herein or a court of competent jurisdiction to be invalid, illegal or
unenforceable shall be ineffective to the extent of such invalidity, illegality
or unenforceability, without affecting in any way the remaining provisions
hereof in such jurisdiction or rendering that or any other provision of this
Agreement invalid, illegal or unenforceable, so long as the material purposes
of this Agreement can be determined and effectuated. Should any provision of
this Agreement be so declared invalid, illegal or unenforceable, the parties
shall agree on a valid provision to substitute for it.
SECTION 6.5 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes any existing
agreements between them whether oral or written. In case of a conflict between
this Agreement and a purchase order or purchase order confirmation contemplated
hereunder, the terms of this Agreement shall govern unless the parties
otherwise agree in writing. The terms of this Agreement shall only be amended,
modified or supplemented as set forth herein or in writing signed by or on
behalf of each party.
SECTION 6.6 DRILL STEM CREDITS
(a) Grant Prideco hereby grants to Weatherford and its Affiliates
drill stem purchase credits in the aggregate amount of $30 million, which
Weatherford and its Affiliates may apply against the purchase price of Drill
Stem Products during the term of this Agreement. Weatherford shall utilize such
credit by giving written notice to Grant Prideco at the time of payment of the
invoice relating to the applicable Drill Stem Products, which notice shall set
forth the invoice (or
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<PAGE> 13
related invoices) for which the Drill Stem Credits are being utilized and the
amount of such credit being utilized.
(b) Drill Stem Credits can be utilized to satisfy only up to 20% of
the invoice amount for each applicable invoice, with the remaining invoice
amount being due in accordance with its terms.
(c) On a quarterly basis, Grant Prideco shall provide Weatherford with
a summary of the Drill Stem Credits balance and a statement of activity with
respect to the Drill Stem Credits. The parties shall work in good faith to
reconcile any discrepancies between the parties' records.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
GRANT PRIDECO, INC. WEATHERFORD INTERNATIONAL, INC.
By: /s/ John C. Coble By: /s/ Curtis W. Huff
----------------------------- ---------------------------------
Name: John C. Coble Name: Curtis W. Huff
-------------------------- -------------------------------
Title: President Title: Executive Vice President
------------------------- ------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated condensed statements of
income and is qualified in its entirety by reference to such
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 27,551
<SECURITIES> 0
<RECEIVABLES> 406,620
<ALLOWANCES> 20,971
<INVENTORY> 401,029
<CURRENT-ASSETS> 942,500
<PP&E> 878,236
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 3,600,046
<CURRENT-LIABILITIES> 739,033
<BONDS> 626,983
0
0
<COMMON> 120,379
<OTHER-SE> 1,716,786
<TOTAL-LIABILITY-AND-EQUITY> 3,600,046
<SALES> 178,789
<TOTAL-REVENUES> 395,382
<CGS> 126,193
<TOTAL-COSTS> 280,992
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,022
<INCOME-PRETAX> 16,238
<INCOME-TAX> 5,682
<INCOME-CONTINUING> 9,993
<DISCONTINUED> (3,458)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,535
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.06
</TABLE>
