<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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PRELIMINARY PROXY MATERIALS
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1997
--------------------
The 1997 Annual Meeting of the Stockholders of Tuboscope Vetco International
Corporation (the "Company") will be held at 10:00 a.m., local time, on May 19,
1997, at The Omni Houston Hotel, 4 Riverway, Houston, Texas 77056, for the
following purposes:
1. To elect a board of six directors for the ensuing year or until the
election and qualification of their respective successors.
2. To approve an amendment to the Company's Certificate of Incorporation,
which will change the name of the Company to Tuboscope Inc.
3. To ratify the selection of Ernst & Young LLP as the Company's independent
auditors.
4. To transact such other business as may properly come before the meeting.
Only stockholders of record of the Company's Common Stock at the close of
business on April 1, 1997 will be entitled to notice of, and to vote at, the
1997 Annual Meeting and any adjournment or postponement thereof.
By order of the Board of Directors,
James F. Maroney, III
Vice President, Secretary and General Counsel
Houston, Texas
April 15, 1997
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PRELIMINARY PROXY MATERIALS
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
2835 HOLMES ROAD
HOUSTON, TEXAS 77051
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1997
---------------
PROXY STATEMENT
---------------
SOLICITATION OF PROXIES
The accompanying proxy is solicited on behalf of the Board of Directors of
Tuboscope Vetco International Corporation (the "Company") for use at the 1997
Annual Meeting of Stockholders (the "Meeting") to be held at The Omni Houston
Hotel, 4 Riverway, Houston, Texas 77056, on May 19, 1997 at 10:00 a.m., local
time, and at any and all adjournments or postponements thereof.
All shares represented by each properly executed, unrevoked proxy received in
time for the Meeting will be voted in the manner specified therein. If the
manner of voting is not specified in an executed proxy received by the Company,
the proxy will be voted FOR (i) the election of the six nominees for election to
the Board of Directors listed in the proxy, (ii) the approval of an amendment to
the Company's Certificate of Incorporation, which will change the name of the
Company to Tuboscope Inc., and (iii) the ratification of the selection of Ernst
& Young LLP as the Company's independent auditors. If any other matters are
properly presented at the Meeting for consideration, including, among other
things, consideration of a motion to adjourn the Meeting to another time or
place, the persons named in the enclosed form of proxy and acting thereunder
will have discretion to vote on such matters in accordance with their best
judgment.
Any stockholder has the power to revoke his or her proxy at any time before
it is voted. A proxy may be revoked (i) by delivering a written notice of
revocation to the Secretary of the Company at or before the taking of the vote
at the Meeting, (ii) by executing a later-dated proxy and delivering it to the
Secretary of the Company prior to the taking of the vote at the Meeting or (iii)
by attending the Meeting and voting in person (although attendance at the
Meeting will not in and of itself constitute a revocation of the proxy).
This proxy statement is being mailed to the Company's stockholders on or
about April 18, 1997. The expense of soliciting proxies will be borne by the
Company. The solicitation will be by mail. Expenses include reimbursement paid
to brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Meeting to beneficial owners of the Common
Stock of the Company (the "Common Stock"). Further solicitation of proxies may
be made by telephone or oral communication with stockholders by the Company's
regular employees who will not receive additional compensation for the
solicitation and by Morrow & Co., Inc., whose services to the Company will
include the search and distribution of materials as well as the solicitation of
proxies from brokers, banks and nominees for which it will receive payment of
$3,500 plus out of pocket expenses.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the 43,585,836 shares of Common Stock outstanding
at the close of business on the record date, April 1, 1997, will be entitled to
notice of, and to vote at, the Meeting or any adjournment or postponement
thereof. On each matter to be considered at the Meeting, each stockholder will
be entitled to cast one vote for each share of Common Stock held of record by
such stockholder on April 1, 1997.
In order to constitute a quorum for the conduct of business at the Meeting, a
majority of the outstanding shares of the Common Stock entitled to vote at the
Meeting must be represented at the Meeting. Under the Company's bylaws and
Delaware law, shares represented by proxies that reflect abstentions or "broker
non-votes" (i.e., shares
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PRELIMINARY PROXY MATERIALS
held by a broker or nominee which are represented at the meeting, but with
respect to which such broker or nominee is not empowered to vote on a particular
proposal) will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum.
VOTING SECURITIES AND CERTAIN HOLDERS THEREOF
The following table sets forth as of April 1, 1997, the amount and percentage
of the outstanding shares of the Common Stock which, according to the
information supplied to the Company, are beneficially owned by (i) each of the
directors of the Company and Tuboscope Vetco International Inc., the Company's
wholly-owned subsidiary ("TVI"), individually (each of whom is also a nominee
for election as a director of the Company), (ii) each of the Named Officers (as
defined herein), (iii) all directors and executive officers of the Company and
TVI as a group and (iv) each person or entity who is known to the Company to be
the beneficial owner of more than 5% of the outstanding Common Stock. Except to
the extent indicated in the footnotes to the following table, each of the
persons or entities listed therein has sole voting and sole investment power
with respect to the shares which are deemed beneficially owned by such person or
entity.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF
COMMON STOCK OUTSTANDING
BENEFICIALLY SHARES OF
NAME OF BENEFICIAL OWNER OWNED(1) COMMON STOCK
- ---------------------------------------- --------------- --------------
<S> <C> <C>
DIRECTORS/NAMED OFFICERS:
L.E. Simmons(2).......................... 13,500,416 29.3%
Eric L. Mattson(3)....................... 4,445,047 9.9%
Jerome R. Baier(4)....................... 774,029 1.8%
Martin R. Reid(5)........................ 243,338 *
William V. Larkin, Jr.(6)................ 221,571 *
J.S. Dickson Leach(7).................... 182,155 *
John F. Lauletta(8)...................... 114,293 *
Kenneth L. Nibling(9).................... 95,738 *
Martin I. Greenberg(10).................. 84,826 *
James F. Maroney, III(11)................ 83,591 *
Joseph C. Winkler(12).................... 59,942 *
All directors and executive officers as
a group (11 persons)(13)................ 19,831,849 41.2%
BENEFICIAL OWNERS--5% OR MORE:
SCF-III, L.P.(14)........................ 6,733,000 15.4%
6600 Texas Commerce Tower
Houston, TX 77002
DOS Partners, L.P.(15)................... 5,366,417 12.3%
6600 Texas Commerce Tower
Houston, TX 77002
</TABLE>
2
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PRELIMINARY PROXY MATERIALS
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF
COMMON STOCK OUTSTANDING
BENEFICIALLY SHARES OF
NAME OF BENEFICIAL OWNER OWNED(1) COMMON STOCK
- ---------------------------------------- --------------- --------------
<S> <C> <C>
Baker Hughes Incorporated(16)........... 4,436,047 10.2%
3900 Essex Lane, Suite 1200
Houston, TX 77027
Kadoorie McAuley International Ltd.(17). 3,394,316 7.8%
23rd Floor, St. George's Building
2 Ice House Street, Central
Hong Kong
State of Wisconsin Investment Board(18). 3,325,600 7.6%
P.O. Box 7842
Madison, WI 53707
Actinium Holding Corporation(19)........ 3,254,967 7.5%
24th Floor, St. George's Building
2 Ice House Street, Central
Hong Kong
Panmell (Holdings) Ltd.(20)............. 2,437,862 5.6%
905 Silvercord, Tower 2
30 Canton Road
Tsimshatsui, Kowloon
Hong Kong
</TABLE>
- -----------------------
* Represents ownership of less than 1.0%.
(1) Except for information based on Schedules 13G and 13D, as indicated in the
footnotes hereto, beneficial ownership is stated as of April 1, 1997 and
includes shares subject to options exercisable within 60 days after April 1,
1997 held by each person, as if such shares were outstanding on April 1,
1997.
(2) Includes 5,366,417 shares which are beneficially owned by DOS Partners, L.P.
See footnote 15 below. The general partner of DOS Partners, L.P. is SCF
Partners, L.P. and the general partner of SCF Partners, L.P. is L.E. Simmons
& Associates, Incorporated, of which L.E. Simmons is the president, a
director and sole stockholder. Also includes 6,733,000 shares which are
beneficially owned by SCF-III, L.P. See footnote 14 below. The general
partner of SCF-III, L.P. is SCF-II, L.P. and the general partner of SCF-II,
L.P. is L.E. Simmons & Associates, Incorporated. Also includes 1,399,999
shares which are beneficially owned by FGSI Partners, L.P. The general
partner of FGSI Partners, L.P. is SCF Partners, L.P. and the general partner
of SCF Partners, L.P. is L.E. Simmons & Associates, Incorporated. Mr.
Simmons disclaims beneficial ownership of such securities except to the
extent of his pecuniary interest therein. Also includes 1,000 shares subject
to options exercisable within 60 days of April 1, 1997.
(3) Includes 4,445,047 shares which are beneficially owned by Baker Hughes
Incorporated ("BHI"). See footnote 16 below. Eric L. Mattson is the Vice
President and Chief Financial Officer of BHI and has the authority to
exercise voting or investment power on behalf of BHI with respect to all or
part of these shares. However, Mr. Mattson disclaims beneficial ownership of
these shares. Also includes 9,000 shares subject to options exercisable
within 60 days of April 1, 1997.
(4) Includes 774,029 shares beneficially owned by The Northwestern Mutual Life
Insurance Company ("Northwestern"). Mr. Baier is Director--Securities of
Northwestern and has shared voting and investment power with respect to
these shares. However, Mr. Baier disclaims beneficial ownership of these
shares. Also includes 33,000 shares subject to options exercisable within 60
days of April 1, 1997.
3
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PRELIMINARY PROXY MATERIALS
(5) Includes 237,700 shares subject to options exercisable within 60 days of
April 1, 1997.
(6) Includes 220,802 shares subject to options exercisable within 60 days of
April 1, 1997.
(7) Includes 1,000 shares subject to options exercisable within 60 days of
April 1, 1997.
(8) Includes 50,000 shares subject to options exercisable within 60 days of
April 1, 1997 and a right to receive 5,806 shares under the Company's 1996
Equity Participation Plan.
(9) Includes 67,650 shares subject to options exercisable within 60 days of
April 1, 1997.
(10) Includes 82,287 shares subject to options exercisable within 60 days of
April 1, 1997.
(11) Includes 67,650 shares subject to options exercisable within 60 days of
April 1, 1997.
(12) Includes 15,483 shares subject to options exercisable within 60 days of
April 1, 1997.
(13) Includes shares which may be deemed to be beneficially owned by Messrs.
Simmons, Mattson and Baier. See Notes (2), (3) and (4).
(14) According to Schedule 13D filed by SCF-III, L.P. Includes 2,533,000 shares
that may be acquired upon exercise of the SCF Warrants (as defined herein).
(15) According to Schedule 13D filed by DOS Partners, L.P.
(16) According to the Schedule 13D filed by Baker Hughes Incorporated ("BHI").
Includes 1,250,000 shares which may be acquired upon exercise of the BHI
Warrants (as defined herein).
(17) According to Schedule 13D filed by Kadoorie McAuley International Ltd.
(18) According to the Schedule 13G filed by the State of Wisconsin Investment
Board, an agency of the State of Wisconsin, which manages public pension
funds.
(19) According to Schedule 13D filed by Actinium Holding Corporation.
(20) According to Schedule 13D filed by Panmell (Holdings) Ltd.
REGISTRATION RIGHTS
Fiber Glass Systems Acquisition
On March 7, 1997, pursuant to an Agreement and Plan of Merger dated as of
March 7, 1997 (the "FGS Merger Agreement") among the Company, FGS Acquisition
Corp., a Texas corporation and wholly owned subsidiary of the Company ("Merger
Sub"), Fiber Glass Systems, Inc., a Texas Corporation ("FGS"), and the
stockholders of FGS, Merger Sub was merged (the "FGS Merger") with and into FGS,
with FGS continuing as a wholly owned subsidiary of the Company. In connection
therewith, the Company entered into a Registration Rights Agreement dated as of
March 7, 1997 (the "FGS Registration Rights Agreement") with certain
stockholders of FGS (the "FGS Stockholders"). Under the terms of the FGS
Registration Rights Agreement, the FGS Stockholders are entitled to certain
"piggyback" registration rights with respect to the shares of Common Stock
obtained pursuant to the FGS Merger, including those which may be received
pursuant to the earnout provisions contained in the FGS Merger Agreement
(collectively, the "FGS Registrable Securities"). The piggyback registration
rights permit the FGS Stockholders to sell all or part of their shares, subject
to certain terms and conditions, as part of a proposed registration by the
Company under the Securities Act of 1933, as amended (the "Securities Act").
4
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PRELIMINARY PROXY MATERIALS
The Company will pay substantially all of the expenses associated with the
above-mentioned registration rights. Such registration rights are subordinate
to, and not inconsistent with, the registration rights granted pursuant to the
Drexel Registration Rights Agreement (as defined below).
Drexel Merger
On April 24, 1996, pursuant to an Agreement and Plan of Merger dated as of
January 3, 1996 among the Company, Grow Acquisition Limited, a Bermuda
corporation and wholly owned subsidiary of the Company ("Sub"), and D.O.S. Ltd.,
a Bermuda corporation ("Drexel"), Sub was merged with and into Drexel, with
Drexel continuing as a wholly owned subsidiary of the Company (the "Drexel
Merger"). In connection with the Drexel Merger, the Company entered into a
Registration Rights Agreement dated as of April 24, 1996 (the "Drexel
Registration Rights Agreement") with SCF-III, L.P., DOS Partners, L.P., Panmell
(Holdings), Ltd. ("Panmell"), Actinium Holding Corporation ("Actinium") and
Kadoorie McAuley International Ltd. ("KMIL") (together, the "Drexel
Stockholders"). Under the terms of the Drexel Registration Rights Agreement,
such stockholders have certain "piggyback" and demand rights, subject to certain
terms and conditions, to register for resale shares of Common Stock obtained
pursuant to the Drexel Merger, the 4,200,000 shares of Common Stock to be
obtained by SCF pursuant to that certain Subscription Agreement dated as of
January 3, 1996 between the Company and SCF (the "Subscription Agreement") and
the 2,533,000 shares (subject to adjustment) of Common Stock which may be
obtained by SCF upon exercise of the certain warrants obtained by SCF pursuant
to the Subscription Agreement (the "Registrable Securities"). From and after
the first anniversary date of the Drexel Registration Rights Agreement, and
subject to the conditions contained therein, the holder or holders of an
aggregate of a majority of the Registrable Securities then owned or held by SCF
and DOS Partners or their assignees and the holder or holders of an aggregate of
a majority of the Registrable Securities then owned or held by Panmell,
Actinium, KMIL or their assignees may each make one written demand that the
Company register for sale all or part of the Registrable Securities owned or
held by such group; provided, however, that the estimated proceeds of the
Registrable Securities proposed to be sold must exceed $10,000,000 and provided
further that the Company shall not be required to effect more than one demand
registration in a twelve month period.
Under the terms of the Drexel Registration Rights Agreement, if the Company
proposes to file a registration statement under the Securities Act, the Company
is required to offer each holder of Registrable Securities the opportunity to
register such number of Registrable Securities as such holder may request;
provided, however, that the Company is not required to offer the holders of the
Registrable Securities the opportunity for registration if the proposed
registration statement is a registration of securities to be offered in
connection with or pursuant to (i) a stock option or employee incentive
compensation plan, (ii) a stockholder reinvestment plan or (iii) an exchange for
any securities or assets of, or in connection with a merger or consolidation
with, an unaffiliated company.
The above registration rights are subject to further restrictions as may be
imposed by the underwriters in any underwritten public offering, and, with
respect to the demand registration rights, to certain "black-out" periods as
described in the Drexel Registration Rights Agreement.
The Drexel Registration Rights Agreement also provides that the Company shall
not effect any public sale or distribution of any securities similar to those
being registered, or any securities convertible into or exchangeable or
exercisable for such securities, except on Form S-8 (or its successor form),
during the ten days prior to, and during the 90-day period beginning on, the
effective date of any demand registration in which the holders of Registrable
Securities are participating (except pursuant to such registration statement).
Expenses of registration pursuant to either piggyback or demand registration
rights will generally be borne by the Company.
Under the terms of the Drexel Registration Rights Agreement, the Company may
not grant any new registration rights to any person without the prior written
consent of the holder or holders of a majority of the Registrable Securities
unless such rights are subordinate to the rights described in the Drexel
Registration Rights Agreement and not inconsistent with such rights.
5
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PRELIMINARY PROXY MATERIALS
Initial Capitalization
The Company, Brentwood Associates IV, L.P. ("Brentwood"), Hub Associates
(together with Brentwood, "BA"), the Management Investors (as hereinafter
defined), certain institutional and other investors (collectively, the "Other
Investors"), and certain other institutional and other investors (the
"Institutional Investors") who acquired shares of Common Stock in connection
with the initial capitalization of the Company, are parties to a stockholders'
agreement (the "Stockholders' Agreement"). The Stockholders' Agreement provides
for "demand" registration rights for each of BA and the Other Investors, as a
group, and the Institutional Investors, as a group. These demands may be
triggered at any time by the written request of holders of at least 25% (with
respect to the initial demand registration) or 50% (with respect to any
subsequent demand registration) of the shares of Common Stock initially issued
to either of such groups which remain privately held by members of such groups.
Such registration rights are subject to termination under certain circumstances.
The number of demand registrations which may be instituted by each of BA and the
Other Investors, as a group, and the Institutional Investors, as a group, may
not exceed two by each group. In the case of a demand registration instituted by
either group, the Stockholders' Agreement provides "piggyback" registration
rights to the other group, the Company and any of the Company's other current
stockholders which allow them to sell all or part of their Common Stock as part
of such demand registration under certain circumstances and subject to certain
restrictions. In addition, the Stockholders' Agreement provides for certain
"piggyback" registration rights to BA, the Other Investors and the Institutional
Investors when the Company proposes to register shares of Common Stock (or
securities convertible or exchangeable for Common Stock) under the Securities
Act for public sale, whether or not for its own account. The Stockholders'
Agreement provides that the Company will pay substantially all of the expenses
associated with the foregoing registration rights.
Vetco Services Acquisition
As partial consideration for the acquisition of substantially all of the
foreign operations of Baker Hughes Tubular Services, Inc. ("Vetco Services")
from BHI, the Company issued to BHI 100,000 shares of Series A Convertible
Preferred Stock and 1,686,047 shares of Common Stock. In connection therewith,
the Company granted to BHI certain "demand" registration rights which may be
triggered with respect to such shares of Common Stock or shares of Common Stock
which are issued by the Company upon conversion or exchange of the Series A
Convertible Preferred Stock (the "BHI Registrable Securities") by the written
request of holders of at least 50% of the BHI Registrable Securities who request
that at least 25% of the BHI Registrable Securities be registered, provided the
expected price to the public is equal to or greater than $8,000,000. Such
registration rights are subject to termination under certain circumstances and
such holders may not request more than two demand registrations. In addition,
BHI received "piggyback" registration rights which allow it to sell all or part
of its shares as part of a proposed registration by the Company under the
Securities Act for the public sale of such shares of Common Stock, whether or
not for its own account, subject to certain conditions and restrictions. The
Company will pay substantially all of the expenses associated with these
registration rights.
Pursuant to that certain Exchange Agreement dated as of January 3, 1996 (the
"Exchange Agreement") between the Company and BHI, the Company issued to BHI
1,500,000 shares of Common Stock and warrants (the "BHI Warrants") to purchase,
subject to adjustment under certain circumstances, an aggregate of 1,250,000
shares of Common Stock at an exercise price of $10 per share expiring on
December 31, 2000, in exchange for all of the 1000,000 shares of Series A
Convertible Preferred Stock held by BHI (the "BHI Exchange"). Pursuant to the
Exchange Agreement, BHI agreed that its registration rights with respect to the
shares of Common Stock received in connection with the BHI Exchange and the
shares of Common Stock issuable upon exercise of the BHI Warrants will be
subordinate to the registration rights granted pursuant to the Drexel
Registration Rights Agreement. BHI's registration rights with respect to the
1,686,047 shares of Common Stock owned by BHI prior to the BHI Exchange will be
superior to the registration rights granted pursuant to the Drexel Registration
Rights Agreement.
BHI Right of First Refusal
BHI is prohibited from selling or otherwise disposing of (except in privately
negotiated transactions) more than an aggregate of 3% of the Company's then
outstanding shares of Common Stock during any period of six months or less
without first offering the Company the opportunity to repurchase the number of
proposed shares to be sold which exceeds 3% of the total outstanding shares.
The Company has five business days after its receipt of notice of such proposed
sale to elect to repurchase the shares at a price per share equal to the average
of the market prices of the Common Stock over a ten-day period. If the Company
fails to make such election, then BHI may sell or so dispose of such shares for
a
6
<PAGE>
PRELIMINARY PROXY MATERIALS
period of six months. BHI is also prohibited from selling or otherwise
disposing of more than an aggregate of 5% of the Company's then outstanding
shares of Common Stock in a privately negotiated transaction or series of
transactions without first offering such shares to the Company. The Company has
five business days after its receipt of notice of such proposed sale to elect to
repurchase either all such shares or any or all of such shares in excess of
500,000 shares for the price and upon the terms specified in the notice. If the
Company fails to make such election, then BHI may sell or so dispose of such
shares for a period of 90 days at a price and on terms no more favorable than
was specified in the notice.
BHI Standstill
BHI has agreed that so long as it is the beneficial owner of the shares of
Common Stock acquired in connection with the Vetco Services acquisition it will
not (i) acquire, offer to acquire, or agree to acquire any shares of Common
Stock (or rights to acquire Common Stock), which would increase its percentage
ownership of the outstanding Common Stock to that greater than its percentage
ownership immediately following the acquisition, (ii) make or participate in any
solicitation of proxies to vote any of the Company's voting securities or (iii)
form, join in, or participate in a voting group with respect to any of the
Company's voting securities. Notwithstanding the foregoing and subject to the
provisions of the Company's Certificate of Incorporation, if, during the term of
the standstill, BHI beneficially owns restricted securities issued as part of
the Vetco Services acquisition which represent more than 5% of the Company's
outstanding Common Stock and BHI derives no greater than $2,000,000 of revenue
from its businesses in direct competition with the Company, then, at BHI's
request, the Company shall nominate at BHI's direction one person to the
Company's Board of Directors. In January 1994, BHI made such request and Eric
L. Mattson was appointed to the Company's Board of Directors at that time and is
a nominee for re-election to the Board by the stockholders. See "Proposal 1--
Election of Directors."
In addition, the Exchange Agreement provides that BHI may not, prior to
December 31, 1997, sell the shares of Common Stock received in the BHI Exchange,
the BHI Warrants and the shares of Common Stock issuable upon exercise of the
BHI Warrants, subject to certain exceptions.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names, ages and titles of the executive
officers of the Company and TVI as of April 1, 1997. Executive officers serve
in the same capacity for both the Company and TVI.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
L.E. Simmons 50 Chairman of the Board
John F. Lauletta 52 President and Chief Executive Officer
Joseph C. Winkler 45 Chief Financial Officer and Treasurer
Martin I. Greenberg 57 Vice President, Controller, Assistant
Treasurer
Kenneth L. Nibling 46 Vice President--Human Resources and
Administration
James F. Maroney, III 46 Vice President, Secretary and General
Clay C. Williams 34 Vice President--Corporate Development
</TABLE>
Set forth below are descriptions of the backgrounds of the executive officers
of the Company and TVI and their principal occupations for the past five years.
For a description of the background of Messrs. Simmons and Lauletta, see
"Proposal 1--Election of Directors." The Company is not aware of any family
relationships among any of its directors and executive officers.
7
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PRELIMINARY PROXY MATERIALS
Joseph C. Winkler has been Chief Financial Officer and Treasurer of the
Company and TVI since April 1996. From 1993 to April 1996, Mr. Winkler served
as the Chief Financial Officer of Drexel. Prior to joining Drexel, he was Chief
Financial Officer of Baker Hughes INTEQ and served in a similar role for various
BHI companies, including Eastman/Teleco and Milpark Drilling Fluids. For ten
years prior to joining BHI, Mr. Winkler held the position of Chief Financial
Officer of an independent oil and gas producer after having spent several years
with Arthur Young and Company.
Martin I. Greenberg has been Vice President, Controller, Assistant Treasurer
and Assistant Secretary of the Company and TVI since November 1991. From June
1991 to November 1991, Mr. Greenberg was Vice President-Finance and Controller
of the Company and TVI. Mr. Greenberg served as Vice President-Controller and
Assistant Secretary of the Company and TVI from July 1990 to June 1991. Mr.
Greenberg was Assistant Controller of TVI from January 1974 to July 1990.
Kenneth L. Nibling has been Vice President-Human Resources and Administration
of the Company and TVI since December 1991. From July 1988 to November 1991,
Mr. Nibling was Director of Human Resources for Union Texas Petroleum Corp., an
international exploration and production company. From January 1984 to July
1988, Mr. Nibling was Manager, Compensation and Employment for Louisiana Land
and Exploration Company.
James F. Maroney, III has been Vice President of the Company and TVI since
May 1991, Secretary of the Company and TVI since January 1991 and General
Counsel of the Company and TVI since November 1989. Mr. Maroney was Assistant
Secretary of the Company and TVI from December 1989 to January 1991. Mr.
Maroney was Associate General Counsel and Head of Litigation for TransAmerican
Natural Gas Corporation, a gas production company, from 1987 to 1989. From 1985
to 1987, Mr. Maroney was in a private law practice specializing in commercial
litigation.
Clay C. Williams has been Vice President--Corporate Development of the
Company and TVI since February 1997. From April 1996 to February 1997, Mr.
Williams was Director of Corporate Development of the Company and TVI. From
March 1996 to April 1996, Mr. Williams was Director of Corporate Development of
Drexel. Mr. Williams was an associate at SCF Partners from December 1993 to
March 1996. From July 1992 to December 1993, Mr. Williams was a graduate
student at the University of Texas business school. Mr. Williams was a senior
petrophysical engineer for Shell Oil Company from 1985 to July 1992.
8
<PAGE>
PRELIMINARY PROXY MATERIALS
EXECUTIVE COMPENSATION
No cash compensation has been paid or is anticipated to be paid to any of the
directors of the Company or TVI, or to any officers of the Company, in their
capacities as such, except that certain of such persons receive annual
compensation for membership on the Board of Directors plus compensation for
attending meetings of the Board of Directors or certain committees of the Board
of Directors of the Company and TVI. See "Proposal 1--Election of Directors."
The following table sets forth certain information regarding the annual and
long-term compensation for services in all capacities to TVI for the fiscal
years ended December 31, 1994, 1995 and 1996, of those persons who were at
December 31, 1996 either (i) chief executive officer or (ii) one of the other
four most highly compensated executive officers of TVI (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS OF
---------------------------------------------------- STOCK ALL
NAME AND OTHER ANNUAL OPTIONS OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) (SHARES) COMPENSATION(3)
- ------------------ ------ --------- ----------- --------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
John F. Lauletta, 1996 $164,014 $278,099 (5) 0 0 $ 1,103
President and Chief
Executive Officer(4)
William V. Larkin, Jr., 1996 113,198 0 0 0 2,590,605 (6)
President and Chief 1995 250,000 100,000 0 43,800 4,415
Executive Officer(4) 1994 242,708 250,000 0 40,000 2,991
Joseph C. Winkler, 1996 97,885 93,000 0 0 0
Chief Financial Officer and
Treasurer(7)
James F. Maroney, III, 1996 127,292 72,800 0 22,000 1,910
Vice President, Secretary and 1995 125,000 50,000 (8) 0 10,900 1,953
General Counsel 1994 103,800 50,000 0 10,000 1,476
Kenneth L. Nibling, 1996 118,208 68,320 0 22,000 1,773
Vice President--Human 1995 115,000 18,400 0 10,900 1,747
Resources and Administration 1994 108,525 46,000 0 10,000 1,484
Martin I. Greenberg, 1996 92,475 53,424 0 20,000 1,348
Vice President, Controller, 1995 90,000 15,400 (9) 0 10,900 1,350
Assistant Treasurer and 1994 85,822 41,000 (10) 0 10,000 1,287
Assistant Secretary
- ----------------------------
</TABLE>
(1) Includes amounts deferred by the Named Officers under the Company's 401(k)
Thrift Savings Plan.
(2) Includes (a) living, travel and other expense reimbursement, (b) the cost of
Company provided automobiles, and (c) club dues reimbursement, but only if
such payments to the Named Officer exceed the lesser of $50,000 or 10% of
the total annual salary and bonus of the Named Officer.
(3) Includes (i) matching contributions by the Company under the Company's
401(k) Thrift Savings Plan in the 1996, 1995 and 1994 amounts of $1,351,
$2,915 and $2,991, respectively, for Mr. Larkin, $1,268, $1,238 and $1,287,
respectively, for Mr. Greenberg, $1,447, $1,342 and $1,484, respectively,
for Mr. Nibling, $1,747, $1,536 and $1,476, respectively, for Mr. Maroney
and in the 1996 amounts of $1,103 and $0 for Mr. Lauletta and Mr. Winkler,
respectively, and (ii) matching contributions by the Company under the
9
<PAGE>
PRELIMINARY PROXY MATERIALS
Company's nonqualified deferred compensation plan in the 1996 amounts of $0
for Mr. Larkin, $0 for Mr. Lauletta, $50 for Mr. Greenberg, $326 for Mr.
Nibling, $163 for Mr. Maroney and $0 for Mr. Winkler.
(4) Mr. Larkin was the President and Chief Executive Officer of the Company
until the closing of the Drexel Merger on April 24, 1996. Following the
closing of the Drexel Merger, Mr. Lauletta became President and Chief
Executive Officer of the Company. Mr. Larkin is no longer employed by the
Company.
(5) Includes an incentive award of $206,250 and a grant of 5,806 shares of
Common Stock under the Company's Equity Participation Plan. The 5,806
shares of Common Stock were valued at the fair market value of the Common
Stock ($12.375) on August 15, 1996, the date of grant.
(6) Includes $1,804,270 for severance and $784,984 for excise tax and gross up
on excise tax paid to Mr. Larkin in April 1996 in connection with his
resignation from office pursuant to the terms of his executive agreement
upon the closing of the Drexel Merger. See "Certain Transactions."
(7) In connection with the Drexel Merger, Mr. Winkler became the Chief
Financial Officer and Treasurer of the Company on April 24, 1996.
(8) Includes a $30,000 special recognition bonus for Mr. Maroney.
(9) Includes a $1,000 special recognition bonus for Mr. Greenberg.
(10) Includes a $5,000 special recognition bonus for Mr. Greenberg.
10
<PAGE>
PRELIMINARY PROXY MATERIALS
The following table sets forth certain information with respect to grants of
stock options pursuant to the Amended and Restated Stock Option Plan for Key
Employees and Directors of Tuboscope Vetco International Corporation (the
"Company Stock Option Plan") during fiscal year 1996 to the Named Officers.
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL
PERCENTAGE REALIZABLE VALUE AT
OF TOTAL ASSUMED ANNUAL
OPTIONS EXERCISE RATES OF STOCK PRICE
GRANTED TO OR BASE APPRECIATION
OPTIONS EMPLOYEES PRICE FOR OPTION TERM
GRANTED IN FISCAL PER EXPIRATION ---------------------
NAME (SHARES) YEAR SHARE DATE 5% 10%
- ---- ------- --------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
John F. Lauletta. 0 -- -- -- -- --
William V. Larkin, Jr. 0 -- -- -- -- --
Joseph C. Winkler 0 -- -- -- -- --
James F. Maroney, III 22,000 13.8 $5.875 01/02/06 $81,285 $205,991
Kenneth L. Nibling 22,000 13.8 5.875 01/02/06 81,285 205,991
Martin I. Greenberg 20,000 12.6 5.875 01/02/06 73,895 187,265
</TABLE>
(1) Under the terms of the Company Stock Option Plan, all options granted become
exercisable in five equal annual installments beginning on the date of
grant. Options are granted for a term of ten years, subject to earlier
termination in certain events. The exercise price is equal to the closing
price of the Common Stock on the Nasdaq National Market on the date of
grant. The Compensation Committee retains discretion, subject to certain
restrictions, to modify the terms of outstanding options and to reprice
outstanding options. In connection with the Drexel Merger, certain
executive agreements for Messrs. Maroney, Nibling and Greenberg were amended
to provide that all of their then outstanding options will be exercisable
until two years after termination, and the executive agreement for Mr.
Larkin was amended to provide that all of his then outstanding options will
be exercisable until two years after his termination of employment with the
Company or five years from April 24, 1996.
The following table sets forth certain information with respect to the
unexercised options to purchase shares of Common Stock under the Company Stock
Option Plan to the Named Officers and held by them at December 31, 1996. No
options were exercised by any of the Named Officers in 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
Number of Unexercised Options Value of Unexercised In-the-Money
at December 31, 1996 Options at December 31, 1996(1)
-------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John F. Lauletta 56,359 147,557 $ 673,381 $1,755,517
William V. Larkin, Jr. 220,802 0 2,018,541 0
Joseph C. Winkler 15,483 54,192 184,991 $ 642,489
James F. Maroney, III 67,650 0 628,075 0
Kenneth L. Nibling 67,650 0 628,075 0
Martin I. Greenberg 82,287 0 756,711 0
- --------------------
</TABLE>
(1) Based on the closing price of Common Stock on the Nasdaq National Market on
December 31, 1996 ($15.50).
11
<PAGE>
PRELIMINARY PROXY MATERIALS
MANAGEMENT AGREEMENTS
Executive Agreements. Messrs. Greenberg, Maroney and Nibling have written
arrangements with the Company which provide certain benefits upon a change in
control of the Company. Change of control is generally deemed to occur when:
(i) a person becomes or enters into a contract to become beneficial owner of 50%
or more of the common stock of the Company or TVI, (ii) all or substantially all
of the business of the Company or TVI is disposed of pursuant to a merger,
consolidation or otherwise (or a contract providing for such disposition is
entered into) and the Company or TVI, as applicable, is not the surviving
corporation or the stockholders of the applicable company prior to the
transaction do not continue to own at least 60% of the surviving corporation,
(iii) the Company or TVI is materially or completely liquidated, (iv) any person
purchases stock of the Company or TVI in a tender or exchange offer with the
express or implied intent of acquiring control of the Company or TVI, as
applicable, or (v) a majority of the board of directors of the Company or TVI is
replaced over a two-year period, unless such replacements have been approved by
at least one-third of those remaining directors who were directors at the
beginning of such two-year period. Immediately upon a change in control, all
unvested stock options and other applicable grants of long-term incentives, if
any, will vest. In addition, if during the two year period following a change
of control, any executive officer (i) is involuntarily terminated other than for
cause (as defined therein), death or disability or (ii) voluntarily terminates
for good reason (as defined therein), such executive officer will receive
severance pay equal to two and one half times the greater of (x) the sum of his
or her annual salary then in effect and his or her maximum annual bonus
opportunity (as defined) then in effect or (y) the sum of his or her annual
salary and his or her maximum annual bonus opportunity for either of the two
previous years. Such executive officer will also be provided ownership of a
Company automobile or payment of 2 1/2 times his or her annual car allowance,
life and health insurance benefits and participation (including Company
contributions) in the Company's 401(k) Plan for a period of thirty months,
outplacement assistance, payment of excise tax on any deemed parachute payments
and a gross up amount for any income tax payment due on any additional benefits
which may be provided by individual employment agreements.
In connection with the Drexel Merger, the executive agreements of the then
existing executive officers of the Company were amended to provide that all of
their then outstanding options will be exercisable until two years after their
termination of employment with the Company or five years from the consummation
of the Drexel Merger with respect to then outstanding options held by Messrs.
Larkin and Reid.
Other Severance Arrangements. Each of Messrs. Lauletta, Winkler, Maroney,
Nibling and Greenberg is entitled to receive severance pay equal to the greater
of six months' base salary ($137,500, $77,500, $65,000, $61,000 and $47,700) or
one and one half weeks' base salary for each year of his employment with TVI (or
TVI's predecessor) (approximately $23,798, $8,942, $26,250, $17,596 and $63,294
as of April 1, 1996). Additionally, a pro rata portion of Messrs. Lauletta's,
Winklers', Maroney's, Nibling's and Greenberg's bonus and stock options received
pursuant to the Company's stock option plans becomes immediately vested and
fully exercisable if his employment is terminated under certain circumstances.
DEFINED BENEFIT PLAN
A German subsidiary of the Company offers a defined benefit plan for its
employees. Plan benefits are determined based on years of employment and a
pension formula, and are subject to certain national insurance rates. The
pension formula provides that payment of the pension benefits will be based on
an average of the employee's annual salary for the last three years (the
"Average Annual Salary"). That portion of the employee's Average Annual Salary
up to the average social security contribution ceiling for the last three years
is multiplied by 0.5% and the remaining Average Annual Salary is multiplied by
1.65%. The products of the two calculations are then added together, and the
resulting amount is multiplied by the years of employment to determine the plan
benefits to be received by the employee.
12
<PAGE>
PRELIMINARY PROXY MATERIALS
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee") of your Board of Directors is
pleased to present its annual report which is intended to update stockholders on
the development of the executive compensation program. This report summarizes
the responsibilities of the Committee, the compensation policy and objectives
that guide the development and administration of the executive compensation
program, each component of the program, and the basis on which the compensation
for the chief executive officer, corporate officers and other key executives was
determined for the calendar year ended December 31, 1996.
During the fiscal year, the Committee was comprised of the following Board
Members, all of whom were non-employee directors of the Company: Eric L.
Mattson, Chair, Martin R. Reid and L.E. Simmmons. The Committees
responsibilities were to oversee the development and administration of the total
compensation program for corporate officers and key executives, and administer
the executive incentive and stock plans. During the fiscal year, the Committee
met two times. In June 1996, the Committee retained J.E. Stone & Associates, an
executive compensation and benefits consulting firm, to undertake a
comprehensive review and restructuring of the executive compensation program
following the merger of the Company and D.O.S. Ltd. ("Drexel").
EXECUTIVE COMPENSATION PHILOSOPHY
In designing its compensation programs, the Company follows its belief that
compensation should reflect the value created for stockholders while supporting
the business strategies and long-range plans of the Company and the markets the
Company serves. In doing so, the compensation programs reflect the following
themes:
A compensation program that stresses the Company's annual financial
performance and increase in value.
A compensation program that strengthens the relationship between pay and
performance by providing variable, at-risk compensation that is reflective of
current market practices.
An annual incentive plan that supports a performance-oriented environment
with superior performance resulting in total annual compensation above
competitive levels.
A long-term incentive plan that is designed to reward executive officers
for the long-term strategic management of the Company and the enhancement of
stockholder value.
The Committee reviews and determines the compensation of the executive
officers of the Company with this philosophy on compensation as its basis.
On an annual basis the Committee, in conjunction with executive management,
assesses the effectiveness of the overall program and compares the compensation
levels of its executives and the performance of the Company to the compensation
received by executives and the performance of similar companies. For 1996, the
primary market comparisons were made to a broad group of 44 oilfield
manufacturing and service companies, adjusted for size and job responsibilities.
Of the companies in the primary comparison group, 19 are included in the
SCI Upstream Index, the peer index of 94 oil service companies which is used to
compare stockholder returns in the performance graph presented elsewhere in this
proxy. Data sources include industry survey groups, national survey databases,
proxy disclosures and general trend data which are updated annually.
Section 162(m) of the Internal Revenue Code of 1986, as amended, currently
imposes a $1 million limitation on the deductibility of certain compensation
paid to the Company's five highest paid executives. Excluded from the
limitation is compensation that is "performance based." For compensation to be
performance based, it must meet certain criteria, including being based on
predetermined objective standards approved by stockholders. The Committee
intends to design the Company's compensation to conform to IRC Section 162(m)
and related regulations so that total compensation paid to any employee will not
exceed $1 million in any one year, except for compensation payments which
qualify as "performance based." The Company may, however, pay compensation
which is not deductible in limited circumstances when sound management of the
Company so requires.
13
<PAGE>
PRELIMINARY PROXY MATERIALS
EXECUTIVE COMPENSATION COMPONENTS
The following is a discussion of the principal components of the executive
compensation program, each of which is intended to serve the overall
compensation philosophy.
Base Salary. The base salary program targets the median of the primary
comparison group. Each executive is reviewed individually on an annual basis.
Salary adjustments are based on the individual's experience and background,
performance during the prior year, the general movement of salaries in the
marketplace, and the Company's financial position. Due to these factors, an
executive's base salary may be above or below the primary comparison group
median at any point in time. Overall, the base salaries of the corporate
officers and key executives approximated the primary comparison group median for
1996.
Annual Management Incentive Compensation. The Committee administers
management incentive plans for executive officers, general managers, operations
and sales managers and sales representatives. The goal of the management
incentive plans is to reward participants in proportion to the performance of
the Company and/or the business unit/region for which they have direct impact.
Annual incentive awards are granted upon the achievement by the participants of
annual financial criteria established by the Committee. The financial measures
for 1996 were based upon Company earnings before interest, taxes, depreciation
and amortization ("EBITDA"), and were stated in terms of pre-established target
and maximum goals for each individual as determined by the Committee. Under the
plans as in effect during 1996, each participant was entitled to receive a
percentage of his or her salary if the target goal was met, and a higher
percentage of his or her salary if higher targeted goals were met.
For 1997, the management incentive plans will be revised to rely on
predetermined, objective performance measures. For corporate participants, the
measure of corporate performance will be earnings per share. For business unit
and regional participants, the performance measures will also include business
unit and/or region pretax profit margin.
Long-Term Stock Based Compensation. The goal of the Company's long-term
stock based incentive plan is to directly link a significant portion of the
executive's compensation to the enhancement of stockholder value. In addition,
long-term incentives encourage management to focus on the long-term development
and prosperity of the Company in addition to annual operating profits.
The Company grants stock options to its key executives based on competitive
multiples of base salary. Senior executives typically receive a higher multiple
and, as a result, have a greater portion of their total compensation linked to
increases in stockholder value. In determining the appropriate grant multiples,
the Company compares itself to publicly traded oilfield manufacturing and
service companies of comparable size and targets awards between the market
median and 75th percentile. The ultimate value of any stock option is based
solely on the increase in value of the shares over the grant price. Options
have historically been granted at fair market value on the date of grant, have a
term of ten years, and vest over a four- or five-year period. Accordingly,
stock options have value only if the stock price appreciates from the date of
grant. This at-risk component of compensation focuses executives on the
creation of stockholder value over the long-term and encourages equity ownership
in the Company. In January 1996, stock options were awarded to Company
executives and key managers of the Company. No additional options were granted
during 1996.
The Committee believes it is in the best interests of stockholders of the
Company for senior executives to own significant amounts of Company stock. In
1997, the Committee intends to establish specific minimum and target ownership
levels for senior executives.
Compensation of the Chief Executive Officer. The Chief Executive Officer,
Mr. John Lauletta, participates in the executive compensation programs described
in this report. Mr. Lauletta was named Chief Executive Officer upon completion
of the merger between the Company and Drexel. For 1996, Mr. Lauletta's base
salary, on an annualized basis, was $275,000. Mr. Lauletta's salary was based
on the factors discussed above in "Base Salary," including a review of market
pay trends and his efforts in the merger between the Company and Drexel. Mr.
Lauletta received an incentive award for 1996 of $206,250 and a grant under the
Company's equity participation plan of 5,806 shares of common stock of the
Company. The Company typically grants options to its executive
14
<PAGE>
officers in January of each year. As Mr. Lauletta did not become the Chief
Executive Officer of the Company until after the merger with Drexel in April
1996, no stock options were awarded to Mr. Lauletta in 1996.
Eric L. Mattson
Martin R. Reid
L. E. Simmons
Date: March 31, 1997
The above report of the Compensation Committee will not be deemed to be
incorporated by reference into any filing by the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates the same by reference.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee, which is responsible for the compensation
policies of the Company with respect to its executive officers, is comprised of
Messrs. Mattson, Reid and Simmons, and met twice in 1996. See "Proposal 1-
Election of Directors-Committees." Mr. Simmons is the Chairman of the Board of
the Company and TVI; however, Mr. Simmons does not receive any compensation from
the Company as an executive officer.
15
<PAGE>
PRELIMINARY PROXY MATERIALS
PERFORMANCE GRAPH(1)
The following line graph compares the yearly percentage change in the
cumulative total stockholder return on the Common Stock against the cumulative
total return of a peer index of 75 oil service companies prepared by Simmons &
Company International, an independent third party, and the Nasdaq Composite
Stock Index, each for the period from December 31, 1991 to December 31, 1996.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG TUBOSCOPE, S&P 500 INDEX AND PEER GROUP
<TABLE>
<CAPTION>
COMPANY
Measurement Period NASDAQ SCI UPSTRON COMMON
(Fiscal Year Covered) INDEX INDEX STOCK
- ------------------- ---------- ----------- -------
<S> <C> <C> <C>
Measurement Pt- 12/91 $100.00 $100.00 $100.00
FYE 6/92 $ 96.12 $ 80.33 $ 94.64
FYE 12/92 $115.45 $ 86.89 $ 85.71
FYE 6/93 $120.06 $135.17 $123.21
FYE 12/93 $132.48 $125.52 $ 87.50
FYE 6/94 $120.40 $141.51 $ 96.43
FYE 12/94 $127.96 $131.56 $ 85.71
FYE 6/95 $159.20 $160.91 $ 91.07
FYE 12/95 $179.44 $204.05 $ 81.25
FYE 6/96 $202.10 $253.57 $158.93
FYE 12/96 $220.18 $324.21 $221.43
</TABLE>
- ---------------
(1) Assumes $100 invested on December 31, 1991 and all dividends reinvested.
CERTAIN TRANSACTIONS
Brentwood, Hub, Northwestern and certain other persons are parties to the
Stockholders' Agreement, pursuant to which they are granted registration rights
which are not generally available to other stockholders of the Company. See
"Voting Securities and Certain Holders Thereof--Registration Rights--Initial
Capitalization." Pursuant to the terms of the Vetco Services acquisition, BHI
was also granted certain registration and other rights not generally available
to other stockholders. See "Voting Securities and Certain Holders Thereof--
Registration Rights--Vetco Services Acquisition," "Voting Securities and Certain
Holders Thereof--BHI Right of First Refusal" and "--BHI Standstill." The FGS
Stockholders are entitled to certain "piggyback" registration rights with
respect to the shares of Common Stock obtained pursuant to the FGS Merger which
are not generally available to other stockholders of the Company. See "Voting
Securities and Certain Holders Thereof-Registration Rights-Fiber Glass Systems
Acquisition." In addition, the Drexel Stockholders also have certain
"piggyback" and demand rights obtained pursuant to the terms of the Drexel
Merger which are not generally available to other stockholders of the Company.
See "Voting Securities and Certain Holders Thereof-Registration Rights-Drexel
Merger."
On March 7, 1997, pursuant to the FGS Merger Agreement, the Company acquired
Fiber Glass Systems, Inc. Upon consummation of the FGS Merger, the outstanding
shares of capital stock of FGS were converted into the
16
<PAGE>
PRELIMINARY PROXY MATERIALS
right to receive (i) approximately 1.69 million shares of Common Stock and
approximately $907,000 in cash and (ii) up to an additional approximate 726,000
shares of Common Stock and approximately $355,000 in cash pursuant to certain
earnout provisions (relating to FGS' fiscal 1997 performance) contained in the
FGS Merger Agreement. FGSI Partners, L.P., a limited partnership, owned
approximately 80% of the outstanding capital stock of FGS. The general partner
of FGSI Partners, L.P. is SCF Partners, L.P., a limited partnership. The general
partner of SCF Partners, L.P., is L.E. Simmons & Associates, Incorporated. L. E.
Simmons, the Chairman of the Board of the Company, is the president, a director
and sole stockholder of L.E. Simmons & Associates, Incorporated.
In connection with the Drexel Merger, Messrs. Larkin, Reid and Koons received
severance payments on April 24, 1996 of $2,589,254, $2,109,508 and $1,597,179,
respectively, in connection with their resignations from office pursuant to the
terms of certain executive agreements.
COMPLIANCE WITH SECURITIES LAWS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities (collectively,
"Insiders"), to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Insiders are
required by regulation of the Commission to furnish the Company with copies of
all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company or written representations that no other
reports were required, during the year ended December 31, 1996, all Section
16(a) filing requirements applicable to its Insiders were complied with, except
that Mr. Hage, a former executive officer of the Company, failed to timely file
his Form 5 reporting an exempt grant of options under the Company's stock option
plan and Mr. Greenberg reported non-exempt dispositions of Common Stock on his
Form 5.
PROPOSAL 1
ELECTION OF DIRECTORS
GENERAL
Directors are elected at each Annual Meeting of Stockholders and hold office
until their successors are duly elected and qualified at the next Annual Meeting
of Stockholders. The Company's Certificate of Incorporation requires that there
be a minimum of one and maximum of ten members of the Board of Directors. The
authorized number of directors is currently fixed at six.
Set forth below are the names and descriptions of the backgrounds of the
nominees for election as directors of the Company. Each of the Company's six
nominees for election to the Board of Directors is currently serving as a
director of the Company and was elected to his present term of office by the
stockholders of the Company. In January 1994, the Board of Directors appointed
Eric L. Mattson as a director. Mr. Mattson's appointment in 1994 and his
nomination at this Meeting, is pursuant to certain rights granted to BHI in
connection with the Company's acquisition of Vetco Services in 1992. See
"Voting Securities and Certain Holders Thereof--BHI Standstill."
L.E. SIMMONS, 50, has been Chairman of the Board of the Company since April
1996. Mr. Simmons has for more than five years served as President and a
director of L.E. Simmons & Associates, Incorporated, which, through an
affiliate, manages private institutional investment partnerships. Mr. Simmons
also serves as a director of Zions Bancorporation, CE Franklin, Ltd. and Drilex
International, Inc.
JEROME R. BAIER, 44, has been a director of the Company since 1988. Since
October 1996, Mr. Baier has been Vice President-Securities of Northwestern
Mutual Life Insurance Company ("Northwestern"). From
17
<PAGE>
PRELIMINARY PROXY MATERIALS
October 1989 to October 1996, Mr. Baier was Director--Securities of
Northwestern. For more than five years prior to October 1989, Mr. Baier was
Associate Director-Securities of Northwestern.
JOHN F. LAULETTA, 52, has been the President and Chief Executive Officer and
a director of the Company since April 1996. From 1993 to April 1996, Mr.
Lauletta was the President and Chief Executive Officer of Drexel. From 1973
until 1993, Mr. Lauletta was with BHI, holding several executive positions,
including President of Exlog/TOTCO, President of Milpark Drilling Fluids and
Vice president of Baker Hughes INTEQ.
J.S. DICKSON LEACH, 51, has been a director of the Company since April 1996.
Prior to the Drexel Merger, Mr. Dickson Leach was a director of Drexel for 15
years. He has been a director and executive officer of Sir Elly Kadoorie & Sons
which is a management firm for Actinium and certain other investments on behalf
of Michael D. Kadoorie and his family, since 1973. He is Chairman of Tai Ping
Carpets International Ltd, Vice Chairman of China Light & Power Co. Ltd. and a
director of The Hong Kong & Shanghai Hotels Ltd. and Hong Kong Aircraft
Engineering Company, all publicly quoted Hong Kong Companies.
ERIC L. MATTSON, 45, has been a director of the Company since January 1994.
Mr. Mattson is and has been Senior Vice President and Chief Financial Officer of
BHI since July 1993. For more than five years prior to 1993, Mr. Mattson was
Vice President and Treasurer of BHI.
MARTIN R. REID, 54, has been a director of the Company since 1990. Mr. Reid
was Chairman of the Board of the Company from October 1990 to April 1996 and was
Chief Executive Officer of the Company and TVI from May 1991 to October 1993.
From June 1994 to present, Mr. Reid has served as the Chairman of the Board and
Chief Executive Officer of Rental Service Corporation, an equipment rental
company. From 1990 through 1993, Mr. Reid was a general partner in MDR
Associates, a private investment concern. From September 1986 to June 1990, Mr.
Reid was Chief Executive Officer of Eastman Christensen Co., a worldwide
provider of directional and horizontal drilling systems to the oil and gas
industry. Mr. Reid was also Vice Chairman of Eastman Christensen Co. from
August 1989 to June 1990.
The Company is not aware of any family relationships among any of the
foregoing directors and its executive officers. The Certificate of
Incorporation and Bylaws of the Company contain provisions eliminating or
limiting the personal liability of directors for violations of a director's
fiduciary duty to the extent permitted by the General Corporation Law of the
State of Delaware.
COMMITTEES
The Board of Directors held eight meetings during the fiscal year ended
December 31, 1996. Each director attended at least 75% of the aggregate of the
total number of meetings of the Board of Directors held during such period and
the total number of meetings held during such period by all committees of the
Board of Directors on which that director served.
Until April, 1996, the Company had standing Audit, Stock Option and Executive
Committees. The Company currently has standing Audit, Executive and
Compensation Committes but has not established a Nominating Committee. During
fiscal 1996, Messrs. Baier, Mattson, Seaver and Shelton comprised the Audit
Committee until April 24, 1996; thereafter, the Audit Committee was comprised of
Messrs. Baier and Leach. The Audit Committee did not meet during the fiscal
year ended December 31, 1996 but met in late 1995 and January of 1997. The
Audit Committee's responsibilities include recommending the selection of the
Company's independent auditors to the Board of Directors, reviewing the (i)
scope and results of the audit engagement with the independent auditors and
management, (ii) adequacy of the Company's internal accounting control
procedures, (iii) independence of the independent auditors and (iv) range of
audit and non-audit fees charged by the independent auditors. Messrs. Warren,
Hubbard, and Pennington comprised the Stock Option Committee until April 24,
1996. The Stock Option Committee, which met once during the period from January
1, 1996 to April 24, 1996 was responsible for administration of the Company's
stock option plans. The Stock Option Committee was disbanded in April 1996 when
its functions were made the responsibility of the Compensation Committee,
comprised of Messrs. Mattson, Reid and Simmons. Until April 24, 1996, Messrs.
Hubbard, Reid, Pennington, and Shelton comprised the Executive Committee;
thereafter, the Executive Committee was comprised of Messrs. Simmons, Lauletta
and
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Mattson. The Executive Committee did not meet during the fiscal year ended
December 31, 1996. Unitl April 1996, the Executive Committee's responsibilities
included reviewing and approving the compensation of the Company's directors,
officers and employees and performing other related functions upon request of
the Board of Directors. In April, 1996 the Executive Committee was
reconstituted as a general advisory committee which reviews ongoing operations
of the Company and performs other functions at the request of the Board of
Directors, and its compensation-related responsibilities were given to the
Compensation Committee.
DIRECTOR COMPENSATION AND AUTOMATIC-GRANT STOCK OPTION PLAN
Each of the directors of the Company who is neither an employee nor otherwise
subject to an agreement to provide services to the Company (a "Qualified
Director") is entitled to receive $10,000 per year as compensation for
membership on the Board of Directors, plus $1,000 for each regular and special
meeting of the Board of Directors attended by him. In addition, if a Qualified
Director is a member of such committee, he is entitled to receive an attendance
fee of $1,000 for each Executive Committee meeting and an attendance fee of $300
for each meeting of the Audit Committee or Stock Option Committee attended by
him. In addition, certain directors may be granted options under the terms of
the Stock Option Plan for Non-Employee Directors.
Under the terms of the 1996 Equity Participation Plan of the Company, each
director of the Company who was not an employee of the Company was automatically
granted an initial option to purchase 4,000 shares of the Company's Common Stock
on April 24, 1996. Each non-employee director who is first appointed or elected
to the Board after April 24, 1996 is automatically granted an initial option to
purchase 4,000 shares of Common Stock on the date of such appointment or
election to the Board. In addition, each non-employee director of the Company
is granted automatically options to purchase an additional 4,000 shares on the
date of the Annual Meeting of Stockholders each year following the initial
grant. All options are granted with an exercise price equal to the fair market
value of the Company's common stock on the date of grant.
In connection with the Drexel Merger, each of the agreements evidencing the
outstanding options under the Company's Stock Option Plan for Non-Employee
Directors of the Company and held by the then current non-employee directors of
the Company were amended to accelerate the vesting of the 112,000 in the
aggregate unvested options and extend the exercise period for all of the
outstanding options held by such directors, so that such options are exercisable
in accordance with the provisions of each option agreement until April 24, 2001.
VOTE
Directors will be elected by a favorable vote of a plurality of the shares of
voting stock present and entitled to vote, in person or by proxy, at the
Meeting. Accordingly, abstentions or broker non-votes as to the election of
directors will not affect the election of the candidates receiving the plurality
of votes. Unless instructed to the contrary, the shares represented by the
proxies will be voted FOR the election of the six nominees named above as
directors. Although it is anticipated that each nominee will be able to serve
as a director, should any nominee become unavailable to serve, the proxies will
be voted for such other person or persons as may be designated by the Company's
Board of Directors.
PROPOSAL 2
ADOPTION OF AN AMENDMENT TO
THE CERTIFICATE OF INCORPORATION
The Board of Directors of the Company has unanimously adopted, subject to
stockholder approval, an amendment to the Company's Certificate of
Incorporation, which will change the name of the Company to Tuboscope Inc. A
copy of the amendment to the Certificate of Incorporation is set forth in
Appendix "A" to this Proxy Statement. The stockholders are asked to approve of
this amendment to the Certificate of Incorporation.
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PRELIMINARY PROXY MATERIALS
VOTE AND RECOMMENDATIONS
The affirmative vote of a majority of the outstanding shares of the Company's
Common Stock is required to approve the proposed Amendment to the Certificate of
Incorporation. Abstentions as to this Proposal 2 will have the same effect as
votes against Proposal 2. Broker non-votes, however, will be treated as unvoted
for purposes of determining approval of Proposal 2 and will not be counted as
votes for or against Proposal 2. Properly executed, unrevoked Proxies will be
voted FOR Proposal 2 unless a vote against Proposal 2 or abstention is
specifically indicated in the Proxy.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSAL TO AMEND THE
COMPANY'S CERTIFICATE OF INCORPORATION AND UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP, the Company's independent auditors for the
fiscal year ended December 31, 1996, was selected by the Board of Directors,
upon recommendation of the Audit Committee, to act in the same capacity for the
fiscal year ending December 31, 1997, subject to ratification by the
stockholders. Neither the firm nor any of its members has any relationship with
the Company or any of its affiliates except in the firm's capacity as the
Company's auditor.
Representatives of Ernst & Young LLP are expected to be present at the
Meeting and will have the opportunity to make statements if they so desire and
respond to appropriate questions from the stockholders.
VOTE AND RECOMMENDATIONS
The affirmative vote of a majority of the outstanding shares of the Company's
Common Stock is required to ratify the selection of the Company's independent
auditors. Abstentions as to this Proposal 3 will have the same effect as votes
against Proposal 3. Broker non-votes, however, will be treated as unvoted for
purposes of determining approval of Proposal 3 and will not be counted as votes
for or against Proposal 3. Properly executed, unrevoked Proxies will be voted
FOR Proposal 3 unless a vote against Proposal 3 or abstention is specifically
indicated in the Proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION OF
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
All proposals of stockholders intended to be presented at the Company's 1998
Annual Meeting of Stockholders must be directed to the attention of the
Secretary of the Company, at the address of the Company set forth on the first
page of this Proxy Statement, by December 19, 1997 if they are to be considered
for possible inclusion in the Proxy Statement and form of proxy used in
connection with such meeting.
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PRELIMINARY PROXY MATERIALS
OTHER MATTERS
As of the date of this Proxy Statement the Board of Directors knows of no
other matters which may be presented for consideration at the Meeting. However,
if any other matter is presented properly for consideration and action at the
Meeting, or any adjournment or postponement thereof, it is intended that the
Proxies will be voted with respect thereto in accordance with the best judgment
and in the discretion of the proxy holders.
By Order of the Board of Directors,
James F. Maroney, III,
Vice President, Secretary and General
Counsel
Dated: April 15, 1997
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PRELIMINARY PROXY MATERIALS
APPENDIX A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Tuboscope Vetco International Corporation, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, Does Hereby Certify:
First: That the Board of Directors of Tuboscope Vetco International
Corporation duly adopted a resolution setting forth a proposed amendment of the
Certificate of Incorporation of the corporation, declaring the proposal
amendment to be advisable and in the best interest of the corporation and its
stockholders, and directing that the proposed amendment be considered at the
next annual meeting of the stockholders of the corporation. The resolution
setting forth the proposed amendment is as follows:
Resolved, that Article First of the Certificate of Incorporation of the
Company is hereby amended, subject to stockholder approval, to read in its
entirety as follows:
"FIRST: The name of the Corporation is Tuboscope Inc. (hereinafter
referred to as the "Company")."
Second: That thereafter, pursuant to resolution of its Board of Directors and
upon the vote of its stockholders at the 1997 Annual Stockholders Meeting, the
necessary number of shares as required by statute were voted in favor of the
amendment.
Third: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be signed
by John F. Lauletta, President and Chief Executive Officer and attested by James
F. Maroney, III, its Vice President, Secretary and General Counsel, this ____
day of May 1997.
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
By:
--------------------------------------
John F. Lauletta
President and Chief Executive Officer
ATTEST:
- --------------------------
James F. Maroney, III
Vice President, Secretary
and General Counsel
<PAGE>
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19, 1997
The undersigned hereby appoints Joseph C. Winkler and James F. Maroney,
III, and each of them, as proxies, each with the power to appoint his
substitute, and hereby authorizes either of them to act and to vote at the
Annual Meeting of Stockholders of Tuboscope Vetco International Corporation (the
"Company") to be held on May 19, 1997, and at any adjournments thereof, as
indicated upon all matters referred to on this proxy card and described in the
Proxy Statement for the Annual Meeting, and, in their discretion, upon any other
matters which may properly come before the meeting.
1. Elect members of the Board of Directors of the Company.
[_] FOR ALL nominees listed below [_] WITHHOLD AUTHORITY to vote for
(except as marked to the contrary). all nominees listed below.
Jerome R. Baier, John F. Lauletta, J.S. Dickson Leach, Eric L. Mattson,
Martin R. Reid and L.E. Simmons
(Instruction: To WITHHOLD AUTHORITY to vote for any individual nominees,
draw a line through (or otherwise strike out) the nominee's name in the list
above.
(Continued and to be signed on reverse side)
2. Approval of an amendment to the Company's Certificate of Incorporation
changing the name of the Company to Tuboscope Inc.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Ratification of the selection of Ernst & Young, LLP as the Company's
independent auditors.
[_] FOR [_] AGAINST [_] ABSTAIN
Shares represented by all properly executed proxies will be voted in
accordance with instructions appearing on this proxy card and in the discretion
of the proxy holders as to any other matter that may properly come before the
meeting. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3.
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<S> <C>
Dated:_______________, 1997 ___________________________________(SEAL)
(Signature)
___________________________________(SEAL)
(Signature)
Please sign as name(s) appears on this proxy card, and date this proxy card. If a joint
account, each joint owner must sign. If signing for a corporation or partnership as agent,
attorney or fiduciary, indicate the capacity in which you are signing.
</TABLE>
