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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission File Number 1-13884
COOPER CAMERON CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 76-0451843
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515 Post Oak Boulevard
Suite 1200
Houston, Texas
(Address of principal 77027
executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 513-3300
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of Each Exchange on
Title of Each Class Which Registered
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Common Stock, Par Value $0.01 Per Share New York Stock Exchange
Junior Participating Preferred Stock New York Stock Exchange
Purchase Rights
Par Value $0.01 Per Share
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 Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in a definitive proxy or information
statement incorporated by reference in Part III of this Form 10-K of any
amendment to this Form 10-K. [_]
The number of shares of Common Stock, par value $.01 per share, outstanding
as of March 15, 2000 was 51,711,412. The aggregate market value of the Common
Stock, par value $0.01 per share, held by non-affiliates of Registrant as of
March 15, 2000 was approximately $3,113,020,468. For the purposes of the
determination of the above statement amount only, all directors and executive
officers of the Registrant are presumed to be affiliates.
_________________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Stockholders for 1999 are incorporated
by reference into Part II.
Portions of Registrant's 2000 Proxy Statement for the Annual Meeting of
Stockholders to be held
May 11, 2000 are incorporated by reference into Part III.
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TABLE OF CONTENTS
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1999 1999 MARCH 25, 2000
ITEM FORM 10-K ANNUAL REPORT PROXY STATEMENT
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PART I
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1. BUSINESS.......................................................... 1 - -
Markets and Products............................................ 2 - -
Market Issues................................................... 7 - -
New Product Development......................................... 7 - -
Competition..................................................... 9 - -
Manufacturing................................................... 10 - -
Backlog......................................................... 10 - -
Patents, Trademarks and Other Intellectual Property............. 10 - -
Employees....................................................... 11 - -
2. PROPERTIES........................................................ 11 - -
3. LEGAL PROCEEDINGS................................................. 12 - -
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............... 13 - -
PART II
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5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS............................................. 14 - -
6. SELECTED FINANCIAL DATA........................................... 14 55 -
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS........................................... 14 25-33 -
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15 30-32
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................... 15 34-54
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE........................................ 15 - -
PART III
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10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................ 15 - 11-12, 24
11. EXECUTIVE COMPENSATION............................................ 17 - 17-20
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT...................................................... 17 - 12-13, 23
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................... 17 - -
PART IV
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14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K........................................................ 17 - -
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PART I
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ITEM 1. BUSINESS.
Cooper Cameron Corporation ("Cooper Cameron" or the "Company") is a leading
international manufacturer of oil and gas pressure control equipment, including
valves, wellheads, controls, chokes, blowout preventers and assembled systems
for oil and gas drilling, production and transmission used in onshore, offshore
and subsea applications. Cooper Cameron is also a leading manufacturer of
centrifugal air compressors, integral and separable reciprocating engines,
compressors and turbochargers.
Cooper Cameron's business of manufacturing petroleum production equipment
and compression and power equipment began in the mid-1800's with the manufacture
of steam engines that provided power for plants and textile or rolling mills.
By 1900, with the discovery of oil and gas, Cooper Cameron moved into the
production of natural gas internal combustion engines and gas compressors. The
Company added to its product offering through various acquisitions, in
particular the acquisitions of The Bessemer Gas Engine Company (gas engines and
compressors); Pennsylvania Pump and Compressor (reciprocating air and gas
compressors); Ajax Iron Works (compressors); Superior (engines and compressors);
Joy Petroleum Equipment Group (valves, couplings and wellheads); Joy Industrial
Compressor Group (compressors); and Cameron Iron Works (blowout preventers, ball
valves, control equipment and McEvoy-Willis wellhead equipment and choke
valves).
Cooper Cameron, a Delaware corporation, was incorporated on November 10,
1994. The Company operated as a wholly-owned subsidiary of Cooper Industries,
Inc. ("Cooper") until June 30, 1995, the effective date of the completion of an
exchange offer with Cooper's stockholders resulting in the Company becoming a
separate stand-alone company. The common stock of Cooper Cameron is trading on
the New York Stock Exchange under the symbol "CAM".
In June 1996, Cooper Cameron purchased the assets and assumed certain
operating liabilities of Ingram Cactus Company for approximately $100.5 million
in cash. The business acquired manufactures and sells wellheads, surface
systems, valves and actuators used primarily in onshore oil and gas production
operations, and owned manufacturing facilities in Oklahoma City, Oklahoma and
Broussard, Louisiana, as well as in the United Kingdom and Austria. The Company
also acquired interests in the Ingram Cactus joint ventures in Venezuela and
Malaysia. The operations have now been integrated into those of the Cameron
division.
In October 1996, Cooper Cameron acquired, for its Cameron division, certain
assets and assumed certain liabilities of Tundra Valve & Wellhead Corp., a
Canadian manufacturer of wellheads, trees and valves, for approximately Canadian
$9.8 million. Also, during 1996, Cooper Cameron acquired, for its Cooper Energy
Services division, certain assets of a developer and provider of ignition
systems for gas engines, particularly those used in large-scale gas transmission
installations, for approximately $6.1 million.
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During 1997, the Company's Cameron division made three small product line
acquisitions totaling $6.3 million.
During 1998, the Company made four acquisitions of companies offering
aftermarket products and services at a cash cost of approximately $15 million.
In April 1998, the Company acquired Orbit Valve International, Inc. ("Orbit(R)")
for approximately $104 million in cash and debt. Orbit became part of the
Cooper Cameron Valves organization. Orbit manufactures and sells high-
performance valves and actuators for the oil and gas and petrochemical
industries. Orbit's primary manufacturing facility is located in Little Rock,
Arkansas with a sales, marketing, assembly, test and warehousing base at
Livingston, Scotland in the United Kingdom.
During 1999, the Company sold its rotating compressor product line business
to Rolls-Royce plc for approximately $200 million. The operations that were sold
had primary facilities in Liverpool, United Kingdom, Hengelo in the Netherlands
and Mt. Vernon, Ohio. The Company decided to divest this product line because it
did not control the key technology of the business (the engine which Rolls-Royce
provides) and had limited aftermarket opportunities.
Also during 1999, the Company's Cameron division acquired the remaining
interest in a joint venture located in Venezuela in which it previously held a
49% equity interest.
BUSINESS SEGMENTS
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MARKETS AND PRODUCTS
The Company's operations are organized into four separate business segments
which are Cameron, Cooper Cameron Valves, Cooper Energy Services and Cooper
Turbocompressor, each of which is also a division. For additional industry
segment information for each of the three years in the period ended December 31,
1999, see Note 13 of the Notes to Consolidated Financial Statements, which Notes
are incorporated herein by reference in Part II, Item 8 hereof ("Notes to
Consolidated Financial Statements.")
Cameron Division
Cameron manufactures pressure control equipment used at the wellhead in the
drilling for and production and transmission of oil and gas, both onshore and
offshore. The primary products include wellheads, drilling valves, blowout
preventers ("BOPs") and control systems and are marketed under the well-known
brand names Cameron(R), W-K-M(R), McEvoy(R), Willis(R), and Ingram Cactus(R).
The equipment is manufactured in a variety of sizes and to various
specifications with working pressure ratings up to 30,000 pounds per square inch
("p.s.i."). The wellhead equipment is designed to support the casing and
production tubulars and includes casing head housings, casing heads and tubing
heads. Valves of different sizes and design are assembled with other components
into an assembly known as a "christmas tree," which is mounted on the wellhead
equipment and is used to control the flow of oil and gas from a producing well.
Most christmas trees are custom designed to meet individual customer
requirements.
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Cameron also manufactures subsea production systems, which consist of
equipment used to complete an oil or gas well on the sea floor. Subsea systems
tend to be sophisticated and generally require a high degree of technological
innovation.
In 1993, Cameron introduced its patented SpoolTree(TM) subsea production
system for use in oil and gas fields with subsea completions that require
frequent retrieval of downhole equipment. With the SpoolTree system, well
completion and workover activities can be performed without a workover riser or
removal of the christmas tree and under conventional blowout preventer control,
thereby reducing the time and equipment needed to perform such activities.
Cameron's drilling-related equipment includes ram and annular BOPs. Cameron
has experienced a dramatic increase in its BOP sales over the past few years due
to an increased market focus on and, up until the second half of 1998, improving
fundamentals in the drilling business. Although order levels declined during
the latter part of 1998 and into 1999, a backlog of orders linked to rig
upgrades and new-build construction resulted in increased drilling-related
revenues in 1999. Cameron also produces other drilling-related equipment, the
most important of which are choke manifolds, drilling risers and control
systems.
Additionally, Cameron provides complete integrated elastomer research,
development and manufacturing. These products are used in pressure and flow
control equipment. This technology also supports the petroleum, petrochemical,
rubber molding and plastics industries in the development and testing of
elastomer and plastic products.
The Cameron Willis Chokes business unit was formed in late 1997 to focus
resources on the choke product line with the goal of enhancing Cameron's
performance in this product line. Cameron Willis manufactures production chokes,
control valves, drilling choke systems, actuators, and pigging and production
automation systems. The Company's primary choke manufacturing operations have
now been consolidated into its Longford, Ireland facility.
The Cameron Controls business unit was created in late 1996 with a primary
goal of expanding Cameron's role as a provider of controls equipment. Drilling
and production equipment used on the ocean floor operates from a platform or
other remote location through hydraulic or electronic connections that allow the
operator to measure and control the pressures and throughput associated with
these installations. Cameron Controls' two primary manufacturing assembly and
testing facilities are located in Celle, Germany and Houston, Texas.
The Cameron division has established an aftermarket business unit with a
comprehensive worldwide aftermarket organization that provides replacement
parts, field service, major repairs and overhauls, unit installation assistance
and Total Vendor Management contracts. Cameron also provides an inventory of
repair parts, service personnel, planning services and inventory and storage of
customers' idle equipment.
Cameron primarily markets its petroleum production equipment products
directly to end-users through a worldwide network of sales and marketing
employees, supported by agents in some international locations. Due to the
extremely technical nature of many of the products, the
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marketing effort is further supported by a staff of engineering employees. The
balance of Cameron's products are sold through established independent
distributors.
Cameron's primary customers include major oil and gas exploration and
production companies, independent oil and gas exploration and production
companies, foreign national oil and gas companies, engineering and construction
companies, drilling contractors and rental equipment companies.
Cooper Cameron Valves Division
Cooper Cameron Valves ("CCV") manufactures valves ranging in sizes from
1/4 inch to 60 inches in diameter and related systems primarily used to control
pressures and direct oil and gas as they are moved from individual wellheads
through flow lines, gathering lines and transmission systems to refineries,
petrochemical plants and industrial centers for processing. Large diameter
valves are used primarily in natural gas transmission lines. Smaller valves are
used in oil and gas gathering and processing systems and in various types of
industrial processes in refineries and petrochemical plants.
Gate valves, ball valves, butterfly valves, Orbit valves, rotary process
valves, block and bleed valves, plug valves, actuators, chokes and aftermarket
parts are marketed under the brand names Cameron(R), W-K-M(R), Orbit(R),
Demco(R), Foster(R) and Thornhill Craver(TM).
CCV markets its equipment and services through a worldwide network of
combined sales and marketing employees, carefully selected distributors and
agents in selected international locations. Due to the extremely technical
nature of many of the products, the marketing effort is further supported by a
staff of engineering employees. CCV's primary customers include major and
independent oil and gas exploration and production companies, foreign national
oil and gas companies, pipeline companies, refining companies and a wide range
of industrial, petrochemical and processing industry companies.
In early 2000, CCV will launch a "Valve Advisor" on the Internet to
facilitate the purchase of engineered products over the web. Customers and
distributors will have ready access to product information, including detailed
technical drawings, product availability and pricing. In addition, this service
will allow CCV to tap into markets that are not covered via existing
distribution channels.
Cooper Energy Services Division
Cooper Energy Services ("CES") provides products and services to the oil
and gas production and transmission, process and power generation markets. The
primary products include engines, integral engine compressors, reciprocating
compressors, turbochargers and aftermarket parts and service. CES markets its
products worldwide under the well-known brand names Ajax(R), Cooper-Bessemer(R),
Superior(R), Enterprise(R), C-B Turbocharger(R), PPC(R), Service Solutions(TM)
and Texcentric(R).
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CES's reciprocating products include engines and compressors in both
"integral" and "separable" configurations. CES also manufactures four-cycle,
natural gas-fueled, reciprocating power engines in both "in-line" and "V"
configurations.
CES provides the Ajax integral engine-compressors (140 to 880 horsepower),
which combine the engine and compressor on a single drive shaft and are used for
gas re-injection and storage, as well as smaller gathering and transmission
lines. In addition, a line of rotary screw compressors powered by natural gas
engines and electric motor drives was introduced in 1997. CES is continuing to
work on a proprietary 1,150 psi high-pressure rotary screw system.
The Superior internal combustion engines (500 to 3,200 horsepower) are
manufactured by CES to drive compressors for gas compression, generators to
provide power sources, and pumps used for various liquid applications. During
1999, the high speed Superior 2400G engines, available in six, eight, twelve or
sixteen-cylinder configurations, were enhanced with the addition of more user-
friendly controls, detonation-sensing technology and low-compression power
pistons. Development of the Superior HG engine, a new high-horsepower engine for
the compression market, was also initiated during the year.
The Superior reciprocating compressors (400 to 9,000 horsepower) are used
primarily for natural gas applications, including production, storage,
withdrawal, processing and transmission, as well as petrochemical processing.
The new Superior WG compressor series has been introduced in 2000 for large
project applications up to 9,000 horsepower. These high speed separable
compressor units can be matched with either natural gas engine drivers or
electric motors and provide a significant installed cost advantage over
competitive equipment in the same power range.
There is a significant base of Cooper-Bessemer engines and compressors (up
to 30,000 horsepower) for which CES provides replacement parts and service on a
worldwide basis.
During 1999, CES organized into four business units in order to better
focus on the strategic growth, product development, and technical support unique
to its product offerings and to better serve its customers' needs. The four
business units consist of the Superior Engine, Ajax and Superior Compressor,
Aftermarket Parts, and Aftermarket Service business units.
CES also made the decision in 1999 to sell all of its current offering of
new compression equipment domestically through a network of independent
distributors rather than on a direct basis with the end user. These distributors
are offered varying levels of pricing and support depending on their volume of
purchases and whether the products purchased are for their own rental fleets or
for resale. CES expects to have substantially completed its network of
distributors for domestic compression equipment by mid-2000. CES is offering its
power generation equipment domestically through a separate group of independent
distributors and continues to sell both its compression and power equipment
internationally direct to end-users through a network of sales and marketing
employees supported by agents in some locations.
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In addition to the sale of the rotating business previously described, CES
initiated a significant level of restructuring aimed at improving the
productivity of its manufacturing processes. In June 1999, CES announced the
closing of the Grove City, Pennsylvania plant and foundry. Most of the activity
previously conducted at that location is being outsourced to third parties or
relocated to other CES or Cooper Cameron facilities. In June 1999, the
relocation of the central warehouse in Mt. Vernon, Ohio to Houston, Texas was
announced as well as the relocation of the compressor plant in Mt. Vernon, Ohio
to Waller, Texas. All of these restructuring activities are expected to be
substantially completed in 2000. CES will also continue to outsource other
manufacturing activity during 2000 where significant cost savings can be
achieved.
The primary customers for compression and power equipment include the major
oil and gas companies, large independent oil and gas producers, gas transmission
companies, equipment leasing companies, petrochemical and refining divisions of
oil companies, independent power producers, non-utility generators and chemical
companies.
Cooper Turbocompressor Division
Cooper Turbocompressor ("CTC") markets its products under the brand names
of TurboAir(R), Quad 2000(R), and MSG(R). This division manufactures the
integrally geared centrifugal air compressors of the Joy Industrial Compressor
Group. The compressors are used by industrial plants as a source of power for
the operation of tools, actuation of control devices and to power automatic and
semi-automatic production equipment. These compressors are used in industries
such as automotive, electronic, textile, chemical, food and beverage and general
manufacturing.
In addition, CTC also manufactures integrally geared centrifugal
compressors for process air and gas applications. In these cases, the
compressor is an integral part of the process in industries such as air
separation, chemical, pharmaceutical, fermentation, petrochemical, refining and
synthetic fuel.
The process and plant air centrifugal compressors manufactured by CTC
deliver oil-free compressed gas to the customer, thus preventing oil
contamination of the finished products. Industrial markets worldwide
increasingly prefer oil-free air for quality, safety, operational and
environmental reasons.
CTC provides aftermarket service and repairs on all equipment it produces
through a worldwide network of service centers and field service technicians
utilizing an extensive inventory of parts, including Genuine Joy(R) parts.
Replacement parts are made to the same high quality standards as those used in
new compressors.
CTC expanded its service organization with added training and certification
of its domestic and international distributors in the plant air market. CTC
provides installation and maintenance service labor, parts and factory repairs
and upgrades to its worldwide customers for plant air and process gas
compressors. Aero performance and microprocessor-based control system upgrades,
as well as refurbishing and re-warranting used compressors, was a significant
area of CTC's aftermarket business in 1999.
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CTC primarily sells its products through sales representatives and
independent distributors supported by a staff of trained product specialists.
Regional application centers, located world-wide, support our customers locally.
CTC is actively expanding its product range through the addition of new
compressor frames (TA 6000 and TA 11000) and the addition of trademark
accessories such as Dry Pac(R) heat compression dryers and Turboblend(R) hydro-
cracked turbomachinery lubricating oil. CTC is also continuing its efforts to
focus on superior customer service.
MARKET ISSUES
Cooper Cameron, through its segments, is one of the market leaders in the
global market for petroleum production equipment. Cooper Cameron believes that
it is well positioned to serve these markets. Plant and service center
facilities around the world in major oil producing regions provide a broad,
global breadth of market coverage.
The international market is expected to be a major source of growth for
Cooper Cameron. The desire of both the developed and the developing countries
to expand their oil and gas transmission capacity for both economic and
political reasons will be one of the primary factors affecting market demand.
Additionally, establishment of industrial infrastructure in the developing
countries will necessitate the growth of basic industries that require plant air
and process compression equipment. Production and service facilities in North
and South America, Europe and the Far East provide the Company with the ability
to serve the global marketplace.
In each of Cooper Cameron's business segments, a large population of
installed engines, compression equipment, and gas and oil production equipment
exists in both the U.S. and international market segments. The rugged, long-
lived nature of the equipment that exists in the field provides a predictable
and profitable repair parts and service business. The Company expects that as
increasing quantities of new units are sold into the international markets,
there will be a continuing growth in market demand for aftermarket parts and
service.
NEW PRODUCT DEVELOPMENT
As petroleum exploration activities have increasingly been focused on
subsea locations, the Cameron division has directed much of its new product
development efforts toward this market. In subsea exploration, customers are
particularly concerned about safety, environmental protection and ease of
installation and maintenance. Cameron's reputation for high quality and high
dependability has given it a competitive advantage in the areas of safety and
environmental protection. A patented subsea production system called the
SpoolTree, which was introduced in 1993, offers substantial cost reduction to
the customer as it is based upon a novel concept that eliminates the need for a
workover riser or removal of the christmas tree during workover. Cameron has
pioneered this concept and has developed similar products for land and platform
applications, which significantly reduce customer costs.
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Cameron has also introduced the MOSAIC(TM) (Modular Subsea And Integrated
Completions) system. MOSAIC includes a suite of pre-engineered elements with
standard interfaces that can be combined in a fashion to allow customers to
configure a system to meet their specific needs. Cameron believes that it has
chosen to standardize components at a level low enough to give customers the
required customization while providing engineering and manufacturing
efficiencies. Cameron has realigned its engineering and marketing resources to
further develop and market the MOSAIC subsea system and other stand-alone
standardized subsea products, such as christmas trees and wellheads.
Several new drilling products were introduced in 1998 and 1999. These new
products included the 3.5 million-pound load capacity LoadKing(TM) riser system,
which set the industry standard for drilling in 10,000-foot water depths; a new
lightweight and lower-cost locking mechanism for subsea BOPs; and a new
generation of variable-bore ram packers. Additionally, Cameron's Freestanding
Drilling Riser, introduced in 1999, was a winner of the Petroleum Engineer
International Special Meritorious Award for Engineering Innovation.
In May 1998, Cameron opened a new Research Center in Houston, Texas. The
53,000 sq. ft. Research Center is one of the largest product development
facilities in the oil service sector. The facility has 10 specially designed
test bays to test and evaluate Cameron's products under realistic conditions.
These include environmental test chambers to simulate extreme pressures and
temperatures, high-strength fixtures for the application of multi-million pound
tensile and bending loads, high pressure gas compressors and test enclosures, a
hyperbaric chamber to simulate the external pressures of deep water
environments, and two circulation loops for erosion and flow testing. This
Research Center is instrumental in providing Cameron's customers with innovative
and cost-effective products.
In 1997, Cameron Controls successfully launched a new electro-hydraulic
drilling control system that was favorably received in the market. A new subsea
production control system was developed and launched in 1998. This successful
product launch has significantly enhanced the subsea systems offerings for the
company.
In response to customer needs, CES has introduced the new,
higher-horsepower, Superior HG engine. This natural gas-fueled engine is rated
at 5,000 HP (550 HP higher than the nearest competition) and will serve high-end
gas compression and power generation markets worldwide.
As a complement to the HG engine, CES has also initiated the development of
the Superior WG compressor series. These high-speed separable compressor units
can be matched with either natural gas engine drivers (like the HG engine) or
electric motors for upstream production, mid-stream processing and gas
transmission markets. The speed, power and versatility of the WG series provide
a significant installed cost advantage over competitive equipment in the same
power range. CES' first sale of the new unit was for an electric motor-driven
dual gas boosting application, and is to be installed in the third quarter of
2000.
CTC focused product development resources to further expand its high
efficiency plant air compressor line and to provide custom compressors matched
to the latest requirements of its
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industrial gas customers. The latter is being achieved by advances in
aerodynamic and rotor dynamic analytical design capability.
The early 2000 introduction of the TA 6000 and the planned introduction of
the TA 11000 in the fourth quarter of 2000 will extend the CTC standard product
range up to 2,500 horsepower. These new products position CTC as a state-of-the
art supplier of turbo plant air compressors in a wide range of horsepowers.
Other new products include the updated Quad 2000 Controller with state-of-
the-art communication capabilities, heat of compression dryer systems, branded
lubrication oil, and improved aerodynamic compressor stages.
COMPETITION
Cooper Cameron competes in all areas of its operations with a number of
other companies, some of which have financial and other resources comparable to
or greater than those of Cooper Cameron.
Cooper Cameron believes it has a leading position in the petroleum
production equipment markets, particularly with respect to its high-pressure
products. In these markets, Cooper Cameron competes principally with FMC
Corporation, Varco International, Inc., Masterflo, Kvaerner Oil and Gas, Vetco
Gray Inc. (a subsidiary of Asea Brown Boveri), Dril-Quip, Inc. and Hydril
Company. The principal competitive factors in the petroleum production
equipment markets are technology, quality, service and price. Cooper Cameron
believes that several factors give it a strong competitive position in these
markets. Most significant are Cooper Cameron's broad product offering, its
worldwide presence and reputation, its service and repair capabilities, its
expertise in high pressure technology and its experience in alliance and
partnership arrangements with customers and other suppliers.
Cooper Cameron believes it also has a leading position in the compression
and power equipment markets. In these markets, Cooper Cameron competes
principally with Dresser Rand of Ingersoll-Rand Company, Caterpillar Inc., Ariel
Corporation, Waukesha Engine Division of Halliburton Company's Dresser Equipment
Group and Atlas-Copco AB. The principal competitive factors in the compression
and power equipment markets are engineering and design capabilities, product
performance, reliability and quality, service and price. Cooper Cameron believes
that its competitive position is based on several factors. Cooper Cameron has a
broad product offering and, unlike many of its competitors, manufactures and
sells both engines and compressors (both as separate units and packaged together
as a single unit). Cooper Cameron led the industry in the introduction of low
emission engine technology and continues today as an industry leader in this
technology. Cooper Cameron has a highly competent engineering staff and skilled
technical and service representatives, with service centers located throughout
the world.
In all of its markets, Cooper Cameron's products have strong brand
recognition and Cooper Cameron has an established reputation for quality and
service. Cooper Cameron has a significant base of previously-installed products,
which provides a strong demand for aftermarket parts and service. Cooper Cameron
has modern manufacturing facilities and state-of-the-art testing capabilities.
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MANUFACTURING
Cooper Cameron has manufacturing facilities worldwide that conduct a broad
variety of processes, including machining, fabrication, assembly and testing
using a variety of forged and cast alloyed steels and stainless steel as the
primary raw materials. In recent years, Cooper Cameron has rationalized plants
and products, closed various manufacturing facilities, moved product lines to
achieve economies of scale, and upgraded the remaining facilities.
Manufacturing processes have been improved and significant capital expenditures
have been made. Cooper Cameron maintains advanced manufacturing, quality
assurance and testing equipment geared to the specific products that it
manufactures and uses extensive process automation in its manufacturing
operations. The manufacturing facilities utilize computer aided numeric
controlled tools and manufacturing techniques that concentrate the equipment
necessary to produce similar products in one area of the plant in a
configuration commonly known as a manufacturing cell. One operator in a
manufacturing cell can monitor and operate several machines, as well as assemble
and test products made by such machines, thereby improving operating efficiency
and product quality while reducing the amount of work-in-process and finished
product inventories.
Cooper Cameron believes that its test capabilities are critical to its
overall process. The Company has the capability to test most equipment at full
load, measuring all operating parameters, efficiency and emissions. All process
compressors for air separation and all plant air compressors are given a
mechanical and aerodynamic test in a dedicated test center prior to shipment.
All of Cooper Cameron's European manufacturing plants are ISO certified and
API licensed. Most of the U.S. plants are ISO certified and certification is in
process for the remainder. ISO is an internationally recognized verification
system for quality management.
BACKLOG
Cooper Cameron's backlog was approximately $513 million at December 31,
1999, (approximately 92% of which is expected to be shipped during 2000) as
compared to $790 million at December 31, 1998, and $786 million at December 31,
1997. Backlog consists of customer orders for which a purchase order has been
received, satisfactory credit or financing arrangements exist and delivery is
scheduled.
PATENTS, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY
Cooper Cameron believes that the success of its business depends more on
the technical competence, creativity and marketing abilities of its employees
than on any individual patent, trademark or copyright. Nevertheless, as part of
its ongoing research, development and manufacturing activities, Cooper Cameron
has a policy of seeking patents when appropriate on inventions concerning new
products and product improvements. Cooper Cameron owns 260 unexpired United
States patents and 683 unexpired foreign patents. During 1999, 80 new patent
applications were filed, more than the last three years combined.
10
<PAGE>
Although in the aggregate these patents and Cooper Cameron's trademarks are
of considerable importance to the manufacturing and marketing of many of its
products, Cooper Cameron does not consider any single patent or trademark or
group of patents or trademarks to be material to its business as a whole, except
the Cameron and Cooper-Bessemer trademarks. Other important trademarks used by
Cooper Cameron include Ajax, Superior, TurboAir, MSG, Quad 2000, C-B
Turbocharger, Enterprise, ENOX, Texcentric, Orbit, W-K-M, McEvoy, Willis, Demco,
PPC, Thornhill Craver and Foster. Cooper Cameron has the right to use the
trademark Joy on aftermarket parts until November 2027. Cooper Cameron has
registered its trademarks in the countries where such registration is deemed
material.
Cooper Cameron also relies on trade secret protection for its confidential
and proprietary information. Cooper Cameron routinely enters into
confidentiality agreements with its employees and suppliers. There can be no
assurance, however, that others will not independently obtain similar
information or otherwise gain access to Cooper Cameron's trade secrets.
EMPLOYEES
As of December 31, 1999, Cooper Cameron had approximately 7,200 employees,
of which approximately 1,314 were represented by labor unions. Cooper Cameron
believes its current relations with employees are good. A labor contract
expired during December 1999 covering 126 hourly employees at the Cameron
division in the United Kingdom. Negotiations have now been completed with
respect to a new three-year contract with these employees. The only other
significant labor contracts expiring during 2000 cover 582 Cameron and CCV
hourly and non-exempt employees at locations in France, Mexico, Singapore, the
United Kingdom and Venezuela and 154 hourly employees at the Turbocompressor
division plant in Buffalo, New York. The Turbocompressor employees are
represented by the Machinists Union (IAM) and are covered by a labor agreement
that expires July 30, 2000. Negotiations with the Machinists Union will begin
in the second quarter of 2000.
ITEM 2. PROPERTIES
The Company operates manufacturing plants ranging in size from
approximately 9,500 square feet to approximately 541,000 square feet of
manufacturing space. The Company also owns and leases warehouses, distribution
centers, aftermarket and storage facilities, and sales offices. The Company
leases its corporate headquarters and its Cameron division headquarters office
space in Houston, Texas.
The Company manufactures, markets and sells its products and provides
services throughout the world, operating facilities in numerous countries. On
December 31, 1999, the significant facilities used by Cooper Cameron throughout
the world for manufacturing, distribution, aftermarket services, machining,
storage and warehousing contained an aggregate of approximately 7,656,736 square
feet of space, of which approximately 6,676,962 square feet (87%) was owned and
979,774 (13%) was leased. Of this total, approximately 5,251,698 square feet
(69%) are located in the United States and 1,546,021 square feet (20%) are
located in Europe. The table below lists the significant manufacturing,
warehouse and distribution facilities by industry segment and geographic area.
Cameron and Cooper Cameron Valves share space in certain facilities and, thus,
are being reported together.
11
<PAGE>
<TABLE>
<CAPTION>
Asia/Pacific
Western Eastern and
Hemisphere Hemisphere Mideast Total
-------------- ------------- -------------- ----------
<S> <C> <C> <C> <C>
Cameron and Cooper Cameron
Valves 17 12 4 33
Cooper Energy Services 21 1 0 22
Cooper Turbocompressor 3 3 0 6
</TABLE>
Cooper Cameron believes its facilities are suitable for their present and
intended purposes and are adequate for the Company's current and anticipated
level of operations.
ITEM 3. LEGAL PROCEEDINGS
Cooper Cameron is a party to various legal proceedings and administrative
actions, including certain environmental matters discussed below, all of which
are of an ordinary or routine nature incidental to the operations of the
Company. In the opinion of Cooper Cameron's management, such proceedings and
actions should not, individually or in the aggregate, have a material adverse
effect on the Company's results of operations or financial condition.
Environmental Matters
Cooper Cameron is subject to numerous federal, state, local and foreign
laws and regulations relating to the storage, handling and discharge of
materials into the environment, including the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA"), the Clean Water Act, the
Clean Air Act (including the 1990 Amendments) and the Resource Conservation and
Recovery Act. Cooper Cameron believes that its existing environmental control
procedures are adequate and it has no current plans for substantial capital
expenditures in this area. Cooper Cameron has a proactive environmental
management program aimed at compliance with existing environmental regulations
and elimination or significant reduction in the generation of pollutants in its
manufacturing processes. Cooper Cameron management intends to continue these
policies and programs.
Cooper Cameron has been identified as a potentially responsible party
("PRP") with respect to five sites designated for cleanup under CERCLA or
similar state laws, which impose liability for cleanup of certain waste sites
and for related natural resource damages without regard to fault or the legality
of waste generation or disposal. Persons liable for such costs and damages
generally include the site owner or operator and persons that disposed or
arranged for
12
<PAGE>
the disposal of substances found at those sites. Although CERCLA imposes joint
and several liability on all PRPs, in application, the PRPs typically allocate
the investigation and cleanup costs based upon the volume of waste contributed
by each PRP. Settlements often can be achieved through negotiations with the
appropriate environmental agency or the other PRPs. PRPs that contributed less
than one percent of the waste are often given the opportunity to settle as a "de
minimis" party, resolving liability for a particular site.
Cooper Cameron owns only one of the sites on which it has been identified
as a PRP. With respect to the remaining four sites, Cooper Cameron's share of
the waste volume is estimated and believed to be less than one percent. Cooper
Cameron is the major PRP at one site, the Osborne Landfill in Grove City,
Pennsylvania, which it owns. Cooper Cameron's facility in Grove City disposed
of wastes at the Osborne Landfill from the early 1950s until 1978. A
remediation plan was developed and then accepted by the U.S. Environmental
Protection Agency as the preferred remedy for the site. The construction phase
of the remediation was completed in 1997 and the remaining costs relate to
ground water treatment and monitoring.
Cooper Cameron has accruals in its balance sheet to the extent costs are
known for the five sites. Although estimates of the cleanup costs have not yet
been made for certain of these sites, Cooper Cameron believes, based on its
preliminary review and other factors, that the Company's share of the costs
relating to these sites will not have a material adverse effect on its results
of operations, financial condition or liquidity. However, no assurance can be
given that the actual costs will not exceed the estimates of the cleanup costs
once determined.
Cooper Cameron does not currently anticipate any material adverse effect on
its results of operations, financial condition or competitive position as a
result of compliance with Federal, state, local or foreign environmental laws or
regulations or cleanup costs of the sites discussed above. However, some risk
of environmental liability and other costs is inherent in the nature of Cooper
Cameron's business, and there can be no assurance that material environmental
costs will not arise. Moreover, it is possible that future developments, such
as promulgation of regulations implementing the 1990 amendments to the Clean Air
Act and other increasingly strict requirements of environmental laws and
enforcement policies thereunder, could lead to material costs of environmental
compliance and cleanup by Cooper Cameron.
The cost of environmental remediation and compliance generally has not been
an item of material expense for Cooper Cameron during any of the periods
presented, other than with respect to the Osborne Landfill described above.
Cooper Cameron's balance sheet at December 31, 1999, includes accruals totaling
approximately $1.3 million for environmental remediation activities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of 1999.
13
<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The common stock of Cooper Cameron, par value $.01 per share (together with
the associated Rights to Purchase Series A Junior Participating Preferred
Stock), is traded on The New York Stock Exchange ("NYSE"). No dividends were
paid during 1999.
The following table indicates the range of trading prices on the NYSE from
January 2, 1998 through December 31, 1998 and January 4, 1999 through December
31, 1999.
Price Range ($)
-------------------------------------
High Low Last
-------- --------- ----------
1999
First Quarter.............. 35 7/8 22 1/4 33 7/8
Second Quarter............. 41 5/16 27 3/4 37 1/16
Third Quarter.............. 44 7/16 32 9/16 37 3/4
Fourth Quarter............. 50 33 9/16 48 15/16
1998
First Quarter.............. 66 45 60 3/8
Second Quarter............. 71 49 3/4 51
Third Quarter.............. 53 3/4 20 1/8 28 1/2
Fourth Quarter............. 38 1/8 21 15/16 24 1/2
As of March 1, 2000, the approximate number of stockholders of record of Cooper
Cameron common stock was 2,666. In addition, there were approximately 25,000
beneficial holders of the common stock, representing persons whose stock is in
nominee or "street name" accounts through brokers.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Selected Consolidated
Historical Financial Data of Cooper Cameron Corporation" on page 55 in the 1999
Annual Report to Stockholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information set forth under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition of Cooper Cameron
Corporation" on pages 25-33 in the 1999 Annual Report to Stockholders is
incorporated herein by reference.
14
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.
The information for this item is set forth in the section entitled "Market
Risk Information" on pages 30-32 in the 1999 Annual Report to Stockholders and
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements of the Company and the
independent auditors' report set forth on pages 34-54 in the 1999 Annual Report
to Stockholders are incorporated herein by reference:
Report of Independent Auditors.
Consolidated Results of Operations for each of the three years in the
period ended December 31, 1999.
Consolidated Balance Sheets as of December 31, 1999 and 1998.
Consolidated Cash Flows for each of the three years in the period
ended December 31, 1999.
Consolidated Changes in Stockholders' Equity for each of the three
years in the period ended December 31, 1999.
Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information on Directors of the Company is set forth in the section
entitled "The Nominees and Continuing Directors" on pages 11-12 in the Proxy
Statement of the Company for the Annual Meeting of Stockholders to be held on
May 11, 2000, which section is incorporated herein by reference. Information
regarding executive officers of the Company is set forth below.
There are no family relationships among the officers listed, and there are
no arrangements or understandings pursuant to which any of them were elected as
officers. Officers are appointed
15
<PAGE>
or elected annually by the Board of Directors at its first meeting following the
Annual Meeting of Stockholders, each to hold office until the corresponding
meeting of the Board in the next year or until a successor shall have been
elected, appointed or shall have qualified.
Section 16(a) Beneficial Ownership Reporting Compliance
The information concerning compliance with Section 16(a) is set forth in
the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance"
on page 24 in the Proxy Statement of the Company for the Annual Meeting of
Stockholders to be held on May 11, 2000, which section is incorporated herein by
reference.
CURRENT EXECUTIVE OFFICERS OF THE REGISTRANT
Present Principal Position and Other
Name and Age Material Positions Held During Last Five Years
- ------------ ----------------------------------------------
Sheldon R. Erikson (58) President and Chief Executive Officer since January
1995. Chairman of the Board from 1988 to January
1995 and President and Chief Executive Officer from
1987 to January 1995 of The Western Company of
North America.
Thomas R. Hix (52) Senior Vice President of Finance and Chief
Financial Officer since January 1995. Senior Vice
President of Finance, Treasurer and Chief Financial
Officer of The Western Company of North America
from 1993 to January 1995.
Franklin Myers (47) Senior Vice President since April 1995. General
Counsel and Secretary from April 1995 to July 1999.
President of the Cooper Energy Services division
since August 1998. Senior Vice President and
General Counsel from 1994 to April 1995 of Baker
Hughes Incorporated.
Joseph D. Chamberlain (53) Vice President and Corporate Controller since April
1995. Controller - Financial Reporting from 1994 to
April 1995, of Cooper Industries, Inc.
A. John Chapman (58) Vice President since May 1998. President, Cooper
Cameron Valves division since 1995. Managing
director of Joy Manufacturing Co. Australia Pty.
Ltd., a subsidiary of Joy Technologies Inc. from
February 1990 to June 1995.
Jane L. Crowder (49) Vice President, Human Resources since May 1999.
Vice President, Compensation and Benefits from 1996
to 1999, and Director, Compensation and Benefits
from 1995 to 1996. Vice
16
<PAGE>
President, Human Resources of the CES division from
September 1998 to October 1999. Vice President,
Human Resources of The Western Company of North
America from 1994 to 1995.
William C. Lemmer (55) Vice President, General Counsel and Secretary since
July 1999. Vice President, General Counsel and
Secretary of Oryx Energy Company from 1994 to
1999.
E. Fred Minter (64) Vice President from November 1996. Chairman from
August 1999 and President from 1988 to August 1999
of the Cooper Turbocompressor division.
Dalton L. Thomas (50) Vice President since July 1998. President, Cameron
division since July 1998. Vice President, Eastern
Hemisphere for Cameron from 1995 until July 1998.
Vice President of Manufacturing and Support
Services, Western Company of North America from
1989 to 1995.
ITEM 11. EXECUTIVE COMPENSATION.
The information for this item is set forth in the section entitled
"Executive Compensation Tables" on pages 17-20 in the Proxy Statement of the
Company for the Annual Meeting of Stockholders to be held on May 11, 2000, which
section is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
The information concerning security ownership of certain beneficial owners
and management is set forth in the sections entitled "Security Ownership of
Certain Beneficial Owners" on page 23 and "Security Ownership of Management" on
pages 12-13 in the Proxy Statement of the Company for the Annual Meeting of
Stockholders to be held on May 11, 2000, which sections are incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
(1) FINANCIAL STATEMENTS:
17
<PAGE>
All financial statements of the Registrant as set forth under Item 8
of this Annual Report on Form 10-K.
(2) FINANCIAL STATEMENT SCHEDULES:
Financial statement schedules are omitted because of the absence of
conditions under which they are required or because all material
information required to be reported is included in the consolidated
financial statements and notes thereto.
(3) EXHIBITS:
3.1 Amended and Restated Certificate of Incorporation of Cooper
Cameron Corporation, dated June 30, 1995, filed as Exhibit 4.2
to the Registration Statement on Form S-8 of Cooper Cameron
Corporation (Commission File No. 33-94948), and incorporated
herein by reference.
3.2 Certificate of Amendment to the Restated Certificate of
Incorporation of Cooper Cameron Corporation, filed as Exhibit
4.3 to the Registration Statement on Form S-8 of Cooper
Cameron Corporation (Commission File No. 333-57995), and
incorporated herein by reference.
3.3 First Amended and Restated Bylaws of Cooper Cameron
Corporation, as amended December 12, 1996, filed as Exhibit
3.2 to the Annual Report on Form 10-K for 1996 of Cooper
Cameron Corporation, and incorporated herein by reference.
4.1 Form of Rights Agreement, dated as of May 1, 1995, between
Cooper Cameron Corporation and First Chicago Trust Company of
New York, as Rights Agent, filed as Exhibit 4.1 to the
Registration Statement on Form S-8 of Cooper Cameron
Corporation (Commission File No. 33-94948), and incorporated
herein by reference.
4.2 First Amendment to Rights Agreement between Cooper Cameron
Corporation and First Chicago Trust Company of New York, as
Rights Agent, dated November 1, 1997, filed as Exhibit 4.2 to
the Annual Report on Form 10-K for 1997 of Cooper Cameron
Corporation, and incorporated herein by reference.
4.3 Registration Statement on Form S-3 filed with the Securities
and Exchange Commission on May 4, 1998 (Registration Statement
No. 333-51705) incorporated herein by reference.
10.1 Amended and Restated Cooper Cameron Corporation Long-Term
Incentive Plan, incorporated by reference to the Cooper
Cameron Corporation Proxy Statement for the Annual Meeting of
Stockholders held on May 8, 1997.
18
<PAGE>
10.2 First Amendment to the Amended and Restated Cooper Cameron
Corporation Long-Term Incentive Plan, effective February 12,
1998.
10.3 Second Amendment to the Amended and Restated Cooper Cameron
Corporation Long-Term Incentive Plan, effective May 13, 1999.
10.4 Cooper Cameron Corporation Second Amended and Restated 1995
Stock Option Plan for Non-Employee Directors (Registration
Statement on Form S-8 No. 333-79787), incorporated herein by
reference.
10.5 Cooper Cameron Corporation Retirement Savings Plan, as Amended
and Restated, effective April 1, 1996, filed as Exhibit 10.10
to the Annual Report on Form 10-K for 1997 of Cooper Cameron
Corporation, and incorporated herein by reference.
10.6 Cooper Cameron Corporation Employee Stock Purchase Plan
(Registration Statement No. 33-94948), incorporated herein by
reference.
10.7 Cooper Cameron Corporation Supplemental Excess Defined Benefit
Plan, filed as Exhibit 10.4 to the Registration Statement on
Form S-4 of Cooper Cameron Corporation (Commission File
No. 33-90288), and incorporated herein by reference.
10.8 First Amendment to Cooper Cameron Corporation Supplemental
Excess Defined Benefit Plan, effective as of January 1, 1996,
filed as Exhibit 10.7 to the Annual Report on Form 10-K for
1996 of Cooper Cameron Corporation, and incorporated herein by
reference.
10.9 Cooper Cameron Corporation Supplemental Excess Defined
Contribution Plan, filed as Exhibit 10.5 to the Registration
Statement on Form S-4 of Cooper Cameron Corporation
(Commission File No. 33-90288), and incorporated herein by
reference.
10.10 First Amendment to Cooper Cameron Corporation Supplemental
Excess Defined Contribution Plan, effective April 1, 1996,
filed as Exhibit 10.9 to the Annual Report on Form 10-K for
1996 of Cooper Cameron Corporation, and incorporated herein by
reference.
10.11 Cooper Cameron Corporation Compensation Deferral Plan
(formerly the Cooper Cameron Corporation Management Incentive
Compensation Deferral Plan), effective January 1, 1996, filed
as Exhibit 10.10 to the Annual Report on Form 10-K for 1996 of
Cooper Cameron Corporation, and incorporated herein by
reference.
19
<PAGE>
10.12 First Amendment to the Cooper Cameron Corporation Compensation
Deferral Plan, effective July 1, 1998.
10.13 Second Amendment to the Cooper Cameron Corporation
Compensation Deferral Plan, effective January 1, 1999.
10.14 Third Amendment to the Cooper Cameron Corporation Compensation
Deferral Plan, effective January 1, 2000.
10.15 Cooper Cameron Corporation Directors Deferred Compensation
Plan, filed as Exhibit 10.7 to the Registration Statement on
Form S-4 of Cooper Cameron Corporation (Commission File
No. 33-90288), and incorporated herein by reference.
10.16 Employment Agreement by and between Sheldon R. Erikson and
Cooper Cameron Corporation, effective as of August 13, 1999.
10.17 Employment Agreement by and between Thomas R. Hix and Cooper
Cameron Corporation, effective as of September 1, 1999.
10.18 Employment Agreement by and between Franklin Myers and Cooper
Cameron Corporation, effective as of September 1, 1999.
10.19 Form of Change in Control Agreement, effective November 11,
1999, by and between Scott Amann, Joe Chamberlain, John
Chapman, Jane Crowder, William Givens, Daniel Keenan, William
Lemmer, Robert Rajeski, and Dalton Thomas.
10.20 1995 Management Incentive Compensation Plan of Cooper Cameron
Corporation, dated as of November 14, 1995, as amended, filed
as Exhibit 10.15 to the Annual Report on Form 10-K for 1996 of
Cooper Cameron Corporation, and incorporated herein by
reference.
10.21 1996 Management Incentive Compensation Plan of Cooper Cameron
Corporation, dated as of February 19, 1996, filed as Exhibit
10.16 to the Annual Report on Form 10-K for 1996 of Cooper
Cameron Corporation, and incorporated herein by reference.
10.22 1997 Management Incentive Compensation Plan of Cooper Cameron
Corporation, dated as of December 9, 1996, filed as Exhibit
10.17 to the Annual Report on Form 10-K for 1996 of Cooper
Cameron Corporation, and incorporated herein by reference.
10.23 Cooper Cameron Corporation Management Incentive Compensation
Plan, as amended, incorporated herein by reference to the
Cooper Cameron
20
<PAGE>
Corporation Proxy Statement for the Annual Meeting of
Stockholders held on May 8, 1997.
10.24 1998 Management Incentive Compensation Plan for Cooper Cameron
Corporation, dated as of January 1, 1998, filed as Exhibit
10.25 to the Annual Report on Form 10-K for 1997 of Cooper
Cameron Corporation, and incorporated herein by reference.
10.25 1999 Management Incentive Compensation Plan for Cooper Cameron
Corporation, dated as of January 1, 1999, filed as Exhibit
10.27 to the Annual Report on Form 10-K for 1998 of Cooper
Cameron Corporation, and incorporated herein by reference.
10.26 Change in Control Policy of Cooper Cameron Corporation,
approved February 19, 1996, filed as Exhibit 10.18 to the
Annual Report on Form 10-K for 1996 of Cooper Cameron
Corporation, and incorporated herein by reference.
10.27 Executive Severance Program of Cooper Cameron Corporation,
approved February 19, 1996, filed as Exhibit 10.19 to the
Annual Report on Form 10-K for 1996 of Cooper Cameron
Corporation, and incorporated herein by reference.
10.28 Credit Agreement, dated as of June 30, 1995, among Cooper
Cameron Corporation and certain of its subsidiaries and the
banks named therein and First National Bank of Chicago, as
agent, filed as Exhibit 4.5 to the Registration Statement on
Form S-8 of Cooper Cameron Corporation (Commission File
No. 33-94948), and incorporated herein by reference.
10.29 Amended and Restated Credit Agreement dated as of March 20,
1997, among Cooper Cameron Corporation and certain of its
subsidiaries and the banks named therein and First National
Bank of Chicago, as agent, filed as Exhibit 10.21 to the
Annual Report on Form 10-K for 1996 of Cooper Cameron
Corporation, and incorporated herein by reference.
10.30 Amendment No. 2 to the Amended and Restated Credit Agreement,
among Cooper Cameron Corporation and certain of its
subsidiaries and the banks named therein and First National
Bank of Chicago, as agent, dated as of July 21, 1999.
10.31 Individual Account Retirement Plan for Hourly-Paid Employees
at the Cooper Cameron Corporation Mount Vernon Plant, filed as
Exhibit 4.6 to the Registration Statement on Form S-8
(Registration No. 333-58005), incorporated herein by
reference.
21
<PAGE>
10.32 Individual Account Retirement Plan for Bargaining Unit
Employees at the Cooper Cameron Corporation Missouri City,
Texas Facility, filed as Exhibit 4.6 to the Registration
Statement on Form S-8 (Registration No. 333-57995),
incorporated herein by reference.
10.33 Individual Account Retirement Plan for Bargaining Unit
Employees at the Cooper Cameron Corporation Buffalo, New York
Plant, filed as Exhibit 4.6 to the Registration Statement on
Form S-8 (Registration No. 333-57991), incorporated herein by
reference.
10.34 Individual Account Retirement Plan for Cooper Cameron
Corporation Hourly Employees, UAW, at the Superior Plant,
filed as Exhibit 4.6 to the Registration Statement on Form S-8
(Registration No. 333-57997), incorporated herein by
reference.
10.35 Individual Account Retirement Plan for Bargaining Unit
Employees at the Cooper Cameron Corporation Grove City
Facility, filed as Exhibit 4.6 to the Registration Statement
on Form S-8 (Registration No. 333-58003), incorporated herein
by reference.
10.36 Cooper Cameron Corporation Savings-Investment Plan for Hourly
Employees, filed as Exhibit 4.7 to the Registration Statement
on Form S-8 (Registration No. 333-77641), incorporated herein
by reference.
13.1 Portions of the 1999 Annual Report to Stockholders are
included as an exhibit to this report and have been
specifically incorporated by reference elsewhere herein.
21.1 Subsidiaries of registrant.
23.1 Consent of Independent Auditors.
27.1 Financial Data Schedule.
(b) REPORTS ON FORM 8-K
The Company filed a Form 8-K, dated October 1, 1999, including, as an
exhibit, a press release dated October 1, 1999 issued by Rolls-Royce plc
announcing that Rolls-Royce has completed the purchase of the rotating
products interests of Cooper Energy Services, a part of Cooper Cameron
Corporation.
22
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THIS 24TH DAY OF
MARCH, 2000.
COOPER CAMERON CORPORATION
REGISTRANT
BY: /s/ JOSEPH D. CHAMBERLAIN
---------------------------------------
(JOSEPH D. CHAMBERLAIN)
Vice President and Corporate Controller
(Principal Accounting Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED ON THIS 24TH DAY OF MARCH, 2000, BELOW BY THE FOLLOWING
PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
--------- -----
/s/ Nathan M. Avery Director
- --------------------------------
(Nathan M. Avery)
/s/ C. Baker Cunningham Director
- --------------------------------
(C. Baker Cunningham)
/s/ Grant A. Dove Director
- --------------------------------
(Grant A. Dove)
/s/ Sheldon R. Erikson Chairman, President and Chief Executive
- -------------------------------- Officer (principal executive officer)
(Sheldon R. Erikson
/s/ Michael E. Patrick Director
- --------------------------------
(Michael E. Patrick)
/s/ David Ross III Director
- --------------------------------
(David Ross III)
/s/ Michael J. Sebastian Director
- --------------------------------
(Michael J. Sebastian)
/s/ Thomas R. Hix Senior Vice President of Finance and
- -------------------------------- Chief Financial Officer
(Thomas R. Hix) (principal financial officer)
23
<PAGE>
EXHIBIT INDEX
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ------------------------------------------------------- ----------
3.1 Amended and Restated Certificate of Incorporation of
Cooper Cameron Corporation, dated June 30, 1995, filed
as Exhibit 4.2 to the Registration Statement on Form
S-8 of Cooper Cameron Corporation (Commission File
No. 33-94948), and incorporated herein by reference.
3.2 Certificate of Amendment to the Restated Certificate
of Incorporation of Cooper Cameron Corporation, filed
as Exhibit 4.3 to the Registration Statement on Form
S-8 of Cooper Cameron Corporation (Commission File
No. 333-57995), and incorporated herein by reference.
3.3 First Amended and Restated Bylaws of Cooper Cameron
Corporation, as amended December 12, 1996, filed as
Exhibit 3.2 to the Annual Report on Form 10-K for
1996 of Cooper Cameron Corporation, and incorporated
herein by reference.
4.1 Form of Rights Agreement, dated as of May 1, 1995,
between Cooper Cameron Corporation and First Chicago
Trust Company of New York, as Rights Agent, filed as
Exhibit 4.1 to the Registration Statement on Form S-8
of Cooper Cameron Corporation (Commission File
No. 33-94948), and incorporated herein by reference.
4.2 First Amendment to Rights Agreement between Cooper
Cameron Corporation and First Chicago Trust Company
of New York, as Rights Agent, dated November 1, 1997,
filed as Exhibit 4.2 to the Annual Report on Form
10-K for 1997 of Cooper Cameron Corporation, and
incorporated herein by reference.
4.3 Registration Statement on Form S-3 filed with the
Securities and Exchange Commission on May 4, 1998
(Registration Statement No. 333-51705) incorporated
herein by reference.
10.1 Amended and Restated Cooper Cameron Corporation Long-
Term Incentive Plan, incorporated by reference to the
Cooper Cameron Corporation Proxy Statement for the
Annual Meeting of Stockholders held on May 8, 1997.
<PAGE>
10.2 First Amendment to the Amended and Restated Cooper
Cameron Corporation Long-Term Incentive Plan,
effective February 12, 1998.
10.3 Second Amendment to the Amended and Restated Cooper
Cameron Corporation Long-Term Incentive Plan,
effective May 13, 1999.
10.4 Cooper Cameron Corporation Second Amended and Restated
1995 Stock Option Plan for Non-Employee Directors
(Registration Statement on Form S-8 No. 333-79787),
incorporated herein by reference.
10.5 Cooper Cameron Corporation Retirement Savings Plan, as
Amended and Restated, effective April 1, 1996, filed as
Exhibit 10.10 to the Annual Report on Form 10-K for
1997 of Cooper Cameron Corporation, and incorporated
herein by reference.
10.6 Cooper Cameron Corporation Employee Stock Purchase Plan
(Registration Statement No. 33-94948), incorporated
herein by reference.
10.7 Cooper Cameron Corporation Supplemental Excess Defined
Benefit Plan, filed as Exhibit 10.4 to the Registration
Statement on Form S-4 of Cooper Cameron Corporation
(Commission File No. 33-90288), and incorporated herein
by reference.
10.8 First Amendment to Cooper Cameron Corporation
Supplemental Excess Defined Benefit Plan, effective as
of January 1, 1996, filed as Exhibit 10.7 to the
Annual Report on Form 10-K for 1996 of Cooper Cameron
Corporation, and incorporated herein by reference.
10.9 Cooper Cameron Corporation Supplemental Excess Defined
Contribution Plan, filed as Exhibit 10.5 to the
Registration Statement on Form S-4 of Cooper Cameron
Corporation (Commission File No. 33-90288), and
incorporated herein by reference.
10.10 First Amendment to Cooper Cameron Corporation
Supplemental Excess Defined Contribution Plan,
effective April 1, 1996, filed as Exhibit 10.9 to
the Annual Report on Form 10-K for 1996 of Cooper
Cameron Corporation, and incorporated herein by
reference.
<PAGE>
10.11 Cooper Cameron Corporation Compensation Deferral Plan
(formerly the Cooper Cameron Corporation Management
Incentive Compensation Deferral Plan), effective
January 1, 1996, filed as Exhibit 10.10 to the Annual
Report on Form 10-K for 1996 of Cooper Cameron
Corporation, and incorporated herein by reference.
10.12 First Amendment to the Cooper Cameron Corporation
Compensation Deferral Plan, effective July 1, 1998.
10.13 Second Amendment to the Cooper Cameron Corporation
Compensation Deferral Plan, effective January 1, 1999.
10.14 Third Amendment to the Cooper Cameron Corporation
Compensation Deferral Plan, effective January 1, 2000.
10.15 Cooper Cameron Corporation Directors Deferred
Compensation Plan, filed as Exhibit 10.7 to the
Registration Statement on Form S-4 of Cooper
Cameron Corporation (Commission File No. 33-90288),
and incorporated herein by reference.
10.16 Employment Agreement by and between Sheldon R. Erikson
and Cooper Cameron Corporation, effective as of
August 13, 1999.
10.17 Employment Agreement by and between Thomas R. Hix and
Cooper Cameron Corporation, effective as of
September 1, 1999.
10.18 Employment Agreement by and between Franklin Myers and
Cooper Cameron Corporation, effective as of
September 1, 1999.
10.19 Form of Change in Control Agreement, effective
November 11, 1999, by and between Scott Amann,
Joe Chamberlain, John Chapman, Jane Crowder,
William Givens, Daniel Keenan, William Lemmer,
Robert Rajeski, and Dalton Thomas.
10.20 1995 Management Incentive Compensation Plan of Cooper
Cameron Corporation, dated as of November 14, 1995,
as amended, filed as Exhibit 10.15 to the Annual
Report on Form 10-K for 1996 of Cooper Cameron
Corporation, and incorporated herein by reference.
10.21 1996 Management Incentive Compensation Plan of Cooper
Cameron Corporation, dated as of February 19, 1996,
filed as Exhibit 10.16 to the Annual Report on Form
10-K for 1996 of Cooper Cameron Corporation, and
incorporated herein by reference.
<PAGE>
10.22 1997 Management Incentive Compensation Plan of Cooper
Cameron Corporation, dated as of December 9, 1996,
filed as Exhibit 10.17 to the Annual Report on Form
10-K for 1996 of Cooper Cameron Corporation, and
incorporated herein by reference.
10.23 Cooper Cameron Corporation Management Incentive
Compensation Plan, as amended, incorporated herein by
reference to the Cooper Cameron Corporation Proxy
Statement for the Annual Meeting of Stockholders held
on May 8, 1997.
10.24 1998 Management Incentive Compensation Plan for Cooper
Cameron Corporation, dated as of January 1, 1998,
filed as Exhibit 10.25 to the Annual Report on Form
10-K for 1997 of Cooper Cameron Corporation, and
incorporated herein by reference.
10.25 1999 Management Incentive Compensation Plan for Cooper
Cameron Corporation, dated as of January 1, 1999, filed
as Exhibit 10.27 to the Annual Report on Form 10-K for
1998 of Cooper Cameron Corporation, and incorporated
herein by reference.
10.26 Change in Control Policy of Cooper Cameron Corporation,
approved February 19, 1996, filed as Exhibit 10.18 to
the Annual Report on Form 10-K for 1996 of Cooper
Cameron Corporation, and incorporated herein by
reference.
10.27 Executive Severance Program of Cooper Cameron
Corporation, approved February 19, 1996, filed as
Exhibit 10.19 to the Annual Report on Form 10-K for
1996 of Cooper Cameron Corporation, and incorporated
herein by reference.
10.28 Credit Agreement, dated as of June 30, 1995, among
Cooper Cameron Corporation and certain of its
subsidiaries and the banks named therein and First
National Bank of Chicago, as agent, filed as Exhibit
4.5 to the Registration Statement on Form S-8 of Cooper
Cameron Corporation (Commission File No. 33-94948), and
incorporated herein by reference.
10.29 Amended and Restated Credit Agreement dated as of
March 20, 1997, among Cooper Cameron Corporation and
certain of its subsidiaries and the banks named therein
and First National Bank of Chicago, as agent, filed as
Exhibit 10.21 to the Annual Report on Form 10-K for
1996 of Cooper Cameron Corporation, and incorporated
herein by reference.
<PAGE>
10.30 Amendment No. 2 to the Amended and Restated Credit
Agreement, among Cooper Cameron Corporation and certain
of its subsidiaries and the banks named therein and First
National Bank of Chicago, as agent, dated as of July 21,
1999.
10.31 Individual Account Retirement Plan for Hourly-Paid
Employees at the Cooper Cameron Corporation Mount Vernon
Plant, filed as Exhibit 4.6 to the Registration
Statement on Form S-8 (Registration No. 333-58005),
incorporated herein by reference.
10.32 Individual Account Retirement Plan for Bargaining Unit
Employees at the Cooper Cameron Corporation Missouri
City, Texas Facility, filed as Exhibit 4.6 to the
Registration Statement on Form S-8 (Registration
No. 333-57995), incorporated herein by reference.
10.33 Individual Account Retirement Plan for Bargaining Unit
Employees at the Cooper Cameron Corporation Buffalo,
New York Plant, filed as Exhibit 4.6 to the Registration
Statement on Form S-8 (Registration No. 333-57991),
incorporated herein by reference.
10.34 Individual Account Retirement Plan for Cooper Cameron
Corporation Hourly Employees, UAW, at the Superior
Plant, filed as Exhibit 4.6 to the Registration
Statement on Form S-8 (Registration No. 333-57997),
incorporated herein by reference.
10.35 Individual Account Retirement Plan for Bargaining Unit
Employees at the Cooper Cameron Corporation Grove City
Facility, filed as Exhibit 4.6 to the Registration
Statement on Form S-8 (Registration No. 333-58003),
incorporated herein by reference.
10.36 Cooper Cameron Corporation Savings-Investment Plan for
Hourly Employees, filed as Exhibit 4.7 to the Registration Statement
on Form S-8 (Registration No. 333-77641), incorporated herein by
reference.
13.1 Portions of the 1999 Annual Report to Stockholders are
included as an exhibit to this report and have been
specifically incorporated by reference elsewhere herein.
21.1 Subsidiaries of registrant.
23.1 Consent of Independent Auditors.
27.1 Financial Data Schedule.
<PAGE>
EXHIBIT 10.2
FIRST AMENDMENT TO
AMENDED AND RESTATED
COOPER CAMERON CORPORATION
LONG-TERM INCENTIVE PLAN
WHEREAS, COOPER CAMERON CORPORATION (the "Company") has heretofore adopted
the AMENDED AND RESTATED COOPER CAMERON CORPORATION LONG-TERM INCENTIVE PLAN
(the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of
February 12, 1998:
1. The number "11,000,000" shall be substituted for the number "8,000,000"
in the first and last sentences of Section 4.1 of the Plan.
2. The third sentence of Section 4.1 of the Plan shall be deleted and the
following shall be substituted therefor:
"Common Stock related to Awards that are forfeited or terminated, expire
unexercised, are settled in cash in lieu of Common Stock or in a manner
such that all or some of the shares covered by an Award are not issued to a
Participant (including where shares of Common Stock covered by an Award are
used to satisfy tax withholding obligations pursuant to Section 15 of the
Plan), or are exchanged for Awards that do not involve Common Stock, shall
immediately become available for Awards hereunder."
3. The third sentence of Section 6.4 of the Plan shall be deleted and the
following shall be substituted therefor:
"The Committee may provide in an Award Agreement respecting a stock option
that, if a Participant pays the option exercise price in shares of Common
Stock, upon the date of such payment a new option shall be granted and the
number of shares of Common Stock subject to such new option shall be equal
to the number of shares of Common Stock tendered in payment (plus the
number of any shares of Common Stock respecting the exercised option
retained to satisfy any tax withholding obligations); provided that such
new option shall not be exercisable in any event after the original term of
the exercised option."
4. As amended hereby, the Plan is specifically ratified and reaffirmed.
/s/ Franklin Myers
-----------------------------------------
Franklin Myers, Senior Vice President,
General Counsel & Secretary
Date: February 12, 1998
<PAGE>
EXHIBIT 10.3
SECOND AMENDMENT TO
AMENDED AND RESTATED
COOPER CAMERON CORPORATION
LONG-TERM INCENTIVE PLAN
WHEREAS, COOPER CAMERON CORPORATION (the "Company") has heretofore adopted
the AMENDED AND RESTATED COOPER CAMERON CORPORATION LONG-TERM INCENTIVE PLAN
(the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of May
13, 1999:
1. Section 14.3 shall be added to the Plan:
"In addition to any other rights or privileges held by a holder with
respect to an Award that is an option (including the provisions of
Section 14.2), upon a Change in Control of the Company, the holder
shall have the right to exchange such option for a new option ("New
Option") that shall be issued according to the following:
(1) the New Option shall be immediately exercisable;
(2) the New Option shall have a term equal to the remaining term of the
LTIP Option it replaces (and shall be exercisable through such term);
(3) the New Option will give the holder the right to acquire shares of the
publicly traded common equity of the Company or any successor or
direct or indirect parent of either ("Replacement Common Stock") (in
the event of two or more classes of common equity, the common equity
used shall be determined by the Compensation Committee of the Board of
Directors of the Company existing prior to a Change in Control);
(4) the exercise price used for the New Option ("New Exercise Price") for
acquiring a share of Replacement Common Stock shall be determined at
the time of the Change in Control by taking (i) the higher of (a) the
aggregate value (as of the date of the Change in Control) equal to the
merger or acquisition consideration paid or payable in the Change in
Control, on a per share basis, or (b) the highest
<PAGE>
price paid for a share of Cooper Cameron common stock over the New
York Stock Exchange (or other primary exchange) during the 12 months
prior to the Change in Control, and (ii) dividing such amount into the
per share exercise price of the LTIP Option; with the result
multiplied by the Replacement Common Stock closing price on its
principal stock exchange on the day of the Change in Control, or if
traded in the over-the-counter market and not on an exchange, the last
bid price in such market;
(5) the number of share of Replacement Common Stock subject to the New
Option shall be the number necessary, using the New Exercise Price, to
provide an aggregate value (as of the date of the Change in Control)
equal to the higher of (a) the merger or acquisition consideration
paid or payable in the Change in Control on a per share basis, or (b)
the highest price paid for a share of Cooper Cameron common stock over
the New York Stock Exchange (or other primary exchange) during the 12
months prior to the Change in Control;
(6) if there is no publicly traded common equity of the Company, or any
successor or any direct or indirect parent of either, then the New
Option shall be with respect to shares of the direct or indirect
parent of the Company, and if no such parent then the Company, and if
the Company no longer exists, then the successor to the Company.
2. Section 14.4 shall be added to the Plan:
"The Board may determine, in connection with an event described in
Sections 14.2 or 14.3, to provide with respect to Awards other
adjustments, rights or privileges, including adjustments, rights or
privileges that are alternatives to those provided in Sections 14.2
and 14.3, but unless such adjustments, rights or privileges are
cumulative to those in Sections 14.2 and 14.3, they will be applicable
only with the consent of the holder of an Award.
3. As amended hereby, the Plan is specifically ratified and reaffirmed.
/s/ Franklin Myers
------------------------------
Franklin Myers,
Senior Vice President
and Secretary
Date: May 13, 1999
<PAGE>
EXHIBIT 10.12
FIRST AMENDMENT TO THE
COOPER CAMERON CORPORATION
COMPENSATION DEFERRAL PLAN
WHEREAS, COOPER CAMERON CORPORATION (the "COMPANY") has heretofore adopted
the COOPER CAMERON CORPORATION COMPENSATION DEFERRAL PLAN (the "PLAN"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan shall be amended as follows; effective as of
July 1, 1998:
1. The term "Change in Control" in Section 1.1(g) of the Plan shall be
replaced with the term "Change of Control" in each place that it
appears.
2. The following shall be added to Section 3.2 of the Plan:
"With respect to a Participant receiving annual installment payments (other
than the final annual installment payment) pursuant to Section 4.1, the
Participant's Plan Account shall be reduced as of the last day of each
calendar year by interest equivalents on the amount of the installment
payment made during such calendar year multiplied by a fraction, the
numerator of which is the number of days between the date of such
installment payment during such calendar year and the end of such calendar
year and the denominator of which is 365. Notwithstanding the foregoing,
in the event a lump sum payment or final annual installment payment is made
within a calendar year, as of the date of such payment, Deferred
Compensation credited to a Participant's Plan Account shall be credited
with interest equivalents, as additional Deferred Compensation, in an
amount equal to the rate provided above. Such interest equivalents shall
be credited (i) on the amount of Deferred Compensation (including any
interest equivalents previously credited pursuant to this Section 3.2)
credited as of the last day of the calendar year preceding such date of
payment, multiplied by a fraction, the numerator of which is the number of
days between such last day and such date of payment and the denominator of
which is 365, (ii) on 50% of the Deferred Compensation credited pursuant to
Section 2.3(a) during the calendar year in which such date of payment
occurs, multiplied by a fraction, the numerator of which is the number of
days between the last day of the calendar year preceding such date of
payment and such date of payment and the denominator of which is 365, and
(iii) on the Deferred Compensation credited pursuant to Sections 2.3(b) and
2.3(c) during the calendar year in which such date of payment occurs,
multiplied by a fraction, the numerator of which is the number of days
between the date(s) such Deferred Compensation was credited during such
calendar year and such date of payment and the denominator of which is
365."
<PAGE>
3. Section 4.1 of the Plan shall be deleted and the following shall be
substituted therefor:
"4.1 PAYMENT OF DEFERRED COMPENSATION. Except as otherwise provided
in this Article, payment of the Deferred Compensation of a Participant for
all calendar years shall not be made until such Participant's termination
of employment with the Employer. As to the time of such payment, if a
Participant terminates employment prior to attaining age sixty, payment
shall be made or commence, as determined in the sole discretion of the
Committee, as of such termination, as of a specified age following such
termination, or as of a specified date following such termination, but in
no event later than age sixty, and if a Participant terminates employment
after attaining age sixty, payment shall be made or commence as of such
termination. The manner of such payment shall be in the form of a lump sum
or annual installments for a five-, ten-, or fifteen-year period, or a
combination thereof, as determined in the sole discretion of the Committee.
In making its determination as to time and manner of payment, the Committee
may consider the age, family status, health, financial status, or such
other factors as it deems relevant respecting the Participant or
Beneficiary. The Participant may, but shall not be required to, express
his preference to the Committee as to the time and manner of payment of his
Deferred Compensation, but the Committee shall be under no obligation to
follow such preference. All deferred Compensation shall be paid in cash.
In the event the Participant or Beneficiary is to receive Deferred
Compensation in installments, the amount of each such installment shall be
equal to a fraction of the amount of the Deferred Compensation remaining to
be paid with respect to such Deferred Compensation, the numerator of which
is one and the denominator of which is the number of installments of such
Deferred Compensation remaining to be paid. The installments of the
Deferred Compensation shall be credited with interest equivalents as
provided in Section 3.2."
4. Section 9.4 of the Plan shall be deleted and the following shall be
substituted therefor:
"9.4 FUNDING. The Plan is intended to constitute an unfunded plan of
deferred compensation for a select group of management or highly
compensated employees of the Employer. The obligation of an Employer
under the Plan to provide a Participant or Beneficiary with a benefit
constitutes the unsecured promise of such Employer to make payments as
provided herein, and no person shall have an interest in, or a lien or
prior claim upon, any property of the Employer. The Employer shall
establish an irrevocable grantor trust (`Trust') with an independent
commercial trustee (`Trustee') to provide for the payments of the
Employer's obligations hereunder. Prior to a Change of Control, the
funding of the Trust shall be in the sole discretion of the Employer. Upon
a Change of Control, and prior to or as of the effective date thereof, the
Employer shall fund the Trust in an amount sufficient to cover all benefit
obligations under the Plan as of such date. Plan benefits may be paid out
of the Employer's general assets or out of the Trust. To the
<PAGE>
extent the Employer transfers assets to the Trust, the Trustee shall pay
Plan benefits to Participants and Beneficiaries out of the Trust in
accordance with the terms of the Trust. The Employer shall remain the
owner of all assets in the Trust, and the assets shall be subject to the
claims of an Employer's creditors if such Employer ever becomes insolvent.
For purposes hereof, an Employer shall be considered `insolvent' if (i)
such Employer is unable to pay its debts as they become due or (ii) such
Employer is subject to a pending proceeding as a debtor under the United
States Bankruptcy Code (or any successor federal statute). The Employer
shall have the duty to inform the Trustee in writing if an Employer becomes
insolvent. Such notice given under the preceding sentence by any party
shall satisfy all of the party's duty to give notice. When so informed,
the Trustee shall suspend payments to the Participants and Beneficiaries
and hold the assets for the benefit of such Employer's general creditors.
If the Trustee receives a written allegation that an Employer is insolvent,
the Trustee shall suspend payments to the Participants and Beneficiaries
and hold the Trust for the benefit of such Employer's general creditors and
shall determine within the period specified in the Trust whether such
Employer is insolvent. If the Trustee determines that such Employer is not
insolvent, the Trustee shall resume payments to the Participants and
Beneficiaries. No Participant or Beneficiary shall have any preferred
claim to, or any beneficial ownership interest in, any assets of the
Trust."
5. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED at Houston, Texas this ____ day of _______________, 19___.
COOPER CAMERON CORPORATION
BY:
------------------------------
NAME:
----------------------------
TITLE:
----------------------------
(Signed Document on File)
<PAGE>
EXHIBIT 10.13
SECOND AMENDMENT TO THE
COOPER CAMERON CORPORATION
COMPENSATION DEFERRAL PLAN
WHEREAS, COOPER CAMERON CORPORATION (the "COMPANY") has heretofore adopted
the COOPER CAMERON CORPORATION COMPENSATION DEFERRAL PLAN (the "PLAN"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan shall be amended as follows; effective as of
January 1, 1999:
1. Clause (ii) of the second sentence of Section 3.2 of the Plan shall be
deleted and the following shall be substituted therefor:
"(ii) on 50% of the Deferred Compensation credited during such calendar
year pursuant to Section 2.3(a) multiplied by a fraction, the numerator of
which is the number of days between the date the participant first elects
to make a deferral pursuant to Section 2.3(a) in such calendar year and the
end of such calendar year and the denominator of which is 365; and"
2. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED at Houston, Texas this ___ day of __________________, 2000.
COOPER CAMERON CORPORATION
By:
-----------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE>
EXHIBIT 10.14
THIRD AMENDMENT TO THE
COOPER CAMERON CORPORATION
COMPENSATION DEFERRAL PLAN
WHEREAS, COOPER CAMERON CORPORATION (the "COMPANY") has heretofore adopted
the COOPER CAMERON CORPORATION COMPENSATION DEFERRAL PLAN (the "PLAN"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan shall be amended as follows; effective as of
January 1, 2000:
1. The term "Board" shall be deleted from Section 2.2 of the Plan and the
phrase "Chief Executive Officer of the Company" shall be substituted therefor.
2. Section 2.4 of the Plan shall be deleted and the following shall be
substituted therefor:
"2.4 TIME OF MAKING ELECTIONS. Any election which may be made by a
Participant under this Article II must be made (i) as to Base Salary, not
later than December 31 of the calendar year preceding the calendar year
during which the Base Salary to which such election relates is earned, and
(ii) as to Incentive Awards, not later than June 30 of the calendar year
during which the Incentive Award to which such election relates is earned.
Notwithstanding the foregoing, for any calendar year during which an
employee first becomes eligible to participate in the Plan, (i) elections
as to the Participant's Base Salary must be made within 30 days of such
employee first becoming so eligible and shall apply to the first payroll
period following such election, and (ii) elections as to the Participant's
Incentive Awards must be made within 30 days of such employee first
becoming so eligible or by June 30 of such calendar year, if later, and
shall apply to the entire Incentive Award for such calendar year; provided,
the amount of such Incentive Award is not reasonably ascertainable at the
time of such initial eligibility following June 1. All elections shall be
made in the manner and form prescribed by the Company."
3. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED at Houston, Texas this ___ day of __________________, 19____.
COOPER CAMERON CORPORATION
By:
-----------------------------------
Name:
------------------------------
Title:
------------------------------
<PAGE>
EXHIBIT 10.16
August 13, 1999
Mr. Sheldon R. Erikson
Chairman, President and
Chief Executive Officer
Cooper Cameron Corporation
515 Post Oak Boulevard
Houston, Texas 77027
Dear Mr. Erikson:
Cooper Cameron Corporation (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential for the protection
and enhancement of the best interests of the Company and its shareholders. In
view of your experience and performance in the business of the Company and its
subsidiaries, the Company desires to secure your services for an extended
period. In addition, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control may arise and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders.
Accordingly, the board of directors of the Company (the "Board") has
determined that appropriate steps should be taken to assure the Company of the
continuation of your services and to reinforce and encourage the attention and
dedication of members of the Company's management to their assigned duties
without distraction in circumstances arising from the possibility of a change in
control of the Company. In particular the Board believes it important, should
the Company or its shareholders receive a proposal for or notice of transfer of
control of the Company, that you be able to assess and advise the Board whether
such transfer would be or is in the best interests of the Company and its
shareholders, and to take such other action regarding such proposal or transfer
as the Board might determine to be appropriate without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this letter
agreement (the "Agreement"), which has been approved by the Board and which
supersedes the previous letter agreement between you and the Company dated
November 30, 1995 in its entirety, sets forth the terms of your continued
employment by the Company and the compensation and severance benefits which the
Company agrees will be provided to you in the event of a change in control and
if your employment with the Company should be terminated under the circumstances
described below.
Reference is made to Annex I hereto for definitions of certain terms used
in this Agreement, and such definitions are incorporated herein by such
reference with the same effect as if set forth herein. Certain capitalized terms
used in this Agreement in connection with the description of various Plans are
defined in the respective Plans, but if any conflicts with a definition herein
contained, the latter shall prevail.
<PAGE>
1. Term of Employment. The Company hereby agrees to continue
your employment and you hereby agree to serve the Company for an employment
period commencing on the date hereof and initially ending the third
anniversary from the date hereof; provided, however, that the employment
period shall automatically be extended for one additional month at the end
of each month of this Agreement (with the date to which the employment
period has most recently been so extended being hereinafter referred to as
the "Expiration Date" and the period commencing the date hereof and ending
on the Expiration Date being hereinafter referred to as the "Employment
Period"), subject to prior termination of the Employment Period pursuant to
Section 4 of this Agreement.
2. Duties.
(a) During the Employment Period, you shall serve the Company as its
Chairman, President and Chief Executive Officer and perform your duties and
responsibilities diligently, faithfully and loyally and devote such time to the
Company's affairs as may be necessary to the end of achieving the proper,
efficient and successful operation of the Company's business. In such capacities
you shall (i) generally have the duties of such offices as specified in the
Bylaws, (ii) report directly to the Board and (iii) have general executive
supervision and management of the business and affairs of the Company, subject
to the direction of the Board or any Committee thereof. The foregoing shall not,
however, be deemed to restrict you from attending to matters or engaging in
activities not directly related to the business of the Company, if reasonable in
scope and time commitment and not otherwise in violation of this Agreement.
(b) If during the Employment Period, (i) a tender offer or exchange
offer is made for 20% or more of the Company's outstanding Voting Securities or
(ii) a transaction is proposed which, if consummated, would result in a Change
of Control, you agree that you will not leave your employment with the Company
(other than as a result of Disability or upon Retirement) and will also render
the services contemplated in the introductory paragraphs of this Agreement until
such time as such tender offer, exchange offer or proposed transaction is
abandoned or terminated or a Change of Control has occurred.
3. Compensation.
(a) Base Salary. As compensation for your services, the Company
agrees to pay you basic compensation at the rate of $525,000 per annum through
December 31, 1999 ("Base Salary"), payable on a current basis in equal
installments not less frequently than monthly, subject only to such payroll and
withholding deductions as may be required by law or the terms of Plans in which
you are a participant. For periods subsequent to December 31, 1999, your Base
Salary shall be established annually by the Compensation Committee of the Board
and paid on the same basis as for the prior year, but no such adjustment shall
result in a Base Salary for any year of less than the highest annual rate so
authorized by the Committee to be paid to you during any previous calendar
year(s) of the Company ended during the Employment Period, except upon your
prior written consent. The Company's obligations to you hereunder shall remain
unaffected by any election (such as that made for the twelve month period ending
December 31, 1999) by you to receive your Base Salary in other than cash, and
for all purposes of this Agreement, such election shall apply only to the period
for which it is made by written agreement between the Company and you.
<PAGE>
(b) Plans. In addition to your Base Salary, you will participate
in the Bonus Plan, Defined Benefit Plan and LTIP Plan, and be eligible to
participate in the Defined Contribution Plan, Purchase Plan and Other Plans,
including the Perquisites, for each year during the Employment Period.
(c) Other. The Company shall reimburse you for all expenses paid or
incurred by you in the performance of your duties under this Agreement in
accordance with the Company's normal expense reimbursement policies applicable
to senior executives.
4. Termination. Upon compliance by the initiating party with any
applicable procedures set forth in Section 5 hereof, your employment with
the Company:
(a) shall terminate automatically upon your death or Retirement;
(b) may be terminated prior to the Expiration Date at the discretion
of the Board upon your Disability;
(c) may be terminated prior to the Expiration Date at the discretion
of the Board for Cause;
(d) may be terminated prior to the Expiration Date at your
discretion, other than for Good Reason;
(e) may be terminated prior to the Expiration Date at the discretion
of the Board prior to a Change of Control without Cause;
(f) may be terminated prior to the Expiration Date at the discretion
of the Board at or after a Change of Control without Cause;
(g) may be terminated prior to the Expiration Date at your
discretion for Good Reason prior to a Change of Control; or
(h) may be terminated prior to the Expiration Date at your
discretion for Good Reason at or after a Change of Control.
5. Procedures for Termination. If it is intended that your
employment be terminated:
(a) pursuant to Section 4(b), the Company shall transmit to you
written notice setting forth the particulars upon which the Company bases
its determination that a Disability exists, together with a Board
resolution adopted by at least two-thirds of the members of the Board
requiring that you resume your duties within 30 days following the date
thereof, failing which a "final discharge" shall then occur;
(b) pursuant to Section 4(c), the Company shall transmit to you
written notice setting forth the Cause for which you are proposed to be
dismissed in sufficient detail to permit a reasonable assessment of the
bona fides thereof, and setting a meeting of the Board not less than 30
days following the date of such notice at which the Board shall consider
your termination and at which you and your counsel shall have the
opportunity to be heard, following which the Board shall either by
resolution withdraw the notice, or if it so finds in its good faith
opinion, issue its report within ten days thereafter that Cause
<PAGE>
exists and specifying the particulars of its findings, in which latter
event a "final discharge" shall occur. After receipt of a notice of
intended termination for Cause, you shall not have any authority to incur
any obligation of any kind whatsoever on behalf of the Company pending
withdrawal of such notice or "final discharge;"
(c) pursuant to Section 4(d), you shall transmit to the Company
written notice specifying that your resignation is other than for Good
Reason;
(d) pursuant to Section 4(e) or 4(f) the Company shall transmit to
you written notice specifying that your termination is without Cause;
(e) pursuant to Section 4(g) or 4(h), you shall transmit to the
Company written notice setting forth the particulars upon which you base
your determination that Good Reason exists and, only if the stated basis
therefor is capable of being cured, requesting a cure within 10 days,
failing which a "final separation" shall then occur, and if such stated
basis is not capable of cure by the Company, "final separation" shall occur
co-extensive with delivery of the notice.
For purposes of this Agreement, a "Termination Date" shall be deemed to
have occurred upon (i) the happening of any event contemplated by Section 4(a)
[death or Retirement], (ii) the date of "final discharge" in the case of
termination initiated under Sections 5(a) [Disability] or 5(b)[Cause], (iii) the
date of "final separation" in the case of a termination initiated under Section
5(e) [Good Reason], or (iv) the 30th day following the date of any notice
contemplated by Sections 5(c) [resignation without Good Reason] or 5(d)
[discharge without Cause]; provided, that any proceeding initiated pursuant to
Section 11 hereof within 15 days after the giving of any notice under this
Section 5 shall (anything else in this Agreement to the contrary
notwithstanding) automatically toll the effectiveness of any Termination Date
until final resolution of such proceeding. Each notice which complies with the
requirements of this Section 5 is hereinafter referred to as a "Termination
Notice".
6. Effect of Termination. If your employment is terminated:
(a) pursuant to Sections 4(a) [death or Retirement], 4(b)
[Disability], 4(c) [Cause], or 4(d) [resignation without Good Reason], then
you shall be entitled to receive (i) payment when due of your Base Salary
through the end of the first monthly pay period ended after the Termination
Date and (ii) all benefits under the Plans in which you are at the time a
participant, to the extent the same are vested under the terms thereof at
the Termination Date, and (except as otherwise provided herein) all other
obligations of the Company under this Agreement shall thereupon cease; or
(b) pursuant to Sections 4(e) [discharge without Cause prior to
Change of Control], 4(f) [discharge without Cause after a Change of
Control], 4(g) [resignation for Good Reason prior to Change of Control], or
4(h) [resignation for Good Reason after a Change of Control], then you
shall become entitled to all benefits conferred upon you by the Severance
Package, and (except as otherwise provided herein) all other obligations of
the Company under this Agreement shall thereupon cease.
You shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment, nor shall the amount of any
payment provided for in this Agreement be reduced by any compensation earned by
you as the result of employment by another employer after any Effective Date or
Termination Date.
<PAGE>
7. LTIP Benefit Acceleration at Effective Date. Immediately upon
any Effective Date, all contingent compensation rights issued to you under
the LTIP Plan (including an option granted under the options in lieu of pay
program) which are then outstanding shall become vested, exercisable,
distributable and unrestricted (any contrary provision in the LTIP Plan
notwithstanding) for a period of 183 days following the Effective Date (the
"Exercise Period") whether or not during such period you continue to be
employed by the Company. During the Exercise Period, you shall have the
right immediately upon any written request by you to the Company, if
approved in writing by any person (acting solely in his individual capacity
and when so acting, such concurring person shall do so without any contrary
"fiduciary" or other duty to the Company) who was at the Effective Date an
officer or director of the Company, to (i) exercise all or any portion of
all your options covered (including, at your sole election, any associated
Tandem SAR) by the LTIP Plan and to have the underlying Shares issued to
you, (ii) have issued to you on a non-forfeitable basis any or all Shares
covered by Restricted Stock Awards held by you under the LTIP Plan, (iii)
have issued to you any or all Performance Shares and/or Performance Units
held by you in the LTIP Plan, (iv) exercise all or any portion of any LTIP
Plan Freestanding SAR held by you, and (v) obtain the full benefit of any
other contingent compensation rights to which you may be entitled under the
LTIP Plan, in each case as though all applicable Performance Targets had
been met for all Performance Periods (including those extending beyond the
Effective Date) and any and all other LTIP Plan contingencies had been
satisfied in full at the Effective Date and the maximum possible benefit
thereunder had been earned in full at the Effective Date. To the extent you
have not exercised or requested performance of such benefits following the
Effective Date and prior to expiration of the Exercise Period, all terms
applicable to any such benefit prior to the Effective Date shall again
become fully applicable as though an Effective Date had never occurred.
8. Excise Tax. To the extent that the acceleration of vesting or
any payment, distribution or issuance made to you pursuant to this
Agreement or otherwise is subject to federal income, excise, or other tax
at a rate above the rate ordinarily applicable to like payments paid in the
ordinary course of business ("Penalty Tax"), whether as a result of the
provisions of Section 280G(b)(1) and 4999(a) of the Internal Revenue Code
of 1986, as amended, any similar or analogous provisions of any statute
adopted subsequent to the date hereof, or otherwise, then the Company shall
pay you an additional amount of cash (the "Additional Amount") such that
the net amount received by you, after paying any applicable Penalty Tax and
any federal or state taxes on such Additional Amount, shall be equal to the
amount that you would have received if such Penalty Tax were not
applicable.
9. Deferral of Payments; Early Payments. At any time prior to a
Termination Date, you may irrevocably direct the Company that any amounts
which are or should become payable to you under the Severance Package or
pursuant to Section 7 hereof shall be paid to you in three equal
installments, payable on or within ten days following the Termination Date,
and on the first and second anniversaries of the initial installment
payment. In addition, if any payment to you in respect of a stock-based
benefit which is precipitated by the occurrence of an Effective Date or a
Termination Date and which would, in and of itself, give rise to a short-
swing profit under Section 16(b) of the Exchange Act, then both the payment
and the entitlement to payment thereof, shall automatically be deferred
until the earliest date (not later than 183 days following a Termination
Date) at which the payment of such benefit would not, in and of itself,
result
<PAGE>
in a short-swing profit. The Company and you further agree that when it has
become apparent in our collective best judgment (as expressed by the
Compensation Committee of the Board, in the case of the Company) that a
Change of Control is likely to occur and further, that a likely consequence
thereof will be the occurrence of a Termination Date, the Company and you
will use reasonable good faith efforts to undertake and conclude
negotiations intended to result in the payment to you of a portion of the
Severance Package earlier than would otherwise be the case hereunder,
thereby increasing the benefit conferred upon you and the tax efficiency of
such payments to the Company, with any consequent tax savings to be
allocated between you and the Company in such reasonable proportions as we
shall agree; unless so agreed to by both parties in writing, no such
negotiation or agreement shall affect the Company's obligations to you
under any other provision of this Agreement.
10. Conditional Share Purchase Obligation.
(a) If a Change of Control occurs as a consequence of a tender offer
or exchange offer (the "Tender Offer"), the Company shall, if requested by you,
purchase from you (whether a Termination Date has occurred following the Change
of Control) for cash on any business day selected by you upon not less than ten
days' notice to the Company, which day shall not be less than ten days following
consummation of the Tender Offer nor more than three years after the Effective
Date, up to that number of Shares which shall be equal to the product of (x) the
number of Shares acquired by you upon exercise or distribution of any benefit
under the Bonus Plan or LTIP Plan (including an option granted under the options
in lieu of pay program) prior to consummation of the Tender Offer, multiplied by
(y) the decimal equivalent of (I) the number of Shares accepted for purchase or
exchange in the Tender Offer, divided by (II) the number of Shares timely and
validly tendered pursuant to the Tender Offer. In the event the above obligation
to purchase Shares occurs by reason of a cash tender offer or a combination cash
tender offer and exchange offer, the cash price per share to be paid to you
hereunder shall be equal to the highest price paid in cash pursuant to the
Tender Offer. In the event such obligation occurs by reason of an exchange
offer, the cash price per share to be paid to you hereunder shall be equal to
the closing price, if traded on a stock exchange, or the average bid and asked
prices, if traded in the over-the-counter market, of the security of the person
so exchanged for the Shares (the "Exchange Security") on the first day on which
the Exchange Security could have been sold by you on such exchange or in the
over-the-counter market, as the case may be, in a regular broker's transaction
had your Shares been tendered and accepted, multiplied by the number of Exchange
Securities (or fraction thereof) issued in the Tender Offer for each Company
Share; and
(b) if a Change of Control occurs pursuant to a Tender Offer and
(i) a merger, consolidation, reorganization, sale, spin-off, or purchase of
assets under which all remaining outstanding Shares will be converted into or
become exchangeable for cash, or for securities ("Merger Security") issued or to
be issued by the Person who made the Tender offer (or a subsidiary or affiliate
of such Person), is thereafter proposed to the Company or its shareholders, and
(ii) such merger, consolidation, reorganization or purchase of assets occurs
less than three years after the Effective Date, and (iii) the amounts of cash
into which each Share would be converted if the transaction is effected wholly
for cash, or the Merger Security Value (as defined below) if such transaction is
effected wholly for Merger Securities, or the sum of the cash and the Merger
Security Value if the Transaction is effected partly for cash and partly for
Merger Securities, as the case may be, is less than 95% of the per share price
that would have been paid by the Company for such portion of your Shares had you
exercised your option to require the Company to purchase such Shares under
Section 10(a) above, the Company shall pay you
<PAGE>
(whether or not a Termination Date has occurred following a Change of
Control), an amount in cash equal to the difference between the aggregate price
you would have received from the number of Shares the Company would have been
required to purchase from you had you exercised such option under Section 10(a)
and the amount of cash and/or the Merger Security Value received for the same
number of Shares in such merger, consolidation, reorganization or purchase of
assets. Such cash payment shall be made to you on a business day selected by you
upon no less than ten calendar days' notice to the Company or its Successor (as
hereinafter defined). For purposes of this Section 10(b), "Merger Security
Value" shall mean the closing price, if traded on a stock exchange, or the
average bid and asked prices if traded in the over-the-counter market, of the
Merger Security on the first day on which the Merger Security could have been
sold by you on such exchange or in the over-the-counter market, as the case may
be, in a regular broker's transaction, multiplied by the number of Merger
Securities (or fraction thereof) for which each Share was exchangeable or into
which each Share was convertible. If no public market develops for the Merger
Security within 30 days from the date of its issue, however, "Merger Security
Value" shall mean the fair market value of such Merger Security (on a per unit
basis) in the written opinion of a nationally recognized investment banking firm
acceptable to you) on the effective date of the merger, consolidation,
reorganization or purchase of assets, as the case may be, multiplied by the
number of Merger Securities (or fraction thereof) for which each Share was
exchangeable or into which each Share was convertible.
10A. Certain Rights with Respect to Options.
(a) In addition to any other rights or privileges held by a holder
with respect to an option (including an option granted under the options in lieu
of pay program) covered by the LTIP Plan ("LTIP Option") (including the
provisions of Section 7 and Section 10), upon a Change in Control of the
Company, the holder shall have the right to exchange such option for a new
option ("New Option"), that shall be issued according to the following:
(1) the New Option shall be immediately exercisable;
(2) the New Option shall have a term equal to the remaining
term of the LTIP Option it replaces (and shall be exercisable through
such term);
(3) the New Option will give the holder the right to acquire
shares of the publicly traded common equity of the Company or any
successor or direct or indirect parent of either ("Replacement Common
Stock") (in the event of two or more classes of common equity, the
common equity used shall be determined by the Compensation Committee
of the Board of Directors of the Company existing prior to a Change in
Control);
(4) the exercise price used for the New Option ("New Exercise
Price") for acquiring a share of Replacement Common Stock shall be
determined at the time of the Change in Control by taking (i) the
higher of (a) the aggregate value (as of the date of the Change in
Control) equal to the merger or acquisition consideration paid or
payable in the Change in Control, on a per share basis, or (b) the
highest price paid for a share of Cooper Cameron common stock over the
New York Stock Exchange (or other primary exchange) during the 12
months prior to the Change in Control, and (ii) dividing such amount
into the per share exercise price of the LTIP Option; with the result
multiplied by the Replacement Common
<PAGE>
Stock closing price on its principal stock exchange on the day of the
Change in Control, or if traded in the over-the-counter market and not
on an exchange, the last bid price in such market;
(5) the number of shares of Replacement Common Stock subject
to the New Option shall be the number necessary, using the New
Exercise Price, to provide an aggregate value (as of the date of the
Change in Control) equal to the higher of (a) the merger or
acquisition consideration paid or payable in the Change in Control on
a per share basis, or (b) the highest price paid for a share of Cooper
Cameron common stock over the New York Stock Exchange (or other
primary exchange) during the 12 months prior to the Change in Control;
(6) if there is no publicly traded common equity of the
Company, or any successor or any direct or indirect parent of either,
then the New Option shall be with respect to shares of the direct or
indirect parent of the Company, and if no such parent then the
Company, and if the Company no longer exists, then the successor to
the Company;
(b) In addition to any other rights or privileges held by a holder
with respect to an option covered by the LTIP Plan (including the provisions of
Section 7 and Section 10), if a Change in Control occurs, each holder of an
option shall have the right, but not the obligation, to tender, within 30 days
of such a Change in Control, any option to the Company (or any successor to the
Company) and receive in exchange therefor a lump sum cash amount equal to the
Black-Scholes value of the option, without discount for risk of forfeiture and
nontransferability determined by using the highest Black-Scholes valuation
during the one-year period prior to the Change in Control. Any Black-Scholes
valuation shall be performed on a basis consistent with the methodology set
forth on Exhibit A to this Agreement.
11. Dispute Resolution. It is irrevocably agreed that if any
dispute arises between us under this Agreement, or as to any interpretive
matter under or alleged breach of this Agreement, the exclusive remedy of
each of us shall be to commence binding arbitration proceedings under the
rules of the American Arbitration Association (the "Rules"), with any such
arbitration proceeding to be conducted in Houston, Texas, applying the
substantive law of the State of Texas ("Arbitration"). If Arbitration is
commenced prior to an Effective Date, each of us will deposit with the
arbitrator(s), 50% of the arbitrator's preliminary estimate of the costs of
arbitration (excluding counsel fees and expenses) as security for costs; if
Arbitration is commenced after an Effective Date, the Company will be
solely responsible for all costs thereof and shall deposit with the
arbitrator(s) 100% of the arbitrator(s) preliminary estimate thereof.
Notwithstanding any contrary provision of the Rules or Texas law, the
Company shall have the burden of proof with respect to any of the following
which are at issue in Arbitration: (i) that Cause or Disability existed at
the time any notice was given to you under Section 5 based upon either them
and/or the sufficiency of such notice; and (ii) that Good Reason did not
exist at the time notice was given to the Company under Section 5 based
upon Good Reason (but only if such notice was dated on or after an
Effective Date) and/or the sufficiency of such notice; and (iii) that a
Change of Control has not occurred. Any final ruling of the arbitrator(s)
in an Arbitration shall be final and binding for all purposes, and judgment
on any Arbitration award may be entered and enforced in any court having
jurisdiction.
<PAGE>
The Company and you irrevocably agree that in the event the arbitrator(s)
shall determine (after hearing) that any matter presented in Arbitration is one
which under Texas law is not susceptible to arbitration, in such event (and only
in such event), (i) exclusive jurisdiction over the non-arbitrable issue shall
be in the lowest Texas state court of general jurisdiction sitting in Harris
County, Texas, (ii) we are each at the time present in Texas for the purpose of
conferring personal jurisdiction; (iii) any such action may be brought in such
courts, and any objection that the Company or you may now or hereafter have to
the venue of such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court is waived, and we each agree not
to plead or claim the same, (iv) service of process in any such proceeding or
action may be effected by mailing a copy thereof by registered or certified
mail, return receipt requested (or any substantially similar form of mail),
postage prepaid, to such party at the address provided in Section 14 hereof, (v)
no punitive or consequential damages shall be awarded in any such action or
proceeding and we each agree not to plead or claim the same; and (vi) prior to
any trial on the merits, we will submit any such non-arbitrable issue to court
supervised, non-binding mediation.
If proceedings are commenced prior to an Effective Date, all actual costs
of Arbitration or court proceedings involving any non-arbitrable issue
(excluding, in each case, counsel fees and expenses), shall be apportioned by
the arbitrator(s) or the court in such manner as shall be deemed equitable in
light of any final Arbitration award or judgment; if commenced on or after an
Effective Date, all such costs shall be borne exclusively by the Company.
Anything else in this Section to the contrary notwithstanding, nothing in
this Agreement shall impair your ability to seek specific performance of your
right to be paid under, and to receive all other benefits conferred by, Section
3 of this Agreement during the pendency of any dispute or proceeding concerning
Sections 5, 6, 7 and/or 9 hereof.
12. Successors; Binding Agreement.
(a) Upon your written request, the Company will seek to have any
Successor (as defined below), by agreement in form and substance satisfactory to
you, expressly assume 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 there
has been a Change of Control prior to, or a Change of Control will result from,
any such succession, then failure of the Company to obtain at your request such
agreement prior to or upon the effectiveness of any such succession (other than
by merger or consolidation) shall constitute Good Reason for termination by you
of your employment and, upon delivery of a Notice of Termination by you to the
Company, you shall be entitled to the benefits provided in Section 6(c) hereof.
"Successor" shall mean any Person that succeeds to, or has the ability to
control, the Company's business as a whole, directly by merger, consolidation or
spin-off or indirectly by purchase of the Company's Voting Securities or
acquisition of all or substantially all of the assets of the Company.
(b) This Agreement shall inure to the benefit of and be enforceable
by your personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
13. Fees and Expenses. The Company shall pay all legal fees and
reasonable expenses incurred by you (including costs of arbitration) as a
result of (a) your termination following a Change of Control (including all
such fees and expenses, if any, incurred in contesting or disputing any
such termination) or (b) your seeking to obtain, assert or enforce any
right or benefit conferred upon you by this Agreement.
<PAGE>
14. Notices. Any and all notices required or permitted to be given
hereunder shall be in writing and shall be deemed to have been given when
delivered in person to the persons specified below or deposited in the
United States mail, certified or registered mail, postage prepaid and
addressed as follows:
If to the Company: Cooper Cameron Corporation
515 Post Oak Boulevard
Houston, Texas 77027
Attention: Chairman, Compensation
Committee of the Board of Directors
If to you: Sheldon R. Erikson
4 Longbow
Houston, Texas 77024
Either party may change, by the giving of notice in accordance with this
Section 14, the address to which notices are thereafter to be sent.
15. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
16. Survival. All obligations undertaken and benefits conferred
pursuant to this Agreement, except those set forth in Sections 1 and 2,
shall survive the Employment Period and continue thereafter until performed
in full.
17. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is
agreed to in writing signed by you and the Chairman of the Compensation
Committee of the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in
this Agreement. The validity, interpretation, construction and performance
of this Agreement shall be governed by the internal laws of the State of
Texas.
<PAGE>
If this letter correctly sets forth our understanding with respect to the
subject matter hereof, please sign and return one copy of this letter to the
Company.
Sincerely,
COOPER CAMERON CORPORATION
BY:
-------------------------------
Grant A. Dove
Chairman of the Compensation Committee
of the Board
Agreed to as of the ___
day of August, 1999:
- ------------------------------
Sheldon R. Erikson
<PAGE>
ANNEX I TO AGREEMENT DATED AUGUST 13, 1999
BETWEEN
COOPER CAMERON CORPORATION
AND
SHELDON R. ERIKSON
Definition of
Certain Terms
"BONUS PLAN" means for each year, the Company's Management Incentive
Compensation Plan or any other Plan adopted by the Board which provides for the
payment of additional compensation on an annual basis to senior executive
officers contingent upon the Company's results of operations for that specific
year, in either case as such Plan shall be amended or modified to, but not on or
after, any Effective Date.
"BYLAWS" means the bylaws of the Company as in effect at the date hereof
and as the same shall be amended or otherwise modified to, but not on or after,
any Effective Date.
"CAUSE" means (i) your conviction by a court of competent jurisdiction,
from which conviction no further appeal can be taken, of a felony-grade crime
involving moral turpitude, or (ii) your willful failure to perform substantially
your duties with the Company (other than a failure due to physical or mental
illness) which is materially and demonstrably injurious to the Company, or (iii)
only prior to an Effective Date, the engaging by you in any "business" engaged
in activities in direct competition with the Company, whether as an employee,
officer or director or through the beneficial ownership by you of 10% or more of
the Voting Securities of such "business." No act or failure to act on your part
shall be considered "willful" unless done, or omitted to be done, by you in bad
faith and without reasonable belief that your action or omission was in, or not
opposed to, the best interests of the Company.
"CHANGE OF CONTROL" means the earliest date at which:
(i) any Person is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
outstanding Voting Securities, other than through the purchase of Voting
Securities directly from the Company through a private placement; or
(ii) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's shareholders,
was approved by a vote of at least two-thirds of the directors comprising the
Incumbent Board shall from and after such election be deemed to be a member of
the Incumbent Board; or
(iii) the Company is merged or consolidated with another corporation or
entity and as a result of such merger or consolidation less than 80% of the
outstanding Voting Securities of the surviving or resulting corporation or
entity shall then be owned by the former stockholders of the Company; or
<PAGE>
(iv) a tender offer or exchange offer is made and consummated by a
Person other than the Company for the ownership of 20% or more of the Voting
Securities of the Company then outstanding; or
(v) all or substantially all of the assets of the Company are sold or
transferred to a Person as to which (A) the Incumbent Board does not have
authority (whether by law or contract) to directly control the use or further
disposition of such assets and (B) the financial results of the Company and such
Person are not consolidated for financial reporting purposes.
Anything else in this definition to the contrary notwithstanding, no
Change of Control shall be deemed to have occurred by virtue of any transaction
which results in you, or a group of Persons which includes you, acquiring 20% or
more of either the combined voting power of the Company's outstanding Voting
Securities or the Voting Securities of any other corporation or entity which
acquires all or substantially all of the assets of the Company, whether by way
of merger, consolidation, sale of such assets or otherwise.
"DEFINED BENEFIT PLAN" means the Company's Retirement Plan and
Supplemental Excess Defined Benefit Plan, as the same shall be amended or
modified to, but not on or after, any Effective Date.
"DEFINED CONTRIBUTION PLAN" means the Company's Retirement Savings
Plan and Supplemental Excess Defined Contribution Plan, as the same shall be
amended or modified to, but not on or after, any Effective Date.
"DISABILITY" means your continuing full-time absence from your duties
with the Company for 180 days or longer as a result of physical or mental
incapacity.
"EFFECTIVE DATE" means the earliest date upon which (i) any of the events
set forth under the definition of Change of Control shall have occurred, (ii)
the receipt by the Company of a Schedule 13D stating the intention of any Person
to take actions which, if accomplished, would constitute a Change of Control, or
(iii) the public announcement by any Person of its intention to take any such
action, in each case without regard for any contingency or condition which has
not been satisfied on such date.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
<PAGE>
"GOOD REASON" means any of the following:
(i) except as a result of your death or Retirement, or following
the receipt by you of a Notice of Termination for Cause or due to
Disability, a change in your status, title(s) or position(s) as an officer
of the Company which, in your reasonable judgment, does not represent a
promotion, with commensurate adjustment of compensation, from your status,
title(s) and position(s); or the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are inconsistent with
such status, title(s) or position(s); or the withdrawal from you of any
duties or responsibilities which in your reasonable opinion are consistent
with such status, title(s) or position(s); or any removal of you from or
any failure to reappoint or reelect you to such position(s); or
(ii) a reduction by the Company in your base salary; or
(iii) the failure by the Company to continue in effect any Plan
in which you were then participating other than as a result of the normal
expiration or amendment of any such Plan in accordance with its terms, or
the taking of any action, or the failure to act, by the Company which would
adversely affect your continued participation in any such Plan on at least
as favorable a basis to you as is the case on the date hereof or which
would materially reduce your benefits under any of such Plan or deprive you
of any material benefit enjoyed by you on the date hereof, except as
proposed by you to the Board or the Compensation Committee thereof; or
(iv) the Company's requiring you to be based anywhere other than
the Company's principal executive offices as they were located as of the
date hereof except for required travel on the Company's business to an
extent substantially consistent with your business travel obligations on
behalf of the Company prior to the date hereof; or
(v) the failure by the Company upon a Change of Control to obtain
the assumption of this Agreement by any Successor (other than by merger or
consolidation); or
(vi) any purported termination by the Company of your employment
which is not effected pursuant to a Notice of Termination; and for purposes
of this Agreement, no such purported termination shall be effective; or
(vii) any refusal by the Company to continue to allow you to
attend to matters or engage in activities not directly related to the
business of the Company which you attended to or were engaged in prior to
the date hereof and which do not otherwise violate your obligations
hereunder; or
(viii) any continuing material default by the Company in the
performance of its obligations under this Agreement, whether before or
after a Change of Control.
"LTIP PLAN" means the Company's Long-Term Incentive Plan adopted as the
same shall be amended or modified to, but not on or after, any Effective Date.
<PAGE>
"OTHER PLANS" means any thrift; bonus or incentive; stock option or
stock accumulation; pension; medical, disability, accident or life insurance
plan, program or policy of the Company which is intended to benefit the chief
executive officer and/or executive officers of the Company (other than the Bonus
Plan, Defined Benefit Plan, Defined Contribution Plan, LTIP Plan or Purchase
Plan).
"PERSON" means any individual, corporation, partnership, group,
association or other "person," as such term is used in Sections 13(d) and 14(d)
of the Exchange Act, other than the Company or any Plans sponsored by the
Company.
"PERQUISITES" means individual perquisites benefits received by
executives, including, but not limited to, the use of company aircraft for 100
hours per year and club membership dues.
"PLANS" means the Bonus Plan, Defined Benefit Plan, Defined
Contribution Plan, LTIP Plan, Purchase Plan, Compensation Deferral Plan and
Other Plans.
"PURCHASE PLAN" means the Company's Employee Stock Purchase Plan
adopted as the same shall be amended or modified to, but not on or after, any
Effective Date.
"RETIREMENT" means termination of your employment on the "normal
retirement date" as set forth in the Defined Benefit Plan.
"SEVERANCE PACKAGE" means your right to receive, and the Company's
obligation to pay and/or perform on, the following:
(a) on or within ten days following an applicable Termination
Date, the Company shall pay to you a lump sum, cash amount equal to the sum
of (i) three times the highest annual rate of Base Salary in effect during
the current year or any of the three years preceding the Termination Date
and (ii) three times the greater of (A) the maximum award you would have
been eligible to receive under the Bonus Plan in respect of the current
year, regardless of any limitations otherwise applicable to the Bonus Plan
(i.e., the failure to have completed any vesting period or the current
measurement period, or the failure to achieve any performance goal
applicable to all or any portion of the measurement period) or (B) the
largest award earned (whether or not paid) under the Bonus Plan in respect
of any of the three years preceding the Termination Date, or (C) 180% of
your Base Pay at the applicable Termination Date, and (ii) three times the
Black-Scholes value at the time of grant of the most valuable one-year
option grant (excluding any option you received at your election in lieu of
salary) you had received from the Company during the five years prior to
your Termination Date with any such Black-Scholes valuation performed on a
basis consistent with the methodology set forth on Exhibit A to the
Agreement. In the event you shall have received for any relevant period,
Shares or rights to acquire the same, in lieu of salary or bonus, then such
Shares shall be valued for all purposes at the higher of aggregate market
value at the date(s) of issue or the Termination Date, without discount in
either case for (u) "blockage," (v) any restriction against transfer, or
(w) any forfeiture provision; and any such "rights"
<PAGE>
(whether denominated as warrants, options, rights or otherwise) shall be
valued at the highest of the aggregate Black-Scholes' value (with any
assumptions used in such valuation determined by an independent investment
banker not associated with either party) or the aggregate "in the money"
value at the date(s) of issue or the Termination Date, without discount in
any case for (x) terms of vesting, forfeiture or exercise, or (y)
"blockage" or (z) any restriction against transfer; and
(b) in addition to your entitlement to the vested portion of your
interest in the Defined Contribution Plan in accordance with the terms of
that plan, the Company shall pay to you, on or within ten days following
the applicable Termination Date, an amount in cash equal to the unvested
portion of the Company's contributions to your account, which unvested
portion shall be valued on the same basis as the Shares contributed by the
Company in respect of the unvested portion were valued at the date(s) of
contribution; and
(c) in addition to any vested retirement benefits to which you
are entitled on the Termination Date under the Defined Benefit Plan, the
Company shall pay to you, on or within ten days following an applicable
Termination Date, an amount in cash equal to the product of (i) a number
equal to your years of life expectancy beyond age 65 as of the Termination
Date determined in accordance with the actuarial assumptions utilized under
the Defined Benefit Plan immediately prior to the Termination Date, times
(ii) an amount equal to the difference between (A) the annual benefit to
which you would have been entitled at age 65 determined (s) as if you were
fully vested thereunder (and without regard to (I) whether you shall
actually have completed the period of "vesting service" required to qualify
for benefits under the Defined Benefit Plan, (II) any limitation on the
amount used in the calculation of the annual benefit thereunder, (III) any
offset thereunder for severance allowances payable thereunder, or (IV) any
amendment to the Defined Benefit Plan made in connection with a Change of
Control and on or prior to the Termination Date, which amendment adversely
affects in any manner the computation of retirement benefits under such
plan), (t) you had continued in employment with the Company as a "salaried
employee" for three years beyond the Termination Date, and (u) based on
"compensation" as defined as the highest annual rate of Base Salary in
effect during the current year or any of the three years preceding the
Termination Date plus the highest award (either earned or paid) under the
Bonus Plan in respect of any of the three years preceding the Termination
Date and (B) the annual benefit, if any, to which you would be entitled
under the single life annuity method of distribution under the Defined
Benefit Plan as of the Termination Date; and
(d) immediately upon an applicable Termination Date, all options
and rights to other forms of contingent incentive compensation granted to
you under the LTIP Plan which are not then fully vested, exercisable,
distributable or otherwise performable by the Company shall immediately
become fully vested, exercisable, distributable or otherwise performable by
the Company as though all applicable Performance Targets had been met or
achieved at maximum levels for all Performance Periods (including those
extending beyond the Termination Date) and any and all other LTIP Plan
contingencies had been
<PAGE>
satisfied in full at the Termination Date and the maximum benefits
thereunder had been earned at the Termination Date;
(e) following an applicable Termination Date, you shall receive
all benefits under and in accordance with the terms of the Plans (other
than the Bonus, Defined Contribution, Defined Benefit and LTIP Plans and
medical, disability, accident and life insurance plans and programs for all
of which separate provision is made herein) in which you are at the time a
participant, but only to the extent the same are vested under the terms of
such Plans at the Termination Date; and
(f) unless you give notice to the Company pursuant to the next
sentence within 90 days following an applicable Termination Date, the
Company shall maintain in full force and effect, at its sole expense for
the continued benefit of you and your dependents during the period from the
Termination Date through the earlier of (i) three years from the
Termination Date or (ii) the commencement date of equivalent benefits from
a new employer, all insured and self-insured employee welfare benefit Plans
and Perquisites in which you were entitled to participate immediately prior
to the Termination Date. Alternatively, if you notify the Company that you
so elect, the Company shall pay you within five days of such notification
an amount in cash equal to three times the average annual cost incurred by
the Company during the preceding three calendar years as a result of your
participation in such welfare benefit Plans (or such fewer whole calendar
years as you have so participated). If your participation in any such
welfare benefit Plan is barred, the Company, at its sole cost and expense,
shall arrange to have issued for the benefit of you and your dependents
individual policies of insurance providing benefits substantially similar
(on an after-tax basis) to those which you are entitled to receive under
such Plans. You shall not be required to pay any premiums or other charges
for such policies. At the end of three years after the Termination Date,
the Company, provided you have not previously received or are not then
receiving equivalent benefits from a new employer, shall arrange, at its
sole cost and expense, to enable you to convert you and your dependents'
coverage under such Plans to individual policies or programs upon the same
terms as employees of the Company may apply for such conversions.
Anything else in this Agreement to the contrary notwithstanding, if an
applicable Termination Date results from a merger or a tender offer or an
exchange offer, then unless otherwise agreed to by both parties in writing, all
amounts to which you shall at the closing thereof, or which you may upon
subsequent notice or lapse of time, become entitled under this Severance Package
or Section 10 shall be accelerated to, and become immediately due and payable
contemporaneously with, such closing.
"SHARES" means shares of Common Stock, $.01 par value, of the Company
at the date of this Agreement, as the same shall be subsequently amended,
modified or changed. The term "market value," when used with respect to a Share
means the closing price therefor on the New York Stock Exchange or if not listed
thereon, on such other exchange as shall at the time constitute the principal
exchange for trading in Shares.
<PAGE>
"VOTING SECURITIES" means, with respect to any corporation or business
enterprise, those securities which under ordinary circumstances are entitled to
vote for the election of directors or others charged with comparable duties
under applicable law.
<PAGE>
EXHIBIT 10.17
September 1, 1999
Mr. Thomas R. Hix
Senior Vice President and
Chief Financial Officer
Cooper Cameron Corporation
515 Post Oak Boulevard
Houston, Texas 77027
Dear Mr. Hix:
Cooper Cameron Corporation (the "Company") considers the establishment
and maintenance of a sound and vital management to be essential for the
protection and enhancement of the best interests of the Company and its
stockholders. In view of your experience and performance in the business of the
Company and its subsidiaries, the Company desires to secure your services for an
extended period. In addition, the Company recognizes that, as is the case with
many publicly-held corporations, the possibility of a change in control may
arise and that such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders.
Accordingly, the board of directors of the Company (the "Board") has
determined that appropriate steps should be taken to assure the Company of the
continuation of your services and to reinforce and encourage the attention and
dedication of members of the Company's management to their assigned duties
without distraction in circumstances arising from the possibility of a change in
control of the Company. In particular the Board believes it important, should
the Company or its stockholders receive a proposal for or notice of transfer of
control of the Company, that you be able to assess and advise the Board whether
such transfer would be or is in the best interests of the Company and its
stockholders, and to take such other action regarding such proposal or transfer
as the Board might determine to be appropriate without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this
agreement (the "Agreement"), which has been approved by the Board and which
supersedes the previous letter agreement between you and the Company dated
November 30, 1995 in its entirety, sets forth the terms of your continued
employment by the Company and the compensation and severance benefits which the
Company agrees will be provided to you in the event your employment with the
Company should be terminated under the circumstances described below.
<PAGE>
Reference is made to Annex I hereto for definitions of certain terms
used in this Agreement, and such definitions are incorporated herein by such
reference with the same effect as if set forth herein. Certain capitalized terms
used in this Agreement in connection with the description of various Plans are
defined in the respective Plans, but if any conflicts with a definition herein
contained, the latter shall prevail.
18. Term of Employment. The Company hereby agrees to continue your
employment and you hereby agree to serve the Company for an employment
period commencing on the date hereof and initially ending August 31, 2000;
provided, however, that on each successive September 1 commencing in 2000,
the employment period shall automatically be extended for one additional
year (with the date to which the employment period has most recently been
so extended being hereinafter referred to as the "Expiration Date" and the
period commencing the date hereof and ending on the Expiration Date being
hereinafter referred to as the "Employment Period"), subject to prior
termination of the Employment Period pursuant to Section 4 of this
Agreement.
19. Duties.
(a) During the Employment Period, you shall serve the Company as its
Senior Vice President and as Chief Financial Officer and perform your duties and
responsibilities diligently, faithfully and loyally and devote such time to the
Company's affairs as may be necessary to the end of achieving the proper,
efficient and successful operation of the Company's business. In such capacities
you shall (i) generally have the duties of such offices as may be specified in
the Bylaws, (ii) report directly to the Chief Executive Officer and (iii) have
general executive management of the financial affairs of the Company, subject to
the direction of the Chairman, President and Chief Executive Officer, the Board
or any Committee thereof. The foregoing shall not, however, be deemed to
restrict you from attending to matters or engaging in activities not directly
related to the business of the Company, if reasonable in scope and time
commitment and not otherwise in violation of this Agreement.
(b) If during the Employment Period, (i) a tender offer or exchange
offer is made for 20% or more of the Company's outstanding Voting Securities or
(ii) a transaction is proposed which, if consummated, would result in a Change
of Control, you agree that you will not leave your employment with the Company
(other than as a result of Disability or upon Retirement) and will also render
the services contemplated in the introductory paragraphs of this Agreement until
such time as such tender offer, exchange offer or proposed transaction is
abandoned or terminated or a Change of Control has occurred.
20. Compensation.
(a) Base Salary. As compensation for your services, the Company
agrees to pay you basic compensation at the rate of $252,000 per annum through
December 31, 1999 and at the rate of $265,000 per annum beginning January 1,
2000 ("Base Salary"), payable on a current basis in equal installments not less
frequently than monthly, subject only to such payroll and withholding deductions
as may be required by law or the terms of Plans in which you are a participant.
For periods subsequent to January 1, 2000, your Base Salary shall be established
<PAGE>
annually by the Compensation Committee of the Board and paid on the same basis
as for the prior year, but no such adjustment shall result in a Base Salary for
any year of less than the highest annual rate so authorized by the Committee to
be paid to you during any previous calendar year(s) of the Company ended during
the Employment Period, except upon your prior written consent. The Company's
obligations to you hereunder shall remain unaffected by any election (such as
that made for the twelve month period ending December 31, 1999) by you to
receive your Base Salary in other than cash, and for all purposes of this
Agreement, such election shall apply only to the period for which it is made by
written agreement between the Company and you.
(b) Plans. In addition to your Base Salary, you will participate
in the Bonus Plan, Defined Benefit Plan and LTIP Plan, and be eligible to
participate in the Defined Contribution Plan, Purchase Plan and Other Plans,
including the Perquisites, for each year during the Employment Period.
(c) Other. The Company shall reimburse you for all expenses paid
or incurred by you in the performance of your duties under this Agreement in
accordance with the Company's normal expense reimbursement policies applicable
to senior executives.
21. Termination. Upon compliance by the initiating party with
any applicable procedures set forth in Section 5 hereof, your employment
with the Company:
(a) shall terminate automatically upon your death or Retirement;
(b) may be terminated prior to the Expiration Date at the
discretion of the Chief Executive Officer upon your Disability;
(c) may be terminated prior to the Expiration Date at the
discretion of the Chief Executive Officer for Cause;
(d) may be terminated prior to the Expiration Date at your
discretion, other than for Good Reason;
(e) may be terminated prior to the Expiration Date at the
discretion of the Chief Executive Officer prior to a Change of Control
without Cause;
(f) may be terminated prior to the Expiration Date at the
discretion of the Chief Executive Officer in conjunction with a Change of
Control without Cause;
(g) may be terminated prior to the Expiration Date at your
discretion for Good Reason prior to a Change of Control; or
(h) may be terminated prior to the Expiration Date at your
discretion for Good Reason at in conjunction with a Change of Control.
<PAGE>
22. Procedures for Termination. If it is intended that your
employment be terminated:
(a) pursuant to Section 4(b), the Company shall transmit to you
written notice setting forth the particulars upon which the Company bases
its determination that a Disability exists, together with a written request
of the Chief Executive Officer that you resume your duties within 30 days
following the date thereof, failing which a "final discharge" shall then
occur;
(b) pursuant to Section 4(c), the Company shall transmit to you
written notice setting forth the Cause for which you are proposed to be
dismissed in sufficient detail to permit a reasonable assessment of the
bona fides thereof, and setting a meeting with the Chief Executive Officer
not less than 30 days following the date of such notice at which the Chief
Executive Officer shall consider your termination and at which you and your
counsel shall have the opportunity to be heard, following which the Chief
Executive Officer shall either withdraw the notice, or if he so finds in
his good faith opinion, issue his report within ten days thereafter that
Cause exists and specifying the particulars of his findings, in which
latter event a "final discharge" shall occur. After receipt of a notice of
intended termination for Cause, you shall not have any authority to incur
any obligation of any kind whatsoever on behalf of the Company pending
withdrawal of such notice or "final discharge;"
(c) pursuant to Section 4(d), you shall transmit to the Company
written notice specifying that your resignation is other than for Good
Reason;
(d) pursuant to Section 4(e) or 4(f) the Company shall transmit
to you written notice specifying that your termination is without Cause;
(e) pursuant to Section 4(g) or 4(h), you shall transmit to the
Company written notice setting forth the particulars upon which you base
your determination that Good Reason exists and, only if the stated basis
therefor is capable of being cured, requesting a cure within 10 days,
failing which a "final separation" shall then occur, and if such stated
basis is not capable of cure by the Company, "final separation" shall occur
co-extensive with delivery of the notice.
For purposes of this Agreement, a "Termination Date" shall be deemed to
have occurred upon (i) the happening of any event contemplated by Section
4(a) [death or Retirement], (ii) the date of "final discharge" in the case of
termination initiated under Sections 5(a) [Disability] or 5(b)[Cause], (iii) the
date of "final separation" in the case of a termination initiated under Section
5(e) [Good Reason], or (iv) the 30th day following the date of any notice
contemplated by Sections 5(c) [resignation without Good Reason] or 5(d)
[discharge without Cause]; provided, that any proceeding initiated pursuant to
Section 11 hereof within 15 days after the giving of any notice under this
Section 5 shall (anything else in this Agreement to the contrary
notwithstanding) automatically toll the effectiveness of any Termination Date
until final resolution of such proceeding. Each notice which complies with the
requirements of this Section 5 is hereinafter referred to as a "Termination
Notice".
<PAGE>
23. Effect of Termination. If your employment is terminated:
(a) pursuant to Sections 4(a) [death or Retirement], 4(b)
[Disability], 4(c) [Cause], or 4(d) [resignation without Good Reason], then
you shall be entitled to receive (i) payment when due of your Base Salary
through the end of the first monthly pay period ended after the Termination
Date and (ii) all benefits under the Plans in which you are at the time a
participant, to the extent the same are vested under the terms thereof at
the Termination Date, and (except as otherwise provided herein) all other
obligations of the Company under this Agreement shall thereupon cease
provided, however, that in the event that your employment is terminated
pursuant to Section 4(a) as a result of your death, without prejudice to
your rights under the LTIP Plan or any option grant made pursuant thereto,
all outstanding options, rights and other forms of contingent incentive
compensation granted to you under the LTIP Plan shall receive the treatment
as provided for in subsection (d) of the definition of Severance Package
herein; or
(b) pursuant to Sections 4(e) [discharge without Cause prior to
Change of Control] or 4(g) [resignation for Good Reason prior to Change of
Control], then you shall become entitled to all benefits conferred upon you
by the Termination Package, and (except as otherwise provided herein) all
other obligations of the Company under this Agreement shall thereupon
cease.
(c) pursuant to Sections 4(f) [discharge without Cause after a
Change of Control] or 4(h) [resignation for Good Reason after a Change of
Control], then you shall become entitled to all benefits conferred upon you
by the Severance Package, and (except as otherwise provided herein) all
other obligations of the Company under this Agreement shall thereupon
cease.
You shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment, nor shall the amount of any
payment provided for in this Agreement be reduced by any compensation earned by
you as the result of employment by another employer after any Effective Date or
Termination Date.
24. LTIP Benefit Acceleration at Effective Date. Immediately upon
any Effective Date, all contingent compensation rights issued to you under
the LTIP Plan (including an option granted under the options in lieu of pay
program) which are then outstanding shall become vested, exercisable,
distributable and unrestricted (any contrary provision in the LTIP Plan
notwithstanding) for a period of 183 days following the Effective Date (the
"Exercise Period") whether or not during such period you continue to be
employed by the Company. During the Exercise Period, you shall have the
right immediately upon any written request by you to the Company, if
approved in writing by any person (acting solely in his individual capacity
and when so acting, such concurring person shall do so without any contrary
"fiduciary" or other duty to the Company) who was at the Effective Date an
officer or director of the Company, to (i) exercise all or any portion of
all your options covered (including, at your sole election, any associated
<PAGE>
Tandem SAR) by the LTIP Plan and to have the underlying Shares issued to
you, (ii) have issued to you on a non-forfeitable basis any or all Shares
covered by Restricted Stock Awards held by you under the LTIP Plan, (iii)
have issued to you any or all Performance Shares and/or Performance Units
held by you in the LTIP Plan, (iv) exercise all or any portion of any LTIP
Plan Freestanding SAR held by you, and (v) obtain the full benefit of any
other contingent compensation rights to which you may be entitled under the
LTIP Plan, in each case as though all applicable Performance Targets had
been met for all Performance Periods (including those extending beyond the
Effective Date) and any and all other LTIP Plan contingencies had been
satisfied in full at the Effective Date and the maximum possible benefit
thereunder had been earned in full at the Effective Date. To the extent you
have not exercised or requested performance of such benefits following the
Effective Date and prior to expiration of the Exercise Period, all terms
applicable to any such benefit prior to the Effective Date shall again
become fully applicable as though an Effective Date had never occurred.
25. Excise Tax. To the extent that the acceleration of vesting or
any payment, distribution or issuance made to you pursuant to this
Agreement or otherwise is subject to federal income, excise, or other tax
at a rate above the rate ordinarily applicable to like payments paid in the
ordinary course of business ("Penalty Tax"), whether as a result of the
provisions of Section 280G(b)(1) and 4999(a) of the Internal Revenue Code
of 1986, as amended, any similar or analogous provisions of any statute
adopted subsequent to the date hereof, or otherwise, then the Company shall
pay you an additional amount of cash (the "Additional Amount") such that
the net amount received by you, after paying any applicable Penalty Tax and
any federal or state taxes on such Additional Amount, shall be equal to the
amount that you would have received if such Penalty Tax were not
applicable.
26. Deferral of Payments; Early Payments. At any time prior to a
Termination Date, you may irrevocably direct the Company that any amounts
which are or should become payable to you under the Termination Package,
the Severance Package or pursuant to Section 7 hereof shall be paid to you
in three equal installments, payable on or within ten days following the
Termination Date, and on the first and second anniversaries of the initial
installment payment. In addition, if any payment to you in respect of a
stock-based benefit which is precipitated by the occurrence of an Effective
Date or a Termination Date and which would, in and of itself, give rise to
a short-swing profit under Section 16(b) of the Exchange Act, then both the
payment and the entitlement to payment thereof, shall automatically be
deferred until the earliest date (not later than 183 days following a
Termination Date) at which the payment of such benefit would not, in and of
itself, result in a short-swing profit. The Company and you further agree
that when it has become apparent in our collective best judgment (as
expressed by the Compensation Committee of the Board, in the case of the
Company) that a Change of Control is likely to occur and further, that a
likely consequence thereof will be the occurrence of a Termination Date,
the Company and you will use reasonable good faith efforts to undertake and
conclude negotiations intended to result in the payment to you of a portion
of the Termination Package or Severance Package earlier than would
otherwise be the case hereunder, thereby increasing the benefit conferred
upon you and the tax
<PAGE>
efficiency of such payments to the Company, with any consequent tax savings
to be allocated between you and the Company in such reasonable proportions
as we shall agree; unless so agreed to by both parties in writing, no such
negotiation or agreement shall affect the Company's obligations to you
under any other provision of this Agreement.
27. Conditional Share Purchase Obligation.
(a) If a Change of Control occurs as a consequence of a tender
offer or exchange offer (the "Tender Offer"), the Company shall, if requested by
you, purchase from you (whether a Termination Date has occurred following the
Change of Control) for cash on any business day selected by you upon not less
than ten days' notice to the Company, which day shall not be less than ten days
following consummation of the Tender Offer nor more than three years after the
Effective Date, up to that number of Shares which shall be equal to the product
of (x) the number of Shares acquired by you upon exercise or distribution of any
benefit under the Bonus Plan or LTIP Plan (including an option granted under the
options in lieu of pay program) prior to consummation of the Tender Offer,
multiplied by (y) the decimal equivalent of (I) the number of Shares accepted
for purchase or exchange in the Tender Offer, divided by (II) the number of
Shares timely and validly tendered pursuant to the Tender Offer. In the event
the above obligation to purchase Shares occurs by reason of a cash tender offer
or a combination cash tender offer and exchange offer, the cash price per share
to be paid to you hereunder shall be equal to the highest price paid in cash
pursuant to the Tender Offer. In the event such obligation occurs by reason of
an exchange offer, the cash price per share to be paid to you hereunder shall be
equal to the closing price, if traded on a stock exchange, or the average bid
and asked prices, if traded in the over-the-counter market, of the security of
the person so exchanged for the Shares (the "Exchange Security") on the first
day on which the Exchange Security could have been sold by you on such exchange
or in the over-the-counter market, as the case may be, in a regular broker's
transaction had your Shares been tendered and accepted, multiplied by the number
of Exchange Securities (or fraction thereof) issued in the Tender Offer for each
Company Share; and
(b) if a Change of Control occurs pursuant to a Tender Offer and (i) a
merger, consolidation, reorganization, sale, spin-off, or purchase of assets
under which all remaining outstanding Shares will be converted into or become
exchangeable for cash, or for securities ("Merger Security") issued or to be
issued by the Person who made the Tender offer (or a subsidiary or affiliate of
such Person), is thereafter proposed to the Company or its stockholders, and
(ii) such merger, consolidation, reorganization or purchase of assets occurs
less than three years after the Effective Date, and (iii) the amounts of cash
into which each Share would be converted if the transaction is effected wholly
for cash, or the Merger Security Value (as defined below) if such transaction is
effected wholly for Merger Securities, or the sum of the cash and the Merger
Security Value if the Transaction is effected partly for cash and partly for
Merger Securities, as the case may be, is less than 95% of the per share price
that would have been paid by the Company for such portion of your Shares had you
exercised your option to require the Company to purchase such Shares under
Section 10(a) above, the Company shall pay you (whether or not a Termination
Date has occurred following a Change of Control), an amount in cash equal to the
difference between the aggregate price you would have received from the
<PAGE>
number of Shares the Company would have been required to purchase from you had
you exercised such option under Section 10(a) and the amount of cash and/or the
Merger Security Value received for the same number of Shares in such merger,
consolidation, reorganization or purchase of assets. Such cash payment shall be
made to you on a business day selected by you upon no less than ten-calendar
days' notice to the Company or its Successor (as hereinafter defined). For
purposes of this Section 10(b), "Merger Security Value" shall mean the closing
price, if traded on a stock exchange, or the average bid and asked prices if
traded in the over-the-counter market, of the Merger Security on the first day
on which the Merger Security could have been sold by you on such exchange or in
the over-the-counter market, as the case may be, in a regular broker's
transaction, multiplied by the number of Merger Securities (or fraction thereof)
for which each Share was exchangeable or into which each Share was convertible.
If no public market develops for the Merger Security within 30 days from the
date of its issue, however, "Merger Security Value" shall mean the fair market
value of such Merger Security (on a per unit basis) in the written opinion of a
nationally recognized investment banking firm acceptable to you) on the
effective date of the merger, consolidation, reorganization or purchase of
assets, as the case may be, multiplied by the number of Merger Securities (or
fraction thereof) for which each Share was exchangeable or into which each Share
was convertible.
10A. Certain Rights with Respect to Options.
(a) In addition to any other rights or privileges held by a holder
with respect to an option (including an option granted under the options in lieu
of pay program) covered by the LTIP Plan ("LTIP Option") (including the
provisions of Section 7 and Section 10), upon a Change in Control of the
Company, the holder shall have the right to exchange such option for a new
option ("New Option"), that shall be issued according to the following:
(1) the New Option shall be immediately exercisable;
(2) the New Option shall have a term equal to the remaining
term of the LTIP Option it replaces (and shall be exercisable through
such term);
(3) the New Option will give the holder the right to acquire
shares of the publicly traded common equity of the Company or any
successor or direct or indirect parent of either ("Replacement Common
Stock") (in the event of two or more classes of common equity, the
common equity used shall be determined by the Compensation Committee
of the Board of Directors of the Company existing prior to a Change in
Control);
(4) the exercise price used for the New Option ("New
Exercise Price") for acquiring a share of Replacement Common Stock
shall be determined at the time of the Change in Control by taking (i)
the higher of (a) the aggregate value (as of the date of the Change in
Control) equal to the merger or acquisition consideration paid or
payable in the Change in Control, on a per share basis, or (b) the
highest price paid for a share of
<PAGE>
Cooper Cameron common stock over the New York Stock Exchange
(or other primary exchange) during the 12 months prior to the Change
in Control, and (ii) dividing such amount into the per share exercise
price of the LTIP Option; with the result multiplied by the
Replacement Common Stock closing price on its principal stock exchange
on the day of the Change in Control, or if traded in the over-the-
counter market and not on an exchange, the last bid price in such
market;
(5) the number of shares of Replacement Common Stock subject
to the New Option shall be the number necessary, using the New
Exercise Price, to provide an aggregate value (as of the date of the
Change in Control) equal to the higher of (a) the merger or
acquisition consideration paid or payable in the Change in Control on
a per share basis, or (b) the highest price paid for a share of Cooper
Cameron common stock over the New York Stock Exchange (or other
primary exchange) during the 12 months prior to the Change in Control;
(6) if there is no publicly traded common equity of the
Company, or any successor or any direct or indirect parent of either,
then the New Option shall be with respect to shares of the direct or
indirect parent of the Company, and if no such parent then the
Company, and if the Company no longer exists, then the successor to
the Company;
(b) In addition to any other rights or privileges held by a holder
with respect to an option covered by the LTIP Plan (including the provisions of
Section 7 and Section 10), if a Change in Control occurs, each holder of an
option shall have the right, but not the obligation, to tender, within 30 days
of such a Change in Control, any option to the Company (or any successor to the
Company) and receive in exchange therefor a lump sum cash amount equal to the
Black-Scholes value of the option, without discount for risk of forfeiture and
nontransferability determined by using the highest Black-Scholes valuation
during the one-year period prior to the Change in Control. Any Black-Scholes
valuation shall be performed on a basis consistent with the methodology set
forth on Exhibit A to this Agreement.
28. Dispute Resolution. It is irrevocably agreed that if any
dispute arises between us under this Agreement, or as to any interpretive
matter under or alleged breach of this Agreement, the exclusive remedy of
each of us shall be to commence binding arbitration proceedings under the
rules of the American Arbitration Association (the "Rules"), with any such
arbitration proceeding to be conducted in Houston, Texas, applying the
substantive law of the State of Texas ("Arbitration"). If Arbitration is
commenced prior to an Effective Date, each of us will deposit with the
arbitrator(s), 50% of the arbitrator's preliminary estimate of the costs of
arbitration (excluding counsel fees and expenses) as security for costs; if
Arbitration is commenced after an Effective Date, the Company will be
solely responsible for all costs thereof and shall deposit with the
arbitrator(s) 100% of the arbitrator(s) preliminary estimate thereof.
Notwithstanding any contrary provision of the Rules or Texas law, the
Company shall have the burden of proof with respect to any of the following
which are at issue in Arbitration: (i) that Cause or
<PAGE>
Disability existed at the time any notice was given to you under Section 5
based upon either them and/or the sufficiency of such notice; and (ii) that
Good Reason did not exist at the time notice was given to the Company under
Section 5 based upon Good Reason (but only if such notice was dated on or
after an Effective Date) and/or the sufficiency of such notice; and (iii)
that a Change of Control has not occurred. Any final ruling of the
arbitrator(s) in an Arbitration shall be final and binding for all
purposes, and judgment on any Arbitration award may be entered and enforced
in any court having jurisdiction.
The Company and you irrevocably agree that in the event the arbitrator(s)
shall determine (after hearing) that any matter presented in Arbitration is one
which under Texas law is not susceptible to arbitration, in such event (and only
in such event), (i) exclusive jurisdiction over the non-arbitrable issue shall
be in the lowest Texas state court of general jurisdiction sitting in Harris
County, Texas, (ii) we are each at the time present in Texas for the purpose of
conferring personal jurisdiction; (iii) any such action may be brought in such
courts, and any objection that the Company or you may now or hereafter have to
the venue of such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court is waived, and we each agree not
to plead or claim the same, (iv) service of process in any such proceeding or
action may be effected by mailing a copy thereof by registered or certified
mail, return receipt requested (or any substantially similar form of mail),
postage prepaid, to such party at the address provided in Section 14 hereof, (v)
no punitive or consequential damages shall be awarded in any such action or
proceeding and we each agree not to plead or claim the same; and (vi) prior to
any trial on the merits, we will submit any such non-arbitrable issue to court
supervised, non-binding mediation.
If proceedings are commenced prior to an Effective Date, all actual costs
of Arbitration or court proceedings involving any non-arbitrable issue
(excluding, in each case, counsel fees and expenses), shall be apportioned by
the arbitrator(s) or the court in such manner as shall be deemed equitable in
light of any final Arbitration award or judgment; if commenced on or after an
Effective Date, all such costs shall be borne exclusively by the Company.
Anything else in this Section to the contrary notwithstanding, nothing in
this Agreement shall impair your ability to seek specific performance of your
right to be paid under, and to receive all other benefits conferred by, Section
3 of this Agreement during the pendency of any dispute or proceeding concerning
Sections 5, 6, 7 and/or 9 hereof.
29. Successors; Binding Agreement.
(a) Upon your written request, the Company will seek to have any
Successor (as defined below), by agreement in form and substance satisfactory to
you, expressly assume 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 there
has been a Change of Control prior to, or a Change of Control will result from,
any such succession, then failure of the Company to obtain at your request such
agreement prior to or upon the effectiveness of any such succession (other than
by merger or consolidation) shall constitute Good Reason for termination by you
of your employment and, upon delivery of a Notice of Termination by you to the
Company, you shall be entitled to the benefits provided in Section 6(c) hereof.
"Successor" shall mean any Person that
<PAGE>
succeeds to, or has the ability to control, the Company's business as a whole,
directly by merger, consolidation or spin-off or indirectly by purchase of the
Company's Voting Securities or acquisition of all or substantially all of the
assets of the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
30. Fees and Expenses. The Company shall pay all legal fees and
reasonable expenses incurred by you (including costs of arbitration) as a
result of (a) your termination following a Change of Control (including all
such fees and expenses, if any, incurred in contesting or disputing any
such termination) or (b) your seeking to obtain, assert or enforce any
right or benefit conferred upon you by this Agreement.
31. Notices. Any and all notices required or permitted to be given
hereunder shall be in writing and shall be deemed to have been given when
delivered in person to the persons specified below or deposited in the United
States mail, certified or registered mail, postage prepaid and addressed as
follows:
If to the Company: Cooper Cameron Corporation
515 Post Oak Boulevard
Houston, Texas 77027
Attention: Chairman, Compensation
Committee of the Board of Directors
If to you: Thomas R. Hix
1 Wexford
Houston, Texas 77024
Either party may change, by the giving of notice in accordance with this
Section 14, the address to which notices are thereafter to be sent.
32. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
33. Survival. All obligations undertaken and benefits conferred
pursuant to this Agreement, except those set forth in Sections 1 and 2,
shall survive the Employment Period and continue thereafter until performed
in full.
34. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or
discharge is agreed to in writing signed by you and the Chairman of the
Compensation Committee of the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or of compliance with,
any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at
<PAGE>
the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not
expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the
internal laws of the State of Texas.
If this letter correctly sets forth our understanding with respect to the
subject matter hereof, please sign and return one copy of this letter to the
Company.
Sincerely,
COOPER CAMERON CORPORATION
BY:
-------------------------------
Sheldon R. Erikson
Chairman, President
and Chief Executive
Officer
Agreed to as of the ___
day of September, 1999:
- ------------------------
Thomas R. Hix
<PAGE>
ANNEX I TO AGREEMENT DATED SEPTEMBER 1, 1999
BETWEEN
COOPER CAMERON CORPORATION
AND
THOMAS R. HIX
Definition of
Certain Terms
"BONUS PLAN" means for each year, the Company's Management Incentive
Compensation Plan or any other Plan adopted by the Board which provides for the
payment of additional compensation on an annual basis to senior executive
officers contingent upon the Company's results of operations for that specific
year, in either case as such Plan shall be amended or modified to, but not on or
after, any Effective Date.
"BYLAWS" means the bylaws of the Company as in effect at the date hereof
and as the same shall be amended or otherwise modified to, but not on or after,
any Effective Date.
"CAUSE" means (i) your conviction by a court of competent jurisdiction,
from which conviction no further appeal can be taken, of a felony-grade crime
involving moral turpitude, or (ii) your willful failure to perform substantially
your duties with the Company (other than a failure due to physical or mental
illness) which is materially and demonstrably injurious to the Company, or (iii)
only prior to an Effective Date, the engaging by you in any "business" engaged
in activities in direct competition with the Company, whether as an employee,
officer or director or through the beneficial ownership by you of 10% or more of
the Voting Securities of such "business." No act or failure to act on your part
shall be considered "willful" unless done, or omitted to be done, by you in bad
faith and without reasonable belief that your action or omission was in, or not
opposed to, the best interests of the Company.
"CHANGE OF CONTROL" means the earliest date at which:
(i) any Person is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
outstanding Voting Securities, other than through the purchase of Voting
Securities directly from the Company through a private placement; or
(ii) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person 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 two-thirds of the directors comprising the
Incumbent Board shall from and after such election be deemed to be a member of
the Incumbent Board; or
<PAGE>
(iii) the Company is merged or consolidated with another corporation
or entity and as a result of such merger or consolidation less than 80% of the
outstanding Voting Securities of the surviving or resulting corporation or
entity shall then be owned by the former stockholders of the Company; or
(iv) a tender offer or exchange offer is made and consummated by a
Person other than the Company for the ownership of 20% or more of the Voting
Securities of the Company then outstanding; or
(v) all or substantially all of the assets of the Company are sold or
transferred to a Person as to which (A) the Incumbent Board does not have
authority (whether by law or contract) to directly control the use or further
disposition of such assets and (B) the financial results of the Company and such
Person are not consolidated for financial reporting purposes.
Anything else in this definition to the contrary notwithstanding, no
Change of Control shall be deemed to have occurred by virtue of any transaction
which results in you, or a group of Persons which includes you, acquiring 20% or
more of either the combined voting power of the Company's outstanding Voting
Securities or the Voting Securities of any other corporation or entity which
acquires all or substantially all of the assets of the Company, whether by way
of merger, consolidation, sale of such assets or otherwise.
"DEFINED BENEFIT PLAN" means the Company's Retirement Plan and
Supplemental Excess Defined Benefit Plan, as the same shall be amended or
modified to, but not on or after, any Effective Date.
"DEFINED CONTRIBUTION PLAN" means the Company's Retirement Savings
Plan and Supplemental Excess Defined Contribution Plan, as the same shall be
amended or modified to, but not on or after, any Effective Date.
"DISABILITY" means your continuing full-time absence from your duties
with the Company for 180 days or longer as a result of physical or mental
incapacity.
"EFFECTIVE DATE" means the earliest date upon which (i) any of the
events set forth under the definition of Change of Control shall have occurred,
(ii) the receipt by the Company of a Schedule 13D stating the intention of any
Person to take actions which, if accomplished, would constitute a Change of
Control, or (iii) the public announcement by any Person of its intention to take
any such action, in each case without regard for any contingency or condition
which has not been satisfied on such date.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
<PAGE>
"GOOD REASON" means any of the following:
(i) except as a result of your death or Retirement, or following
the receipt by you of a Notice of Termination for Cause or due to
Disability, a change in your status, title(s) or position(s) as an officer
of the Company which, in your reasonable judgment, does not represent a
promotion, with commensurate adjustment of compensation, from your status,
title(s) and position(s); or the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are inconsistent with
such status, title(s) or position(s); or the withdrawal from you of any
duties or responsibilities which in your reasonable opinion are consistent
with such status, title(s) or position(s); or any removal of you from or
any failure to reappoint or reelect you to such position(s); or
(ii) a reduction by the Company in your base salary; or
(iii) the failure by the Company to continue in effect any Plan
in which you were then participating other than as a result of the normal
expiration or amendment of any such Plan in accordance with its terms, or
the taking of any action, or the failure to act, by the Company which would
adversely affect your continued participation in any such Plan on at least
as favorable a basis to you as is the case on the date hereof or which
would materially reduce your benefits under any of such Plan or deprive you
of any material benefit enjoyed by you on the date hereof, except as
proposed by you to the Board or the Compensation Committee thereof; or
(iv) the Company's requiring you to be based anywhere outside a
twenty-five (25) mile radius of your office as it was located as of the
date hereof except for required travel on the Company's business to an
extent substantially consistent with your business travel obligations on
behalf of the Company prior to the date hereof; or
(v) the failure by the Company upon a Change of Control to obtain
the assumption of this Agreement by any Successor (other than by merger or
consolidation); or
(vi) any purported termination by the Company of your employment
which is not effected pursuant to a Notice of Termination; and for purposes
of this Agreement, no such purported termination shall be effective; or
(vii) any refusal by the Company to continue to allow you to
attend to matters or engage in activities not directly related to the
business of the Company which you attended to or were engaged in prior to
the date hereof and which do not otherwise violate your obligations
hereunder; or
(viii) any continuing material default by the Company in the
performance of its obligations under this Agreement, whether before or
after a Change of Control.
"LTIP PLAN" means the Company's Long-Term Incentive Plan adopted as the
same shall be amended or modified to, but not on or after, any Effective Date.
<PAGE>
"OTHER PLANS" means any thrift; bonus or incentive; stock option or
stock accumulation; pension; medical, disability, accident or life insurance
plan, program or policy of the Company which is intended to benefit the chief
executive officer and/or executive officers of the Company (other than the Bonus
Plan, Defined Benefit Plan, Defined Contribution Plan, LTIP Plan or Purchase
Plan).
"PERSON" means any individual, corporation, partnership, group,
association or other "person," as such term is used in Sections 13(d) and 14(d)
of the Exchange Act, other than the Company or any Plans sponsored by the
Company.
"PERQUISITES" means individual perquisites benefits received by
executives, including, but not limited to, the use of company aircraft for 50
hours per year and club membership dues.
"PLANS" means the Bonus Plan, Defined Benefit Plan, Defined
Contribution Plan, LTIP Plan, Purchase Plan, Compensation Deferral Plan and
Other Plans.
"PURCHASE PLAN" means the Company's Employee Stock Purchase Plan
adopted as the same shall be amended or modified to, but not on or after, any
Effective Date.
"RETIREMENT" means termination of your employment on the "normal
retirement date" as set forth in the Defined Benefit Plan.
"SEVERANCE PACKAGE" means your right to receive, and the Company's
obligation to pay and/or perform on, the following:
(a) on or within ten days following an applicable Termination
Date, the Company shall pay to you a lump sum, cash amount equal to the sum
of (i) three times the highest annual rate of Base Salary in effect during
the current year or any of the three years preceding the Termination Date
and (ii) three times the greater of (A) the maximum award you would have
been eligible to receive under the Bonus Plan in respect of the current
year, regardless of any limitations otherwise applicable to the Bonus Plan
(i.e., the failure to have completed any vesting period or the current
measurement period, or the failure to achieve any performance goal
applicable to all or any portion of the measurement period) or (B) the
largest award earned (whether or not paid) under the Bonus Plan in respect
of any of the three years preceding the Termination Date, or (C) 100% of
your Base Salary at the applicable Termination Date, and (iii) three times
the Black-Scholes value at the time of grant of the most valuable one-year
option grant (excluding any option you received at your election in lieu of
salary) you had received from the Company during the five years prior to
your Termination Date with any such Black-Scholes valuation performed on a
basis consistent with the methodology set forth on Exhibit A to the
Agreement. In the event you shall have received for any relevant period,
Shares or rights to acquire the same, in lieu of salary or bonus, then such
Shares shall be valued for all purposes at the higher of aggregate market
value at the date(s) of issue or the Termination Date, without discount in
either case for (u) "blockage," (v) any restriction against transfer, or
(w) any forfeiture provision; and any such "rights"
<PAGE>
(whether denominated as warrants, options, rights or otherwise) shall be
valued at the highest of the aggregate Black-Scholes' value (with any
assumptions used in such valuation determined by an independent investment
banker not associated with either party) or the aggregate "in the money"
value at the date(s) of issue or the Termination Date, without discount in
any case for (x) terms of vesting, forfeiture or exercise, or (y)
"blockage" or (z) any restriction against transfer; and
(b) in addition to your entitlement to the vested portion of your
interest in the Defined Contribution Plan in accordance with the terms of
that plan, the Company shall pay to you, on or within ten days following
the applicable Termination Date, an amount in cash equal to the unvested
portion of the Company's contributions to your account, which unvested
portion shall be valued on the same basis as the Shares contributed by the
Company in respect of the unvested portion were valued at the date(s) of
contribution; and
(c) in addition to any vested retirement benefits to which you
are entitled on the Termination Date under the Defined Benefit Plan, the
Company shall pay to you, on or within ten days following an applicable
Termination Date, an amount in cash equal to the product of (i) a number
equal to your years of life expectancy beyond age 65 as of the Termination
Date determined in accordance with the actuarial assumptions utilized under
the Defined Benefit Plan immediately prior to the Termination Date, times
(ii) an amount equal to the difference between (A) the annual benefit to
which you would have been entitled at age 65 determined (s) as if you were
fully vested thereunder (and without regard to (I) whether you shall
actually have completed the period of "vesting service" required to qualify
for benefits under the Defined Benefit Plan, (II) any limitation on the
amount used in the calculation of the annual benefit thereunder, (III) any
offset thereunder for severance allowances payable thereunder, or (IV) any
amendment to the Defined Benefit Plan made in connection with a Change of
Control and on or prior to the Termination Date, which amendment adversely
affects in any manner the computation of retirement benefits under such
plan), (t) you had continued in employment with the Company as a "salaried
employee" for three years beyond the Termination Date, and (u) based on
"compensation" as defined as the highest annual rate of Base Salary in
effect during the current year or any of the three years preceding the
Termination Date plus the highest award (either earned or paid) under the
Bonus Plan in respect of any of the three years preceding the Termination
Date and (B) the annual benefit, if any, to which you would be entitled
under the single life annuity method of distribution under the Defined
Benefit Plan as of the Termination Date; and
(d) immediately upon an applicable Termination Date, all options
and rights to other forms of contingent incentive compensation granted to
you under the LTIP Plan which are not then fully vested, exercisable,
distributable or otherwise performable by the Company shall immediately
become fully vested, exercisable, distributable or otherwise performable by
the Company as though all applicable Performance Targets had been met or
achieved at maximum levels for all Performance Periods (including those
extending beyond the Termination Date) and any and all other LTIP Plan
contingencies had been
<PAGE>
satisfied in full at the Termination Date and the maximum benefits
thereunder had been earned at the Termination Date;
(e) following an applicable Termination Date, you shall receive
all benefits under and in accordance with the terms of the Plans (other
than the Bonus, Defined Contribution, Defined Benefit and LTIP Plans and
medical, disability, accident and life insurance plans and programs for all
of which separate provision is made herein) in which you are at the time a
participant, but only to the extent the same are vested under the terms of
such Plans at the Termination Date; and
(f) unless you give notice to the Company pursuant to the next
sentence within 90 days following an applicable Termination Date, the
Company shall maintain in full force and effect, at its sole expense for
the continued benefit of you and your dependents during the period from the
Termination Date through the earlier of (i) three years from the
Termination Date or (ii) the commencement date of equivalent benefits from
a new employer, all insured and self-insured employee welfare benefit Plans
and Perquisites in which you were entitled to participate immediately prior
to the Termination Date. Alternatively, if you notify the Company that you
so elect, the Company shall pay you within five days of such notification
an amount in cash equal to three times the average annual cost incurred by
the Company during the preceding three calendar years as a result of your
participation in such welfare benefit Plans (or such fewer whole calendar
years as you have so participated). If your participation in any such
welfare benefit Plan is barred, the Company, at its sole cost and expense,
shall arrange to have issued for the benefit of you and your dependents
individual policies of insurance providing benefits substantially similar
(on an after-tax basis) to those which you are entitled to receive under
such Plans. You shall not be required to pay any premiums or other charges
for such policies. At the end of three years after the Termination Date,
the Company, provided you have not previously received or are not then
receiving equivalent benefits from a new employer, shall arrange, at its
sole cost and expense, to enable you to convert you and your dependents'
coverage under such Plans to individual policies or programs upon the same
terms as employees of the Company may apply for such conversions.
Anything else in this Agreement to the contrary notwithstanding, if an
applicable Termination Date results from a merger or a tender offer or an
exchange offer, then unless otherwise agreed to by both parties in writing, all
amounts to which you shall at the closing thereof, or which you may upon
subsequent notice or lapse of time, become entitled under this Severance Package
or Section 10 shall be accelerated to, and become immediately due and payable
contemporaneously with, such closing.
"SHARES" means shares of Common Stock, $.01 par value, of the Company
at the date of this Agreement, as the same shall be subsequently amended,
modified or changed. The term "market value," when used with respect to a Share
means the closing price therefor on the New York Stock Exchange or if not listed
thereon, on such other exchange as shall at the time constitute the principal
exchange for trading in Shares.
<PAGE>
"TERMINATION PACKAGE" means your right to receive, and the Company's
obligation to pay and/or perform on, the following:
(a) on or within ten days following an applicable Termination Date,
the Company shall pay to you a lump sum, cash amount equal to the sum of
(i) two times the highest annual rate of Base Salary in effect during the
current year or any of the two years preceding the Termination Date and
(ii) two times the greater of (A) the maximum award you would have been
eligible to receive under the Bonus Plan in respect of the current year,
regardless of any limitations otherwise applicable to the Bonus Plan (i.e.,
the failure to have completed any vesting period or the current measurement
period, or the failure to achieve any performance goal applicable to all or
any portion of the measurement period) or (B) the largest award earned
(whether or not paid) under the Bonus Plan in respect of any of the three
years preceding the Termination Date; and
(b) following an applicable Termination Date, you shall receive all
benefits under and in accordance with the terms of the Plans (other than
the Bonus Plans for which separate provision is made above) in which you
are at the time a participant, but only to the extent the same are vested
under the terms of such Plans at the Termination Date.
"VOTING SECURITIES" means, with respect to any corporation or business
enterprise, those securities which under ordinary circumstances are entitled to
vote for the election of directors or others charged with comparable duties
under applicable law.
<PAGE>
EXHIBIT 10.18
September 1, 1999
Mr. Franklin Myers
President, Cooper Energy Services Division
Cooper Cameron Corporation
515 Post Oak Boulevard
Houston, Texas 77027
Dear Mr. Myers:
Cooper Cameron Corporation (the "Company") considers the establishment
and maintenance of a sound and vital management to be essential for the
protection and enhancement of the best interests of the Company and its
stockholders. In view of your experience and performance in the business of the
Company and its subsidiaries, the Company desires to secure your services for an
extended period. In addition, the Company recognizes that, as is the case with
many publicly-held corporations, the possibility of a change in control may
arise and that such possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders.
Accordingly, the board of directors of the Company (the "Board") has
determined that appropriate steps should be taken to assure the Company of the
continuation of your services and to reinforce and encourage the attention and
dedication of members of the Company's management to their assigned duties
without distraction in circumstances arising from the possibility of a change in
control of the Company. In particular the Board believes it important, should
the Company or its stockholders receive a proposal for or notice of transfer of
control of the Company, that you be able to assess and advise the Board whether
such transfer would be or is in the best interests of the Company and its
stockholders, and to take such other action regarding such proposal or transfer
as the Board might determine to be appropriate without being influenced by the
uncertainties of your own situation.
In order to induce you to remain in the employ of the Company, this
agreement (the "Agreement"), which has been approved by the Board and which
supersedes the previous letter agreement between you and the Company dated
November 30, 1995 in its entirety, sets forth the terms of your continued
employment by the Company and the compensation and severance benefits which the
Company agrees will be provided to you in the event your employment with the
Company should be terminated under the circumstances described below.
<PAGE>
Reference is made to Annex I hereto for definitions of certain terms
used in this Agreement, and such definitions are incorporated herein by such
reference with the same effect as if set forth herein. Certain capitalized terms
used in this Agreement in connection with the description of various Plans are
defined in the respective Plans, but if any conflicts with a definition herein
contained, the latter shall prevail.
35. Term of Employment. The Company hereby agrees to continue your
employment and you hereby agree to serve the Company for an employment
period commencing on the date hereof and initially ending August 31, 2000;
provided, however, that on each successive September 1 commencing in 2000,
the employment period shall automatically be extended for one additional
year (with the date to which the employment period has most recently been
so extended being hereinafter referred to as the "Expiration Date" and the
period commencing the date hereof and ending on the Expiration Date being
hereinafter referred to as the "Employment Period"), subject to prior
termination of the Employment Period pursuant to Section 4 of this
Agreement.
36. Duties.
(a) During the Employment Period, you shall serve the Company as
its Senior Vice President and as President, Cooper Energy Services Division, and
perform your duties and responsibilities diligently, faithfully and loyally and
devote such time to the Company's affairs as may be necessary to the end of
achieving the proper, efficient and successful operation of the Company's
business. In such capacities you shall (i) generally have the duties of such
offices as may be specified in the Bylaws, (ii) report directly to the Chief
Executive Officer and (iii) have general executive management of the business
and affairs of the Division, subject to the direction of the Chairman, President
and Chief Executive Officer, the Board or any Committee thereof. The foregoing
shall not, however, be deemed to restrict you from attending to matters or
engaging in activities not directly related to the business of the Company, if
reasonable in scope and time commitment and not otherwise in violation of this
Agreement.
(b) If during the Employment Period, (i) a tender offer or exchange
offer is made for 20% or more of the Company's outstanding Voting Securities or
(ii) a transaction is proposed which, if consummated, would result in a Change
of Control, you agree that you will not leave your employment with the Company
(other than as a result of Disability or upon Retirement) and will also render
the services contemplated in the introductory paragraphs of this Agreement until
such time as such tender offer, exchange offer or proposed transaction is
abandoned or terminated or a Change of Control has occurred.
37. Compensation.
(a) Base Salary. As compensation for your services, the Company
agrees to pay you basic compensation at the rate of $252,000 per annum through
December 31, 1999 and at the rate of $265,000 per annum beginning January 1,
2000 ("Base Salary"), payable on a current basis in equal installments not less
frequently than monthly, subject only to such payroll and withholding deductions
as may be required by law or the terms of Plans in which you are a participant.
For periods subsequent to January 1, 2000, your Base Salary shall be established
<PAGE>
annually by the Compensation Committee of the Board and paid on the same basis
as for the prior year, but no such adjustment shall result in a Base Salary for
any year of less than the highest annual rate so authorized by the Committee to
be paid to you during any previous calendar year(s) of the Company ended during
the Employment Period, except upon your prior written consent. The Company's
obligations to you hereunder shall remain unaffected by any election (such as
that made for the twelve month period ending December 31, 1999) by you to
receive your Base Salary in other than cash, and for all purposes of this
Agreement, such election shall apply only to the period for which it is made by
written agreement between the Company and you.
(b) Plans. In addition to your Base Salary, you will participate
in the Bonus Plan, Defined Benefit Plan and LTIP Plan, and be eligible to
participate in the Defined Contribution Plan, Purchase Plan and Other Plans,
including the Perquisites, for each year during the Employment Period.
(c) Other. The Company shall reimburse you for all expenses paid
or incurred by you in the performance of your duties under this Agreement in
accordance with the Company's normal expense reimbursement policies applicable
to senior executives.
38. Termination. Upon compliance by the initiating party with any
applicable procedures set forth in Section 5 hereof, your employment with the
Company:
(a) shall terminate automatically upon your death or Retirement;
(b) may be terminated prior to the Expiration Date at the
discretion of the Chief Executive Officer upon your Disability;
(c) may be terminated prior to the Expiration Date at the
discretion of the Chief Executive Officer for Cause;
(d) may be terminated prior to the Expiration Date at your
discretion, other than for Good Reason;
(e) may be terminated prior to the Expiration Date at the discretion
of the Chief Executive Officer prior to a Change of Control without Cause;
(f) may be terminated prior to the Expiration Date at the discretion
of the Chief Executive Officer in conjunction with a Change of Control
without Cause;
(g) may be terminated prior to the Expiration Date at your discretion
for Good Reason prior to a Change of Control; or
(h) may be terminated prior to the Expiration Date at your discretion
for Good Reason in conjunction with a Change of Control.
<PAGE>
39. Procedures for Termination. If it is intended that your
employment be terminated:
(a) pursuant to Section 4(b), the Company shall transmit to you
written notice setting forth the particulars upon which the Company bases
its determination that a Disability exists, together with a written request
of the Chief Executive Officer that you resume your duties within 30 days
following the date thereof, failing which a "final discharge" shall then
occur;
(b) pursuant to Section 4(c), the Company shall transmit to you
written notice setting forth the Cause for which you are proposed to be
dismissed in sufficient detail to permit a reasonable assessment of the
bona fides thereof, and setting a meeting with the Chief Executive Officer
not less than 30 days following the date of such notice at which the Chief
Executive Officer shall consider your termination and at which you and your
counsel shall have the opportunity to be heard, following which the Chief
Executive Officer shall either withdraw the notice, or if he so finds in
his good faith opinion, issue his report within ten days thereafter that
Cause exists and specifying the particulars of his findings, in which
latter event a "final discharge" shall occur. After receipt of a notice of
intended termination for Cause, you shall not have any authority to incur
any obligation of any kind whatsoever on behalf of the Company pending
withdrawal of such notice or "final discharge;"
(c) pursuant to Section 4(d), you shall transmit to the Company
written notice specifying that your resignation is other than for Good
Reason;
(d) pursuant to Section 4(e) or 4(f) the Company shall transmit
to you written notice specifying that your termination is without Cause;
(e) pursuant to Section 4(g) or 4(h), you shall transmit to the
Company written notice setting forth the particulars upon which you base
your determination that Good Reason exists and, only if the stated basis
therefor is capable of being cured, requesting a cure within 10 days,
failing which a "final separation" shall then occur, and if such stated
basis is not capable of cure by the Company, "final separation" shall occur
co-extensive with delivery of the notice.
For purposes of this Agreement, a "Termination Date" shall be deemed
to have occurred upon (i) the happening of any event contemplated by Section
4(a) [death or Retirement], (ii) the date of "final discharge" in the case of
termination initiated under Sections 5(a) [Disability] or 5(b)[Cause], (iii) the
date of "final separation" in the case of a termination initiated under Section
5(e) [Good Reason], or (iv) the 30th day following the date of any notice
contemplated by Sections 5(c) [resignation without Good Reason] or 5(d)
[discharge without Cause]; provided, that any proceeding initiated pursuant to
Section 11 hereof within 15 days after the giving of any notice under this
Section 5 shall (anything else in this Agreement to the contrary
notwithstanding) automatically toll the effectiveness of any Termination Date
until final resolution of such proceeding. Each notice which complies with the
requirements of this Section 5 is hereinafter referred to as a "Termination
Notice".
<PAGE>
40. Effect of Termination. If your employment is terminated:
(a) pursuant to Sections 4(a) [death or Retirement], 4(b)
[Disability], 4(c) [Cause], or 4(d) [resignation without Good Reason], then
you shall be entitled to receive (i) payment when due of your Base Salary
through the end of the first monthly pay period ended after the Termination
Date and (ii) all benefits under the Plans in which you are at the time a
participant, to the extent the same are vested under the terms thereof at
the Termination Date, and (except as otherwise provided herein) all other
obligations of the Company under this Agreement shall thereupon cease
provided, however, that in the event that your employment is terminated
pursuant to Section 4(a) as a result of your death, without prejudice to
your rights under the LTIP Plan or any option grant made pursuant thereto,
all outstanding options, rights and other forms of contingent incentive
compensation granted to you under the LTIP Plan shall receive the treatment
as provided for in subsection (d) of the definition of Severance Package
herein; or
(b) pursuant to Sections 4(e) [discharge without Cause prior to
Change of Control] or 4(g) [resignation for Good Reason prior to Change of
Control], then you shall become entitled to all benefits conferred upon you
by the Termination Package, and (except as otherwise provided herein) all
other obligations of the Company under this Agreement shall thereupon
cease.
(c) pursuant to Sections 4(f) [discharge without Cause after a
Change of Control] or 4(h) [resignation for Good Reason after a Change of
Control], then you shall become entitled to all benefits conferred upon you
by the Severance Package, and (except as otherwise provided herein) all
other obligations of the Company under this Agreement shall thereupon
cease.
You shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment, nor shall the amount of any
payment provided for in this Agreement be reduced by any compensation earned by
you as the result of employment by another employer after any Effective Date or
Termination Date.
41. LTIP Benefit Acceleration at Effective Date. Immediately upon
any Effective Date, all contingent compensation rights issued to you under
the LTIP Plan (including an option granted under the options in lieu of pay
program) which are then outstanding shall become vested, exercisable,
distributable and unrestricted (any contrary provision in the LTIP Plan
notwithstanding) for a period of 183 days following the Effective Date (the
"Exercise Period") whether or not during such period you continue to be
employed by the Company. During the Exercise Period, you shall have the
right immediately upon any written request by you to the Company, if
approved in writing by any person (acting solely in his individual capacity
and when so acting, such concurring person shall do so without any contrary
"fiduciary" or other duty to the Company) who was at the Effective Date an
officer or director of the Company, to (i) exercise all or any portion of
all your options covered (including, at your sole election, any associated
<PAGE>
Tandem SAR) by the LTIP Plan and to have the underlying Shares issued to
you, (ii) have issued to you on a non-forfeitable basis any or all Shares
covered by Restricted Stock Awards held by you under the LTIP Plan, (iii)
have issued to you any or all Performance Shares and/or Performance Units
held by you in the LTIP Plan, (iv) exercise all or any portion of any LTIP
Plan Freestanding SAR held by you, and (v) obtain the full benefit of any
other contingent compensation rights to which you may be entitled under the
LTIP Plan, in each case as though all applicable Performance Targets had
been met for all Performance Periods (including those extending beyond the
Effective Date) and any and all other LTIP Plan contingencies had been
satisfied in full at the Effective Date and the maximum possible benefit
thereunder had been earned in full at the Effective Date. To the extent you
have not exercised or requested performance of such benefits following the
Effective Date and prior to expiration of the Exercise Period, all terms
applicable to any such benefit prior to the Effective Date shall again
become fully applicable as though an Effective Date had never occurred.
42. Excise Tax. To the extent that the acceleration of vesting
or any payment, distribution or issuance made to you pursuant to this
Agreement or otherwise is subject to federal income, excise, or other tax
at a rate above the rate ordinarily applicable to like payments paid in the
ordinary course of business ("Penalty Tax"), whether as a result of the
provisions of Section 280G(b)(1) and 4999(a) of the Internal Revenue Code
of 1986, as amended, any similar or analogous provisions of any statute
adopted subsequent to the date hereof, or otherwise, then the Company shall
pay you an additional amount of cash (the "Additional Amount") such that
the net amount received by you, after paying any applicable Penalty Tax and
any federal or state taxes on such Additional Amount, shall be equal to the
amount that you would have received if such Penalty Tax were not
applicable.
43. Deferral of Payments; Early Payments. At any time prior to a
Termination Date, you may irrevocably direct the Company that any amounts
which are or should become payable to you under the Termination Package,
the Severance Package or pursuant to Section 7 hereof shall be paid to you
in three equal installments, payable on or within ten days following the
Termination Date, and on the first and second anniversaries of the initial
installment payment. In addition, if any payment to you in respect of a
stock-based benefit which is precipitated by the occurrence of an Effective
Date or a Termination Date and which would, in and of itself, give rise to
a short-swing profit under Section 16(b) of the Exchange Act, then both the
payment and the entitlement to payment thereof, shall automatically be
deferred until the earliest date (not later than 183 days following a
Termination Date) at which the payment of such benefit would not, in and of
itself, result in a short-swing profit. The Company and you further agree
that when it has become apparent in our collective best judgment (as
expressed by the Compensation Committee of the Board, in the case of the
Company) that a Change of Control is likely to occur and further, that a
likely consequence thereof will be the occurrence of a Termination Date,
the Company and you will use reasonable good faith efforts to undertake and
conclude negotiations intended to result in the payment to you of a portion
of the Termination Package or Severance Package earlier than would
otherwise be the case hereunder, thereby increasing the benefit conferred
upon you and the tax
<PAGE>
efficiency of such payments to the Company, with any consequent tax savings
to be allocated between you and the Company in such reasonable proportions
as we shall agree; unless so agreed to by both parties in writing, no such
negotiation or agreement shall affect the Company's obligations to you
under any other provision of this Agreement.
44. Conditional Share Purchase Obligation.
(a) If a Change of Control occurs as a consequence of a tender offer
or exchange offer (the "Tender Offer"), the Company shall, if requested by you,
purchase from you (whether a Termination Date has occurred following the Change
of Control) for cash on any business day selected by you upon not less than ten
days' notice to the Company, which day shall not be less than ten days following
consummation of the Tender Offer nor more than three years after the Effective
Date, up to that number of Shares which shall be equal to the product of (x) the
number of Shares acquired by you upon exercise or distribution of any benefit
under the Bonus Plan or LTIP Plan (including an option granted under the options
in lieu of pay program) prior to consummation of the Tender Offer, multiplied by
(y) the decimal equivalent of (I) the number of Shares accepted for purchase or
exchange in the Tender Offer, divided by (II) the number of Shares timely and
validly tendered pursuant to the Tender Offer. In the event the above obligation
to purchase Shares occurs by reason of a cash tender offer or a combination cash
tender offer and exchange offer, the cash price per share to be paid to you
hereunder shall be equal to the highest price paid in cash pursuant to the
Tender Offer. In the event such obligation occurs by reason of an exchange
offer, the cash price per share to be paid to you hereunder shall be equal to
the closing price, if traded on a stock exchange, or the average bid and asked
prices, if traded in the over-the-counter market, of the security of the person
so exchanged for the Shares (the "Exchange Security") on the first day on which
the Exchange Security could have been sold by you on such exchange or in the
over-the-counter market, as the case may be, in a regular broker's transaction
had your Shares been tendered and accepted, multiplied by the number of Exchange
Securities (or fraction thereof) issued in the Tender Offer for each Company
Share; and
(b) if a Change of Control occurs pursuant to a Tender Offer and (i) a
merger, consolidation, reorganization, sale, spin-off, or purchase of assets
under which all remaining outstanding Shares will be converted into or become
exchangeable for cash, or for securities ("Merger Security") issued or to be
issued by the Person who made the Tender offer (or a subsidiary or affiliate of
such Person), is thereafter proposed to the Company or its stockholders, and
(ii) such merger, consolidation, reorganization or purchase of assets occurs
less than three years after the Effective Date, and (iii) the amounts of cash
into which each Share would be converted if the transaction is effected wholly
for cash, or the Merger Security Value (as defined below) if such transaction is
effected wholly for Merger Securities, or the sum of the cash and the Merger
Security Value if the Transaction is effected partly for cash and partly for
Merger Securities, as the case may be, is less than 95% of the per share price
that would have been paid by the Company for such portion of your Shares had you
exercised your option to require the Company to purchase such Shares under
Section 10(a) above, the Company shall pay you (whether or not a Termination
Date has occurred following a Change of Control), an amount in
<PAGE>
cash equal to the difference between the aggregate price you would have received
from the number of Shares the Company would have been required to purchase from
you had you exercised such option under Section 10(a) and the amount of cash
and/or the Merger Security Value received for the same number of Shares in such
merger, consolidation, reorganization or purchase of assets. Such cash payment
shall be made to you on a business day selected by you upon no less than ten-
calendar days' notice to the Company or its Successor (as hereinafter defined).
For purposes of this Section 10(b), "Merger Security Value" shall mean the
closing price, if traded on a stock exchange, or the average bid and asked
prices if traded in the over-the-counter market, of the Merger Security on the
first day on which the Merger Security could have been sold by you on such
exchange or in the over-the-counter market, as the case may be, in a regular
broker's transaction, multiplied by the number of Merger Securities (or fraction
thereof) for which each Share was exchangeable or into which each Share was
convertible. If no public market develops for the Merger Security within 30 days
from the date of its issue, however, "Merger Security Value" shall mean the fair
market value of such Merger Security (on a per unit basis) in the written
opinion of a nationally recognized investment banking firm acceptable to you) on
the effective date of the merger, consolidation, reorganization or purchase of
assets, as the case may be, multiplied by the number of Merger Securities (or
fraction thereof) for which each Share was exchangeable or into which each Share
was convertible.
10A. Certain Rights with Respect to Options.
(a) In addition to any other rights or privileges held by a holder
with respect to an option (including an option granted under the options in lieu
of pay program) covered by the LTIP Plan ("LTIP Option") (including the
provisions of Section 7 and Section 10), upon a Change in Control of the
Company, the holder shall have the right to exchange such option for a new
option ("New Option"), that shall be issued according to the following:
(1) the New Option shall be immediately exercisable;
(2) the New Option shall have a term equal to the remaining
term of the LTIP Option it replaces (and shall be exercisable through
such term);
(3) the New Option will give the holder the right to acquire
shares of the publicly traded common equity of the Company or any
successor or direct or indirect parent of either ("Replacement Common
Stock") (in the event of two or more classes of common equity, the
common equity used shall be determined by the Compensation Committee
of the Board of Directors of the Company existing prior to a Change in
Control);
(4) the exercise price used for the New Option ("New Exercise
Price") for acquiring a share of Replacement Common Stock shall be
determined at the time of the Change in Control by taking (i) the
higher of (a) the aggregate value (as of the date of the Change in
Control) equal to the merger or acquisition consideration paid or
payable in the Change in
<PAGE>
Control, on a per share basis, or (b) the highest price paid for a
share of Cooper Cameron common stock over the New York Stock Exchange
(or other primary exchange) during the 12 months prior to the Change
in Control, and (ii) dividing such amount into the per share exercise
price of the LTIP Option; with the result multiplied by the
Replacement Common Stock closing price on its principal stock exchange
on the day of the Change in Control, or if traded in the over-the-
counter market and not on an exchange, the last bid price in such
market;
(5) the number of shares of Replacement Common Stock subject
to the New Option shall be the number necessary, using the New
Exercise Price, to provide an aggregate value (as of the date of the
Change in Control) equal to the higher of (a) the merger or
acquisition consideration paid or payable in the Change in Control on
a per share basis, or (b) the highest price paid for a share of Cooper
Cameron common stock over the New York Stock Exchange (or other
primary exchange) during the 12 months prior to the Change in Control;
(6) if there is no publicly traded common equity of the Company,
or any successor or any direct or indirect parent of either, then the
New Option shall be with respect to shares of the direct or indirect
parent of the Company, and if no such parent then the Company, and if
the Company no longer exists, then the successor to the Company;
(b) In addition to any other rights or privileges held by a holder
with respect to an option covered by the LTIP Plan (including the provisions of
Section 7 and Section 10), if a Change in Control occurs, each holder of an
option shall have the right, but not the obligation, to tender, within 30 days
of such a Change in Control, any option to the Company (or any successor to the
Company) and receive in exchange therefor a lump sum cash amount equal to the
Black-Scholes value of the option, without discount for risk of forfeiture and
nontransferability determined by using the highest Black-Scholes valuation
during the one-year period prior to the Change in Control. Any Black-Scholes
valuation shall be performed on a basis consistent with the methodology set
forth on Exhibit A to this Agreement.
45. Dispute Resolution. It is irrevocably agreed that if any
dispute arises between us under this Agreement, or as to any interpretive
matter under or alleged breach of this Agreement, the exclusive remedy of
each of us shall be to commence binding arbitration proceedings under the
rules of the American Arbitration Association (the "Rules"), with any such
arbitration proceeding to be conducted in Houston, Texas, applying the
substantive law of the State of Texas ("Arbitration"). If Arbitration is
commenced prior to an Effective Date, each of us will deposit with the
arbitrator(s), 50% of the arbitrator's preliminary estimate of the costs of
arbitration (excluding counsel fees and expenses) as security for costs; if
Arbitration is commenced after an Effective Date, the Company will be
solely responsible for all costs thereof and shall deposit with the
arbitrator(s) 100% of the arbitrator(s) preliminary estimate thereof.
Notwithstanding any contrary provision of the Rules or Texas law, the
Company shall have the burden of proof
<PAGE>
with respect to any of the following which are at issue in Arbitration: (i)
that Cause or Disability existed at the time any notice was given to you
under Section 5 based upon either them and/or the sufficiency of such
notice; and (ii) that Good Reason did not exist at the time notice was
given to the Company under Section 5 based upon Good Reason (but only if
such notice was dated on or after an Effective Date) and/or the sufficiency
of such notice; and (iii) that a Change of Control has not occurred. Any
final ruling of the arbitrator(s) in an Arbitration shall be final and
binding for all purposes, and judgment on any Arbitration award may be
entered and enforced in any court having jurisdiction.
The Company and you irrevocably agree that in the event the arbitrator(s)
shall determine (after hearing) that any matter presented in Arbitration is one
which under Texas law is not susceptible to arbitration, in such event (and only
in such event), (i) exclusive jurisdiction over the non-arbitrable issue shall
be in the lowest Texas state court of general jurisdiction sitting in Harris
County, Texas, (ii) we are each at the time present in Texas for the purpose of
conferring personal jurisdiction; (iii) any such action may be brought in such
courts, and any objection that the Company or you may now or hereafter have to
the venue of such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court is waived, and we each agree not
to plead or claim the same, (iv) service of process in any such proceeding or
action may be effected by mailing a copy thereof by registered or certified
mail, return receipt requested (or any substantially similar form of mail),
postage prepaid, to such party at the address provided in Section 14 hereof, (v)
no punitive or consequential damages shall be awarded in any such action or
proceeding and we each agree not to plead or claim the same; and (vi) prior to
any trial on the merits, we will submit any such non-arbitrable issue to court
supervised, non-binding mediation.
If proceedings are commenced prior to an Effective Date, all actual costs
of Arbitration or court proceedings involving any non-arbitrable issue
(excluding, in each case, counsel fees and expenses), shall be apportioned by
the arbitrator(s) or the court in such manner as shall be deemed equitable in
light of any final Arbitration award or judgment; if commenced on or after an
Effective Date, all such costs shall be borne exclusively by the Company.
Anything else in this Section to the contrary notwithstanding, nothing in
this Agreement shall impair your ability to seek specific performance of your
right to be paid under, and to receive all other benefits conferred by, Section
3 of this Agreement during the pendency of any dispute or proceeding concerning
Sections 5, 6, 7 and/or 9 hereof.
46. Successors; Binding Agreement.
(a) Upon your written request, the Company will seek to have any
Successor (as defined below), by agreement in form and substance satisfactory to
you, expressly assume 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 there
has been a Change of Control prior to, or a Change of Control will result from,
any such succession, then failure of the Company to obtain at your request such
agreement prior to or upon the effectiveness of any such succession (other than
by merger or consolidation) shall constitute Good Reason for termination by you
of your employment and, upon delivery of a Notice of Termination by you to the
Company, you shall be
<PAGE>
entitled to the benefits provided in Section 6(c) hereof. "Successor" shall mean
any Person that succeeds to, or has the ability to control, the Company's
business as a whole, directly by merger, consolidation or spin-off or indirectly
by purchase of the Company's Voting Securities or acquisition of all or
substantially all of the assets of the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
47. Fees and Expenses. The Company shall pay all legal fees and
reasonable expenses incurred by you (including costs of arbitration) as a
result of (a) your termination following a Change of Control (including all
such fees and expenses, if any, incurred in contesting or disputing any
such termination) or (b) your seeking to obtain, assert or enforce any
right or benefit conferred upon you by this Agreement.
48. Notices. Any and all notices required or permitted to be given
hereunder shall be in writing and shall be deemed to have been given when
delivered in person to the persons specified below or deposited in the
United States mail, certified or registered mail, postage prepaid and
addressed as follows:
If to the Company: Cooper Cameron Corporation
515 Post Oak Boulevard
Houston, Texas 77027
Attention: Chairman, Compensation
Committee of the Board of Directors
If to you: Franklin Myers
10,022 Park Trail
Houston, Texas 77024
Either party may change, by the giving of notice in accordance with this
Section 14, the address to which notices are thereafter to be sent.
49. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
50. Survival. All obligations undertaken and benefits conferred
pursuant to this Agreement, except those set forth in Sections 1 and 2,
shall survive the Employment Period and continue thereafter until performed
in full.
51. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or
discharge is agreed to in writing signed by you and the Chairman of the
Compensation Committee of the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or of compliance with,
any condition or provision of this Agreement to be performed by such
<PAGE>
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not
expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the
internal laws of the State of Texas.
If this letter correctly sets forth our understanding with respect to the
subject matter hereof, please sign and return one copy of this letter to the
Company.
Sincerely,
COOPER CAMERON CORPORATION
BY:
-------------------------------------
Sheldon R. Erikson
Chairman, President and Chief Executive
Officer
Agreed to as of the ___
day of September, 1999:
- -----------------------
Franklin Myers
<PAGE>
ANNEX I TO AGREEMENT DATED SEPTEMBER 1, 1999
BETWEEN
COOPER CAMERON CORPORATION
AND
FRANKLIN MYERS
Definition of
Certain Terms
"BONUS PLAN" means for each year, the Company's Management Incentive
Compensation Plan or any other Plan adopted by the Board which provides for the
payment of additional compensation on an annual basis to senior executive
officers contingent upon the Company's results of operations for that specific
year, in either case as such Plan shall be amended or modified to, but not on or
after, any Effective Date.
"BYLAWS" means the bylaws of the Company as in effect at the date hereof
and as the same shall be amended or otherwise modified to, but not on or after,
any Effective Date.
"CAUSE" means (i) your conviction by a court of competent jurisdiction,
from which conviction no further appeal can be taken, of a felony-grade crime
involving moral turpitude, or (ii) your willful failure to perform substantially
your duties with the Company (other than a failure due to physical or mental
illness) which is materially and demonstrably injurious to the Company, or (iii)
only prior to an Effective Date, the engaging by you in any "business" engaged
in activities in direct competition with the Company, whether as an employee,
officer or director or through the beneficial ownership by you of 10% or more of
the Voting Securities of such "business." No act or failure to act on your part
shall be considered "willful" unless done, or omitted to be done, by you in bad
faith and without reasonable belief that your action or omission was in, or not
opposed to, the best interests of the Company.
"CHANGE OF CONTROL" means the earliest date at which:
(i) any Person is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
outstanding Voting Securities, other than through the purchase of Voting
Securities directly from the Company through a private placement; or
(ii) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person 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 two-thirds of the directors comprising the
Incumbent Board shall from and after such election be deemed to be a member of
the Incumbent Board; or
<PAGE>
(iii) the Company is merged or consolidated with another corporation
or entity and as a result of such merger or consolidation less than 80% of the
outstanding Voting Securities of the surviving or resulting corporation or
entity shall then be owned by the former stockholders of the Company; or
(iv) a tender offer or exchange offer is made and consummated by a
Person other than the Company for the ownership of 20% or more of the Voting
Securities of the Company then outstanding; or
(v) all or substantially all of the assets of the Company are sold or
transferred to a Person as to which (A) the Incumbent Board does not have
authority (whether by law or contract) to directly control the use or further
disposition of such assets and (B) the financial results of the Company and such
Person are not consolidated for financial reporting purposes.
Anything else in this definition to the contrary notwithstanding, no
Change of Control shall be deemed to have occurred by virtue of any transaction
which results in you, or a group of Persons which includes you, acquiring 20% or
more of either the combined voting power of the Company's outstanding Voting
Securities or the Voting Securities of any other corporation or entity which
acquires all or substantially all of the assets of the Company, whether by way
of merger, consolidation, sale of such assets or otherwise.
"DEFINED BENEFIT PLAN" means the Company's Retirement Plan and
Supplemental Excess Defined Benefit Plan, as the same shall be amended or
modified to, but not on or after, any Effective Date.
"DEFINED CONTRIBUTION PLAN" means the Company's Retirement Savings Plan
and Supplemental Excess Defined Contribution Plan, as the same shall be amended
or modified to, but not on or after, any Effective Date.
"DISABILITY" means your continuing full-time absence from your duties
with the Company for 180 days or longer as a result of physical or mental
incapacity.
"EFFECTIVE DATE" means the earliest date upon which (i) any of the events
set forth under the definition of Change of Control shall have occurred, (ii)
the receipt by the Company of a Schedule 13D stating the intention of any Person
to take actions which, if accomplished, would constitute a Change of Control, or
(iii) the public announcement by any Person of its intention to take any such
action, in each case without regard for any contingency or condition which has
not been satisfied on such date.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
<PAGE>
"GOOD REASON" means any of the following:
(i) except as a result of your death or Retirement, or following
the receipt by you of a Notice of Termination for Cause or due to
Disability, a change in your status, title(s) or position(s) as an officer
of the Company which, in your reasonable judgment, does not represent a
promotion, with commensurate adjustment of compensation, from your status,
title(s) and position(s); or the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are inconsistent with
such status, title(s) or position(s); or the withdrawal from you of any
duties or responsibilities which in your reasonable opinion are consistent
with such status, title(s) or position(s); or any removal of you from or
any failure to reappoint or reelect you to such position(s); or
(ii) a reduction by the Company in your base salary; or
(iii) the failure by the Company to continue in effect any Plan
in which you were then participating other than as a result of the normal
expiration or amendment of any such Plan in accordance with its terms, or
the taking of any action, or the failure to act, by the Company which would
adversely affect your continued participation in any such Plan on at least
as favorable a basis to you as is the case on the date hereof or which
would materially reduce your benefits under any of such Plan or deprive you
of any material benefit enjoyed by you on the date hereof, except as
proposed by you to the Board or the Compensation Committee thereof; or
(iv) the Company's requiring you to be based anywhere outside a
twenty-five (25) mile radius of your office as it was located as of the
date hereof except for required travel on the Company's business to an
extent substantially consistent with your business travel obligations on
behalf of the Company prior to the date hereof; or
(v) the failure by the Company upon a Change of Control to obtain
the assumption of this Agreement by any Successor (other than by merger or
consolidation); or
(vi) any purported termination by the Company of your employment
which is not effected pursuant to a Notice of Termination; and for purposes
of this Agreement, no such purported termination shall be effective; or
(vii) any refusal by the Company to continue to allow you to attend
to matters or engage in activities not directly related to the business of
the Company which you attended to or were engaged in prior to the date
hereof and which do not otherwise violate your obligations hereunder; or
(viii) any continuing material default by the Company in the
performance of its obligations under this Agreement, whether before or
after a Change of Control.
"LTIP PLAN" means the Company's Long-Term Incentive Plan adopted as the
same shall be amended or modified to, but not on or after, any Effective Date.
<PAGE>
"OTHER PLANS" means any thrift; bonus or incentive; stock option or
stock accumulation; pension; medical, disability, accident or life insurance
plan, program or policy of the Company which is intended to benefit the chief
executive officer and/or executive officers of the Company (other than the Bonus
Plan, Defined Benefit Plan, Defined Contribution Plan, LTIP Plan or Purchase
Plan).
"PERSON" means any individual, corporation, partnership, group,
association or other "person," as such term is used in Sections 13(d) and 14(d)
of the Exchange Act, other than the Company or any Plans sponsored by the
Company.
"PERQUISITES" means individual perquisites benefits received by
executives, including, but not limited to, the use of company aircraft for 50
hours per year and club membership dues.
"PLANS" means the Bonus Plan, Defined Benefit Plan, Defined
Contribution Plan, LTIP Plan, Purchase Plan, Compensation Deferral Plan and
Other Plans.
"PURCHASE PLAN" means the Company's Employee Stock Purchase Plan
adopted as the same shall be amended or modified to, but not on or after, any
Effective Date.
"RETIREMENT" means termination of your employment on the "normal
retirement date" as set forth in the Defined Benefit Plan.
"SEVERANCE PACKAGE" means your right to receive, and the Company's
obligation to pay and/or perform on, the following:
(a) on or within ten days following an applicable Termination
Date, the Company shall pay to you a lump sum, cash amount equal to the sum
of (i) three times the highest annual rate of Base Salary in effect during
the current year or any of the three years preceding the Termination Date
and (ii) three times the greater of (A) the maximum award you would have
been eligible to receive under the Bonus Plan in respect of the current
year, regardless of any limitations otherwise applicable to the Bonus Plan
(i.e., the failure to have completed any vesting period or the current
measurement period, or the failure to achieve any performance goal
applicable to all or any portion of the measurement period) or (B) the
largest award earned (whether or not paid) under the Bonus Plan in respect
of any of the three years preceding the Termination Date, or (C) 100% of
your Base Salary at the applicable Termination Date, and (iii) three times
the Black-Scholes value at the time of grant of the most valuable one-year
option grant (excluding any option you received at your election in lieu of
salary) you had received from the Company during the five years prior to
your Termination Date with any such Black-Scholes valuation performed on a
basis consistent with the methodology set forth on Exhibit A to the
Agreement. In the event you shall have received for any relevant period,
Shares or rights to acquire the same, in lieu of salary or bonus, then such
Shares shall be valued for all purposes at the higher of aggregate market
value at the date(s) of issue or the Termination Date, without discount in
either case for (u) "blockage," (v) any restriction against transfer, or
(w) any forfeiture provision; and any such "rights"
<PAGE>
(whether denominated as warrants, options, rights or otherwise) shall be
valued at the highest of the aggregate Black-Scholes' value (with any
assumptions used in such valuation determined by an independent investment
banker not associated with either party) or the aggregate "in the money"
value at the date(s) of issue or the Termination Date, without discount in
any case for (x) terms of vesting, forfeiture or exercise, or (y)
"blockage" or (z) any restriction against transfer; and
(b) in addition to your entitlement to the vested portion of your
interest in the Defined Contribution Plan in accordance with the terms of
that plan, the Company shall pay to you, on or within ten days following
the applicable Termination Date, an amount in cash equal to the unvested
portion of the Company's contributions to your account, which unvested
portion shall be valued on the same basis as the Shares contributed by the
Company in respect of the unvested portion were valued at the date(s) of
contribution; and
(c) in addition to any vested retirement benefits to which you
are entitled on the Termination Date under the Defined Benefit Plan, the
Company shall pay to you, on or within ten days following an applicable
Termination Date, an amount in cash equal to the product of (i) a number
equal to your years of life expectancy beyond age 65 as of the Termination
Date determined in accordance with the actuarial assumptions utilized under
the Defined Benefit Plan immediately prior to the Termination Date, times
(ii) an amount equal to the difference between (A) the annual benefit to
which you would have been entitled at age 65 determined (s) as if you were
fully vested thereunder (and without regard to (I) whether you shall
actually have completed the period of "vesting service" required to qualify
for benefits under the Defined Benefit Plan, (II) any limitation on the
amount used in the calculation of the annual benefit thereunder, (III) any
offset thereunder for severance allowances payable thereunder, or (IV) any
amendment to the Defined Benefit Plan made in connection with a Change of
Control and on or prior to the Termination Date, which amendment adversely
affects in any manner the computation of retirement benefits under such
plan), (t) you had continued in employment with the Company as a "salaried
employee" for three years beyond the Termination Date, and (u) based on
"compensation" as defined as the highest annual rate of Base Salary in
effect during the current year or any of the three years preceding the
Termination Date plus the highest award (either earned or paid) under the
Bonus Plan in respect of any of the three years preceding the Termination
Date and (B) the annual benefit, if any, to which you would be entitled
under the single life annuity method of distribution under the Defined
Benefit Plan as of the Termination Date; and
(d) immediately upon an applicable Termination Date, all options
and rights to other forms of contingent incentive compensation granted to
you under the LTIP Plan which are not then fully vested, exercisable,
distributable or otherwise performable by the Company shall immediately
become fully vested, exercisable, distributable or otherwise performable by
the Company as though all applicable Performance Targets had been met or
achieved at maximum levels for all Performance Periods (including those
extending beyond the Termination Date) and any and all other LTIP Plan
contingencies had been
<PAGE>
satisfied in full at the Termination Date and the maximum benefits
thereunder had been earned at the Termination Date;
(e) following an applicable Termination Date, you shall receive
all benefits under and in accordance with the terms of the Plans (other
than the Bonus, Defined Contribution, Defined Benefit and LTIP Plans and
medical, disability, accident and life insurance plans and programs for all
of which separate provision is made herein) in which you are at the time a
participant, but only to the extent the same are vested under the terms of
such Plans at the Termination Date; and
(f) unless you give notice to the Company pursuant to the next
sentence within 90 days following an applicable Termination Date, the
Company shall maintain in full force and effect, at its sole expense for
the continued benefit of you and your dependents during the period from the
Termination Date through the earlier of (i) three years from the
Termination Date or (ii) the commencement date of equivalent benefits from
a new employer, all insured and self-insured employee welfare benefit Plans
and Perquisites in which you were entitled to participate immediately prior
to the Termination Date. Alternatively, if you notify the Company that you
so elect, the Company shall pay you within five days of such notification
an amount in cash equal to three times the average annual cost incurred by
the Company during the preceding three calendar years as a result of your
participation in such welfare benefit Plans (or such fewer whole calendar
years as you have so participated). If your participation in any such
welfare benefit Plan is barred, the Company, at its sole cost and expense,
shall arrange to have issued for the benefit of you and your dependents
individual policies of insurance providing benefits substantially similar
(on an after-tax basis) to those which you are entitled to receive under
such Plans. You shall not be required to pay any premiums or other charges
for such policies. At the end of three years after the Termination Date,
the Company, provided you have not previously received or are not then
receiving equivalent benefits from a new employer, shall arrange, at its
sole cost and expense, to enable you to convert you and your dependents'
coverage under such Plans to individual policies or programs upon the same
terms as employees of the Company may apply for such conversions.
Anything else in this Agreement to the contrary notwithstanding, if an
applicable Termination Date results from a merger or a tender offer or an
exchange offer, then unless otherwise agreed to by both parties in writing, all
amounts to which you shall at the closing thereof, or which you may upon
subsequent notice or lapse of time, become entitled under this Severance Package
or Section 10 shall be accelerated to, and become immediately due and payable
contemporaneously with, such closing.
"SHARES" means shares of Common Stock, $.01 par value, of the Company
at the date of this Agreement, as the same shall be subsequently amended,
modified or changed. The term "market value," when used with respect to a Share
means the closing price therefor on the New York Stock Exchange or if not listed
thereon, on such other exchange as shall at the time constitute the principal
exchange for trading in Shares.
<PAGE>
"TERMINATION PACKAGE" means your right to receive, and the Company's
obligation to pay and/or perform on, the following:
(a) on or within ten days following an applicable Termination Date,
the Company shall pay to you a lump sum, cash amount equal to the sum of
(i) two times the highest annual rate of Base Salary in effect during the
current year or any of the two years preceding the Termination Date and
(ii) two times the greater of (A) the maximum award you would have been
eligible to receive under the Bonus Plan in respect of the current year,
regardless of any limitations otherwise applicable to the Bonus Plan (i.e.,
the failure to have completed any vesting period or the current measurement
period, or the failure to achieve any performance goal applicable to all or
any portion of the measurement period) or (B) the largest award earned
(whether or not paid) under the Bonus Plan in respect of any of the three
years preceding the Termination Date; and
(b) following an applicable Termination Date, you shall receive all
benefits under and in accordance with the terms of the Plans (other than
the Bonus Plans for which separate provision is made above) in which you
are at the time a participant, but only to the extent the same are vested
under the terms of such Plans at the Termination Date.
"VOTING SECURITIES" means, with respect to any corporation or business
enterprise, those securities which under ordinary circumstances are entitled to
vote for the election of directors or others charged with comparable duties
under applicable law.
<PAGE>
EXHIBIT 10.19
November 11, 1999
<<Title>> <<FirstName>> <<LastName>>
<<JobTitle>>
<<Company>>
<<City>>, <<State>>
Dear <<FirstName>>:
Cooper Cameron Corporation (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential for the protection
and enhancement of the best interests of the Company and its shareholders. The
Company recognizes that, as is the case with many publicly-held corporations,
the possibility of a "Change of Control" (as defined herein) may arise and that
such possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders. Accordingly, the board of
directors of the Company (the "Board") has determined that appropriate steps
should be taken to assure the Company of the continuation of your service and to
reinforce and encourage the attention and dedication of members of the Company's
management to their assigned duties without distraction in circumstances arising
from the possibility of a Change of Control of the Company. In particular the
Board believes it important, should the Company or its shareholders receive a
proposal for or notice of transfer of control of the Company, or consider one
itself, that you be able to assess and advise the Company whether such transfer
would be or is in the best interests of the Company and its shareholders, and to
take such other action regarding such transfer as the Board might determine to
be appropriate without being influenced by the uncertainties of your own
situation.
In order to induce you to remain in the employ of the Company, this letter
agreement (the "Agreement"), prepared pursuant to authority granted by the
Board, sets forth the compensation and severance benefits which the Company
agrees will be provided to you should your employment with the Company be
terminated in connection with a Change of Control under the circumstances
described below as well as certain other benefits which will be made available
to you should you be employed by the Company on the Effective Date of a Change
of Control.
Reference is made to Annex I hereto for definitions of certain terms used
in this Agreement, and such definitions are incorporated herein by such
reference with the same effect as if set forth herein.
<PAGE>
Page 2
1. Termination in Connection with a Change of Control.
(a) If there is a termination of your employment with the Company
either by the Company without Cause or by you for Good Reason during the period
between the Effective Date of a Change of Control and 2 years following the
Change of Control (the "Effective Period"), and if such Effective Date occurs
during the life of this Agreement, you shall be entitled to the following
benefits , whether or not this Agreement has been cancelled prior to the time of
your termination:
(i) all benefits conferred upon you by the Severance Package, and
(ii) in addition, all benefits payable under the provisions either of
the Company's employee and executive Plans in which you are a participant
immediately prior to the Effective Date, or of those plans in existence at the
time of your Termination Date, whichever are more favorable to you, in
accordance with the terms and conditions of such Plans or plans, such benefits
to be paid under such Plans or plans and not under this Agreement.
(b) Notwithstanding the above, you shall not be entitled to any
such benefits if your termination results from your death, disability or
retirement, unless your death, disability or retirement occurs (i) during the
Effective Period and (ii), with respect to the benefits conferred by the
Severance Package only, after either it has been decided that you will be
terminated without Cause during the Effective Period, or you have given notice
of termination for Good Reason during the Effective Period.
(c) You shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment, nor
shall the amount of any payment provided for in this Agreement be
reduced by any compensation earned by you as the result of
employment by another employer after any Termination Date.
2. Procedures for Termination.
(a) If it is intended that your employment be terminated by you for
Good Reason you shall transmit to the Company written notice setting forth the
particulars upon which you base your determination that Good Reason exists and,
only if the stated basis therefore is capable of being cured, requesting a cure
within 10 days. Failing such a cure, a "final separation" shall then occur, and
if such stated basis is not capable of cure by the Company, "final separation"
shall occur co-extensive with delivery of the notice. For purposes of this
Agreement, a "Termination Date" shall be deemed to have occurred upon the date
of such "final separation".
(b) If it is intended that your employment be terminated by the
Company without Cause, a "Termination Date" shall be deemed to have occurred
upon the 30th day following the date of receipt of any notice so stating, or
upon the date specified in the notice, whichever is later. If it is intended
that your employment be terminated by the Company for Cause, if you contest such
termination pursuant to any proceeding initiated pursuant to Section 7 hereof
within 15 days of receipt of such notice, and it is ultimately determined that
cause did not
<PAGE>
Page 3
exist, then (anything else in the Agreement to the contrary notwithstanding) a
"Termination Date" shall be deemed to have occurred upon the final resolution of
such proceeding.
3. LTIP Benefit Acceleration. Immediately upon any Change of Control, all
contingent compensation rights issued to you under the LTIP Plan which are then
outstanding shall become vested, exercisable, distributable and unrestricted
(any contrary provision in the LTIP Plan notwithstanding) whether or not you
continue to be employed by the Company. You shall have the right immediately
upon any written request by you to the Company, to (i) exercise all or any
portion of all your options covered (including, at your sole election, any
associated Tandem SAR) by the LTIP Plan and to have the underlying Shares issued
to you, (ii) have issued to you on a non-forfeitable basis any or all Shares
covered by Restricted Stock Awards held by you under the LTIP Plan, (iii) have
issued to you any or all Performance Shares and/or Performance Units held by you
in the LTIP Plan, (iv) exercise all or any portion of any LTIP Plan Freestanding
SAR held by you, and (v) obtain the full benefit of any other contingent
compensation rights to which you may be entitled under the LTIP Plan, in each
case as though all applicable Performance Targets had been met or achieved at
maximum levels for all Performance Periods (including those extending beyond the
Effective Date) and any and all other LTIP Plan contingencies had been satisfied
in full at the date of the Change of Control and the maximum possible benefits
thereunder had been earned at the date of the Change of Control.
4. Conditional Share Purchase Obligation.
(a) If a Change of Control occurs as a consequence of a tender offer
or exchange offer (the "Tender Offer"), the Company shall, if requested by you,
purchase from you (whether a Termination Date has occurred following the Change
of Control) for cash on any business day selected by you upon not less than ten
days' notice to the Company, which day shall not be less than ten days following
consummation of the Tender Offer nor more than three years after the Effective
Date, up to that number of Shares which shall be equal to the product of (x) the
number of Shares acquired by you upon exercise or distribution of any benefit
under the Bonus Plan or LTIP Plan prior to consummation of the Tender Offer,
multiplied by (y) the decimal equivalent of (I) the number of Shares accepted
for purchase or exchange in the Tender Offer, divided by (II) the number of
Shares timely and validly tendered pursuant to the Tender Offer. In the event
the above obligation to purchase Shares occurs by reason of a cash tender offer
or a combination cash tender offer and exchange offer, the cash price per share
to be paid to you hereunder shall be equal to the highest price paid in cash
pursuant to the Tender Offer. In the event such obligation occurs by reason of
an exchange offer, the cash price per share to be paid to you hereunder shall be
equal to the closing price, if traded on a stock exchange, or the average bid
and asked prices, if traded in the over-the-counter market, of the security of
the person so exchanged for the Shares (the "Exchange Security") on the first
day on which the Exchange Security could have been sold by you on such exchange
or in the over-the-counter market, as the case may be, in a regular broker's
transaction had your Shares been tendered and accepted, multiplied by the number
of Exchange Securities (or fraction thereof) issued in the Tender Offer for each
Company Share; and
<PAGE>
Page 4
(b) If a Change of Control occurs pursuant to a Tender Offer and (i)
a merger, consolidation, reorganization, sale, spin-off, or purchase of assets
under which all remaining outstanding Shares will be converted into or become
exchangeable for cash, or for securities ("Merger Security") issued or to be
issued by the Person who made the Tender Offer (or a subsidiary or affiliate of
such Person), is thereafter proposed to the Company or its shareholders, and
(ii) such merger, consolidation, reorganization or purchase of assets occurs
less than three years after the Effective Date, and (iii) the amounts of cash
into which each Share would be converted if the transaction is effected wholly
for cash, or the Merger Security Value (as defined below) if such transaction is
effected wholly for Merger Securities, or the sum of the cash and the Merger
Security Value if the Transaction is effected partly for cash and partly for
Merger Securities, as the case may be, is less than 95% of the per share price
that would have been paid by the Company for such portion of your Shares had you
exercised your option to require the Company to purchase such Shares under
Section 4(a) above, the Company shall pay you (whether or not a Termination Date
has occurred following a Change of Control), an amount in cash equal to the
difference between the aggregate price you would have received from the number
of Shares the Company would have been required to purchase from you had you
exercised such option under Section 4(a) and the amount of cash and/or the
Merger Security Value received for the same number of Shares in such merger,
consolidation, reorganization or purchase of assets. Such cash payment shall be
made to you on a business day selected by you upon no less than ten-calendar
days' notice to the Company or its Successor (as hereinafter defined). For
purposes of this Section 4(b), "Merger Security Value" shall mean the closing
price, if traded on a stock exchange, or the average bid and asked prices if
traded in the over-the-counter market, of the Merger Security on the first day
on which the Merger Security could have been sold by you on such exchange or in
the over-the-counter market, as the case may be, in a regular broker's
transaction, multiplied by the number of Merger Securities (or fraction thereof)
for which each Share was exchangeable or into which each Share was convertible.
If no public market develops for the Merger Security within 30 days from the
date of its issue, however, "Merger Security Value" shall mean the fair market
value of such Merger Security (on a per unit basis in the written opinion of a
nationally recognized investment banking firm acceptable to you) on the
effective date of the merger, consolidation, reorganization or purchase of
assets, as the case may be, multiplied by the number of Merger Securities (or
fraction thereof) for which each Share was exchangeable or into which each Share
was convertible.
5. Certain Rights with Respect to Options.
(a) In addition to any other rights or privileges held by a holder
with respect to an option covered by the LTIP Plan ("LTIP Option") (including
the provisions of Section 3 and Section 4), upon a Change of Control of the
Company, the holder shall have the right to exchange such option for a new
option ("New Option"), that shall be issued according to the following:
(i) the New Option shall be immediately exercisable;
(ii) the New Option shall have a term equal to the remaining term of
the LTIP Option it replaces (and shall be exercisable through such term);
<PAGE>
Page 5
(iii) the New Option will give the holder the right to acquire shares
of the publicly traded common equity of the Company or any successor or direct
or indirect parent of either ("Replacement Common Stock") (in the event of two
or more classes of common equity, the common equity used shall be determined by
the Compensation Committee of the Board of Directors of the Company existing
prior to a Change of Control);
(iv) the exercise price used for the New Option ("New Exercise
Price") for acquiring a share of Replacement Common Stock shall be determined at
the time of the Change of Control by taking (x) the higher of (1) the aggregate
value (as of the date of the Change of Control) equal to the merger or
acquisition consideration paid or payable in the Change of Control, on a per
share basis, or (2) the highest price paid for a share of Company common stock
over the New York Stock Exchange (or other primary exchange) during the 12
months prior to the Change of Control, and (y) dividing such amount into the per
share exercise price of the LTIP Option; with the result multiplied by the
Replacement Common Stock closing price on its principal stock exchange on the
day of the Change in Control, or if traded in the over-the-counter market and
not on an exchange, the last bid price in such market;
(v) the number of shares of Replacement Common Stock subject to the
New Option shall be the number necessary, using the New Exercise Price, to
provide an aggregate value (as of the date of the Change of Control) equal to
the higher of (x) the merger or acquisition consideration paid or payable in the
Change of Control on a per share basis, or (y) the highest price paid for a
share of Company common stock over the New York Stock Exchange (or other primary
exchange) during the 12 months prior to the Change of Control;
(vi) if there is no publicly traded common equity of the Company,
or any successor or any direct or indirect parent of either, then the New Option
shall be with respect to shares of the direct or indirect parent of the Company,
and if no such parent then the Company, and if the Company no longer exists,
then the successor to the Company;
(b) In addition to any other rights or privileges held by a holder
with respect to an option covered by the LTIP Plan (including the provisions of
Section 3 and Section 4), if a Change of Control occurs, you shall have the
right, but not the obligation, to tender, within 30 days of such a Change of
Control, any option to the Company (or any successor to the Company) and receive
in exchange therefor a lump sum cash amount equal to the Black-Scholes value of
the option, without discount for risk of forfeiture and nontransferability
determined by using the highest Black-Scholes valuation during the one-year
period prior to the Change of Control. Any Black-Scholes valuation shall be
performed on a basis consistent with the methodology set forth on Exhibit A to
this Agreement.
6. Excise Tax.
(a) Any other provision of this Agreement to the contrary
notwithstanding, if the present value (as defined herein) of the total amount of
payments and benefits to be paid or provided to you under this Agreement which
are considered to be "parachute payments" within the meaning of Section 280G(b)
of the Internal Revenue Code of 1986, as amended (the "Code"), when added to any
other such "parachute payments" received by you from the
<PAGE>
Page 6
Company upon or after a Change of Control, whether or not under this Agreement,
is in excess of the amount you can receive without causing you to be subject to
an excise tax with respect to such amount on account of Code Section 4999, the
Company shall pay to you an additional amount (hereinafter referred to as the
"Excise Tax Premium"). The Excise Tax Premium shall be equal to the excise tax
determined under Code Sections 280G and 4999 attributable to the total amount of
payments and benefits to be paid or provided to you under this Agreement and any
other "parachute payments" received by you upon or after a Change of Control.
The Excise Tax Premium shall also include any amount attributable to excise tax
on the Excise Tax Premium. The Company shall also pay to you an additional
amount (the "Additional Amount") such that the net amount received by you, after
paying any applicable Excise Tax Premium and any federal or state income, excise
or other tax on such additional amount, shall be equal to the amount that you
would have received if such Excise Tax Premium were not applicable. You shall be
deemed to pay income taxes on the date of termination of your employment at the
highest marginal rate of income taxation in effect in your taxing jurisdiction.
The Additional Amount shall include any amount attributable to income, excise or
other tax on the Additional Amount.
(b) Not later than 30 days following your Termination Date as
provided herein, the independent public accountants acting as auditors for the
Company on the date of the Change of Control (or another accounting firm
designated by you) shall determine whether the sum of the present value of any
"parachute payments" payable under this Agreement and the present value of any
other "parachute payments" received by you from the Company upon or after a
Change of Control is in excess of the amount you can receive without causing you
to be subject to an excise tax with respect to such amount on account of Code
Section 4999, and shall determine the amount of any Excise Tax Premium and
Additional Amount payable to you. The Excise Tax Premium and Additional Amount
shall be paid to you as soon as practicable but in no event later than 35 days
following your Termination Date, and shall be net of any amounts required to be
withheld for taxes.
(c) For purposes of this Section 6C, "present value" means the value
determined in accordance with the principles of Section 1274 (b) (2) of the Code
under the rules provided in Treasury Regulations under Section 280G of the Code.
(d) References to Code Section 280G herein are specific references
to Section 280G as added to the Code by the Tax Reform Act of 1984 and as
amended by the Tax Reform Act of 1986. To the extent Code Section 280G is again
amended prior to the termination of this Agreement, or is replaced by a
successor statute, the provisions of this Section 6 shall be deemed modified
without further action of the parties in a manner consistent with such
amendments or successor statutes, as the case may be. In the event that Code
Section 280G or any successor statute is repealed, this Section 6 shall cease to
be effective on the effective date of such repeal. The parties recognize that
Treasury Regulations under Code Sections 280G and 4999 may affect the amount
that may be paid hereunder and agree that, upon the issuance of any such
regulations, this Agreement may be modified as in good faith may be deemed
necessary in light of the provisions of such regulations to achieve the purposes
hereof, and that consent to such modifications shall not be unreasonably
withheld.
<PAGE>
Page 7
7. Dispute Resolution.
(a) This Agreement shall be governed in all respects, including as to
validity, interpretation and effect, by the internal laws of the State of Texas
without regard to choice of law principles.
(b) It is irrevocably agreed that if any dispute arises between us
under this Agreement: (i) exclusive jurisdiction shall be in the lowest Texas
state court of general jurisdiction sitting in Harris County, Texas, (ii) we are
each at the time present in Texas for the purpose of conferring personal
jurisdiction; (iii) any such action may be brought in such court, and any
objection that the Company or you may now or hereafter have to the venue of such
action or proceeding in any such court or that such action or proceeding was
brought in an inconvenient court is waived, and we each agree not to plead or
claim the same, (iv) service of process in any such proceeding or action may be
effected by mailing a copy thereof by registered or certified mail, return
receipt requested (or any substantially similar form of mail), postage prepaid,
to such party at the address provided in Section 11 hereof, and (v) prior to any
trial on the merits, we will submit to court supervised, non-binding mediation.
(c) Notwithstanding any contrary provision of Texas law, the Company
shall have the burden of proof with respect to any of the following : (i) that
Cause existed at the time any notice was given to you under Section 2 (ii) that
Good Reason did not exist at the time notice was given to the Company under
Section 2; and (iii) that a Change of Control has not occurred.
8. Successors; Binding Agreement.
(a) In the event any Successor (as defined below) does not assume
this Agreement by operation of law the Company will seek to have any Successor,
by agreement in form and substance satisfactory to you, expressly assume 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 there has been a Change of
Control prior to, or a Change of Control will result from, any such succession,
then failure of the Company to obtain at your request such agreement prior to or
upon the effectiveness of any such succession (unless assumption occurs as a
matter of law) shall constitute Good Reason for termination by you of your
employment and, upon delivery of a notice of termination by you to the Company,
you shall be entitled to the benefits provided for herein. "Successor" shall
mean any Person that succeeds to, or has the ability to control, the Company's
business as a whole, directly by merger, consolidation, spin-off or similar
transaction, or indirectly by purchase of the Company's Voting Securities or
acquisition of all or substantially all of the assets of the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
<PAGE>
Page 8
9. Fees and Expenses. The Company shall pay all legal fees and
expenses incurred by you as a result of (i) your termination following a Change
of Control (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination) as well as (ii) your seeking to interpret,
obtain, assert or enforce any right or benefit conferred upon you by this
Agreement.
10. Notices. Any and all notices required or permitted to be given
hereunder shall be in writing and shall be deemed to have been given when
delivered in person to the persons specified below or deposited in the United
States mail, certified or registered mail, postage prepaid and addressed as
follows:
If to the Company: Cooper Cameron Corporation
515 Post Oak Boulevard, Suite 1200
Houston, Texas 77027
Attention: Chief Executive Officer
If to you: <<FirstName>> <<LastName>>
<<homeadd>>
<<homecity>>, <<homest>> <<homezip>>
Either party may change, by the giving of notice in accordance with
this Section 10, the address to which notices are thereafter to be sent.
11. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
12. Survival. All obligations undertaken and benefits conferred
pursuant to this Agreement, shall survive any termination of your employment and
continue until performed in full.
13. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to
in writing signed by you and the Company. No waiver by either party hereto at
any time of any breach by the other party hereto of, or of compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The internal laws of the State of Texas shall govern the validity,
interpretation, construction and performance of this Agreement.
14. Duplicate Originals. This Agreement has been executed in
duplicate originals, with one to be held by each of the parties hereto.
<PAGE>
Page 9
If this letter correctly sets forth our understanding with respect to
the subject matter hereof, please sign and return one copy of this letter to the
Company.
Sincerely,
COOPER CAMERON CORPORATION
BY:
-----------------------------
Sheldon R. Erikson
Chairman, President and
Chief Executive Officer
Agreed to as of the ___
day of November, 1999:
----------------------------------
<<FirstName>> <<LastName>>
<PAGE>
ANNEX I TO AGREEMENT DATED NOVEMBER 8, 1999
BETWEEN
COOPER CAMERON CORPORATION
AND
(FirstName) (LASTNAME)
Definition of
Certain Terms
"BONUS PLAN" means for each year, the Company's Management Incentive
Compensation Plan or any other Plan adopted by the Board which provides for the
payment of additional compensation on an annual basis to senior executive
officers contingent upon the Company's results of operations for that specific
year, in either case as such Plan shall be amended or modified to, but not on or
after, any Effective Date.
"BYLAWS" means the bylaws of the Company as in effect at the date
hereof and as the same shall be amended or otherwise modified to, but not on or
after, any Effective Date.
"CAUSE" means (i) your conviction by a court of competent
jurisdiction, from which conviction no further appeal can be taken, of a felony-
grade crime involving moral turpitude, or (ii) your willful failure to perform
substantially your duties with the Company (other than a failure due to physical
or mental illness) which is materially and demonstrably injurious to the
Company. No act or failure to act on your part shall be considered "willful"
unless done, or omitted to be done, by you in bad faith and without reasonable
belief that your action or omission was in, or not opposed to, the best
interests of the Company.
"CHANGE OF CONTROL" means the earliest date at which:
(i) any Person is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
outstanding Voting Securities, other than through the purchase of Voting
Securities directly from the Company through a private placement; or
(ii) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's shareholders,
was approved by a vote of at least two-thirds of the directors comprising the
Incumbent Board shall from and after such election be deemed to be a member of
the Incumbent Board; or
(iii) the Company is merged or consolidated with another corporation
or entity and as a result of such merger or consolidation less than 60% of the
outstanding Voting Securities of the surviving or resulting corporation or
entity shall then be owned by the former stockholders of the Company; or
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(iv) a tender offer or exchange offer is made and consummated by a
Person other than the Company for the ownership of 20% or more of the Voting
Securities of the Company then outstanding; or
(v) all or substantially all of the assets of the Company are sold or
transferred to a Person as to which (A) the Incumbent Board does not have
authority (whether by law or contract) to directly control the use or further
disposition of such assets and (B) the financial results of the Company and such
Person are not consolidated for financial reporting purposes.
Anything else in this definition to the contrary notwithstanding, no
Change of Control shall be deemed to have occurred by virtue of any transaction
which results in you, or a group of Persons which includes you, acquiring more
than 20% of either the combined voting power of the Company's outstanding Voting
Securities or the Voting Securities of any other corporation or entity which
acquires all or substantially all of the assets of the Company, whether by way
of merger, consolidation, sale of such assets or otherwise.
"DEFINED BENEFIT PLAN" means the Company's Retirement Plan and
Supplemental Excess Defined Benefit Plan, as the same shall be amended or
modified to, but not on or after, any Effective Date.
"DEFINED CONTRIBUTION PLAN" means the Company's Retirement Savings
Plan and Supplemental Excess Defined Contribution Plan, as the same shall be
amended or modified to, but not on or after, any Effective Date.
"DISABILITY" means your continuing full-time absence from your duties
with the Company for 180 days or longer as a result of physical or mental
incapacity.
"EFFECTIVE DATE" means the earliest date upon which (i) any of the
events set forth under the definition of Change of Control shall have occurred,
(ii) the receipt by the Company of a Schedule 13D stating the intention of any
Person to take actions which, if accomplished, would constitute a Change of
Control, (iii) the public announcement by any Person of its intention to take
any such action, in each case without regard for any contingency or condition
which has not been satisfied on such date, (iv) the agreement by the Company to
enter into a transaction which, if consummated, would result in a Change of
Control, or (v) consideration by the Board of a transaction which, if
consummated, would result in a Change of Control.
If, however, an Effective Date occurs but the proposed transaction to
which it relates ceases to be actively considered or it is not consummated
within 12 months of such Effective Date, the Effective Period will be deemed not
to have commenced for purposes of this Agreement. If an Effective Date occurs
with respect to a proposed transaction which ceases to be actively considered
but for which active consideration is revived, the Effective Date with respect
to the Change of Control that ultimately occurs shall be that date when
consideration was revived and carried through to consummation.
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<PAGE>
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"GOOD REASON" means any of the following:
(i) except as a result of your death or Retirement, or following the
receipt by you of a Notice of Termination for Cause or due to Disability, a
change in your status, title(s) or position(s) with the Company, including
as an officer of the Company, which, in your reasonable judgment, does not
represent a promotion, with commensurate adjustment of compensation, from
your status, title(s) and position(s) immediately prior to the Effective
Date; or the assignment to you of any duties or responsibilities which, in
your reasonable judgment, are inconsistent with such status, title(s) or
position(s); or the withdrawal from you of any duties or responsibilities
which in your reasonable opinion are consistent with such status, title(s)
or position(s); or any removal of you from or any failure to reappoint or
reelect you to such position(s); or
(ii) a reduction by the Company in your base salary in effect
immediately prior to the Effective Date: or
(iii) the failure by the Company to continue in effect any Plan in
which you were participating immediately prior to the Effective Date other
than as a result of the normal expiration or amendment of any such Plan in
accordance with its terms, or the taking of any action, or the failure to
act, by the Company which would adversely affect your continued
participation in any such Plan on at least as favorable a basis to you as
is the case immediately prior to the Effective Date or which would
materially reduce your benefits under any of such Plans or deprive you of
any material benefit enjoyed by you immediately prior to the Effective
Date, except as proposed by you to the Company; or
(iv) the relocation of the principal place of your employment to a
location 25 miles further from your principal residence without your
express written consent; or
(v) the failure by the Company upon a Change of Control to obtain the
assumption of this Agreement by any Successor (other than by operation of
law); or
(vi) any refusal by the Company to continue to allow you to attend to
matters or engage in activities not directly related to the business of the
Company which you attended to or were engaged in immediately prior to the
Effective Date and which do not otherwise violate your obligations
hereunder; or
(vii) any continuing material default by the Company in the
performance of its obligations under this Agreement, whether before or
after a Change of Control.
"LTIP PLAN" means the Company's Long-Term Incentive Plan adopted as it
may be amended, modified, or replaced, up to, but not on or after, an Effective
Date.
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<PAGE>
"OTHER PLANS" means any thrift; bonus or incentive; stock option or
stock accumulation; pension; medical, disability, accident or life insurance
plan, program or policy of the Company which is intended to benefit employees of
the Company that are similarly situated to you (other than the Bonus Plan,
Defined Benefit Plan, Defined Contribution Plan, LTIP Plan or Purchase Plan).
"PERSON" means any individual, corporation, partnership, group,
association or other "person," as such term is used in Sections 13(d) and 14(d)
of the Exchange Act, other than the Company or any Plans sponsored by the
Company.
"PERQUISITES" means individual perquisites benefits received by you
immediately prior to the Effective Date, including, but not limited to, club
membership dues.
"PLANS" means the Bonus Plan, Defined Benefit Plan, Defined
Contribution Plan, LTIP Plan, Purchase Plan, Compensation Deferral Plan and
Other Plans.
"PURCHASE PLAN" means the Company's Employee Stock Purchase Plan
adopted as the same shall be amended or modified to, but not on or after, any
Effective Date.
"RETIREMENT" means termination of your employment on the "normal
retirement date" as set forth in the Defined Benefit Plan.
"SEVERANCE PACKAGE" means your right to receive, and the Company's
obligation to pay and/or perform on, the following:
(a) on or within ten days following an applicable Termination Date,
the Company shall pay to you a lump sum, cash amount equal to the sum of
(i) three times the highest annual rate of Base Salary in effect during the
current year or any of the three years preceding the Termination Date and
(ii) three times the greater of (A) the maximum award you would have been
eligible to receive under the Bonus Plan in respect of the current year,
regardless of any limitations otherwise applicable to the Bonus Plan (i.e.,
the failure to have completed any vesting period or the current measurement
period, or the failure to achieve any performance goal applicable to all or
any portion of the measurement period) or (B) the largest award earned
(whether or not paid) under the Bonus Plan in respect of any of the three
years preceding the Termination Date, or (C) (percent)% of your Base Pay
at the applicable Termination Date, and (iii) three times the Black-Scholes
value at the time of grant of the most valuable one-year option grant
(excluding any option you received at your election in lieu of salary or
bonus award) you had received from the Company during the five years prior
to your Termination Date with any such Black-Scholes valuation performed on
a basis consistent with the methodology set forth on Exhibit A to the
Agreement; and
(b) in addition to your entitlement to the vested portion of your
interest
in the Defined Contribution Plan in accordance with the terms of that plan,
the Company shall pay to you, on or within ten days following the
applicable Termination Date, an amount in cash equal to the unvested
portion of the Company's contributions to your account,
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<PAGE>
which unvested portion shall be valued on the same basis as the Shares
contributed by the Company in respect of the unvested portion were valued
at the date(s) of contribution; and
(c) in addition to any vested retirement benefits to which you are
entitled on the Termination Date under the Defined Benefit Plan, the
Company shall pay to you, on or within ten days following an applicable
Termination Date, an amount in cash equal to the product of (i) a number
equal to your years of life expectancy beyond age 65 determined in
accordance with the actuarial assumptions utilized under the Defined
Benefit Plan immediately prior to the Termination Date, times (ii) an
amount equal to the difference between (A) the annual benefit to which you
would have been entitled under the "single life annuity" method of
distribution under the Defined Benefit Plan if you were fully vested
thereunder (without regard to (I) whether you shall actually have completed
the period of Vesting Service required to qualify for benefits under the
Defined Benefit Plan, (II) any limitation on the amount used in the
calculation of the annual benefit thereunder, (III) any offset thereunder
for severance allowances payable thereunder, or (IV) any amendment to the
Defined Benefit Plan made in connection with a Change of Control and on or
prior to the Termination Date, which amendment adversely affects in any
manner the computation of retirement benefits under such plan) and had
accumulated an additional three years of Vesting Service thereunder, and
(B) the annual benefit, if any, to which you would be entitled under the
single life annuity method of distribution under the Defined Benefit Plan
as of the Termination Date; and
(d) unless you give notice to the Company pursuant to the next
sentence within 90 days following an applicable Termination Date, the
Company shall maintain in full force and effect, at its sole expense for
the continued benefit of you and your dependents during the period from the
Termination Date through the earlier (i) three years from the Termination
Date or (ii) the commencement date of equivalent benefits from a new
employer, all insured and self-insured employee welfare benefit Plans and
Perquisites in which you were entitled to participate immediately prior to
the Termination Date. Alternatively, if you notify the Company that you so
elect, the Company shall pay you within five days of such notification an
amount in cash equal to three times the average annual cost incurred by the
Company during the preceding three calendar years as a result of your
participation in such welfare benefit Plans (or such fewer whole calendar
years as you have so participated). If your participation in any such
welfare benefit Plan is barred, the Company, at its sole cost and expense,
shall arrange to have issued for the benefit of you and your dependents
individual policies of insurance providing benefits substantially similar
(on an after-tax basis) to those which you are entitled to receive under
such Plans. You shall not be required to pay any premiums or other charges
for such policies. At the end of three years after the Termination Date,
the Company, provided you have not previously received or are not then
receiving equivalent benefits from a new employer, shall arrange, at its
sole cost and expense, to enable you to programs upon the same terms as
employees of the Company may apply for such conversions.
A-5
<PAGE>
Anything else in this Agreement to the contrary notwithstanding, if (i) you
are terminated in connection with a merger, consolidation or a tender offer or
an exchange offer, (ii) you are entitled to the benefits provided for under
Section 1 hereof, and (iii) your Termination Date precedes or occurs on the date
of the closing thereof, then unless otherwise agreed to by both parties in
writing, all amounts to which you are or shall become entitled to under this
Agreement, which are calculable as of the closing date, shall be accelerated to,
and become immediately due and payable contemporaneously with such closing.
"SHARES" means shares of Common Stock, $.01 par value, of the Company at
the date of this Agreement, as the same shall be subsequently amended, modified
or changed. The term "market value," when used with respect to a Share means the
closing price therefor on the New York Stock Exchange or if not listed thereon,
on such other exchange as shall at the tune constitute the principal exchange
for trading in Shares.
"VOTING SECURITIES" means, with respect to any corporation or business
enterprise, those securities, which under ordinary circumstances are entitled to
vote for the election of directors or others charged with comparable duties
under applicable law.
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<PAGE>
EXHIBIT 10.30
AMENDMENT NO. 2
This Amendment No. 2 dated as of July 21, 1999 ("Agreement") is among
Cooper Cameron Corporation, a Delaware corporation ("Borrower"); Cooper Cameron
(U.K.) Limited, a company formed under the laws of the United Kingdom, Cameron
France, S.A., a societe anonyme formed under the laws of the Republic of France,
Cameron GmbH, a Gesellschaft mit beschrankter Haftung formed under the laws of
the Federal Republic of Germany, and Cooper Cameron (Singapore) Pte. Ltd., a
private limited company formed under the laws of the Republic of Singapore (the
"Borrowing Subsidiaries"); the Lenders (as defined below) executing this
Agreement; and The First National Bank of Chicago, as agent for the Lenders
("Agent").
INTRODUCTION
A. The Borrower, the Borrowing Subsidiaries, the Lenders, the Co-Agents
(as defined therein), and the Agent are parties to the Amended and Restated
Credit Agreement dated as of March 20, 1997 and Amendment No. 1 to the Credit
Agreement dated as of July 11, 1997 (as so amended, the "Credit Agreement").
B. The Borrower, the Borrowing Subsidiaries, and the Lenders have agreed
to amend the Credit Agreement to (i) revise the definition of "EBITDA", (ii) add
the Euro as an available currency under the facility, and (iii) address the Year
2000 Problem (as defined below).
THEREFORE, the Borrower, the Borrowing Subsidiaries, the Lenders, and the
Agent hereby agree as follows:
Section 1. Definitions; References. Unless otherwise defined in this
Agreement, terms used in this Agreement which are defined in the Credit
Agreement shall have the meanings assigned to such terms in the Credit
Agreement.
Section 2. Amendments.
(a) Article I of the Credit Agreement is amended as follows:
(i) the following definition is amended in its entirety to read as
follows:
"EBITDA" means, for any applicable computation period, (a) the
Borrower's and Subsidiaries' Net Income (excluding non-cash, non-
recurring, unusual charges) on a consolidated basis for such period plus
(b) income and franchise taxes accrued during such period plus (c) Interest
Expense accrued during such period plus (d) amortization and depreciation
deducted in determining Net Income for such period.
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<PAGE>
(ii) the following new definition is added in alphabetical order with
the existing definitions:
"Euro" and/or "EUR" means the euro referred to in Council Regulation
(EC) No. 1103/97 dated June 17, 1997 passed by the Council of the European
Union, or, if different, the then lawful currency of the member states of
the European Union that participate in the third stage of Economic and
Monetary Union.
(iii) the definition of "Business Day" is amended to add the
following passage in clause (a) after the words "carried on in the London
interbank market":
(and, if the Advances which are the subject of such borrowing, payment, or
rate selection are denominated in Euros, a day upon which such clearing
system as is determined by the Agent to be suitable for clearing or
settlement of the Euro is open for business)
(iv) the first sentence of the definition of "Eurocurrency Base Rate"
is amended to replace the phrase "German marks, British pounds sterling, or
Dollars" with the phrase "German marks, British pounds sterling, Euros, or
Dollars".
(v) the definition of "Restructuring Charges" is deleted in its
entirety.
(b) Section 2.16 of the Credit Agreement is amended to add the following
clause (c) after the existing clause (b):
(c) If, after the making of any Advance in any currency other than
Dollars, currency control or exchange regulations are imposed in the
country which issues such currency with the result that the type of
currency in which the Advance was made (the "Original Currency") no longer
exists or the Borrower is not able to make payment to the Agent for the
account of the Lenders in such Original Currency, then all payments to be
made by the Borrower hereunder in such currency shall instead be made when
due in Dollars in an amount equal to the Dollar Equivalent (as of the date
of repayment) of such payment due, it being the intention of the parties
hereto that the Borrower take all risks of the imposition of any such
currency control or exchange regulations.
(c) Clause (a) of Section 3.4 of the Credit Agreement is amended to read in
its entirety as follows:
(a) deposits of a type, currency, and maturity appropriate to match
fund Eurocurrency Advances are not available,
(d) The following new Section 5.18 is added after Section 5.17 of the
Credit Agreement:
5.18 Year 2000. Except to the extent that a failure to do so could
not
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<PAGE>
reasonably be expected to cause a Material Adverse Effect, the Borrower
has (a) completed a review and assessment of all areas within its and each
of its Subsidiaries' business and operations (including those affected by
suppliers, vendors, and customers) that could be adversely affected by the
"Year 2000 Problem" (that is, the risk that computer applications used by
the Borrowers (or suppliers or vendors) may be unable to recognize and
perform properly date-sensitive functions involving certain dates after
December 31, 1999), (b) developed a plan and timeline for addressing on a
timely basis, but in any event before September 30, 1999, the Year 2000
Problem, and (c) to date, implemented that plan substantially in accordance
with that timetable. Based on the foregoing, the Borrower believes that
all computer applications (including those of its suppliers and vendors)
that are material to its or any of its Subsidiaries' business and
operations are reasonably expected on a timely basis, but in any event
before September 30, 1999, to address adequately the Year 2000 Problem
(that is, be "Year 2000 Compliant"), except to the extent that a failure to
do so could not reasonably be expected to cause a Material Adverse Effect.
(e) Section 6.1 of the Credit Agreement is amended to add the following new
paragraph (j) after paragraph (i):
(j) Prompt written notice in the event the Borrower discovers or
determines that any computer application (including those of its suppliers,
vendors, and customers) that is material to its or any of its Subsidiaries'
business and operations will not be Year 2000 Compliant (as defined in
Section 5.18), except to the extent that such failure could not reasonably
be expected to cause a Material Adverse Effect.
(f) Schedule 2.9 to the Credit Agreement is supplemented with the
information on Schedule 2.9 to this Agreement.
Section 3. Representations and Warranties. The Borrowers represent and
warrant to the Agent and the Lenders that:
(a) the representations and warranties set forth in the Credit Agreement
are true and correct in all material respects as of the date of this Agreement,
except to the extent any such representation or warranty is stated to relate
solely to an earlier date, in which case such representation or warranty was
true and correct in all material respects as of such earlier date;
(b) (i) the execution, delivery, and performance of this Agreement have
been duly authorized by appropriate proceedings, and (ii) this Agreement
constitutes a legal, valid, and binding obligation of the Borrowers, enforceable
in accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the rights of
creditors generally and general principles of equity; and
(c) as of the effectiveness of this Agreement, no Default or Event of
Default has occurred and is continuing.
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<PAGE>
Section 4. Effectiveness. This Agreement shall become effective and the
Credit Agreement shall be amended as provided in this Agreement upon the
occurrence of the following conditions precedent:
(a) the Borrowers, the Agent, and the Lenders shall have delivered duly and
validly executed originals of this Agreement to the Agent;
(b) the representations and warranties in this Agreement shall be true and
correct in all material respects; and
(c) the Borrower shall pay the following fees to each Lender which executes
this Agreement and delivers it to the Agent prior to 12:00 noon on July 21,
1999:
(i) a flat fee of $10,000 and
(ii) .05% of such Lender's Revolving Credit Commitment.
Section 5. Effect on Loan Documents.
(a) Except as amended herein, the Credit Agreement and the Loan Documents
remain in full force and effect as originally executed and amended heretofore.
Nothing herein shall act as a waiver of any of the Agent's or Lenders' rights
under the Loan Documents, as amended, including the waiver of any Default or
Unmatured Default, however denominated.
(b) This Agreement is a Loan Document for the purposes of the provisions of
the other Loan Documents. Without limiting the foregoing, any breach of
representations, warranties, and covenants under this Agreement may be a Default
or Unmatured Default under other Loan Documents.
(c) The Borrower, as the Parent Guarantor, hereby reaffirms its obligations
under the Parent Guaranty and agrees that its obligations under the Parent
Guaranty are not affected by this Agreement and remain in full force.
Section 6. Choice of Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York.
Section 7. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original.
EXECUTED as of the date first above written.
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<PAGE>
COOPER CAMERON CORPORATION
By:
-----------------------------------
Daniel P. Keenan
Vice President & Treasurer
COOPER CAMERON (U.K.) LIMITED
CAMERON FRANCE, S.A.
CAMERON GMBH
COOPER CAMERON (SINGAPORE) PTE.
LTD.
By:
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Daniel P. Keenan
Attorney-in-fact
THE FIRST NATIONAL BANK OF
CHICAGO, individually and as Agent
By:
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Thomas E. Both
First Vice President
ABN AMRO BANK N.V., individually and as
Co-Agent
By:
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Name:
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Title:
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By:
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Name:
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Title:
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THE BANK OF NOVA SCOTIA, individually
and as Co-Agent
By:
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Name:
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Title:
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THE CHASE MANHATTAN BANK,
individually and as Co-Agent
By:
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Name:
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Title:
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CREDIT LYONNAIS, NEW YORK BRANCH,
individually and as Co-Agent
By:
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Name:
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Title:
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PNC BANK, NATIONAL ASSOCIATION,
individually and as Co-Agent
By:
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Name:
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Title:
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ROYAL BANK OF CANADA, individually
and as Co-Agent
By:
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Name:
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Title:
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SOCIETE GENERALE, SOUTHWEST
AGENCY , individually and as Co-Agent
By:
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Name:
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Title:
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AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED
By:
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Name:
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Title:
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COMMERZBANK AG, NEW YORK BRANCH
By:
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Name:
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Title:
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By:
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Name:
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Title:
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NATIONAL WESTMINSTER BANK PLC
By:
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Name:
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Title:
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Name:
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Title:
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BANK OF AMERICA, N.A. (successor by
merger to NationsBank of Texas, N.A.),
individually and as Co-Agent
By:
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Name:
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Title:
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BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION (formerly
Bank of America Illinois), individually
and as Co-Agent
By:
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Name:
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Title:
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EXHIBIT 13.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION OF COOPER CAMERON CORPORATION
The following discussion of the Company's historical results of operations and
financial condition should be read in conjunction with the Company's
consolidated financial statements and notes thereto included elsewhere in this
Annual Report. All per share amounts included in this discussion are based on
"diluted" shares outstanding.
OVERVIEW
The Company's operations are organized into four separate business segments --
Cameron, Cooper Cameron Valves (CCV), Cooper Energy Services (CES) and Cooper
Turbocompressor (CTC). Cameron is a leading international manufacturer of oil
and gas pressure control equipment, including wellheads, chokes, blowout
preventers and assembled systems for oil and gas drilling, production and
transmission used in onshore, offshore and subsea applications. CCV provides a
full range of ball valves, gate valves, butterfly valves and accessories to
customers across a wide range of the energy industry and industrial market. CES
designs, manufactures, markets and services compression and power equipment,
primarily for the energy industry, and CTC provides centrifugal air compressors
and aftermarket products to manufacturing companies and chemical process
industries worldwide.
The following table sets forth the consolidated percentage relationship to
revenues of certain income statement items for the periods presented.
<TABLE>
<CAPTION>
Years Ended December 31,
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1999 1998 1997
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<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
- -------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales (exclusive of depreciation and amortization) 72.8 70.6 71.8
Depreciation and amortization 5.7 3.9 3.7
Selling and administrative expenses 14.1 12.2 11.9
Interest expense 1.9 1.7 1.6
Nonrecurring/unusual charges (credits), net 0.7 1.2 --
- -------------------------------------------------------------------------------------------
Total costs and expenses 95.2 89.6 89.0
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Income before income taxes 4.8 10.4 11.0
Income tax provision (1.9) (3.2) (3.2)
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Net income 2.9% 7.2% 7.8%
- -------------------------------------------------------------------------------------------
</TABLE>
1999 COMPARED TO 1998
Cooper Cameron Corporation had net income of $43.0 million, or $.78 per share,
for the twelve months ended December 31, 1999. This compares to $136.2 million,
or $2.48 per share, for the same period in 1998.
Included in the 1999 results were after-tax charges of $37.5 million ($55.9
million pre-tax), or $.69 per share, for cost rationalization in all four
segments. These charges included non-cash asset write-downs, severance costs
for staff reductions and $9.2 million in pre-tax charges related to various cost
reduction programs initiated during 1998. Because of current accounting rules
regarding when certain types of charges can be recognized in the financial
statements, the Company currently anticipates that it will incur approximately
$7 million in additional after-tax nonrecurring charges in 2000 ($11 million
pre-tax) related to actions commenced in 1999. When completed, the actions
undertaken during 1999 are expected to provide approximately $36 million in
annual pre-tax cost savings compared with savings during 1999 of approximately
$12 million.
Providing a partial offset to nonrecurring expense was a preliminary after-tax
gain of $25.8 million ($45.3 million pre-tax), or $.47 per share, on the sale of
the CES rotating compressor business to Rolls-Royce plc for approximately $200
million in cash.
Included in the 1998 results were $15.5 million, or $.28 per share, in after-
tax nonrecurring/unusual charges ($22.0 million pre-tax), primarily for
severance costs in all four segments. See Note 2 of the Notes to Consolidated
Financial Statements for further information regarding the nonrecurring/unusual
charges (credits) recorded in both 1999 and 1998.
Excluding these nonrecurring/unusual charges (credits), the Company earned
$1.00 per share in 1999 compared to $2.76 per share in 1998.
Revenues
Revenues for 1999 totaled $1.46 billion, a decrease of 22% from the $1.88
billion in 1998, with declines in all four segments. Revenues for Cameron
totaled $811.2 million, a decrease of 21% from 1998 revenues of $1.02 billion.
Revenues decreased in surface and subsea products, while drilling product
revenues increased. Drilling product revenues were heavily influenced by long
lead-time major project orders booked during 1998, while subsea products
suffered from the lack of major projects in the Gulf of
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Mexico and North Sea. Surface products, which have a shorter delivery cycle and
respond more quickly to changes in orders, reflected the low levels of activity
in this market during 1999. Revenues for Cameron Controls, Cameron Willis, and
aftermarket are included in drilling, surface, and subsea product categories. On
a geographical basis, revenues decreased in all regions. The Western Hemisphere
declined primarily due to weak surface product activity related to the generally
sluggish market conditions in the U.S., Canada, and Latin America. The Eastern
Hemisphere decreased primarily due to the weak activity in the North Sea, while
Asia-Pacific declined due to delayed gas development projects throughout the
region.
CCV's revenues of $231.7 million declined by 25% from the $309.0 million in
1998. The weakness was across all products and markets, including oilfield
distributor products, where customers worked off excess inventories during 1999,
and in pipeline valves, where major projects were delayed. Additionally, Orbit
Valve International, Inc. (Orbit Valve) products declined, due to a lack of
major upgrade or new chemical plant projects, in spite of an extra quarter of
revenues in 1999 (the business was acquired April 2, 1998).
Revenues for CES of $317.1 million declined by 24% from the $417.7 million in
1998. The market served by this segment remained very competitive during 1999,
with industry-wide overcapacity. Virtually all of the revenue decline was in
the rotating compressor business, which was sold to Rolls-Royce plc on September
30, 1999. Through the sale date, this portion of the business had revenues of
$92.4 million, compared to $185.7 million for all of 1998. The ongoing
reciprocating products business declined by 3% from 1998 to 1999 due to
generally stagnant market conditions.
CTC had revenues of $104.7 million, or a decrease of 22%, from $134.3 in 1998,
with declines across all lines of the business. The most significant decline
was in process air machines, where large air separation customers delayed
placing new orders during 1999. The overall low level of products sold directly
to Southeast Asian markets was the primary factor in the plant air machine
market during the year. This continuing weakness in the Asian markets also
caused industrial development projects in other parts of the world to be pushed
out and, when undertaken, to be more price competitive.
Cost and Expenses
The $417.4 million revenue decrease discussed above resulted in a $263.5
million decrease in cost of sales (exclusive of depreciation and amortization)
and a resulting gross margin shortfall of $153.9 million. Because short-term
cost control measures were not able to keep pace with the revenue decline, as
well as changes in sales mix, the gross margin percentage (defined as revenues
less cost of sales as a percentage of revenues) declined by 2.2 percentage
points. This result is discussed below in more detail for each segment.
Cameron's gross margin percentage was 29.6% in 1999, compared to 32.7% in
1998. The decline resulted from an increase in relatively lower-margin drilling
product revenues combined with a decrease in higher-margin surface and subsea
products. Additionally, pricing pressure, which began to increase in late 1998,
continued during 1999, although the effect on 1999 results was somewhat
mitigated by shipments from backlog at favorable pricing levels. Providing a
partial offset were the benefits of various ongoing cost reductions, including
foreign sourcing of material, staffing reductions, and capital expenditures for
new higher-efficiency machine tools.
CCV's gross margin percentage decreased from 31.5% in 1998 to 28.5% in 1999.
The decline was caused by increased pricing pressure, as competitors fought to
retain share in the severely depressed markets, and manufacturing period cost
reductions which were unable to keep pace, in the near term, with the rapid
decline in revenues.
The gross margin percentage for CES improved from 18.4% in 1998 to 18.5% in
1999. This slight improvement was the result of the decrease in the lower-
margin rotating compressor business revenues, partially offset by pricing
pressure throughout the business and cost reductions that could not keep pace
with the revenue decline.
CTC's gross margin percentage declined from 33.1% in 1998 to 32.6% in 1999.
The decline resulted from pricing pressure in all product lines, but
particularly in process air machines.
Depreciation and amortization expense increased by $11.2 million, from $72.5
million in 1998 to $83.7 million in 1999. This increase was due mainly to
capital spending during 1998 and 1999, primarily in Cameron.
Selling and administrative expenses decreased by $24.0 million, or 10%, from
$229.7 million in 1998 to $205.7 million in 1999. Cameron decreased by $18.3
million due to cost reductions in response to revenue declines. CCV declined by
$3.7 million as the additional quarter of Orbit Valve was more than offset by
cost reductions in the remainder of the business. CES decreased by $3.6 million
due to the sale of the rotating compressor business on September 30, 1999 and
cost reductions in the reciprocating business. Despite the Company's efforts to
reduce costs in this area, selling and administrative expense as a percentage of
revenue increased from 12.2% in 1998 to 14.1% in 1999. As the effect of cost
reductions initiated throughout 1999 take full effect, this ratio should
gradually improve.
Reflecting the various factors discussed above, operating income (defined as
earnings before the gain on sale, nonrecurring/unusual charges, corporate
expenses, interest and taxes) totaled $123.0 million, a decrease of $138.8
million from 1998. Cameron decreased from $180.2 million to $94.9 million, CCV
declined from $48.4 million to $20.4 million, CES decreased from $6.8 million to
a loss of $(8.5) million, and CTC declined from $26.4 million to $16.2 million.
Interest expense was $27.8 million in 1999, a decrease of $4.9 million from
1998. This decline was due to a lower average debt level, primarily from
working capital reductions and the proceeds from the sale of the rotating
compressor business.
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The tax rate for 1999 was 39.4%, reflecting the combination of a 43.0% tax
rate on the gain on sale, combined with a full year rate on operational
earnings, including nonrecurring expenses, of 32.9%. The 32.9% rate compares to
a 1998 rate of 30.4%, and is higher primarily due to a change in the mix of
domestic and foreign earnings.
1998 COMPARED TO 1997
Cooper Cameron Corporation had net income of $136.2 million, or $2.48 per
share, for the twelve months ended December 31, 1998. This compares to $140.6
million, or $2.53 per share, for the same period in 1997. Included in the 1998
results were $15.5 million, or $.28 per share, in after-tax nonrecurring/unusual
charges ($22.0 million pre-tax). Of the $22 million, approximately $15 million
related to severance and resulting relocation costs for employees in all four
segments, with the remainder covering incurred costs related to the shutdown of
CCV's manufacturing facility in Missouri City, Texas, as well as a further
restructuring of CES's operations in Grove City, Pennsylvania, Mt. Vernon, Ohio
and Liverpool, United Kingdom. Small amounts of costs related to the Company's
April 1998 acquisition of Orbit Valve were also included. Approximately $7
million remained to be expensed, under existing accounting rules, regarding the
above actions. Since the majority of these actions were not initiated until the
fourth quarter of 1998, only a small amount of cost savings were realized during
1998. See Note 2 of the Notes to Consolidated Financial Statements for further
information regarding these nonrecurring/unusual charges. Excluding these
nonrecurring/unusual charges, the Company earned $2.76 per share in 1998, a 9%
improvement from 1997. This increase was due primarily to the strong
performance of Cameron and the Orbit Valve acquisition in CCV (see Note 3 of the
Notes to Consolidated Financial Statements).
Revenues
Revenues for 1998 totaled $1.88 billion, an increase of 4% from the $1.81
billion in 1997. Orbit Valve, included since April 2, 1998, contributed
approximately $71 million in revenues during the year. Excluding the effect of
this acquisition, increased revenues in Cameron were more than offset by
weakness in CCV, CES and CTC.
Revenues for Cameron totaled $1.02 billion, an increase of 17% over 1997
revenues of $874.7 million. Revenue increased for drilling and subsea products,
while surface product revenues declined slightly. Drilling and subsea product
activity is heavily influenced by major projects, while surface products have a
shorter delivery cycle and respond more quickly to changes in order activity.
Of particular note were increased drilling and subsea equipment shipments for
deep-water projects in the Gulf of Mexico and installations in the North Sea.
Also contributing to the revenue growth was improved aftermarket activity, as
demand for spare parts and refurbished equipment increased.
CCV's revenues of $309.0 million improved by 26% from the $244.9 million in
1997. This increase was due to nine months of revenues from the Orbit Valve
acquisition, totaling approximately $71 million. The remaining CCV revenue
decline of 3% reflected weaker oilfield distributor products, particularly in
the fourth quarter.
Revenues for CES of $417.7 million declined by 21% from the $527.3 million in
1997. The energy-related markets served by this segment were very competitive
during 1998, with industry-wide overcapacity. The most significant revenue
decline was in rotating compressor projects, where new major projects were
delayed as Asian oil and gas demand lessened. Aftermarket activity also
declined as customers delayed maintenance programs and reduced their spare parts
inventories.
CTC had revenues of $134.3 million, or a decrease of 16% from $159.1 million
in 1997. This decline was across all lines of the business and resulted
primarily from the so-called "Asian crisis". The slowdown in the Southeast
Asian markets worsened during the year and caused industrial development
projects in other parts of the world to be pushed out and, when undertaken, to
be more price competitive.
Cost and Expenses
Cost of sales (exclusive of depreciation and amortization) of $1.33 billion in
1998 increased by $32.6 million, or 3%, compared with $1.30 billion in 1997.
The increase was largely due to the previously discussed 4% revenue growth.
Cost of sales increased at a rate less than the revenue increase for both
Cameron and CCV, such that these segments had a positive flow-through effect on
earnings. Conversely, CES and CTC both had revenue declines that exceeded cost
of sales decreases. This result is discussed below for each segment.
Cameron's gross margin percentage (defined as revenues less cost of sales as a
percentage of revenues) was 32.7% in 1998, compared to 30.8% in 1997. This
increase resulted from improved pricing, the leveraging of various manufacturing
support costs that are relatively fixed in the short-term, and cost reductions,
including benefits from capital expenditures. Pricing pressure began to
increase late in the year as market conditions weakened, but improved pricing on
shipments from backlog minimized the effect on 1998.
CCV's gross margin percentage increased from 29.5% in 1997 to 31.5% in 1998
due to improved pricing and the addition of the Orbit Valve products, which
carry somewhat higher margins than other CCV products. Pricing pressure,
however, also increased in this segment during the second half of 1998,
particularly in the domestic oilfield distribution market.
The gross margin percentage for CES declined from 21.1% in 1997 to 18.4% in
1998. Pricing pressure throughout the business and cost reduction efforts that
did not keep pace with the revenue decline were the primary factors contributing
to this decrease.
CTC's gross margin percentage was 33.1% in 1998, compared to 35.6% in 1997.
Pricing pressure intensified during the year, as competitors became more
aggressive with the continued absence of orders from Southeast Asia. This was a
major growth
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market for much of 1997 that virtually disappeared in 1998, resulting in more
competition for orders from the remaining markets. Additionally, cost reductions
that did not keep pace with the revenue decline also contributed to this
decrease.
Depreciation and amortization expense increased by $6.6 million, from $65.9
million in 1997 to $72.5 million in 1998. This increase was primarily due to
higher capital spending in Cameron and CTC, and the Orbit Valve acquisition in
CCV.
Selling and administrative expenses increased by $14.4 million, or 7%, from
$215.3 million in 1997 to $229.7 million in 1998. This increase was, in
Cameron, due to the higher revenues and, in CCV, due to the Orbit Valve
acquisition. These expenses decreased in both CES and CTC in response to the
revenue declines. As a percentage of revenues, these costs increased from 11.9%
in 1997 to 12.2% in 1998. Cameron achieved a leveraging effect on their
increased volume, showing an improvement in this relationship, while CES and CTC
were, in the near term, unable to reduce costs in line with the revenue decline.
CCV was affected by the Orbit Valve acquisition, which carried proportionately
greater selling and administrative costs than the remainder of the business.
Reflecting the various factors discussed above, operating income (defined as
earnings before nonrecurring/unusual charges, corporate expenses, interest, and
taxes) totaled $261.8 million, an increase of $20.1 million from 1997. Cameron
improved from $129.5 million in 1997 to $180.2 million in 1998, and CCV
increased from $37.4 million to $48.4 million. CES declined from $35.3 million
to $6.8 million, and CTC decreased from $39.5 million to $26.4 million.
Interest expense increased from $28.6 million in 1997 to $32.7 million in
1998, primarily due to an increase in the average debt level related to the
Orbit Valve acquisition and increased capital expenditures. While working
capital declined from year-end 1997 to year-end 1998, the improvement was all in
the fourth quarter. During the remainder of the year, higher working capital
levels were required to support the revenue and backlog in Cameron. Average
interest rates in 1998 were 6.5% compared to 6.6% in 1997.
Income taxes were $59.6 million in 1998, an increase of $0.8 million from 1997
due to a slightly higher effective tax rate. The Company's effective tax rate
increased to 30.4% in 1998 from 29.5% in 1997, mainly due to a change in the mix
of domestic and foreign earnings.
OUTLOOK FOR 2000
If energy prices and expectations remain at levels that result in customers
increasing spending on oil and gas projects in 2000, the Company's financial
performance is expected to improve, with earnings per share, before
nonrecurring/unusual items, currently estimated to increase by approximately 40%
from the 1999 level. Additional information regarding each segment's 2000
outlook can be found in the segment discussions in the front section of this
report.
PRICING AND VOLUME
The Company believes that during 1999 unit volumes decreased in all four
segments. During 1998, the Company believes unit volumes increased at Cameron
and CCV, but decreased at CES and CTC. Excluding the effect of the Orbit Valve
acquisition on unit volumes, CCV would have had a unit volume decline in 1998.
Prices declined moderately in all four segments during 1999 due to the weak
market conditions and competitive pricing pressure. During 1998, Cameron and
CCV realized moderate price increases in excess of cost increases, while CES and
CTC prices declined slightly in response to weaker market conditions.
LIQUIDITY AND CAPITAL RESOURCES
During 1999, total indebtedness decreased by nearly 50% to $210.3 million at
year-end compared to $414.0 million at December 31, 1998. This decrease, which
was largely attributable to the $203.2 million of cash received at the end of
the third quarter in connection with the sale of the rotating compressor
business, contributed to the lowest debt-to-capitalization ratio since the
Company's inception -- 22.8% at December 31, 1999. This compares to a debt-to-
capitalization ratio of 34.7% at December 31, 1998 and 37.0% at December 31,
1997.
During 1998, total indebtedness increased by $37.0 million from 1997. The
combination of strong earnings and improved working capital management during
1998 largely offset over $207 million of cash utilized for capital expenditures
and acquisitions, in addition to over $20 million of debt assumed in the Orbit
acquisition, as well as $36 million of cash used to repurchase Company stock
early in the year. At December 31, 1998, CES had $19.5 million of receivables
recognized under the percentage of completion method, of which $14.8 million had
not yet been billed to customers.
During the third quarter of 1998, the Company entered into agreements with
five banks providing for additional credit facilities, totaling $155 million,
which supplemented the Company's existing $475 million long-term credit
agreement. These agreements were allowed to expire during the third quarter of
1999 without being renewed. In addition to uncommitted amounts available under
various other borrowing arrangements, the Company had $349.7 million of
committed borrowing capacity available at December 31, 1999.
In addition, during May 1998, the Company filed a traditional "shelf"
registration statement with the U.S. Securities and Exchange Commission in
connection with the possible issuance, from time to time, in one or more
offerings, of up to $500 million in securities, consisting of either (1)
unsecured debt securities, (2) shares of preferred stock, (3) shares of common
stock or (4) warrants for the purchase of debt securities, preferred stock or
common stock. In connection with this registration statement, the Company
entered into treasury locks, or forward rate agreements, which locked in a
weighted average interest rate of 5.83% on
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$175 million of a prospective long-term debt issuance. During March 1999, the
Company entered into interest rate swaps with various financial institutions
effectively converting $175 million of outstanding floating rate debt to fixed
rate debt at a weighted average interest rate of 6.46%. This transaction
replaced the existing treasury locks, or forward rate agreements. The Company
paid $8.2 million to the counterparties to the treasury locks in connection with
the termination of these agreements. In December 1999, the Company terminated
the interest rate swaps, receiving $11.2 million from the counterparties to
these agreements. Of the net $3 million gain, $.9 million was recognized in the
fourth quarter of 1999 and the remainder is being amortized to interest expense
over the remaining 10-year life of the interest rate swaps.
In connection with the shelf registration, the Company received preliminary
ratings on its senior unsecured debt of A- from Standard & Poor's and Baa1 from
Moody's.
During 1997, the Company reduced total indebtedness by $17.7 million. The
significant improvement in 1997 earnings and activity under the Company's stock
option and other employee benefit plans was largely offset by increases in
working capital, capital expenditures, and the purchase of treasury stock. The
increase in working capital during 1997 was associated with improved revenues
and the significantly higher year-end backlog level for Cameron.
The Company's liquidity can be susceptible to fairly large swings in
relatively short periods of time. This is largely because of the cyclical
nature of the industry in which the Company competes and the long time period
from when the Company first receives a large equipment order until the product
can be manufactured, delivered, and the receivable collected.
WORKING CAPITAL
Operating working capital is defined as receivables and inventories less
accounts payable and accrued liabilities, excluding the effect of foreign
currency translation, acquisitions and divestitures.
During 1999, operating working capital decreased $91.8 million. Receivables
decreased by $40 million, primarily in Cameron and CCV, due to a combined 22%
decline in revenues. Inventories decreased by $72 million, with declines in
Cameron, CCV, and CTC, and an increase in CES. The declines were related to the
weak markets and the resulting decrease in production requirements, as well as a
continuing focus on inventory reduction programs. The increase in CES resulted
from a higher year-end 1999 backlog level in reciprocating products. Accounts
payable and accrued liabilities decreased $21 million, reflecting the lower
business levels and a decline in cash advances and progress payments received
from customers as major project orders in Cameron's backlog declined.
During 1998, operating working capital decreased $13.9 million. This result
was comprised of a $58 million increase during the first nine months of 1998
followed by a fourth quarter decline of $71.9 million. Of the fourth quarter
decline, approximately $44 million came from receivables and $43 million from
inventories, partially offset by lower accounts payable and accrued liabilities
of approximately $15 million. The receivable and inventory declines reflected
some initial slowing of activity, and for receivables, unusually strong fourth
quarter collections. On a year-to-year basis, receivables declined by nearly
$80 million, including a nearly $24 million decline in receivables recognized by
CES under the percentage of completion method, which reflected the completion of
large gas turbine and compressor projects. Despite the fourth quarter decrease,
inventories increased on a year-to-year basis by $23 million, with small
declines in Cameron and CCV (excluding Orbit) offset by an increase at CES and
CTC. While the declines reflected normal operating activity, the increase at
CES resulted from a decision to maintain production levels despite delays in the
receipt of anticipated orders. This decision was, to a large degree, validated
by the receipt in late 1998 and early in 1999 of nearly $57 million of gas
turbine and compressor project business. The $42 million year-to-year decrease
in accounts payable and accrued liabilities reflected a decline in inventory
purchases as well as the lower overall year-end 1998 business levels, partially
offset by an increase in cash advances and progress payments received from
customers on major project orders in Cameron's backlog.
During 1997, operating working capital increased $88.7 million. Receivables
increased as a result of higher revenues. Receivables recognized under the
percentage of completion method of accounting declined from $65.4 million at
year-end 1996 to $43.2 million at year-end 1997. This relates to the timing of
orders received for large gas turbine and compressor projects in CES.
Inventories increased, largely in Cameron, in support of the significantly
higher year-end backlog level and general improvement in activity. The increase
in accounts payable and accrued liabilities reflected the higher business
levels, an increase in cash advances and progress payments received from
customers on orders in backlog, as well as continuing focus on managing the
Company's payments to vendors.
CASH FLOWS
During 1999, cash flows from operating activities totaled $139.9 million, a
decline of $95.7 million or 41% from the prior year level. This decline was
primarily attributable to a $93.2 million decrease in net income for the year.
The cash flow from operations, along with the proceeds from the sale of the
rotating compressor business totaling $203.2 million and $9.3 million from the
sale of plant and equipment was utilized primarily to pay down outstanding debt
of approximately $196.2 million, fund capital expenditures totaling $64.9
million and allow for the mid-December acquisition of $92.3 million
(approximately 3.5 million shares) of common stock under forward purchase
agreements with two financial institutions (see further discussion below under
Market Risk Information). Other uses of cash included the acquisition during
the fourth quarter of the remaining interest in a joint venture located in
Venezuela in which the Company previously held a 49% equity interest.
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During 1998, cash flows from operating activities totaled $235.6 million, more
than twice the level of the previous year. This cash flow, along with net
proceeds from sales of plant and equipment of $7.4 million, stock option
exercises and other activities of $3.4 million and additional borrowings of
$15.7 million, was utilized to fund capital spending of $115.5 million, the cash
cost of acquisitions totaling $99.4 million and repurchases of Company stock
totaling $36.1 million. The Company's available cash balance also increased by
nearly $10 million. The $119.9 million increase in cash flow from operating
activities compared to the prior year was virtually all due to working capital
changes, predominantly at Cameron and CES. The decline in working capital
requirements in 1998 and the increase in 1997 are discussed in the Working
Capital section immediately above.
With regard to capital spending, nearly two-thirds of total expenditures for
the years 1999, 1998 and 1997 were attributable to Cameron, primarily for
projects to increase factory throughput and improve delivery times.
During 1997, cash flows from operating activities totaled $115.7 million,
proceeds from the sales of plant and equipment totaled $4.9 million, and funds
received from the exercise of stock options and other employee benefit plans
totaled $23.5 million. The Company expended $6.3 million on several small
product line acquisitions, $72.3 million on capital projects, $2.3 million for
principal payments on capital leases, and $33.7 million on the purchase of
treasury stock. This resulted in a decrease in outstanding debt of $26.7
million, and an increase in cash of $2.5 million.
CAPITAL EXPENDITURES AND COMMITMENTS
Capital projects to reduce product costs, improve product quality, increase
manufacturing efficiency and operating flexibility, or enhance production
capacity resulted in expenditures of $64.9 million in 1999 compared to $115.5
million in 1998 and $72.3 million in 1997.
At December 31, 1999, internal commitments for new capital projects amounted
to approximately $51.0 million compared to $32.0 million at year-end 1998, with
a resulting 10% increase in anticipated year 2000 capital expenditures. The
commitments for 2000 include approximately $18.5 million for machinery and
equipment modernization and enhancement, $12.9 million for capacity enhancement,
$9.7 million for various computer hardware and software projects, $1.6 million
for environmental projects, and $8.3 million for other items. Expenditures in
1999 and commitments for 2000 are focused on generating near-term returns by
reducing costs, increasing factory throughput, and improving delivery times for
customers.
EVALUATION OF GOODWILL REALIZATION
Of the Company's $271 million of net goodwill at December 31, 1999, the
majority relates to acquisitions made by its former parent, Cooper Industries,
Inc., prior to the mid-1995 split-off of Cooper Cameron as a separate public
company. These acquisitions included various businesses which were incorporated
into the CES organization, the Joy Industrial Compressor Group, which became the
predominate part of the CTC division and, most significantly, the 1989
acquisition of Cameron Iron Works (now the Cameron division). At the time of
the Company's split-off from Cooper Industries, the goodwill related to Cameron
was written down by $441 million. Subsequent to the split-off, the Company's
primary acquisitions have included the 1996 purchase of Ingram Cactus Company
(incorporated into Cameron's operations) and the CCV purchase of Orbit Valve
International, Inc. in 1998. Cameron, CCV and CES have also made various
smaller product line acquisitions over the last four and one-half years which
have added to the Company's goodwill. In most cases, the Company has determined
40 years to be an appropriate period for amortizing goodwill from the respective
acquisition dates due to the long-lived nature of the businesses acquired and
the lack of rapid technological change or obsolescence associated with these
operations. Even though the Company experienced a reduced level of operating
income in 1999 compared to 1998, results for 2000 are expected to show
improvement. At the present time, the Company has no reason to believe that
future cash flows from these operations will not be sufficient to fully realize
the remaining carrying value of its goodwill.
ENVIRONMENTAL REMEDIATION
The cost of environmental remediation and compliance has not been an item of
material expense for the Company during any of the periods presented, other than
with respect to the Osborne Landfill in Grove City, Pennsylvania. The Company's
facility in Grove City disposed of wastes at the Osborne Landfill from the early
1950s until 1978. A remediation plan was developed and then accepted by the
U.S. Environmental Protection Agency as the preferred remedy for the site. The
construction phase of the remediation was completed during 1997 and the
remaining costs relate to ground water treatment and monitoring. The Company's
balance sheet at December 31, 1999 includes accruals totaling $1.3 million for
environmental matters ($1.4 million at December 31, 1998). Cooper Cameron has
been identified as a potentially responsible party with respect to five sites
designated for cleanup under the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA") or similar state laws. The Company's
involvement at three of the sites is at a de minimis level, with a fourth, as
yet undesignated, expected to also be at a de minimis level. The fifth site is
Osborne. Although estimated cleanup costs have not yet been totally determined,
the Company believes, based on its review and other factors, that the costs
related to these sites will not have a material adverse effect on the Company's
results of operations, financial condition or liquidity. However, no assurance
can be given that the actual cost will not exceed the estimates of the cleanup
costs, once determined.
MARKET RISK INFORMATION
A large portion of the Company's operations consist of manufacturing and sales
activities in foreign jurisdictions, principally in Europe, Canada, Latin
America and the Pacific Rim. As a result, the Company's financial performance
may be affected by changes
30
<PAGE>
in foreign currency exchange rates or weak economic conditions in these markets.
Overall, the Company generally is a net receiver of Pounds Sterling and Canadian
dollars and, therefore, benefits from a weaker dollar with respect to these
currencies. Typically, the Company is a net payer of euros (including related
legacy currencies) and Norwegian krone as well as other currencies such as the
Singapore dollar and, more recently, the Brazilian real. A weaker dollar with
respect to these currencies may have an adverse effect on the Company. For each
of the last three years, the Company's gain or loss from foreign currency-
denominated transactions has not been material.
In order to mitigate the effect of exchange rate changes, the Company will
often structure sales contracts to provide for collections from customers in
U.S. dollars. In certain specific instances, the Company may enter into forward
foreign currency exchange contracts to hedge specific, large, non-U.S. dollar
anticipated receipts or large anticipated receipts in currencies for which the
Company does not traditionally have fully offsetting local currency
expenditures. During 1999, the Company was a party mainly to forward foreign
currency exchange contracts related to certain large European, including the
U.K., currency receipts.
The Company's interest expense is most sensitive to changes in the general
level of U.S. interest rates, particularly in regard to debt instruments with
rates pegged to the London Interbank Offered Rate (LIBOR). As a result, the
Company was a party to interest rate swaps, which effectively fixed the LIBOR
component of its borrowing cost on a total of $250 million, through mid-December
of 1999, and $75 million at December 31, 1999, of outstanding indebtedness.
Further details concerning these interest rate swaps are set forth elsewhere in
this discussion, as well as in Notes 10 and 14 of the Notes to Consolidated
Financial Statements.
The following is a summary of the Company's outstanding financial instruments
with exposure to changes in interest rates, exchange rates or market rates:
<TABLE>
<CAPTION>
Interest Exchange Market
Rate Rate Rate
(dollars in millions) Sensitive Sensitive Sensitive
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
As of December 31, 1999:
U.S. dollar variable rate debt, due 2002 $167.3
Average interest rate 6.7%
Fair value difference $ --
U.S. dollar fixed rate debt 1 $ 20.5
Average interest rate 6.1%
Fair value difference $ --
Other (primarily Canadian dollar) variable
rate debt, due 2002 $ 12.6 $12.6
Average interest rate 6.9% 6.9%
Fair value difference $ -- $ --
Interest rate swaps -- pay fixed/receive
variable notional amount, due 2000 $ 75.0
Average fixed pay rate 5.77%
Average receive rate (LIBOR) 6.00%
Fair value difference $ 0.2
Forward contracts to buy/sell foreign
currencies (due 2000):
Buy euros, net $ 2.8
Average euro to U.S. dollar contract rate 1.01
12/31/99 euro to U.S. dollar exchange rate 1.01
Fair value difference $ --
Buy British pounds $51.9
Average British pound to U.S. dollar contract rate 1.61
12/31/99 British pound to U.S. dollar exchange rate 1.62
Fair value difference $ 0.3
Buy other currencies (primarily Norwegian krone) $10.4
Fair value difference $ --
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Interest Exchange Market
Rate Rate Rate
Sensitive Sensitive Sensitive
- -------------------------------------------------------------------------------------------
<S> <C> <C> C>
As of December 31, 1998:
U.S. dollar variable rate debt $351.5
Average interest rate 5.7%
Fair value difference $ --
U.S. dollar fixed rate debt $ 20.5
Average interest rate 6.1%
Fair value difference $ --
Other (primarily Brazilian real and Canadian
dollar) variable rate debt 2 $ 29.7 $29.7
Average interest rate 18.1% 18.1%
Fair value difference $ -- $ --
Interest rate swaps --
Notional amount $ 75.0
Fair value difference $ (0.6)
Treasury locks 3 --
Notional amount $175.0
Fair value difference $(14.9)
Forward foreign currency contracts --
Buy Canadian dollars $ 3.2
Sell Canadian dollars $ (7.4)
Fair value difference, net $ 0.1
Forward contracts to purchase company stock 4 --
Notional amount $ 92.3
Fair value difference $ (6.2)
</TABLE>
1 Includes $10.0 million at 6% due 2000. The remaining balance is due in 2002.
2 Includes $13.3 million denominated in Brazilian real at an average rate of
31.6%.
3 See Note 10 of the Notes to Consolidated Financial Statements for information
on the disposition of the treasury locks during 1999.
4 See Note 12 of the Notes to Consolidated Financial Statements for information
on the disposition of the forward equity purchase contracts during 1999.
32
<PAGE>
YEAR 2000
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems as well as the development of contingency plans. As a result
of those planning and remediation efforts, the Company has experienced no
disruptions or other problems with respect to its core business systems,
worldwide local and wide area network communications and plant services as a
result of the Year 2000 date change. Excluding internal personnel costs, the
Company's final cost with respect to this program, including new capital assets
required, was less than $2.5 million. All non-capital costs were expensed as
incurred.
EURO CURRENCY
Effective January 1, 1999, eleven participating European Union member
countries introduced a new common currency (the euro) and, at that time,
established a fixed conversion rate between their legacy currencies and the
euro. The legal currency of each country will continue to be used as legal
tender along with the euro through June 30, 2002. Thereafter, the legacy
currencies will be cancelled and the euro will be used for all financial
transactions in the participating countries. During this three and one-half
year dual-currency environment, special rules apply for converting among legacy
currencies. The Company has not encountered nor does it anticipate any material
adverse consequences to its operations or its financial results from its
continued participation in euro currency-denominated transactions.
OTHER
In addition to the historical data contained herein, this Annual Report,
including the information set forth above in the Company's Management's
Discussion and Analysis and elsewhere in this report, includes forward-looking
statements regarding the future revenues and profitability of the Company,
future savings from nonrecurring actions taken to date, as well as an estimate
of future levels of capital spending made in reliance upon the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. The
Company's actual results may differ materially from those described in forward-
looking statements. Such statements are based on current expectations of the
Company's performance and are subject to a variety of factors, not under the
control of the Company, which can affect the Company's results of operations,
liquidity or financial condition. Such factors may include overall demand for
the Company's products; changes in the price of (and demand for) oil and gas in
both domestic and international markets; political and social issues affecting
the countries in which the Company does business; fluctuations in currency
markets worldwide; and variations in global economic activity. In particular,
current and projected oil and gas prices directly affect customers' spending
levels and their related purchases of the Company's products and services; as a
result, changes in price expectations may impact the Company's financial results
due to changes in cost structure, staffing or spending levels.
Because the information herein is based solely on data currently available, it
is subject to change as a result of changes in conditions over which the Company
has no control or influence, and should not therefore be viewed as assurance
regarding the Company's future performance. Additionally, the Company is not
obligated to make public indication of such changes unless required under
applicable disclosure rules and regulations.
33
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
COOPER CAMERON CORPORATION
We have audited the accompanying consolidated balance sheets of Cooper Cameron
Corporation as of December 31, 1999 and 1998 and the related statements of
consolidated results of operations, consolidated changes in stockholders' equity
and consolidated cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Cooper Cameron Corporation at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Houston, Texas
January 27, 2000
34
<PAGE>
CONSOLIDATED RESULTS OF OPERATIONS
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
- -----------------------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $1,464,760 $1,882,111 $1,806,109
- -----------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales (exclusive of depreciation
and amortization) 1,065,975 1,329,522 1,296,947
Depreciation and amortization 83,716 72,474 65,862
Selling and administrative expenses 205,734 229,710 215,331
Interest expense 27,834 32,721 28,591
Nonrecurring/unusual charges (credits), net 10,585 21,956 --
- -----------------------------------------------------------------------------------------
1,393,844 1,686,383 1,606,731
Income before income taxes 70,916 195,728 199,378
Income tax provision (27,914) (59,572) (58,796)
- -----------------------------------------------------------------------------------------
Net income $ 43,002 $ 136,156 $ 140,582
- -----------------------------------------------------------------------------------------
Earnings per share:
Basic $ .81 $ 2.58 $ 2.70
Diluted $ .78 $ 2.48 $ 2.53
-----------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
35
<PAGE>
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except shares and per share data)
<TABLE>
<CAPTION>
DECEMBER 31,
- ------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 8,215 $ 21,296
Receivables, net 271,511 366,396
Inventories, net 400,038 548,053
Other 24,809 30,515
- ------------------------------------------------------------------------------------
Total current assets 704,573 966,260
- ------------------------------------------------------------------------------------
Plant and equipment, at cost less accumulated
depreciation 419,613 490,579
Intangibles, less accumulated amortization 280,954 293,461
Other assets 65,579 73,303
- ------------------------------------------------------------------------------------
Total assets $1,470,719 $1,823,603
- ------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt $ 14,472 $ 49,599
Accounts payable and accrued liabilities 394,971 453,664
Accrued income taxes 12,383 26,579
- ------------------------------------------------------------------------------------
Total current liabilities 421,826 529,842
- ------------------------------------------------------------------------------------
Long-term debt 195,860 364,363
Postretirement benefits other than pensions 60,823 73,884
Deferred income taxes 38,931 51,148
Other long-term liabilities 39,201 24,081
- ------------------------------------------------------------------------------------
Total liabilities 756,641 1,043,318
- ------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, par value $.01 per share, 150,000,000
shares authorized, 54,001,507 shares issued
(53,259,620 at December 31, 1998) 540 533
Preferred stock, par value $.01 per share, 10,000,000
shares authorized, no shares issued or outstanding -- --
Capital in excess of par value 899,978 883,626
Accumulated other elements of comprehensive income (12,039) 17,455
Retained deficit (including $441,000 charge on
June 30, 1995 related to goodwill impairment) (78,327) (121,329)
Less: Treasury stock - 3,433,548 shares at cost (96,074) --
- ------------------------------------------------------------------------------------
Total stockholders' equity 714,078 780,285
- ------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,470,719 $1,823,603
- ------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
36
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CASH FLOWS
(dollars in thousands)
YEARS ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 43,002 $ 136,156 $ 140,582
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 64,395 54,735 50,234
Amortization 19,321 17,739 15,628
Deferred income taxes (10,688) 6,037 15,077
Changes in assets and liabilities, net of translation and effects
of acquisitions, dispositions and non-cash items:
Receivables 40,319 79,574 (77,216)
Inventories 72,402 (23,517) (100,485)
Accounts payable and accrued liabilities (20,872) (42,147) 89,013
Other assets and liabilities, net (42,169) 7,031 (17,127)
- -----------------------------------------------------------------------------------------------------------
Change in assets and liabilities 49,680 20,941 (105,815)
-----------------------------------------------------------------------------------------------------------
Exclude nonoperating gain from sale of rotating
business, net of tax (25,788) -- --
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 139,922 235,608 115,706
- -----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures and proceeds from sales of plant and
equipment, net (55,653) (108,077) (67,396)
Proceeds from sale of rotating business 203,160 -- --
Acquisitions (7,540) (99,353) (6,278)
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities 139,967 (207,430) (73,674)
- -----------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Loan borrowings (repayments), net (196,232) 15,743 (26,712)
Activity under stock option plans and other (4,802) 3,432 21,131
Purchase of treasury stock (92,332) (36,050) (33,723)
- -----------------------------------------------------------------------------------------------------------
Net cash used for financing activities (293,366) (16,875) (39,304)
- -----------------------------------------------------------------------------------------------------------
Effect of translation on cash 396 (1,606) (186)
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (13,081) 9,697 2,542
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year 21,296 11,599 9,057
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 8,215 $ 21,296 $ 11,599
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
37
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands)
ACCUMULATED
OTHER
CAPITAL IN ELEMENTS OF
COMMON EXCESS OF COMPREHENSIVE COMPREHENSIVE RETAINED TREASURY
STOCK PAR VALUE INCOME INCOME DEFICIT STOCK
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1996 $ 256 $873,933 $ 40,632 $(398,067) $ (626)
Net income $140,582 140,582
--------
Other comprehensive income (loss):
Foreign currency translation (35,182)
Minimum pension liability, net of
$1,455 in taxes 2,349
--------
Total other comprehensive income (loss) (32,833) (32,833)
--------
Comprehensive income $107,749
========
Purchase of treasury stock (33,723)
Common stock issued under stock option
and other employee benefit plans 16 26,935 2,579
Tax benefit of employee stock benefit
plan transactions 22,367
Effect of stock split on equity balances 260 (260)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1997 532 922,975 7,799 (257,485) (31,770)
Net income $136,156 136,156
--------
Other comprehensive income:
Foreign currency translation 9,736
Minimum pension liability, net of
$49 in taxes (80)
--------
Total other comprehensive income 9,656 9,656
--------
Comprehensive income $145,812
========
Purchase of treasury stock (36,050)
Common stock issued under stock option
and other employee benefit plans 1 (53,305) 67,820
Tax benefit of employee stock benefit
plan transactions 15,223
Cost of forward stock purchase agreements (1,267)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1998 533 883,626 17,455 (121,329) --
Net income $ 43,002 43,002
========
Other comprehensive income (loss):
Foreign currency translation (29,479)
Minimum pension liability, net of
$63 in taxes (15)
--------
Total other comprehensive income (loss) (29,494) (29,494)
--------
Comprehensive income $ 13,508
========
Purchase of treasury stock 1,267 (98,378)
Common stock issued under stock option
and other employee benefit plans 7 9,392 2,304
Tax benefit of employee stock benefit
plan transactions 5,693
- ---------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1999 $ 540 $899,978 $(12,039) $ (78,327) $(96,074)
==================================================================================================================================
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF MAJOR ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements include
the accounts of the Company and all majority-owned subsidiaries. Investments of
50% or less in affiliated companies are accounted for using the equity method.
The Company's operations are organized into four separate business segments or
divisions, each with a President who reports to the Company's Chairman and Chief
Executive Officer. The four segments are Cameron, Cooper Cameron Valves (CCV),
Cooper Energy Services (CES) and Cooper Turbocompressor (CTC). Additional
information regarding each segment may be found in Note 13 of the Notes to
Consolidated Financial Statements.
Estimates in Financial Statements -- The preparation of the financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
Revenue Recognition -- Revenue is recognized at the time of shipment or the
performance of services except in the case of certain larger, long lead time
orders at Cooper Energy Services which are accounted for using the percentage of
completion method. Under this method, revenue is recognized as work progresses
in the ratio that costs incurred bear to estimated total costs. The aggregate
of costs incurred reduces net inventories while the revenue recognized is shown
as a receivable. The portion of the Cooper Energy Services business that
utilized the percentage of completion method was sold on September 30, 1999.
See Note 2 for additional information. Expected losses on contracts in progress
are charged to operations currently.
Inventories -- Inventories are carried at cost or, if lower, net realizable
value. On the basis of current costs, 68% of inventories in 1999 and 70% in
1998 are carried on the last-in, first-out (LIFO) method. The remaining
inventories, which are located outside the United States, are carried on the
first-in, first-out (FIFO) method.
Plant and Equipment -- Depreciation is provided over the estimated useful
lives of the related assets, or in the case of assets under capital leases, over
the related lease term, if less, using primarily the straight-line method. This
method is applied to group asset accounts which in general have the following
lives: buildings - 10 to 40 years; machinery and equipment - 3 to 18 years; and
tooling, dies, patterns and all other - 5 to 10 years.
Intangibles -- Intangibles consist primarily of goodwill related to purchase
acquisitions. With minor exceptions, the goodwill is being amortized over 40
years from respective acquisition dates. The carrying value of the Company's
goodwill is reviewed by division at least annually or whenever there are
indications that the goodwill may be impaired.
Income Taxes -- Income tax expense includes U.S. and foreign income taxes,
including U.S. federal taxes on undistributed earnings of foreign subsidiaries
to the extent such earnings are planned to be remitted. Taxes are not provided
on the translation component of comprehensive income since the effect of
translation is not considered to modify the amount of the earnings that are
planned to be remitted.
Environmental Remediation and Compliance -- Environmental remediation and
postremediation monitoring costs are accrued when such obligations become
probable and reasonably estimable. Such future expenditures are not discounted
to their present value. Environmental costs that are capitalized are
depreciated generally utilizing a 15-year life.
Product Warranty -- Estimated warranty expense is accrued either at the time
of sale or, in most cases, when specific warranty problems are encountered.
Adjustments to the accruals are made periodically to reflect actual experience.
Stock Options and Employee Stock Purchase Plan -- Options to purchase Common
stock are granted to certain executive officers and key management personnel at
100% of the market value of the Company's stock at the date of grant. As
permitted, the Company follows Accounting Principles Board Opinion No. 25 and,
as a result, no compensation expense is recognized under its stock option plans
or the Employee Stock Purchase Plan.
Derivative Financial Instruments -- The Company has interest rate swap
agreements that modify the interest characteristics of its outstanding debt.
Interest rate differentials to be paid or received as a result of interest rate
swap agreements are recognized over the lives of the swaps as an adjustment to
interest expense. Gains and losses on early terminations of these agreements
would be deferred and amortized as an adjustment to interest expense over the
remaining term of the original life of the swap agreement. The fair value of
swap agreements and changes in fair value as a result of changes in market
interest rates are not recognized in the financial statements. Additionally,
treasury locks, or forward rate agreements, were utilized in prior years to
hedge the interest rate on prospective long-term debt issuances. These treasury
locks were replaced in March 1999 with interest rate swaps, which were
subsequently terminated in December 1999. The unrealized net gain from these
transactions is being amortized over the remaining term of the original life of
the interest rate swaps (see Note 10 of the Notes to Consolidated Financial
Statements for further information).
39
<PAGE>
The Company also has foreign currency forward contracts to hedge its cash flow
exposure on significant transactions denominated in currencies other than the
U.S. dollar. These contracts are entered into for periods consistent with the
terms of the underlying transactions. The Company does not engage in
speculation. Unrealized gains and losses on foreign currency forward contracts
are deferred and recognized as an adjustment to the basis of the underlying
transaction at the time the foreign currency transaction is completed.
Cash Equivalents -- For purposes of the Consolidated Cash Flows statement, the
Company considers all investments purchased with original maturities of three
months or less to be cash equivalents.
New Accounting Pronouncements -- In June 1999, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS) No.
137 which had the effect of deferring implementation of SFAS No. 133 (Accounting
for Derivative Instruments and Hedging Activities) until no later than
January 1, 2001 for calendar year companies. SFAS 133, once adopted, will
require the Company to recognize all derivatives on its balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The Company will
undertake an evaluation of the impact of SFAS No. 133 on its derivatives and
hedging activities beginning in early 2000. Given the limited number of
derivative transactions in which the Company typically engages, the effect of
the new standard is unlikely to be material.
NOTE 2: NONRECURRING/UNUSUAL CHARGES (CREDITS)
On September 30, 1999, the Company completed the sale to Rolls-Royce plc of
the CES division's rotating compressor product line which included centrifugal
compressors, power turbines and En-Tronic(R) controls. The operations that were
sold had primary facilities in Mt. Vernon, Ohio, Liverpool, United Kingdom and
Hengelo in the Netherlands. The Company received $203,160,000 in cash in
connection with the sale, which is subject to adjustment based on a final
balance sheet for the business. Included in the sale was the Company's 50%
interest in Cooper Rolls, Inc., a marketing joint venture company equally owned
with Rolls-Royce prior to the transaction. The Company recorded a preliminary
pre-tax gain from the sale totaling $45,262,000. The Rotating compressor
product line generated revenues through September 30, 1999 of approximately
$92,400,000 and incurred a loss, including an allocation of certain shared
general and administrative costs, over the same period before interest, taxes,
depreciation, amortization and nonrecurring charges (credits) of approximately
$8,400,000.
In addition, the Company has recorded nonrecurring/unusual charges related to
both ongoing costs of previously initiated cost rationalization programs and
additional programs that were initiated during 1999. The nonrecurring/unusual
charges by segment are as follows:
YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------------------
(dollars in thousands) 1999 1998
- -----------------------------------------------------------------------------
Cameron $15,881 $ 6,063
CCV 9,873 7,796
CES 29,385 7,810
CTC 708 287
- -----------------------------------------------------------------------------
$55,847 $21,956
- -----------------------------------------------------------------------------
Cameron recorded approximately $13,176,000 during 1999 (nearly $4,100,000 of
which was recorded in the fourth quarter) for employee severance, primarily
associated with the continued rationalization of its operations in the U.S., the
U.K. and France in response to decreased market demand that began in 1998. The
remaining nonrecurring charges for 1999 relate primarily to employee severance
and other costs associated with the closure of this segment's manufacturing
facility in Austria which was initiated at the end of the second quarter. The
charges during 1998 consisted primarily of costs associated with the termination
of specific employees in connection with the decline in market activity
described above. Nearly three-fourths of the costs incurred during 1998 related
to this segment's operations in the U.S., the U.K. and France.
The $17,669,000 of nonrecurring/unusual charges recorded by CCV during 1998
and 1999 (including $1,436,000 recorded in the fourth quarter of 1999) relate
to: (i) the shut-down (including severance, relocation and other costs) of a
manufacturing facility in Missouri City, Texas (announced in the third quarter
of 1998), (ii) one-time acquisition costs relating to the 1998 acquisition of
Orbit Valve International, Inc. (see Note 3 of the Notes to Consolidated
Financial Statements) and (iii) severance, primarily associated with employment
reductions at this segment's operations in Beziers, France. The transfer of
production from the Missouri City facility to another facility in Oklahoma City,
Oklahoma was substantially completed during the early part of 1999 and the
Missouri City facility will be sold in due course.
40
<PAGE>
CES recorded approximately $29,385,000 during 1999 (including nearly
$15,212,000 of non-cash asset impairment charges) relating to employee
severance, the announced shutdown of the Company's underutilized foundry and
associated machining operations in Grove City, Pennsylvania and the relocation
of its compressor plant in Mt. Vernon, Ohio. The remaining 1999 costs primarily
relate to employee relocations and various facility/warehouse consolidations.
Approximately $5,649,000 of these total nonrecurring/unusual charges were
recorded in the fourth quarter of 1999. The costs incurred during 1998 were
associated with the severance and relocation of salaried personnel in the Mt.
Vernon and Grove City facilities.
All 1998 and 1999 CTC nonrecurring charges related to employee severance
associated with declining demand in that segment's markets.
Since December 31, 1998, the Company's headcount has been reduced by
approximately 2,100 employees, or 23%, as a result of the sale of the rotating
business, the actions described above and normal attrition. The cash flow
effect of the above actions (excluding proceeds from the sale of the rotating
business), was approximately $37,409,000 in 1999 and $10,406,000 in 1998.
Certain idle facility costs are expected to continue beyond 1999.
NOTE 3: ACQUISITIONS
During 1999, Cameron acquired the remaining interest in a joint venture
located in Venezuela in which it previously held a 49% equity interest. Prior
to the acquisition, which was accounted for under the purchase method of
accounting, the Company included its share of the operating results of the joint
venture in its results of operations using the equity method. The acquisition
resulted in additional goodwill of approximately $3,500,000.
Effective April 2, 1998, the Company acquired Orbit Valve International, Inc.
for approximately $104,000,000 in cash and assumed indebtedness. Orbit, which
has been integrated into CCV, is based in Little Rock, Arkansas and manufactures
and sells high-performance valves for the oil and gas and petrochemical
industries. Orbit generated revenues of approximately $71,000,000 from the
acquisition date through December 31, 1998. Additionally, during July 1998, the
Company acquired certain assets and assumed certain liabilities of Brisco
Engineering Ltd., a U.K. company, for approximately $12,400,000 in cash and
debt. The acquired operations, which participate in the repair and aftermarket
parts business for control systems, have been consolidated into the Cameron
organization. The two purchase acquisitions resulted in additional goodwill of
$63,786,000. Three other small product line acquisitions were also made during
1998 to supplement the Company's aftermarket operations. The results of
operations from all acquisitions have been included with the Company's results
for the year ended December 31, 1998 from the respective acquisition dates
forward.
NOTE 4: RECEIVABLES
December 31,
- -------------------------------------------------------------------------------
(dollars in thousands) 1999 1998
- -------------------------------------------------------------------------------
Trade receivables $243,336 $336,854
Receivables under the percentage of completion method
($4,626 billed at December 31, 1998) -- 19,457
Other receivables 31,152 14,152
Allowance for doubtful accounts (2,977) (4,067)
- -------------------------------------------------------------------------------
$271,511 $366,396
- -------------------------------------------------------------------------------
Trade receivables include $12,576,000 and $10,561,000 at December 31, 1999 and
1998, respectively, of amounts which have not as yet been billed because of
contractual provisions providing for a delay in the billing until various post-
delivery conditions have been met. All of these amounts should be billed and
collected in less than one year.
<TABLE>
<CAPTION>
NOTE 5: INVENTORIES
DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 43,851 $ 60,265
Work-in-process 126,949 205,870
Finished goods, including parts and subassemblies 301,910 364,954
Other 2,712 3,491
- ------------------------------------------------------------------------------------------------------------------------
475,422 634,580
Excess of current standard costs over LIFO costs (58,951) (79,076)
Allowance for obsolete and slow-moving inventory (16,433) (7,451)
- ------------------------------------------------------------------------------------------------------------------------
$400,038 $548,053
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
NOTE 6: PLANT AND EQUIPMENT AND INTANGIBLES
DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Plant and equipment:
Land and land improvements $ 36,954 $ 35,290
Buildings 174,645 197,278
Machinery and equipment 402,187 467,837
Tooling, dies, patterns, etc. 55,845 64,480
Assets under capital leases 22,684 21,292
All other 102,637 123,091
Construction in progress 17,253 29,573
- ------------------------------------------------------------------------------------------------------------------------
812,205 938,841
Accumulated depreciation (392,592) (448,262)
- ------------------------------------------------------------------------------------------------------------------------
$ 419,613 $ 490,579
- ------------------------------------------------------------------------------------------------------------------------
Intangibles:
Goodwill $ 455,115 $ 455,662
Assets related to pension plans 371 434
Other 53,297 62,938
- ------------------------------------------------------------------------------------------------------------------------
508,783 519,034
Accumulated amortization (227,829) (225,573)
- ------------------------------------------------------------------------------------------------------------------------
$ 280,954 $ 293,461
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NOTE 7: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trade accounts and accruals $230,286 $290,310
Salaries, wages and related fringe benefits 55,456 48,054
Product warranty, late delivery, and similar costs 20,187 37,518
Deferred income taxes 34,962 26,414
Nonrecurring/unusual charges 10,328 10,345
Other (individual items less than 5% of total current liabilities) 43,752 41,023
- ------------------------------------------------------------------------------------------------------------------------
$394,971 $453,664
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8: EMPLOYEE BENEFIT PLANS
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 9,598 $ 9,287 $ 7,835 $ 168 $ 189 $ 225
Interest cost 18,366 17,929 17,838 2,928 3,254 3,442
Expected return on plan assets (30,653) (28,425) (27,649) -- -- --
Amortization of prior service cost (266) (404) (419) (300) (700) (700)
Amortization of (gains) losses and other (5,802) (4,320) (1,526) (10,600) (9,700) (10,100)
- ------------------------------------------------------------------------------------------------------------------------------------
Net periodic benefit income (8,757) (5,933) (3,921) (7,804) (6,957) (7,133)
Curtailment gain (446) -- -- -- -- --
Settlement gain (2,087) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total net benefit income $(11,290) $ (5,933) $ (3,921) $ (7,804) $(6,957) $ (7,133)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
- -------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $289,547 $261,921 $51,298 $49,421
Service cost 9,598 9,287 168 189
Interest cost 18,366 17,929 2,928 3,254
Plan participants' contributions 911 1,057 -- --
Amendments 1,059 -- -- --
Change in discount rate/remeasurement impact (14,507) 11,239 -- --
Actuarial (gains) losses (3,743) 17,641 (5,429) 3,058
Exchange rate changes (4,211) (406) -- --
Curtailment results 612 -- -- --
Settlement results 4,314 -- -- --
Benefits paid directly or from plan assets (26,239) (29,121) (5,257) (4,624)
- -------------------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year $275,707 $289,547 $43,708 $51,298
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
- -------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in plan assets:
Fair value of plan assets at beginning of year $342,130 $313,061 $ -- $ --
Actual return on plan assets 42,212 56,322 -- --
Asset gain 7,435 -- -- --
Company contributions 705 1,224 5,257 4,624
Plan participants' contributions 911 1,057 -- --
Exchange rate changes (4,151) (815) -- --
Impact of remeasurement (1,875) -- -- --
Benefits paid from plan assets (25,836) (28,719) (5,257) (4,624)
- -------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $361,531 $342,130 $ -- $ --
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
- -------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plan assets in excess of (less than) benefit
obligations at end of year $ 85,824 $52,583 $(43,708) $(51,298)
Unrecognized net (gain) loss (33,478) (9,781) (16,315) (21,486)
Unrecognized prior service cost (2,577) (4,344) (800) (1,100)
Unrecognized net transition (asset) 266 (224) -- --
- -------------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost 50,035 38,234 (60,823) (73,884)
Underfunded plan adjustments recognized:
Accrued minimum liability (888) (1,038) -- --
Intangible asset 371 434 -- --
Accumulated other comprehensive income, net of tax 388 373 -- --
- -------------------------------------------------------------------------------------------------------------------------------
Net assets (liabilities) recognized on balance
sheet at end of year $ 49,906 $38,003 $(60,823) $(73,884)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
- -------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average assumptions as of
December 31:
Domestic plans:
- ---------------
Discount rate 7.5% 6.5% 7.53% 6.19%
Expected return on plan assets 9.25% 9.25%
Rate of compensation increase 4.5% 4.5%
Health care cost trend rate 7.5% 7.5%
International plans:
- --------------------
Discount rate 6.0 - 6.25% 5.5 - 6.25%
Expected return on plan assets 6 - 9% 6 - 9%
Rate of compensation increase 3.5 - 4.5% 3.5 - 5%
</TABLE>
For 1999, the rate of compensation increase is based on an age-grade scale
ranging from 7.5% to 3.0% with a weighted average rate of approximately 4.5%.
The health care cost trend is assumed to decrease gradually from 7.5% to 5% by
2005 and remain at that level thereafter. A one-percentage-point change in the
assumed health care cost trend rate would have the following effects:
<TABLE>
<CAPTION>
1 - PERCENTAGE 1 - PERCENTAGE
(DOLLARS IN THOUSANDS) POINT INCREASE POINT DECREASE
- -------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest
cost components in 1999 $ 271 $ (238)
Effect on postretirement benefit obligation
as of December 31, 1999 $3,169 $(2,826)
</TABLE>
Amounts applicable to the Company's pension plans with projected and
accumulated benefit obligations in excess of plan assets are as follows:
<TABLE>
<CAPTION>
(dollars in thousands) 1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Projected benefit obligation $(8,675) $(9,237)
Accumulated benefit obligation $(7,767) $(8,149)
Fair value of plan assets $ 2,728 $ 2,810
</TABLE>
The Company sponsors the Cooper Cameron Corporation Retirement Plan
(Retirement Plan) covering all salaried U.S. employees and certain domestic
hourly employees as well as separate defined benefit pension plans for employees
of its U.K. and German subsidiaries and several unfunded defined benefit
arrangements for various other employee groups.
Aggregate pension expense (income) amounted to $(1,851,000) in 1999,
$5,121,000 in 1998 and $7,002,000 in 1997. The Company's income with respect to
the defined benefit pension plans is set forth in the table above. The
Company's change in the discount rate for domestic pension plans from 6.5% to
7.5% resulted in a $900,000 reduction in fourth quarter 1999 pension expense and
is expected to reduce 2000 expense by approximately $3,600,000. Expense with
respect to various defined contribution plans for the years ended December 31,
1999, 1998 and 1997 amounted to $9,439,000, $11,054,000 and $10,923,000,
respectively.
Effective September 30, 1999, the Company sold the CES division's rotating
compressor product line (see Note 2 of the Notes to Consolidated Financial
Statements for further information). This sale resulted in a one-time
curtailment gain of $446,000 for the Retirement Plan. A one-time gain of
$2,087,000 was also recognized as a settlement to the Retirement Plan as a
result of the large number of payouts during the year which required accelerated
recognition of a portion of the Retirement Plan's unrecognized net gain. There
were no curtailments or settlements recognized in 1998 or 1997. In connection
with the sale of the rotating compressor business, the Company retained all
defined benefit pension and postretirement benefit liabilities earned by
employees of this business through September 30, 1999.
44
<PAGE>
The assets of the domestic and foreign plans are maintained in various trusts
and consist primarily of equity and fixed income securities.
In addition, the Company's full-time domestic employees who are not covered by
a bargaining unit are also eligible to participate in the Cooper Cameron
Corporation Retirement Savings Plan. Under this plan, employees' savings
deferrals are partially matched with shares of the Company's Common stock. The
Company's expense under this plan equals the matching contribution under the
Plan's formula. Expense for the years ended December 31, 1999, 1998 and 1997
amounted to $7,598,000, $8,432,000 and $7,683,000, respectively.
The Company's salaried employees also participate in various domestic employee
welfare benefit plans, including medical, dental and prescriptions, among other
benefits for active employees. Salaried employees who retired prior to 1989, as
well as certain other employees who were near retirement at that date and
elected to receive certain benefits, have retiree medical, prescription and life
insurance benefits, while active salaried employees do not have postretirement
health care benefits.
The hourly employees have separate plans with varying benefit formulas, but
currently active employees, except for certain employees similar to those
described above, will not receive health care benefits after retirement.
All of the welfare benefit plans, including those providing postretirement
benefits, are unfunded.
NOTE 9: STOCK OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES
---------------------------
LONG-TERM NON-EMPLOYEE WEIGHTED
INCENTIVE DIRECTOR AVERAGE
PLAN PLAN EXERCISE PRICES
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stock options outstanding at December 31, 1996 4,920,430 246,842 $15.95
Options granted 2,865,982 144,000 $34.98
Options cancelled (146,795) -- $11.70
Options exercised (1,592,970) (147,250) $12.84
- -----------------------------------------------------------------------------------------------------
Stock options outstanding at December 31, 1997 6,046,647 243,592 $26.02
Options granted 2,485,019 96,540 $35.32
Options cancelled (154,352) -- $33.00
Options exercised (1,324,498) (21,592) $16.65
- -----------------------------------------------------------------------------------------------------
Stock options outstanding at December 31, 1998 7,052,816 318,540 $30.84
Options granted 1,646,113 61,740 $41.35
Options cancelled (230,004) -- $36.80
Options exercised (884,744) -- $17.74
- -----------------------------------------------------------------------------------------------------
Stock options outstanding at December 31, 1999/1/ 7,584,181 380,280 $34.38
- -----------------------------------------------------------------------------------------------------
Stock options exercisable at December 31, 1999/1/ 3,560,046 292,800 $31.19
- -----------------------------------------------------------------------------------------------------
</TABLE>
/1/ Exercise prices range from $8.329 to $70.625 per share.
Options are granted to key employees under the Long-term Incentive Plan and
generally become exercisable on the first anniversary date following the date of
grant in one-third increments each year or in annual increments of one-sixth,
one-third, one-third and one-sixth. In 1998, options that fully vested at the
end of 1999 were also granted to a limited number of employees. These options
all expire ten years after the date of grant. Certain key executives also
elected in 1998 to receive options in lieu of salary for the year ended December
31, 1999. The options granted under the Options in Lieu of Salary Program
generally become exercisable at the end of the related salary period and expire
five years after the beginning of the salary period. Similar options were not
granted in 1999 with respect to salary for the year 2000.
Under the Company's Non-employee Director Stock Option Plan, non-employee
directors receive a grant of 6,000 stock options annually. In addition,
directors are permitted to take either a portion of or their full annual
retainer in cash ($30,000) or receive, in lieu of cash, additional stock
options. All directors elected to receive all of their retainer in stock
options for 1999, 1998 and 1997. The election to receive their entire retainer
in stock options for the year 1999 was made during 1998. As a result, the
shares granted during 1998 in lieu of the retainer amounted to 34,800 for the
period through December 31, 1998 and 25,740 for the year 1999. Additionally,
during 1999, directors were granted 25,740 shares in lieu of retainer for the
year 2000. The exercise price of each option is based on the fair market value
of the Company's stock at the date of grant. The options generally expire five
years after the date
45
<PAGE>
of grant and become exercisable one year following the date
of grant. In the case of options granted in lieu of retainer, the options
become exercisable one year following the beginning of the retainer period and
expire five years following the beginning of the retainer period.
As of December 31, 1999, shares reserved for future grants under the Long-term
Incentive and Non-employee Director Stock Option Plans were 663,778 and 456,878,
respectively. The weighted-average remaining contractual life of all options at
December 31, 1999 is approximately 6.8 years.
Pro forma information is required by SFAS No. 123 to reflect the estimated
effect on net income and earnings per share as if the Company had accounted for
the stock option grants and the Employee Stock Purchase Plan (ESPP) using the
fair value method described in that Statement. The fair value was estimated at
the date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1999, 1998 and 1997, respectively: risk-free
interest rates of 5.5%, 5.2% and 5.9%; dividend yields of zero, zero and 0.8%;
volatility factors of the expected market price of the Company's Common stock of
.494, .482 and .349; and a weighted-average expected life of the options of 3.6,
4.0 and 3.5 years. These assumptions resulted in a weighted-average grant date
fair value for options and the ESPP of $17.02 and $10.56, respectively, for
1999; $15.18 and $10.11, respectively, for 1998; and $10.83 and $14.49,
respectively, for 1997. For purposes of the pro forma disclosures, the estimated
fair value is amortized to expense over the vesting period. Reflecting the
amortization of this hypothetical expense for 1999, 1998 and 1997 results in pro
forma net income and diluted earnings per share of $20,417,000 and $0.36,
respectively, for 1999; $118,562,000 and $2.11, respectively, for 1998; and
$128,875,000 and $2.32, respectively, for 1997.
EMPLOYEE STOCK PURCHASE PLAN
Under the Cooper Cameron Employee Stock Purchase Plan, the Company is
authorized to sell up to 2,000,000 shares of Common stock to its full-time
domestic, U.K., Ireland, Singapore and Canada employees, nearly all of whom are
eligible to participate. Under the terms of the Plan, employees may elect each
year to have up to 10% of their annual compensation withheld to purchase the
Company's Common stock. The purchase price of the stock is 85% of the lower of
the beginning-of-plan year or end-of-plan year market price of the Company's
Common stock. Under the 1999/2000 plan, over 1,700 employees elected to
purchase approximately 192,000 shares of the Company's Common stock at $31.03
per share, or 85% of the market price of the Company's Common stock on July 31,
2000, if lower. A total of 210,057 shares were purchased at $30.23 per share on
July 31, 1999 under the 1998/1999 plan.
NOTE 10: LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
- -------------------------------------------------------------------
(dollars in thousands) 1999 1998
- -------------------------------------------------------------------
<S> <C> <C>
Floating-rate revolving credit advances $125,341 $350,939
Other long-term debt 75,059 50,756
Obligations under capital leases 9,932 12,267
- -------------------------------------------------------------------
210,332 413,962
Current maturities (14,472) (49,599)
- -------------------------------------------------------------------
Long-term portion $195,860 $364,363
- -------------------------------------------------------------------
</TABLE>
The Company is party to a long-term credit agreement (the Credit Agreement)
with various banks which provides for an aggregate unsecured borrowing capacity
of $475,000,000 of floating-rate revolving credit advances maturing March 31,
2002. The Company is required to pay a facility fee on the committed amount
under the Credit Agreement, which at December 31, 1999 equalled .075% annually.
The Company had entered into agreements during 1998 with five banks providing
for additional committed credit facilities totaling $155,000,000. These
agreements were allowed to expire during the third quarter of 1999 without being
renewed.
In addition to the above, the Company also has other unsecured and uncommitted
credit facilities available both domestically and to its foreign subsidiaries.
At December 31, 1999, the weighted-average interest rate on the revolving
credit advances was 6.35% (5.72% at December 31, 1998). Excluding approximately
$1,071,000 of dollar equivalent local currency indebtedness in Brazil at a
notional rate (before currency effects) of 25% annually, the average interest
rate on the remaining debt was 6.86% at December 31, 1999 (6.6% at December 31,
1998).
At December 31, 1999, the Company had reclassified as long-term $54,529,000
(none at December 31, 1998) of indebtedness which by its terms represents a
current liability reflecting the Company's intention and ability to refinance
such amounts under the Credit Agreement. As a result, future maturities of the
floating-rate revolving credit advances and other long-term debt are
$10,026,000, $-0- and $190,374,000 for the years 2000, 2001 and 2002,
respectively.
As described further in Note 14, the Company has entered into interest rate
swaps with a notional value of $75,000,000, resulting in an effective fixed rate
of 5.77% on that portion of the Company's outstanding debt for the period from
January 1, 2000 until the expiration of all outstanding agreements on June 30,
2000.
46
<PAGE>
During March 1999, the Company entered into interest rate swaps with various
financial institutions to effectively convert $175,000,000 of outstanding
floating rate debt to fixed rate debt at a weighted-average interest rate of
6.46%. This transaction replaced existing treasury locks, or forward rate
agreements. The Company paid $8,235,000 to the counterparties to the treasury
locks in connection with the termination of these agreements. In December 1999,
the Company terminated the interest rate swaps, receiving $11,239,000 from the
counterparties to these agreements. Of the net $3,004,000 gain, $899,000 was
recognized in the fourth quarter of 1999 and the remainder is being amortized to
interest expense over the remaining 10-year life of the interest rate swaps.
At December 31, 1999, the Company had $349,659,000 of committed borrowing
capacity available plus additional uncommitted amounts available under various
other borrowing arrangements.
Under the terms of the Credit Agreement, the Company is required to maintain
certain financial ratios including a debt-to-capitalization ratio of not more
than 50%, except in certain instances involving acquisitions, and a coverage
ratio of earnings before interest, taxes, depreciation and amortization (EBITDA)
less capital expenditures equal to at least 2.5 times interest expense. The
Credit Agreement also specifies certain limitations regarding additional
indebtedness outside the Credit Agreement and the amounts invested in the
Company's foreign subsidiaries. The Company has been, throughout all periods
reported, and was, at December 31, 1999, in compliance with all loan covenants.
For the years 1999, 1998 and 1997, total interest expense was $27,834,000,
$32,721,000 and $28,591,000, respectively. Interest paid by the Company in
1999, in 1998 (after considering $2,187,000 of interest capitalized during 1998)
and in 1997 is not materially different than the amounts expensed.
At December 31, 1999, the Company was party to a long-term lease extending out
12 years (inclusive of renewal options) involving annual rentals of up to
$2,400,000. The Company also leases certain facilities, office space, vehicles,
and office, data processing and other equipment under capital and operating
leases. The obligations with respect to these leases are generally for five
years or less and are not considered to be material individually or in the
aggregate.
47
<PAGE>
NOTE 11: INCOME TAXES
<TABLE>
<CAPTION>
Years Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes:
U.S. operations $ 13,536 $ 58,976 $ 97,024
Foreign operations 57,380 136,752 102,354
- ----------------------------------------------------------------------------------------------------------------
Income before income taxes $ 70,916 $195,728 $ 199,378
- ----------------------------------------------------------------------------------------------------------------
Income taxes:
Current:
U.S. federal $ 10,805 $ 14,973 $ 23,914
U.S. state and local and franchise 4,501 3,934 3,905
Foreign 23,296 34,628 15,900
- ----------------------------------------------------------------------------------------------------------------
38,602 53,535 43,719
- ----------------------------------------------------------------------------------------------------------------
Deferred:
U.S. federal (6,829) 126 9,558
U.S. state and local (1,026) 19 1,567
Foreign (2,833) 5,892 3,952
- ----------------------------------------------------------------------------------------------------------------
(10,688) 6,037 15,077
- ----------------------------------------------------------------------------------------------------------------
Income tax provision $ 27,914 $ 59,572 $ 58,796
- ----------------------------------------------------------------------------------------------------------------
Items giving rise to deferred income taxes:
Reserves and accruals $ (16,349) $ 812 $ (4,266)
Inventory allowances, full absorption and LIFO (8,315) 3,906 15,196
Percentage of completion income (recognized) not
recognized for tax (2,018) (2,877) (808)
Prepaid medical and dental expenses (166) 35 (4,511)
Postretirement benefits other than pensions 4,996 4,429 4,501
U.S. tax deductions less than (in excess of) amounts
currently deductible 15,744 (5,927) (1,694)
Other (4,580) 5,659 6,659
- ----------------------------------------------------------------------------------------------------------------
Deferred income taxes $ (10,688) $ 6,037 $ 15,077
- ----------------------------------------------------------------------------------------------------------------
The differences between the provision for income taxes and income
taxes using the U.S. federal income tax rate were as follows:
U.S. federal statutory rate 35.00% 35.00% 35.00%
Nondeductible goodwill 4.48 1.52 1.43
State and local income taxes 2.37 0.93 1.69
Tax exempt income (0.99) (1.43) (0.88)
Foreign statutory rate differential (2.75) (2.30) (1.14)
Change in valuation of prior year tax assets (3.24) (3.57) (7.10)
Losses not receiving a tax benefit 2.64 0.91 0.59
All other 1.85 (0.62) (0.10)
- ----------------------------------------------------------------------------------------------------------------
Total 39.36% 30.44% 29.49%
- ----------------------------------------------------------------------------------------------------------------
Total income taxes paid $ 42,696 $ 22,166 $ 12,929
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Components of deferred tax balances:
Deferred tax liabilities:
Plant and equipment $ (38,415) $ (42,571)
Inventory (45,628) (53,757)
Pensions (10,073) (10,592)
Percentage of completion -- (2,018)
Other (35,723) (27,576)
- ----------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities (129,839) (136,514)
- ----------------------------------------------------------------------------------------------------------------
Deferred tax assets:
Postretirement benefits other than pensions 23,265 28,261
Reserves and accruals 51,916 35,100
Net operating losses and related deferred tax assets 9,058 22,865
Other 7,021 637
- ----------------------------------------------------------------------------------------------------------------
Total deferred tax assets 91,260 86,863
- ----------------------------------------------------------------------------------------------------------------
Valuation allowance (18,695) (19,120)
- ----------------------------------------------------------------------------------------------------------------
Net deferred tax liabilities $ (57,274) $ (68,771)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The Company's 1999 effective tax rate of 39.36% is comprised of an effective
tax rate of 43.0% with respect to the preliminary pre-tax gain on the sale of
the Rotating compressor business and a 32.9% rate with respect to the remainder
of the Company's earnings. During each of the last three years certain of the
Company's international operations have incurred losses that have not been tax
benefited, while others, that had losses in a prior year, generated earnings in
a subsequent year that utilized the prior year unrecorded benefit of the loss.
In addition, during 1999 and 1998 respectively, $2,300,000 and $2,032,000 of
deferred tax assets that had been reserved in prior years were realized and the
related reserves were reversed. The effect of these items on the Company's
overall effective tax rate are included in the rate reconciliation captions:
"Change in valuation of prior year tax assets" and "Losses not receiving a tax
benefit". As a result of all of the foregoing, the valuation allowances
established in prior years were reduced in 1999, 1998 and 1997 by $425,000,
$5,201,000 and $12,896,000, respectively, with a corresponding reduction in the
Company's income tax expense.
In 1999, all of the deferred tax assets recorded in 1998 and 1997 and prior
years with respect to U.S. taxable losses were utilized such that, along with
other deductions originating in 1999, the Company paid only a small amount of
actual tax during 1999 on its domestic earnings, including the gain on the sale
of Rotating. During 1998 and 1997, a primary item giving rise to the domestic
taxable loss was the tax deduction that the Company receives with respect to
certain employee stock benefit plan transactions. This benefit, which is
credited to capital in excess of par value, amounted to $15,223,000 and
$22,367,000 in 1998 and 1997, respectively. The comparable 1999 benefit of
$5,693,000 was fully utilized during 1999.
The Company's tax provision includes U.S. tax expected to be payable on the
foreign portion of the Company's income before income taxes when such earnings
are remitted. The Company's accruals are sufficient to cover the additional
U.S. taxes estimated to be payable on the earnings that the Company anticipates
will be remitted. Through December 31, 1999, this amounted to essentially all
unremitted earnings of the Company's foreign subsidiaries except certain
unremitted earnings in the U.K., Ireland, and Singapore which are considered to
be permanently reinvested.
49
<PAGE>
NOTE 12: COMMON STOCK, PREFERRED STOCK AND RETAINED DEFICIT
COMMON STOCK
During the Annual Meeting of Stockholders held on May 14, 1998, an Amended and
Restated Certificate of Incorporation was approved resulting in an increase in
the amount of Common stock the Company is authorized to issue from 75,000,000
shares to 150,000,000 shares, par value $.01 per share.
In November 1998, the Company's board of directors approved the repurchase of
up to 10,000,000 shares of Common stock for use in the Company's various
employee stock ownership, option and benefit plans. In December 1999, the
Company exercised its option under outstanding forward purchase agreements to
purchase 3,515,900 shares of its common stock from various third parties at a
specified price as defined in the agreements. The total amount paid was
$98,378,000, which includes $6,046,000 of prepaid acquisition costs. In
addition, the Company also purchased approximately 503,000 shares during the
fourth quarter of 1997 and 709,700 shares in January 1998. Treasury shares are
utilized to satisfy stock option exercises and stock issuances under the
Employee Stock Purchase Plan. Additionally, at December 31, 1999, 10,417,983
shares of unissued Common stock were reserved for future issuance under various
employee benefit plans.
PREFERRED STOCK
The Company is authorized to issue up to 10,000,000 shares of preferred stock,
par value $.01 per share. At December 31, 1999, no preferred shares were issued
or outstanding. Shares of preferred stock may be issued in one or more series
of classes, each of which series or class shall have such distinctive
designation or title as shall be fixed by the Board of Directors of the Company
prior to issuance of any shares. Each such series or class shall have such
voting powers, full or limited, or no voting powers, and such preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated in such
resolution or resolutions providing for the issuance of such series or class of
preferred stock as may be adopted by the Board of Directors prior to the
issuance of any shares thereof. A total of 1,500,000 shares of Series A Junior
Participating Preferred Stock has been reserved for issuance upon exercise of
the Stockholder Rights described below.
STOCKHOLDER RIGHTS PLAN
On May 23, 1995, the Company's Board of Directors declared a dividend
distribution of one Right for each then-current and future outstanding share of
Common stock. Each Right entitles the registered holder to purchase one one-
hundredth of a share of Series A Junior Participating Preferred Stock of the
Company, par value $.01 per share, for an exercise price of $300. Unless
earlier redeemed by the Company at a price of $.01 each, the Rights become
exercisable only in certain circumstances constituting a potential change in
control of the Company and will expire on October 31, 2007.
Each share of Series A Junior Participating Preferred Stock purchased upon
exercise of the Rights will be entitled to certain minimum preferential
quarterly dividend payments as well as a specified minimum preferential
liquidation payment in the event of a merger, consolidation or other similar
transaction. Each share will also be entitled to 100 votes to be voted together
with the Common stockholders and will be junior to any other series of Preferred
Stock authorized or issued by the Company, unless the terms of such other series
provides otherwise.
In the event of a potential change in control, each holder of a Right, other
than Rights beneficially owned by the acquiring party (which will have become
void), will have the right to receive upon exercise of a Right that number of
shares of Common stock of the Company, or, in certain instances, Common stock of
the acquiring party, having a market value equal to two times the current
exercise price of the Right.
RETAINED DEFICIT
The Company's retained deficit as of December 31, 1999 and 1998 includes a
$441,000,000 charge related to the goodwill write-down which occurred concurrent
with the Company becoming a separate stand-alone entity on June 30, 1995 in
connection with the split-off from its former parent, Cooper Industries, Inc.
Delaware law, under which the Company is incorporated, provides that dividends
may be declared by the Company's board of directors from a current year's
earnings as well as from the net of capital in excess of par value less the
retained deficit. Accordingly, at December 31, 1999, the Company had
approximately $821,651,000 from which dividends could be paid.
50
<PAGE>
NOTE 13: INDUSTRY SEGMENTS
The Company's operations are organized into four separate business segments,
each of which is also a division with a President who reports to the Company's
Chairman and Chief Executive Officer. The four segments are Cameron, CCV, CES
and CTC. Cameron is a leading international manufacturer of oil and gas
pressure control equipment, including wellheads, chokes, blowout preventers and
assembled systems for oil and gas drilling, production and transmission used in
onshore, offshore and subsea applications. Split out from Cameron as a
separately managed business in mid-1995, CCV provides a full range of ball
valves, gate valves, butterfly valves and accessories used primarily to control
pressures and direct oil and gas as they are moved from individual wellheads
through transmission systems to refineries, petrochemical plants and other
processing centers. CES designs, manufactures, markets and services compression
and power equipment including engines, integral engine compressors,
reciprocating compressors, turbochargers and ignition systems. Through
September 30, 1999, CES operations also included a rotating compressor product
line. See Note 2 for additional information regarding the sale of this
business.
The primary customers of Cameron, CCV and CES are major and independent oil
and gas exploration and production companies, foreign national oil and gas
companies, drilling contractors, pipeline companies, refiners and other
industrial and petrochemical processing companies.
Finally, CTC provides centrifugal air compressors and aftermarket products to
manufacturing companies and chemical process industries worldwide.
The Company markets its equipment through a worldwide network of sales and
marketing employees supported by agents and distributors in selected
international locations. Due to the extremely technical nature of many of the
products, the marketing effort is further supported by a staff of engineering
employees.
For the years ended December 31, 1999, 1998 and 1997, the Company incurred
research and development costs designed to enhance or add to its existing
product offerings totaling $34,827,000, $33,034,000 and $25,371,000,
respectively. Cameron accounted for 78%, 79% and 72% of each respective year's
total costs.
<TABLE>
<CAPTION>
(dollars in thousands) FOR THE YEAR ENDED DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
CORPORATE
CAMERON CCV CES CTC & OTHER CONSOLIDATED
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 811,228 $231,715 $317,074 $104,743 $ -- $1,464,760
- -----------------------------------------------------------------------------------------------------------------------
EBITDA1 $ 139,281 $ 33,368 $ 9,947 $ 22,867 $(12,412) $ 193,051
Depreciation and amortization 44,416 12,965 18,491 6,639 1,205 83,716
Interest expense -- -- -- -- 27,834 27,834
Nonrecurring/unusual charges (credits) 15,881 9,873 (15,877) 708 -- 10,585
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before taxes $ 78,984 $ 10,530 $ 7,333 $ 15,520 $(41,451) $ 70,916
- -----------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 38,835 $ 4,891 $ 16,925 $ 4,050 $ 208 $ 64,909
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 908,120 $245,102 $194,417 $101,867 $ 21,213 $1,470,719
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(dollars in thousands) FOR THE YEAR ENDED DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------------------------------
CORPORATE
CAMERON CCV CES CTC & OTHER CONSOLIDATED
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $1,021,088 $309,021 $417,663 $134,339 $ -- $1,882,111
- -----------------------------------------------------------------------------------------------------------------------
EBITDA/1/ $ 214,969 $ 60,906 $ 24,694 $ 32,691 $(10,381) $ 322,879
Depreciation and amortization 34,795 12,509 17,884 6,253 1,033 72,474
Interest expense -- -- -- -- 32,721 32,721
Nonrecurring/unusual charges 6,063 7,796 7,810 287 -- 21,956
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before taxes $ 174,111 $ 40,601 $ (1,000) $ 26,151 $(44,135) $ 195,728
- -----------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 82,028 $ 5,563 $ 20,696 $ 6,291 $ 891 $ 115,469
- -----------------------------------------------------------------------------------------------------------------------
Total assets $1,041,738 $295,327 $359,739 $112,261 $ 14,538 $1,823,603
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
(dollars in thousands) FOR THE YEAR ENDED DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------
CORPORATE
CAMERON CCV CES CTC & OTHER CONSOLIDATED
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 874,747 $244,910 $527,325 $159,127 $ -- $1,806,109
- -----------------------------------------------------------------------------------------------------------------------
EBITDA/1/ $ 160,547 $ 47,164 $ 54,513 $ 44,654 $(13,047) $ 293,831
Depreciation and amortization 31,008 9,802 19,241 5,105 706 65,862
Interest expense -- -- -- -- 28,591 28,591
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before taxes $ 129,539 $ 37,362 $ 35,272 $ 39,549 $(42,344) $ 199,378
- -----------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 47,072 $ 4,348 $ 9,243 $ 10,329 $ 1,305 $ 72,297
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 951,569 $188,246 $377,051 $114,320 $ 12,044 $1,643,230
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Geographic Information:
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------
LONG-LIVED LONG-LIVED LONG-LIVED
REVENUES ASSETS REVENUES ASSETS REVENUES ASSETS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $ 805,171 $445,497 $ 991,738 $510,482 $1,001,103 $405,674
United Kingdom 225,364 123,541 368,945 140,759 330,011 128,757
Other foreign countries 434,225 131,529 521,428 132,799 474,995 101,534
- -----------------------------------------------------------------------------------------------------------
Total $1,464,760 $700,567 $1,882,111 $784,040 $1,806,109 $635,965
- -----------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Earnings before interest, taxes, depreciation and amortization (excluding
nonrecurring/unusual charges (credits)).
Intersegment sales and related receivables for each of the years shown were
immaterial and have been eliminated.
For normal management reporting, and therefore the above segment information,
consolidated interest expense is treated as a Corporate expense because debt,
including location, type, currency, etc., is managed on a worldwide basis by the
Corporate Treasury Department.
NOTE 14: OFF-BALANCE SHEET RISK, CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE
OF FINANCIAL INSTRUMENTS
Off-Balance Sheet Risk
At December 31, 1999, the Company was contingently liable with respect to
approximately $33,447,000 ($86,055,000 at December 31, 1998) of standby letters
of credit ("letters") issued in connection with the delivery, installation and
performance of the Company's products under contracts with customers throughout
the world. Of the outstanding total, approximately 73% relates to Cameron. The
Company was also liable for approximately $24,991,000 of bank guarantees and
letters of credit used to secure certain financial obligations of the Company
($20,994,000 at December 31, 1998). While certain of the letters do not have a
fixed expiration date, the majority expire within the next one to two years and
the Company would expect to issue new or extend existing letters in the normal
course of business.
Except for certain financial instruments as described below, the Company's
other off-balance sheet risks are not material.
Concentrations of Credit Risk
Apart from its normal exposure to its customers, who are predominantly in the
energy industry, the Company has no significant concentrations of credit risk at
December 31, 1999.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, trade receivables, trade payables, debt instruments, interest rate
swap contracts and foreign currency forward contracts. The book values of cash
and cash equivalents, trade receivables and trade payables and floating-rate
debt instruments are considered to be representative of their respective fair
values. Based on the spread between the contract forward rate and the spot rate
as of year-end on contracts with similar terms to existing contracts, the fair
value associated with the Company's foreign currency forward contracts was
approximately $252,000 higher than nominal value at December 31, 1999.
52
<PAGE>
As described in Note 10 of the Notes to Consolidated Financial Statements, the
Company is a party to various interest rate swap agreements with a notional
amount of $75,000,000. On a mark-to-market basis at December 31, 1999, the
interest rate swaps had current values that were approximately $204,000 above
their nominal values.
NOTE 15: SUMMARY OF NONCASH INVESTING AND FINANCING ACTIVITIES
Increase (decrease) in net assets:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock issued for employee stock ownership and
retirement savings plans $7,425 $ 4,359
Adjustment of minimum pension liability (15) (80)
Tax benefit of certain employee stock benefit plan transactions 5,693 15,223
Other 549 (549)
</TABLE>
NOTE 16: EARNINGS PER SHARE
The weighted average number of common shares (utilized for basic earnings per
share presentation) and common stock equivalents outstanding for each period
presented was as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------------------------------------------------
(amounts in thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average shares outstanding 53,328 52,857 52,145
Common stock equivalents 1,520 2,045 3,461
- -----------------------------------------------------------------------------------------------------------------------------
Shares utilized in diluted earnings per share presentation 54,848 54,902 55,606
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 17: ACCUMULATED OTHER ELEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
DECEMBER 31,
- -----------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated foreign currency translation
gain (loss) $(11,651) $17,828
Accumulated adjustments to record minimum
pension liabilities (388) (373)
- -----------------------------------------------------------------------------------------------------------------------------
$(12,039) $17,455
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
NOTE 18: UNAUDITED QUARTERLY OPERATING RESULTS
<TABLE>
<CAPTION>
1999 (BY QUARTER)
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data) 1/2/ 2/2/ 3/2/ 4/2/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $383,954 $385,022 $373,473 $322,311
Gross margin/1/ 103,921 99,268 98,751 96,845
Net income 10,762 9,129 15,928 7,183
Earnings per share:
Basic .20 .17 .30 .14
Diluted .20 .17 .29 .13
</TABLE>
<TABLE>
<CAPTION>
1998 (BY QUARTER)
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data) 1 2 3/2/ 4/2/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $426,896 $502,706 $477,213 $475,296
Gross margin/1/ 128,564 153,828 140,639 129,558
Net income 33,223 45,064 31,153 26,716
Earnings per share:
Basic .63 .86 .59 .50
Diluted .60 .81 .58 .49
</TABLE>
/1/ Gross margin equals revenues less cost of sales before depreciation and
amortization.
/2/ See Note 2 of the Notes to Consolidated Financial Statements for further
information relating to nonrecurring/unusual charges (credits) incurred
during 1999 and 1998.
54
<PAGE>
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF COOPER CAMERON CORPORATION
The following table sets forth selected historical financial data for the
Company for each of the five years in the period ended December 31, 1999. The
financial information included herein may not necessarily be indicative of the
financial position or results of operations of the Company in the future or of
the financial position or results of operations of the Company that would have
been obtained if the Company had been a separate, stand-alone entity during all
periods presented. This information should be read in conjunction with the
consolidated financial statements of the Company and notes thereto included
elsewhere in this Annual Report.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- ------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Data/1/:
Revenues $1,464,760 $1,882,111 $1,806,109 $1,388,187 $1,144,035
- ------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales (exclusive of
depreciation and amortization) 1,065,975 1,329,522 1,296,947 1,010,558 881,798
Depreciation and amortization 83,716 72,474 65,862 62,480 71,754
Selling and administrative
expenses 205,734 229,710 215,331 194,983 181,097
Interest expense 27,834 32,721 28,591 20,878 23,273
Provision for impairment of
goodwill -- -- -- -- 441,000
Nonrecurring/unusual charges (credits), net/2/ 10,585 21,956 -- 7,274 41,509
- ------------------------------------------------------------------------------------------------------------------------
1,393,844 1,686,383 1,606,731 1,296,173 1,640,431
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 70,916 195,728 199,378 92,014 (496,396)
Income tax provision (27,914) (59,572) (58,796) (27,830) (3,657)
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 43,002 $ 136,156 $ 140,582 $ 64,184 $ (500,053)
- ------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share (pro
forma prior to June 30, 1995)/3/:
Basic $.81 $2.58 $2.70 $1.27 $(9.98)
Diluted $.78 $2.48 $2.53 $1.21 $(9.98)
- ------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (at the end of
period):
Total assets $1,470,719 $1,823,603 $1,643,230 $1,468,922 $1,135,405
Stockholders' equity 714,078 780,285 642,051 516,128 423,588
Long-term debt 195,860 364,363 328,824 347,548 234,841
Other long-term obligations 138,955 149,113 143,560 160,405 160,267
</TABLE>
/1/ The Company became a separate public company effective June 30, 1995 in
connection with the completion of an exchange offer involving the
stockholders of its former parent, Cooper Industries, Inc. (Cooper). The
financial information for periods prior to this date were prepared as if the
Company had been a separate entity from Cooper and included the assets,
liabilities, revenues and expenses that were directly related to the
Company's operations. Because the majority of the Company's domestic results
and, in certain cases, foreign results were included in the consolidated
financial statements of Cooper on a divisional basis, there were no separate
meaningful historical equity accounts for the Company prior to June 30,
1995. Additionally, for periods prior to June 30, 1995, all of the excess
cash generated by the Company's operations was regularly remitted to Cooper
pursuant to Cooper's centralized cash management program. As a result, total
indebtedness prior to June 30, 1995 has been held constant at $375,000,000.
/2/ See Note 2 of the Notes to Consolidated Financial Statements for further
information relating to the nonrecurring/unusual charges (credits) incurred
during 1999 and 1998. Information relating to the nonrecurring/unusual
charges incurred during 1996 and 1995 may be found in the 1996 Annual Report
to Stockholders.
/3/ For periods prior to June 30, 1995, earnings (loss) per share amounts have
been computed on a pro forma basis based on the assumption that 50,000,000
shares of Common stock were outstanding during each period presented.
55
<PAGE>
EXHIBIT 21.1
COOPER CAMERON CORPORATION -- SUBSIDIARIES & JOINT VENTURES
-------------------------------------------------------------
(AS OF MARCH 1, 2000)
<TABLE>
<CAPTION>
COOPER CAMERON CORPORATION (DELAWARE) - PARENT % OWNED % OWNED STATE/COUNTRY OF
BY SUBSIDIARY BY CCC INCORPORATION OR
------------- ------- ORGANIZATION
------------
<S> <C> <C> <C>
Cameron Algerie (1 share owned by CCPEG)/1/ 100% Algeria
Cameron Argentina S.A.I.C. (122,700 shares owned by CCPEG)/1/ Less than 1% 100% Argentina
Cameron Australasia Pty. Ltd. 100% Australia
Cooper Cameron Pensions Australia. Pty. Ltd. 100% Australia
Cameron France, S.A. (6 shares owned by directors) 100% France
Cameron France E.U.R.L. 100% France
Cameron France S.N.C./3/ 100% France
Cameron Gabon, S.A. (7 shares owned by directors) 100% Gabon
Cameron GmbH 100% Germany
Cameron Services Middle East LLC (Joint Venture)/6/ 24% Oman
Cameron Ireland Limited (1 share owned by CCPEG)/1/ 100% Ireland
Cameron Norge AS 100% Norway
Cameron Venezolana, S.A. /1/ 100% Venezuela
Cameron Remanufacturer 100% Venezuela
Camercay, Ltd. 100% Grand Cayman
Compression Services Company 100% Ohio
Cooper Cameron Cayman Limited 100% Grand Cayman
Cooper Cameron do Brasil Ltda. (1 share owned by CCPEG)/1/ 100% Brazil
Cooper Cameron Foreign Sales Company Ltd. 100% Barbados
Cooper Cameron (Malaysia) Sdn Bhd 100% Malaysia
Cooper Cameron (U.K.) Limited 100% United Kingdom
Cameron Offshore Engineering Limited 100% United Kingdom
Cooper Cameron Pensions Limited 100% United Kingdom
Cameron Integrated Services Limited 100% United Kingdom
Cooper Cameron Holding B.V. 100% Netherlands
Cooper Energy Services B.V. 100% Netherlands
Cameron B.V. 100% Netherlands
Cooper Cameron Limited 100% Canada
Cooper Cameron Corporation Nigeria Limited /4/ 60% Nigeria
Cooper Energy Services de Venezuela, S.A. 100% Venezuela
Cooper Energy Services International, Inc. 100% Ohio
Canada Tiefbohrgerate und Maschinenfabrik GmbH 100% Austria
(1 share owned by CCPEG)/1/
Cooper Cameron (Singapore) Pte. Ltd. 39% 61% Singapore
Cameron (B) Sendirian Berhad (except 1 share owned by a Director) 100% Brunei
Cooper Cameron de Mexico S.A. de C.V. (1 share owned by CCPEG) /1/ 100% Mexico
Cooper Cameron Petroleum Equipment Group, Inc. 100% Delaware
Cooper Flow Control Australia Pty. Ltd. 50% 50% Australia
Cooper Turbocompressor, Inc. (Delaware) 100% Delaware
Ingram Cactus de Venezuela , S.A. (Venezuela Joint Venture) /2/ 49% Venezuela
Cameron Cactus Cayman Ltd. (Grand Cayman) 100% Grand Cayman
Lyulka-Cooper (Russian Federation Joint Venture)/5/ 50% Russia
Orbit Valve International, Inc. (Arkansas) 100% Arkansas
Orbit Valve Company (Arkansas) 100% Arkansas
Orbit Valve Asia, Inc. (Arkansas) 100% Arkansas
Orbit Valve Company Europe (Arkansas) 100% Arkansas
Orbit Valve PLC (U.K.) 100% United Kingdom
Orbit Valve Canada Ltd. (Alberta, Canada) 100% Alberta, Canada
Wellhead Holdings Malaysia, Inc. (Nevada) 100% Nevada
1 Partially owned by Cooper Cameron Petroleum Equipment 4 Partially owned by various Nigerian entities and individuals.
Group, Inc. 5 Partially owned by Lyulka-Saturn.
2 Partially owned by Carmelo Antonio Moschella Carnabuci. 6 Partially owned by United Engineering Services LLC
3 Partially owned by Cameron France E.U.R.L
</TABLE>
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
-------------------------------
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Cooper Cameron Corporation of our report dated January 27, 2000, included in
the 1999 Annual Report to Stockholders of Cooper Cameron Corporation.
We also consent to the incorporation by reference in the following Registration
Statements on Forms S-8 or Form S-3 of Cooper Cameron Corporation of our report
dated January 27, 2000, with respect to the consolidated financial statements
incorporated herein by reference in the Annual Report (Form 10-K) for the year
ended December 31, 1999.
Registration
Statement No. Purpose
- ------------- -------
No. 333-26923 and Form S-8 Registration Statement pertaining to the
No. 33-95004 Amended and Restated Cooper Cameron Corporation
Long-Term Incentive Plan
No. 33-94948 Form S-8 Registration Statement pertaining to the Cooper
Cameron Corporation Employee Stock Purchase Plan
No. 33-95000 Form S-8 Registration Statement pertaining to the Cooper
Cameron Corporation Amended and Restated 1995 Stock
Option Plan for Non-Employee Directors
No. 33-95002 Form S-8 Registration Statement pertaining to the Cooper
Cameron Corporation Retirement Savings Plan
No. 333-58005 Form S-8 Registration Statement pertaining to the
Individual Retirement Plan for Hourly-Paid Employees at
the Cooper Cameron Corporation Mount Vernon Plant
No. 333-57995 Form S-8 Registration Statement pertaining to the
Individual Account Retirement Plan for Bargaining Unit
Employees at the Cooper Cameron Corporation Missouri
City, Texas Facility
No. 333-57991 Form S-8 Registration Statement pertaining to the
Individual Account Retirement Plan for Bargaining Unit
Employees at the Cooper Cameron Corporation Buffalo, New
York Plant
<PAGE>
No. 333-57997 Form S-8 Registration Statement pertaining to the
Individual Account Retirement Plan for Cooper Cameron
Corporation Hourly Employees, UAW, at the Superior Plant
No. 333-58001 Form S-8 Registration Statement pertaining to the
Individual Account Retirement Plan for Cooper Cameron
Corporation Hourly Employees, IAM, at the Superior Plant
No. 333-58003 Form S-8 Registration Statement pertaining to the
Individual Account Retirement Plan for Bargaining Unit
Employees at the Cooper Cameron Corporation Grove City
Facility
No. 333-53545 Form S-8 Registration Statement pertaining to the
Amended and Restated Cooper Cameron Corporation Long-
Term Incentive Plan
No. 333-51705 Form S-3 Registration Statement pertaining to the Cooper
Cameron Corporation shelf registration of debt
securities
No. 333-77641 Form S-8 Registration Statement pertaining to the Cooper
Cameron Corporation Savings-Investment Plan for Hourly
Employees
No. 333-79787 Form S-8 Registration Statement pertaining to the Cooper
Cameron Corporation Second Amended and Restated 1995
Stock Option Plan for Non-Employee Directors
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Houston, Texas
March 24, 2000
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