1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MAY 14, 1997
------------
NATIONAL-OILWELL, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 333-11051 76-0475815
--------------- ---------------- -------------------
(STATE OR OTHER (COMMISSION FILE (I.R.S. EMPLOYER
JURISDICTION OF NUMBER) IDENTIFICATION NO.)
INCORPORATION)
5555 SAN FELIPE
HOUSTON, TEXAS 77056
----------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713)960-5100
--------------
(NOT APPLICABLE)
-------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
2
ITEM 5. OTHER EVENTS.
National-Oilwell, Inc., a Delaware corporation (the "Company"), and
Dreco Energy Services Ltd., an Alberta corporation ("Dreco"), have entered into
a Combination Agreement dated as of May 14, 1997 (the "Combination Agreement"),
which is filed herewith as Exhibit 2.1 and is incorporated herein by reference.
The Company and Dreco have issued a joint press release announcing the
Combination Agreement, which is filed herewith as Exhibit 99.1 and is
incorporated herein by reference.
Concurrently with the execution and delivery of the Combination
Agreement, DPI Oil Service Partners Limited Partnership and DPI Partners II;
First Reserve Fund V, Limited Partnership, First Reserve Fund V-2, Limited
Partnership and First Reserve Fund VI, Limited Partnership; Frederick W.
Pheasey; and Robert L. Phillips entered into Stockholder Agreements, which are
filed herewith as Exhibits 99.2, 99.3, 99.4 and 99.5, respectively, and are
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) The following exhibits are filed with this report:
Exhibit Number Description
-------------- -----------
2.1 Combination Agreement dated as of May 14, 1997 between the Company and Dreco.
99.1 Joint press release of the Company and Dreco issued May 14, 1997.
99.2 Stockholder Agreement dated May 14, 1997 of DPI Oil Service Partners Limited Partnership and
DPI Partners II.
99.3 Stockholder Agreement dated May 14, 1997 of First Reserve Fund V, Limited Partnership,
First Reserve Fund V-2, Limited Partnership and First Reserve Fund VI, Limited Partnership.
99.4 Stockholder Agreement dated May 14, 1997 of Frederick W. Pheasey.
99.5 Stockholder Agreement dated May 14, 1997 of Robert L. Phillips.
- 2 -
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
NATIONAL-OILWELL, INC.
By: /s/ STEVEN W. KRABLIN
-----------------------------
Steven W. Krablin
Vice President and
Chief Financial Officer
Dated: May 23, 1997
- 3 -
4
EXHIBIT INDEX
Exhibit
2.1 Combination Agreement dated as of May 14, 1997 between the Company and Dreco.
99.1 Joint press release of the Company and Dreco issued May 14, 1997.
99.2 Stockholder Agreement dated May 14, 1997 of DPI Oil Service Partners Limited Partnership and DPI Partners II.
99.3 Stockholder Agreement dated May 14, 1997 of First Reserve Fund V, Limited Partnership, First Reserve Fund
V-2, Limited Partnership and First Reserve Fund VI, Limited Partnership.
99.4 Stockholder Agreement dated May 14, 1997 of Frederick W. Pheasey.
99.5 Stockholder Agreement dated May 14, 1997 of Robert L. Phillips.
1
COMBINATION AGREEMENT
BY AND BETWEEN
NATIONAL-OILWELL, INC.
AND
DRECO ENERGY SERVICES LTD.
DATED AS OF MAY 14, 1997
2
TABLE OF CONTENTS
Page
ARTICLE I - GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Plan of Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Adjustments to Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.4 Other Effects of the Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Restated South Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Joint Proxy Statement; Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.7 Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.8 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF NORTH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Agreement Authorized and its Effect on Other Obligations . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Securities Reports and Financial Statements, Books and Records . . . . . . . . . . . . . . . . . . . . 8
2.6 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.9 Litigation; Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.10 Absence of Certain Changes and Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.11 Additional North Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.12 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.13 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.14 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.15 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.17 Compliance With Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.18 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.19 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.20 Pooling Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.21 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.22 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.23 Fairness and Pooling Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.24 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.25 Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SOUTH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Agreement Authorized and its Effect on Other Obligations . . . . . . . . . . . . . . . . . . . . . . . 16
3.3 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.5 Securities Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.6 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.7 Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3
3.8 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.9 Litigation; Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.10 Absence of Certain Changes and Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.11 Additional South Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.12 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.13 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.14 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.15 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.17 Compliance With Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.18 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.19 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.20 Pooling Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.21 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.22 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.23 Fairness and Pooling Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.24 Restrictions on Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.25 Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV - OBLIGATIONS PENDING EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1 Agreements of South and North . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.2 Additional Agreements of North . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.3 Additional Agreements of South . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.5 Comfort Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.6 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1 Conditions Precedent to Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.2 Conditions Precedent to Obligations of North . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.3 Conditions Precedent to Obligations of South . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.2 Notice of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.4 Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.3 Ancillary Documents/Reservation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.4 Exchange of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.5 Indemnification and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.6 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
-ii-
4
ARTICLE VIII - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.1 No Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.6 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.8 Amendment and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
-iii-
5
COMBINATION AGREEMENT
THIS COMBINATION AGREEMENT (this "Agreement") is entered into as of
May 14, 1997, by and between National-Oilwell, Inc., a Delaware corporation
("NOI"), and Dreco Energy Services Ltd., an Alberta corporation ("Dreco").
RECITALS
WHEREAS, the respective boards of directors of NOI and Dreco each deem
it advisable and in the best interests of their respective stockholders to
combine their respective businesses by NOI acquiring shares in the capital
stock of Dreco pursuant to this Agreement and the Plan of Arrangement (as
hereinafter defined).
WHEREAS, in furtherance of such acquisition, the respective boards of
directors of NOI and Dreco have approved the transactions contemplated by this
Agreement, the board of directors of Dreco has agreed to submit the Plan of
Arrangement and the other transactions contemplated hereby to its shareholders
and the Court of Queen's Bench of Alberta (the "Court") for approval, and the
board of directors of NOI has agreed to submit the Restated NOI Charter (as
hereinafter defined) and the other transactions contemplated hereby to its
stockholders for approval.
WHEREAS, the respective boards of directors of NOI and Dreco have
approved and adopted this Agreement and the Plan of Arrangement as a plan of
reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), and as a reorganization of capital of Dreco under Section
86 of the Income Tax Act (Canada) (the "ITA") for those Dreco shareholders who
hold Dreco Common Shares (as hereinafter defined), on capital account.
WHEREAS, it is intended that the transactions contemplated hereby will
be treated as a "pooling of interests" for accounting purposes.
WHEREAS, to induce NOI to enter into this Agreement, contemporaneously
herewith Frederick W. Pheasey and Robert L. Phillips, owners of approximately
5.2% of the issued and outstanding Dreco Common Shares, have entered into an
agreement (the "Dreco Stockholders Agreement") pursuant to which they have
agreed to support the Plan of Arrangement and the other transactions
contemplated hereby.
WHEREAS, to induce Dreco to enter into this Agreement,
contemporaneously herewith DPI Oil Service Partners Limited Partnership, DPI
Partners II, First Reserve Fund V1, Limited Partnership, First Reserve Fund V-2
and First Reserve Fund V, Limited Partnership, owners of approximately 52% of
the issued and outstanding NOI Common Stock (as hereinafter defined), have
entered into an agreement (the "NOI Stockholders Agreement") pursuant to which
they have agreed to support the Plan of Arrangement and the other transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
6
ARTICLE I
GENERAL
1.1 Plan of Arrangement. As promptly as practicable, Dreco will
apply to the Court pursuant to Part 15 of the Business Corporations Act
(Alberta) (the "ABCA") for an interim order in form and substance reasonably
satisfactory to NOI (the "Interim Order") providing for, among other things,
the calling and holding of the Dreco Shareholders Meeting (as hereinafter
defined) for the purpose of considering and, if deemed advisable, approving the
arrangement (the "Arrangement") under Part 15 of the ABCA and pursuant to this
Agreement and the Plan of Arrangement substantially in the form of Exhibit A
(the "Plan of Arrangement"). If the Dreco shareholders approve the
Arrangement, thereafter Dreco will take the necessary steps to submit the
Arrangement to the Court and apply for a final order of the Court approving the
Arrangement in such fashion as the Court may direct (the "Final Order"). At
12:01 a.m. (the "Effective Time") on the date (the "Effective Date") shown on
the certificate of arrangement issued by the Registrar under the ABCA giving
effect to the Arrangement, the following reorganization of capital shall occur
and shall be deemed to occur in the following order without any further act or
formality:
(a) The articles of amalgamation of Dreco shall be
amended to authorize an unlimited number of exchangeable shares (the
"Exchangeable Shares") and one Class A preferred share (the "Preferred Share");
(b) Dreco shall issue to NOI one Class A Preferred Share
in consideration of the issuance to Dreco of one share of common stock, $.01
par value per share, of NOI ("NOI Common Stock"). The stated capital of the
Class A Preferred Share shall be equal to the fair market value, as determined
by the board of directors of Dreco, of a share of NOI Common Stock. No
certificate shall be issued in respect of the Class A Preferred Share;
(c) Each of the Dreco Common Shares (other than Dreco
Common Shares held by holders who have exercised their rights of dissent in
accordance with the Plan of Arrangement and who are ultimately entitled to be
paid the fair value for such shares) will be exchanged for a number of
Exchangeable Shares at an exchange ratio equal to 1.2 of an Exchangeable Share
per Dreco Common Share (the "Exchange Ratio"), and each such holder of Dreco
Common Shares will receive that whole number of Exchangeable Shares resulting
from the exchange of such holder's Dreco Common Shares. In lieu of fractional
Exchangeable Shares, each holder of a Dreco Common Share who otherwise would be
entitled to receive a fraction of an Exchangeable Share shall be paid by Dreco
a cash amount determined in accordance with the Plan of Arrangement;
(d) Upon the exchange referred to in Section 1.1(c), each
holder of one or more Dreco Common Shares shall cease to be such a holder,
shall have his name removed from the register of holders of Dreco Common Shares
and shall (unless held by a holder who has exercised his rights of dissent in
accordance with the Plan of Arrangement and who is ultimately entitled to be
paid the fair value for such shares) become a holder of the number of fully
paid Exchangeable Shares to which he is entitled as a result of the exchange
referred to in Section 1.1(c), and such holder's name shall be added to the
register of holders of Exchangeable Shares accordingly;
(e) The aggregate stated capital of the Exchangeable
Shares will be equal to the aggregate stated capital of the Dreco Common Shares
immediately prior to the Arrangement that are
-2-
7
exchanged pursuant to Section 1.1(c), thereby excluding the stated capital
attributed to the fractional shares paid in cash as contemplated in Section
1.1(c);
(f) The articles of amalgamation of Dreco shall be
amended to reduce the number of authorized Dreco Common Shares to one and the
following restriction will be added to the rights, privileges, restrictions and
conditions attaching to the Dreco Common Shares:
"RESTRICTION. So long as any of the Exchangeable Shares of
the Corporation are outstanding, the Corporation shall not at
any time without, but may at any time with, the approval of
the board of directors of the holder of the common shares
issue any further Exchangeable Shares or other shares of the
Corporation, except as specifically required in accordance
with the rights, privileges, restrictions and conditions
attaching to the Exchangeable Shares of the Corporation."
(g) The one outstanding Class A Preferred Share will be
exchanged for one Dreco Common Share, and the holder thereof shall cease to be
a holder of the Class A Preferred Share, shall have its name removed from the
register of holders of Class A Preferred Shares and shall become a holder of
the one fully paid and non-assessable Dreco Common Share to which it is
entitled as a result of the exchange referred to in this Section 1.1(g) and
such holder's name shall be added to the register of holders of Dreco Common
Shares accordingly;
(h) The stated capital of the one Dreco Common Share
shall be equal to the stated capital of the one Class A Preferred Share
immediately prior to the exchange of such Class A Preferred Share pursuant to
Section 1.1(g);
(i) The articles of amalgamation of Dreco shall be
amended to delete the Class A Preferred Shares from the authorized share
capital; and
(j) Each of the then outstanding options to purchase
Dreco Common Shares (collectively, the "Dreco Options") (which includes without
limitation all outstanding options pursuant to private stock option
arrangements and all outstanding options granted under Dreco's Amended and
Restated 1989 Employee Incentive Stock Option Plan (the "Dreco Option Plan"))
will and without any further action on the part of any holder thereof (herein,
an "optionholder"), be exchanged for an option to purchase that number of
Exchangeable Shares determined by multiplying the number of Dreco Common Shares
subject to such Dreco Options at the Effective Time by the Exchange Ratio, at
an exercise price per Exchangeable Share equal to the exercise price per share
of such Dreco Option immediately prior to the Effective Time, divided by the
Exchange Ratio. If the foregoing calculation results in an exchanged Dreco
Option being exercisable for a fraction of an Exchangeable Share, then the
number of Exchangeable Shares subject to such option will be rounded down to
the nearest whole number of shares, and the total exercise price for the option
will be reduced by the exercise price of the fractional share. The term,
exercisability, vesting schedule, and all other terms and conditions of the
Dreco Options will otherwise be unchanged by the provisions of this Section
1.1(j) and shall operate in accordance with their terms.
1.2 Adjustments to Exchange Ratio. (a) The Exchange Ratio shall
be adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution
-3-
8
of securities convertible into NOI Common Stock or Dreco Common Shares),
reorganization, recapitalization or other like change with respect to NOI Common
Stock or Dreco Common Shares occurring after the date hereof and prior to the
Effective Time.
(b) The Exchange Ratio shall also be adjusted pursuant to
the following:
(i) if the average of the per share closing price
on the New York Stock Exchange (the "NYSE") of shares of NOI Common Stock (as
reported in the NYSE composite transactions) during the 20 consecutive trading
days ending on the fifth trading day prior to the Effective Time (the
"Pre-Closing Average Price") shall be less than $36.00 per share, the Exchange
Ratio shall be adjusted to equal 1.2 multiplied by a fraction, the numerator of
which is $36.00 and the denominator of which is the higher of (A) $33.00 and
(B) the Pre-Closing Average Price; and
(ii) if the Pre-Closing Average Price shall be
greater than $47.25 per share, the Exchange Ratio shall be adjusted to equal
1.2 multiplied by a fraction, the numerator of which is $47.25 and the
denominator of which is the Pre-Closing Average Price;
provided, however, that Dreco shall have the right to terminate this Agreement
in accordance with Section 6.1(k) in the event the Pre-Closing Average Price is
less than $33.00 per share and NOI, after Dreco shall have exercised its right
to request NOI to do so, elects not to adjust the Exchange Ratio to equal 1.2
multiplied by a fraction, the numerator of which is $36.00, and the denominator
of which is the Pre-Closing Average Price.
1.3 Dissenting Shares. Holders of Dreco Common Shares may
exercise rights of dissent with respect to such shares in connection with the
Arrangement pursuant to and in the manner set forth in Section 184 of the ABCA
and Section 3.1 of the Plan of Arrangement (such holders referred to as
"Dissenters" or as "Dissenting Shareholders" when referring exclusively to
Dreco Shareholders). Dreco shall give NOI (i) prompt notice of any written
demands of a right of dissent, withdrawals of such demands, and any other
instruments served pursuant to the ABCA and received by Dreco and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
such rights. Without the prior written consent of NOI, except as required by
applicable law, Dreco shall not make any payment with respect to any such
rights or offer to settle or settle any such rights.
1.4 Other Effects of the Arrangement. At the Effective Time: (a)
the directors of Dreco will be Steven W. Krablin and Frederick W. Pheasey; (b)
the officers of Dreco will be as designated by the board of directors of Dreco
prior to the Effective Time, subject to later removal and appointment of other
officers; (c) each Dreco Common Share and each Dreco Option outstanding
immediately prior to the Effective Time will be exchanged as provided in
Section 1.1; and (d) the Arrangement will, from and after the Effective Time,
have all of the effects provided by applicable law, including the ABCA.
1.5 Restated NOI Charter. Prior to the Closing, NOI shall have
restated its Certificate of Incorporation as set forth in Exhibit B (the
"Restated NOI Charter").
-4-
9
1.6 Joint Proxy Statement; Registration Statement.
(a) As promptly as practicable after execution of this
Agreement, NOI and Dreco shall prepare and file with the United States
Securities and Exchange Commission (the "SEC") a preliminary joint management
information circular and proxy statement (the "Joint Proxy Statement"),
together with any other documents required by the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), in connection with the Arrangement and the other
transactions contemplated hereby. The Joint Proxy Statement shall constitute
(i) the management information circular of Dreco with respect to the meeting of
shareholders of Dreco relating to the Arrangement and the approval of certain
matters in connection therewith (the "Dreco Shareholders Meeting") and (ii) the
proxy statement of NOI with respect to the meeting of stockholders of NOI with
respect to the issuance of NOI Common Stock from time to time upon exchange of
the Exchangeable Shares and certain other matters (including the approval of
the Restated NOI Charter) relating to the agreements of NOI contained herein
(the "NOI Stockholders Meeting"). As promptly as practicable after the
preliminary Joint Proxy Statement is cleared by the SEC, NOI and Dreco shall
cause the Joint Proxy Statement to be mailed to each company's respective
stockholders, as the case may be. If NOI determines on the advice of its
outside counsel that it is necessary to file a registration statement (the
"Registration Statement") in order to register the NOI Common Stock to be
issued from time to time after the Effective Time upon exchange of the
Exchangeable Shares, then NOI shall file the Registration Statement with the
SEC and, if necessary, maintain the effectiveness of such registration for the
period that such Exchangeable Shares remain outstanding and NOI and Dreco shall
use their best efforts to cause the Registration Statement to become effective
prior to the mailing of the Joint Proxy Statement. Notwithstanding anything
herein to the contrary, NOI shall be under no obligation to file the
Registration Statement if it shall have determined on the advice of its outside
counsel that the issuance of shares of NOI Common Stock upon exchange of the
Exchangeable Shares after the Effective Time is exempt from the registration
requirements of Section 5 of the Securities Act by virtue of Section 3(a)(9)
and/or 3(a)(10) thereof. In connection with such determination, NOI and Dreco
shall prepare and file with the SEC a request for no action (the "No Action
Request") seeking to confirm the availability of such an exemption.
(b) Each party shall promptly furnish to the other party
all information concerning such party and its stockholders as may be reasonably
required in connection with any action contemplated by this Section 1.6. The
Joint Proxy Statement and, if required, the Registration Statement, shall
comply in all material respects with all applicable requirements of law. Each
of NOI and Dreco will notify the other promptly of the receipt of any comments
from the SEC and of any request by the SEC for amendments or supplements to the
Joint Proxy Statement or the Registration Statement, if required, or for
additional information, and will supply the other with copies of all
correspondence with the SEC with respect to the Joint Proxy Statement or the
Registration Statement, if required. Whenever any event occurs which should be
set forth in an amendment or supplement to the Joint Proxy Statement or the
Registration Statement, if required, NOI or Dreco, as the case may be, shall
promptly inform the other of such occurrence and cooperate in filing with the
SEC, and/or mailing to stockholders of NOI and Dreco, as may be applicable,
such amendment or supplement.
(c) NOI and Dreco shall take any action required to be
taken under any applicable provincial or state securities laws (including "blue
sky" laws) in connection with the issuance of the NOI Common Stock and the
Arrangement; provided, however, that with respect to the blue sky and Canadian
provincial qualifications, neither NOI nor Dreco shall be required to register
or qualify as a
-5-
10
foreign corporation or reporting issuer where any such entity is not now so
registered or qualified except as to matters and transactions arising solely
from the offer and sale of the NOI Common Stock or the issuance of the
Exchangeable Shares.
1.7 Material Adverse Effect. In this Agreement, the term
"Material Adverse Effect" used with respect to any party means any event,
change or effect that is materially adverse to the financial condition,
properties or business of such party and its subsidiaries, taken as a whole;
provided, that a Material Adverse Effect shall not include any decline in
backlog between the date hereof and the Effective Date resulting from a failure
to receive new orders or any adverse effect resulting from changes in general
economic conditions or conditions generally affecting the industries in which
NOI or Dreco operate.
1.8 Currency. Unless otherwise specified, all references in this
Agreement to "dollars" or "$" shall mean United States dollars.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF DRECO
Except as set forth in a letter dated the date of this Agreement and
delivered by Dreco to NOI concurrently herewith (the "Dreco Disclosure
Letter"), Dreco hereby represents and warrants to, and agrees with, NOI that:
2.1 Organization and Standing. Dreco and each body corporate,
partnership, joint venture, association or other business entity of which more
than 50% of the total voting power of shares of stock or units of ownership or
beneficial interest entitled to vote in the election of directors (or members
of a comparable governing body) is owned or controlled, directly or indirectly,
by Dreco (the "Dreco Subsidiaries"), is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, has full requisite power and authority to carry
on its business as it is currently conducted, and to own, lease and operate the
properties currently owned, leased and operated by it, and is duly qualified or
licensed to do business and is in good standing as a foreign corporation or
organization authorized to do business in all jurisdictions in which the
character of the properties owned or leased or the nature of the business
conducted by it would make such qualification or licensing necessary, except
where the failure to be so qualified or licensed would not have a Material
Adverse Effect on Dreco. The Dreco Disclosure Letter sets forth a complete
list of the Dreco Subsidiaries, the percentage of each subsidiary's outstanding
capital stock or other ownership interest owned by Dreco or another Dreco
Subsidiary (and a description of any lien, charge, mortgage, security interest,
option, preferential purchase right or other right or interest of any other
person (collectively, an "Encumbrance") on such stock or other ownership
interest) and a complete list of each jurisdiction in which each of Dreco and
the Dreco Subsidiaries is duly qualified and in good standing to do business.
2.2 Agreement Authorized and its Effect on Other Obligations. (a)
Dreco has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and, subject to approval of
Dreco's shareholders and the Court as provided in this Agreement, to consummate
the Arrangement and the other transactions contemplated by this Agreement. The
execution and delivery of this Agreement by Dreco and, subject to approval of
Dreco's shareholders and the Court as provided in this Agreement, the
consummation by Dreco of the
-6-
11
Arrangement and the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Dreco. This
Agreement has been duly executed and delivered by Dreco and is the valid and
binding obligation of Dreco, enforceable in accordance with its terms, except
that such enforceability may be subject to (i) bankruptcy, insolvency,
reorganization or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles, and that the
consummation of the Arrangement is subject to approval of Dreco's shareholders
and the Court as provided in this Agreement.
(b) Neither the execution, delivery or performance of
this Agreement or the Arrangement by Dreco, nor the consummation of the
transactions contemplated hereby or thereby by Dreco nor compliance with the
provisions hereof or thereof by Dreco will: (i) conflict with, or result in any
violations of, the articles of amalgamation or bylaws of Dreco or any
equivalent document of any of the Dreco Subsidiaries, or (ii) result in any
breach of or cause a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, amendment, cancellation or
acceleration of any obligation contained in, or the loss of any material
benefit under, or result in the creation of any Encumbrance upon any of the
material properties or assets of Dreco or any of the Dreco Subsidiaries under,
any term, condition or provision of any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Dreco or any of the
Dreco Subsidiaries or their respective properties or assets, other than any
such breaches, defaults, losses, or encumbrances which, individually or in the
aggregate, would not have a Material Adverse Effect on Dreco.
2.3 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (each a "Governmental Entity"), is
required to be obtained by Dreco or any of the Dreco Subsidiaries in connection
with the execution and delivery of this Agreement or the Plan of Arrangement or
the consummation of the transactions contemplated hereby or thereby, except
for: (i) the filing with the applicable Canadian provincial securities
commissions or regulatory authorities (the "Commissions") and the Court and the
mailing to shareholders of Dreco of the Joint Proxy Statement relating to the
Dreco Shareholders Meeting, (ii) the furnishing to the SEC of such reports and
information under the Exchange Act and the rules and regulations promulgated by
the SEC thereunder, as may be required in connection with this Agreement and
the transactions contemplated hereby (the "SEC Filings"); (iii) approval by the
Court of the Arrangement and the filings of the articles of arrangement and
other required arrangement or other documents as required by the ABCA; (iv)
such filings, authorizations, orders and approvals as may be required under
state "control share acquisition," "anti-takeover" or other similar statutes,
any other applicable federal, provincial or state securities laws and the rules
of the Nasdaq Stock Market (the "NASDAQ") or The Toronto Stock Exchange
("TSE"); (v) such filings and notifications as may be necessary under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); (vi) such notices and filings as may be necessary under the Investment
Canada Act and under the Competition Act (Canada); and (vii) where the failure
to obtain such consents, approvals, etc., would not prevent or delay the
consummation of the Arrangement or otherwise prevent Dreco from performing its
obligations under this Agreement and would not reasonably be expected to have a
Material Adverse Effect on Dreco.
2.4 Capitalization. (a) The authorized capital stock of Dreco
consists of 50,000,000 Dreco class "A" common shares, no par value ("Dreco
Common Shares", which term shall include for all purposes of this Agreement the
related Dreco Common Share purchase rights issued or
-7-
12
issuable under that certain Shareholder Rights Plan Agreement dated as of
November 15, 1996 (the "Rights Agreement"), between Dreco and Montreal Trust
Company of Canada, as Rights Agent). As of May 13, 1997, 7,817,222 Dreco Common
Shares were issued and outstanding and no Dreco Common Shares were held by Dreco
in its treasury. As of May 13, 1997, an aggregate of 547,550 Dreco Common Shares
were reserved for issuance pursuant to outstanding Dreco Options granted under
the Dreco Option Plan or pursuant to private stock option arrangements, and
Dreco has reserved for issuance under the Rights Agreement the number of Dreco
Common Shares required to be issued upon the exercise of the rights provided by
the Rights Agreement in accordance with the terms and conditions thereof. Prior
to the date hereof, 411,200 of the Dreco Options have vested in accordance with
their terms and 136,350 remain unvested. The consummation of the transactions
contemplated by this Agreement will not accelerate the vesting of any unvested
Dreco Options. No Dreco Preferred Shares are issued or outstanding. All of the
issued and outstanding Dreco Common Shares have been duly authorized and validly
issued, are fully paid and non-assessable, were not issued in violation of the
terms of any agreement or other understanding binding upon Dreco and were issued
in compliance with all applicable charter documents of Dreco and all applicable
federal, provincial and foreign securities laws, rules and regulations. There
are, and have been, no preemptive rights with respect to the issuance of the
Dreco Common Shares or any other capital stock of Dreco.
(b) There are no outstanding subscriptions, options,
warrants, convertible securities, calls, commitments, agreements or rights
(contingent or otherwise) of any character to purchase or otherwise acquire
from Dreco any shares of, or any securities convertible into, the capital stock
of Dreco.
(c) Dreco will waive the application of the Rights
Agreement with respect to the Plan of Arrangement and the other transactions
contemplated hereby and, except in connection with the acceptance of a Superior
Proposal pursuant to Sections 4.2(n) and 6.1(i), Dreco will not waive,
terminate or otherwise render the Rights Agreement inoperative with respect to
any other Acquisition Transaction (as hereinafter defined). At the time of
Closing, the Rights Agreement will have been terminated and no persons or
entities shall have any rights thereunder.
2.5 Securities Reports and Financial Statements, Books and
Records. (a) Dreco has filed all forms, reports and documents with the
Commissions required to be filed by it pursuant to relevant Canadian securities
statutes, regulations, policies and rules (collectively, the "Dreco Canadian
Securities Reports"), all of which have complied in all material respects with
all applicable requirements of such statutes, regulations, policies and rules.
None of the Dreco Canadian Securities Reports, at the time filed or as
subsequently amended, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The financial statements of Dreco
contained in the Dreco Canadian Securities Reports complied in all material
respects with the then applicable accounting requirements and the published
rules and regulations of the relevant Canadian securities statutes with respect
thereto, were prepared in accordance with Canadian generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may have been indicated in the notes thereto or, in the case of
unaudited statements, as permitted by applicable laws, rules or regulations)
and fairly present (subject, in the case of the unaudited statements, to
normal, year-end audit adjustments) the consolidated financial position of
Dreco and its consolidated Dreco Subsidiaries as at the respective dates
thereof and the consolidated results of their operations and cash flows for the
respective periods then ended.
-8-
13
(b) Dreco has filed all forms, reports and documents with
the SEC required to be filed by it pursuant to relevant United States
securities statutes, regulations, policies and rules (collectively, the "Dreco
United States Securities Reports"; and together with the Dreco Canadian
Securities Reports, the "Dreco Securities Reports"), all of which have complied
in all material respects with all applicable requirements of such statutes,
regulations, policies and rules. None of the Dreco United States Securities
Reports, at the time filed or as subsequently amended, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of Dreco contained in the Dreco United States Securities
Reports complied in all material respects with the then applicable accounting
requirements and the published rules and regulations of the relevant United
States securities statutes with respect thereto, were prepared in accordance
with Canadian generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may have been indicated in the
notes thereto or, in the case of unaudited statements, as permitted by
applicable laws, rules or regulations) and fairly present (subject, in the case
of the unaudited statements, to normal, year-end audit adjustments) the
consolidated financial position of Dreco and its consolidated Dreco
Subsidiaries as at the respective dates thereof and the consolidated results of
their operations and cash flows for the respective periods then ended.
(c) There has been no change in Dreco's accounting
policies or the methods of making accounting estimates or changes in estimates
that are material to such financial statements, except as described in the
notes thereto.
(d) The books, records and accounts of Dreco and the
Dreco Subsidiaries (i) have been maintained in accordance with good business
practices on a basis consistent with prior years, (ii) are stated in reasonable
detail and accurately and fairly reflect in all material respects the
transactions and dispositions of the assets of Dreco and the Dreco Subsidiaries
and (iii) accurately and fairly reflect in all material respects the basis for
the Dreco financial statements. Dreco has devised and maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(iv) transactions are executed in accordance with management's general or
specific authorization; and (v) transactions are recorded as necessary (A) to
permit preparation of financial statements in conformity with Canadian and
United States generally accepted accounting principles or any other criteria
applicable to such statements and (B) to maintain accountability for assets.
2.6 Liabilities. Neither Dreco nor any Dreco Subsidiary has any
material liabilities or obligations, either accrued, absolute, contingent or
otherwise, or has any knowledge of any potential material liabilities or
obligations, other than those disclosed in the Dreco Securities Reports or
incurred in the ordinary course of business since August 31, 1996.
2.7 Information Supplied. None of the information supplied or to
be supplied by Dreco for inclusion or incorporation by reference in the Joint
Proxy Statement (and, if filed, the Registration Statement) will, at the time
the Joint Proxy Statement is mailed to the shareholders of Dreco and at the
time of the Dreco Shareholders Meeting (and, if filed, at the time the
Registration Statement is declared effective), contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading.
-9-
14
2.8 No Defaults. Neither Dreco nor any Dreco Subsidiary is, or
has received notice that it would be with the passage of time, in default or
violation of any term, condition or provision of (a) its charter documents or
bylaws; (b) any judgment, decree or order applicable to it; or (c) any loan or
credit agreement, note, bond, mortgage, indenture, contract, agreement, lease,
license or other instrument to which Dreco or any Dreco Subsidiary is now a
party or by which it or any of its properties or assets may be bound, except in
the case of item (c) for defaults and violations which, individually or in the
aggregate, would not have a Material Adverse Effect on Dreco.
2.9 Litigation; Investigations. There is no claim, action, suit
or proceeding pending, or to the knowledge of Dreco threatened against Dreco or
any of the Dreco Subsidiaries, which would, if adversely determined,
individually or in the aggregate, have a Material Adverse Effect on Dreco, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Dreco or any of the Dreco Subsidiaries
having, or which, insofar as reasonably can be foreseen, in the future could
have, any such effect. There is no investigation pending, or to the knowledge
of Dreco threatened, against Dreco or any of the Dreco Subsidiaries before any
Governmental Entity.
2.10 Absence of Certain Changes and Events. Other than as a result
of the transactions contemplated by this Agreement, since August 31, 1996,
there has not been:
(a) Any material adverse change in the financial
condition, operations, assets, liabilities or business of Dreco and the Dreco
Subsidiaries, taken as a whole;
(b) Any material damage, destruction, or loss to the
business or properties of Dreco and the Dreco Subsidiaries, taken as a whole,
not covered by insurance;
(c) Any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital stock of Dreco, or any
direct or indirect redemption, purchase or any other acquisition by Dreco of
any such stock;
(d) Any change in the capital stock or in the number of
shares or classes of Dreco's authorized or outstanding capital stock as
described in Section 2.4 (other than as a result of exercises of Dreco Options
outstanding as of August 31, 1996);
(e) Any material labor dispute or charge of unfair labor
practice (other than routine individual grievances), any activity or proceeding
by a labor union or, to the knowledge of Dreco, by a representative thereof to
organize any employees of Dreco or any Dreco Subsidiary or any campaign being
conducted to solicit authorization from employees to be represented by such
labor union;
(f) Any other event or condition known to Dreco
particularly pertaining to and adversely affecting the operations, assets or
business of Dreco or any of the Dreco Subsidiaries (other than events or
conditions which are of a general or industry-wide nature and of general public
knowledge) which would constitute a Material Adverse Effect on Dreco; or
(g) Any material cancellation of backlog that has not
been replaced by new orders.
-10-
15
2.11 Additional Dreco Information. The Dreco Disclosure Letter
contains true, complete and correct lists of the following items with respect
to Dreco and each of the Dreco Subsidiaries, and Dreco has furnished or made
available to NOI true, complete and correct copies of all documents referred to
in such lists:
(a) Each parcel of real property owned, or subject to a
contract of purchase and sale, with a fair market value in excess of
$1,000,000, with a description of the nature and amount of any Encumbrance
thereon, and each parcel of real property leased, or subject to a lease
commitment, with annual rental payments in excess of $250,000;
(b) All material insurance policies or bonds currently
maintained, including those covering properties, buildings, machinery,
equipment, fixtures, employees and operations, as well as a listing of any
premiums, audit adjustments or retroactive adjustments due or pending on such
policies or any predecessor policies;
(c) All contracts which involve, or may involve,
aggregate payments by any party thereto of $1,000,000 or more, which are to be
performed in whole or in part after the Effective Time;
(d) All material bonus, incentive compensation, deferred
compensation, profit-sharing, retirement, pension, welfare, group insurance,
death benefit, or other fringe benefit plans, arrangements or trust agreements;
(e) Any collective bargaining agreements with any labor
union or other representative of employees, including all amendments and
supplements, and all employment and consulting agreements;
(f) All material patents, trademarks, copyrights and
other intellectual property rights owned, licensed or used and all applications
therefor;
(g) All material trade names and fictitious names used or
held, whether and where such names are registered and where used;
(h) All material long-term and short-term promissory
notes, installment contracts, loan agreements, credit agreements, operating and
finance leases, and any other agreements relating thereto or with respect to
collateral securing the same; and
(i) All material indebtedness, liabilities and
commitments of third parties (other than Dreco Subsidiaries) and as to which it
is a guarantor, endorser, co-maker, surety or accommodation maker, or is
contingently liable therefor (excluding liabilities as an endorser of checks
and the like in the ordinary course of business) or has otherwise provided any
form of financial assistance and all letters of credit, whether stand-by or
documentary, issued by any third party.
2.12 Certain Agreements. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (a) result in any payment (including severance, unemployment compensation,
parachute payment, bonus or otherwise) becoming due to any director, employee
or independent contractor of Dreco or any of the Dreco Subsidiaries (as defined
in Section 2.13) under any Dreco Plan (as hereinafter defined) or otherwise,
(b) materially
-11-
16
increase any benefits otherwise payable under any Dreco Plan or otherwise or (c)
result in the acceleration of the time of payment or vesting of any such
benefits.
2.13 Employee Benefit Plans. For purposes of Section 2.12 and this
Section 2.13, Dreco Subsidiaries shall include any enterprise which, with
Dreco, forms or formed a controlled group of corporations, a group of trades or
business under common control or an affiliated service group, within the
meaning of Section 414(b), (c) or (m) of the Code. All employee benefits plans
covering active, former or retired employees of Dreco and the Dreco
Subsidiaries are listed in the Dreco Disclosure Letter (the "Dreco Plans").
Dreco has made available to NOI true, complete and correct copies of each Dreco
Plan, any related trust agreement, annuity or insurance contract or other
funding vehicle, if any, and summary plan descriptions and other descriptive
materials furnished to participants of the plans, and each plan's most recent
annual reports filed with the Internal Revenue Service, including exhibits and
related financial reports, if any, and: (a) each Dreco Plan has been maintained
and administered in material compliance with its terms and is, to the extent
required by applicable law or contract, fully funded without having any deficit
or unfunded actuarial liability; (b) all required employer contributions under
any such plans have been made and the applicable funds have been funded in
accordance with the terms thereof and no past service funding liabilities exist
thereunder; (c) each Dreco Plan that is required or intended to be qualified
under applicable law or registered or approved by a governmental agency or
authority has been so qualified, registered or approved by the appropriate
governmental agency or authority, and nothing has occurred since the date of
the last qualification, registration or approval to adversely affect, or cause,
the appropriate governmental agency or authority to revoke such qualification,
registration or approval; (d) to the extent applicable, the Dreco Plans comply,
in all material respects, with the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the Code and any other
applicable tax act and other laws, and any Dreco Plan intended to be qualified
under Section 401(a) of the Code has been determined by the Internal Revenue
Service to be so qualified and nothing has occurred to cause the loss of such
qualified status; (e) no Dreco Plan is covered by Title 4 of ERISA or Section
412 of the Code; (f) there are no pending or anticipated material claims
against or otherwise involving any of the Dreco Plans and no suit, action or
other litigation (excluding claims for benefits incurred in the ordinary course
of Dreco Plan activities) has been brought against or with respect to any Dreco
Plan; (g) all material contributions, reserves or premium payments required to
be made as of the date hereof to the Dreco Plans have been made or provided
for; (h) neither Dreco nor any Dreco Subsidiary has incurred or reasonably
expects to incur any liability under subtitle C or D of Title 4 of ERISA with
respect to any "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by Dreco, any Dreco
Subsidiary or any entity which is considered one employer with Dreco under
Section 4001 of ERISA; (i) neither Dreco nor any Dreco Subsidiary has incurred
or reasonably expects to incur any withdrawal liability under Subtitle E of
Title 4 of ERISA with respect to any "multiemployer plan", within the meaning
of Section 4001(a)(3) of ERISA; and (j) neither Dreco nor any Dreco Subsidiary
has any obligations for retiree health and life benefits under any Dreco Plan,
except as set forth on the Dreco Disclosure Letter and there are no
restrictions on the rights of Dreco or any of the Dreco Subsidiaries to amend
or terminate any such Dreco Plan without incurring any liability thereunder.
2.14 Intellectual Property. Dreco or the Dreco Subsidiaries own or
possess licenses to use all patents, patent applications, trademarks and
service marks (including registrations and applications therefor), trade names,
copyrights and written know-how, trade secrets and all other similar
proprietary data and the goodwill associated therewith (collectively, the
"Dreco Intellectual Property") that are either material to the business of
Dreco or any Dreco Subsidiary or that are necessary for the
-12-
17
manufacture, use, license or sale of any services or products manufactured,
used, licensed or sold by Dreco and the Dreco Subsidiaries. The Dreco
Intellectual Property is owned or licensed by Dreco or the Dreco Subsidiaries
free and clear of any Encumbrance other than such Encumbrances as are listed in
the Dreco Disclosure Letter. Except in the ordinary course of business, neither
Dreco nor any of the Dreco Subsidiaries has granted to any other person any
license to use any Dreco Intellectual Property. Neither Dreco nor any of the
Dreco Subsidiaries has received any notice of infringement, misappropriation or
conflict with, the intellectual property rights of others in connection with the
use by Dreco and the Dreco Subsidiaries of the Dreco Intellectual Property.
2.15 Title to Properties. Except for goods and other property
sold, used or otherwise disposed of since August 31, 1996 in the ordinary
course of business for fair value, Dreco has good and indefeasible title to all
its properties, interests in properties and assets, real and personal,
reflected in its August 31, 1996 financial statements, free and clear of any
Encumbrance, except (a) Encumbrances reflected in the balance sheet of Dreco as
of August 31, 1996, (b) liens for current taxes not yet due and payable and (c)
such imperfections of title, easements and Encumbrances, if any, as are not
substantial in character, amount or extent and do not and will not materially
detract from the value, or interfere with the present use, of the property
subject thereto or affected thereby, or otherwise materially impair business
operations. All leases pursuant to which Dreco or any Dreco Subsidiary leases
(whether as lessee or lessor) any real or personal property are in good
standing, valid, and effective; and there is not, under any such leases, any
existing or prospective default or event of default or event which with notice
or lapse of time, or both, would constitute a default by Dreco or any Dreco
Subsidiary and in respect to which Dreco or a Dreco Subsidiary has not taken
adequate steps to prevent a default from occurring. The buildings and premises
of Dreco and each of the Dreco Subsidiaries that are used in its business are
in good operating condition and repair, subject only to ordinary wear and tear.
All major items of operating equipment of Dreco and the Dreco Subsidiaries are
in good operating condition and in a state of reasonable maintenance and
repair, ordinary wear and tear excepted, and are free from any known defects
except as may be repaired by routine maintenance and such minor defects as do
not substantially interfere with the continued use thereof in the conduct of
normal operations.
2.16 Environmental Matters. (a) There are no environmental
conditions or circumstances, such as the presence or release of any hazardous
substance, on any property presently or, to the knowledge of Dreco, previously
owned or leased by Dreco or any of the Dreco Subsidiaries that could reasonably
be expected to result in a Material Adverse Effect on Dreco;
(b) Dreco and the Dreco Subsidiaries have in full force
and effect all material environmental permits, licenses, approvals and other
authorizations required to conduct their operations and are operating in
material compliance thereunder;
(c) Dreco's and the Dreco Subsidiaries' operations and
the use of their assets do not violate any applicable United States or Canadian
or other federal, provincial, state or local law, statute, ordinance, rule,
regulation, order or notice requirement pertaining to (i) the condition or
protection of air, groundwater, surface water, soil, or other environmental
media, (ii) the environment, including natural resources or any activity which
affects the environment or (iii) the regulation of any pollutants,
contaminants, waste or other substances (whether or not hazardous or toxic),
including the Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials Transportation
Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery
Act (42 U.S.C. Section 1609 et seq.) the Clean Water
-13-
18
Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et
seq.), the Toxic Substances Control Act (17 U.S.C. Section 2601 et seq.), the
Safe Drinking Water Act (42 U.S.C. Section 201 and Section 300f et seq.), the
Rivers and Harbors Act (33 U.S.C. Section 401 et seq.), the Oil Pollution Act
(33 U.S.C. Section 2701 et seq.) and analogous Canadian, foreign, provincial,
state and local provisions, as any of the foregoing may have been amended or
supplemented from time to time (collectively the "Applicable Environmental
Laws"), except for violations which, either singly or in the aggregate, would
not result in a Material Adverse Effect on Dreco;
(d) To the knowledge of Dreco, none of the operations or
assets of Dreco or any Dreco Subsidiary has ever been conducted or used by
Dreco or any Dreco Subsidiary in such a manner as to constitute a violation of
any of the Applicable Environmental Laws, except for violations which, either
singly or in the aggregate, would not result in a Material Adverse Effect on
Dreco;
(e) No written notice has been served on Dreco or any
Dreco Subsidiary from any entity, governmental agency or individual regarding
any existing, pending or threatened investigation or inquiry related to alleged
violations under any Applicable Environmental Laws, or regarding any claims for
remedial obligations or contribution under any Applicable Environmental Laws,
other than any of the foregoing which, either singly or in the aggregate, would
not result in a Material Adverse Effect on Dreco; and
(f) Dreco does not know of any reason that would preclude
it or NOI from renewing or obtaining a reissuance of the material permits,
licenses or other authorizations required pursuant to any Applicable
Environmental Laws to operate and use any of Dreco's or the Dreco Subsidiaries'
assets for their current purposes and uses.
2.17 Compliance With Other Laws. Neither Dreco nor any Dreco
Subsidiary is in violation of or in default with respect to, or in alleged
violation of or alleged default with respect to any other applicable law or any
applicable rule or regulation, or any writ or decree of any court or any
governmental commission, board, bureau, agency or instrumentality, or
delinquent with respect to any report required to be filed with any
Governmental Entity, except for violations and delinquencies which, either
singly or in the aggregate, do not and are not expected to result in a Material
Adverse Effect on Dreco.
2.18 Taxes. Except with respect to failures which, in the
aggregate, would not result in a Material Adverse Effect on Dreco, proper and
accurate federal, provincial, state and local income, capital, withholding,
value added, sales, use, franchise, gross revenue, turnover, excise, payroll,
property, employment, customs duties and any and all other tax returns,
reports, and estimates have been filed with appropriate governmental agencies,
domestic and foreign, by Dreco and each of the Dreco Subsidiaries for each
period for which any returns, reports, or estimates were due (taking into
account any extensions of time to file before the date hereof); all taxes shown
by such returns to be payable and any other taxes due and payable have been
paid other than those being contested in good faith by Dreco or a Dreco
Subsidiary; and the tax provision reflected in Dreco's financial statements is
adequate, in accordance with Canadian or United States (as the case may be)
generally accepted accounting principles, to cover liabilities of Dreco and the
Dreco Subsidiaries for all taxes, including any interest, penalties and
additions to taxes of any character whatsoever applicable to Dreco and the
Dreco Subsidiaries or their assets or businesses. No waiver of any statute of
limitations executed by Dreco or a Dreco Subsidiary with respect to any tax is
in effect for any period. Dreco has not received any notice of reassessment
from Revenue Canada. There are no tax liens on any assets of
-14-
19
Dreco or the Dreco Subsidiaries except for taxes not yet currently due and those
which could not reasonably be expected to result in a Material Adverse Effect on
Dreco.
2.19 Vote Required. Except as may be provided in the Interim
Order, at the Dreco Shareholders Meeting at which a quorum is present, the
affirmative vote of the holders of two-thirds of the Dreco Common Shares
present is required to approve this Agreement, the Arrangement and the
consummation of the transactions contemplated hereby.
2.20 Pooling Matters. Neither Dreco nor any of its affiliates has
taken or agreed to take any action that, without giving effect to any action
taken or agreed to be taken by NOI or any of its affiliates, would prevent NOI
from accounting for the business combination to be effected by the Arrangement
as a pooling of interests.
2.21 Brokers and Finders. Other than Credit Suisse First Boston
Corporation, none of Dreco or any of the Dreco Subsidiaries nor any of their
respective directors, officers or employees has employed any broker or finder
or incurred any liability for any financial advisory fees, brokerage fees,
commissions or similar payments in connection with the transactions
contemplated by this Agreement. The Dreco Disclosure Letter includes a copy of
Dreco's engagement letter or contract with Credit Suisse First Boston
Corporation or, if there is no engagement letter or contract, a description of
all material terms of Dreco's engagement arrangement with such firm.
2.22 Disclosure. No representation or warranty made by Dreco in
this Agreement or the Dreco Disclosure Letter, nor any document, written
information, statement, financial statement, certificate or Exhibit prepared
and furnished or to be prepared and furnished by Dreco or its representatives
pursuant hereto or in connection with the transactions contemplated hereby,
when taken together, contains or contained (as of the date made) any untrue
statement of a material fact when made, or omits or omitted (as of the date
made) to state a material fact necessary to make the statements or facts
contained herein or therein not misleading in light of the circumstances under
which they were made.
2.23 Fairness and Pooling Opinions. Dreco's board of directors has
received written opinions (a) from Credit Suisse First Boston Corporation that
the Exchange Ratio is fair to Dreco's shareholders from a financial point of
view (the "Dreco Fairness Opinion") and (b) from Coopers & Lybrand that, in
accordance with United States generally accepted accounting principles and
applicable rules and regulations of the SEC, after May 1997, Dreco will be a
poolable entity (the "Dreco Pooling Opinion").
2.24 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or court decree binding upon Dreco or
any Dreco Subsidiary that has or could reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of Dreco or
any Dreco Subsidiary, any acquisition of property by Dreco or any Dreco
Subsidiary or the conduct of any business by Dreco or any Dreco Subsidiary.
-15-
20
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF NOI
Except as set forth in a letter dated the date of this Agreement and
delivered by NOI to Dreco concurrently herewith (the "NOI Disclosure Letter"),
NOI hereby represents and warrants to, and agrees with, Dreco that:
3.1 Organization and Standing. NOI and each body corporate,
partnership, joint venture, association or other business entity of which more
than 50% of the total voting power of shares of stock or units of ownership or
beneficial interest entitled to vote in the election of directors (or members
of a comparable governing body) is owned or controlled, directly or indirectly,
by NOI (the "NOI Subsidiaries"), is an entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization, has full requisite power and authority to carry on its business
as it is currently conducted, and to own, lease and operate the properties
currently owned, leased and operated by it, and is duly qualified or licensed
to do business and is in good standing as a foreign corporation or organization
authorized to do business in all jurisdictions in which the character of the
properties owned or leased or the nature of the business conducted by it would
make such qualification or licensing necessary, except where the failure to be
so qualified or licensed would not have a Material Adverse Effect on NOI. The
NOI Disclosure Letter sets forth a complete list of the NOI Subsidiaries, the
percentage of each subsidiary's outstanding capital stock or other ownership
interest owned by NOI or another NOI Subsidiary (and a description of any
Encumbrance on such stock or other ownership interest) and a complete list of
each jurisdiction in which each of NOI and the NOI Subsidiaries is duly
qualified and in good standing to do business.
3.2 Agreement Authorized and its Effect on Other Obligations. (a)
NOI has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and, subject to approval of
NOI's stockholders as provided in this Agreement, to consummate the Arrangement
and the other transactions contemplated by this Agreement. The execution and
delivery of this Agreement by NOI and, subject to approval of NOI's
stockholders as provided in this Agreement, the consummation by NOI of the
Arrangement and the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of NOI. This
Agreement has been duly executed and delivered by NOI and is the valid and
binding obligation of NOI, enforceable in accordance with its terms, except
that such enforceability may be subject to (i) bankruptcy, insolvency,
reorganization or other similar laws affecting or relating to enforcement of
creditors' rights generally and (ii) general equitable principles, and that the
consummation of the Arrangement is subject to approval of NOI's stockholders as
provided in this Agreement.
(b) Neither the execution, delivery or performance of
this Agreement or the Arrangement by NOI, nor the consummation of the
transactions contemplated hereby or thereby by NOI nor compliance with the
provisions hereof or thereof by NOI will: (i) conflict with, or result in any
violations of, the Certificate of Incorporation or bylaws of NOI or any
equivalent document of any of the NOI Subsidiaries, or (ii) result in any
breach of or cause a default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, amendment, cancellation or
acceleration of any obligation contained in, or the loss of any material
benefit under, or result in the creation of any Encumbrance upon any of the
material properties or assets of NOI or any of the NOI Subsidiaries under, any
term, condition or provision of any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to NOI or any of the NOI
Subsidiaries or their respective properties or assets,
-16-
21
other than any such breaches, defaults, losses, or encumbrances which,
individually or in the aggregate, would not have a Material Adverse Effect on
NOI.
3.3 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity, is required to be obtained by NOI or any of the NOI Subsidiaries in
connection with the execution and delivery of this Agreement or the Plan of
Arrangement or the consummation of the transactions contemplated hereby or
thereby, except for: (i) the filing with the Commissions and the mailing to
stockholders of NOI of the Joint Proxy Statement relating to the NOI
Stockholders Meeting, (ii) the furnishing to the SEC of the SEC Filings; (iii)
approval by the Court of the Arrangement and the filings of the articles of
arrangement and other required arrangement or other documents as required by
the ABCA; (iv) such filings, authorizations, orders and approvals as may be
required under state "control share acquisition," "anti-takeover" or other
similar statutes, any other applicable federal, provincial or state securities
laws and the rules of the NYSE; (v) such filings and notifications as may be
necessary under the HSR Act; (vi) such notices and filings as may be necessary
under the Investment Canada Act and under the Competition Act (Canada); and
(vii) where the failure to obtain such consents, approvals, etc., would not
prevent or delay the consummation of the Arrangement or otherwise prevent NOI
from performing its obligations under this Agreement and would not reasonably
be expected to have a Material Adverse Effect on NOI.
3.4 Capitalization. (a) The authorized capital stock of NOI
consists of 40,000,000 common shares, $.01 par value ("NOI Common Stock") and
10,000,000 shares of preferred stock, par value $.01 per share ("NOI Preferred
Stock"). As of May 10, 1997, 17,874,128 shares of NOI Common Stock were issued
and outstanding and no NOI Common Shares were held by NOI in its treasury. As
of May 10, 1997, 141,548 shares of NOI Common Stock were reserved for issuance
upon the exercise of stock options then outstanding under NOI's stock option
plans, 858,452 shares of NOI Common Stock were reserved for future issuance of
options under NOI's stock option plans, and 316,281 shares of NOI Common Stock
were reserved for issuance under NOI's value appreciation plans. No shares of
NOI Preferred Stock are issued or outstanding. All of the issued and
outstanding NOI Common Stock have been duly authorized and validly issued, are
fully paid and non-assessable, were not issued in violation of the terms of any
agreement or other understanding binding upon NOI and were issued in compliance
with all applicable charter documents of NOI and all applicable federal, state
and foreign securities laws, rules and regulations. There are, and have been,
no preemptive rights with respect to the issuance of the NOI Common Stock or
any other capital stock of NOI.
(b) There are no outstanding subscriptions, options,
warrants, convertible securities, calls, commitments, agreements or rights
(contingent or otherwise) of any character to purchase or otherwise acquire
from NOI any shares of, or any securities convertible into, the capital stock
of NOI.
3.5 Securities Reports and Financial Statements. (a) NOI has
filed all forms, reports and documents required to be filed by it by the SEC or
pursuant to relevant United States securities statutes, regulations, policies
and rules (collectively, the "NOI Securities Reports"), all of which have
complied in all material respects with all applicable requirements of such
statutes, regulations, policies and rules. None of the NOI Securities Reports,
at the time filed or as subsequently amended, contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances
-17-
22
under which they were made, not misleading. The financial statements of NOI
contained in the NOI Securities Reports complied in all material respects with
the then applicable accounting requirements and the published rules and
regulations of the relevant United States securities statutes with respect
thereto, were prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may have been indicated in the notes thereto or, in the case of
unaudited statements, as permitted by applicable laws, rules or regulations) and
fairly present (subject, in the case of the unaudited statements, to normal,
year-end audit adjustments) the consolidated financial position of NOI and its
consolidated NOI Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and cash flows for the respective
periods then ended. There has been no change in NOI's accounting policies or
the methods of making accounting estimates or changes in estimates that are
material to such financial statements, except as described in the notes thereto.
(b) The books, records and accounts of NOI and the NOI
Subsidiaries (i) have been maintained in accordance with good business
practices on a basis consistent with prior years, (ii) are stated in reasonable
detail and accurately and fairly reflect in all material respects the
transactions and dispositions of the assets of NOI and the NOI Subsidiaries and
(iii) accurately and fairly reflect in all material respects the basis for the
NOI financial statements. NOI has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (iv)
transactions are executed in accordance with management's general or specific
authorization; and (v) transactions are recorded as necessary (A) to permit
preparation of financial statements in conformity with United States generally
accepted accounting principles or any other criteria applicable to such
statements and (B) to maintain accountability for assets.
3.6 Liabilities. Neither NOI nor any NOI Subsidiary has any
material liabilities or obligations, either accrued, absolute, contingent or
otherwise, or has any knowledge of any potential material liabilities or
obligations, other than those disclosed in the NOI Securities Reports or
incurred in the ordinary course of business since December 31, 1996.
3.7 Information Supplied. None of the information supplied or to
be supplied by NOI for inclusion or incorporation by reference in the Joint
Proxy Statement (and, if filed, the Registration Statement) will, at the time
the Joint Proxy Statement is mailed to the shareholders of NOI and at the time
of the NOI Stockholders Meeting (and, if filed, at the time the Registration
Statement is declared effective), contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Joint Proxy Statement will comply as
to form in all material respects with the provisions of the ABCA and applicable
United States and Canadian securities laws and the rules and regulations
promulgated thereunder.
3.8 No Defaults. Neither NOI nor any NOI Subsidiary is, or has
received notice that it would be with the passage of time, in default or
violation of any term, condition or provision of (a) its charter documents or
bylaws; (b) any judgment, decree or order applicable to it; or (c) any loan or
credit agreement, note, bond, mortgage, indenture, contract, agreement, lease,
license or other instrument to which NOI or any NOI Subsidiary is now a party
or by which it or any of its properties or assets may be bound, except in the
case of item (c) for defaults and violations which, individually or in the
aggregate, would not have a Material Adverse Effect on NOI.
-18-
23
3.9 Litigation; Investigations. There is no claim, action, suit
or proceeding pending, or to the knowledge of NOI threatened against NOI or any
of the NOI Subsidiaries, which would, if adversely determined, individually or
in the aggregate, have a Material Adverse Effect on NOI, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against NOI or any of the NOI Subsidiaries having, or
which, insofar as reasonably can be foreseen, in the future could have, any
such effect. There is no investigation pending, or to the knowledge of NOI
threatened, against NOI or any of the NOI Subsidiaries before any Governmental
Entity.
3.10 Absence of Certain Changes and Events. Other than as a result
of the transactions contemplated by this Agreement, since December 31, 1996,
there has not been:
(a) Any material adverse change in the financial
condition, operations, assets, liabilities or business of NOI and the NOI
Subsidiaries, taken as a whole;
(b) Any material damage, destruction, or loss to the
business or properties of NOI and the NOI Subsidiaries, taken as a whole, not
covered by insurance;
(c) Any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital stock of NOI, or any
direct or indirect redemption, purchase or any other acquisition by NOI of any
such stock;
(d) Any change in the capital stock or in the number of
shares or classes of NOI's authorized or outstanding capital stock as described
in Section 3.4 (other than as a result of exercises of options to purchase NOI
Common Stock and issuances under NOI's value appreciation plans of shares of
NOI Common Stock outstanding as of December 31, 1996);
(e) Any material labor dispute or charge of unfair labor
practice (other than routine individual grievances), any activity or proceeding
by a labor union or, to the knowledge of NOI, by representative thereof to
organize any employees of NOI or any NOI Subsidiary or any campaign being
conducted to solicit authorization from employees to be represented by such
labor union;
(f) Any other event or condition known to NOI
particularly pertaining to and adversely affecting the operations, assets or
business of NOI or any of the NOI Subsidiaries (other than events or conditions
which are of a general or industry-wide nature and of general public knowledge)
which would constitute a Material Adverse Effect on NOI; or
(g) Any material cancellation of backlog that has not
been replaced by new orders.
3.11 Additional NOI Information. The NOI Disclosure Letter
contains true, complete and correct lists of the following items with respect
to NOI and each of the NOI Subsidiaries, and NOI has furnished or made
available to Dreco true, complete and correct copies of all documents referred
to in such lists:
(a) Each parcel of real property owned, or subject to a
contract of purchase and sale, with a fair market value in excess of
$1,000,000, with a description of the nature and amount of
-19-
24
any Encumbrance thereon, and each parcel of real property leased, or subject to
a lease commitment, with annual rental payments in excess of $250,000;
(b) All material insurance policies or bonds currently
maintained, including those covering properties, buildings, machinery,
equipment, fixtures, employees and operations, as well as a listing of any
premiums, audit adjustments or retroactive adjustments due or pending on such
policies or any predecessor policies;
(c) All contracts which involve, or may involve,
aggregate payments by any party thereto of $1,000,000 or more, which are to be
performed in whole or in part after the Effective Time;
(d) All bonus, incentive compensation, deferred
compensation, profit-sharing, retirement, pension, welfare, group insurance,
death benefit, or other fringe benefit plans, arrangements or trust agreements;
(e) Any collective bargaining agreements with any labor
union or other representative of employees, including all amendments and
supplements, and all employment and consulting agreements;
(f) All material patents, trademarks, copyrights and
other intellectual property rights owned, licensed or used and all applications
therefor;
(g) All material trade names and fictitious names used or
held, whether and where such names are registered and where used;
(h) All material long-term and short-term promissory
notes, installment contracts, loan agreements, credit agreements, operating and
finance leases, and any other agreements relating thereto or with respect to
collateral securing the same; and
(i) All material indebtedness, liabilities and
commitments of third parties (other than NOI Subsidiaries) and as to which it
is a guarantor, endorser, co-maker, surety or accommodation maker, or is
contingently liable therefor (excluding liabilities as an endorser of checks
and the like in the ordinary course of business) or has otherwise provided any
form of financial assistance and all letters of credit, whether stand-by or
documentary, issued by any third party.
3.12 Certain Agreements. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (a) result in any payment (including severance, unemployment compensation,
parachute payment, bonus or otherwise) becoming due to any director, employee
or independent contractor of NOI or any of the NOI Subsidiaries (as defined in
Section 3.13) under any NOI Plan (as hereinafter defined) or otherwise, (b)
materially increase any benefits otherwise payable under any NOI Plan or
otherwise or (c) result in the acceleration of the time of payment or vesting
of any such benefits.
3.13 Employee Benefit Plans. For purposes of Section 3.12 and this
Section 3.13, NOI Subsidiaries shall include any enterprise which, with NOI,
forms or formed a controlled group of corporations, a group of trades or
business under common control or an affiliated service group, within the
meaning of Section 414(b), (c) or (m) of the Code. All employee benefits plans
covering
-20-
25
active, former or retired employees of NOI and the NOI Subsidiaries are listed
in the NOI Disclosure Letter (the "NOI Plans"). NOI has made available to Dreco
true, complete and correct copies of each NOI Plan, any related trust agreement,
annuity or insurance contract or other funding vehicle, if any, and summary plan
descriptions and other descriptive materials furnished to participants of the
plans, and each plan's most recent annual reports filed with the Internal
Revenue Service, including exhibits and related financial reports, if any, and:
(a) each NOI Plan has been maintained and administered in material compliance
with its terms and is, to the extent required by applicable law or contract,
fully funded without having any deficit or unfunded actuarial liability; (b) all
required employer contributions under any such plans have been made and the
applicable funds have been funded in accordance with the terms thereof and no
past service funding liabilities exist thereunder; (c) each NOI Plan that is
required or intended to be qualified under applicable law or registered or
approved by a governmental agency or authority has been so qualified, registered
or approved by the appropriate governmental agency or authority, and nothing has
occurred since the date of the last qualification, registration or approval to
adversely affect, or cause, the appropriate governmental agency or authority to
revoke such qualification, registration or approval; (d) to the extent
applicable, the NOI Plans comply, in all material respects, with the
requirements of ERISA, the Code and any other applicable tax act and other laws,
and any NOI Plan intended to be qualified under Section 401(a) of the Code has
been determined by the Internal Revenue Service to be so qualified and nothing
has occurred to cause the loss of such qualified status; (e) no NOI Plan is
covered by Title 4 of ERISA or Section 412 of the Code; (f) there are no
pending or anticipated material claims against or otherwise involving any of the
NOI Plans and no suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of NOI Plan activities) has been brought against
or with respect to any NOI Plan; (g) all material contributions, reserves or
premium payments, required to be made as of the date hereof to the NOI Plans
have been made or provided for; (h) neither NOI nor any NOI Subsidiary has
incurred or reasonably expects to incur any liability under subtitle C or D of
Title 4 of ERISA with respect to any "single-employer plan", within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained by NOI, any
NOI Subsidiary or any entity which is considered one employer with NOI under
Section 4001 of ERISA; (i) neither NOI nor any NOI Subsidiary has incurred or
reasonably expects to incur any withdrawal liability under Subtitle E of Title
4 of ERISA with respect to any "multiemployer plan", within the meaning of
Section 4001(a)(3) of ERISA; and (j) neither NOI nor any NOI Subsidiary has any
obligations for retiree health and life benefits under any NOI Plan, except as
set forth on the NOI Disclosure Letter and there are no restrictions on the
rights of NOI or any of the NOI Subsidiaries to amend or terminate any such NOI
Plan without incurring any liability thereunder.
3.14 Intellectual Property. NOI or the NOI Subsidiaries own or
possess licenses to use all patents, patent applications, trademarks and
service marks (including registrations and applications therefor), trade names,
copyrights and written know-how, trade secrets and all other similar
proprietary data and the goodwill associated therewith (collectively, the "NOI
Intellectual Property") that are either material to the business of NOI or any
NOI Subsidiary or that are necessary for the manufacture, use, license or sale
of any services or products manufactured, used, licensed or sold by NOI and the
NOI Subsidiaries. The NOI Intellectual Property is owned or licensed by NOI or
the NOI Subsidiaries free and clear of any Encumbrance other than such
Encumbrances as are listed in the NOI Disclosure Letter. Except in the
ordinary course of business, neither NOI nor any of he NOI Subsidiaries has
granted to any other person any license to use any NOI Intellectual Property.
Neither NOI nor any of the NOI Subsidiaries has received any notice of
infringement, misappropriation or conflict with, the intellectual property
rights of others in connection with the use by NOI and the NOI Subsidiaries of
the NOI Intellectual Property.
-21-
26
3.15 Title to Properties. Except for goods and other property
sold, used or otherwise disposed of since December 31, 1996 in the ordinary
course of business for fair value, NOI has good and indefeasible title to all
its properties, interests in properties and assets, real and personal,
reflected in its December 31, 1996 financial statements, free and clear of any
Encumbrance, except (a) Encumbrances reflected in the balance sheet of NOI as
of December 31, 1996, (b) liens for current taxes not yet due and payable and
(c) such imperfections of title, easements and Encumbrances, if any, as are not
substantial in character, amount or extent and do not and will not materially
detract from the value, or interfere with the present use, of the property
subject thereto or affected thereby, or otherwise materially impair business
operations. All leases pursuant to which NOI or any NOI Subsidiary leases
(whether as lessee or lessor) any real or personal property are in good
standing, valid, and effective; and there is not, under any such leases, any
existing or prospective default or event of default or event which with notice
or lapse of time, or both, would constitute a default by NOI or any NOI
Subsidiary and in respect to which NOI or a NOI Subsidiary has not taken
adequate steps to prevent a default from occurring. The buildings and premises
of NOI and each of the NOI Subsidiaries that are used in its business are in
good operating condition and repair, subject only to ordinary wear and tear.
All major items of operating equipment of NOI and the NOI Subsidiaries are in
good operating condition and in a state of reasonable maintenance and repair,
ordinary wear and tear excepted, and are free from any known defects except as
may be repaired by routine maintenance and such minor defects as do not
substantially interfere with the continued use thereof in the conduct of normal
operations.
3.16 Environmental Matters. (a) There are no environmental
conditions or circumstances, such as the presence or release of any hazardous
substance, on any property presently or, to the knowledge of NOI, previously
owned or leased by NOI or any of the NOI Subsidiaries that could reasonably be
expected to result in a Material Adverse Effect on NOI;
(b) NOI and the NOI Subsidiaries have in full force and
effect all material environmental permits, licenses, approvals and other
authorizations required to conduct their operations and are operating in
material compliance thereunder;
(c) NOI's and the NOI Subsidiaries' operations and the
use of their assets do not violate any applicable United States or Canadian or
other federal, provincial, state or local law, statute, ordinance, rule,
regulation, order or notice requirement pertaining to (i) the condition or
protection of air, groundwater, surface water, soil, or other environmental
media, (ii) the environment, including natural resources or any activity which
affects the environment or (iii) the regulation of any pollutants,
contaminants, waste or other substances (whether or not hazardous or toxic),
including the Applicable Environmental Laws, except for violations which,
either singly or in the aggregate, would not result in a Material Adverse
Effect on NOI;
(d) To the knowledge of NOI, none of the operations or
assets of NOI or any NOI Subsidiary has ever been conducted or used by NOI or
any NOI Subsidiary in such a manner as to constitute a violation of any of the
Applicable Environmental Laws, except for violations which, either singly or in
the aggregate, would not result in a Material Adverse Effect on NOI;
(e) No written notice has been served on NOI or any NOI
Subsidiary from any entity, governmental agency or individual regarding any
existing, pending or threatened investigation or inquiry related to alleged
violations under any Applicable Environmental Laws, or regarding any claims for
remedial obligations or contribution under any Applicable Environmental Laws,
other than
-22-
27
any of the foregoing which, either singly or in the aggregate, would not result
in a Material Adverse Effect on NOI; and
(f) NOI does not know of any reason that would preclude
it from renewing or obtaining a reissuance of the permits, licenses, or other
authorizations required pursuant to any Applicable Environmental Laws to
operate and use any of NOI's or the NOI Subsidiaries' assets for their current
purposes and uses.
3.17 Compliance With Other Laws. Neither NOI nor any NOI
Subsidiary is in violation of or in default with respect to, or in alleged
violation of or alleged default with respect to any other applicable law or any
applicable rule or regulation, or any writ or decree of any court or any
governmental commission, board, bureau, agency or instrumentality, or
delinquent with respect to any report required to be filed with any
Governmental Entity, except for violations and delinquencies which, either
singly or in the aggregate, do not and are not expected to result in a Material
Adverse Effect on NOI.
3.18 Taxes. Except with respect to failures which, in the
aggregate, would not result in a Material Adverse Effect on NOI, proper and
accurate federal, provincial, state and local income, capital, withholding,
value added, sales, use, franchise, gross revenue, turnover, excise, payroll,
property, employment, customs duties and any and all other tax returns,
reports, and estimates have been filed with appropriate governmental agencies,
domestic and foreign, by NOI and each of the NOI Subsidiaries for each period
for which any returns, reports, or estimates were due (taking into account any
extensions of time to file before the date hereof); all taxes shown by such
returns to be payable and any other taxes due and payable have been paid other
than those being contested in good faith by NOI or a NOI Subsidiary; and the
tax provision reflected in NOI's financial statements is adequate, in
accordance with United States generally accepted accounting principles, to
cover liabilities of NOI and the NOI Subsidiaries for all taxes, including any
interest, penalties and additions to taxes of any character whatsoever
applicable to NOI and the NOI Subsidiaries or their assets or businesses. No
waiver of any statute of limitations executed by NOI or a NOI Subsidiary with
respect to any tax is in effect for any period. There are no tax liens on any
assets of NOI or the NOI Subsidiaries except for taxes not yet currently due
and those which could not reasonably be expected to result in a Material
Adverse Effect on NOI.
3.19 Vote Required. At a stockholders meeting at which a quorum is
present, (a) the affirmative vote of the holders of a majority of the
outstanding shares of NOI Common Stock cast at the meeting is required to
approve the issuance of the NOI Common Stock pursuant to this Agreement upon
exchange of the Exchangeable Shares and (b) the affirmative vote of the holders
of a majority of the issued and outstanding shares of NOI Common Stock is
necessary to approve the NOI Restated Charter.
3.20 Pooling Matters. Neither NOI nor any of its affiliates has
taken or agreed to take any action that, without giving effect to any action
taken or agreed to be taken by Dreco or any of its affiliates, would prevent
NOI from accounting for the business combination to be effected by the
Arrangement as a pooling of interests.
3.21 Brokers and Finders. Other than Merrill Lynch & Co. in
accordance with the terms of its engagement letter dated April 20, 1997, a copy
of which has previously been provided to Dreco, none of NOI or any of the NOI
Subsidiaries nor any of their respective directors, officers or
-23-
28
employees has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or similar payments in
connection with the transactions contemplated by this Agreement.
3.22 Disclosure. No representation or warranty made by NOI in this
Agreement or the NOI Disclosure Letter, nor any document, written information,
statement, financial statement, certificate or Exhibit prepared and furnished
or to be prepared and furnished by NOI or its representatives pursuant hereto
or in connection with the transactions contemplated hereby, when taken
together, contains or contained (as of the date made) any untrue statement of a
material fact when made, or omits or omitted (as the case may be) to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
made.
3.23 Fairness and Pooling Opinions. NOI's board of directors has
received written opinions (a) from Merrill Lynch & Co. that the Exchange Ratio
is fair to NOI from a financial point of view (the "NOI Fairness Opinion") and
(b) from Ernst & Young LLP that, in accordance with United States generally
accepted accounting principles and applicable rules and regulations of the SEC,
NOI is a poolable entity and after May 1997 the Arrangement should be treated
as a "pooling of interests" for accounting purposes (the "NOI Pooling
Opinion").
3.24 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or court decree binding upon NOI or any
NOI Subsidiary that has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of NOI or any NOI
Subsidiary, any acquisition of property by NOI or any NOI Subsidiary or the
conduct of any business by NOI or any NOI Subsidiary.
ARTICLE IV
OBLIGATIONS PENDING EFFECTIVE DATE
4.1 Agreements of NOI and Dreco. NOI and Dreco agree to take the
following actions after the date hereof:
(a) Each party will promptly execute and file or join in
the execution and filing of any application or other document that may be
necessary in order to obtain the authorization, approval or consent of any
Governmental Entity which may be reasonably required, or which the other party
may reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement. Each party will use its reasonable best
efforts to promptly obtain such authorizations, approvals and consents.
Without limiting the generality of the foregoing, as promptly as practicable
after the execution of this Agreement, each party shall make all required
filings under the HSR Act and shall make such filings as are necessary under
the Investment Canada Act and the Competition Act (Canada);
(b) Each party will allow the other and its agents
reasonable access to the files, books, records and offices of itself and its
subsidiaries, including any and all information relating to such party's tax
matters, contracts, leases, licenses and real, personal and intangible property
and financial condition. Each party will cause its accountants to cooperate
with the other in making available to the other party all financial information
reasonably requested, including the right to
-24-
29
examine all working papers pertaining to tax matters and financial statements
prepared or audited by such accountants;
(c) NOI and Dreco shall cooperate in the preparation and
prompt filing of the Joint Proxy Statement (and, if required, the Registration
Statement) with the SEC;
(d) Each of NOI and Dreco will promptly notify the other
in writing (i) of any event occurring subsequent to the date of this Agreement
which would render any representation and warranty of such party contained in
this Agreement untrue or inaccurate in any material respect, (ii) of any
Material Adverse Effect on such party and (iii) of any breach by such party of
any material covenant or agreement contained in this Agreement; and
(e) During the term of this Agreement, each of NOI and
Dreco will use its reasonable best efforts to satisfy or cause to be satisfied
all the conditions precedent that are set forth in Article V hereof, and each
of NOI and Dreco will use its reasonable best efforts to cause the Arrangement
and the other transactions contemplated by this Agreement to be consummated.
4.2 Additional Agreements of Dreco. Dreco agrees that, except as
expressly contemplated by this Agreement or as otherwise agreed to in writing
by NOI or as set forth in the Dreco Disclosure Letter, from the date hereof to
the Effective Date it will, and will cause each of the Dreco Subsidiaries to:
(a) Other than as contemplated by this Agreement, operate
its business only in the usual, regular and ordinary manner so as to maintain
the goodwill it now enjoys and, to the extent consistent with such operation,
use all commercially reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and
employees, and preserve its relationships with customers, suppliers,
distributors and others having business dealings with it;
(b) Maintain all of its property and assets in customary
repair, order, and condition, reasonable wear and use and damage
by fire or unavoidable casualty excepted;
(c) Maintain its books of account and records in the
usual, regular and ordinary manner, in accordance with generally accepted
accounting principles applied on a consistent basis;
(d) Duly comply in all material respects with all laws
applicable to it and to the conduct of its business;
(e) Not (i) enter into any contracts of employment which
(A) cannot be terminated on notice of 14 days or less or (B) provide for any
severance payments or benefits covering a period beyond the termination date of
such employment contract, except as may be required by law or (ii) amend any
employee benefit plan or stock option plan, except as may be required for
compliance with this Agreement or applicable law;
(f) Not incur any borrowings except (i) the refinancing
of indebtedness now outstanding or additional borrowings under its existing
revolving credit facilities, (ii) the prepayment by customers of amounts due or
to become due for goods sold or services rendered or to be rendered in the
future, (iii) trade payables incurred in the ordinary course of business or
(iv) other borrowings incurred in the ordinary course of business to finance
normal operations;
-25-
30
(g) Not enter into commitments of a capital expenditure
nature or incur any contingent liability which would exceed $2,000,000, in the
aggregate, except (i) as may be necessary for the maintenance of existing
facilities, machinery and equipment in good operating condition and repair in
the ordinary course of business or (ii) as may be required by law;
(h) Not sell, dispose of, or encumber, any property or
assets, except (i) in the ordinary course of business or (ii) as may be
reasonably required in connection with borrowings under Section 4.2(f);
(i) Maintain insurance upon all its properties and with
respect to the conduct of its business of such kinds and in such amounts as is
customary in the type of business in which it is engaged, but not less than
that presently carried by it;
(j) Not amend its charter documents or bylaws or other
organizational documents or merge or consolidate with or into any other
corporation or change in any manner the rights of its capital stock or the
character of its business;
(k) Not issue or sell (except upon the exercise of
outstanding options), or issue options or rights to subscribe to, or enter into
any contract or commitment to issue or sell, any shares of its capital stock or
subdivide or in any way reclassify any shares of its capital stock, or acquire,
or agree to acquire, any shares of its capital stock;
(l) Not declare or pay any dividend on shares of its
capital stock or make any other distribution of assets to the holders thereof;
(m) Deliver to NOI, within 45 days after the end of each
fiscal quarter of Dreco beginning May 31, 1997, and through the Effective Date,
unaudited consolidated balance sheets and related unaudited statements of
income, retained earnings and cash flows as of the end of each fiscal quarter
of Dreco, and as of the corresponding fiscal quarter of the previous fiscal
year. Dreco hereby represents and warrants that such unaudited consolidated
financial statements shall (i) be complete in all material respects except for
the omission of notes and schedules contained in audited financial statements,
(ii) present fairly in all material respects the financial condition of Dreco
as at the dates indicated and the results of operations for the respective
periods indicated, (iii) shall have been prepared in accordance with Canadian
generally accepted accounting principles applied on a consistent basis, except
as noted therein and (iv) shall contain all adjustments which Dreco considers
necessary for a fair presentation of its results for each respective fiscal
period; and
(n) Without the prior written consent of NOI, from and
after the date hereof, Dreco and the Dreco Subsidiaries will not, and will not
authorize or permit any of their officers, directors, employees, financial
advisors, representatives and agents ("Representatives") to, directly or
indirectly, solicit, initiate or encourage (including by way of furnishing
information) or take any other action to facilitate any inquiries or the making
of any proposal which constitutes or may reasonably be expected to lead to an
Acquisition Proposal (as defined herein) from any person, or engage in any
discussion or negotiations relating thereto or accept any Acquisition Proposal;
provided, however, that notwithstanding any other provision hereof, Dreco may
(i) at any time prior to the time Dreco's shareholders shall have voted to
approve the Plan of Arrangement and the other transactions contemplated
thereby, engage in discussions or negotiations with a third party who (without
any solicitation, initiation or encouragement, directly or indirectly, by
Dreco, any Dreco Subsidiary or the
-26-
31
Representatives after the date hereof) seeks to initiate such discussions or
negotiations and may furnish such third party information concerning Dreco and
its business, properties and assets if, and only to the extent that, (A) the
third party has first made an Acquisition Proposal that is financially superior
to the transactions contemplated by this Agreement and has demonstrated that the
funds or other consideration necessary for the Acquisition Proposal are
reasonably likely to be available (as determined in good faith in each case by
Dreco's board of directors after receiving the written advice of its financial
advisors) (a "Superior Proposal") and Dreco's board of directors shall conclude
in good faith, after considering applicable law and receiving the written advice
of outside counsel that such action is necessary for the board of directors to
act in a manner consistent with its fiduciary duties under applicable law, and
(B) prior to furnishing such information to or entering into discussions or
negotiations with such person or entity, Dreco provides prompt notice to NOI to
the effect that it is furnishing information to or entering into discussions or
negotiations with such person or entity and receives from such person or entity
an executed confidentiality agreement in reasonably customary form, (ii) comply
with Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to a
tender or exchange offer and similar rules under applicable Canadian securities
laws relating to the provision of directors' circulars, and make appropriate
disclosure with respect thereto to Dreco's shareholders and (iii) accept a
Superior Proposal from a third party, but only (in the case of this clause
(iii)) if prior to such acceptance Dreco terminates this Agreement in accordance
with Sections 6.1(i) and 6.4. Dreco shall immediately cease and terminate any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by Dreco, any Dreco Subsidiary
or their Representatives with respect to an Acquisition Proposal. Dreco shall
notify NOI orally and in writing of any inquiries, offers or proposals with
respect to an Acquisition Proposal (including without limitation the terms and
conditions of any such proposal, the identity of the person making it and all
other information reasonably requested by NOI), within 24 hours of the receipt
thereof, shall keep NOI informed of the status and details of any such inquiry,
offer or proposal and answer NOI's questions with respect thereto, and shall
give NOI five days' advance notice of any agreement to be entered into with, or
any information to be supplied to, any person making such inquiry, offer or
proposal. As used herein, "Acquisition Proposal" shall mean a proposal or offer
(other than by NOI) to acquire beneficial ownership (as defined under Rule 13(d)
of the Exchange Act) of all or a material portion of the assets of, or any
material equity interest in, Dreco or its material Subsidiaries pursuant to a
merger, consolidation or other business combination, by means of a sale of
shares of capital stock, sale of assets, tender offer or exchange offer or
similar transaction involving Dreco or its material Subsidiaries including
without limitation any single or multi-step transaction or series of related
transactions which is structured to permit such third party to acquire
beneficial ownership or any material portion of the assets of, or any material
portion of the equity interest in, Dreco or its material Subsidiaries (other
than the transactions contemplated by this Agreement), provided however, in no
event shall an underwritten public or private sale of Dreco Common shares
(aggregating less than 50% of the currently issued and outstanding Dreco Common
Shares), which is not made in connection with a merger, consolidation or other
business combination, be deemed to be an Acquisition Proposal.
4.3 Additional Agreements of NOI. NOI agrees that, except as
expressly contemplated by this Agreement or otherwise agreed to in writing by
Dreco or as set forth in the NOI Disclosure Letter, from the date hereof to the
Effective Date it will, and will cause each of the NOI Subsidiaries to:
(a) Other than as contemplated by this Agreement, operate
its business only in the usual, regular, and ordinary manner so as to maintain
the goodwill it now enjoys and, to the extent
-27-
32
consistent with such operation, use all commercially reasonable efforts to
preserve intact its present business organization, keep available the services
of its present officers and employees, and preserve its relationships with
customers, suppliers, distributors, and others having business dealings with it;
(b) Maintain all of its property and assets in customary
repair, order, and condition, reasonable wear and use and damage by fire or
unavoidable casualty excepted;
(c) Maintain its books of account and records in the
usual, regular, and ordinary manner, in accordance with generally accepted
accounting principles applied on a consistent basis;
(d) Duly comply in all material respects with all laws
applicable to it and to the conduct of its business;
(e) Not (i) enter into any contracts of employment which
(A) cannot be terminated on notice of 14 days or less or (B) provide for any
severance payments or benefits covering a period beyond the termination date of
such employment contract, except as may be required by law or (ii) amend any
employee benefit plan or stock option plan, except as may be required for
compliance with this Agreement or applicable law;
(f) Not incur any borrowings except (i) the refinancing
of indebtedness now outstanding or additional borrowings under its existing
revolving credit facilities, (ii) the prepayment by customers of amounts due or
to become due for goods sold or services rendered or to be rendered in the
future, (iii) trade payables incurred in the ordinary course of business or
(iv) other borrowings incurred in the ordinary course of business to finance
normal operations;
(g) Not enter into commitments of a capital expenditure
nature or incur any contingent liability which would exceed $2,000,000, in the
aggregate, except (i) as may be necessary for the maintenance of existing
facilities, machinery and equipment in good operating condition and repair in
the ordinary course of business or (ii) as may be required by law;
(h) Not sell, dispose of, or encumber, any property or
assets, except (i) in the ordinary course of business or (ii) as may be
reasonably required in connection with borrowings under Section 4.3(f);
(i) Maintain insurance upon all its properties and with
respect to the conduct of its business of such kinds and in such amounts as is
customary in the type of business in which it is engaged, but not less than
that presently carried by it;
(j) Not amend its charter documents or bylaws or other
organizational documents or merge or consolidate with or into any other
corporation or change in any manner the rights of its capital stock or the
character of its business;
(k) Not issue or sell (except upon the exercise of
outstanding options or warrants), or issue options or rights to subscribe to,
or enter into any contract or commitment to issue or sell, any shares of its
capital stock or subdivide or in any way reclassify any shares of its capital
stock, or acquire, or agree to acquire, any shares of its capital stock;
-28-
33
(l) Not declare or pay any dividend on shares of its
capital stock or make any other distribution of assets to the holders thereof;
(m) Deliver to Dreco, within 45 days after the end of
each fiscal quarter of NOI beginning June 30, 1997, and through the Effective
Date, unaudited consolidated balance sheets and related unaudited statements of
income, retained earnings and cash flows as of the end of each fiscal quarter
of NOI, and as of the corresponding fiscal quarter of the previous fiscal year.
NOI hereby represents and warrants that such unaudited consolidated financial
statements shall (i) be complete in all material respects except for the
omission of notes and schedules contained in audited financial statements, (ii)
present fairly in all material respects the financial condition of NOI as at
the dates indicated and the results of operations for the respective periods
indicated, (iii) shall have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis, except
as noted therein and (iv) shall contain all adjustments which NOI considers
necessary for a fair presentation of its results for each respective fiscal
period;
(n) Use its reasonable best efforts to cause (i) the
shares of NOI Common Stock to be issued from time to time after the Effective
Time upon exchange of the Exchangeable Shares to be listed upon the Closing on
the NYSE and (ii) with the cooperation and assistance of Dreco, the
Exchangeable Shares to be listed on a mutually acceptable Canadian stock
exchange.
4.4 Public Announcements. Neither NOI nor Dreco, nor any of their
respective affiliates, shall issue or cause the publication of any press
release or other public announcement with respect to this Agreement, the
Arrangement or the other transactions contemplated hereby without the prior
consent of the other party, except as may be required by law or by any listing
agreement with a national securities exchange.
4.5 Comfort Letters. (a) Dreco shall use its reasonable best
efforts to cause to be delivered to NOI a letter (the "Dreco Comfort Letter")
of Coopers & Lybrand addressed to NOI and dated as of a date within five days
before the earlier of (i) the date the Joint Proxy Statement is first mailed to
each company's respective stockholders, and (ii) if a Registration Statement is
required, the date on which the Registration Statement shall become effective,
in form and substance reasonably satisfactory to NOI and customary in scope and
substance for "comfort" letters delivered by independent public accountants in
connection with proxy statements and registration statements similar to the
Joint Proxy Statement and, if required, the Registration Statement.
(b) NOI shall use its reasonable best efforts to cause to
be delivered to Dreco a letter (the "NOI Comfort Letter") of Ernst & Young LLP
addressed to Dreco and dated as of a date within five days before the earlier
of (i) the date the Joint Proxy Statement is first mailed to each company's
respective stockholders, and (ii) if a Registration Statement is required, the
date on which the Registration Statement shall become effective, in form and
substance reasonably satisfactory to Dreco and customary in scope and substance
for "comfort" letters delivered by independent public accountants in connection
with proxy statements and registration statements similar to the Joint Proxy
Statement and, if required, the Registration Statement.
4.6 Board of Directors. The board of directors of NOI will take
action prior to the Effective Time to cause the number of directors comprising
the full board of directors of NOI to be increased from eight to ten persons,
and two persons designated by the Dreco board of directors (which designations
shall be subject to the approval of a majority of NOI's directors at that time)
shall
-29-
34
be elected to the board of directors of NOI by the NOI board of directors
effective at the Effective Time, such increase in number and such election to be
subject to the consummation of the Closing. If prior to the Effective Time any
Dreco designee for director shall decline or be unable to serve as a director of
NOI, Dreco's board of directors shall designate another person to serve in such
person's stead, subject to the approval of a majority of NOI's directors at that
time.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1 Conditions Precedent to Obligations of Each Party. The
obligations of each party to consummate and effect the transactions
contemplated hereunder shall be subject to the satisfaction or waiver before
the Effective Date of the following conditions:
(a) Consents of Certain Parties in Privity. NOI and
Dreco shall have received all written consents, assignments, waivers,
authorizations or other certificates necessary to provide for the continuation
in full force and effect of all their material contracts and leases and for
them to consummate the transactions contemplated hereby, except when the
failure to receive such consents or other certificates would not have a
Material Adverse Effect on NOI or Dreco;
(b) Stockholder Approval. This Agreement, the
Arrangement and the other transactions contemplated hereby shall have been
approved and adopted by the Dreco shareholders in accordance with applicable
law and Dreco's articles of amalgamation and bylaws, and Dreco shall not have
received on or prior to the Effective Time notice from the holders of more than
10% of the issued and outstanding Dreco Common Shares of their intention to
exercise their rights of dissent under section 184 of the ABCA. In addition,
the issuance of NOI Common Stock from time to time upon the exchange of the
Exchangeable Shares and the other proposals described in Section 7.1 shall have
been approved by the NOI stockholders in accordance with the rules of the NYSE,
applicable law and NOI's Certificate of Incorporation and bylaws;
(c) No Legal Action. No order shall have been entered
and remain in effect in any action or proceeding before any Governmental Entity
that would prevent or make illegal the consummation of the Arrangement;
(d) Court Approval. The Court shall have issued its
final order approving the Arrangement in form and substance reasonably
satisfactory to NOI and Dreco and reflecting the terms hereof;
(e) Commissions, etc. All necessary orders shall have
been obtained from the Commissions and other relevant United States and
Canadian securities regulatory authorities in connection with the Arrangement.
All waiting periods required by HSR shall have expired with respect to the
transactions contemplated by this Agreement, or early termination with respect
thereto shall have been obtained, without the imposition of any governmental
request or order requiring the sale or disposition or holding separate (through
a trust or otherwise) of a material portion of the assets or businesses of
Dreco or NOI. NOI and Dreco shall each have filed all notices and information
(if any) required under Part IX of the Competition Act (Canada) and the
applicable waiting periods and any extensions thereof shall have expired or the
parties shall have received an Advance Ruling Certificate pursuant to Section
102 of the Competition Act (Canada) setting out that the Director
-30-
35
under such Act is satisfied he would not have sufficient grounds on which to
apply for an order in respect of the Arrangement. The Arrangement shall have
received the allowance or approval or deemed allowance or approval by the
responsible Minister under the Investment Canada Act in respect of the
Arrangement, to the extent such allowance or approval is required, on terms and
conditions satisfactory to the parties;
(f) SEC Matters. The Registration Statement, if
required, shall have been declared effective under the Securities Act on or
before the mailing to stockholders of NOI and Dreco of the Joint Proxy
Statement and, if a shelf Registration Statement is required by the SEC, the
shelf Registration Statement shall have been declared effective under the
Securities Act on or before the Effective Date, and in both cases at their
effective dates and on the Closing Date the Registration Statements shall not
be the subject of any stop-order or proceedings seeking a stop-order, and the
Joint Proxy Statement shall on the Closing Date not be subject to any similar
proceedings commenced or threatened by the SEC or the Commissions. In
addition, the No Action Request, as it relates to the exemption from
registration of the Exchangeable Shares to be issued to Dreco's shareholders,
shall have received a favorable response from the SEC; and
(g) Listings. The NOI Common Stock to be issued from
time to time after the Effective Time upon exchange of the Exchangeable Shares
shall have been approved for listing on the NYSE, and the Exchangeable Shares
shall be listed on a reasonably acceptable Canadian stock exchange, in each
case subject only to notice of issuance.
5.2 Conditions Precedent to Obligations of Dreco. The
obligations of Dreco to consummate and effect the transactions contemplated
hereunder shall be subject to the satisfaction or waiver on or before the
Effective Date of the following conditions:
(a) Representations and Warranties. The representations
and warranties of NOI contained in this Agreement shall be true and correct on
the date hereof and (except to the extent such representations and warranties
speak as of a date earlier than the date hereof) shall also be true and correct
on and as of the Effective Date, with the same force and effect as if made on
and as of the Effective Date; provided, however, that for purposes of this
Section 5.2(a) only, such representations and warranties shall be deemed to be
true and correct as of the Effective Date unless the failure or failures of
such representations and warranties to be so true and correct (without regard
to materiality qualifiers contained therein), individually or in the aggregate,
results or would reasonably be expected to result in a Material Adverse Effect
on Dreco or NOI (only after including its ownership of Dreco and the Dreco
Subsidiaries after the Arrangement);
(b) Covenants. NOI shall have performed and complied
with all covenants required by this Agreement to be performed or complied with,
in all material respects, by NOI on or before the Effective Date;
(c) Certificate. NOI shall have delivered to Dreco a
certificate, dated the Effective Date and signed by its chief executive officer
and its chief financial officer, to the effect set forth in Sections 5.2 (a)
and (b);
(d) Opinion of NOI Counsel. Dreco shall have received
opinions, dated as of the Effective Date, from Morgan, Lewis & Bockius LLP,
United States counsel for NOI, and from
-31-
36
Stikeman, Elliott, Canadian counsel for NOI, each in form and substance
reasonably satisfactory to Dreco;
(e) Tax Opinion. Dreco shall have received an opinion in
form and substance reasonably satisfactory to Dreco of Blake, Cassels &
Graydon, Canadian tax counsel for Dreco, to the effect that the Arrangement
will be generally treated for Canadian federal income tax purposes as a
reorganization of capital for those Dreco shareholders who hold their Dreco
Common Shares as capital property for purposes of the ITA;
(f) Fairness Opinion. The Dreco Fairness Opinion shall
have been confirmed by Credit Suisse First Boston Corporation in writing to
Dreco's board of directors as of the date the Joint Proxy Statement was first
mailed to the shareholders of Dreco and shall not have subsequently been
withdrawn;
(g) Pooling Matters. The Dreco Pooling Opinion shall
have been confirmed by Coopers & Lybrand in writing to Dreco's board of
directors on the Effective Date. In addition, no event shall have occurred
which would establish with reasonable certainty that the Arrangement would not
be treated as a "pooling of interests" for accounting purposes;
(h) Comfort Letter. Dreco shall have received the NOI
Comfort Letter and an additional letter from Ernst & Young LLP, dated the
Effective Date, in form and substance reasonably satisfactory to Dreco, stating
that nothing has come to their attention, as of a date no earlier than five
days prior to the Effective Date, which would require any change in the NOI
Comfort Letter if it were required to be dated and delivered on the Effective
Date;
(i) Affiliates Agreements. NOI shall have furnished
copies to Dreco of the NOI affiliates agreements referred to Section 7.6(b);
and
(j) Certificates and Resolutions. Dreco shall have
received such other certificates and resolutions of NOI as may be reasonably
required in connection with the consummation of the transactions contemplated
by this Agreement.
5.3 Conditions Precedent to Obligations of NOI. The obligations
of NOI to consummate and effect the transactions contemplated hereunder shall
be subject to the satisfaction or waiver on or before the Effective Date of the
following conditions:
(a) Representations and Warranties. The representations
and warranties of Dreco contained in this Agreement shall be true and correct
on the date hereof and (except to the extent such representations and
warranties speak as of a date earlier than the date hereof) shall also be true
and correct on and as of the Effective Date, with the same force and effect as
if made on and as of the Effective Date; provided, however, that for purposes
of this Section 5.3(a) only, such representations and warranties shall be
deemed to be true and correct as of the Effective Date unless the failure or
failures of such representations and warranties to be so true and correct
(without regard to materiality qualifiers contained therein), individually or
in the aggregate, results or would reasonably be expected to result in a
Material Adverse Effect on NOI (either with or without including its ownership
of Dreco and the Dreco Subsidiaries after the Arrangement);
-32-
37
(b) Covenants. Dreco shall have performed and complied
with all covenants required by this Agreement to be performed or complied with,
in all material respects, by Dreco on or before the Effective Date;
(c) Certificate. Dreco shall have delivered to NOI a
certificate, dated the Effective Date and signed by its chief executive officer
and its chief financial officer, to the effect set forth in Sections 5.3 (a)
and (b);
(d) Opinion of Dreco Counsel. NOI shall have received
opinions, dated as of the Effective Date, from Fulbright & Jaworski L.L.P.,
United States counsel for Dreco, and from Blake, Cassels & Graydon, Canadian
counsel for Dreco, each in form and substance reasonably satisfactory to Dreco;
(e) Fairness Opinion. The NOI Fairness Opinion shall
have been confirmed by Merrill Lynch & Co. in writing to NOI's board of
directors as of the date the Joint Proxy Statement was first mailed to the
stockholders of NOI and shall not have subsequently been withdrawn;
(f) Pooling Matters. The NOI Pooling Opinion shall have
been confirmed by Ernst & Young LLP in writing to NOI's board of directors on
the Effective Date. In addition, no event shall have occurred which would
establish with reasonable certainty that the Arrangement would not be treated
as a "pooling of interests" for accounting purposes;
(g) Redemption of Rights. Dreco shall have given a
binding notice of redemption or termination of the Rights (as therein defined)
under the Rights Agreement in accordance with Section 5.1 of the Rights
Agreement, and shall have taken any other action required under the Rights
Agreement and applicable law such that the only right at the Effective Time and
thereafter of the holders of Rights shall be to receive the Redemption Price
(as defined in the Rights Agreement) for each Right so held;
(h) Comfort Letter. NOI shall have received the Dreco
Comfort Letter and an additional letter from Coopers & Lybrand, dated the
Effective Date, in form and substance reasonably satisfactory to NOI, stating
that nothing has come to their attention, as of a date no earlier than five
days prior to the Effective Date, which would require any change in the Dreco
Comfort Letter if it were required to be dated and delivered on the Effective
Date;
(i) Affiliates Agreements. Dreco shall have furnished
copies to NOI of the Dreco affiliates agreements referred to Section 7.6(a);
and
(j) Certificates and Resolutions. NOI shall have
received such other certificates and resolutions of Dreco as may be reasonably
required in connection with the consummation of this Agreement.
ARTICLE VI
TERMINATION
-33-
38
6.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the
transactions contemplated hereby by the stockholders of NOI or Dreco, as
follows:
(a) by mutual agreement of Dreco and NOI;
(b) by Dreco, if there has been a breach by NOI of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of NOI, or if any representation or warranty of NOI shall have become
untrue, in either case which has or can reasonably be expected to have a
Material Adverse Effect on NOI, and which NOI fails to cure within 15 business
days after written notice thereof from Dreco (except that no cure period shall
be provided for a breach by NOI which by its nature cannot be cured);
(c) by NOI, if there has been a breach by Dreco of any
representation, warranty, covenant or agreement set forth in this Agreement on
the part of Dreco, or if any representation or warranty of Dreco shall have
become untrue, in either case which has or can reasonably be expected to have a
Material Adverse Effect on Dreco, and which Dreco fails to cure within 15
business days after written notice thereof from NOI (except that no cure period
shall be provided for a breach by Dreco which by its nature cannot be cured);
(d) by either party, if all the conditions for Closing
the Arrangement shall not have been satisfied or waived on or before 5:00 p.m.,
Houston, Texas time on October 31, 1997, other than as a result of a breach of
this Agreement by the terminating party;
(e) by either party (i) if the shareholders of Dreco do
not approve the Arrangement (and the other matters to be approved at such
meeting as provided in Section 7.1 hereof) at the Dreco Shareholders Meeting,
or (ii) if the stockholders of NOI do not approve at the NOI Stockholders
Meeting the issuance of NOI Common Stock issuable upon the exchange of the
Exchangeable Shares (and the other matters to be approved at such meeting as
provided in Section 7.1 hereof);
(f) by either party if a final and non-appealable order
shall have been entered in any action or proceeding before any Governmental
Entity that prevents or makes illegal the consummation of the Arrangement;
(g) by NOI if the Dreco board of directors or any
committee of the Dreco board of directors (i) shall withdraw or modify in any
adverse manner its approval or recommendation of this Agreement, the
Arrangement and the other transactions contemplated hereby, (ii) within ten
days after NOI's request, shall fail to reaffirm such approval or
recommendation, (iii) shall approve or recommend any Acquisition Proposal,
other than with NOI or an affiliate thereof, or (iv) shall resolve to take any
of the actions specified in this Section 6.1(g);
(h) by Dreco if the NOI board of directors or any
committee of the NOI board of directors (i) shall withdraw or modify in any
adverse manner its approval or recommendation of this Agreement, the
Arrangement and the other transactions contemplated hereby, (ii) within ten
days after Dreco's request, shall fail to reaffirm such approval or
recommendation or (iii) shall resolve to take any of the actions specified in
this Section 6.1(h);
-34-
39
(i) by Dreco, prior to the approval of this Agreement,
the Arrangement and the other transactions contemplated hereby by the
shareholders of Dreco, upon five days' prior notice to NOI, if, as a result of
a Superior Proposal by a party other than NOI or any of its affiliates, Dreco's
board of directors determines in good faith that their fiduciary obligations
under applicable law require that such Superior Proposal be accepted; provided,
however, that (i) Dreco's board of directors shall have concluded in good
faith, after considering provisions of applicable law and after giving effect to
all concessions which may be offered by NOI pursuant to clause (ii) below, after
receiving the written advice of outside counsel, that such action is necessary
for Dreco's board of directors to act in a manner consistent with its fiduciary
duties under applicable law and (ii) prior to any such termination and prior to
accepting, or entering into any agreement regarding, the Superior Proposal Dreco
shall provide NOI (for at least five days) an opportunity to amend this
Agreement to provide for terms substantially similar to those included in the
Superior Proposal, and in addition Dreco shall, and shall cause its respective
financial and legal advisors to, negotiate in good faith with NOI to make such
adjustments in the terms and conditions of this Agreement as would enable Dreco
to proceed with the transactions contemplated hereby. In the event this
Agreement is amended as provided above (including without limitation if NOI and
Dreco agree to mutually acceptable adjustments as provided above), then Dreco
shall not enter into any agreement regarding the Superior Proposal;
(j) by either party, if NOI shall have approved, or
agreed to or announced any agreement to effect, any transaction that would
result in any person, who is not currently a NOI stockholder, acquiring
beneficial ownership of more than 50% of the issued and outstanding capital
stock of NOI; or
(k) by Dreco, in the circumstances contemplated by
Section 1.2(b).
6.2 Notice of Termination. Any termination of this Agreement
under Section 6.1 above will be effected by the delivery of written notice by
the terminating party to the other party hereto.
6.3 Effect of Termination. Subject to Section 6.4, in the event
of termination of this Agreement by either Dreco or NOI pursuant to Section
6.1, this Agreement shall forthwith become void and have no effect, and there
shall be no liability or obligation on the part of NOI or Dreco or their
respective officers or directors, except that (i) the provisions of the
Confidentiality Agreement dated April 30, 1997 shall survive any such
termination and abandonment, and (ii) no party shall be released or relieved
from any liability arising from the willful breach by such party of any of its
representations, warranties, covenants or agreements as set forth in this
Agreement.
6.4 Termination Fee. (a) If this Agreement is terminated (i) by
Dreco pursuant to Section 6.1(b), or (ii) by either party pursuant to Section
6.1(e)(ii), then NOI shall pay to Dreco a cash termination fee of $2,500,000 at
the time of such termination.
(b) If this Agreement is terminated (i) by NOI pursuant
to Section 6.1(c), or (ii) by either party pursuant to Section 6.1(e)(i), then
Dreco shall pay to NOI a cash termination fee of $2,500,000 at the time of such
termination, and an additional cash termination fee of $9,500,000 if within 12
months of such termination Dreco enters into a definitive agreement with
respect to an Acquisition Proposal (other than with NOI or any of its
affiliates), or announces an Acquisition Proposal within such 12 month period
and enters into a definitive agreement in respect thereof within 18 months of
such termination.
-35-
40
(c) If this Agreement is terminated by NOI pursuant to
Section 6.1(g) or by Dreco pursuant to Section 6.1(i), then Dreco shall pay to
NOI upon such termination a cash termination fee of $12,000,000 at the time of
such termination.
(d) If this Agreement is terminated by Dreco pursuant to
Section 6.1(h) or by NOI pursuant to Section 6.1(j), then NOI shall pay to
Dreco upon such termination a cash termination fee of $12,000,000 at the time
of such termination.
(e) NOI and Dreco each agree that the agreements
contained in Sections 6.4(a) through 6.4(d) are an integral part of the
transactions contemplated by this Agreement. If either party fails to promptly
pay the other party any fee due under such Sections 6.4(a) through 6.4(d), it
shall pay the other party's costs and expenses (including legal fees and
expenses) in connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate of Wells Fargo
Bank, N.A. from the date such fee was first due.
ARTICLE VII
ADDITIONAL AGREEMENTS
NOI and Dreco each agree to take the following actions after the
execution of this Agreement.
7.1 Meetings. Dreco and NOI shall each duly call a meeting of its
stockholders to be held within 45 days after the SEC has indicated that it has
no further comments on the Joint Proxy Statement for the purpose of (a) in the
case of Dreco, voting upon (i) the Plan of Arrangement and the transactions
contemplated hereby and thereby, and (b) in the case of NOI, voting upon (i) a
proposal to approve the issuance of such number of shares of NOI Common Stock
as are necessary to consummate the Arrangement, (ii) a proposal to adopt the
NOI Restated Charter and (iii) such other matters relating to the Arrangement,
if any, as shall be legally required in the reasonable opinion of NOI; and each
shall, subject to Section 4.2(n) in the case of Dreco, through its board of
directors, recommend to its stockholders approval of such matters and shall
coordinate and cooperate with respect to the timing of such meetings.
7.2 The Closing. Subject to the termination of this Agreement as
provided in Article VI, the Closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of National-Oilwell,
Inc., 5555 San Felipe, Houston, Texas 77210 on a date (the "Closing Date") and
at a time to be mutually agreed upon by the parties, which date shall be no
later than the first business day after all conditions to Closing set forth
herein shall have been satisfied or waived, unless another place, time and date
is mutually selected by Dreco and NOI. Concurrently with the Closing, the Plan
of Arrangement will be filed with the Registrar under the ABCA.
7.3 Ancillary Documents/Reservation of Shares.
(a) Provided all other conditions of this Agreement have
been satisfied or waived, Dreco shall, on the Closing Date, file Articles of
Arrangement pursuant to Part 15 of the ABCA to give effect to the Plan of
Arrangement, such Articles of Arrangement to contain share conditions for
Exchangeable Shares substantially in the form of those contained in Exhibit A.
-36-
41
(b) On the Effective Date:
(i) NOI shall execute and deliver a Support
Agreement containing the terms and conditions set forth in Exhibit C, together
with such other terms and conditions as may be agreed to by the parties hereto
acting reasonably;
(ii) NOI, Dreco and a Canadian trust company to be
mutually agreeable to NOI and Dreco, acting reasonably, shall execute and
deliver a Voting and Exchange Trust Agreement containing the terms and
conditions set forth in Exhibit D, together with such other terms and
conditions as may be agreed to by the parties hereto acting reasonably; and
(iii) NOI shall file with the Secretary of State of
Delaware a Restated Certificate of Incorporation which shall be in
substantially the form set forth in Exhibit B.
(c) On or before the Effective Date, NOI will reserve for
issuance such number of shares of NOI Common Stock as shall be necessary to
give effect to the exchanges and assumptions or exchanges of options
contemplated hereby.
7.4 Exchange of Options. Promptly after the Effective Time, NOI
will notify in writing each holder of a Dreco Option of the exchange of such
Dreco Option for an option to purchase Exchangeable Shares in accordance with
Section 1.1(j) hereof.
7.5 Indemnification and Related Matters.
(a) NOI agrees that all rights to indemnification
existing in favor of the present or former directors and officers of Dreco (as
such) or any of the Dreco Subsidiaries or present or former directors and
officers (as such) of Dreco or any of the Dreco Subsidiaries serving or who
served at Dreco's or any of the Dreco Subsidiaries' request as a director,
officer, employee, agent or representative of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise (each such
present or former director or officer of Dreco or any of the Dreco
Subsidiaries, an "Indemnified Party"), as provided in Dreco's charter or bylaws
or similar documents of any of the Dreco Subsidiaries in effect as of the date
hereof with respect to matters occurring prior to the Effective Time, shall
survive and shall continue in full force and effect and without modification
for a period of not less than the statutes of limitations applicable to such
matters.
(b) From and after the Effective Time, NOI and Dreco,
jointly and severally, shall and shall cause Dreco to indemnify and hold
harmless to the fullest extent permitted under the ABCA, each Indemnified Party
against any costs and expenses (including reasonable attorney's fees),
judgments, fines, losses, claims and damages and liabilities, and amounts paid
in settlement thereof with the consent of the indemnifying party, in connection
with any actual or threatened claim, action, suit, proceeding or investigation
that is based on, or arises out of, the fact that such person is or was a
director or officer of Dreco or any Dreco Subsidiary (including without
limitation with respect to any of the transactions contemplated hereby or the
Arrangement) or who is serving or who served at Dreco's or any of the Dreco
Subsidiaries' request as a director, officer, employee, agent or representative
of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise. In the event of any such claim, action, suit,
proceeding or investigation, NOI shall cause Dreco to pay the reasonable fees
and expenses of counsel in advance of the final disposition of any such claim,
action, suit, proceeding or investigation to the fullest extent permitted by
law subject to
-37-
42
the limitations imposed by the ABCA. Without limiting the foregoing, in the
event any such claim, action, suit, proceeding or investigation is brought
against any Indemnified Parties, (i) the Indemnified Parties may retain counsel
reasonably satisfactory to NOI and, subject to limitations imposed by the ABCA,
Dreco shall (or NOI shall cause Dreco to) pay all reasonable fees and expenses
of such counsel for the Indemnified Parties promptly as statements therefor are
received; and (ii) NOI will use all reasonable efforts to assist in the defense
of such matter; provided, however, that neither Dreco nor NOI shall be liable
for any settlement effected without its prior written consent which shall not be
unreasonably withheld. Any Indemnified Party wishing to claim indemnification
under this Section 7.5(b), upon learning of any such claim, action, suit,
proceeding or investigation, shall notify NOI (but the failure to so notify
shall not relieve a party from any liability which it may have under this
Section 7.5(b) except to the extent such failure prejudices such party). The
Indemnified Parties as a group may retain only one law firm in any jurisdiction
to represent them with respect to each such matter unless such counsel
determines that there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties, in which event such additional counsel may be required to
be retained by the Indemnified Parties.
(c) Subject to limitations imposed by the ABCA, Dreco
shall (or NOI shall cause Dreco to) pay all expenses, including reasonable
attorney's fees, as the same may be incurred by any Indemnified Parties in any
action by any Indemnified Party or parties seeking to enforce the indemnity or
other obligations provided for in this Section 7.5; provided, however, that
Dreco will be entitled to reimbursement for any advances made under this
Section 7.5 to any Indemnified Party who ultimately proves unsuccessful in
enforcing the indemnity as finally determined by a non-appealable judgment in a
court of competent jurisdiction, and payment of such expenses in advance of the
final disposition of the action shall be made only upon receipt of any
undertaking by the Indemnified Party to reimburse all amounts advanced if such
action ultimately proves unsuccessful.
(d) For a period of six years after the Effective Date,
NOI shall continue in effect director and officer liability insurance for the
benefit of the Indemnified Parties in such amounts, and with such deductibles,
retained amounts, coverages and exclusions as NOI shall provide for its own
directors and officers during such period.
(e) This Section 7.5, which shall survive the
consummation of this Agreement and the Arrangement, is intended to benefit each
person or entity indemnified hereunder.
7.6 Affiliate Agreements.
(a) To ensure that the Arrangement will be accounted for
as a "pooling of interests" and to ensure compliance with Rule 145 of the rules
and regulations promulgated by the SEC and the Securities Act, on or before the
date the Joint Proxy Statement is first mailed to each company's respective
stockholders Dreco will use its reasonable best efforts to have its Affiliates
sign and deliver to NOI the Dreco affiliate agreements in the form of Exhibit
E. The identity of all such Dreco Affiliates is set forth on such exhibit.
For purposes of this Agreement, an "Affiliate" shall have the meaning referred
to in Rule 145 under the Securities Act.
(b) To ensure that the Arrangement will be accounted for
as a "pooling of interests" on or before the date the Joint Proxy Statement is
first mailed to each company's respective stockholders NOI will use its
reasonable best efforts to have its Affiliates sign and deliver to NOI the
-38-
43
NOI Affiliate Agreements in the form of Exhibit F. The identity of all such NOI
Affiliates is set forth on such exhibit.
-39-
44
ARTICLE V3
MISCELLANEOUS
8.1 No Survival of Representations and Warranties. All
representations and warranties of the parties contained in this Agreement will
remain operative and in full force and effect, regardless of any investigation
made by or on behalf of the parties to this Agreement, until the earlier of the
valid termination of this Agreement or the Closing Date, whereupon such
representations and warranties will expire and be of no further force or
effect. All agreements and covenants of the parties shall survive the Closing
Date, except as otherwise set forth in this Agreement.
8.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by
recognized overnight courier, by facsimile (receipt confirmed) or mailed by
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to NOI to: National-Oilwell, Inc., 5555 San
Felipe, P.O. Box 4638 (77210), Houston, Texas 77056, with required copies to
Morgan, Lewis & Bockius LLP, 2000 One Logan Square, Philadelphia, PA 19103,
Attention: David R. King, Esq., Facsimile No. 215/963- 5299, and to Stikeman,
Elliott, Suite 5300, P.O. Box 85, Commerce Court West, Toronto, Ontario, Canada
M5L 1B9, Attention: Ian Douglas, Esq., Facsimile No. 416/947-0866.
(b) if to Dreco to: Dreco Energy Services Ltd., #1340
Weber Centre, 5555 Calgary Trail South, Edmonton, Alberta, Canada T6H 5P9, with
required copies to Fulbright & Jaworski L.L.P., 1301 McKinney, Suite 5100,
Houston, TX 77010, Attention: Robert F. Gray, Jr., Esq. Facsimile No.
713/651-5246, and to Blake, Cassels & Graydon, 3500 Bankers Hall East, 855-2nd
Street S.W., Calgary, Alberta, Canada T2P 4J8, Attention: Patrick C. Finnerty,
Esq., Facsimile No. 403/260-9700.
8.3 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used therein shall be deemed in each case to be followed by
the words "without limitation." The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.4 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstance in any other jurisdiction or to
other persons or circumstances in any jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
8.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to each of the other parties, it being understood
that all parties need not sign the same counterpart.
-40-
45
8.6 Miscellaneous. This Agreement, which includes the Dreco
Disclosure Letter, the NOI Disclosure Letter and the Exhibits hereto, the Dreco
Stockholders Agreement, the NOI Stockholders Agreement, the Confidentiality
Agreement, dated April 30, 1997, between NOI and Dreco, and any other documents
referred to herein or contemplated hereby (a) constitute the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof; (b) are not intended to confer upon
any other person any rights or remedies hereunder (except that Section 7.5 is
for the benefit of Dreco's directors and officers and is intended to confer
rights on such persons); and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided.
8.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless of
the laws that might otherwise govern under applicable principles of conflicts
of law) as to all matters, including without limitation validity, construction,
effect, performance and remedies.
8.8 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either
retroactively or prospectively) only by a writing signed by the party to be
bound thereby. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default. The Agreement may be amended by
the parties hereto at any time before or after approval of the Dreco
shareholders or optionholders or the NOI stockholders, but, after such
approval, no amendment will be made which by applicable law requires the
further approval of the Dreco shareholders or optionholders or the NOI
stockholders without obtaining such further approval.
8.9 Expenses. Except as otherwise provided herein, each party
will bear its respective expenses and legal fees incurred with respect to this
Agreement and the transactions contemplated hereby.
-41-
46
IN WITNESS WHEREOF, NOI and Dreco have caused this Agreement to be
signed by their respective officers thereunder duly authorized, all as of the
date first written above.
NATIONAL-OILWELL, INC.
By /s/ JOEL V. STAFF
---------------------------------
Joel V. Staff
President
DRECO ENERGY SERVICES LTD.
By /s/ ROBERT L. PHILLIPS
---------------------------------
Robert L. Phillips
President
-42-
47
EXHIBIT A
PLAN OF ARRANGEMENT
AND
EXCHANGEABLE SHARE PROVISIONS
48
PLAN OF ARRANGEMENT
UNDER SECTION 186
OF THE BUSINESS CORPORATIONS ACT (ALBERTA)
INVOLVING AND AFFECTING DRECO ENERGY SERVICES LTD.
AND THE HOLDERS OF ITS CLASS "A" COMMON SHARES,
OPTIONS AND SHAREHOLDER RIGHTS
ARTICLE 1
INTERPRETATION
SECTION 1.1 DEFINITIONS. In this Plan of Arrangement unless there is
something in the subject matter or context inconsistent therewith, the
following terms shall have the respective meanings set out below and
grammatical variations of such terms shall have corresponding meanings:
"ABCA" means the Business Corporations Act (Alberta);
"ARRANGEMENT" means the arrangement under section 186 of the
ABCA on the terms and subject to the conditions set out in this Plan of
Arrangement, subject to any amendments thereto made (i) in accordance with
Section 8.8 of the Combination Agreement, (ii) in accordance with Section 6.1
hereof or (iii) at the direction of the Court in the Final Order;
"ARRANGEMENT RESOLUTION" means the special resolution passed
by the holders of the Dreco Common Shares and the Optionholders at the Meeting;
"AUTOMATIC REDEMPTION DATE" has the meaning provided in the
Exchangeable Share Provisions;
"AVERAGE CLOSING PRICE" means the average closing price
(computed and rounded to the third decimal point) of shares of National Common
Stock on the NYSE during the 10 trading days ending on the last trading day
prior to the Effective Date;
"BUSINESS DAY" has the meaning provided in the Exchangeable
Share Provisions;
"CLASS A PREFERRED SHARE" means the one authorized Class A
Preferred Share of Dreco having the rights, privileges, restrictions and
conditions set out in Appendix A annexed hereto;
"COMBINATION AGREEMENT" means the agreement by and among
National and Dreco, dated o , 1997, as amended and restated from time to time,
providing for, among other things, this Plan of Arrangement and the
Arrangement;
"COURT" means the Court of Queen's Bench of Alberta;
49
- 2 -
"DEPOSITORY" means Montreal Trust Company of Canada at its
principal transfer office in Calgary, Alberta;
"DISSENT PROCEDURES" has the meaning set out in Section 3.1;
"DRECO" means Dreco Energy Services Ltd., a corporation
existing under the ABCA;
"DRECO COMMON SHARES" means the Class "A" Common Shares in the
capital of Dreco;
"EFFECTIVE DATE" means the date shown on the certificate of
arrangement issued by the Registrar under the ABCA giving effect to the
Arrangement;
"EFFECTIVE TIME" means 12:01 a.m. on the Effective Date;
"EXCHANGE PUT RIGHT" has the meaning provided in the
Exchangeable Share Provisions;
"EXCHANGE RATIO" means the ratio of exchange of Exchangeable
Shares for Dreco Common Shares, as determined under the Combination Agreement
and subject to adjustment as provided herein;
"EXCHANGEABLE SHARE CONSIDERATION" has the meaning provided in
the Exchangeable Share Provisions;
"EXCHANGEABLE SHARE PRICE" has the meaning provided in the
Exchangeable Share Provisions;
"EXCHANGEABLE SHARE PROVISIONS" means the rights, privileges,
restrictions and conditions attaching to the Exchangeable Shares, which are set
forth in Appendix A hereto;
"EXCHANGEABLE SHARES" means the Exchangeable Shares in the
capital of Dreco provided for in this Plan of Arrangement;
"FINAL ORDER" means the final order of the Court approving the
Arrangement;
"LIQUIDATION CALL RIGHT" has the meaning provided in Section
5.1;
"LIQUIDATION DATE" has the meaning provided in the
Exchangeable Share Provisions;
"MEETING" means the special meeting of the shareholders of
Dreco and of the Optionholders to be held to consider this Plan of Arrangement;
50
- 3 -
"NATIONAL" means National-Oilwell, Inc., a corporation under
the laws of Delaware;
"NATIONAL COMMON STOCK" has the meaning provided in the
Exchangeable Share Provisions;
"NYSE" means the New York Stock Exchange;
"OPTIONS" means all options to purchase Dreco Common Shares
outstanding as at the Effective Date under the Dreco's Amended and Restated
1989 Employee Incentive Stock Option Plan and under all private stock option
agreements;
"OPTIONHOLDERS" means holders of Options;
"PROXY STATEMENT" means the Joint Management Information
Circular and Proxy Statement of National and Dreco dated _______________, 1997;
"REDEMPTION CALL PURCHASE PRICE" has the meaning provided in
Section 5.2;
"REDEMPTION CALL RIGHT" has the meaning provided in Section
5.2;
"SUBSIDIARY" has the meaning provided in the Exchangeable
Share Provisions;
"TRANSFER AGENT" means the duly appointed transfer agent for
the time being of the Exchangeable Shares, and if there is more than one such
agent then the principal Canadian agent; and
"VOTING AND EXCHANGE TRUST AGREEMENT" means the agreement so
entitled between National, Dreco and the Trustee named therein to be dated as
of the Effective Date and provided for in the Combination Agreement, as amended
from time to time.
SECTION 1.2 SECTIONS, HEADINGS AND APPENDIXES. The division of this Plan
of Arrangement into sections and the insertion of headings are for reference
purposes only and shall not affect the interpretation of this Plan of
Arrangement. Unless otherwise indicated, any reference in this Plan of
Arrangement to a section or an Appendix refers to the specified section of or
Appendix to this Plan of Arrangement. The Appendixes are incorporated herein
and are part hereof.
SECTION 1.3 NUMBER, GENDER AND PERSONS. In this Plan of Arrangement,
unless the context otherwise requires, words importing the singular number
include the plural and vice versa, words importing the singular number include
the plural and vice versa, words importing any gender include all genders and
words importing persons include individuals, bodies corporate, partnerships,
associations, trusts, unincorporated organizations, governmental bodies and
other legal or business entities of any kind.
51
- 4 -
SECTION 1.4 DATE FOR ANY ACTION. In the event that any date on or by
which any action is required or permitted to be taken hereunder is not a
Business Day, such action shall be required or permitted to be taken on or by
the next succeeding day which is a Business Day.
SECTION 1.5 CURRENCY. Unless otherwise expressly stated herein, all
references to currency and payments in cash or money in this Plan of
Arrangement are to United States dollars.
SECTION 1.6 STATUTORY REFERENCES. Any reference in this Plan of
Arrangement to a statute includes such statute as amended, consolidated or
re-enacted from time to time,all regulations made thereunder, all amendments to
such regulations from time to time, and any statute or regulation which
supersedes such statute or regulations.
ARTICLE 2
ARRANGEMENT
SECTION 2.1 ARRANGEMENT. At the Effective Time on the Effective Date, the
following reorganization of capital and other transactions shall occur and
shall be deemed to occur in the following order without any further act or
formality:
(a) The Articles of Amalgamation of Dreco shall be amended to (i)
create and authorize an unlimited number of Exchangeable
Shares and one Class A Preferred Share.
(b) Dreco shall issue to National one Class A Preferred Share in
consideration of the issuance to Dreco of one share of
National Common Stock. The stated capital of the Class A
Preferred Share shall be equal to the fair market value, as
determined by the board of directors of Dreco, of a share of
National Common Stock. No certificate shall be issued in
respect of the Class A Preferred Share.
(c) Each Dreco Common Share (other than Dreco Common Shares held
by holders who have exercised their rights of dissent in
accordance with Section 3.1 hereof and who are ultimately
entitled to be paid the fair value for such shares and other
than Dreco Common Shares held by National or any Subsidiary
thereof) will be exchanged at the Exchange Ratio for a number
of Exchangeable Shares, and each such holder thereof will
receive a whole number of Exchangeable Shares resulting
therefrom. In lieu of fractional Exchangeable Shares, each
such holder who otherwise would be entitled to receive a
fraction of an Exchangeable Share on the exchange shall be
paid by Dreco an amount determined as set forth in Section
4.3.
52
- 5 -
(d) Upon the exchange referred to in subsection (c) above, each
such holder of a Dreco Common Share shall cease to be such a
holder, shall have hisname removed from the register of
holders of Dreco Common Shares and shall become a holder of
the number of fully paid Exchangeable Shares to which he is
entitled as a result of the exchange referred to in subsection
(c), and such holder's name shall be added to the register of
holders of Exchangeable Shares accordingly.
(e) The aggregate stated capital of the Exchangeable Shares will
be equal to the aggregate stated capital immediately prior to
the Effective Date of the Dreco Common Shares which are
exchanged pursuant to such subsection 2.1(c) above, thereby
excluding the stated capital attributable to the fractional
shares for which payment is made as contemplated in subsection
(c) above.
(f) The Articles of Amalgamation of Dreco shall be amended to
reduce the number of authorized Dreco Common Shares to one and
the following restriction will be added to the rights,
privileges, restrictions and conditions attaching to the Dreco
Common Shares:
"RESTRICTION"
So long as any of the Exchangeable Shares of the
Corporation are outstanding, the Corporation shall not at any
time without, but may at any time with, the approval of the
board of directors of the holder of the common shares issue
any further Exchangeable Shares of the Corporation, except as
specifically required in accordance with the rights,
privileges, restrictions and conditions attaching to the
Exchangeable Shares of the Corporation."
(g) The one outstanding Class A Preferred Share will be exchanged
for one fully-paid and non-assessable Dreco Common Share and
the holder thereof shall cease to be a holder of the Class A
Preferred Share, shall have its name removed from the register
of holders of Class A Preferred Shares and shall become a
holder of the Dreco Common Share to which it is entitled as a
result of the exchange referred to in this subsection (g), and
such holder's name shall be added to the register as holder of
the Dreco Common Share accordingly.
(h) The stated capital of the one Dreco Common Share shall be
equal to the stated capital of the one Class A Preferred Share
immediately prior to the exchange contemplated in subsection
(g).
(i) The Articles of Amalgamation of Dreco shall be amended to
delete the Class A Preferred Share from the authorized share
capital.
53
- 6 -
(j) Each of the then outstanding Options will, without any further
action on the part of any Optionholder, be exchanged for an
option to purchase the number of Exchangeable Shares
determined by multiplying the number of Dreco Common Shares
subject to such Option at the Effective Time by the Exchange
Ratio, at an exercise price per Exchangeable Share equal to
the exercise price per share of such Option immediately prior
to the Effective Time divided by the Exchange Ratio. If the
foregoing calculation results in an exchanged Option being
exercisable for a fraction of an Exchangeable Share, then the
number of Exchangeable Shares subject to such Option will be
rounded down to the nearest whole number of shares, and the
total exercise price for the Option will be reduced by the
exercise price of the fractional share. The term,
exercisability, vesting schedule, and all other terms and
conditions of the Options will otherwise be unchanged by the
provisions of this paragraph (j) and shall operate in
accordance with their terms.
(k) All rights outstanding under the Shareholder Rights Plan
Agreement between Dreco and Montreal Trust Company of Canada
dated as of November 15, 1996 (the "Rights Plan") immediately
prior to the Effective Date shall, on the Effective Date, be
redeemed and cancelled, all on the terms and with the effects
and results contained in the Rights Plan, and the Rights Plan
shall be terminated.
ARTICLE 3
RIGHTS OF DISSENT
SECTION 3.1 RIGHTS OF DISSENT. Holders of Dreco Common Shares or Options
may exercise rights of dissent with respect to such shares or Options pursuant
to and in the manner set forth in section 184 of the ABCA and this Section 3.1
(the "DISSENT PROCEDURES") in connection with the Arrangement, and holders who
duly exercise such rights of dissent and who:
(a) are ultimately entitled to be paid fair value for the Dreco
Common Shares or Options shall be deemed to have transferred
such Dreco Common Shares or Options to Dreco for cancellation
on the Effective Date; or
(b) are ultimately not entitled, for any reason, to be paid the
fair value for their Dreco Common Shares or Options shall be
deemed to have participated in the Arrangement on the same
basis as any non-dissenting holder of Dreco Common Shares or
Options,
but in no case shall Dreco be required to recognize such holders as holders of
Dreco Common Shares or Options on and after the Effective Date, and the names
of such persons shall be deleted from the register of holders of Dreco Common
Shares or Options on the Effective Date.
54
- 7 -
ARTICLE 4
CERTIFICATES AND FRACTIONAL SHARES
SECTION 4.1 ISSUANCE OF CERTIFICATES REPRESENTING EXCHANGEABLE SHARES. At
or promptly after the Effective Time, Dreco shall deposit with the Depositary,
for the benefit of the holders of Dreco Common Shares exchanged pursuant to
subsection 2.1(c), certificates representing the Exchangeable Shares issued
pursuant to subsection 2.1(c) upon the exchange. Upon surrender to the
Depositary of a certificate which immediately prior to the Effective Time
represented outstanding Dreco Common Shares which were exchanged for
Exchangeable Shares, together with such other documents and instruments as
would have been required to effect the transfer of the shares formerly
represented by such certificate under the ABCA and the by-laws of Dreco and
such additional documents and instruments as the Depositary may reasonably
require, the holder of such surrendered certificate shall be entitled to
receive in exchange therefor, and the Depositary shall deliver to such holder,
a certificate representing that number (rounded down to the nearest whole
number) of Exchangeable Shares which such holder has the right to receive
(together with any dividends or distributions with respect thereto pursuant to
Section 4.2 and any cash in lieu of fractional Exchangeable Shares pursuant to
Section 4.3), and the certificate so surrendered shall forthwith be cancelled.
In the event of a transfer of ownership of Dreco Common Shares which is not
registered in the transfer records of Dreco a certificate representing the
proper number of Exchangeable Shares may be issued to a transferee if the
certificate representing such Dreco Common Shares is presented to the
Depositary, accompanied by all documents required to evidence and effect such
transfer. Until surrendered as contemplated by this Section 4.1, each
certificate which immediately prior to the Effective Time represented
outstanding Dreco Common Shares which were exchanged for Exchangeable Shares
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender (a) the certificate representing
Exchangeable Shares as contemplated by this Section 4.1, (b) a cash payment in
lieu of any fractional Exchangeable Shares as contemplated by Section 4.3 and
(c) any dividends or distributions with a record date after the Effective Time
theretofore paid or payable with respect to Exchangeable Shares as contemplated
by Section 4.2.
SECTION 4.2 DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED CERTIFICATES. No
dividends or other distributions declared or made after the Effective Time with
respect to Exchangeable Shares with a record date after the Effective Time
shall be paid to the holder of any unsurrendered certificate which, immediately
prior to the Effective Time, represented outstanding Dreco Common Shares which
were exchanged pursuant to Section 2.1, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 4.3,
unless and until such certificate shall be surrendered in accordance with
Section 4.1. Subject to applicable law and to Section 4.5, at the time of such
surrender of any such certificate (or, in the case of clause (c) below, at the
appropriate payment date), there shall be paid to the record holder of the
certificates representing whole Exchangeable Shares in all cases without
interest, (a) the amount of any cash payable in lieu of a fractional
Exchangeable Share to which such holder is entitled pursuant
55
- 8 -
to Section 4.3, (b) the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole Exchangeable Share, and (c) the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole Exchangeable Share.
SECTION 4.3 NO FRACTIONAL SHARES. No certificates or scrip representing
fractional Exchangeable Shares shall be issued upon the surrender for exchange
of certificates pursuant to Section 4.1, and such fractional interests shall
not entitle the owner thereof to vote or to possess or exercise any rights as a
security holder of Dreco. In lieu of any such fractional interests, each
person entitled thereto will receive an amount of cash (rounded to the nearest
whole cent), without interest, equal to the product of (a) such fraction,
multiplied by (b) the Average Closing Price, such amount to be provided to the
Depositary by Dreco upon request.
SECTION 4.4 LOST CERTIFICATES. If any certificate which immediately prior
to the Effective Time represented outstanding Dreco Common Shares which were
exchanged pursuant to Section 2.1 has been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such certificate to
be lost, stolen or destroyed, the Depositary will issue in exchange for such
lost, stolen or destroyed certificate, certificates representing Exchangeable
Shares (and any dividends or distributions with respect thereto and any cash
pursuant to Section 4.3) deliverable in respect thereof as determined in
accordance with Section 2.1. When authorizing such payment in exchange for any
lost, stolen or destroyed certificate, the person to whom certificates
representing Exchangeable Shares are to be issued shall, as a condition
precedent to the issuance thereof, give a bond satisfactory to Dreco, National
and the Transfer Agent, as the case may be, in such sum as Dreco may direct or
otherwise indemnify Dreco or National in a manner satisfactory to Dreco and the
Transfer Agent against any claim that may be made against Dreco, National or
the Transfer Agent with respect to the certificate alleged to have been lost,
stolen or destroyed.
SECTION 4.5 EXTINGUISHMENT OF RIGHTS. Any certificate which immediately
prior to the Effective Time represented outstanding Dreco Common Shares which
were exchanged pursuant to Section 2.1 and has not been deposited, with all
other instruments required by Section 4.1, on or prior to the tenth anniversary
of the Effective Date shall cease to represent a claim or interest of any kind
or nature as a shareholder of Dreco. On such date, the Exchangeable Shares to
which the former registered holder of the certificate referred to in the
preceding sentence was ultimately entitled shall be deemed to have been
surrendered for no consideration to Dreco together with all entitlements to
dividends, distributions and interest thereon held for such former registered
holder.
56
- 9 -
ARTICLE 5
CERTAIN RIGHTS OF NATIONAL TO ACQUIRE
EXCHANGEABLE SHARES
SECTION 5.1 NATIONAL LIQUIDATION CALL RIGHT.
(a) National shall have the overriding right (the "LIQUIDATION
CALL RIGHT"), in the event of and notwithstanding the proposed
liquidation, dissolution or winding-up of Dreco as referred to
in Article 5 of the Exchangeable Share Provisions, to purchase
from all but not less than all of the holders (other than
National and any Subsidiary thereof) of Exchangeable Shares on
the Liquidation Date all but not less than all of the
Exchangeable Shares held by such holders on payment by
National to each holder of the Exchangeable Share Price
applicable on the last Business Day prior to the Liquidation
Date (the "LIQUIDATION CALL PURCHASE PRICE"). In the event of
the exercise of the Liquidation Call Right by National, each
holder shall be obligated to sell all the Exchangeable Shares
held by the holder to National on the Liquidation Date on
payment by National to the holder of the Liquidation Call
Purchase Price for each such share.
(b) To exercise the Liquidation Call Right, National must notify
Dreco's Transfer Agent in writing, as agent for the holders of
Exchangeable Shares, and Dreco of National's intention to
exercise such right at least 55 days before the Liquidation
Date in the case of a voluntary liquidation, dissolution or
winding-up of Dreco and at least five Business Days before the
Liquidation Date in the case of an involuntary liquidation,
dissolution or winding-up of Dreco. The Transfer Agent will
notify the holders of Exchangeable Shares as to whether or not
National has exercised the Liquidation Call Right forthwith
after the expiry of the date by which the same may be
exercised by National. If National exercises the Liquidation
Call Right, on the Liquidation Date National will purchase and
the holders will sell all of the Exchangeable Shares then
outstanding for a price per share equal to the Liquidation
Call Purchase Price.
(c) For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Liquidation Call Right,
National shall deposit with the Transfer Agent, on or before
the Liquidation Date, the Exchangeable Share Consideration
representing the total Liquidation Call Purchase Price.
Provided that such Exchangeable Share Consideration has been
so deposited with the Transfer Agent, on and after the
Liquidation Date the right of each holder of Exchangeable
Shares will be limited to receiving such holder's
proportionate part of the total Liquidation Call Purchase
Price payable by National without interest upon presentation
and surrender by the holder of certificates representing the
Exchangeable Shares held by such holder and
57
- 10 -
the holder shall on and after the Liquidation Date be
considered and deemed for all purposes to be the holder of the
National Common Stock delivered to it. Upon surrender to the
Transfer Agent of a certificate or certificates representing
Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of
Exchangeable Shares under the ABCA and the by-laws of Dreco
and such additional documents and instruments as the Transfer
Agent may reasonably require, the holder of such surrendered
certificate or certificates shall be entitled to receive in
exchange therefor, and the Transfer Agent on behalf of
National shall deliver to such holder, the Exchangeable Share
Consideration to which the holder is entitled. If National
does not exercise the Liquidation Call Right in the manner
described above, on the Liquidation Date the holders of the
Exchangeable Shares will be entitled to receive in exchange
therefor the liquidation price otherwise payable by Dreco in
connection with the liquidation, dissolution or winding-up of
Dreco pursuant to Article 5 of the Exchangeable Share
Provisions. Notwithstanding the foregoing, until such
Exchangeable Share Consideration is delivered to the holder,
the holder shall be deemed to still be a holder of
Exchangeable Shares for purposes of all voting rights with
respect thereto under the Voting and Exchange Trust Agreement.
SECTION 5.2 NATIONAL REDEMPTION CALL RIGHT.
(a) National shall have the overriding right ( the "REDEMPTION
CALL RIGHT"), notwithstanding the proposed redemption of the
Exchangeable Shares by Dreco pursuant to Article 7 of the
Exchangeable Share Provisions, to purchase from all but not
less than all of the holders (other than National or any
Subsidiary thereof) of Exchangeable Shares on the Automatic
Redemption Date all but not less than all of the Exchangeable
Shares held by each such holder on payment by National to the
holder of the Exchangeable Share Price applicable on the last
Business Day prior to the Automatic Redemption Date (the
"REDEMPTION CALL PURCHASE PRICE"). In the event of the
exercise of the Redemption Call Right by National, each holder
shall be obligated to sell all the Exchangeable Shares held by
the holder to National on the Automatic Redemption Date on
payment by National to the holder of the Redemption Call
Purchase Price for each such share.
(b) To exercise the Redemption Call Right, National must notify
the Transfer Agent in writing, as agent for the holders of
Exchangeable Shares, and Dreco of National's intention to
exercise such right at least 125 days before the Automatic
Redemption Date. The Transfer Agent will notify the holders
of the Exchangeable Shares as to whether or not National has
exercised the Redemption Call Right forthwith after the date
by which the same may be exercised by National. If National
exercises the Redemption Call Right, on the Automatic
Redemption Date National will purchase and
58
- 11 -
the holders will sell all of the Exchangeable Shares then
outstanding for a price per share equal to the Redemption Call
Purchase Price.
(c) For the purposes of completing the purchase of the
Exchangeable Shares pursuant to the Redemption Call Right,
National shall deposit with the Transfer Agent, on or before
the Automatic Redemption Date, the Exchangeable Share
Consideration representing the total Redemption Call Purchase
Price. Provided that such Exchangeable Share Consideration
has been so deposited with the Transfer Agent, on and after
the Automatic Redemption Date the rights of each holder of
Exchangeable Shares will be limited to receiving such holder's
proportionate part of the total Redemption Call Purchase Price
payable by National upon presentation and surrender by the
holder of certificates representing the Exchangeable Shares
held by such holder and the holder shall on and after the
Automatic Redemption Date by considered and deemed for all
purposes to be the holder of the National Common Stock
delivered to such holder. Upon surrender to the Transfer
Agent of a certificate or certificates representing
Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of
Exchangeable Shares under the ABCA and the by-laws of National
and such additional documents and instruments as the Transfer
Agent may reasonably require, the holder of such surrendered
certificate or certificates shall be entitled to receive in
exchange therefor, and the Transfer Agent on behalf of
National shall deliver to such holder, the Exchangeable Share
Consideration to which the holder is entitled. If National
does not exercise the Redemption Call Right in the manner
described above, on the Automatic Redemption Date the holders
of the Exchangeable Shares will be entitled to receive in
exchange therefor the redemption price otherwise payable by
Dreco in connection with the redemption of the Exchangeable
Shares pursuant to Article 7 of the Exchangeable Share
Provisions. Notwithstanding the foregoing, until such
Exchangeable Share Consideration is delivered to the holder,
the holder shall be deemed to still be a holder of
Exchangeable Shares for purposes of all voting rights with
respect thereto under the Voting and Exchange Trust Agreement.
SECTION 5.3 EXCHANGE PUT RIGHT. Upon and subject to the terms and
conditions contained in the Exchangeable Share Provisions and the Voting and
Exchange Trust Agreement:
(a) a holder of Exchangeable Shares shall have the right (the
"Exchange Put Right") at any time to require National to
purchase all or any part of the Exchangeable Shares of the
holder; and
(b) upon the exercise by the holder of the Exchange Put Right, the
holder shall be required to sell to National, and National
shall be required to purchase from the holder, that number of
Exchangeable Shares in respect of which
59
- 12 -
the Exchange Put Right is exercised, in consideration of the
payment by National of the Exchangeable Share Price applicable
thereto and delivery by or on behalf of National of the
Exchangeable Share Consideration representing the total
applicable Exchangeable Share Price.
ARTICLE 6
AMENDMENT
SECTION 6.1 PLAN OF ARRANGEMENT AMENDMENT. Dreco reserves the right to
amend, modify and/or supplement this Plan of Arrangement at any time and from
time to time provided that any such amendment, modification, or supplement must
be contained in a written document that is (a) agreed to by National, (b) filed
with the Court and, if made following the Meeting, approved by the Court and
(c) communicated to holders of Dreco Common Shares and Options in the manner
required by the Court (if so required).
Any amendment, modification or supplement to this Plan of Arrangement
may be proposed by Dreco at any time prior to or at the Meeting (provided that
National shall have consented thereto) with or without any other prior notice
or communication, and if so proposed and accepted by the persons voting at the
Meeting (other than as may be required under the Court's interim order), shall
become part of this Plan of Arrangement for all purposes.
Any amendment, modification or supplement to this Plan of Arrangement
which is approved by the Court following the Meeting shall be effective only
(a) if it is consented to by Dreco, (b) if it is consented to by National and
(c) if required by the Court or applicable law, it is consented to by the
holders of the Dreco Common Shares or the Exchangeable Shares and Options as
the case may be.
________________________________________________________
60
APPENDIX A TO THE PLAN
OF ARRANGEMENT OF DRECO
PROVISIONS ATTACHING TO THE CLASS A PREFERRED SHARE
The Class A Preferred Share in the capital of the Corporation shall
have attached thereto the following rights, privileges, restrictions and
conditions:
DIVIDENDS
Subject to the prior rights of the holders of any shares ranking senior
to the Class A Preferred Share with respect to priority in the payment of
dividends, the holder of Class A Preferred Share shall be entitled to receive
dividends and the Corporation shall pay dividends thereon, as and when declared
by the board of directors of the Corporation as cumulative dividends in the
amount of $1.00 per share per annum payable annually on December 31 in each
year in arrears. Such dividends shall accrue from the date of issue to and
including the date to which the computation of dividends is to be made. A
cheque for the amount of the dividend less any required deduction shall be
mailed by first class mail to the address of the registered holder thereof.
DISSOLUTION
In the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other distribution of
assets of the Corporation among its shareholders for the purpose of winding-up
its affairs, subject to the prior rights of the holders of any shares ranking
senior to the Class A Preferred Share with respect to priority in the
distribution of assets upon liquidation, dissolution or winding-up, the holder
of the Class A Preferred Share shall be entitled to receive an amount equal to
the stated capital in respect of the Class A Preferred Share and dividends
remaining unpaid, including all cumulative dividends, whether or not declared.
After payment to the holder of the Class A Preferred Share of such amounts,
such holder shall not be entitled to share in any further distribution of the
assets of the Corporation.
VOTING RIGHTS
Except where specifically provided by the Act, the holder of the Class
A Preferred Share shall not be entitled to receive notice of or to attend
meetings of the shareholders of the Corporation and shall not be entitled to
vote at any meeting of shareholders of the Corporation.
61
PROVISIONS ATTACHING TO EXCHANGEABLE SHARES
The Exchangeable Shares in the capital of the Corporation shall have
the following rights, privileges, restrictions and conditions:
ARTICLE 1
INTERPRETATION
For the purposes of these rights, privileges, restrictions and
conditions:
1.1 "ACT" means the Business Corporations Act (Alberta), as
amended, consolidated or reenacted from time to time.
"AGGREGATE EQUIVALENT VOTE AMOUNT" means, with respect to any
matter, proposition or question on which holders of National Common Stock are
entitled to vote, consent or otherwise act, the product of (i) the number of
shares of Exchangeable Shares then issued and outstanding and held by holders
other than National and its Subsidiaries multiplied by (ii) the number of votes
to which a holder of one share of National Common Stock is entitled with
respect to such matter, proposition or question.
"AUTOMATIC REDEMPTION DATE" means the date for the automatic
redemption by the Corporation of Exchangeable Shares pursuant to Article 7 of
these share provisions, which date shall be o, o unless (a) such date shall be
extended at any time or from time to time to a specified later date by the
Board of Directors by not later than o, o or (b) such date shall be accelerated
at any time to a specified earlier date by the Board of Directors if at such
time there are less than o Exchangeable Shares outstanding (other than
Exchangeable Shares held by National and its Subsidiaries and as such number of
shares may be adjusted as deemed appropriate by the Board of Directors to give
effect to any subdivision or consolidation of or stock dividend on the
Exchangeable Shares, any issuance or distribution of rights to acquire
Exchangeable Shares or securities exchangeable for or convertible into or
carrying rights to acquire Exchangeable Shares, any issue or distribution of
other securities or rights or evidences of indebtedness or assets, or any other
capital reorganization or other transaction involving or affecting the
Exchangeable Shares), in each case upon at least 60 days' prior written notice
of any such extension or acceleration, as the case may be, to the registered
holders of the Exchangeable Shares, in which case the Automatic Redemption Date
shall be the later or earlier date designated in such notice.
"BOARD OF DIRECTORS" means the Board of Directors of the
Corporation and any committee thereof acting within its authority.
62
- 2 -
"BUSINESS DAY" means any day other than a Saturday, a Sunday
or a day when banks are not open for business in either or both of Houston,
Texas and Calgary, Alberta.
"CLASS A PREFERRED SHARE" means the Class A Preferred Share
in the capital of the Corporation.
"COMMON SHARES" means the common shares in the capital of the
Corporation.
"CORPORATION" means Dreco Energy Services Ltd., a corporation
under the laws of the Province of Alberta and includes any successor
corporation.
"CURRENT MARKET PRICE" means, in respect of a share of
National Common Stock on any date, the average of the closing bid and ask
prices of National Common Stock during a period of 20 consecutive trading days
ending not more than five trading days before such date on the New York Stock
Exchange, or, if National Common Stock is not then traded on the New York Stock
Exchange, on such other principal U.S. stock exchange or automated quotation
system on which the National Common Stock is listed or quoted, as the case may
be, as may be selected by the Board of Directors for such purpose; provided,
however, that if in the opinion of the Board of Directors the public
distribution or trading activity of National Common Stock during such period
does not create a market which reflects the fair market value of a share of
National Common Stock, then the Current Market Price of a share of National
Common Stock shall be determined by the Board of Directors based upon the
advice of such qualified independent financial advisors as the Board of
Directors may deem to be appropriate, and provided further than any such
selection, opinion or determination by the Board of Directors shall be
conclusive and binding.
"EXCHANGE PUT RIGHT" has the meaning provided in Article 8.
"EXCHANGEABLE SHARE CONSIDERATION" means, for any acquisition
of or redemption of or distribution of assets of the Corporation in respect of
or purchase pursuant to the Exchange Put Right of Exchangeable Shares pursuant
to these share provisions, the Plan of Arrangement, the Support Agreement or
the Voting and Exchange Trust Agreement:
(a) certificates representing the aggregate number of
shares of National Common Stock deliverable in
connection with such action;
(b) a cheque or cheques payable at par at any branch of
the bankers of the payor in the amount of all
declared and unpaid and undeclared
63
- 3 -
but payable cash dividends deliverable in connection with such action; and
(c) such stock or property constituting any declared and
unpaid non-cash dividends deliverable in connection
with such action;
provided that (i) that part of the consideration which is the Current Market
Price of a share of National Common Stock shall be fully paid and satisfied by
the delivery of one share of National Common Stock, (ii) that part of the
consideration which represents non-cash dividends remaining unpaid shall be
fully paid and satisfied by delivery of such non-cash items, (iii) any such
stock shall be duly issued as fully paid and non-assessable and any such
property shall be delivered free and clear of any lien, claim, encumbrance,
security interest or adverse claim or interest and (iv) such consideration
shall be paid less any tax required to be deducted and withheld therefrom and
without interest.
"EXCHANGEABLE SHARE PRICE" means, for each Exchangeable Share,
an amount equal to the aggregate of:
(a) the Current Market Price of a share of National
Common Stock; plus
(b) an additional amount equal to the full amount of all
cash dividends declared and unpaid on such
Exchangeable Share; plus
(c) an additional amount equal to all dividends declared
on National Common Stock which have not been declared
on Exchangeable Shares in accordance herewith; plus
(d) an additional amount representing non-cash dividends
declared and unpaid on such Exchangeable Share.
"EXCHANGEABLE SHARES" means the Exchangeable Shares of the
Corporation having the rights, privileges, restrictions and conditions set
forth herein.
"LIQUIDATION AMOUNT" has the meaning provided in Section 5.1.
"LIQUIDATION CALL RIGHT" has the meaning provided in the Plan
of Arrangement.
"LIQUIDATION DATE" has the meaning provided in Section 5.1.
"NATIONAL" means National-Oilwell, Inc., a corporation
organized and existing under the laws of the State of Delaware and includes any
successor corporation.
64
- 4 -
"NATIONAL CALL NOTICE" has the meaning provided in Section
6.3.
"NATIONAL COMMON STOCK" means the shares of common stock of
National, with a par value of U.S. $0.01 per share, having voting rights of one
vote per share, and any other securities resulting from the application of
section 2.7 of the Support Agreement.
"NATIONAL DIVIDEND DECLARATION DATE" means the date on which
the board of directors of National declares any dividend on the National Common
Stock.
"NATIONAL SPECIAL SHARE" means the one share of Special Voting
Stock of National with a par value of U.S. $0.01 and having voting rights at
meetings of holders of National Common Stock equal to the Aggregate Equivalent
Voting Amount.
"PLAN OF ARRANGEMENT" means the plan of arrangement involving
and affecting the Corporation and the holders of its Class "A" Common Shares,
options and shareholder rights under section 186 of the Act, to which plan of
arrangement these share provisions are an appendix.
"PURCHASE PRICE" has the meaning provided in Section 6.3.
"REDEMPTION CALL PURCHASE PRICE" has the meaning provided in
the Plan of Arrangement.
"REDEMPTION CALL RIGHT" has the meaning provided in the Plan
of Arrangement.
"REDEMPTION PRICE" has the meaning provided in Section 7.1.
"RETRACTED SHARES" has the meaning provided in subsection
6.1(i).
"RETRACTION CALL RIGHT" has the meaning provided in subsection
6.1(iii).
"RETRACTION DATE" has the meaning provided in subsection
6.1(ii).
"RETRACTION PRICE" has the meaning provided in Section 6.1.
"RETRACTION REQUEST" has the meaning provided in Section 6.1.
"SUBSIDIARY", in relation to any person, means any body
corporate partnership, joint venture, association or other entity of which more
than 50% of the total voting power of shares of stock or units of ownership or
beneficial interest entitled to vote in the election of directors (or members
of a comparable governing body) is owned or controlled, directly or indirectly,
by such person.
65
- 5 -
"SUPPORT AGREEMENT" means the Support Agreement between
National and the Corporation made as of [EFFECTIVE DATE], 1997.
"TRANSFER AGENT" means the duly appointed transfer agent for
the time being of the Exchangeable Shares, and if there is more than one such
agent then the principal Canadian agent.
"TRUSTEE" means Montreal Trust Company of Canada and any
successor trustee appointed under the Voting and Exchange Trust Agreement.
"VOTING AND EXCHANGE TRUST AGREEMENT" means the Voting and
Exchange Trust Agreement between the Corporation, National and the Trustee made
as of [EFFECTIVE DATE], 1997.
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
2.1 The Exchangeable Shares shall rank junior to the Class A
Preferred Share, and shall be entitled to a preference over the Common Shares
and any other shares ranking junior to the Exchangeable Shares, with respect to
the payment of dividends and the distribution of assets in the event of the
liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary, or any other distribution of the assets of the Corporation among
its shareholders for the purpose of winding-up its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to receive
and the Board of Directors shall, subject to applicable law, on each National
Dividend Declaration Date, declare a dividend on each Exchangeable Share (a) in
the case of a cash dividend declared on the National Common Stock, in an amount
in cash for each Exchangeable Share equal to the cash dividend declared on each
share of National Common Stock or (b) in the case of a stock dividend declared
on the National Common Stock to be paid in National Common Stock, in such
number of Exchangeable Shares for each Exchangeable Share as is equal to the
number of shares of National Common Stock to be paid on each share of National
Common Stock or (c) in the case of a dividend declared on the National Common
Stock in property other than cash or National Common Stock, in such type and
amount of property for each Exchangeable Share as is the same as the type and
amount of property declared as a dividend on each share of National Common
Stock. Such dividends shall be
66
- 6 -
paid out of money, assets or property of the Corporation properly applicable to
the payment of dividends, or out of authorized but unissued shares of the
Corporation.
3.2 Cheques of the Corporation payable at par at any branch of the
bankers of the Corporation shall be issued in respect of any cash dividends
contemplated by subsection 3.1(a) hereof and the sending of such a cheque to
each holder of an Exchangeable Share (less any tax required to be deducted and
withheld from such dividends paid or credited by the Corporation) shall satisfy
the cash dividends represented thereby unless the cheque is not paid on
presentation. Certificates registered in the name of the registered holder of
Exchangeable Shares shall be issued or transferred in respect of any stock
dividends contemplated by subsection 3.1(b) hereof and the sending of such a
certificate to each holder of an Exchangeable Share shall satisfy the stock
dividend represented thereby. Such other type and amount of property in
respect of any dividends contemplated by subsection 3.1(c) hereof shall be
issued, distributed or transferred by the Corporation in such manner as it
shall determine and the issuance, distribution or transfer thereof by the
Corporation to each holder of an Exchangeable Share shall satisfy the dividend
represented thereby. In all cases any such dividends shall be subject to any
reduction or adjustment for tax required to be deducted and withheld from such
dividends paid or credited by the Corporation. No holder of an Exchangeable
Share shall be entitled to recover by action or other legal process against the
Corporation any dividend which is represented by a cheque that has not been
duly presented to the Corporation's bankers for payment or which otherwise
remains unclaimed for a period of six years from the date on which such
dividend was payable.
3.3 The record date for the determination of the holders of
Exchangeable Shares entitled to receive payment of, and the payment date for,
any dividend declared on the Exchangeable Shares under Section 3.1 hereof shall
be the same dates as the record date and payment date, respectively, for the
corresponding dividend declared on the National Common Stock.
3.4 If on any payment date for any dividends declared on the
Exchangeable Shares under Section 3.1 hereof the dividends are not paid in full
on all of the Exchangeable Shares then outstanding, any such dividends which
remain unpaid shall be paid on a subsequent date or dates determined by the
Board of Directors on which the Corporation shall have sufficient moneys,
assets or property properly applicable to the payment of such dividends.
3.5 Except as provided in this Article 3, the holders of
Exchangeable Shares shall not be entitled to receive dividends in respect
thereof.
67
- 7 -
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, the
Corporation shall not at any time without, by may at any time with, the
approval of the holders of the Exchangeable Shares given as specified in
Section 9.2 of these share provisions:
(a) pay any dividends on the Common Shares, or any other shares
ranking junior to be Exchangeable Shares, other than stock
dividends payable in any such other shares ranking junior to
the Exchangeable Shares;
(b) redeem or purchase or make any capital distribution in respect
of Common Shares or any other shares ranking junior to the
Exchangeable Shares with respect to the payment of dividends
or on any liquidation distribution;
(c) redeem or purchase any other shares of the Corporation ranking
equally with the Exchangeable Shares with respect of the
payment of dividends or on any liquidation distribution; or
(d) amend the articles or by-laws of the Corporation.
The restrictions in subsections 4.1(a), 4.1(b), and 4.1(c) above shall not
apply if all dividends on the outstanding Exchangeable Shares corresponding to
dividends declared with a record date on or following the effective date of the
Plan of Arrangement on the National Common Stock shall have been declared on
the Exchangeable Shares and paid in full.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of
the Corporation or any other distribution of the assets of the Corporation
among its shareholders for the purpose of winding-up its affairs, a holder of
Exchangeable Shares shall be entitled, subject to applicable law, to receive
from the assets of the Corporation in respect of each Exchangeable Share held
by such holder on the effective date of such liquidation, dissolution or
winding-up (the "LIQUIDATION DATE"), before any distribution of any part of the
assets of the Corporation to the holders of the Common Shares or any other
shares ranking junior to the Exchangeable Shares, an amount equal to the
Exchangeable Share Price applicable on the last Business Day prior to the
Liquidation Date (the "LIQUIDATION AMOUNT"). In connection with payment of the
Liquidation Amount, the Corporation shall be entitled to liquidate some of the
National Common Stock which would otherwise be
68
- 8 -
deliverable to the particular holder of Exchangeable Shares in order to fund
any statutory withholding tax obligation.
5.2 On or promptly after the Liquidation Date, and subject to the
exercise by National of the Liquidation Call Right, the Corporation shall cause
to be delivered to the holders of the Exchangeable Shares the Liquidation
Amount for each such Exchangeable Share upon presentation and surrender of the
certificates representing such Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the by-laws of the Corporation and such
additional documents and instruments as the Transfer Agent may reasonably
require, at the registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation by notice to the holders
of the Exchangeable Shares. Payment of the total Liquidation Amount for such
Exchangeable Shares shall be made by delivery to each holder, at the address of
the holder recorded in the securities register of the Corporation for the
Exchangeable Shares or by holding for pick up by the holder at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation by notice to the holders of Exchangeable Shares,
on behalf of the Corporation of the Exchangeable Share Consideration
representing the total Liquidation Amount. On and after the Liquidation Date,
the holders of the Exchangeable Shares shall cease to be holders of such
Exchangeable Shares and shall not be entitled to exercise any of the rights of
holders in respect thereof, other than the right to receive their proportionate
part of the total Liquidation Amount, unless payment of the total Liquidation
Amount for such Exchangeable Shares shall not be made upon presentation and
surrender of share certificates in accordance with the foregoing provisions, in
which case the rights of the holders shall remain unaffected until the total
Liquidation Amount has been paid in the manner hereinbefore provided. The
Corporation shall have the right at any time on or after the Liquidation Date
to deposit or cause to be deposited the Exchangeable Share Consideration in
respect of the Exchangeable Shares represented by certificates that have not at
the Liquidation Date been surrendered by the holders thereof in a custodial
account or for safe keeping, in the case of non-cash items, with any chartered
bank or trust company in Canada. Upon such deposit being made, the rights of
the holders of Exchangeable Shares after such deposit shall be limited to
receiving their proportionate part of the total Liquidation Amount for such
Exchangeable Shares so deposited, against presentation and surrender of the
said certificates held by them, respectively, in accordance with the foregoing
provisions. Upon such payment or deposit of such Exchangeable Share
Consideration, the holders of the Exchangeable Shares shall thereafter be
considered and deemed for all purposes to be the holders of the National Common
Stock delivered to them. Notwithstanding the foregoing, until such payment or
deposit of such Exchangeable Share Consideration, the holder shall be deemed to
still be a holder of Exchangeable Shares for purposes of all voting rights with
respect thereto under the Voting and Exchange Trust Agreement.
69
- 9 -
5.3 After the Corporation has satisfied its obligations to pay the
holders of the Exchangeable Shares the Liquidation Amount per Exchangeable
Share, such holders shall not be entitled to share in any further distribution
of the assets of the Corporation.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time
subject to the exercise by National of the Retraction Call Right and otherwise
upon compliance with the provisions of this Article 6, to require the
Corporation to redeem any or all of the Exchangeable Shares registered in the
name of such holder for an amount equal to the Exchangeable Share Price
applicable on the last Business Day prior to the Retraction Date (the
"RETRACTION PRICE"). In connection with payment of the Retraction Price, the
Corporation shall be entitled to liquidate some of the National Common Stock
that would otherwise be deliverable to the particular holder of Exchangeable
Shares in order to fund any statutory withholding tax obligation. To effect
such redemption, the holder shall present and surrender at the registered
office of the Corporation or at any office of the Transfer Agent as may be
specified by the Corporation by notice to the holders of Exchangeable Shares
the certificate or certificates representing the Exchangeable Shares which the
holder desires to have the Corporation redeem, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the by-laws of the Corporation and such
additional documents and instruments as the Transfer Agent may reasonably
require, and together with a duly executed statement (the "RETRACTION REQUEST")
in the form of Schedule A hereto or in such other form as may be acceptable to
the Corporation:
(i) specifying that the holder desires to have all or
any number specified therein of the Exchangeable Shares represented by
such certificate or certificates (the "RETRACTED SHARES") redeemed by
the Corporation;
(ii) stating the Business Day on which the holder desires
to have the Corporation redeem the Retracted Shares (the "RETRACTION
DATE"), provided that the Retraction Date shall be not less than five
Business Days nor more than 10 Business Days after the date on which
the Retraction Request is received by the Corporation and further
provided that, in the event that no such Business Day is specified by
the holder in the Retraction Request, the Retraction Date shall be
deemed to be the tenth Business Day after the date on which the
Retraction Request is received by the Corporation; and
(iii) acknowledging the overriding right (the "RETRACTION
CALL RIGHT") of National to purchase all but not less than all the
Retracted Shares directly from the holder and that the Retraction
Request shall be deemed to be a revocable offer
70
- 10 -
by the holder to sell the Retracted Shares in accordance with the
Retraction Call Right on the terms and conditions set out in Section
6.3 below.
6.2 Subject to the exercise by National of the Retraction Call
Right, upon receipt by the Corporation or the Transfer Agent in the manner
specified in Section 6.1 hereof of a certificate or certificates representing
the number of Exchangeable Shares which the holder desires to have the
Corporation redeem, together with a Retraction Request, and provided that the
Retraction Request is not revoked by the holder in the manner specified in
Section 6.7, the Corporation shall redeem the Retracted Shares effective at the
close of business on the Retraction Date and shall cause to be delivered to
such holder the total Retraction Price with respect to such shares in
accordance with Section 6.4 hereof. If only a part of the Exchangeable Shares
represented by any certificate are redeemed or purchased by National pursuant
to the Retraction Call right, a new certificate for the balance of such
Exchangeable Shares shall be issued to the holder at the expense of the
Corporation.
6.3 Upon receipt by the Corporation of a Retraction Request, the
Corporation shall immediately notify National thereof. In order to exercise
the Retraction Call Right, National must notify the Corporation in writing of
its determination to do so (the "NATIONAL CALL NOTICE") within two Business
Days of such notification. If National does not so notify the Corporation
within two Business Days, the Corporation will notify the holder as soon as
possible thereafter that National will not exercise the Retraction Call Right.
If National delivers the National Call Notice within such two Business Days,
and provided that the Retraction Request is not revoked by the holder in the
manner specified in Section 6.7, the Retraction Request shall thereupon be
considered only to be an offer by the holder to sell the Retracted Shares to
National in accordance with the Retraction Call Right. In such event, the
Corporation shall not redeem the Retracted Shares and National shall purchase
from such holder and such holder shall sell to National on the Retraction Date
the Retracted Shares for a purchase price (the "PURCHASE PRICE") per share
equal to the Retraction Price per share. For the purposes of completing a
purchase pursuant to the Retraction Call Right, National shall deposit with the
Transfer Agent, on or before the Retraction Date the Exchangeable Share
Consideration representing the total Purchase Price. Provided that such
Exchangeable Share Consideration has been so deposited with the Transfer Agent,
the closing of the purchase and sale of the Retracted Shares pursuant to the
Retraction Call Right shall be deemed to have occurred as at the close of
business on the Retraction Date and, for greater certainty, no redemption by
the Corporation of such Retracted Shares shall take place on the Retraction
Date. In the event that National does not deliver a National Call Notice
within two Business Days or otherwise comply with these Exchangeable Share
provisions in respect thereto, and provided that Retraction Request is not
revoked by the holder in the manner specified in Section 6.7, the Corporation
shall redeem the Retracted Shares on the Retraction Date and in the manner
otherwise contemplated in this Article 6.
71
- 11 -
6.4 The Corporation or National, as the case may be, shall deliver
or cause the Transfer Agent to deliver to the relevant holder, at the address
of the holder recorded in the securities register of the Corporation for the
Exchangeable Shares or at the address specified in the holder's Retraction
Request or by holding for pick up by the holder at the registered office of the
Corporation or at any office of the Transfer Agent as may be specified by the
Corporation by notice to the holders of Exchangeable Shares, the Exchangeable
Share Consideration representing the total Retraction Price or the total
Purchase Price, as the case may be, and such delivery of such Exchangeable
Share Consideration to the Transfer Agent shall be deemed to be payment of and
shall satisfy and discharge all liability for the total Retraction Price or
total Purchase Price, as the case may be, except as to any cheque included
therein which is not paid on due presentation.
6.5 On and after the close of business on the Retraction Date, the
holder of the Retracted Shares shall not be entitled to exercise any of the
rights of a holder in respect thereof, other than the right to receive his
proportionate part of the total Retraction Price or total Purchase Price, as
the case may be, unless upon presentation and surrender of certificates in
accordance with the foregoing provisions, payment of the total Retraction Price
or the total Purchase Price, as the case may be, shall not be made, in which
case the rights of such holder shall remain unaffected until the total
Retraction Price or the total Purchase Price, as the case may be, has been paid
in the manner hereinbefore provided. On and after the close of business on the
Retraction Date, provided that presentation and surrender of certificates and
payment of the total Retraction Price or the total Purchase Price, as the case
may be, has been made in accordance with the foregoing provisions, the holder
of the Retracted Shares so redeemed by the Corporation or purchased by National
shall thereafter be considered and deemed for all purposes to be a holder of
the National Common Stock delivered to it. Notwithstanding the foregoing,
until payment of such Exchangeable Share Consideration to the holder, the
holder shall be deemed to still be a holder of Exchangeable Shares for purposes
of all voting rights with respect thereto under the Voting and Exchange Trust
Agreement.
6.6 Notwithstanding any other provision of this Article 6, the
Corporation shall not be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent that such redemption of Retracted
Shares would be contrary to liquidity or solvency requirements or other
provisions of applicable law. If the Corporation believes that on any
Retraction Date it would not be permitted by any of such provisions to redeem
the Retracted Shares tendered for redemption on such date, and provided that
National shall not have exercised the Retraction Call Right with respect to the
Retracted Shares, the Corporation shall only be obligated to redeem Retracted
Shares specified by a holder in a Retraction Request to the extent of the
maximum number that may be so redeemed (rounded down to a whole number of
shares) as would not be contrary to such provisions and shall notify the holder
at least two Business Days prior to the Retraction Date as to the number of
Retracted Shares which will not be redeemed by the Corporation. In any case in
which the redemption by the Corporation of Retracted Shares would be contrary
to liquidity or solvency requirements or other provisions of applicable law,
the Corporation
72
- 12 -
shall redeem Retracted Shares in accordance with Section 6.2 of these share
provisions on a pro rata basis and shall issue to each holder of Retracted
Shares a new certificate, at the expense of the Corporation, representing the
Retracted Shares not redeemed by the Corporation pursuant to Section 6.2
hereof. Provided that the Retraction Request is not revoked by the holder in
the manner specified in Section 6.7, the holder of any such Retracted Shares
not redeemed by the Corporation pursuant to Section 6.2 of these share
provisions as a result of liquidity or solvency requirements or applicable law
shall be deemed by giving the Retraction Request to require National to
purchase such Retracted Shares from such holder on the Retraction date or as
soon as practicable thereafter on payment by National to such holder of the
Purchase Price for each such Retracted Share, all as more specifically provided
in the Voting and Exchange Trust Agreement, and National shall make such
purchase.
6.7 A holder of Retracted Shares may, by notice in writing given
by the holder to the Corporation before the close of business on the Business
Day immediately preceding the Retraction Date, withdraw its Retraction Request
in which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell
the Retracted Shares to National shall be deemed to have been revoked.
ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY
THE CORPORATION
7.1 Subject to applicable law, and if National does not exercise
the Redemption Call Right, the Corporation shall on the Automatic Redemption
Date redeem the whole of the then outstanding Exchangeable Shares for an amount
equal to the Exchangeable Share Price applicable on the last Business Day prior
to the Automatic Redemption Date (the "REDEMPTION PRICE"). In connection with
payment of the Redemption Price, the Corporation shall be entitled to liquidate
some of the National Common Stock which would otherwise be deliverable to the
particular holder of Exchangeable Shares in order to fund any statutory
withholding tax obligation.
7.2 In any case of a redemption of Exchangeable Shares under this
Article 7, the Corporation shall, at least 120 days before the Automatic
Redemption Date, send or cause to be sent to each holder of Exchangeable Shares
a notice in writing of the redemption by the Corporation or the purchase by
National under the Redemption Call Right, as the case may be, of the
Exchangeable Shares held by such holder. Such notice shall set out the formula
for determining the Redemption Price or the Redemption Call Purchase Price, as
the case may be, the Automatic Redemption Date and, if applicable, particulars
of the Redemption Call Right.
73
- 13 -
7.3 On or after the Automatic Redemption Date and subject to the
exercise by National of the Redemption Call Right, the Corporation shall cause
to be delivered to the holders of the Exchangeable Shares to be redeemed the
Redemption Price for each such Exchangeable Share upon presentation and
surrender at the registered office of the Corporation or at any office of the
Transfer Agent as may be specified by the Corporation in such notice of the
certificates representing such Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the by-laws of the Corporation and such
additional documents and instruments as the Transfer Agent may reasonably
require. Payment of the total Redemption Price for such Exchangeable Shares
shall be made by delivery to each holder, at the address of the holder recorded
in the securities register or at any office of the Transfer Agent as may be
specified by the Corporation in such notice, on behalf of the Corporation of
the Exchangeable Share Consideration representing the total Redemption Price.
On and after the Automatic Redemption Date, the holders of the Exchangeable
Shares called for redemption shall cease to be holders of such Exchangeable
Shares and shall not be entitled to exercise any of the rights of holders in
respect thereof, other than the right to receive their proportionate part of
the total Redemption Price, unless payment of the total Redemption Price for
such Exchangeable Shares shall not be made upon presentation and surrender of
certificates in accordance with the foregoing provisions, in which case the
rights of the holders shall remain unaffected until the total Redemption Price
has been paid in the manner hereinbefore provided. The Corporation shall have
the right at any time after the sending of notice of its intention to redeem
the Exchangeable Shares as aforesaid to deposit or cause to be deposited the
Exchangeable Share Consideration with respect to the Exchangeable Shares so
called for redemption, or of such of the said Exchangeable Shares represented
by certificates that have not at the date of such deposit been surrendered by
the holders thereof in connection with such redemption, in a custodial account
or for safe keeping, in the case of non-cash items, with any chartered bank or
trust company in Canada named in such notice. Upon the later of such deposit
being made and the Automatic Redemption Date, the Exchangeable Shares in
respect whereof such deposit shall have been made shall be redeemed and the
rights of the holders thereof after such deposit or Automatic Redemption Date,
as the case may be, shall be limited to receiving their proportionate part of
the total Redemption Price for such Exchangeable Shares so deposited, against
presentation and surrender of the said certificates held by them, respectively,
in accordance with the foregoing provisions. Upon such payment or deposit of
such Exchangeable Share Consideration, the holders of the Exchangeable Shares
shall thereafter be considered and deemed for all purposes to be holders of the
National Common Stock delivered to them. Notwithstanding the foregoing, until
such payment or deposit of such Exchangeable Share Consideration is made, the
holder shall be deemed to still be a holder of Exchangeable Shares for purposes
of all voting rights with respect thereto under the Voting and Exchange Trust
Agreement.
74
- 14 -
ARTICLE 8
EXCHANGE PUT RIGHT
8.1 Upon and subject to the terms and conditions contained in the
Exchangeable Share Provisions and the Voting and Exchange Trust Agreement:
(a) a holder of Exchangeable Shares shall have the right (the
"Exchange Put Right") at any time to require National to
purchase all or any part of the Exchangeable Shares of the
holder; and
(b) upon the exercise by the holder of the Exchange Put Right, the
holder shall be required to sell to National, and National
shall be required to purchase from the holder, that number of
Exchangeable Shares in respect of which the Exchange Put Right
is exercised, in consideration of the payment by National of
the Exchangeable Share Price applicable thereto (which shall
be the Exchangeable Share Price applicable on the last
Business Day prior to receipt of notice required under section
8.2) and delivery by or on behalf of National of the
Exchangeable Share Consideration representing the total
applicable Exchangeable Share Price.
8.2 The Exchange Put Right provided in section 8.1 hereof and in
Article V of the Voting and Exchange Trust Agreement may be exercised at any
time by notice in writing given by the holder to and received by the Trustee
(the date of such receipt, the "Exchange Put Date") accompanied by presentation
and surrender of the certificates representing such Exchangeable Shares,
together with such documents and instruments as may be required to effect a
transfer of Exchangeable Shares under the Act and the by-laws of the
Corporation and such additional documents and instruments as the Trustee may
reasonably require, at the principal transfer office in Calgary, Alberta of the
Trustee, or at such other office or offices of the Trustee or of other persons
designated by the Trustee for that purpose as may from time to time be
maintained by the Trustee for that purpose. Such notice may be in the form of
the panel, if any, on the certificates representing Exchangeable Shares, or
other form satisfactory to the Trustee (or such other persons aforesaid), shall
stipulate the number of Exchangeable Shares in respect of which the right is
exercised (which may not exceed the number of shares represented by
certificates surrendered to the Trustee), shall be irrevocable unless the
exchange is not completed in accordance herewith and with the Voting and
Exchange Trust Agreement and shall constitute the holder's authorization to the
Trustee (and such other persons aforesaid) to effect the exchange on behalf of
the holder.
8.3 The surrender by the holder of Exchangeable Shares under
section 8.2 shall constitute the representation, warranty and covenant of the
holder that the Exchangeable Shares so purchased are sold free and clear of any
lien, encumbrance, security interest or adverse claim or interest.
75
- 15 -
8.4 If a part only of the Exchangeable Shares represented by any
certificate are to be sold and purchased pursuant to the exercise of the
Exchange Put Right, a new certificate for the balance of such Exchangeable
Shares shall be issued to the holder at the expense of the Corporation.
8.5 Upon receipt by the Trustee of the notice, certificates and
other documents or instruments required by section 8.2, the Trustee shall
deliver or cause to be delivered, on behalf of National and subject to receipt
by the Trustee from National of the applicable Exchangeable Share
Consideration, to the relevant holder at the address of the holder specified in
the notice or by holding for pick-up by the holder at the registered office of
the Corporation or at any office of the Trustee (or other persons aforesaid)
maintained for that purpose, the Exchangeable Share Consideration representing
the total applicable Exchangeable Share Price. Delivery by National to the
Trustee of such Exchangeable Share Consideration shall be deemed to be payment
of and shall satisfy and discharge all liability for the total applicable
Exchangeable Share Price, except as to any cheque included therein which is not
paid on due presentation.
8.6 On and after the close of business on the Exchange Put Date,
the holder of the Exchangeable Shares in respect of which the Exchange Put
Right is exercised shall not be entitled to exercise any of the rights of a
holder in respect thereof, other than the right to receive the total applicable
Exchangeable Share Price, unless upon presentation and surrender of
certificates in accordance with the foregoing provisions, payment of such total
price shall not be made, in which case the rights of such holder shall remain
unaffected until such payment has been made. On and after the close of
business on the Exchange Put Date provided that presentation and surrender of
certificates and payment of such total price has been made in accordance with
the foregoing provisions, the holder of the Exchangeable Shares so purchased by
National shall thereafter be considered and deemed for all purposes to be a
holder of the National Common Stock delivered to it. Notwithstanding the
foregoing, until payment of such total price to the holder, the holder shall be
deemed to still be a holder of Exchangeable Shares for purposes of all voting
rights with respect thereto under the Voting and Exchange Trust Agreement.
ARTICLE 9
VOTING RIGHTS
9.1 Except as required by applicable law and the provisions
hereof, the holders of the Exchangeable Shares shall not be entitled as such to
receive notice of or to attend any meeting of the shareholders of the
Corporation or to vote at any such meeting.
76
- 16 -
ARTICLE 10
AMENDMENT AND APPROVAL
10.1 The rights, privileges, restrictions and conditions attaching
to the Exchangeable Shares may be added to, changed or removed but, except as
hereinafter provided, only with the approval of the holders of the Exchangeable
Shares given as hereinafter specified.
10.2 Any approval given by the holders of the Exchangeable Shares
to add to, change or remove any right, privilege, restriction or condition
attaching to the Exchangeable Shares or any other matter requiring the approval
or consent of the holders of the Exchangeable Shares shall be deemed to have
been sufficiently given if it shall have been given in accordance with
applicable law subject to a minimum requirement that such approval be evidenced
by resolution passed by not less than 66 2/3% of the votes cast on such
resolution by persons represented in person or by proxy at a meeting of holders
of Exchangeable Shares duly called and held at which the holders of at least
50% of the outstanding Exchangeable Shares at that time are present or
represented by proxy (excluding Exchangeable Shares beneficially owned by
National or its Subsidiaries). If at any such meeting the holders of at least
50% of the outstanding Exchangeable Shares at that time are not present or
represented by proxy within one-half hour after the time appointed for such
meeting then the meeting shall be adjourned to such date not less than 10 days
thereafter and to such time and place as may be designated by the Chairman of
such meeting. At such adjourned meeting the holders of Exchangeable Shares
present or represented by proxy thereat may transact the business for which the
meeting was originally called and a resolution passed thereat by the
affirmative vote of not less than 66 2/3% of the votes cast on such resolution
by persons represented in person or by proxy at such meeting shall constitute
the approval or consent of the holders of the Exchangeable Shares. For the
purposes of this section, any spoiled votes, illegible votes, defective votes
and abstinences shall be deemed to be votes not cast.
ARTICLE 11
RECIPROCAL CHANGES, ETC. IN RESPECT OF
NATIONAL COMMON STOCK
11.1 (a) Each holder of an Exchangeable Share acknowledges that the
Support Agreement provides, in part, that National will not without the prior
approval of the Corporation and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 10.1 of these share
provisions:
(i) issue or distribute National Common Stock (or
securities exchangeable for or convertible into or from which may be
derived National
77
- 17 -
Common Stock) to the holders of all or substantially all of the then
outstanding National Common Stock by way of stock dividend or other
distribution; or
(ii) issue or distribute rights, options or warrants to
the holders of all or substantially all of the then outstanding
National Common Stock entitling them to subscribe for or to purchase
shares of National Common Stock (or securities exchangeable for or
convertible into or carrying rights to acquire shares of National
Common Stock); or
(iii) issue or distribute to the holders of all or
substantially all of the then outstanding shares of National Common
Stock (A) shares or securities of National of any class other than
National Common Stock (other than shares convertible into or
exchangeable for or carrying rights to acquire National Common Stock),
(B) rights, options or warrants other than those referred to in
subsection 11.1(a)(ii) above, (C) evidences of indebtedness of
National or (D) assets of National;
unless the Corporation is permitted under applicable law to issue and
distribute the economic equivalent on a per share basis of such
rights, options, warrants, securities, shares, evidences of
indebtedness or assets and the items referred to in clauses (i), (ii)
and (iii) above, as applicable, are issued or distributed
simultaneously to holders of Exchangeable Shares.
(b) Each holder of an Exchangeable Share acknowledges that the
Support Agreement further provides, in part, that National will not without the
prior approval of the Corporation and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 10.1 of these share
provisions;
(i) subdivide, redivide or change the then outstanding
shares of National Common Stock into a greater number of shares of
National Common Stock; or
(ii) reduce, combine or consolidate or change the then
outstanding shares of National Common Stock into a lesser number of
shares of National Common Stock; or
(iii) reclassify or otherwise change the shares of National
Common Stock or effect an amalgamation, merger, reorganization or
other transaction involving or affecting the shares of National Common
Stock;
unless the Corporation is permitted under applicable law to
simultaneously make the same or an economically equivalent change to,
or in the rights of the holders of, the Exchangeable Shares and the
same or an economically equivalent change is simultaneously made to,
or in the rights of the holders of, the Exchangeable Shares.
78
- 18 -
The Support Agreement further provides, in part, that the aforesaid provisions
of the Support Agreement shall not be changed without the approval of the
holders of the Exchangeable Shares given in accordance with Section 10.1 of
these share provisions.
ARTICLE 12
ACTIONS BY THE CORPORATION UNDER
SUPPORT AGREEMENT
12.1 The Corporation will take all such actions and do all such
things as shall be necessary or advisable to perform and comply with and to
ensure performance and compliance by National with all provisions of the
Support Agreement, the Voting Trust and Exchange Agreement and National's
Amended and Restated Certificate of Incorporation applicable to the Corporation
and National, respectively, in accordance with the terms thereof including,
without limitation, taking all such actions and doing all such things as shall
be necessary or advisable to enforce to the fullest extent possible for the
direct benefit of the Corporation all rights and benefits in favour of the
Corporation under or pursuant thereto.
12.2 The Corporation shall not propose, agree to or otherwise give
effect to any amendment to, or waiver or forgiveness of its rights or
obligations under, the Support Agreement, the Voting Trust and Exchange
Agreement or National's Amended and Restated Certificate of Incorporation
without the approval of the holders of the Exchangeable Shares given in
accordance with Section 10.1 of these share provisions other than such
amendments, waivers and/or forgiveness as may be necessary or advisable for the
purpose of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of the Corporation or the holders
of Exchangeable Shares; or
(b) making such provisions or modifications not inconsistent with
such agreement or certificate as may be necessary or desirable
with respect to matters or questions arising thereunder which,
in the opinion of the Board of Directors, it may be expedient
to make, provided that the Board of Directors shall be of the
opinion, after consultation with counsel, that such provisions
and modifications will not be prejudicial to the interests of
the holders of the Exchangeable Shares; or
(c) making such changes in or corrections to such agreement or
certificate which, on the advice of counsel to the
Corporation, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent provision
or clerical omission or mistake or manifest error contained
therein, provided that the Board of Directors shall be of the
opinion, after
79
- 19 -
consultation with counsel, that such changes or corrections
will not be prejudicial to the interests of the holders of the
Exchangeable Shares.
ARTICLE 13
LEGEND
13.1 The certificates evidencing the Exchangeable Shares shall
contain or have affixed thereto a legend, in form and on terms approved by the
Board of Directors, with respect to the Support Agreement, the provisions of
the Plan of Arrangement relating to the Liquidation Call Right and the
Redemption Call Right, and the Voting and Exchange Trust Agreement (including
the provisions with respect to the voting rights, exchange right and automatic
exchange thereunder).
ARTICLE 14
MISCELLANEOUS
14.1 Any notice, request or other communication to be given to the
Corporation by a holder of Exchangeable Shares shall be in writing and shall be
valid and effective if given by mail (postage prepaid) or by telecopy or by
delivery to the registered office of the Corporation and addressed to the
attention of the President. Any such notice, request or other communication,
if given by mail, telecopy or delivery, shall only be deemed to have been given
and received upon actual receipt thereof by the Corporation.
14.2 Any presentation and surrender by a holder of Exchangeable
Shares to the Corporation or the Transfer Agent of certificates representing
Exchangeable Shares in connection with the liquidation, dissolution or
winding-up of the Corporation or the retraction or redemption of Exchangeable
Shares shall be made by registered mail (postage prepaid) or by delivery to the
registered office of the Corporation or to such office of the Transfer Agent as
may be specified by the Corporation, in each case addressed to the attention of
the President of the Corporation. Any such presentation and surrender of
certificates shall only be deemed to have been made and to be effective upon
actual receipt thereof by the Corporation or the Transfer Agent, as the case
may be, and the method of any such presentation and surrender of certificates
shall be at the sole risk of the holder.
14.3 Any notice, request or other communication to be given to a
holder of Exchangeable Shares by or on behalf of the Corporation shall be in
writing and shall be valid and effective if given by mail (postage prepaid) or
by delivery to the address of the holder recorded in the securities register of
the Corporation or, in the event of the address of any such holder not being so
recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given my mail, shall be deemed to
80
- 20 -
have been given and received on the fifth Business Day following the date of
mailing and, if given by delivery, shall be deemed to have been given and
received on the date of delivery. Accidental failure or omission to give any
notice, request or other communication to one or more holders of Exchangeable
Shares shall not invalidate or otherwise alter or affect any action or
proceeding to be or intended to be taken by the Corporation.
14.4 For greater certainty, the Corporation shall not be required
for any purpose under these share provisions to recognize or take account of
persons who are not so recorded in such securities register.
14.5 All Exchangeable Shares acquired by the Corporation upon the
redemption or retraction thereof shall be cancelled.
____________________________________________________
81
SCHEDULE "A"
NOTICE OF RETRACTION
To the Corporation and National-Oilwell, Inc. ("National")
This notice is given pursuant to Article 6 of the provisions
(the "SHARE PROVISIONS") attaching to the share(s) represented by this
certificate and all capitalized words and expressions used in this notice which
are defined in the Share Provisions have the meaning attributed to such words
and expressions in such Share Provisions.
The undersigned hereby notifies the Corporation that, subject
to the Retraction Call Right referred to below, the undersigned desires to have
the Corporation redeem in accordance with Article 6 of the Share Provisions:
[ ] all share(s) represented by this certificate; or
[ ] ____________________________________ share(s) only.
The undersigned hereby notifies the Corporation that the
Retraction Date shall be ______________________ __________________ .
NOTE: The Retraction Date must be a Business Day and must not be less than
five Business Days nor more than 10 Business Days after the date upon
which this notice is received by the Corporation. In the event that
no such business day is correctly specified above, the Retraction Date
shall be deemed to be the tenth Business Day after the date on which
this notice is received by the Corporation.
The undersigned acknowledges the Retraction Call Right of
National to purchase all but not less than all the Retracted Shares from the
undersigned and that his notice shall be deemed to be a recoverable offer by
the undersigned to sell the Retracted Shares to National in accordance with the
Retraction Call Right on the Retraction Date for the Retraction Price and on
the other terms and conditions set out in Section 6.3 of the Share Provisions.
If National determines not to exercise the Retraction Call Right, the
Corporation will notify the undersigned of such fact as soon as possible. This
notice of retraction, and offer to sell the Retracted Shares to National, may
be revoked and withdrawn by the undersigned by notice in writing given to the
Corporation at any time before the close of business on the Business Date
immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of liquidity
or solvency provisions of applicable law, the Corporation is unable to redeem
all Retracted Shares, the undersigned will be deemed to have exercised the
Exchange Right (as defined in the Voting and Exchange Trust Agreement) so as to
require National to purchase the unredeemed Retracted Shares.
82
- 2 -
The undersigned hereby represents and warrants to the
Corporation and National that the undersigned has good title to, and owns, the
share(s) represented by this certificate to be acquired by the Corporation or
National, as the case may be, free and clear of all liens, claims,
encumbrances, security interests and adverse claims or interests.
________________ __________________________________ ____________________________________
(Date) (Signature of Shareholder) (Guarantee of Signature)
[ ] Please check box if the legal or beneficial owner of the Retracted
Shares is a non-resident of Canada.
[ ] Please check box if the securities and any cheque(s) or other non-cash
assets resulting from the retraction of the Retracted Shares are to be
held for pick-up by the shareholder at the principal transfer office
of Montreal Trust Company of Canada (the "TRANSFER AGENT") in Calgary,
Alberta, failing which the securities and any cheque(s) or other
non-cash assets will be delivered to the shareholder in accordance
with the share provisions.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Transfer Agent may require, must be
deposited with the Transfer Agent at its principal transfer office in
Calgary, Alberta. The securities and any cheque(s) or other non-cash
assets resulting from the retraction or purchase of the Retracted
Shares will be issued and registered in, and made payable to, or
transferred into, respectively, the name of the shareholder as it
appears on the register of the Corporation and the securities,
cheque(s) and other non-cash assets resulting from such retraction or
purchase will be delivered to the shareholder in accordance with the
Share Provisions.
______________________________________________ _______________________________________
Name of Person in Whose Name Securities or Date
Cheque(s) or Other Non-cash Assets Are To Be
Registered, Issued or Delivered (please print)
_______________________________________________ _______________________________________
Street Address or P.O. Box Signature of Shareholder
_______________________________________________ ________________________________________
City, Province Signature Guaranteed by
83
- 3 -
NOTE: If the notice of retraction is for less than all of the
share(s) represented by this certificate, a certificate
representing the remaining shares of the Corporation will be
issued and registered in the name of the shareholder as it
appears on the register of the Corporation, unless the Share
Transfer Power on the certificate is duly completed in respect
of such shares.
________________________________________________
84
EXHIBIT B
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
NATIONAL-OILWELL, INC.
FIRST: The name of the Corporation is National-Oilwell, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of the registered agent of the Corporation at such address
is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful business, act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: CAPITAL STOCK
I. AUTHORIZED SHARES
The total number of shares of stock that the Corporation shall have
authority to issue is, 50,013,289 shares of capital stock, consisting of (i)
40,000,000 shares of common stock, par value $.01 per share ("Common Stock");
(ii) 13,288 shares of Class A Common Stock, par value $.01 per share ("Class A
Common Stock"); (iii) one share of Special Voting Stock ("Special Voting
Stock"; the Class A Common Stock and the Common Stock and the Special Voting
Stock are collectively referred to as the "Common Shares"); and (iv) 10,000,000
shares of preferred stock, par value $.01 per share ("Preferred Stock").
The Common Shares shall have the rights, preferences and limitations
set forth below. Capitalized terms used but not otherwise defined in Parts I or
II of this Article Fourth are defined in Part III of this Article Fourth.
II. COMMON SHARES
Except as otherwise provided in this Part II or as otherwise required
by applicable law, all shares of Special Voting Stock, Class A Common Stock and
Common Stock shall be identical in all respects and shall entitle the holders
thereof to the same rights and privileges, subject to the same qualifications,
limitations and restrictions.
SECTION 1. SPECIAL VOTING STOCK. Each outstanding share of Special
Voting Stock shall be entitled at any relevant date to the number of votes
determined in accordance with the "Plan of Arrangement" (as that term is
defined in that certain "Combination Agreement" dated as of _______________,
1997, by and between the Corporation and Dreco Energy Services Ltd.) on all
matters presented to the stockholders. No dividend or distribution of assets
shall be paid to the holders of Special Voting Stock. The Special Voting Stock
is not convertible into any other class or series of the capital stock of the
Corporation or into cash, property or other rights, and may not be redeemed.
Any
-1-
85
shares of Special Voting Stock purchased or otherwise acquired by the
Corporation shall be deemed retired and shall be canceled and may not
thereafter be reissued or otherwise disposed of by the Corporation . At such
time as the Special Voting Stock has no votes attached to it because there are
no "Exchangeable Shares" (as that terms is defined in the Combination
Agreement) outstanding, the Special Voting Stock shall be canceled.
SECTION 2. VOTING RIGHTS. Except as otherwise provided in this Part II
or as otherwise required by applicable law, all holders of Class A Common Stock
and Common Stock shall be entitled to one vote per share on all matters to be
voted on by the Corporation's stockholders. In respect of all matters
concerning the voting of shares, the Class A Common Stock, the Common Stock and
the Special Voting Stock shall vote as a single class and such voting rights
shall be identical in all respects.
SECTION 3. DISTRIBUTIONS. At the time of each Distribution, such
Distribution shall be made to the holders of Class A Common Stock and Common
Stock in the following priority:
(i) The holders of Class A Common Stock shall be entitled to receive
all or a portion of such Distribution (ratably among such holders based upon
the number of shares of Class A Common Stock held by each such holder as of the
time of such Distribution) equal to the aggregate Unreturned Original Cost of
the outstanding shares of Class A Common Stock as of the time of such
Distribution, and no Distribution or any portion thereof shall be made under
Section 2(ii) below until the entire amount of Unreturned Original Cost of the
outstanding shares of Class A Common Stock as of the time of such Distribution
has been paid in full. The Distributions made pursuant to this paragraph 2(i)
to holders of Class A Common Stock shall constitute a return of Original Cost
of Class A Common Stock.
(ii) After the holders of Class A Common Stock have received
Distributions equal to the entire Original Cost thereof pursuant to paragraph
2(i) above, holders of Common Shares as a group, shall be entitled to receive
the remaining portion of such Distribution (ratably among such holders based
upon the number of Common Shares held by each such holder as of the time of
such Distribution).
(iii) If the Corporation is a party to a merger or consolidation in
which the stockholders of the Corporation receive Merger Consideration, all of
the Merger Consideration shall be deemed to be a Distribution for purposes of
allocating all of such Merger Consideration between the holders of Class A
Common Stock and the holders of Common Stock under this Section 2.
SECTION 4. STOCK SPLITS AND STOCK DIVIDENDS. The Corporation shall not
in any manner subdivide (by stock split, stock dividend or otherwise) or
combine (by stock split, stock dividend or otherwise) the outstanding Common
Shares of one class unless the outstanding Common Shares of the other class
shall be proportionately subdivided or combined. All such subdivisions and
combinations shall be payable only in Class A Common Stock to the holders of
Class A Common Stock and in Common Stock to the holders of Common Stock. In no
event shall a stock split or stock dividend constitute a return of Original
Cost.
SECTION 5. CONVERSION. Immediately prior to the Public Offering Time,
each share of Class A Common Stock outstanding immediately prior to the Public
Offering Time shall be, without further action by the Corporation or the holder
thereof, changed and converted into a number of shares of Common Stock equal to
the sum of the Unreturned Original Cost on each such share of Class A Common
Stock as of the Public Offering Time divided by the Net Public Offering Price.
Each certificate
-2-
86
representing shares of Class A Common Stock shall automatically represent from
and after the Public Offering Time that number of shares of Common Stock into
which such shares of Class A Common Stock have been converted pursuant to the
preceding sentence. When shares of Class A Common Stock have been converted
pursuant to this Section 4, they shall be irrevocably canceled and not
reissued. Following conversion of all of the shares of Class A Common Stock, no
other shares of Class A Common Stock shall be issued, at any time, by the
Corporation.
SECTION 6. REGISTRATION OF TRANSFER. The Corporation shall keep at its
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of Common Shares. Upon the surrender of any
certificate representing shares of any class of Common Shares at such place,
the Corporation shall, at the request of the registered holder of such
certificate, execute and deliver a new certificate or certificates in exchange
therefor representing in the aggregate the number of shares of such class
represented by the surrendered certificate, and the Corporation forthwith shall
cancel such surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of shares of such class
as is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate. The issuance of
new certificates shall be made without charge to the holders of the surrendered
certificates for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such issuance.
SECTION 7. REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder will be
satisfactory) of the ownership and the loss, theft, destruction or mutilation
of any certificate evidencing one or more shares of any class of Common Shares,
and in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that if the
holder is a financial institution or other institutional investor its own
agreement will be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
SECTION 8. NOTICES. All notices referred to herein shall be in
writing, shall be delivered personally or by first class mail, postage prepaid,
and shall be deemed to have been given when so delivered or mailed to the
Corporation at its principal executive offices and to any stockholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder).
SECTION 9. AMENDMENT AND WAIVER. No amendment or waiver of any
provision of this Article Fourth shall be effective without the prior written
consent of the holders of a majority of the then outstanding Common Shares
voting as a single class; provided that no amendment as to any terms or
provisions of, or for the benefit of, any class of Common Shares that adversely
affects the powers, preferences or special rights of such class of Common
Shares shall be effective without the prior consent of the holders of a
majority of the then outstanding shares of such affected class of Common
Shares, voting as a single class.
-3-
87
III. DEFINITIONS
"DISTRIBUTION" means each distribution made by the Corporation to
holders of Common Shares, whether in cash, property or securities of the
Corporation or any other entity and whether by dividend, liquidating
distributions or otherwise; provided that neither of the following shall be a
Distribution: (a) any redemption or repurchase by the Corporation of any Common
Shares for any reason or (b) any recapitalization or exchange of any Common
Shares for other securities of the Corporation, or any subdivision (by stock
split, stock dividend or otherwise) or any combination (by stock split, stock
dividend or otherwise) of any outstanding Common Shares.
"GENERAL CORPORATION LAW" means the General Corporation Law of the
State of Delaware, as amended from time to time.
"MERGER CONSIDERATION" means cash, property or securities of an entity
other than the Corporation received by the stockholders of the Corporation in
any merger or consolidation, valued at the fair market value thereof as
determined by the board of directors of the Corporation.
"NET PUBLIC OFFERING PRICE" means the initial public offering price
per share of Common Stock set forth on the front cover page of the final
prospectus included in the Registration Statement referenced in the definition
of Public Offering Time and in the form first used to confirm sales of the
Common Stock, after deduction for any underwriting discount or commissions, but
without deduction for any expenses, incurred by the Corporation in connection
with the initial public offering.
"ORIGINAL COST" of each share of Class A Common Stock shall be equal
to the amount originally paid for such share when it was issued by the
Corporation (as proportionally adjusted for all stock splits, stock dividends
and other recapitalizations affecting the Class A Common Stock), all such
shares shall be deemed to have an Original Cost equal to $24,900 per share (as
proportionally adjusted for all stock splits, stock dividends and other
recapitalizations affecting the Class A Common Stock).
"PUBLIC OFFERING TIME" means the time the Corporation's Registration
Statement on Form S-1 relating to the initial public offering of its Common
Stock is declared effective under Section 8(a) of the Securities Act of 1933,
as amended, by the Securities and Exchange Commission.
"UNRETURNED ORIGINAL COST" of any share of Class A Common Stock means
an amount equal to the excess, if any, of (a) the Original Cost of such share,
over (b) the aggregate amount of Distributions made by the Corporation that
constitute a return of Original Cost of such share.
IV. PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more
classes or series, the shares of each class or series to have any designations
and powers, preferences, and rights, and qualifications, limitations, and
restrictions thereof as are stated and expressed in this Article IV and in the
resolution or resolutions providing for the issue of such class or series
adopted by the board of directors of the Corporation as hereafter prescribed.
Authority is hereby expressly granted to and vested in the board of
directors of the Corporation to authorize the issuance of the Preferred Stock
from time to time in one or more classes or series, and
-4-
88
with respect to each class or series of the Preferred Stock, to state by the
resolution or resolutions from time to time adopted providing for the issuance
thereof the following:
(i) whether or not the class or series is to have voting
rights, special, or limited, or is to be without voting rights, and
whether or not such class or series is to be entitled to vote as a
separate class either alone or together with the holders of one or
more other classes or series of stock;
(ii) the number of shares to constitute the class or series
and the designations thereof;
(iii)the preferences and relative, participating, optional,
or other special rights, if any, and the qualifications, limitations,
or restrictions thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series shall
be redeemable at the option of the Corporation or the holders thereof
or upon the happening of any specified event, and, if redeemable, the
redemption price or prices (which may be payable in the form of cash,
notes, securities, or other property), and the time or times at which,
and the terms and conditions upon which, such shares shall be
redeemable and the manner of redemption;
(v) whether or not the shares of a class or series shall be
subject to the operation of retirement or sinking funds to be applied
to the purchase or redemption of such shares for retirement, and, if
such retirement or sinking fund or funds are to be established, the
periodic amount thereof, and the terms and provisions relative to the
operation thereof;
(vi) the dividend rate, whether dividends are payable in
cash, stock of the Corporation, or other property, the conditions upon
which and the times when such dividends are payable, the preference to
or the relation to the payment of dividends payable on any other class
or classes or series of stock, whether or not such dividends shall be
cumulative or noncumulative, and if cumulative, the date or dates from
which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which
the holders of any class or series thereof shall be entitled to
receive upon the voluntary or involuntary dissolution of, or upon any
distribution of the assets of, the Corporation;
(viii) whether or not the shares of any class or series, at
the option of the Corporation or the holder thereof or upon the
happening of any specified event, shall be convertible into or
exchangeable for the shares of any other class or classes or of any
other series of the same or any other class or classes of stock,
securities, or other property of the Corporation and the conversion
price or prices or ratio or ratios or the rate or rates at which such
conversion or exchange may be made, with such adjustments, if any, as
shall be stated and expressed or provided for in such resolution or
resolutions; and
(ix) any other special rights and protective provisions with
respect to any class or series as may to the board of directors of the
Corporation seem advisable.
-5-
89
The shares of each class or series of the Preferred Stock may vary
from the shares of any other class or series thereof in any or all of the
foregoing respects and in any other manner. The board of directors of the
Corporation may increase the number of shares of the Preferred Stock designated
for any existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The board of directors of the Corporation may decrease
the number of shares of the Preferred Stock designated for any existing class
or series by a resolution subtracting from such class or series authorized and
unissued shares of the Preferred Stock designated for such existing class or
series, and the shares so subtracted shall become authorized, unissued, and
undesignated shares of the Preferred Stock. The number of authorized shares of
Preferred Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the outstanding Common Stock, without a vote of the holders of the
Preferred Stock, or of any series thereof, unless a vote of any such holder is
required pursuant to any Preferred Stock Series Resolution.
V. NO PREEMPTIVE RIGHTS
No holder of shares of stock of the Corporation shall have any
preemptive or other rights, except such rights as are expressly provided by
contract, to purchase or subscribe for or receive any shares of any class, or
series thereof, of stock of the Corporation, whether now or hereafter
authorized, or any warrants, options, bonds, debentures or other securities
convertible into, exchangeable for or carrying any right to purchase any shares
of any class, or series thereof, of stock; but such additional shares of stock
and such warrants, options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase any shares of any
class, or series thereof, of stock may be issued or disposed of by the board of
directors to such persons, and on such terms and for such lawful consideration,
as in its discretion it shall deem advisable or as to which the Corporation
shall have by binding contract agreed.
VI. REGISTERED OWNER
The Corporation shall be entitled to treat the person in whose name
any share of its stock is registered as the owner thereof for all purposes and
shall not be bound to recognize any equitable or other claim to, or interest
in, such share on the part of any other person, whether or not the Corporation
shall have notice thereof, except as expressly provided by applicable law.
VII. GENERAL
Subject to the foregoing provisions of this Amended and Restated
Certificate of Incorporation, the Corporation may issue shares of its Preferred
Stock and Common Stock from time to time for such consideration (not less than
the par value thereof) as may be fixed by the board of directors of the
Corporation, which is expressly authorized to fix the same in its absolute
discretion subject to the foregoing conditions. Shares so issued for which the
consideration shall have been paid or delivered to the Corporation shall be
deemed fully paid stock and shall not be liable to any further call or
assessment thereon, and the holders of such shares shall not be liable for any
further payments in respect of such shares.
The Corporation shall have authority to create and issue rights and
options entitling their holders to purchase shares of the Corporation's capital
stock of any class or series or other securities of the
-6-
90
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the board of directors of the Corporation. The board of directors
of the Corporation shall be empowered to set the exercise price, duration,
times for exercise, and other terms of such rights or options; provided,
however, that the consideration to be received for any shares of capital stock
subject thereto shall not be less than the par value thereof.
FIFTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
I. DIRECTORS
The number, classification, and terms of the board of directors of the
Corporation and the procedures to elect directors, to remove directors, and to
fill vacancies in the board of directors shall be as follows:
(a) The number of directors that shall constitute the whole
board of directors shall from time to time be fixed exclusively by the
board of directors by a resolution adopted by a majority of the whole
board of directors serving at the time of that vote. In no event shall
the number of directors that constitute the whole board of directors
be fewer than three. No decrease in the number of directors shall have
the effect of shortening the term of any incumbent director. Directors
of the Corporation need not be elected by written ballot unless the
by-laws of the Corporation otherwise provide.
(b) The board of directors of the Corporation shall be
divided into three classes designated Class I, Class II, and Class
III, respectively, all as nearly equal in number as possible, with
each director then in office receiving the classification that at
least a majority of the board of directors designates. The initial
term of office of directors of Class I shall expire at the annual
meeting of stockholders of the Corporation in 1997, of Class II shall
expire at the annual meeting of stockholders of the Corporation in
1998, and of Class III shall expire at the annual meeting of
stockholders of the Corporation in 1999, and in all cases as to each
director until his successor is elected and qualified or until his
earlier death, resignation or removal. At each annual meeting of
stockholders beginning with the annual meeting of stockholders in
1997, each director elected to succeed a director whose term is then
expiring shall hold his office until the third annual meeting of
stockholders after his election and until his successor is elected and
qualified or until his earlier death, resignation or removal. If the
number of directors that constitutes the whole board of directors is
changed as permitted by this Article V, the majority of the whole
board of directors that adopts the change shall also fix and determine
the number of directors comprising each class; provided, however, that
any increase or decrease in the number of directors shall be
apportioned among the classes as equally as possible.
(c) Vacancies in the board of directors resulting from death,
resignation, retirement, disqualification, removal from office, or
other cause and newly-created directorships resulting from any
increase in the authorized number of directors may be filled by no
less than a majority vote of the remaining directors then in office,
though less than a quorum, who are designated to represent the same
class or classes of stockholders that the vacant position, when
filled, is to represent or by the sole remaining director (but not by
the stockholders except as required by
-7-
91
law), and each director so chosen shall receive the classification of
the vacant directorship to which he has been appointed or, if it is a
newly-created directorship, shall receive the classification that at
least a majority of the board of directors designates and shall hold
office until the first meeting of stockholders held after his
election for the purpose of electing directors of that classification
and until his successor is elected and qualified or until his earlier
death, resignation, or removal from office.
(d) A director of any class of directors of the Corporation
may be removed before the expiration date of that director's term of
office, only for cause, by an affirmative vote of the holders of not
less than eighty percent (80%) of the votes of the outstanding shares
of the class or classes or series of stock then entitled to be voted
at an election of directors of that class or series, voting together
as a single class, cast at the annual meeting of stockholders or at
any special meeting of stockholders called by a majority of the whole
board of directors for this purpose.
II. POWER TO AMEND BY-LAWS
The by-laws may be altered or repealed and new by-laws may be adopted
(a) at any annual or special meeting of stockholders if notice of the proposed
alteration, repeal or adoption of the new by-law or by-laws be contained in the
notice of such annual or special meeting by the affirmative vote of a majority
of the stock issued and outstanding and entitled to vote thereat, voting
together as a single class, or (b) by the affirmative vote of a majority of the
members present at any regular meeting of the board of directors, or at any
special meeting of the board of directors, without any action on the part of
the stockholders, if notice of the proposed alteration, repeal or adoption of
the new by-law or by-laws be contained in the notice of such regular or special
meeting.
III. STOCKHOLDERS' ACTION -- SPECIAL MEETINGS
After October 15, 1996, no action required to be taken or that may be
taken at any meeting of common stockholders of the Corporation may be taken
without a meeting, and, after such date, the power of common stockholders to
consent in writing, without a meeting, to the taking of any action is
specifically denied.
Special meetings of the stockholders of the Corporation, and any
proposals to be considered at such meetings, may be called and proposed
exclusively by (i) the Chairman of the Board, (ii) the President or (iii) the
board of directors, pursuant to a resolution approved by a majority of the
members of the board of directors at the time in office, and no stockholder of
the Corporation shall require the board of directors to call a special meeting
of common stockholders or to propose business at a special meeting of
stockholders. Except as otherwise required by law or regulation, no business
proposed by a stockholder to be considered at an annual meeting of the
stockholders (including the nomination of any person to be elected as a
director of the Corporation) shall be considered by the stockholders at that
meeting unless, no later than ninety (90) days before the annual meeting of
stockholders or (if later) ten days after the first public notice of that
meeting is sent to stockholders, the Corporation receives from the stockholder
proposing that business a written notice that sets forth (1) the nature of the
proposed business with reasonable particularity, including the exact text of
any proposal to be presented for adoption, and the reasons for conducting that
business at the annual meeting; (2) with respect to each such stockholder, that
stockholder's name and address (as they appear on the records of the
Corporation), business address
-8-
92
and telephone number, residence address and telephone number, and the number of
shares of each class of stock of the Corporation beneficially owned by that
stockholder; (3) any interest of the stockholder in the proposed business; (4)
the name or names of each person nominated by the stockholder to be elected or
re-elected as a director, if any; and (5) with respect to each nominee, that
nominee's name, business address and telephone number, and residence address
and telephone number, the number of shares, if any, of each class of stock of
the Corporation owned directly and beneficially by that nominee, and all
information relating to that nominee that is required to be disclosed in
solicitations of proxies for elections of directors, or is otherwise required,
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the AExchange Act") (or any provision of law subsequently replacing
Regulation 14A), together with a duly acknowledged letter signed by the nominee
stating his or her acceptance of the nomination by that stockholder, stating
his or her intention to serve as director if elected, and consenting to being
named as a nominee for director in any proxy statement relating to such
election. The person presiding at the annual meeting shall determine whether
business (including the nomination of any person as a director) has been
properly brought before the meeting and, if the facts so warrant, shall not
permit any business (or voting with respect to any particular nominee) to be
transacted that has not been properly brought before the meeting.
Notwithstanding any other provisions of this Amended and Restated Certificate
of Incorporation or any provision of law that might otherwise permit a lesser
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the capital stock of the Corporation required by
law or by this Amended and Restated Certificate of Incorporation, the
affirmative vote of the holders of not less than eighty percent (80%) of the
shares of the Corporation then entitled to be voted in an election of
directors, voting together as a single class, shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article Fifth.
SIXTH: ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS AND
INDEMNIFICATION
I. ELIMINATION OF CERTAIN LIABILITY OF DIRECTORS
No director shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty by such director
as a director, except for liability (a) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (b) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the General Corporation Law of the
State of Delaware, or (d) for any transaction from which the director derived
an improper personal benefit. Any amendment or repeal of this Part I of this
Article Sixth shall be prospective only, and neither the amendment nor repeal
of this Part I of this Article Sixth shall eliminate or reduce the effect of
this Part I of this Article Sixth in respect of any matter occurring, or any
cause of action, suit or claim that, but for this Part I of this Article Sixth
would accrue or arise, prior to such amendment or repeal. If the Delaware
General Corporation Law hereafter is amended to authorize corporate action
further eliminating or limiting the liability of directors, then the liability
of a director of the Corporation, in addition to the limitation on personal
liability provided herein, shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended from time to
time.
II. INDEMNIFICATION AND INSURANCE
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil,
-9-
93
criminal, administrative or investigative (hereinafter a Aproceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was or has agreed to become a director or officer of the
Corporation or is or was serving or has agreed to serve at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director or officer, or in any
other capacity while serving or having agreed to serve as a director or
officer, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than said Law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including, without limitation, attorneys' fees, judgments, fines, excise taxes
pursuant to the Employee Retirement Income Security Act of 1974 or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered
by such person in connection therewith and such indemnification shall continue
as to a person who has ceased to serve in the capacity which initially entitled
such person to indemnity hereunder and shall inure to the benefit of his or her
heirs, executors and administrators. The right to indemnification conferred in
this Part II of this Article Sixth shall be a contract right and shall include
the right to be paid by the Corporation the expenses incurred in defending any
such proceeding in advance of its final disposition; provided, however, that,
if the Delaware General Corporation Law requires, the payment of such expenses
incurred by a current, former or proposed director or officer in his or her
capacity as a director or officer or proposed director or officer (and not in
any other capacity in which service was or is or has been agreed to be rendered
by such person while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final disposition of a
proceeding shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such indemnified person, to repay all amounts
so advanced if it shall ultimately be determined that such indemnified person
is not entitled to be indemnified under this Part II or otherwise. The
Corporation may, by action of its board of directors, provide indemnification
to employees and agents of the Corporation, individually or as a group, with
the same scope and effect as the foregoing indemnification of directors and
officers.
SECTION 2. RIGHT OF CLAIMANT TO BRING SUIT. If a written claim from or
on behalf of an indemnified party under Section 1 of this Part II is not paid
in full by the Corporation within thirty days after such written claim has been
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standard of conduct which makes it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
board of directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the Corporation
(including its board of directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
-10-
94
SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and
the advancement and payment of expenses conferred in this Part II shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of this Amended and Restated Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 4. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any person who is or was serving as a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, against any expense, liability
or loss, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the Delaware General
Corporation Law.
SECTION 5. SAVINGS CLAUSE. If this Part II or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify and hold harmless each director and
officer of the Corporation, as to costs, charges and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative to the full extent permitted by any applicable portion of this
Part II that shall not have been invalidated and to the fullest extent
permitted by applicable law.
SECTION 6. DEFINITIONS. For purposes of this Part II, reference to the
"Corporation" shall include, in addition to the Corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger prior to (or, in the case of an entity specifically
designated in a resolution of the board of directors, after) the adoption
hereof and which, if its separate existence had continued, would have had the
power and authority to indemnify its directors, officers and employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Part II with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
SEVENTH: No contract or transaction between the Corporation and one or
more of its directors, officers, or stockholders or between the Corporation and
any person (as used herein "person" means any corporation, partnership,
association, firm, trust, joint venture, political subdivision, or
instrumentality) or other organization in which one or more of its directors,
officers, or stockholders are directors, officers, or stockholders, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or any committee thereof which authorizes the contract or
transaction, or solely because his, her, or their votes are counted for such
purpose, if: (i) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the board
of directors or the committee, and the board of directors or the committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (ii) the material facts as to his or her
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
-11-
95
transaction is specifically approved in good faith by majority vote of the
stockholders; or (iii) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved, or ratified by the board
of directors, a committee thereof, or the stockholders. Interested directors
may be counted in determining the presence of a quorum at a meeting of the
board of directors or of a committee which authorizes the contract or
transaction.
EIGHTH: The Corporation reserves the right to amend, change, or repeal
any provision contained in the Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed by law, and all rights
and powers conferred herein on stockholders, directors, and officers are
subject to this reserved power.
-12-
96
EXHIBIT C
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT is entered into as of _________, 1997, between
National-Oilwell, Inc., a Delaware corporation ("NOI"), and Dreco Energy
Services Ltd., an Alberta corporation ("Dreco").
RECITALS
WHEREAS, pursuant to a Combination Agreement dated as of May 13, 1997,
by and between NOI and Dreco (such agreement as it may be amended or restated
is hereinafter referred to as the "Combination Agreement") the parties agreed
that on the Effective Date (as defined in the Combination Agreement), NOI and
Dreco would execute and deliver a Support Agreement containing the terms and
conditions set forth in Exhibit C to the Combination Agreement together with
such other terms and conditions as may be agreed to by the parties to the
Combination Agreement acting reasonably.
WHEREAS, pursuant to an arrangement (the "Arrangement") effected by
Articles of Arrangement dated _____, 1997 filed pursuant to the Business
Corporations Act (Alberta) (or any successor or other corporate statute by
which Dreco may in the future be governed) (the "Act") each issued and
outstanding class "A" common share of Dreco (a "Dreco Common Share") was
exchanged for ___ issued and outstanding Exchangeable Shares of Dreco (the
"Exchangeable Shares"), and thereafter, Dreco's sole issued and outstanding
Preferred Share was exchanged by the holder thereof for one issued and
outstanding Dreco Common Share.
WHEREAS, the above-mentioned Articles of Arrangement set forth the
rights, privileges, restrictions and conditions (collectively the "Exchangeable
Share Provisions") attaching to the Exchangeable Shares.
WHEREAS, the parties hereto desire to make appropriate provision and to
establish a procedure whereby NOI will take certain actions and make certain
payments and deliveries necessary to ensure that Dreco will be able to make
certain payments and to deliver or cause to be delivered shares of NOI Common
Stock in satisfaction of the obligations of Dreco under the Exchangeable Share
Provisions with respect to the payment and satisfaction of dividends,
Liquidation Amounts, Retraction Prices and Redemption Prices, all in accordance
with the Exchangeable Share Provisions.
NOW, THEREFORE, in consideration of the respective covenants and
agreements provided in this agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
97
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. Each term denoted herein by initial capital
letters and not otherwise defined herein shall have the meaning attributed
thereto in the Exchangeable Share Provisions, unless the context requires
otherwise.
1.2 Interpretation Not Affected by Headings, Etc. The division of
this agreement into articles, sections and paragraphs and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this agreement.
1.3 Number, Gender, Etc. Words importing the singular number only
shall include the plural and vice versa. Words importing the use of any gender
shall include all genders.
1.4 Date for Any Action. If any date on which any action is required
to be taken under this agreement is not a Business Day, such action shall be
required to be taken on the next succeeding Business Day.
ARTICLE II
COVENANTS OF NOI AND Dreco
2.1 Covenants of NOI Regarding Exchangeable Shares. So long as any
Exchangeable Shares are outstanding, NOI will:
(a) not declare or pay any dividend on NOI Common Stock unless
(A) Dreco will have sufficient assets, funds and other property available to
enable the due declaration and the due and punctual payment in accordance with
applicable law of an equivalent dividend on the Exchangeable Shares and (B)
subsection 2.1(b) shall be complied with in connection with such dividend;
(b) cause Dreco to declare simultaneously with the declaration
of any dividend on NOI Common Stock an equivalent dividend on the Exchangeable
Shares and, when such dividend is paid on NOI Common Stock, cause Dreco to pay
simultaneously therewith such equivalent dividend on the Exchangeable Shares,
in each case in accordance with the Exchangeable Share Provisions;
(c) advise Dreco sufficiently in advance of the declaration by
NOI of any dividend on NOI Common Stock and take all such other actions as are
necessary, in cooperation with Dreco, to ensure that the respective declaration
date, record date and payment date for a dividend on the Exchangeable Shares
shall be the same as the record date, declaration date and payment date for the
corresponding dividend on NOI Common Stock and that such dividend on the
Exchangeable Shares will correspond with any requirement of the principal stock
exchange on which the Exchangeable Shares are listed;
2
98
(d) ensure that the record date for any dividend declared on
NOI Common Stock is not less than ten Business Days after the declaration date
for such dividend;
(e) take all such actions and do all such things as are
necessary or desirable to enable and permit Dreco, in accordance with
applicable law, to pay and otherwise perform its obligations with respect to
the satisfaction of the Liquidation Amount in respect of each issued and
outstanding Exchangeable Share upon the liquidation, dissolution or winding-up
of Dreco or any other distribution of the assets of Dreco for the purpose of
winding up its affairs, including without limitation all such actions and all
such things as are necessary or desirable to enable and permit Dreco to cause
to be delivered shares of NOI Common Stock to the holders of Exchangeable
Shares in accordance with the provisions of Article 5 of the Exchangeable
Share Provisions;
(f) take all such actions and do all such things as are
necessary or desirable to enable and permit Dreco, in accordance with
applicable law, to pay and otherwise perform its obligations with respect to
the satisfaction of the Retraction Price and the Redemption Price, including
without limitation all such actions and all such things as are necessary or
desirable to enable and permit Dreco to cause to be delivered shares of NOI
Common Stock to the holders of Exchangeable Shares, upon the retraction or
redemption of the Exchangeable Shares in accordance with the provisions of
Article 6 or Article 7 of the Exchangeable Share Provisions, as the case may
be; and
(g) not exercise its vote as a shareholder to initiate the
voluntary liquidation, dissolution or winding-up of Dreco nor take any action
or omit to take any action that is designed to result in the liquidation,
dissolution or winding-up of Dreco.
2.2 Segregation of Funds. NOI will cause Dreco to deposit a
sufficient amount of funds in a separate account and segregate a sufficient
amount of such assets and other property as is necessary to enable Dreco to pay
or otherwise satisfy the applicable dividends, Liquidation Amount, Retraction
Price or Redemption Price, in each case for the benefit of holders from time to
time of the Exchangeable Shares, and Dreco will use such funds, assets and
other property so segregated exclusively for the payment of dividends and the
payment or other satisfaction of the Liquidation Amount, the Retraction Price
or the Redemption Price, as applicable, net of any corresponding withholding
tax obligations and for the remittance of such withholding tax obligations.
2.3 Reservation of Shares of NOI Common Stock. NOI hereby
represents, warrants and covenants that it has irrevocably reserved for
issuance and will at all times keep available, free from pre-emptive and other
rights, out of its authorized and unissued capital stock such number of shares
of NOI Common Stock (or other shares or securities into which NOI Common Stock
may be reclassified or changed as contemplated by section 2.7 hereof) (a) as is
equal to the sum of (i) the number of Exchangeable Shares issued and
outstanding from time to time and (ii) the number of Exchangeable Shares
issuable upon the exercise of all rights to acquire Exchangeable Shares
outstanding from time to time and (b) as are now
3
99
and may hereafter be required to enable and permit Dreco to meet its
obligations hereunder, under the Voting and Exchange Trust Agreement, under the
Exchangeable Share Provisions and under any other security or commitment
pursuant to the Arrangement with respect to which NOI may now or hereafter be
required to issue shares of NOI Common Stock.
2.4 Notification of Certain Events. In order to assist NOI to comply
with its obligations hereunder, Dreco will give NOI notice of each of the
following events at the time set forth below:
(a) in the event of any determination by the Board of
Directors of Dreco to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to Dreco or to effect any other
distribution of the assets of Dreco among its shareholders for the purpose of
winding-up its affairs, at least [60] days prior to the proposed effective date
of such liquidation, dissolution, winding-up or other distribution;
(b) immediately, upon the earlier of (A) receipt by Dreco of
notice of, and (B) Dreco otherwise becoming aware of, any threatened or
instituted claim, suit, petition or other proceedings with respect to the
involuntary liquidation, dissolution or winding-up of Dreco or to effect any
other distribution of the assets of Dreco among its shareholders for the
purpose of winding-up its affairs;
(c) immediately, upon receipt by Dreco of a Retraction Request
(as defined in the Exchangeable Share Provisions);
(d) at least [130] days prior to any accelerated Automatic
Redemption Date determined by the Board of Directors of Dreco in accordance
with the Exchangeable Share Provisions; and
(e) as soon as practicable upon the issuance by Dreco of any
Exchangeable Shares or rights to acquire Exchangeable Shares.
2.5 Delivery of Shares of NOI Common Stock. In furtherance of its
obligations hereunder, upon notice of any event which requires Dreco to cause
to be delivered shares of NOI Common Stock to any holder of Exchangeable
Shares, NOI shall forthwith issue and deliver the requisite shares of NOI
Common Stock to or to the order of the former holder of the surrendered
Exchangeable Shares, as Dreco shall direct. All such shares of NOI Common
Stock shall be duly issued as fully paid and non-assessable and shall be free
and clear of any lien, claim, encumbrance, security interest or adverse claim
or interest.
2.6 Qualification of Shares of NOI Common Stock. NOI covenants that
if any shares of NOI Common Stock to be issued and delivered hereunder
(including for greater certainty, pursuant to the Exchangeable Share
Provisions, or pursuant to the Exchange Put Right, the Exchange Right or the
Automatic Exchange Rights (both as defined in the Voting and Exchange Trust
Agreement)) require registration or qualification with or approval of or
4
100
the filing of any document including any prospectus or similar document, the
taking of any proceeding with or the obtaining of any order, ruling or consent
from any governmental or regulatory authority under any Canadian or United
States federal, provincial or state law or regulation or pursuant to the rules
and regulations of any regulatory authority, or the fulfillment of any other
legal requirement (collectively, the "Applicable Laws") before such shares may
be issued and delivered by NOI to the initial holder thereof (other than Dreco)
or in order that such shares may be freely traded thereafter (other than any
restrictions on transfer by reason of a holder being a "control person" of NOI
for purposes of Canadian federal or provincial securities law or an "affiliate"
of NOI for purposes of United States federal or state securities law), NOI will
in good faith expeditiously take all such actions and do all such things as are
necessary to cause such shares of NOI Common Stock to be and remain duly
registered, qualified or approved. NOI represents and warrants that it has in
good faith taken all actions and done all things as are necessary under
Applicable Laws as they exist on the date hereof to cause the shares of NOI
Common Stock to be issued and delivered hereunder (including, for greater
certainty, pursuant to the Exchangeable Share Provisions or pursuant to the
Exchange Put Right, the Exchange Right and the Automatic Exchange Rights) to be
freely tradeable thereafter (other than restrictions on transfer by reason of a
holder being a "control person" of NOI for the purposes of Canadian federal and
provincial securities law or an "affiliate" of NOI for purposes of United
States federal or state securities law). NOI will in good faith expeditiously
take all such actions and do all such things as are necessary to cause all
shares of NOI Common Stock to be delivered hereunder (including, for greater
certainty, pursuant to Exchangeable Share Provisions or pursuant to the
Exchange Put Right, the Exchange Right or the Automatic Exchange Rights) to be
listed, quoted or posted for trading on all stock exchanges and quotation
systems on which such shares are listed, quoted or posted for trading at such
time. NOI will in good faith expeditiously take all such action and do all
such things as are necessary to cause all Exchangeable Shares to be and to
continue to be listed and posted for trading on a stock exchange in Canada.
2.7 Equivalence.
(a) NOI will not, without the prior approval of Dreco and the
prior approval of the holders of the Exchangeable Shares given in accordance
with Section 10.1 of the Exchangeable Share Provisions:
(i) issue or distribute shares of NOI Common Stock (or
securities exchangeable for or convertible into or carrying rights to acquire
shares of NOI Common Stock) to the holders of all or substantially all of the
then outstanding NOI Common Stock by way of stock dividend or other
distribution; or
(ii) issue or distribute rights, options or warrants to
the holders of all or substantially all of the then outstanding shares of NOI
Common Stock entitling them to subscribe for or to purchase shares of NOI
Common Stock (or securities exchangeable for or convertible into or carrying
rights to acquire shares of NOI Common Stock); or
5
101
(iii) issue or distribute to the holders of all or
substantially all of the then outstanding shares of NOI Common Stock (A) shares
or securities of NOI of any class other than NOI Common Stock (other than
shares convertible into or exchangeable for or carrying rights to acquire
shares of NOI Common Stock), (B) rights, options or warrants other than those
referred to in subsection 2.7(a)(ii) above, (C) evidences of indebtedness of
NOI or (D) assets of NOI;
unless
(iv) Dreco is permitted under applicable law to issue or
distribute the economic equivalent on a per share basis of such rights,
options, warrants, securities, shares, evidences of indebtedness or other
assets to holders of the Exchangeable Shares; and
(v) Dreco shall issue or distribute such rights,
options, warrants, securities, shares, evidences of indebtedness or other
assets simultaneously to holders of the Exchangeable Shares.
(b) NOI will not without the prior approval of Dreco and the
prior approval of the holders of the Exchangeable Shares given in accordance
with Section 10.1 of the Exchangeable Share Provisions:
(i) subdivide, redivide or change the then outstanding
shares of NOI Common Stock into a greater number of shares of NOI Common Stock;
or
(ii) reduce, combine or consolidate or change the then
outstanding shares of NOI Common Stock into a lesser number of shares of NOI
Common Stock; or
(iii) reclassify or otherwise change the shares of NOI
Common Stock or effect an amalgamation, merger, reorganization or other
transaction affecting the shares of NOI Common Stock;
unless
(iv) Dreco is permitted under applicable law to
simultaneously make the same or an economically equivalent change to, or in the
rights of holders of, the Exchangeable Shares and
(v) the same or an economically equivalent change is
made to, or in the rights of the holders of, the Exchangeable Shares.
(c) NOI will ensure that the record date for any event
referred to in section 2.7(a) or 2.7(b) above, or (if no record date is
applicable for such event) the effective date for any such event, is not less
than 20 Business Days after the date on which such event is
6
102
declared or announced by NOI (with simultaneous notice thereof to be given by
NOI to Dreco).
2.8 Tender Offers, Etc. In the event that a tender offer, share
exchange offer, issuer bid, take-over bid or similar transaction with respect
to NOI Common Stock (an "Offer") is proposed by NOI or is proposed to NOI or
its shareholders and is recommended by the Board of Directors of NOI, or is
otherwise effected or to be effected with the consent or approval of the Board
of Directors of NOI, NOI shall, in good faith, take all such actions and do all
such things as are necessary or desirable to enable and permit holders of
Exchangeable Shares to participate in such Offer to the same extent and on an
equivalent basis as the holders of shares of NOI Common Stock, without
discrimination, including, without limiting the generality of the foregoing,
NOI will use its good faith efforts expeditiously to (and shall, in the case of
a transaction proposed by NOI or where NOI is a participant in the negotiation
thereof) ensure that holders of Exchangeable Shares may participate in all such
Offers without being required to retract Exchangeable Shares as against Dreco
(or, if so required, to ensure that any such retraction shall be effective only
upon, and shall be conditional upon, the closing of the Offer and only to the
extent necessary to tender or deposit to the Offer).
2.9 Ownership of Outstanding Shares. Without the prior approval of
Dreco and the prior approval of the holders of the Exchangeable Shares given in
accordance with Section 10.1 of the Exchangeable Share Provisions, NOI
covenants and agrees in favor of Dreco that, as long as any outstanding
Exchangeable Shares are owned by any person or entity other than NOI or any of
its Subsidiaries, NOI will be and remain the direct or indirect beneficial
owner of all issued and outstanding Dreco Common Shares and of at least 50.1%
of all other securities of Dreco carrying or entitled to voting rights in any
circumstances generally for the election of directors, in each case other than
the Exchangeable Shares.
2.10 NOI Not to Vote Exchangeable Shares. NOI covenants and agrees
that it will appoint and cause to be appointed proxy holders with respect to
all Exchangeable Shares held by NOI and its Subsidiaries for the sole purpose
of attending each meeting of holders of Exchangeable Shares in order to be
counted as part of the quorum for each such meeting. NOI further covenants and
agrees that it will not, and will cause its Subsidiaries not to, exercise any
voting rights which may be exercisable by holders of Exchangeable Shares from
time to time pursuant to the Exchangeable Share Provisions or pursuant to the
provisions of the Act with respect to any Exchangeable Shares held by it or by
its Subsidiaries in respect of any matter considered at any meeting of holders
of Exchangeable Shares.
2.11 Due Performance. On and after the Effective Date, NOI shall duly
and timely perform all of its obligations provided for in the Plan of
Arrangement, including any obligations that may arise upon the exercise of
NOI's rights under the Exchangeable Share Provisions.
7
103
ARTICLE III
GENERAL
3.1 Term. This agreement shall come into force and be effective as
of the date hereof and shall terminate and be of no further force and effect at
such time as no Exchangeable Shares (or securities or rights convertible into
or exchangeable for or carrying rights to acquire Exchangeable Shares) are held
by any party other than NOI and any of its Subsidiaries.
3.2 Changes in Capital of NOI and Dreco. Notwithstanding the
provisions of section 3.4 hereof, at all times after the occurrence of any
event effected pursuant to section 2.7 or 2.8 hereof, as a result of which
either NOI Common Stock or the Exchangeable Shares or both are in any way
changed, this agreement shall forthwith be amended and modified as necessary in
order that it shall apply with full force and effect, mutatis mutandis, to all
new securities into which NOI Common Stock or the Exchangeable Shares or both
are so changed, and the parties hereto shall execute and deliver an agreement
in writing giving effect to and evidencing such necessary amendments and
modifications.
3.3 Severability. If any provision of this agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this agreement shall not in any way be affected or impaired
thereby and this agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
3.4 Amendments, Modifications, Etc. This agreement may not be
amended or modified except by an agreement in writing executed by Dreco and NOI
and approved by the holders of the Exchangeable Shares in accordance with
Section 10.1 of the Exchangeable Share Provisions.
3.5 Ministerial Amendments. Notwithstanding the provisions of
section 3.4, the parties to this agreement may in writing, at any time and from
time to time, without the approval of the holders of the Exchangeable Shares,
amend or modify this agreement for the purposes of:
(a) adding to the covenants of either or both parties for the
protection of the holders of the Exchangeable Shares;
(b) making such amendments or modifications not inconsistent
with this agreement as may be necessary or desirable with respect to matters or
questions which, in the opinion of the board of directors of each of Dreco and
NOI, it may be expedient to make, provided that each such board of directors
shall be of the opinion that such amendments or modifications will not be
prejudicial to the interests of the holders of the Exchangeable Shares; or
8
104
(c) making such changes or corrections which, on the advice of
counsel to Dreco and NOI, are required for the purpose of curing or correcting
any ambiguity or defect or inconsistent provision or clerical omission or
mistake or manifest error; provided that the boards of directors of each of
Dreco and NOI shall be of the opinion that such changes or corrections will not
be prejudicial to the interests of the holders of the Exchangeable Shares.
3.6 Meeting to Consider Amendments. Dreco, at the request of NOI,
shall call a meeting or meetings of the holders of the Exchangeable Shares for
the purpose of considering any proposed amendment or modification requiring
approval of such shareholders. Any such meeting or meetings shall be called
and held in accordance with the by-laws of Dreco, the Exchangeable Share
Provisions and all applicable laws.
3.7 Amendments Only in Writing. No amendment to or modification or
waiver of any of the provisions of this agreement otherwise permitted hereunder
shall be effective unless made in writing and signed by both of the parties
hereto.
3.8 Inurement. This agreement shall be binding upon and inure to the
benefit of the parties hereto and the holders, from time to time, of
Exchangeable Shares and each of their respective heirs, successors and assigns.
3.9 Notices to Parties. All notices and other communications between
the parties shall be in writing and shall be deemed to have been given if
delivered personally or by confirmed telecopy to the parties at the following
addresses (or at such other address for either such party as shall be specified
in like notice):
(a) if to NOI to: National-Oilwell, Inc., 5555 San Felipe,
P.O. Box 4368 (77210), Houston, TX 77210, Attention: President, Facsimile No.
713/960-5237, with required copies to Morgan, Lewis & Bockius LLP, 2000 One
Logan Square, Philadelphia, PA 19103, Attention: David R. King, Esq.,
Facsimile No. 215/963-5299, and to Stikeman, Elliott, Suite 5300, P.O. Box 85,
Commerce Court West, Toronto, Ontario, Canada M5L 1B9, Attention: Ian Douglas,
Esq., Facsimile No. 416/947-0866.
(b) if to Dreco to: Dreco Energy Services Ltd., #1340 Weber
Centre, 555 Calgary Trail, Edmonton, Canada T6H 5P9, Attention: President,
Facsimile No. 403/438-8256, with required copies to Fulbright & Jaworski
L.L.P., 1301 McKinney, Suite 5100, Houston, TX 77010, Attention: Robert F.
Gray, Jr., Facsimile No. 713/651-5246, and to Blake, Cassells & Graydon, 3500
Bankers Hall East, 855-2nd Street S.W., Calgary, Alberta, Canada T2P 4J8,
Attention: Patrick C. Finnerty, Esq., Facsimile No. 403/260-9700.
Any notice or other communication given personally shall be
deemed to have been given and received upon delivery thereof and if given by
telecopy shall be deemed to have been given and received on the date of
confirmed receipt thereof, unless such day is not
9
105
a Business Day, in which case it shall be deemed to have been given and
received upon the immediately following Business Day.
3.10 Counterparts. This agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which taken together
shall constitute one and the same instrument.
3.11 Jurisdiction. This agreement shall be construed and enforced in
accordance with the laws of the Province of Alberta and the laws of Canada
applicable therein.
3.12 Attornment. NOI agrees that any action or proceeding arising out
of or relating to this agreement may be instituted in the courts of Alberta,
waives any objection which it may have now or hereafter to the venue of any
such action or proceeding, irrevocably submits to the jurisdiction of such
courts in any such action or proceeding, agrees to be bound by any judgment of
such courts and not to seek, and hereby waives, any review of the merits of any
such judgment by the courts of any other jurisdiction and hereby appoints Dreco
at its registered office in the Province of Alberta as NOI's attorney for
service of process.
10
106
IN WITNESS WHEREOF, NOI and Dreco have caused this agreement to be
signed by their respective officers thereunder duly authorized, all as of the
date first written above.
NATIONAL-OILWELL, INC.
By:
----------------------------------
Joel V. Staff
President
DRECO ENERGY SERVICES LTD.
By:
----------------------------------
Robert L. Phillips
President
11
107
EXHIBIT D
VOTING AND EXCHANGE TRUST AGREEMENT
THIS VOTING AND EXCHANGE TRUST AGREEMENT is entered into as of
___________, 1997, by and between National-Oilwell, Inc., a Delaware
corporation ("NOI"), Dreco Energy Services Ltd., an Alberta corporation
("Dreco"), and ________ Trust Company, a Canadian trust company ("Trustee").
WHEREAS, pursuant to a Combination Agreement dated as of May 13, 1997,
by and between NOI and Dreco (such agreement as it may be amended or restated
is hereinafter referred to as the "Combination Agreement") the parties agreed
that on the Effective Date (as defined in the Combination Agreement), NOI and
Dreco would execute and deliver a Voting and Exchange Trust Agreement
containing the terms and conditions set forth in Exhibit D to the Combination
Agreement together with such other terms and conditions as may be agreed to by
the parties to the Combination Agreement acting reasonably.
WHEREAS, pursuant to an arrangement (the "Arrangement") effected by
Articles of Arrangement dated ______, 1997 filed pursuant to the Business
Corporations Act (Alberta) (or any successor or other corporate statute by
which Dreco may in the future be governed) (the "Act"), each issued and
outstanding class "A" common share of Dreco (a "Dreco Common Share") was
exchanged for ___ issued and outstanding Exchangeable Shares of Dreco (the
"Exchangeable Shares"), and thereafter, Dreco's sole issued and outstanding
Class A Preferred Share was exchanged by the holder thereof for one issued and
outstanding Dreco Common Share.
WHEREAS, the above-mentioned Articles of Arrangement set forth the
rights, privileges, restrictions and conditions attaching to the Exchangeable
Shares (collectively, the "Exchangeable Share Provisions").
WHEREAS, NOI is to provide voting rights in NOI to each holder (other
than NOI and its Subsidiaries) from time to time of Exchangeable Shares, such
voting rights per Exchangeable Share to be equivalent to the voting rights per
share of NOI Common Stock.
WHEREAS, NOI is to grant to and in favor of the holders (other than NOI
and its Subsidiaries) from time to time of Exchangeable Shares the right, in
the circumstances set forth herein, to require NOI to purchase from each such
holder all or any part of the Exchangeable Shares held by the holder.
WHEREAS, the parties desire to make appropriate provision and to
establish a procedure whereby voting rights in NOI shall be exercisable by
holders (other than NOI and its Subsidiaries) from time to time of Exchangeable
Shares by and through the Trustee, which will hold legal title to one share of
NOI Special Voting Stock (the "NOI Special Voting Stock") to which voting
rights attach for the benefit of such holders and whereby the
108
rights to require NOI to purchase Exchangeable Shares from the holders thereof
(other than NOI and its Subsidiaries) shall be exercisable by such holders from
time to time of Exchangeable Shares by and through the Trustee, which will hold
legal title to such rights for the benefit of such holders.
WHEREAS, these recitals and any statements of fact in this agreement are
made by NOI and Dreco and not by the Trustee.
NOW, THEREFORE, in consideration of the respective covenants and
agreements provided in this agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions. In this agreement, the following terms shall have
the following meanings:
"AGGREGATE EQUIVALENT VOTE AMOUNT" means, with respect to any matter,
proposition or question on which holders of NOI Common Stock are entitled to
vote, consent or otherwise act, the product of (i) the number of shares of
Exchangeable Shares issued and outstanding and held by Holders multiplied by
(ii) the number of votes to which a holder of one share of NOI Common Stock is
entitled with respect to such matter, proposition or question.
"ARRANGEMENT" has the meaning provided in the recitals hereto.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of NOI
to effect the automatic exchange of shares of NOI Common Stock for Exchangeable
Shares pursuant to Section 5.12 hereof.
"BOARD OF DIRECTORS" means the Board of Directors of Dreco.
"BUSINESS DAY" has the meaning provided in the Exchangeable Share
Provisions;
"DRECO COMMON SHARES" has the meaning provided in the recitals hereto.
"EQUIVALENT VOTE AMOUNT" means, with respect any matter, proposition or
question on which holders of NOI Common Stock are entitled to vote, consent or
otherwise act, the number of votes to which a holder of one share of NOI Common
Stock is entitled with respect to such matter, proposition or question.
"EXCHANGE PUT RIGHT" has the meaning provided in the Exchangeable Share
Provisions.
-2-
109
"EXCHANGE RIGHT" has the meaning provided in Article V hereof.
"EXCHANGEABLE SHARE CONSIDERATION" has the meaning provided in the
Exchangeable Share Provisions.
"EXCHANGEABLE SHARE PRICE" has the meaning provided in the Exchangeable
Share Provisions.
"EXCHANGEABLE SHARE PROVISIONS" has the meaning provided in the recitals
hereto.
"EXCHANGEABLE SHARES" has the meaning provided in the recitals hereto.
"HOLDER VOTES" has the meaning provided in Section 4.2 hereof.
"HOLDERS" means the registered holders from time to time of Exchangeable
Shares, other than NOI and its Subsidiaries.
"INSOLVENCY EVENT" means the institution by Dreco of any proceeding to
be adjudicated a bankrupt or insolvent or to be dissolved or wound-up, or the
consent of Dreco to the institution of bankruptcy, insolvency, dissolution or
winding-up proceedings against it, or the filing of a petition, answer or
consent seeking dissolution or winding-up under any bankruptcy, insolvency or
analogous laws, including without limitation the Companies Creditors'
Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada), and
the failure by Dreco to contest in good faith any such proceedings commenced in
respect of Dreco within 15 days of becoming aware thereof, or the consent by
Dreco to the filing of any such petition or to the appointment of a receiver,
or the making by Dreco of a general assignment for the benefit of creditors, or
the admission in writing by Dreco of its inability to pay its debts generally
as they become due, or Dreco's not being permitted, pursuant to liquidity or
solvency requirements of applicable law, to redeem any Retracted Shares
pursuant to Section 6.6 of the Exchangeable Share Provisions.
"LIQUIDATION CALL RIGHT" has the meaning provided in the Exchangeable
Share Provisions.
"LIQUIDATION EVENT" has the meaning provided in subsection 5.12(b)
hereof.
"LIQUIDATION EVENT EFFECTIVE TIME" has the meaning provided in
subsection 5.12(c) hereof.
"LIST" has the meaning provided in Section 4.6 hereof.
"NOI COMMON STOCK" has the meaning provided in the Exchangeable Share
Provisions.
"NOI CONSENT" has the meaning provided in Section 4.2 hereof.
-3-
110
"NOI MEETING" has the meaning provided in Section 4.2 hereof.
"NOI SPECIAL VOTING STOCK" has the meaning provided in the recitals
hereto.
"NOI SUCCESSOR" has the meaning provided in subsection 11.1(a) hereof.
"OFFICER'S CERTIFICATE" means, with respect to NOI or Dreco, as the case
may be, a certificate signed by any one of the Chairman of the Board, the
Vice-Chairman of the Board (if there be one), the President or any
Vice-President of NOI or Dreco, as the case may be.
"PERSON" includes an individual, body corporate, partnership, company,
unincorporated syndicate or organization, trust, trustee, executor,
administrator and other legal representative.
"PLAN OF ARRANGEMENT" has the meaning provided in the Exchangeable Share
Provisions.
"REDEMPTION CALL RIGHT" has the meaning provided in the Exchangeable
Share Provisions.
"RETRACTED SHARES" has the meaning provided in Section 5.7 hereof.
"RETRACTION CALL RIGHT" has the meaning provided in the Exchangeable
Share Provisions.
"SUBSIDIARY" has the meaning provided in the Exchangeable Share
Provisions.
"SUPPORT AGREEMENT" means that certain support agreement made as of even
date hereof by and between NOI and Dreco.
"TRUST" means the trust created by this agreement.
"TRUST ESTATE" means the Voting Share, any other securities, the
Exchange Right, the Automatic Exchange Rights and any money or other property
which may be held by the Trustee from time to time pursuant to this agreement.
"TRUSTEE" means _______ Trust Company and, subject to the provisions of
Article X hereof, includes any successor trustee or permitted assigns.
"VOTING RIGHTS" means the voting rights attached to the Voting Share.
"VOTING SHARE" means the one share of NOI Special Voting Stock, U.S.
$0.01 par value, issued by NOI to and deposited with the Trustee, which
entitles the holder of record to a number of votes at meetings of holders of
NOI Common Stock equal to the Aggregate Equivalent Vote Amount.
-4-
111
1.2 Interpretation Not Affected by Headings, Etc. The division of
this agreement into articles, sections and paragraphs and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this agreement.
1.3 Number, Gender, Etc. Words importing the singular number only
shall include the plural and vice versa. Words importing the use of any
gender shall include all genders.
1.4 Date for Any Action. If any date on which any action is
required to be taken under this agreement is not a Business Day, such action
shall be required to be taken on the next succeeding Business Day.
ARTICLE II
PURPOSE OF AGREEMENT
The purpose of this agreement is to create the Trust for the benefit of
the Holders, as herein provided. The Trustee will hold the Voting Share in
order to enable the Trustee to exercise the Voting Rights and will hold the
Exchange Right and the Automatic Exchange Rights in order to enable the Trustee
to exercise such rights, in each case as trustee for and on behalf of the
Holders as provided in this agreement.
ARTICLE III
VOTING SHARE
3.1 Issuance and Ownership of the Voting Share. NOI hereby issues to
and deposits with the Trustee the Voting Share to be hereafter held of record
by the Trustee as trustee for and on behalf of, and for the use and benefit of,
the Holders and in accordance with the provisions of this agreement. NOI
hereby acknowledges receipt from the Trustee as trustee for and on behalf of
the Holders of good and valuable consideration (and the adequacy thereof) for
the issuance of the Voting Share by NOI to the Trustee. During the term of the
Trust and subject to the terms and conditions of this agreement, the Trustee
shall possess and be vested with full legal ownership of the Voting Share and
shall be entitled to exercise all of the rights and powers of an owner with
respect to the Voting Share, provided that the Trustee shall:
(a) hold the Voting Share and the legal title thereto as
trustee solely for the use and benefit of the Holders in accordance with the
provisions of this agreement; and
(b) except as specifically authorized by this agreement, have
no power or authority to sell, transfer, vote or otherwise deal in or with the
Voting Share, and the Voting Share shall not be used or disposed of by the
Trustee for any purpose other than the purposes for which this Trust is created
pursuant to this agreement.
3.2 Legended Share Certificates. Dreco will cause each certificate
representing Exchangeable Shares to bear an appropriate legend notifying the
Holders of their right to
-5-
112
instruct the Trustee with respect to the exercise of the Voting Rights with
respect to the Exchangeable Shares held by a Holder.
3.3 Safe Keeping of Certificate. The certificate representing the
Voting Share shall at all times be held in safe keeping by the Trustee or its
agent.
ARTICLE IV
EXERCISE OF VOTING RIGHTS
4.1 Voting Rights. The Trustee, as the holder of record of the
Voting Share, shall be entitled to all of the Voting Rights, including the
right to consent to or to vote in person or by proxy the Voting Share, on any
matter, question or proposition whatsoever that may properly come before the
stockholders of NOI at a NOI Meeting or in connection with a NOI Consent (in
each case, as hereinafter defined). The Voting Rights shall be and remain
vested in and exercised by the Trustee. Subject to Section 7.15 hereof, the
Trustee shall exercise the Voting Rights only on the basis of instructions
received pursuant to this Article IV from Holders entitled to instruct the
Trustee as to the voting thereof at the time at which a NOI Consent is sought
or a NOI Meeting is held. To the extent that no instructions are received from
a Holder with respect to the Voting Rights to which such Holder is entitled,
the Trustee shall not exercise or permit the exercise of such Holder's Voting
Rights.
4.2 Number of Votes. With respect to all meetings of stockholders of
NOI at which holders of shares of NOI Common Stock are entitled to vote (a "NOI
Meeting") and with respect to all written consents sought by NOI from its
stockholders including the holders of shares of NOI Common Stock (a "NOI
Consent"), each Holder shall be entitled to instruct the Trustee to cast and
exercise, in the manner instructed, a number of votes equal to the Equivalent
Vote Amount for each Exchangeable Share owned of record by such Holder on the
record date established by NOI or by applicable law for such NOI Meeting or NOI
Consent, as the case may be, (the "Holder Votes") in respect of each matter,
question or proposition to be voted on at such NOI Meeting or to be consented
to in connection with such NOI Consent.
4.3 Mailings to Shareholders. With respect to each NOI Meeting and
NOI Consent, the Trustee will mail or cause to be mailed (or otherwise
communicate in the same manner as NOI utilizes in communications to holders of
NOI Common Stock, subject to the Trustee's ability to provide this method of
communication and upon being advised in writing of such method) to each of the
Holders named in the List on the same day as the initial mailing or notice (or
other communication) with respect thereto is given by NOI to its stockholders:
(a) a copy of such notice, together with any proxy or
information statement and related materials to be provided to stockholders of
NOI;
(b) a statement that such Holder is entitled to instruct the
Trustee as to the exercise of the Holder Votes with respect to such NOI Meeting
or NOI Consent, as the case
-6-
113
may be, or, pursuant to Section 4.7 hereof, to attend such NOI Meeting and to
exercise personally the Holder Votes thereat;
(c) a statement as to the manner in which such instructions
may be given to the Trustee, including an express indication that instructions
may be given to the Trustee to give:
(i) a proxy to such Holder or his designee to exercise
personally the Holder Votes; or
(ii) a proxy to a designated agent or other
representative of the management of NOI to exercise such Holder Votes;
(d) a statement that if no such instructions are received from
the Holder, the Holder Votes to which such Holder is entitled will not be
exercised;
(e) a form of direction whereby the Holder may so direct and
instruct the Trustee as contemplated herein; and
(f) a statement of (i) the time and date by which such
instructions must be received by the Trustee in order to be binding upon it,
which in the case of a NOI Meeting shall not be earlier than the close of
business on the Business Day prior to such meeting, and (ii) the method for
revoking or amending such instructions.
The materials referred to above are to be provided by NOI to the
Trustee, but shall be subject to review and comment by the Trustee.
For the purpose of determining Holder Votes to which a Holder is
entitled in respect of any such NOI Meeting or NOI Consent, the number of
Exchangeable Shares owned of record by the Holder shall be determined at the
close of business on the record date established by NOI or by applicable law
for purposes of determining stockholders entitled to vote at such NOI Meeting
or to give written consent in connection with such NOI Consent. NOI will
notify the Trustee in writing of any decision of the board of directors of NOI
with respect to the calling of any such NOI Meeting or the seeking of any such
NOI Consent and shall provide all necessary information and materials to the
Trustee in each case promptly and in any event in sufficient time to enable the
Trustee to perform its obligations contemplated by this Section 4.3.
4.4 Copies of Stockholder Information. NOI will deliver to the
Trustee copies of all proxy materials, (including notices of NOI Meetings, but
excluding proxies to vote shares of NOI Common Stock), information statements,
reports (including without limitation all interim and annual financial
statements) and other written communications that are to be distributed from
time to time to holders of NOI Common Stock in sufficient quantities and in
sufficient time so as to enable the Trustee to send those materials to each
Holder at the same time as such materials are first sent to holders of NOI
Common Stock. The Trustee will mail or otherwise send to each Holder, at the
expense of NOI, copies of all such materials
-7-
114
(and all materials specifically directed to the Holders or to the Trustee for
the benefit of the Holders by NOI) received by the Trustee from NOI at the same
time as such materials are first sent to holders of NOI Common Stock. The
Trustee will make copies of all such materials available for inspection by any
Holder at the Trustee's principal transfer office in the cities of Calgary and
Toronto.
4.5 Other Materials. Immediately after receipt by NOI or any
stockholder of NOI of any material sent or given generally to the holders of
NOI Common Stock by or on behalf of a third party, including without limitation
dissident proxy and information circulars (and related information and
material) and tender and exchange offer circulars (and related information and
material), NOI shall use its best efforts to obtain and deliver to the Trustee
copies thereof in sufficient quantities so as to enable the Trustee to forward
such material (unless the same has been provided directly to Holders by such
third party) to each Holder as soon as possible thereafter. As soon as
practicable after receipt thereof, the Trustee will mail or otherwise send to
each Holder, at the expense of NOI, copies of all such materials received by
the Trustee from NOI. The Trustee will also make copies of all such materials
available for inspection by any Holder at the Trustee's principal transfer
office in the cities of Calgary and Toronto.
4.6 List of Persons Entitled to Vote. Dreco shall, (i) prior to each
annual, general and special NOI Meeting or the seeking of any NOI Consent and
(ii) forthwith upon each request made at any time by the Trustee in writing,
prepare or cause to be prepared a list (a "List") of the names and addresses of
the Holders arranged in alphabetical order and showing the number of
Exchangeable Shares held of record by each such Holder, in each case at the
close of business on the date specified by the Trustee in such request or, in
the case of a List prepared in connection with a NOI Meeting or a NOI Consent,
at the close of business on the record date established by NOI or pursuant to
applicable law for determining the holders of NOI Common Stock entitled to
receive notice of and/or to vote at such NOI Meeting or to give consent in
connection with such NOI Consent. Each such List shall be delivered to the
Trustee promptly after receipt by Dreco of such request or the record date for
such meeting or seeking of consent, as the case may be, and in any event within
sufficient time as to enable the Trustee to perform its obligations under this
agreement. NOI agrees to give Dreco written notice (with a copy to the
Trustee) of the calling of any NOI Meeting or the seeking of any NOI Consent,
together with the record dates therefor, sufficiently prior to the date of the
calling of such meeting or seeking of such consent so as to enable Dreco to
perform its obligations under this Section 4.6.
4.7 Entitlement to Direct Votes. Any Holder named in a List prepared
in connection with any NOI Meeting or any NOI Consent will be entitled (i) to
instruct the Trustee in the manner described in Section 4.3 hereof with respect
to the exercise of the Holder Votes to which such Holder is entitled or (ii) to
attend such meeting and personally to exercise thereat (or to exercise with
respect to any written consent), as the proxy of the Trustee, the Holder Votes
to which such Holder is entitled.
-8-
115
4.8 Voting by Trustee, and Attendance of Trustee Representative, at
Meeting.
(a) In connection with each NOI Meeting and NOI Consent, the
Trustee shall exercise, either in person or by proxy, in accordance with the
instructions received from a Holder pursuant to Section 4.3 hereof, the Holder
Votes as to which such Holder is entitled to direct the vote (or any lesser
number thereof as may be set forth in the instructions); provided, however,
that such written instructions are received by the Trustee from the Holder
prior to the time and date fixed by it for receipt of such instructions in the
notice given by the Trustee to the Holder pursuant to Section 4.3 hereof.
(b) The Trustee shall cause such representatives as are
empowered by it to sign and deliver, on behalf of the Trustee, proxies for
Voting Rights to attend each NOI Meeting. Upon submission by a Holder (or its
designee) of identification satisfactory to the Trustee's representatives, and
at the Holder's request, such representatives shall sign and deliver to such
Holder (or its designee) a proxy to exercise personally the Holder Votes as to
which such Holder is otherwise entitled hereunder to direct the vote, if such
Holder either:
(i) has not previously given the Trustee instructions
pursuant to Section 4.3 hereof in respect of such meeting, or
(ii) submits to the Trustee's representatives written
revocation of any such previous instructions.
At such meeting, the Holder exercising such Holder Votes shall have the
same rights as the Trustee to speak at the meeting in respect of any matter,
question or proposition, to vote by way of ballot at the meeting in respect of
any matter, question or proposition and to vote at such meeting by way of a
show of hands in respect of any matter, question or proposition.
4.9 Distribution of Written Materials. Any written materials to be
distributed by the Trustee to the Holders pursuant to this agreement shall be
delivered or sent by mail (or otherwise communicated in the same manner as NOI
utilizes in communications to holders of NOI Common Stock) to each Holder at
its address as shown on the books of Dreco. Dreco shall provide or cause to be
provided to the Trustee for this purpose, on a timely basis and without charge
or other expense:
(a) current lists of the Holders; and
(b) on the request of the Trustee, mailing labels to enable
the Trustee to carry out its duties under this agreement.
The materials referred to above are to be provided by Dreco to the
Trustee, but shall be subject to review and comment by the Trustee.
-9-
116
4.10 Termination of Voting Rights. Except as otherwise provided
herein or in the Exchangeable Share provisions, all of the rights of a Holder
with respect to the Holder Votes exercisable in respect of the Exchangeable
Shares held by such Holder, including the right to instruct the Trustee as to
the voting of or to vote personally such Holder Votes, shall be deemed to be
surrendered by the Holder to NOI, and such Holder Votes and the Voting Rights
represented thereby shall cease immediately, upon the delivery by such Holder
to the Trustee of the certificates representing such Exchangeable Shares in
connection with the exercise by the Holder of the Exchange Right or the
occurrence of the automatic exchange of Exchangeable Shares for shares of NOI
Common Stock, as specified in Article V hereof (unless in either case NOI
shall not have delivered the Exchangeable Share Consideration deliverable in
exchange therefor to the Trustee for delivery to the Holders), or upon the
redemption of Exchangeable Shares pursuant to Article 6 or Article 7 of the
Exchangeable Share Provisions, or upon the effective date of the liquidation,
dissolution or winding-up of Dreco or any other distribution of the assets of
Dreco among its shareholders for the purpose of winding up its affairs pursuant
to Article 5 of the Exchangeable Share Provisions, or upon the purchase of
Exchangeable Shares from the holder thereof by NOI pursuant to the exercise by
NOI of the Retraction Call Right, the Redemption Call Right or the Liquidation
Call Right.
ARTICLE V
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 Grant and Ownership of the Exchange Right. NOI hereby grants to
the Trustee as trustee for and on behalf of, and for the use and benefit of,
the Holders:
(a) the Exchange Put Right,
(b) the right (the "Exchange Right"), upon the occurrence and
during the continuance of an Insolvency Event, to require NOI to purchase from
each or any Holder all or any part of the Exchangeable Shares held by the
Holders, and
(c) the Automatic Exchange Rights,
all in accordance with the provisions of this agreement and the
Exchangeable Share Provisions, as the case may be. NOI hereby acknowledges
receipt from the Trustee as trustee for and on behalf of the Holders of good
and valuable consideration (and the adequacy thereof) for the grant of the
Exchange Put Right, the Exchange Right and the Automatic Exchange Rights by NOI
to the Trustee. During the term of the Trust and subject to the terms and
conditions of this agreement, the Trustee shall possess and be vested with full
legal ownership of the Exchange Put Right, the Exchange Right and the Automatic
Exchange Rights and shall be entitled to exercise all of the rights and powers
of an owner with respect to the Exchange Put Right, the Exchange Right and the
Automatic Exchange Rights, provided that the Trustee shall:
-10-
117
(d) hold the Exchange Put Right, the Exchange Right and the
Automatic Exchange Rights and the legal title thereto as trustee solely for the
use and benefit of the Holders in accordance with the provisions of this
agreement; and
(e) except as specifically authorized by this agreement, have
no power or authority to exercise or otherwise deal in or with the Exchange Put
Right, the Exchange Right or the Automatic Exchange Rights, and the Trustee
shall not exercise any such rights for any purpose other than the purposes for
which this Trust is created pursuant to this agreement.
5.2 Legended Share Certificates. Dreco will cause each certificate
representing Exchangeable Shares to bear an appropriate legend notifying the
Holders of:
(a) their right to instruct the Trustee with respect to the
exercise of the Exchange Put Right and the Exchange Right in respect of the
Exchangeable Shares held by a Holder; and
(b) the Automatic Exchange Rights.
5.3 General Exercise of Exchange Put Right and Exchange Right. The
Exchange Put Right and the Exchange Right shall be and remain vested in and
exercised by the Trustee. Subject to Section 7.15 hereof, the Trustee shall
exercise the Exchange Put Right and the Exchange Right only on the basis of
instructions received pursuant to this Article V from Holders entitled to
instruct the Trustee as to the exercise thereof. To the extent that no
instructions are received from a Holder with respect to the Exchange Put Right
and the Exchange Right, the Trustee shall not exercise or permit the exercise
of the Exchange Put Right and the Exchange Right.
5.4 Purchase Price. The purchase price payable by NOI for each
Exchangeable Share to be purchased by NOI (a) under the Exchange Put Right
shall be the amount determined under the Exchangeable Share Provisions, and (b)
under the Exchange Right shall be an amount equal to the Exchangeable Share
Price on the last Business Day prior to the day of closing of the purchase and
sale of such Exchangeable Share under the Exchange Right. In connection with
each exercise of the Exchange Right, NOI will provide to the Trustee an
Officer's Certificate setting forth the calculation of the applicable
Exchangeable Share Price for each Exchangeable Share. The applicable
Exchangeable Share Price for each such Exchangeable Share so purchased may be
satisfied only by NOI's issuing and delivering or causing to be delivered to
the Trustee, on behalf of the relevant Holder, the applicable Exchangeable
Share Consideration representing the total applicable Exchangeable Share Price.
5.5 Exercise Instructions. Subject to the terms and conditions
herein set forth, a Holder shall be entitled, upon the occurrence and during
the continuance of an Insolvency Event, to instruct the Trustee to exercise the
Exchange Right with respect to all or any part of the Exchangeable Shares
registered in the name of such Holder on the books of Dreco.
-11-
118
To cause the exercise of the Exchange Right by the Trustee, the Holder shall
deliver to the Trustee, in person or by certified or registered mail, at its
principal transfer office in Calgary, Alberta or at such other places in Canada
as the Trustee may from time to time designate by written notice to the
Holders, the certificates representing the Exchangeable Shares which such
Holder desires NOI to purchase, duly endorsed in blank, and accompanied by such
other documents and instruments as may be required to effect a transfer of
Exchangeable Shares under the Act and the by-laws of Dreco and such additional
documents and instruments as the Trustee may reasonably require, together with:
(a) a duly completed form of notice of exercise of the
Exchange Right, contained on the reverse of or attached to the Exchangeable
Share certificates, stating:
(i) that the Holder thereby instructs the Trustee to
exercise the Exchange Right so as to require NOI to purchase from the Holder
the number of Exchangeable Shares specified therein,
(ii) that such Holder has good title to and owns all
such Exchangeable Shares to be acquired by NOI free and clear of all liens,
claims, encumbrances, security interests and adverse claims or interests,
(iii) the names in which the certificates representing
NOI Common Stock issuable in connection with the exercise of the Exchange Right
are to be issued, and
(iv) the names and addresses of the persons to whom the
Exchangeable Share Consideration should be delivered; and
(b) payment (or evidence satisfactory to the Trustee, Dreco
and NOI of payment) of the taxes (if any) payable as contemplated by Section
5.8 of this agreement.
If only a part of the Exchangeable Shares represented by any
certificate or certificates delivered to the Trustee are to be purchased by NOI
under the Exchange Right, a new certificate for the balance of such
Exchangeable Shares shall be issued to the Holder at the expense of Dreco.
5.6 Delivery of Exchangeable Share Consideration; Effect of Exercise.
Promptly after receipt of the certificates representing the Exchangeable Shares
which the Holder desires NOI to purchase under the Exchange Put Right or the
Exchange Right (together with such documents and instruments of transfer and a
duly completed form of notice of exercise of the Exchange Put Right or the
Exchange Right), duly endorsed for transfer to NOI, the Trustee shall notify
NOI and Dreco of its receipt of the same, which notice to NOI and Dreco shall
constitute exercise of the Exchange Put Right or the Exchange Right by the
Trustee on behalf of the Holder of such Exchangeable Shares, and NOI shall
immediately thereafter deliver or cause to be delivered to the Trustee, for
delivery to the Holder of such Exchangeable Shares (or to such other persons,
if any, properly designated by such Holder), the Exchangeable Share
Consideration deliverable in connection with the exercise of the
-12-
119
Exchange Put Right or the Exchange Right; provided, however, that no such
delivery shall be made unless and until the Holder requesting the same shall
have paid (or provided evidence satisfactory to the Trustee, Dreco and NOI of
the payment of) the taxes (if any) payable as contemplated by Section 5.8 of
this agreement. Immediately upon the giving of notice by the Trustee to NOI
and Dreco of the exercise of the Exchange Put Right or the Exchange Right, as
provided in this Section 5.6, the closing of the transaction of purchase and
sale contemplated by the Exchange Put Right or the Exchange Right shall be
deemed to have occurred, and the Holder of such Exchangeable Shares shall be
deemed to have transferred to NOI all of its right, title and interest in and
to such Exchangeable Shares and the related interest in the Trust Estate, shall
cease to be a holder of such Exchangeable Shares and shall not be entitled to
exercise any of the rights of a holder in respect thereof, other than the right
to receive his proportionate part of the total purchase price therefor, unless
such Exchangeable Share Consideration is not delivered by NOI to the Trustee,
for delivery to such Holder (or to such other persons, if any, properly
designated by such Holder), within three Business Days of the date of the
giving of such notice by the Trustee, in which case the rights of the Holder
shall remain unaffected until such Exchangeable Share Consideration is
delivered by NOI and any check included therein is paid. Concurrently with
such Holder ceasing to be a holder of Exchangeable Shares, the Holder shall be
considered and deemed for all purposes to be the holder of the shares of NOI
Common Stock delivered to it pursuant to the Exchange Put Right or the Exchange
Right. Notwithstanding the foregoing until the Exchangeable Share
Consideration is delivered to the Holder, the Holder shall be deemed to still
be a holder of the sold Exchangeable Shares for purposes of voting rights with
respect thereto under this agreement.
5.7 Exercise of Exchange Right Subsequent to Retraction. In the
event that a Holder has exercised its right under Article 6 of the Exchangeable
Share Provisions to require Dreco to redeem any or all of the Exchangeable
Shares held by the Holder (the "Retracted Shares") and is notified by Dreco
pursuant to Section 6.6 of the Exchangeable Share Provisions that Dreco will
not be permitted as a result of liquidity or solvency requirements of
applicable law to redeem all such Retracted Shares, subject to receipt by the
Trustee of written notice to that effect from Dreco and provided that NOI shall
not have exercised the Retraction Call Right with respect to the Retracted
Shares and that the Holder has not revoked the retraction request delivered by
the Holder to Dreco pursuant to Section 6.1 of the Exchangeable Share
Provisions, the retraction request will constitute and will be deemed to
constitute notice from the Holder to the Trustee instructing the Trustee to
exercise the Exchange Right with respect to those Retracted Shares which Dreco
is unable to redeem. In any such event, Dreco hereby agrees with the Trustee
and in favor of the Holder immediately to notify the Trustee of such
prohibition against Dreco's redeeming all of the Retracted Shares and
immediately to forward or cause to be forwarded to the Trustee all relevant
materials delivered by the Holder to Dreco or to the transfer agent of the
Exchangeable Shares (including without limitation a copy of the retraction
request delivered pursuant to Section 6.1 of the Exchangeable Share Provisions)
in connection with such proposed redemption of the Retracted Shares, and the
Trustee will thereupon exercise the Exchange Right with respect to the
Retracted Shares which Dreco is not permitted to redeem
-13-
120
and will require NOI to purchase such shares in accordance with the provisions
of this Article V.
5.8 Stamp or Other Transfer Taxes. Upon any sale of Exchangeable
Shares to NOI pursuant to the Exchange Put Right, the Exchange Right or the
Automatic Exchange Rights, the share certificate or certificates representing
NOI Common Stock to be delivered in connection with the payment of the total
purchase price therefor shall be issued in the name of the Holder of the
Exchangeable Shares so sold or in such names as such Holder may otherwise
direct in writing without charge to the holder of the Exchangeable Shares so
sold, provided, however, that such Holder:
(a) shall pay (and neither NOI, Dreco nor the Trustee shall be
required to pay) any documentary, stamp, transfer or other similar taxes that
may be payable in respect of any transfer involved in the issuance or delivery
of such shares to a person other than such Holder; or
(b) shall have established to the satisfaction of the Trustee,
NOI and Dreco that such taxes, if any, have been paid.
5.9 Notice of Insolvency Event. Immediately upon the occurrence of
an Insolvency Event or any event which with the giving of notice or the passage
of time or both would be an Insolvency Event, Dreco and NOI shall give written
notice thereof to the Trustee. As soon as practicable after receiving notice
from Dreco or NOI of the occurrence of an Insolvency Event, the Trustee will
mail to each Holder, at the expense of NOI, a notice of such Insolvency Event
in the form provided by NOI, which notice shall contain a brief statement of
the right of the Holders with respect to the Exchange Right.
5.10 Qualification of NOI Common Stock. NOI covenants that if any
shares of NOI Common Stock to be issued and delivered pursuant to the Exchange
Put Right, the Exchange Right or the Automatic Exchange Rights require
registration or qualification with or approval of or the filing of any document
including any prospectus or similar document, the taking of any proceeding with
or the obtaining of any order, ruling or consent from any governmental or
regulatory authority under any Canadian or United States federal, provincial or
state law or regulation or pursuant to the rules and regulations of any
regulatory authority, or the fulfillment of any other legal requirement
(collectively, the "Applicable Laws") before such shares may be issued and
delivered by NOI to the initial holder thereof (other than Dreco) or in order
that such shares may be freely traded thereafter (other than any restrictions
on transfer by reason of a holder being a "control person" of NOI for purposes
of Canadian federal or provincial securities law or an "affiliate" of NOI for
purposes of United States federal or state securities law), NOI will in good
faith expeditiously take all such actions and do all such things as are
necessary to cause such shares of NOI Common Stock to be and remain duly
registered, qualified or approved. NOI represents and warrants that it has in
good faith taken all actions and done all things as are necessary under
Applicable Laws as they exist on the date hereof to cause the shares of NOI
Common Stock to be issued and delivered pursuant to the Exchange Put Right, the
Exchange
-14-
121
Right and the Automatic Exchange Rights and to be freely tradeable thereafter
(other than restrictions on transfer by reason of a holder being a "control
person" of NOI for the purposes of Canadian federal and provincial securities
law or an "affiliate" of NOI for the purposes of United States federal or state
securities law). NOI will in good faith expeditiously take all such actions
and do all such things as are necessary to cause all shares of NOI Common Stock
to be delivered pursuant to the Exchange Put Right, the Exchange Right or the
Automatic Exchange Rights to be listed, quoted or posted for trading on all
stock exchanges and quotation systems on which such shares are listed, quoted
or posted for trading at such time.
5.11 Reservation of Shares of NOI Common Stock. NOI hereby
represents, warrants and covenants that it has irrevocably reserved for
issuance and will at all times keep available, free from pre-emptive and other
rights, out of its authorized and unissued capital stock such number of shares
of NOI Common Stock:
(a) as is equal to the sum of
(i) the number of Exchangeable Shares issued and
outstanding from time to time and
(ii) the number of Exchangeable Shares issuable upon
the exercise of all rights to acquire Exchangeable Shares outstanding from time
to time and
(b) as are now and may hereafter be required to enable and
permit Dreco to meet its obligations hereunder, under the Amended and Restated
Certificate of Incorporation of NOI, under the Support Agreement, under the
Exchangeable Share Provisions and under any other security or commitment
pursuant to the Arrangement with respect to which NOI may now or hereafter be
required to issue shares of NOI Common Stock.
5.12 Automatic Exchange on Liquidation of NOI.
(a) NOI will give the Trustee written notice of each of the
following events at the time set forth below:
(i) in the event of any determination by the board of
directors of the NOI to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to NOI or to effect any other distribution
of assets of NOI among its stockholders for the purpose of winding up its
affairs, at least 60 days prior to the proposed effective date of such
liquidation, dissolution, winding-up or other distribution; and
(ii) immediately, upon the earlier of
(A) receipt by NOI of notice of and
-15-
122
(B) NOI's otherwise becoming aware of any
threatened or instituted claim, suit, petition or other proceedings with
respect to the involuntary liquidation, dissolution or winding-up of NOI or to
effect any other distribution of assets of NOI among its stockholders for the
purpose of winding up its affairs.
(b) Immediately following receipt by the Trustee from NOI of
notice of any event (a "Liquidation Event") contemplated by Section 5.12(a)
above, the Trustee will give notice thereof to the Holders. Such notice will
be provided by NOI to the Trustee and shall include a brief description of the
automatic exchange of Exchangeable Shares for shares of NOI Common Stock
provided for in Section 5.12(c) below.
(c) In order that the Holders will be able to participate on a
pro rata basis with the holders of NOI Common Stock in the distribution of
assets of NOI in connection with a Liquidation Event, immediately prior to the
effective time (the "Liquidation Event Effective Time") of a Liquidation
Event, all of the then outstanding Exchangeable Shares shall be automatically
exchanged for shares of NOI Common Stock. To effect such automatic exchange,
NOI shall be deemed to have purchased each Exchangeable Share outstanding
immediately prior to the Liquidation Event Effective Time and held by Holders,
and each Holder shall be deemed to have sold the Exchangeable Shares held by it
at such time, for a purchase price per share equal to the Exchangeable Share
Price applicable at such time. In connection with such automatic exchange,
NOI will provide to the Trustee an Officer's Certificate setting forth the
calculation of the purchase price for each Exchangeable Share.
(d) The closing of the transaction of purchase and sale
contemplated by Section 5.12(c) above shall be deemed to have occurred
immediately prior to the Liquidation Event Effective Time, and each Holder of
Exchangeable Shares shall be deemed to have transferred to NOI all of the
Holder's right, title and interest in and to such Exchangeable Shares and the
related interest in the Trust Estate and shall cease to be a holder of such
Exchangeable Shares, and NOI shall deliver to the Holder the Exchangeable Share
Consideration deliverable upon the automatic exchange of Exchangeable Shares.
Concurrently with such Holder's ceasing to be a holder of Exchangeable Shares,
the Holder shall be considered and deemed for all purposes to be the holder of
the shares of NOI Common Stock issued to it pursuant to the automatic exchange
of Exchangeable Shares for NOI Common Stock, and the certificates held by the
Holder previously representing the Exchangeable Shares exchanged by the Holder
with NOI pursuant to such automatic exchange shall thereafter be deemed to
represent the shares of NOI Common Stock issued to the Holder by NOI pursuant
to such automatic exchange. Upon the request of a Holder and the surrender by
the Holder of Exchangeable Share certificates deemed to represent shares of NOI
Common Stock, duly endorsed in blank and accompanied by such instruments of
transfer as NOI may reasonably require, NOI shall deliver or cause to be
delivered to the Holder certificates representing the shares of NOI Common
Stock of which the Holder is the holder. Notwithstanding the foregoing, until
each Holder is actually entered on the register of holders of NOI Common
Stock, such Holder shall be deemed to still be a holder of the
-16-
123
transferred Exchangeable Shares for purposes of all voting rights with respect
thereto under this agreement.
ARTICLE VI
RESTRICTIONS ON ISSUANCE OF NOI SPECIAL VOTING STOCK
During the term of this agreement, NOI will not issue any shares of NOI
Special Voting Stock in addition to the Voting Share.
ARTICLE VII
CONCERNING THE TRUSTEE
7.1 Powers and Duties of the Trustee. The rights, powers and
authorities of the Trustee under this agreement, in its capacity as trustee of
the Trust, shall include:
(a) receipt and deposit of the Voting Share from NOI as
trustee for and on behalf of the Holders in accordance with the provisions of
this agreement;
(b) granting proxies and distributing materials to Holders as
provided in this agreement;
(c) voting the Holder Votes in accordance with the provisions
of this agreement;
(d) receiving the grant of the Exchange Put Right, the
Exchange Right and the Automatic Exchange Rights from NOI as trustee for and on
behalf of the Holders in accordance with the provisions of this agreement;
(e) exercising the Exchange Put Right and the Exchange Right
and enforcing the benefit of the Automatic Exchange Rights, in each case in
accordance with the provisions of this agreement, and in connection therewith
receiving from Holders Exchangeable Shares and other requisite documents and
distributing to such Holders the shares of NOI Common Stock and checks, if any,
to which such Holders are entitled upon the exercise of the Exchange Put Right
and the Exchange Right or pursuant to the Automatic Exchange Rights, as the
case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time to time, a part of
the Trust Estate as provided in this agreement;
(h) taking action at the direction of a Holder or Holders to
enforce the obligations of NOI under this agreement; and
-17-
124
(i) taking such other actions and doing such other things as
are specifically provided in this agreement.
In the exercise of such rights, powers and authorities the Trustee shall
have (and is granted) such incidental and additional rights, powers and
authority not in conflict with any of the provisions of this agreement as the
Trustee, acting in good faith and in the reasonable exercise of its
discretion, may deem necessary, appropriate or desirable to effect the purpose
of the Trust. Any exercise of such discretionary rights, powers and
authorities by the Trustee shall be final, conclusive and binding upon all
persons. For greater certainty, the Trustee shall have only those duties as
are set out specifically in this agreement. The Trustee in exercising its
rights, powers, duties and authorities hereunder shall act honestly and in good
faith with a view to the best interests of the Holders and shall exercise the
care, diligence and skill that a reasonably prudent trustee would exercise in
comparable circumstances. The Trustee shall not be bound to give any notice or
do or take any act, action or proceeding by virtue of the powers conferred on
it hereby unless and until it shall be specifically required to do so under the
terms hereof; nor shall the Trustee be required to take any notice of, or to do
or to take any act, action or proceeding as a result of any default or breach
of any provision hereunder, unless and until notified in writing of such
default or breach, which notices shall distinctly specify the default or breach
desired to be brought to the attention of the Trustee and in the absence of
such notice the Trustee may for all purposes of this agreement conclusively
assume that no default or breach has been made in the observance or performance
of any of the representations, warranties, covenants, agreements or conditions
contained herein.
7.2 No Conflict of Interest. The Trustee represents to Dreco and NOI
that at the date of execution and delivery of this agreement there exists no
material conflict of interest in the role of the Trustee as a fiduciary
hereunder and the role of the Trustee in any other capacity. The Trustee
shall, within 90 days after it becomes aware that such a material conflict of
interest exists, either eliminate such material conflict of interest or resign
in the manner and with the effect specified in Article X hereof. If,
notwithstanding the foregoing provisions of this Section 7.2, the Trustee has
such a material conflict of interest, the validity and enforceability of this
agreement shall not be affected in any manner whatsoever by reason only of the
existence of such material conflict of interest. If the Trustee contravenes
the foregoing provisions of this Section 7.2, any interested party may apply
to the superior court of the province in which Dreco has its registered office
for an order that the Trustee be replaced as trustee hereunder.
7.3 Dealings with Transfer Agents, Registrars, Etc. Dreco and NOI
irrevocably authorize the Trustee, from time to time, to:
(a) consult, communicate and otherwise deal with the
respective registrars and transfer agents, and with any such subsequent
registrar or transfer agent, of the Exchangeable Shares and NOI Common Stock;
and
(b) requisition, from time to time,
-18-
125
(i) from any such registrar or transfer agent any
information readily available from the records maintained by it which the
Trustee may reasonably require for the discharge of its duties and
responsibilities under this agreement and
(ii) from the transfer agent of NOI Common Stock, and
any subsequent transfer agent of such shares, to complete the exercise from
time to time of the Exchange Put Right, the Exchange Right and the Automatic
Exchange Rights in the manner specified in Article V hereof, the share
certificates issuable upon such exercise.
Dreco and NOI irrevocably authorize their respective registrars and
transfer agents to comply with all such requests. NOI covenants that it will
supply its transfer agent with duly executed share certificates for the purpose
of completing the exercise from time to time of the Exchange Put Right, the
Exchange Right and the Automatic Exchange Rights, in each case pursuant to
Article V hereof.
7.4 Books and Records. The Trustee shall keep available for
inspection by NOI and Dreco, at the Trustee's principal transfer office in
Calgary, Alberta, correct and complete books and records of account relating to
the Trustee's actions under this agreement, including without limitation all
information relating to mailings and instructions to and from Holders and all
transactions pursuant to the Voting Rights, the Exchange Put Right, the
Exchange Right and the Automatic Exchange Rights for the term of this
agreement. On or before March 31, 1998, and on or before March 31 in every
year thereafter, so long as the Voting Share is on deposit with the Trustee,
the Trustee shall transmit to NOI and Dreco a brief report, dated as of the
preceding December 31, with respect to:
(a) property and funds comprising the Trust Estate as of that
date;
(b) the number of exercises of the Exchange Put Right and the
Exchange Right, if any, and the aggregate number of Exchangeable Shares
received by the Trustee on behalf of Holders in consideration of the issue and
delivery by NOI of shares of NOI Common Stock in connection with the Exchange
Put Right and the Exchange Right, during the calendar year ended on such date;
and
(c) all other actions taken by the Trustee in the performance
of its duties under this agreement which it had not previously reported.
7.5 Income Tax Returns and Reports. The Trustee shall, to the extent
necessary, prepare and file on behalf of the Trust appropriate United States
and Canadian income tax returns and any other returns or reports as may be
required by applicable law or pursuant to the rules and regulations of any
securities exchange or other trading system through which the Exchangeable
Shares are traded and, in connection therewith, may obtain the advice and
assistance of such experts as the Trustee may consider necessary or advisable.
If requested by the Trustee, NOI shall retain such experts for purposes of
providing such advice and assistance.
-19-
126
7.6 Indemnification Prior to Certain Actions by Trustee. The Trustee
shall exercise any or all of the rights, duties, powers or authorities vested
in it by this agreement at the request, order or direction of any Holder upon
such Holder's furnishing to the Trustee reasonable funding, security and
indemnity against the costs, expenses and liabilities which may be incurred by
the Trustee therein or thereby; provided that no Holder shall be obligated to
furnish to the Trustee any such funding, security or indemnity in connection
with the exercise by the Trustee of any of its rights, duties, powers and
authorities with respect to the Voting Share pursuant to Article IV hereof,
subject to Section 7.15 hereof, and with respect to the Exchange Put Right and
the Exchange Right pursuant to Article V hereof, subject to Section 7.15
hereof, and with respect to the Automatic Exchange Rights pursuant to Article V
hereof. None of the provisions contained in this agreement shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability
in the exercise of any of its rights, powers, duties or authorities unless
funded, given funds, security and indemnified as aforesaid.
7.7 Actions by Holders. No Holder shall have the right to institute
any action, suit or proceeding or to exercise any other remedy authorized by
this agreement for the purpose of enforcing any of its rights or for the
execution of any trust or power hereunder unless the Holder has requested the
Trustee to take or institute such action, suit or proceeding and furnished the
Trustee with the funding, security and indemnity referred to in Section 7.6
hereof and the Trustee shall have failed to act within a reasonable time
thereafter. In such case, but not otherwise, the Holder shall be entitled to
take proceedings in any court of competent jurisdiction such as the Trustee
might have taken; it being understood and intended that no one or more Holders
shall have any right in any manner whatsoever to affect, disturb or prejudice
the rights hereby created by any such action, or to enforce any right hereunder
or under the Voting Rights, the Exchange Put Right, the Exchange Right or the
Automatic Exchange Rights, except subject to the conditions and in the manner
herein provided, and that all powers and trusts hereunder shall be exercised
and all proceedings at law shall be instituted, had and maintained by the
Trustee, except only as herein provided, and in any event for the equal benefit
of all Holders.
7.8 Reliance upon Declarations. The Trustee shall not be considered
to be in contravention of any of its rights, powers, duties and authorities
hereunder if, when required, it acts and relies in good faith upon lists,
mailing labels, notices, statutory declarations, certificates, opinions,
reports or other papers or documents furnished pursuant to the provisions
hereof or required by the Trustee to be furnished to it in the exercise of its
rights, powers, duties and authorities hereunder, and such lists, mailing
labels, notices, statutory declarations, certificates, opinions, reports or
other papers or documents comply with the provisions of Section 7.9 hereof, if
applicable, and with any other applicable provisions of this agreement.
7.9 Evidence and Authority to Trustee. Dreco and/or NOI shall
furnish to the Trustee evidence of compliance with the conditions provided for
in this agreement relating to any action or step required or permitted to be
taken by Dreco and/or NOI or the Trustee under this agreement or as a result
of any obligation imposed under this agreement,
-20-
127
including, without limitation, in respect of the Voting Rights or the Exchange
Put Right, the Exchange Right or the Automatic Exchange Rights and the taking
of any other action to be taken by the Trustee at the request of or on the
application of Dreco and/or NOI forthwith if and when:
(a) such evidence is required by any other section of this
agreement to be furnished to the Trustee in accordance with the terms of this
Section 7.9; or
(b) the Trustee, in the exercise of its rights, powers, duties
and authorities under this agreement, gives Dreco and/or NOI written notice
requiring it to furnish such evidence in relation to any particular action or
obligation specified in such notice.
Such evidence shall consist of an Officer's Certificate of Dreco
and/or NOI or a statutory declaration or a certificate made by persons entitled
to sign an Officer's Certificate stating that any such condition has been
complied with in accordance with the terms of this agreement.
Whenever such evidence relates to a matter other than the Voting
Rights or the Exchange Put Right, the Exchange Right or the Automatic Exchange
Rights, and except as otherwise specifically provided herein, such evidence may
consist of a report or opinion of any solicitor, auditor, accountant,
appraiser, valuer, engineer or other expert or any other person whose
qualifications give authority to a statement made by him, provided that if such
report or opinion is furnished by a director, officer or employee of Dreco
and/or NOI it shall be in the form of an Officer's Certificate or a statutory
declaration.
Each statutory declaration, certificate, opinion or report
furnished to the Trustee as evidence of compliance with a condition provided
for in this agreement shall include a statement by the person giving the
evidence:
(i) declaring that he has read and understands the provisions
of this agreement relating to the condition in question;
(ii) describing the nature and scope of the examination or
investigation upon which he based the statutory declaration, certificate,
statement or opinion; and
(iii) declaring that he has made such examination or
investigation as he believes is necessary to enable him to make the statements
or give the opinions contained or expressed therein.
7.10 Experts, Advisers and Agents. The Trustee may:
(a) in relation to these presents act and rely on the opinion
or advice of or information obtained from or prepared by any solicitor,
auditor, accountant, appraiser, valuer, engineer or other expert, whether
retained by the Trustee or by Dreco and/or NOI or otherwise, and may employ
such assistants as may be necessary to the proper determination
-21-
128
and discharge of its powers and duties and determination of its rights
hereunder and may pay proper and reasonable compensation for all such legal and
other advice or assistance as aforesaid; and
(b) employ such agents and other assistants as it may
reasonably require for the proper determination and discharge of its powers and
duties hereunder, and may pay reasonable remuneration for all services
performed for it (and shall be entitled to receive reasonable remuneration for
all services performed by it) in the discharge of the trusts hereof and
compensation for all disbursements, costs and expenses made or incurred by it
in the determination and discharge of its duties hereunder and in the
management of the Trust.
7.11 Investment of Moneys Held by Trustee. Unless otherwise provided
in this agreement, any moneys held by or on behalf of the Trustee which under
the terms of this agreement may or ought to be invested or which may be on
deposit with the Trustee or which may be in the hands of the Trustee, may be
invested and reinvested in the name or under the control of the Trustee in
securities in which, under the laws of the Province of Alberta, trustees are
authorized to invest trust moneys; provided that such securities are stated to
mature within two years after their purchase by the Trustee, and the Trustee
shall so invest such moneys on the written direction of Dreco. Pending the
investment of any moneys as hereinbefore provided, such moneys may be deposited
in the name of the Trustee in any chartered bank in Canada or, with the consent
of Dreco, in the deposit department of the Trustee or any other loan or trust
company authorized to accept deposits under the laws of Canada or any province
thereof at the rate of interest then current on similar deposits.
7.12 Trustee Not Required to Give Security. The Trustee shall not be
required to give any bond or security in respect of the execution of the
trusts, rights, duties, powers and authorities of this agreement or otherwise
in respect of the premises.
7.13 Trustee Not Bound to Act on Request. Except as in this agreement
otherwise specifically provided, the Trustee shall not be bound to act in
accordance with any direction or request of Dreco and/or NOI or of the
directors thereof until a duly authenticated copy of the instrument or
resolution containing such direction or request shall have been delivered to
the Trustee, and the Trustee shall be empowered to act and rely upon any such
copy purporting to be authenticated and believed by the Trustee to be genuine.
7.14 Authority to Carry on Business. The Trustee represents to Dreco
and NOI that at the date of execution and delivery by it of this agreement it
is authorized to carry on the business of a trust company in the Province of
Alberta but if, notwithstanding the provisions of this Section 7.14, it ceases
to be so authorized to carry on business, the validity and enforceability of
this agreement and the Voting Rights, the Exchange Put Right, the Exchange
Right and the Automatic Exchange Rights shall not be affected in any manner
whatsoever by reason only of such event; provided, however, the Trustee shall,
within 90 days after ceasing to be authorized to carry on the business of a
trust company in the Province of Alberta, either become so authorized or resign
in the manner and with the effect specified in Article X hereof.
-22-
129
7.15 Conflicting Claims. If conflicting claims or demands are made or
asserted with respect to any interest of any Holder in any Exchangeable Shares,
including any disagreement between the heirs, representatives, successors or
assigns succeeding to all or any part of the interest of any Holder in any
Exchangeable Shares resulting in conflicting claims or demands being made in
connection with such interest, then the Trustee shall be entitled, at its sole
discretion, to refuse to recognize or to comply with any such claim or demand.
In so refusing, the Trustee may elect not to exercise any Voting Rights,
Exchange Put Right, Exchange Right or Automatic Exchange Rights subject to such
conflicting claims or demands and, in so doing, the Trustee shall not be or
become liable to any person on account of such election or its failure or
refusal to comply with any such conflicting claims or demands. The Trustee
shall be entitled to continue to refrain from acting and to refuse to act
until:
(a) the rights of all adverse claimants with respect to the
Voting Rights, Exchange Put Right, Exchange Right or Automatic Exchange Rights
subject to such conflicting claims or demands have been adjudicated by a final
judgment of a court of competent jurisdiction; or
(b) all differences with respect to the Voting Rights,
Exchange Put Right, Exchange Right or Automatic Exchange Rights subject to such
conflicting claims or demands have been conclusively settled by a valid written
agreement binding on all such adverse claimants, and the Trustee shall have
been furnished with an executed copy of such agreement.
If the Trustee elects to recognize any claim or comply with any
demand made by any such adverse claimant, it may in its discretion require such
claimant to furnish such surety bond or other security satisfactory to the
Trustee as it shall deem appropriate fully to indemnify it as between all
conflicting claims or demands.
7.16 Acceptance of Trust. The Trustee hereby accepts the Trust
created and provided for by and in this agreement and agrees to perform the
same upon the terms and conditions herein set forth and to hold all rights,
privileges and benefits conferred hereby and by law in trust for the various
persons who shall from time to time be Holders, subject to all the terms and
conditions herein set forth.
ARTICLE VIII
COMPENSATION
NOI and Dreco jointly and severally agree to pay to the Trustee
reasonable compensation for all of the services rendered by it under this
agreement and will reimburse the Trustee for all reasonable expenses (including
but not limited to taxes, compensation paid to experts, agents and advisors
and travel expenses) and disbursements, including the cost and expense of any
suit or litigation of any character and any proceedings before any governmental
agency, reasonably incurred by the Trustee in connection with its rights and
duties under this agreement; provided that NOI and Dreco shall have no
obligation to reimburse the Trustee for any expenses or disbursements paid,
incurred or suffered by the
-23-
130
Trustee in any suit or litigation in which the Trustee is determined to have
acted in bad faith or with negligence or willful misconduct.
ARTICLE IX
INDEMNIFICATION AND LIMITATION OF LIABILITY
9.1 Indemnification of the Trustee. NOI and Dreco jointly and
severally agree to indemnify and hold harmless the Trustee and each of its
directors, officers, employees and agents appointed and acting in accordance
with this agreement (collectively, the "Indemnified Parties") against all
claims, losses, damages, costs, penalties, fines and reasonable expenses
(including reasonable expenses of the Trustee's legal counsel) which, without
fraud, negligence, willful misconduct or bad faith on the part of such
Indemnified Party, may be paid, incurred or suffered by the Indemnified Party
by reason of or as a result of the Trustee's acceptance or administration of
the Trust, its compliance with its duties set forth in this agreement, or any
written or oral instructions delivered to the Trustee by NOI or Dreco pursuant
hereto. In no case shall NOI or Dreco be liable under this indemnity for any
claim against any of the Indemnified Parties unless NOI and Dreco shall be
notified by the Trustee of the written assertion of a claim or of any action
commenced against the Indemnified Parties, promptly after any of the
Indemnified Parties shall have received any such written assertion of a claim
or shall have been served with a summons or other first legal process giving
information as to the nature and basis of the claim. Subject to (i) below, NOI
and Dreco shall be entitled to participate at their own expense in the defense
and, if NOI or Dreco so elect at any time after receipt of such notice, either
of them may assume the defense of any suit brought to enforce any such claim.
The Trustee shall have the right to employ separate counsel in any such suit
and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of the Trustee unless: (i) the employment of
such counsel has been authorized by NOI or Dreco, such authorization not to be
unreasonably withheld; or (ii) the named parties to any such suit include both
the Trustee and NOI or Dreco and the Trustee shall have been advised by counsel
acceptable to NOI or Dreco that there may be one or more legal defenses
available to the Trustee that are different from or in addition to those
available to NOI or Dreco and that an actual or potential conflict of interest
exists (in which case NOI and Dreco shall not have the right to assume the
defense of such suit on behalf of the Trustee, but shall be liable to pay the
reasonable fees and expenses of counsel for the Trustee).
9.2 Limitation of Liability. The Trustee shall not be held liable
for any loss which may occur by reason of depreciation of the value of any part
of the Trust Estate or any loss incurred on any investment of funds pursuant to
this agreement, except to the extent that such loss is attributable to the
fraud, negligence, willful misconduct or bad faith on the part of the Trustee.
-24-
131
ARTICLE X
CHANGE OF TRUSTEE
10.1 Resignation. The Trustee, or any trustee hereafter appointed,
may at any time resign by giving written notice of such resignation to NOI and
Dreco specifying the date on which it desires to resign, provided that such
notice shall never be given less than 60 days before such desired resignation
date unless NOI and Dreco otherwise agree and provided further that such
resignation shall not take effect until the date of the appointment of a
successor trustee and the acceptance of such appointment by the successor
trustee. Upon receiving such notice of resignation, NOI and Dreco shall
promptly appoint a successor trustee by written instrument in duplicate, one
copy of which shall be delivered to the resigning trustee and one copy to the
successor trustee. Failing acceptance by a successor trustee, a successor
trustee may be appointed by an order of the superior court of the province in
which the Dreco has its registered office upon application of one or more of
the parties hereto.
10.2 Removal. The Trustee, or any trustee hereafter appointed, may be
removed with or without cause, at any time on 60 days' prior notice by written
instrument executed by NOI and Dreco, in duplicate, one copy of which shall be
delivered to the trustee so removed and one copy to the successor trustee,
provided that, in connection with such removal, provision is made for a
replacement trustee similar to that contemplated in Section 10.1.
10.3 Successor Trustee. Any successor trustee appointed as provided
under this agreement shall execute, acknowledge and deliver to NOI and Dreco
and to its predecessor trustee an instrument accepting such appointment.
Thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor under this agreement, with like effect as if
originally named as trustee in this agreement. However, on the written request
of NOI and Dreco or of the successor trustee, the trustee ceasing to act shall,
upon payment of any amounts then due it pursuant to the provisions of this
agreement, execute and deliver an instrument transferring to such successor
trustee all the rights and powers of the trustee so ceasing to act. Upon the
request of any such successor trustee, NOI, Dreco and such predecessor trustee
shall execute any and all instruments in writing for more fully and certainly
vesting in and confirming to such successor trustee all such rights and powers.
10.4 Notice of Successor Trustee. Upon acceptance of appointment by a
successor trustee as provided herein, NOI and Dreco shall cause to be mailed
notice of the succession of such trustee hereunder to each Holder specified in
a List. If NOI or Dreco shall fail to cause such notice to be mailed within
10 days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of NOI and Dreco.
-25-
132
ARTICLE XI
NOI SUCCESSORS
11.1 Certain Requirements in Respect of Combination, Etc. NOI shall
not enter into any transaction (whether by way of reconstruction,
reorganization, consolidation, merger, transfer, sale, lease or otherwise)
whereby all or substantially all of its undertaking, property and assets would
become the property of any other Person or, in the case of a merger, of the
continuing corporation resulting therefrom, but may do so if:
(a) such other Person or continuing corporation (the "NOI
Successor"), by operation of law, becomes, without more, bound by the terms and
provisions of this agreement or, if not so bound, executes, prior to or
contemporaneously with the consummation of such transaction an agreement
supplemental hereto and such other instruments (if any) as are satisfactory to
the Trustee and in the opinion of legal counsel to the Trustee are necessary or
advisable to evidence the assumption by the NOI Successor of liability for all
moneys payable and property deliverable hereunder, the covenant of such NOI
Successor to pay and deliver or cause to be delivered the same and its
agreement to observe and perform all the covenants and obligations of NOI under
this agreement; and
(b) such transaction shall, to the satisfaction of the Trustee
and in the opinion of legal counsel to the Trustee, be upon such terms which
substantially preserve and do not impair in any material respect any of the
rights, duties, powers and authorities of the Trustee or of the Holders
hereunder.
11.2 Vesting of Powers in Successor. Whenever the conditions of
Section 11.1 hereof have been duly observed and performed, the Trustee, if
required by Section 11.1 hereof, the NOI Successor and Dreco shall execute and
deliver the supplemental agreement provided for in Article XII hereof, and
thereupon the NOI Successor shall possess and from time to time may exercise
each and every right and power of NOI under this agreement in the name of NOI
or otherwise and any act or proceeding by any provision of this agreement
required to be done or performed by the board of directors of NOI or any
officers of NOI may be done and performed with like force and effect by the
directors or officers of such NOI Successor.
11.3 Wholly-owned Subsidiaries. Nothing herein shall be construed as
preventing the amalgamation or merger of any wholly-owned subsidiary of NOI
with or into NOI or the winding-up, liquidation or dissolution of any
wholly-owned subsidiary of NOI provided that all of the assets of such
subsidiary are transferred to NOI or another wholly-owned subsidiary of NOI,
and any such transactions are expressly permitted by this Article XI.
ARTICLE XII
AMENDMENTS AND SUPPLEMENTAL AGREEMENTS
12.1 Amendments, Modifications, Etc. Subject to Section 12.4, this
agreement may not be amended, modified or waived except by an agreement in
writing executed by Dreco,
-26-
133
NOI and the Trustee and approved by the Holders in accordance with Section 10.1
of the Exchangeable Share Provisions. No amendment to or modification or
waiver of any of the provisions of this agreement otherwise permitted hereunder
shall be effective unless made in writing and signed by all of the parties
hereto.
12.2 Ministerial Amendments. Notwithstanding the provisions of
Section 12.1 hereof, the parties to this agreement may in writing, at any time
and from time to time, without the approval of the Holders, amend or modify
this agreement for the purposes of:
(a) adding to the covenants of any or all of the parties
hereto for the protection of the Holders hereunder;
(b) making such amendments or modifications not inconsistent
with this agreement as may be necessary or desirable with respect to matters
or questions which, in the opinion of the board of directors of each of NOI and
Dreco and in the opinion of the Trustee and its counsel, having in mind the
best interests of the Holders as a whole, it may be expedient to make, provided
that such boards of directors and the Trustee and its counsel shall be of the
opinion that such amendments and modifications will not be prejudicial to the
interests of the Holders as a whole; or
(c) making such changes or corrections which, on the advice of
counsel to Dreco, NOI and the Trustee, are required for the purpose of curing
or correcting any ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error; provided that the Trustee and its
counsel and the board of directors of each of Dreco and NOI shall be of the
opinion that such changes or corrections will not be prejudicial to the
interests of the Holders as a whole.
12.3 Meeting to Consider Amendments. Dreco, at the request of NOI,
shall call a meeting or meetings of the Holders for the purpose of considering
any proposed amendment or modification requiring approval pursuant hereto. Any
such meeting or meetings shall be called and held in accordance with the
by-laws of Dreco, the Exchangeable Share Provisions and all applicable laws.
12.4 Changes in Capital of NOI and Dreco. At all times after the
occurrence of any event effected pursuant to Section 2.7 or Section 2.8 of the
Support Agreement, as a result of which either NOI Common Stock or the
Exchangeable Shares or both are in any way changed, this agreement shall
forthwith be amended and modified as necessary in order that it shall apply
with full force and effect, mutatis mutandis, to all new securities into which
NOI Common Stock or the Exchangeable Shares or both are so changed, and the
parties hereto shall execute and deliver a supplemental agreement giving effect
to and evidencing such necessary amendments and modifications.
12.5 Execution of Supplemental Agreements. From time to time Dreco
(when authorized by a resolution of its Board of Directors), NOI (when
authorized by a resolution of its board of directors) and the Trustee may,
subject to the provisions of these presents,
-27-
134
and they shall, when so directed by these presents, execute and deliver by
their proper officers, agreements or other instruments supplemental hereto,
which thereafter shall form part hereof, for any one or more of the following
purposes:
(a) evidencing the succession of any NOI Successors to NOI and
the covenants of and obligations assumed by each such NOI Successor in
accordance with the provisions of Article XI and the successor of any successor
trustee in accordance with the provisions of Article X;
(b) making any additions to, deletions from or alterations of
the provisions of this agreement or the Voting Rights, the Exchange Put Right,
the Exchange Right or the Automatic Exchange Rights which, in the opinion of
the Trustee and its counsel, will not be prejudicial to the interests of the
Holders as a whole or are in the opinion of counsel to the Trustee necessary or
advisable in order to incorporate, reflect or comply with any legislation the
provisions of which apply to NOI, Dreco, the Trustee or this agreement; and
(c) for any other purposes not inconsistent with the
provisions of this agreement, including without limitation to make or evidence
any amendment or modification to this agreement as contemplated hereby,
provided that, in the opinion of the Trustee and its counsel, the rights of the
Trustee and the Holders as a whole will not be prejudiced thereby.
ARTICLE XIII
TERMINATION
13.1 Term. The Trust created by this agreement shall continue until
the earliest to occur of the following events:
(a) no outstanding Exchangeable Shares are held by a Holder;
(b) each of Dreco and NOI elects in writing to terminate the
Trust and such termination is approved by the Holders of the Exchangeable
Shares in accordance with Section 10.1 of the Exchangeable Share Provisions;
and
(c) 21 years after the death of the last survivor of the
descendants of His Majesty King George VI of the United Kingdom of Great
Britain and Northern Ireland living on the date of the creation of the Trust.
13.2 Survival of Agreement. This agreement shall survive any
termination of the Trust and shall continue until there are no Exchangeable
Shares outstanding held by a Holder; provided, however, that the provisions of
Articles VIII and IX hereof shall survive any such termination of this
agreement.
-28-
135
ARTICLE XIV
GENERAL
14.1 Severability. If any provision of this agreement is held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remainder of this agreement shall not in any way be affected or impaired
thereby, and the agreement shall be carried out as nearly as possible in
accordance with its original terms and conditions.
14.2 Inurement. This agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns and to the benefit of the Holders.
14.3 Notices to Parties. All notices and other communications between
the parties hereunder shall be in writing and shall be deemed to have been
given if delivered personally or by confirmed telecopy to the parties at the
following addresses (or at such other address for such party as shall be
specified in like notice):
(a) if to NOI to: National-Oilwell, Inc., 5555 San Felipe,
P.O. Box 4638 (77210), Houston, Texas 77210, Attention: President, Facsimile
No. 713/960-5237, with required copies to Morgan, Lewis & Bockius LLP, 2000 One
Logan Square, Philadelphia, PA 19103, Attention: David R. King, Esq., Facsimile
No. 215/963-5299, and to Stikeman, Elliott, Suite 5300, P.O. Box 85, Commerce
Court West, Toronto, Ontario, Canada M5L 1B9, Attention: John M. Stransman,
Esq., Facsimile No. 416/947-0866.
(b) if to Dreco to: Dreco Energy Services Ltd., #1340 Weber
Centre, 5555 Calgary Trail South, Edmonton, Alberta, Canada T6H 5P9, Attention:
President, Facsimile No. 403/438-8256, with required copies to Fulbright &
Jaworski L.L.P., 1301 McKinney, Suite 5100, Houston, TX 77010, Attention:
Robert F. Gray, Jr., Facsimile No. 713/651-5246, and to Blake, Cassels &
Graydon, 3500 Bankers Hill East, 855-2d Street S.W., Calgary, Alberta, Canada
T2P 4J8, Attention: Patrick C. Finnerty, Esq., facsimile no. 403/260-9700.
(c) if to the Trustee to:
Any notice or other communication given personally shall be
deemed to have been given and received upon delivery thereof, and if given by
telecopy shall be deemed to have been given and received on the date of receipt
thereof unless such day is not a Business Day in which case it shall be deemed
to have been given and received upon the immediately following Business Day.
14.4 Notice to Holders. Any and all notices to be given and any
documents to be sent to any Holders may be given or sent to the address of such
Holder shown on the register of Holders of Exchangeable Shares in any manner
permitted by the Exchangeable Share Provisions and shall be deemed to be
received (if given or sent in such manner) at the time specified in such
Exchangeable Share Provisions, the provisions of which Exchangeable
-29-
136
Share Provisions shall apply mutatis mutandis to notices or documents as
aforesaid sent to such Holders.
14.5 Risk of Payments by Post. Whenever payments are to be made or
documents are to be sent to any Holder by the Trustee, by Dreco or by NOI or by
such Holder to the Trustee or to NOI or Dreco, the making of such payment or
sending of such document sent through the post shall be at the risk of Dreco or
NOI, in the case of payments made or documents sent by the Trustee or Dreco or
NOI, and the Holder, in the case of payments made or documents sent by the
Holder.
14.6 Counterparts. This agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
14.7 Jurisdiction. This agreement shall be construed and enforced in
accordance with the laws of the Province of Alberta and the laws of Canada
applicable therein.
14.8 Attornment. NOI agrees that any action or proceeding arising out
of or relating to this agreement may be instituted in the courts of Alberta,
waives any objection which it may have now or hereafter to the venue of any
such action or proceeding, irrevocably submits to the jurisdiction of such
courts in any such action or proceeding, agrees to be bound by any judgment of
such courts and agrees not to seek, and hereby waives, any review of the merits
of any such judgment by the courts of any other jurisdiction and hereby
appoints Dreco at its registered office in the Province of Alberta as NOI's
attorney for service of process.
-30-
137
IN WITNESS WHEREOF, the parties hereby have caused this agreement to be
duly executed as of the date first above written.
National-Oilwell, Inc.
By:
------------------------------------------
Joel V. Staff
President
Dreco Energy Services Ltd.
By:
------------------------------------------
Robert L. Phillips
President
_______ TRUST COMPANY
By:
------------------------------------------
[name]
[title]
-31-
138
Exhibit E
Form of Dreco Affiliate's Agreement
AFFILIATE'S AGREEMENT
THIS AFFILIATE AGREEMENT (the "Agreement") is made and entered into on
_________, 1997 by and among National-Oilwell, Inc., a Delaware corporation
("NOI"), Dreco Energy Services Ltd., an Alberta corporation ("Dreco"), and the
undersigned affiliate of Dreco ("Affiliate").
RECITALS
WHEREAS, Dreco and NOI have entered into a Combination Agreement (the
"Combination Agreement") providing for, among other things, the acquisition by
NOI of shares in the capital stock of Dreco (the "Combination").
WHEREAS, Affiliate may receive, as a result of the Combination,
Exchangeable Shares (as defined in the Combination Agreement) in the capital
stock of Dreco in exchange for shares of Class "A" common shares, no par value
per share, of Dreco (the "Dreco Common Shares") owned by Affiliate at the
Effective Time (as defined in the Combination Agreement), and shares of common
stock, par value $.01 per share, of NOI (the "NOI Common Stock," and together
with the Exchangeable Shares, "Combination Shares") pursuant to the
Exchangeable Share Provisions (the "Exchangeable Share Provisions") of the Plan
of Arrangement attached as Exhibit A to the Combination Agreement ("Plan of
Arrangement").
WHEREAS, Affiliate understands that, because the Combination will be
accounted for using the "pooling-of-interests" method and Affiliate may be
deemed, as of the date hereof, to be an "affiliate" of Dreco, as such term is
interpreted for purposes of the "pooling-of-interests rules" and paragraphs (c)
and (d) of Rule 145 of the rules and regulations of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), the Combination Shares beneficially owned by Affiliate may
only be disposed of in conformity with the limitations described herein.
NOW THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares. (a) Affiliate agrees not to
transfer, sell, pledge or otherwise dispose of or direct or cause the sale,
transfer or other disposition of, or reduce Affiliate's risk relative to, any
shares of Dreco Common Shares (except for the conversion of the Dreco Common
Shares into Exchangeable Shares and the conversion of Exchangeable Shares into
NOI Common Stock as contemplated by the Combination Agreement and the Plan of
Arrangement) held by Affiliate or on Affiliate's behalf, whether owned on the
date hereof or acquired on or after ______________, 1997 (30 days prior to the
Effective Date (as defined in the Combination Agreement)).
(b) Affiliate agrees not to transfer, sell, pledge or
otherwise dispose of, or direct or cause the sale, transfer or other
disposition of, or reduce Affiliate's risk relative to, any Combination Shares
held by Affiliate or on Affiliate's behalf or received by Affiliate or on
Affiliate's
139
behalf in or as a result of the Combination or otherwise, until after the date
(the "Expiration Date") NOI shall have publicly released a report in the form
of a quarterly earnings report, registration statement filed with the
Commission, a report filed with the Commission on Form 10-K, 10-Q or 8-K or any
other public filing, statement or public announcement which includes the
combined financial results (including combined sales and net income) of NOI and
Dreco for a period of at least 30 days of combined operations of NOI and
Dreco following the Effective Date.
2. Representations, Warranties and Covenants of Affiliate.
Affiliate represents, warrants and covenants as follows:
(a) Affiliate has full power and authority to execute
this Agreement, to make the representations, warranties and covenants herein
contained and to perform Affiliate's obligations hereunder.
(b) In addition to the Agreements contained in Section 1
above, Affiliate will not sell, transfer, or otherwise dispose of, or make any
offer or agreement relating to any of the foregoing with respect to, any
Combination Shares, except: (i) in a transaction described in Rule 145(d) under
the Securities Act; (ii) in a transaction that is otherwise exempt from the
registration requirements of the Securities Act; or (iii) pursuant to an
effective registration statement under the Securities Act.
3. Limited Resales. NOI acknowledges that the provisions of
Section 2(b) of this Agreement will be satisfied as to any sale by the
undersigned of the Combination Shares pursuant to Rule 145(d) under the
Securities Act, upon receipt of a broker's letter and a letter from the
undersigned with respect to that sale stating that the applicable requirements
of Rule 145(d)(1) have been met or a letter from the undersigned stating that
the requirements of Rule 145(d)(1) are inapplicable by virtue of Rule 145(d)(2)
or Rule 145(d)(3); provided, however, that NOI has no reasonable basis to
believe that such sales were not made in compliance with such provisions of
Rule 145(d) and subject to any changes in Rule 145 after the date of this
Agreement.
4. Legends.
Affiliate also understands and agrees that stop transfer
instructions will be given to NOI's transfer agent with respect to certificates
evidencing the NOI Common Stock and that there will be placed on the
certificates evidencing the Exchangeable Shares and the NOI Common Stock issued
pursuant to the terms of the Exchangeable Share Provisions legends stating in
substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE
EFFECT TO ANY ATTEMPTED SALE, TRANSFER OR ASSIGNMENT, PRIOR TO THE
PUBLICATION AND DISSEMINATION OF FINANCIAL STATEMENTS BY NOI WHICH
INCLUDE THE RESULTS OF AT LEAST THIRTY (30) DAYS OF COMBINED
OPERATIONS OF NOI AND DRECO.
and
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
2
140
ACT OF 1933, AS AMENDED, APPLIES. THESE SHARES MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF SUCH RULE.
5. Termination. This Agreement shall be terminated and shall be
of no further force and effect upon the termination of the Combination
Agreement pursuant to Section 6.1 of the Combination Agreement.
6. Miscellaneous.
(a) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
(b) Binding Agreement. This Agreement will inure to the benefit
of and be binding upon and enforceable against the parties and their successors
and assigns, including administrators, executors, representatives, heirs,
legatees and devisees of Affiliate and pledgees holding Combination Shares as
collateral.
(c) Waiver. No waiver by any party hereto of any condition or of
any breach of any provision of this Agreement shall be effective unless in
writing and signed by each party hereto.
(d) Governing Law. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Delaware.
(e) Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
(f) Third Party Reliance. Counsel to and independent auditors for
the parties shall be entitled to rely upon this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
NATIONAL-OILWELL, INC. AFFILIATE
By: By:
------------------------------------------------ ------------------------------------------------
Joel V. Staff
President
DRECO ENERGY SERVICES LTD. Affiliate's Address for Notice:
- --------------------------------------------------- ---------------------------------------------------
Robert L. Phillips
President ---------------------------------------------------
---------------------------------------------------
141
Exhibit F
Form of NOI Affiliate's Agreement
AFFILIATE'S AGREEMENT
THIS AFFILIATE AGREEMENT (the "Agreement") is made and entered into on
_________, 1997 by and among National-Oilwell, Inc., a Delaware corporation
("NOI"), Dreco Energy Services Ltd., an Alberta corporation ("Dreco"), and the
undersigned affiliate of NOI ("Affiliate").
RECITALS
WHEREAS, Dreco and NOI have entered into a Combination Agreement (the
"Combination Agreement") providing for, among other things, the acquisition by
NOI of shares in the capital stock of Dreco (the "Combination").
WHEREAS, Affiliate understands that, because the Combination will be
accounted for using the "pooling-of-interests" method and Affiliate may be
deemed, as of the date hereof, to be an "affiliate" of NOI, as such term is
interpreted for purposes of the "pooling-of-interests rules" and paragraphs (c)
and (d) of Rule 145 of the rules and regulations of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), the shares of common stock, par value $.01 per share, of NOI
("NOI Common Stock") beneficially owned by Affiliate may only be disposed of in
conformity with the limitations described herein.
NOW THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares. Affiliate agrees not to transfer,
sell, pledge, or otherwise dispose of or direct or cause the sale, transfer or
other disposition of, or reduce Affiliate's risk relative to, any NOI Common
Stock held by Affiliate or on Affiliate's behalf, whether owned on the date
hereof or acquired thereafter, during the period beginning on ______________,
1997 (30 days prior to the Effective Date (as defined in the Combination
Agreement)) and ending on the date (the "Expiration Date") NOI shall have
publicly released a report in the form of a quarterly earnings report,
registration statement filed with the Commission, a report filed with the
Commission on Form 10-K, 10-Q or 8-K or any other public filing, statement or
public announcement which includes the combined financial results (including
combined sales and net income) of NOI and Dreco for a period of at least 30
days of combined operations of NOI and Dreco following the Effective Date.
2. Representations, Warranties and Covenants of Affiliate.
Affiliate represents, warrants and covenants that Affiliate has full power and
authority to execute this Agreement, to make the representations, warranties
and covenants herein contained and to perform Affiliate's obligations
hereunder.
142
3. Termination. This Agreement shall be terminated and shall be
of no further force and effect upon the termination of the Combination
Agreement pursuant to Section 6.1 of the Combination Agreement.
4. Miscellaneous.
(a) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
(b) Binding Agreement. This Agreement will inure to the benefit
of and be binding upon and enforceable against the parties and their successors
and assigns, including administrators, executors, representatives, heirs,
legatees and devisees of Affiliate and pledgees holding NOI Common Stock as
collateral.
(c) Waiver. No waiver by any party hereto of any condition or of
any breach of any provision of this Agreement shall be effective unless in
writing and signed by each party hereto.
(d) Governing Law. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Delaware.
(e) Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
(f) Third Party Reliance. Counsel to and independent auditors for
the parties shall be entitled to rely upon this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
NATIONAL-OILWELL, INC. AFFILIATE
By: By:
------------------------------------------------ ------------------------------------------------
Joel V. Staff
President
DRECO ENERGY SERVICES LTD. Affiliate's Address for Notice:
- --------------------------------------------------- ---------------------------------------------------
Robert L. Phillips
President ---------------------------------------------------
---------------------------------------------------
1
EXHIBIT 99.1
NEWS
CONTACTS: STEVE KRABLIN
NATIONAL-OILWELL, INC.
(713) 960-5506
JAMES E. DEVANEY
DRECO ENERGY SERVICES LTD.
(403)944-3900
FOR IMMEDIATE RELEASE
NATIONAL-OILWELL AND DRECO ANNOUNCE
SIGNING OF DEFINITIVE COMBINATION AGREEMENT
HOUSTON, TX, MAY 14, 1997 - - National-Oilwell, Inc. (NOI/NYSE) and Dreco
Energy Services Ltd. (NASDAQ/DREAF, T.S.E./DRE.A) jointly announced today the
signing of a definitive agreement to combine the two companies.
The terms of the agreement provide for the exchange of Dreco common shares for
National-Oilwell common shares in a pooling of interests transaction that is
expected to be tax free to both companies. The exchange ratio is subject to a
collar and will provide Dreco's shareholders with 1.2 shares of National-
Oilwell stock, if during the 20 consecutive trading days ending 5 days before
closing, National-Oilwell's average stock price is between $36.00 and $47.25.
If the average stock price is above $47.25, the exchange ratio adjusts to
provide Dreco holders with $56.70 of National-Oilwell common stock, and, if the
average stock price is below $36.00, the exchange ratio adjusts to provide
Dreco holders with $43.20 of National-Oilwell common stock.
National-Oilwell would issue approximately 9.4 million shares of its common
stock valued at $366 million, based on a 1.2 exchange ratio. The combination
is expected to be accretive to estimated 1997 earnings per share of National-
Oilwell, excluding one-time charges related to expenses associated with the
transaction.
Joel V. Staff, Chairman and CEO of National-Oilwell, said, "The combination of
National-Oilwell and Dreco affords excellent opportunities for the
shareholders, employees and customers of both companies by significantly
enhancing the combined company's ability to provide high quality equipment and
services. Bringing together the respective strengths of these organizations
will create a unique capability to provide our customers with innovative and
reliable drilling systems solutions. In addition, the combination of Dreco's
-more-
2
downhole products group, including its role as a leading independent supplier
of drilling motors, with National-Oilwell's distribution services presents
numerous opportunities to expand the already strong positions held by the
respective companies. The combined companies will have a strong balance sheet
and a current market capitalization in excess of $1 billion."
Fred Pheasey, Chairman of Dreco, said, "The range of products of the combined
drilling and well servicing equipment businesses will span from equipment and
packages for deep drilling requirements through to reentry drilling, well
servicing and coiled tubing well service and drilling applications, both land
and offshore. In addition, Dreco's downhole product business will benefit from
its tie with National-Oilwell." Robert L. Phillips, President and CEO of
Dreco, further added "This transaction provides an exciting opportunity for
Dreco's shareholders and employees. It is consistent with the company's longer
term strategic goals. The combination will create an organization that has
greater prospects for broad based growth in all of our businesses. In
particular, National-Oilwell's complementary products and distribution system
in addition to its worldwide installed base of equipment should provide
significant opportunities. Both companies have key customer relationships
which should be enhanced by this combination.
At closing, the shareholders of Dreco would have the option of receiving either
National-Oilwell common stock or Dreco exchangeable shares. In general, the
exchangeable shares would be exchangeable at the shareholder's option for
National-Oilwell common stock on a share-for-share basis and otherwise would
have equivalent economic and voting rights.
The merger has been approved by the boards of directors of both companies.
Credit Suisse First Boston acted as financial advisor to Dreco, and Merrill
Lynch & Co. acted as financial advisor to National-Oilwell. Holders of
approximately 52% of National-Oilwell's common stock, as well as the Chairman
and the President and CEO of Dreco, have entered into voting agreements in
support of the transaction.
The transaction, which is structured as a plan of arrangement under Alberta
law, is subject to various conditions, including shareholder approvals of both
companies, the approval of the Alberta Court, and other regulatory approvals in
both the U.S. and Canada. It is anticipated that shareholders meetings and the
closing of the transaction would occur during the third quarter of 1997.
National-Oilwell is a worldwide leader in the design, manufacture and sale of
machinery and equipment and in the distribution of maintenance, repair and
operating products used in oil and gas drilling and production. The company's
machinery and equipment include drawworks, mud pumps and power swivels, which
are the major mechanical components of rigs used to drill oil and gas wells.
Many of these components are designed specifically for applications in
offshore, extended reach and deep land drilling. The Company distributes
products and provides services, including complete customer inventory
procurement and management, from a network of approximately 120 service centers
and from its Houston headquarters.
-more-
3
Dreco, based in Edmonton, Alberta, Canada, designs and manufactures specialty
drilling and well servicing equipment and downhole tools. Drilling and well
servicing equipment packages include those specialized for Arctic operating
environments, offshore platforms, desert service as well as conventional land
and offshore applications. Downhole tools include highly engineered drilling
products focused on the increased use of horizontal and other directional
drilling applications by oil and gas companies.
Statements made in this press release that are forward-looking in nature are
intended to be "forward-looking statements" with the meaning of Section 21E of
the Securities Exchange Act of 1934. Although National-Oilwell and Dreco
believe that the expectations described herein are reasonable, the actual
results of the combined company could differ materially from those currently
anticipated. Factors that could cause results to differ materially include:
changes in industry conditions and demand for oil and gas, and delays in the
ability of National-Oilwell to fully integrate the operations of Dreco and
achieve the strategic benefits described above. Other factors are set forth
under "Risk Factors" in Item 1 of National-Oilwells's Annual Report on Form 10-
K for the fiscal year ended December 31, 1996, filed with the Securities and
Exchange Commission, and under "Industry Conditions," "International
Operations," "Significant Contracts," "Operating Risks" and "Environmental
Matters" in Item 1 of Dreco's Annual Report on Form 10-K for the fiscal year
ended August 31, 1996, filed with the Securities and Exchange Commission.
* * * * *
-more-
1
EXHIBIT 99.2
STOCKHOLDER AGREEMENT
May 14, 1997
Dreco Energy Services Ltd.
#1340 Weber Centre
5555 Calgary Trail South
Edmonton, Alberta, Canada T6H 5P9
Attention: President
Reference is made to the Combination Agreement by and between National-Oilwell,
Inc. ("NOI") and Dreco Energy Services Ltd. ("Dreco") dated as of May 14, 1997
(the "Agreement") and the other transactions, including, without limitation,
the restatement of NOI's charter, contemplated by the Agreement (the
"Contemplated Transactions"), providing for the combination of NOI and Dreco.
As an inducement to, and in consideration of, Dreco's entering into the
Agreement, the undersigned covenants and agrees as follows:
(i) At any meeting of the stockholders of NOI at which either the
approval of the Agreement or of the Contemplated Transactions or
both are to be voted upon, the undersigned will vote any voting
securities of NOI over which the undersigned has voting authority
in favor of the approval of the Agreement of the Contemplated
Transactions unless the Board of Directors of NOI is
recommending, at the time of such meeting, that stockholders of
NOI vote against such approval.
(ii) Until the Closing (as defined in the Agreement) or the
termination of the Agreement, the undersigned will not sell,
contract to sell or otherwise dispose of any voting securities of
NOI over which the undersigned has dispositive authority.
Very Truly Yours,
DPI Oil Service Partners Limited Partnership
By Inverness/Phoenix L.L.C., its general partner
By: /s/ W. McComb Dunwoody
Name: W. McComb Dunwoody
Title: President
DPI Partners II
By Inverness/Phoenix L.L.C., its general partner
By: /s/ W. McComb Dunwoody
Name: W. McComb Dunwoody
Title: President
1
EXHIBIT 99.3
STOCKHOLDER AGREEMENT
May 14, 1997
Dreco Energy Services Ltd.
#1340 Weber Centre
5555 Calgary Trail South
Edmonton, Alberta, Canada T6H 5P9
Attention: President
Reference is made to the Combination Agreement by and between National-Oilwell,
Inc. ("NOI") and Dreco Energy Services Ltd. ("Dreco") dated as of May 14, 1997
(the "Agreement") and the other transactions, including, without limitation,
the restatement of NOI's charter, contemplated by the Agreement (the
"Contemplated Transactions"), providing for the combination of NOI and Dreco.
As an inducement to, and in consideration of, Dreco's entering into the
Agreement, the undersigned covenants and agrees as follows:
(i) At any meeting of the stockholders of NOI at which either the
approval of the Agreement or of the Contemplated Transactions or
both are to be voted upon, the undersigned will vote any voting
securities of NOI over which the undersigned has voting authority
in favor of the approval of the Agreement of the Contemplated
Transactions unless the Board of Directors of NOI is
recommending, at the time of such meeting, that stockholders of
NOI vote against such approval.
(ii) Until the Closing (as defined in the Agreement) or the
termination of the Agreement, the undersigned will not sell,
contract to sell or otherwise dispose of any voting securities of
NOI over which the undersigned has dispositive authority.
Very Truly Yours,
First Reserve Fund V, Limited Partnership
By First Reserve Corporation, its general partner
By: /s/ William E. Macaulay
Name: William E. Macaulay
Title: President
First Reserve Fund V-2, Limited Partnership
By First Reserve Corporation, its general partner
By: /s/ William E. Macaulay
Name: William E. Macaulay
Title: President
First Reserve Fund VI, Limited Partnership
By First Reserve Corporation, its general partner
By: /s/ William E. Macaulay
Name: William E. Macaulay
Title: President
1
EXHIBIT 99.4
SHAREHOLDER AGREEMENT
May 14, 1997
National-Oilwell, Inc.
5555 San Felipe
P.O. Box 4638
Houston, Texas 77210
Attention: President
Reference is made to the Combination Agreement by and between National-Oilwell,
Inc. ("NOI") and Dreco Energy Services Ltd. ("Dreco") dated as of May 14, 1997
(the "Agreement"), the other transactions contemplated by the Agreement (the
"Contemplated Transactions") and the arrangement (the "Arrangement") under Part
15 of the Business Corporations Act (Alberta) substantially in the form of
Exhibit A to the Agreement, all providing for the combination of NOI and Dreco.
As an inducement to, and in consideration of, NOI's entering into the
Agreement, the undersigned covenants and agrees as follows:
(i) At any meeting of the shareholders of Dreco at which either the
approval of the Arrangement or of the Contemplated Transactions
or both are to be voted upon, the undersigned will vote any
voting securities (the "Securities") of Dreco over which the
undersigned has voting authority in favor of the approval of the
Arrangement and of the Contemplated Transactions unless the Board
of Directors of Dreco is recommending, at the time of such
meeting, that shareholders of Dreco vote against such approval in
view of the pendency of a Superior Proposal (as defined in the
Agreement).
(ii) Until the Closing (as defined in the Agreement) or the
termination of the Agreement, the undersigned will not directly
or indirectly (a) solicit, initiate or encourage (including by
way of furnishing information) or take any other action to
facilitate any inquiries or the making of any proposal which
constitutes or may reasonably be expected to lead to an
Acquisition Proposal (as defined in the Agreement) from any
person or (b) engage in any discussion or negotiations relating
thereto or accept any Acquisition Proposal; provided that the
foregoing clause (b) shall not prohibit the undersigned, a
director of Dreco, from acting (subject to the Agreement) solely
in his capacity as a director of Dreco.
2
(iii) Until the Closing (as defined in the Agreement) or the
termination of the Agreement, the undersigned will not sell,
contract to sell or otherwise dispose of any voting securities of
Dreco over which the undersigned has dispositive authority.
Very Truly Yours,
/s/ FREDERICK W. PHEASEY
- --------------------------------------
Frederick W. Pheasey
1
EXHIBIT 99.5
SHAREHOLDER AGREEMENT
May 14, 1997
National-Oilwell, Inc.
5555 San Felipe
P.O. Box 4638
Houston, Texas 77210
Attention: President
Reference is made to the Combination Agreement by and between National-Oilwell,
Inc. ("NOI") and Dreco Energy Services Ltd. ("Dreco") dated as of May 14, 1997
(the "Agreement"), the other transactions contemplated by the Agreement (the
"Contemplated Transactions") and the arrangement (the "Arrangement") under Part
15 of the Business Corporations Act (Alberta) substantially in the form of
Exhibit A to the Agreement, all providing for the combination of NOI and Dreco.
As an inducement to, and in consideration of, NOI's entering into the
Agreement, the undersigned covenants and agrees as follows:
(i) At any meeting of the shareholders of Dreco at which either the
approval of the Arrangement or of the Contemplated Transactions
or both are to be voted upon, the undersigned will vote any
voting securities (the "Securities") of Dreco over which the
undersigned has voting authority in favor of the approval of the
Arrangement and of the Contemplated Transactions unless the Board
of Directors of Dreco is recommending, at the time of such
meeting, that shareholders of Dreco vote against such approval in
view of the pendency of a Superior Proposal (as defined in the
Agreement).
(ii) Until the Closing (as defined in the Agreement) or the
termination of the Agreement, the undersigned will not directly
or indirectly (a) solicit, initiate or encourage (including by
way of furnishing information) or take any other action to
facilitate any inquiries or the making of any proposal which
constitutes or may reasonably be expected to lead to an
Acquisition Proposal (as defined in the Agreement) from any
person or (b) engage in any discussion or negotiations relating
thereto or accept any Acquisition Proposal; provided that the
foregoing clause (b) shall not prohibit the undersigned, a
director of Dreco, from acting (subject to the Agreement) solely
in his capacity as a director of Dreco.
2
(iii) Until the Closing (as defined in the Agreement) or the
termination of the Agreement, the undersigned will not sell,
contract to sell or otherwise dispose of any voting securities of
Dreco over which the undersigned has dispositive authority.
Very Truly Yours,
/s/ ROBERT L. PHILLIPS
- --------------------------
Robert L. Phillips
