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SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
14(a) of the Securities Exchange Act
of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party Other than the Registrant
Check the Appropriate Box
[ ] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Exchange Act Rule 14a-11 or 14a-12
NATIONAL-OILWELL, INC.
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(Name of Registrant as Specified In Its Charter)
NATIONAL-OILWELL, INC.
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(Name of Persons(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate bos):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14-a6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which the transaction applies;
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Set forth the amount on which the filing
fee is calculated and state how it was determined.
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[NATIONAL OILWELL LOGO]
NATIONAL-OILWELL, INC.
10000 RICHMOND AVENUE - 4TH FLOOR
HOUSTON, TEXAS 77042
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1999
TO THE STOCKHOLDERS OF NATIONAL-OILWELL, INC.:
Notice is hereby given that the annual meeting of stockholders of
NATIONAL-OILWELL, INC. will be held at the ITT Sheraton Luxury Collection Hotel,
1919 Briar Oaks Lane, Houston, Texas, at 11:00 A.M., local time, on Wednesday,
May 19, 1999, for the following purposes:
1. To re-elect three directors, each for a term of three years
and to elect one director for a term of one year;
2. To approve an amendment to the National-Oilwell, Inc. Amended
and Restated Stock Award and Long-Term Incentive Plan to
increase by 2,500,000 the number of shares of common stock
reserved under the plan; and
3. To transact any other business properly brought before the
meeting.
If you were a stockholder of record at the close of business on March
22, 1999, you may vote at the Annual Meeting. A list of the stockholders will be
available for inspection at the company's offices during normal business hours
for the 10 days prior to the meeting, and at the time and place of the meeting.
PLEASE DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES MAY BE
VOTED IN ACCORDANCE WITH YOUR WISHES AND SO THAT THE PRESENCE OF A QUORUM MAY BE
ASSURED. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON
IN THE EVENT YOU ATTEND THE MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME
BEFORE IT IS VOTED.
By order of the board of directors,
/s/ M. Gay Mather
M. Gay Mather
Assistant Secretary
Houston, Texas
April 20, 1999
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NATIONAL-OILWELL, INC.
10000 RICHMOND AVENUE - 4TH FLOOR
HOUSTON, TEXAS 77042
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1999
The Board of Directors is soliciting proxies to be used at the 1999 annual
meeting. This proxy statement, the form of proxy and National Oilwell's 1998
Annual Report are being mailed to stockholders on or about April 20, 1999.
PURPOSE OF THE MEETING
At the meeting, the Company's stockholders will be asked to elect four directors
and to approve an amendment to the National-Oilwell, Inc. Amended and Restated
Stock Award and Long-Term Incentive Plan (the "Stock Plan").
VOTING AT THE MEETING
Recordholders of National Oilwell Common Stock and Dreco Energy Services
Ltd. Exchangeable Shares at the close of business on March 22, 1999 may vote at
the meeting. Each stockholder has one vote for each share of common stock and
each exchangeable share.
On March 22, 1999, there were a total of 56,313,049 shares entitled to
vote at the meeting. These consisted of 53,812,544 shares of common stock and
2,500,505 Exchangeable Shares. References to "Shares" and "stockholders" in this
proxy statement and at the annual meeting include all common stockholders and
exchangeable shareholders entitled to vote at the meeting.
Exchangeable Shares are designed to have economic rights equivalent to
Common Stock and they can be exchanged on a one-for-one basis into Common Stock.
Exchangeable shareholders may vote at the meeting by instructing Montreal Trust
Company of Canada, the Trustee of Exchangeable Shares, how to vote their
Exchangeable Shares. The Trustee will only vote pursuant to the instructions of
the relevant shareholders and will not vote any shares as to which it has not
received instructions. An exchangeable shareholder may also instruct the Trustee
to give a proxy to a holder specifically designated by the shareholder, or to
grant a proxy to National Oilwell's management. Like common stockholders, on or
about April 20, 1999, exchangeable shareholders are being mailed this proxy
statement and National Oilwell's 1998 Annual Report. They are also being mailed
a form of proxy and voting instruction card relating to Exchangeable Shares.
The holders of a majority of the Shares entitled to vote constitute a
quorum. Directors are to be elected by a plurality of the votes cast at the
meeting. To be approved, the Stock Plan must receive the affirmative vote of a
majority of the quorum. Except as provided by law or the Company's Amended and
Restated Certificate of Incorporation or by-laws, the affirmative vote of the
holders of a majority of the Shares entitled to vote at the meeting and present
in person or represented by proxy is required to take action with respect to any
other matter that may properly be brought before the meeting. Shares cannot be
voted at the meeting unless the holder of record is present in person or by
proxy. The enclosed proxy is a means by which a stockholder may authorize the
voting of his or her shares at the meeting. The Shares represented by each
properly executed proxy card will be voted at the meeting in accordance with
each stockholder's direction. Stockholders are urged to specify their choices by
marking the appropriate boxes on the enclosed proxy card; if no choice has been
specified by a holder of Common Stock or the Trustee, the Common Stock will be
voted as recommended by the board of directors. However, if no choice has been
specified by a holder of Exchangeable Shares, the Exchangeable Shares will not
be voted with respect to such matter. If any other matters are properly
presented to the meeting for action, the proxy holders will vote the proxies
(which confer discretionary authority to vote on such matters) in accordance
with their best judgment.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect, other than for purposes of determining the presence of a
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quorum. Abstentions may be specified on the proposal to approve the amendment to
Stock Plan, but not for the election of directors. Abstentions will be
considered present and entitled to vote at the meeting, but will not be counted
as votes cast in the affirmative. Abstentions on the proposal to amend the Stock
Plan will have the effect of a negative vote because this proposal requires the
affirmative vote of a majority of the shares present in person or represented by
proxy at the meeting and entitled to vote. The Company believes that brokers
that are member firms of the New York Stock Exchange ("NYSE") and who hold
Common Stock in street name for customers, but have not received instructions
from a beneficial owner, have the authority under the rules of the NYSE to vote
those shares with respect to the election of directors and the proposal to
approve the amendment to the Stock Plan
Proxies may be revoked at any time prior to the time that the vote is
taken at the meeting. Proxies may be revoked by filing with the Secretary of the
Company or the Trustee, as applicable, a written revocation or another form of
proxy bearing a date later than the date of the proxy previously furnished. A
proxy may also be revoked by attending the meeting and voting in person.
Attendance at the meeting will not in and of itself constitute revocation of a
proxy.
YOUR PROXY VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE, SIGN
AND RETURN THE ACCOMPANYING PROXY REGARDLESS OF WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING.
ELECTION OF DIRECTORS
The Amended and Restated Certificate of Incorporation of the Company
classifies the board of directors into three classes having staggered terms of
three years each. The number of directors is fixed from time to time by
resolution of the board adopted by a vote of a majority of the whole board of
directors serving at the time of that vote, but shall not be less than three.
The board of directors is currently set at eight members. Bruce M. Rothstein,
whose term of office expires in 2000, has announced his intention to retire from
the board of directors at the May 19, 1999 annual meeting, and James T. Dresher,
whose term of office was also to expire in 2000, passed away on February 28,
1999. Ben A. Guill is being presented for election as a director to the class
whose terms expire in 2000. The vacancy created by Mr. Dresher's death is
currently unfilled. It is the intention of the board of directors to reduce the
number of its members to seven at its May 19, 1999 meeting, to be held
immediately prior to the annual meeting of stockholders.
The board of directors has nominated W. McComb Dunwoody, William E.
Macaulay, and Joel V. Staff for election as directors for a term expiring in
2002 and has nominated Ben A. Guill, for election as director for a term
expiring in 2000. With the exception of Mr. Rothstein, who will retire from the
board at the annual meeting, the remaining directors will continue to serve in
accordance with their prior election.
At the meeting, proxies in the accompanying form, properly executed, will
be voted for the election of the four nominees, unless authority to do so has
been withheld in the manner specified in the instruction on the proxy or revoked
in the manner previously described. Discretionary authority is reserved to cast
votes for the election of a substitute recommended by the board of directors
should any nominee be unable or unwilling to serve as a director. The Company
believes that all of the nominees will be available to serve.
The four directors are to be elected by a plurality of the votes cast. A
stockholder entitled to vote for the election of directors can withhold
authority to vote for all nominees for director or can withhold authority to
vote for any nominee for director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF NOMINATIONS
The Company's Amended and Restated Certificate of Incorporation provides
that, subject to certain limitations discussed below, nominations of persons for
election to the Board of Directors may be made at any annual meeting of
stockholders (or at any special meeting of stockholders called for the purpose
of electing directors) by any stockholder of the Company (i) who is a
stockholder of record on the date of the giving of the notice and on the record
date for the determination of stockholders entitled to vote at such meeting and
(ii) who complies with the notice procedures set forth below. Holders of
Exchangeable Shares will be deemed to satisfy these requirements by complying
with the notice procedures set forth below and timely delivering such notice to
the Trustee.
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To be timely, a stockholder's notice to the Company must be received at
the Company's principal executive offices by the later of (i) ninety days before
the meeting of stockholders or (ii) ten days after the first public notice of
that meeting is sent to stockholders. The Company must receive from the
stockholder a notice that sets forth (i) that stockholder's name and address (as
they appear on the records of the Company), business address and telephone
number, resident address and telephone number, and the number of shares of each
class of stock of the Company beneficially owned by that stockholder; and (ii) a
description of all arrangements or understandings between such stockholder and
each proposed nominee and any other person or persons (including their names)
pursuant to which the nominations are to be made by such stockholder. The notice
must provide with respect to each nominee (i) that nominee's name, business
address and telephone number, and residence address and telephone number; (ii)
the number of shares, if any, of each class of stock of the Company owned
directly or beneficially by that nominee; (iii) any other information relating
to that nominee that would be required to be disclosed in a proxy statement or
other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to Regulation 14A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"); and (iv) 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.
Notices in respect of nominations for directors must be received by the
Company no later than April 30, 1999.
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INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS AND REGARDING
CONTINUING DIRECTORS
The information provided herein as to personal background has been provided by
each director and nominee as of March 22, 1999. The periods shown for service as
an employee of the Company by Mr. Staff includes service as an employee of the
predecessor partnership to the Company.
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NOMINEES FOR ELECTION AT THE 1999 ANNUAL MEETING
FOR TERMS EXPIRING IN 2002
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W. McComb Dunwoody Mr. Dunwoody has served as a Director of the Company
since January 1996. He is a Managing Director of
Inverness Management LLC. Through Inverness
Management LLC and its affiliates, Mr. Dunwoody has
been engaged in sponsoring and investing in private
equity transactions since 1981. Additionally, Mr.
Dunwoody has served as President and Chief Executive
Officer of Inverness/Phoenix LLC since 1994 and has
been Chief Executive Officer of The Inverness Group
Incorporated since 1981. Age: 54.
William E. Macaulay Mr. Macaulay has served as a Director of the
Company since January 1996. He is the Chairman and
Chief Executive Officer of First Reserve Corporation,
a corporate manager of private investments focusing
on the energy and energy-related sectors, which he
joined in 1983. Mr. Macaulay serves as a director of
Weatherford International, Inc., an oilfield service
company, Maverick Tube Corporation, a manufacturer of
steel pipe and casing, and Cal Dive International,
Inc., a provider of subsea services in the Gulf of
Mexico. Age: 53.
Joel V. Staff Mr. Staff has served as the President and Chief
Executive Officer of the Company since July 1993 and
Chairman of the Board since January 1996. Mr. Staff
also serves as a director of Denali Incorporated, a
provider of products and services for handling
critical fluids. Age: 55.
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NOMINEES FOR ELECTION AT THE 1999 ANNUAL MEETING
FOR TERMS EXPIRING IN 2000
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Ben A. Guill Mr. Guill is President of First Reserve Corporation,
a corporate manager of private investments focusing
on the energy and energy-related sectors, which he
joined in September 1998. For a period greater than
five years prior to joining First Reserve, he was the
Managing Director and Co-head of Investment Banking
of Simmons & Company International, an investment
banking firm specializing in the oil service
industry. Age: 48.
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DIRECTORS CONTINUING IN OFFICE
WITH TERMS EXPIRING IN 2001
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Howard I. Bull Mr. Bull has served as a Director of the Company
since January 1996. Mr. Bull was President, Chief
Executive Officer and a director of Dal-Tile
International, Inc., which is the largest
manufacturer and distributor of tile in North
America, from April 1994 to his retirement in June
1997. Prior to joining Dal-Tile International, Inc.,
Mr. Bull spent 10 years with Baker Hughes
Incorporated, a worldwide diversified oil services
company, where he became Chief Executive Officer for
Baker Hughes Drilling Equipment Company. Mr. Bull
also serves as a director of Marine Drilling
Companies, Inc., an offshore drilling contractor, and
NATCO Holdings, Inc., a manufacturer of oil and gas
processing equipment. Age: 58.
James C. Comis III Mr. Comis has served as a Director of the Company
since January 1996. He is a Managing Director of
Inverness Management LLC. Through Inverness
Management LLC and its affiliates, Mr. Comis has been
engaged in sponsoring and investing in private equity
transactions since 1990. Additionally, Mr. Comis has
served as Managing Director of Inverness/Phoenix LLC
since 1994. Age: 34.
Frederick W. Pheasey Mr. Pheasey has served as a Director and Executive
Vice President of the Company since September 1997.
He was a co-founder of Dreco and was employed by that
company and its predecessors from 1972 to September
1997, most recently as its Chairman. Age: 56.
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APPROVAL OF AN AMENDMENT TO THE NATIONAL--OILWELL, INC. AMENDED AND
RESTATED STOCK AWARD AND LONG-TERM INCENTIVE PLAN
At the meeting, there will be presented to the stockholders a proposal to
approve an amendment to increase by 2,500,000 the number of authorized shares
available under the Stock Plan. The purpose of Stock Plan is to provide a means
through which the Company can attract and retain key employees and directors of
outstanding abilities, whereby such individuals can acquire and maintain stock
ownership thereby increasing their interest in the Company's welfare, and to
provide such individuals with additional incentive and reward opportunities
designed to enhance the profitable growth of the Company over the long-term. All
references in this proxy statement related to number of shares authorized or
issued have been adjusted for the two-for-one stock split on November 18, 1997.
The Company's board of directors and stockholders adopted the Stock Plan
in January 1996. In August 1996, the board of directors adopted amendments to
the Stock Plan (i) increasing the maximum number of shares of Common Stock
issued and available for issuance under the Stock Plan from 1,882,606 to
3,882,606 and (ii) providing that awards under the Stock Plan, other than
Incentive Stock Options, may be granted to outside directors of the Company. On
May 14, 1997 stockholders of the Company approved the Stock Plan, which approval
included amendments to bring the Stock Plan into compliance with section 162(m)
of the Internal Revenue Code (the "Code"). On August 21, 1998, the Stock Plan
was amended to allow for the grant of awards to consultants. On February 10,
1999, the board of directors approved an amendment to the Stock Plan, subject to
stockholder approval at the annual meeting, to increase the number of authorized
shares available for issuance under the Stock Plan from 3,882,606 to 6,382,606.
At March 31, 1999, 2,387,683 shares were reserved for issuance upon the exercise
of outstanding options under the Stock Plan and pursuant to restricted stock
agreements, and 451,087 shares were available for the grant of future awards.
VOTE REQUIRED FOR APPROVAL
To be approved, the proposal to amend the Stock Plan must receive the vote
of a majority of the shares present, or represented by proxy, and entitled to
vote at the meeting, provided that the total number of votes cast represents a
majority of the shares entitled to vote on the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE AMENDMENT TO
THE STOCK PLAN.
DESCRIPTION OF THE STOCK PLAN
The Stock Plan provides for the grant of incentive stock options ("ISOs"),
non-qualified stock options ("NQSOs"), stock appreciation rights ("SARs"),
restricted stock awards, performance share awards, stock equivalent awards or
any combination of the foregoing, as is best suited to the circumstances of the
particular recipient. Key employees, non-employee directors of the Company and
consultants to the Company may participate in the Stock Plan, except that
non-employee directors and consultants may not receive ISOs. The Stock Plan, as
amended, authorizes the issuance of up to an aggregate of 6,383,606 shares of
Common Stock of the Company to participants in the Stock Plan.
The Restricted Stock is subject to forfeiture restrictions, which prohibit
the stock from being sold, assigned, pledged, exchanged or otherwise transferred
until the forfeiture restrictions have lapsed. The restricted stock agreements
also provide that the Restricted Stock must be resold to the Company for $0.01
per share if the recipients' employment with the Company is terminated for any
reason prior to the lapse of the forfeiture restrictions. As of March 31, 1999,
527,140 shares of Common Stock of the Company were subject to forfeiture under
restricted stock agreements with five recipients including: Mr. Staff - 225,932
shares, Mr. Miller - 75,302 shares, Mr. Fasnacht - 75,302 shares and Mr. Krablin
- - 75,302 shares. The remaining forfeiture restrictions will lapse in equal
amounts on January 17, 2000 and January 17, 2001, and in their entirety upon a
participant's disability, death or involuntary termination without cause. Any of
the shares of Restricted Stock which are forfeited become available for
reissuance under the Stock Plan.
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The Stock Plan authorizes the issuance of stock options to key employees,
non-employee directors and consultants of the Company. At March 31, 1999, an
aggregate of 1,860,543 shares were reserved for issuance pursuant to
non-qualified stock options issued under the Stock Plan, at exercise prices
ranging from $8.625 to $28.8125.
At March 31, 1999, there were approximately 130 persons eligible and
participating in the Stock Plan, five of whom are non-employee directors of the
Company and seven of whom are executive officers of the Company. On February 9,
1999, non-qualified stock options were granted at an exercise price of $10.125
per share as follows: Mr. Staff - 230,480 shares; Mr. Pheasey - 55,063 shares;
Mr. Miller - 109,533 shares; Mr. Fasnacht - 84,533 shares; Mr. Krablin - 89,469
shares; all current executive officers as a group - 652,168 shares; all current
non-employee directors as a group - 47,620 shares; and all non-executive officer
employees as a group 524,577 shares. As of March 31, 1999 an aggregate of
2,387,683 options and restricted stock awards subject to forfeiture were
outstanding under the Stock Plan and 451,087 shares were available for the
issuance of future awards or options. The closing price of the Company's common
stock on the New York Stock Exchange on March 31, 1999 was $11.5625.
No awards of ISOs, SARs, performance share awards, stock equivalent
awards, or any combination of the foregoing, have been granted under the Stock
Plan as of March 31, 1999.
The compensation committee of the board has administrative authority over
the Stock Plan. It determines which eligible employees will receive grants of
awards or options, the number of shares of Common Stock subject to each award or
option, when such award or option shall be made, the duration of any applicable
exercise or restriction period, when the options will become exercisable, and
the term, not to exceed ten years in the case of ISOs, during which the option
may be exercised. All award and grant decisions under the Stock Plan shall be
made by two or more "outside directors" as defined in section 162(m) of the
Code.
Under the Stock Plan, the exercise price of NQSOs, ISOs and SARs must be
no less than the market price on the date of grant. Outstanding options under
the Stock Plan have been granted at no less than the market price on the date of
grant and generally become exercisable in three equal annual installments
beginning one year after the date of grant and remain exercisable until five
years after the date of grant. The maximum number of shares that may be granted
to any individual during the term of the Stock must be less than one-half the
aggregate number of shares of Common Stock authorized for issuance under the
Stock Plan.
The Stock Plan will terminate on July 23, 2006 unless terminated earlier
by the Board or extended by the Board with approval of the stockholders. The
Stock Plan provides that the Board in its discretion may terminate the plan or
alter or amend the plan or any part thereof from time to time; provided that no
change in any outstanding grant or award may be made which would impair the
rights of the participant without the consent of the participant, and provided
further that the Board may not, without approval of the stockholders, amend the
Stock Plan to (i) increase the aggregate number of shares of Common Stock which
may be issued under the plan; (ii) change the class of employees eligible to
receive ISOs under the plan; or (iii) modify materially the requirements as to
eligibility for participation in the plan if such approval is required by
section 162(m) of the Code.
FEDERAL INCOME TAX CONSEQUENCES
ISOs. Stock Plan participants will not be subject to federal income
taxation upon the grant or exercise of ISOs granted under the Stock Plan, and
the Company will not be entitled to a federal income tax deduction by reason of
such grant or exercise. However, the amount by which the fair market value of
the shares at the time of exercise exceeds the option price (or other tax basis
in the shares) is an item of tax preference subject to the alternative minimum
tax applicable to the person exercising the option. A sale of shares acquired by
exercise of an ISO that does not occur within one year after the exercise and
within two years after the grant of the option generally will result in the
recognition of long-term capital gain or loss in the amount of the difference
between the amount realized on the sale and the participant's tax basis in the
shares, assuming that the shares were held as capital assets, and the Company
will not be entitled to any tax deduction in connection therewith.
If such sale occurs within one year from the date of exercise of the
option or within two years from the date of the option grant (a "disqualifying
disposition"), the participant generally will recognize ordinary compensation
income equal to the lesser of (i) the excess of the fair market value of the
shares on the date of exercise of the options over the
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option price or (ii) the excess of the amount realized on the sale of the shares
over the option price. Any gain (or loss) realized on a disqualifying
disposition in excess of (or below) the amount treated as ordinary compensation
income will be a long-term or short-term capital gain (or loss), depending upon
the length of time the shares were held. The Company generally will be entitled
to a tax deduction on a disqualifying disposition in the amount of the ordinary
compensation income recognized by the participant at the time the participant
recognizes such income.
NQSOs. There are no federal income tax consequences to the participant or
to the Company upon the grant of an NQSO under the Stock Plan. Upon the exercise
of NQSOs, participants will recognize ordinary compensation income in an amount
equal to the excess of the fair market value of the shares at the time of
exercise over the option price, and the Company generally will be entitled to a
corresponding tax deduction at such time. Upon the sale of shares acquired by
exercise of an NQSO, the participant will have a capital gain or loss (long-term
or short-term depending upon the length of time the shares were held) in an
amount equal to the difference between the participant's basis in the shares and
the amount realized upon the sale.
Restricted Stock Awards. A recipient normally will not recognize taxable
income upon receiving a Restricted Stock Award, and the Company will not be
entitled to a deduction, until such Common Stock is transferable by the
recipient or no longer subject to a substantial risk of forfeiture for federal
tax purposes, whichever occurs earlier. When the Common Stock is either
transferable by the recipient or no longer subject to a substantial risk of
forfeiture, the recipient will recognize ordinary compensation income in an
amount equal to the fair market value of the Common Stock subject to the
Restricted Stock Award (less any amount paid for such shares) at that time, and
the Company ordinarily will be entitled to a deduction in the same amount. A
recipient may, however, elect to recognize ordinary compensation income in the
year the Restricted Stock Award is awarded in an amount equal to the Fair Market
Value of the Common Stock (less any amount paid for such shares) at that time,
determined without regard to the restrictions. In such event, the Company
generally will be entitled to a deduction in the same year. Any gain or loss
recognized by the recipient upon subsequent disposition of the Common Stock will
be capital gain or loss (long-term or short-term depending upon the length of
time the shares were held). If after making the election, any Common Stock
subject to a Restricted Stock Award is forfeited, or if the market value
declines during the Restriction Period, the recipient ordinarily is not entitled
to any tax deduction or tax refund (other than with respect to any amount paid
for the shares).
Under Section 162(m) of the Code, enacted in August 1993, the Company may
be precluded from claiming a federal income tax deduction for total remuneration
in excess of $1,000,000 paid to the chief executive officer or to any of the
other four most highly compensated officers. Total remuneration would include
amounts received upon the exercise of stock options. An exception exists,
however, for "performance-based compensation," including amounts received upon
the exercise of stock options pursuant to a plan approved by stockholders that
meets certain requirements.
ACCOUNTING CONSIDERATIONS
There is no charge to the income of the Company in connection with the
grant or exercise of an option under the Stock Plan as long as the option price
is not below the market price on the date of grant. Any tax benefit received by
the Company upon exercise of an NQSO or as a result of a disqualifying
disposition of option shares obtained upon exercise of an ISO is reflected as a
credit to capital in excess of par value and not as income.
Earnings per share may be affected by the Stock Plan by the effect on the
calculation, as prescribed under generally accepted accounting principles, of
the number of outstanding shares of the Company's Common Stock. The calculation
reflects the potential dilutive effect, using the treasury stock method,
assuming the exercise of outstanding stock options. At the time shares are
actually issued as a result of the exercise of stock options, additional
dilution of earnings per share could result.
The assumed value of an SAR (generally, the excess of the market value of
the underlying shares over the option price at the end of each accounting
period) is treated as compensation expense that is accrued over the period that
the SAR is outstanding. A deferred tax asset may also be created if the related
tax deduction occurs in a period later than the one in which the compensation
expense is recognized for accounting purposes.
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NEW PLAN BENEFITS
Because awards are made from time to time by the compensation committee of
the board of directors to those persons the committee determines in its
discretion should receive awards, the benefits and amounts that may be received
in the future by persons eligible to participate in the Stock Plan are not
determinable.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF SHARES BY DIRECTORS AND OFFICERS
The following table sets forth certain information with respect to Shares
beneficially owned by each director and nominee for director of the Company, by
each of the current executive officers named in the Summary Compensation Table
and by all current directors, director nominees and executive officers of the
Company as a group. This information has been provided by each of the directors
and executive officers as of March 31, 1999, at the request of the Company.
Shares Percent
Name of individual beneficially of class
or identity of group owned(1) outstanding(2)
-------------------- -------------- --------------
Howard I. Bull ....................................... 4,053(3) *
James C. Comis ....................................... 9,409,571(4) 16.71%
W. McComb Dunwoody ................................... 9,572,253(4) 17.00%
James J. Fasnacht .................................... 312,590 *
Ben A. Guill ......................................... 12,128,194(5) 21.54%
Honor Guiney ......................................... 0 *
Steven W. Krablin .................................... 311,728 *
William E. Macaulay .................................. 12,132,247(5) 21.54%
Merrill A. Miller .................................... 231,305 *
Frederick W. Pheasey ................................. 336,967 *
Joel V. Staff ........................................ 1,491,030(6) 2.65%
All current directors, director nominees and executive
officers as a group (12 persons) ................... 24,943,769 44.20%
- -------------------------
* Denotes ownership of less than one percent of the class outstanding.
(1) This column includes shares subject to options granted pursuant to the
Company's stock option plans which are exercisable by May 30, 1999. Messrs.
Bull, Comis, Dunwoody, and Macaulay each hold unexercised options to
purchase 4,053 of such shares, and Messrs. Fasnacht, Krablin, Miller,
Pheasey and Staff each respectively hold 18,330, 16,948, 26,621, 6,357 and
29,164 unexercised options to purchase such shares.
(2) At March 22, 1999, there were 56,313,049 Shares outstanding. Shares not
outstanding but beneficially owned by a given person are deemed outstanding
for purposes of computing the percentage of Shares owned by such person,
but not for purposes of computing the percentage owned by any other person.
(3) Mr. Bull has approximately a 2.9% interest in DPI Partners I, a general
partnership which holds a limited partnership interest in DPI Oil Service
Partners Limited Partnership. Additionally, Mr. Bull holds a limited
partnership interest in DPI Oil Service Partners Limited Partnership, which
holds 9,300,562 shares of the Common Stock. The interest of Mr. Bull and
DPI Partners I in DPI Oil Service Partners Limited Partnership, after the
return of the original investment plus interest, are approximately 0.8% and
20.0%, respectively. Mr. Bull disclaims beneficial ownership of all such
shares.
(4) Includes 9,300,562 shares beneficially owned by Inverness/Phoenix LLC of
which Messrs. Comis and Dunwoody are principals.
(5) Includes 12,128,194 shares beneficially owned by First Reserve Corporation
of which Mr. Macaulay is Chairman and Chief Executive Officer and Mr. Guill
is President. Messrs. Macaulay and Guill each disclaim beneficial ownership
of all such shares.
(6) Includes 811,228 shares owned by the trusts created by that certain Trust
Agreement dated April 12, 1989 by and among Joel V. Staff and Mary Martha
Staff, as Trustors, and Richard Staff, as Trustee. Mr. Staff does not vote
nor exercise investment power over and disclaims beneficial ownership of
these shares.
-10-
13
OTHER PRINCIPAL HOLDERS OF SHARES
The following entities were beneficial owners of more than five percent of
Shares as of the dates indicated:
Voting Power Investment Power
------------------------ --------------------------
Shares Percent
Beneficially of
Name and Address Owned Class(1) Sole Shared Sole Shared
- ---------------- ------------- --------- ---------- ---------- ----------- -----------
First Reserve Corporation(2)
475 Steamboat Road
Greenwich, CT -6830 12,128,194 21.54% -0- 12,128,194 -0- 12,128,194
Inverness/Phoenix LLC(3)
660 Steamboat Road
Greenwich, CT 06830 9,488,822 16.82% -0- 9,300,562 -0- 9,300,562
Putnam Investments, Inc.(4)
One Post Office Square
Boston, MA 02109 3,375,000 5.99% -0- 186,800 -0- 3,375,000
Westburne Inc.(5)
505 Lock Street, Suite 2000
St. Laurent, Quebec 3,000,000 5.33% 3,000,000 -0- 3,000,000 -0-
Canada H42 1X7
- -------------------
(1) On March 22, 1999, there were 56,313,049 Shares outstanding.
(2) Represents shares beneficially owned as of March 22, 1999 by the following
limited partnerships: First Reserve Fund V, Limited Partnership ("Fund V")
- 334,830; First Reserve Fund V-2, Limited Partnership ("Fund V-2") -
334,830; First Reserve Fund VI, Limited Partnership ("Fund VI") -
7,700,834; First Reserve Fund VII, Limited Partnership ("Fund VII") -
1,548,600; and First Reserve Fund VIII, LP ("Fund VIII") - 2,209,100. First
Reserve Corporation, as the general partner of Fund V, Fund V-2, Fund VI,
First Reserve GP VII, LP (who, in turn, is the general partner of Fund VII)
and First Reserve GP VIII, LP (who, in turn, is the general partner of Fund
VII), has the power to cause each partnership to dispose of or to vote
shares held by each partnership. Mr. William E. Macaulay, a stockholder of
First Reserve Corporation, may be deemed to share beneficial ownership of
shares owned by each of the partnerships as a result of ownership and
control over First Reserve Corporation. Mr. Macaulay disclaims beneficial
ownership of all such shares.
(3) Represents 9,300,562 shares beneficially owned as of March 22, 1999 by DPI
Oil Service Partners Limited Partnership ("DPIOSP"). Inverness/Phoenix LLC,
in its role as managing general partner of DPIOSP, has the power to cause
DPIOSP to dispose of or to vote shares held by DPIOSP. Messrs. Comis and
Dunwoody, each of whom is a director of the Company, serve on the
investment committee of Inverness/Phoenix LLC, which committee has sole
power to vote and dispose of that company's investments. See footnote (3)
on page 10 of this proxy statement for the ownership interest of Mr. Bull,
who is a director of the Company, in DPIOSP. Includes 188,260 shares owned
by DPCM Holding, Inc., who has a controlling interest in Inverness/Phoenix
LLC.
(4) As reflected in Schedule 13G filed with the SEC on February 9, 1999.
(5) As reflected in Schedule 13G filed with the SEC on January 21, 1999.
-11-
14
MEETINGS AND COMMITTEES OF THE BOARD
During 1998, six meetings of the board of directors of the Company were
held. The Company's by-laws provide that the board of directors, by resolution
adopted by a majority of the board, may designate an Executive Committee and one
or more other committees, with each such committee to consist of one or more
directors.
Executive Committee. The executive committee has the full power and
authority to exercise all the powers of the board of directors in the management
of the Company except the power to fill vacancies in the board of directors and
the power to amend the by-laws. The Executive Committee met twice during 1998.
The current members of the Executive Committee are W. McComb Dunwoody, committee
chairman, William E. Macaulay and Joel V.
Staff.
Audit Committee. The audit committee is composed of directors who are not
officers of the Company or any of its subsidiaries. During 1999 the audit
committee was composed of James T. Dresher, committee chairman, and Howard I.
Bull. Mr. Dresher passed away in February 1999 and Mr. Bull is currently the
only member of the audit committee. The audit committee meets periodically with
the Company's financial and accounting officers, management and independent
public accountants to review the scope of auditing procedures, policies relating
to internal auditing and accounting procedures and controls. It also provides
general oversight with respect to the accounting principles employed in the
Company's financial reporting, reviews litigation and other legal matters that
may affect the Company's financial condition and monitors compliance with the
Company's business ethics and other policies. The audit committee met once
during 1998.
Compensation Committee. The compensation committee is composed of members
of the board who are not officers of the Company or any of its subsidiaries.
This committee has general supervisory power over, and the power to grant awards
under, the Company's stock award plans. In addition, the compensation committee
reviews the recommendations of the Chief Executive Officer as to appropriate
compensation of the Company's principal executive officers and certain other key
personnel and establishes the compensation of such persons and the Chief
Executive Officer. It also periodically examines the general compensation
structure of the Company and supervises the welfare and pension plans and
compensation plans of the Company. The compensation committee met twice during
1998. During 1998, the compensation committee was comprised of Howard I. Bull,
committee chairman, and James T. Dresher. Mr. Dresher passed away in February
1999. The compensation committee currently consists of Mr. Bull and Mr.
Rothstein.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information regarding each of the Company's
current executive officers. Executive officers of the Company are elected
annually by the board of directors to serve in their respective capacities until
their successors are duly elected and qualified or until their earlier
resignation or removal. The periods shown for service as an employee of the
Company include service as an employee of the predecessor partnership of the
Company.
Joel V. Staff Mr. Staff has served as the President and Chief
Executive Officer of the Company since July 1993 and
Chairman of the Board since January 1996. Mr. Staff
also serves as a director of Denali Incorporated, a
provider of products and services for handling
critical fluids. Age: 55.
James J. Fasnacht Mr. Fasnacht joined the Company in 1979 and has
served as its Vice President since November 1993, as
Group President, Distribution Services since April
1997, and as General Manager of Pumping Systems from
November 1993 to April 1997. Age: 44.
Jerry N. Gauche Mr. Gauche has served as Vice
President-Organizational Effectiveness since joining
the Company in January 1994. Age: 50.
-12-
15
Honor Guiney Ms. Guiney has served as Vice President and Chief
Information Officer since April 1999 and as a
consultant to the Company from April 1998 to April
1999. From September 1993 to April 1998, Ms. Guiney
served as Vice President of Professional Services of
Unidata, Inc., a Denver-based software company. Age:
42.
Steven W. Krablin Mr. Krablin has served as Vice President and Chief
Financial Officer since January 1996. Mr. Krablin
served in various capacities including Vice
President-Finance and Chief Financial Officer of
Enterra Corporation, an NYSE-listed, international
oilfield service company, from November 1986 to
January 1996. Age: 49.
Merrill A. Miller, Jr. Mr. Miller has served as Vice President since July
1996, as Group President, Products and Technology
since April 1997, as General Manager of Drilling
Systems from July 1996 to April 1997 and as Vice
President of Marketing, Drilling Systems from
February 1996 to July 1996. Prior thereto, Mr. Miller
was President of Anadarko Drilling Company, a
drilling contractor, from January 1995 to February
1996. From May 1980 to January 1995, Mr. Miller
served in various capacities including Vice
President/U.S. Operations of Helmerich & Payne
International Drilling Co., a drilling contractor.
Age: 48.
Frederick W. Pheasey Mr. Pheasey has served as a Director and Executive
Vice President of the Company since September 1997.
He was a co-founder of Dreco and was employed by that
company and its predecessors from 1972 to September
1997, most recently as its Chairman. Age: 56.
-13-
16
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth for the years ended December 31, 1996, 1997
and 1998 the compensation paid by the Company to its Chief Executive Officer and
four other most highly compensated executive officers (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
----------------------------------- ----------------------- ------------
Other Securities
Name Annual Restricted Underly- All Other
and Compen- Stock Ing LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($)(1) SARs (#) ($)(2) ($)(3)
- --------------------- ------ ----------- ----------- ------- ---------- ----------- ------------ ------------
Joel V. Staff 1998 370,806 -- -- -- 87,492 -- 34,128
Chairman, President 1997 300,000 191,250 -- -- -- -- 14,054
and CEO 1996 291,352 186,983 -- 2,567 -- 1,675,423 14,512
Frederick W. Pheasey 1998 230,182 -- -- -- 19,071 -- --
Exec. Vice 1997 66,887 7,594 -- -- -- -- --
President(4) 1996 -- -- -- -- -- -- --
Merrill A. Miller 1998 186,923 -- -- -- 49,751 -- 3,914
Group President- 1997 162,307 85,211 -- -- 15,058 -- 3,486
Products & 1996 135,577 71,758 -- 856 -- 558,474 --
Technology
James J. Fasnacht 1998 178,462 -- -- -- 24,876 -- 17,522
Group President- 1997 150,769 79,154 -- -- 15,058 -- 12,478
Distribution Services 1996 120,000 63,513 -- 856 -- 558,474 7,683
Steven W. Krablin 1998 176,169 -- -- -- 20,730 -- 12,262
Vice President and 1997 150,000 78,750 -- -- 15,058 -- 3,755
CFO 1996 144,231 76,338 -- 856 -- 558,474 --
- ------------------------------
(1) The number and value at December 31, 1998 of restricted stockholdings for
the named executive officers are: Mr. Staff - 338,898 shares, $3,791,421; Mr.
Miller - 112,953 shares, $1,263,662; Mr. Fasnacht - 112,953 shares, $1,263,662;
and Mr. Krablin - 112,953 shares, $1,263,662. The forfeiture restrictions lapse
in equal annual amounts each January 17, 1999 through 2001, and in their
entirety upon a participant's disability, death or involuntary termination
without cause. The recipients of restricted stock awards are only entitled to
dividends declared upon shares issued pursuant to the award upon the lapse of
forfeiture restrictions.
(2) Represents total amounts accrued to the named individuals with respect to
payments under the Company's Value Appreciation and Incentive Plans, which
provided for certain executive officers of the company to qualify for an award
upon the occurrence of certain events, including an initial public offering.
Distributions under the plans will be made in cash and stock until January 17,
2001. Cash distributions made under the plans as of December 31, 1998 are as
follows: Mr. Staff - $628,274; Mr. Miller - $209,425; Mr. Fasnacht - $209,425;
and Mr. Krablin - $209,425. Stock distributions made under the plans as of
December 31, 1998 are as follows: Mr. Staff - 49,288 shares; Mr. Miller - 16,430
shares; Mr. Fasnacht - 16,430 shares and Mr. Krablin - 16,430 shares.
(3) These amounts include:
(a)The Company's cash contributions for 1998 under the National-Oilwell
Retirement and Thrift Plan, a defined contribution plan, on behalf of Mr.
Staff, $15,063; Mr. Miller - $3,914; Mr. Fasnacht - $3,773; and Mr. Krablin
- $7,398.
(b)The Company's cash contributions for 1998 under the National-Oilwell
Supplemental Savings Plan, a defined contribution plan, on behalf of Mr.
Staff - $19,065; Mr. Fasnacht - $13,749; and Mr. Krablin - $4,864.
(4) Mr. Pheasey joined the Company in September 1997.
-14-
17
GRANTS OF OPTIONS/SAR'S IN LAST FISCAL YEAR
The following table provides information concerning stock options granted
to Named Executive Officers during the fiscal year ended December 31, 1998. The
Company has granted no stock appreciation rights.
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
- ------------------------------------------------------------------------------------------- ----------------------
% of total
Number of Options
Securities Granted to Exercise
Underlying Employees in Price Expiration
Name Options Granted Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ------------------------- ----------------- ---------------- --------- ----------- -------- ----------
Joel V. Staff 87,492 20.1% 28.25 02/18/03 682,871 1,508,966
Frederick W. Pheasey 19,071 4.4% 28.25 02/18/03 148,848 328,915
Merrill A. Miller, Jr. 49,751 11.4% 28.25 02/18/03 388,304 858,050
James J. Fasnacht 24,876 5.7% 28.25 02/18/03 194,156 429,034
Steven W. Krablin 20,730 4.8% 28.25 02/18/03 161,796 357,528
The option exercise price per share is equal to the fair market value of a
share of Common Stock on the date of grant. The grants have a term of five years
from the date of grant and vest in three equal annual installments beginning one
year from the date of grant.
FY-END OPTION VALUES
The following table provides the value of unexercised options held by the
Named Executive Officers as of December 31, 1998. None of the Named Executive
Officers exercised options during 1998.
Number of Securities Value of Unexercised
Underlying Unexercised In-the- Money Options
Options at FY-End (#) at FY-End ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
----------------------------- ------------------------- ------------------------
Joel V. Staff 0 / 87,492 $0 / $0
Frederick W. Pheasey 0 / 19,071 $0 / $0
Merrill A. Miller, Jr. 5,019 / 59,790 $0 / $0
James J. Fasnacht 5,019 / 34,915 $0 / $0
Steven W. Krablin 5,019 / 30,769 $0 / $0
-15-
18
COMPENSATION OF DIRECTORS
Directors who are full-time employees of the Company do not receive a
retainer or fees for service on the board of directors or on committees of the
board. Members of the board of directors who are not full-time employees of the
Company receive an annual fee of $20,000, a fee of $1,000 for attendance at each
meeting of the board of directors and at each meeting of its committees or any
special committee established by the board, and a fee of $1,000 per day for any
special assignments. The chairmen of the audit and compensation committees
receive a fee of $1,250 for attendance at each meeting of the committee they
chair. In addition, non-employee directors are eligible for grants of stock
options, other than ISOs, and other awards under the Stock Plan. On February 18,
1998, each non-employee director of the Company was granted a non-qualified
stock option to purchase 4,153 shares of the Company's common stock, and on
February 9, 1999 each non-employee director was granted a non-qualified stock
option to purchase 9,524 shares of the Company's common stock. The option
exercise price per share is equal to the fair market value of a share of common
stock on the date of grant. The options have a term of five years from the date
of grant and vest in three equal annual installments beginning one year after
the date of grant.
EMPLOYMENT CONTRACTS
Effective as of January 1, 1996, the Company entered into an employment
agreement with Messrs. Staff, Fasnacht, and Krablin and on February 5, 1996
entered into an employment agreement with Mr. Miller. Each of the agreements
provides for a base salary, participation in an employee incentive plan and
employee benefits as generally provided to all employees. The agreements provide
for the following base salaries in 1999: Mr. Staff - $383,680; Mr. Fasnacht -
$180,000; Mr. Krablin - $178,800 and Mr. Miller - $190,000. The agreements have
a continuing term of two years in the case of Mr. Staff and one year for each of
the other executive officers. The Company is not obligated to pay any amounts
pursuant to the employment agreements upon (i) voluntary termination; (ii)
termination for cause (as defined); (iii) death; (iv) long-term disability; or
(v) employee's refusal to accept comparable employment with a successor
corporation. If the employment relationship is terminated by the Company for any
other reason, or by the employee due to an uncorrected material breach of the
employment agreement by the Company, the employee is entitled to receive his
base salary and current year targeted bonus amount under an employee incentive
plan either as a lump sum payment or over the one-year term, or two-year term in
the case of Mr. Staff, as determined by the employment agreement under the
circumstances. During the period of employment and for a period after
termination of two years for Mr. Staff and one year for each of the other
executive officers, the employees are generally prohibited from competing or
assisting others to compete in its existing or recent business, or inducing any
other employee to terminate employment with the Company.
Upon termination, other than for cause, participants in the Company's
Value Appreciation and Incentive Plans A and B, including Messrs. Staff, Miller,
Fasnacht and Krablin, are entitled to any amounts accrued on their behalf for
which they have not yet received a distribution. Messrs. Staff, Miller, Fasnacht
and Krablin are recipients of restricted stock awards under the Company's Stock
Plan. Under the terms of the Restricted Stock Agreements pursuant to which the
restricted stock awards were issued, any restricted stock must be resold to the
Company for $0.01 per share if the recipient's employment with the Company is
terminated for any reason prior to the lapse of the forfeiture restrictions. The
forfeiture restrictions lapse each year beginning January 17, 1997, on 20% of
the total number of shares of restricted stock awarded to each participant and
in their entirety upon a participant's disability, death or involuntary
termination of employment without cause.
On April 19, 1999 Ms. Guiney joined the Company as its Vice President and
Chief Information Officer and the Company entered into an employment agreement
with Ms. Guiney, which provides for an annual base salary of $208,000,
reimbursement of expenses, participation in the Stock Plan and participation in
employee benefit plans as generally available to all employees, except
participation in any annual cash incentive plan. The agreement also provides for
a stock option grant for 81,500 shares of common stock, which grant vests in
three installments upon the achievement of certain performance targets. The
agreement has a term of two years after which time it can be terminated by
either the Company or Ms. Guiney, upon which termination she will receive one
year's base salary.
-16-
19
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Since the Company's common stock became a publicly-traded security in
October 1996, the compensation committee's philosophy regarding the Company's
executive compensation program has been to design a compensation package that
will attract and retain key executives focused on the Company's annual growth
and long-term strategy. The committee intends to achieve this objective through
payment of a total compensation package that approximates the industry median
but that is weighted to the performance of the Company. Base pay and cash
incentives are intended to be below the market median, while incentives such as
stock options are intended to be above the market median.
The Company's executive compensation program is administered by the
compensation committee of the board of directors. The committee establishes
specific compensation levels for executive officers and other key personnel and
administers the Company's stock award plans and the Company's Value Appreciation
and Incentive Plans A and B.
In 1998, the Company's executive officers, who were executive officers at
the time of the Company's initial public offering, received certain cash and
stock awards under the Company's Value Appreciation and Incentive Plans.
Distributions under these awards will occur through January 2001. These awards
were provided primarily in consideration of the executive officers' assistance
and participation in the purchase of the Company's business from its previous
owners and the Company's initial public offering. These awards were not designed
as part of the Company's overall executive compensation program and were not
regarded by the compensation committee as such.
The main components of the executive compensation program for 1998 were
base salary, participation in one of the Company's incentive plans and the grant
of non-qualified stock option awards. Salary levels are based on factors
including individual performance and level and scope of responsibility. In
establishing the base salary levels for the executive officers (other than Mr.
Staff) the compensation committee considers the recommendations of Mr. Staff, to
whom these officers report. The compensation committee targets base salary
levels at or below the median industry peer level, which is determined by
consideration of compensation survey reports and salary levels paid by similar
companies in the oilfield service industry. The companies used for comparison
purposes include, but are not limited to, those companies included in the
Company's peer group index.
All employees of the Company, including executive officers, participated
in a Company incentive plan in 1998 (the "1998 Incentive Plan"). The incentive
plans are designed to align a portion of each employee's cash compensation with
Company performance. The amount of the aggregate award under the plans was
determined by the Company's performance objectives based on measures of
operating profit and the ratio of operating profit to capital employed. A
minimum performance level had to be achieved by the Company before any award was
earned, and higher levels of achievement were rewarded with increasing payments
based upon an established progression. A participant's award varied depending
upon the level of his or her participation. The maximum award opportunity for
executive officers, other than the chief executive officer, under the 1998
Incentive Plan was approximately 75% of base salary.
Compensation of the Chief Executive Officer. Components of the chief
executive officer's compensation for 1998 included base salary, participation in
the 1998 Incentive Plan and the grant of stock options. In determining Mr.
Staff's compensation for 1998, the committee considered the compensation level
of chief executive officers of comparable companies and the continued successful
growth of the Company's revenues and profitability. Mr. Staff's base salary for
1998 was $383,680 and he received an option grant to purchase 87,492 shares of
National Oilwell common stock. The committee believes Mr. Staff's base salary
level to be below the median industry peer level. Under the 1998 Incentive Plan,
Mr. Staff could have earned up to 112% of his base salary if the plan's maximum
performance targets had been met.
COMPENSATION COMMITTEE
Howard I. Bull, Committee Chairman
-17-
20
PERFORMANCE GRAPH
The following line graph shows the cumulative total stockholder
return on the Company's Common Stock from October 29, 1996, the first
trading day after the date it was registered under the Exchange Act, to
December 31, 1998, and compares it with the cumulative total return
over the same period of the S&P 500 Index and to a self-constructed
peer group of similar companies in the oilfield service industry (which
includes BJ Services Company, Cooper Cameron Corporation, Smith
International, Inc., Tuboscope Vetco International Corporation and
Varco International Incorporated.) The self-constructed peer group was
modified in 1998 to replace Camco International with Smith
International, upon Camco's acquisition by Schlumberger. The graph
includes both the old peer group and the new peer group. The graph
assumes a $100 investment in Common Stock based on the initial per
share price to the public of $17.00 and in each index at October 29,
1996 and that all dividends were reinvested. Peer group returns are
based on the market capitalization of each individual company within
the peer group at the beginning of the comparison period.
[CHART]
Oct. 29, 1996 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1998
------------- ------------- ------------- -------------
National-Oilwell, Inc. 100 181 402 132
New Peer Group 100 119 180 72
Old Peer Group 100 119 185 74
S&P 500 100 106 141 182
-18-
21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FEE AGREEMENTS
In connection with the acquisition of the Company's predecessor
partnership in 1996, the Company entered into a five-year Management Services
Agreement with its largest stockholder, Inverness/Phoenix LLC, whereby the
Company would pay $1.0 million per year for management assistance and other
services as agreed. The agreement also provided that Inverness/Phoenix LLC
receive 1% of the aggregate transaction value in connection with each
acquisition or disposition completed during the five-year period and that First
Reserve Corporation, the Company's second largest stockholder, receive certain
fees for specific acquisitions. In connection with the Company's initial public
offering, this agreement was terminated pursuant to a Deferred Fee Agreement
which provides for cash payments of up to $4.4 million. During 1997 and 1996,
cash payments aggregating $2.5 million were made to Inverness/Phoenix LLC and
First Reserve Corporation in connection with the Deferred Fee Agreement. During
1998, cash payments aggregating $1.0 million were made to Inverness/Phoenix LLC,
and they will continue to receive future quarterly payments of $250,000 through
December 31, 1999.
On May 29, 1998, the Company purchased Phoenix Energy Products, Inc. for
an aggregate value of approximately $150 million. The seller of Phoenix is an
affiliate of First Reserve Corporation, which is the beneficial owner of 21.54%
of National Oilwell's common stock. Mr. Macaulay is the Chairman and Chief
Executive Officer and Mr. Guill is the President of First Reserve Corporation.
In connection with the implementation of SAP, the Company used the
services during 1998 of certain consultants, including Honor Guiney, employed by
a firm of which Ms. Guiney is the principal. On April 19, 1999 Ms. Guiney became
Vice President and Chief Information Officer of the Company. Payments for Ms.
Guiney's services and reimbursement of expenses in 1998 approximated $319,000
and payments for the services and expense reimbursements of the other
consultants in 1998 approximated $266,000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires executive officers and directors
of the Company and persons who own more than 10% of the Common Stock, to file
reports of ownership and changes in ownership with the SEC and the New York
Stock Exchange. Based solely on its review of copies of such reports received by
the Company and written representations from certain reporting persons that no
Form 5's were required for those persons, the Company believes that during 1998,
all Section 16(a) filing requirements applicable to the Company's officers,
directors and greater than 10% stockholders have been met, with the exception of
a late Form 5 filing by Mr. Dunwoody and a late Amended Form 3 filing by Richard
L. Lionberger, who is no longer an employee of the Company.
SELECTION OF INDEPENDENT AUDITORS
The board of directors has selected Ernst & Young LLP, the Company's
independent public accountants, to continue in such capacity for the current
year. Representatives of that firm are expected to be present at the annual
meeting with the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
PROXY SOLICITATION
The cost of soliciting proxies will be paid by the Company. Beacon Hill
Partners, Inc., 90 Broad Street, New York, New York has been employed to solicit
proxies in connection with the Company's Common Stock and the voting of the
Exchangeable Shares, in the United States and Canada, by mail, telephone or
personal solicitation for a fee of approximately $2,750 plus expenses. The
Company will also reimburse brokers or other persons holding stock in their
names or in the names of their nominees for their reasonable expenses in
forwarding proxy material to beneficial owners of stock, in accordance with
applicable requirements of the SEC, New York Stock Exchange, Canadian
-19-
22
securities commissions and The Toronto Stock Exchange. Proxies may also be
solicited by directors, officers and employees of the Company, but such persons
will not be specially compensated for such services.
STOCKHOLDER SUGGESTIONS AND PROPOSALS
FOR THE 2000 ANNUAL MEETING
If you wish to submit proposals to be included in our 2000 proxy
statement, we must receive them on or before Thursday, December 2, 1999. If you
are a holder of Common Stock, please address your proposals to: M. GAY MATHER,
ASSISTANT SECRETARY, NATIONAL-OILWELL, INC., 10000 RICHMOND AVENUE - 4TH FLOOR,
HOUSTON, TEXAS 77042. If you are a holder of Exchangeable Shares, please address
your proposals to the Trustee: Montreal Trust Company of Canada, 600, 530-8th
Avenue, S.W., Calgary, Alberta, Canada T2P 3S8, Attention: Department Manager,
Stock Transfer Service. If you wish to submit proposals at the meeting that are
not eligible for inclusion in the proxy statement, you must give written notice
no later than February 15, 2000 to: M. GAY MATHER, ASSISTANT SECRETARY,
NATIONAL-OILWELL, INC., 10000 RICHMOND AVENUE - 4TH FLOOR, HOUSTON, TEXAS 77042.
If you do not comply with this notice provision, the proxy holders will be
allowed to use their discretionary voting authority on the proposal when it is
raised at the meeting. In addition, proposals must also comply with National
Oilwell's by-laws and the rules and regulations of the Securities and Exchange
Commission.
ANNUAL REPORT AND OTHER MATTERS
We do not know of any matters to be acted upon at the meeting other than
those discussed in this proxy statement. If any other matter is presented, proxy
holders will vote on the matter in accordance with their best judgment.
National Oilwell's 1998 Annual Report, is included in this mailing, but is
not considered part of the proxy solicitation materials.
By order of the board of directors,
/s/ M. Gay Mather
M. Gay Mather
Assistant Secretary
Houston, Texas
April 20, 1999
-20-
23
[NATIONAL-OILWELL, INC. LOGO]
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS ON MAY 19, 1999
The undersigned hereby appoints Montreal Trust Company of Canada (the
"Trustee"), and, unless you withhold authority by checking the following box [
], authorizes the Trustee to appoint by proxy Steven W. Krablin and M. Gay
Mather or either of them with full power of substitution, the proxy or proxies
of the undersigned to attend the annual meeting of stockholders of
National-Oilwell, Inc. to be held on Wednesday, May 19, 1999, and any
adjournments thereof, and to vote all Exchangeable Shares of Dreco Energy
Services Ltd. that the signer is entitled to vote as indicated on the reverse
side and, at their discretion, on any other matters properly brought before the
meeting, and any adjournments thereof, all as set forth in the April 15, 1999
proxy statement.
This proxy is solicited on behalf of the board of directors of National-Oilwell,
Inc. The shares represented by this proxy will be voted as directed by the
Stockholder only if this proxy is completed, returned to and received not later
than 4:30 p.m. (Calgary time) on Monday, May 17, 1999 by Montreal Trust Company
of Canada, 600, 530 - 8th Avenue S.W., Calgary, Alberta T2P 3S8. Proxies may be
mailed in the return envelope provided or faxed to 403-267-6529.
In the event you wish to attend the meeting in person and vote your shares
directly, please check the following box [ ], in which case the Trustee will
issue a proxy to you for your shares at the meeting; however, the Trustee
accepts no responsibility for timely forwarding a proxy to vote your shares
directly if such instruction is not received by 4:30 p.m. (Calgary time) on May
17, 1999. In all events, the risk of delivery of such a proxy remains with the
holders of Exchangeable Shares.
The undersigned acknowledges receipt of the April 15, 1999 Notice of Annual
Meeting and the Proxy Statement, which more particularly describes the matters
referred to herein.
- --------------------------------------- ------------------------------------
Signature Signature if held jointly
- --------------------------------------- ------------------------------------
Date Date
(Signature(s) should be exactly as name or names appear on this proxy. If stock
is held jointly, each holder should sign. If signing is by attorney, executor,
administrator, trustee or guardian, please give full title.)
24
PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY.
(PLEASE READ OTHER SIDE FIRST.)
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES.
1. The election of directors: W. McComb Dunwoody, Ben A. Guill, William E.
Macaulay and Joel V. Staff
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed above. for all nominees listed above.
INSTRUCTION: to withhold authority to vote for any individual nominee, write the
nominee's name in the space provided below:
- ------------------------------------
2. To approve an amendment to the Amended and Restated National-Oilwell Stock
Award and Long-Term Incentive Plan, as described in the Proxy Statement.
FOR the proposal [ ]
AGAINST the proposal [ ]
ABSTAIN [ ]
25
[NATIONAL-OILWELL, INC. LOGO]
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS ON MAY 19, 1999
The undersigned hereby appoints Steven W. Krablin and M. Gay Mather or either of
them with full power of substitution, the proxy or proxies of the undersigned to
attend the annual meeting of stockholders of National-Oilwell, Inc. to be held
on Wednesday, May 19, 1999, and any adjournments thereof, and to vote the shares
of stock that the signer would be entitled to vote if personally present as
indicated on the reverse side and, at their discretion, on any other matters
properly brought before the meeting, and any adjournments thereof, all as set
forth in the April 15, 1999 proxy statement.
This proxy is solicited on behalf of the board of directors of National-Oilwell,
Inc. The shares represented by this proxy will be voted as directed by the
Stockholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted in accordance with the recommendations of the board of
directors for all nominees.
The undersigned acknowledges receipt of the April 15, 1999 Notice of Annual
Meeting and the Proxy Statement, which more particularly describes the matters
referred to herein.
- ------------------------------------ ---------------------------------------
Signature Signature if held jointly
- ------------------------------------ ---------------------------------------
Date Date
(Signature(s) should be exactly as name or names appear on this proxy. If stock
is held jointly, each holder should sign. If signing is by attorney, executor,
administrator, trustee or guardian, please give full title.)
26
PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY.
[X] Please mark your vote
as in this example
using dark ink only.
(PLEASE READ OTHER SIDE FIRST.)
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES.
1. The election of directors: W. McComb Dunwoody, Ben A. Guill, William E.
Macaulay and Joel V. Staff
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed above. for all nominees listed above.
INSTRUCTION: to withhold authority to vote for any individual nominee, write the
nominee's name in the space provided below:
- ---------------------------------
2. To approve an amendment to the Amended and Restated National-Oilwell Stock
Award and Long-Term Incentive Plan, as described in the Proxy Statement.
FOR the proposal [ ]
AGAINST the proposal [ ]
ABSTAIN [ ]
