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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 10, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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NATIONAL-OILWELL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 5084 76-0475815
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification No.) Identification Number)
10000 RICHMOND AVE.
HOUSTON, TEXAS 77042
(713) 346-7500
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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STEVEN W. KRABLIN
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
10000 RICHMOND AVE.
HOUSTON, TEXAS 77042
(713) 346-7500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
DAVID R. KING, ESQUIRE WILLIAM F. HENZE II, ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP JONES, DAY, REAVIS & POGUE
1701 MARKET STREET 599 LEXINGTON AVENUE
PHILADELPHIA, PENNSYLVANIA 19103-2921 NEW YORK, NEW YORK 10022
(215) 963-5000 (212) 326-3939
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration for the same
offering: [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF CLASS OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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Common Stock, par value $.01 per
share.......................... 14,381,511 shares $24.10 $346,537,059 $91,486
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(1) Based on the maximum number of shares to be issued in connection with the
merger, calculated as the product obtained by multiplying (a) an exchange
ratio of 0.3385 shares of the registrant's common stock for each share of
IRI common stock, par value $.01 per share, by (b) 42,486,000, the sum of
(i) the aggregate number of shares of IRI common stock outstanding on May 4,
2000 and (ii) the aggregate number of shares of IRI common stock issuable
pursuant to outstanding options.
(2) Estimated solely for the purposes of calculating the registration fee
required by Section 6(b) of the Securities Act, and calculated pursuant to
Rule 457(f) under the Securities Act. Pursuant to Rule 457(f)(1) under the
Securities Act, the proposed maximum aggregate offering price of the
registrant's common stock was calculated in accordance with Rule 457(c)
under the Securities Act as: (a) $8.1565, the average of the high and low
prices per share of IRI common stock on May 4, 2000 as reported on the New
York Stock Exchange, multiplied by (b) 42,486,000, the number of shares of
IRI common stock computed as described in clause (b) of Note (1).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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NATIONAL-OILWELL, INC.
10000 RICHMOND AVENUE
4TH FLOOR
HOUSTON, TEXAS 77042-4200
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NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD ON , 2000
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
National-Oilwell, Inc. will be held on , 2000, at a.m., local
time, at , for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement of Merger, dated as of March 15, 2000, among National-Oilwell,
Inc., Arrow Acquisition Corp. and IRI International Corporation. A copy of
the merger agreement is attached to this document as Appendix I.
2. To consider and vote upon a proposal to adopt a restated
certificate of incorporation that includes an amendment increasing the
number of authorized shares of NOI common stock from 75,000,000 shares to
150,000,000 shares.
3. To consider and transact such other business as may properly come
before the meeting of stockholders or any adjournment of postponement
thereof.
If you were a stockholder of record at the close of business on May 1,
2000, you may vote at the special meeting. A list of the stockholders entitled
to vote at the special meeting will be available for inspection at NOI's offices
during normal business hours for the 10 days prior to the meeting, and at the
time and place of the meeting.
Proposals 1 and 2 above may be referred to in this document as the NOI
merger proposals. With respect to the NOI merger proposals, the NOI Board of
Directors recommends that stockholders vote FOR the approval and adoption of the
merger agreement and FOR the adoption of a restated certificate of
incorporation. The merger will not be completed unless the restated certificate
of incorporation is adopted. NOI stockholders who held 15.90% of the voting
power of the outstanding shares of NOI common stock as of May 1, 2000 agreed
with IRI to vote their shares of NOI common stock in favor of the NOI merger
proposals so long as the NOI Board of Directors is recommending that NOI
stockholders vote in favor of the NOI merger proposals.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED, WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON.
ACCORDINGLY, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN
THE ENCLOSED POSTAGE PREPAID ENVELOPE. YOU MAY REVOKE YOUR PROXY IN WRITING OR
IN PERSON AT ANY TIME BEFORE THE MEETING IN ACCORDANCE WITH THE INSTRUCTIONS
CONTAINED IN THIS DOCUMENT. IF YOUR PROXY CARD IS SIGNED, DATED AND RETURNED
WITHOUT SPECIFYING YOUR CHOICE, THE SHARES WILL BE VOTED AS RECOMMENDED BY THE
NOI BOARD OF DIRECTORS.
By Order of the Board of Directors
Joel V. Staff
Chairman of the Board, President and
Chief Executive Officer
Houston, Texas
, 2000
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IRI INTERNATIONAL CORPORATION
WELLS FARGO PLAZA
1000 LOUISIANA, SUITE 5900
HOUSTON, TEXAS 77002
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NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD ON , 2000
A special meeting of stockholders of IRI International Corporation will be
held on , 2000, at a.m., local time, at
, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement of Merger, dated as of March 15, 2000, among National-Oilwell,
Inc., Arrow Acquisition Corp. and IRI International Corporation. A copy of
the merger agreement is attached to this document as Appendix I.
2. To consider and transact such other business as may properly come
before the special meeting of stockholders or any adjournment or
postponement thereof.
If you were a stockholder of record at the close of business on May 1,
2000, you may vote at the special meeting. A list of the stockholders entitled
to vote at the special meeting will be available for inspection at IRI's offices
during normal business hours for the 10 days prior to the meeting, and at the
time and place of the meeting.
The IRI Board of Directors recommends that stockholders vote FOR the
approval and adoption of the merger agreement. The affirmative vote of the of
holders at least a majority of the outstanding shares of IRI common stock is
required for approval and adoption of the merger agreement. IRI stockholders who
held 50.16% of the voting power of the outstanding shares of IRI common stock as
of May 1, 2000 have agreed with NOI to vote their shares of IRI common stock in
favor of the approval and adoption of the merger agreement so long as the IRI
Board of Directors is recommending that IRI stockholders vote in favor of the
merger agreement.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED, WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON.
ACCORDINGLY, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN
THE ENCLOSED POSTAGE PREPAID ENVELOPE. YOU MAY REVOKE YOUR PROXY IN WRITING OR
IN PERSON AT ANY TIME BEFORE THE SPECIAL MEETING OF STOCKHOLDERS IN ACCORDANCE
WITH THE INSTRUCTIONS CONTAINED IN THIS DOCUMENT. IF YOUR PROXY CARD IS SIGNED,
DATED AND RETURNED WITHOUT SPECIFYING YOUR CHOICE, THE SHARES WILL BE VOTED AS
RECOMMENDED BY THE IRI BOARD OF DIRECTORS.
By Order of the Board of Directors
Hushang Ansary
Chairman of the Board and
Chief Executive Officer
Houston, Texas
, 2000
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[NOI LOGO] NATIONAL-OILWELL, INC. [IRI LOGO]
IRI INTERNATIONAL CORPORATION
JOINT PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED -- YOUR VOTE IS IMPORTANT
The respective boards of directors of National-Oilwell, Inc. and IRI
International Corporation have agreed to a merger which they believe will
enhance the growth of their existing businesses.
This joint proxy statement/prospectus provides you with detailed
information about the merger agreement and the merger for you to consider in
connection with your vote on the merger agreement. This joint proxy
statement/prospectus also serves as a prospectus of NOI to provide information
to IRI stockholders in connection with their receipt of NOI common stock in the
merger. This joint proxy statement/prospectus refers you to other documents that
NOI and IRI have filed with the Securities and Exchange Commission where you can
obtain financial and other information about NOI and IRI. We encourage you to
read this entire document carefully.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE OF THIS JOINT PROXY
STATEMENT/PROSPECTUS FOR A DESCRIPTION OF CERTAIN RISKS ASSOCIATED WITH APPROVAL
OF THE MERGER.
If we complete the merger, a wholly-owned subsidiary of NOI will merge into
IRI. IRI will be the surviving corporation and will retain its separate
corporate existence as a wholly-owned subsidiary of NOI. IRI stockholders will
receive 0.3385 shares of NOI common stock for each share of IRI common stock
that they own, plus cash in lieu of any fractional shares. Each option to
purchase shares of IRI common stock will be converted into an option exercisable
for the number of shares of NOI common stock determined in accordance with the
exchange ratio. NOI stockholders will continue to own their existing shares.
Immediately after the merger, the former stockholders of IRI will hold
13,506,150 shares of NOI common stock, representing approximately 16.9% of the
outstanding NOI common stock. This information is based on the number of shares
of NOI and IRI common stock outstanding on May 1, 2000.
IRI common stock is listed on the New York Stock Exchange. IRI's NYSE
symbol is "IIR." NOI common stock is listed on the NYSE. NOI's NYSE symbol is
"NOI." NOI has applied to list the NOI common stock to be issued to the IRI
stockholders on the NYSE, and this listing is a condition to the merger.
The merger cannot be completed unless the IRI stockholders adopt the merger
agreement and NOI stockholders adopt the merger agreement and a restated
certificate of incorporation that increases the number of authorized shares of
NOI common stock. Adoption of the merger agreement by the IRI stockholders
requires the affirmative vote of holders of a majority of IRI's outstanding
common stock. Holders representing approximately 50.16% of IRI's outstanding
common stock have agreed to vote in favor of the merger agreement so long as the
IRI Board of Directors is recommending that IRI stockholders vote in favor of
the merger agreement. Adoption of the merger agreement and the restated
certificate of incorporation by the NOI stockholders each require the
affirmative vote of the holders of a majority of NOI's outstanding common stock.
Holders representing approximately 15.90% of NOI's outstanding common stock have
agreed to vote in favor of the merger and the restated certificate of
incorporation so long as the NOI Board of Directors is recommending that NOI
stockholders vote in favor of the NOI merger proposals.
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We have scheduled meetings for our stockholders to vote on these matters.
The dates, times and places of the stockholder meetings are as follows:
FOR NOI STOCKHOLDERS: FOR IRI STOCKHOLDERS:
, 2000 , 2000
a.m., local time a.m., local time
[Location] [Location]
[Address] [Address]
[City, State Zip Code] [City, State Zip Code]
The Board of Directors of each company believes that a merger is advisable
and in your best interests and unanimously recommends that you vote for the
proposals relating to the merger at your meeting.
Whether or not you plan to attend the meeting, please take the time to vote
by completing the enclosed proxy card and mailing it to us as soon as possible.
If you sign, date and mail your proxy card without indicating how you want to
vote, your proxy will be counted as a vote in favor of the merger. If you fail
to return your card the effect will be a vote against the merger.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE MERGER OR THE NOI COMMON STOCK TO BE
ISSUED IN THE MERGER OR DETERMINED WHETHER THIS DOCUMENT IS ACCURATE OR
ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This joint proxy statement/prospectus is dated , 2000
and is first being mailed to stockholders of NOI and IRI on or about
, 2000.
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TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 6
PROSPECTUS SUMMARY.......................................... 9
SELECTED FINANCIAL DATA OF NOI.............................. 13
SELECTED FINANCIAL DATA OF IRI.............................. 14
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA.................. 15
COMPARATIVE PER SHARE INFORMATION........................... 16
RISK FACTORS................................................ 17
Risks Relating to the Merger................................ 17
Risks Relating to NOI....................................... 17
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS............. 20
STOCKHOLDER MEETINGS........................................ 21
Times and Places; Purposes.................................. 21
Record Date; Voting Rights; Votes Required for Approval..... 21
Proxies..................................................... 22
THE MERGER.................................................. 23
Structure of the Merger..................................... 23
Merger Consideration........................................ 23
No Fractional Shares........................................ 23
Effective Time of the Merger................................ 23
Background of the Merger.................................... 23
Recommendation of the NOI Board of Directors; NOI's Reasons
for the Merger............................................ 24
Recommendation of the IRI Board of Directors; IRI's Reasons
for the Merger............................................ 25
Opinions of Financial Advisors.............................. 26
Stockholder Agreements...................................... 38
Registration Rights Agreement............................... 38
Certain Material United States Federal Income Tax
Consequences of The Merger................................ 39
Stock Options............................................... 40
Accounting Treatment........................................ 41
Resales of NOI Common Stock................................. 41
INTERESTS OF IRI DIRECTORS AND EXECUTIVE OFFICERS IN THE
MERGER.................................................... 42
Interests of IRI Management in the Management of NOI after
the Merger................................................ 42
Registration Rights Granted to Certain IRI Stockholders..... 42
Indemnification and Insurance............................... 42
Employment Agreements....................................... 42
Noncompete Agreement........................................ 43
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND
INFORMATION............................................... 44
Market Price Data........................................... 44
Dividend Policies........................................... 45
THE MERGER AGREEMENT........................................ 45
Conversion of Shares........................................ 45
Exchange of Stock Certificates.............................. 45
Representations and Warranties.............................. 45
Material Covenants.......................................... 46
Conditions to Obligations to Effect the Merger.............. 49
Additional Conditions to Obligations of NOI................. 49
Additional Conditions to Obligations of IRI................. 50
Termination; Termination Fees and Expenses.................. 50
Amendment and Waiver........................................ 52
COMPARISON OF THE RIGHTS OF THE HOLDERS OF IRI COMMON STOCK
AND NOI COMMON STOCK...................................... 52
Stockholder Action.......................................... 52
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Special Stockholders' Meetings.......................................................................... 52
Number and Election of Directors........................................................................ 53
Removal of Directors.................................................................................... 53
Vacancies............................................................................................... 53
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS....................................................... 54
BUSINESS OF NATIONAL OILWELL............................................................................ 60
BUSINESS OF IRI INTERNATIONAL........................................................................... 61
APPROVAL OF THE RESTATED CERTIFICATE OF INCORPORATION OF NOI............................................ 62
LEGAL MATTERS........................................................................................... 63
EXPERTS................................................................................................. 63
WHERE YOU CAN FIND MORE INFORMATION..................................................................... 63
APPENDIX I -- AGREEMENT OF MERGER....................................................................... I - 1
APPENDIX II -- OPINION OF MERRILL LYNCH & CO............................................................ II - 1
APPENDIX III -- OPINION OF LEHMAN BROTHERS INCORPORATED................................................. III - 1
APPENDIX IV -- PROPOSED RESTATED CERTIFICATE OF INCORPORATION OF NOI.................................... IV - 1
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THIS DOCUMENT INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT NOI AND IRI THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS DOCUMENT.
STOCKHOLDERS MAY OBTAIN THIS INFORMATION FROM THE APPROPRIATE COMPANY WITHOUT
CHARGE UPON WRITTEN OR ORAL REQUEST TO THE FOLLOWING:
National-Oilwell, Inc. IRI International Corporation
10000 Richmond Avenue Wells Fargo Plaza
4th Floor 1000 Louisiana, Suite 5900
Houston, Texas 77042-4200 Houston, Texas 77002
Attention: Gay Mather, Director of Communications Attention: Robert L. Hargrave,
Telephone Number: (713) 346-7775 Chief Financial Officer
Telephone Number: (713) 868-8847
If you would like to request documents from NOI or IRI, please do so by
, 2000, so that you may receive them before the stockholder
meetings. If you request any incorporated documents, we will mail them to you by
first class mail or other equally prompt means as soon as practicable after we
receive your request. Incorporated documents can also be obtained by accessing
the SEC's website at www.sec.gov.
NOI has supplied all information contained in this document relating to
NOI, and IRI has supplied all of the information relating to IRI.
NOI and IRI have not authorized anyone to give you any information or to
make any representations about the merger and other transactions discussed in
this document other than those contained herein. If you are given any
information or representations about these matters that is not discussed in this
document, you must not rely on that information.
This document is not an offer to sell or a solicitation of an offer to buy
securities anywhere or to anyone where or to whom it would be unlawful to offer
or sell securities under applicable law.
The delivery of this document or the common stock of NOI offered by this
document does not, under any circumstances, mean that there has not been a
change in the affairs of NOI or IRI since the date of this document. It also
does not mean that information in this document is correct after this date.
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY DO NOI AND IRI WANT TO MERGE?
A. The merger will provide a strategic and complementary fit with the existing
businesses of NOI and IRI. NOI's drilling equipment business has largely
focused on the deep land and offshore markets, while IRI has concentrated
on mobile well servicing and drilling rigs. We believe that the merger of
NOI and IRI will achieve significant combination benefits as we integrate
the best manufacturing, sales and service operations of the combined
companies.
For more detailed reasons for the merger, see pages through
.
Q: WHY ARE THE NOI BOARD OF DIRECTORS AND THE IRI BOARD OF DIRECTORS
RECOMMENDING THAT I VOTE FOR ADOPTION OF THE MERGER AGREEMENT?
A. In reaching a decision to approve the merger agreement, the merger and to
recommend adoption of the merger agreement by stockholders, the respective
boards of directors of NOI and IRI consulted with its management, as well
as financial and legal advisors, and considered the terms of the proposed
merger agreement. In addition, the NOI Board of Directors considered each
of the items set forth on pages to , and the IRI Board of
Directors considered each of the items set forth on pages to .
Based on those consultations and considerations, the NOI Board of Directors
and the IRI Board of Directors each unanimously approved the merger
agreement and the merger, and believe that the terms of the merger
agreement and the merger are advisable and fair to, and in the best
interests of, NOI and IRI and their respective stockholders.
Q: WHAT WILL IRI COMMON STOCKHOLDERS RECEIVE IN THE MERGER?
A. The merger will result in the exchange of each outstanding share of IRI
common stock for 0.3385 shares of NOI common stock. IRI stockholders will
not receive any fractional shares. Instead, they will receive cash in an
amount equal to the closing price of a share of NOI common stock on the
last trading day before the merger multiplied by the appropriate fraction.
Q: WILL NOI STOCKHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE MERGER?
A. No. NOI stockholders will continue to hold the NOI shares they own at the
time of the merger.
Q: WHAT IF THE MERGER IS NOT COMPLETED?
A. If the merger is not completed, IRI will continue to operate as an
independent company. IRI may be required to pay a termination fee under the
merger agreement if the merger is not completed for certain reasons.
Q: WHERE CAN I GET INFORMATION REGARDING NOI, IRI AND THE MERGER?
A. We urge you to read and consider the information contained in this joint
proxy statement/prospectus, including its appendices. You also may want to
review the documents referenced under "Where You Can Find More
Information."
Q: WILL THE MERGER DILUTE THE OWNERSHIP OF NOI STOCKHOLDERS?
A. Yes. The issuance of shares of NOI common stock to IRI stockholders will
result in existing NOI stockholders owning a reduced percentage of a larger
corporation. Immediately after the merger, the former stockholders of IRI
will hold approximately 16.9% of the outstanding NOI common stock. This is
based on the number of shares of NOI and IRI common stock outstanding on
May 1, 2000.
Q: WHO WILL MANAGE NOI AFTER THE MERGER?
A. At the effective time of the merger, the NOI Board of Directors will be
expanded from 8 to 9 directors to include Hushang Ansary, the current
Chairman and Chief Executive Officer of IRI, or, if Mr. Ansary is unable or
unwilling to serve, another person designated by IRI reasonably acceptable
to NOI.
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Q: WHO MAY VOTE AT THE MEETING?
A. All NOI stockholders of record as of the close of business on May 1, 2000
may vote at the NOI annual meeting. If you are an NOI stockholder, you are
entitled to one vote per share of NOI common stock that you own on the
record date, or one vote per exchangeable share of Dreco that you own.
All IRI stockholders of record as of the close of business on May 1, 2000
may vote at the IRI special meeting. If you are an IRI stockholder, you are
entitled to one vote per share of IRI common stock that you own on the
record date.
Q: WHAT AM I BEING ASKED TO VOTE UPON IN CONNECTION WITH THE MERGER?
A. If you are an IRI stockholder, you are being asked to vote for the approval
and adoption of the merger agreement.
If you are an NOI stockholder, you are being asked to vote for the approval
and adoption of the merger agreement and the adoption of a restated
certificate of incorporation that includes an amendment to increase the
number of authorized shares of NOI common stock.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE MERGER?
A. Holders of a majority of the outstanding shares of NOI common stock must
approve the merger agreement and NOI's restated certificate of
incorporation. NOI stockholders who held 15.90% of the voting power of the
outstanding shares of NOI common stock as of May 1, 2000 agreed with IRI to
vote their shares of NOI common stock in favor of the NOI merger proposals
so long as the NOI Board of Directors is recommending that NOI stockholders
vote in favor of the NOI merger proposals.
Holders of a majority of the outstanding shares of IRI common stock must
approve the merger agreement. IRI stockholders who held 50.16% of the
voting power of the outstanding shares of IRI common stock as of May 1,
2000 have agreed with NOI to vote their shares of IRI common stock in favor
of the approval and adoption of the merger agreement so long as the IRI
Board of Directors is recommending that the IRI stockholders vote in favor
of the merger agreement.
Q: WHAT DO I NEED TO DO NOW?
A. After reviewing this document, indicate on your proxy card how you want to
vote, sign it and mail it in the enclosed postage prepaid return envelope
as soon as possible so that the proxyholder may vote your shares at your
stockholder meeting.
Q: WHEN ARE THE STOCKHOLDER MEETINGS?
A. The special meeting for NOI stockholders will take place on ,
2000, and the special meeting for IRI stockholders will take place on
, 2000.
Q: HOW WILL MY SHARES BE VOTED IF I RETURN A BLANK PROXY CARD?
A. If you are an NOI common stockholder or an IRI common stockholder and you
sign and send in your proxy card and do not indicate how you want to vote,
we will count your proxy as a vote in favor of the proposals submitted at
your stockholder meeting. If you are a Dreco exchangeable shareholder and
you sign and send in your proxy card and do not indicate how you want to
vote, your shares will not be voted.
Q: WHAT WILL BE THE EFFECT IF I DO NOT VOTE ON THE MERGER PROPOSALS?
A. If you abstain from voting or do not vote your shares by proxy or in
person, it will have the same effect as a vote against adoption of the
merger proposals.
Q: CAN I VOTE MY SHARES IN PERSON?
A. Yes. If you hold your shares as the record holder and not in street name,
you may attend your stockholder meeting and vote your shares in person,
rather than signing and mailing your proxy card.
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Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A. Your broker will vote your shares on the merger proposals only if you
instruct your broker how to vote. Your broker will send you directions on
how you can instruct your broker to vote. If you do not instruct your
broker, your shares will not be voted, which will have the same effect as a
vote against the adoption of the merger proposals.
Q: CAN I REVOKE MY PROXY AND CHANGE MY VOTE?
A. Yes. You may change your vote in one of three ways at any time before your
proxy is voted at the special meeting. First, you may send a written notice
stating that you would like to revoke your proxy. Second, you may complete
and submit a new, later dated proxy. Third, you may attend the special
meeting and vote in person.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A. No. After we complete the merger, we will send IRI stockholders written
instructions on how to exchange their stock certificates. NOI stockholders
will retain their stock certificates after the merger.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A. We currently expect to complete the merger during the second calendar
quarter of 2000 if we obtain the required stockholder approvals at the
stockholder meetings and satisfy certain additional conditions. One of the
conditions is the expiration of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which
occurred on May 3, 2000. However, subject to certain exceptions, either NOI
or IRI can terminate the merger agreement if we do not complete the merger
by September 1, 2000.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO IRI AND NOI STOCKHOLDERS?
A. The exchange of shares by IRI stockholders will be tax-free to them for
U.S. federal income tax purposes, except for taxes payable on any gain
recognized as a result of receiving cash in lieu of fractional shares of
NOI common stock. The merger will have no tax consequences to NOI
stockholders. A summary of the material federal income tax consequences of
the merger is included in the section "The Merger -- Certain U.S. Federal
Income Tax Consequences" on page .
Q: AM I ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER?
A. No. Neither NOI stockholders nor IRI stockholders will have appraisal
rights.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A. If you have more questions about the merger or if you need additional
copies of this joint proxy statement/prospectus or the enclosed proxy, you
should contact:
National-Oilwell, Inc.:
10000 Richmond Avenue
4th Floor
Houston, Texas 77042-4200
Attention: Gay Mather, Director of Communications
Telephone Number: (713) 346-7775
IRI International Corporation:
Wells Fargo Plaza
1000 Louisiana, Suite 5900
Houston, Texas 77002
Attention: Robert L. Hargrave,
Chief Financial Officer
Telephone Number: (713) 868-8847
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PROSPECTUS SUMMARY
This summary highlights selected information about NOI, IRI and the merger.
It does not contain all of the information that is important to you. To
understand the merger fully and for a more complete description of the legal
terms of the merger, you should carefully read this entire joint proxy
statement/ prospectus and the documents attached as appendices. In addition, we
incorporate by reference important business and financial information about NOI
and IRI into this joint proxy statement/prospectus. You may obtain the
information incorporated by reference without charge by following the
instructions in the section "Where You Can Find More Information" on page . We
have included page references parenthetically to direct you to a more complete
description of the topics presented in this summary.
THE PARTIES TO THE MERGER
NATIONAL-OILWELL, INC. (PAGE )
10000 Richmond Avenue, 4th Floor
Houston, Texas 77042
(713) 346-7500
NOI is a worldwide leader in the design, manufacture and sale of
comprehensive systems and components used in oil and gas drilling and
production, as well as in providing supply chain integration services to the
upstream oil and gas industry.
NOI was incorporated in Delaware in 1995.
IRI INTERNATIONAL CORPORATION (PAGE )
Wells Fargo Plaza
1000 Louisiana, Suite 5900
Houston, Texas 77002
(713) 651-8002
IRI is one of the world's largest manufacturers of land-based drilling and
well-servicing rigs and rig components for use in the global oil and gas
industry.
The predecessor company to IRI was incorporated in Delaware in 1985.
REASONS FOR THE MERGER (PAGE )
The boards of directors of NOI and IRI believe that the respective
businesses of NOI and IRI provide a strategic and complementary fit and that
there will be significant combination benefits as the best manufacturing, sales
and service operations of the two companies are combined.
To review the background and reasons for the merger in greater detail, see
pages through . To review the risks relating to the merger, see pages
through .
STRUCTURE OF THE MERGER
If we complete the merger, IRI will merge with a subsidiary of NOI and will
become a wholly-owned subsidiary of NOI. The merger is subject to conditions and
rights of termination described in this document and in the merger agreement. We
have attached the merger agreement as Appendix I to this joint proxy
statement/prospectus. It is the legal document governing the merger. WE
ENCOURAGE YOU TO READ THE MERGER AGREEMENT.
WHAT IRI STOCKHOLDERS WILL RECEIVE IN THE MERGER (PAGE )
If we complete the merger, each IRI stockholder will receive 0.3385 shares
of NOI common stock for each share of IRI common stock owned by that IRI
stockholder. We sometimes refer to this number of shares as the exchange ratio.
NOI will not issue any fractional shares. Instead, each IRI stockholder will
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receive cash in lieu of any fractional share of NOI common stock they would have
otherwise been entitled to receive.
Example:
- If an IRI stockholder currently owns 100 shares of IRI common stock, he
will receive 33 shares of NOI common stock, and a check for the market
value of the 0.85 fractional share.
In addition, each outstanding IRI option will be converted into an option
to purchase 0.3385 shares of NOI common stock for each IRI share subject to the
option.
DETERMINATIONS OF BOARD OF DIRECTORS AND RECOMMENDATIONS TO STOCKHOLDERS (PAGE
)
NOI. The NOI Board of Directors has unanimously approved the merger, the
merger agreement and NOI's restated certificate of incorporation that increases
the number of shares of common stock from 75,000,000 to 150,000,000 shares. The
NOI Board of Directors recommends that the NOI stockholders vote FOR the
proposals to approve and adopt the merger agreement and the restated certificate
of incorporation.
IRI. The IRI Board of Directors has unanimously approved the merger and the
merger agreement and believes that it is in the best interests of the IRI
stockholders to merge with NOI. The IRI Board of Directors recommends that the
IRI stockholders vote FOR the proposal to approve and adopt the merger
agreement.
OPINIONS OF FINANCIAL ADVISORS (PAGE )
In deciding to approve the merger, we considered opinions from our
respective financial advisors as to the fairness of the exchange ratio from a
financial point of view to NOI and to the IRI stockholders as of the date of
these opinions. NOI received an opinion from Merrill Lynch & Co. and IRI
received an opinion from Lehman Brothers Incorporated. Each of these opinions
describes the bases and assumptions on which it was rendered. The opinions are
attached as Appendix II and Appendix III to this joint proxy
statement/prospectus. We encourage you to read and consider these opinions.
THE MEETINGS (PAGE )
The special meeting of the NOI stockholders will be held at , on
, 2000, at , local time.
At the NOI meeting, holders of NOI common stock and Dreco exchangeable
shares will consider and vote upon the NOI merger proposals. Approval of the
merger proposals requires the approval of the majority of the outstanding shares
of NOI common stock. The outstanding shares of NOI common stock include the
exchangeable shares issued in connection with NOI's acquisition of Dreco.
The special meeting of the IRI stockholders will be held at , on
, 2000, at , local time.
At the IRI meeting, holders of IRI common stock will consider and vote upon
the IRI merger agreement and the merger. Approval of the merger agreement and
the merger requires the approval of the holders of a majority of the outstanding
shares of IRI common stock.
FEDERAL INCOME TAX CONSIDERATIONS (PAGE )
A condition of the merger is that each of NOI and IRI receive an opinion
from its outside counsel that the merger will be treated as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended. This treatment means that the merger will be tax-free to the IRI
stockholders except to the extent of any cash received in lieu of fractional
shares of NOI common stock.
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You should consult your tax advisor for a full understanding of the tax
consequences of the merger applicable to you.
ACCOUNTING TREATMENT (PAGE )
NOI and IRI intend for the merger to be accounted for as a
pooling-of-interests. This means that NOI will restate its consolidated
financial statements for prior periods at the effective time of the merger to
include the assets, liabilities, stockholders' equity and results of operations
of IRI as if IRI had always been a wholly-owned subsidiary of NOI.
CONDITIONS TO THE MERGER (PAGE )
We will complete the merger only if NOI and IRI satisfy, or in some cases,
waive, several conditions in the merger agreement.
TERMINATION OF THE MERGER AGREEMENT (PAGE )
The boards of directors of both NOI and IRI can agree to terminate the
merger agreement at any time. Either company can terminate if, among other
things:
- the merger is not consummated on or before September 1, 2000;
- a governmental authority permanently prohibits the merger;
- by either party upon the other party's breach of any obligation,
representation or warranty under the agreement which would result in a
material adverse effect;
- after the occurrence of changes or events that individually or in the
aggregate have or are reasonably expected to have a material adverse
effect on the other party; or
- if the stockholders of either party shall not approve the merger
proposals.
IRI has the right to terminate the merger agreement if the NOI Board of
Directors modifies in any adverse manner its approval or recommendation of the
merger agreement.
IRI also has the right to terminate the merger agreement prior to obtaining
stockholder approval if the IRI Board of Directors accepts an IRI Superior
Proposal (as defined on page of this joint proxy statement/prospectus), and
pays to NOI a termination fee of $15,000,000.
Additionally, NOI has the right to terminate the merger agreement if the
IRI Board of Directors withdraws its approval of the merger or if IRI breaches
its non-solicitation obligations under the merger agreement. If IRI, in either
such case, enters into an agreement with respect to, or completes, an IRI
acquisition proposal (as defined on page of this joint proxy
statement/prospectus) within one year, IRI must pay to NOI a fee of $15,000,000.
STOCK EXCHANGE LISTING OF NOI COMMON STOCK (PAGE )
It is a condition to the completion of the merger that NOI common stock
issued to IRI stockholders in the merger be authorized for listing on the NYSE.
DELISTING AND DEREGISTRATION OF IRI COMMON STOCK (PAGE )
If the merger is completed, IRI common stock will be delisted from the NYSE
and will be deregistered under the Securities Exchange Act of 1934, as amended.
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ABSENCE OF APPRAISAL RIGHTS (PAGE )
IRI common stock is listed on the New York Stock Exchange, and the NOI
common stock to be received by the IRI stockholders will be listed on the New
York Stock Exchange. As a result, IRI stockholders and NOI stockholders will not
be entitled to appraisal rights under Delaware law.
INTERESTS OF IRI DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER (PAGE )
IRI stockholders should note that certain members of senior management or
directors who are also stockholders of IRI have interests in the merger that are
in addition to those of IRI stockholders. Those interests include becoming a
director of NOI, the grant of certain registration rights, being entitled to the
continuation of certain indemnification provisions and being entitled to certain
benefits under employment agreements.
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SELECTED FINANCIAL DATA OF NOI
The following table sets forth summary historical financial data of NOI
derived from the financial statements incorporated by reference in this joint
proxy statement/prospectus. Data for all periods shown below is restated to
combine the results of Dupre Supply Company and Dupre International Inc.
pursuant to pooling-of-interests accounting. As a result of the differing year
ends of NOI and Dreco Energy Services Ltd. prior to the combination of the
companies, the balance sheets and results of operations for dissimilar year ends
have been combined pursuant to pooling-of-interests accounting. NOI's results of
operations for the year ended December 31, 1997 include Dreco's results of
operations for the six months ended May 31, 1997 and the six months ended
December 31, 1997. Data for the year ended December 31, 1996 includes the
operations of Dreco for the twelve months ended and as of November 30, 1996.
Data for the year ended August 31, 1995 reflect the operations of Dreco and
Dupre only, as NOI did not exist for pooling purposes prior to January 1, 1996.
YEAR
YEAR ENDED DECEMBER 31, ENDED
--------------------------------------------- AUGUST 31,
1999 1998 1997(2) 1996(3) 1995(1)
-------- ---------- ---------- -------- -----------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
OPERATING DATA:
Revenues $745,215 $1,271,914 $1,097,406 $822,443 $129,634
Operating income (loss)(4).......... 21,901 122,512 91,786 30,534 11,023
Income (loss) before taxes and
extraordinary loss(5)............ 4,518 109,356 86,145 19,428 13,045
Income (loss) before extraordinary
loss(5).......................... 1,520 68,954 54,827 12,695 8,493
Net income (loss)................... 1,520 68,954 54,204 8,695 8,493
Income (loss) per share before
extraordinary loss(5)
Basic............................ 0.03 1.26 1.03 0.30 0.60
Diluted.......................... 0.03 1.26 1.02 0.30 0.59
Net income (loss) per share
Basic............................ 0.03 1.26 1.02 0.20 0.60
Diluted.......................... 0.03 1.26 1.01 0.20 0.59
OTHER DATA:
Depreciation and amortization....... 23,244 20,598 15,443 9,219 4,907
Capital expenditures................ 15,369 29,241 34,783 15,796 6,666
BALANCE SHEET DATA:
Working capital..................... 302,166 364,130 255,610 171,608 35,090
Total assets........................ 782,311 855,888 602,993 376,523 87,208
Long-term debt...................... 196,007 221,198 61,719 39,302 2,183
Stockholders' equity................ 395,075 393,299 284,208 173,099 51,584
- ---------------
(1) Data for the year ended August 31, 1995 reflect the operations of Dreco and
Dupre only, as the operations of NOI were acquired from a predecessor
partnership as of January 1, 1996 and, in accordance with generally accepted
accounting principles, cannot be combined prior to that date. Data for Dupre
is as of December 31, 1995.
(2) In order to conform Dreco's fiscal year end to match NOI's year end, the
results of operations for the month of June 1997 have been included directly
in stockholders' equity. Dreco's revenues and net income were $13.4 million
and $0.9 million for the month of June 1997.
(3) In order to conform Dreco's fiscal year end to NOI's December 31 year end,
the results of operations for the period from September 1, 1995 through
November 30, 1995 have been included directly in stockholders' equity.
Dreco's revenues and net income were $33.4 million and $3.2 million for such
period.
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(4) In December 1998, NOI recorded a $16,400,000 charge related to personnel
reductions and facility closures and a $5,600,000 charge related to the
writedown to the lower of cost or market of certain tubular inventories. In
September 1997, NOI recorded a $10,600,000 charge related to merger expenses
incurred in connection with the combination with Dreco. In October 1996, NOI
recorded $16,611,000 in charges related to the cancellation of management
agreements and expenses related to special incentive plans that terminated
upon the occurrence of the initial public offering of its common stock.
(5) NOI recorded extraordinary losses in September 1997 of $623,000 (net of
$376,000 income tax benefit) and in October 1996 of $4,000,000 (net of
$2,400,000 income tax benefit) due to the write-offs of deferred debt
issuance costs.
SELECTED FINANCIAL DATA OF IRI
The following table sets forth selected historical financial information
for IRI. The information presented for the years ended December 31, 1999, 1998
and 1997, and the year ended March 31, 1996, as well as the nine month period
ended December 31, 1996, is derived from IRI's audited consolidated financial
statements. The information for the nine month period ended December 31, 1995 is
derived from IRI's unaudited consolidated financial statements. The following
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements of IRI, including the notes thereto, incorporated by
reference in this joint proxy statement/prospectus.
NINE MONTHS ENDED YEAR
YEAR ENDED DECEMBER 31, DECEMBER 31, ENDED
------------------------------ --------------------- MARCH 31,
1999 1998 1997(1) 1996 1995 1996
-------- -------- -------- ------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
OPERATING DATA:
Revenues.................... $ 92,190 $175,045 $185,366 $62,298 $39,141 $52,506
Operating income (loss)..... (20,576) 17,303 22,619 9,110 4,926 7,639
Income (loss) before
extraordinary item....... (10,905) 12,382 12,535 8,377 5,136 7,963
Extraordinary charge on
early extinguishment of
debt, net of tax
benefit.................. -- -- (1,512) -- -- --
Net income (loss)........... (10,905) 12,382 11,023 8,377 5,136 7,963
Weighted average shares
outstanding -- basic and
diluted.................. 39,900 39,900 31,275 30,000 30,000 30,000
Income (loss) per common
share -- basic and
diluted.................. $ (0.27) $ 0.31 $ 0.35 $ 0.28 $ 0.17 $ 0.27
DECEMBER 31,
------------------------------------ MARCH 31,
1999 1998 1997 1996 1996
------- ------- ------- ------ ---------
BALANCE SHEET DATA:
Working capital............................. 149,849 164,246 161,890 38,658 35,461
Total assets................................ 217,093 239,166 251,074 58,671 46,631
Long-term debt and obligation under capital
lease less current installments.......... -- 319 586 522 --
Stockholders' equity........................ 201,300 210,259 198,406 24,903 16,526
- ---------------
(1) IRI acquired the business and operations of the Downhole Products Division
on March 31, 1997 and Cardwell International, Ltd. on April 17, 1997.
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(2) Amortization of negative goodwill decreased cost of goods sold in all
periods. Negative goodwill was fully amortized as of September 30, 1999. See
Notes to IRI's Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview"
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following summary unaudited pro forma financial data has been derived
from and should be read with the Unaudited Pro Forma Combined Financial
Statements and related notes on pages through . This information is based
on the historical consolidated balance sheets and related historical
consolidated statements of income of NOI and IRI giving effect to the merger
using the pooling-of-interests method of accounting for business combinations.
This information is for illustrative purposes only. The companies may have
performed differently had they actually been combined. You should not rely on
the summary unaudited pro forma financial data as being indicative of the
historical results that would have been achieved had the companies always been
combined or the future results that the combined company will experience after
the merger.
YEARS ENDED DECEMBER 31,
-------------------------------------
1999 1998 1997
--------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA STATEMENT OF OPERATIONS DATA:
Revenue................................................. $837,405.. $1,446,959 $1,282,772
Net income (loss) from continuing operations............ (9,385) 81,336 67,362
Net income (loss) per share from continuing operations
Basic................................................ $ (0.13) $ 1.19 $ 1.06
======== ========== ==========
Diluted.............................................. $ (0.13) $ 1.19 $ 1.05
======== ========== ==========
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents............................... $ 49,777
Working capital......................................... 442,435
Total assets............................................ 989,634
Long-term debt.......................................... 196,007
Total stockholders' equity.............................. 586,605
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COMPARATIVE PER SHARE INFORMATION
NOI's common stock is listed on the New York Stock Exchange. On March 15,
2000, the last full trading day on the NYSE prior to the public announcement of
the proposed merger, NOI's common stock closed at $23.75 per share. On May 4,
2000, NOI's common stock closed at $24.94 per share.
IRI's common stock is listed on the New York Stock Exchange. On March 15,
2000, the last full trading day on the NYSE prior to the public announcement of
the proposed merger, IRI's common stock closed at $5.75 per share. On May 4,
2000, IRI's common stock closed at $8.31 per share.
We have set forth below consolidated net income (loss) and book value per
share data of NOI and IRI on an historic basis for NOI, on a pro forma basis
giving effect to the acquisition of IRI and on a pro forma basis per IRI
equivalent share. The IRI equivalent share pro forma data was computed by
multiplying the NOI pro forma combined information by 0.3385, the exchange ratio
in the merger.
The net income (loss) per share is computed on the basis of weighted
average shares outstanding. Fully diluted net income per share is not presented
because common stock equivalents did not result in material dilution and had no
dilutive effect.
You should read the information set forth below in conjunction with the
audited consolidated financial statements of NOI and IRI incorporated by
reference in this joint proxy statement/prospectus and the Unaudited Pro Forma
Financial Information contained elsewhere in this Prospectus.
NOI IRI
---------------------- -----------------------
EQUIVALENT
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ----------
INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS
PER DILUTED SHARE:
Year Ended December 31,
1999.............................................. $0.03 $(0.13) $(0.27) $(0.04)
1998.............................................. 1.26 1.19 0.31 0.40
1997.............................................. 1.02 1.05 0.40 0.36
BOOK VALUE PER SHARE:
December 31, 1999................................... 6.79 8.12 5.05 2.75
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RISK FACTORS
In making your determination as to how to vote on the merger proposals, you
should consider the following factors:
RISKS RELATING TO THE MERGER
NOI may not be able to integrate the operations of IRI and realize the
potential benefits of the merger
Integration of the operations of NOI and IRI will present significant
challenges. The integration of managers from each company will result in changes
affecting employees and the operations of both companies. Differences in
management approach and corporate culture may strain employee relations. The
success of the merger will also depend on the ability of NOI and IRI to
integrate business strategies. If NOI and IRI are not able to integrate their
respective operations successfully, NOI may not achieve the anticipated
financial benefits of the merger.
The exchange ratio for NOI common stock to be received in the merger is fixed
and will not be adjusted in the event of any change in stock price
Upon completion of the merger, each share of IRI common stock will be
exchanged for 0.3385 shares of NOI common stock. This conversion number is fixed
and will not be adjusted as a result of any change in the price of NOI common
stock. Any change in the price of NOI common stock will affect the value of the
consideration that IRI stockholders receive in the merger. Because the merger
will be completed only after all the conditions to the merger are satisfied or
waived, there is no way to be sure that the price of NOI common stock on the
date of the NOI and the IRI stockholder meetings will be the same as its price
at the time the merger is completed. The price of NOI common stock at the time
that the merger is completed may be higher or lower than its price on the date
of this document or the date of the NOI and IRI stockholders meetings. You are
encouraged to obtain current market quotations for NOI.
NOI stockholders will be diluted by the merger
The merger will dilute the ownership position of the present stockholders
of NOI. Based on the number of shares of IRI common stock outstanding as of May
1, 2000, NOI will issue to IRI stockholders approximately 13,506,150 shares of
NOI common stock in the merger. As a result, IRI stockholders will hold
approximately 16.9% of the NOI common stock outstanding after the completion of
the merger, based on the common stock of NOI and IRI outstanding as of May 1,
2000.
Loss of pooling-of-interests accounting treatment for the merger would harm
the financial results of the merger
If the merger does not qualify for pooling-of-interests accounting
treatment for financial reporting purposes, the future reported earnings of NOI
would be harmed because NOI will be required to record and amortize goodwill and
other intangible assets resulting from the merger. Such accounting treatment
will have the effect of reducing operating income, which may harm the trading
price of NOI common stock.
RISKS RELATING TO NOI
NOI Depends on the Oil and Gas Industry
NOI is very dependent upon the oil and gas industry and its willingness to
explore for and produce oil and gas. The industry's willingness to explore and
produce depends upon the prevailing view of future product prices. Many factors
affect the supply and demand for oil and gas and therefore influence product
prices, including:
- level of production from known reserves;
- cost of producing oil and gas;
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- level of drilling activity;
- worldwide economic activity;
- national government political requirements;
- development of alternate energy sources; and
- environmental regulation.
If there is a significant reduction in demand for drilling services, in cash
flows of drilling contractors or production companies or in drilling or well
servicing rig utilization rates, then demand for NOI's products will drop.
Oil and Gas Prices Are Volatile
Oil and gas prices have been volatile over the last ten years, ranging from
$10-$40 per barrel. Oil prices were low in 1998, generally ranging from $11 to
$16 per barrel. In 1999 oil prices recovered to more normal historical levels
and have generally been in the $25-$30 per barrel range thus far in 2000. Spot
gas prices have also been volatile over the last ten years, ranging from less
than $1.00 per mcf of gas to above $3.00. Gas prices were moderate in 1998 and
1999 generally ranging from $1.80 to $2.50 per mcf. Gas prices thus far in 2000
have remained around $2.50 to $3.00 per mcf.
These price changes have caused many shifts in the strategies and
expenditure levels of oil and gas companies and drilling contractors,
particularly with respect to decisions to purchase major capital equipment of
the type that NOI manufactures. In the second half of 1998, lower oil prices
slowed production and new drilling, particularly in areas where the per barrel
cost of production is high. This slowdown quickly affected NOI's distribution
business and subsequently negatively impacted its Products and Technology
segment. While oil and gas commodity prices have been higher in 1999 and early
2000, this may not have a positive impact on the businesses of NOI. NOI cannot
predict future oil and gas prices or the effect prices will have on exploration
and production levels.
NOI's Industry Is Highly Competitive
The oil field products and services industry is highly competitive. The
following competitive actions can each affect the revenues and earnings of NOI:
- price changes;
- new product and technology introductions; and
- improvements in availability and delivery.
NOI competes with many companies. Some of these companies may possess
greater financial resources than NOI or offer certain products that NOI does not
have.
NOI Faces Potential Product Liability and Warranty Claims
Customers use some of NOI's products in potentially hazardous drilling,
completion and production applications that can cause:
- injury or loss of life;
- damage to property, equipment or the environment; and
- suspension of operations.
NOI has what it believes to be the amounts and types of insurance coverage
which are consistent with normal industry practice. However, NOI's insurance
does not protect it against all liabilities. NOI cannot guarantee that its
insurance will be adequate to cover all liabilities NOI may incur. NOI also
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cannot assure that it will be able to maintain its insurance in the future at
levels it thinks are necessary and at rates it considers reasonable. In
addition, particular types of insurance coverage may not be available in the
future.
NOI may be named as a defendant in product liability or other lawsuits
asserting potentially large claims if an accident occurs at a location where its
equipment and services have been used. NOI is currently party to legal and
administrative proceedings. NOI cannot predict the outcome of these proceedings,
nor the effects any negative outcomes may have on it.
Foreign and Domestic Political Developments and Governmental Regulations Can
Affect NOI
Many aspects of NOI's operations are affected by political developments,
including restrictions on the ability to do business in various foreign
jurisdictions. NOI is also subject to foreign and domestic government
regulations, such as regulations relating to oil field operations, worker safety
and environmental protection.
In addition, NOI depends on demand for its products and services from the
oil and gas industry, and is therefore affected by any changes in laws and
regulations that affect the oil and gas industry. If laws or regulations are
adopted which hinder exploration for or production of oil and gas, NOI's
operations could suffer. NOI cannot predict the extent to which its future
operations may be affected by political developments, new legislation or new
regulations.
Environmental Regulations Can Affect NOI
Many foreign, federal, state, provincial and local environmental laws and
regulations affect the operations of NOI, as well as the operations of our
customers. The technical requirements of these laws and regulations are becoming
increasingly expensive, complex and stringent. These laws and regulations may
sanction NOI for damages to natural resources or threats to public health and
safety. These laws can also make NOI liable for the actions of others, or for
our prior acts that were legal at the time.
Violations of laws or regulations may result in any one or more of the
following:
- revocation of permits;
- corrective action orders;
- administrative or civil penalties; or
- criminal prosecution.
Certain environmental laws may subject NOI to joint and several liability
for spills or releases of hazardous substances. This means that NOI could be
forced to pay an entire judgment even in a case in which it was only partially
responsible for the damage. NOI could also be sued for personal injuries or
property damage as a result of alleged exposure to hazardous substances, as well
as damage to natural resources.
Instability of Foreign Markets Could Have a Negative Impact on the Revenues of
NOI
Some of the revenues of NOI depend upon customers in the Middle East,
Africa, Southeast Asia, South America and other international markets. These
revenues are subject to risks of instability of foreign economies and
governments. NOI's sales can be affected by laws and regulations limiting
exports to particular countries and sometimes export laws and regulations of one
jurisdiction contradict those of another.
NOI is exposed to the risks of changes in exchange rates between the U.S.
dollar and foreign currencies. NOI does not currently engage in or plan to
engage in any significant hedging or currency trading transactions designed to
compensate for adverse currency fluctuations.
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NOI May Not Be Able to Successfully Manage Its Growth
NOI acquired three companies in 1997, five in 1998, three in 1999 and two
in the first quarter of 2000. NOI also intends to acquire additional companies
in the future, whenever feasible. NOI cannot predict whether suitable
acquisition candidates will be available on reasonable terms. Further, NOI may
not have access to adequate funds to complete any desired acquisitions. Once
acquired, NOI cannot guarantee that it will successfully integrate the
operations of the acquired companies.
Combining organizations could interrupt the activities of some or all of
the businesses of NOI, and have a negative impact on operations. Recent
acquisitions and recent growth in revenues have placed significant demands on
NOI to do the following:
- improve the combined entity's operational, financial and management
information systems;
- develop further the management skills of NOI's managers and supervisors;
and
- continue to train, motivate and effectively manage NOI's employees.
If NOI fails to effectively manage its growth, its results could suffer.
NOI Has Debt
In 1998 NOI issued 6 7/8% senior notes due July 1, 2005. As a result of
this issuance, NOI has become more leveraged. As of December 31, 1999, NOI had a
total of $196.0 million of debt, and a total of $395.1 million of stockholders'
equity. NOI's leverage requires it to use some of its cash flow from operations
for payment of interest on its debt. NOI's leverage may also make it more
difficult to obtain additional financing in the future. Further, NOI's leverage
could make it more vulnerable to economic downturns and competitive pressures.
Potential Future Sale of Shares of NOI Could Affect Its Market Price
Future sales of shares of NOI by stockholders or option holders could have
a negative effect on the market price of NOI stock. At May 1, 2000, NOI had
issued outstanding options to purchase a total of 2,504,124 of its shares at
prices ranging from $5.62 to $28.81 per share.
First Reserve Corporation and certain other stockholders currently have
specific registration rights with regard to the sale of their shares. If the
merger is completed, certain IRI stockholders will receive registration rights
with regard to approximately 7,352,000 shares of NOI common stock and First
Reserve will receive similar rights with respect to 10,174,334 shares in
exchange for their existing registration rights. See "The Merger -- Registration
Rights Agreement."
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this joint proxy statement/prospectus contains,
or has incorporated by reference, forward-looking statements. Statements that
are not historical facts, including statements about our beliefs and
expectations, are forward-looking statements. Forward-looking statements
typically are identified by use of terms such as "may," "will," "expect,"
"anticipate," "estimate," and similar words, although some forward-looking
statements are expressed differently. You should be aware that our actual
results could differ materially from those contained in the forward-looking
statements due to a number of factors, including changes in oil and gas prices,
customer demand for our products and worldwide economic activity. You should
also consider carefully the statements under "Risk Factors" which address
additional factors that could cause our actual results to differ from those set
forth in the forward-looking statements. Given these uncertainties, current or
prospective investors are cautioned not to place undue reliance on any such
forward-looking statements. We disclaim any obligation or intent to update any
such factors or forward-looking statement to reflect future events or
developments.
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STOCKHOLDER MEETINGS
NOI will hold a special meeting of its stockholders. IRI will also hold a
special meeting of its stockholders. Our boards of directors are providing you
with this joint proxy statement/prospectus in order to solicit your proxy for
use at the meetings.
TIMES AND PLACES; PURPOSES
NOI Special Meeting. NOI will hold its special meeting at on
, , starting at a.m., local time. At the NOI meeting, the
stockholders of NOI will consider and vote upon:
- the merger agreement;
- the restated certificate of incorporation of NOI that includes an
amendment increasing the number of authorized shares of common stock from
75,000,000 to 150,000,000; and
- such other matters as may properly come before the NOI meeting.
IRI Special Meeting. IRI will hold a special meeting of its stockholders at
the offices of , on , 2000, starting at a.m., local
time. At the IRI meeting, the holders of outstanding shares of IRI common stock,
will consider and vote upon:
- the merger agreement; and
- such other matters as may properly come before the IRI meeting.
RECORD DATE; VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
NOI. The NOI board has set the close of business on May 1, 2000 as the NOI
record date. Only holders of record of shares of NOI common stock and of Dreco
Energy Services Ltd. exchangeable shares on May 1, 2000 are entitled to notice
of and to vote at the NOI special meeting. On the NOI record date, there were
66,351,790 shares outstanding and entitled to vote at the NOI meeting. These
consisted of 64,149,206 shares of NOI common stock and 2,202,584 exchangeable
shares. These shares were held by approximately 550 stockholders of record.
The exchangeable shares were issued in connection with the combination of
NOI and Dreco. The exchangeable shares are designed to have economic rights
equivalent to NOI common stock and they can be exchanged on a one-for-one basis
into NOI common stock. Exchangeable shareholders may vote at their meeting by
instructing Montreal Trust Company of Canada, the Trustee of exchangeable
shares, how to vote their exchangeable shares. The Trustee will vote only
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 exchangeable shareholder, or to grant a proxy to NOI's
management.
At the NOI special meeting:
- each record holder of NOI common stock and exchangeable shares is
entitled to one vote per share;
- the presence in person or by proxy of the holders of a majority of the
outstanding shares is necessary to constitute a quorum;
- approval and adoption of the merger agreement requires the approval of a
majority of the outstanding shares of NOI common stock; and
- approval and adoption of the restated certificate of incorporation of
NOI, requires the approval of a majority of the outstanding shares of NOI
common stock.
The NOI stockholder support agreements obligate the First Reserve
stockholders and Joel V. Staff to vote their shares in favor of the NOI merger
proposals so long as the NOI Board of Directors is recommending
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that NOI stockholders vote in favor of the NOI merger proposals. These
stockholders own approximately 15.90% of the shares of NOI entitled to vote; and
IRI. The IRI board has set the close of business on May 1, 2000 as the IRI
record date. Only holders of record of shares of IRI common stock on May 1, 2000
are entitled to notice of and to vote at the IRI special meeting. On the IRI
record date, there were 39,900,000 shares of IRI common stock outstanding and
entitled to vote at the IRI meeting. These shares were held by 87 stockholders
of record.
At the IRI special meeting:
- each record holder of common stock is entitled to one vote per share;
- the presence in person or by proxy of the holders of a majority of the
outstanding shares is necessary to constitute a quorum;
- approval and adoption of the merger agreement requires the approval by
the holders of a majority of the outstanding shares of IRI common stock;
and
The IRI stockholder support agreements obligate certain IRI stockholders to
vote their shares in favor of the merger agreement so long as the IRI Board of
Directors is recommending that IRI stockholders vote in favor of the merger
agreement. These stockholders own approximately 50.16% of the shares of IRI
entitled to vote. Accordingly, the votes of these IRI stockholders will be
sufficient to approve the merger without the vote of any other IRI stockholder.
PROXIES
- Completed Proxies. If you complete and return a proxy and your company
receives the proxy prior to or at your meeting, your proxy will be voted
in accordance with your instructions.
- Proxies with No Instructions. If a holder of common stock executes and
returns a proxy but does not provide instructions as to its vote, your
proxy will be voted FOR approval and adoption of the merger agreement and
the restated NOI certificate of incorporation, as the case may be.
However, if a holder of exchangeable shares executes and returns a proxy
but does not provide instructions as to its vote, the exchangeable shares
will not be voted.
- Proxies Marked Abstain. If you execute and return a proxy marked ABSTAIN,
your proxy will count for purposes of determining whether there is a
quorum and for purposes of determining the voting power and number of
shares entitled to vote at the meetings but the shares will not be voted.
Proxies marked ABSTAIN will have the effect of a vote AGAINST the merger
agreement and the amendment to the NOI certificate of incorporation.
- Broker Non-Votes. Shares represented by "broker non-votes" will be
counted for purposes of determining whether there is a quorum at the
meetings. "Broker non-votes" generally mean brokers and nominees are
precluded from exercising their voting discretion. Broker non-votes will
have the same effect as a proxy marked ABSTAIN.
- Other Business. We are not aware of any business for consideration at the
meetings other than as described in this joint proxy
statement/prospectus. However, if matters are properly brought before the
meetings, then the persons appointed as proxies will have the discretion
to vote or act thereon according to their best judgment.
- Revocation. You may revoke your proxy at any time prior to its use. In
order to revoke your proxy, you must deliver to the secretary of NOI or
IRI, as the case may be, a signed notice of revocation or you must
deliver a later-dated proxy changing your vote. In addition, you may
choose to attend your meeting and vote in person. Please realize that
simply attending the meeting will not in itself constitute the revocation
of your proxy.
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- Costs of Solicitation. Each company will pay the costs associated with
soliciting proxies from its stockholders. Beacon Hill Partners, Inc. has
been employed to solicit proxies in connection with NOI'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 $4,000 plus expenses. NOI and IRI will also reimburse
brokers or other persons holding stock in their names or in the names of
their nominees for their reasonable expenses for forwarding proxy
material to beneficial owners of stock, in accordance with applicable
requirements of the SEC, New York Stock Exchange, Canadian Securities
Commissions and Toronto Stock Exchange, as applicable. In order to ensure
sufficient representation at our meetings, we may request by telephone or
telegram the return of your proxy card. Please assist us by promptly
returning your proxy card without delay.
PLEASE DO NOT SEND YOUR IRI STOCK CERTIFICATES WITH YOUR PROXY CARD. WE
WILL MAIL IRI STOCKHOLDERS A SEPARATE TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE
SURRENDER OF YOUR CERTIFICATES AS SOON AS PRACTICABLE AFTER THE COMPLETION OF
THE MERGER. NOI STOCKHOLDERS WILL KEEP THEIR STOCK CERTIFICATES.
THE MERGER
The information in this document summarizes the material terms of the
merger agreement. We urge you to read the merger agreement which is the legal
document that governs the merger and which is attached hereto as Appendix I and
incorporated by reference into this document.
STRUCTURE OF THE MERGER
At the time the merger becomes effective, a wholly-owned merger subsidiary
of NOI will merge with and into IRI and will cease to exist as a separate
corporation. NOI's merger subsidiary and IRI are both incorporated in Delaware.
IRI will survive as a wholly-owned subsidiary of NOI following the merger.
MERGER CONSIDERATION
NOI will convert each share of IRI common stock outstanding immediately
before the effective time of the merger into 0.3385 shares of NOI common stock.
In addition, each outstanding IRI option will be converted into an option to
purchase 0.3385 shares of NOI common stock for each IRI share subject to the
option. The share conversion number is a fixed number.
NO FRACTIONAL SHARES
NOI will not issue fractional shares of NOI common stock to IRI
stockholders. Instead, for each fractional share, NOI will pay an amount of cash
based on the closing price of NOI common stock reported on the NYSE on the last
trading day before the effective time of the merger. For more information
regarding the conversion of IRI common stock, see "The Merger
Agreement -- Conversion of Shares" on page .
EFFECTIVE TIME OF THE MERGER
The merger will become effective when we file the certificate of merger
with the Delaware Secretary of State. We will file the certificate of merger as
soon as practicable after all conditions in the merger agreement are waived or
satisfied. For more information regarding these conditions, see "The Merger
Agreement -- Conditions to Obligations to Effect the Merger" on page .
BACKGROUND OF THE MERGER
On February 16, 2000, Joel Staff, Chief Executive Officer of NOI, and
Hushang Ansary, Chief Executive Officer of IRI, agreed to meet the following
week to discuss a possible transaction between the companies. Management of NOI
met during that week and discussed the possibility of a transaction, including
potential exchange ratios and initial valuations of the entities.
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On February 21, 2000, Messrs. Staff and Ansary met to discuss the strategic
fit and other matters regarding a possible merger based upon a stock-for-stock
exchange. At a regularly scheduled meeting of the NOI Board of Directors on
February 23, 2000, management advised the board of the possibility of a
transaction and the expected effect it could have on NOI.
On March 2, 2000, Messrs. Staff and Ansary again met to further discuss
possibilities regarding a transaction. On March 3, 2000, Mr. Staff forwarded a
written indication of interest to Mr. Ansary outlining the basic terms on which
NOI would be willing to acquire the outstanding shares of IRI.
On March 6, 7 and 8, 2000, management of each company and its respective
financial and accounting advisors met to exchange financial data and operating
information. On March 10, 2000, a Special Meeting of the NOI Board of Directors
was held with management and representatives of Merrill Lynch & Co. in
attendance to consider the potential combination and review the proposed terms
and the combination benefits. Prior to the meeting, the directors received
materials prepared by management and Merrill Lynch, along with recent financial
statements filed by IRI with the SEC and other public data. All but one of the
directors of NOI were present at the meeting, and they unanimously authorized
management to pursue further discussions regarding a potential merger on terms
similar to those discussed.
Negotiations regarding various terms of the combination continued over the
weekend and on the following Monday, March 13, 2000, between management and
counsel for both companies.
On March 14, 2000, the IRI Board of Directors met with management and
Lehman Brothers Incorporated to consider the possible transaction, including the
proposed terms and the combination benefits. Prior to the meeting, the directors
received materials prepared by management, its legal advisors and Lehman
Brothers relating to the potential combination along with recent financial
statements of NOI and other public data. All of the directors of IRI were
present at the meeting, and they unanimously authorized management to pursue
further discussions regarding the potential merger as presented.
On March 15, 2000, the NOI Board of Directors met to review the final terms
of the proposed merger as set forth in the merger agreement. At the meeting,
Merrill Lynch rendered its oral opinion, confirmed by its subsequent written
opinion dated March 15, 2000, that as of the date thereof and based upon and
subject to the factors and assumptions therein, the Exchange Ratio was fair to
NOI from a financial point of view. See "-- Opinions of Financial
Advisors -- Opinion of Financial Advisor to the NOI Board." All of the NOI
directors, along with members of management and legal counsel, were present at
the meeting and the directors unanimously approved the proposed merger and the
merger agreement.
On March 15, 2000, the IRI Board of Directors met to review the final terms
of the proposed merger as set forth in the merger agreement. At the meeting,
Lehman Brothers rendered its oral opinion, confirmed by its subsequent written
opinion dated March 15, 2000, that as of the date thereof and based upon and
subject to the factors and assumptions therein, the exchange ratio was fair to
IRI stockholders from a financial point of view. See "-- Opinions of Financial
Advisors -- Opinion of Financial Advisor to the IRI Board." Each of the IRI
directors, along with members of management and legal counsel were present at
the meeting, and the directors unanimously approved the proposed merger and the
merger agreement.
The merger agreement subsequently was executed and delivered on behalf of
both companies and an announcement thereof was released to the public.
RECOMMENDATION OF THE NOI BOARD OF DIRECTORS; NOI'S REASONS FOR THE MERGER
The NOI board has determined that the merger is in the best interests of
NOI and its stockholders and believes that the merger will allow NOI and IRI to
combine their resources to enhance their ability to provide oil field products
and services. Accordingly, the NOI board has unanimously approved the merger
agreement and the amendment of its certificate of incorporation to increase the
number of authorized
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shares of common stock. In reaching its determination, the NOI board consulted
with NOI's management, as well as its financial and legal advisors, and
considered the following material factors:
- The anticipated business advantages from the merger, including:
(1) the addition of IRI's well-respected product lines in the medium
and shallow depth mobile drilling and well servicing rig market to the deep
land and mobile offshore drilling product lines of NOI;
(2) the attractiveness to many customers of having NOI's larger sales,
service and after-market support operations applied to IRI's drilling and
well servicing product lines;
(3) the combination of the highly-regarded Bowen product line with the
downhole product group of NOI;
(4) the attractiveness to many customers of having access to a broader
line of downhole products through the larger combined distribution network
of the two companies; and
(5) the ability to eliminate redundant costs in each operation and
more efficiently supply the marketplace as a combined entity;
- The benefits to NOI stockholders of increasing the number of shares
outstanding, thereby potentially increasing market capitalization,
trading volume and institutional interest in NOI's business and
securities;
- The resulting stronger balance sheet and larger absolute size, increasing
access to capital and financial markets, and potentially lowering future
costs of equity and debt transactions; and
- The potential of additional access to international markets that
historically have been good markets for IRI.
THE NOI BOARD BELIEVES THAT THE MERGER IS FAIR TO, ADVISABLE AND IN THE
BEST INTERESTS OF THE NOI STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED, ADOPTED AND
DECLARED ADVISABLE, THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY
THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE NOI STOCKHOLDERS VOTE
FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND FOR THE ADOPTION OF A
RESTATED CERTIFICATE OF INCORPORATION.
RECOMMENDATION OF THE IRI BOARD OF DIRECTORS; IRI'S REASONS FOR THE MERGER
In approving the merger agreement and the related transactions, the IRI
board took into account a number of factors, including the following:
The IRI Board of Directors considered the following factors in approving
the merger:
- The combined entity will be significantly larger than IRI and will have
better access to capital and financial markets. This, combined with its
increased product diversity, should decrease the adverse effect of
fluctuations in demand characteristic of the oil field services sector.
- The combined entity will offer a much broader range of oil field products
and services, which will potentially make the combined entity a more
attractive option for customers in an industry clearly trending toward
fewer, larger suppliers capable of offering full lines of oil field
products and services.
- The combination is a good strategic fit. Taken together, the combined
entities will have a larger installed asset base and serve complementary
markets.
- The combined entity is positioned to be a leader in a consolidating
industry with critical scale and scope, particularly in drilling
equipment and downhole tool products.
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- The combined entity will have strong brand name recognition across a full
complement of products and services.
- The combined entity will have significantly greater public float and
enterprise value, significantly greater daily trading volume, and greater
visibility with, and increased following by, the analyst community. These
factors should increase the IRI stockholders' liquidity and create for
them increased opportunity for stock price appreciation.
- The merger can be effected on a tax free basis for the IRI stockholders.
- The opinion of Lehman Brothers, delivered to the IRI Board of Directors
on March 15, 2000 that, as of such date and based upon and subject to the
matters set forth therein, the exchange ratio was fair to the IRI
stockholders from a financial point of view. See "-- Opinions of
Financial Advisors -- Opinion of Lehman Brothers."
THE IRI BOARD BELIEVES THAT THE MERGER IS FAIR TO, ADVISABLE AND IN THE
BEST INTERESTS OF THE IRI STOCKHOLDERS AND HAS UNANIMOUSLY APPROVED, ADOPTED AND
DECLARED ADVISABLE THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE
MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE IRI STOCKHOLDERS VOTE FOR
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
OPINION OF FINANCIAL ADVISOR TO THE NOI BOARD.
NOI retained Merrill Lynch to act as its financial advisor in connection
with the merger. At a meeting of the NOI board held on March 15, 2000, Merrill
Lynch rendered its oral opinion to the NOI board that, as of such date and based
upon and subject to the matters reviewed with the NOI board, the proposed
consideration was fair from a financial point of view to NOI. Merrill Lynch
subsequently confirmed its oral opinion by delivery of its written opinion dated
March 15, 2000.
THE FULL TEXT OF THE WRITTEN OPINION OF MERRILL LYNCH IS ATTACHED AS
APPENDIX II TO THIS JOINT PROXY STATEMENT/PROSPECTUS. THE DESCRIPTION OF MERRILL
LYNCH'S OPINION SET FORTH IN THIS DOCUMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION. STOCKHOLDERS OF NOI ARE URGED TO
READ THE MERRILL LYNCH OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND THE QUALIFICATIONS AND LIMITATIONS OF
THE REVIEW UNDERTAKEN BY MERRILL LYNCH IN RENDERING ITS OPINION.
THE MERRILL LYNCH OPINION WAS PROVIDED TO THE NOI BOARD FOR ITS INFORMATION
AND ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE PROPOSED
CONSIDERATION TO BE PAID BY NOI. IT DOES NOT ADDRESS THE MERITS OF THE
UNDERLYING DECISION BY NOI TO ENGAGE IN THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO NOI'S STOCKHOLDERS AS TO HOW SUCH STOCKHOLDERS SHOULD VOTE ON
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT OR ANY OTHER MATTER.
Merrill Lynch's opinion was among several factors taken into consideration
by the NOI board in making its determination to approve the merger agreement.
Consequently, you should not view the Merrill Lynch analyses described below as
determinative of the decision of the NOI board or NOI's management with respect
to the fairness of the proposed consideration.
Merrill Lynch has consented to its opinion being set forth in Appendix II,
and to references being made to Merrill Lynch under the headings "Prospectus
Summary" and "The Merger" in this document.
In arriving at its opinion, Merrill Lynch, among other things:
- reviewed certified audited financial statements for the year ended
December 31, 1999 for IRI and NOI;
- reviewed NOI's and IRI's Annual Reports, Forms 10-K and related financial
information for the five fiscal years ended December 31, 1998;
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- reviewed NOI's and IRI's Forms 10-Q and the related unaudited financial
information for the quarterly periods ending March 31, 1999, June 30,
1999 and September 30, 1999;
- reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets and prospects of NOI and IRI,
furnished to Merrill Lynch by NOI and IRI;
- reviewed the amount and timing of the cost savings and synergies expected
to result from the merger furnished to Merrill Lynch by the management of
NOI (the "Expected Synergies");
- conducted discussions with members of senior management of NOI and IRI
concerning their respective businesses and prospects;
- reviewed the historical market prices and trading activity for NOI and
IRI and compared them with that of certain publicly traded companies
which Merrill Lynch deemed to be reasonably similar to NOI and IRI,
respectively;
- compared the results of operations of NOI and IRI with that of certain
companies which Merrill Lynch deemed to be reasonably similar to NOI and
IRI, respectively;
- compared the proposed financial terms of the transaction contemplated by
the merger agreement with the financial terms of certain other mergers
and acquisitions which Merrill Lynch deemed to be relevant;
- considered the pro forma effect of the merger on NOI's capitalization
ratios and earnings, cash flow and book value per share;
- reviewed a draft of the merger agreement; and
- reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as Merrill
Lynch deemed necessary, including our assessment of general economic,
market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed that:
- all information supplied to, reviewed by or discussed with Merrill Lynch,
as well as all publicly available information, was accurate and complete;
- the financial forecast information furnished to or discussed with Merrill
Lynch by NOI and IRI were reasonably prepared and reflected the best
currently available estimates and judgments of the management of NOI and
IRI;
- the expected synergies will be achieved substantially in accordance with
the information furnished to Merrill Lynch by the management of NOI;
- the unaudited financial information for the year ended December 31, 1999
was reasonably prepared and reflects the best currently available
estimates and judgments of NOI and IRI;
- the merger will be accounted for as a pooling-of-interests for accounting
purposes; and
- the merger will qualify as a tax-free reorganization for U.S. federal
income tax purposes.
Merrill Lynch did not:
- assume any responsibility for independently verifying any information
supplied to or otherwise made available to Merrill Lynch;
- undertake an independent evaluation or appraisal of any of the assets or
liabilities of NOI or IRI;
- receive any such evaluation or appraisal prepared by another party; or
- conduct any physical inspection of the properties, facilities or assets
of NOI or IRI.
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Merrill Lynch's opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated and the information made
available to Merrill Lynch as of March 15, 2000. Merrill Lynch was not asked to
consider, and its opinion does not in any manner address, the price at which
NOI's common stock will actually trade following consummation of the merger.
The summary set forth below does not purport to be a complete description
of the analyses underlying Merrill Lynch's opinion or the presentation made by
Merrill Lynch to the NOI Board. The preparation of a fairness opinion is a
complex and analytical process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances. Therefore, such opinion is not
readily susceptible to partial analysis or summary description.
In connection with rendering its opinion, Merrill Lynch performed a variety
of financial analyses. In arriving at its opinion, Merrill Lynch did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Merrill Lynch believes that its analyses must
be considered as a whole and that selecting portions of its analyses, without
considering all of its analyses, would create an incomplete view of the process
underlying its opinion.
Some of the summaries of financial analyses include information presented
in tabular format. In order to fully understand the financial analyses performed
by Merrill Lynch, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the data set forth in the tables without
considering the full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of the financial analyses performed by Merrill
Lynch.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters. Many of these matters are beyond the
control of Merrill Lynch, NOI or IRI. The estimates contained in Merrill Lynch's
analyses are inherently uncertain and are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, some of Merrill Lynch's methodologies
include estimates of the value of businesses or securities. These estimates are
not appraisals and are not intended to reflect the prices at which such
businesses or securities might actually be sold.
The following is a summary of the material analyses presented by Merrill
Lynch to the NOI board when Merrill Lynch gave its opinion. In concluding that
the proposed consideration was fair from a financial point of view to NOI and in
its discussions with the NOI Board, Merrill Lynch compared the proposed
consideration to each relevant range of enterprise values of IRI set forth
below, which were derived from the analyses performed by Merrill Lynch, and
noted that the proposed consideration was generally consistent with the relevant
ranges of such enterprise values. The implied relevant range of enterprise
values of IRI derived by Merrill Lynch were as follows:
ENTERPRISE VALUE
RELEVANT RANGE
VALUATION METHODOLOGY ($ IN MILLIONS)
- --------------------- ----------------
Discounted Cash Flow Analysis........................ $300-$375
Comparable Acquisition Analysis...................... 225- 300
Comparable Company Trading Analysis.................. 250- 350
Financial Forecasts NOI and IRI provided Merrill Lynch with their
respective forecasted financial performance. NOI then adjusted IRI's forecasted
financial performance in order to develop a set of forecasted financials for use
in the various analyses performed by Merrill Lynch.
Discounted Cash Flow Analysis In order to determine a relevant range of
enterprise values based upon a discounted cash flow analysis (the "DCF
Analysis"), Merrill Lynch performed a DCF Analysis for IRI using projections
provided to Merrill Lynch by the management of IRI as adjusted by NOI.
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The DCF Analysis was based upon the discount to present value, assuming
discount rates ranging from 10.0% to 12.0%, of the following:
- IRI's projected free cash flows for the years 2000 through 2004; and
- IRI's value in 2004 based upon a range of multiples from 7.5x to 8.5x
projected 2004 EBITDA.
Utilizing the DCF Analysis, Merrill Lynch calculated a relevant range of
enterprise values for IRI of $300 million to $375 million.
Comparable Acquisition Analysis Merrill Lynch also reviewed publicly
available information relating to selected merger and acquisition transactions
in respect of companies primarily engaged in oil field service operations (the
"Comparable Acquisition Analysis"). With respect to IRI, Merrill Lynch examined
multiples of the value of the common equity in each of the transactions to
trailing twelve months' net income and examined multiples of the consideration
paid for the common equity and the value of the indebtedness assumed in each of
the transactions, less any cash assumed, to such acquired companies' trailing
twelve months' EBITDA. The transactions in the oil field service industry that
Merrill Lynch reviewed were the following (collectively the "Comparable
Acquisitions"), with relevant announcement dates in parentheses:
- NOI's acquisition of Hitec ASA (1999);
- Weatherford International, Inc.'s acquisition of Dailey International,
Inc. (1999);
- Smith International, Inc.'s acquisition of Wilson Industries (1998);
- Castle Harlan Partners III, L.P.'s acquisition of Tidewater Inc.'s
compression business (1997);
- NOI's acquisition of Dreco Energy Services Ltd. (1997);
- Baker Hughes Inc.'s acquisition of Drilex International Inc. (1997);
- Camco's acquisition of Production Operators (1997);
- BJ Services Company's acquisition of Nowsco Well Services Ltd. (1996);
- Tuboscope Vetco International's acquisition of Drexel Oilfield Services
Ltd. (1996);
- Weatherford International's acquisition of H&H Oil Tools Ltd. (1994);
- Enterra Corporation's acquisition of Total Energy Services, Inc. (1994);
- Dresser Industries Inc.'s acquisition of Wheatly TXT (1994);
- Dresser Industries Inc.'s acquisition of Baroid Corporation (1994);
- Wheatly TXT Corp.'s acquisition of Axelson, Inc. (1993);
- Halliburton Company's acquisition of the Directional Drilling Division of
Smith International, Inc. (1992);
- Emerson Electric Company's acquisition of Fisher Controls (1992); and
- Cooper Industries, Inc.'s acquisition of Cameron Iron Works (1989).
In order to determine a relevant range of enterprise values based on the
Comparable Acquisition Analysis, Merrill Lynch:
- compared the equity value (defined to be consideration paid for the
common equity) in each of the Comparable Transactions as a multiple of
the then publicly available trailing twelve months' net income to common
shareholders (the "Net Income Multiple") to the corresponding estimated
financial measure of IRI for the year ending December 31, 2000; and
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- compared the enterprise value (defined to be the equity value plus the
liquidation value of preferred stock plus the principal amount of debt
less cash) for each of the Comparable Transactions as a multiple of the
then publicly available trailing twelve months' EBITDA (the "EBITDA
Multiple") to the corresponding estimated financial measure of IRI for
the year ending December 31, 2000.
Merrill Lynch determined that the relevant range of transaction multiples
for the Comparable Acquisitions were as follows:
- Net Income Multiple: 25.0x to 30.0x; and
- EBITDA Multiple: 10.0x to 13.0x.
Such multiples were applied to IRI's forecast as adjusted by NOI for each
of the respective financial measures as described above, providing the following
relevant ranges of enterprise values for IRI:
- the Net Income Multiple resulted in a relevant range of enterprise values
for IRI between $216.6 million and $270.0 million; and
- the EBITDA Multiple resulted in a relevant range of enterprise values for
IRI between $226.6 million and $294.6 million.
Utilizing the Comparable Acquisition Analysis, Merrill Lynch calculated a
relevant range of enterprise values for IRI of $225 million to $300 million.
Because the reasons for, and circumstances surrounding, each of the
Comparable Acquisitions analyzed were so diverse and due to the inherent
differences between the operations and financial conditions of IRI and the
selected companies, Merrill Lynch believes that a purely quantitative Comparable
Acquisition Analysis would not be dispositive in the context of the merger.
Merrill Lynch further believes that an appropriate use of a Comparable
Acquisition Analysis in this instance involves qualitative judgments concerning
the differences between the characteristics of these Comparable Acquisitions and
the merger that would affect the value of IRI. These judgments are reflected in
Merrill Lynch's opinion.
Comparable Company Trading Analysis Using publicly available information,
Merrill Lynch compared selected historical stock, financial and operating ratios
for IRI with corresponding data and ratios of selected similar publicly traded
companies (the "Comparable Company Trading Analysis"). These companies were
selected by Merrill Lynch based upon Merrill Lynch's views as to the
comparability of financial and operating characteristics of these companies to
IRI. With respect to each such analysis, Merrill Lynch made such comparisons
among the following companies:
- Dril-Quip, Inc.;
- NOI;
- Smith International, Inc.;
- Tesco Corporation;
- Tuboscope Inc.;
- Varco International, Inc.; and
- Weatherford International, Inc. (collectively, the "Comparable
Companies").
In order to determine a relevant range of enterprise values based upon a
Comparable Company Trading Analysis, Merrill Lynch compared the market value of
IRI common stock as a multiple of estimated 2000 net income (the "2000 Net
Income Ratio") and estimated 2001 net income (the "2001 Net Income Ratio") to
the corresponding ratios for each of the Comparable Companies. Additionally,
Merrill Lynch compared the enterprise value of IRI as a multiple of estimated
2000 EBITDA (the "2000
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EBITDA Ratio") and estimated 2001 EBITDA (the "2001 EBITDA Ratio") to the
corresponding ratios for each of the Comparable Companies. The earnings
estimates and EBITDA estimates for the Comparable Companies were obtained from
Merrill Lynch research and the Institutional Brokers Estimate System ("IBES"), a
data service which monitors and publishes a compilation of earnings estimates
produced by selected research analysts on companies of interest to investors.
Merrill Lynch determined that the relevant ranges of trading multiples for the
Comparable Companies were as follows:
- 2000 Net Income Ratio: 30.0x to 40.0x;
- 2001 Net Income Ratio: 15.0x to 25.0x;
- 2000 EBITDA Ratio: 10.0x to 15.0x; and
- 2001 EBITDA Ratio: 9.0x to 11.0x.
Such multiples were applied to the relevant financial measures from IRI's
forecast as provided by IRI and as adjusted by NOI, providing the following
relevant ranges of enterprise values for IRI:
- 2000 Net Income Ratio: $270.0 million to $376.9 million;
- 2001 Net Income Ratio: $190.9 million to $351.7 million;
- 2000 EBITDA Ratio: $226.6 million to $339.9 million; and
- 2001 EBITDA Ratio: $274.9 million to $335.9 million.
Using the Comparable Company Trading Analysis, Merrill Lynch calculated a
relevant range of enterprise values for IRI of $250 million to $350 million.
Because of the inherent differences among the operations of IRI and the
selected Comparable Companies, Merrill Lynch believes that a purely quantitative
Comparable Company Trading Analysis would not be dispositive in the context of
the merger. Merrill Lynch further believes that an appropriate use of a
Comparable Company Trading Analysis in this instance involves qualitative
judgments concerning the differences between the characteristics of these
companies and IRI that would affect the value of the Comparable Companies and
IRI. These judgments are reflected in Merrill Lynch's opinion.
Merger Consequences Merrill Lynch analyzed certain pro forma effects which
could result from the merger, based on the financial forecasts provided by NOI's
management for NOI's 2000 and 2001 fiscal years and financial forecasts provided
by IRI's management as adjusted by NOI for IRI's 2000 and 2001 fiscal years.
Merrill Lynch was advised by the management of NOI that the merger will be
accounted for as a pooling-of-interests under generally accepted accounting
principles. Management of NOI also provided Merrill Lynch with projections of
the expected synergies which are estimated to result from the merger and are
expected to be retained by the stockholders of the combined entity. This
analysis indicated that the merger would be accretive to the forecasted earnings
per share of NOI for its 2000 and 2001 fiscal years after giving effect to the
merger.
NOI retained Merrill Lynch based upon Merrill Lynch's experience and
expertise. Merrill Lynch is an internationally recognized investment banking and
advisory firm. Merrill Lynch, as part of its investment banking business,
regularly engages in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. Merrill Lynch has in the past
provided financial advisory and/or financing services to NOI, and may continue
to do so and has received, and may receive, customary fees for the rendering of
such services.
In the ordinary course of its securities business, Merrill Lynch and its
affiliates may actively trade the debt and equity securities of NOI and IRI for
their own accounts and for the accounts of customers and anticipate trading in
the securities of NOI after the merger. Accordingly, Merrill Lynch and its
affiliates may at any time hold a long or short position in such securities.
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Pursuant to an engagement letter dated March 10, 2000, NOI retained Merrill
Lynch to act as its financial advisor with regard to a possible acquisition
transaction. Pursuant to the engagement letter, NOI has agreed to pay Merrill
Lynch a fee of $1,250,000 for services rendered in connection with the merger,
which is contingent upon the consummation of the merger. In addition, if the
merger agreement is terminated under circumstances pursuant to which a
termination fee is paid to NOI (the break-up fee), NOI has agreed to pay Merrill
Lynch a fee of 15% of any such break-up fee for its services, subject to a
maximum of $1,000,000. In addition, NOI has agreed to reimburse Merrill Lynch
for the expenses reasonably incurred by it entering into and performing services
in connection with its engagement. NOI will also indemnify Merrill Lynch and its
officers, directors, employees, agents and controlling persons against certain
expenses, losses, claims, damages or liabilities in connection with its services
performed in connection with its engagement.
OPINION OF FINANCIAL ADVISOR TO THE IRI BOARD.
OPINION OF LEHMAN BROTHERS
Lehman Brothers acted as IRI's financial advisor in connection with the
merger. IRI instructed Lehman Brothers, in its role as financial advisor, to
evaluate the fairness, from a financial perspective, of the exchange ratio
offered to IRI stockholders in the merger. On March 14 and 15, 2000,
respectively, Lehman Brothers delivered its oral and written opinion to the IRI
board, to the effect that, as of such dates and based upon and subject to
certain matters stated therein, from a financial point of view, the exchange
ratio offered to IRI's stockholders in the merger was fair to such stockholders.
THE FULL TEXT OF THE LEHMAN BROTHERS' FAIRNESS OPINION, WHICH SETS FORTH
THE ASSUMPTIONS MADE, FACTORS CONSIDERED AND LIMITATIONS UPON THE REVIEW
UNDERTAKEN BY LEHMAN BROTHERS IN RENDERING ITS OPINION, IS INCLUDED AS APPENDIX
III TO THIS JOINT PROXY STATEMENT/PROSPECTUS, AND IS INCORPORATED HEREIN BY
REFERENCE. THE FOLLOWING SUMMARY OF THE MATERIAL PROVISIONS OF LEHMAN BROTHERS'
FAIRNESS OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH OPINION. IRI
STOCKHOLDERS ARE URGED TO READ THE LEHMAN BROTHERS OPINION IN ITS ENTIRETY.
No limitations were imposed by IRI on the scope of Lehman Brothers'
investigation or the procedures to be followed by Lehman Brothers in rendering
its opinion. The form and amount of the consideration to be received by IRI
stockholders in the merger was determined through arm's-length negotiations
between the parties. In arriving at its opinion, Lehman Brothers did not ascribe
a specific range of values to IRI or NOI but made its determination as to the
fairness of the exchange ratio on the basis of the financial and comparative
analyses described below. Lehman Brothers' opinion is for the use and benefit of
the IRI board and was rendered to the IRI board in connection with the IRI
board's consideration of the merger. Lehman Brothers' opinion does not
constitute a recommendation to any IRI stockholder as to how such stockholder
should vote with respect to the merger. Lehman Brothers was not requested to
opine as to, and its opinion does not address, IRI's underlying business
decision to proceed with the merger. In addition, the Lehman Brothers opinion
does not address the prices at which shares of NOI common stock will actually
trade after the merger.
In arriving at its opinion, Lehman Brothers reviewed and analyzed the
following:
- the merger agreement and the specific terms of the merger, including
provisions therein relating to corporate governance and management of NOI
following the merger;
- such publicly available information concerning IRI and NOI that Lehman
Brothers believed to be relevant to its analysis, including, without
limitation, each of the periodic reports and proxy statements filed by
IRI and NOI since January 1, 1999, including the audited and unaudited
financial statements included in such reports and statements;
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- financial and operating information with respect to the respective
businesses, operations and prospects of IRI and NOI as furnished to
Lehman Brothers by IRI and NOI, including
(a) certified audited financial statements for the year ended December
31, 1999 for IRI and NOI;
(b) financial budgets for the fiscal year 2000 for each of IRI and
NOI; and
(c) the amounts and timing of cost savings and operating synergies
expected to result from a combination of the businesses or IRI and NOI;
- published estimates of third party research analysts with respect to the
future financial performance of IRI and NOI, respectively;
- a history of the trading price and volume of IRI's common stock from
November 1997 to March 13, 2000 and a comparison of that trading history
with those of other companies Lehman Brothers deemed relevant, including
NOI;
- a history of the trading price and volume of NOI's common stock from
November 1997 to March 13, 2000 and a comparison of that trading history
with those of other companies that Lehman Brothers deemed relevant,
including IRI;
- a comparison of the historical financial results and present financial
condition of IRI with those of other companies that Lehman Brothers
deemed relevant, including NOI;
- a comparison of the historical financial results and present financial
condition of NOI with those of other companies that Lehman Brothers
deemed relevant, including IRI;
- the potential pro forma impact of the merger on IRI, including cost
savings and operating synergies expected by the managements of IRI and
NOI to result from a combination of the businesses of IRI and NOI;
- a comparison of the financial terms of the merger with the financial
terms of certain other transactions that Lehman Brothers deemed relevant;
and
- the relevant contributions on a pro forma basis of IRI and NOI to the
financial condition and results of operations of the combined company
upon consummation of the merger.
In addition, Lehman Brothers had discussions with the managements of IRI
and NOI concerning their respective businesses, operations, financial
conditions, assets and prospects and the cost savings, operating synergies and
strategic benefits expected by the managements of IRI and NOI to result from a
combination of the businesses of IRI and NOI. Lehman Brothers also undertook
such other studies, analyses and investigations as it deemed appropriate.
In arriving at its opinion, Lehman Brothers has assumed and relied upon the
accuracy and completeness of the financial and other information used by Lehman
Brothers without assuming any responsibility for independent verification of
such information and has further relied upon the assurances of managements of
IRI and NOI that they are not aware of any facts or circumstances that would
make such information inaccurate or misleading. With respect to the budgets for
the fiscal years 2000 and 2001 for IRI, upon advice of IRI, Lehman Brothers has
assumed that such budgets have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the management of IRI as
to the financial performance of IRI for such fiscal year and that IRI will
perform substantially in accordance with such budgets. With respect to the
budget for the fiscal year 2000 for NOI, upon advice of NOI, Lehman Brothers has
assumed that such budget has been reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the management of NOI as to
the financial performance of NOI for such fiscal year and that NOI will perform
substantially in accordance with such budget. Lehman Brothers has not been
provided with, and did not have access to, any financial projections of IRI for
any period beyond fiscal year 2001 or NOI for any period beyond fiscal year
2000. Accordingly,
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upon the advice of IRI and NOI, respectively, Lehman Brothers has assumed that
the published estimates of third party research analysts are a reasonable basis
upon which to evaluate the future financial performance of IRI and NOI and that
each of IRI and NOI will perform substantially in accordance with such
estimates. With respect to the cost savings, operating synergies and strategic
benefits, upon advice of IRI and NOI, Lehman Brothers has assumed that the cost
savings, operating synergies and strategic benefits will be achieved
substantially in accordance with the expectations of the managements of IRI and
NOI. In arriving at its opinion, Lehman Brothers has not conducted a physical
inspection of the properties and facilities of IRI or NOI and has not made or
obtained any evaluations or appraisals of the assets or liabilities of IRI or
NOI. In addition, the IRI Board has not authorized Lehman Brothers to solicit,
and Lehman Brothers has not solicited, any proposals or offers from any third
party with respect to the purchase of all or a part of IRI's business. Upon
advice of IRI and its legal and accounting advisors, Lehman Brothers has assumed
that the merger will qualify (i) for pooling-of-interests accounting treatment
and (ii) as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and therefore as a tax-free
transaction to the stockholders of IRI. Lehman Brothers' opinion necessarily is
based upon market, economic and other conditions as they existed on, and could
be evaluated as of, the date of its opinion.
In connection with rendering its opinion, Lehman Brothers performed certain
financial, comparative and other analyses as described below. The preparation of
the fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial and comparative analysis and the application
of those methods to the particular circumstances. As a result, fairness opinions
are not readily susceptible to summary description. Furthermore, in arriving at
its opinion, Lehman Brothers did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly, Lehman
Brothers believes that its analyses must be considered as a whole and that
considering any portion of such analyses and of the factors considered, without
considering all analyses and factors, could create a misleading or incomplete
view of the process underlying its opinion. In performing its analyses, Lehman
Brothers made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond the
control of IRI or NOI. Any estimates contained in the analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth
therein. In addition, analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses may
actually be sold.
Valuation Analyses The various valuation methodologies noted above and the
implied exchange ratios derived therefrom are included in the following table.
This table should be read together with the more detailed descriptions set forth
below. In particular, in applying the various valuation methodologies to the
particular businesses, operations and prospects of IRI and NOI, and the
particular circumstances of the merger, Lehman Brothers made qualitative
judgments as to the significance and relevance of each analysis. Accordingly,
methodologies and the implied exchange ratios derived therefrom set forth in the
table must be considered as a whole and in the context of the narrative
description of the financial analyses, including the assumptions underlying
these analyses. Considering the implied exchange ratios set forth in the table
without considering the full narrative description of the financial analyses,
including the assumptions
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underlying these analyses, could create a misleading or incomplete view of the
process underlying, and conclusions represented by, Lehman Brothers' opinion.
VALUATION METHODOLOGY VALUATION METHODOLOGY RATIO RANGE
- --------------------- --------------------- -------------
Comparable Premiums Analysis Market valuation benchmark based upon 0.2839-0.3020
the premiums to current stock price
paid in selected comparable
transactions
Comparable Company Trading Analysis Market valuation benchmark based on 0.3233-0.4452
the common stock trading multiples of
selected comparable companies
Comparable Acquisitions Analysis Market valuation benchmark based on 0.2513-0.3210
consideration paid in selected
comparable transactions
Historical Common Stock Trading Analysis of the relative daily 0.2286-0.2337
Analysis historical closing prices of each
company over selected time periods
Contribution Analysis Measures relative contribution of each 0.3622-0.4686
company to the combined company total
for various measures such as
discretionary cash flow and net income
Exchange ratio in the merger 0.3385
Comparable Premiums Analysis. With respect to IRI, Lehman Brothers reviewed
the premiums paid in selected domestic U.S. and international oil field
equipment/services company transactions based upon publicly available
information which were announced from June of 1994 to March of 2000 including,
but not limited to:
- Schlumberger N.V.'s acquisition of Camco International Inc;
- Baker Hughes Incorporated's acquisition of Western Atlas Inc;
- EVI, Inc.'s acquisition of Weatherford Enterra, Inc;
- Halliburton Company's acquisition of Dresser Industries, Inc.;
- NOI's acquisition of Dreco Energy Services Ltd.; and
- Camco International Inc.'s acquisition of Production Operators Corp.
For each transaction, Lehman Brothers calculated the premium paid to the
stockholders of the acquired company based upon the acquired company's common
stock price one day, one week, four weeks and eight weeks prior to the
announcement date of such transaction.
The transaction premiums were applied to IRI's data point for each of the
dates specified to obtain a range of values for IRI's common stock. Theses
values were then compared to NOI's closing common stock price on March 14, 2000,
the day preceding delivery of Lehman Brothers' opinion to the IRI Board.
The comparable premiums analysis resulted in an implied exchange ratio of
0.2839 to 0.3020. However, because the market conditions, rationale and
circumstances surrounding each of the transactions analyzed were specific to
each transaction and because of the inherent differences between the businesses,
operations and prospects of IRI and NOI and the companies involved in the
transactions analyzed, Lehman Brothers believed that it was inappropriate to,
and therefore did not, rely solely on the quantitative results of the analysis.
Accordingly, Lehman Brothers also made qualitative judgments concerning the
differences between the characteristics of these transactions and the merger
that would affect the equity values of IRI and NOI and such other companies.
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Comparable Company Trading Analysis. With respect to IRI and NOI, Lehman
Brothers reviewed the public stock market trading multiples for selected
domestic U.S. and Canadian oil field equipment manufacturers, including, but not
limited to:
- Cooper Cameron Corporation;
- Dril-Quip Inc.;
- Smith International, Inc.;
- Tesco Corporation;
- Tuboscope Inc.;
- Varco International, Inc.; and
- Weatherford International, Inc.
Using publicly available information, Lehman Brothers calculated and
analyzed the common equity market value multiples of certain projected financial
criteria based upon published analyst estimates, such as net income and
discretionary cash flow. Lehman Brothers also calculated and analyzed the
adjusted capitalization multiples of certain projected financial criteria based
upon published analyst estimates, such as EBITDA. The adjusted capitalization of
each company was obtained by adding long-term debt to the sum of the market
value of its common equity, the value of its preferred stock based upon its
market value if publicly traded and its liquidation value if privately held, and
the book value of any minority interest minus the cash balance.
This methodology yielded an implied exchange ratio range of 0.3233 to
0.4452. However, because of the inherent differences between the businesses,
operations and prospects of IRI and NOI and the companies included in the
comparable companies group, Lehman Brothers believed that it was inappropriate
to, and therefore did not, rely solely on the quantitative results of the
analysis. Accordingly, Lehman Brothers also made qualitative judgments
concerning the differences between the financial and operating characteristics
of IRI and NOI and the companies in the comparable companies group that would
affect the public trading values of IRI and NOI and such comparable companies.
Comparable Acquisitions Analysis. With respect to IRI and NOI, Lehman
Brothers reviewed certain publicly available information on selected domestic
U.S. and international transactions which were announced from June of 1994 to
March of 2000 including, but not limited to:
- Schlumberger N.V.'s acquisition of Camco International Inc;
- Baker Hughes Incorporated's acquisition of Western Atlas Inc;
- EVI, Inc.'s acquisition of Weatherford Enterra, Inc;
- Halliburton Company's acquisition of Dresser Industries, Inc.;
- NOI's acquisition of Dreco Energy Services Ltd.; and
- Camco International Inc.'s acquisition of Production Operators Corp.
For each transaction, Lehman Brothers calculated an enterprise value
multiple based on the EBITDA during the last twelve month period prior to
announcement of the transaction and equity value multiples based on the one and
two year forward estimated net income.
The enterprise and equity value multiples were applied to IRI's data points
for each of the above-mentioned statistics adjusting the enterprise value for
the market value of total debt less cash and cash equivalents to calculate an
implied equity value range.
The comparable acquisitions analysis resulted in an implied exchange ratio
range of 0.2513 to 0.3210. However, because the market conditions, rationale and
circumstances surrounding each of the transactions
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analyzed were specific to each transaction and because of the inherent
differences between the businesses, operations and prospects of IRI and NOI and
the companies involved in the transactions analyzed, Lehman Brothers believed
that it was inappropriate to, and therefore did not, rely solely on the
quantitative results of the analysis. Accordingly, Lehman Brothers also made
qualitative judgments concerning the differences between the characteristics of
these transactions and the merger that would affect the equity values of IRI and
NOI and such other companies.
Historical Common Stock Trading Analysis. Lehman Brothers reviewed the
daily historical closing share prices of the IRI and NOI common stock for the
period from November 14, 1997 to March 13, 2000. Lehman Brothers analyzed the
ratio of the March 13, 2000 closing share price for IRI to the corresponding
closing share price of NOI. In addition, Lehman Brothers reviewed the ratio of
the closing share prices for IRI and NOI based on the 10, 20, 30, 60 and 180
trading day and one year and two year averages as of March 13, 2000. Based on
the 30 and 60 day average closing prices of the IRI and NOI common stock, this
analysis implies an exchange ratio range of 0.2286 to 0.2337.
Contribution Analysis. Lehman Brothers analyzed the relative net income and
discretionary cash flow contributions of IRI and NOI to the combined company
based on projected financial data provided by IRI and NOI and published
estimates of third party research and assuming no cost savings or synergies for
the years 2000 and 2001. This analysis indicated that IRI will contribute
approximately 20.0% to 22.0% of the combined company's annual net income and
17.9% to 18.3% of the combined company's annual discretionary cash flow. IRI
stockholders will receive shares representing approximately 16.9% ownership of
the combined company.
Pro Forma Merger Consequences Analysis. Lehman Brothers prepared a pro
forma merger model which incorporates IRI and NOI's financial projections based
on certain assumptions and merger related adjustments for the years 2000 and
2001. The model also incorporates the companies' estimates of future cost
savings and synergies resulting from the merger. Lehman Brothers then compared
the earnings and discretionary cash flow of IRI on a stand alone basis to the
earnings and discretionary cash flow attributable to IRI's respective interests
in pro forma NOI. The analysis indicated the merger will be accretive to IRI's
discretionary cash flow per share in 2000 and roughly neutral to IRI's
discretionary cash flow per share in 2001.
Lehman Brothers is an internationally recognized investment banking firm
engaged in, among other things, the valuation of businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive bids, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. The IRI
board selected Lehman Brothers because of its expertise, reputation and
familiarity with IRI in particular and the oil field service industry in general
and because its investment banking professionals have substantial experience in
transactions comparable to the merger.
Pursuant to the terms of an engagement letter dated March 10, 2000, between
Lehman Brothers and IRI, IRI has agreed to pay a fee of $3,000,000 to Lehman
Brothers upon successful completion of the merger. IRI has also agreed to
reimburse Lehman Brothers for its reasonable expenses incurred in connection
with its engagement, and to indemnify Lehman Brothers and certain related
persons against certain liabilities in connection with its engagement. Lehman
Brothers has previously rendered financial advisory and investment banking
services to IRI for which it has received customary compensation. These services
include lead managing the initial public offering of IRI common stock in
November of 1997, advising in IRI's acquisitions of Bowen Tools, Inc. and
Cardwell International Corporation in March of 1997; including providing
financing for those acquisitions; and underwriting a revolving credit facility
for IRI in 1998. Lehman Brothers has also performed various investment banking
services for NOI in the past and has received customary fees for such services.
In the ordinary course of its business, Lehman Brothers actively trades in
the debt and equity securities of IRI and NOI for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities.
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STOCKHOLDER AGREEMENTS
Hushang Ansary, Nina Ansary, Nader Ansary (to the extent of 1,000,000 of
the IRI shares owned by him), the Ansary Foundation and the Ansary Family Trust
(collectively, the "Ansary Stockholders") entered into stockholder agreements
with NOI as an inducement for NOI to enter into the merger agreement. Likewise,
First Reserve Fund VI, First Reserve Fund VII, First Reserve Fund VIII
(collectively, the "First Reserve Stockholders") and Joel V. Staff, entered into
stockholder agreements with IRI as an inducement for IRI to enter into the
merger agreement. Pursuant to the IRI stockholder agreements, the Ansary
Stockholders each agreed, so long as the IRI board is recommending that IRI
stockholders vote in favor of the merger proposal, (i) to vote all shares under
their voting control in favor of the IRI merger proposal (other than Nader
Ansary, whose agreement extends only to 1,000,000 of the IRI shares owned by
him), (ii) to refrain from soliciting, initiating or encouraging inquiries which
could lead to an IRI acquisition proposal and (iii) to refrain from engaging in
any discussion or negotiations relating to an IRI acquisition proposal or
accepting an IRI acquisition proposal. Pursuant to the NOI stockholder
agreements, the First Reserve Fund stockholders and Mr. Staff each agreed to
vote all shares under their voting control in favor of the NOI merger proposals.
The IRI stockholder agreements and the NOI stockholder agreements also
impose certain stock transfer restrictions. In particular, subject to certain
limited exceptions, the Ansary Stockholders (other than Nader Ansary, whose
agreement extends only to 1,000,000 of the IRI shares owned by him) may not
sell, contract to sell or otherwise dispose of any voting securities of IRI
while the merger agreement is in effect, and the First Reserve stockholders and
Mr. Staff may not sell, contract to sell or otherwise dispose of any voting
securities of NOI while the merger agreement is in effect; provided, however,
that the Ansary Stockholders, the First Reserve Stockholders and Mr. Staff may
sell shares of common stock owned by them pursuant to Rule 144 of the Securities
Act if such sales do not jeopardize the treatment of the merger as a
pooling-of-interests and if such sales are permitted by the insider trading
restrictions of the respective companies.
Each of the IRI stockholder agreements and the NOI stockholder agreements
will terminate when the merger is completed or, if the merger is not completed,
when the merger agreement is terminated.
As of May 1, 2000, the Ansary Stockholders held approximately 50.16% of the
voting power of the outstanding shares of IRI common stock. As of May 1, 2000,
the First Reserve Stockholders and Mr. Staff held approximately 15.90% of the
voting power of the outstanding shares of NOI common stock.
REGISTRATION RIGHTS AGREEMENT
In connection with the merger agreement, NOI granted the Ansary
Stockholders the right to require NOI to file registration statements with the
SEC to register the resale of all shares of NOI common stock they receive in the
merger. A summary of material terms of the registration rights agreement
follows, but we urge you to fully read the registration rights agreement the
form of which is set forth in Exhibit E to Appendix I. The First Reserve
Stockholders, who have certain registration rights pursuant to that certain
stockholders agreement dated as of January 16, 1996 with NOW Holdings, Inc. and
certain other stockholders, were made a party to the registration rights
agreement, which serves to supersede and replace those registration rights
granted to the First Reserve Stockholders under the initial stockholders
agreement.
The holders of at least 5,000,000 shares of NOI common stock to which the
registration rights apply can request that NOI register their shares of NOI
common stock under the Securities Act of 1933, as amended. The registration
rights agreement generally requires NOI to file a registration statement within
60 calendar days after the end of the period within which requests for
registration may be given to NOI. Each of the First Reserve Stockholders and
each of the Ansary Stockholders has the right to request one demand
registration; provided that such request may not be made within the six month
period immediately following the effective date of a preceding demand
registration.
If NOI proposes to register any of its common stock or debt securities for
sale to the public, NOI must generally offer each of the holders of registration
rights the opportunity to offer their shares of NOI
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common stock in such public offering. Each holder will have 30 days to respond
to NOI advising NOI of the number of shares such holder desires to be registered
and sold. No such piggyback registration will relieve NOI of its obligation to
register shares of NOI common stock upon the exercise of the First Reserve
Stockholders or the Ansary Stockholders of their respective demand registration
rights. NOI is not obligated under the registration rights agreement to register
any shares of the NOI common stock to which registration rights apply incidental
to the registration of any of its securities in connection with mergers,
acquisitions, exchange offers, dividend reinvestment plans or stock option or
other employee benefit plans.
NOI will pay all expenses related to the filing of registration statements
pursuant to the registration rights agreement except:
- underwriting discounts and commissions;
- fees and expenses of more than one firm of counsel for the holders; and
- applicable transfer and documentary stamp taxes, if any.
CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a discussion of the material United States federal income
tax consequences of the merger. This discussion does not address all tax
consequences that may be relevant to particular taxpayers in light of their
personal circumstances or to taxpayers subject to special treatment under the
Internal Revenue Code of 1986, as amended, including insurance companies,
financial institutions, mutual funds, dealers in insurance companies, financial
institutions, mutual funds, dealers in securities, tax-exempt organizations,
foreign persons, persons who do not hold securities, tax-exempt organizations,
persons who do not hold shares of IRI common stock as capital assets, persons
who hold shares of IRI common stock as part of a straddle or a conversion
transaction for United States federal income tax purposes, and individuals who
received shares of IRI common stock pursuant to the exercise of employee stock
options or otherwise as compensation.
This discussion provides no information on tax consequences of the merger,
if any, under applicable foreign, state, local and other tax laws. This
discussion is based on the provisions of the Code, applicable Treasury
Regulations thereunder, IRS rulings and judicial decisions in effect as of the
date of this document. We can give no assurance that future legislative,
administrative or judicial changes or interpretations will not affect the
accuracy of this discussion. Any such change or interpretation could apply
retroactively and could affect the accuracy of this discussion. The discussion
also is based upon (i) certain factual representations made by NOI and IRI, and
(ii) the assumption that the merger will be consummated in accordance with the
terms of the merger agreement. Neither NOI nor IRI will seek rulings from the
IRS concerning the tax consequences of the merger.
We urge each IRI stockholder to consult such stockholder's own tax advisor
as to the specific tax consequences of the merger and to such stockholder,
including the application of foreign, state, local and other tax laws.
Based on the assumptions discussed above and upon the representations of
NOI and IRI, it is the opinion of Jones, Day, Reavis & Pogue, tax counsel to
IRI, and Morgan, Lewis & Bockius LLP, tax counsel to NOI, that, for United
States federal income tax purposes, the merger will constitute a reorganization
within the meaning of Section 368(a) of the Code, that IRI, NOI and NOI's merger
subsidiary will each be a party to the reorganization within the meaning of
Section 368(b) of the Code, and that, accordingly, none of IRI, NOI or NOI's
merger subsidiary will recognize gain or loss for United States federal income
tax purposes as a result of the merger and IRI stockholders will not recognize
gain or loss for United States federal income tax purposes on the receipt
pursuant to the merger of the NOI common stock in exchange for IRI common stock
except to the extent they receive cash in lieu of fractional shares of NOI
common stock. An opinion of counsel is not binding on the IRS and we can give no
assurance that the IRS will not take a position contrary to one or more
positions reflected in such opinions or that the courts will uphold such
opinions if challenged by the IRS.
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The aggregate tax basis of the NOI common stock received by an IRI
stockholder, including any fractional share deemed received, will be equal to
the tax basis of the IRI common stock exchanged therefore. The holding period of
such NOI common stock will include the holding period of the IRI common stock
exchanged therefor, provided that the shares of IRI common stock are held as
capital assets at the effective time of the merger.
Cash in Lieu of a Fractional Share.
An IRI stockholder who receives cash in lieu of a fractional share of NOI
common stock will be treated as having received this fractional share as a part
of the exchange and having it redeemed by NOI for cash. Therefore, such IRI
stockholder will recognize gain or loss equal to the difference, if any, between
the amount of cash so received and the tax basis of the IRI common stock
allocable to this fractional share. This gain or loss will constitute capital
gain or loss if the stockholder held the IRI common stock as a capital asset at
the time of the merger and will be long-term capital gain or loss if the holding
period was greater than one year at the effective time of the merger. In the
case of an individual, any such long-term capital gain will be subject to a
maximum federal income tax rate of 20%. The deductibility of capital losses is
subject to limitations for both individuals and corporations.
Backup Withholding.
A holder of IRI common stock may be subject, under certain circumstances,
to backup withholding at a rate of 31% with respect to the amount of cash, if
any, received in lieu of a fractional share interest unless the holder provides
proof of an applicable exemption or a correct taxpayer identification number,
and otherwise complies with applicable requirements of the backup withholding
rules. Any amounts withheld under the backup withholding rules are not an
additional tax and may be refunded or credited against the holder's federal
income tax liability, provided the required information is furnished to the IRS.
The obligation of each of IRI and NOI to consummate the merger is
conditioned upon, among other things, the receipt by each of IRI and NOI of a
tax opinion from each of their respective tax counsels that is identical in all
material respects to the opinions set forth above. The opinions to be delivered
at closing will be based on the facts described therein and upon certain
assumptions and certain representations made by IRI, NOI and others. In the
event that IRI or NOI is unable to obtain its respective opinion of counsel, as
set forth above, each of IRI and NOI is permitted, under the merger agreement,
to waive the receipt of such opinions as a condition to such party's obligation
to consummate the merger. As of the date of this document, neither IRI nor NOI
intends to waive the condition as to the receipt of opinions of counsel as set
forth herein and neither party anticipates that the material federal income tax
consequences of the merger will be materially different than those described
above. In the event of such a failure to obtain tax opinions as set forth above,
and a party's determination to waive such condition to the consummation of the
merger, IRI and NOI will resolicit the votes of its respective stockholders to
approve the merger.
STOCK OPTIONS
Under the merger agreement, at the effective time of the merger, each IRI
stock option exercisable for shares of IRI common stock under the IRI's Equity
Incentive Plan will be converted into an option exercisable for that number of
shares of NOI common stock equal to the product of:
- the aggregate number of shares of IRI common stock for which such IRI
stock option was exercisable; and
- the exchange ratio of 0.3385,
and rounded to eliminate fractional shares, if necessary. The exercise price per
share of such converted stock option will be equal to the aggregate exercise
price per share of such IRI common stock immediately prior to the effective time
divided by .3385, rounded to the nearest cent, if necessary. IRI's Equity
Incentive Plan allows up to 8,000,000 shares to be reserved for the granting of
options, and, as of
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May 1, 2000, IRI had issued outstanding options to purchase a total of 2,586,000
shares of IRI common stock.
ACCOUNTING TREATMENT
NOI and IRI intend for the merger to be accounted for as a
pooling-of-interests, as that term is used under generally accepted accounting
principles, for accounting and financial reporting purposes. Under the
pooling-of-interests method of accounting, NOI will restate its consolidated
financial statements for prior periods at the effective time of the merger to
include the assets, liabilities, stockholders' equity and results of operations
of IRI as if IRI had always been a wholly-owned subsidiary of NOI.
A condition of the obligation of NOI to complete the merger is that NOI
shall have received a letter dated the closing date from its independent
auditors regarding that firm's concurrence with NOI management's conclusions as
to the appropriateness of pooling-of-interests accounting for the merger. A
condition of the obligation of IRI to complete the merger is that IRI shall have
received a letter dated the closing date from its independent auditors regarding
that firm's concurrence with IRI management's conclusions as to whether IRI
meets the conditions necessary for it to enter into the business combination
accounted for as a pooling-of-interests.
RESALES OF NOI COMMON STOCK
All shares of NOI common stock to be issued in the merger will be freely
transferable, except for shares received by any person who may be deemed to be
an affiliate of IRI for purposes of paragraphs (c) and (d) of Rule 145 under the
Securities Act. An affiliate of IRI is any individual or entity that directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with, IRI or NOI. Under Rule 145, an affiliate of IRI may
not resell his or her shares of NOI common stock received in the merger except
in transactions permitted by Rule 145 or as otherwise permitted under the
Securities Act, including selling such shares pursuant to an effective
registration statement. IRI has delivered to NOI a list setting forth the names
and addresses of all persons who were, at the time of the signing of the merger
agreement, affiliates of IRI. NOI granted certain affiliates of IRI the right to
require NOI to register the resale of their NOI common stock so that they may
sell such shares without being subject to the resale restrictions of Rule 145.
For more information, see "-- Registration Rights Agreement."
Additionally, in order for the merger to qualify for pooling-of-interests
accounting treatment for financial reporting purposes:
- no NOI affiliate may sell, transfer or reduce such NOI affiliate's risk
relative to, any NOI common stock held by such NOI affiliate during the
period beginning 30 days prior to the effective time of the merger and
ending on the date NOI publicly releases the combined financial results
of NOI and IRI for a period of 30 days of combined operations of NOI and
IRI following the effective time of the merger;
- no IRI affiliate may sell, transfer or reduce such IRI affiliate's risk
relative to, any shares of IRI common stock held by such IRI affiliate
(except for the conversion of IRI common stock into NOI common stock as
contemplated by the merger agreement) beginning 30 days prior to the
effective time of the merger; and
- no IRI affiliate may sell, transfer or reduce such IRI affiliate's risk
relative to, any NOI common stock held by such IRI affiliate or received
by such IRI affiliate as a result of the merger, until after the date NOI
publicly releases the combined financial results of NOI and IRI for a
period of 30 days of combined operations of NOI and IRI following the
effective time of the merger.
Accordingly, persons who may be deemed affiliates of either NOI or IRI are
being required to execute agreements containing certain restrictions on
transfers of the relevant stock. The merger agreement
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requires IRI to use its reasonable efforts to cause its affiliates to enter into
these agreements and conditions NOI's obligation to effect the merger on the
receipt of these agreements.
INTERESTS OF IRI DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER
In considering the recommendation of the IRI Board of Directors in favor of
the merger, you should be aware that certain directors and executive officers of
IRI have interests in the merger that are in addition to the interests of IRI
stockholders. These interests are described below, and except as described
below, those persons have, to the knowledge of NOI and IRI, no material interest
in the merger apart from those of stockholders generally. The IRI Board of
Directors was aware of, and considered the interests of, its directors and
officers in approving the merger agreement and the merger.
INTERESTS OF IRI MANAGEMENT IN THE MANAGEMENT OF NOI AFTER THE MERGER
Pursuant to the terms of the merger agreement, NOI will expand its 8 member
Board of Directors by one member and, prior to the effective time, take all
action necessary to appoint Hushang Ansary or, if Mr. Ansary is unable or
unwilling to serve, another individual designated by the IRI Board of Directors
and reasonably acceptable to NOI.
REGISTRATION RIGHTS GRANTED TO CERTAIN IRI STOCKHOLDERS
NOI granted demand registration rights and piggyback registration rights to
certain IRI stockholders, including a director and executive officer of IRI. For
a description of these rights, See "The Merger -- Registration Rights
Agreement."
INDEMNIFICATION AND INSURANCE
The merger agreement provides that all rights of indemnification from
liabilities existing in favor of the directors or officers of IRI as provided in
IRI's certificate of incorporation and by-laws will be assumed by the surviving
corporation in the merger, and will continue in full force and effect in
accordance with their terms after the merger. NOI will maintain for six years
after the merger the current policies of directors' and officers' liability
insurance or substitute policies no less advantageous than those provided to
directors and officers of NOI. NOI's obligation to provide this insurance
coverage is subject to a cap of 200% of the cost of such coverage immediately
prior to the Effective Time.
EMPLOYMENT AGREEMENTS
IRI entered into employment agreements with eight officers of IRI (each, an
"Employee"), including Robert L. Hargrave, Vice Chairman and Chief Financial
Officer and Gary W. Stratulate, President and Chief Operating Officer. Messrs.
Hargrave and Statulate are also directors of IRI. The employment agreements will
become effective as of the closing of the merger. 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 base salaries of $300,000 for Mr. Hargrave and $225,895 for Mr. Stratulate.
The agreements have a continuing term of one year. If Employee's employment is
involuntarily terminated at any time without cause, such Employee will have the
right to receive a lump sum payment of 150% of his base salary. Finally, the
agreements provide that during the period of employment and for a period of one
year after termination of employment, an Employee is generally prohibited from
competing or assisting others to compete in its existing or recent business, or
inducing any other employee to terminate employment with IRI or its successor.
After termination of employment, the non-competition obligations generally apply
only to businesses with annual revenues in excess of $20 million competitive
with any line of business conducted by IRI or any of its subsidiaries with
annual revenues in excess of $20 million for the last fiscal year prior to
termination.
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NONCOMPETE AGREEMENT
Effective upon closing of the merger, Mr. Ansary shall be subject to a
non-competition agreement with IRI providing that Mr. Ansary is generally
prohibited from competing or assisting others to compete with NOI's existing
businesses, as of the date of the closing of the merger, for a period of three
years. IRI has agreed to pay Mr. Ansary an aggregate of $3 million as
consideration for entering into the non-competition agreement, with $1 million
payable upon the closing of the merger and an additional $1 million payable upon
each of the first and second anniversaries of the closing of the merger.
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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
MARKET PRICE DATA
NOI
NOI common stock is listed on the NYSE (ticker symbol: NOI). The following
table sets forth the high and low sales prices of NOI common stock as reported
on the NYSE for the periods indicated. For current price information,
stockholders are urged to consult publicly available sources.
HIGH LOW
------ ------
2000
First Quarter............................................... $31.38 $14.25
Second Quarter (through May , 2000)....................... $30.19 $24.94
1999
First Quarter............................................... $13.63 $ 8.75
Second Quarter.............................................. 14.25 10.25
Third Quarter............................................... 18.19 13.38
Fourth Quarter.............................................. 16.06 12.50
1998
First Quarter............................................... $34.00 $23.88
Second Quarter.............................................. 39.75 25.94
Third Quarter............................................... 29.13 7.75
Fourth Quarter.............................................. 17.69 8.81
On March 15, 2000, the last trading day prior to announcement of the
merger, the closing price of NOI common stock on the New York Stock Exchange was
$23.75. On May , 2000 the closing price of NOI common stock on the New York
Stock Exchange was $ .
IRI International
IRI common stock is listed on the NYSE (ticker symbol: IIR). The following
table sets forth the high and low sales prices of IRI common stock as reported
on the NYSE for the periods indicated.
HIGH LOW
------ ------
2000
First Quarter............................................... $ 9.63 $ 3.44
Second Quarter (through May , 2000)....................... 9.44 7.94
1999
First Quarter............................................... $ 4.25 $ 2.94
Second Quarter.............................................. 6.00 3.75
Third Quarter............................................... 5.38 4.44
Fourth Quarter.............................................. 4.88 3.13
1998
First Quarter............................................... $14.19 $10.38
Second Quarter.............................................. 14.88 10.75
Third Quarter............................................... 12.00 4.56
Fourth Quarter.............................................. 6.38 3.00
On March 15, 2000, the last trading day prior to announcement of the
merger, the closing price of IRI common stock on the New York Stock Exchange was
$5.75. On May , 2000, the closing price of IRI common stock on the New York
Stock Exchange was $ .
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DIVIDEND POLICIES
NOI has never paid cash dividends and anticipates that it will not pay cash
dividends on NOI common stock in the foreseeable future.
IRI has never paid any cash dividends.
THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement
between NOI, Arrow Acquisition Corp. and IRI and is not an exhaustive
description. You should read the merger agreement carefully. A copy of the
merger agreement is attached as Appendix I to this joint proxy statement/
prospectus.
CONVERSION OF SHARES
As a result of the merger, each share of IRI's common stock issued and
outstanding immediately prior to the merger will be converted into the right to
receive 0.3385 shares of common stock, par value $.01 per share, of NOI. If you
own IRI common stock, you may exchange your shares of IRI common stock for
shares of NOI common stock after the merger becomes effective. In addition, we
will make a cash payment to you for any fractional shares of NOI common stock
you would otherwise be entitled to receive.
When the merger becomes effective, we will cancel and retire all shares of
IRI's common stock issued and outstanding immediately prior to the merger and
they will cease to exist as anything other than the right to receive NOI common
stock, plus any applicable cash payment in respect of fractional shares, as
described above.
At the effective time of the merger, each IRI stock option exercisable for
shares of IRI common stock will be converted to an option exercisable for the
number of shares of NOI common stock equal to the aggregate number of shares of
IRI common stock for which the IRI stock option was exercisable multiplied by
the exchange ratio of 0.3385. The exercise price per share for each converted
stock option will be the aggregate exercise price of the IRI stock option
immediately prior to the merger divided by .3385.
EXCHANGE OF STOCK CERTIFICATES
When the merger becomes effective, we will mail you instructions explaining
how to exchange your canceled shares of IRI common stock for your new shares of
NOI common stock. We have appointed American Stock Transfer and Trust Company as
the exchange agent who will handle all transactions concerning your submission
of canceled shares and receipt of NOI common stock plus any applicable cash
payment in lieu of fractional shares of NOI common stock.
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES FOR CANCELED IRI SHARES TO
EITHER NOI OR IRI. THE EXCHANGE AGENT WILL MAIL YOU A SEPARATE TRANSMITTAL FORM
WITH INSTRUCTIONS FOR THE SURRENDER OF YOUR CERTIFICATES AS SOON AS PRACTICABLE
AFTER THE CONSUMMATION OF THE MERGER. YOU WILL NOT RECEIVE ANY CONSIDERATION FOR
CERTIFICATES SENT TO IRI OR NOI.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties of IRI
customary for a transaction of this nature relating to, among other things:
- IRI's organization, capitalization and authority to enter into the
agreement;
- the enforceability of the merger agreement as a binding obligation of
IRI;
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- the absence of any conflicts between the merger agreement and any of
IRI's other material contracts, any law, or any of IRI's charter or bylaw
provisions;
- required filings and consents;
- the accuracy of IRI's financial statements and filings with the SEC and
IRI's submission of all required filings;
- material liabilities or obligations incurred by IRI or any IRI subsidiary
since December 31, 1999 other than in the ordinary course of business;
- IRI's conduct of its business since December 31, 1999 and the absence of
any material adverse effect on the business of IRI;
- the accuracy of the information which IRI supplied for inclusion in this
joint proxy statement/ prospectus;
- environmental matters;
- certain matters with respect to pooling-of-interests accounting;
- IRI's financial advisor's opinion; and
- the stockholder vote required for IRI's approval and adoption of the
merger agreement and the merger.
The merger agreement also includes representations and warranties by NOI as
to:
- NOI's organization, capitalization and authority to enter into the
agreement;
- the enforceability of the merger agreement as a binding obligation of
NOI;
- the absence of any conflicts between the merger agreement and any of
NOI's other material contracts, any law, or any of NOI's charter or bylaw
provisions;
- required filings and consents;
- the accuracy of NOI's financial statements and filings with the SEC and
NOI's submission of all required filings;
- material liabilities or obligations incurred by NOI or any NOI subsidiary
since December 31, 1999 other than in the ordinary course of business;
- NOI's conduct of its business since December 31, 1999 and the absence of
any material adverse effect on NOI;
- the accuracy of the information which NOI supplied for inclusion in this
joint proxy statement/ prospectus;
- environmental matters;
- certain matters with respect to pooling-of-interests accounting;
- NOI's financial advisor's opinion; and
- the stockholder vote required for NOI's approval and adoption of the
merger agreement and the merger.
MATERIAL COVENANTS
The merger agreement contains various covenants made by NOI and IRI.
Certain of those covenants are set forth below.
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Conduct of IRI's Business. IRI made certain covenants concerning the
conduct of its business and the business of its subsidiaries from the date of
execution of the merger agreement until the effective time of the merger,
including, but not limited to, except for matters as set forth in the IRI
disclosure letter, obtaining NOI's consent prior to:
- amending or proposing to amend its charter or bylaws;
- changing its capitalization;
- declaring or paying any dividend;
- merging or consolidating with or into any other corporation or changing
in any manner the rights of its capital stock or the character of its
business;
- entering into or modifying any material contract, lease or agreement
other than in the ordinary course of business;
- conducting the business of IRI other than in the ordinary course of
business and in compliance with all applicable laws and regulations; and
- taking any action that would cause the merger not to be treated as a
pooling-of-interests for accounting purposes and a reorganization within
the meaning of Section 368(a) of the Code.
Conduct of NOI's Business. NOI made certain covenants concerning the
conduct of its business and the business of its subsidiaries from the date of
execution of the merger agreement until the effective time of the merger,
including, but not limited to, except for matters as set forth in the NOI
disclosure letter, obtaining IRI's consent prior to:
- amending or proposing to amend its charter or bylaws;
- changing its capitalization;
- declaring or paying any dividend;
- merging or consolidating with or into any other corporation or changing
in any manner the rights of its capital stock or the character of its
business;
- entering into or modifying any material contract, lease or agreement
other than in the ordinary course of business;
- conducting the business of NOI other than in the ordinary course of
business and in compliance with all applicable laws and regulations; and
- taking any action that would cause the merger not to be treated as a
pooling-of-interests for accounting purposes and a reorganization within
the meaning of Section 368(a) of the Code.
Proxy Statement. NOI and IRI jointly prepared this joint proxy
statement/prospectus. NOI and IRI agreed to cause the joint proxy
statement/prospectus to comply in all material respects with all applicable
requirements of law. In addition, NOI and IRI agreed that the information
provided by NOI and IRI for use in any filings with the SEC would at all times
prior to the effective time of the merger be true and correct in all material
respects and would not omit to state any material fact required to be stated or
necessary in order to make such information not false or misleading, and NOI and
IRI agreed to promptly correct any such information that has become false or
misleading.
Stockholders' Meeting. IRI covenanted to use its reasonable best efforts to
solicit and secure from its stockholders the approval and adoption of the merger
agreement and the merger, provided that it did not covenant to engage in any
action which IRI's Board of Directors determines in good faith, after
consultation with independent legal counsel, would cause it to breach its
fiduciary duties to the IRI stockholders.
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NOI covenanted to use its reasonable best efforts to solicit and secure
from its stockholders the adoption of the merger agreement and the amendment to
the NOI certificate of incorporation to increase the number of authorized shares
of common stock, provided that it did not covenant to engage in any action which
NOI's Board of Directors determines in good faith, after consultation with
independent legal counsel, would cause it to breach its fiduciary duties to the
NOI stockholders.
Affiliates. IRI agreed to use its reasonable efforts to cause those parties
identified as IRI affiliates for pooling-of-interests accounting purposes to
execute and deliver an affiliate agreement at least 30 days prior to the
effective time of the merger. NOI agrees to use its reasonable efforts to cause
those parties identified as NOI affiliates for pooling-of-interests purposes to
execute and deliver an affiliate agreement at least 30 days prior to the
effective time of the merger.
Consummation of Transaction. Each party covenanted to use its reasonable
best efforts to take all actions necessary, proper or advisable to consummate
and make effective the transactions contemplated by the merger agreement.
Public Announcements. The parties agreed to consult with each other before
making any public announcements or otherwise communicating with any news media
concerning the merger agreement or the transactions contemplated thereby, unless
required by applicable law.
Notification. The parties agreed to promptly notify each other with respect
to the occurrence or any threatened occurrence of any fact or circumstance that
would cause or constitute a breach of any of the representations and warranties
set forth in the merger agreement, and use its respective best efforts to remedy
any such breach.
Consents; Filings; Further Actions. Each party covenanted to use its
commercially reasonable efforts to comply with all legal requirements which may
be imposed with respect to the merger and to obtain all authorizations, consents
and approvals of governmental entities and other third parties which may be
necessary to complete the transactions contemplated by the merger agreement.
Directors' and Officers' Indemnification and Insurance. NOI covenanted to
maintain in effect the current provisions regarding indemnification of officers
and directors contained in the charter documents and bylaws of IRI for a period
of six years following the effective time of the merger. NOI further covenanted
that it shall cause the surviving corporation to maintain, for six years
following the effective time of the merger, the existing policies of directors'
and officers' liability insurance maintained by IRI, or comparable policies that
are no less advantageous than those provided to directors and officers of NOI;
provided, that NOI is not obligated to provide such coverage to the extent that
the cost of such coverage exceeds 200% of the cost immediately prior to the
effective time of the merger.
No Solicitation. IRI covenanted not to, without the prior written consent
of NOI,
- solicit, initiate or encourage (including by way of furnishing
information) or take any other action to facilitate knowingly any
inquiries or the making of any proposal that would constitute or may
reasonably be expected to lead to an IRI Acquisition Proposal;
- engage in any discussion or negotiation relating to any IRI Acquisition
Proposal; or
- enter into any agreement with respect to, agree to, approve or recommend
any IRI Acquisition Proposal.
An IRI Acquisition Proposal is a proposal or offer for a tender or exchange
offer, merger, consolidation or other business combination involving IRI or any
IRI subsidiary or any proposal to acquire in any manner a substantial equity
interest in, or a substantial portion of the assets of, IRI or any IRI
subsidiary.
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This covenant does, however, expressly permit IRI to, prior to the approval
of the merger agreement by IRI's stockholders:
- engage in discussions or negotiations with a third party who (without
solicitation or initiation by IRI) makes an unsolicited bona fide written
IRI Acquisition Proposal, if the IRI Board of Directors determines, in
good faith (1) after consultation with its financial advisors, that such
competing proposal is financially superior to the transactions
contemplated by the merger agreement (an "IRI Superior Proposal") and (2)
after considering applicable provisions of state law and after
consultation with independent legal counsel, that such action is
necessary for the Board of Directors to act in a manner consistent with
its fiduciary duties under applicable law;
- comply with Rule 14e-2 of the Exchange Act with regard to a tender or
exchange offer;
- accept an IRI Superior Proposal.
In the event that IRI accepts an IRI Superior Proposal it will be obligated to
pay a termination fee of $15,000,000. See "The Merger Agreement -- Termination;
Termination Fees and Expenses."
In addition, IRI covenanted to notify NOI within 24 hours of the receipt of
any competing proposal or inquiries indicating that any person is considering
making a competing proposal. Additionally, prior to accepting a superior
proposal, IRI covenanted to negotiate in good faith with NOI, for a period of
not less than five business days, to make such changes to the terms and
conditions of the merger agreement that would enable IRI to proceed with the
transactions contemplated by the merger agreement.
CONDITIONS TO OBLIGATIONS TO EFFECT THE MERGER
The merger agreement contains various conditions to the parties'
obligations to effect the merger, including:
- the requisite approval of the IRI stockholders and the NOI stockholders
(including the approval by the NOI stockholders of the amendment to the
certificate of incorporation of NOI);
- the absence of any judicial or quasi-judicial action or litigation that
restrains or prohibits consummation of the merger and the related
transactions or that prohibits or limits the ownership, operation or
control by IRI, NOI or any of their respective subsidiaries of any part
of their respective businesses or assets, or any action taken by any
governmental entity seeking to prohibit the merger.
- the expiration or termination of any waiting period applicable to the
merger under the HSR Act, which occurred on May 3, 2000;
- effectiveness of the registration of which this joint proxy
statement/prospectus is a part;
- approval of the NYSE, upon official notice of issuance, of the listing of
the NOI common stock to be issued in the merger; and
- the granting or obtaining of all consents and approvals which are
necessary to the consummation of the merger, and the failure to obtain
which would have a material adverse effect on NOI or IRI.
ADDITIONAL CONDITIONS TO OBLIGATIONS OF NOI
- the accuracy in all respects of the representations and warranties of IRI
that are qualified by materiality, and the accuracy in all material
respects of the representations and warranties of IRI that are not
qualified by materiality, each on the date of closing, and delivery to
NOI of an officer's certificate to that effect;
- IRI's performance in all material respects of each of the obligations it
has agreed, under the merger agreement, to perform prior to the closing,
and delivery to NOI of an officer's certificate to that effect;
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53
- the absence of any IRI material adverse effect, as defined in the merger
agreement, since March 15, 2000 and delivery to NOI of an officer's
certificate to that effect;
- the delivery of the pooling letter by NOI's independent auditors to the
NOI Board of Directors;
- the NOI fairness opinion given by Merrill Lynch & Co. shall not have been
withdrawn;
- NOI's receipt of an opinion from tax counsel stating the merger as
contemplated in the merger agreement will be treated for federal income
tax purposes as a reorganization within the meaning of section 368(a) of
the Code; and
- NOI's receipt of an affiliate agreement from all parties deemed to be
IRI's affiliates, as defined under Rule 145 of the Securities Act.
ADDITIONAL CONDITIONS TO OBLIGATIONS OF IRI
- the accuracy in all respects of the representations and warranties of NOI
and Arrow Acquisition Corp. that are qualified by materiality, and the
accuracy in all material respects of the representations and warranties
of NOI and Arrow Acquisition Corp. that are not qualified by materiality,
each on the date of closing, and delivery to IRI of an officer's
certificate to that effect;
- NOI's and Arrow Acquisition Corp.'s performance in all material respects
of each of the obligations it has agreed, under the merger agreement, to
perform prior to the closing, and delivery to IRI of an officer's
certificate to that effect;
- the absence of any NOI material adverse effect, as defined in the merger
agreement, since March 15, 2000 and delivery to IRI of an officer's
certificate to that effect;
- the delivery of the pooling letter by IRI's independent auditors to the
IRI Board of Directors;
- the IRI fairness opinion given by Lehman Brothers shall not have been
withdrawn;
- IRI's receipt of an opinion from tax counsel stating the merger as
contemplated in the merger agreement will be treated for federal income
tax purposes as a reorganization within the meaning of section 368(a) of
the Code;
- IRI's receipt of an affiliate agreement from all parties deemed to be
NOI's affiliates, as defined under Rule 145 of the Securities Act;
- the execution and delivery by NOI of the registration rights agreement to
certain stockholders of IRI; and
- the taking of all action necessary by NOI to elect to the NOI Board of
Directors Mr. Ansary or another individual designated by the IRI Board of
Directors and reasonably acceptable to NOI if Mr. Ansary is unable or
unwilling to serve.
TERMINATION; TERMINATION FEES AND EXPENSES
The merger agreement provides that the merger may be abandoned and the
merger agreement may be terminated prior to the merger's effectiveness, in
various ways including:
- by mutual written consent of NOI and IRI;
- by either NOI or IRI if the merger is not consummated on or before
September 1, 2000, as long as the party requesting such termination did
not, by its failure to fulfill an obligation under the merger agreement,
cause the merger not to be consummated;
- by either NOI or IRI if any governmental entity or arbitrator with
jurisdiction issues a final order, injunction or decree permanently
preventing consummation of the merger;
- by either NOI or IRI upon the other entity's breach or failure to comply
with, its obligations under the merger agreement in any material respect,
or any representation or warranty of the other entity
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54
being incorrect in any material respect, and such breach, failure or
misrepresentation is not cured within 30 days after notice, and such
breaches, failures or misrepresentations, individually or in the
aggregate, would result in a material adverse effect;
- by NOI if IRI fails to comply with its obligations regarding
non-solicitation under the agreement and such breach is not cured within
10 days of notice to IRI;
- by NOI or IRI after the occurrence of changes or events that,
individually or in the aggregate, have (or are reasonably expected to
have) a material adverse effect on the other entity;
- by NOI if the IRI Board of Directors withdraws or modifies its approval
or recommendation of the merger agreement in any adverse manner, fails to
reaffirm such approval or recommendation within 10 days of a request by
NOI, approves or recommends any acquisition of a material portion of its
assets or any tender offer for shares of its capital stock, other than by
NOI or an affiliate of NOI, recommends that the IRI stockholders tender
their shares in a tender offer or exchange offer that has been commenced
or with respect to which an offer to purchase or a registration statement
has been filed or resolves to take any of the preceding actions;
- by IRI if the NOI Board of Directors withdraws or modifies its approval
or recommendation of the merger agreement in any adverse manner, fails to
reaffirm such approval or recommendation within 10 days of a request by
IRI, or resolves to take any of the preceding actions;
- by NOI or IRI if the required stockholder approval of the other entity is
not obtained; or
- by IRI, prior to the approval of the merger agreement by the IRI
stockholders, if IRI accepts an IRI Superior Proposal in accordance with
the requirements of the merger agreement.
If the merger agreement is terminated, it becomes void and none of the
parties to the merger agreement has any liability or further rights or
obligations under the agreement other than the remedies described below.
However, if the agreement is terminated (1) by one party due to the other
party's failure to comply with its obligations or a breach of its
representations or warranties that are not being cured or (2) by NOI if IRI
fails to comply with its non-solicitation obligations under the merger
agreement, the breaching party remains fully liable to the non-breaching party
for such breach.
If the merger agreement is terminated, each party is responsible for the
expenses it incurs.
However, if
- NOI terminates the agreement because the IRI Board of Directors withdraws
its approval, fails to reaffirm such approval, approves or recommends any
acquisition of a material portion of its assets or any tender offer for
shares of its capital stock, recommends that the IRI stockholders tender
their shares in a tender offer or exchange offer or resolves to take any
of the preceding actions; or
- NOI terminates the agreement because IRI breaches its non-solicitation
obligations under the agreement (which breach is not cured within 10 days
of notice by NOI),
then, if after the date of the merger agreement and prior to such termination,
an IRI Acquisition Proposal was made, and within one year following such
termination, IRI has entered into an agreement with respect to, or consummated,
an IRI Acquisition Proposal, IRI will pay a termination fee of $15,000,000 to
NOI within one business day after entering into such agreement or consummating
such IRI Acquisition Proposal.
Additionally, if IRI terminates the agreement prior to obtaining IRI
stockholder approval at the IRI stockholders' meeting because the IRI Board of
Directors accepts an IRI Superior Proposal, IRI will pay a termination fee of
$15,000,000 to NOI concurrently with termination.
If IRI fails to promptly pay any termination fees due to NOI under the
merger agreement, IRI will pay the costs and expenses (including reasonable
legal fees and expenses) in connection with any action taken to collect payment,
plus interest on the amount of the unpaid fee.
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AMENDMENT AND WAIVER
The merger agreement may be amended by NOI and IRI at any time prior to the
effective time. Any amendment must be in writing signed by all the parties. Once
IRI's stockholders have voted approval of the merger agreement, however, no
party may make an amendment to the merger agreement which would reduce the
amount or change the type of consideration for which each share of IRI's common
stock will be exchanged or which would materially and adversely affect the IRI
stockholders.
Prior to the consummation of the merger, any party may:
- extend the time given for the performance of any of the obligations or
other acts of the other parties;
- waive any inaccuracies in the representations and warranties of the other
parties contained herein or in any document delivered by the other
parties pursuant to the merger agreement; and
- waive compliance by the other parties with any of the agreements or
conditions contained in the merger agreement.
Any agreement as to extension or waiver by any party will be valid only as
against such party and only if set forth in writing executed by such party.
COMPARISON OF THE RIGHTS OF THE HOLDERS OF IRI COMMON STOCK
AND NOI COMMON STOCK
The rights of both NOI and IRI stockholders are governed by the Delaware
General Corporation Law, and the respective certificates of incorporation and
bylaws of NOI and IRI. Upon completion of the merger, IRI stockholders will
become NOI stockholders. The material differences between the rights of IRI
stockholders and NOI stockholders, resulting from differences in their
respective certificates of incorporation and bylaws, are summarized below.
STOCKHOLDER ACTION
Under the Delaware General Corporation Law, unless a corporation's
certificate of incorporation provides otherwise, any action required or
permitted to be taken at a stockholders' meeting may be taken without a meeting,
without prior notice and without a vote if a written consent, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote upon such action
were present and voted. NOI's certificate of incorporation expressly provides
that no action required or permitted to be taken at a common stockholders'
meeting may be taken without a meeting. NOI's certificate of incorporation also
provides that the power of common stockholders to consent in writing is
specifically denied. IRI's bylaws provide that stockholders may consent in
writing to any action required or permitted to be taken at a meeting without
such a meeting.
SPECIAL STOCKHOLDERS' MEETINGS
The Delaware General Corporation Law provides that a special stockholders'
meeting may be called by the corporation's board of directors or by such person
or persons as the certificate of incorporation or the bylaws may authorize.
NOI's certificate of incorporation provides that the following persons may call
a special meeting:
- the chairman of the board of directors;
- the president; or
- the board of directors pursuant to a resolution approved by a majority of
the members of the board then in office.
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56
NOI's certificate of incorporation does not permit the stockholders to call
a special meeting.
IRI's bylaws provide that a special meeting may be called by:
- the chairman of the board;
- the chief executive officer if there is no acting chairman of the board;
- the secretary upon written request of the majority of the board of
directors; or
- the holders of the majority of the outstanding common stock.
NUMBER AND ELECTION OF DIRECTORS
The Delaware General Corporation Law permits a corporation's certificate of
incorporation or bylaws to contain provisions governing the number and terms of
directors. However, if the certificate of incorporation contains provisions
fixing the number of directors, such number may be changed only by an amendment
to the certificate of incorporation. Directors may be elected at the annual
stockholders' meeting, or at a different stockholders' meeting if the
corporation's bylaws so provide. Stockholders also may elect directors by
written consent in lieu of a stockholders' meeting. If the stockholders' written
consent electing the directors is not unanimous, the consent may substitute for
the meeting only if every position on the board available to be filled at that
time is vacant, and the consent fills all the vacant positions. NOI's
certificate of incorporation provides that the number of directors shall be
fixed by a resolution adopted by a majority of the board of directors, but in no
event may the board consist of less than three directors. NOI's certificate of
incorporation also provides that the board will be divided into three classes
whose terms have staggered expiration dates. IRI's bylaws provide that the
number of directors may not be less than three nor more than 17. The number of
directors is set by a vote of the holders of a majority of the outstanding
stock, subject to the rights, if any, of holders of preferred stock. IRI's
bylaws also provide that directors will hold office until the next annual
meeting of stockholders.
REMOVAL OF DIRECTORS
The Delaware General Corporation Law provides that a director or directors
may be removed with or without cause by the holders of a majority of the shares
then entitled to vote at an election of directors, except that:
- members of a classified board may be removed only for cause, unless the
certificate of incorporation provides otherwise; and
- in the case of a corporation having cumulative voting, if less than the
entire board is to be removed, no director may be removed without cause
if the votes cast against his or her removal would be sufficient, if
cumulatively voted, to elect such director at an election of the entire
board of directors or of the class of directors to which such director
belongs.
NOI's certificate of incorporation provides that a director of any class of
directors may be removed only for cause, by an affirmative vote of stockholders
holding 80% of the outstanding shares of the class or series of stock entitled
to vote at an election of directors of that class or series. IRI's bylaws
provide that any director may be removed with or without cause by the holders of
a majority of IRI's outstanding common stock, subject to the rights, if any, of
holders of preferred stock.
VACANCIES
Under the Delaware General Corporation Law, unless the corporation's
certificate of incorporation or bylaws provides otherwise, vacancies on the
board of directors and newly created directorships resulting from an increase in
the authorized number of directors may be filled by:
- a majority of the directors then in office, although less than a quorum;
or
- by the sole remaining director.
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However, in the case of a classified board, vacancies and newly created
directorships may be filled by a majority of the directors elected by such
class, or by the sole remaining director so elected. If the board is classified,
directors elected to fill vacancies or newly created directorships shall hold
office until the next election of the class to which they belong, and until
their successors have been duly elected and qualified. In addition, if,
immediately prior to the filling of any such vacancy or newly created
directorship, the directors in office constitute less than a majority of the
whole board, the Delaware Court of Chancery may, upon application of any
stockholder or stockholders holding at least 10% of the total number of
outstanding shares entitled to vote for such directors, summarily order an
election to fill any such vacancy or newly created directorship, or replace the
directors chosen by the directors then in office. IRI's bylaws provide that
vacancies and newly created directorships resulting from an increase in the
number of directors may be filled by the holders of a majority of IRI's
outstanding common stock, subject to the rights, if any, of the holders of
preferred stock.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The unaudited pro forma combined financial statements have been prepared
assuming the merger is accounted for as a pooling-of-interests under U.S. GAAP
and are based on the historical consolidated financial statements of NOI and
IRI. The following unaudited pro forma combined balance sheet at December 31,
1999 and unaudited pro forma combined statements of operations for the three
years in the period ended December 31, 1999 have been derived from, and should
be read in conjunction with, the audited Consolidated Financial Statements of
NOI and IRI and the related notes, which are incorporated by reference into this
joint proxy statement/prospectus. The unaudited pro forma financial statements
of operations were prepared as if NOI and IRI had been combined since the
beginning of each period presented. There are no significant adjustments
required to the historical financial data of NOI and IRI to conform the
accounting policies of the two companies.
The unaudited pro forma combined financial statements are presented for
illustrative purposes only and are not necessarily indicative of actual results
of operations or financial position that would have been achieved had the
transaction been consummated at the beginning of the period presented, nor are
they necessarily indicative of future results.
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NATIONAL-OILWELL, INC. AND IRI INTERNATIONAL CORPORATION
UNAUDITED PROFORMA COMBINED BALANCE SHEET
AS AT DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
NATIONAL IRI PRO FORMA
OILWELL INTERNATIONAL ADJUSTMENTS COMBINED
-------- ------------- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents.................. $ 12,403 $ 50,374 $(13,000)(1) $ 49,777(3)
Accounts receivables....................... 185,920 14,476 200,396
Unbilled revenues.......................... 1,400 1,400
Inventories................................ 254,052 92,572 346,624
Deferred taxes............................. 9,296 1,388 3,230(1) 13,914
Income tax receivable...................... 10,171 2,717 12,888
Prepaid and other current assets........... 6,534 1,242 7,776
-------- -------- -------- --------
Total current assets............... 478,376 164,169 (9,770) 632,965
Property, plant and equipment, net........... 109,147 45,697 154,844
Deferred taxes............................... 7,781 3,945 11,726
Goodwill..................................... 174,498 -- 174,498
Property held for sale....................... 7,424 -- 7,424
Other assets................................. 5,085 3,282 8,367
-------- -------- -------- --------
$782,311 $217,093 $ (9,770) $989,634
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.......... $ -- $ 1 $ $ 1
Accounts payable........................... 100,963 5,256 106,219
Customer prepayments....................... 16,838 1,938 18,776
Other accrued liabilities.................. 58,409 7,125 65,534
-------- -------- -------- --------
Total current liabilities.......... 176,210 14,320 -- 190,530
Long-term debt............................... 196,007 -- -- 196,007(3)
Deferred taxes............................... 6,138 -- 6,138
Other liabilities............................ 8,881 1,473 10,354
-------- -------- -------- --------
Total liabilities.................. 387,236 15,793 403,029
Commitments and contingencies
Stockholders' equity:
Common stock issued and outstanding........ 582 399 (267)(2) 714
Additional paid-in capital................. 246,553 168,884 267(2) 415,704
Accumulated other comprehensive (loss)..... (11,537) (386) (11,923)
Retained earnings.......................... 159,477 32,403 (9,770)(1) 182,110
-------- -------- -------- --------
395,075 201,300 (9,770) 586,605
-------- -------- -------- --------
$782,311 $217,093 $ (9,770) $989,634
======== ======== ======== ========
The accompanying notes are an integral part of these statements.
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NATIONAL-OILWELL, INC. AND IRI INTERNATIONAL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE)
YEAR ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
-------- ---------- ----------
Revenues.................................................. $837,405 $1,446,959 $1,282,772
Cost of revenues.......................................... 686,735 1,116,967 1,019,912
-------- ---------- ----------
Gross profit.............................................. 150,670 329,992 262,860
Selling, general, and administrative...................... 147,566 173,154 137,795
Special charge............................................ 1,779 17,023 10,660
-------- ---------- ----------
Operating income.......................................... 1,325 139,815 114,405
Interest and financial costs.............................. (15,872) (14,261) (15,850)
Interest income........................................... 2,276 3,238 2,270
Other income (expense), net............................... (2,588) (3,771) 641
-------- ---------- ----------
Income before income taxes from continuing operations..... (14,859) 125,021 101,466
Provision (benefit) for income taxes...................... (5,474) 43,685 34,104
-------- ---------- ----------
Net income (loss) from continuing operations.............. $ (9,385) $ 81,336 $ 67,362
======== ========== ==========
Net income per share from continuing operations:
Basic................................................... $ (0.13) $ 1.19 $ 1.06
======== ========== ==========
Diluted................................................. $ (0.13) $ 1.19 $ 1.05
======== ========== ==========
Weighted average shares outstanding:
Basic................................................... 71,720 68,171 63,596
======== ========== ==========
Diluted................................................. 72,034 68,353 64,429
======== ========== ==========
The accompanying notes are an integral part of these statements.
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(1) To record the estimated one-time combination costs of $13,000,000
primarily related to professional and advisory fees, severance and
non-compete agreements, consolidation and integration costs reduced by
a tax benefit of $3,230. These costs are non-recurring and are not
reflected in the Unaudited Pro Forma Combined Statement of Operations.
Under the three-year non-compete agreement with IRI's chief executive
officer, $3,000,000 in payments would be deferred and charged to income
in subsequent years.
(2) To record the issuance of 13,506,150 shares of NOI Common Stock in
exchange for 39,900,000 shares of IRI Common Stock outstanding at
December 31, 1999 based upon a conversion rate of 0.3385 of a share of
NOI Common Stock for each share of IRI Common Stock.
(3) The Unaudited Pro Forma Combined Balance Sheet reflects consolidated
cash holdings of $49,777,000. Management intends to pay off outstanding
debt with excess cash that would have approximated $32,000,000 at debt
at December 31, 1999. If the $32,000,000 of excess cash had been
reclassified against outstanding debt at December 31, 1999 the combined
debt to equity ratio would have been 28.0% and outstanding debt would
have been reduced to approximately $164,000,000. The remaining debt
includes $150,000,000 of 6 7/8% senior notes due in 2005.
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NATIONAL-OILWELL, INC. AND IRI INTERNATIONAL CORPORATION
UNAUDITED ADJUSTED PRO FORMA COMBINED STATEMENT OF OPERATIONS
The following unaudited adjusted pro forma combined statement of operations
is a supplemental statement that is not intended to comply with
pooling-of-interests accounting as it contains adjustments to reflect
management's estimates of combination benefits that would have been achieved if
the combination had been completed as of the beginning of the period. This
statement is not intended to replace the results shown on page .
YEAR ENDED DECEMBER 31, 1999
----------------------------------------------------
HISTORICAL
------------------------ ADJUSTED
NATIONAL IRI PRO FORMA
OILWELL INTERNATIONAL ADJUSTMENTS COMBINED
-------- ------------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
Revenues....................................... $745,215 $ 92,190 $837,405
Cost of revenues............................... 603,579 83,156 (2,337)(1) 684,398
-------- -------- -------- --------
Gross profit................................... 141,636 9,034 2,337 153,007
Selling, general, and administrative........... 119,735 27,831 (17,552)(1) 130,014
Special charge................................. -- 1,779 1,779
-------- -------- -------- --------
Operating income............................... 21,901 (20,576) 19,889 21,214
Interest and financial costs................... (15,509) (363) 3,111(2) (12,761)
Interest income................................ 737 1,539 (1,281)(2) 995
Other income (expense), net.................... (2,611) 23 (2,588)
Income before income taxes from continuing
operations................................... 4,518 (19,377) 21,719 6,860
Provision (benefit) for income taxes........... 2,998 (8,472) 8,470(3) 2,996
-------- -------- -------- --------
Net income from continuing operations.......... $ 1,520 $(10,905) $ 13,249 $ 3,864
======== ======== ======== ========
Net income per share from continuing
operations:
Basic........................................ $ 0.03 $ (0.27) $ 0.05
======== ======== ========
Diluted...................................... $ 0.03 $ (0.27) $ 0.05
======== ======== ========
Weighted average shares outstanding:
Basic........................................ 58,214 39,900 13,506(4) 71,720
======== ======== ======== ========
Diluted...................................... 58,528 39,900 14,000(5) 72,528
======== ======== ======== ========
The accompanying notes are an integral part of these statements.
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NOTES TO THE UNAUDITED ADJUSTED PRO FORMA STATEMENT OF OPERATIONS
(1) To record estimated cost savings as a result of consolidating corporate
offices and certain operations of the combining companies.
(2) To record the effect on interest expense and income of applying excess
cash of IRI to outstanding debt of NOI, reflecting a net rate
differential of 4%.
(3) To reflect the tax effect of the above using a 38% tax rate.
(4) To record the issuance of 13,506,150 shares of NOI Common Stock in
exchange for 39,900,000 shares of IRI Common Stock outstanding at
December 31, 1999 based upon a conversion rate of 0.3385 of a share of
NOI Common Stock for each share of IRI Common Stock.
(5) Under the merger agreement the outstanding IRI stock options will
convert to NOI stock options. The 2,586,000 of IRI stock options
converted under the "treasury-stock method" at a share price of $25.00
per share and a weighted average exercise price of $3.6858, yields
494,087 NOI stock options. In the computation of fully diluted earnings
per share, the NOI shares issued for outstanding IRI shares plus IRI
options assumed exercised, increases the combined weighted average
shares to 14,000,000.
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BUSINESS OF NATIONAL OILWELL
NOI is a worldwide leader in the design, manufacture and sale of
comprehensive systems and components used in oil and gas drilling and
production, as well as in providing supply chain integration services to the
upstream oil and gas industry.
NOI manufactures and assembles drilling machinery, including drawworks, mud
pumps and top drives, which are the major mechanical components of drilling
rigs, as well as masts, derricks and substructures. Many of these components are
designed specifically for more demanding applications, which include offshore,
extended reach and deep land drilling. NOI estimates that a majority of the
mobile offshore rig fleet and the world's larger land rigs (2,000 horsepower and
greater) manufactured in the last twenty years utilize drawworks, mud pumps and
other drilling machinery components manufactured by NOI's Products and
Technology segment. NOI also provides electrical power systems, computerized
control systems and automation systems for drilling rigs. NOI's systems,
including the Cyberbase(TM) and automated pipe handling systems, are used in
many of the industry's most technologically demanding applications. In addition,
NOI provides engineering and fabrication services to integrate its drilling
products and deliver complete land drilling rigs and drilling modules for mobile
offshore drilling rigs or offshore drilling platforms.
Through its Products and Technology segment, NOI designs and manufactures
drilling motors and specialized drilling tools for rent and sale. Drilling
motors are essential components of systems for horizontal, directional, extended
reach and performance drilling. Drilling tools include drilling jars, shock
tools and other specialized products.
NOI's Distribution Services segment offers comprehensive supply chain
integration services to the drilling and production industry segments. NOI's
network of service centers located in the United States and Canada and near
major drilling and production activity worldwide use state of the art
information technology platforms to provide procurement, inventory management
and logistics services. These service centers stock and sell a variety of
expendable items for oil field applications and spare parts for equipment
manufactured by NOI.
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BUSINESS OF IRI INTERNATIONAL
IRI International Corporation is one of the world's largest manufacturers
of land-based drilling well-servicing rigs and rig component parts for use in
the global oil and gas industry. IRI is principally engaged in the design,
manufacture, service, sale and rental of onshore and offshore oil field
equipment for the domestic and international markets. IRI's Oilfield Equipment
Division designs and produces rigs to meet the special requirements of IRI's
global clientele for service in remote areas and harsh climatic conditions.
IRI's Downhole Products Division is a major manufacturer of down hole fishing
and drilling tools. IRI offers a complete line of oil field power equipment,
including top drives, power swivels, wireline pressure control equipment and
coiled tubing systems, which complement IRI's drilling and well-servicing rigs.
IRI also manufactures and maintains a significant inventory of replacement parts
for rigs produced by IRI and others, enabling IRI to meet the needs of its
customers on a timely basis. IRI's Specialty Steel Division produces premium
alloy steel for commercial and military use and for use in manufacturing oil
field equipment products.
IRI markets its oil field equipment primarily through its own sales force
and through designated agents and distributors in every major oil and gas
producing region in the world. IRI maintains 25 domestic and 7 international
sales, parts and service centers in areas of significant drilling and production
operations. IRI's network of service centers in the United States provides its
customers with refurbishment or repair services as well as ready access to
replacement parts for equipment in the field. IRI's worldwide sales and
marketing activities are closely coordinated with and supported by a staff of
engineers and design technicians. This network allows IRI to provide its
customers with products meeting their customized design specifications.
The predecessor of IRI was founded in 1985 through the combination of
Ingersoll-Rand Oilfield Products Company and the Ideco Division of Dresser
Industries, Inc., and was later acquired by Energy Services International Ltd.
in 1994 ("ESI"). IRI acquired the business and operations of the Bowen Tools
Division (the "Bowen Acquisition") on March 31, 1997 and Cardwell International,
Ltd. (the "Cardwell Acquisition") on April 17, 1997 (together, the
"Acquisitions"). In October 1997, IRI merged with ESI, and ESI, as the surviving
entity, changed its name to IRI International Corporation. In November 1997, IRI
consummated its initial public offering of 13,800,000 shares (which included
3,900,000 shares sold by certain stockholders) of its common stock.
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APPROVAL OF THE RESTATED CERTIFICATE OF INCORPORATION OF NOI
The NOI Board of Directors believes that it is desirable for the NOI
stockholders to consider and act upon a proposal to adopt a restated certificate
of incorporation of NOI which includes an increase in the authorized shares of
common stock, $.01 par value, from 75,000,000 to 150,000,000 shares. The
restated certificate of incorporation also deletes references to NOI's Class A
Common Stock, which was retired at the time of NOI's initial public offering.
Of the 75,000,000 currently authorized shares of common stock, as of May 1,
2000, 66,351,790 shares of NOI common stock were issued and outstanding
(assuming the conversion of certain exchangeable shares issued in connection
with the combination of NOI and Dreco Energy Services Ltd.) and 2,504,124 shares
of NOI common stock were subject to issuance under NOI's long term incentive
plans. Pursuant to the terms of the merger agreement, NOI has agreed to issue
approximately 14,381,511 shares of common stock to the IRI stockholders in the
merger and upon exercise of outstanding stock options of IRI.
The certificate of incorporation currently provides that NOI is authorized
to issue 75,000,000 shares of common stock. NOI cannot complete the merger
unless the NOI stockholders adopt the restated certificate of incorporation,
since NOI does not have sufficient authorized but unissued shares to issue to
the IRI stockholders in connection with the merger.
Except for shares currently reserved as explained above, NOI does not now
have any present plan, understanding or agreement to issue additional shares of
common stock. However, the NOI Board of Directors of NOI believes that the
proposed increase in authorized shares of common stock is desirable to enhance
NOI's flexibility in connection with possible future actions, such as stock
splits, stock dividends, corporate mergers and acquisitions, financings,
acquisitions of property, use in employee benefit plans, or other corporate
purposes. The NOI Board of Directors will determine whether, when, and on what
terms the issuance of shares of common stock may be warranted in connection with
any of the foregoing purposes.
Approval of the proposed restated certificate of incorporation could have
an anti-takeover effect, in that NOI could issue additional shares in an effort
to create voting impediments or to dilute the common stock ownership of a person
seeking to acquire control of NOI. NOI's ability to issue the shares could
discourage a third party from attempting to acquire control of NOI. However, the
proposal to increase the amount of authorized common stock is not in response to
any effort of which NOI is aware to accumulate common stock or obtain control of
NOI.
If the proposed restated certificate of incorporation is adopted, all or
any of the authorized shares of common stock may be issued without further
action by the stockholders and without first offering such shares to the NOI
stockholders for subscription. The issuance of common stock otherwise than on a
pro-rata basis to all holders of such stock would reduce the proportionate
interests of such stockholders.
Additionally, pursuant to the proposal, all references to "Class A Common
Stock" in the certificate of incorporation will be deleted.
Other than increasing the authorized shares of common stock from 75,000,000
to 150,000,000, and deleting references to Class A Common Stock, the proposed
amendment does not change the certificate of incorporation. The full text of the
restated certificate of incorporation is set forth in Appendix IV to this joint
proxy statement/prospectus.
The NOI Board of Directors has unanimously adopted resolutions approving
the restated certificate of incorporation, declaring its advisability and
directing that it be submitted to the stockholders for their approval. If
adopted by the stockholders, the restated certificate of incorporation will
become effective upon filing as required by the General Corporation Law of
Delaware.
The NOI Board of Directors recommends a vote "FOR" the above proposal.
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LEGAL MATTERS
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, will issue an
opinion as to the validity of the common stock of NOI to be issued in the
merger. In addition, Jones, Day, Reavis & Pogue and Morgan, Lewis & Bockius LLP
will issue tax opinions to IRI and NOI, respectively, in connection with the
merger agreement.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements included in NOI's Annual Report on Form 10-K for the year
ended December 31, 1999, as set forth in their report, which is incorporated by
reference in this Prospectus and Registration Statement. NOI's statements are
incorporated by reference in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
The consolidated financial statements of IRI International Corporation and
Subsidiaries as of December 31, 1999 and 1998 and for each of the years in the
three-year period ended December 31, 1999, are incorporated by reference in this
joint proxy statement/prospectus and registration statement on Form S-4 in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of such firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
NOI and IRI file reports and other information with the Securities and
Exchange Commission. These reports, proxy statements and other information can
be read and copied at the public reference facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549; Midwest Regional office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; and Northeast Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can be obtained at the prescribed
rates from the Public Reference Section of the SEC at its principal office in
Washington, D.C. by calling the SEC at 1-800-732-0330. In addition, NOI and IRI
file this material electronically with the SEC, and the SEC maintains a Web site
(http://www.sec.gov) that contains reports, proxy statements and other
information regarding companies (including us) that file electronically with the
SEC. The common stock of NOI and IRI is listed on the NYSE, and reports, proxy
statements and other information can also be inspected at the office of the
NYSE, 20 Broad Street, New York, New York 10005.
NOI has filed with the SEC a registration statement on Form S-4, with
respect to our common stock to be issued to IRI stockholders in connection with
the completion of the merger, and this prospectus is part of our registration
statement. For further information with respect to us and the shares, we refer
you to the registration statement and its exhibits. This document is part of
that registration statement and constitutes a prospectus of NOI in addition to
being a proxy statement for NOI's special meeting of stockholders. IRI is also
using this document as a proxy statement for its special meeting of
stockholders. As allowed by SEC rules, this document does not contain all of the
information you can find in the registration statement or the exhibits to the
registration statement.
The SEC allows NOI and IRI to incorporate by reference information into
this document, which means that NOI and IRI can disclose important information
to you by referring to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this document,
except for any information superseded by information in this document.
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This document incorporates by reference the following SEC filings by NOI
and IRI:
NOI SEC Filings:
1. Annual Report on Form 10-K for the year ended December 31, 1999,
including the information contained in NOI's definitive proxy statement
dated April 7, 2000 that is incorporated by reference in the Annual Report
on Form 10-K.
2. Registration Statement on Form 8-A registering under the Exchange
Act the common stock of NOI filed October 15, 1996, as amended by NOI's
Current Report on Form 8-K filed on November 11, 1997.
IRI SEC Filings:
Annual Report on Form 10-K for the year ended December 31, 1999.
NOI and IRI are also incorporating by reference all documents that they
file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act between the date of this joint proxy statement/ prospectus and the date of
their respective stockholder meetings.
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APPENDIX I
AGREEMENT OF MERGER
AMONG
NATIONAL-OILWELL, INC.
ARROW ACQUISITION, INC.
AND
IRI INTERNATIONAL CORPORATION
DATED AS OF MARCH 15, 2000
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TABLE OF CONTENTS
ARTICLE 1 THE MERGER....................................................... 1
Section 1.1 The Merger.................................................. 1
Section 1.2 Closing..................................................... 1
Section 1.3 Effect...................................................... 1
Section 1.4 Certificate of Incorporation................................ 1
Section 1.5 The Bylaws.................................................. 2
Section 1.6 Directors of Surviving Corporation.......................... 2
Section 1.7 Officers of Surviving Corporation........................... 2
Section 1.8 Effect of the Merger on Capital Stock....................... 2
Section 1.9 Exchange of Certificates for Shares......................... 2
Section 1.10 Treatment of Stock Options.................................. 4
Section 1.11 IRI Stockholder Support..................................... 5
Section 1.12 NOI Stockholder Support..................................... 5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF IRI............................ 5
Section 2.1 Corporate Existence......................................... 5
Section 2.2 Capitalization.............................................. 5
Section 2.3 Subsidiaries; No Interest in Other Entities................. 6
Section 2.4 Authority................................................... 6
Section 2.5 Validity of Contemplated Transactions; Etc. ................ 7
Section 2.6 Governmental Consents and Approvals......................... 7
Section 2.7 Securities Reports and Financial Statements................. 7
Section 2.8 Absence of Undisclosed Liabilities.......................... 8
Section 2.9 Information Supplied........................................ 8
Section 2.10 Existing Condition.......................................... 8
Section 2.11 Taxes....................................................... 9
Section 2.12 Legal Proceedings; Etc. .................................... 9
Section 2.13 Compliance with Law......................................... 9
Section 2.14 Certain Agreements.......................................... 9
Section 2.15 Employee Benefit Plans...................................... 10
Section 2.16 Environmental Matters....................................... 11
Section 2.17 No Brokers or Finders....................................... 12
Section 2.18 Pooling Matters............................................. 12
Section 2.19 Fairness Opinion............................................ 12
Section 2.20 Restrictions on Business Activities......................... 13
Section 2.21 Vote Required............................................... 13
Section 2.22 Board Action; Etc. ......................................... 13
Section 2.23 Completeness of Disclosure.................................. 13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF NOI............................ 13
Section 3.1 Corporate Existence......................................... 13
Section 3.2 Capitalization.............................................. 13
Section 3.3 Subsidiaries; No Interest in Other Entities................. 14
Section 3.4 Authority................................................... 15
Section 3.5 Validity of Contemplated Transactions; Etc. ................ 15
Section 3.6 Governmental Consents and Approvals......................... 15
Section 3.7 Securities Reports and Financial Statements................. 15
Section 3.8 Absence of Undisclosed Liabilities.......................... 16
Section 3.9 Information Supplied........................................ 16
Section 3.10 Existing Condition.......................................... 16
Section 3.11 Taxes....................................................... 17
Section 3.12 Legal Proceedings; Etc. .................................... 17
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Section 3.13 Compliance with Law........................................................................ 17
Section 3.14 Certain Agreements......................................................................... 17
Section 3.15 Employee Benefit Plans..................................................................... 18
Section 3.16 Environmental Matters...................................................................... 19
Section 3.17 No Brokers or Finders...................................................................... 20
Section 3.18 Pooling Matters............................................................................ 20
Section 3.19 Fairness Opinion........................................................................... 20
Section 3.20 Restrictions on Business Activities........................................................ 20
Section 3.21 Vote Required.............................................................................. 20
Section 3.22 Board Action; Etc. ........................................................................ 21
Section 3.23 Completeness of Disclosure................................................................. 21
Section 3.24 No Prior Activities by Acquisition......................................................... 21
ARTICLE 4 OTHER AGREEMENTS.................................................................................. 21
Section 4.1 Conduct of IRI's Business.................................................................. 21
Section 4.2 Conduct of NOI's Business.................................................................. 23
Section 4.3 NYSE Listing............................................................................... 24
Section 4.4 Access..................................................................................... 24
Section 4.5 Affiliate Agreements....................................................................... 25
Section 4.6 Stockholder Votes; Proxy Statement......................................................... 25
Section 4.7 Reasonable Best Efforts.................................................................... 26
Section 4.8 Public Announcements....................................................................... 26
Section 4.9 Notification............................................................................... 26
Section 4.10 Subsequent Financial Statements............................................................ 26
Section 4.11 Regulatory and Other Authorizations........................................................ 27
Section 4.12 Takeover Statute........................................................................... 27
Section 4.13 Indemnification of Directors and Officers.................................................. 27
Section 4.14 No Solicitation by IRI..................................................................... 27
ARTICLE 5 CONDITIONS TO THE MERGER.......................................................................... 29
Section 5.1 Conditions to the Obligations of NOI and IRI............................................... 29
Section 5.2 Additional Conditions to the Obligations of NOI............................................ 29
Section 5.3 Additional Conditions to the Obligations of IRI............................................ 30
ARTICLE 6 TERMINATION, AMENDMENT AND WAIVER................................................................. 31
Section 6.1 Termination................................................................................ 32
Section 6.2 Effect of Termination...................................................................... 32
Section 6.3 Amendment.................................................................................. 32
Section 6.4 Waiver..................................................................................... 33
ARTICLE 7 MISCELLANEOUS..................................................................................... 33
Section 7.1 Notices.................................................................................... 33
Section 7.2 Certain Limitations........................................................................ 34
Section 7.3 Cooperation................................................................................ 34
Section 7.4 Expenses................................................................................... 34
Section 7.5 Governing Law.............................................................................. 35
Section 7.6 Counterparts; Effectiveness................................................................ 35
Section 7.7 Severability............................................................................... 35
Section 7.8 Entire Agreement........................................................................... 35
Section 7.9 Miscellaneous.............................................................................. 35
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EXHIBITS
A Form of IRI Stockholder Support Agreement
B Form of NOI Stockholder Support Agreement
C Form of IRI Affiliate Agreement
D Form of NOI Affiliate Agreement
E Form of Registration Rights Agreement
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AGREEMENT OF MERGER
AGREEMENT OF MERGER, dated as of March 15, 2000 (the "Agreement"), among
National-Oilwell, Inc., a Delaware corporation ("NOI"), Arrow Acquisition, Inc.,
a Delaware corporation and a wholly-owned subsidiary of NOI organized for the
sole purpose of consummating the transactions contemplated by this Agreement
("Acquisition"), and IRI International Corporation, a Delaware corporation
("IRI").
WITNESSETH
WHEREAS, the respective boards of directors of NOI, Acquisition and IRI
have each approved the acquisition of IRI by NOI through a merger (the "Merger")
of Acquisition with and into IRI in accordance with this Agreement and the
applicable provisions of the Delaware General Corporation Law ("DGCL");
WHEREAS, the Boards of Directors of NOI and IRI have each determined that
the Merger and the other transactions contemplated hereby are consistent with,
and in furtherance of, their respective business strategies and goals;
WHEREAS, it is intended that the Merger will be a tax-free reorganization
under section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, it is intended that the Merger will be a "pooling-of-interests"
for financial accounting purposes.
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, hereby agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1 The Merger. On the Closing Date (as defined in Section 1.2),
Acquisition shall be merged with and into IRI pursuant to the terms of this
Agreement and the separate corporate existence of Acquisition shall cease. IRI
shall be the surviving corporation in the Merger (sometimes referred to as the
"Surviving Corporation") and shall continue to be governed by the DGCL.
SECTION 1.2 Closing. The parties shall hold a closing (the "Closing") on a
date mutually agreed upon that is as soon as practicable (and, in any event,
within two business days) after fulfillment of the conditions set forth in
Article VI (the "Closing Date"), at 10:00 A.M. (local time) at the offices of
Morgan, Lewis & Bockius LLP, Philadelphia, PA, or at such other date, time or
place as the parties hereto may agree.
SECTION 1.3 Effect. On the Closing Date the parties shall file with the
Delaware Secretary of State a certificate of merger as required by the DGCL, and
shall make all other filings necessary under the DGCL. The Merger shall become
effective upon the filing of such certificate of merger (the "Effective Time").
The Merger shall have the effects provided therefor by the DGCL.
SECTION 1.4 Certificate of Incorporation. The certificate of incorporation
of IRI in effect immediately prior to the Effective Time shall, from and after
the Effective Time, be the certificate of incorporation of the Surviving
Corporation, until duly amended as provided therein or by applicable law, except
that at the Effective Time Article of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows:
"The authorized capital stock of the corporation shall
consist
of 1,000 shares of Common Stock, par value $.01 per
share."
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SECTION 1.5 The Bylaws. The bylaws of IRI in effect at the Effective Time
shall, from and after the Effective Time, be the bylaws of the Surviving
Corporation, until duly amended as provided therein and by applicable law.
SECTION 1.6 Directors of Surviving Corporation. From and after the
Effective Time, the directors of the Surviving Corporation shall be Joel V.
Staff and Steven W. Krablin until their successors have been duly elected or
qualified or until their death, resignation or removal in accordance with the
bylaws of the Surviving Corporation.
SECTION 1.7 Officers of Surviving Corporation. From and after the
Effective Time, the officers of IRI shall be the officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their death, resignation or removal in accordance with the
bylaws of the Surviving Corporation.
SECTION 1.8 Effect of the Merger on Capital Stock. At the Effective Time,
as a result of the Merger and without any action on the part of the holder of
any capital stock of IRI or Acquisition:
(a) Merger Consideration. Each share (each an "IRI Share" and together
the "IRI Shares") of the common stock, par value $.01 per share, of IRI
(the "IRI Common Stock") issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive and become
exchangeable for 0.3385 share (the "Exchange Ratio") of common stock, par
value $.01 per share, of NOI ("NOI Common Stock"), and cash in lieu of
fractional shares of NOI Common Stock, if any, pursuant to Section 1.9(d)
(collectively, the "Merger Consideration"). At the Effective Time, all IRI
Shares shall no longer be outstanding, shall be canceled and retired and
shall cease to exist, and each certificate (a "Certificate") formerly
representing any IRI Shares shall thereafter represent only the right to
receive the Merger Consideration and any distribution or dividend under
Section 1.9(b). Any IRI Shares that are treasury shares shall be cancelled.
(b) Acquisition. At the Effective Time, each share of common stock,
par value $.01 per share, of Acquisition issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued,
fully paid and nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation, and the Surviving Corporation shall be
a wholly-owned subsidiary of NOI.
SECTION 1.9 Exchange of Certificates for Shares.
(a) Exchange Procedures.
(i) Letter of Transmittal. Promptly after the Effective Time, the
Surviving Corporation shall cause an exchange agent selected by NOI (the
"Exchange Agent") to mail to each holder of record of a Certificate (A)
a letter of transmittal specifying that delivery shall be effected, and
that risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates (or affidavits of loss in lieu of
Certificates) to the Exchange Agent, in a form and with other provisions
reasonably acceptable to both NOI and IRI, and (B) instructions for
exchanging the Certificates for (1) certificates representing shares of
NOI Common Stock, (2) cash in lieu of fractional shares and (3) any
unpaid dividends and other distributions.
(ii) Surrender of Certificates. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, the holder of that Certificate shall be
entitled to receive in exchange (A) a certificate representing that
number of whole shares of NOI Common Stock that the holder is entitled
to receive under this Article 1, (B) a check in the amount (after giving
effect to any required tax withholding) of (1) any cash in lieu of
fractional shares plus (2) any unpaid dividends (other than stock
dividends) and any other dividends or other distributions that such
holder has the right to receive under the provisions of this Article 1,
and the Certificate so surrendered shall immediately be canceled. No
interest will be paid or accrued on any amount payable upon surrender of
the Certificates.
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(iii) Unregistered Transferees. In the event of a transfer of
ownership of IRI Shares that are not registered in the transfer records
of IRI, a certificate representing the proper number of shares of NOI
Common Stock, together with a check for any cash to be paid upon the
surrender of the Certificate and any other dividends or distributions in
respect of those shares, may be issued or paid to such a transferee if
the Certificate formerly representing such IRI Shares is presented to
the Exchange Agent, accompanied by all documents required to evidence
and effect the transfer and to evidence that any applicable stock
transfer taxes have been paid. If any certificate for shares of NOI
Common Stock is to be issued in a name other than that in which the
surrendered Certificate is registered, it shall be a condition of such
exchange that the person requesting such exchange shall pay any transfer
or other taxes required by reason of the issuance of certificates for
shares of NOI Common Stock in a name other than that of the registered
holder of the surrendered Certificate, or shall establish to the
satisfaction of NOI or the Exchange Agent that such tax has been paid or
is not applicable.
(iv) No Other Rights. Until surrendered as contemplated by this
Section 1.9(a), each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive the certificate
representing shares of NOI Common Stock and any other dividend or
distribution in respect of those shares and cash in lieu of any
fractional shares of NOI Common Stock, as contemplated by this Section
1.9(a). All shares of NOI Common Stock, together with any cash paid
under Section 1.9(b) or Section 1.9(d) issued upon the surrender for or
exchange of Certificates in accordance with the terms of this Agreement,
shall be deemed to have been issued in full satisfaction of all rights
pertaining to the IRI Shares formerly represented by such Certificates.
(b) Distributions with Respect to Unexchanged Shares. Whenever a
dividend or other distribution is declared by NOI in respect of NOI Common
Stock and the record date for that dividend or other distribution is at or
after the Effective Time, that declaration shall include dividends or other
distributions in respect of all shares issuable under this Agreement. No
dividends or other distributions in respect of the NOI Common Stock shall
be paid to any holder of any unsurrendered Certificate until that
Certificate is surrendered for exchange in accordance with this Article 1.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be issued or paid to the holder of the
certificates representing whole shares of NOI Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
dividends or other distributions with a record date after the Effective
Time and a payment date on or prior to the date of issuance of such whole
shares of NOI Common Stock and not previously paid, and (ii) at the
appropriate payment date, the dividends or other distributions payable with
respect to such whole shares of NOI Common Stock with a record date after
the Effective Time but with a payment date subsequent to surrender. For
purposes of dividends or other distributions in respect of shares of NOI
Common Stock, 6ll shares of NOI Common Stock to be issued pursuant to the
Merger shall be deemed issued and outstanding as of the Effective Time.
(c) No Further Transfers. At the Effective Time, the stock transfer
books of IRI shall be closed and there shall be no further registration of
transfers on the records of IRI of the IRI Shares that were outstanding
immediately prior to the Effective Time.
(d) Fractional Shares. No certificates or scrip representing
fractional shares of NOI Common Stock shall be issued upon the surrender
for exchange of Certificates, and such fractional share interests will not
entitle its owner to vote, to receive dividends or to any other rights of a
stockholder of NOI. Notwithstanding any other provision of this Agreement,
each holder of IRI Shares exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of NOI Common
Stock (after taking into account all Certificates delivered by such holder)
shall receive from the Exchange Agent, in accordance with the provisions of
this Article 1, an amount in cash equal to the product obtained by
multiplying (i) the fractional share interest to which such holder would
otherwise be entitled (after taking into account all IRI Shares held at the
Effective
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Time by such holder) by (ii) the closing price for a share of NOI Common
Stock on the New York Stock Exchange on the business day preceding the date
on which the Effective Time occurs.
(e) Termination of Exchange Period; Unclaimed Stock. Any shares of NOI
Common Stock and any cash to be paid in lieu of fractional shares and any
dividends or other distributions with respect to NOI Common Stock deposited
by NOI with the Exchange Agent that remain unclaimed by the stockholders of
IRI 180 days after the Effective Time shall be paid to NOI. Any former
stockholders of IRI who have not theretofore complied with this Article 1
shall thereafter look only to NOI for payment of their Merger Consideration
and any dividends and other distributions issuable or payable pursuant to
Section 1.8 and Section 1.9(b) upon due surrender of their Certificates (or
affidavits of loss in lieu of Certificates), in each case, without any
interest. Notwithstanding the foregoing, none of NOI, the Surviving
Corporation, the Exchange Agent or any other person shall be liable to any
former holder of IRI Shares for any amount properly delivered to a public
official under applicable abandoned property, escheat or similar laws. If
any Certificates shall not have been surrendered prior to five years after
the Effective Time (or immediately prior to such earlier date on which any
Merger Consideration in respect of such Certificate would otherwise escheat
to or become the property of any governmental entity), any amounts payable
in respect of such Certificate shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of
all claims or interests of any person previously entitled to those amounts.
(f) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have 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 and the posting by such person of a bond in the
form reasonably required by NOI as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate the shares
of NOI Common Stock, any unpaid dividends or other distributions and any
cash payment in lieu of a fractional share in respect of that Certificate
issuable or payable under this Article 1 upon due surrender of and
deliverable in respect of the IRI Shares by such Certificate under this
Agreement, in each case, without interest.
SECTION 1.10 Treatment of Stock Options.
(a) As of the Effective Time of the Merger, each IRI stock option
exercisable for shares of IRI Common Stock under the IRI Option Plan, (as
defined in Section 2.2) will be converted (as converted, a "Converted Stock
Option") by virtue of the Merger and without any action on the part of the
holder thereof, to an option exercisable for that number of shares of NOI
Common Stock equal to the product of (x) the aggregate number of shares of
IRI Common Stock for which such IRI stock option was exercisable and (y)
the Exchange Ratio, rounded, in the case of any IRI stock options other
than an "incentive stock option" (within the meaning of Section 422 of the
Code) up, and in the case of any incentive stock option, down, to the
nearest whole share, if necessary, and the exercise price per share of such
Converted Stock Option shall be equal to the aggregate exercise price of
such IRI Stock Option immediately prior to the Effective Time divided by
the number of shares of NOI Common Stock for which such Converted Stock
Option shall be exercisable, as determined above rounded to the nearest
cent, if necessary. Prior to the Effective Time, IRI shall make such
amendments and take such other actions, if necessary, with respect to the
IRI Option Plan as shall be necessary to permit the adjustment referred to
in this Section 1.10.
(b) It is the intention of the parties that, to the extent that any
IRI Stock Option constituted an incentive stock option immediately prior to
the Effective Time, such option continue to qualify as an incentive stock
option to the maximum extent permitted by Section 422 of the Code, and that
the adjustment of the IRI stock options provided by this Section 1.10
satisfy the conditions of Section 424(a) of the Code.
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SECTION 1.11 IRI Stockholder Support. To induce NOI to enter into this
Agreement, contemporaneously herewith owners of approximately 50.49% of the
issued and outstanding IRI Common Stock shall enter into agreements
substantially in the form attached as Exhibit A attached hereto.
SECTION 1.12 NOI Stockholder Support. To induce IRI to enter into this
Agreement, contemporaneously herewith owners of approximately 16.78% of the
issued and outstanding NOI Common Stock shall enter into agreements
substantially in the form attached as Exhibit B hereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF IRI
Except as expressly set forth in a letter dated the date of this Agreement and
delivered by IRI to NOI concurrently herewith (the "IRI Disclosure Letter"), the
IRI Securities Reports (as defined in Section 2.7) filed after December 31, 1998
and the IRI 1999 audited consolidated financial statements (including the notes
thereto), IRI hereby represents and warrants to NOI as follows:
SECTION 2.1 Corporate Existence. IRI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and it has all requisite corporate power and authority to carry on its business
as now being conducted and to own, lease and operate the properties used in
connection therewith. IRI is duly qualified or licensed to do business and is in
good standing as a foreign corporation 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 the business, financial condition or
results of operations of IRI and its subsidiaries, taken as a whole, excluding
any such effect resulting from (a) changes or conditions affecting the
industries in which IRI and its subsidiaries operate or (b) changes in the
United States economy or financial markets generally (a "IRI Material Adverse
Effect"). All of such jurisdictions are listed in the IRI Disclosure Letter. The
IRI Disclosure Letter sets forth true and correct copies of the Certificate of
Incorporation and bylaws of IRI as currently in effect.
SECTION 2.2 Capitalization. The total authorized capital stock of IRI
consists of 100,000,000 shares of common stock, $.01 par value per share (all
such authorized common stock having been previously defined as IRI Common
Stock), and 25,000,000 shares of preferred stock, $1.00 par value per share
("IRI Preferred Stock"). As of March 10, 2000 (a) 39,900,000 of such shares of
IRI Common Stock were issued and outstanding, (b) no shares of IRI Preferred
Stock were issued and outstanding, (c) no shares of IRI Common Stock were held
as treasury shares and (d) 8,000,000 shares of IRI Common Stock were reserved
for issuance under IRI's Equity Incentive Plan (the "IRI Stock Plan") (2,586,000
of which were subject to outstanding options and 5,414,000 of which were
reserved for future option grants). Since March 10, 2000 no additional shares of
capital stock have been reserved for issuance by IRI and the only issuances of
shares of capital stock of IRI have been issuances of IRI Common Stock upon the
exercise of outstanding IRI stock options as listed in the IRI Disclosure
Letter. All of the issued and outstanding shares of IRI 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 IRI and were issued in compliance with all applicable charter documents of
IRI and all applicable laws, including without limitation all federal, state and
foreign securities laws, rules and regulations. All of the IRI treasury shares
were acquired by IRI in compliance with all applicable laws, including without
limitation all federal, state and foreign securities laws, rules and
regulations. Except for the IRI Stock Plan and as set forth in the IRI
Disclosure Letter, 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 IRI any shares
of, or any securities convertible into, the capital stock of IRI. There are, and
have been, no preemptive rights with respect to any capital stock of IRI.
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SECTION 2.3 Subsidiaries; No Interest in Other Entities.
(a) The IRI Disclosure Letter lists each Subsidiary (as hereinafter
defined) and Joint Venture (as hereinafter defined) of IRI (each a "IRI
Subsidiary", and collectively, the "IRI Subsidiaries"). "Subsidiary" means,
with respect to any party, any corporation, limited liability company,
partnership, joint venture or other business association or entity, at
least a majority of the voting securities or economic interests of which is
directly or indirectly owned or controlled by such party or by any one or
more of its Subsidiaries. "Joint Venture" means, with respect to any party,
any corporation, limited liability company, partnership, joint venture or
other business association or entity in which (i) such party or any one or
more of its Subsidiaries, directly or indirectly, owns or controls more
than five percent and less than a majority of any class of the outstanding
voting securities or economic interests, or (ii) such party or a Subsidiary
of such party is a general partner. Each IRI Subsidiary is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, and each has all requisite power and authority to carry on
its business as now being conducted and to own, lease and operate the
properties used in connection therewith, except for matters that would not
have an IRI Material Adverse Effect. Each IRI Subsidiary 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 an
IRI Material Adverse Effect. All of such jurisdictions are listed in the
IRI Disclosure Letter.
(b) The authorized, issued and outstanding securities of each IRI
Subsidiary, and the ownership thereof, are listed in the IRI Disclosure
Letter. All of such issued and outstanding securities 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 the IRI Subsidiary and were issued in compliance with all
applicable charter documents of the IRI Subsidiary and all applicable laws,
including without limitation all federal, state and foreign securities
laws, rules and regulations. 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 any IRI Subsidiary any shares of, or any securities
convertible into, the securities of any IRI Subsidiary. There are, and have
been, no preemptive rights with respect to the issuance of the securities
of any IRI Subsidiary.
(c) Except as set forth in the IRI Disclosure Letter, IRI is the
lawful owner of record and beneficially of all of the issued and
outstanding securities of each Subsidiary, free and clear of all pledges,
liens, encumbrances, claims, security interests and other charges and
restrictions thereon of every kind, including without limitation any
subscriptions, options, warrants, convertible securities, calls,
commitments, agreements or rights (contingent or otherwise) of any
character granting to any person any interest in or right to acquire from
IRI or any IRI Subsidiary at any time, or upon the happening of any stated
event, any securities of such IRI Subsidiary.
(d) Except as set forth in the IRI Disclosure Letter, IRI owns no
shares of any corporation other than the Subsidiaries and has no other
ownership or other investment interest, either of record, beneficially or
equitably, in any association, partnership, joint venture or legal entity,
except for marketable securities and bank, checking and money market
accounts and other cash equivalent investments.
SECTION 2.4 Authority. IRI has the corporate power to execute, deliver and
perform this Agreement. The execution, delivery and performance hereof by IRI
have been duly authorized by all necessary corporate action, subject to the
approval of the holders of a majority of the outstanding shares of IRI Common
Stock ("IRI Stockholder Approval"). This Agreement is a legal, valid and binding
obligation of IRI and is enforceable against IRI in accordance with its terms,
except as may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting the enforcement of creditors'
rights in general, and except that the enforceability of the Agreement is
subject
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to general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
SECTION 2.5 Validity of Contemplated Transactions; Etc. The execution,
delivery and performance hereof by IRI will not contravene or violate (a)
subject to the consents, approvals, orders, authorizations, filings,
declarations and registrations specified in Section 2.6 or in the IRI Disclosure
Letter in response thereto, any law, rule or regulation to which IRI or any IRI
Subsidiary is subject, (b) any judgment, order, writ, injunction or decree of
any court, arbitrator or governmental or regulatory official, body or authority
which is applicable to IRI or any IRI Subsidiary or (c) the charter documents of
IRI or any IRI Subsidiary; nor will such execution, delivery or performance
violate, be in conflict with or result in the breach (with or without the giving
of notice or lapse of time, or both) of any term, condition or provision of, or
require the consent of any other party to, any contract, commitment, agreement,
lease, license, permit, authorization, document or other understanding, oral or
written, to or by which IRI or any IRI Subsidiary is a party or otherwise bound
or affected or by which any of the assets or properties of IRI or any IRI
Subsidiary may be bound or affected or give any party with rights thereunder the
right to terminate, modify, accelerate, renegotiate or otherwise change the
existing rights or obligations of IRI or any IRI Subsidiary thereunder, or
result in the creation of any lien, claim, encumbrance, security interest,
option, charge or restriction of any kind upon any of the assets or properties
of IRI other than any such violations, conflicts or breaches, or any such
terminations, modifications, accelerations, renegotiations or other change, as
would not, individually or in the aggregate, have an IRI Material Adverse
Effect.
SECTION 2.6 Governmental Consents and Approvals. Except as set forth in
the IRI Disclosure Letter, neither the execution and delivery of this Agreement
by IRI, nor the consummation by IRI of the transactions contemplated hereby will
require any consent, approval, order, authorization or permit of, or filing with
or notification to, any federal, state, local or foreign court, administrative
agency, commission or other governmental or regulatory authority, agency or
instrumentality, except (a) the filing of the Registration Statement (as
hereinafter defined) with the Securities and Exchange Commission (the "SEC") in
accordance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act") and the entry of an order by the
SEC permitting such Registration Statement to become effective, and compliance
with applicable state securities laws, (b) the filing of the Proxy Statement (as
hereinafter defined) and related proxy materials with the SEC in accordance with
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), (c) notification pursuant to, and expiration or
termination of the waiting period under, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), (d) the filing of the Merger Documents in accordance with the
DGCL, and (e) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent it from performing its obligations under this Agreement without having
an IRI Material Adverse Effect.
SECTION 2.7 Securities Reports and Financial Statements. IRI has filed all
forms, reports and documents required to be filed by it by the SEC or pursuant
to relevant securities statutes, regulations, policies and rules (collectively,
the "IRI Securities Reports"), and has provided NOI with a copy of its 1999
audited consolidated financial statements (together with the IRI Securities
Reports, the "IRI Disclosure Documents") and has provided NOI with a draft copy
of its Annual Report on Form 10-K for the year ended December 31, 1999 (the "IRI
Draft Form 10-K"), all of which have complied (or, in the case of the IRI Draft
Form 10-K, will comply) in all material respects with all applicable
requirements of such statutes, regulations, policies and rules. None of the IRI
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 IRI contained in the IRI Disclosure Documents complied
in all material respects with the then applicable accounting requirements and
the published rules and regulations of the relevant securities statutes with
respect thereto, were prepared in accordance with 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
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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) in all material respects the consolidated financial
position of IRI and its consolidated IRI 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 IRI'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.
SECTION 2.8 Absence of Undisclosed Liabilities. Neither IRI nor any IRI
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 IRI
Disclosure Documents or incurred in the ordinary course of business since
December 31, 1999.
SECTION 2.9 Information Supplied. The information supplied by IRI for
inclusion in the registration statement of NOI on Form S-4 pursuant to which
shares of NOI Common Stock will be registered with the SEC (the "Registration
Statement") will not contain, at the time the Registration Statement is declared
effective by the SEC, any untrue statement of a material fact or omit to state
any material fact required to be stated in the Registration Statement or
necessary in order to make the statements in the Registration Statement not
misleading. The information supplied by IRI for inclusion in the joint proxy
statement/prospectus (the "Proxy Statement") to be sent to the stockholders of
IRI in connection with the special meeting of IRI's stockholders to consider
this Agreement and the Merger (the "IRI Stockholders Meeting"), and to the
stockholders of NOI in connection with the meeting of NOI's stockholders at
which this Agreement will be considered (the "NOI Stockholders Meeting") will
not, at the time the Proxy Statement is first mailed to stockholders, at the
time of the IRI Stockholders Meeting, or at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
was made, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made in the
Proxy Statement not false or misleading or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the IRI Stockholders Meeting which has become
false or misleading. If at any time prior to the Effective Time any event
relating to IRI or any IRI Subsidiary or any affiliates of the foregoing should
be discovered by IRI which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, IRI shall
promptly inform NOI.
SECTION 2.10 Existing Condition. Since December 31, 1999, IRI and the IRI
Subsidiaries have conducted their business solely in the ordinary course
consistent with past practice, and have not:
(a) suffered any IRI Material Adverse Effect;
(b) been subject to any other events or conditions of any character
that would have a IRI Material Adverse Effect or impair the ability of IRI
to perform its obligations under this Agreement or prevent or delay the
consummation of any of the transactions contemplated hereby;
(c) made any material change to their respective accounting methods,
principles or practices;
(d) been subject to any revaluation of any of their assets that,
individually or in the aggregate has had, or would reasonably be expected
to have, an IRI Material Adverse Effect, including without limitation
writing down inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
(e) made any change in their authorized or issued capital stock,
granted any stock option or right to purchase shares of capital stock of
IRI or any IRI subsidiary, or declared or paid any dividends;
(f) amended their respective certificates of incorporation (or similar
charter document) or bylaws;
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(g) paid or increased any bonuses, salaries, or other compensation to
any stockholder, director, officer or other employee, except in the
ordinary course of business;
(h) incurred any material liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or
discharged or satisfied any material liens, encumbrances, claims and other
charges and restrictions of any kind, or paid any material liabilities,
other than in the ordinary course of business consistent with past
practice, or failed to pay or discharge when due any liabilities of which
the failure to pay or discharge has caused or will cause any material
damage or risk of material loss to it or any of its material assets or
properties;
(i) taken or been subject to any other action or event that would have
required the consent of NOI pursuant to Section 4.1; or
(j) entered into an agreement, whether oral or written, to do any of
the foregoing.
SECTION 2.11 Taxes. Except with respect to failures which, in the
aggregate, would not result in an IRI Material Adverse Effect, proper and
accurate federal, state, local and foreign 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 IRI and each IRI Subsidiary 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 IRI or an IRI Subsidiary; and the tax provision
reflected in IRI's financial statements is adequate, in accordance with
generally accepted accounting principles, to cover liabilities of IRI and the
IRI Subsidiaries for all taxes, including without limitation any interest,
penalties and additions to taxes of any character whatsoever applicable to IRI
and the IRI Subsidiaries or their assets or businesses. No waiver of any statute
of limitations executed by IRI or an IRI Subsidiary with respect to any tax is
in effect for any period. IRI has not received any notice of reassessment from
the Internal Revenue Service. There are no tax liens on any assets of IRI or the
IRI Subsidiaries except for taxes not yet currently due and those which would
not reasonably be expected to result in an IRI Material Adverse Effect.
SECTION 2.12 Legal Proceedings; Etc. Except as disclosed in the IRI
Securities Reports, there are no claims, actions, suits, investigations,
proceedings or arbitrations, either administrative or judicial, pending, or to
the knowledge of IRI threatened or contemplated, by or against or affecting IRI
or any IRI Subsidiary or their assets or business, before or by any court or
governmental or regulatory official, body or authority, or before an arbitrator
of any kind that, individually or in the aggregate, if adversely determined
would have an IRI Material Adverse Effect, that involve the risk of criminal
liability, or would have the effect of preventing, delaying, making illegal, or
otherwise interfering with any of the transactions contemplated by this
Agreement.
SECTION 2.13 Compliance with Law. IRI and its Subsidiaries are not in
violation of any, law, rule or regulation to which they or their businesses are,
or their operations, assets or properties are, subject and have not failed to
obtain or adhere to the requirements of any license, permit or other
authorization necessary to the ownership of their assets and properties or to
the conduct of their businesses, except for violations and failures as, either
singly or in the aggregate, would not have an IRI Material Adverse Effect.
SECTION 2.14 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 IRI or any IRI Subsidiary under any IRI Plan (as
hereinafter defined) or otherwise, (b) materially increase any benefits
otherwise payable under any IRI Plan or otherwise or (c) result in the
acceleration of the time of payment or vesting of any such benefits.
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SECTION 2.15 Employee Benefit Plans.
(a) Except for the plans set forth in the IRI Disclosure Letter, IRI
does not sponsor or maintain any plan, fund, program, policy, arrangement,
contract or commitment, whether or not qualified for federal income tax
purposes, whether or not funded, whether formal or informal, whether
written or oral, and whether for the benefit of a single individual or more
than one individual, which is in the nature of (i) an employee pension
benefit plan (as defined in section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), (ii) an employee welfare
benefit plan (as defined in section 3(1) of ERISA), (iii) an incentive
current or deferred compensation, or other benefit or compensation
arrangement for employees, former employees, their dependents and/or their
beneficiaries, or (iv) an arrangement that could be characterized as
providing bonus compensation, compensation associated with a change of
control, severance benefits, or fringe benefits. For purposes of this
Section 2.15 the term IRI shall include any enterprise which, with IRI,
forms or formed at any time since September 2, 1974 a controlled group of
corporations within the meaning of section 414(b) of the Code, a group of
trades or businesses under common control within the meaning of section
414(c) of the Code, or any affiliated service group within the meaning of
section 414(m) of the Code.
(b) IRI does not sponsor or maintain, and is not a contributing
employer or otherwise a party to, or has any obligation or liability under
or with respect to, any defined benefit plan within the meaning of section
3(35) of ERISA, whether or not such plan has been terminated, or any
annuity contract related thereto.
(c) The term "IRI Plan" shall include all of the employee benefit
plans and arrangements set forth in the IRI Disclosure Letter, and any
other employee benefit plan of IRI (as defined in section 3(3) of ERISA),
whether terminated (within the past ten years) or currently in effect. With
respect to any IRI Plans, IRI has made available and, if requested,
delivered to NOI true and complete copies of (i) all documents governing
such IRI Plan, and all amendments thereto, (ii) the last three annual
reports relating to such IRI Plans other than any terminated IRI Plan filed
by IRI or any of its subsidiaries or officials of any IRI Plan with the
United States Department of Labor, the Internal Revenue Service, or any
other federal or state regulatory agency, (iii) all summary plan
descriptions, notices and other reporting and disclosure material furnished
to participants in any such IRI Plans, (iv) all accounting and financial
reports prepared with respect to any of such IRI Plans, and (v) all
Internal Revenue Service ruling or determination letters on any of such IRI
Plans. Each financial or other report made available or delivered to NOI
pursuant hereto is complete and accurate in all material respects, and
there have been no material adverse changes in the financial status of any
IRI Plan since the date of the most recent report provided with respect
thereto.
(d) IRI has operated, and has caused its appointees and nominees to
operate, each IRI Plan in a manner which is in material compliance with the
terms thereof and with all applicable law, regulations and administrative
agency rulings and requirements applicable thereto. Each employee, former
employee and every dependent of the foregoing entitled to continuation of
benefit coverage under any employee welfare benefit plan sponsored by IRI
has been accorded all the rights to which such person is entitled as a
matter of law or regulation.
(e) Full payment has been made of all amounts which IRI is required,
under applicable law or under any IRI Plan or any agreement related to any
IRI Plan to which IRI is a party, to have paid as contributions thereto as
of the last day of the most recent fiscal year of each IRI Plan ended prior
to the date hereof. IRI has made adequate provision for reserves to meet
contributions that have not been made because they are not yet due under
the terms of any IRI Plan or related agreements. Benefits under all IRI
Plans are as represented and have not been increased subsequent to the date
as of which documents have been provided.
(f) Each IRI Plan intended to be qualified under sections 401(a),
401(k) and 501(a) of the Code is either a standardized prototype plan
covered by an opinion letter issued by the Internal Revenue Service or a
non-standardized prototype plan or an individually designed plan covered by
a
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determination letter issued by the Internal Revenue Service and nothing has
occurred since the date of such opinion letter or determination letter
which resulted or is likely to result in IRI's inability to rely on such
letter.
(g) IRI has not engaged in any conduct that could result in the
imposition upon IRI of any excise tax under section 4971 through 4980B of
the Code or civil liability under section 502(i) of ERISA.
(h) There is no action, claim or demand of any kind (other than
routine claims for benefits) that has been brought or threatened against
any IRI Plan, or the assets thereof, against any fiduciary of such IRI
Plan, or against IRI with respect to any IRI Plan, and IRI has no knowledge
of any investigation or administrative review that could result in the
imposition on IRI of any penalty or assessment in connection with any IRI
Plan.
(i) IRI is not presently or potentially liable with respect to any
employee benefit plan (as defined in section 3(3) of ERISA), whether
terminated or currently in effect, sponsored, maintained or contributed to
(or with respect to which IRI has or had an obligation to contribute) by
IRI within the five years preceding the date of this Agreement, whether
such plan is a single employer plan, a multiple employer plan, or a
multiemployer plan. Liability to which reference is made herein includes,
but is not limited to, penalties, late payment fees or taxes with respect
to any plan or the administration of any plan and liability with respect to
fiduciary conduct in connection with any such plan, but does not include
claims for benefits in the ordinary course.
(j) IRI does not maintain or participate in, and is not obligated to
contribute to, or has ever maintained or participated in, or been obligated
to contribute to, any "multiemployer plan" within the meaning of section
3(37) of ERISA.
(k) No IRI Plan provides any health, life or other welfare coverage to
employees of IRI beyond termination of their employment with IRI by reason
of retirement or otherwise, other than coverage as may be required under
section 4980B of the Code or part 6 of ERISA, or under the continuation of
coverage provisions of the laws of any state or locality.
(l) IRI has filed or caused to be filed on a timely basis all returns,
reports, statements, notices, declarations, and other documents required by
any federal, state, local or foreign governmental agency, (including
without limitation, the Internal Revenue Service, the Department of Labor,
the Pension Benefit Guaranty Corporation and the SEC) with respect to each
IRI Plan sponsored by or maintained by IRI or with which IRI has or had any
filing obligation. IRI has delivered or caused to be delivered to every
participant, beneficiary and every other party entitled to such material
all plan descriptions, returns, reports, schedules, notices, statements and
similar materials, including without limitation, summary plan descriptions
and reports as are required under title I of ERISA and/or the Code.
(m) IRI has not made any commitment regarding the continuation of any
IRI Plan after the Closing Date and, other than limitations imposed under
the terms of a collective bargaining agreement or under Section 4980B of
the Code, NOI may, or may cause IRI to, without penalty, amend, cancel,
terminate or otherwise modify in any and all respects any such Plan on or
after the Closing Date in accordance with its terms.
(n) Except as would not have an IRI Material Adverse Effect, IRI has
no liability for taxes or benefits with respect to any persons whom IRI has
treated as independent contractors and who currently render or have
rendered services to IRI.
SECTION 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 previously owned or leased by IRI or any IRI Subsidiary that
would reasonably be expected to result in an IRI Material Adverse Effect;
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(b) IRI and the IRI Subsidiaries have in full force and effect all
material environmental permits, licenses, approvals and other
authorizations required to conduct their operations as presently operated
and are operating in material compliance thereunder;
(c) IRI's and the IRI Subsidiaries' operations and use of their assets
do not violate any applicable federal, state, local or foreign 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
without limitation natural resources or any activity which affects the
environment or (iii) the regulation of any pollutants, contaminants, waste,
substances (whether or not hazardous or toxic), including without
limitation 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 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 state,
local and foreign 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 have an IRI Material Adverse Effect;
(d) None of the operations or assets of IRI or any IRI Subsidiary has
ever been conducted or used by IRI or any IRI 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
have an IRI Material Adverse Effect;
(e) No notice has been served on IRI or any IRI 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 have an IRI Material Adverse Effect; and
(f) IRI does not know of any reason it would not be able to renew any
of the material permits, licenses or other authorizations required pursuant
to any Applicable Environmental Laws to operate and use any of IRI's or the
IRI Subsidiaries' assets for their current purposes and uses.
(g) For purposes of this Agreement, "Hazardous Substance" means any
element, compound, substance or material of any nature whatsoever
(including, without limitation, any product) that is listed, classified or
regulated pursuant to any Environmental Law or the subject of any
regulatory action by any Governmental Authority pursuant to any
Environmental Law, including without limitation, any petroleum product,
by-product or additive, asbestos-containing material, polychlorinated
biphenyl, radioactive materials, volatile organic compounds, or hazardous
air pollutant.
SECTION 2.17 No Brokers or Finders. All negotiations by IRI relative to
this Agreement have been carried on by IRI directly without the intervention of
any person who may be entitled to any brokerage or finder's fee or other
commission or compensation in respect hereof or the consummation of the
transactions contemplated hereby.
SECTION 2.18 Pooling Matters. The IRI Disclosure Letter lists all officers
and directors and any other persons who are "affiliates" of IRI for
pooling-of-interests accounting purposes (each, an "IRI Pooling Affiliate"). To
the knowledge of IRI, in accordance with generally accepted accounting
principles and applicable rules and regulations of the SEC, IRI is a poolable
entity. A true and correct copy of a draft opinion of KPMG LLP to such effect is
included in the IRI Disclosure Letter.
SECTION 2.19 Fairness Opinion. The Board of Directors of IRI has been
advised in writing (a copy of which is included in the IRI Disclosure Letter) by
Lehman Brothers Incorporated that, as of the date
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of this Agreement, the Exchange Ratio is fair to stockholders of IRI from a
financial point of view (the "IRI Fairness Opinion").
SECTION 2.20 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon IRI or any IRI
Subsidiary that has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of IRI or any IRI
Subsidiary, any acquisition of property by IRI or any IRI Subsidiary or the
conduct of any business by IRI or any IRI Subsidiary.
SECTION 2.21 Vote Required. The IRI Stockholder Approval is the only vote
of the holders of any class or series of IRI's securities necessary to approve
this Agreement, the Merger and the other transactions contemplated hereby.
SECTION 2.22 Board Action; Etc. The Board of Directors of IRI has
[unanimously] determined that the transactions contemplated by this Agreement
are in the best interests of IRI and its stockholders and advisable and has
resolved to recommend to such stockholders that they vote in favor of adoption
of this Agreement. The Board of Directors of IRI has, [by unanimous vote], duly
and validly approved, and taken all corporate actions required to be taken by
the Board of Directors of IRI for the consummation of the transactions,
including the Merger, contemplated hereby and resolved to recommend that the
stockholders of IRI adopt this Agreement. IRI has been advised by each of its
directors and executive officers that each such person intends to vote his
shares of IRI Common Stock in favor of the adoption of this Agreement.
SECTION 2.23 Completeness of Disclosure. No representation or warranty by
IRI contained in this Agreement, and no representation, warranty or statement
contained in the IRI Disclosure Letter or any list, certificate, exhibit or
other instrument, document, agreement or writing furnished or to be furnished
to, or made with, IRI pursuant hereto or in connection with the negotiation,
execution or performance hereof, contains or will contain any untrue statement
of a material fact or omits or will omit to state any fact necessary to make any
statement herein or therein not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF NOI
Except as expressly set forth in a letter dated the date of this Agreement and
delivered by NOI to IRI concurrently herewith (the "NOI Disclosure Letter"), the
NOI Securities Reports (as defined in Section 3.7) filed after December 31, 1998
and the NOI 1999 audited consolidated financial statements (including the notes
thereto), NOI hereby represents and warrants to IRI as follows:
SECTION 3.1 Corporate Existence. NOI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and it has all requisite corporate power and authority to carry on its business
as now being conducted and to own, lease and operate the properties used in
connection therewith. NOI is duly qualified or licensed to do business and is in
good standing as a foreign corporation 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 the business, financial condition or
results of operations of NOI and its subsidiaries, taken as a whole excluding
any such effect resulting from (a) changes or conditions generally affecting the
industries in which NOI and its subsidiaries operate or (b) changes in the
United States economy or financial markets generally (a "NOI Material Adverse
Effect"). All of such jurisdictions are listed in the NOI Disclosure Letter. The
NOI Disclosure Letter sets forth true and correct copies of the Certificate of
Incorporation and Bylaws of NOI and Acquisition as currently in effect.
SECTION 3.2 Capitalization. The total authorized capital stock of NOI
consists of 75,000,000 shares of common stock, par value $.01 per share (all
such authorized common stock having been previously defined as NOI Common
Stock), and 10,000,000 shares of preferred stock, par value $.01 per share
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("NOI Preferred Stock"). As of March 10, 2000, (a) 66,283,519 shares of NOI
Common Stock were issued and outstanding (assuming the conversion of the
exchangeable shares issued in connection with the combination of NOI and Dreco
Energy Services Ltd.), (b) no shares of NOI Preferred Stock were issued and
outstanding, (c) no shares of NOI Common Stock were held as treasury shares and
(d) 2,762,692 shares of NOI Common Stock were subject to issuance under NOI's
long term incentive plans (the "NOI Stock Plans"). Since March 10, 2000 no
additional shares of capital stock have been reserved for issuance by NOI and
the only issuances of shares of capital stock of NOI have been issuances of NOI
Common Stock upon the exercise of outstanding NOI stock options as listed in the
NOI Disclosure Letter. All of the issued and outstanding shares of 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 laws, including without
limitation all federal, state and foreign securities laws, rules and
regulations. Except for the NOI Stock Plans and as set forth in the NOI
Disclosure Letter, 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. There are, and
have been, no preemptive rights with respect to any capital stock of NOI.
SECTION 3.3 Subsidiaries; No Interest in Other Entities.
(a) The NOI Disclosure Letter lists each Subsidiary and Joint Venture
of NOI (each a "NOI Subsidiary", and collectively the "NOI Subsidiaries").
Each NOI Subsidiary is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and each has
all requisite power and authority to carry on its business as now being
conducted and to own, lease and operate the properties used in connection
therewith, except for matters that would not have a NOI Material Adverse
Effect. Each NOI Subsidiary 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 NOI Material
Adverse Effect. All of such jurisdictions are listed in the NOI Disclosure
Letter.
(b) The authorized, issued and outstanding securities of each NOI
Subsidiary, and the ownership thereof, are listed in the NOI Disclosure
Letter. All of such issued and outstanding securities 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 the NOI Subsidiary and were issued in compliance with all
applicable charter documents of the NOI Subsidiary and all applicable laws,
including without limitation all federal, state and foreign securities
laws, rules and regulations. 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 any NOI Subsidiary any shares of, or any securities
convertible into, the securities of any NOI Subsidiary. There are, and have
been, no preemptive rights with respect to the issuance of the securities
of any NOI Subsidiary.
(c) Except as set forth in the NOI Disclosure Letter, NOI is the
lawful owner of record and beneficially of all of the issued and
outstanding securities of each Subsidiary, free and clear of all pledges,
liens, encumbrances, claims and other charges and restrictions thereon of
every kind, including without limitation any subscriptions, options,
warrants, convertible securities, calls, commitments, agreements or rights
(contingent or otherwise) of any character granting to any person any
interest in or right to acquire from NOI or any NOI Subsidiary at any time,
or upon the happening of any stated event, any securities of such NOI
Subsidiary.
(d) Except as set forth in the NOI Disclosure Letter, NOI owns no
shares of any corporation other than the Subsidiaries and has no other
ownership or other investment interest, either of record, beneficially or
equitably, in any association, partnership, joint venture or legal entity,
except for
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marketable securities and bank, checking and money market accounts and
other cash equivalent investments.
SECTION 3.4 Authority. Each of NOI and Acquisition has the corporate power
to execute, deliver and perform this Agreement. The execution, delivery and
performance hereof by each of NOI and Acquisition have been duly authorized by
all necessary corporate action, subject to the approval of the holders of a
majority of the outstanding shares of NOI Common Stock ("NOI Stockholder
Approval"). This Agreement is a legal, valid and binding obligation of each of
NOI and Acquisition and is enforceable against NOI and Acquisition in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other laws affecting the
enforcement of creditors' rights in general, and except that the enforceability
of the Agreement is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 3.5 Validity of Contemplated Transactions; Etc. The execution,
delivery and performance by NOI will not contravene or violate (a) subject to
the consents, approvals, orders, authorizations, filings, declarations and
registrations specified in Section 3.6 or in the NOI Disclosure Letter in
response thereto, any law, rule or regulation to which NOI or any NOI Subsidiary
is subject, (b) any judgment, order, writ, injunction or decree of any court,
arbitrator or governmental or regulatory official, body or authority which is
applicable to NOI or any NOI Subsidiary or (c) the charter documents of NOI or
any NOI Subsidiary; nor will such execution, delivery or performance violate, be
in conflict with or result in the breach (with or without the giving of notice
or lapse of time, or both) of any term, condition or provision of, or require
the consent of any other party to, any contract, commitment, agreement, lease,
license, permit, authorization, document or other understanding, oral or
written, to or by which NOI or any NOI Subsidiary is a party or otherwise bound
or affected or by which any of the assets or properties of NOI or any NOI
Subsidiary may be bound or affected or give any party with rights thereunder the
right to terminate, modify, accelerate, renegotiate or otherwise change the
existing rights or obligations of NOI or any NOI Subsidiary thereunder, or
result in the creation of any lien, claim, encumbrance, security interest,
option, charge or restriction of any kind upon any of the assets or properties
of NOI, other than any such violations, conflicts or breaches, or any such
terminations, modifications, accelerations, renegotiations or other change, as
would not, individually or in the aggregate, have a NOI Material Adverse Effect.
SECTION 3.6 Governmental Consents and Approvals. Except as set forth in
the NOI Disclosure Letter, neither the execution and delivery of this Agreement
by NOI or Acquisition, nor the consummation by NOI and Acquisition of the
transactions contemplated hereby will require any consent, approval, order,
authorization or permit of, or filing with or notification to, any federal,
state, local or foreign court, administrative agency, commission or other
governmental or regulatory authority, agency or instrumentality, except (a) the
filing of the Registration Statement with the SEC in accordance with the
Securities Act and the entry of an order by the SEC permitting such Registration
Statement to become effective, and compliance with applicable state securities
laws, (b) the filing of the Proxy Statement and related proxy materials with the
SEC in accordance with the Exchange Act, (c) notification pursuant to, and
expiration or termination of the waiting period under, the HSR Act, (d) the
filing of the Merger Documents in accordance with the DGCL, and (e) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent it from performing its
obligations under this Agreement without having a NOI Material Adverse Effect.
SECTION 3.7 Securities Reports and Financial Statements. NOI has filed all
forms, reports and documents required to be filed by it by the SEC or pursuant
to relevant securities statutes, regulations, policies and rules (collectively,
the "NOI Securities Reports"), and has provided IRI with a copy of its 1999
audited consolidated financial statements (together with the NOI Securities
Reports (the "NOI Disclosure Documents") and has provided NOI with a draft of
copy of its Annual Report on Form 10-K for the year ended December 31, 1999 (the
"[NOI Draft Form 10-K"), all of which have complied (or in the case of the NOI
Draft Form 10-K will comply) in all material respects with all applicable
requirements of such statutes, regulations, policies and rules. None of the NOI
Securities Reports, at the
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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 NOI contained in the NOI Disclosure Documents complied in all
material respects with the then applicable accounting requirements and the
published rules and regulations of the relevant securities statutes with respect
thereto, were prepared in accordance with 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) in all material respects 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.
SECTION 3.8 Absence of Undisclosed 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
Disclosure Documents or incurred in the ordinary course of business since
December 31, 1999.
SECTION 3.9 Information Supplied. The information supplied by NOI for
inclusion in the Registration Statement will not contain, at the time the
Registration Statement is declared effective by the SEC, any untrue statement of
a material fact or omit to state any material fact required to be stated in the
Registration Statement or necessary in order to make the statements in the
Registration Statement not misleading. The information supplied by NOI for
inclusion in the Proxy Statement will not, at the time the Proxy Statement is
first mailed to stockholders, at the time of the IRI Stockholders Meeting or NOI
Stockholders Meeting, or at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it was made, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made in the Proxy Statement not false
or misleading or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the NOI Stockholders Meeting which has become false or misleading.
If at any time prior to the Effective Time any event relating to NOI or any NOI
Subsidiary or any affiliates of the foregoing should be discovered by NOI which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, NOI shall promptly inform IRI.
SECTION 3.10 Existing Condition. Since December 31, 1999, NOI and the NOI
Subsidiaries have conducted their business solely in the ordinary course
consistent with past practice, and have not:
(a) suffered any NOI Material Adverse Effect;
(b) been subject to any other events or conditions of any character
that would have a NOI Material Adverse Effect or impair the ability of NOI
to perform its obligations under this Agreement or prevent or delay the
consummation of any of the transactions contemplated hereby;
(c) made any material change to their respective accounting methods,
principles or practices;
(d) been subject to any revaluation of any of their assets that,
individually or in the aggregate has had, or would reasonably be expected
to have, a NOI Material Adverse Effect, including without limitation
writing down inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
(e) made any change in their authorized or issued capital stock,
granted any stock option or right to purchase shares of capital stock of
NOI or any NOI subsidiary or declared or paid any dividends;
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(f) amended their respective certificates of incorporation (or similar
charter documents) or bylaws;
(g) paid or increased any bonuses, salaries, or other compensation to
any stockholder, director, officer or employees, excepts in the ordinary
course of business;
(h) incurred any material liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or
discharged or satisfied any material liens, encumbrances, claims and other
charges and restrictions of any kind, or paid any material liabilities,
other than in the ordinary course of business consistent with past
practice, or failed to pay or discharge when due any liabilities of which
the failure to pay or discharge has caused or will cause any material
damage or risk of material loss to it or any of its material assets or
properties;
(i) taken or been subject to any other action or event that would have
required the consent of IRI pursuant to Section 4.2; or
(j) entered into an agreement, whether oral or written, to do any of
the foregoing.
SECTION 3.11 Taxes. Except with respect to failures which, in the
aggregate, would not result in a NOI Material Adverse Effect, proper and
accurate federal, state, local and foreign 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 NOI Subsidiary 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
generally accepted accounting principles, to cover liabilities of NOI and the
NOI Subsidiaries for all taxes, including without limitation 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. NOI has not received any notice of reassessment from the
Internal Revenue Service. There are no tax liens on any assets of NOI or the NOI
Subsidiaries except for taxes not yet currently due and those which would not
reasonably be expected to result in a NOI Material Adverse Effect.
SECTION 3.12 Legal Proceedings; Etc. Except as disclosed in the NOI
Securities Reports, there are no claims, actions, suits, investigations,
proceedings or arbitrations, either administrative or judicial, pending, or to
the knowledge of NOI threatened or contemplated, by or against or affecting NOI
or any NOI Subsidiary or their assets or business, before or by any court or
governmental or regulatory official, body or authority, or before an arbitrator
of any kind that, individually or in the aggregate, if adversely determined
would have a NOI Material Adverse Effect, or that involve the risk of criminal
liability, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with any of the transactions contemplated by this
Agreement.
SECTION 3.13 Compliance with Law. NOI and its Subsidiaries are not in
violation of any, law, rule or regulation to which they or their businesses are,
or their operations, assets or properties are, subject and have not failed to
obtain or adhere to the requirements of any license, permit or other
authorization necessary to the ownership of their assets and properties or to
the conduct of their businesses, except for violations and failures as, either
singly or in the aggregate, would not have a NOI Material Adverse Effect.
SECTION 3.14 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 NOI Subsidiary 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.
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SECTION 3.15 Employee Benefit Plans.
(a) Except for the plans set forth in the NOI Disclosure Letter, NOI
does not sponsor or maintain any plan, fund, program, policy, arrangement,
contract or commitment, whether or not qualified for federal income tax
purposes, whether or not funded, whether formal or informal, whether
written or oral, and whether for the benefit of a single individual or more
than one individual, which is in the nature of (i) an employee pension
benefit plan (as defined in section 3(2) of ERISA), (ii) an employee
welfare benefit plan (as defined in section 3(1) of ERISA), (iii) an
incentive current or deferred compensation, or other benefit or
compensation arrangement for employees, former employees, their dependents
and/or their beneficiaries, or (iv) an arrangement that could be
characterized as providing bonus compensation, compensation associated with
a change of control, severance benefits, or fringe benefits. For purposes
of this Section 3.15 the term NOI shall include any enterprise which, with
NOI, forms or formed at any time since September 2, 1974 a controlled group
of corporations within the meaning of section 414(b) of the Code, a group
of trades or businesses under common control within the meaning of section
414(c) of the Code, or any affiliated service group within the meaning of
section 414(m) of the Code.
(b) NOI does not sponsor or maintain, and is not a contributing
employer or otherwise a party to, or has any obligation or liability under
or with respect to, any defined benefit plan within the meaning of section
3(35) of ERISA, whether or not such plan has been terminated, or any
annuity contract related thereto.
(c) The term "NOI Plan" shall include all of the employee benefit
plans and arrangements set forth in the NOI Disclosure Letter, and any
other employee benefit plan of NOI (as defined in section 3(3) of ERISA),
whether terminated (within the past ten years) or currently in effect. With
respect to any NOI Plans, NOI has made available and, if requested,
delivered to IRI true and complete copies of (i) all documents governing
such NOI Plan, and all amendments thereto, (ii) the last three annual
reports relating to such NOI Plans other than any terminated NOI Plan filed
by NOI or any of its subsidiaries or officials of any NOI Plan with the
United States Department of Labor, the Internal Revenue Service, or any
other federal or state regulatory agency, (iii) all summary plan
descriptions, notices and other reporting and disclosure material furnished
to participants in any such NOI Plans, (iv) all accounting and financial
reports prepared with respect to any of such NOI Plans, and (v) all
Internal Revenue Service ruling or determination letters on any of such NOI
Plans. Each financial or other report made available or delivered to IRI
pursuant hereto is complete and accurate in all material respects, and
there have been no material adverse changes in the financial status of any
NOI Plan since the date of the most recent report provided with respect
thereto.
(d) NOI has operated, and has caused its appointees and nominees to
operate, each NOI Plan in a manner which is in material compliance with the
terms thereof and with all applicable law, regulations and administrative
agency rulings and requirements applicable thereto. Each employee, former
employee and every dependent of the foregoing entitled to continuation of
benefit coverage under any employee welfare benefit plan sponsored by NOI
has been accorded all the rights to which such person is entitled as a
matter of law or regulation.
(e) Full payment has been made of all amounts which NOI is required,
under applicable law or under any NOI Plan or any agreement related to any
NOI Plan to which NOI is a party, to have paid as contributions thereto as
of the last day of the most recent fiscal year of each NOI Plan ended prior
to the date hereof. NOI has made adequate provision for reserves to meet
contributions that have not been made because they are not yet due under
the terms of any NOI Plan or related agreements. Benefits under all NOI
Plans are as represented and have not been increased subsequent to the date
as of which documents have been provided.
(f) Each NOI Plan intended to be qualified under sections 401(a),
401(k) and 501(a) of the Code is either a standardized prototype plan
covered by an opinion letter issued by the Internal Revenue Service or a
non-standardized prototype plan or an individually designed plan covered by
a
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determination letter issued by the Internal Revenue Service and nothing has
occurred since the date of such opinion letter or determination letter
which resulted or is likely to result in NOI's inability to rely on such
letter.
(g) NOI has not engaged in any conduct that could result in the
imposition upon NOI of any excise tax under section 4971 through 4980B of
the Code or civil liability under section 502(i) of ERISA.
(h) There is no action, claim or demand of any kind (other than
routine claims for benefits) that has been brought or threatened against
any NOI Plan, or the assets thereof, against any fiduciary of such NOI
Plan, or against NOI with respect to any NOI Plan, and NOI has no knowledge
of any investigation or administrative review that could result in the
imposition on NOI of any penalty or assessment in connection with any NOI
Plan.
(i) NOI is not presently or potentially liable with respect to any
employee benefit plan (as defined in section 3(3) of ERISA), whether
terminated or currently in effect, sponsored, maintained or contributed to
(or with respect to which NOI has or had an obligation to contribute) by
NOI within the five years preceding the date of this Agreement, whether
such plan is a single employer plan, a multiple employer plan, or a
multiemployer plan. Liability to which reference is made herein includes,
but is not limited to, penalties, late payment fees or taxes with respect
to any plan or the administration of any plan and liability with respect to
fiduciary conduct in connection with any such plan, but does not include
claims for benefits in the ordinary course.
(j) NOI does not maintain or participate in, and is not obligated to
contribute to, or has ever maintained or participated in, or been obligated
to contribute to, any "multiemployer plan" within the meaning of section
3(37) of ERISA.
(k) No NOI Plan provides any health, life or other welfare coverage to
employees of NOI beyond termination of their employment with NOI by reason
of retirement or otherwise, other than coverage as may be required under
section 4980B of the Code or part 6 of ERISA, or under the continuation of
coverage provisions of the laws of any state or locality.
(l) NOI has filed or caused to be filed on a timely basis all returns,
reports, statements, notices, declarations, and other documents required by
any federal, state, local or foreign governmental agency, (including
without limitation, the Internal Revenue Service, the Department of Labor,
the Pension Benefit Guaranty Corporation and the SEC) with respect to each
NOI Plan sponsored by or maintained by NOI or with which NOI has or had any
filing obligation. NOI has delivered or caused to be delivered to every
participant, beneficiary and every other party entitled to such material
all plan descriptions, returns, reports, schedules, notices, statements and
similar materials, including without limitation, summary plan descriptions
and reports as are required under title I of ERISA and/or the Code.
(m) NOI has not made any commitment regarding the continuation of any
NOI Plan after the Closing Date and, other than limitations imposed under
the terms of a collective bargaining agreement under Section 4980B of the
Code, NOI may, without penalty, amend, cancel, terminate or otherwise
modify in any and all respects any such Plan on or after the Closing Date
in accordance with its terms.
(n) Except as would not have a NOI Material Adverse Effect, NOI has no
liability for taxes or benefits with respect to any such persons whom NOI
has treated as independent contractors who currently render or have
rendered services to NOI.
SECTION 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 previously owned or leased by NOI or any NOI Subsidiary that
would reasonably be expected to result in a NOI Material Adverse Effect;
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(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 as presently operated
and are operating in material compliance thereunder;
(c) NOI's and the NOI Subsidiaries' operations and use of their assets
do not violate any applicable federal, state, local or foreign 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
without limitation natural resources or any activity which affects the
environment or (iii) the regulation of any pollutants, contaminants, waste,
substances (whether or not hazardous or toxic), including without
limitation the Applicable Environmental Laws, except for violations which,
either singly or in the aggregate, would not have a NOI Material Adverse
Effect;
(d) 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
have a NOI Material Adverse Effect;
(e) No 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 any of the foregoing which, either singly or in the aggregate, would
not have a NOI Material Adverse Effect; and
(f) NOI does not know of any reason it would not be able to renew any
of the material 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.
SECTION 3.17 No Brokers or Finders. All negotiations by NOI relative to
this Agreement have been carried on by NOI directly without the intervention of
any person who may be entitled to any brokerage or finder's fee or other
commission or compensation in respect hereof or the consummation of the
transactions contemplated hereby.
SECTION 3.18 Pooling Matters. The NOI Disclosure Letter lists all officers
and directors and any other persons who are "affiliates" of NOI for
pooling-of-interests accounting purposes (each, a "NOI Pooling Affiliate"). To
the knowledge of NOI, in accordance with generally accepted accounting
principles and applicable rules and regulations of the SEC, NOI is a poolable
entity and the Merger will be treated as a "pooling-of-interests" for accounting
purposes. A true and correct copy of a draft opinion of Ernst & Young LLP to
such effect is included in the NOI Disclosure Letter.
SECTION 3.19 Fairness Opinion. The Board of Directors of NOI has been
advised in writing (a copy of which is included in the NOI Disclosure Letter) by
Merrill Lynch & Co. that the Exchange Ratio is fair to NOI from a financial
point of view (the "NOI Fairness Opinion").
SECTION 3.20 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or 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.
SECTION 3.21 Vote Required. The NOI Stockholder Approval and approval of
an amendment to NOI's Certificate of Incorporation to increase the authorized
amount of NOI common stock from 75 million shares to 150 million shares (the
"Additional Shares Amendment") are the only votes of the holders of any class or
series of NOI's securities necessary to approve this Agreement, the Merger and
the other transactions contemplated hereby.]
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SECTION 3.22 Board Action; Etc. The Board of Directors of NOI has
unanimously determined that the transactions contemplated by this Agreement are
in the best interests of NOI and its stockholders and has resolved to recommend
to such stockholders that they vote in favor of adoption of this Agreement and
in favor of the Additional Shares Amendment. The Board of Directors of NOI has,
by unanimous vote of those present, duly and validly approved, and taken all
corporate actions required to be taken by the Board of Directors of NOI for the
consummation of the transactions, including the Merger, contemplated hereby and
resolved to recommend that the stockholders of NOI adopt this Agreement. NOI has
been advised by each of its directors and executive officers that each such
person intends to vote his shares of NOI Common Stock in favor of adoption of
this Agreement and in favor of the Additional Shares Amendment.
SECTION 3.23 Completeness of Disclosure. No representation or warranty by
NOI contained in this Agreement, and no representation, warranty or statement
contained in the NOI Disclosure Letter or any list, certificate, Exhibit or
other instrument, document, agreement or writing furnished or to be furnished
to, or made with, NOI pursuant hereto or in connection with the negotiation,
execution or performance hereof, contains or will contain any untrue statement
of a material fact or omits or will omit to state any fact necessary to make any
statement herein or therein not misleading.
SECTION 3.24 No Prior Activities by Acquisition. Except in connection with
its incorporation or organization or the negotiation and consummation of this
Agreement and the transactions contemplated hereby, Acquisition has not incurred
any obligations or liabilities and has not engaged in any business or activities
of any type whatsoever or entered into any agreements or arrangements with any
person or entity.
ARTICLE 4
OTHER AGREEMENTS
SECTION 4.1 Conduct of IRI's Business. IRI covenants and agrees that,
between the date of this Agreement and the Effective Time, unless NOI shall
otherwise consent in writing, except as otherwise expressly contemplated hereby
or as set forth in the IRI Disclosure Letter:
(a) The business of IRI and the IRI Subsidiaries shall be conducted
only in, and such entities shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice;
(b) IRI and the IRI Subsidiaries shall use their reasonable efforts to
preserve substantially intact the business organization of IRI and the IRI
Subsidiaries, to keep available the services of those of its present
officers, employees and consultants that are integral to the operation of
its business as presently conducted and to preserve the present
relationships of IRI and the IRI Subsidiaries with customers, suppliers and
other persons with which IRI and the IRI Subsidiaries have significant
business relations.
By way of amplification and not limitation, except as otherwise expressly
contemplated by this Agreement, IRI agrees on behalf of itself and the IRI
Subsidiaries that, without the prior written consent of NOI, each of IRI
and the IRI Subsidiaries will, between the date of this Agreement and the
Effective Time:
(c) not, directly or indirectly, do any of the following: (i) amend or
propose to amend its charter documents or by-laws; (ii) split, combine or
reclassify any outstanding shares of its capital stock, or declare, set
aside or pay any dividend payable in cash, stock, property or otherwise
with respect to such shares; (iii) redeem, purchase, acquire or offer to
acquire any shares of its capital stock; (iv) issue, sell, pledge or
dispose of, or agree to issue, sell, pledge or dispose of, any additional
shares of, or securities convertible or exchangeable for, or any options,
warrants or rights of any kind to acquire any shares of, its capital stock
of any class or other property or assets whether pursuant to any rights
agreement, stock option plans described in the IRI Disclosure Letter or
otherwise, provided that IRI may issue shares of IRI Common Stock pursuant
to currently outstanding options referred to in the IRI Disclosure Letter;
(v) accelerate, amend or change the period of exercisability of options or
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restricted stock granted under any of IRI Stock Plans or authorize cash
payments in exchange for any options granted under any of such plans except
as required by the terms of such plans or any related agreements in effect
as of the date of this Agreement, or (vi) enter into any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this paragraph (c);
(d) not, directly or indirectly, (i) acquire (by merger, consolidation
or acquisition of stock or assets) any corporation, partnership, limited
liability company or other business organization or division thereof, or
make any equity investments therein (or fail to dispose of, in an orderly
manner, any marketable equity securities owned by IRI on the date hereof);
(ii) except in the ordinary course of business and consistent with past
practices, sell, pledge, dispose of or encumber any assets (including
without limitation licenses, permits, authorizations or rights) of IRI or
the IRI Subsidiaries or enter into any securitization transactions; (iii)
incur any indebtedness for borrowed money except borrowings under existing
revolving credit arrangements in an amount not exceeding $10,000,000 in the
aggregate, (iv) make any commitments or agreements for capital expenditures
or capital additions or betterments exceeding in the aggregate $4,000,000
except such as may be involved in ordinary repair, maintenance or
replacement of its assets; (v) enter into or modify any material contract,
lease or agreement except in the ordinary course of business and consistent
with past practice; (vi) terminate, modify, assign, waive, release or
relinquish any material contract rights or amend any material rights or
claims not in the ordinary course of business or except as expressly
provided herein; or (vii) enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this paragraph
(d);
(e) not, directly or indirectly, (i) initiate any litigation or
arbitration proceeding other than in the ordinary course of business; (ii)
revalue any of its assets, including without limitation writing down the
value of inventory or writing off notes or accounts receivable, other than
in the ordinary course of business pursuant to arm's length transactions on
commercially reasonable terms; (iii) make any material change to its
accounting methods, principles or practices; or (iv) settle or compromise
any tax liability, or prepare or file any tax return inconsistent with past
practice or, on any such tax return, take any position, make any election
or adopt any method that is inconsistent with positions taken, elections
made or methods used in preparing or filing similar tax returns in prior
periods;
(f) not, directly or indirectly, (i) grant any increase in the salary
or other compensation of its employees except in the ordinary course of
business and consistent with past practice or grant any bonus to any
employee or enter into any employment agreement or make any loan to or
enter into any material transaction of any other nature with any officer or
employee of IRI; (ii) take any action to institute any new severance or
termination pay practices with respect to any directors, officers or
employees of IRI or to increase the benefits payable under its severance or
termination pay practices; or (iii) adopt or amend, in any respect, except
as may be required by applicable law or regulation, any bonus, profit
sharing, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment or other employee benefit plan,
agreement, trust, fund, plan or arrangement for the benefit or welfare of
any directors, officers or employees;
(g) not, directly or indirectly, take any action which would cause its
representations and warranties contained herein to become inaccurate in any
material respect;
(h) not, directly or indirectly, take (and will use reasonable efforts
to prevent any affiliate of IRI from taking) or agree in writing or
otherwise to take, (i) any of the actions described in this Section 4.l;
(ii) any action which would make any of IRI's representations or warranties
in this Agreement, if made on and as of the date of such action or
agreement, untrue or incorrect in any material respect; (iii) any action
which could prevent it from performing, or cause it not to perform, its
obligations under this Agreement; or (iv) any action that would cause the
Merger not to be treated as a "pooling-of-interests" for accounting
purposes and a reorganization within the meaning of Section 368(a) of the
Code; and
(i) promptly disclose to NOI any information contained in its
representations and warranties or the IRI Disclosure Letter which, because
of an event occurring after the date hereof, is incomplete or
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is no longer correct as of all times after the date hereof until the
Closing Date; provided, however, that none of such disclosures shall be
deemed to modify, amend or supplement the representations and warranties of
IRI or the IRI Disclosure Letter for the purposes of Article 5, unless NOI
shall have consented thereto in writing.
SECTION 4.2 Conduct of NOI's Business. NOI covenants and agrees that,
between the date of this Agreement and the Effective Time, unless IRI shall
otherwise consent in writing, except as otherwise expressly contemplated hereby
or as set forth in the NOI Disclosure Letter:
(a) The business of NOI and the NOI Subsidiaries shall be conducted
only in, and such entities shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice;
(b) NOI and the NOI Subsidiaries shall use their reasonable efforts to
preserve substantially intact the business organization of NOI and the NOI
Subsidiaries, to keep available the services of those of its present
officers, employees and consultants that are integral to the operation of
its business as presently conducted and to preserve the present
relationships of NOI and the NOI Subsidiaries with customers, suppliers and
other persons with which NOI and the NOI Subsidiaries have significant
business relations.
By way of amplification and not limitation, except as otherwise expressly
contemplated by this Agreement, NOI agrees on behalf of itself and the NOI
Subsidiaries that, without the prior written consent of IRI, each of NOI
and the NOI Subsidiaries will, between the date of this Agreement and the
Effective Time:
(c) not, directly or indirectly, do any of the following: (i) amend or
propose to amend its charter documents or by-laws; (ii) split, combine or
reclassify any outstanding shares of its capital stock, or declare, set
aside or pay any dividend payable in cash, stock, property or otherwise
with respect to such shares; (iii) redeem, purchase, acquire or offer to
acquire any shares of its capital stock; (iv) issue, sell, pledge or
dispose of, or agree to issue, sell, pledge or dispose of, any additional
shares of, or securities convertible or exchangeable for, or any options,
warrants or rights of any kind to acquire any shares of, its capital stock
of any class or other property or assets whether pursuant to any rights
agreement, stock option plans described in the NOI Disclosure Letter or
otherwise, provided that NOI may issue shares of NOI Common Stock (A)
pursuant to currently outstanding options referred to in the NOI Disclosure
Letter; (B) pursuant to acquisitions (provided that any such acquisition
would not constitute a significant business combination within the meaning
of Rule 11-01(b) of Regulation S-X of the SEC or delay consummation of the
Merger); or (C) in other transactions in an amount not exceeding 3,000,000
shares in the aggregate for such other transactions, provided that no such
transaction shall delay consummation of the Merger; (v) accelerate, amend
or change the period of exercisability of options or restricted stock
granted under any of NOI Stock Plans or authorize cash payments in exchange
for any options granted under any of such plans except as required by the
terms of such plans or any related agreements in effect as of the date of
this Agreement, or (vi) enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this paragraph
(c);
(d) not, directly or indirectly, (i) sell, pledge, dispose of or
encumber any assets (including without limitation licenses, permits,
authorizations or rights) of NOI or the NOI Subsidiaries or enter into any
securitization transactions; (ii) incur any indebtedness for borrowed money
or issue any debt securities exceeding $100,000,000 in the aggregate, (iii)
make any commitments or agreements for capital expenditures or capital
additions or betterments exceeding in the aggregate $25,000,000 except such
as may be involved in ordinary repair, maintenance or replacement of its
assets or pursuant to acquisitions; or (iv) enter into any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this paragraph (d);
(e) other than in the ordinary course of business, not, directly or
indirectly, (i) initiate any litigation or arbitration proceeding; (ii)
revalue any of its assets, including without limitation writing
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down the value of inventory or writing off notes or accounts receivable;
(iii) make any material change to its accounting methods, principles or
practices; or (iv) settle or compromise any tax liability, or prepare or
file any tax return inconsistent with past practice or, on any such tax
return, take any position, make any election or adopt any method that is
inconsistent with positions taken, elections made or methods used in
preparing or filing similar tax returns in prior periods;
(f) except in the ordinary course of business consistent with past
practice, not, directly or indirectly, (i) grant any increase in the salary
or other compensation of its employees or grant any bonus to any employee
or enter into any employment agreement or make any loan to or enter into
any material transaction of any other nature with any officer or employee
of NOI; (ii) take any action to institute any new severance or termination
pay practices with respect to any directors, officers or employees of NOI
or to increase the benefits payable under its severance or termination pay
practices; or (iii) adopt or amend, in any respect, except as may be
required by applicable law or regulation, any bonus, profit sharing,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust,
fund, plan or arrangement for the benefit or welfare of any directors,
officers or employees;
(g) not, directly or indirectly, take any action which would cause its
representations and warranties contained herein to become inaccurate in any
material respect;
(h) not, directly or indirectly, take (and will use reasonable efforts
to prevent any affiliate of NOI from taking) or agree in writing or
otherwise to take, (i) any of the actions described in this Section 4.2;
(ii) any action which would make any of NOI's representations or warranties
in this Agreement, if made on and as of the date of such action or
agreement, untrue or incorrect in any material respect; (iii) any action
which could prevent it from performing, or cause it not to perform, its
obligations under this Agreement; or (iv) any action that would cause the
Merger not to be treated as a "pooling-of-interests" for accounting
purposes and a reorganization within the meaning of section 368(a) of the
Code; and
(i) promptly disclose to IRI any information contained in its
representations and warranties or the NOI Disclosure Letter which, because
of an event occurring after the date hereof, is incomplete or is no longer
correct as of all times after the date hereof until the Closing Date;
provided, however, that none of such disclosures shall be deemed to modify,
amend or supplement the representations and warranties of NOI or the NOI
Disclosure Letter for the purposes of Article 5, unless IRI shall have
consented thereto in writing.
SECTION 4.3 NYSE Listing. NOI shall as promptly as practicable following
the date hereof apply for approval for listing of the NOI Common Stock to be
issued pursuant to the Merger on the New York Stock Exchange (the "NYSE").
SECTION 4.4 Access. Between the date of this Agreement and the Effective
Time, IRI and NOI will each (a) give the other party and its authorized
representatives reasonable access, during regular business hours upon reasonable
notice, to its officers, directors, representatives, facilities and books and
records, (b) permit the other party and its authorized representatives to make
such reasonable inspections as it may require, and (c) cause its officers and
those of its subsidiaries to furnish the other party and its representatives
with such financial and operating data and other information with respect to its
business and properties, as the other party and its representatives may from
time to time reasonably request. In the event either party requests access to
information that the other party considers highly confidential, the party
receiving the request may indicate that the information requested is
confidential. If the parties cannot agree on an acceptable method to review the
information, the party requesting access shall designate an independent third
party institution reasonably acceptable to the other party to review such
information and report, in reasonable detail, its findings to the requesting
party without disclosing the confidential aspects of such information. All such
access and information obtained by NOI, IRI and their authorized representatives
shall be subject to the terms and conditions of the confidentiality agreement
between NOI and IRI dated March 6, 2000 (the "Confidentiality Agreement").
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SECTION 4.5 Affiliate Agreements; Pooling. As soon as practicable
following the date of this Agreement and in any event at least 30 days prior to
the Effective Time, (a) IRI shall use its reasonable efforts to cause each IRI
Pooling Affiliate to execute and deliver an affiliate agreement in the form of
Exhibit C hereto, and (b) NOI shall use its reasonable efforts to cause each NOI
Pooling Affiliate to execute and deliver an affiliate agreement in the form of
Exhibit D hereto. Each of IRI and NOI shall use its reasonable efforts to obtain
the opinion of its independent public accountants referred to in Article 5
hereof.
SECTION 4.6 Stockholder Votes; Proxy Statement.
(a) As promptly as practicable after the date hereof, IRI shall take
all action necessary in accordance with Rules 14a-1 et seq. of the Exchange
Act, the DGCL, the rules of the NYSE and IRI's certificate of incorporation
and by-laws to call, give notice of, convene and hold the IRI Stockholders
Meeting as promptly as practicable to consider and vote upon the adoption
of this Agreement, and for such other purposes as may be necessary or
desirable, which, if practicable, will be held on the same date as the date
of the NOI Stockholders Meeting. Subject to the fiduciary duties of IRI's
Board of Directors under applicable law, as determined by such directors in
good faith after consultation with independent legal counsel, the Board of
Directors of IRI shall use its reasonable best efforts to solicit and
secure from its stockholders such approval and adoption of this Agreement,
the Merger and the transactions contemplated hereby, which efforts may
include without limitation soliciting stockholder proxies therefor, and to
advise NOI upon its request, from time to time, as to the status of the
stockholder vote then tabulated.
(b) As promptly as practicable after the date hereof, NOI shall take
all action necessary in accordance with Rules 14a-1 et seq. of the Exchange
Act, the DGCL, the rules of the New York Stock Exchange and NOI's
certificate of incorporation and by-laws to call, give notice of, convene
and hold the NOI Stockholders Meeting as promptly as practicable to
consider and vote upon the adoption of this Agreement and the Additional
Shares Amendment, and for such other purposes as may be necessary or
desirable, which, if practicable, will be held on the same date as the date
of the IRI Stockholders Meeting. Subject to the fiduciary duties of NOI's
Board of Directors under applicable law, as determined by such directors in
good faith after consultation with independent legal counsel, the Board of
Directors of NOI shall use its reasonable best efforts to solicit and
secure from its stockholders adoption of this Agreement and the Additional
Shares Amendment, which efforts may include without limitation soliciting
stockholder proxies therefor and to advise IRI upon its request, from time
to time, as to the status of the stockholder vote then tabulated.
(c) As promptly as practicable after the date hereof, NOI and IRI
shall jointly prepare and file with the SEC preliminary proxy materials of
the Company under the Exchange Act with respect to the Merger, and a
preliminary prospectus of NOI with respect to NOI Common Stock to be issued
in the Merger and will thereafter use their respective best efforts to
respond to any comments of the SEC with respect thereto and to cause the
Registration Statement to become effective, and the Proxy Statement and
proxy to be mailed to the stockholders of IRI [and NOI], as promptly as
practicable. The Proxy Statement shall include the unqualified
recommendation of IRI's and NOI's Boards of Directors that their respective
stockholders vote in favor of the approval and adoption of this Agreement,
the Merger and the transactions contemplated hereby, unless in either case
otherwise necessary due to the applicable fiduciary duties of the directors
of IRI or NOI as the case may be, as determined by such directors in good
faith after consultation with independent legal counsel.
(d) As soon as practicable after the date hereof, IRI and NOI shall
prepare and file any other filings required to be filed by each under the
Exchange Act or any other federal or state securities laws relating to the
Merger and the transactions contemplated hereby (collectively, "Other
Filings") and shall use their best efforts to respond to any comments of
the SEC or any other appropriate government official with respect thereto.
(e) IRI and NOI shall cooperate with each other and provide to each
other all information necessary in order to prepare the Registration
Statement, the Proxy Statement and the Other Filings
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(collectively, the "SEC Transaction Filings") and shall provide promptly to
the other party any information that such party may obtain that could
necessitate amending any such document.
(f) IRI and NOI shall notify the other party promptly of the receipt
of any comments from the SEC or its staff or any other appropriate
government official and of any requests by the SEC or its staff or any
other appropriate government official for amendments or supplements to any
of the SEC Transaction Filings or for additional information and shall
supply the other party with copies of all correspondence between IRI or any
of its representatives or NOI and any of its representatives, as the case
may be, on the one hand, and the SEC or its staff or any other appropriate
government official, on the other hand, with respect thereto. If at any
time prior to the Effective Time, any event shall occur that should be set
forth in an amendment of, or a supplement to, any of the SEC Transaction
Filings, IRI and NOI agree promptly to prepare and file such amendment or
supplement and to distribute such amendment or supplement as required by
applicable law, including without limitation, in the case of an amendment
or supplement to the Proxy Statement, mailing such supplement or amendment
to the stockholders of IRI and NOI. NOI shall not be required to maintain
the effectiveness of the Registration Statement for the purpose of resale
by stockholders of IRI who may be affiliates of IRI or NOI pursuant to Rule
145 under the Securities Act.
(g) The information provided and to be provided by IRI and NOI for use
in SEC Transaction Filings shall at all times prior to the Effective Time
be true and correct in all material respects and shall not omit to state
any material fact required to be stated therein or necessary in order to
make such information not false or misleading, and IRI and NOI each agree
to promptly correct any such information provided by it for use in the SEC
Transaction Filings that shall have become false or misleading. The SEC
Transaction Filings, when filed with the SEC or any appropriate government
official, shall comply as to form in all material respects with all
applicable requirements of law.
SECTION 4.7 Reasonable Best Efforts. Subject to the fiduciary duties of
its Board of Directors, as determined by such directors in good faith after
consultation with independent legal counsel, and except as otherwise provided
herein, each of the parties hereto agrees to use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws, statutes,
ordinances, codes, rules and regulations to consummate and make effective the
transactions contemplated by this Agreement in the most expeditious manner
practicable, including, without limitation, the satisfaction of all conditions
to the Merger, and to consummate the Merger as promptly as practicable.
SECTION 4.8 Public Announcements. No party hereto shall make any public
announcements or otherwise communicate with any news media with respect to this
Agreement or any of the transactions contemplated hereby without prior
consultation with the other parties as to the timing and contents of any such
announcement as may be reasonable under the circumstances; provided, that
nothing contained herein shall prevent any party from promptly making all
filings with governmental entities and all disclosure as may, in its good faith
judgment, be required or advisable in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby
(in which case the disclosing party shall advise the other parties and provide
them with a copy of the proposed disclosure or filing prior to making the
disclosure or filing).
SECTION 4.9 Notification. Each party hereto shall, in the event of, or
promptly after obtaining knowledge of the occurrence or threatened occurrence
of, any fact or circumstance that would cause or constitute a breach of any of
its representations and warranties set forth herein, give notice thereof to the
other parties and shall use its best efforts to prevent or promptly to remedy
such breach; provided, however, that none of such notices shall be deemed to
modify, amend or supplement the representations and warranties of the such party
or the disclosure schedules of such party for the purposes of Article 5 hereof,
unless the other party shall have consented thereto in writing.
SECTION 4.10 Subsequent Financial Statements. Prior to the Effective Time,
each party will consult with the other prior to (a) making publicly available
its financial results for any period, and (b) the filing
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of (which shall be timely filing with the SEC) each Annual Report on Form 10-K,
Quarterly Report on Form 10-Q and Current Report on Form 8-K required to be
filed by it under the Exchange Act and will promptly deliver to the other copies
of each such report filed with the SEC.
SECTION 4.11 Regulatory and Other Authorizations.
(a) Each party hereto agrees to use commercially reasonable efforts to
comply with all legal requirements which may be imposed on such party with
respect to the Merger and to obtain all authorizations, consents, orders
and approvals of governmental entities and non-governmental third parties
that may be or become necessary for (i) its respective execution and
delivery of, and the performance of its respective obligations pursuant to,
this Agreement, and (ii) the ownership of IRI by NOI, and each party will
cooperate fully with the other party in promptly seeking to obtain all such
authorizations, consents, orders and approvals. Without limitation, NOI and
IRI shall each make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act no later than 20 days after the date hereof and
shall promptly respond to any request for additional information with
respect thereto. Each such filing shall request early termination of the
waiting period imposed by the HSR Act.
(b) Notwithstanding anything else to the contrary contained in this
Agreement, NOI shall have no obligation to oppose, challenge or appeal any
suit action or proceeding by any governmental entity before any court or
governmental authority, agency or tribunal, domestic or foreign or any
order or ruling by any such body, (i) seeking to restrain or prohibit or
restraining or prohibiting the consummation of the Merger or any of the
other transactions contemplated by this Agreement, (ii) seeking to prohibit
or limit or prohibiting or limiting the ownership, operation or control by
NOI, IRI or any of their respective subsidiaries of any portion of the
business or assets of NOI, IRI or any of their respective subsidiaries, or
(iii) seeking to compel or compelling NOI, IRI or any of their respective
subsidiaries to dispose of, grant rights in respect of, or hold separate
any portion of the business or assets of NOI, IRI or any of their
respective subsidiaries. Neither IRI nor any IRI Subsidiaries shall take or
agree to take any of the actions described in the immediately preceding
sentence without the prior written consent of NOI.
SECTION 4.12 Takeover Statute. If any Takeover Statute shall become
applicable to the transactions contemplated hereby, each of IRI and NOI and the
members of their respective Boards of Directors shall grant such approvals and
take such actions as are reasonably necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
such statute.
SECTION 4.13 Indemnification of Directors and Officers. For a period of
[SIX] years after the Effective Time, NOI shall (a) maintain in effect the
current provisions regarding indemnification of officers and directors contained
in the charter documents and by-laws of IRI, and (b) indemnify the directors and
officers of IRI to the full extent to which they are entitled to indemnification
under such provisions. For such period, South shall cause the Surviving
Corporation to maintain in effect the current policies of directors' and
officers' liability insurance maintained by IRI or substitute policies no less
advantageous than those provided to directors and officers of NOI; provided,
however, that NOI shall not be obligated to provide such coverage to the extent
that the cost of such coverage exceeds 200% of the cost of such coverage
immediately prior to the Effective Time.
SECTION 4.14 No Solicitation by IRI.
(a) Without the prior written consent of NOI, from and after the date
hereof, IRI shall not, and shall not authorize or permit any IRI
Subsidiaries or any officers, directors, employees, financial advisors,
agents and other representatives of any of the foregoing ("IRI
Representatives") to, directly or indirectly, (i) solicit, initiate or
encourage (including by way of furnishing information) or take any other
action to facilitate knowingly any inquiries or the making of any proposal
which constitutes or may reasonably be expected to lead to an IRI
Acquisition Proposal (as hereinafter defined) from any person; (ii) engage
in any discussion or negotiations relating to any IRI Acquisition Proposal;
or
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(iii) enter into any agreement with respect to, agree to, approve or
recommend any IRI Acquisition Proposal; provided, however, that
notwithstanding any other provision hereof, IRI may, (A) at any time prior
to the time IRI's stockholders shall have voted to approve this Agreement
engage in discussions or negotiations with a third party (and may furnish
such third party information concerning IRI and its business, properties
and assets to such party) who (without any solicitation, initiation,
encouragement, discussion or negotiation, directly or indirectly, by or
with IRI or the IRI Representatives after the date hereof) makes an
unsolicited bona fide written IRI Acquisition Proposal if, and only to the
extent that, (1) the third party has first made an IRI Acquisition Proposal
that is financially superior to the transactions contemplated by this
Agreement (as determined in good faith in each case by IRI's Board of
Directors after consultation with its financial advisors) (such an
Acquisition Proposal, an "IRI Superior Proposal"), and IRI's Board of
Directors shall conclude in good faith, after considering applicable
provisions of state law, after consultation with independent legal 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 (2) prior to
furnishing such information to or entering into discussions or negotiations
with such person or entity, IRI receives from such person or entity an
executed confidentiality agreement in substantially the same form as the
Confidentiality Agreement, and (3) IRI shall have fully complied with this
Section 4.14; (B) comply with Rule 14e-2 promulgated under the Exchange Act
with regard to a tender or exchange offer; and/or (C) accept an IRI
Superior Proposal from a third party, provided IRI terminates this
Agreement pursuant to Section 6.1(i). As used herein, "IRI Acquisition
Proposal" means a proposal or offer for a tender or exchange offer, merger,
consolidation or other business combination involving IRI or any IRI
Subsidiary or any proposal to acquire in any manner a substantial equity
interest in, or a substantial portion of the assets of, IRI or any IRI
Subsidiary.
(b) IRI shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by IRI or the IRI
Representatives with respect to the foregoing and shall promptly request
the return of all confidential or proprietary information of IRI furnished
to any of such parties. IRI shall notify NOI orally and in writing of any
such inquiries, offers or proposals (including without limitation the terms
and conditions of any such proposal and the identity of the person making
it), within 24 hours of the receipt thereof, and shall keep NOI informed of
the status and details of any such inquiry, offer or proposal.
(c) Prior to accepting an IRI Superior Proposal, IRI shall, and shall
cause its financial and legal advisors to, negotiate in good faith with
NOI, for a period of not less than five business days, to make such changes
to the terms and conditions of this Agreement as would enable IRI to
proceed with the transactions contemplated hereby.
(d) During the period from the date of this Agreement through the
Effective Time, IRI shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which it or any
IRI Subsidiary is a party. During such period, IRI shall enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreement, including without limitation by obtaining injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court of the United States of America or of any
state having jurisdiction.
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ARTICLE 5
CONDITIONS TO THE MERGER
SECTION 5.1 Conditions to the Obligations of NOI and IRI. The obligations
of each party under this Agreement to consummate the Merger are subject to the
fulfillment prior to or at the Closing of each of the following conditions:
(a) Stockholder Approval. This Agreement shall have been adopted by
the requisite vote of the stockholders of IRI and the stockholders of NOI
in accordance with applicable law and by applicable provisions of their
respective charter documents and by-laws and the Additional Shares
Amendment shall have been approved by the stockholders of NOI.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal or regulatory restraint or
prohibition shall have been issued and be in effect (i) restraining or
prohibiting the consummation of the Merger or any of the transactions
contemplated hereby, or (ii) prohibiting or limiting the ownership,
operation or control by IRI, NOI or any of their respective subsidiaries of
any portion of the business or assets of IRI, NOI or any of their
respective subsidiaries, or compelling IRI, NOI or any of their respective
subsidiaries to dispose of, grant rights in respect of, or hold separate
any portion of the business or assets of IRI, NOI or any of their
respective subsidiaries; nor shall any action have been taken by any
governmental entity or any federal, state, local or foreign statute, rule,
regulation, executive order, decree or injunction have been enacted,
entered, promulgated or enforced by any governmental entity or arbitrator,
which is in effect and has the effect of making the Merger illegal or
otherwise prohibiting the consummation of the Merger.
(c) HSR Act. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(d) Registration Statement. The Registration Statement shall have been
declared effective under the Securities Act and no stop orders with respect
thereto shall have been issued, and NOI shall have received all requisite
authorizations under all applicable state securities or blue sky laws
necessary to consummate the transaction.
(e) NYSE Listing. Approval for listing by the NYSE upon official
notice of issuance of the NOI Common Stock to be issued in the Merger shall
have been received by NOI.
(f) Other Consents and Approvals. All consents and approvals, the
granting or obtaining of which is necessary for the consummation of the
Merger and the failure to obtain of which would have an IRI Material
Adverse Effect or a NOI Material Adverse Effect, shall have been obtained.
SECTION 5.2 Additional Conditions to the Obligations of NOI. The
obligations of NOI under this Agreement to consummate the Merger are also
subject to the fulfillment prior to or at the Closing of each of the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of IRI contained in this Agreement that is qualified by
materiality shall be true and correct at and as of the Closing Date as if
made at and as of the Closing Date, and each of such representations and
warranties that is not so qualified shall be true and correct in all
material respects at and as of the Closing Date as if made at and as of the
Closing Date, and at the Closing IRI shall have delivered to NOI a
certificate to such effect.
(b) Performance of Obligations. Each of the obligations of IRI to be
performed on or before the Closing Date pursuant to this Agreement shall
have been duly performed in all material respects on or before the Closing
Date, and at the Closing IRI shall have delivered to NOI a certificate to
such effect.
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(c) No IRI Material Adverse Change. Since the date of this Agreement,
no changes or events shall have occurred that, individually or in the
aggregate, have (or are reasonably expected to have) an IRI Material
Adverse Effect, and at the Closing IRI shall have delivered to NOI a
certificate to such effect.
(d) Pooling and Fairness Opinions. The Board of Directors of NOI shall
have received (i) from Ernst & Young LLP an opinion dated as of the Closing
Date in the form of the draft referred to in Section 3.18 and (ii) the NOI
Fairness Opinion shall not have been subsequently withdrawn by Merrill
Lynch & Co.
(e) Tax Opinion. Morgan, Lewis & Bockius LLP shall have delivered to
NOI its written opinion, dated as of the date of mailing of the Proxy
Statement, in form and substance reasonably satisfactory to NOI,
substantially to the effect that (i) the Merger constitutes a
reorganization under Section 368(a) of the Code, (ii) IRI, NOI and
Acquisition will each be a party to that reorganization within the meaning
of Section 368(b) of the Code and (iii) IRI, NOI and Acquisition will not
recognize any gain or loss for U.S. federal income tax purposes as a result
of the Merger, and such opinion shall not have been subsequently withdrawn
or modified in any material respect.
(f) Affiliate Agreements. Each IRI Pooling Affiliate shall have
executed and delivered an affiliate agreement substantially in the form
attached as Exhibit C hereto.
SECTION 5.3 Additional Conditions to the Obligations of IRI. The
obligations of IRI under this Agreement to consummate the Merger are also
subject to the fulfillment prior to or at the Closing of each of the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of NOI and Acquisition contained in this Agreement that is
qualified by materiality shall be true and correct at and as of the Closing
Date as if made at and as of the Closing Date, and each of such
representations and warranties that is not so qualified shall be true and
correct in all material respects at and as of the Closing Date as if made
at and as of the Closing Date, and at the Closing NOI shall have delivered
to IRI a certificate to such effect.
(b) Performance of Obligations. Each of the obligations of NOI and
Acquisition to be performed on or before the Closing Date pursuant to this
Agreement shall have been duly performed in all material respects on or
before the Closing Date, and at the Closing NOI shall have delivered to IRI
a certificate to such effect.
(c) No NOI Material Adverse Change. Since the date of this Agreement,
no changes or events shall have occurred that, individually or in the
aggregate, have (or are reasonably expected to have) a NOI Material Adverse
Effect, and at the Closing NOI shall have delivered to IRI a certificate to
such effect.
(d) Pooling and Fairness Opinions. The Board of Directors of IRI shall
have received (i) from KPMG LLP an opinion dated as of the Closing Date in
the form of the draft referred to in Section 2.18 unless NOI shall have
waived the condition set forth in Section 5.2(d)(i), and (ii) the IRI
Fairness Opinion shall not have been subsequently withdrawn by Lehman
Brothers Incorporated.
(e) Tax Opinion. Jones, Day, Reavis & Pogue shall have delivered to
IRI its written opinion, dated as of the date of mailing of the Proxy
Statement, in form and substance reasonably satisfactory to IRI,
substantially to the effect that (i) the Merger constitutes a
reorganization under Section 368(a) of the Code, (ii) IRI, NOI and
Acquisition will each be a party to that reorganization within the meaning
of Section 368(b) of the Code, (iii) IRI, NOI and Acquisition will not
recognize any gain or loss for U.S. federal income tax purposes as a result
of the Merger, and (iv) the stockholders of IRI will not recognize any gain
or loss for U.S. federal income tax purposes upon their exchange of IRI
Common Stock solely for NOI Common Stock pursuant to the Merger (except
with respect to cash received in lieu of a fractional share interest in NOI
Common Stock), and such opinion shall not have been subsequently withdrawn
or modified in any material respect.
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(f) Affiliate Agreements. Unless NOI shall have waived the condition
set forth in Section 5.2(d)(i), each NOI Pooling Affiliate shall have
executed and delivered an affiliate agreement substantially in the form
attached as Exhibit D hereto.
(g) Registration Rights. NOI shall have executed and delivered a
Registration Rights Agreement in substantially the form set forth in
Exhibit E hereto to the stockholders of IRI named in Exhibit E.
(h) Board Seat. NOI shall have taken the action necessary to elect to
the Board of Directors of NOI, as of the Effective Time, Hushang Ansary or
another individual designated by the Board of Directors of IRI and
acceptable to NOI.
ARTICLE 6
TERMINATION, AMENDMENT AND WAIVER
SECTION 6.1 Termination. This Agreement may be terminated (by written
notice by the terminating party to the other party) and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date:
(a) By mutual written consent of each of NOI and IRI;
(b) By either NOI or IRI if the Merger shall not have been consummated
on or before September 1, 2000 (the "Termination Date"); provided, however,
that the right to terminate this Agreement under this Section 6.1(b) shall
not be available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date;
(c) By either NOI or IRI if any governmental entity or arbitrator
shall have issued an order, decree or ruling or taken any other action
(which order, decree or ruling the parties shall use their commercially
reasonable efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable;
(d) By (i) NOI if IRI shall have failed to comply with its obligations
in Section 4.14 and such breach is not cured within 10 days of a notice
thereof to IRI or if IRI shall have breached, or failed to comply with, in
any material respect any of its obligations under this Agreement or any
representation or warranty made by IRI shall have been incorrect in any
material respect when made or shall have since ceased to be true and
correct in any material respect, and such breach, failure or
misrepresentation is not cured within 30 days after notice thereof and such
breaches, failures or misrepresentations, individually or in the aggregate,
result or would reasonably be expected to result in an IRI Material Adverse
Effect, and (ii) IRI if NOI shall have breached, or failed to comply with,
in any material respect any of its obligations under this Agreement or any
representation or warranty made by NOI shall have been incorrect in any
material respect when made or shall have since ceased to be true and
correct in any material respect, and such breach, failure or
misrepresentation is not cured within 30 days after notice thereof and such
breaches, failures or misrepresentations, individually or in the aggregate,
result or would reasonably be expected to result in a NOI Material Adverse
Effect;
(e) By NOI after the occurrence of changes or events that,
individually or in the aggregate, have (or are reasonably expected to have)
an IRI Material Adverse Effect, or by IRI after the occurrence of changes
or events that, individually or in the aggregate, have (or are reasonably
expected to have) a NOI Material Adverse Effect.
(f) By NOI if the Board of Directors of IRI (i) shall withdraw or
modify in any adverse manner its approval or recommendation of this
Agreement, (ii) within ten days after NOI's request, shall fail to reaffirm
such approval or recommendation, (iii) shall approve or recommend any
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acquisition of a material portion of its assets or any tender offer for
shares of its capital stock, in each case, other than by NOI or an
affiliate thereof, (iv) shall have recommended that the stockholders of IRI
tender their shares in a tender offer or exchange offer for any of the
outstanding shares of IRI Common Stock that shall have been commenced or
with respect to which an offer to purchase or a registration statement
shall have been filed (other than by NOI or an affiliate thereof) or
publicly announced its intention to take no position with respect to such
tender or exchange offer, or (v) shall resolve to take any of the actions
specified in this clause (f);
(g) By IRI if the Board of Directors of NOI (i) shall withdraw or
modify in any adverse manner its approval or recommendation of this
Agreement, (ii) within ten days after IRI's request, shall fail to reaffirm
such approval or recommendation, or (iii) shall resolve to take any of the
actions specified in this clause (g);
(h) By NOI or IRI if (i) the IRI Stockholder Approval shall fail to
have been obtained at the IRI Stockholders Meeting, including any
adjournments thereof, or (ii) the NOI Stockholder Approval and approval of
the Additional Shares Amendment shall fail to have been obtained at the NOI
Stockholders Meeting, including any adjournments thereof; or
(i) By IRI, prior to the approval of this Agreement by the
stockholders of IRI, if, as a result of an IRI Superior Proposal by a party
other than NOI or any of its affiliates, the Board of Directors of IRI
determines in compliance with the provisions of Section 4.14 that such IRI
Superior Proposal be accepted; provided, however, that IRI has fully
complied with all the applicable requirements of Section 6.2(b), including
without limitation the payment of the termination fee payable thereunder at
such time.
SECTION 6.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided in
Section 6.1 hereof, this Agreement shall forthwith become void and there
shall be no liability on the part of any of the parties, except (i) as set
forth in the last sentence of Section 4.4 and in Sections 4.8, 6.2(b), 7.3
and 7.4, and (ii) nothing herein shall relieve any party from liability for
any breach, failure or misrepresentation by such party resulting in
termination of this Agreement by the other party pursuant to Section
6.1(d).
(b) If this Agreement (i) is terminated by NOI pursuant to Section
6.1(f) or by IRI pursuant to Section 6.1(i) or (ii) is terminated by South
as a result of IRI's breach of Section 4.14 which is not cured within 10
days after notice thereof to IRI, then IRI shall be obligated to pay to NOI
a termination fee of $15,000,000 as hereinafter provided. Such termination
fee shall be paid concurrently with termination under Section 6.1(i). In
the case of termination under Section 6.1(f) or as a result of a breach of
Section 4.14, if after the date of this Agreement and prior to such
termination there shall have been an IRI Acquisition Proposal (whether or
not it shall have been rejected or withdrawn prior to such termination) and
within one year after such termination, IRI shall have entered into an
agreement with respect to, or consummated, an IRI Acquisition Proposal,
such termination fee shall be paid to NOI within one business day after
entering into an agreement with respect to, or consummating, an IRI
Acquisition Proposal.
(c) If IRI fails to promptly pay any termination fee due under Section
6.2(b), IRI shall pay the costs and expenses (including without limitation
reasonable legal fees and expenses) in connection with any action,
including without limitation 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 The Chase Manhattan
Bank from the date such fee was required to be paid.
SECTION 6.3 Amendment. This Agreement may be amended by NOI and IRI
pursuant to a writing adopted by action taken by NOI and IRI at any time before
the Effective Time; provided, however, that, after approval of this Agreement by
the stockholders of IRI, no amendment may be made which would alter or change
the amount or kinds of consideration to be received by the holders of IRI Common
Stock
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upon consummation of the Merger or which would materially and adversely affect
the holders of IRI Common Stock. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 6.4 Waiver. At any time before the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document delivered by the other parties pursuant hereto, and (c) waive
compliance by the other parties with any of the agreements or conditions
contained herein. Any agreement on the part of a party to any such extension or
waiver shall be valid only as against such party and only if set forth in an
instrument in writing signed by such party.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given upon (a) personal delivery, (b)
transmitter's confirmation of a receipt of a telefax, (c) confirmed delivery by
a standard overnight carrier or when delivered by hand or (d) when mailed in the
United States by certified mail, postage prepaid, addressed as follows:
If to NOI or Acquisition, to:
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
Attention: ,
Facsimile No. ( ) -
with a required copy to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attention: David R. King, Esq.
Facsimile No. 215-963-5299
If to IRI, to:
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
Attention: ,
Facsimile No. ( ) -
with a required copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, NY 10022
Attention: William F. Henze, Esq.
Facsimile No. (212) 755-7306
or such other address as shall be furnished in writing by any party to the
others prior to the giving of the applicable notice or other communication.
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SECTION 7.2 Certain Limitations
(a) The representations and warranties made in this Agreement by each
of IRI and NOI shall be deemed for all purposes to be qualified by the
disclosures made in the respective Disclosure Letter, regardless of whether
in the case of any particular representations or warranty such
representation or warranty refers to the specific section of such
Disclosure Letter in which disclosure is made or to any other portion
thereof, so long as the relevance of a disclosure to the matter in question
in another portion of such Disclosure Letter is reasonably apparent.
(b) The parties hereto expressly acknowledge that regardless of the
facts or circumstances, (i) no financial advisor, attorney, director,
officer, employee, member, manager, stockholder or other representative of
any party (a "Representative") had, has or will have any duty to any other
party in connection with this Agreement or the transactions contemplated
hereby and (ii) no party will have any right of recovery against a
Representative of any other party by reason of this Agreement or the
transactions contemplated hereby on any theory, whether alleged breach of
contract, negligent misrepresentation, federal or state securities or other
laws or otherwise; provided, however, nothing in this Section (i) shall
relieve any party of liability for the acts or omissions of its
Representatives to the extent such liability attaches under this Agreement
or applicable principles of law or (ii) is intended to release or waive any
right a party may have against any person for fraud or fraudulent conduct
by such person.
(c) The parties hereto hereby waive any and all claims or causes of
action that might be asserted in connection with the transactions
contemplated by this Agreement, including under common law (including
negligent misrepresentation or similar theories), trade regulation,
environmental or other laws, except for claims or causes of action brought
under and subject to the terms of this Agreement; provided, however, that
nothing in this Section is intended to release or waive any right a party
may have against any person for fraud or fraudulent conduct by such person.
(d) Each of the parties is a sophisticated legal entity that was
advised by experienced counsel and, to the extent it deemed necessary,
other advisors in connection with this Agreement, the events giving rise
hereto and the transactions contemplated hereby, including the Merger
(collectively, the "Transaction"). Accordingly, each of the parties hereby
acknowledges and agrees (on behalf of itself and its affiliates) that:
(i) Such party has not relied and will not rely upon any written or
oral information previously furnished to or discovered by it or its
Representatives (including without limitation data room information or
oral or written information previously furnished by or on behalf of any
other party in connection with the Transaction, including without
limitation information furnished by any other party, any affiliates of
any other party or any of its Representatives), other than this
Agreement (including the other party's Disclosure Letter);
(ii) There are no representations or warranties by or on behalf of
any other party hereto, or any of its affiliates or Representatives in
respect of the Transaction other than those expressly set forth in this
Agreement (including the other party's Disclosure Letter).
SECTION 7.3 Cooperation. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its reasonable best efforts to
take, or cause to be taken, such action, to execute and deliver, or cause to be
executed and delivered, such governmental notifications and additional documents
and instruments and to do, or cause to be done, all things necessary, proper or
advisable under the provisions of this Agreement and under applicable law to
consummate and make effective the transactions contemplated by this Agreement.
SECTION 7.4 Expenses. NOI has and will pay the fees, expenses and
disbursements of NOI and Acquisition and their agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement, and IRI has and will pay the fees, expenses and disbursements of IRI
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and its agents, representatives, financial advisors, accountants and counsel
incurred in connection with the subject matter of this Agreement.
SECTION 7.5 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.
SECTION 7.6 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be deemed an original, with the
same effect as if the signatures hereto and thereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
SECTION 7.7 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 shall remain in full force and effect, and to this end the
provisions of this Agreement shall be severable.
SECTION 7.8 Entire Agreement. This Agreement, which includes the IRI
Disclosure Letter, the NOI Disclosure Letter and the Exhibits hereto, together
with the Confidentiality Agreement, constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings, both written and oral, among the parties,
with respect to the subject matter of this Agreement.
SECTION 7.9 Miscellaneous. Nothing in this Agreement express or implied is
intended to confer upon any other person any rights or remedies under or by
reason of this Agreement, except for Section 4.13 (which is intended to be for
the benefit of the persons provided for therein, and may be enforced by such
persons). Neither this Agreement, nor any of the rights, interests or
obligations hereunder may be assigned, directly or indirectly, including without
limitation by merger, change in equity ownership, operation of law or otherwise,
by any party without the prior written consent of other parties hereto. Subject
to the foregoing, this Agreement and all of the provisions hereof shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective permitted successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
NATIONAL-OILWELL, INC.
By Joel V. Staff
As its President
ARROW ACQUISITION CORP.
By Steven W. Krablin
As its Vice President
IRI INTERNATIONAL CORPORATION
By Hushang Ansary
As its Chairman & CEO
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INDEX OF DEFINED TERMS
Acquisition............................ 1
Additional Shares Amendment............ 27
Agreement.............................. 1
Applicable Environmental Laws.......... 16
Certificate............................ 3
Closing................................ 1
Closing Date........................... 1
Code................................... 1
Confidentiality Agreement.............. 33
Converted Stock Option................. 5
DGCL................................... 1
Effective Time......................... 2
ERISA.................................. 13
Exchange Act........................... 9
Exchange Agent......................... 3
Exchange Ratio......................... 3
Hazardous Substance.................... 16
HSR Act................................ 9
IRI Acquisition Proposal............... 37
IRI Common Stock....................... 2
IRI Disclosure Documents............... 10
IRI Disclosure Letter.................. 6
IRI Draft Form 10-K.................... 10
IRI Material Adverse Effect............ 6
IRI Plan............................... 13
IRI Pooling Affiliate.................. 16
IRI Preferred Stock.................... 7
IRI Representatives.................... 37
IRI Securities Reports................. 10
IRI Share.............................. 2
IRI Shares............................. 2
IRI Stock Plan......................... 7
IRI Stockholder Approval............... 8
IRI Stockholders Meeting............... 10
IRI Subsidiaries....................... 7
IRI Subsidiary......................... 7
IRI Superior Proposal.................. 37
Merger................................. 1
Merger Consideration................... 3
NOI Common Stock....................... 3
NOI Disclosure Documents............... 21
NOI Disclosure Letter.................. 17
NOI Draft Form 10-K.................... 21
NOI Fairness Opinion................... 27
NOI Material Adverse Effect............ 18
NOI Plan............................... 24
NOI Pooling Affiliate.................. 27
NOI Preferred Stock.................... 18
NOI Securities Reports................. 21
NOI Stock Plans........................ 18
NOI Stockholder Approval............... 20
NOI Stockholders Meeting............... 10
NOI Subsidiaries....................... 19
NOI Subsidiary......................... 19
NYSE................................... 32
Proxy Statement........................ 10
Registration Statement................. 10
Representative......................... 44
SEC.................................... 9
SEC Transaction Filings................ 34
Securities Act......................... 9
Subsidiary............................. 7
Surviving Corporation.................. 1
Termination Date....................... 41
Transaction............................ 45
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EXHIBIT A
FORM OF IRI INTERNATIONAL CORPORATION
STOCKHOLDER AGREEMENT
, 2000
National-Oilwell, Inc.
10000 Richmond Avenue
Houston, Texas 77042
Ladies and Gentlemen:
Reference is made to the Agreement of Merger by and between
National-Oilwell, Inc., a Delaware corporation ("NOI"), Arrow Acquisition Corp.,
a Delaware corporation and IRI International Corporation, a Delaware corporation
("IRI"), dated as of the date hereof (the "Agreement"). As an inducement to, and
in consideration of, NOI's entering into the Agreement, the undersigned
covenants and agrees as follows, unless the Board of Directors of IRI shall not
be recommending, at the time of such meeting, that stockholders of IRI vote for
such approval, in which case this letter agreement shall no longer be effective:
(i) At any meeting of the stockholders of IRI at which the approval of
the Agreement is to be voted upon, the undersigned will vote any voting
securities (the "Securities") of IRI over which the undersigned has voting
authority in favor of the approval of the Agreement unless the Board of
Directors of IRI is recommending, at the time of such meeting, that
stockholders of IRI vote against such approval.
(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 IRI Acquisition Proposal (as defined in the
Agreement) from any person or (b) engage in any discussion or negotiations
relating thereto or accept an IRI Acquisition Proposal; provided that the
foregoing clause (b) shall not prohibit the undersigned, a director of IRI,
from acting (subject to the Agreement) solely in his capacity as a director
of IRI.
(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 IRI over which the
undersigned has dispositive authority. Provided, however, that
(a) If is otherwise permitted to sell voting securities
of IRI pursuant to IRI's trading restrictions for insiders; and
(b) If such trading does not, in the opinion of IRI's auditors,
jeopardize the treatment of the proposed transaction as a pooling of
interests, then
(c) shall be permitted to sell common shares solely
through the open market sales pursuant to Rule 144 of the Securities Act
of 1933, as amended.
This letter agreement shall terminate upon any termination of the
Agreement.
Very truly yours,
------------------------------------
Stockholder
with respect to shares of common
stock of IRI
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CONSENT OF SPOUSE
I, , the spouse of , acknowledge that I have read the
foregoing Stockholder Agreement (the "Agreement"), by and between my spouse and
NOI, and that I know the contents of the Agreement. I hereby agree to be bound
by the Agreement and acknowledge and agree that my interest, if any, in the
Securities (as defined in the Agreement) is subject to the Agreement and shall
be irrevocably bound by the Agreement, and further understand and agree that any
community property interest I may have in the Securities shall be similarly
bound by the Agreement.
I acknowledge that I am free to seek independent professional guidance or
counsel with respect to this Consent. I have either sought such guidance or
counsel or determined after reviewing the Agreement carefully that I waive such
right. I am not relying on any representation or advice from NOI or any of its
representatives about the Agreement, its contents or effect.
------------------------------------
Name:
Dated:
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EXHIBIT B
March 15, 2000
IRI International Corporation
First Interstate Bank Plaza
1000 Louisiana, Suite 5900
Houston, Texas 77002
Ladies and Gentlemen:
Reference is made to the Agreement of Merger by and between
National-Oilwell, Inc., a Delaware corporation ("NOI"), Arrow Acquisition Corp.,
a Delaware corporation and IRI International Corporation ("IRI") dated as of the
date hereof (the "Agreement"), and the amendment to NOI's Certificate of
Incorporation to increase the amount of NOI's authorized common stock
contemplated by the Agreement (the "Share Increase"). As an inducement to, and
in consideration of, NOI's entering into the Agreement, the undersigned
covenants and agrees as follows, unless the Board of Directors of NOI shall not
be recommending, at the time of such meeting, that stockholders of NOI vote for
such approval, in which case this letter agreement shall no longer be effective:
(i) At any meeting of the stockholders of NOI at which either the
approval of the Agreement or of the Share Increase or both are to be voted
upon, the undersigned will vote any voting securities (the "Securities") of
NOI over which the undersigned has voting authority in favor of the
approval of the Agreement and Share Increase 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. Provided, however, that
(a) If is otherwise permitted to sell voting securities
of NOI pursuant to NOI's trading restrictions for insiders; and
(b) If such trading does not, in the opinion of NOI's auditors,
jeopardize the treatment of the proposed transaction as a pooling of
interests, then
(c) shall be permitted to sell common shares solely
through the open market sales pursuant to Rule 144 of the Securities Act
of 1933, as amended.
This letter agreement shall terminate upon any termination of the
Agreement.
Very truly yours,
------------------------------------
with respect to shares of
common stock of NOI
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CONSENT OF SPOUSE
I, , the spouse of , acknowledge that I have read the
foregoing Stockholder Agreement (the "Agreement"), by and between my spouse and
IRI, and that I know the contents of the Agreement. I hereby agree to be bound
by the Agreement and acknowledge and agree that my interest, if any, in the
Securities (as defined in the Agreement) is subject to the Agreement and shall
be irrevocably bound by the Agreement, and further understand and agree that any
community property interest I may have in the Securities shall be similarly
bound by the Agreement.
I acknowledge that I am free to seek independent professional guidance or
counsel with respect to this Consent. I have either sought such guidance or
counsel or determined after reviewing the Agreement carefully that I waive such
right. I am not relying on any representation or advice from IRI or any of its
representatives about the Agreement, its contents or effect.
------------------------------------
Name:
Dated:
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EXHIBIT C
FORM OF IRI INTERNATIONAL CORPORATION
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT (the "Agreement") is made and entered into on
, 2000 by and among National-Oilwell, a Delaware corporation
("NOI"), IRI International Corporation, a Delaware corporation ("IRI"), and the
undersigned affiliate of IRI ("Affiliate").
RECITALS
WHEREAS, NOI, Arrow Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of NOI ("Acquisition") and IRI have entered into an
Agreement of Merger dated as of March , 2000 (the "Agreement") providing for,
among other things, the merger of IRI and Acquisition (the "Merger").
WHEREAS, Affiliate may receive, as a result of the Merger, in exchange for
shares of common stock, par value $.01 per share, of IRI (the "IRI Common
Stock") owned by Affiliate at the Effective Time (as defined in the Agreement),
shares of common stock, par value $.01 per share, of NOI (the "NOI Common
Stock").
WHEREAS, Affiliate understands that, because the Merger 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 IRI, as such term is defined for
purposes of 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") and in the Commission's
Accounting Series Releases 130 and 135, the IRI Common Stock and the NOI Common
Stock beneficially owned and to be 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,
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 IRI Common
Stock held by Affiliate or on Affiliate's behalf, whether owned on the date
hereof or hereafter acquired (except for the conversion of the IRI Common Stock
into NOI Common Stock as contemplated by the Agreement) beginning 30 days prior
to the Effective Time (as defined in the Agreement).
(b) Affiliate agrees not to transfer, sell 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 or received by Affiliate or on Affiliate's behalf in or as a
result of the Merger 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 IRI for a period of at least 30 days
of combined operations of NOI and IRI following the Effective Time.
(c) 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 NOI
Common Stock, 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.
2. Limited Resales. NOI acknowledges that the provisions of Section 1(c) of
this Agreement will be satisfied as to any sale by the undersigned of the NOI
Common Stock 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
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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.
3. 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
NOI Common Stock issued pursuant to the terms of the Agreement 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 NATIONAL-OILWELL, INC.
WHICH INCLUDE THE RESULTS OF AT LEAST THIRTY (30) DAYS OF COMBINED
OPERATIONS OF NATIONAL-OILWELL, INC. AND IRI INTERNATIONAL CORPORATION.
and
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED IN ACCORDANCE
WITH THE TERMS OF SUCH RULE OR OTHERWISE IN ACCORDANCE WITH SUCH
SECURITIES ACT.
4. Termination. This Agreement shall be terminated and shall be of no
further force and effect upon any termination of the Agreement in accordance
with its terms.
5. Miscellaneous.
(a) 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) 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) 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) This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the laws of the State of Delaware.
(e) The Section headings herein are for convenience only and shall not
affect the construction or interpretation of this Agreement.
(f) Counsel to and independent auditors for the parties shall be
entitled to rely upon this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
NATIONAL-OILWELL, INC.
By:
-----------------------------------------------------
Title:
AFFILIATE
By:
-----------------------------------------------------
IRI INTERNATIONAL CORPORATION
By:
-----------------------------------------------------
Title:
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EXHIBIT D
FORM OF NATIONAL-OILWELL, INC.
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT (the "Agreement") is made and entered into on
, 2000 by and among National-Oilwell, Inc., a Delaware corporation
("NOI"), IRI International Corporation, a Delaware corporation ("IRI"), and the
undersigned affiliate of NOI ("Affiliate").
RECITALS
WHEREAS, NOI, Arrow Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of NOI ("Acquisition") and IRI have entered into an
Agreement of Merger dated as of March , 2000 (the "Agreement") providing for,
among other things, the merger of IRI and Acquisition (the "Merger").
WHEREAS, Affiliate understands that, because the Merger 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 defined for
purposes of 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, and in the Commission's Accounting Series Releases 130
and 135, 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, 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
hereafter acquired, during the period beginning 30 days prior to the Effective
Time (as defined in the 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 IRI for a period of at
least 30 days of combined operations of NOI and IRI following the Effective
Time.
2. Termination. This Agreement shall be terminated and shall be of no
further force and effect upon any termination of the Agreement in accordance
with its terms.
3. Miscellaneous.
(a) 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) 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) 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) This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the laws of the State of Delaware.
(e) The Section headings herein are for convenience only and shall not
affect the construction or interpretation of this Agreement.
(f) Counsel to and independent auditors for the parties shall be
entitled to rely upon this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
NATIONAL-OILWELL, INC.
By:
-----------------------------------------------------
Title:
AFFILIATE
By:
-----------------------------------------------------
IRI INTERNATIONAL CORPORATION
By:
-----------------------------------------------------
Title:
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EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement"), is made and entered
into as of , 2000, by National-Oilwell, Inc., a Delaware corporation
(the "Company"), for the benefit of First Reserve Fund VI, Limited Partnership,
First Reserve Fund VII, Limited Partnership and First Reserve Fund VIII, Limited
Partnership (collectively, together with any permitted assignee under Section
3.1, the "First Reserve Stockholders") and Hushang Ansary, Nader Ansary, Nina
Ansary, The Ansary Family Trust and The Ansary Foundation (collectively,
together with any permitted assignee under Section 3.1, the "Ansary
Stockholders") (the First Reserve Stockholders and the Ansary Stockholders are
referred to collectively in this Agreement as the "Stockholders").
WITNESSETH:
WHEREAS, the First Reserve Stockholders are party to that certain
Stockholders Agreement dated as of January 16, 1996 (the "Stockholders
Agreement") with NOW Holdings, Inc. and certain other stockholders, which, among
other things, grants registration rights to the First Reserve Stockholders;
WHEREAS, as a result of the Merger (the "Merger") provided for in the
Agreement of Merger dated as of , 2000 among the Company, Arrow
Acquisition Corp. and IRI International Corporation, the Ansary Stockholders
will become the owners of shares of Common Stock of the Company ("Company Common
Stock"), and the Ansary Stockholders may be deemed to be Affiliates (as defined
below) of the Company;
WHEREAS, the parties to this Agreement desire to establish the terms and
conditions of certain registration rights covering the resale of the shares of
Company Common Stock by the Holders (as defined below).
NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, the parties hereto hereby agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the following
respective meanings:
AFFILIATE shall mean with respect to any Person, (a) any Person which
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, (b) any Person who
is a director or executive officer (i) of such Person, (ii) of any Subsidiary of
such Person, or (iii) of any Person described in the foregoing clause (a), or
(c) any spouse, parent, sibling, mother-in-law, father-in-law, brother-in-law,
sister-in-law, aunt, uncle, first cousin or direct descendant of any Person
described in the foregoing clause (b). For purposes of this definition,
"control" of a Person shall mean the power, direct or indirect, (i) to vote or
direct the voting of 50% or more of the outstanding shares of voting Capital
Stock of such Person, or (ii) to direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
AGREEMENT shall mean this Agreement as in effect on the date hereof and as
hereafter from time to time amended, modified or supplemented in accordance with
the terms hereof.
COMMISSION shall mean the Securities and Exchange Commission and any
successor commission or agency having similar powers.
EXCHANGE ACT shall mean, as of any date, the Securities Exchange Act of
1934, as amended, or any similar Federal statute then in effect, and a reference
to a particular section thereof shall include a reference to the comparable
section, if any, of such similar Federal statute.
HOLDER means a First Reserve Stockholder or an Ansary Stockholder.
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NASD means the National Association of Securities Dealers, Inc., or any
successor regulatory body exercising similar functions.
PERSON shall mean an individual or a corporation, association, partnership,
joint venture, organization, business, individual, trust, or any other entity or
organization.
REGISTRABLE SECURITIES means (i) in the case of the First Reserve
Stockholders, the shares of Company Common Stock held by the First Reserve
Stockholders as of the date hereof, and (ii) in the case of the Ansary
Stockholders, the shares of Company Common Stock issued to the Ansary
Stockholders pursuant to the Merger; provided however, in each such case that
such shares of Company Common Stock held by a particular Holder shall cease to
be Registrable Securities when (i) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of under such registration statement,
(ii) they shall have been distributed to the public pursuant to Rule 144, (iii)
they shall have been otherwise transferred or disposed of, and new certificates
therefor not bearing a legend restricting further transfer shall have been
delivered by the Company, and subsequent transfer or disposition of them shall
not require their registration or qualification under the Securities Act or any
similar state law then in force, or (iv) they shall have ceased to be
outstanding. The Company or the Board of Directors of Company may approve the
inclusion of acquired securities acquired after the date hereof as Registrable
Securities, and agrees that all shares listed on Schedule are approved as
Registrable Securities.
REGISTRATION EXPENSES shall mean any and all out-of-pocket expenses
incident to the Company's performance of or compliance with Article II hereof,
including, without limitation, all Commission, stock exchange or NASD
registration and filing fees, all fees and expenses of complying with securities
and blue sky laws (including the reasonable fees and disbursements of
underwriters' counsel in connection with blue sky qualifications and NASD
filings), all fees and expenses of the transfer agent and registrar for the
Registrable Securities, all printing expenses, the fees and disbursements of
counsel for the Company and of its independent public accountants, including the
expenses of any special audits and/or "cold comfort" letters required by or
incident to such performance and compliance, and the reasonable fees and
disbursements of one firm of counsel, but excluding underwriting discounts and
commissions and applicable transfer and documentary stamp taxes, if any, which
shall be borne by the seller of the securities in all cases.
SECURITIES ACT shall mean, as of any date, the Securities Act of 1933, as
amended, or any similar Federal statute then in effect, and in reference to a
particular section thereof shall include a reference to the comparable section,
if any, of any such similar Federal statute.
ARTICLE II.
REGISTRATION RIGHTS.
SECTION 2.1 Demand Registration.
(a) At any time following the date of this Agreement, the First
Reserve Stockholders, or any of them, or the Ansary Stockholders, or any of
them, may request in writing that the Company effect the registration under
the Securities Act of all or part of their Registrable Securities,
specifying in the request the number of Registrable Securities to be
registered by each such Stockholder and the intended method of disposition
thereof (such notice is hereinafter referred to as a "Holder Request").
Unless otherwise agreed by the First Reserve Stockholders and the Ansary
Stockholders, if the First Reserve Stockholders or the Ansary Stockholders
(the "Requesting Stockholders") desire to issue a Holder Request in
accordance with the preceding sentence, the Requesting Stockholder will
give the other Stockholders written notice to such effect at least 30 days
prior to issuing a Holder Request and will include in such Holder Request
all Registrable Securities which the other Stockholders request. Upon
receipt of such Holder Request, the Company will promptly give written
notice of such requested registration to all other holders of Company
Common Stock or other Company securities holding piggyback registration
rights, which other holders shall have the right, subject to the
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provisions of Section 2.1(h) hereof, to include such Company Common Stock
or other Company securities held by them in such registration and thereupon
the Company will, as expeditiously as possible, use its best efforts to
effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by the Stockholders; and
(ii) all other registrable securities which the Company has been
requested to register by any other holder thereof by written request
given to the Company within 30 calendar days after the giving of such
written notice by the Company,
all to the extent necessary to permit the disposition of the Registrable
Securities so to be registered pursuant to an Underwritten Offering (as
hereinafter defined) or by such other method of disposition as the
Requesting Stockholders may specify in the Holder Request; provided,
however, that the Company shall not be obligated to file a registration
statement pursuant to any Holder Request under this Section 2.1(a):
(A) Unless the Company shall have received a Holder Request for
at least 5,000,000 shares of Company Common Stock;
(B) Other than a registration statement on Form S-3 or a similar
short form registration statement, within a period of 12 months after
the effective date of any other registration statement relating to
any Holder Request under this Section 2.1(a) that was not effected on
Form S-3 (or any similar short form); or
(C) Within the six month period immediately following the
effective date of a registration previously effected by the Company
pursuant to this Section 2.1.
(b) Notwithstanding the foregoing provisions of Section 2.1(a), the
Company shall not be obligated to file more than one registration statement
pursuant to this Section 2.1 on behalf of the First Reserve Stockholders as
Requesting Stockholders and one registration statement pursuant to this
Section 2.1 on behalf of the Ansary Stockholders as Requesting
Stockholders.
(c) If the Company proposes to effect a registration requested
pursuant to this Section 2.1 by the filing of a registration statement on
Form S-3 (or any similar short-form registration statement), the Company
will comply with any request by the managing underwriter (as hereinafter
defined) to effect such registration on another permitted form if such
managing underwriter advises the Company that, in its opinion, the use of
another form of registration statement is of material importance to the
success of such proposed offering.
(d) A registration requested pursuant to Section 2.1(a) will not be
deemed to have been effected unless it has become effective; provided,
that, if after it has become effective, the offering of Registrable
Securities pursuant to such registration is interfered with by any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or court, such registration will be deemed not to have
been effected.
(e) The Company will pay all Registration Expenses in connection with
each of the registrations of Registrable Securities effected by it pursuant
to this Section 2.1.
(f) The Requesting Stockholders shall have the right to select the
investment banker (or investment bankers) that shall manage the offering
(collectively, the "managing underwriter"), provided, however, that such
managing underwriter must be reasonably satisfactory to the Company.
(g) Whenever a requested registration pursuant to this Section 2.1
involves a firm commitment underwriting (an "Underwritten Offering"), the
only shares that may be included in such Offering are (i) Registrable
Securities, and (ii) securities of the Company which are not Registrable
Securities included in such Offering with the written consent of the
Requesting Stockholders ("Company Securities").
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(h) If a registration pursuant to this Section 2.1 involves an
Underwritten Offering and the managing underwriter shall advise the Company
that, in its judgment, the number of shares proposed to be included in such
Offering should be limited due to market conditions, then the Company will
promptly so advise the Stockholders proposing to sell Registrable
Securities in the Offering, and the Company Securities and securities of
any person other than a Stockholder, if any, shall first be excluded from
such Offering to the extent necessary to meet such limitation; and if
further exclusions are necessary to meet such limitation, the Registrable
Securities to be sold by Stockholders other than the Requesting
Stockholders shall next be excluded.
SECTION 2.2. Piggyback Registration.
(a) If the Company at any time proposes to register any of its equity
or debt securities under the Securities Act (other than a registration on
Form S-4 or S-8 or any successor or similar forms thereto and other than
pursuant to a registration under Section 2.1), whether or not for sale for
its own account, on a form and in a manner that would permit registration
of Registrable Securities for sale to the public under the Securities Act,
it will give written notice to all the Holders of Registrable Securities
promptly of its intention to do so, describing such securities and
specifying the form and manner and the other relevant facts involved in
such proposed registration (including, without limitation, (x) whether or
not such registration will be in connection with an underwritten offering
of Registrable Securities and, if so, the identity of the managing
underwriter and whether such offering will be pursuant to a "best efforts"
or "firm commitment" underwriting and (y) the price (net of any
underwriting commissions, discounts and the like) at which the Registrable
Securities are reasonably expected to be sold) if such disclosure is
acceptable to the managing underwriter. Upon the written request of any
such Holder delivered to the Company within 30 calendar days after the
receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended
method of disposition thereof), the Company will use best efforts to effect
the registration under the Securities Act of all of the Registrable
Securities that the Company has been so requested to register; provided,
however, that:
(i) If, at any time after giving such written notice of its
intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such
securities, the Company may, at its election, give written notice of
such determination to each holder of Registrable Securities who made a
request as hereinabove provided and thereupon the Company shall be
relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay
the Registration Expenses in connection therewith), without prejudice,
however, to the rights of the holders of the Registrable Securities to
request that such registration be effected as a registration under
Section 2.1.
(ii) If such registration involves an Underwritten Offering, all
holders of Registrable Securities requesting some or all of their
Registrable Securities to be included in the Company's registration must
sell that portion of their Registrable Securities to the underwriters
selected by the Company on the same terms and conditions as apply to the
Company.
No registration effected under this Section 2.2 shall relieve the
Company of its obligation to effect registration upon request under
Section 2.1.
(b) The Company shall not be obligated to effect any registration of
Registrable Securities under this Section 2.2 incidental to the
registration of any of its securities in connection with mergers,
acquisitions, exchange offers, dividend reinvestment plans or stock option
or other employee benefit plans.
(c) The Registration Expenses incurred in connection with each
registration of Registrable Securities requested pursuant to this Section
2.2 shall be paid by the Company.
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(d) If a registration pursuant to this Section 2.2 involves an
Underwritten Offering and the managing underwriter advises the Company
that, in its opinion, the number of securities proposed to be included in
such registration should be limited due to market conditions, then the
Company will include in such registration (i) first, the securities the
Company or any other selling stockholders on whose behalf such registration
is filed proposes to sell, and (ii) second, the number of shares of Common
Stock requested to be included in such registration pursuant to piggyback
registration rights that, in the opinion of such managing underwriter, can
be sold, such amount to be allocated pro rata among all such requesting
holders on the basis of the relative number of securities each such holder
has requested to be included in such registration.
(e) In connection with any Underwritten Offering with respect to which
Holders of Registrable Securities shall have requested registration
pursuant to this Section 2.2, the Company shall have the right to select
the managing underwriter with respect to the offering.
(f) Notwithstanding anything in this Section 2.2 to the contrary, each
person who was granted piggyback registration rights pursuant to Section
6.2 of the Stockholders Agreement shall be entitled to the same rights
under this Agreement as granted under the Stockholders Agreement.
SECTION 2.3. Registration Procedures.
(a) If and whenever the Company is required to use its best efforts to
effect or cause the registration of any Registrable Securities under the
Securities Act as provided in Section 2.1 or 2.2, the Company will:
(i) Prepare and, in any event within 60 calendar days after the end
of the period within which requests for registration may be given to the
Company, file with the Commission a registration statement with respect
to such Registrable Securities and use its best efforts to cause such
registration statement to become and remain effective; provided that the
Company may discontinue any registration of its securities that is being
effected pursuant to Section 2.2 at any time prior to the effective date
of the registration statement relating thereto.
(ii) Prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period not exceeding nine months and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered
by such registration statement during such period in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement, provided, that before filing a
registration statement or prospectus relating to the sale of Registrable
Securities, or any amendments or supplements thereto, the Company will
furnish to counsel to each Holder of Registrable Securities covered by
such registration statement or prospectus, copies of all documents
proposed to be filed, which documents will be subject to the review of
such counsel, and the Company will give reasonable consideration in good
faith to any comments of such counsel.
(iii) Furnish to each Holder of Registrable Securities covered by
the registration statement and to each underwriter, if any, of such
Registrable Securities, such number of copies of a prospectus and
preliminary prospectus for delivery in conformity with the requirements
of the Securities Act, and such other documents, as such Person may
reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities.
(iv) Use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each seller shall
reasonably request, and do any and all other acts and things which may
be reasonably necessary or advisable to enable such seller to consummate
the disposition of the Registrable Securities owned by such seller, in
such jurisdictions, except that the Company shall not for any such
purpose be required (A) to qualify to do business as a foreign
corporation in any
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jurisdiction where, but for the requirements of this Section 2.3(a)(iv),
it is not then so qualified, or (B) to subject itself to taxation in any
such jurisdiction, or (C) to take any action which would subject it to
general or unlimited service of process in any such jurisdiction where
it is not then so subject.
(v) Use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of
such Registrable Securities.
(vi) Immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate time period mentioned in Section 6.3(a)(ii), if
the Company becomes aware that the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and, at the
request of any such seller, deliver a reasonable number of copies of an
amended or supplemental prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities,
each prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make generally available to
its security holders, in each case as soon as practicable, but not later
than 45 calendar days after the close of the period covered thereby (90
calendar days in case the period covered corresponds to a fiscal year of
the Company), an earnings statement of the Company which will satisfy
the provisions of Section 11(a) of the Securities Act.
(viii) Use its best efforts in cooperation with the underwriters to
list such Registrable Securities on each securities exchange as they may
reasonably designate.
(ix) In the event the offering is an underwritten offering, use its
best efforts to obtain a "cold comfort" letter from the independent
public accountants for the Company in customary form and covering such
matters of the type customarily covered by such letters as the
Stockholders may reasonably request, in order to effect an underwritten
public offering of such Registrable Securities.
(x) Execute and deliver all instruments and documents (including in
an Underwritten Offering an underwriting agreement in customary form)
and take such other actions and obtain such certificates and opinions as
the Stockholders may reasonably request in order to effect an
underwritten public offering of such Registrable Securities.
(xi) Make available for inspection by the seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to
such registration statement and by any attorney, accountant or other
agent retained by any such seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and
properties of the Company, and cause all of the Company's officers,
directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement.
(xii) Obtain for delivery to the underwriter or agent an opinion or
opinions from counsel for the Company in customary form and in form and
scope reasonably satisfactory to such underwriter or agent and their
counsel.
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(b) Each Holder of Registrable Securities will, upon receipt of any
notice from the Company of the happening of any event of the kind described
in Section 2.3(a)(vi), forthwith discontinue disposition of the Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 2.3(a)(vi).
(c) If a registration pursuant to Section 2.1 or 2.2 involves an
Underwritten Offering, each holder of Registrable Securities agrees, if
such Holder's Registrable Securities are included in such registration, not
to effect any public sale or distribution, including any sale pursuant to
Rule 144 under the Securities Act, of any Registrable Securities, or of any
security convertible into or exchangeable or exercisable for any
Registrable Securities (other than as part of such Underwritten Offering),
without the consent of the managing underwriter, during a period commencing
seven calendar days before and ending 90 calendar days (or such lesser
number as the managing underwriter shall designate) after the effective
date of such registration.
(d) If a registration pursuant to Section 2.1 or 2.2 involves an
Underwritten Offering, the Company agrees, if so required by the managing
underwriter, not to effect any public sale or distribution of any of its
equity or debt securities, as the case may be, or securities convertible
into or exchangeable or exercisable for any of such equity or debt
securities, as the case may be, during a period commencing seven calendar
days before and ending 180 calendar days after the effective date of such
registration, except for such Underwritten Offering or except in connection
with a stock option plan, stock purchase plan, savings or similar plans, or
an acquisition, merger or exchange offer.
(e) If a registration pursuant to Section 2.1 or 2.2 involves an
Underwritten Offering, any Holder of Registrable Securities requesting to
be included in such registration may elect, in writing, prior to the
effective date of the registration statement filed in connection with such
registration, not to register such securities in connection with such
registration, unless such Holder has agreed with the Company or the
managing underwriter to limit its rights under this Section 2.3.
(f) It is understood that in any Underwritten Offering, in addition to
any shares of stock (the "initial shares") the underwriters have committed
to purchase, the underwriting agreement may grant the underwriters an
option to purchase up to a number of additional shares of stock (the
"option shares") equal to 15% of the initial shares (or such other maximum
amount as the NASD may then permit), solely to cover over-allotments.
Shares of stock proposed to be sold by the Company and the other Holders
shall be allocated between initial shares and option shares as agreed or,
in the absence of agreement, shall be allocated pro rata among the Company
and all such Holders on the basis of the relative number of Registrable
Securities included in such registration.
SECTION 2.4. Indemnification.
(a) In the event of any registration of any securities of the Company
under the Securities Act pursuant to Section 2.1 or 2.2, the Company will,
and it hereby agrees to, indemnify and hold harmless, to the extent
permitted by law, each seller of any Registrable Securities covered by such
registration statement, each Affiliate of such seller and their respective
directors, officers, employees and agents or general and limited partners
(and directors, officers, employees and agents thereof) and, if such seller
is a portfolio or investment fund, its investment advisors or agents, each
other Person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls such seller or
any such underwriter within the meaning of the Securities Act, as follows:
(i) against any and all loss, liability, claim, damage or expense
whatsoever arising out of or based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration
statement (or any amendment or supplement thereto), including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising out
of an untrue statement or alleged untrue statement of a material fact
contained in any
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preliminary prospectus or prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of
any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, if such settlement is effected with the
written consent of the Company; and
(iii) against any and all expense reasonably incurred by them in
connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement
or mission to the extent that any such expense is not paid under
subparagraph (i) or (ii) above;
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Seller or any such director,
officer, employee, agent, general or limited partner, investment advisor
or agent, underwriter or controlling Person and shall survive the
transfer of such securities by such Seller.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed in accordance
with Section 2.1 or 2.2, that the Company shall have received an
undertaking reasonably satisfactory to it from the prospective seller of
such Registrable Securities or any underwriter, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in Section
2.4(a)) the Company with respect to any statement or alleged statement in
or omission or alleged omission from such registration statement, any
preliminary, final or summary prospectus contained therein, or any
amendment or supplement, if such statement or alleged statement or omission
or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such seller
or underwriter specifically stating that it is for use in the preparation
of such registration statement, preliminary, final or summary prospectus or
amendment or supplement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Company
or any such director, officer or controlling Person and shall survive the
transfer of such securities by such seller. In that event, the obligations
of the Company and such sellers pursuant to this Section 2.4 are to be
several and not joint; provided, however, that, with respect to each claim
pursuant to this Section, the Company shall be liable for the full amount
of such claim, and each such seller's liability under this Section 2.4
shall be limited to an amount equal to the net proceeds (after deducting
the underwriting discount and expenses) received by such seller from the
sale of Registrable Securities held by such seller pursuant to this
Agreement.
(c) Promptly after receipt by an indemnified party hereunder of
written notice of the commencement of any action or proceeding involving a
claim referred to in this Section 2.4, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to such indemnifying party of the commencement of such
action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of
its obligations under this Section 2.4, except to the extent (not including
any such notice of an underwriter) that the indemnifying party is
materially prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim (in which case
the indemnifying party shall not be liable for the fees and expenses of
more than one firm of counsel), the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its
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election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party for any legal or other expenses
subsequently incurred by such indemnifying party in connection with the
defense thereof provided that the indemnifying party will not agree to any
settlement without the prior consent of the indemnified party (which
consent shall not be unreasonably withheld) unless such settlement requires
no more than a monetary payment for which the indemnifying party agrees to
indemnify the indemnified party and includes a full, unconditional and
complete release of the indemnified person, provided, however, that the
indemnified party shall be entitled to take control of the defense of any
claim as to which, in the reasonable judgment of the indemnifying party's
counsel, representation of both the indemnifying party and the indemnified
party would be inappropriate under the applicable standards of professional
conduct due to actual or potential differing interests between them. In the
event that the indemnifying party does not assume the defense of a claim
pursuant to this Section 2.4(c), the indemnified party will have the right
to defend such claim by all appropriate proceedings, and will have control
of such defense and proceedings, and the indemnified party shall have the
right to agree to any settlement without the prior consent of the
indemnifying party. Each indemnified party shall, and shall cause its legal
counsel to, provide reasonable cooperation to the indemnifying party and
its legal counsel in connection with its assuming the defense of any claim,
including the furnishing of the indemnifying party with all papers served
in such proceeding. In the event that an indemnifying party assumes the
defense of an action under this Section 2.4(c), then such indemnifying
party shall, subject to the provisions of this Section 2.4, indemnify and
hold harmless the indemnified party from any and all losses, claims,
damages or liabilities by reason of such settlement or judgment.
(d) The Company and each seller of Registerable Securities shall
provide for the foregoing indemnity (with appropriate modifications) in any
underwriting agreement with respect to any required registration or other
qualification of securities under any federal or state law or regulation of
any governmental authority.
SECTION 2.5. Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by Section
2.4 is for any reason not available or insufficient for any reason to hold
harmless an indemnified party in respect of any losses, claims, damages or
liabilities referred to therein, the parties required to indemnify by the terms
thereof shall contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement incurred by
the Company, any seller of Registrable Securities and one or more of the
underwriters, except to the extent that contribution is not permitted under
Section 11(f) of the Securities Act. In determining the amounts which the
respective parties shall contribute, there shall be considered the relative
benefits received by each party from the offering of the Registrable Securities
by taking into account the portion of the proceeds of the offering realized by
each, and the relative fault of each party by taking into account the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and prevent any
statement or omission and any other equitable considerations appropriate under
the circumstances. The Company and each Person selling securities agree with
each other that no seller of Registrable Securities shall be required to
contribute any amount in excess of the amount such seller would have been
required to pay to an indemnified party if the indemnity under Section 2.4(b)
were available. The Company and each such seller agree with each other and the
underwriters of the Registerable Securities, if requested by such underwriters,
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation (even if the underwriters were
treated as one entity for such purpose) or for the underwriters' portion of such
contribution to exceed the percentage that the underwriting discount bears to
the initial public offering price of the Registrable Securities. For purposes of
this Section 2.5, each Person, if any, who controls an underwriter within the
meaning of Section 15 of the Securities Act shall have the same rights to
contribution as such underwriter, and each director and each officer of the
Company who signed the registration statement, and each Person, if any, who
controls the Company or a seller of Registrable Securities within the meaning of
Section 15 of the Securities Act shall have the same rights to contribution as
the Company or a seller of Registrable Securities, as the case may be.
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SECTION 2.6. Rule 144. The Company covenants that it will file the reports
required to be filed by it under the Exchange Act and the rules and regulations
adopted by the Commission thereunder, and it will take such further action as
any holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell shares of Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
ARTICLE III.
MISCELLANEOUS.
SECTION 3.1. Successors and Assigns. Except as otherwise provided herein,
all of the terms and provisions of this Agreement shall be binding upon, shall
inure to the benefit of and shall be enforceable by the respective successors,
heirs and assigns of the parties hereto. No Holder may assign any of its rights
hereunder to any other Person without the prior written consent of the Company.
The Company may not assign any of its rights hereunder to any Person other than
an Affiliate of the Company.
SECTION 3.2. Amendment and Modification; Waiver of Compliance.
(a) This Agreement may be amended only by a written instrument duly
executed by the Company and the Holders of a majority of the Registrable
Securities; provided, however, that any amendment which adversely affects
the rights of any Holder of Registrable Securities must be approved by the
Holder of Registrable Securities whose rights would be adversely affected
by such amendment.
(b) Except as otherwise provided in this Agreement, any failure of any
of the parties to comply with any obligation, covenant, agreement or
condition herein may be waived by the party entitled to the benefits
thereof only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
(c) In the event of any conflict between the provisions of this
Agreement and the provisions of any other agreement, the provisions of this
Agreement shall govern and prevail, except as otherwise provided herein.
SECTION 3.3. Notices. Any notice, request, claim, demand, document and
other communication hereunder to any party shall be effective upon receipt (or
refusal of receipt) and shall be in writing and delivered personally or sent by
telex or telecopy (with such telex or telecopy confirmed promptly in writing
sent by first class mail), or first class mail, or other similar means of
communication, as follows:
(i) If to the Company, addressed to its principal executive offices to
the attention of its Secretary;
(ii) If to the First Reserve Stockholders, to:
Ben Guill
First Reserve Corporation
600 Travis, Suite 6000
Houston, Texas 77002
with a copy to:
Thomas R. Denison
First Reserve Corporation
1801 California Street, Suite 4110
Denver, Colorado 80202
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(iii) If to the Ansary Stockholders, to
or, in each case, to such other address or telex or telecopy number as
such party may most recently designate, in writing to each Holder.
All such communications shall be deemed to have been given or made when so
delivered by hand or sent by telecopy, or if mailed, five business days after
being so mailed.
SECTION 3.4. Entire Agreement; Governing Law.
(a) This Agreement and the other writings referred to herein or
delivered pursuant hereto which form a part hereof contain the entire
agreement among the parties hereto with respect to the subject transactions
contemplated hereby and supersede all prior oral and written agreements and
memoranda and undertakings among the parties hereto with regard to this
subject matter. The Company represents to the Stockholders that the rights
granted to the holders hereunder do not in any way conflict with and are
not inconsistent with the rights granted or obligations accepted under any
other agreement (including its Certificate of Incorporation) to which the
Company is a party.
(b) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF THAT WOULD REQUIRE THE APPLICATION
OF THE LAWS OF ANY JURISDICTION OTHER THAN DELAWARE).
SECTION 3.5. Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 3.6. Recapitalizations, Exchanges, Etc., Affecting the
Securities. The provisions of this Agreement shall apply to the full extent set
forth herein with respect to the Company Common Stock held by the First Reserve
Stockholders or issued in the Merger to the Ansary Stockholders, and to any and
all equity or debt securities of the Company or any successors or assigns of the
Company (whether by merger, consolidation, sale of assets, or otherwise) which
may be issued in respect of, in exchange for, or in substitution of, such
Company Common Stock and shall be appropriately adjusted for any stock
dividends, splits, reverse splits, combinations, reclassifications,
recapitalizations, reorganizations and the like occurring after the date hereof.
SECTION 3.7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 3.8. Agreement Supersedes Stockholders Agreement. This Agreement
shall supersede and replace the registration rights of the First Reserve
Stockholders under the Stockholders Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
NATIONAL-OILWELL, INC.:
------------------------------------
FIRST RESERVE STOCKHOLDERS
------------------------------------
ANSARY STOCKHOLDERS
------------------------------------
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APPENDIX II
OPINION OF MERRILL LYNCH & CO.
[LETTERHEAD OF MERRILL LYNCH & CO.]
March 15, 2000
Board of Directors
National-Oilwell, Inc.
10000 Richmond Avenue, Suite 400
Houston, Texas 77042
Attention: Joel V. Staff
Gentlemen:
National-Oilwell, Inc. (the "Company") and IRI International Corporation
(the "Subject Company") propose to enter into an agreement (the "Agreement")
pursuant to which the Subject Company will be merged with the Company in a
transaction (the "Merger") in which each share of the Subject Company's common
stock, par value $0.01 per share (the "Shares"), will be converted into the
right to receive 0.3385 shares of the common stock, par value $0.01 per share,
of the Company (the "Company Shares"). The Merger is expected to be considered
by the shareholders of the Company and the Subject Company at special
shareholders' meetings to be held in May 2000 and consummated on or shortly
after the date of such meetings.
You have asked us whether, in our opinion, the proposed consideration to be
paid by the Company pursuant to the Merger is fair to the Company from a
financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Subject Company's unaudited financial information for
the year ended December 31, 1999; the Subject Company's Annual Reports,
Forms 10-K and related financial information for the five fiscal years
ended December 31, 1998; and the Subject Company's Forms 10-Q and the
related unaudited financial information for the quarterly periods ending
March 31, 1999, June 30, 1999 and September 30, 1999;
(2) Reviewed the Company's unaudited financial information for the
year ended December 31, 1999; the Company's Annual Reports, Forms 10-K and
related financial information for the five fiscal years ended December 31,
1998; and the Company's Forms 10-Q and the related unaudited financial
information for the quarterly periods ending March 31, 1999, June 30, 1999
and September 30, 1999;
(3) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and prospects of the
Subject Company and the Company, furnished to us by the Subject Company and
the Company, as well as the amount and timing of the cost savings and
related expenses and synergies expected to result from the Merger furnished
to us by the management of the Company (the "Expected Synergies");
(4) Conducted discussions with members of senior management of the
Subject Company and the Company concerning their respective businesses and
prospects;
(5) Reviewed the historical market prices and trading activity for the
Shares and the Company Shares and compared them with that of certain
publicly traded companies which we deemed to be reasonably similar to the
Subject Company and the Company, respectively;
(6) Compared the results of operations of the Subject Company and the
Company with that of certain companies which we deemed to be reasonably
similar to the Subject Company and the Company, respectively;
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(7) Compared the proposed financial terms of the transactions
contemplated by the Agreement with the financial terms of certain other
mergers and acquisitions which we deemed to be relevant;
(8) Considered the pro forma effect of the Merger on the Company's
capitalization ratios and earnings, cash flow and book value per share;
(9) Reviewed a draft of the Agreement; and
(10) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market and
monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Subject
Company and the Company, and we have not independently verified such information
or undertaken an independent appraisal of the assets of the Subject Company or
the Company. In addition, we have not made any physical inspections of the
properties or assets of the Subject Company or the Company in connection with
this engagement. With respect to the financial forecasts and the estimates of
Expected Synergies furnished by the Subject Company and the Company, we have
assumed that they have been reasonably prepared and reflect the best currently
available estimates and judgment of the Subject Company's or the Company's
management as to the expected future financial performance of the Subject
Company or the Company, as the case may be. We have also assumed that the Merger
will constitute a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended, and qualify for accounting treatment
as a pooling of interests.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. We are not expressing any opinion herein as to the price at which the
Company Shares will trade following the announcement or consummation of the
Merger.
We have acted as financial advisor to the Company with respect to the
Merger and will receive a fee from the Company for our services which is
contingent upon the consummation of the Merger. We have, in the past, provided
financing services to the Company and may continue to do so, and have received,
and may receive, fees for such services. In addition, the Company has agreed to
indemnify us for certain liabilities arising out of our engagement. In the
ordinary course of our business, we or our affiliates may actively trade the
equity and debt securities of the Company and the Subject Company (including the
Company Shares and the Shares) for our or our affiliates' own account and for
the account of customers and, accordingly, may at any time hold a long or short
position in such securities.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not constitute a recommendation to any stockholder of the Company
as to how such stockholder should vote with respect to the Merger. Except as
provided below, this opinion may not be reproduced, summarized, described or
referred to without Merrill Lynch's prior written consent. If this opinion is
included in the proxy statement to be mailed to the stockholders of the Company
or the Subject Company in connection with the Merger, such opinion will be
reproduced in such proxy statement in full, and any description of or reference
to Merrill Lynch or summary of the opinion in such proxy statement will be in a
form reasonably acceptable to Merrill Lynch and its counsel.
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On the basis of, and subject to the foregoing, we are of the opinion that
the proposed consideration to be paid by the Company pursuant to the Merger is
fair to the Company from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
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APPENDIX III
OPINION OF LEHMAN BROTHERS INCORPORATED
LEHMAN BROTHERS
March 15, 2000
Board of Directors
IRI International Corporation
1000 Louisiana, Suite 5900
Houston, Texas 77002
Members of the Board:
We understand that IRI International Corporation ("IRI" or the "Company")
and National-Oilwell, Inc. ("National-Oilwell") are considering entering into a
transaction pursuant to which IRI will merge with National-Oilwell Acquisition,
Inc. ("Acquisition Company"), a wholly-owned subsidiary of National-Oilwell (the
"Merger"). Upon the effectiveness of the Merger, each issued and outstanding
share of IRI common stock shall be converted into the right to receive .3385
shares of National-Oilwell common stock (the "Exchange Ratio"). The terms and
conditions of the Proposed Merger are set forth in more detail in the Agreement
of Merger dated March 15, 2000 by and among IRI, National-Oilwell and
Acquisition Company (the "Agreement").
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's stockholders of the Exchange Ratio to be offered to such stockholders
in the Merger. We have not been requested to opine as to, and our opinion does
not in any manner address, the Company's underlying business decision to proceed
with or effect the Merger.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Merger; (2) such publicly available information
concerning the Company and National-Oilwell that we believe to be relevant to
our analysis, including, without limitation, each of the periodic reports and
proxy statements filed by the Company and National-Oilwell since January 1, 1999
(including the audited and unaudited financial statements included in such
reports and statements); (3) financial and operating information with respect to
the respective businesses, operations and prospects of the Company and
National-Oilwell as furnished to us by the Company and National-Oilwell,
respectively, including (A) certified audited financial statements for the year
ended December 31, 1999 for each of the Company and National-Oilwell, in the
form expected to be filed in their Annual Reports on Form 10-K for the fiscal
year ended December 31, 1999 (drafts of which were provided to us), (B)
financial budgets for the fiscal year 2000 for each of the Company and
National-Oilwell and (C) amounts and timing of the cost savings and operating
synergies expected by the managements of the Company and National-Oilwell to
result from a combination of the businesses of the Company and National-Oilwell
(the "Synergies"); (4) published estimates of third party research analysts with
respect to the future financial performance of the Company and National-Oilwell,
respectively, (5) a history of the trading price and volume of the Company's
common stock from November 1997 to the present and a comparison of that trading
history with those of other companies that we deemed relevant, including
National-Oilwell, (6) a history of the trading price and volume of
National-Oilwell's common stock from November 1997 to the present and a
comparison of that trading history with those of other companies that we deemed
relevant, including the Company, (7) a comparison of the historical financial
results and present financial condition of the Company with those of other
companies that we deemed relevant, including National-Oilwell, (8) a comparison
of the historical financial results and present financial condition of
National-Oilwell with those of other companies that we deemed relevant,
including the Company, (9) the potential pro forma impact of the Merger,
including the Synergies, (10) a comparison of the financial terms of the Merger
with the financial terms of certain other transactions that we deemed relevant
and (11) the relative contributions of the Company and National-Oilwell to the
combined company upon consummation of the Proposed Transactions. In addition, we
have
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had discussions with the managements of the Company and National-Oilwell
concerning their respective businesses, operations, assets, financial condition
and prospects and the Synergies and have undertaken such other studies, analyses
and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of managements of the Company and
National-Oilwell that they are not aware of any facts or circumstances that
would make such information inaccurate or misleading. With respect to the
budgets for the fiscal years 2000 and 2001 for the Company, upon advice of the
Company, we have assumed that such budgets have been reasonably prepared on a
basis reflecting the best currently available estimates and judgments of the
management of the Company as to the financial performance of the Company for
such fiscal year and that the Company will perform substantially in accordance
with such budgets. With respect to the budget for the fiscal year 2000 for
National-Oilwell, upon advice of National-Oilwell, we have assumed that such
budget has been reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of National-Oilwell as to
the financial performance of National-Oilwell for such fiscal year and that
National-Oilwell will perform substantially in accordance with such budget. We
have not been provided with, and did not have access to, any financial
projections of the Company for any period beyond fiscal year 2001 or
National-Oilwell for any period beyond fiscal year 2000. Accordingly, upon the
advice of the Company and National-Oilwell, respectively, we have assumed that
the published estimates of third party research analysts are a reasonable basis
upon which to evaluate the future financial performance of the Company and
National-Oilwell and that each of the Company and National-Oilwell will perform
substantially in accordance with such estimates. With respect to the Synergies,
upon advice of the Company and National-Oilwell, we have assumed that the
Synergies will be achieved substantially in accordance with the expectations of
the managements of the Company and National-Oilwell. In arriving at our opinion,
we have not conducted a physical inspection of the properties and facilities of
the Company or National-Oilwell and have not made or obtained any evaluations or
appraisals of the assets or liabilities of the Company or National-Oilwell. In
addition, you have not authorized us to solicit, and we have not solicited, any
proposals or offers from any third party with respect to the purchase of all or
a part of the Company's business. Upon advice of the Company and its legal and
accounting advisors, we have assumed that the Merger will qualify (i) for
pooling-of-interests accounting treatment and (ii) as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended,
and therefore as a tax-free transaction to the stockholders of the Company. Our
opinion necessarily is based upon market, economic and other conditions as they
exist on, and can be evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Exchange Ratio to be
offered to the stockholders of the Company is fair to such stockholders.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services which is contingent upon the
consummation of the Merger. In addition, the Company has agreed to indemnify us
for certain liabilities that may arise out of the rendering of this opinion. We
also have performed various investment banking services for the Company in the
past and have received customary compensation for such services. In the ordinary
course of our business, we may actively trade in the equity securities of the
Company and National-Oilwell for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
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This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Merger. This opinion is not intended to be and does not
constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote with respect to the Merger.
Very truly yours,
LEHMAN BROTHERS
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APPENDIX IV
PROPOSED RESTATED CERTIFICATE OF INCORPORATION OF NOI
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, 160,000,001 shares of capital stock, consisting of (i)
150,000,000 shares of common stock, par value $.01 per share ("Common Stock");
(ii) one share of Special Voting Stock ("Special Voting Stock"); the Common
Stock and the Special Voting Stock are collectively referred to as the ("Common
Shares"); and (iii) 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 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 May 14, 1997 (as amended), 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 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 term 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 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
shares, 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. 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
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other class shall be proportionately subdivided or combined. All such
subdivisions and combinations shall be payable only in Common Stock to the
holders of Common Stock.
SECTION 4. 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 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 therefore
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 5. 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 reasonable
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 6. 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 7. AMENDMENT AND WAIVER. No amendment or waiver of any provision of
this Article Fourth shall be effective without 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.
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 a 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.
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,
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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
hereinafter 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 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 of 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.
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
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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 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 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
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constitute the whole board of directors shall 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 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 Fifth, 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 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
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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 an 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 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 of 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 "exchange 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, 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 to 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 or directors, then the liability of a director of
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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, criminal, administrative or investigative
(hereinafter a "proceeding"), 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
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.
IV-7
142
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 of 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 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 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, directors, and officers are subject
to this reserved power.
IV-8
143
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL")
authorizes, inter alia, a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that such person is or was an officer or director of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. a Delaware corporation may
indemnify past or present officers and directors of such corporation or of
another corporation or other enterprise at the former corporation's request, in
an action by or in the right of the corporation to procure a judgment in its
favor under the same conditions, except that no indemnification is permitted
without judicial approval if such person is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in defense of any action referred to above, or in defense of any
claim, issue or matter therein, the corporation must indemnify him against the
expenses (including attorney's fees) which he actually and reasonably incurred
in connection therewith. Section 145 further provides that any indemnification
shall be made by the corporation only as authorized in each specific case upon a
determination by the (i) stockholders, (ii) board of directors by a majority
vote or a quorum consisting of directors who were not parties to such action,
suit or proceeding or (iii) independent counsel if a quorum of disinterested
directors so directs. Section 145 provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a person
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 145 of the DGCL also empowers National Oilwell to purchase and
maintain insurance on behalf of any person who is or was an officer or director
of National Oilwell against liability asserted against or incurred by him in any
such capacity, whether or not National Oilwell would have the power to indemnify
such officer or director against such liability under the provisions of Section
145. National Oilwell maintains a directors' and officers' liability policy for
such purposes.
Article Sixth, Part II, Section 1 of National Oilwell's Amended and
Restated Certificate of Incorporation and Article VI of National Oilwell's
Bylaws each provide that directors, officers, employees and agents shall be
indemnified to the fullest extent permitted by Section 145 of the DGCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 -- Agreement of Merger dated as of March 15, 2000 among
National Oilwell, Inc., Arrow Acquisition Corp. and IRI
International Corporation (Included as Appendix I to the
joint proxy/prospectus which is part of this registration
statement on Form S-4)
5 -- Opinion of Morgan, Lewis & Bockius LLP regarding legality
of securities being registered
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of KPMG LLP
II-1
144
EXHIBIT
NUMBER DESCRIPTION
------- -----------
23.3 -- Consent of Morgan, Lewis & Bockius LLP (included in its
opinion filed as Exhibit 5)
24.1 -- Powers of Attorney (included as part of the signature
page hereto)
99.1 -- Proxy Card for stockholders of National-Oilwell, Inc.
99.2 -- Proxy Card for exchangeable shareholders of Dreco Energy
Services Ltd.
99.3 -- Proxy Card for stockholders of IRI International
Corporation
(b) All schedules are omitted because they are not applicable or the
required information has been provided in the consolidated financial statements
or the notes thereto.
(c) Financial Advisor Opinions
(1) Opinion of Merrill Lynch & Co., attached as Appendix II to the
joint proxy statement/ prospectus which is part of this registration
statement on Form S-4.
(2) Opinion of Lehman Brothers Incorporated, attached as Appendix III
to the joint proxy statement/prospectus which is part of this registration
statement on Form S-4.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who
II-2
145
may be deemed underwriters, in addition to the information called for by
the other items of the applicable form;
(5) that every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
(6) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof;
(7) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request; and
(8) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
146
SIGNATURES
Pursuant to the requirements on the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Houston, state of Texas
on May 10, 2000.
NATIONAL-OILWELL, INC.
By: /s/ JOEL V. STAFF
----------------------------------
Joel V. Staff
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below in so signing also makes, constitutes and appoints Steven W.
Krablin his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all registration statements filed by
National-Oilwell, Inc., a Delaware corporation, in which the undersigned holds
offices and any amendments to the registration statement, and to file any and
all of the same, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ JOEL V. STAFF Chairman of the Board, President May 10, 2000
- ----------------------------------------------------- and Chief Executive Officer
Joel V. Staff (Principal Executive Officer)
/s/ STEVEN W. KRABLIN Vice President and Chief Financial May 10, 2000
- ----------------------------------------------------- Officer (Principal Financial
Steven W. Krablin Officer and Principal Accounting
Officer)
/s/ HOWARD I. BULL Director May 10, 2000
- -----------------------------------------------------
Howard I. Bull
/s/ JAMES C. COMIS III Director May 10, 2000
- -----------------------------------------------------
James C. Comis III
/s/ W. MCCOMB DUNWOODY Director May 10, 2000
- -----------------------------------------------------
W. McComb Dunwoody
II-4
147
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ JON GJEDEBO Director May 10, 2000
- -----------------------------------------------------
Jon Gjedebo
/s/ BEN A. GUILL Director May 10, 2000
- -----------------------------------------------------
Ben A. Guill
/s/ WILLIAM E. MACAULAY Director May 10, 2000
- -----------------------------------------------------
William E. Macaulay
/s/ FREDERICK W. PHEASEY Director May 10, 2000
- -----------------------------------------------------
Frederick W. Pheasey
II-5
148
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 -- Agreement of Merger dated as of March 15, 2000 among
National Oilwell, Inc., Arrow Acquisition Corp. and IRI
International Corporation (Included as Appendix I to the
joint proxy/prospectus which is part of this registration
statement on Form S-4)
5 -- Opinion of Morgan, Lewis & Bockius LLP regarding legality
of securities being registered
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of KPMG LLP
23.3 -- Consent of Morgan, Lewis & Bockius LLP (included in its
opinion filed as Exhibit 5)
24.1 -- Powers of Attorney (included as part of the signature
page hereto)
99.1 -- Proxy Card for stockholders of National-Oilwell, Inc.
99.2 -- Proxy Card for exchangeable shareholders of Dreco Energy
Services Ltd.
99.3 -- Proxy Card for stockholders of IRI International
Corporation
1
EXHIBIT 5
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103-2921
Tel: (215) 963-5000
Fax: (215) 963-5299
May 10, 2000
National-Oilwell, Inc.
10000 Richmond Ave.
Houston, Texas 77042
Re: National-Oilwell, Inc. Registration Statement on Form S-4 relating to
14,381,511
shares of Common Stock, $.01 par value
Ladies and Gentlemen:
We have acted as counsel to National-Oilwell, Inc., a Delaware corporation
(the "Company"), in connection with (i) the negotiation by the Company and IRI
International Corporation, a Delaware corporation ("IRI") of a Merger Agreement
dated as of March 15, 2000 (the "Merger Agreement"), between the Company and IRI
relating to the merger of the Company and IRI and (ii) the preparation of the
subject Registration Statement on Form S-4 (the "Registration Statement") to be
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Act"), relating to the issuance of up to 14,381,511
shares (the "Shares") of the Company's Common Stock, par value $0.01 per share.
We understand that the issuance of the Shares pursuant to the Merger
Agreement is contingent upon, among other things, the requisite approval of the
Merger by the respective stockholders of the Company and IRI. In rendering the
opinion set forth below, we have reviewed (a) the Registration Statement; (b)
the Company's Amended and Restated Certificate of Incorporation and Bylaws; (c)
certain records of the Company's corporate proceedings; (d) the Merger
Agreement; and (e) such records, documents, statutes and decisions as we have
deemed relevant. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity with the original of all documents submitted to us as copies
thereof.
Our opinion set forth below is limited to the Delaware General Corporation
Law.
Based upon the foregoing, we are of the opinion that, when and to the
extent (i) the Registration Statement has become effective under the Act, (ii)
the stockholders of the Company and IRI have approved the Merger and (iii) the
Shares are issued as described in the Registration Statement and in accordance
with the terms and conditions of the Merger Agreement, the Shares will be
validly issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as Exhibit 5 to the
Registration Statement and further consent to the reference to our firm under
the caption "Legal Matters" in the prospectus included in the Registration
Statement. In giving such opinion, we do not hereby admit that we are acting
within the category of persons whose consent is required under Section 7 of the
Act or the rules or regulations of the Securities and Exchange Commission
thereunder.
The opinion expressed herein is solely for your benefit, and may be relied
upon only by you.
Very truly yours,
/s/ MORGAN, LEWIS & BOCKIUS LLP
1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of National-Oilwell,
Inc. for the registration of 14,381,511 shares of its common stock and to the
incorporation by reference in such Registration Statement of our report dated
March 16, 2000 with respect to the consolidated financial statements of
National-Oilwell, Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 1999 filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
------------------------------------
Ernst & Young LLP
Houston, Texas
May 10, 2000
1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our report dated March 8,
2000, with respect to the consolidated balance sheets of IRI International
Corporation and Subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and comprehensive
income and cash flows for each of the years in the three-year period ended
December 31, 1999, which report appears in the December 31, 1999 annual report
on Form 10-K of IRI International Corporation, incorporated by reference herein
and to the reference to our firm under the heading "Experts" in this joint proxy
statement/prospectus and registration statement on Form S-4 of National-Oilwell,
Inc.
/s/ KPMG LLP
------------------------------------
KPMG LLP
Houston, Texas
May 10, 2000
1
EXHIBIT 99.1
NATIONAL-OILWELL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF STOCKHOLDERS
ON _______________, 2000
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 Special Meeting of Stockholders of National-Oilwell, Inc. (the
"National-Oilwell Meeting") to be held on ______________, _________, 2000, and
any adjournment or postponement 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
___________, 2000 Joint Proxy Statement/Prospectus and any supplements thereto.
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 "FOR" Proposals 1 and 2.
The undersigned acknowledges receipt of the _____________, 2000 Notice of
Special Meeting and the Joint Proxy Statement/Prospectus, which more
particularly describes the matters referred to herein.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
2
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD BACK AS SOON AS POSSIBLE!
[X] Please mark your vote
as in this example.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE PROPOSALS
DESCRIBED BELOW.
1. Approval of the Agreement of Merger, dated as of March 15, 2000, among
National-Oilwell, Inc., Arrow Acquisition Corp. and IRI International
Corporation, and the transactions contemplated thereby.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Adoption of a restated certificate of incorporation that includes an
amendment increasing the number of authorized shares of NOI common stock from
75,000,000 shares to 150,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- ---------------------------------- -----------------------------------------
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.)
1
EXHIBIT 99.2
NATIONAL-OILWELL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF STOCKHOLDERS
ON __________________, 2000
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 Special Meeting of Stockholders of
National-Oilwell, Inc. to be held on ____________, _______, 2000, 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 ________, 2000
Joint Proxy Statement/Prospectus.
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
stockholders only if this proxy is completed, returned to and received not later
than 4:30 p.m. (Calgary time) on ___________, _______, 2000 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
___________, 2000. IN ALL EVENTS, THE RISK OF DELIVERY OF SUCH A PROXY REMAINS
WITH THE HOLDERS OF EXCHANGEABLE SHARES.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE __________, 2000 NOTICE OF SPECIAL
MEETING AND THE JOINT PROXY STATEMENT/PROSPECTUS, WHICH MORE PARTICULARLY
DESCRIBES THE MATTERS REFERRED TO HEREIN.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
2
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD BACK AS SOON AS POSSIBLE!
[X] Please mark your vote
as in this example.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE PROPOSALS
DESCRIBED BELOW.
1. Approval of the Agreement of Merger, dated as of March 15, 2000, among
National-Oilwell, Inc., Arrow Acquisition Corp. and IRI International
Corporation, and the transactions contemplated thereby.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Adoption of a restated certificate of incorporation that includes an
amendment increasing the number of authorized shares of NOI common stock from
75,000,000 shares to 150,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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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.)
1
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS -- , 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints, as proxies for the undersigned, HUSHANG
ANSARY and ABDALLAH ANDRAWOS, or any one of them, with full power of
substitution, to vote all shares of the capital stock of IRI International
Corporation (the "Company") which the undersigned is entitled to vote at the
Special Meeting of Stockholders of the Company to be held on , 2000,
at , local time, and at any adjournments or postponements thereof, receipt of
Notice of which meeting and the Joint Proxy Statement/Prospectus accompanying
the same being hereby acknowledged by the undersigned, upon the matters
described in the , 2000 Joint Proxy Statement/Prospectus and upon
such other business as may properly come before the meeting and any
adjournments or postponements thereof, hereby revoking any proxies heretofore
given.
EACH PROPERLY EXECUTED PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE BELOW AND ON THE REVERSE SIDE HEREOF. IF NO SPECIFICATIONS
ARE MADE, THE PROXIES WILL BE VOTED FOR THE PROPOSAL.
A VOTE FOR THE PROPOSAL IS RECOMMENDED BY THE BOARD OF DIRECTORS.
Approval of the Agreement of Merger, dated as of March 15, 2000, among
National-Oilwell, Inc., Arrow Acquisition Corp. and the Company, and the
transactions contemplated thereby: (check one box only)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated: ___________________________
___________________________
SIGNATURE OF STOCKHOLDER
___________________________
SIGNATURE OF STOCKHOLDER
NOTE: Please sign your name or
names exactly as set forth
hereon. For jointly owned shares,
each owner should sign. If
signing as attorney, executor,
administrator, trustee or
guardian, please indicated the
capacity in which you are acting.
Proxies executed by corporations
should be signed by a duly
authorized officer and should
bear the corporate seal.
PLEASE DATE AND SIGN THIS PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
