-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NpYp0lEJyqMUa3CgoOubj2CveEjjxD0mcWQGWnkfP2WS4db3YZ8Q2SZWUL6aDmyv yjRvvRX3/h6w+TVZvd63YQ== 0000944209-97-000133.txt : 19970222 0000944209-97-000133.hdr.sgml : 19970222 ACCESSION NUMBER: 0000944209-97-000133 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19970212 EFFECTIVENESS DATE: 19970212 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARCO INTERNATIONAL INC CENTRAL INDEX KEY: 0000102993 STANDARD INDUSTRIAL CLASSIFICATION: OIL & GAS FILED MACHINERY & EQUIPMENT [3533] IRS NUMBER: 950472620 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-21681 FILM NUMBER: 97527983 BUSINESS ADDRESS: STREET 1: 743 N ECKHOFF ST CITY: ORANGE STATE: CA ZIP: 92668 BUSINESS PHONE: 7149781900 MAIL ADDRESS: STREET 1: 743 NO ECKHOFF STREET CITY: ORANGE STATE: CA ZIP: 92668 S-8 1 FORM S-8 As filed with the Securities and Exchange Commission on February 12, 1997 Registration No. 333- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------- VARCO INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) California 95-0472620 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) -------------------- 743 North Eckhoff Street Orange, California (Address of Principal 92868 Executive Offices) (Zip Code) -------------------- 1990 Stock Option Plan (Full title of the plan) RICHARD A. KERTSON Vice President-Finance and Chief Financial Officer 743 North Eckhoff Street Orange, California 92868 (Name and address of agent for service) (714) 978-1900 (Telephone number, including area code, of agent for service) -------------------- The Commission is requested to send copies of all communications to: LARRY M. MEEKS, ESQ. Pircher, Nichols & Meeks 1999 Avenue of the Stars, Suite 2600 Los Angeles, California 90067 (310) 201-8903 -------------------- CALCULATION OF REGISTRATION FEE
Proposed Proposed maximum Title of securities Amount to be maximum offering aggregate offering Amount of to be registered registered price per unit price registration fee - --------------------------------------------------------------------------------------------------------------------- Common Stock 2,000,000 shares $24.9375(1) $49,875,000(1) $15,113.64 =====================================================================================================================
(1) Estimated solely for purpose of calculating the registration fee based on the average of the high and low prices reported on the NYSE Composite Tape on February 6, 1997. PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE. The following documents which have heretofore been filed by Varco International, Inc. (the "Company") with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 are incorporated by reference in this registration statement: (1) The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. (2) The Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996. (3) The description of the Company's Common Stock contained in the Company's Form 8-A Registration Statement filed May 29, 1981, including any amendment or report filed for the purpose of updating such description. In addition, all documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, after the date hereof and prior to the filing of a post-effective amendment to this Registration Statement which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from their respective dates of filing. ITEM 4. DESCRIPTION OF SECURITIES. Not applicable. ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL. The legality of the Common Stock registered pursuant to this Registration Statement has been passed upon for the Company by Pircher, Nichols & Meeks, of which Leo J. Pircher, a director of the Company, is a partner. ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 204(a)(10) of the California General Corporation Law (the "GCL") permits a corporation, in its Articles of Incorporation, to eliminate or limit the personal liability of directors for monetary damages in an action brought by or in the right of the corporation (a "derivative action") for breach of a director's duties to the corporation provided, however, that such a provision may not eliminate or limit the liability of directors for (1) acts or omissions that involve intentional misconduct or a knowing and culpable violation of law; (2) acts or omissions that a director believes to be contrary to the best interests of the 1 corporation or its shareholders or that involve the absence of good faith on the part of the director; (3) any transaction from which the director derived an improper personal benefit; (4) acts or omissions that show a reckless disregard for the director's duty to the corporation or its shareholders in circumstances in which the director was aware, or should have been aware, in the ordinary course of performing a director's duties, of a risk of serious injury to the corporation or its shareholders; (5) acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the director's duty to the corporation or its shareholders; (6) transactions between a corporation and its directors or corporations having interrelated directors under Section 310 of the GCL; or (7) improper distributions to shareholders, loans or guaranties under Section 316 of the GCL. Section 204(a)(11) of the GCL permits a corporation in its Articles of Incorporation to provide for indemnification of directors, officers, employees and other agents by bylaw, agreement or otherwise in excess of that expressly permitted by Section 317 of the GCL except that provision may not be made for indemnification which is expressly prohibited by Section 317 of the GCL or for acts or omissions from which a director may not be relieved of liability under Section 204(a)(10) of the GCL. Section 317(b) of the GCL permits a corporation to indemnify a director, officer, employee or other agent against expenses, judgments, fines, settlements and other amounts incurred in connection with any proceeding other than a derivative action if he acted in good faith and in a manner he reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe that his conduct was unlawful. With respect to derivative actions, Section 317(c) of the GCL permits a corporation to indemnify a director, officer, employee or other agent against expenses incurred in connection with the defense or settlement of such an action if he acted in good faith and in a manner which he believed to be in the best interests of the corporation and its shareholders. Under Section 317(c), indemnification in a derivative action is not permitted (1) with respect to any matter in which the person seeking indemnification is held to be liable to the corporation in the performance of his duties to the corporation and its shareholders unless and only to the extent that the court in which the proceeding was brought determines that, in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnification for expenses and then only to the extent that such court shall determine; (2) for any amount paid in settling or otherwise disposing of a pending action without court approval; or (3) for expenses incurred in defending a pending action which is settled or otherwise disposed of without court approval. Section 317(d) of the GCL requires a corporation to indemnify any director, officer, employee or other agent for all expenses actually and reasonably incurred by him in any proceeding to the extent that he is successful on the merits. The Company's Amended and Restated Articles of Incorporation (1) eliminate the liability of directors for monetary damages to the fullest extent permitted under California law and (2) permit the Company to provide indemnification to directors, officers, employees and other agents by bylaw provisions, agreements, vote of shareholders or 2 disinterested directors, or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the GCL subject only to the limits set forth in Section 204 of the GCL. The Bylaws of the Company generally require indemnification of any officer or director of the Company for all costs, charges, expenses, liabilities and losses (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) incurred in any action, suit or proceeding by reason of the fact that he is or was a director of the Company except to the extent that such indemnification would be expressly prohibited under California law or the Company's Amended and Restated Articles of Incorporation. The Company is a party to an Indemnity Agreement with each of its directors and executive officers which generally provides the indemnitee with a contractual right to indemnification for all Expenses (which is defined to include attorneys' fees and amounts paid in settlement), judgments, fines, penalties and ERISA excise taxes incurred in any action, suit or proceeding by reason of his position with the Company, except to the extent that such indemnification is prohibited by California law. The Company also maintains a liability insurance policy under which officers and directors are generally indemnified against losses and liability (including costs, expenses, settlements and judgments) incurred by them in such capacities, other than specified excluded losses. ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable. ITEM 8. EXHIBITS. 4.1 Amended and Restated Articles of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995. *4.2 1990 Stock Option Plan, as amended. *5 Opinion of Pircher, Nichols & Meeks. *23.1 Consent of Ernst & Young LLP. *23.2 Consent of Pircher, Nichols & Meeks (included in Exhibit 5). *24 Power of Attorney. _____________ *Filed herewith. ITEM 9. 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: 3 (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 this registration statement (or the most recent post-effective amendment hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this 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. (b) The undersigned registrant hereby undertakes 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 Section 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 this 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. (c) 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 proceedings) is asserted by such director, 4 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. 5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Orange, State of California, on February 11, 1997. VARCO INTERNATIONAL, INC. By: /s/Richard A. Kertson ------------------------------------- Richard A. Kertson Vice President-Finance 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 Title Date --------- ----- ---- President and Chief Executive Officer and Director *GEORGE BOYADJIEFF (Principal Executive - --------------------------- Officer) February 11, 1997 George Boyadjieff Vice President-Finance and Chief Financial Officer /s/Richard A. Kertson (Principal Financial - --------------------------- Officer) February 11, 1997 Richard A. Kertson Controller-Treasurer and Chief Accounting Officer /s/Donald L. Stichler (Principal Accounting - --------------------------- Officer) February 11, 1997 Donald L. Stichler *WALTER B. REINHOLD Director February 11, 1997 - --------------------------- Walter B. Reinhold *TALTON R. EMBRY Director February 11, 1997 - --------------------------- Talton R. Embry
6 *ANDRE R. HORN Director February 11, 1997 - --------------------------- Andre R. Horn *MAURICE E. JACQUES Director February 11, 1997 - --------------------------- Maurice E. Jacques *JACK W. KNOWLTON Director February 11, 1997 - --------------------------- Jack W. Knowlton *LEO J. PIRCHER Director February 11, 1997 - --------------------------- Leo J. Pircher *CARROLL W. SUGGS Director February 11, 1997 - --------------------------- Carroll W. Suggs *ROBERT A. TEITSWORTH Director February 11, 1997 - --------------------------- Robert A. Teitsworth *EUGENE R. WHITE Director February 11, 1997 - --------------------------- Eugene R. White *JAMES D. WOODS Director February 11, 1997 - --------------------------- James D. Woods *By /s/Richard A. Kertson ----------------------- Richard A. Kertson Attorney-in-fact
7 EXHIBIT INDEX Exhibit Page - ------- ---- 4.1 Amended and Restated Articles of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 4.2 1990 Stock Option Plan, as amended. 5 Opinion of Pircher, Nichols & Meeks. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Pircher, Nichols & Meeks (included in Exhibit 5). 24 Power of Attorney. EX-4.2 2 1990 STOCK OPTION PLAN EXHIBIT 4.2 VARCO INTERNATIONAL, INC. 1990 STOCK OPTION PLAN AS AMENDED THROUGH NOVEMBER 7, 1996 1. PURPOSE This 1990 Stock Option Plan (the "Plan") is established for the purpose of promoting the interests of Varco International, Inc. ("Varco") and its Subsidiaries (as hereinafter defined) (Varco and its Subsidiaries being hereinafter collectively called the "Company") by providing to key employees of the Company who are primarily responsible for the management, growth and success of its business a favorable opportunity to acquire and to participate in the appreciation of the Common Stock of Varco ("Common Stock") and to participate in the overall growth and success of the Company, thereby providing such employees with an incentive to remain in the employ of the Company and to contribute to its success. The Plan seeks to achieve this purpose by providing for the grant of incentive stock options ("Incentive Stock Options") within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), options other than Incentive Stock Options ("Nonstatutory Options") and stock appreciation rights ("SAR's"). Unless provided to the contrary, all references to "options" in this Plan shall include both Incentive Stock Options and Nonstatutory Options. As used in the Plan, the term "Subsidiary" shall have the meaning set forth in Section 425(f) of the Code. 2. ADMINISTRATION OF THE PLAN A. The Plan shall be administered by a committee (the "Committee") appointed by the Board of Directors of Varco (the "Board"), which shall consist of not less than three directors of Varco, each of whom shall be a "Non-Employee Director", as such term is defined in Rule 16b-3 adopted by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as such Rule may be amended from time to time. The members of the Committee shall serve at the pleasure of the Board. The Board may designate its Compensation Committee, if any, as the Committee provided that the members of the Compensation Committee meet the foregoing criteria. B. Subject to the provisions of the Plan, the Committee shall have the sole authority to determine: (1) The employees of the Company to whom options to purchase and SAR's with respect to Common Stock shall be granted; (2) The number of shares of Common Stock to be optioned to each employee; 1 (3) The number of SAR's to be granted to each employee; (4) The price to be paid for the shares upon the exercise of each option; (5) The period within which each option or SAR may be exercised; and (6) The terms and conditions of each stock option agreement and SAR agreement entered into between Varco and any employee. In addition, the Committee shall have the sole authority to determine, at the time of grant, that an option which otherwise satisfies the criteria for treatment as an Incentive Stock Option will not be treated as an Incentive Stock Option. C. The Committee shall have full power and authority to interpret and construe any and all provisions of the Plan and all option agreements and SAR agreements executed pursuant thereto, and to adopt rules and regulations for the administration of the Plan. Decisions of the Committee shall be final and binding upon all parties having an interest in the Plan. 3. ELIGIBILITY The persons who shall be eligible to be granted options to purchase shares of Common Stock and SAR's under the Plan shall be such key employees of the Company (including officers and directors who are also key employees of the Company) as the Committee shall determine from time to time, provided, however, that no member of the Committee shall be eligible to be granted options or SAR's under the Plan while serving as a member of the Committee. 4. COMMON STOCK SUBJECT TO PLAN Subject to adjustment as provided in Section 8 hereof, the aggregate number of shares of Common Stock which may be issued upon the exercise of options or SAR's under the Plan shall not exceed three million (3,000,000). Such shares shall be authorized but unissued shares. If any option granted under the Plan shall expire or terminate for any reason without having been exercised in full, the unpurchased shares subject thereto shall again become available for the purposes of the Plan except that the shares subject to any option (or portion thereof) surrendered upon the exercise of an SAR shall not again become available for the purposes of the Plan. 5. [DELETED] 6. TERMS OF OPTIONS 6(a). IN GENERAL. Each option granted under the Plan shall be evidenced by a stock option agreement between the employee to whom such option is granted and Varco. 6(b). NONSTATUTORY OPTIONS. Each stock option agreement evidencing a Nonstatutory Option shall provide that such Option is subject to the following terms and 2 conditions and to such other terms and conditions not inconsistent therewith as the Committee may deem appropriate in each case: A. Option Price. The price to be paid for each share of Common Stock upon the exercise of each Nonstatutory Option shall be determined by the Committee at the time such Option is granted, but shall in no event be less than one hundred percent (100%) of the Fair Market Value (as hereinafter defined) of the Common Stock on the date such Option is granted. As used in the Plan, "Fair Market Value" of the Common Stock on any date shall mean (i) the mean of the high and low sales prices of shares of Common Stock reported by the New York Stock Exchange (or any other national stock exchange on which the Common Stock is listed or admitted to unlisted trading privileges) on such date (or if there was no sale on such date, the highest asked price for Common Stock on such date), (ii) if the Common Stock is not listed on the New York Stock Exchange (or listed or admitted to unlisted trading privileges on any other national stock exchange) on such date, the mean of the last reported "bid" and "asked" prices on such date, as reported by the National Association of Securities Dealers Automated Quotation System, or if not so reported, as furnished by the National Quotation Bureau, Inc., or if such firm at the time is not engaged in the business of reporting such prices, as furnished by any similar firm then engaged in such business as selected by the Committee, or if there is no such firm, as furnished by any member of the National Association of Securities Dealers, Inc. selected by the Committee; or (iii) if the Common Stock is not listed or admitted to unlisted trading privileges on any national stock exchange and bid and asked prices are not so reported, Fair Market Value shall be determined by the Committee based upon such evidence as it may deem necessary or appropriate. B. Period of Option. The period or periods within which a Nonstatutory Option may be exercised shall be determined by the Committee at the time such Option is granted, but shall in no event exceed ten (10) years from the date such Option is granted. In this connection, the Committee shall have authority in its discretion to prescribe in any related option agreement that such Option shall be exercisable in full at any time or from time to time during the term thereof, or to provide for the exercise thereof in such installments at such times during said term as the Committee may determine. C. Payment for Stock. The option price for each share of Common Stock purchased under a Nonstatutory Option shall be paid in full at the time of purchase. The Committee may provide that the option price be payable at the election of the employee, with the consent of the Committee, in whole or in part, either in cash or by delivery of Common Stock in transferable form, such Common Stock to be valued for such purpose at its Fair Market Value on the date on which such Option is exercised. No share of Common Stock shall be issued until full payment therefor has been made, and no employee shall have any rights as an owner of shares of Common Stock until the date of issuance to him of the stock certificate evidencing such shares. 3 D. Death. Upon the death of an employee, any Nonstatutory Option which he holds may be exercised, to the extent it was exercisable on the date of his death, within such period after the date of his death (not to exceed twelve (12) months) as the Committee shall prescribe in his option agreement, by the employee's representative or by the person entitled thereto under his will or the laws of intestate succession. However, such Option shall in no event be exercised more than ten years from the date it was granted. E. Retirement. Upon the retirement of an employee (either pursuant to the Varco International, Inc. Profit Sharing Plan or pursuant to the approval of the Committee), a Nonstatutory Option may be exercised by him with respect to all or any portion of the balance of the shares of Common Stock subject thereto within such period after the date of his retirement (not to exceed three (3) months) as the Committee shall prescribe in his option agreement. Such Option shall terminate upon the expiration of such period unless the employee dies prior thereto, in which event he shall be deemed to have died on the date of his retirement; provided, however, in no event shall such Option be exercised more than ten years from the date such Option is granted. F. Other Severance. In the event an employee leaves the employ of the Company for any reason other than as set forth in paragraphs D and E above, any Nonstatutory Option which he holds shall terminate at the earlier of the date his employment terminates or the date he receives written notice that his employment is or will be terminated. G. Transfer to Related Corporation. In the event that an employee leaves the employ of Varco to become an employee of any Subsidiary or an employee leaves the employ of a Subsidiary to become an employee of Varco or another Subsidiary, such employee shall be deemed to continue as an employee for all purposes of this Plan. H. Nontransferability. Each Nonstatutory Option shall be nontransferable except by will or the laws of descent and distribution and shall be exercisable during an employee's lifetime only by him. I. Agreement to Serve. Each employee shall agree that he will remain in the service of the Company for a period of at least two (2) years from the date of the grant of a Nonstatutory Option or until his earlier death or retirement. However, nothing in this Plan or in any option granted hereunder shall affect the Company's right to terminate at any time and for any reason the employment of any employee who has been granted an option hereunder. 6(c). INCENTIVE STOCK OPTIONS. Each stock option agreement evidencing an Incentive Stock Option shall provide that the option is subject to the following terms and conditions and to such other terms and conditions not inconsistent therewith as the Committee may deem appropriate in each case: 4 A. Option Price. The price to be paid for each share of Common Stock upon the exercise of each Incentive Stock Option shall be determined by the Committee at the time such Option is granted, but shall in no event be less than one hundred percent (100%) of the Fair Market Value of the Common Stock on the date such Option is granted or not less than 110% of the fair market value of such shares on the date such Option is granted in the case of an employee then owning (within the meaning of Section 425(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporations. B. Period of Option. The period or periods within which an Incentive Stock Option may be exercised shall be determined by the Committee at the time such Option is granted, but shall in no event exceed ten (10) years from the date such Option is granted or five (5) years in the case of an employee owning (within the meaning of Section 425(d) of the Code), at the time such option was granted, more than 10% of the total combined voting power of all classes of stock of the Company or of its parent or subsidiary corporations, except that no Incentive Stock Option shall be exercisable with respect to any of the shares subject thereto earlier than the date which is one year from the date of its grant nor later than the date which is ten years after the date of grant. Subject to the foregoing limitations, the Committee shall have the authority in its discretion to prescribe in any related option agreement that such Option shall be exercisable in full at any time or from time to time during the term thereof, or to provide for the exercise thereof in such installments at such times during said term as the Committee may determine. C. Payment for Stock. The option price for each share of stock purchased under an Incentive Stock Option shall be paid in full at the time of purchase. The Committee may provide that the option price be payable at the election of the employee with the consent of the Committee in whole or in part either in cash or by delivery of Common Stock in transferable form, such Common Stock to be valued for such purpose at its Fair Market Value on the date on which such Option is exercised. No share of Common Stock shall be issued until full payment therefor has been made, and no employee shall have any rights as an owner of Common Stock until the date of issuance to him of the stock certificate evidencing such Common Stock. D. Death. Upon the death of an employee, any Incentive Stock Option which he holds may be exercised, to the extent it was exercisable at the date of his death, within such period after the date of his death (not to exceed twelve (12) months) as the Committee shall prescribe in his option agreement, by the employee's representative or by the person entitled thereto under his will or the laws of intestate succession. However, such Option shall in no event be exercised more than ten years from the date it was granted. E. Retirement. Upon the retirement of an employee (either pursuant to the Varco International, Inc. Profit Sharing Plan or pursuant to the approval of the Committee), an Incentive Stock Option may be exercised by him with respect to all or any portion of the balance of the shares of Common Stock subject thereto within 5 such period after the date of his retirement (not to exceed three (3) months) as the Committee shall prescribe in his option agreement. Such Option shall terminate upon the expiration of such period unless the employee dies prior thereto, in which event he shall be deemed to have died on the date of his retirement; provided, however, in no event shall such Option be exercised more than ten years from the date such Option is granted. F. Other Severance. In the event an employee leaves the employ of the Company for any reason other than as set forth in paragraphs D and E above, any Incentive Stock Option which he holds shall terminate at the earlier of the date his employment terminates or the date he receives written notice that his employment is or will be terminated. G. Transfer to Related Corporation. In the event that an employee leaves the employ of Varco to become an employee of any Subsidiary or an employee leaves the employ of a Subsidiary to become an employee of Varco or another Subsidiary, such employee shall be deemed to continue as an employee for all purposes of this Plan. H. Nontransferability. An Incentive Stock Option shall be nontransferable except by will or the laws of descent and distribution and shall be exercisable during an employee's lifetime only by him. I. Agreement to Serve. Each employee shall agree that he will remain in the service of the Company for a period of at least two (2) years from the date of the grant of an Incentive Stock Option or until his earlier death or retirement. However, nothing in this Plan or in any option granted hereunder shall affect the Company's right to terminate at any time and for any reason the employment of any employee who has been granted an option hereunder. J. Limitation on Amount. Subject to the further limitations set forth in Section 4 hereof, the aggregate Fair Market Value (determined as of the time the option is granted) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an employee in any calendar year (under the Plan and all other incentive stock option plans of the Company and any parent or subsidiary of the Company) shall not exceed $100,000. 7. STOCK APPRECIATION RIGHTS Each option granted under the Plan may, at the discretion of the Committee, include an SAR. Each SAR shall be evidenced by an SAR agreement (which may be included in the related stock option agreement) between the employee to whom such SAR is granted and Varco. Each SAR agreement shall provide that each SAR thereunder is subject to the following terms and conditions and to such other terms and conditions not inconsistent therewith as the Committee may deem appropriate in each case: A. Grant. Each SAR shall be granted in connection with, and shall relate to, a specific option granted under the Plan, and, in the discretion of the 6 Committee, shall be granted either concurrently with the grant of such option or at any time prior to the date six months preceding the date of the expiration of such option except that an SAR granted in connection with and relating to an Incentive Stock Option may only be granted concurrently with the grant of such Incentive Stock Option. B. Entitlement of Holder. Subject to such conditions, limitations and restrictions as the Committee shall specify, each SAR which relates to an option granted under the Plan shall entitle the holder, upon surrender to Varco of the SAR together with such option or any portion thereof to the extent unexercised, to receive from Varco shares of Common Stock, cash or a combination of shares of Common Stock and cash, as the Committee shall determine. The amount of cash and/or the Fair Market Value of the Common Stock received upon exercise of an SAR shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the shares of Common Stock subject to the option (or portion thereof) surrendered exceeds the option price of such shares of Common Stock. C. Limitations. Subject to subsection D below, an SAR granted hereunder shall be exercisable only at such time or times, and only to the extent that, the related option is exercisable and shall not be transferable except to the extent that such related option may be transferable. Specifically, but not by way of limitation of the foregoing, in the case of an SAR granted in connection with, and with respect to, an Incentive Stock Option, the following conditions must be met: (1) the expiration date of the SAR does not extend beyond the expiration date of the underlying Incentive Stock Option; (2) the SAR is transferable only when such Incentive Stock Option is transferable and under the same conditions; (3) the SAR is exercisable only when such Incentive Stock Option is exercisable; and (4) the SAR is exercisable only when the Fair Market Value of the shares of Common Stock subject to such Incentive Stock Option exceeds the option price of such option. D. Manner of Exercise. Each SAR granted hereunder may be exercised by written notice to Varco at its corporate headquarters. Except in the case of the death or disability of the holder of such right, each SAR granted pursuant to the Plan shall in no event be exercisable prior to the expiration of six months after the date of grant of such SAR. If, on the date when an option expires, the option price under such option is less than the Fair Market Value of the Common Stock on such date and any portion of such option has not been exercised or surrendered, then any SAR included in such option shall automatically be deemed to be exercised as of such date with respect to such portion. 7 E. Maximum Payment. At the time of the grant of an SAR hereunder, the Committee may (in its sole discretion) determine the maximum amount payable with respect to such SAR. 8. ADJUSTMENT OF SHARES A. In the event of changes in the outstanding Common Stock by reason of stock dividends, splitups, consolidations, recapitalizations, reorganizations or like events (as determined by the Committee), an appropriate adjustment shall be made by the Committee in the number of shares available for issuance under the Plan, in the number of shares set forth in Section 5 hereof, and in the number of shares and the option price per share specified in any stock option agreement with respect to any unpurchased shares. The determination of the Committee as to what adjustments shall be made shall be conclusive. B. Subsection A above to the contrary notwithstanding, in the event of any merger, consolidation or other reorganization of Varco in which Varco is not the surviving or continuing corporation (as determined by the Committee) or in the event of the liquidation or dissolution of Varco, all options and SAR's granted hereunder shall terminate on the effective date of the merger, consolidation, reorganization, liquidation or dissolution unless the agreement with respect thereto provides otherwise. Any other provision of this Plan to the contrary notwithstanding, all outstanding options and SAR's granted hereunder shall be fully exercisable for a period of thirty (30) days prior to the effective date of any such merger, consolidation, reorganization, liquidation or dissolution unless, in the case of a merger, consolidation or reorganization, such options and SAR's are assumed by the continuing or surviving corporation. C. Neither the action of Varco in establishing the Plan, nor any action taken by the Committee under the Plan, nor any provision of the Plan shall affect the right or power of Varco to make or authorize any adjustments, recapitalizations, or other changes in Varco's capital structure or business, any merger or consolidation, any issuance of bonds, debentures, preferred shares or common shares, the dissolution or liquidation of Varco or any Subsidiary, any sale of all or any part of Varco's or any Subsidiary's assets or business or any other act whether or not similar to the foregoing events. 9. AMENDMENT, EXTENSION AND RENEWAL OF OPTIONS AND SAR'S Subject to the limitations of the Plan, the Committee may modify, extend or renew outstanding options or may accept the cancellation of outstanding options (to the extent not previously exercised) in return for the grant of new options at the same or a different price. Notwithstanding the foregoing, no modification of an option shall, without the consent of the optionee, alter or impair his rights or obligations under such option. 10. WITHHOLDING TAXES Varco or the Subsidiary that employs any employee shall have the right to deduct any sums that federal, state or local tax law requires to be withheld with respect to the exercise of any option or SAR, or as otherwise may be required by such laws. Varco or 8 such Subsidiary may require as a condition to issuing shares upon the exercise of an option or making any payment upon the exercise of an SAR that the employee or other person exercising the option or SAR pay any sums that federal, state or local tax law requires to be withheld with respect to such exercise. 11. REGULATORY REQUIREMENTS A. The Committee may require an employee, as a condition of either the grant or the exercise of an option or an SAR to represent and establish to the satisfaction of the Committee that all shares of Common Stock acquired upon the exercise of such option or SAR will be acquired for investment and not for resale. The Committee may prevent the sale or other disposition of any shares acquired pursuant to any such representation until it is satisfied that such sale or other disposition would not be in contravention of applicable state or Federal securities laws. B. No option granted pursuant to this Plan shall be exercisable in whole or in part, nor shall an employee receive any shares of Common Stock upon exercise of an SAR if at any time the Committee shall determine in its discretion that the listing or qualification of the shares of Common Stock subject to such option on any securities exchange or under any applicable law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such option or the issue of shares thereunder, unless such listing, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. 12. AMENDMENT The Board may amend the Plan at any time, except that without shareholder approval: A. The number of shares of Common Stock subject to the Plan shall not be increased except as provided in Section 8 hereof; B. The number of shares of Common Stock which may be optioned to any one employee may not be increased; C. The option price per share of Common Stock may not be fixed at less than 100 percent of the Fair Market Value of a share of Common Stock of the Company on the date the option is granted; D. The maximum period of ten years during which the options may be exercised may not be extended; E. The class of employees eligible to receive options under the Plan as set forth in Section 3 shall not be changed; and F. This Section 11 may not be amended in a manner which limits or reduces the amendments which require shareholder approval. 9 13. TERMINATION The Board may at any time terminate the Plan by appropriate corporate resolution. Unless sooner terminated, the Plan shall terminate automatically on March 5, 2000. The termination of the Plan shall not affect the validity of any option or SAR outstanding at the date of such termination, but no option or SAR shall be granted after such date. 14. EFFECTIVE DATE The Plan was adopted by the Board on March 6, 1990 and shall be effective as of such date. Options and SAR's may be granted but not exercised prior to shareholder approval of the Plan by a majority of the holders of the Common Stock present or represented and entitled to vote at a meeting duly called and held in accordance with the laws of the State of California. If such shareholder approval shall not have been obtained on or before September 30, 1990, any options and SAR's therefore granted shall terminate retroactive as of the date they were granted, and no additional options or SAR's shall be granted under the Plan. 10 EX-5 3 OPINION OF PIRCHER, NICHOLS & MEEKS EXHIBIT 5 PIRCHER, NICHOLS & MEEKS Attorneys at Law 1999 Avenue of the Stars Suite 2600 Los Angeles, California 90067 (310) 201-8900 FAX (310) 201-8922 February 11, 1997 Varco International, Inc. 743 North Eckhoff Street Orange, California 92868 Ladies & Gentlemen: We have acted as counsel to Varco International, Inc. (the "Company") in connection with the preparation and filing by the Company of a Registration Statement on Form S-8 (the "Registration Statement"), relating to 2,000,000 shares of the Company's Common Stock issuable under the Company's 1990 Stock Option Plan, as amended (the "Plan"). We have reviewed originals or copies, certified or otherwise identified to our satisfaction, of the Registration Statement and such certificates of public officials and of officers of the Company and such other documents, corporate records or other instruments as we have deemed necessary or appropriate for the purposes of this opinion. We have assumed that all signatures on all documents examined by us are genuine, all documents submitted to us as originals are authentic, and all documents submitted to us as copies conform with the original executed documents. Based upon the foregoing, we are of the opinion that: 1. The Company is validly organized and existing under the laws of the State of California. 2. Any shares of the Common Stock of the Company issued and sold by the Company upon the exercise of options granted pursuant to the provisions of the Plan will constitute validly authorized and issued Common Stock of the Company and will be fully paid and nonassessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement referred to above. Very truly yours, /s/ PIRCHER, NICHOLS & MEEKS EX-23.1 4 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement on Form S-8 pertaining to the 1990 Stock Option Plan of Varco International, Inc. of our report dated February 15, 1996, with respect to the consolidated financial statements and schedule of Varco International, Inc. incorporated by reference in its Annual Report (Form 10-K) for the year ended December 31, 1995, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP Orange County February 12, 1997 EX-24 5 POWER OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints GEORGE BOYADJIEFF and RICHARD A. KERTSON, and each of them, with full power of substitution and resubstitution, as his or her true and lawful attorney-in-fact, for him or her and in his or her name, place and stead, in any and all capacities, to execute a Registration Statement on Form S-8 of Varco International, Inc. (the "Company") relating to the registration under the Securities Act of 1933, as amended, of 2,000,000 additional shares of the Common Stock of the Company issuable pursuant to the Company's 1990 Stock Option Plan, as amended, and any and all amendments or post-effective amendments to said Registration Statement and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission. /s/ George Boyadjieff /s/ Walter B. Reinhold - ------------------------ ------------------------ GEORGE BOYADJIEFF WALTER B. REINHOLD /s/ Talton R. Embry /s/ Carroll W. Suggs - ------------------------ ------------------------ TALTON R. EMBRY CARROLL W. SUGGS /s/ Andre R. Horn /s/ Robert A. Teitsworth - ------------------------ ------------------------ ANDRE R. HORN ROBERT A. TEITSWORTH /s/ Maurice E. Jacques /s/ Eugene R. White - ------------------------ ------------------------ MAURICE E. JACQUES EUGENE R. WHITE /s/ Jack W. Knowlton /s/ James D. Woods - ------------------------ ------------------------ JACK W. KNOWLTON JAMES D. WOODS /s/ Leo J. Pircher - ------------------------ LEO J. PIRCHER Dated: May 8, 1996 -----END PRIVACY-ENHANCED MESSAGE-----