-----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, F28UpPWeQUdCo93zsbeaucWCTfoRX8SlZmHjA9byv7J9G2tTyq6Fplax9b8QVjOS y7Qxt53htBAIIJpg8rd9yw== 0000950109-96-003243.txt : 19960520 0000950109-96-003243.hdr.sgml : 19960520 ACCESSION NUMBER: 0000950109-96-003243 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19960517 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-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-02869 FILM NUMBER: 96569465 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-3/A 1 AMENDMENT NO. 3 TO FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 17, 1996 REGISTRATION NO. 333-02869 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- AMENDMENT NO. 3 TO FORM S-3 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 92668 (714) 978-1900 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) --------------- RICHARD A. KERTSON VICE PRESIDENT--FINANCE AND CHIEF FINANCIAL OFFICER 743 NORTH ECKHOFF STREET ORANGE, CALIFORNIA 92668 (714) 978-1900 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) --------------- THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO: LARRY M. MEEKS, ESQ. J. DAVID KIRKLAND, ESQ. JOHN R. LIGHT, ESQ. PIRCHER, NICHOLS & MEEKS BAKER & BOTTS, L.L.P. LATHAM & WATKINS 1999 AVENUE OF THE STARS, 910 LOUISIANA, SUITE 3000 633 WEST FIFTH STREET, SUITE 2600 HOUSTON, TEXAS 77002 SUITE 4000 LOS ANGELES, CALIFORNIA (713) 229-1101 LOS ANGELES, CALIFORNIA 90067 90071 (310) 201-8903 (213) 891-8240 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as practicable after this Registration Statement shall become effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, 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, please 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(c) 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 delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] --------------- 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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED MAY 17, 1996 6,596,041 Shares [LOGO OF VARCO/R/ INTERNATIONAL, INC. APPEARS HERE] Common Stock -------- All 6,596,041 of the shares of Common Stock (the "Common Stock") of Varco International, Inc., a California corporation ("Varco" or the "Company") offered hereby (the "Offering") are being sold by certain shareholders of the Company (collectively, the "Selling Shareholders"). The Company will not receive any of the proceeds from the sale of the shares by the Selling Shareholders. The Common Stock is listed on the New York Stock Exchange under the symbol "VRC." On May 16, 1996 the last reported sale price of the Common Stock on the New York Stock Exchange Composite Tape was $15.75 per share. -------- FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" ON PAGE 5. -------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Proceeds to Price to Discounts and Selling Public Commissions Shareholders(1)(2) ------------- ------------- ------------------ Per Share.................................. $ $ $ Total(3)................................... $ $ $
(1) The Company and the Selling Shareholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) The Company will pay certain expenses of the Offering estimated at $ . (3) The Company has granted the Underwriters an option exercisable for 30 days from the date of this Prospectus to purchase a maximum of 989,406 additional shares to cover over-allotments of shares. If the option is exercised in full, the total Price to Public will be $ , Underwriting Discounts and Commissions will be $ , and the total Proceeds to the Company will be $ . See "Underwriting." -------- The shares are offered by the Underwriters when, as and if delivered to and accepted by the Underwriters and subject to their right to reject orders in whole or in part. It is expected that the shares will be ready for delivery on or about May , 1996, against payment in immediately available funds. CS First Boston Howard, Weil, Labouisse, Friedrichs I n c o r p o r a t e d Simmons & Company International The date of this Prospectus is May , 1996 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OF COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES 10B-6, 10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934. 2 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial data appearing elsewhere in this Prospectus and in the consolidated financial statements, including the notes thereto, and other documents which are incorporated herein by reference. As used herein, the terms "Varco" and the "Company" refer to Varco International, Inc. or Varco and its subsidiaries, as the context may require. THE COMPANY Varco International, Inc. is a leading manufacturer of products used in the oil and gas well drilling industry worldwide. The Company has the leading market position in most of its product lines and is widely recognized for the development of new technology and equipment which enhances the productivity and safety of the drilling process. The Company's products are sold for use in approximately 82 countries, and international revenues accounted for approximately 69% of total revenues for the fiscal year ended December 31, 1995. Since 1987, Varco has made several strategic acquisitions, which have significantly increased its revenue base and expanded its product development opportunities. Varco operates through five divisions: Varco Drilling Systems designs and manufactures integrated systems for rotating and handling the various sizes and types of pipe used on a drilling rig. It is widely recognized for developing innovative drilling technology and products. Its principal products are Top Drive Drilling Systems and pipe handling systems. The Top Drive Drilling System, first introduced in 1982, has gained acceptance as a safer and more productive technology than conventional methods for a wide variety of drilling applications. Through mechanization and automation, Varco's pipe handling systems eliminate the manual handling of pipe on a drilling rig. Varco BJ Oil Tools manufactures a complete line of conventional drilling rig tools and equipment, including pipe handling tools, hoisting equipment and rotary equipment. Varco BJ is the market leader in virtually all of its product lines. Martin-Decker/TOTCO Instrumentation primarily designs, manufactures, sells and rents products involving the measurement, analysis, recording and display of information that enhances the productivity and safety of the drilling process. Its most significant product is the TOTAL System, a computer-based drilling information system. Based on revenues, Martin-Decker/TOTCO is the worldwide leader in drilling rig instrumentation. Shaffer primarily designs and manufactures pressure control equipment, principally blowout preventers ("BOPs"), for use on drilling rigs. Shaffer also provides motion compensation equipment for use on floating offshore rigs. Thule Rigtech designs and sells solids control equipment, which is used on a drilling rig in the mixing, handling, transport and cleaning of drilling fluids ("drilling mud"). Thule Rigtech is Varco's most recent acquisition, having been acquired in November 1994. The principal executive offices of the Company are located at 743 North Eckhoff Street, Orange, California 92668 (telephone: (714) 978-1900). 3 RECENT DEVELOPMENTS In recent months offshore drilling activity has increased, raising the capacity utilization of the worldwide mobile offshore rig fleet to 87% in the first quarter of 1996, from 81% in the comparable period a year ago. In particular, the demand for "high specification" rigs (i.e., those capable of drilling in deeper water and/or harsh environments) has been very strong. The recent levels of offshore rig utilization represent the highest level in more than ten years. These trends benefit Varco in two important ways. First, equipment of the type supplied by Varco is critical to the upgrading of rigs to meet the capacity and capability requirements associated with more difficult drilling conditions. Second, Varco's key customers, the offshore drilling contractors, are recording their best financial results in many years, thus combining the incentive and the financial resources to invest in the upgrading of drilling equipment. As a result, Varco's incoming orders have increased. Order bookings were $76.9 million in the first quarter of 1995, $85.6 million in the fourth quarter of 1995, and $102.2 million in the first quarter of 1996, in each case establishing a new all-time high for the Company. THE OFFERING All of the shares of Common Stock of the Company offered are being sold by the Selling Shareholders except to the extent that the over-allotment option granted by the Company to the Underwriters is exercised. To the extent that the over-allotment option is exercised, the net proceeds realized by the Company will be used first for the repayment of indebtedness and then for working capital or other general corporate purposes. See "Use of Proceeds." If the over-allotment option is exercised in full, the number of shares of Common Stock outstanding after the offering will be 31,282,869, based on the number of shares outstanding at April 19, 1996. 4 RISK FACTORS Prospective investors should consider carefully the following factors, together with the other information appearing in this Prospectus or incorporated herein by reference before purchasing shares of Common Stock offered hereby. VOLATILE INDUSTRY CONDITIONS The Company's operations are materially dependent upon the level of worldwide drilling activity, particularly offshore drilling. Such activity levels are affected by both short-term and long-term trends in world oil and natural gas prices. In recent years, oil and natural gas prices and, therefore the level of drilling activity, have been extremely volatile. Any prolonged reduction in oil and natural gas prices would, in all likelihood, depress the level of drilling activity and result in a decline in the demand for the Company's products. Any sustained reduction in such activity would, in all likelihood, have a material adverse effect on the Company's revenues and profitability. MANAGEMENT OF ACCELERATING GROWTH The Company's orders and revenues have increased substantially in recent quarters, particularly in its Drilling Systems and Shaffer Divisions. Following a number of years of dramatic downsizing, the Company's operating divisions have been, or may be, required to significantly increase their level of output. Such increases create strains on existing management and organization structures, systems and procedures, and human resources. There is no assurance that these strains will not result in a material adverse effect on the Company's revenues and profitability. SHARES AVAILABLE FOR FUTURE SALE Certain shareholders of the Company (including Walter B. Reinhold, one of the Selling Shareholders) are parties to an Agreement (the "Shareholders' Agreement") imposing certain restrictions on transfers of certain shares of Common Stock owned by them and certain of their transferees, which expires on May 22, 1996. For a further description of these restrictions, see "Selling Shareholders." Of the approximately 3,200,000 shares of Common Stock subject to the Shareholders' Agreement, 994,547 shares are beneficially owned by Mr. Reinhold. Based on information available to the Company and the record list of holders of the Common Stock of the Company as of March 20, 1996, the other major holders of shares subject to the Shareholders' Agreement and the number of shares held by them (individually, as trustee, as executor, or as custodian) which are subject to the transfer restrictions are as follows: Baldwin Reinhold, Jr. and Mary E. Reinhold, 907,780 shares; Howard P. Lorenz, 600,331 shares; Baldwin Terry Reinhold and Carol Anne Reinhold, 93,264 shares; Charlotte L. Llanes, 62,252 shares; Darlene M. Reinhold, 58,292 shares; and John G. Reinhold, 57,685 shares. Upon the expiration of the Shareholders' Agreement on May 22, 1996, the shares subject thereto will no longer be subject to the transfer restrictions contained in the Shareholders' Agreement although to the extent that any holder of shares formerly subject to the agreement is an affiliate of the Company, sales of shares may be subject to the volume limitations of Rule 144 ("Rule 144") under the Securities Act of 1933, as amended (the "Securities Act"). Rule 144 permits an affiliate to sell, within any three-month period, a number of shares not exceeding the greater of 1% of the then outstanding shares of the Company's Common Stock (approximately 302,000 shares based on the number of shares outstanding at March 31, 1996) or the average weekly trading volume during the four weeks preceding the date of filing of notice of the proposed sale with the Securities and Exchange Commission pursuant to Rule 144 (approximately 1,450,000 shares for the four weeks ended April 26, 1996). Assuming that trading in the Common Stock continues at similar levels, the Rule 144 volume limitations would not limit sales by any such affiliate. However, Walter B. Reinhold has agreed that for a period of 120 days after the date of this Prospectus he will not sell or otherwise dispose of any shares of Common Stock owned by him except for the shares included in the Offering. See "Underwriting." Future sales of substantial amounts of Common Stock in the public market could adversely affect prevailing market prices of the Common Stock. 5 USE OF PROCEEDS The Company will not receive any of the proceeds from the sale of the Common Stock offered by the Selling Shareholders. Any net proceeds to the Company from the exercise of the over-allotment option, in whole or in part, will be applied first to the principal payment, due June 30, 1996, in the amount of $10,000,000 on the Company's 8.95% Senior Notes and then to the repayment of amounts outstanding under the Company's revolving credit facility ($2,000,000 at March 31, 1996). Advances currently outstanding under the revolving credit facility bear interest at prime plus .50% (8.75% at March 31, 1996) and mature on October 31, 1998. Any remaining balance of the net proceeds will be used by the Company for working capital and other general corporate purposes. In the event that the over-allotment is not exercised or is not exercised in full, the Company believes that its cash and cash equivalents and revolving credit facility will be sufficient to meet its capital expenditures, operating cash needs and the principal payment on the 8.95% Senior Notes in 1996. PRICE RANGE OF COMMON STOCK Varco's Common Stock is listed on the New York Stock Exchange (symbol "VRC"). The following table sets forth for the periods indicated the high and low sale prices per share of the Common Stock on the New York Stock Exchange Composite Tape. The last reported sale price of the Common Stock on the New York Stock Exchange Composite Tape as of a recent date is set forth on the cover page of this Prospectus. There were 1,847 holders of record of the Common Stock as of the close of business on April 19, 1996.
COMMON STOCK PRICE ----------- HIGH LOW ---- --- 1994: First Quarter................................................. $ 7 $5 1/4 Second Quarter................................................ 7 5 1/8 Third Quarter................................................. 7 3/8 5 7/8 Fourth Quarter................................................ 7 3/8 6 1995: First Quarter................................................. 7 3/4 6 Second Quarter................................................ 9 1/2 7 5/8 Third Quarter................................................. 11 7/8 8 1/8 Fourth Quarter................................................ 12 7/8 8 3/8 1996: First Quarter................................................. 12 7/8 8 3/4 Second Quarter (through May 16, 1996)......................... 17 1/8 12 1/8
The transfer agent and registrar for the Common Stock is Harris Trust Company of California. 6 CAPITALIZATION The following table sets forth the consolidated capitalization of the Company as of March 31, 1996, and as adjusted to reflect the sale by the Company of 989,406 shares of Common Stock at an assumed offering price of $16.00 per share, assuming that the over-allotment option granted to the Underwriters is exercised in full, and the application of a portion of the net proceeds therefrom to the principal payment, due June 30, 1996, on the 8.95% Senior Notes and amounts outstanding under the Company's revolving credit facility.
MARCH 31, 1996 --------------------- ACTUAL AS ADJUSTED -------- ----------- (IN THOUSANDS) Current Portion of Long-Term Debt........................ $ 10,000 $ 0 ======== ======== Long-Term Debt(1) 8.95% Senior Notes..................................... $ 30,000 $ 30,000 Note payable under revolving credit agreement.......... 2,000 0 Other indebtedness and unamortized issuance costs...... (417) (417) -------- -------- Total long-term debt................................... $ 31,583 $ 29,583 -------- -------- Shareholders' Equity Common Stock: 80,000,000 shares authorized, 30,231,786 shares issued and outstanding actual; 31,221,192 shares as adjusted, stated value (2).................. $ 20,600 $ 21,589 Additional paid-in capital............................. 104,491 118,001 Retained earnings...................................... 29,499 29,499 -------- -------- Total shareholders' equity............................. 154,590 169,089 -------- -------- Total Capitalization..................................... $186,173 $198,672 ======== ========
- -------- (1) See Note F of notes to consolidated financial statements incorporated by reference herein for a description of the Company's long-term debt. (2) Excludes 257,102 shares of Common Stock issuable upon exercise of options granted under the Company's 1980 Stock Option Plan; 1,196,616 shares issuable upon exercise of options granted under the Company's 1990 Stock Option Plan; 15,000 shares issuable upon exercise of options held by three non-employee directors; 972,148 shares reserved for issuance pursuant to the Company's 1980 Employee Stock Purchase Plan; 637,024 shares reserved for issuance pursuant to the Company's Stock Bonus Plan; and 650,000 shares reserved for issuance pursuant to the Company's 1994 Directors' Stock Option Plan. 7 SELECTED CONSOLIDATED FINANCIAL DATA The following information is selected or derived from the consolidated financial statements of the Company and its subsidiaries. Such consolidated financial statements for each of the five years in the period ended December 31, 1995 have been audited by Ernst & Young LLP, independent auditors. Information for March 31, 1995 and 1996 and the three-month periods then ended are selected or derived from unaudited consolidated financial statements of the Company and incudes all adjustments (consisting of only normal recurring accruals) which management considers necessary for a fair presentation of such financial information for such periods. Operating results for the three-month period ended March 31, 1996 are not necessarily indicative of results that may be expected for any other interim period or for the entire year ending December 31, 1996. This information should be read in conjunction with the consolidated financial statements, related notes, and other financial information incorporated by reference herein, including "Management's Discussion and Analysis of Financial Condition and Results of Operations." STATEMENT OF OPERATIONS DATA: (in thousands, except per share data)
THREE MONTHS YEAR ENDED DECEMBER 31, ENDED MARCH 31, -------------------------------------------- ----------------- 1991 1992(1) 1993(1) 1994(1) 1995 1995 1996 -------- -------- -------- -------- -------- -------- -------- SUMMARY OF OPERATIONS Revenues................ $216,622 $173,069 $193,480 $223,601 $273,731 $ 57,645 $ 70,969 Gross Profit............ 79,431 63,049 72,010 86,761 99,214 23,787 24,746 Selling, General and Administrative Expenses............... 47,616 49,067 48,423 53,798 61,014 15,145 16,117 Research and Development............ 10,757 9,818 9,479 11,438 13,156 3,190 3,572 Interest Expense........ 4,509 3,918 5,010 4,766 4,516 1,204 1,005 Income Before Income Taxes.................. 16,925 852 10,811 18,917 21,908 4,721 4,765 Income Taxes............ 2,894 530 3,715 6,756 7,469 1,808 1,737 Income Before Cumulative Effect of Change in Accounting for Income Taxes.................. 14,031 322 7,096 12,161 14,439 2,913 3,028 Net Income(2)........... 14,031 2,358 7,096 12,161 14,439 2,913 3,028 Depreciation and Amortization........... 9,943 10,964 10,687 10,996 12,347 3,012 3,012 Income Per Share Before Cumulative Effect of Change in Accounting for Income Taxes....... 0.45 0.01 0.21 0.36 0.46 0.09 0.10 Net Income Per Share(2)............... 0.45 0.07 0.21 0.36 0.46 0.09 0.10 Average Shares used in Computing Net Income Per Share.............. 31,161 32,996 33,400 33,522 31,729 33,592 30,728 BALANCE SHEET DATA: (in thousands) DECEMBER 31, MARCH 31, -------------------------------------------- ----------------- 1991 1992 1993 1994 1995 1995 1996 -------- -------- -------- -------- -------- -------- -------- Working Capital......... $ 82,748 $102,953 $113,241 $112,342 $ 89,187 $116,203 $ 95,573 Property and Equipment-- Net.................... 43,018 49,797 47,241 47,659 50,622 49,684 50,953 Total Assets............ 204,066 232,301 248,021 257,641 246,571 269,128 258,944 Long Term Debt.......... 25,567 51,326 49,164 39,349 29,539 39,408 31,583 Shareholders' Equity.... 141,919 144,366 152,608 163,728 151,179 167,573 154,590
- -------- (1) Includes the acquisitions of the Shaffer Division of Baroid Corporation as of July 17, 1992, Metrox, Inc. as of August 17, 1993 and Rig Technology Limited as of November 30, 1994. (2) 1992 net income includes cumulative effect of adopting Statement of Financial Accounting Standards No. 109. See notes to consolidated financial statements incorporated herein by reference. 8 SELLING SHAREHOLDERS The Selling Shareholders listed in the following table have indicated their intention to sell such number of shares of Common Stock in the Offering as is set forth opposite their respective names. The numbers of shares of Common Stock shown as being owned by the Selling Shareholders prior to the Offering are as of March 31, 1996.
COMMON STOCK COMMON STOCK TO BE BENEFICIALLY OWNED BENEFICIALLY PRIOR TO THE OWNED AFTER THE OFFERING OFFERING --------------------- NUMBER OF ------------------ PERCENT SHARES PERCENT NUMBER OF OF TO BE SOLD NUMBER OF OF SHARES CLASS(1) IN THE OFFERING SHARES CLASS(1) --------- -------- --------------- --------- -------- Baker Hughes Incorporated........... 6,346,041 21.0% 6,346,041 0 0% Walter B. Reinhold...... 1,118,167(2) 3.7% 250,000 868,167 2.9%
- -------- (1) Based upon 30,231,786 shares outstanding at March 31, 1996. (2) Includes (a) 78,400 shares held by a trust of which Mr. Reinhold and Leo J. Pircher, a director of the Company, are trustees and share voting and investment power and as to which Mr. Reinhold disclaims beneficial ownership, (b) 200 shares Mr. Reinhold owns jointly with his spouse, with respect to which he shares voting and investment power with his spouse, and (c) 45,020 additional shares, all owned by Mr. Reinhold's spouse, with respect to which Mr. Reinhold shares voting and investment power and disclaims beneficial ownership. Does not include 58,292 shares with respect to which Mr. Reinhold's spouse acts as custodian and with respect to which she has sole voting and investment power and Mr. Reinhold disclaims beneficial ownership. All 6,596,041 shares of Common Stock included in the Offering are being sold by the Selling Shareholders. The Company has granted to the Underwriters an option to purchase up to 989,406 additional shares solely to cover over- allotments, if any. Of the 6,346,041 shares of Common Stock beneficially owned by Baker Hughes Incorporated ("Baker Hughes") (1) 3,000,000 were issued to Baker Hughes in September 1988, as part of the consideration for the acquisition by the Company of Baker Hughes' BJ Machinery Division, pursuant to the provisions of an Asset Purchase Agreement, dated as of August 10, 1988 (the "BJ Purchase Agreement"), (2) an additional 1,000,000 shares were issued to Baker Hughes in December 1990 upon the exercise (for an aggregate exercise price of $4,000,000) of a Warrant issued to Baker Hughes as an additional part of the consideration for the BJ Machinery Division acquisition, and (3) the balance of 2,346,041 shares were issued to Baker Hughes in November 1990, as part of the consideration for the acquisition by the Company of Baker Hughes' TOTCO Product Line, pursuant to the provisions of an Amended and Restated Asset Purchase Agreement, dated as of August 1, 1990 (the "TOTCO Purchase Agreement"). The shares being sold by Baker Hughes are being included in the Company's Registration Statement for the Offering pursuant to certain registration rights agreed to by the Company in connection with the BJ Machinery Division and the TOTCO Product Line acquisitions. The Company agreed to pay all expenses of registering shares on behalf of Baker Hughes other than underwriting discounts and commissions and any fees or disbursements of Baker Hughes' counsel. The Company and Baker Hughes have agreed to indemnify each other against certain liabilities under the Securities Act. Pursuant to the BJ Purchase Agreement, the Company agreed that, during the period commencing on the closing date of the BJ Machinery acquisition and terminating on the earlier of (a) the date on which the Company shall have discharged in full its obligations to make certain royalty payments to Baker Hughes under the provisions of the BJ Purchase Agreement and (b) September 29, 1996, it would use its best efforts to cause a designee of Baker Hughes to be elected to the Company's Board of Directors. Pursuant to the foregoing, James D. Woods, Chairman and Chief Executive Officer of Baker Hughes, was named as Baker Hughes' designee and has served as a director of the Company during the period October 1988 through May 1990 and the period December 1990 to the present. 9 Pursuant to the TOTCO Purchase Agreement, Baker Hughes agreed that (subject to certain exceptions) so long as Baker Hughes or any subsidiary beneficially owned any of the shares of Common Stock issued in connection with the BJ Machinery Division acquisition or the TOTCO Product Line acquisition, and in any event for at least seven years from November 28, 1990, the date of the closing of the TOTCO Product Line acquisition, neither Baker Hughes nor any subsidiary would acquire any additional shares of the Common Stock or rights or options to acquire the Common Stock if such acquisition would result in Baker Hughes and its affiliates owning more than 21.8% of Varco's outstanding Common Stock. Baker Hughes also agreed not to participate in any solicitation of proxies with respect to Varco during such period. In addition, Baker Hughes agreed that it would not dispose of any shares of Common Stock constituting more than 5% of the outstanding shares of such stock in a privately negotiated transaction or series of transactions to any person or group of related persons without first offering such shares to the Company at the price and upon the terms upon which such shares were proposed to be sold. In such event, the Company may elect to purchase either (i) all of such shares or (ii) any or all of such shares in excess of 3,000,000 shares on the terms of the proposed sale. Baker Hughes also agreed that it would not dispose of any shares of Common Stock constituting more than 3% of the outstanding shares of stock in open market transactions or in any other manner (other than a privately negotiated transaction) over a period of six months or less without first offering to the Company such shares as would cause the total number of shares sold by Baker Hughes during such period to exceed 3% of the outstanding shares. The Company has waived its rights of first refusal in connection with the Offering. Walter B. Reinhold is Chairman of the Board of Directors of the Company. All of the shares included in the Offering by Mr. Reinhold were acquired by him by gift or inheritance from his father prior to 1977. Mr. Reinhold, Baldwin Reinhold, Jr., the estate of Charlotte Reinhold Lorenz, deceased, and Baldwin T. Reinhold, the son of Baldwin Reinhold, Jr., are parties to an Agreement dated as of June 11, 1981 (the "Shareholders' Agreement") imposing certain restrictions on transfers of shares of Common Stock owned by them at the time the Shareholders' Agreement became effective and any additional voting securities of the Company issued with respect thereto by way of stock dividend, stock split or other distribution. Specifically, the Shareholders' Agreement prohibits any transfer except (1) any transfer pursuant to a registration statement under the Securities Act, (2) the sale by any party of not more than 20,000 shares (adjusted to reflect any stock dividends, stock splits or reverse stock splits) during any 12-month period pursuant to Rule 144, (3) inter vivos gifts, provided that the aggregate value given by any party to any one person during any 12-month period does not exceed $50,000 ($500,000 in the case of direct or indirect gifts to a member of the donor's family or the donor's former spouse), (4) bequests or inter vivos gifts, direct or indirect, to charitable institutions, provided that the aggregate value given by any party to charitable institutions during any 12-month period does not exceed $2,000,000, (5) transfers by will or the laws of descent and distribution, or (6) transfers with the written consent of the holders of 80% of the shares then subject to the Shareholders' Agreement. Any transferee under clause (3) or (6) above must agree to be bound by the provisions of the Shareholders' Agreement restricting transfers unless, in the case of any transfer under clause (6), otherwise agreed by the parties approving such transfer, and any transferee under clause (5) above other than a charitable institution is deemed to be bound by such provisions. Unless sooner terminated by the parties, the foregoing restrictions terminate on May 22, 1996. Approximately 3,200,000 shares of Common Stock, or 10.6% of the shares outstanding at March 31, 1996, are currently subject to the Shareholders' Agreement. 10 UNDERWRITING Under the terms and subject to the conditions contained in the Underwriting Agreement (the "Underwriting Agreement"), the form of which is filed as an exhibit to the Registration Statement, the underwriters named below (the "Underwriters"), for whom CS First Boston Corporation ("CS First Boston"), Howard, Weil, Labouisse, Friedrichs Incorporated and Simmons & Company International are acting as representatives (the "Representatives") have severally and not jointly agreed to purchase from the Selling Shareholders the number of shares of Common Stock set forth opposite their respective names below at the initial public offering price less the underwriting discounts and commissions set forth on the cover page of this Prospectus:
NUMBER OF UNDERWRITER SHARES ----------- --------- CS First Boston Corporation........................................ Howard, Weil, Labouisse, Friedrichs Incorporated................... Simmons & Company International.................................... --------- Total............................................................ 6,596,041 =========
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will be obligated to purchase all of the shares of Common Stock offered hereby (other than those shares covered by the over-allotment option described below) if any are purchased. The Underwriting Agreement provides that, in the event of a default by an Underwriter, in certain circumstances the purchase commitments of non-defaulting Underwriters may be increased or the Underwriting Agreement may be terminated. The Company has granted the Underwriters an option expiring at the close of business on the 30th day after the date of this Prospectus, exercisable by CS First Boston, to purchase up to an additional 989,406 shares from the Company at the public offering price less underwriting discounts and commissions, all as set forth on the cover page of this Prospectus. Such option may be exercised only to cover over-allotments in the sale of shares of the Common Stock. To the extent that the Underwriters exercise such option, each Underwriter will become obligated, subject to certain conditions, to purchase a number of option shares proportionate to such Underwriter's initial commitment as indicated in the preceding table. The Company has been advised by the Representatives that the Underwriters propose to offer the shares to the public initially at the public offering price set forth on the cover of this Prospectus and through the Representatives to certain dealers at such price less a concession of $ per share, and the Underwriters and such dealers may allow a discount of $ per share on sales to certain other dealers. After the initial public offering, the public offering price and concession and discount to dealers may be changed by the Representatives. The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain liabilities, including civil liabilities under the Securities Act, or contribute to payments which the Underwriters may be required to make in respect thereof. The Company and its executive officers and directors have agreed that, for a period of 120 days after the date of this Prospectus, they will not, without the prior written consent of CS First Boston, sell, contract to sell or otherwise dispose of any shares of Common Stock owned by them, directly or indirectly, except for grants of options under the Company's existing stock option plans, the issuance of shares pursuant to awards under the Company's Stock Bonus Plan, the issuance of shares of Common Stock upon exercise of outstanding options, and the issuance and sale by the Company of Common Stock pursuant to the Company's Employee Stock Purchase Plan and will not pledge, file a registration statement or announce the filing of a registration statement covering the shares. 11 NOTICE TO CANADIAN RESIDENTS RESALE RESTRICTIONS The distribution of the Common Stock in Canada is being made only on a private placement basis exempt from the requirement that the Company or the Selling Shareholders prepare and file a prospectus with the securities regulatory authorities in each province where trades of Common Stock are effected. Accordingly, any resale of the Common Stock in Canada must be made in accordance with applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with available statutory exemptions or pursuant to a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the Common Stock. REPRESENTATIONS OF PURCHASERS Each purchaser of Common Stock in Canada who receives a purchase confirmation will be deemed to represent to the Selling Shareholders and/or the Company and the dealer from whom such purchase confirmation is received that (i) such purchaser is entitled under applicable provincial securities laws to purchase such Common Stock without the benefit of a prospectus qualified under such securities laws, (ii) where required by law, that such purchaser is purchasing as principal and not as agent, and (iii) such purchaser has reviewed the text above under "Resale Restrictions." The securities being offered are those of a foreign issuer and Ontario purchasers will not receive the contractual right of action prescribed by section 32 of the Regulation under the Securities Act (Ontario). As a result, Ontario purchasers must rely on other remedies that may be available, including common law rights of action for damages or rescission or rights of action under the civil liability provisions of the U.S. federal securities laws. All of the issuer's directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Ontario purchasers to effect service of process within Canada upon the issuer or such persons. All or a substantial portion of the assets of the issuer and such persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the issuer or such persons in Canada or to enforce a judgment obtained in Canadian courts against such issuer or persons outside of Canada. NOTICE TO BRITISH COLUMBIA RESIDENTS A purchaser of Common Stock to whom the Securities Act (British Columbia) applies is advised that such purchaser is required to file with the British Columbia Securities Commission a report within ten days of the sale of any Common Stock acquired by such purchaser pursuant to this Offering. Such report must be in the form attached to British Columbia Securities Commission Blanket Order BOR 95/17, a copy of which may be obtained from the Company. Only one such report must be filed in respect of Common Stock acquired on the same date and under the same prospectus exemption. 12 LEGAL OPINIONS The validity of the Common Stock offered hereby will be passed upon for Varco by Pircher, Nichols & Meeks, Los Angeles, California. Mr. Leo J. Pircher, a member of the firm of Pircher, Nichols & Meeks, is a director of Varco. Mr. Pircher owns beneficially 5,200 shares of Varco's Common Stock and holds options to purchase an additional 10,000 shares. In addition, Mr. Pircher is a holder of record of, and has sole or shared voting or investment power with respect to, 347,648 shares of Common Stock in fiduciary capacities. Certain legal matters will be passed upon for the Underwriters by Latham & Watkins, Los Angeles, California. EXPERTS The consolidated financial statements of Varco International, Inc. incorporated by reference in Varco International, Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1995, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The information included under the caption "Selected Consolidated Financial Data" for each of the five years in the period ended December 31, 1995, appearing in this Prospectus and Registration Statement have been derived from consolidated financial statements audited by Ernst & Young LLP. AVAILABLE INFORMATION Varco is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, files, reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at its principal office at Room 1024, 450 Fifth Street, N.W., Washington, D.C. and at its regional offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material also can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Varco's Common Stock is listed on the New York Stock Exchange, and such reports, proxy statements and other information can also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. Varco has filed with the Commission a Registration Statement on Form S-3 ( the "Registration Statement") under the Securities Act with respect to the Common Stock offered hereby. This Prospectus does not contain all the information set forth in the Registration Statement and the exhibits and schedules thereto, certain parts of which are omitted in accordance with the rules and regulations of the Commission. Statements contained in this Prospectus concerning the provisions of documents filed with the Registration Statement as exhibits accurately describe the relevant material provisions of such documents, but are necessarily summaries of such documents, and each such statement is qualified in its entirety by reference to the copy of the applicable document filed with the Commission. For further information, reference is made to such Registration Statement, exhibits and schedules, which may be inspected without charge at the Commission's principal office in Washington, D.C., and copies thereof may be obtained upon payment of the fees prescribed by the Commission. 13 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission are incorporated by reference herein: (a) The Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. (b) The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996. (c) 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, each document filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Common Stock pursuant hereto shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing such document. Any statement contained in this Prospectus or in a document incorporated or deemed to be incorporated by reference in this Prospectus shall be deemed to be modified or superseded for purposes of the Registration Statement and this Prospectus to the extent that a statement contained in this Prospectus, or in any subsequently filed document that also is or is deemed to be incorporated by reference in this Prospectus, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Registration Statement or this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, upon the written or oral request of such person, a copy of any and all of the documents that are incorporated by reference in this Prospectus (not including the exhibits to any such document unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates by reference). Requests for such copies should be directed to Varco International, Inc., Attention: Investor Relations, 743 North Eckhoff Street, Orange, California 92668, telephone number (714) 978- 1900. 14 - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR- MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS OR ANY UNDER- WRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSE- QUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. ------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary......................................................... 3 Risk Factors............................................................... 5 Use of Proceeds............................................................ 6 Price Range of Common Stock................................................ 6 Capitalization............................................................. 7 Selected Consolidated Financial Data....................................... 8 Selling Shareholders....................................................... 9 Underwriting............................................................... 11 Notice to Canadian Residents............................................... 12 Legal Opinions............................................................. 13 Experts.................................................................... 13 Available Information...................................................... 13 Incorporation of Certain Documents by Reference............................ 14
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 6,596,041 Shares LOGO Common Stock PROSPECTUS CS First Boston Howard, Weil, Labouisse, Friedrichs Incorporated Simmons & Company International - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Set forth below is an estimate of the approximate amount of the fees and expenses, all of which are payable by the Company, in connection with the offering described in this Registration Statement.
APPROXIMATE AMOUNT ----------- SEC Registration Fees......................................... $38,745 NASD Filing Fee............................................... 11,736 Printing and Engraving Expenses............................... 50,000 Legal Fees and Expenses....................................... 75,000 Accounting Fees and Expenses.................................. 15,000 Blue Sky Fees and Expenses.................................... 7,000 Miscellaneous................................................. 2,519 -------- Total....................................................... $200,000 ========
ITEM 15. 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 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 II-1 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 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 16. EXHIBITS. **1.1 Form of Underwriting Agreement. 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 Bylaws of the Company, incorporated by reference to Exhibit 3.7 to Amendment No. 1 to the Company's Registration Statement on Form S-1, Registration No. 33-40191. 4.3 Note Agreement, dated as of July 1, 1992 between Varco International, Inc. and the Purchasers named in Schedule 1 thereto, incorporated by reference to Exhibit 4.0 to Varco's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992. 4.4 First Amendment to Note Agreement, dated as of November 12, 1992, to Note Agreement included as Exhibit 4.3 hereto, incorporated by reference to Exhibit 4.3 to Varco's Annual Report on Form 10-K for the year ended December 31, 1992. 4.5 Waiver and Second Amendment to Note Agreement, dated as of February 25, 1993, to Note Agreement included as Exhibit 4.3 hereto, incorporated by reference to Exhibit 4.4 to Varco's Annual Report on Form 10-K for the year ended December 31, 1992.
II-2 4.6 Waiver, dated as of March 8, 1995, to Note Agreement included as Exhibit 4.3 hereto, incorporated by reference to Exhibit 4.4 to Varco's Annual Report on Form 10-K for the year ended December 31, 1994. 4.7 Waiver and Third Amendment, dated as of March 8, 1995 to Note Agreement included as Exhibit 4.3 hereto, incorporated by reference to Exhibit 4.5 to Varco's Annual Report on Form 10-K for the year ended December 31, 1995. 4.8 Credit Agreement, dated as of February 25, 1993 among Varco International, Inc., Citicorp USA, Inc. and Citibank, N.A., incorporated by reference to Exhibit 4.5 to Varco's Annual Report on Form 10-K for the year ended December 31, 1992. 4.9 First Amendment dated as of August 3, 1993 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4 to Varco's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993. 4.10 Second Amendment dated as of September 23, 1993 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.6 to Varco's Annual Report on Form 10-K for the year ended December 31, 1993. 4.11 Third Amendment dated as of December 1, 1993 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.7 to Varco's Annual Report on Form 10-K for the year ended December 31, 1993. 4.12 Fourth Amendment dated as of May 12, 1994 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4 to Varco's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994. 4.13 Fifth Amendment dated as of October 31, 1994 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.10 to Varco's Annual Report on Form 10-K for the year ended December 31, 1994. 4.14 Sixth Amendment dated as of March 17, 1995 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.12 to Varco's Annual Report on Form 10-K for the year ended December 31, 1995. 4.15 Seventh Amendment dated as of December 31, 1995 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.13 to Varco's Annual Report on Form 10-K for the year ended December 31, 1995. **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 (included on signature page of this Registration Statement).
- -------- * Previously filed. ** Filed herewith. ITEM 17. UNDERTAKINGS. (a) The undersigned registrant hereby undertakes that: (1) For purposes of determining liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating II-3 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. (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. (c) 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 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. II-4 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-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 3 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ORANGE, STATE OF CALIFORNIA, ON MAY 16, 1996. 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 AMENDMENT NO. 3 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- * George Boyadjieff President and Chief - ------------------------------------- Executive Officer May 16, 1996 GEORGE BOYADJIEFF and Director (Principal Executive Officer) /s/ Richard A. Kertson Vice President-- - ------------------------------------- Finance and Chief May 16, 1996 RICHARD A. KERTSON Financial Officer (Principal Financial Officer) /s/ Donald L. Stichler Controller-- - ------------------------------------- Treasurer and Chief May 16, 1996 DONALD L. STICHLER Accounting Officer (Principal Accounting Officer) * Walter B. Reinhold Director - ------------------------------------- May 16, 1996 WALTER B. REINHOLD * Talton R. Embry Director - ------------------------------------- May 16, 1996 TALTON R. EMBRY
II-5 SIGNATURE TITLE DATE * Andre R. Horn Director - ------------------------------------- May 16, 1996 ANDRE R. HORN * Maurice E. Jacques Director - ------------------------------------- May 16, 1996 MAURICE E. JACQUES * Jack W. Knowlton Director - ------------------------------------- May 16, 1996 JACK W. KNOWLTON * Leo J. Pircher Director - ------------------------------------- May 16, 1996 LEO J. PIRCHER * Carroll W. Suggs Director - ------------------------------------- May 16, 1996 CARROLL W. SUGGS * Robert A. Teitsworth Director - ------------------------------------- May 16, 1996 ROBERT A. TEITSWORTH Director May , 1996 - ------------------------------------- EUGENE R. WHITE * James D. Woods Director - ------------------------------------- May 16, 1996 JAMES D. WOODS *By /s/ Richard A. Kertson --------------------------------- Richard A. Kertson Attorney-in-Fact II-6 EXHIBIT INDEX
EXHIBIT PAGE ------- ---- 1.1 Form of Underwriting Agreement. 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 Bylaws of the Company, incorporated by reference to Exhibit 3.7 to Amendment No. 1 to the Company's Registration Statement on Form S-1, Registration No. 33-40191. 4.3 Note Agreement, dated as of July 1, 1992 between Varco International, Inc. and the Purchasers named in Schedule 1 thereto, incorporated by reference to Exhibit 4.0 to Varco's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992. 4.4 First Amendment to Note Agreement, dated as of November 12, 1992, to Note Agreement included as Exhibit 4.3 hereto, incorporated by reference to Exhibit 4.3 to Varco's Annual Report on Form 10-K for the year ended December 31, 1992. 4.5 Waiver and Second Amendment to Note Agreement, dated as of February 25, 1993, to Note Agreement included as Exhibit 4.3 hereto, incorporated by reference to Exhibit 4.4 to Varco's Annual Report on Form 10-K for the year ended December 31, 1992. 4.6 Waiver, dated as of March 8, 1995, to Note Agreement included as Exhibit 4.3 hereto, incorporated by reference to Exhibit 4.4 to Varco's Annual Report on Form 10-K for the year ended December 31, 1994. 4.7 Waiver and Third Amendment, dated as of March 8, 1995 to Note Agreement included as Exhibit 4.3 hereto, incorporated by reference to Exhibit 4.5 to Varco's Annual Report on Form 10-K for the year ended December 31, 1995. 4.8 Credit Agreement, dated as of February 25, 1993 among Varco International, Inc., Citicorp USA, Inc. and Citibank, N.A., incorporated by reference to Exhibit 4.5 to Varco's Annual Report on Form 10-K for the year ended December 31, 1992. 4.9 First Amendment dated as of August 3, 1993 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4 to Varco's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993. 4.10 Second Amendment dated as of September 23, 1993 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.6 to Varco's Annual Report on Form 10-K for the year ended December 31, 1993. 4.11 Third Amendment dated as of December 1, 1993 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.7 to Varco's Annual Report on Form 10-K for the year ended December 31, 1993. 4.12 Fourth Amendment dated as of May 12, 1994 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4 to Varco's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994. 4.13 Fifth Amendment dated as of October 31, 1994 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.10 to Varco's Annual Report on Form 10-K for the year ended December 31, 1994. 4.14 Sixth Amendment dated as of March 17, 1995 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.12 to Varco's Annual Report on Form 10-K for the year ended December 31, 1995.
EXHIBIT PAGE ------- ---- 4.15 Seventh Amendment dated as of December 31, 1995 to Credit Agreement included as Exhibit 4.8 hereto, incorporated by reference to Exhibit 4.13 to Varco's Annual Report on Form 10-K for the year ended December 31, 1995. 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 (included on signature page of this Registration Statement).
2 EX-1 2 UNDERWRITING AGREEMENT EXHIBIT 1 6,596,041 Shares VARCO INTERNATIONAL, INC. Common Stock UNDERWRITING AGREEMENT ---------------------- May __, 1996 CS First Boston Corporation Howard, Weil, Labouisse, Friedrichs Incorporated Simmons & Company International As Representatives of the Several Underwriters, c/o CS First Boston Corporation, Park Avenue Plaza New York, NY 10055 Dear Sirs: 1. Introduction. Baker Hughes Incorporated, a Delaware corporation ("Baker Hughes"), and Walter B. Reinhold, an individual ("Reinhold" and, together with Baker Hughes, "Selling Stockholders") propose severally to sell an aggregate of 6,596,041 outstanding shares ("Firm Securities") of the Common Stock ("Securities"), of Varco International, Inc., a California corporation ("Company"), and the Company proposes to issue and sell to the Underwriters, at the option of the Underwriters, an aggregate of not more than 989,406 additional shares ("Optional Securities") of the Company's Securities as set forth below. The Firm Securities and the Optional Securities are herein collectively called the "Offered Securities." The Selling Stockholders and the Company hereby agree with the several Underwriters named in Schedule A hereto ("Underwriters") as follows: 2. Representations and Warranties of the Company and the Selling Stockholders. (a) The Company represents and warrants to, and agrees with, the several Underwriters and the several Selling Stockholders that: (i) A registration statement (No. 333-02869) relating to the Offered Securities, including a form of prospectus, has been filed with the Securities and Exchange Commission ("Commission") and either (A) has been declared effective under the Securities Act of 1933, as amended ("Act"), and is not proposed to be amended or (B) is proposed to be amended by amendment or post-effective amendment. If such registration statement (the "initial registration statement") has been declared effective, either (A) an additional registration statement (the "additional registration statement") relating to the Offered Securities may have been filed with the Commission pursuant to Rule 462(b) under the Act ("Rule 462(b)") and, if so filed, has become effective upon filing pursuant to such Rule and the Offered Securities all have been duly registered under the Act pursuant to the initial registration statement and, if applicable, the additional registration statement, or (B) such an additional registration statement may be proposed to be filed with the Commission pursuant to Rule 462(b) and, if so filed, will become effective upon filing pursuant to such Rule and upon such filing the Offered Securities will all have been duly registered under the Act pursuant to the initial registration statement and, if applicable, such additional registration statement. If the Company does not propose to amend the initial registration statement or if an additional registration statement has been filed and the Company does not propose to amend it, and if any post-effective amendment to either such registration statement has been filed with the Commission prior to the execution and delivery of this Agreement, the most recent amendment (if any) to each such registration statement has been declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c) under the Act ("Rule 462(c)") or, in the case of the additional registration statement, Rule 462(b). For purposes of this Agreement, "Effective Time" with respect to the initial registration statement or, if filed prior to the execution and delivery of this Agreement, the additional registration statement means (A) if the Company has advised the Representatives that it does not propose to amend such registration statement, the date and time as of which such registration statement, or the most recent post-effective amendment thereto (if any) filed prior to the execution and delivery of this Agreement, was declared effective by the Commission or has become effective upon filing pursuant to Rule 462(c), or (B) if the Company has advised the Representatives that it proposes to file an amendment or post-effective amendment to such registration statement, the date and time as of which such registration statement, as amended by such amendment or post-effective amendment, as the case may be, is declared effective by the Commission. If an additional registration statement has not been filed prior to the execution and delivery of this Agreement but the Company has advised the Representatives that it proposes to file one, "Effective Time" with respect to such additional registration statement means the date and time as of which such registration statement is filed and becomes effective pursuant to Rule 462(b). "Effective Date" with respect to the initial registration statement or the additional registration statement (if any) means the date of the Effective Time thereof. The initial registration statement, as amended at its Effective Time, including all information contained in the additional registration statement (if any) and deemed to be a part of the initial registration statement as of the Effective Time of the additional registration statement pursuant to the General Instructions of the Form on which it is filed and including all information (if any) deemed to be a part of the initial registration statement as of its Effective Time pursuant to Rule 430A(b) under the Act ("Rule 430A(b)"), is hereinafter referred to as the "Initial Registration Statement." The additional registration statement, as amended at its Effective Time, including the contents of the initial registration statement incorporated by reference therein and including all information (if any) deemed to be a part of the additional registration statement as of its Effective Time pursuant to Rule 430A(b), is hereinafter referred to as the "Additional Registration Statement." The Initial Registration Statement and the Additional Registration Statement are hereinafter referred to collectively as the "Registration Statements" and individually as a "Registration Statement." The form of prospectus relating to the Offered Securities, as first filed with the Commission pursuant to and in accordance with Rule 424(b) or (if 2 no such filing is required) as included in a Registration Statement, is hereinafter referred to as the "Prospectus." No document has been or will be prepared or distributed in reliance on Rule 434 under the Act. (ii) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement: (A) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement conformed in all respects to the requirements of the Act and the rule and regulations of the Commission ("Rules and Regulations") and did not include any 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; (B) on the Effective Date of the Additional Registration Statement (if any), each Registration Statement conformed, or will conform, in all respects to the requirements of the Act and the Rules and Regulations and did not include, or will not include, any untrue statement of a material fact and did not omit, or will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and (C) on the date of this Agreement, the Initial Registration Statement and, if the Effective Time of the Additional Registration Statement is prior to the execution and delivery of this Agreement, the Additional Registration Statement each conforms, and at the time of filing of the Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Date of the Additional Registration Statement in which the Prospectus is included, each Registration Statement and the Prospectus will conform, in all respects to the requirements of the Act and the Rules and Regulations, and neither of such documents includes, or will include, any untrue statement of a material fact or omits, or will omit, to state a material fact required to be stated therein or necessary to make the statements therein not misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: on the Effective Date of the Initial Registration Statement, the Initial Registration Statement and the Prospectus will conform in all respects to the requirements of the Act and the Rules and Regulations; neither of such documents will include any untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and no Additional Registration Statement has been or will be filed. The two preceding sentences do not apply to (i) statements in or omissions from a Registration Statement or the Prospectus based upon written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information is that described as such in Section 7(d) or (ii) written information furnished to the Company by any Selling Stockholder specifically for use in a Registration Statement or the Prospectus. (iii) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of California, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; and the Company is duly qualified to do business as a foreign corporation and is in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except for jurisdictions in which the failure to so qualify would not have a material adverse effect on the 3 financial condition or business prospects of the Company and its subsidiaries taken as a whole. (iv) Each subsidiary of the Company has been duly incorporated and is an existing corporation in good standing under the laws of the jurisdiction of its incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; each subsidiary of the Company is duly qualified to do business as a foreign corporation and is in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification (except for jurisdictions in which the failure to so qualify would not have a material adverse effect on the financial condition or business prospects of the Company and its subsidiaries, taken as a whole); all of the issued and outstanding capital stock of each subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each subsidiary owned by the Company, directly or through subsidiaries, is owned free from liens, encumbrances and defects. (v) The Firm Securities and all other outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable; the Optional Securities, upon issuance and delivery thereof and payment therefor in the manner provided herein will be duly authorized, validly issued, fully paid and nonassessable; the Offered Securities conform to the description thereof contained in the Prospectus; and the stockholders of the Company have no preemptive rights with respect to the Securities. (vi) Except as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Underwriter for a brokerage commission, finder's fee or other like payment in connection with the sale of the Offered Securities. (vii) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by the Company for the consummation of the transactions contemplated by this Agreement in connection with the sale of the Offered Securities, except such as have been obtained and made under the Act and such as may be required under state securities laws. (viii) The execution, delivery and performance of this Agreement, and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms or provisions of, or constitute a default under, any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any subsidiary of the Company or any of their properties, or any agreement or instrument to which the Company or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject, or the charter or bylaws of the Company or any such subsidiary (except as rights to indemnification and contribution may be limited by federal or state securities laws). 4 (ix) This Agreement has been duly authorized, executed and delivered by the Company. (x) Except as disclosed in the Prospectus, the Company and its subsidiaries have good and marketable title to all real properties and all other properties and assets owned by them, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or to be made thereof by them; and except as disclosed in the Prospectus, the Company and its subsidiaries hold any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or to be made thereof by them. (xi) The Company and its subsidiaries possess adequate certificates, authorizations or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by them and have not received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the Company and its subsidiaries taken as a whole. (xii) No labor dispute with the employees of the Company or any subsidiary exists or, to the knowledge of the Company, is imminent that might have a material adverse effect on the Company and its subsidiaries taken as a whole. (xiii) The Company and its subsidiaries own, possess or can acquire on reasonable terms adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "intellectual property rights") necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any intellectual property rights that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the Company and its subsidiaries taken as a whole. (xiv) Except as disclosed in the Prospectus, neither the Company nor any of its subsidiaries is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "environmental laws"), owns or operates any real property contaminated with any substance that is subject to any environmental laws, is liable for any off-site disposal or contamination pursuant to any environmental laws, or is subject to any claim relating to any environmental laws, which violation, contamination, liability or claim would individually or in the aggregate have a material adverse effect on the Company and its subsidiaries taken as a whole; and the Company is not aware of any pending investigation which might lead to such a claim. 5 (xv) Except as disclosed in the Prospectus, there are no pending actions, suits or proceedings against or affecting the Company, any of its subsidiaries or any of their respective properties that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole, or would materially and adversely affect the ability of the Company to perform its obligations under this Agreement, or which are otherwise material in the context of the sale of the Offered Securities; and no such actions, suits or proceedings are threatened or, to the Company's knowledge, contemplated. (xvi) The financial statements included in each Registration Statement and the Prospectus present fairly the financial position of the Company and its consolidated subsidiaries as of the dates shown and their results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with generally accepted accounting principles in effect in the United States, applied on a consistent basis, except as disclosed therein; the assumptions used in preparing the pro forma financial information included in each Registration Statement and the Prospectus under the caption "Capitalization" provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events described therein; the related pro forma adjustments give appropriate effect to those assumptions; and the pro forma columns therein reflect the proper application of those adjustments to the corresponding historical financial statement amounts. (xvii) Except as disclosed in the Prospectus, since the date of the latest audited financial statements included in the Prospectus there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole, and, except as disclosed in or contemplated by the Prospectus, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (xviii) The Company is not and, after giving effect to the offering and sale of the Offered Securities, will not be, an "investment company" as defined in the Investment Company Act of 1940, as amended. (xix) Neither the Company nor any of its affiliates does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Section 517.075, Florida Statutes and the Company agrees to comply with such Section if prior to the completion of the distribution of the Offered Securities it commences doing such business. (b) Each Selling Stockholder severally and not jointly represents and warrants to, and agrees with, the several Underwriters that: 6 (i) Such Selling Stockholder has, and on the First Closing Date will have, valid and unencumbered title to the Firm Securities to be delivered by such Selling Stockholder on such Closing Date and full right, power and authority to enter into this Agreement and to sell, assign, transfer and deliver the Firm Securities to be delivered by such Selling Stockholder on such Closing Date; and upon the delivery of and payment for the Firm Securities to be delivered by such Selling Stockholder on such Closing Date the several Underwriters will acquire valid and unencumbered title to the Firm Securities to be delivered by such Selling Stockholder. (ii) If the Effective Time of the Initial Registration Statement is prior to execution and delivery of this Agreement: (A) on the Effective Date of the Initial Registration Statement, the Initial Registration Statement conformed in all respects to the requirements of the Act and the Rules and Regulations and did not include any 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; (B) on the Effective Date of the Additional Registration Statement (if any), each Registration Statement conformed, or will conform, in all respects to the requirements of the Act and the Rules and Regulations and did not include, or will not include, any untrue statement of a material fact and did not omit, or will not omit, to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (C) on the date of this Agreement, the Initial Registration Statement and, if the Effective Time of the Additional Registration Statement is prior to the execution and delivery of this Agreement, the Additional Registration Statement, each conforms, and at the time of filing of the Prospectus pursuant to Rule 424(b) or (if no such filing is required) at the Effective Date of the Additional Registration Statement in which the Prospectus is included, each Registration Statement and the Prospectus will conform, in all respects to the requirements of the Act and the Rules and Regulations, and neither of such documents includes, or will include, any untrue statement of a material fact or omits, or will omit, to state a material fact required to be stated therein or necessary to make the statements therein not misleading. If the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement: on the Effective Date of the Initial Registration Statement, the Initial Registration Statement and the Prospectus will conform in all respects to the requirements of the Act and the Rules and Regulations; and neither of such documents will include any untrue statement of a material fact or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The two preceding sentences apply only to the extent that any statements in or omissions from a Registration Statement or the Prospectus are based on written information furnished to the Company by such Selling Stockholder specifically for use therein. 3. Purchase, Sale and Delivery of Offered Securities. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, each of the Selling Stockholders agrees, severally and not jointly, to sell to the Underwriters, and the Underwriters agree, severally and not jointly, to purchase from each Selling Stockholder, at a purchase price of $______ per share, the respective numbers 7 of Firm Securities set forth below the name of such Selling Stockholder and opposite the name of such Underwriter set forth in Schedule A hereto. Certificates in negotiable form for the Firm Securities to be sold by Reinhold have been placed in custody, for delivery under this Agreement, under a Custody Agreement with _____________, as custodian ("Custodian"). Reinhold agrees that the Firm Securities represented by the certificates held in custody for him under such Custody Agreement are subject to the interest of the Underwriters hereunder, that the arrangements made by him for such custody are to that extent irrevocable, and that his obligations hereunder shall not be terminated by operation of law, whether due to Reinhold's death or the occurrence of any other event. If Reinhold should die, or if any other such event should occur, before the delivery of the Firm Securities hereunder, certificates for the Firm Securities shall be delivered by the Custodian to the Representatives in accordance with the terms and conditions of this Agreement as if such death or other event had not occurred, regardless of whether or not the Custodian shall have received notice of such death or other event. Baker Hughes and the Custodian will deliver the Firm Securities to be delivered by them to the Representatives for the accounts of the Underwriters at the office of Latham & Watkins, 633 West Fifth Street, Suite 4000, Los Angeles, California, against payment of the purchase price thereof by official bank checks in Federal Reserve funds drawn to the orders of such Selling Stockholders at the office of Latham & Watkins, or by wire transfer to the respective accounts of such Selling Stockholders at banks mutually acceptable to CS First Boston and each such Selling Stockholder, at 10:00 a.m., New York time, on May __, 1996, or at such other time not later than three full business days thereafter as CS First Boston Corporation ("CS First Boston") and Baker Hughes determine, such time being herein referred to as the "First Closing Date." For purposes of Rule 15c6-1 under the Securities Exchange Act of 1934, the First Closing Date (if later than the otherwise applicable settlement date) shall be the settlement date for payment of funds and delivery of securities for all the Firm Securities sold pursuant to the offering. The certificates for the Firm Securities so to be delivered will be in definitive form, in such denominations and registered in such names as CS First Boston requests and will be made available for checking and packaging at the office of CS First Boston, 55 East 52nd Street, New York, New York, at least 24 hours prior to the First Closing Date. In addition, upon written notice from CS First Boston given to the Company from time to time not more than 30 days subsequent to the date of the Prospectus, the Underwriters may purchase all or less than all of the Optional Securities at the purchase price per Security to be paid for the Firm Securities. The Company agrees to sell to the Underwriters the number of shares of Optional Securities specified in such notice and the Underwriters agree, severally and not jointly, to purchase such Optional Securities. Such Optional Securities shall be purchased for the account of each Underwriter in the same proportion as the number of Firm Securities set forth opposite such Underwriter's name bears to the total number of Firm Securities (subject to adjustment by CS First Boston to eliminate fractions) and may be purchased by the Underwriters only for the purpose of covering over-allotments made in connection with the sale of the Firm Securities. No Optional Securities shall be sold or delivered unless the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities or any portion thereof may be exercised from time to time and, to the extent 8 not previously exercised, may be surrendered and terminated at any time upon notice by CS First Boston to the Company. Each time for the delivery of and payment for the Optional Securities, being herein referred to as an "Optional Closing Date," which may be the First Closing Date (the First Closing Date and each Optional Closing Date, if any, being sometimes referred to as a "Closing Date"), shall be determined by CS First Boston but shall be not later than three full business days after written notice of election to purchase Optional Securities is given. The Company will deliver the Optional Securities being purchased on each Optional Closing Date to the Representatives for the accounts of the several Underwriters, against payment of the purchase price therefor by official bank check or checks in Federal Reserve funds drawn to the order of the Company at the above office of Latham & Watkins, or by wire transfer to the Company's account at a bank acceptable to CS First Boston. The certificates for the Optional Securities being purchased on each Optional Closing Date will be in definitive form, in such denominations and registered in such names as CS First Boston requests upon reasonable notice prior to such Optional Closing Date and will be made available for checking and packaging at the above office of CS First Boston at a reasonable time in advance of such Optional Closing Date. 4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Offered Securities for sale to the public as set forth in the Prospectus. 5. Certain Agreements of the Company and the Selling Stockholders. The Company agrees with the several Underwriters and the several Selling Stockholders that: (a) If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, the Company will file the Prospectus with the Commission pursuant to and in accordance with subparagraph (1) (or, if applicable and if consented to by CS First Boston, subparagraph (4) of Rule 424(b)) not later than the earlier of (A) the second business day following the execution and delivery of this Agreement, or (B) the fifteenth business day after the Effective Date of the Initial Registration Statement. The Company will advise CS First Boston promptly of any such filing pursuant to Rule 424(b). If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement and an additional registration statement is necessary to register a portion of the Offered Securities under the Act but the Effective Time thereof has not occurred as of such execution and delivery, the Company will file the additional registration statement or, if filed, will file a post-effective amendment thereto with the Commission pursuant to and in accordance with Rule 462(b) on or prior to 10:00 p.m., New York time, on the date of this Agreement or, if earlier, on or prior to the time the Prospectus is printed and distributed to any Underwriter, or will make such filing at such later date as shall have been consented to by CS First Boston. (b) The Company will advise CS First Boston promptly of any proposal to amend or supplement the initial registration statement or any additional registration statement as filed or the related prospectus or the Initial Registration Statement, the Additional Registration Statement (if any) or the Prospectus and will not effect such amendment or supplementation without CS First Boston's consent; and the Company will also advise CS First Boston promptly of the effectiveness of each Registration Statement (if its Effective Time is subsequent to the execution 9 and delivery to this Agreement) and of any amendment or supplementation of a Registration Statement or the Prospectus and of the institution by the Commission of any stop order proceedings in respect of a Registration Statement and will use its best efforts to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued. (c) If, at any time when a prospectus relating to the Offered Securities is required to be delivered under the Act in connection with sale by any Underwriter or dealer, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Act, the Company will promptly notify CS First Boston of such event and will promptly prepare and file with the Commission, at its own expense, an amendment or supplement which will correct such statement or omission or will effect such compliance. Neither CS First Boston's consent to, nor the Underwriters' delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6. (d) As soon as practicable, but not later than the Availability Date (as defined below), the Company will make generally available to its securityholders an earnings statement covering a period of at least 12 months beginning after the Effective Date of the Initial Registration Statement (or, if later, the Effective Date of the Additional Registration Statement) which will satisfy the provisions of Section 11(a) of the Act. For the purpose of the preceding sentence, "Availability Date" means the 45th day after the end of the fourth fiscal quarter following the fiscal quarter that includes such Effective Date, except that if such fourth fiscal quarter is the last quarter of the Company's fiscal year, "Availability Date" means the 90th day after the end of such fourth fiscal quarter. (e) The Company will furnish to the Representatives and to Baker Hughes copies of each Registration Statement (of which, three copies for the Representatives and one copy for Baker Hughes will be signed and will include all exhibits), each related preliminary prospectus, and, so long as delivery of a prospectus relating to the Offered Securities is required under the Act in connection with sales by any Underwriter or dealer, the Prospectus and all amendments and supplements to such documents, in each case in such quantities as CS First Boston requests. The Prospectus shall be so furnished on or prior to 3:00 p.m., New York time, on the business day following the later of the execution and delivery this Agreement or the Effective Time of the Initial Registration Statement. All other such documents shall be so furnished as soon as available. The Company will pay the expenses of printing and distributing to the Underwriters all such documents. (f) The Company will arrange for the qualification of the Offered Securities for sale under the laws of such jurisdictions as CS First Boston designates and will continue such qualifications in effect so long as required for the distribution, except that in no event shall the Company be obligated in connection therewith to qualify as a foreign corporation or to execute a general consent for the service of process. 10 (g) During the period of two years hereafter, the Company will furnish to the Representatives and, upon request, to each of the other Underwriters, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to the Representatives as soon as available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Securities Exchange Act of 1934 or mailed to stockholders. (h) For a period of 120 days after the date of the initial public offering of the Offered Securities, neither the Company nor Reinhold will offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Commission a registration statement under the Act relating to any additional shares of its or his Securities or securities convertible into or exchangeable or exercisable for any shares of the Company's Securities, or publicly disclose the intention to make any such offer, sale, pledge, disposal or filing, without the prior written consent of CS First Boston; except: (i) issuances of Securities pursuant to the exercise of options outstanding on the date hereof; (ii) grants of options pursuant to the terms of the Company's 1990 Stock Option Plan and 1994 Directors' Stock Option Plan or issuances of Securities pursuant to the exercise of such options; (iii) sales of Securities pursuant to the Company's 1980 Stock Purchase Plan; (iv) issuances of Securities pursuant to the Company's Stock Bonus Plan; and (v) registration of additional Securities issuable upon the exercise of options granted under the Company's 1990 Stock Option Plan. (i) The Company agrees with the several Underwriters that it will pay all expenses incident to the performance of its obligations and the obligations of the Selling Stockholders under this Agreement, and will reimburse the Underwriters (if and to the extent incurred by them) for any filing fees and other expenses (including fees and disbursements of counsel) incurred by them in connection with qualification of the Offered Securities for sale under the laws of such jurisdictions as CS First Boston designates and the printing of memoranda relating thereto, for the filing fee of the National Association of Securities Dealers, Inc. relating to the Offered Securities, for any transfer taxes on the sale of the Offered Securities to the Underwriters and for expenses incurred in distributing preliminary prospectuses and the Prospectus (including any amendments and supplements thereto) to the Underwriters. The foregoing provisions are intended to relieve the Underwriters from the payment of expenses and costs which the Company has hereby agreed to pay and shall not affect any agreement which the Company and any Selling Stockholder shall make, or have made, for the sharing of such expenses and costs. It is understood that except as provided in this Section and Section 7, the Underwriters shall pay all of their own costs and expenses, including fees and disbursements of their counsel, stock transfer taxes on the resale of any of the Securities by them and any advertising expenses connected with any offers they make. It is understood further that each of the Company and the Underwriters will bear their own costs in connection with any selling efforts made in connection with the offering of the Securities. (j) Each Selling Stockholder agrees to deliver to CS First Boston, attention: Transactions Advisory Group, on or prior to the First Closing Date a properly completed and executed United States Treasury Department Form W-9 (or other applicable form or statement specified by Treasury Department regulations in lieu thereof). 11 6. Conditions to the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Securities on the First Closing Date and the Optional Securities to be purchased on each Optional Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company and the Selling Stockholders herein, to the accuracy of the statements of Company officers made pursuant to the provisions hereof, to the performance by the Company and the Selling Stockholders of their obligations hereunder and to the following additional conditions precedent: (a) The Representatives shall have received a letter, dated the date of delivery thereof (which, if the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, shall be on or prior to the date of this Agreement or, if the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement, shall be prior to the filing of the amendment or post-effective amendment to the registration statement to be filed shortly prior to such Effective Time), of Ernst & Young LLP confirming that they are independent public accountants within the meaning of the Act and the applicable Rules and Regulations and stating to the effect that: (i) in their opinion the financial statements and schedules examined by them and included in the Registration Statements comply as to form in all material respects with the applicable accounting requirements of the Act and the related Rules and Regulations; (ii) they have performed the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement of Auditing Standards No. 71, Interim Financial Information, on the unaudited financial statements included in the Registration Statements; (iii) on the basis of the review referred to in clause (ii) above, a reading of the latest available interim financial statements of the Company, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A) the unaudited financial statements included in the Registration Statements do not comply as to form in all material respects with the applicable accounting requirements of the Act and the related Rules and Regulations or any material modifications should be made to such unaudited financial statements for them to be in conformity with generally accepted accounting principles; (B) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than five days prior to the date of this Agreement, there was any change in the capital stock or any increase in short-term indebtedness or long-term debt of the Company and its consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net assets, as compared with amounts shown on the latest balance sheet included in the Prospectus; or (C) for the period from the closing date of the latest income statement included in the Prospectus to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year, in consolidated net sales or net operating income or in the total per share amounts of consolidated net income; 12 except in all cases set forth in clauses (B) and (C) above for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Registration Statements (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter. For purposes of this subsection, (i) if the Effective Time of the Initial Registration Statement is subsequent to the execution and delivery of this Agreement, "Registration Statements" shall mean the initial registration statement as proposed to be amended by the amendment or post-effective amendment to be filed shortly prior to its Effective Time, (ii) if the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement but the Effective Time of the Additional Registration Statement is subsequent to such execution and delivery, "Registration Statements" shall mean the Initial Registration Statement and the additional registration statement as proposed to be filed or as proposed to be amended by the post- effective amendment to be filed shortly prior to its Effective Time, and (iii) "Prospectus" shall mean the prospectus included in the Registration Statements. All financial statements and schedules included in material incorporated by reference into the Prospectus shall be deemed included in the Registration Statements for purposes of this subsection. (b) If the Effective Time of the Initial Registration Statement is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 p.m., New York time, on the date of this Agreement or such later date as shall have been consented to by CS First Boston. If the Effective Time of the Additional Registration Statement (if any) is not prior to the execution and delivery of this Agreement, such Effective Time shall have occurred not later than 10:00 p.m., New York time, on the date of this Agreement or, if earlier, the time the Prospectus is printed and distributed to any Underwriter, or shall have occurred at such later date as shall have been consented to by CS First Boston. If the Effective Time of the Initial Registration Statement is prior to the execution and delivery of this Agreement, the Prospectus shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) of this Agreement. Prior to such Closing Date, no stop order suspending the effectiveness of a Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of any Selling Stockholder, the Company or the Representatives, shall be contemplated by the Commission. (c) Subsequent to the execution and delivery of this Agreement, there shall not have occurred: (i) any change, or any development or event involving a prospective change, in the condition (financial or other), business, properties or results of operations of the Company or 13 its subsidiaries which, in the judgment of a majority in interest of the Underwriters, including the Representatives, is material and adverse and makes it impractical or inadvisable to proceed with completion of the offering or the sale of and payment for the Offered Securities; (ii) any downgrading in the rating of any debt securities of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iii) any suspension or limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the- counter market; (iv) any banking moratorium declared by U.S. Federal or New York authorities; or (v) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of a majority in the interest of the Underwriters, including the Representatives, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the offering or the sale of and payment for the Offered Securities. (d) The Representatives shall have received an opinion dated such Closing Date of Pircher, Nichols & Meeks, counsel for the Company, to the effect that: (i) The Company has been duly incorporated and is an existing corporation in good standing under the laws of the State of California, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; and the Company is duly qualified to do business as a foreign corporation and is in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except for jurisdictions in which the failure to so qualify would not have a material adverse effect on the financial condition or business prospects of the Company and its subsidiaries taken as a whole; (ii) The Firm Securities delivered on such Closing Date and all other outstanding shares of the Common Stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable; the Optional Securities to be delivered on such Closing Date, upon issuance and delivery thereof and payment therefor in the manner provided herein will be duly authorized, validly issued, fully paid and nonassessable; the Offered Securities conform to the description thereof contained in the Prospectus; and the stockholders of the Company have no preemptive rights with respect to the Securities; (iii) No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by the Company for the consummation of the transactions contemplated by this Agreement in connection with the sale of the Offered Securities, except such as have been obtained and made under the Act and such as may be required under state securities laws; 14 (iv) The execution, delivery and performance of this Agreement and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms or provisions of, or constitute a default under, any statute, rule, regulation or order of any governmental agency or body or any court having jurisdiction over the Company or any subsidiary of the Company or any of their properties, which such rule, regulation, or order is known to such counsel, or any agreement or instrument known to such counsel to which the Company or any such subsidiary is a party or by which the Company or any such subsidiary is bound or to which any of the properties of the Company or any such subsidiary is subject, or the charter or bylaws of the Company or any such subsidiary (except as rights to indemnification and contribution may be limited by federal or state securities laws); (v) The Initial Registration Statement was declared effective under the Act as of the date and time specified in such opinion, the Additional Registration Statement (if any) was filed and became effective under the Act as of the date and time (if determinable) specified in such opinion, the Prospectus either was filed with the Commission pursuant to the subparagraph of Rule 424(b) specified in such opinion on the date specified therein or was included in the Initial Registration Statement or the Additional Registration Statement (as the case may be), and, to the best of the knowledge of such counsel, no stop order suspending the effectiveness of a Registration Statement or any part thereof has been issued and no proceedings for that purpose have been instituted or are pending or contemplated under the Act, and each Registration Statement and the Prospectus, and each amendment or supplement thereto, as of their respective or issue dates, complied as to form in all material respects with the requirements of the Act and the Rules and Regulations (except for the financial statements and other financial data as to which such counsel need express no opinion); (vi) The descriptions in the Registration Statements and Prospectus of statutes, legal and governmental proceedings and contracts and other documents are accurate and fairly present the information required to be shown; and such counsel do not know of any legal or governmental proceedings required to be described in a Registration Statement or the Prospectus which are not described as required or of any contracts or documents of a character required to be described in a Registration Statement or the Prospectus or to be filed as exhibits to a Registration Statement which are not described and filed as required; it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statements or the Prospectus; (vii) This Agreement has been duly authorized, executed and delivered by the Company; and (viii) In addition, such counsel shall state that, although they have not verified the accuracy or completeness of the statements contained in the Initial Registration Statement or the Additional Registration Statement (if any) or any amendment to either thereof, nothing has come to the attention of such counsel which causes them to believe that any Registration Statement or any amendment thereto, as of its effective date or as 15 of such Closing Date (except for the financial statements and other financial data as to which such counsel need express no opinion), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any amendment or supplement thereto, as of its issue date or as of such Closing Date (except for the financial statements and other financial data as to which such counsel need express no such opinion), contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (e) The Representatives shall have received an opinion dated the First Closing Date of Baker & Botts, L.L.P., counsel for Baker Hughes, to the effect that: (i) Baker Hughes had full right, power and authority to sell, assign, transfer and deliver the Firm Securities delivered by it on the First Closing Date hereunder; and upon transfer of the Firm Securities to be sold by Baker Hughes hereunder to the Underwriters, the Underwriters will acquire such Firm Securities free and clear of all adverse claims (within the meaning of the Uniform Commercial Code as in effect in the State of New York), assuming the Underwriters take delivery in good faith and without notice of any adverse claim; (ii) No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by Baker Hughes for the consummation of the transactions contemplated by this Agreement in connection with the sale by it of the Firm Securities, except such as have been obtained and made under the Act and such as may be required under state securities laws; (iii) To the knowledge of such counsel, the execution, delivery and performance of this Agreement and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms or provisions of, or constitute a default under, any statute, rule or regulation of any governmental agency or body having jurisdiction over Baker Hughes or any of its properties or the charter or bylaws of Baker Hughes; and (iv) This Agreement has been duly authorized, executed and delivered by Baker Hughes. (f) The Representatives shall have received an opinion dated the First Closing Date of Lawrence O'Donnell III, general counsel for Baker Hughes, to the effect that: (i) To the knowledge of such counsel, the execution, delivery and performance of this Agreement and the consummation of the transactions herein contemplated will not result in a breach or violation of any of the terms or provisions of, or constitute a default under, any order of any governmental agency or body or any court having jurisdiction over Baker Hughes or any of its properties or any agreement or 16 instrument to which Baker Hughes is a party or by which Baker Hughes is bound or to which any of its properties is subject. (g) The Representatives shall have received an opinion dated such Closing Date of Pircher, Nichols & Meeks, special counsel for Reinhold, to the effect that: (i) No facts have come to such counsel's attention which causes them to believe that Reinhold lacks full legal right, power and authority to sell, assign, transfer and deliver the Firm Securities to be sold by him hereunder on such Closing Date; (ii) No facts have come to such counsel's attention which causes them to believe that Reinhold lacks valid and unencumbered title to the Firm Securities to be delivered by him on such Closing Date; (iii) No facts have come to such counsel's attention which causes them to believe that upon delivery of the Firm Securities to be sold by Reinhold hereunder on such Closing Date and payment therefor in accordance with the terms of this Agreement and assuming that the Underwriters who have severally purchased such Firm Securities in good faith without notice of any adverse claim, such Underwriters will not have marketable title to the Firm Securities sold by Reinhold hereunder, free and clear of any liens, claims, encumbrances and security interests whatsoever, and that such title will not vest in the Underwriters, who have severally purchased such Securities hereunder; (iv) No consent, approval, authorization or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by Reinhold for the consummation of the transactions contemplated by this Agreement in connection with the sale by him of the Firm Securities, except such as have been obtained and made under the Act and such as may be required under state securities laws; and (v) No facts have come to such counsel's attention which causes them to believe that the execution, delivery and performance of this Agreement and the consummation of the transactions herein contemplated will result in a breach or violation of any of the terms or provisions of, or constitute a default under, any statute, rule, regulation or order of any governmental agency or body or any court having jurisdiction over Reinhold or any of his properties or any agreement or instrument to which Reinhold is a party or by which Reinhold is bound or to which any of his properties is subject (except as rights to indemnification and contribution may be limited by federal or state securities laws). (h) The Representatives shall have received from Latham & Watkins, special counsel for the Underwriters, such opinion or opinions, dated such Closing Date, with respect to the incorporation of the Company, the validity of the Offered Securities delivered on such Closing Date, the Registration Statements, the Prospectus and other related matters as the Representatives may require, and the Selling Stockholders and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. 17 (i) The Representatives shall have received a certificate, dated such Closing Date, of the President or any Vice-President and a principal financial or accounting officer of the Company in which such officers to the best of their knowledge after reasonable investigation state that: the representations and warranties of the Company in this Agreement are true and correct; the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date; no stop order suspending the effectiveness of any Registration Statement has been issued and no proceedings for that purpose have been instituted or are contemplated by the Commission; the Additional Registration Statement (if any) satisfying the requirements of subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment of the applicable filing fee in accordance with Rule 111 under the Act, prior to the time the Prospectus was printed and distributed to any Underwriter; and, subsequent to the date of the most recent financial statements in the Prospectus, there has been no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries taken as a whole, except as set forth or contemplated by the Prospectus or as described in such certificate. (j) The Representatives shall have received a letter dated such Closing Date of Ernst & Young LLP which meets the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than five days prior to such Closing Date for the purposes of this subsection. Each Selling Stockholder and the Company will furnish the Representatives with such conformed copies of such opinions, certificates, letters and documents as the Representatives reasonably request. CS First Boston may in its sole discretion waive on behalf of the Underwriters compliance with any conditions to the obligations of the Underwriters hereunder, whether in respect of an Optional Closing Date or otherwise. 7. Indemnification and Contribution. (a) The Company will indemnify and hold harmless each Underwriter and Reinhold against any losses, claims, damages or liabilities, joint or several, to which such Underwriter or Reinhold may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse such Underwriter or Reinhold for any legal or other expenses reasonably incurred by such Underwriter or Reinhold in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, notwithstanding the possibility that payments for such expenses might later be held to be improper, in which case the person receiving them shall promptly refund them to the Company; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any such documents in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Selling Stockholder or by any Underwriter through the 18 Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any Selling Stockholder or by any Underwriter consists of the information described as such in subsection (b), (c) or (d) below, as applicable; provided, further, that the indemnity contained in this subsection (a) with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter from whom the person asserting a loss, claim, damage or liability arising from an untrue statement or omission in any preliminary prospectus purchased Offered Securities which are the subject thereof if the Prospectus corrected such untrue statement or omission and if such Underwriter failed to send a copy of the Prospectus as the same was supplemented or amended to such person at or prior to the written confirmation of the sale of the Offered Securities to such person as required by the Act. (b) Subject to the limitations set forth below, Reinhold will indemnify and hold harmless the Company and each Underwriter against any losses, claims, damages or liabilities, joint or several, to which the Company or such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with information furnished to the Company or the Underwriters by Reinhold specifically for use therein, it being understood and agreed that the only such information furnished by Reinhold consists of the information concerning Reinhold contained in the Prospectus under the caption "Selling Shareholders," and Reinhold will reimburse such Underwriter or the Company for any legal or other expenses reasonably incurred by such Underwriter or the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, notwithstanding the possibility that payments for such expenses might later be held to be improper, in which case the person receiving them shall promptly refund them to Reinhold; provided, further, that the indemnity contained in this subsection (b) with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter from whom the person asserting a loss, claim, damage or liability arising from an untrue statement or omission in any preliminary prospectus purchased Offered Securities which are the subject thereof if the Prospectus corrected such untrue statement or omission and if such Underwriter failed to send a copy of the Prospectus as the same was supplemented or amended to such person at or prior to the written confirmation of the sale of the Offered Securities to such person as required by the Act. The aggregate liability of Reinhold under this indemnity agreement shall not exceed the proceeds received by him in connection with the sale of his Firm Shares. (c) Baker Hughes will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are 19 based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with information furnished to the Company or the Underwriters by Baker Hughes specifically for use therein, it being understood and agreed that the only such information furnished by Baker Hughes consists of the information concerning Baker Hughes in the Prospectus under the caption "Selling Shareholders"; and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, notwithstanding the possibility that payments for such expenses might later be held to be improper, in which case the person receiving them shall promptly refund them to Baker Hughes; provided, however, that the indemnity contained in this subsection (c) with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter from whom the person asserting a loss, claim, damage or liability arising from an untrue statement or omission in any preliminary prospectus purchased Offered Securities which are the subject thereof if the Prospectus corrected such untrue statement or omission and if such Underwriter failed to send a copy of the Prospectus as the same was supplemented or amended to such person at or prior to the written confirmation of the sale of the Offered Securities to such person as required by the Act. The aggregate liability of Baker Hughes under this indemnity agreement shall not exceed the proceeds received by it in connection with the sale of its Firm Shares. (d) Each Underwriter will severally and not jointly indemnify and hold harmless the Company and the Selling Stockholders against any losses, claims, damages or liabilities to which the Company or the Selling Stockholders may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Underwriter through the Representatives specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company and the Selling Stockholders in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred, notwithstanding the possibility that payments for such expenses might later be held to be improper, in which case the person receiving such payments shall promptly refund them to such Underwriter, it being understood and agreed that the only such information furnished by any Underwriter consists of the following information in the Prospectus furnished on behalf of each Underwriter: the last paragraph at the bottom of the cover page concerning the terms of the offering by the Underwriters, the legends concerning over-allotments and stabilization and regarding transactions by certain affiliated persons on the inside front cover page and the concession and reallowance figures appearing in the fourth paragraph under the caption "Underwriting." (e) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be 20 made against an indemnifying party under subsection (a), (b), (c) or (d) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a), (b), (c) or (d) above. In case any such action is brought against any indemnified party and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly and with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof, other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. (f) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a), (b), (c) or (d) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a), (b), (c) or (d) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholders, on the one hand, and the Underwriters, on the other hand, from the offering of the Securities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, the Selling Stockholders and the Underwriters in connection with the statements or omission which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Stockholders, on the one hand, and the Underwriters, on the other hand, shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Selling Stockholders and the Company bear to the total underwriting discount and commissions received by the Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, the Selling Stockholders or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (f) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (f). Notwithstanding the provisions of this subsection (f), (i) no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount 21 of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and (ii) no Selling Stockholder shall be required to contribute any amount in excess of the amount by which the net proceeds received by it or him exceeds the amount of any damages that such Selling Stockholder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (f) to contribute are several in proportion to their respective underwriting obligations and not joint. The obligations of each of the Selling Stockholders under this subsection (f) to contribute are several in proportion to the total proceeds received by it or him and are not joint. (g) The obligations of the Company and the Selling Stockholders under this Section shall be in addition to any liability which the Company and the Selling Stockholders may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each director of the Company, to each officer of the Company who has signed a Registration Statement, to each person, if any, who controls the Company within the meaning of the Act, and to each person, if any, who controls a Selling Stockholder within the meaning of the Act. 8. Default of Underwriters. If any Underwriter or Underwriters default in their obligations to purchase Offered Securities hereunder on either the First Closing Date or any Optional Closing Date and the aggregate number of shares of Offered Securities that such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date, CS First Boston may make arrangements satisfactory to Baker Hughes (in the case of a default with respect to the Firm Securities) or the Company (in case of default with respect to the Optional Securities) for the purchase of such Offered Securities by other persons, including any of the Underwriters, but if no such arrangements are made by such Closing Date, the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Offered Securities that such defaulting Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or Underwriters so default and the aggregate number of shares of Offered Securities with respect to which such default or defaults occur exceeds 10% of the total number of shares of Offered Securities that the Underwriters are obligated to purchase on such Closing Date and arrangements satisfactory to CS First Boston and Baker Hughes (in the case of a default with respect to the Firm Securities) or the Company (in case of default with respect to the Optional Securities) for the purchase of such Offered Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter, the Company or the Selling Stockholders, except as provided in Section 9 (provided that if such default occurs with respect to Optional Securities after the First Closing Date, this Agreement will not terminate as to the Firm Securities or any Optional Securities purchased prior to such termination). As used in this Agreement, the term "Underwriter" 22 includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Selling Stockholders, of the Company or its officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter, any Selling Stockholder, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Offered Securities. If this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Offered Securities by the Underwriters is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5 and the respective obligations of the Company, the Selling Stockholders, and the Underwriters pursuant to Section 7 shall remain in effect, and if any Offered Securities have been purchased hereunder the representations and warranties in Section 2 and all obligations under Section 5 shall also remain in effect. If the purchase of the Offered Securities by the Underwriters is not consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 or the occurrence of any event specified in clause (iii), (iv) or (v) of Section 6(c), the Company will reimburse the Underwriters for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Offered Securities. 10. Notices. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed to the Representatives, c/o CS First Boston Corporation, Park Avenue Plaza, New York, New York 10055, Attention: Investment Banking Department -- Transactions Advisory Group, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at 743 North Eckhoff Street, Orange, California 92668, Attention: Richard A. Kertson, or, if sent to Baker Hughes will be mailed, delivered or telegraphed and confirmed to Baker Hughes Incorporated at 3900 Essex Lane, Suite 1200, Houston, Texas 77027, attention: Lawrence O'Donnell III, or, if sent to Walter B. Reinhold will be mailed, delivered or telegraphed and confirmed to him at 743 North Eckhoff Street, Orange, California 92668; provided, however, that any notice to an Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Underwriter. 11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective personal representatives and successors and the officers and directors and controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder. 12. Representation. The Representatives will act for the several Underwriters in connection with the transactions contemplated by this Agreement, and any action under this Agreement taken by the Representatives jointly or by CS First Boston will be binding upon all the Underwriters. In the case of any executive officer or director of the Company who has agreed for a period following the date of the Prospectus not to sell, contract to sell or otherwise dispose of any shares of Common Stock of the Company owned by them, directly or indirectly, 23 without the written consent of the Underwriters, CS First Boston shall have the authority to give such consent on the behalf of the Representatives and the Underwriters. 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. THE COMPANY AND EACH SELLING STOCKHOLDER HEREBY SEVERALLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 24 If the foregoing is in accordance with the Representatives' understanding of our agreement, kindly sign and return to the Company one of the counterparts hereof, whereupon it will become a binding agreement among the Selling Stockholders, the Company and the several Underwriters in accordance with its terms. Very truly yours, BAKER HUGHES INCORPORATED By:_______________________________________ Name:_________________________________ Title:________________________________ __________________________________________ WALTER B. REINHOLD VARCO INTERNATIONAL, INC. By:_______________________________________ Name:_________________________________ Title:________________________________ The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. CS FIRST BOSTON CORPORATION HOWARD, WEIL, LABOUISSE, FRIEDRICHS INCORPORATED SIMMONS & COMPANY INTERNATIONAL Acting on behalf of themselves and as the Representatives of the several Underwriters. By: CS FIRST BOSTON CORPORATION By: ____________________________ Name:________________________ Title:_______________________ 25 SCHEDULE A
Number of Firm Securities Number of to be Sold by: Firm Securities ---------------------- to be Purchased Underwriter Baker Hughes Reinhold --------------- ----------- -------------------------- CS First Boston Corporation Howard, Weil, Labouisse, Friedrichs Incorporated Simmons & Company International TOTAL: 6,346,041 250,000 6,596,041
26 EX-5 3 OPINION OF PIRCHER NICHOLS & MEEKS EXHIBIT 5 Pircher, Nichols & Meeks ATTORNEYS AT LAW 1999 AVENUE OF THE STARS LOS ANGELES, CALIFORNIA 90067 (310) 201-8900 FAX 93100 201-8922 May 16, 1996 Varco International, Inc. 743 North Eckhoff Street Orange, California 92668 Gentlemen: We are acting as counsel to Varco International, Inc., a California corporation (the "Company"), in connection with the registration under the Securities Act of 1933, as amended (the "Securities Act") of 7,585,447 shares of the Common Stock of the Company, consisting of (i) 6,346,041 shares (the "Baker Hughes Shares") to be offered and sold by Baker Hughes Incorporated, (ii) 250,000 shares (the "Reinhold Shares" and, together with the Baker Hughes Shares, the "Firm Shares") to be offered and sold by Walter B. Reinhold, and (iii) 989,406 shares (the "Optional Shares") to be subject to an over-allotment option to be granted by the Company to the Underwriters of the proposed offering pursuant to a Registration Statement on Form S-3 (No. 333-02869), filed by the Company with the Securities and Exchange Commission (the "Commission") on April 26, 1996, Amendment No. 1 thereto as filed with the Commission on May 3, 1996, Amendment No. 2 thereto as filed with the Commission on May 3, 1996, and Amendment No. 3 thereto to be filed with the Commission on May 17, 1996 (as so amended, the "Registration Statement"). We have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary for the purposes of this opinion. Based upon the foregoing, we are of the opinion that, upon the effectiveness of the Registration Statement: 1. The Firm Shares constitute legally issued, fully paid and nonassessable shares of the Common Stock of the Company. 2. The Optional Shares, upon issuance and delivery thereof and payment therefor as contemplated by the prospectus included in the Registration Statement and upon approval by the Board of Directors of the Company or the special Executive Committee appointed for such purpose by such Board of the price to be paid to the Company for the Optional Shares (to be reflected in the prospectus to be included in the Registration Statement at the time it becomes effective or the prospectus to be filed by the Company pursuant to Rule 424(b) and Rule 430A under the Securities Act) will constitute legally issued, fully paid and nonassessable shares of the Common Stock of the Company. We hereby consent to the filing of this opinion as Exhibit 5 to the Registration Statement and to the references to us under the caption "Legal Opinions" in the prospectus which constitutes part of the Registration Statement. Very truly yours, 119168.1 PIRCHER, NICHOLS & MEEKS EX-23.1 4 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Experts" and "Selected Consolidated Financial Data" in Amendment No. 3 to the Registration Statement (Form S-3 No. 333-02869) and related Prospectus of Varco International, Inc. for the registration of 7,585,447 shares of its common stock and the incorporation by reference therein of our report dated February 15, 1996, with respect to the consolidated financial statements and schedule of Varco International, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 1995, filed with the Securities and Exchange Commission. ERNST & YOUNG LLP Orange County, California May 16, 1996 -----END PRIVACY-ENHANCED MESSAGE-----