SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party Other than the Registrant
Check the Appropriate Box
[ ] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Exchange Act Rule 14a-11 or 14a-12
NATIONAL-OILWELL, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Persons(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14-a6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________
2) Aggregate number of securities to which the transaction applies;
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Set forth the amount on which the filing
fee is calculated and state how it was determined.)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement num-
ber, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
________________________________________________________________________
[NATIONAL-OILWELL, INC. LOGO]
NATIONAL-OILWELL, INC.
10000 RICHMOND AVENUE
HOUSTON, TEXAS 77042
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 25, 2003
DATE: Wednesday, June 25, 2003
TIME: 2:00 p.m. (Houston time)
PLACE: 10000 Richmond Avenue
Houston, Texas 77042
MATTERS TO BE VOTED ON:
1. Election of two directors to hold office for a three-year term; and
2. Any other matters that may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE TWO
NOMINEES FOR DIRECTOR.
The Board of Directors has set May 5, 2003 as the record date for the Annual
Meeting. If you were a stockholder of record at the close of business on May 5,
2003 you are entitled to vote at the Annual Meeting. A complete list of these
stockholders will be available for examination at the Annual Meeting and at our
offices at 10000 Richmond Avenue, Houston, Texas for a period of ten days prior
to the Annual Meeting.
You are cordially invited to join us at the Annual Meeting. However, to ensure
your representation, we request that you return your signed proxy card at your
earliest convenience, whether or not you plan to attend the Annual Meeting. You
may revoke your proxy at any time if you wish to attend and vote in person.
By Order of the Board of Directors
/s/ M. Gay Mather
M. Gay Mather
Corporate Secretary
Houston, Texas
May 28, 2003
NATIONAL-OILWELL, INC.
10000 RICHMOND AVENUE
HOUSTON, TEXAS 77042
PROXY STATEMENT
ANNUAL MEETING: Date: Wednesday, June 25, 2003
Time: 2:00 p.m. (Houston time)
Place: 10000 Richmond Avenue
Houston, Texas 77042
AGENDA: Proposal 1: For the election of two nominees
as directors of the Company for a term of
three years.
RECORD DATE/
WHO CAN VOTE: All stockholders of record at the close of
business on May 5, 2003, are entitled to
vote. The only class of securities entitled
to vote at the Annual Meeting is National
Oilwell common stock. Holders of National
Oilwell common stock are entitled to one
vote per share at the Annual Meeting.
PROXIES SOLICITED BY: Your vote and proxy is being solicited by
the Board of Directors for use at the Annual
Meeting. This proxy statement and enclosed
proxy card is being sent on behalf of the
Board of Directors to all stockholders
beginning on or about May 28, 2003. By
completing, signing and returning your proxy
card, you will authorize the persons named
on the proxy card to vote your shares
according to your instructions.
PROXIES: If you do not indicate how you wish to vote
your common stock, the persons named on the
proxy card will vote FOR election of the two
nominees for director (Proposal 1). If you
"withhold" your vote for any of the
nominees, it will be excluded and will have
no effect other than for purposes of
determining a quorum.
REVOKING YOUR You can revoke your proxy at any time prior
PROXY: to the time that the vote is taken at the
meeting by: (i) filing a written notice
revoking your proxy; (ii) filing another
proxy bearing a later date; or (iii) casting
your vote in person at the Annual Meeting.
Your last vote will be the vote that is
counted.
QUORUM: As of May 5th, there were 84,235,183 shares
of National Oilwell common stock issued and
outstanding. The holders of these shares
have the right to cast one vote for each
share held by them. The presence, in person
or by proxy, of stockholders entitled to
cast at least 42,117,592 votes constitutes a
quorum for adopting the proposals at the
Annual Meeting and directors are
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elected by a plurality of the votes cast at
the meeting. If you have properly signed and
returned your proxy card by mail, you will
be considered part of the quorum, and the
persons named on the proxy card will vote
your shares as you have instructed them. If
a broker holding your shares in "street"
name indicates to us on a proxy card that
the broker lacks discretionary authority to
vote your shares, we will not consider your
shares as present or entitled to vote for
any purpose.
MULTIPLE
PROXY CARDS: If you receive multiple proxy cards, this
indicates that your shares are held in more
than one account, such as two brokerage
accounts, and are registered in different
names. You should vote each of the proxy
cards to ensure that all of your shares are
voted.
COST OF PROXY
SOLICITATION: We have retained InvestorCom, Inc. to
solicit proxies from our stockholders at an
estimated fee of $3,000, plus expenses. This
fee does not include the costs of preparing,
printing, assembling, delivering and mailing
the Proxy Statement. The Company will pay
for the cost of soliciting proxies. Some of
our directors, officers and employees may
also solicit proxies personally, without any
additional compensation, by telephone or
mail. Proxy materials also will be furnished
without cost to brokers and other nominees
to forward to the beneficial owners of
shares held in their names.
PLEASE VOTE -- YOUR VOTE IS IMPORTANT
-2-
ELECTION OF DIRECTORS
PROPOSAL NO. 1 ON THE PROXY CARD
The Board of Directors of National Oilwell is divided into three classes, each
class serving a term of three years. Directors whose terms expire this year
include Hushang Ansary, Jon Gjedebo, and Ben A. Guill. Mr. Gjedebo will not
stand for reelection.
Hushang Ansary and Ben A. Guill are nominees for directors for a three-year term
expiring at the Annual Meeting in 2006, or when their successors are elected and
qualified. National Oilwell believes both nominees will be able to serve if
elected. However, if either nominee is unable to serve, the remaining members of
the Board have authority to nominate another person, elect a substitute, or
reduce the size of the Board. Directors whose terms expire in 2004 and 2005 will
continue to serve in accordance with their prior election or appointment. The
size of the Board is currently set at nine members. Proxies cannot be voted for
a greater number of persons than the number of nominees named. If the two
nominees are elected, the Board will consist of eight members. The Company has a
search underway for an additional independent board member and anticipates that
this director will be appointed in 2003 for a term expiring at the Annual
Meeting in 2006.
Vote Required for Approval - Directors are to be elected by a plurality of the
votes cast at the meeting. This means that the two nominees receiving the
greatest number of votes will be elected. Votes withheld for any Director will
not be counted. Your shares will be voted as you specify on your proxy. If your
properly executed proxy does not specify how you want your shares voted, we will
vote them for the election of the two nominees listed below.
INFORMATION REGARDING NOMINEES FOR DIRECTOR FOR TERMS EXPIRING IN 2006:
YEAR
EXPIRATION FIRST
OF PRESENT BECAME
NAME AGE TERM BIOGRAPHY DIRECTOR
---------------------------------------------------------------------------------------------------------------------
Hushang Ansary 75 2003 Mr. Ansary was appointed as a Director in June 2000 2000
pursuant to the merger agreement between National
Oilwell and IRI International Corporation. Mr. Ansary
was Chairman of the Board of IRI from September 1994
until its merger with National Oilwell in June 2000.
Ben A. Guill 52 2003 Mr. Guill is President of First Reserve Corporation, 1999
a corporate manager of private investments focusing
on the energy and energy-related sectors, which he
joined in September 1998. For a period greater than
five years prior to joining First Reserve, he was the
Managing Director and Co-head of Investment Banking
of Simmons & Company International, an
investment-banking firm specializing in the oil
service industry. Mr. Guill serves as a director of
Superior Energy Services, Inc., an oilfield services
and equipment company, TransMontaigne, Inc., an oil
products distribution and refining company, Chicago
Bridge & Iron Company N.V., a global engineering and
construction company, Dresser, Inc., a leader in the
design, manufacture and marketing of highly
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engineered equipment and services for the energy
industry, T-3 Energy Services, Inc., a consolidator
of high-end equipment repair and specialty machining
operations focused in the Gulf of Mexico, Destiny
Resource Services, Inc., a provider of seismic
services to the oil and gas industry, and Quanta
Services, Inc., a leading provider of specialized
contracting services for the electric power,
telecommunications, broadband cable and gas pipeline
industries.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE ELECTION OF THE
TWO NOMINEES FOR DIRECTOR.
INFORMATION REGARDING CURRENT DIRECTORS WHOSE TERMS EXPIRE IN 2004 AND 2005:
YEAR
EXPIRATION FIRST
OF PRESENT BECAME
NAME AGE TERM BIOGRAPHY DIRECTOR
---------------------------------------------------------------------------------------------------------------------
Roger L. Jarvis 49 2004 Mr. Jarvis was appointed as a Director in February 2002
2002. He has served as President, Chief Executive
Officer and Director of Spinnaker Exploration
Company, a natural gas and oil exploration and
production company, since 1996 and as its Chairman of
the Board since 1998. Mr. Jarvis also serves as a
director of The Bill Barret Corporation, a private
company engaged in the acquisition, exploitation and
exploration of oil and gas properties in the Rocky
Mountains.
Merrill A. Miller, Jr. 52 2004 Mr. Miller has been a Director since May 2001 and 2001
Chairman of the Board since May 2002. He has served
as the Company's President and Chief Operating
Officer since November 2000, as Chief Executive
Officer since May 2001, and in various senior
executive positions with the Company since February
1996.
Frederick W. Pheasey 60 2004 Mr. Pheasey has served as a Director and Executive 1997
Vice President of the Company since September 1997.
He was Chairman and a co-founder of Dreco Energy
Services Ltd., which was acquired by National Oilwell
in September 1997. Mr. Pheasey is a Director of
Precision Drilling Corporation, a Canadian oilfield
service company engaged in land drilling, well
servicing operations, industrial process services and
rental of oilfield equipment, and of Enerchem
International Inc., a global supplier of specialty
chemicals and hydrocarbon based well-servicing fluids
to the oil and gas industry.
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Joel V. Staff 59 2005 Mr. Staff has served as a Director since January 1996 1996
and as Chairman of the Board from January 1996 to May
2002. He was the Company's Chief Executive Officer
from July 1993 to May 2001 and served as its
President from July 1993 through November 2000. Mr.
Staff has served as Chairman and Chief Executive
Officer of Reliant Resources, Inc., a provider of
electricity and energy services to wholesale and
retail customers in the United States and Western
Europe, since April 2003. He is also a Director of
Ensco International, Incorporated, an international
offshore contract drilling company that also provides
marine transportation services in the Gulf of Mexico.
William E. Macaulay 57 2005 Mr. Macaulay is the Chairman and Chief Executive 1996
Officer of First Reserve Corporation, a corporate
manager of private investments focusing on the energy
and energy-related sectors, which he joined in 1983.
Mr. Macaulay serves as Chairman of Dresser, Inc., a
leader in the design, manufacture and marketing of
highly engineered equipment and services for the
energy industry. He also serves as a director of
Weatherford International, Inc., an oilfield service
company, Maverick Tube Corporation, a manufacturer of
steel pipe and casing, and Pride International, Inc.,
a contract drilling and related services company.
Robert E. Beauchamp 43 2005 Mr. Beauchamp was appointed as a Director in August 2002
2002. He has served as President and CEO and as a
Director of BMC Software, Inc., a leading provider of
enterprise management solutions, since January 2001.
During his 14 years with BMC, he has served as senior
vice president of research & development, vice
president of strategic marketing and corporate
development, and director of strategic marketing.
-5-
COMMITTEES AND MEETINGS OF THE BOARD
COMMITTEES
During 2002, the Board of Directors had the following standing committees: Audit
and Nominating, Compensation, and Executive. As a result of certain corporate
governance initiatives by the Board of Directors, effective after the 2003
annual meeting the board will have three standing committees: Audit,
Compensation, and Nominating/Corporate Governance.
NUMBER OF MEETINGS HELD IN 2002
Board of Directors 5
Audit and Nominating Committee 3
Compensation Committee 2
Executive Committee 1
ATTENDANCE AT MEETINGS
Each director attended greater than 75% of the meetings of the board and
committees of which a director was a member, except Mr. Guill. In 2000 and 2001,
Mr. Guill attended 89% and 92% of the meetings of the board and committees of
which he was a member, and has attended 100% of all 2003 meetings to date.
AUDIT AND NOMINATING COMMITTEE
Messrs. Guill (Chair), Jarvis, and Macaulay are the current members of the
Audit and Nominating Committee. All members of this committee are "independent"
within the meaning of the rules governing audit committees by the New York Stock
Exchange.
The committee oversees the Company's financial reporting process on behalf of
the Board, and reports the results of their activities to the Board. They
provide assistance to the board of directors in fulfilling their oversight
responsibility to the shareholders, potential shareholders, the investment
community, and others relating to the Company's financial statements and the
financial reporting process, the systems of internal accounting and financial
controls, and the annual independent audit of the Company's financial
statements. The responsibilities of this committee are set forth in the Audit
Committee Charter, a copy of which was included as Appendix A to the Proxy
Statement for the 2001 Annual Meeting of Stockholders. In April 2003 the Board
of Directors adopted a new Audit Committee Charter, which is attached to this
proxy statement as Appendix III. The committee will function under the new
charter after the 2003 annual meeting.
The Audit and Nominating Committee also currently has the responsibility of
identifying candidates for election as directors; reviewing background
information relating to candidates for director, and recommending to the board
of directors the slate of directors to be submitted to stockholders for
election. After the 2003 annual meeting the Nominating/Corporate Governance
Committee will hold these responsibilities and will consider nominees for
directors recommended by stockholders. Written suggestions for nominees should
be sent to the Secretary of the Company.
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Any stockholder of record who is entitled to vote for the election of directors
may nominate persons for election as directors if timely written notice in
proper form of the intent to make a nomination at the Annual Meeting is received
by the Company at National-Oilwell, Inc., 10000 Richmond Avenue - 6th Floor,
Houston, TX 77042, Attention: M. Gay Mather, Corporate Secretary. The notice
must be received no later than June 7, 2003 - 10 days after the first public
notice of the Annual Meeting is first sent to stockholders. To be in proper
form, the notice must contain prescribed information about the proponent and
each nominee, including such information about each nominee as would have been
required to be included in a proxy statement filed pursuant to the rules of the
Securities and Exchange Commission had such nominee been nominated by the board
of directors.
COMPENSATION COMMITTEE
Messrs. Guill (Chair) and Jarvis are the current members of the Compensation
Committee. All members of the Compensation Committee are independent,
non-employee directors. The primary functions of the Compensation Committee are
to supervise and approve awards under our stock option plans, establish the
compensation of the chief executive officer and our other principal executive
officers, supervise our welfare and pension plans and compensation plans, and
periodically examine our general compensation structure.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. During 2002,
Messrs. Guill and Jarvis and W. McComb Dunwoody, who retired from the board at
the 2002 Annual Meeting, served on the Compensation Committee. None of these
members is a former or current officer or employee of the Company or any of its
subsidiaries, is involved in a relationship requiring disclosure as an
interlocking executive officer/director, or had any relationship requiring
disclosure under Item 404 of Regulation S-K.
EXECUTIVE COMMITTEE
Messrs. Staff (Chair), Macaulay, and Miller are the current members of the
Executive Committee. The Executive Committee may exercise all the powers of the
board of directors, with the exceptions of filling vacancies in the board of
directors and amending our by-laws. The primary function of the Executive
Committee is to act on behalf of the board of directors between regularly
scheduled meetings of the Board.
-7-
AUDIT COMMITTEE REPORT
The responsibilities of the Audit Committee, which are set forth in the Audit
Committee Charter adopted by the board of directors, include providing oversight
to the Company's financial reporting process through periodic meetings with the
Company's independent auditors and management to review accounting, auditing,
internal controls and financial reporting matters. The management of the Company
is responsible for the preparation and integrity of the financial reporting
information and related systems of internal controls. The Audit Committee, in
carrying out its role, relies on the Company's senior management, including
senior financial management, and its independent auditors.
We have reviewed and discussed with senior management the audited financial
statements included in the Company's Annual Report on Form 10-K. Management has
confirmed to us that such financial statements have been prepared with integrity
and objectivity and in conformity with generally accepted accounting principles.
We have discussed with Ernst & Young LLP, the Company's independent auditors,
the matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AU Sec. 380). SAS 61 requires the independent auditors to
provide us with additional information regarding the scope and results of their
audit of the Company's financial statements that may assist us in overseeing
management's financial reporting and disclosure process, including with respect
to (i) their responsibility under generally accepted auditing standards, (ii)
significant accounting policies, (iii) their judgments about the quality of
accounting principles, (iv) management judgments and accounting estimates, (v)
methods of accounting for significant unusual transactions and for controversial
or emerging areas, (vi) audit adjustments, (vii) fraud and illegal acts, (viii)
material weaknesses in internal control, (ix) other information documents
containing audited financial statements, (x) disagreements with management on
financial accounting and reporting matters, (xi) difficulties encountered in
performing the audit, (xii) major issues discussed with management prior to
retention, (xiii) consultation with other accountants, (xiv) fees charged by
Ernst & Young during 2002, and (xv) Ernst & Young's independence. We concluded
that the non-audit services provided by the auditors did not compromise their
independence.
We have received from Ernst & Young a letter providing the disclosures required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees) with respect to any relationships between Ernst & Young LLP
and the Company. Ernst & Young LLP has discussed its independence with us, and
has confirmed in such letter that, in its professional judgment, it is
independent of the Company within the meaning of the federal securities laws.
Based on the review of the financial statements, the discussion with Ernst &
Young regarding SAS 61 and receipt from them of the required written
disclosures, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's 2002 Annual Report on
Form 10-K.
MEMBERS OF THE AUDIT COMMITTEE
Ben A. Guill, Committee Chairman
Roger L. Jarvis
William E. Macaulay
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INFORMATION REGARDING OUR INDEPENDENT AUDITORS
The Board of Directors has reappointed Ernst & Young LLP as independent auditors
for 2003. Representatives of Ernst & Young will attend the Annual Meeting, where
they will be available to answer questions and have the opportunity to make a
statement if they desire.
AUDIT FEES
During 2002, Ernst & Young billed the Company as follows:
Audit Fees $ 360,000
Financial Information Systems Design
and Implementation Fees 0
All Other Fees:
Audit-Related Services 293,000
Tax Services 457,000
---------
Total $1,110,000
The Audit Committee has considered whether the provision of all services other
than those rendered for the audit of the Company's financial statements is
compatible with maintaining Ernst & Young's independence and has concluded that
their independence is not compromised.
BOARD COMPENSATION
During 2002, directors who are not our employees were paid $1,000 for each Board
and Committee meeting attended or for special assignments; $1,250 for the
Committee Chairman for each Audit and Nominating Committee and Compensation
Committee meeting attended; and $7,500 for each quarter of the year in which the
person serves as a director. Directors fees were increased in 2003 to $1,250 for
each Board and Committee meeting attended or for special assignments; $2,000 for
the Committee Chairman for each standing committee of the Board; and $8,750 for
each quarter of the year in which the person serves as a director.
These directors also receive non-qualified stock options under our stock option
plan. On January 30, 2002, each non-employee director was granted an option to
purchase 5,000, shares of our common stock. The option exercise price per share
is $18.53, the fair market value of a share of our common stock on the date of
grant. The options have a term of ten years from the date of grant and vest in
three equal annual installments beginning one year after the date of grant. On
February 14, 2003, each non-employee director was granted an option to purchase
7,500 shares of our common stock at an exercise price per share of $20.14, the
fair market value of a share of our common stock on the date of grant, under the
same terms described above.
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CORPORATE GOVERNANCE
Over the past several months, the Board of Directors has undertaken a review of
the Company's corporate governance standards and practices in response to the
Sarbanes-Oxley Act of 2002 and related SEC rules and New York Stock Exchange
Corporate Governance Rule Proposals. The board has committed to promote
transparency in reporting information about the Company, compliance with the
spirit as well as the literal requirements of applicable laws, rules and
regulations, and corporate behavior that conforms to corporate governance
standards that substantially exceed the consensus view of minimum acceptable
corporate governance standards. As a result of this review, in April 2003 the
Board of Directors adopted Corporate Governance Guidelines which establish
provisions for the board's composition and function, board committees and
committee membership, evaluation of director independence, the roles of the
Chairman of the Board, the Chief Executive Officer and the Lead Director, the
evaluation of the Chief Executive Officer, regular meetings of non-management
directors, board conduct and review, selection and orientation of directors,
director compensation, access to management and independent advisors, and annual
review of the Guidelines. A copy of the Guidelines is attached to this Proxy
Statement as Appendix I.
BOARD COMMITTEES AND COMMITTEE MEMBERSHIP
Under its adopted Guidelines, the board elected to have three standing
committees--an Audit Committee, a Compensation Committee, and a
Nominating/Corporate Governance Committee. Additionally, the board elected to
repeal its Executive Committee. New charters for the standing committees were
adopted on April 3, 2003 and these charters are attached as Appendixes II, III
and IV to this Proxy Statement. All members of each committee will be
independent directors as defined by the Guidelines. Members will be appointed to
these standing committees, which will function under the new charters after the
2003 annual meeting.
DIRECTOR INDEPENDENCE
The Corporate Governance Guidelines address, among other things, standards for
evaluating the independence of the Company's directors. In April 2003 the Board
undertook a review of director independence and considered transactions and
relationships during the prior year between each director or any member of his
or her immediate family and the Company and its affiliates, including those
reported under "Certain Relationships and Related Transactions" in this proxy
statement. As a result of this review, the Board affirmatively determined that
the following directors are independent of the Company and its management under
the standards set forth in the Corporate Governance Guidelines: Robert E.
Beauchamp, Ben A. Guill, Roger L. Jarvis, and William E. Macaulay.
POLICIES ON BUSINESS ETHICS AND CONDUCT
The Company has a long-standing Business Ethics Policy. Additionally, in April
2003 the Board adopted the Code of Business Conduct and Ethics For Members of
the Board of Directors and Executive Officers and the Code of Ethics for Senior
Financial Officers. These codes are designed to focus the board and management
on areas of ethical risk, provide guidance to personnel to help them recognize
and deal with ethical issues, provide mechanisms to report
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unethical conduct and help to foster a culture of honesty and accountability. As
set forth in the Corporate Governance Guidelines, the Board may not waive the
application of the Company's policies on business ethics and conduct for any
Director or Executive Officer. Copies of the Code of Business Conduct and Ethics
For Members of the Board of Directors and Executive Officers and the Code of
Ethics for Senior Financial Officers are attached to this Proxy Statement as
Appendixes V and VI.
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EXECUTIVE OFFICERS
The following persons are our executive officers. The executive officers of the
Company serve at the pleasure of the Board of Directors and are subject to
annual appointment by the Board of Directors at its first meeting following the
Annual Meeting. None of the executive officers or directors has any family
relationships with each other.
NAME AGE POSITION
---- --- --------
Merrill A. Miller, Jr. 52 President and Chief Executive Officer
Robert L. Bloom 55 Group President - Rig Equipment
Howard Davis 44 Vice President and Chief Administrative Officer
Jerry N. Gauche 54 Vice President - Organizational Effectiveness
Jon Gjedebo 58 Executive Vice President and Chief Technology Officer
Steven W. Krablin 52 Vice President and Chief Financial Officer
Kevin Neveu 42 Group President - Downhole Tools
Mark Reese 44 Group President - Mission Products
Dwight W. Rettig 42 General Counsel
Gary Stratulate 46 Group President - Rig Systems and Controls
Robert Workman 34 Group President - Distribution Services
Merrill A. (Pete) Miller, Jr. has served as President and Chief Operating
Officer since November 2000, as Chief Executive Officer since May 2001, and in
various senior executive positions since February 1996.
Robert L. Bloom has served as President of National Oilwell's Rig Equipment
Group since June 2000, and was Vice President of Drilling Systems from 1998 to
2000. He has been with the Company for 33 years serving in various engineering
and management capacities.
Howard Davis has served as Vice President and Chief Administrative Officer since
August 2002. He served as Vice President and Chief Financial Officer of National
Oilwell's Products and Technology Group From 1997 to August 2002 and as Manager
of Financial Planning and Analysis of that group from 1996 to 1997.
Jerry N. Gauche has served as Vice President-Organizational Effectiveness since
January 1994.
Jon Gjedebo has served as Executive Vice President and Chief Technology Officer
since March 2000. Prior to that, Mr. Gjedebo was President and Chief Executive
Officer of Hitec ASA, a company he founded in 1985 and that National Oilwell
acquired in February 2000.
Steven W. Krablin has served as Vice President and Chief Financial Officer since
January 1996. Mr. Krablin serves as a director of T-3 Energy Services, Inc., a
consolidator of high-end equipment repair and specialty machining operations
focused in the Gulf of Mexico.
Kevin Neveu has served as President of National Oilwell's Downhole Tools Group
since June 2000, and from 1999 to 2000 as Vice President and Managing Director
of Downhole Tools. From 1997 to 1999 he served as Vice President of the
Company's Canadian drilling equipment and downhole tool operations.
-12-
Mark Reese has served as President of National Oilwell's Mission Products Group
since August 2000. From May 1997 to August 2000 he was Vice President of
Operations for the Company's Distribution Services Group, and from July 1995 to
May 1997 served as Northern Area Manager for that group.
Dwight W. Rettig has served as General Counsel of National Oilwell since
February 1999, and from February 1998 to February 1999 as General Counsel of the
Company's Distribution Services Group. From February 1997 to February 1998 he
was the Chief Legal Officer of NATCO Group, Inc., a provider of wellhead
equipment, systems and services used in the production of oil and gas.
Gary Stratulate has served as President of National Oilwell's Rig Systems and
Controls Group since June 2000. From April 1997 to June 2000 he served in
various senior executive positions at IRI International Corporation, a
manufacturer of oilfield equipment, which was acquired by National Oilwell in
June 2000.
Robert Workman has served as President of National Oilwell's Distribution
Services Group since February 2001. From 1997 to 2001 he served in various
management capacities for that group, most recently as Vice President of
Operations.
-13-
STOCK OWNERSHIP
This table shows the number and percentage of shares of National Oilwell stock
beneficially owned by 1) owners of more than five percent of the outstanding
shares of the Company, 2) our current directors, director nominees, and Named
Executive Officers, and 3) all current directors, director nominees and
executive officers as a group. Information for each of the current directors,
director nominees and executive officers has been provided at the request of the
Company as of May 5, 2003.
NO. OF PERCENT
5% OWNERS SHARES(1) OF CLASS(2)
--------- --------- -----------
FMR Corp(3)................................................... 11,497,635 13.65%
82 Devonshire Street
Boston, MA 02109
Neuberger Berman Inc.(4)...................................... 4,145,875 4.92%
605 Third Avenue
New York, NY 10158-3698
NAME OF INDIVIDUAL
Hushang Ansary(5)............................................. 2,739,244 3.24%
Robert E. Beauchamp........................................... 0 *
Robert L. Bloom............................................... 47,091 *
Jon Gjedebo(6)................................................ 789,648 *
Ben A. Guill.................................................. 28,191 *
Roger L. Jarvis............................................... 1,666 *
Steven W. Krablin............................................. 223,228 *
William E. Macaulay(7)........................................ 24,928 *
Merrill A. Miller, Jr......................................... 334,035 *
Frederick W. Pheasey.......................................... 109,855 *
Joel V. Staff................................................. 529,283 *
Gary Stratulate............................................... 40,485 *
All current directors, director nominees, and executive
officers as a group (18 persons)............................ 5,336,618 6.23%
*Less than 1%.
(1)This column includes options that are currently exercisable or will become
exercisable by July 4, 2003 as follows: Hushang Ansary--411,158; Robert L.
Bloom--23,231; Jon Gjedebo--32,450; Ben Guill--17,034; Roger Jarvis--1,666;
Steven W. Krablin--165,166; William E. Macaulay--18,914; Merrill A. Miller,
Jr.--173,597; Frederick W. Pheasey--43,025; Joel V. Staff--353,709; and Gary
Stratulate--35,885.
(2)At May 5, 2003 there were 84,235,183 shares outstanding.
(3)Shares owned at December 31, 2002, as reflected in Amendment No. 4 to
Schedule 13G filed with the SEC on February 14, 2003. Fidelity Management &
Research Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp. ("FMR") is
the beneficial owner of 10,829,710 shares as a result of acting as investment
adviser to various investment companies (the "Funds). Edward C. Johnson 3d,
Chairman of FMR, FMR, through its control of Fidelity, and the funds each has
sole power to dispose of the 10,829,710 shares owned by the Funds. Neither FMR
nor Edward C. Johnson 3d has the sole power to vote or direct the voting of the
shares owned directly by the Funds, which power resides with the Funds' Boards
of Trustees. Fidelity carries out the voting of the shares under written
guidelines established by the Funds' Boards of Trustees. Fidelity Management
Trust Company ("FMTC"), a wholly-owned subsidiary of FMR, is the beneficial
owner of 342,220 shares as a result of its serving as investment manager of the
institutional account(s). Edward C. Johnson 3d and FMR, through its control of
FMTC, each has sole dispositive power
-14-
over 342,220 shares and sole power to vote or to direct the voting of 342,220
shares owned by the institutional account(s). Geode Capital Management, LLC
("Geode"), is the beneficial owner of 305 shares. Geode is wholly owned by
Fidelity Investors III Limited Partnership ("FILP III"). Fidelity Investors
Management, LLC ("FIML") is the general partner and investment manager of FILP
III. The managers of Geode, the members of FIML and the limited partners of FILP
III are certain shareholders and employees of FMR. Members of the Edward C.
Johnson 3d family are the predominant owners of Class B shares of common stock
of FMR, representing approximately 49% of the voting power of FMR. Mr. Johnson
3d owns 12.0% and Abigail Johnson, a Director of FMR, owns 24.5% of the
aggregate outstanding voting stock of FMR. The Johnson family group and all
other Class B shareholders have entered into a shareholders' voting agreement
under which all Class B shares will be voted in accordance with the majority
vote of Class B shares. Accordingly, through their ownership of voting common
stock and the execution of the shareholders' voting agreement, members of the
Johnson family may be deemed, under the Investment Company Act of 1940, to form
a controlling group with respect to FMR. Fidelity International Limited and
various foreign-based subsidiaries provide investment advisory and management
services to a number of non-U.S. investment companies (the "International
Funds") and certain institutional investors. Fidelity International Limited is
the beneficial owner of 325,400 shares.
(4)Shares owned at December 31, 2002, as reflected in Schedule 13G filed with
the SEC on February 13, 2003. Neuberger Berman, LLC., a wholly-owned subsidiary
of Neuberger Berman Inc. has sole power to vote or to direct the vote with
respect to 83,444 shares and shared power to vote or to direct the vote with
respect to 3,012,829 shares, and shared power to dispose or to direct the
disposition of 4,145,875 shares. Neuberger Berman LLC. and Neuberger Berman
Management Inc., a wholly-owned subsidiary of Neuberger Berman Inc., serve as
sub-adviser and investment manager, respectively, of Neuberger Berman's various
mutual funds and are deemed to be beneficial owners of 4,145,875 shares since
they both have shared power to make decisions whether to retain or dispose and
vote the shares.
(5)Includes the following shares of which Mr. Ansary disclaims beneficial
ownership: 4,160 shares owned by the Ansary Foundation, and 9,393 shares owned
by his wife.
(6) Includes 757,198 shares that Mr. Gjedebo owns shares through Joto Einedom AS
and Styrbjorn AS.
(7) Includes the following shares of which Mr. Macaulay disclaims beneficial
ownership: 1,082 shares held in trust for his children and 1,622 shares owned by
his wife.
-15-
EXECUTIVE COMPENSATION
The following table sets forth for the years ended December 31, 2000, 2001 and
2002 the compensation paid by the Company to its Chief Executive Officer and
four other most highly compensated executive officers (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
Long-Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
---------------------------------- ------------------------ -------
Other Securities
Name Annual Restricted Underly- All Other
and Compen- Stock ing LTIP Compen-
Principal sation Award(s) Options/ Payouts sation (1)
Position Year Salary($) Bonus($) ($) ($) SARs (#) ($) ($)
---------------------------------------------------------------------------------------------------------------------------------
Merrill A. Miller, Jr. 2002 325,000 - - - 70,000 - 17,938
President and CEO 2001 314,327 244,421 - - 49,382 - 13,020
2000 236,154 64,142 - - 44,321 - 7,049
Steven W. Krablin 2002 280,000 - - - 40,000 - 19,600
Vice President 2001 272,885 141,464 - - 37,037 - 12,280
and CFO 2000 218,185 52,349 - - 37,673 - 7,716
Gary Stratulate(2) 2002 255,895 - - - 20,000 - 10,826
President, Rig Systems 2001 260,816 99,245 - - 9,629 - 8,710
and Controls Group 2000 129,566 26,149 - - 3,036 - -
Jon Gjedebo(3) 2002 230,400 - - - 10,000 - -
Exec. Vice President 2001 208,800 101,122 - - 12,345 - -
and CTO 2000 178,769 44,857 - - 20,887 - -
Robert Bloom 2002 175,000 - - - 20,000 - 16,625
President, Rig 2001 156,593 69,753 - - 9,629 - 10,961
Equipment Group 2000 119,308 24,383 - - 4,432 - 8,596
(1)These amounts include:
(a)The Company's cash contributions for 2002 under the National-Oilwell
Retirement and Thrift Plan, a defined contribution plan, on behalf of Mr.
Miller - $14,188; Mr. Krablin - $4,900; Mr. Stratulate - $10,826; and Mr.
Bloom - $16,625.
(b)The Company's cash contributions for 2002 under the National-Oilwell
Supplemental Savings Plan, a defined contribution plan, on behalf of Mr.
Miller - $3,750; and Mr. Krablin - $14,700.
(2)Mr. Stratulate joined National Oilwell in July 2000.
(3)Mr. Gjedebo joined National Oilwell in March 2000.
-16-
GRANTS OF OPTIONS/SAR'S IN LAST FISCAL YEAR
The following table provides information concerning stock options granted to
Named Executive Officers during the fiscal year ended December 31, 2002. We have
granted no stock appreciation rights.
Gains Based on Assumed
Rates of Stock Price
Appreciation for Option
2002 Option Grants Term
----------------------------------------------------------------------------------------------------------------
Percent of
2002
Employee Exercise
Options Option Price per Expiration Assumed Assumed
Granted Grants Share ($) Date Rate 5% ($) Rate 10% ($)
----------------------------------------------------------------------------------------------------------------
Merrill A. Miller, Jr. 70,000 7.2% 18.53 01/31/12 815,739 2,067,243
Steven W. Krablin 40,000 4.1% 18.53 01/31/12 466,137 1,181,282
Gary Stratulate 20,000 2.0% 18.53 01/31/12 233,068 590,641
Jon Gjedebo 10,000 1.0% 18.53 01/31/12 116,534 295,320
Robert L. Bloom 20,000 2.0% 18.53 01/31/12 233,068 590,641
The option exercise price per share is equal to the fair market value of a share
of Common Stock on the date of grant. The grants have terms of ten years from
the date of grant and vest in three equal annual installments beginning one year
from the date of grant.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table provides information about option exercises by the Named
Executive Officers during 2002 and the value of unexercised options held by them
at December 31, 2002.
Number of Unexercised Value of Unexercised
Options at in-the-money Options
2002 Stock Option Exercises December 31, 2002 at December 31, 2002
---------------------------------------------------------------------------------------------
Shares Value Realized Exercisable Unexercisable Exercisable Unexercisable
---------------------------------------------------------------------------------------------
Merrill A. Miller, Jr. 15,058 $ 105,142 168,780 117,696 $ 855,453 $ 231,700
Steven W. Krablin 15,058 105,142 147,659 77,250 1,048,129 132,400
Gary Stratulate 0 - 26,009 27,432 242,593 66,200
Jon Gjedebo 0 - 18,039 25,193 - 33,100
Robert L. Bloom 0 - 7,543 27,898 33,470 66,200
The Company made no awards during 2002 under any Long-Term Incentive Plan, nor
does the Company have any defined benefit or actual plan under which benefits
are determined primarily by final compensation and years of service.
-17-
EMPLOYMENT CONTRACTS
National Oilwell entered into employment agreements on January 1, 2002 with
Messrs. Miller and Krablin that contain certain termination provisions. The
agreements each have a term of three years and are automatically extended on an
annual basis. The agreements provide for a base salary, participation in
employee incentive plans, and employee benefits as generally provided to all
employees. If the employment relationship is terminated by National Oilwell for
any reason other than (i) voluntary termination; (ii) termination for cause (as
defined); (iii) death; or (iv) long-term disability; or if the employment
relationship is terminated by the employee for Good Reason, the employee is
entitled to receive three times the sum of his current base salary plus the
highest annual bonus received by the employee over the preceding three-year
period, three times the amount equal to the total of the employer matching
contributions under the Company's Retirement and Thrift Plan and Supplemental
Savings Plan, and three years participation in the Company's welfare and medical
benefit plans. The employee shall have the right, during the 60 day period after
such termination, to elect to surrender all or part of any stock options held by
the employee at the time of termination, whether or not exercisable, for a cash
payment equal to the spread between the cost of the option and the highest
reported per share sales price during the 60 day period prior to the date of
termination. Any option not so surrendered will remain exercisable until the
earlier of one year after the date of termination or the stated expiration date
of the specific option grant. Under the agreements, termination by the employee
for "Good Reason" means (i) the assignment to the employee of any duties
inconsistent with his current position or any action by the Company that results
in a diminution in the employee's position, authority, duties or
responsibilities; (ii) a failure by the Company to comply with the terms of the
agreement; or (iii) the requirement of the employee to relocate or to travel to
a substantially greater extent than required at the date of the agreement. The
agreements also contain restrictions on competitive activities and solicitation
of our employees for three years following the date of termination.
We entered into an employment agreement on January 1, 2002 with Mr. Bloom that
contains certain termination provisions. The agreement has a one-year term and
is automatically extended on an annual basis. The agreement provides for a base
salary, participation in employee incentive plans, and employee benefits as
generally provided to all employees. If the employment relationship is
terminated by National Oilwell for any reason other than (i) voluntary
termination; (ii) termination for cause (as defined); (iii) death; or (iv)
long-term disability; or if the employment relationship is terminated by the
employee for Good Reason, the employee is entitled to receive the sum of his
current base salary plus the highest annual bonus Mr. Bloom would be entitled to
earn under the current year incentive plan and an amount equal to the total of
the employer matching contributions under the Company's Retirement and Thrift
Plan and Supplemental Savings Plan, and one year's participation in the
Company's welfare and medical benefit plans. The agreement also contains
restriction on competitive activities and solicitation of our employees for one
year following the date of termination.
We entered into an employment agreement with Mr. Stratulate in connection with
the June 28, 2000 merger between the Company and IRI International Corporation.
The agreement provides for a base salary, participation in employee incentive
plans, and employee benefits as generally provided to all employees. The
agreement automatically extends for one year on an annual basis. If Mr.
Stratulate's employment is involuntarily terminated at any time without cause,
he will have the right to receive a lump sum payment of 150% of his base salary.
The agreement also contains restrictions on competitive activities and
solicitation of our employees for one year following the date of termination.
-18-
Effective March 1, 2000, we entered into an employment agreement with Mr.
Gjedebo that had an initial term of three years and will terminate on November
30, 2003. The agreement provides for an annual base salary, participation in
employee incentive plans and employee benefits as generally provided to all
employees. Upon involuntary termination other than for cause, the agreement
allows for payment of one year's base salary plus annual cash incentive. For a
minimum period of one year after termination, Mr. Gjedebo is generally
prohibited from competing or assisting others to compete against the Company.
Additionally, the Company's stock option agreements provide for full vesting of
unvested outstanding options in the event of a change of control of the Company
and a change in the optionee's responsibilities following a change of control.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As part of the June 28, 2000 merger between the Company and IRI International
Corporation, Mr. Ansary, a director, entered into a non-competition agreement
that generally prohibits him from competing or assisting others to compete with
National Oilwell's existing business and from soliciting our employees. Over the
three-year term of the agreement, Mr. Ansary received aggregate consideration of
$3,000,000, with the final $1,000,000 payment made in June 2002.
Mr. Staff was Chief Executive Officer of National Oilwell from 1993 to 2001, and
its Chairman from 1996 to 2002. In connection with the termination of his
executive relationship with the Company, Mr. Staff continues to participate in
the Company's medical benefit plans at the Company's expense.
We lease an office building and storage yard in Stavanger, Norway from Mr.
Gjedebo, a director and executive officer. For 2002, we paid approximately
$475,000 to Mr. Gjedebo in lease payments. The lease expires January 1, 2010.
Mr. Gjedebo is Chairman and controlling shareholder of HitecVision A.S. During
2002, the Company had sales of approximately $158,000 to and purchases of
approximately $64,000 from HitecVision and its affiliated companies. All
transactions with these companies were on terms competitive with other third
party vendors.
We transact business with companies with which certain of our Directors are
affiliated. All transactions with these companies are on terms competitive with
other third party vendors, and none of these is material either to us or any of
these companies.
-19-
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
National Oilwell's executive compensation program is administered by the
Compensation Committee of the Board of Directors. The committee establishes
specific compensation levels for key executives and administers the Company's
stock award plans. The Compensation Committee's philosophy regarding executive
compensation is to design a compensation package that will attract and retain
key executives focused on the Company's annual growth and long-term strategy.
The committee's objective is to provide compensation packages for key executives
that offer compensation opportunities in the median range of oilfield service
companies with a similar market capitalization.
The main components of the executive compensation program for 2002 were base
salary, participation in the Company's annual cash incentive plan and the grant
of non-qualified stock option awards. Salary levels are based on factors
including individual performance, level and scope of responsibility and
competitive salary levels within the industry. The committee determines median
base salary levels by a comprehensive review of information provided in proxy
statements filed by companies in the industry with similar market
capitalizations.
All employees, including key executives, participated in the Company incentive
plan in 2002, aligning a portion of each employee's cash compensation with
Company performance against predetermined targets. As in prior years, the
incentive plan provided for cash awards if objectives related to the Company's
financial performance were met, and participant award opportunities varied
depending upon levels of participation. The Company had to achieve an
established minimum operating profit target before awards were earned by any
employees, including executive officers, with higher levels of performance
resulting in increased payments based upon an established progression.
Established targets for 2002 were not met and no payments were made under the
incentive plan.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. Components of Mr. Miller's
compensation for 2002 included base salary, participation in the incentive plan
and the grant of stock options. Mr. Miller's base salary for 2002 was $325,000
and he received an option grant to purchase 70,000 shares of National Oilwell
common stock. As described above, he received no payment under the 2002
incentive plan. The committee routinely reviews the compensation level of chief
executive officers of industry companies with similar market capitalizations as
well as Mr. Miller's individual performance and success in achieving the
Company's strategic objectives. In January 2002, the committee recommended an
increase to Mr. Miller's base salary in acknowledgement of his May 2001
promotion to chief executive officer, and the successful execution of the
Company's strategy. Mr. Miller chose to decline the proposed increase in light
of the softness in the industry at that time. In May 2002 Mr. Miller assumed the
additional responsibilities of Chairman of the Board, and in recognition of this
and the Company's successful growth and financial performance in a depressed
market environment during 2002, his annual base salary was increased to $475,000
in January 2003. The committee believes this salary level is more reflective of,
but still below, the median salary for chief executive officers of comparably
sized companies in the oilfield service industry. The committee has indicated
its intention, contingent upon continued favorable evaluations of Mr. Miller's
performance, to further increase his salary to be more in line with the median
base salary indicated by a review of compensation packages for comparable
positions.
MEMBERS OF THE COMPENSATION COMMITTEE
Ben A. Guill, Committee Chairman
Roger L. Jarvis
-20-
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on our common
stock to the S&P 500 Index and to a self-constructed peer group of similar
companies in the oilfield service industry (including BJ Services Company,
Cooper Cameron Corporation, Smith International, Inc., and Varco International
Inc.). The total shareholder return assumes $100 invested on December 31, 1997
in National Oilwell, the S&P 500 Index, and the peer group. It also assumes
reinvestment of all dividends. The peer group is weighted based on the market
capitalization of each company. The results shown in the graph below are not
necessarily indicative of future performance.
[PERFORMANCE GRAPH]
Cumulative Total Return
-----------------------------------------------------------------------
12/97 12/98 12/99 12/00 12/01 12/02
----- ----- ----- ----- ----- -----
National Oilwell 100 33 46 113 60 64
S & P 500 100 129 156 141 125 97
Peer Group 100 41 88 132 102 114
-21-
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The rules of the SEC require that the Company disclose late filings of reports
of stock ownership (and changes in stock ownership) by its directors, executive
officers, and beneficial owners of more than ten percent of the Company's stock.
To the Company's knowledge, based solely upon review of the copies of such
reports furnished to the Company during the year ended December 31, 2002, no
director, executive officer, or 10% beneficial holder failed to file on a timely
basis reports required by Section 16(a) of the Exchange Act during the most
recent fiscal year.
STOCKHOLDER PROPOSALS FOR THE 2004 ANNUAL MEETING
If you wish to submit proposals to be included in our 2004 proxy statement, we
must receive them on or before December 31, 2003. Please address your proposals
to: M. GAY MATHER, SECRETARY, NATIONAL-OILWELL, INC., 10000 RICHMOND AVENUE--6TH
FLOOR, HOUSTON, TEXAS 77042.
If you wish to submit proposals at the meeting that are not eligible for
inclusion in the proxy statement, you must give written notice no later than
April 1, 2004 to: M. GAY MATHER, SECRETARY, NATIONAL-OILWELL, INC., 10000
RICHMOND AVENUE--6TH FLOOR, HOUSTON, TEXAS 77042. If you do not comply with this
notice provision, the proxy holders will be allowed to use their discretionary
voting authority on the proposal when it is raised at the meeting. In addition,
proposals must also comply with National Oilwell's by-laws and the rules and
regulations of the Securities and Exchange Commission.
ANNUAL REPORT AND OTHER MATTERS
At the date this proxy statement went to press, we did not know of any other
matters to be acted upon at the meeting other than the election of directors as
discussed in this proxy statement. If any other matter is presented, proxy
holders will vote on the matter in accordance with their best judgment.
National Oilwell's 2002 Annual Report on Form 10K, as amended as amended by its
Form 10K/A filed on April 14, 2003, is included in this mailing, but is not
considered part of the proxy solicitation materials.
By order of the board of directors,
/s/ M. Gay Mather
M. Gay Mather
Secretary
Houston, Texas
May 28, 2003
-22-
APPENDIX I
NATIONAL-OILWELL, INC.
("COMPANY")
CORPORATE GOVERNANCE GUIDELINES
ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 3, 2003
OBJECTIVES SOUGHT TO BE ACHIEVED
By adopting these Guidelines, the Board of Directors of the Company (the
"Board") has committed to promote:
- Transparency in reporting the Company's financial condition
and results of operations, its business activities and other
information about the Company, its management and its Board of
Directors to regulatory authorities, the Company's
shareholders and the Company's other constituencies;
- Compliance with not only the literal requirements but also the
Company's perception of the intended purposes of applicable
laws, rules and regulations; and
- Corporate behavior that conforms to corporate governance
standards that substantially exceed the consensus view of
minimum acceptable corporate governance standards.
COMPOSITION OF THE BOARD OF DIRECTORS
The bylaws provide that the number of Directors shall be determined from time to
time by resolution of the Board. The Board believes that at the present time the
optimal number of Directors is nine, but the Board will review this matter
annually and will increase or decrease the number of Directors as appropriate
after considering the recommendation of the Nominating/Corporate Governance
Committee.
It is the policy of the Board of Directors that the Board will reflect the
following characteristics at the earliest practicable time but in no event later
than the time, if any, that each of the following becomes a legal or regulatory
requirement:
- Each Director shall have a reputation for integrity, honesty,
candor, fairness and discretion;
- Each Director shall be knowledgeable, or willing to become so
quickly, in the critical aspects of the Company's businesses
and operations;
- Each Director shall be experienced and skillful in serving as
a competent overseer of, and trusted advisor to, the senior
management of at least one substantial enterprise;
I-1
- Only one member of the Board shall be an executive officer or
other employee of the Company. It is anticipated that under
normal circumstances that employee shall be the Chief
Executive Officer;
- Diversity in the mix of the gender, race and background among
Directors, consistent with the Board's requirements for
knowledgeable, experienced, motivated and ethical members;
- A majority of the Directors shall meet the standards of
independence from the Company and its management set forth
under "Director Independence" below; and
- A range of talent, skill and expertise sufficient to provide
sound and prudent guidance with respect to the full scope of
the Company's operations and interests.
FUNCTIONS OF THE BOARD OF DIRECTORS
The Board of Directors has four regularly scheduled meetings a year at which it
reviews and discusses reports by management on the performance of the Company,
its plans and prospects, as well as immediate issues facing the Company. In
addition to its general oversight of management, the Board also performs a
number of specific functions, including:
- Selecting, monitoring, evaluating, compensating, and-if
necessary- replacing the Chief Executive Officer and ensuring
management succession;
- In consultation with the Chief Executive Officer, selecting,
monitoring, evaluating, compensating, and-if
necessary-replacing the other senior executives;
- Reviewing and approving management's strategic and business
plans, including developing a depth of knowledge of the
businesses being served, understanding and questioning the
assumptions upon which such plans are based, and reaching an
independent judgment as to the probability that the plans can
be realized;
- Reviewing and approving the Company's financial objectives,
plans, and actions, including significant capital allocations
and expenditures;
- Establishing and approving the Company's policies regarding
levels of delegated authority;
- Monitoring corporate performance against the Company's
strategic and business plans, including overseeing the
Company's operating results on a regular basis to evaluate
whether its businesses are being properly managed;
- Promoting ethical behavior and compliance with laws and
regulations, auditing and accounting principles, and the
Company's own governing documents;
- Reviewing, approving and periodically revising, as
appropriate, the Company's mission statement, these Guidelines
and the charters of the Board's various standing Committees;
I-2
- Assessing the Board's own effectiveness in fulfilling these
and other Board and committee responsibilities; and
- Performing such other functions as are prescribed by law, or
assigned to the Board in the Company's governing documents.
The Board of Directors has delegated to the Chief Executive Officer, working
with the other executive officers of the Company and its affiliates, the
authority and responsibility for managing the business of the Company in a
manner consistent with the standards set forth in these Guidelines, and in
accordance with any specific plans, instructions or directions of the Board.
DIRECTOR INDEPENDENCE
A majority of the members of the Board shall be independent Directors under the
proposed New York Stock Exchange (NYSE) listing rules (the "Listing Rules") on
or before the deadline mandated by the NYSE. Directors who do not meet the
NYSE's independence standards also make valuable contributions to the Board and
to the Company by reason of their experience and wisdom. For a Director to be
deemed "independent," the Board shall affirmatively determine that the Director
has no material relationship with the Company or its affiliates or any member of
the senior management of the Company or his or her affiliates. In making this
determination, the Board shall not deem a Director to be independent if he or
she:
- Is, or within the lesser of the past five years or the period
since the effective date of the Listing Rules has been,
employed by the Company or any of its affiliates;
- Is, or within the lesser of the past five years or the period
since the effective date of the Listing Rules has been,
affiliated with or employed by a (present or former) auditor
of the Company or any of its affiliates;
- Currently participates, or within the lesser of the past five
years or the period since the effective date of the Listing
Rules has participated, in an interlocking directorate in
which an Executive Officer of the Company or any of its
affiliates serves on the compensation committee of a company
that concurrently employs the Director;
- Is, or within the lesser of the last five years or the period
since the effective date of the Listing Rules has been, an
executive officer or employee of another company whose sales
of goods and services to and/or purchases of goods and
services from the Company during any accounting year
represented in the aggregate the greater of at least 2% or $1
million of the Company's consolidated gross revenues for that
year;
- Is, or within the lesser of the last five years or the period
since the effective date of the Listing Rules has been, an
executive officer or employee of another company whose sales
of goods and services to and/or purchases of goods and
services from the Company during any accounting year
represented in the aggregate the greater of at least 2% or $1
million dollars of such other company's consolidated gross
revenues for that year;
I-3
- Receives directly or indirectly any consulting, advisory or
other compensatory fee from the Company or an affiliate of the
Company (other than compensation received as a Director); or
- Is a member of the immediate family of any person who would
not qualify as independent under the foregoing standards;
provided, that employment of an immediate family member of a
Director in a non-officer position shall not preclude the
Board from determining that the Director is independent.
For purposes of these Guidelines, the terms:
- "affiliate" means any corporation or other entity that
controls, is controlled by or is under common control with the
Company, as evidenced by the power to elect a majority of the
board of directors or comparable governing body of such
entity; and
- "immediate family" means spouse, parents, children, siblings,
mothers- and fathers-in-law, sons- and daughters-in-law,
brothers- and sisters-in-law and anyone (other than employees)
sharing a person's home.
The Board shall undertake an annual review of the independence of all
non-employee Directors. In advance of the meeting at which this review occurs,
each non-employee Director shall be asked to provide the Board with full
information regarding the Director's business and other relationships with the
Company and its affiliates and with senior management and their affiliates to
enable the Board to evaluate the Director's independence. Following such annual
review, only those Directors whom the Board affirmatively determines have no
material relationship with the Company will be considered independent Directors,
subject to additional qualifications prescribed under the final Listing Rules.
The basis for any determination that a relationship is not material will be
published in the Company's annual proxy statement.
Directors have an affirmative obligation to inform the Board of any material
changes in their circumstances or relationships that may impact their
designation by the Board as "independent." This obligation includes all business
relationships among Directors, between Directors and the Company and its
affiliates or members of senior management and their affiliates, whether or not
such business relationships are subject to the approval requirement set forth in
the following provision.
Each Director shall submit to the Nominating/Corporate Governance Committee for
its consideration a letter of resignation upon resignation or retirement from,
or termination of, the Director's principal current employment, or other
similarly material changes in professional occupation or association. Following
receipt of a recommendation from the Nominating/Corporate Governance Committee,
the Board shall be free to accept or reject the letter of resignation. The Board
shall act promptly with respect to each such letter of resignation and shall
promptly notify the Director concerned of its decision.
The Company shall not make any personal loans or extensions of credit to nor
become contingently liable for any indebtedness of Directors or Executive
Officers.
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STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
Directors and Executive Officers are encouraged to own shares of the Company's
stock and increase their ownership of those shares over time.
BOARD LEADERSHIP
Subject to review from time to time, the Company will continue to combine the
roles of Chair of the Board and Chief Executive Officer and will appoint a Lead
Director, as set forth below.
ROLE OF THE CHAIR
The Chair is responsible for coordinating the activities of the Board. In
addition to the duties of a regular Board member and those set forth in the
Company's bylaws applicable to the office, the Chair has the following specific
responsibilities:
- Schedule Board meetings in a manner that enables the Board and
its committees to perform their duties responsibly while not
interfering with the ongoing operations of the Company;
- Prepare, with input from the Chief Executive Officer if the
same person does not hold both offices, committee chairs and
other Directors, the agendas for the Board meetings;
- Define the quality, quantity and timeliness of the flow of
information between senior management and the Board;
- Approve, in consultation with other Directors, the retention
of consultants who report directly to the Board;
- Interview, along with the members of the Nominating/Corporate
Governance Committee, all Board candidates, and make
recommendations to that committee;
- Assist the Board in the implementation of these Guidelines;
and
- Consult with the Nominating/Corporate Governance Committee
with respect to the membership of the various Board committees
and the selection of the committee chairs.
ROLE OF LEAD DIRECTOR
The Lead Director shall be an independent Director and shall be responsible for
developing the agenda for, and presiding over the executive sessions of, the
Board's non-management Directors and acting as principal liaison between the
non-management Directors and the Chief Executive Officer on matters dealt with
in executive session. If the Chair of the Board is an independent Director, that
person shall also serve as the Lead Director.
CRITERIA FOR SELECTION OF CHIEF EXECUTIVE OFFICER AND ANNUAL EVALUATION
The Chief Executive Officer should exhibit and have a reputation for dedication,
integrity, honesty, candor, fairness and discretion. The Chief Executive Officer
should also be knowledgeable or willing to become so quickly in the critical
aspects of the Company's businesses and operations. He
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or she should be experienced in serving in a leadership position as a member of
senior management of a substantial publicly held corporation, including
extensive experience in matters such as dealing with employees, investors,
customers, vendors, competitors, suppliers, rating agencies and regulatory
authorities.
Annually, the Compensation Committee shall solicit information from each
Director regarding the performance of the Chief Executive Officer during the
current year. The Compensation Committee shall compile the information and
present an evaluation of the Chief Executive Officer's performance and a
recommendation regarding the terms of his or her continued employment to the
independent members of the Board. Thereafter, the Compensation Committee shall
discuss its evaluation and the recommendation of the independent members of the
Board with the Chief Executive Officer.
MANAGEMENT SUCCESSION AND REVIEW
The Chief Executive Officer shall be responsible for: (a) developing processes
to identify talent within the Company to succeed to senior positions in
management; and (b) annually discussing such processes and presenting the
information developed pursuant thereto to the Nominating/Corporate Governance
Committee for its consideration. This committee shall be responsible for
planning for succession in the senior management ranks, including the office of
the Chief Executive Officer.
ACCESS TO MANAGERS AND OUTSIDE ADVISORS
Each Director may consult with any manager or employee or with any outside
advisor to the Company at any time. If appropriate, it is expected that the
Director will inform the Chief Executive Officer when significant issues are
being discussed.
The Board, as well as each Committee of the Board, shall have the right to
retain, at the Company's expense, such outside advisors as the Board or
applicable Committee shall deem appropriate.
BOARD MEETINGS
The Chair of the Board, with input from the other members of the Board, shall
determine the timing and length of the meetings of the Board. The Board expects
that four regular meetings at appropriate intervals are in general desirable for
the performance of the Board's normal responsibilities. In addition to regularly
scheduled meetings, unscheduled or special Board meetings may be called upon
appropriate notice at any time to address specific needs of the Company.
Directors are expected to attend and participate in person in each regularly
scheduled Board meeting, as well as the dinner meeting held the evening before
each regularly scheduled Board meeting. It is recognized, however, that
telephone conference participation by a Director may be necessary from time to
time and that such participation is preferable to a Director missing a Board
meeting.
The Chair shall establish the agenda for each Board meeting with input from the
other Directors. Each agenda for a regularly scheduled Board meeting will
include an "Other Business" segment. Each Director shall have the ability to
include items on the agenda, request the presence of or a report by any member
of the Company's senior management or raise subjects during the "Other Business"
segment of each regularly scheduled Board meeting that are not on the agenda for
that meeting. The Chair of the Board or the Corporate Secretary shall circulate
the final agenda among
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the Directors. To the extent deemed appropriate by the Chief Executive Officer,
the operating heads of the major businesses of the Company shall be afforded an
opportunity to make presentations to the Board. The Company's Chief Executive
Officer (if not a Director), Chief Financial Officer and Corporate Secretary
shall attend each meeting of the Board, unless requested otherwise by the Board.
MEETINGS OF NON-MANAGEMENT DIRECTORS IN EXECUTIVE SESSION
After each regularly scheduled meeting of the Board of Directors, the
non-management members of the Board shall meet in regularly scheduled executive
session, without the participation of the Chief Executive Officer or other
members of the Company's management to review matters concerning the
relationship of the Board with the management Directors and other members of the
Company's management and such other matters as the Lead Director and
participating Directors may deem appropriate. The Board shall not take formal
actions at such sessions, although the participating Directors may make
recommendations for consideration by the full Board. Additional executive
sessions may be scheduled from time to time as determined by the Lead Director
or a majority of the non-management Directors. Minutes of each meeting shall be
prepared and the topics discussed at each meeting shall be summarized for the
Chief Executive Officer by the Lead Director or the other non-management
Directors participating in the meeting.
BOARD COMMITTEES AND COMMITTEE MEMBERSHIP
There are currently three standing Committees of the Board of Directors: Audit,
Compensation and Nominating/Corporate Governance. From time to time, the Board
may designate ad hoc Committees in conformity with the Company's bylaws. Each
standing Committee shall have the authority and responsibilities delineated in
the Company's bylaws, the resolutions creating it and any applicable charter. No
standing Committee is authorized to create a subcommittee. The Board of
Directors shall have the authority to disband any ad hoc or standing Committee
when it deems it appropriate to do so, provided that the Company shall at all
times have such Committees as may be required by applicable law or listing
standards.
The Nominating/Corporate Governance Committee, in consultation with the Chair of
the Board, and after considering the desires, experience and expertise of
individual Directors, shall make a recommendation and report to the Board
regarding the assignment of Directors to Committees, including the designation
of Committee Chairs. Committees and their Chairs shall be appointed by the Board
of Directors annually at the annual organizational meeting of the Board of
Directors. It is the Board's policy that only Directors who at all times meet
the independence and other requirements of applicable law, listing requirements
and these Guidelines shall serve on the Company's standing Committees.
Each standing Committee shall have a written charter, which shall be approved by
the full Board of Directors and state the purpose of such Committee. Committee
charters shall be reviewed periodically to reflect the activities of each of the
respective Committees, changes in applicable law or regulation and other
relevant considerations, and proposed revisions to such charters shall be
approved by the full Board of Directors. If any Director ceases to be
independent under the standards set forth herein while serving on any Committee
whose members must be independent, he or she shall promptly resign from that
Committee.
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COMMITTEE MEETINGS
Each Committee Chair, in consultation with the Chair of the Board, shall
establish agendas and set meetings at the frequency and length appropriate and
necessary to carry out the Committee's responsibilities.
Any Director who is not a member of a particular Committee may attend any
Committee meeting, unless otherwise requested by the Committee Chair. All
Directors shall be entitled to receive information distributed in respect of any
particular Committee meeting, unless (i) otherwise requested by the Committee
Chair or (ii) the Director elects not to receive such materials.
BOARD MATERIALS
Directors shall receive information and data that are important to their
understanding of the businesses of the Company in sufficient time to prepare for
meetings and in any event at least two business days prior to any regularly
scheduled meeting in the case of a regular agenda item and as promptly as
practicable thereafter with respect to any special agenda item. Information and
data relating to matters to be addressed at a specially scheduled meeting shall
be received by Directors as soon as practicable prior to the meeting. This
material shall be as concise as possible while providing the requisite
information; and it shall include highlights and summaries whenever appropriate.
The material may be distributed by electronic means, regular mail, fax, courier,
or overnight mail. However, it is recognized that certain circumstances may on
occasion cause written materials to be unavailable in advance of the meeting.
Directors may request that the Chief Executive Officer or appropriate members of
senior management present to the Board information on specific topics relating
to the Company and its operations.
BOARD CONDUCT AND REVIEW
The Audit Committee shall periodically assess the Company's Code of Business
Conduct and Ethics for Members of the Board of Directors and Executive Officers
(the "Code") and the other policies referred to in or constituting part of the
Company's Code of Ethics (as defined in the Code) to assure that each of them
addresses appropriate topics, contains compliance standards and procedures, and
comports with relevant law and NYSE listing rules. Members of the Board of
Directors shall act at all times in accordance with the requirements of the Code
of Ethics, which shall be applicable to each Director. The Board may not waive
the application of the Code of Ethics for any Executive Officer or Director, but
may determine that the substantive requirements of the Code of Ethics are not
contravened by a particular set of circumstances.
The Nominating/Corporate Governance Committee shall conduct an annual review and
evaluation of the conduct and performance of the Board, its members, the Board's
standing committees and their members based upon completion by each Director of
an evaluation form circulated annually, that includes, among other things, an
assessment of:
- The composition and independence of the Board and each
standing committee of which such Director is a member;
- Access to and review of information from management by the
Board and each standing committee of which a Director is a
member, and the quality of such information;
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- The performance of the members of the Board and each standing
committee of which such Director is a member;
- The Board's responsiveness to shareholder concerns;
- Maintenance and implementation of the Company's Code of
Ethics; and
- Maintenance and implementation of these Guidelines.
The review shall seek to identify specific areas, if any, in need of improvement
or strengthening and the results shall be summarized in a report delivered by
the Nominating/Corporate Governance Committee to the full Board annually. The
Board shall discuss the report and consider any recommendations set forth
therein. The Board may request that any member who receives unfavorable
performance reviews from at least a majority of the other members of the Board
or any committee upon which he or she serves resign from the Board or any such
committee.
Service on the board of directors of any company by the Chief Executive Officer
or any other member of the Company's senior management shall be approved by the
Nominating/Corporate Governance Committee prior to the commencement of service
on any such board.
SELECTION AND ORIENTATION OF DIRECTORS
The Board shall be responsible for identifying candidates for membership on the
Board. Prospective candidates for Director shall be initially identified by the
Chair of the Board or any Director, shall be interviewed by members of the
Nominating/Corporate Governance Committee and shall be recommended by that
committee to the full Board for its consideration and approval. Invitations for
membership on the Board shall be extended by the Chair of the Board or such
other person as may be designated by the Nominating/Corporate Governance
Committee.
The Board recognizes that it is important for the Board to balance the benefits
of continuity with the benefits of fresh viewpoints and experience. In selecting
Directors, whether new candidates or continuing Directors, the Board shall give
the highest priority to meeting the standards and qualifications set forth at
the beginning of these Guidelines. In this connection, the Board shall seek
candidates whose occupation, service on other boards, or other time constraints
will not adversely affect their ability to dedicate the requisite time to
service on this Board.
The Nominating/Corporate Governance Committee, working with the Company's senior
management, shall provide appropriate orientation programs for new Directors,
which shall be designed both to familiarize new Directors with the full scope of
the Company's businesses and key challenges and to assist new Directors in
developing and maintaining the skills necessary or appropriate for the
performance of their responsibilities. The Nominating/Corporate Governance
Committee, working with the Company's senior management, shall also periodically
provide materials or briefing sessions for all Directors on subjects that would
assist them in discharging their duties and manage for visits to the Company's
key facilities. The Company shall offer annually to pay the costs for each
Director attending and participating in one professionally sponsored conference
or educational program designated to familiarize directors of publicly held
companies with their duties and responsibilities.
DIRECTOR COMPENSATION
The Compensation Committee shall review annually the Directors' compensation
package and make recommendations as appropriate to the full Board. Director
compensation should be
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sufficient to enable the Company to attract talented and qualified individuals
to serve on the Board and its standing Committees. Director compensation must be
the sole remuneration from the Company for members of the Audit, Compensation,
and Nominating/Corporate Governance Committees.
COMMUNICATIONS WITH THIRD PARTIES
Generally, the Chief Executive Officer, the Chief Financial Officer or one of
their designees shall be the chief spokesperson for the Company, except under
extraordinary circumstances, in which event the Chair and/or the Lead Director
shall serve as the spokesperson for the Company.
REPRICING STOCK OPTIONS
The Company shall not reprice any stock options.
AGE, TERM AND OTHER LIMITS
These Guidelines have been adopted to promote high standards of professionalism
and commitment in regards to service by the Company's Directors and Executive
Officers. Accordingly, the Board believes that arbitrary restrictions on the
number of directorships that a Director may hold, the number of terms a Director
may serve or the maximum age of any Director are unnecessary.
CORPORATE GOVERNANCE GUIDELINES
The Nominating/Corporate Governance Committee shall reevaluate, no less
frequently than annually, these Guidelines and recommend to the Board such
revisions as it deems necessary or appropriate for the Board to discharge its
responsibilities more effectively.
If the Board ascertains at any time that any of the Guidelines set forth herein
are not in full force and effect, the Board shall take such action as it deem
reasonably necessary to assure full compliance as promptly as practicable.
Copies of the current version of these Guidelines, the Company's Code of
Business Conduct and Ethics for Members of the Board of Directors and Executive
Officers, the Code of Ethics for Senior Financial Officers and the charter for
each standing Committee of the Board shall be posted on the Company's website.
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APPENDIX II
NATIONAL-OILWELL, INC.
("COMPANY")
CHARTER OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 3, 2003
I. AUDIT COMMITTEE PURPOSE
The Audit Committee (the "Committee") is appointed by the Board of Directors
(the "Board") to assist the Board in fulfilling its oversight responsibilities.
The Committee's primary duties and responsibilities are to:
- Monitor the integrity of the Company's financial
statements, financial reporting processes, systems of
internal controls regarding finance, accounting and
legal compliance and disclosure controls and
procedures.
- Select and appoint the Company's independent
auditors, pre-approve all audit and non-audit
services to be provided, consistent with all
applicable laws, to the Company by the Company's
independent auditors, and establish the fees and
other compensation to be paid to the independent
auditors.
- Monitor the independence and performance of the
Company's independent auditors and internal auditing
function.
- Establish procedures for the receipt, retention,
response to and treatment of complaints, including
confidential, anonymous submissions by the Company's
employees, regarding accounting, internal controls,
disclosure or auditing matters, and provide an avenue
of communication among the independent auditors,
management, the internal auditing function and the
Board of Directors.
The Committee has the authority to conduct any investigation appropriate to
fulfilling its responsibilities, and it has direct and confidential access to
the independent auditors as well as officers and employees of the Company. The
Committee has the authority to retain, at the Company's expense, special legal,
accounting or other consultants or experts it deems necessary in the performance
of its duties. The Company shall at all times make adequate provisions for the
payment of all fees and other compensation, approved by the Committee, to the
Company's independent auditors in connection with the issuance of its audit
report, or to any consultants or experts employed by the Committee.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
The Committee shall be comprised of three or more directors as determined by the
Board, each of whom shall meet the independence and experience requirements of
the Securities and Exchange
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Commission, the New York Stock Exchange and the Corporate Governance Guidelines
of the Board (as each may be modified or supplemented). All members of the
Committee shall have a basic understanding of finance and accounting and be able
to read and understand fundamental financial statements of the sort published by
the Company at the time of their appointment to the Committee, and at least one
member of the Committee shall have accounting or related financial management
expertise and qualify as an "audit committee financial expert" in accordance
with the requirements of the Securities and Exchange Commission and other
applicable rules (as may be modified or supplemented).
No Director may serve as a member of the Committee if such Director serves on
the audit committee of more than two other public companies.
Committee members shall be appointed by the Board. If a Committee Chair is not
designated by the Board or present, the members of the Committee may designate a
Chair by majority vote of the Committee membership.
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. A majority of the members of the Committee shall
constitute a quorum. The Committee may act by unanimous written consent, when
deemed necessary or desirable by the Committee or its Chair.
The Committee shall meet privately in executive session at least four times
annually with management, the manager of internal auditing, the independent
auditors, and as a committee to discuss any matters that the Committee or each
of these groups believe should be discussed. In addition, the Committee, or at
least its Chair, shall communicate with management and the independent auditors
quarterly to review the Company's financial statements and significant findings
based upon the independent auditors' review procedures.
The Chair of the Committee, with input from the other members of the Committee
as well as the Chief Financial Officer, the General Counsel, the Internal Audit
Group, the Risk Mitigation Group and the independent auditor, shall develop the
agenda for each Committee Meeting.
The Committee shall not be authorized to create any subcommittees.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
REVIEW PROCEDURES
1. Review the Company's annual audited financial statements prior
to filing or release, including the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Review should include discussion with management and the independent auditors of
significant issues regarding critical accounting estimates, accounting
principles, practices and judgments, including, without limitation, a review
with the independent auditors of any auditor report to the Committee required
under rules of the Securities and Exchange Commission (as may be modified or
supplemented). Review should also include review of the independence of the
independent auditors (see item 11 below) and a discussion with the independent
auditors of the conduct of their audit (see item 12 below). Based on such review
determine whether to recommend to the Board that the annual audited financial
statements be included in the Company's Annual Report filed under the rules of
the Securities and Exchange Commission.
2. In consultation with management, the independent auditors and
the internal auditors, consider the integrity of the Company's financial
reporting processes and controls.
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Discuss significant financial risk exposures and the steps management has taken
to monitor, control and report such exposures. Review significant findings
prepared by the independent auditors and the internal audit function together
with management's responses. Review any significant changes to the Company's
auditing and accounting policies. Resolve disagreements, if any, between
management and the independent auditors.
3. Review with financial management and the independent auditors
the Company's quarterly earnings releases and financial statements prior to
filing or release. The Committee may designate a member of the Committee to
represent the entire Committee for purposes of this review.
4. Review any exceptions to the certifications required of the
Chief Executive Officer and Chief Financial Officer in connection with the
filings of annual and quarterly financial statements with the Securities and
Exchange Commission.
5. Periodically review and discuss financial information and
earnings guidance provided to analysts and rating agencies. The Committee may
designate a member of the Committee to represent the entire Committee for
purposes of this review.
6. Review and reassess the adequacy of this Charter at least
annually and submit any recommended changes herein to the Board at its fourth
regularly scheduled meeting in each year. Submit the Charter to the Board of
Directors for approval and cause the Charter to be approved at least once every
three years in accordance with the regulations of the Securities and Exchange
Commission and the New York Stock Exchange (as may be modified or supplemented).
INDEPENDENT AUDITORS
7. The Company's independent auditors are directly accountable to
the Committee and the Board of Directors. The Committee shall review the
independence and performance of the independent auditors, annually appoint the
independent auditors and approve any discharge of auditors when circumstances
warrant.
8. The Committee shall set clear hiring policies for employees or
former employees of the independent auditors.
9. Approve the fees and other significant compensation to be paid
to the independent auditors.
10. Approve the independent auditors' annual audit plan, including
scope, staffing, locations and reliance upon management and the internal audit
function.
11. On an annual basis, review and discuss with the independent
auditors all significant relationships the auditors have with the Company that
could impair the auditors' independence. Such review should include receipt and
review of a report from the independent auditors regarding their independence
consistent with Independence Standards Board Standard I (as may be modified or
supplemented). All engagements for non-audit services by the independent
auditors must be approved by the Committee prior to the commencement of
services. The Committee may designate a member of the Committee to represent the
entire Committee for purposes of approval of non-audit services, subject to
review by the full Committee at the next regularly scheduled meeting. The
Company's independent auditors may not be engaged to
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perform prohibited activities under the Sarbanes-Oxley Act of 2002 or the rules
of the Public Company Accounting Oversight Board or the Securities and Exchange
Commission.
12. Prior to filing or releasing annual financial statements,
discuss the results of the audit with the independent auditors, including a
discussion of the matters required to be communicated to audit committees in
accordance with SAS 61 (as may be modified or supplemented). Prior to filing or
releasing quarterly unaudited financial statements, discuss the independent
auditors matters required to be communicated to audit committees in accordance
with SAS 71 (as may be modified or supplemented).
13. Obtain from the independent auditors assurance that Section
10A of the Securities Exchange Act of 1934 (which requires, among other things,
that audits shall include procedures relative to the detection of illegal acts
and the identification of material related party transactions and sets forth the
required response to audit discoveries) has not been implicated.
14. Consider the independent auditors' judgment about the quality
and appropriateness of the Company's accounting principles, including acceptable
alternatives and critical accounting estimates as applied in its financial
reporting.
INTERNAL AUDIT FUNCTION AND LEGAL COMPLIANCE
15. Review the budget and activities of the Company's internal
audit function, audit plans, procedures and result, and coordination with
independent auditors. Regularly review the continued overall effectiveness of
the internal audit function as required under relevant law and New York Stock
Exchange Listing Standards.
16. Review significant reports prepared by the internal audit
department together with management's response and follow-up to these reports.
17. Review reports received by the Company's Risk Mitigation Group
with respect to complaints regarding accounting, internal accounting controls,
disclosure controls and procedures, auditing matters or violations of the
Company's Code of Ethics (as defined in the Company's Code of Business Conduct
for Members of the Board of Directors and Executive Officers)(collectively,
"Complaints").
18. On at least an annual basis, review with the Company's
counsel, any legal matters that could have a significant impact on the Company's
financial statements, the Company's compliance with applicable laws and
regulations and inquiries received from regulators or governmental agencies.
19. Review and assess at least annually the Company's Code of
Ethics, recommend changes in the Code of Ethics as conditions warrant and
confirm that management has established a system to monitor compliance with the
Code of Ethics by officers and relevant employees of the Company.
20. Review management's monitoring of the Company's compliance
with the Code of Ethics, and confirm that management has a review system in
place to maximize the likelihood that the Company's financial statements,
reports, other financial information and disclosures disseminated to
governmental organizations and the public satisfy applicable legal requirements.
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21. Facilitate and review, as appropriate, the Company's
procedures for the receipt, retention and treatment of Complaints received by
the Company from (a) Company employees through the Company's Risk Mitigation
Group or (b) Company employees or others through confidential, anonymous
submission(s) to a post office box (or confidential e-mail) directly to the
Chair of the Audit Committee.
22. Confirm that any action requested by the Chair in respect of
any alleged Complaint has been taken as requested by the Committee.
23. Serve as the Board's qualified legal compliance committee
pursuant to which an attorney for the Company may report purported evidence of a
material violation of securities law, breach of fiduciary duty or similar
violation by the Company or one of its agents.
OTHER AUDIT COMMITTEE RESPONSIBILITIES
24. Annually prepare the report to shareholders as required by the
roles of the Securities and Exchange Commission to be included in the Company's
annual proxy statement.
25. Review and approve all related-party transactions.
26. Perform any other activities consistent with this Charter, the
Company's bylaws and governing law, as the Committee or the Board deems
necessary or appropriate.
27. Maintain minutes of meetings and periodically report to the
Board of Directors on significant results of the foregoing activities.
28. The Committee shall be evaluated through the annual evaluation
process conducted by the Nominating/Corporate Governance Committee.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to conduct audits or to determine
that the Company's financial statements are complete and accurate and are in
accordance with generally accepted accounting principles, which is the
responsibility of management and the independent auditors. It is also the
responsibility of management to assure compliance with laws and regulations and
the Company's corporate policies with oversight by the Committee in the areas
covered by this Charter.
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APPENDIX III
NATIONAL-OILWELL, INC.
("COMPANY")
CHARTER OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 3, 2003
I. COMPENSATION COMMITTEE PURPOSE
The Compensation Committee (the "Committee") is appointed by the Board of
Directors (the "Board") to assist the Board in fulfilling its oversight
responsibilities. The Committee's primary duties and responsibilities are to:
- Discharge the Board's responsibilities relating to
compensation of the Company's directors and executive
officers.
- Approve and evaluate all compensation of directors
and executive officers, including salaries, bonuses,
and compensation plans, policies and programs of the
Company.
- Administer all plans of the Company under which
shares of common stock may be acquired by directors
or executive officers of the Company.
The Committee has the authority, at the Company's expense and to the extent it
deems necessary or appropriate, to retain special legal, compensation or other
consultants to advise the Committee. The Company shall at all times make
adequate provisions for the payment of all fees and other compensation, approved
by the Committee, to any consultants or experts employed by the Committee. The
Committee may request any officer or employee of the Company or the Company's
counsel to attend a meeting of the Committee or to meet with any member of, or
consultants to, the Committee.
II. COMPENSATION COMMITTEE COMPOSITION AND MEETINGS
The Committee shall be comprised of three or more directors as determined by the
Board, each of whom shall meet the independence requirements of the Securities
and Exchange Commission, the New York Stock Exchange and the Corporate
Governance Guidelines of the Board (as each may be modified or supplemented) and
the definition of "Outside Director" as defined in section 162(m) of the
Internal Revenue Code.
Committee members shall be appointed by the Board. If a Committee Chair is not
designated by the Board or present, the members of the Committee may designate a
Chair by majority vote of the Committee membership.
The Committee shall meet at least twice annually, or more frequently as
circumstances dictate. A majority of the members of the Committee shall
constitute a quorum. The Committee may act by unanimous written consent, when
deemed necessary or desirable by the Committee.
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The Chair of the Committee, with input from the other members of the Committee
and the representatives of the Company's senior management designated by the
Chief Executive Officer, shall develop the agenda for each Committee meeting.
The Committee shall not be authorized to create any subcommittees.
III. COMPENSATION COMMITTEE RESPONSIBILITIES AND DUTIES
1. Equity-based Plans. The Committee shall make recommendations
to the Board with respect to incentive-compensation plans and equity-based plans
for all employees.
2. Stock Plan Administration. The Committee shall have full and
final authority in connection with the administration of all plans of the
Company under which shares of common stock or other equity securities of the
Company may be issued to directors and executive officers. In furtherance of the
foregoing, the Committee shall, in its sole discretion, grant options and make
awards of shares under the Company's stock plans.
3. Director Compensation. The Committee shall assess the adequacy
and suitability of the Company's compensation plan for members of its Board, at
the time of the fourth regularly scheduled Board meeting in each year. In
carrying out this responsibility, the Committee shall consider whether the
Company's director compensation plan is sufficient to enable the Company to
attract talented and qualified individuals to serve on the Board and its
standing committees. Where the Committee considers it appropriate, the Committee
may engage compensation consultants to evaluate the adequacy of the Company's
director compensation plan. The Committee shall prepare, as appropriate,
modifications to the current director compensation plan and submit any such
modifications to the full Board for its disposition.
4. Chief Executive Officer ("CEO") Compensation and Goals. The
Committee shall annually review and approve corporate goals and objectives
relevant to CEO compensation, solicit input from all directors of the Company at
the fourth regularly scheduled Board meeting in each year, evaluate the CEO's
performance in light of those goals and objectives, recommend to the
non-management members of the Board the CEO's total annual compensation package
at the first regularly scheduled Board meeting in the following year and
thereafter the Chair of the Committee shall provide development feedback to the
CEO. In determining the long-term incentive component of CEO compensation, the
Committee will consider the Company's performance and relative shareholder
return, the value of similar incentive awards to CEOs at comparable companies,
and the awards given to the CEO in past years.
5. Approval of Other Executive Officer Compensation. Following
the first regularly scheduled Board meeting in each year, the Committee shall
review with the CEO and approve for the executive officers of the Company other
than the CEO: (a) annual base salary level, (b) the annual incentive opportunity
level, (c) the long-term incentive opportunity level, (d) employment agreements,
and change in control agreements/provisions, in each case as, when and if
appropriate, and (e) any special or supplemental benefits.
6. Annual Report on Executive Officer Compensation. The Committee
shall produce the annual report on executive officer compensation for inclusion
in the proxy statement of the Company.
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7. Other Activities. Perform any other activities consistent with
this Charter, the Company's bylaws and governing law, as the Committee or the
Board deems necessary or appropriate, including a review and assessment of this
Charter at least annually and the submission of any recommended changes therein
to the Board at its fourth regularly scheduled meeting in each year.
8. Committee Minutes and Reports. Maintain minutes of meetings
and periodically report to the Board on significant results of the foregoing
activities.
9. Section 16(b) Approvals. Pre-approve all transactions in the
Company's securities, by and between the Company and any director and executive
officer of the Company, for which exemptive treatment from Section 16(b) of the
Exchange Act is sought.
10. Evaluations. This Committee shall be evaluated through the
annual evaluation process administered by the Nominating/Corporate Governance
Committee.
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APPENDIX IV
NATIONAL-OILWELL, INC.
("COMPANY")
CHARTER OF THE NOMINATING/CORPORATE
GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS
ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 3, 2003
I. NOMINATING/CORPORATE GOVERNANCE COMMITTEE PURPOSE
The Nominating/Corporate Governance Committee (the "Committee") is appointed by
the Board of Directors (the "Board") to assist the Board in fulfilling its
oversight responsibilities. The Committee's primary duties and responsibilities
are to:
- Ensure that the Board and its Committees are
appropriately constituted so that the Board and
Directors may effectively meet their fiduciary
obligations to shareholders and the Company.
- Identify individuals qualified to become Board
members and recommend to the Board the Director
nominees for the next annual meeting of shareholders
and candidates to fill vacancies in the Board.
- Recommend to the Board annually the Directors to be
appointed to Board committees.
- Monitor, review, and recommend when necessary, any
changes to the Corporate Governance Guidelines.
- Monitor and evaluate annually how effectively the
Board and the Company have implemented the policies
and principles of the Corporate Governance
Guidelines.
The Committee has the authority, at the Company's expense, to retain (and
terminate as necessary) any search firm used to identify director candidates and
shall have sole authority to approve such search firm's fees and other retention
terms. The Committee shall also have authority to obtain advice and assistance
from internal or external legal, accounting or other advisors it deems necessary
in the performance of its duties. The Company shall at all times make adequate
provisions for the payment of all fees and other compensation, approved by the
Committee, to any consultants or experts employed by the Committee. The
Committee may request any officer or employee of the Company or the Company's
counsel to attend a meeting of the Committee or to meet with any member of, or
consultants to, the Committee.
II. NOMINATING/CORPORATE GOVERNANCE COMMITTEE COMPOSITION AND MEETINGS
The Committee shall be comprised of three or more directors as determined by the
Board, each of whom shall meet the independence requirements of the Securities
and Exchange Commission, the
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New York Stock Exchange and the Corporate Governance Guidelines of the Board
(the "Guidelines") (as each may be modified or supplemented).
Committee members shall be appointed by the Board. If a Committee Chair is not
designated by the Board or present, the members of the Committee may designate a
Chair by majority vote of the Committee membership.
The Committee shall meet at least twice annually, or more frequently as
circumstances dictate. A majority of the members of the Committee shall
constitute a quorum. The Committee may act by unanimous written consent, when
deemed necessary or desirable by the Committee or its Chair.
The Chair of the Committee, with input from the other members of the Committee
and the representatives of the Company's senior management designated by the
Chief Executive Officer, shall develop the agenda for each Committee meeting.
The Committee shall not be authorized to create any subcommittees.
III. NOMINATING/CORPORATE GOVERNANCE COMMITTEE RESPONSIBILITIES AND DUTIES
RECOMMEND NOMINEES FOR ELECTION AS DIRECTORS
The Committee shall recommend to the Board the Director nominees for
the next annual meeting of shareholders and persons to fill vacancies
in the Board that occur between meetings of shareholders. In carrying
out this responsibility, the Committee shall:
1. Determine the desired Board skills and attributes and, when
appropriate, conduct searches for prospective Board members
whose skills and attributes reflect those desired and consider
candidates suggested by shareholders.
2. Interview prospective candidates and ascertain whether they
meet the qualifications for director set forth in the
Guidelines.
3. Secure approval by the entire Board of each nominee for
election as a Director or person selected to fill a vacancy on
the Board.
4. Approve extending an invitation to join the Board if the
invitation is proposed to be extended by any person other than
the Chair of the Committee.
RECOMMEND APPOINTMENTS
5. The Committee, in consultation with the Chair of the Board,
and after considering the desires, experience and expertise of
individual Directors, shall make a recommendation and report
to the Board regarding the assignment of Directors to
Committees, including the designation of Committee Chairs.
Committees and their Chairs shall be appointed by the Board of
Directors annually at the annual organizational meeting of the
Board of Directors. It is the Board's policy that only
Directors who at all times meet the independence and other
requirements of applicable law, listing requirements and the
Guidelines shall serve on the Company's standing Committees.
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6. Annually, the Committee shall appoint an independent Director
to serve as the Company's Lead Director.
EVALUATE THE BOARD, ITS COMMITTEES AND THEIR MEMBERS
The Committee shall conduct an annual review and evaluation of the
conduct and performance of the Board, its members, the Board's
committees and their members based upon completion by each director of
an evaluation form circulated in connection with the second regularly
scheduled Board meeting in each year. The evaluation form shall include
questions designed to solicit an assessment of:
7. The composition and independence of the Board and each
committee of which a Director is a member.
8. Access to and review of information from management by the
Board and each committee on which a Director is a member, and
the quality of such information.
9. The performance of the members of the Board and each committee
of which each Director is a member.
10. The Board's responsiveness to shareholder concerns.
11. Maintenance and implementation of the Company's Code of Ethics
(as defined in Company's Code of Business Conduct and Ethics
for Members of the Board of Directors and Executive Officer).
12. Maintenance and implementation of the Guidelines.
The review shall seek to identify specific areas, if any, in need of
improvement or strengthening and the results shall be summarized in a
report by the Committee that is presented to the full Board during the
fourth regularly scheduled Board meeting in each year. The Board shall
discuss the report and consider any recommendations set forth therein.
The Board may request that any member who receives unfavorable
performance reviews from at least a majority of the other members of
the Board or any committee upon which he or she serves resign from the
Board or any such committee.
MONITOR AND EVALUATE THE CORPORATE GOVERNANCE GUIDELINES
The Committee shall annually review the Guidelines. In carrying out
this responsibility, the Committee shall:
13. Determine whether the Guidelines are being effectively adhered
to and implemented.
14. Ensure that the Guidelines are appropriate for the Company and
comply with applicable laws, regulations and listing
standards.
15. Recommend any desirable changes in the Guidelines to the Board
during the fourth regularly scheduled Board meeting in each
year.
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16. Consider any other corporate governance issues that may arise
from time to time, and develop appropriate recommendations to
the Board.
BOARD ORIENTATIONS AND CONTINUING EDUCATION
17. The Committee, working with the Company's senior management,
shall be responsible for the development of an orientation
program for new Directors, which shall be designed both to
familiarize new Directors with the full scope of the Company's
business and key challenges and to assist new Directors in
developing and maintaining the skills necessary or appropriate
for the discharge of their responsibilities. The program
should include background material, meetings with senior
management and visits to the Company's key facilities.
REVIEW OF MANAGEMENT SUCCESSION PLANS
18. The Committee shall be responsible for planning for succession
in the senior management ranks of the Company, including the
office of Chief Executive Officer. The Chief Executive Officer
shall report to the Committee at the time of the fourth
regularly scheduled Board meeting in each year regarding the
processes in place to identify talent within the Company to
succeed to senior management positions and the information
developed during the current calendar year pursuant to those
processes.
OTHER NOMINATING/CORPORATE GOVERNANCE COMMITTEE RESPONSIBILITIES
The Committee shall discharge the following additional
responsibilities:
19. Perform any other activities consistent with this Charter, the
Company's bylaws and governing law, as the Committee or the
Board deems necessary or appropriate, including a review and
assessment of this Charter at least annually and the
submission of any recommended changes therein to the Board at
its fourth regularly scheduled meeting in each year.
20. Consider at least annually and recommend to the Board during
the third regularly scheduled Board meeting in each year
suggested changes, if any, in the size of the Board.
21. Review the corporate governance disclosures in the Company's
proxy statement for each annual meeting of shareholders.
22. Approve service by the Chief Executive Officer or any other
member of senior management on the board of directors of any
company if the Committee deems such service appropriate and
desirable under the circumstances.
23. Receive, evaluate and formulate a recommendation to the Board
regarding any resignation letter received from a
non-management director upon his or her resignation or
retirement from, or termination of, his or her principal
current employment, or other similar change in professional
occupation or association.
24. Maintain minutes of meetings and periodically report to the
Board of Directors on significant results of the foregoing
activities.
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APPENDIX V
NATIONAL-OILWELL, INC.
CODE OF BUSINESS CONDUCT AND ETHICS FOR
MEMBERS OF THE BOARD OF DIRECTORS
AND EXECUTIVE OFFICERS
ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 3, 2003
The Board of Directors (the "Board") of National-Oilwell, Inc. (the
"Company") has adopted the following Code of Business Conduct and Ethics for
Members of the Board of Directors and Executive Officers (this "Code"). This
Code is intended to focus the Board, each Director, Company management, and each
Executive Officer on areas of ethical risk, provide guidance to Directors and
management to help them recognize and deal with ethical issues, provide
mechanisms to report unethical conduct, and help foster a culture of honesty and
accountability. Each Director and Executive Officer must comply with the letter
and spirit of this Code. This Code, the Company's Business Ethics Policy,
Conflict of Interest Policy, Policy Regarding Employee Inventions and
Confidential Information, Improper Business Payments Policy, Policy Regarding
U.S. Antitrust Laws, Code of Ethics for Senior Financial Officers and Policy on
Insider Trading, in the aggregate constitute the Company's Code of Ethics.
No code or policy can anticipate every situation that may arise.
Accordingly, this Code is intended to serve as a source of guiding principles
for Directors and Executive Officers. Directors and Executive Officers are
encouraged to bring questions about particular circumstances that may implicate
one or more of the provisions of this Code to the attention of the Chair of the
Audit Committee, who may consult with legal counsel as appropriate.
Executive Officers of the Company, including Directors who also serve
as Executive Officers of the Company should read this Code in conjunction with
the Company's Business Ethics Policy.
1. CONFLICT OF INTEREST.
A "conflict of interest" occurs when a Director's or Executive
Officer's private interest interferes in any way, or appears to interfere, with
the interests of the Company as a whole. Conflicts of interest also arise when a
Director or Executive Officer, or a member of his or her immediate family,
receives improper personal benefits as a result of his or her position as a
Director or Executive Officer of the Company. Loans or guarantees of obligations
may create conflicts of interest; therefore, the Company shall not make any
personal loans or extensions of credit to nor become contingently liable for any
indebtedness of Directors or Executive Officers or a member of his or her
family.
Directors and Executive Officers must avoid conflicts of interest with
the Company. Any situation that involves, or may reasonably be expected to
involve, a conflict of interest with the Company must be disclosed immediately
to the Chair of the Audit Committee.
I-23
This Code does not attempt to describe all possible conflicts of
interest which could develop. Some of the more common conflicts from which
Directors and Executive Officers must refrain, however, are set out below.
- Relationship of Company with third parties. Directors and
Executive Officers may not engage in any conduct or activities
that are inconsistent with the Company's best interests or
that disrupt or impair the Company's relationship with any
person or entity with which the Company has or proposes to
enter into a business or contractual relationship.
- Compensation from non-Company sources. Directors and Executive
Officers may not accept compensation, in any form, for
services performed for the Company from any source other than
the Company.
- Gifts. Directors and Executive Officers and members of their
families may not offer, give or receive gifts from persons or
entities who deal with the Company in those cases where any
such gift is being made in order to influence the Directors'
or Executive Officers' actions as members of the Board and
senior management of the Company, or where acceptance of the
gifts could create the appearance of a conflict of interest.
2. CORPORATE OPPORTUNITIES.
Directors and Executive Officers owe a duty to the Company to advance
its legitimate interests when the opportunity to do so arises. Executive
Officers, and Directors when an opportunity that relates to the Company's
business has been presented to the Directors solely by the Company or its agents
and until such time as the Company has determined that it will not pursue the
opportunity, are prohibited from: (a) taking for themselves personally
opportunities that are discovered through the use of corporate property,
information or the Director's or Executive Officer's position; (b) using the
Company's property, information, or position for personal gain; or (c)
personally competing with the Company, directly or indirectly, for business
opportunities. However, if it has been determined that the Company will not
pursue an opportunity that relates to the Company's business, a non-management
Director may do so.
3. CONFIDENTIALITY.
Directors and Executive Officers must maintain the confidentiality of
information entrusted to them by the Company or its customers, and any other
confidential information about the Company that comes to them, from whatever
source, in their capacity as Director or Executive Officer, except when
disclosure is authorized or required by laws or regulations. Confidential
information includes all non-public information that might be of use to
competitors, or harmful to the Company or its customers, if disclosed.
4. PROTECTION AND PROPER USE OF COMPANY ASSETS.
Theft, carelessness and waste of assets have a direct impact on the
Company's profitability. Directors and Executive Officers shall protect the
Company's assets and ensure their efficient use.
I-24
5. FAIR DEALING.
The conduct required by fair dealing requires honesty in fact and the
observance of reasonable commercial standards of fair dealing. Directors and
Executive Officers shall deal fairly and oversee fair dealing by employees and
officers with the Company's directors, officers, employees, customers, suppliers
and competitors. None should do anything that could be interpreted as dishonest
or outside reasonable commercial standards of fair dealing.
6. COMPLIANCE WITH LAWS, RULES AND REGULATIONS.
Directors and Executive Officers shall comply, and oversee compliance
by employees, officers and other directors, with all laws, rules and regulations
applicable to the Company.
7. COMPLIANCE WITH THIS CODE CANNOT BE WAIVED.
While compliance with this Code cannot be waived by the Board or any
Committee of the Board, the Board may, upon a favorable recommendation from its
Audit Committee, determine that a proposed course of conduct does not contravene
the substantive requirements of this Code.
8. ENCOURAGING THE REPORTING OF ANY ILLEGAL OR UNETHICAL
BEHAVIOR.
Directors and Executive Officers should promote ethical behavior and
take steps to create a working environment at the Company that: (a) encourages
employees to talk to supervisors, managers and other appropriate personnel when
in doubt about the best course of action in a particular situation; (b)
encourages employees to report violations of laws, rules, regulations or the
Company's Code of Ethics to appropriate personnel; and (c) fosters the
understanding among employees that the Company will not permit retaliation for
reports made in good faith.
9. FAILURE TO COMPLY; COMPLIANCE PROCEDURES.
A failure by any Director or Executive Officer to comply with the laws
or regulations governing the Company's business, this Code or any other Company
policy or requirement may result in disciplinary action, and, if warranted,
legal proceedings. Directors and Executive Officers should communicate any
suspected violations of this Code promptly to the Chair of the Audit Committee.
Violations will be investigated by the Audit Committee or by a person or persons
designated by the Audit Committee and appropriate action will be taken in the
event of any violations of this Code.
10. ANNUAL REVIEW.
Annually, each Director and Executive Officer shall provide written
certification that he or she has read and understands this Code and its contents
and that he or she has not violated, and is not aware that any other Director or
Executive Officer has violated, this Code.
I-25
APPENDIX VI
NATIONAL-OILWELL, INC.
CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS
ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 3, 2003
As [SPECIFY TITLE] of National-Oilwell, Inc. (the "Company"), I certify that I
will adhere to the following principles and responsibilities, as well as the
Company's Policy on Business Ethics and other legal and compliance policies and
procedures (collectively the "Code"):
- Act with honesty and integrity, avoiding actual or apparent
conflicts of interest involving personal and professional
relationships;
- To the best of my knowledge and abilities, I will provide
other officials and constituents of the Company information
that is full, fair, complete, objective, timely and
understandable;
- To the best of my knowledge and abilities, I will comply with
rules and regulations of U.S. and non-U.S. governmental
entities, as well as other private and public regulatory
agencies to which the Company is subject;
- Act at all times in good faith, responsibly, with due care,
competence and diligence, and without any misrepresentation of
material facts;
- Act objectively, without allowing my independent judgment to
be subordinated;
- Respect the confidentiality of Company information, except
when authorized or otherwise required to make any disclosure,
and avoid the use of any Company information for personal
advantage;
- Share my knowledge and skills with others to improve the
Company's communications to its constituents;
- Promote ethical behavior among employees under my supervision
at the Company;
- Promptly report to the Chair of the Audit Committee of the
Board of Directors of the Company any violations of the Code;
and
- Protect the Company's assets and ensure their efficient use.
______________________________
Employee:
Date:
I-26
NATIONAL-OILWELL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS ON JUNE 25, 2003
The undersigned hereby appoints Steven W. Krablin and M. Gay Mather or either of
them with full power of substitution, the proxy or proxies of the undersigned to
attend the Annual Meeting of Stockholders of National-Oilwell, Inc. to be held
on Wednesday, June 25, 2003, and any adjournments thereof, and to vote the
shares of stock that the signer would be entitled to vote if personally present
as indicated on the reverse side and, at their discretion, on any other matters
properly brought before the meeting, and any adjournments thereof, all as set
forth in the May 28, 2003 proxy statement.
This proxy is solicited on behalf of the board of directors of National-Oilwell,
Inc. The shares represented by this proxy will be voted as directed by the
Stockholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted in accordance with the recommendations of the board of
directors for all nominees.
The undersigned acknowledges receipt of the May 28, 2003 Notice of Annual
Meeting and the Proxy Statement, which more particularly describes the matters
referred to herein.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD BACK AS SOON AS POSSIBLE!
[X] Please mark your vote
as in this example.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES.
1. The election of directors:
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed at right. for all nominees listed at right
NOMINEES: Hushang Ansary
Ben A. Guill
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THE
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW:
___________________________________
___________________________________ ___________________________________
Signature Signature if held jointly
___________________________________ ___________________________________
Date Date
(Signature(s) should be exactly as name or names appear on this proxy. If stock
is held jointly, each holder should sign. If signing is by attorney, executor,
administrator, trustee or guardian, please give full title.)