2006 Proxy Statement and
2005 Annual Report to Stockholders
Notice of 2006 ...
TABLE OF CONTENTS
...
Management’s Report on Internal Control Over Financial Reporting ....................................A-49
Report of Indepe...
NATIONAL OILWELL VARCO, INC.
10000 Richmond Avenue
...
NATIONAL OILWELL VARCO, INC.
10000 Richmond Avenue
Houston, Tex...
QUORUM: As of March 31, 2006, there were 174,853,276 shares of
National Oilwell Varco common stock...
please contact ADP Householding Department, in writing, at 51
Mercedes Way, Edgewood, New York 1171...
MERGER WITH VARCO
On March 11, 2005, National-Oilwell, Inc., a Delaware corporation (“National Oilwell”) held a
special m...
Vote Required for Approval
Directors are to be elected by a plurality of the votes cast at the meeting. This means that t...
Expiration Year
Date of ...
Expiration Year
Date of ...
Expiration Year
Date of ...
Expiration Year
Date of ...
COMMITTEES AND MEETINGS OF THE BOARD
Committees
The Board of Directors had the following standing committees: Audit, Com...
On May 18, 2005, the Board approved the grant of 7,500 options to each non-employee director
under the National Oilwell Va...
The Compensation Committee is appointed by the Board of Directors to assist the Board in
fulfilling its oversight responsi...
Director Nominees
The Nominating/Corporate Governance Committee has the responsibility of identifying
candidates for elect...
AUDIT COMMITTEE REPORT
The responsibilities of the Audit Committee, which are set forth in the Audit Committee Charter
a...
Notwithstanding the foregoing, our charter clarifies that it is not our duty to conduct audits or to
determine that the Co...
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
PROPOSAL NO. 2 ON THE PROXY CARD
Information Regar...
(1)
Consists primarily of fees for employee benefit plans, due diligence related to acquisition
transactions, and accou...
CORPORATE GOVERNANCE
National Oilwell Varco’s Board of Directors is committed to promoting transparency in reporting
inf...
ethics and conduct for any Director or Executive Officer. Copies of the Code of Business
Conduct and Ethics For Members of...
EXECUTIVE OFFICERS
The following persons are our current executive officers. The executive officers of the Company
...
Name Age Position Biography
Dwight W. Rettig 45 Vice President, Gene...
STOCK OWNERSHIP
Security Ownership of Certain Beneficial Owners
Based on information filed with the SEC as of the most r...
Security Ownership of Management
This table shows the number and percentage of shares of the Company’s stock beneficially...
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information as of our f...
EXECUTIVE COMPENSATION
The following table sets forth for the years ended December 31, 2005, 2004 and 2003 the
co...
(5)
Mr. Smith joined the Company in March 2005, upon consummation of the merger with Varco.
Compensation paid by Varco (i...
Number of Unexercised Value of Unexercised
O...
the date of termination. Any option not so surrendered will remain exercisable until the earlier of
one year after the dat...
was assumed by the Company as a result of the Merger (the “Amended SERP”). The Amended
SERP provides for retirement, death...
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K
of 149

national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K

Published on: Mar 3, 2016
Published in: Economy & Finance      Technology      Business      
Source: www.slideshare.net


Transcripts - national oilwell varco 2006 Proxy Statement/2005 Annual Report on Form 10-K

  • 1. 2006 Proxy Statement and 2005 Annual Report to Stockholders Notice of 2006 April 13, 2006 Annual Meeting Fellow Stockholders: and Proxy On behalf of your Board of Directors and your management, we Statement are pleased to invite you to attend the Annual Meeting of Stockholders of National Oilwell Varco, Inc. It will be held on Wednesday, May 17, 2006 at 10:00 A.M., local time, at the Houston Marriott Westchase, 2900 Briarpark Drive, Houston, Texas 77042. You will find information regarding the matters to be voted on at the meeting in the formal Notice of Meeting and Proxy Statement, which are included on the following pages of this 2005 Annual booklet. Report to Whether or not you plan to attend, please sign and return the enclosed proxy in the accompanying envelope as soon as Stockholders possible so that your shares will be voted at the meeting. The vote of each and every stockholder is most important to us. Please note that your completed proxy will not prevent you from attending the meeting and voting in person should you so choose. • Management’s Also included in this booklet as Appendix A is National Oilwell Discussion and Varco’s 2005 Annual Report on Form 10K, which we are distributing to the company’s stockholders in lieu of a separate Analysis annual report. Thank you for your continued support of and interest in National Oilwell Varco. • Consolidated Sincerely, Financial Statements Merrill A. (Pete) Miller, Jr. Chairman, President and Chief Executive Officer
  • 2. TABLE OF CONTENTS Page NOTICE OF ANNUAL MEETING OF STOCKHOLDERS PROXY STATEMENT ................................................................................................................. 1 Merger with Varco......................................................................................................................... 4 Proposal No. 1 – Election of Directors .......................................................................................... 4 Committees and Meetings of the Board....................................................................................... 10 Board Compensation.................................................................................................................... 10 Audit Committee Report.............................................................................................................. 14 Proposal No. 2 – Ratification of Independent Auditors............................................................... 16 Corporate Governance ................................................................................................................. 18 Executive Officers ....................................................................................................................... 20 Stock Ownership.......................................................................................................................... 22 Executive Compensation ............................................................................................................. 25 Employment Contracts................................................................................................................. 27 Certain Relationships and Related Transactions.......................................................................... 31 Compensation Committee Report on Executive Compensation.................................................. 31 Performance Graph ...................................................................................................................... 34 Section 16(a) Beneficial Ownership Reporting Compliance....................................................... 35 Stockholder Proposals for the 2007 Annual Meeting .................................................................. 35 Annual Report and Other Matters................................................................................................ 35 Appendix I – Charter of the Audit Committee of the Board of Directors .................................. I-1 Appendix II – Charter of the Compensation Committee of the Board of Directors................... I-8 Appendix III – Charter of the Nominating/Corporate Governance Committee of the Board of Directors..................................................................................................................... I-11 Appendix IV – Corporate Governance Guidelines................................................................... I-16 Appendix V – Code of Business Conduct and Ethics for Members of the Board of Directors.................................................................................................................................... I-27 Appendix VI – Code of Ethics For Senior Financial Officers.................................................. I-31 APPENDIX A ANNUAL REPORT TO STOCKHOLDERS Business .....................................................................................................................................A-1 Risk Factors .............................................................................................................................A-15 Glossary of Oilfield Terms ......................................................................................................A-18 Properties .................................................................................................................................A-23 Legal Proceedings....................................................................................................................A-25 Submission of Matters To A Vote of Security Holders...........................................................A-25 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.................................................................................................A-26 Selected Financial Data............................................................................................................A-26 Management’s Discussion and Analysis of Financial Condition and Results of Operations..A-27 Quantitative and Qualitative Disclosures about Market Risk..................................................A-41 Controls and Procedures ..........................................................................................................A-42 Report of Independent Registered Public Accounting Firm....................................................A-48
  • 3. Management’s Report on Internal Control Over Financial Reporting ....................................A-49 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting..................................................................................................................A-50 Consolidated Financial Statements ..........................................................................................A-51 Notes to Consolidated Financial Statements............................................................................A-55 Valuation and Qualifying Accounts.........................................................................................A-75
  • 4. NATIONAL OILWELL VARCO, INC. 10000 Richmond Avenue Houston, Texas 77042 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held May 17, 2006 DATE: Wednesday, May 17, 2006 TIME: 10:00 a.m. (Houston time) PLACE: Houston Marriott Westchase 2900 Briarpark Drive Houston, Texas 77042 The 2006 annual meeting of stockholders of National Oilwell Varco, Inc. will be held at the Houston Marriott Westchase, 2900 Briarpark Drive, Houston, Texas on Wednesday, May 17, 2006, at 10:00 a.m. local time, for the following purposes: 1. To elect three directors to hold office for a three-year term; 2. To consider and act upon a proposal to ratify the appointment of Ernst & Young LLP as independent auditors of the company for 2006; and 3. To consider and act upon any other matters that may properly come before the annual meeting or any postponement or adjournment thereof. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE THREE NOMINEES FOR DIRECTOR AND FOR THE PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR 2006. The Board of Directors has set March 31, 2006 as the record date for the Annual Meeting. If you were a stockholder of record at the close of business on March 31, 2006 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, during ordinary business hours, 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/ Dwight W. Rettig Dwight W. Rettig Vice President, General Counsel and Secretary Houston, Texas April 13, 2006
  • 5. NATIONAL OILWELL VARCO, INC. 10000 Richmond Avenue Houston, Texas 77042 PROXY STATEMENT ANNUAL MEETING: Date: Wednesday, May 17, 2006 Time: 10:00 a.m. (Houston time) Place: Houston Marriott Westchase 2900 Briarpark Drive Houston, Texas 77042 AGENDA: Proposal 1: For the election of three nominees as directors of the Company for a term of three years. Proposal 2: For the ratification of the appointment of Ernst & Young LLP as independent auditors of the company. RECORD DATE/ WHO CAN VOTE: All stockholders of record at the close of business on March 31, 2006 are entitled to vote. The only class of securities entitled to vote at the Annual Meeting is National Oilwell Varco common stock. Holders of National Oilwell Varco 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 April 13, 2006. 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 your properly executed proxy does not indicate how you wish to vote your common stock, the persons named on the proxy card will vote FOR election of the three nominees for director (Proposal 1) and FOR the ratification of the appointment of Ernst & Young LLP as independent auditors. REVOKING YOUR You can revoke your proxy at any time prior to the time that the PROXY: 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. -1-
  • 6. QUORUM: As of March 31, 2006, there were 174,853,276 shares of National Oilwell Varco 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 87,426,639 votes constitutes a quorum for adopting the proposals at the Annual Meeting. Abstentions will be included in determining the number of shares present at the meeting for the purpose of determining a quorum, as will broker non-votes. A broker non-vote occurs when a broker is not permitted to vote on a matter without instructions from the beneficial owner of the shares and no instruction is given. However, there will be no broker non-votes in connection with this meeting as the nature of the proposals to be considered at the meeting allows brokers discretionary voting in the absence of timely instruction from beneficial owners. 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. 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. HOUSEHOLDING: The Securities and Exchange Commission, or SEC, has adopted rules that permit companies and intermediaries, such as brokers, to satisfy the delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a copy of these materials, other than the Proxy Card, to those stockholders. This process, which is commonly referred to as “householding,” can mean extra convenience for stockholders and cost savings for the Company. Beneficial stockholders can request information about householding from their banks, brokers, or other holders of record. Through householding, stockholders of record who have the same address and last name will receive only one copy of our Proxy Statement and Annual Report, unless one or more of these stockholders notifies us that they wish to continue receiving individual copies. This procedure will reduce printing costs and postage fees. Stockholders who participate in householding will continue to receive separate Proxy Cards. If you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of Proxy Statements and Annual Reports, or if you hold stock in more than one account and wish to receive only a single copy of the Proxy Statement or Annual Report for your household, -2-
  • 7. please contact ADP Householding Department, in writing, at 51 Mercedes Way, Edgewood, New York 11717, or by phone at (800) 542-1061. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate Proxy Statement and Annual Report, please notify your broker if you are a beneficial stockholder. COST OF PROXY SOLICITATION: We have retained InvestorCom, Inc. to solicit proxies from our stockholders at an estimated fee of $4,500, 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 -3-
  • 8. MERGER WITH VARCO On March 11, 2005, National-Oilwell, Inc., a Delaware corporation (“National Oilwell”) held a special meeting of stockholders to approve the merger of Varco International, Inc., a Delaware corporation (“Varco”) with and into National Oilwell, with National Oilwell being the surviving corporation (the “Merger”). National Oilwell then changed its name to National Oilwell Varco, Inc. (“National Oilwell Varco” or the “Company”), pursuant to the Amended and Restated Agreement and Plan of Merger, effective as of August 11, 2004 (the “Merger Agreement”). At completion of the Merger, National Oilwell stockholders owned approximately 51% of the Company and Varco stockholders owned approximately 49% of the Company. ELECTION OF DIRECTORS PROPOSAL NO. 1 ON THE PROXY CARD The Board of Directors of National Oilwell Varco is divided into three classes, each class serving a term of three years. Directors whose terms expire this year include: Greg L. Armstrong, David D. Harrison and Merrill A. Miller, Jr. Greg L. Armstrong, David D. Harrison and Merrill A. Miller, Jr. are nominees for directors for a three-year term expiring at the Annual Meeting in 2009, or when their successors are elected and qualified. We believe each of the nominees will be able to serve if elected. However, if any 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 2007 and 2008 will continue to serve in accordance with their prior election or appointment. Proxies cannot be voted for a greater number of persons than the number of nominees named. -4-
  • 9. Vote Required for Approval Directors are to be elected by a plurality of the votes cast at the meeting. This means that the three nominees receiving the greatest number of votes will be elected. In accordance with New York Stock Exchange rules, a proposal to elect directors is considered to be a “discretionary” item. This means that brokerage firms may vote in their discretion on this matter on behalf of beneficial owners who have not furnished voting instructions within the time period specified in the voting instructions submitted by such brokerage firms. 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 three nominees listed below. Information Regarding Nominees for Director for Terms Expiring in 2009: Expiration Year Date of First Current Became Name Age Term Biography Director Merrill A. Miller, Jr. 55 2006 Mr. Miller has been a Director of the Company since 2001 May 2001 and Chairman of the Board since July 22, 2005. He also served as Chairman of the Board from May 2002 through March 11, 2005. He served as the Company’s Chief Operating Officer from November 2000 through March 11, 2005. He has served as President since November 2000 and as Chief Executive Officer since May 2001. He has served in various senior executive positions with National Oilwell since February 1996. Mr. Miller also serves as a director of Penn Virginia Corporation, a company engaged in the exploration, acquisition, development and production of crude oil and natural gas. Greg L. Armstrong 47 2006 Mr. Armstrong has been a Director of the Company 2005 since March 2005. Mr. Armstrong served as a Director of Varco from May 20, 2004 until its merger with the Company on March 11, 2005. Since 1998, he has been the Chairman of the Board and Chief Executive Officer of Plains All American GP LLC, the general partner and controlling entity of Plains All American Pipeline, L.P., a publicly traded master limited partnership engaged in the business of marketing, gathering, transporting, terminalling and storing crude oil. Mr. Armstrong is a member of the National Petroleum Council. -5-
  • 10. Expiration Year Date of First Current Became Name Age Term Biography Director David D. Harrison 58 2006 Mr. Harrison has been a Director of the Company 2003 since August 2003. Since February 2000, he has served as Executive Vice President and Chief Financial Officer of Pentair, Inc., a diversified manufacturer in water technologies and enclosures businesses. From September 1999 through February 2000, Mr. Harrison was Executive Vice President and Chief Financial Officer of the Scotts Company, a lawn and garden products company. He was Executive Vice President and Chief Financial Officer and a Director of Coltec Industries, a company in the industrial and aerospace arena from 1996 to 1999. He also served as Executive Vice President and Chief Financial Officer of Pentair, Inc. from 1994 to 1996. From 1972 through 1994, Mr. Harrison held various international and domestic finance positions with a combination of General Electric and Borg-Warner Chemicals. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE ELECTION OF THE THREE NOMINEES FOR DIRECTOR. Information Regarding Continuing Directors: Expiration Year Date of First Current Became Name Age Term Biography Director Robert E. Beauchamp 46 2008 Mr. Beauchamp has been a Director of the Company 2002 since August 2002. Since 1988, he has served in various capacities at BMC Software, Inc., a leading provider of enterprise management solutions, most recently as President and Chief Executive Officer and as a director. During his sixteen years with BMC, he also served as senior vice president of research & development, vice president of strategic marketing and corporate development, and director of strategic marketing. -6-
  • 11. Expiration Year Date of First Current Became Name Age Term Biography Director Ben A. Guill 55 2007 Mr. Guill has been a Director of the Company since 1999 1999. He is President of First Reserve Corporation, a corporate manager of private investments focusing on the energy and energy-related sectors, which he joined in September 1998. Mr. Guill serves as a director of Dresser, Inc., a leader in the design, manufacture and marketing of highly 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; and is Chairman of the Board of Chart Industries, Inc., an independent global manufacturer of highly engineered equipment used in the production, storage and end-use of hydrocarbon and industrial gases. Roger L. Jarvis 52 2007 Mr. Jarvis has been a Director of the Company since 2002 February 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, until its acquisition by Norsk Hydro ASA in December 2005. Mr. Jarvis also serves as a director of The Bill Barret Corporation, a company engaged in the acquisition, exploitation and exploration of oil and gas properties in the Rocky Mountains. -7-
  • 12. Expiration Year Date of First Current Became Name Age Term Biography Director Eric L. Mattson 54 2007 Mr. Mattson has been a Director of the Company 2005 since March 2005. Mr. Mattson served as a Director of Varco (and its predecessor, Tuboscope Inc.) from January 1994 until its merger with the Company on March 11, 2005. Since November 2003, Mr. Mattson has been Senior Vice President and Chief Financial Officer of VeriCenter, Inc., a private provider of managed hosting services. From November 2002 until October 2003, Mr. Mattson worked as an independent consultant. Mr. Mattson was the Chief Financial Officer of Netrail, Inc., a private Internet backbone and broadband service provider, from September 1999 until November 2002. Netrail filed for Chapter 11 Bankruptcy protection in the Northern Georgia district of the United States Bankruptcy Court in July 2001. In November 2002, the Bankruptcy Court approved Netrail’s plan of liquidation and appointed a Trustee to effect the plan. At that time, Mr. Mattson ceased to be the Chief Financial Officer of Netrail. From July 1993 until May 1999, Mr. Mattson served as Senior Vice President and Chief Financial Officer of Baker Hughes Incorporated, a provider of products and services to the oil, gas and process industries. Jeffery A. Smisek 51 2008 Mr. Smisek has been a Director of the Company 2005 since March 2005. Mr. Smisek served as a Director of Varco (and its predecessor, Tuboscope Inc.) from February 1998 until its merger with the Company on March 11, 2005. Since December 30, 2004, Mr. Smisek has served as President and a director of Continental Airlines, Inc. Mr. Smisek previously served Continental Airlines, Inc. as: Executive Vice President from March 2003 until December 2004; Executive Vice President — Corporate from May 2001 until March 2003; and Executive Vice President, General Counsel and Secretary from November 1996 to May 2001. -8-
  • 13. Expiration Year Date of First Current Became Name Age Term Biography Director James D. Woods 74 2008 Mr. Woods has been a Director of the Company 2005 since March 2005. Mr. Woods served as a Director of Varco from May 2000, and from 1988 until May 2000 he served as a director of a company acquired by Varco, until its merger with the Company on March 11, 2005. Mr. Woods is the Chairman Emeritus and retired Chief Executive Officer of Baker Hughes Incorporated. Mr. Woods was Chief Executive Officer of Baker Hughes from April 1987, and Chairman from January 1989, in each case until January 1997. Mr. Woods is also a director of ESCO Technologies, an NYSE-listed supplier of engineered filtration precuts to the process, healthcare and transportation markets; Foster Wheeler Ltd., an OTC-traded holding company of various subsidiaries which provides a broad range of engineering, design, construction and environmental services; OMI Corporation, an NYSE-listed bulk shipping company providing seaborne transportation services primarily of crude oil and refined petroleum products; USEC Inc., an NYSE-listed supplier of enriched uranium; and Complete Production Services, Inc., a supplier of oilfield products and services. -9-
  • 14. COMMITTEES AND MEETINGS OF THE BOARD Committees The Board of Directors had the following standing committees: Audit, Compensation, and Nominating/Corporate Governance. Number of Meetings Held in 2005 Board of Directors 4 Audit Committee 6 Compensation Committee 3 Nominating/Corporate Governance Committee 2 Attendance at Meetings Each incumbent director attended at least 75% of the meetings of the Board and committees of which that director was a member. Board Compensation Members of the Company’s Board of Directors who are not full-time employees of the Company receive the following cash compensation: • For service on the Board of Directors – an annual retainer of $45,000, paid quarterly; • For service as chairman of the audit committee of the Board of Directors – an annual retainer of $15,000, paid quarterly; • For service as chairman of each of the compensation committee and the nominating/corporate governance committee of the Board of Directors – an annual retainer of $10,000, paid quarterly; • For service as a member of the audit committee of the Board of Directors – an annual retainer of $7,500, paid quarterly; • For service as a member of each of the compensation committee and the nominating/corporate governance committee of the Board of Directors – an annual retainer of $5,000, paid quarterly; and • $1,500 for each Board meeting and each committee meeting attended. Directors of the Board who are also employees of the Company do not receive any compensation for their service as directors. Members of the Board are also eligible to receive stock options and awards, including restricted stock, performance awards, phantom shares, stock payments, or SARs under the National Oilwell Varco Long-Term Incentive Plan. -10-
  • 15. On May 18, 2005, the Board approved the grant of 7,500 options to each non-employee director under the National Oilwell Varco Long-Term Incentive Plan. The exercise price of the options is $41.63 per share, which was the fair market value of one share of the Company’s 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 on the first anniversary of the date of the grant. Audit Committee Messrs. Harrison (Chairman), Armstrong, Guill and Mattson are the current members of the Audit Committee. All members of this committee are “independent” within the meaning of the rules governing audit committees by the New York Stock Exchange. The Audit Committee is appointed by the Board of Directors 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, 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 audit 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 audit function and the Board of Directors. Prepare an audit committee report as required by the Securities and Exchange Commission (the “SEC”) to be included in the Company’s annual proxy statement. Monitor the Company’s compliance with legal and regulatory requirements. A copy of the Audit Committee Charter is attached to this Proxy Statement as Appendix I, and is also available on the Company’s website, www.nov.com, under the Investor Relations/Corporate Governance section. Audit Committee Financial Expert The Board of Directors has determined that all members of the Audit Committee meet the New York Stock Exchange standard of having accounting or related financial management expertise and meet the SEC’s criteria of an Audit Committee Financial Expert. Compensation Committee Messrs. Woods (Chairman), Beauchamp, Guill and Smisek are the current members of the Compensation Committee. All members of the Compensation Committee are independent as defined by the applicable New York Stock Exchange listing standards. -11-
  • 16. The Compensation Committee is appointed by the Board of Directors 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. A copy of the Compensation Committee Charter is attached to this Proxy Statement as Appendix II, and is also available on the Company’s website, www.nov.com, under the Investor Relations/Corporate Governance section. Compensation Committee Interlocks and Insider Participation. During 2005, Messrs. Woods, Beauchamp, Guill and Smisek 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. Nominating/Corporate Governance Committee Messrs. Beauchamp (Chairman), Jarvis, Smisek and Woods are the current members of the Nominating/Corporate Governance Committee. All members of the Nominating/Corporate Governance Committee are independent as defined by the applicable New York Stock Exchange listing standards. The Nominating/Corporate Governance Committee is appointed by the Board of Directors 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 director nominees for each 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 the effectiveness of the Board and management of the Company, including their effectiveness in implementing the policies and principles of the Corporate Governance Guidelines. A copy of the Nominating/Corporate Governance Committee Charter is attached to this Proxy Statement as Appendix III, and is also available on the Company’s website, www.nov.com, under the Investor Relations/Corporate Governance section. -12-
  • 17. Director Nominees The Nominating/Corporate Governance Committee 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 nominees for directors to be submitted to stockholders for election. It is the policy of the committee to consider director candidates recommended by stockholders. Nominees to be evaluated by the Nominating/Corporate Governance Committee are selected by the committee from candidates recommended by multiple sources, including other directors, management, stockholders, and candidates identified by independent search firms (which firms may be paid by the Company for their services), all of whom will be evaluated based on the same criteria. As of March 31, 2006, we had not received any recommendations from stockholders for potential director candidates. All of the current nominees for director are standing members of the Board that are proposed by the entire Board for re-election. Written suggestions for nominees should be sent to the Secretary of the Company at the address listed below. The Board of Directors believes that nominees should reflect the following characteristics: Have a reputation for integrity, honesty, candor, fairness and discretion. Be knowledgeable, or willing to become so quickly, in the critical aspects of the Company’s businesses and operations. Be experienced and skillful in serving as a competent overseer of, and trusted advisor to, the senior management of at least one substantial enterprise. Have 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. 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 Varco, Inc., 10000 Richmond Avenue – 6th Floor, Houston, TX 77042, Attention: Dwight W. Rettig, Secretary. The notice must be received no later than April 23, 2006 – 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 SEC had such nominee been nominated by the Board of Directors. -13-
  • 18. 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 combined and separate 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. The Board of Directors has determined that all of the members of the Audit Committee are independent based on the guidelines set forth by the New York Stock Exchange and SEC rules for the independence of Audit Committee members. The Audit Committee held six (6) meetings in 2005, and at each regularly scheduled quarterly meeting met in executive session with both the internal audit director and the independent audit partner, without management being present. 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), as may be modified or supplemented. SAS 61 requires independent auditors to communicate certain matters related to the conduct of an audit to those who have responsibility for oversight of the financial reporting process, specifically the audit committee. Among the matters to be communicated to the audit committee are: (1) methods used to account for significant unusual transactions; (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus; (3) the process used by management in formulating particularly sensitive accounting estimates and the basis for the auditor's conclusions regarding the reasonableness of those estimates; and (4) disagreements with management over the application of accounting principles, the basis for management's accounting estimates, and the disclosures in the financial statements. In addition, the Audit Committee reviewed with Ernst & Young their judgment as to the quality, not just the acceptability, of the Company’s accounting principles. 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, Independence Standards Board Standard No. 1, 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 2005 Annual Report on Form 10-K. -14-
  • 19. Notwithstanding the foregoing, our charter clarifies that it is not our duty 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. Management is responsible for the Company’s financial reporting process, including its system of internal controls, and for the preparation of financial statements in accordance with GAAP. Management is also responsible for assuring compliance with laws and regulations and the Company's corporate policies, subject to our oversight in the areas covered by our charter. The independent auditors are responsible for expressing opinions on those financial statements and on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting. Members of the Audit Committee David D. Harrison, Committee Chairman Greg L. Armstrong Ben A. Guill Eric L. Mattson -15-
  • 20. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS PROPOSAL NO. 2 ON THE PROXY CARD Information Regarding our Independent Auditors The Audit Committee of the Board of Directors has reappointed Ernst & Young LLP as independent auditors for 2006. Stockholders are being asked to vote upon the ratification of the appointment. Representatives of Ernst & Young will attend the Annual Meeting, where they will be available to respond to appropriate questions and have the opportunity to make a statement if they desire. Vote Required for Approval The proposal to ratify the appointment of Ernst & Young LLP as independent auditors will require approval by a majority of the votes cast on the meeting. In accordance with New York Stock Exchange rules, a proposal to ratify independent auditors is considered to be a “discretionary” item. This means that brokerage firms may vote in their discretion on this matter on behalf of beneficial owners who have not furnished voting instructions within the time period specified in the voting instructions submitted by such brokerage firms. Abstentions, which will be counted as votes present for the purpose of determining a quorum, will have the effect of a vote against the proposal. 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 ratification of the appointment of Ernst & Young LLP as independent auditors. Audit Fees The Audit Committee pre-approves all services provided by the Company’s independent auditors to the Company and its subsidiaries. Consideration and approval of such services generally occurs in the regularly scheduled quarterly meetings of the Audit Committee. The Audit Committee has delegated the Chairman of the Audit Committee to pre-approve allowed non-audit services, subject to review by the full committee at the next regularly scheduled meeting. 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. The following table sets forth Ernst & Young LLP’s fees for services rendered during 2004 and 2005. All 2005 services provided by Ernst & Young LLP were pre-approved by the Audit Committee. 2005 2004 (in thousands) Audit Fees $4,278 $2,436 (1) Audit Related Fees 299 182 (2) Tax Fees 705 603 All Other Fees - - Total $ 5,282 $ 3,221 -16-
  • 21. (1) Consists primarily of fees for employee benefit plans, due diligence related to acquisition transactions, and accounting consultations. (2) Consists primarily of fees for compliance, planning and advice with respect to various domestic and foreign corporate tax matters. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP. -17-
  • 22. CORPORATE GOVERNANCE National Oilwell Varco’s Board of Directors is committed to promoting transparency in reporting information about the Company, complying 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. 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 IV, and is also available on the Company’s website, www.nov.com, under the Investor Relations/Corporate Governance section. Director Independence The Corporate Governance Guidelines address, among other things, standards for evaluating the independence of the Company’s directors. The Board undertakes an annual review of director independence and considers 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. In February 2006, as a result of this annual review, the Board affirmatively determined that a majority of the members of the Board of Directors are independent of the Company and its management under the standards set forth in the Corporate Governance Guidelines. The following directors were affirmed as independent: Greg L. Armstrong, Robert E. Beauchamp, Ben A. Guill, David D. Harrison, Roger L. Jarvis, Eric L. Mattson, Jeffery A. Smisek, and James D. Woods. Lead Director The non-management members of the Board of Directors have appointed Robert E. Beauchamp as Lead Director. The Lead Director is responsible for developing the agenda for, and presiding over the executive sessions of, the Board’s non-management directors, and for acting as principal liaison between the non-management directors and the chief executive officer on matters dealt with in executive session. Policies on Business Ethics and Conduct The Company has a long-standing Business Ethics Policy. 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 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 -18-
  • 23. 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, respectively, and are also available on the Company’s website, www.nov.com, under the Investor Relations/Corporate Governance section. Communications with Directors The Board has provided a process for interested parties to communicate with our non- management directors. Parties wishing to communicate confidentially with our non-management directors may do so by calling 1-800-372-3956. This procedure is described on the Company’s website, www.nov.com, in the Investor Relations/Corporate Governance section. Calls to this number will be answered by an independent, automated system 24 hours a day, 365 days a year. A transcript of the call will be delivered to a member of the Audit Committee. Parties wishing to send written communications to the Board, other than sales-related communications, should send a letter addressed to the member or members of the Board to whom the communication is directed, care of the Secretary, National Oilwell Varco, Inc., 10000 Richmond Avenue, Houston, Texas, 77042. All such communications will be forwarded to the Board member or members specified. Director Attendance at Annual Meetings The Company does not have a formal policy with respect to director attendance at annual stockholder meetings. In 2005, all members of the Board were in attendance at the annual meeting. NYSE Corporate Governance Matters As a listed company with the New York Stock Exchange, our Chief Executive Officer, as required under Section 303A.12(a) of the NYSE Listed Company Manual, must certify to the NYSE each year whether or not he is aware of any violation by the company of NYSE Corporate Governance listing standards as of the date of the certification. On August 19, 2005, the Company’s Chief Executive Officer submitted such a certification to the NYSE which stated that he was not aware of any violation by the Company of the NYSE Corporate Governance listing standards. On March 6, 2006, the Company filed its 2005 Form 10-K with the SEC, which included as Exhibits 31.1 and 31.2 the Chief Executive Officer and Chief Financial Officer certifications required under Section 302 of the Sarbanes-Oxley Act of 2002. -19-
  • 24. EXECUTIVE OFFICERS The following persons are our current 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. None of the executive officers, directors, or nominees for director has any family relationships with each other. Name Age Position Biography Merrill A. Miller, Jr. 55 President and Chief Executive Mr. Miller has served as the Company’s Officer President since November 2000, Chief Executive Officer since May 2001 and Chairman of the Board since July 22, 2005. Mr. Miller also served as Chairman of the Board from May 2002 through March 11, 2005. He served as the Company’s Chief Operating Officer from November 2000 through March 11, 2005. He has served in various senior executive positions with the Company since February 1996. Mr. Miller also serves as a director of Penn Virginia Corporation, a company engaged in the exploration, acquisition, development and production of crude oil and natural gas. Robert Blanchard 44 Vice President, Corporate Mr. Blanchard has served as the Company’s Controller and Chief Accounting Vice President, Corporate Controller and Officer Chief Accounting Officer since May, 2005. Mr. Blanchard served as Controller of Varco from 1999 and as its Vice President from 2002 until its merger with the Company on March 11, 2005. Kevin Neveu 45 President – Rig Technology Mr. Neveu has served as President – Rig Technology since March 2005. He served as President of National Oilwell’s Rig Solutions – Western Hemisphere from May 2003 to March 2005 and as President of our Downhole Tools Group from June 2000 to May 2003, and from 1999 to 2000 as Vice President and Managing Director of Downhole Tools. Mark Reese 47 President – Expendable Products Mr. Reese has served as President – Expendable Products since January 2004. He served as President of the Company’s Mission Products Group from August 2000 to January 2004. From May 1997 to August 2000 he was Vice President of Operations for the Company’s Distribution Services Group. -20-
  • 25. Name Age Position Biography Dwight W. Rettig 45 Vice President, General Counsel Mr. Rettig has served as the Company’s and Secretary Vice President and General Counsel since February 1999, and from February 1998 to February 1999 as General Counsel of the Company’s Distribution Services Group. Haynes B. Smith, III 54 President – Services Mr. Smith has served as President – Services since March 2005. From May 2000 until Varco’s merger with the Company on March 11, 2005, Mr. Smith served as President- Varco Services Group. From July 1996 to May 2000, he was Varco’s Vice President- Western Hemisphere Operations. Clay C. Williams 43 Senior Vice President and Chief Mr. Williams has served as the Company’s Financial Officer Senior Vice President and Chief Financial Officer since March 2005. He served as Varco’s Vice President and Chief Financial Officer from January 2003 until its merger with the Company on March 11, 2005. From May 2002 until January 2003, Mr. Williams served as Varco’s Vice President Finance and Corporate Development. From February 2001 until May 2002, and from February 1997 until February 2000, he served as Varco’s Vice President— Corporate Development. -21-
  • 26. STOCK OWNERSHIP Security Ownership of Certain Beneficial Owners Based on information filed with the SEC as of the most recent practicable date, this table shows the number and percentage of shares beneficially owned by owners of more than five percent of the outstanding shares of the stock of the Company at December 31, 2005. The number and percentage of shares beneficially owned is based on 174,362,488 shares outstanding as of December 31, 2005. No. of Percent 5% Owners Shares of Class FMR Corp.(1) 26,151,337 15.00% 82 Devonshire Street Boston, MA 02109 (1) Shares owned at December 31, 2005, as reflected in Amendment No. 7 to Schedule 13G filed with the SEC on February 14, 2006. Fidelity Management & Research Company (quot;Fidelityquot;), a wholly-owned subsidiary of FMR Corp. (“FMR”), is the beneficial owner of 25,879,015 shares as a result of acting as investment adviser to various investment companies (the “Funds”). Edward C. Johnson 3d and FMR Corp., through its control of Fidelity, and the Funds each has sole power to dispose of the 25,879,015 shares owned by the Funds. Members of the family of Edward C. Johnson 3d, Chairman of FMR Corp., are the predominant owners, directly or through trusts, of Series B shares of common stock of FMR, representing 49% of the voting power of FMR. The Johnson family group and all other Series B Shareholders have entered into a shareholders’ voting agreement under which all Series B shares will be voted in accordance with the majority vote of Series 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. 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 250,637 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 over 250,637 shares and sole power to vote or to direct the voting of 250,637 shares owned by the institutional account(s). Strategic Advisers, Inc., a wholly-owned subsidiary of FMR Corp., provides investment advisory services to individuals. As such, FMR Corp.’s beneficial ownership includes 6,685 shares beneficially owned through Strategic Advisers, Inc. Fidelity International Limited and various foreign-based subsidiaries provide investment advisory and management services to a number of non-U.S. investment companies (the quot;International Fundsquot;) and certain institutional investors. Fidelity International Limited is the beneficial owner of 15,000 shares. -22-
  • 27. Security Ownership of Management This table shows the number and percentage of shares of the Company’s stock beneficially owned as of March 31, 2006 by each of our current directors and executive officers and by all current directors and executive officers as a group. The number and percentage of shares beneficially owned is based on 174,853,276 shares outstanding as of March 31, 2006. Beneficial ownership includes any shares as to which the director or executive officer has the right to acquire within 60 days of March 31, 2006 through the exercise of any stock option, warrant or other right. Each stockholder has sole voting and investment power, or shares these powers with his spouse, with respect to the shares beneficially owned. Shares Beneficially Owned Outstanding Options Exercisable Number of Common Within 60 Percent Shares(1) Days of Class* Name of Individual Greg L. Armstrong…………………………………………….. 1,672 2,500 * Robert E. Beauchamp…………………………………………. 1,250 14,167 * Robert Blanchard……………………………………………… 1,250 1,896 * Ben A. Guill…………………………………………………… 11,157 29,370 * David D. Harrison……………………………………………... 2,000 12,500 * Roger L. Jarvis………………………………………………… 369 20,000 * Eric L. Mattson………………………………………………... 8,410 18,388 * Merrill A. Miller, Jr....………………………………………… 172,839 83,333 * Kevin A. Neveu……………………………………………….. 0 30,000 * Mark A. Reese………………………………………………… 0 30,000 * Dwight W. Rettig……………………………………………… 0 30,000 * Jeffery A. Smisek……………………………………………… 7,139 4,173 * Haynes B. Smith………………………………………………. 21,387 10,035 * Clay C. Williams……………………………………………… 20,023 96,507 * James D. Woods………………………………………………. 6,116 4,173 * All current directors and executive officers as a group (15 persons)…………………………………………………… 253,612 387,042 * *Less than 1 percent. (1) Includes shares deemed held by executive officers and directors in the Company’s 401(k) plans and deferred compensation plans. -23-
  • 28. Securities Authorized for Issuance Under Equity Compensation Plans The following table sets forth information as of our fiscal year ended December 31, 2005, with respect to compensation plans under which our common stock may be issued: Number of securities remaining available for future issuance under Number of securities to equity compensation be issued upon exercise plans (excluding Weighted-average of outstanding options, exercise price of securities reflected in column (a)) warrants and rights outstanding options, (a) (c) (1) Plan Category warrants and rights (b) Equity compensation plans approved by security holders 4,340,842 $ 30.36 7,464,000 Equity compensation plans not approved by 0 0 0 security holders Total 4,340,842 $ 30.36 7,464,000 (1) Shares could be issued other than upon the exercise of stock options, warrants or rights; however, none are anticipated during 2006. On February 21, 2006, the Company granted 2,344,000 stock options at an exercise price of $66.58. -24-
  • 29. EXECUTIVE COMPENSATION The following table sets forth for the years ended December 31, 2005, 2004 and 2003 the compensation paid by the Company to its Chief Executive Officer and four other most highly compensated executive officers (the “Named Executive Officers”) serving in such capacity at December 31, 2005. SUMMARY COMPENSATION TABLE Long-Term Compensation Annual Compensation Awards Payouts Other Securities Name Annual Restricted Underly- All Other and Compen- Stock ing LTIP Compen- (2) Principal sation Award(s) Options/ Payouts sation Position Year Salary($) Bonus($) ($) ($) (1) SARs (#) ($) ($) Merrill A. Miller, Jr. 2005 650,000 776,685 - 2,097,000 64,000 - 11,077 President and CEO 2004 571,635 443,325 - - 100,000 - 18,187 2003 451,923 46,706 - - 50,000 - 14,250 Clay C. Williams (3) 2005 255,419 299,536 - - - - 10,600 Sr. Vice President 2004 - - - - - - - and CFO 2003 - - - - - - - Kevin A. Neveu (4) 2005 278,269 249,378 - - 30,000 - 8,400 Group President 2004 244,808 142,394 - - 30,000 - 15,375 Rig Technology 2003 217,308 16,844 - - 30,000 - 4,370 Mark A. Reese 2005 278,269 249,378 - - 30,000 - 8,400 Group President 2004 248,462 144,519 - - 30,000 - 15,425 Expendable Products 2003 196,154 15,204 - - 30,000 - 78,867 Haynes B. Smith (5) 2005 265,635 330,719 - - - - 11,024 Group President 2004 - - - - - - - Services 2003 - - - - - - - (1) For the year ended December 31, 2005, the amount disclosed in this column reflects the dollar value of 36,000 shares of restricted stock granted to Mr. Merrill A. Miller, Jr. on October 12, 2005. As of December 31, 2005, Mr. Miller held 36,000 shares of restricted stock with a dollar value of $2,257,200 on that date. (2) These amounts include: (a)The Company’s cash contributions for 2005 under the National Oilwell Varco Retirement and Thrift Plan, a defined contribution plan, on behalf of Mr. Miller - $8,400; Mr. Neveu - $8,400; and Mr. Reese - $8,400. (b)The Company’s cash contributions for 2005 under the National Oilwell Varco Supplemental Savings Plan, a defined contribution plan, on behalf of Mr. Miller - $2,677; Mr. Williams - $10,600; and Mr. Smith - $11,024. (3) Mr. Williams joined the Company in March 2005, upon consummation of the merger with Varco. Compensation paid by Varco (including stock options) to Mr. Williams for services rendered to Varco prior to the Merger is not included in the table. (4) Mr. Neveu has served as President of the Company’s Rig Technology Group since March 2005. -25-
  • 30. (5) Mr. Smith joined the Company in March 2005, upon consummation of the merger with Varco. Compensation paid by Varco (including stock options) to Mr. Smith for services rendered to Varco prior to the Merger is not included in the table. Grants of Options/SAR’s in Last Fiscal Year The following table provides information concerning stock options granted to Named Executive Officers during the fiscal year ended December 31, 2005. The Company has granted no stock appreciation rights. Gains Based on Assumed Rates of Stock Price Appreciation for Option 2005 Option Grants Term Percent of 2005 Employee Exercise Options Option Price per Expiration Assumed Assumed Granted Grants Share ($) Date Rate 5% ($) Rate 10% ($) 64,000 58.25 2,344,519 5,941,470 Merrill A. Miller, Jr. 5.3% 10/13/15 Clay C. Williams (1) - - - - - - 30,000 37.60 709,393 1,797,741 Kevin A. Neveu 2.5% 02/08/15 30,000 37.60 709,393 1,797,741 Mark A. Reese 2.5% 02/08/15 Haynes B. Smith (2) - - - - - - __________ (1) Stock options granted to Mr. Williams by Varco prior to the Merger are not included in the table. Varco granted Mr. Williams 31,500 stock options on January 26, 2005 with an exercise price of $30.39, which was assumed by the Company and converted into 26,343 stock options with an exercise price of $36.34 as a result of the Merger. The grant has a term of ten years from the date of grant and vest in three equal annual installments beginning one year from the date of grant. (2) Stock options granted to Mr. Smith by Varco prior to the Merger are not included in the table. Varco granted Mr. Smith 36,000 stock options on January 26, 2005 with an exercise price of $30.39, which was assumed by the Company and converted into 30,106 stock options with an exercise price of $36.34 as a result of the Merger. The grant has a term of ten years from the date of grant and vest in three equal annual installments beginning one year from the date of grant. 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 2005 and the value of unexercised options held by them at December 31, 2005. -26-
  • 31. Number of Unexercised Value of Unexercised Options at in-the-money Options 2005 Stock Option Exercises December 31, 2005 at December 31, 2005 Shares Acquired on Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable 197,036 $ 4,202,986 33,333 147,334 $ 1,149,322 $ 3,292,826 Merrill A. Miller, Jr. 87,726 26,343 3,636,689 694,402 Clay C. Williams - - 0 60,000 Kevin A. Neveu - 49,251 1,132,768 1,868,200 1,868,200 36,296 779,010 0 60,000 Mark A. Reese - 36,185 895,086 0 30,106 - 793,594 Haynes B. Smith The Company made a restricted stock award to Mr. Miller for 36,000 shares of Common Stock on October 12, 2005. The restricted stock award shall vest commencing on the third anniversary of the date of grant. The Company made no other awards during 2005 under any Long-Term Incentive Plan nor did the Company at December 31, 2005 have any defined benefit or actuarial plans under which benefits are determined primarily by final compensation and years of service. However, the Company has assumed defined benefit plans in connection with the Varco Merger, as further described below. Employment Contracts and Termination of Employment and Change-in-Control Arrangements Miller, Neveu and Reese The Company entered into an employment agreement on January 1, 2002 with Mr. Miller. Under the employment agreement, Mr. Miller is provided a base salary, currently set at $800,000. The employment agreement also entitles him to receive an annual bonus and to participate in the Company’s incentive, savings and retirement plans. The agreement has a term of three years 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. In addition, the agreement contains certain termination provisions. If the employment relationship is terminated by the Company for any reason other than • voluntary termination; • termination for cause (as defined); • death; or • 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 -27-
  • 32. 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 agreement, termination by the employee for “Good Reason” means • 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; • a failure by the Company to comply with the terms of the agreement; or • the requirement of the employee to relocate or to travel to a substantially greater extent than required at the date of the agreement. In addition, compensation will be “grossed up” for any excise tax imposed under Section 4999 of the Internal Revenue Code as a result of any payment or benefit provided to Mr. Miller under the employment agreement. The agreement also contains restrictions on competitive activities and solicitation of our employees for three years following the date of termination. We entered into employment agreements on January 1, 2002 with Messrs. Neveu and Reese that contain certain termination provisions. Under the employment agreements, Messrs. Neveu and Reese are provided base salary. The agreements have a one-year term and are automatically extended on an annual basis. The agreements also provide for participation in employee incentive plans, and employee benefits as generally provided to all employees. If the employment relationship is terminated by the Company for any reason other than • voluntary termination; • termination for cause (as defined); • death; or • 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 he 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 agreements also contain restrictions on competitive activities and solicitation of our employees for one year following the date of termination. 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. Williams and Smith The Company assumed the Amended and Restated Executive Agreements entered into on December 19, 2003 by Varco with Messrs. Williams and Smith. The agreements have an initial term that continues in effect through December 31, 2006 and are automatically extended for one or more additional terms of three (3) years each. The agreements contain certain termination provisions, as further described below under “Change in Control Severance Plan”. Varco Supplemental Executive Retirement Plan. Messrs. Williams and Smith were participants in the Amendment and Restatement of the Supplemental Executive Retirement Plan of Varco which -28-
  • 33. was assumed by the Company as a result of the Merger (the “Amended SERP”). The Amended SERP provides for retirement, death and disability benefits, payable over ten years. The annual benefit amount is generally equal to 50% of the average of a participant’s highest five calendar years of base salary, or if greater, in the case of a change of control that occurs prior to January 1, 2006 (which occurred as a result of the Merger), the average salary in effect since January 2001. This annual benefit is subject to a service reduction in the event the participant retires or his employment is terminated prior to reaching age 65 (excluded from this reduction are terminations following a change in control). Messrs. Williams and Smith are currently fully vested in the benefits provided by the Amended SERP. Based on historical earnings and presuming normal retirement at age 65, Messrs. Williams and Smith would be entitled to an annual benefit of approximately $137,017 and $148,572, respectively. Amendment and Restatement of the Varco Executive Retiree Medical Plan. Messrs. Williams and Smith were participants in the Amendment and Restatement of the Varco International, Inc. Executive Retiree Medical Plan which was assumed by the Company as a result of the Merger (the “Medical Plan”). Upon and following (i) certain retirements of a participant at or after age 55, or (ii) the death or disability of a participant, or (iii) terminations of a participant prior to age 55 (but benefits are not payable until age 55), the participant, his spouse and dependent children shall be provided the medical, dental, vision and prescription drug benefits that are then provided to the Company’s executive officers. These Medical Plan benefits are, however, conditioned upon the Company’s receipt of a monthly cash contribution in an amount not greater than that paid by the executive officers for similar benefits, and, in certain circumstances, the participant having achieved 10 years of service with the Company or any of its predecessor companies prior to retirement or termination of employment. Messrs. Williams and Smith are currently fully vested in the benefits provided by the Medical Plan. Change in Control Severance Plan. Messrs. Williams and Smith (for purposes of this subsection, each an “executive”) were participants in the Varco change in control severance plan, which was assumed by the Company as a result of the Merger. The change in control severance plan provides benefits in the case of a change in control of Varco, which occurred as a result of the Merger. As a result of the Merger, all of the outstanding options held by Messrs. Williams and Smith subject to the change in control severance plan became fully exercisable. Certain other benefits are available if, within two years after March 11, 2005, the executive is terminated other than for cause or if the executive terminates his employment for good reason (each as defined below). Upon such qualifying termination following a change in control, the executive is entitled to severance compensation and benefits, including those set forth below: • A lump sum payment equal to three times base salary; • A lump sum cash payment equal to the participant’s annual bonus at the higher of Expected Value (as defined) or actual results during the year of termination, which is pro-rated to the date of termination; • A lump sum payment equal to three times bonus at expected value; • Full vesting of all accrued benefits under the Company’s 401(k) Plan, SERP, Supplemental Savings Plan and Medical Plan, as applicable; -29-

Related Documents