UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ______________
Commission File Number 001-14273
CORE LABORATORIES N.V.
(Exact name of registrant as specified in its charter)
The Netherlands Not Applicable
State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Herengracht 424
1017 BZ Amsterdam
The Netherlands Not Applicable
(Address of principal executive offices) (Zip Code)
|
Registrant's telephone number, including area code: (31-20)420-3191
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes |X| No
Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Exchange Act. Yes |X| No
CORE LABORATORIES N.V.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2003
INDEX
Page
Part I -- Financial Information
Item 1 Financial Statements
Consolidated Balance Sheets at March 31, 2003 and December 31, 2002................ 1
Consolidated Statements of Operations for the Three Months Ended
March 31, 2003 and 2002............................................................ 2
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2003 and 2002............................................................ 3
Notes to Consolidated Financial Statements ........................................ 4
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................................... 10
Item 3 Quantitative and Qualitative Disclosures of Market Risk............................ 17
Item 3 Controls and Procedures............................................................ 18
Part II -- Other Information
Item 1 Legal Proceedings.................................................................. 21
Item 2 Changes in Securities.............................................................. 21
Item 3 Defaults Upon Senior Securities.................................................... 21
Item 4 Submission of Matters to a Vote of Security Holders ............................... 21
Item 5 Other Information.................................................................. 21
Item 6 Exhibits and Reports on Form 8-K................................................... 22
Signature ...................................................................... 23
Officer Certifications .......................................................... 24
ii
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CORE LABORATORIES N.V.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 31, December 31,
2003 2002
---------- ----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................... $ 10,623 $ 14,876
Accounts receivable, less allowance for doubtful accounts of
$9,122 and $8,853 at 2003 and 2002, respectively........................ 98,902 100,602
Inventories, net............................................................ 33,952 34,532
Prepaid expenses and other current assets................................... 15,003 13,671
Deferred tax asset.......................................................... 10,596 11,992
---------- ----------
Total current assets............................................................. 169,076 175,673
PROPERTY, PLANT AND EQUIPMENT, net............................................... 95,194 95,452
INTANGIBLES, net................................................................. 8,808 8,913
GOODWILL ........................................................................ 133,446 133,446
OTHER ASSETS ................................................................... 7,335 7,669
---------- ----------
Total assets..................................................... $ 413,859 $ 421,153
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and capital lease obligations.......... $ 1,185 $ 1,145
Accounts payable............................................................ 25,153 25,407
Accrued payroll and related cost............................................ 10,182 9,662
Taxes other than payroll and income......................................... 1,736 3,224
Unearned revenues........................................................... 2,561 1,709
Accrued interest............................................................ 1,304 2,891
Other accrued expenses...................................................... 4,730 6,046
---------- ----------
Total current liabilities........................................................ 46,851 50,084
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS..................................... 92,022 88,035
DEFERRED COMPENSATION............................................................ 3,855 3,544
DEFERRED TAX LIABILITY........................................................... 13,972 14,461
OTHER LONG-TERM LIABILITIES...................................................... 6,082 6,539
MINORITY INTEREST................................................................ 626 344
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preference shares, EUR 0.01 par value; 3,000,000 shares authorized,
none issued or outstanding.............................................. -- --
Common shares, EUR 0.01 par value; 100,000,000 shares authorized,
33,277,110 issued and 31,625,910 outstanding at 2003 and
33,275,910 issued and 32,415,510 outstanding at 2002.................... 546 546
Additional paid-in capital.................................................. 187,365 187,364
Retained earnings........................................................... 80,404 79,247
Treasury shares (at cost), 1,651,200 and 860,400 at 2003
and 2002, respectively.................................................. (17,864) (9,011)
----------- -----------
Total shareholders' equity.............................................. 250,451 258,146
---------- ----------
Total liabilities and shareholders' equity......................... $ 413,859 $ 421,153
========== ==========
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The accompanying notes are an integral part of these consolidated financial statements.
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
Three Months Ended
March 31,
----------------------------
2003 2002
---------- ----------
(Unaudited)
REVENUES:
SERVICES.................................................................... $ 74,876 $ 69,178
SALES....................................................................... 18,084 15,105
---------- ----------
92,960 84,283
OPERATING EXPENSES:
Cost of services............................................................ 62,232 57,120
Cost of sales............................................................... 16,127 13,864
General and administrative expenses ........................................ 5,569 4,728
Depreciation and amortization............................................... 5,185 4,922
Other expense, net.......................................................... 619 1,270
---------- ----------
89,732 81,904
INCOME FROM OPERATIONS........................................................... 3,228 2,379
INTEREST EXPENSE................................................................. 1,643 1,976
---------- ----------
INCOME BEFORE INCOME TAX EXPENSE AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE.................................... 1,585 403
INCOME TAX EXPENSE............................................................... 428 169
---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE........................................................ 1,157 234
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE.............................. - (16,692)
---------- ----------
NET INCOME (LOSS)................................................................ $ 1,157 $ (16,458)
========== ==========
PER SHARE INFORMATION:
BASIC EARNINGS PER SHARE BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE.............................. $ 0.04 $ 0.01
---------- ----------
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE......................... $ - $ (0.50)
---------- ----------
BASIC EARNINGS (LOSS) PER SHARE............................................. $ 0.04 $ (0.49)
========== ==========
WEIGHTED AVERAGE BASIC COMMON SHARES
OUTSTANDING.................................................... 32,085 33,210
========== ==========
DILUTED EARNINGS PER SHARE BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE.............................. $ 0.04 $ 0.01
---------- ----------
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE......................... $ - $ (0.50)
---------- ----------
DILUTED EARNINGS (LOSS) PER SHARE........................................... $ 0.04 $ (0.49)
========== ==========
WEIGHTED AVERAGE DILUTED COMMON SHARES
OUTSTANDING.................................................... 32,520 33,210
========== ==========
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The accompanying notes are an integral part of these consolidated financial statements.
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
----------------------------
2003 2002
---------- ----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities................................... $ 5,299 $ 5,269
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................................ (4,754) (4,013)
Proceeds from sale of fixed assets.......................................... 27 299
---------- ----------
Net cash used in investing activities................................... (4,727) (3,714)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt........................................................... (1,000) (5,014)
Proceeds from debt borrowings .............................................. 5,033 4,002
Capital lease obligation, net............................................... (6) (8)
Stock options exercised..................................................... 1 206
Repurchase of common shares................................................. (8,853) -
Other....................................................................... - (1)
---------- ----------
Net cash used in financing activities................................... (4,825) (815)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS........................................ (4,253) 740
CASH AND CASH EQUIVALENTS, beginning of period................................... 14,876 14,456
---------- ----------
CASH AND CASH EQUIVALENTS, end of period......................................... $ 10,623 $ 15,196
========== ==========
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The accompanying notes are an integral part of these consolidated financial statements.
CORE LABORATORIES N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying unaudited consolidated financial statements include the accounts of Core Laboratories and its subsidiaries and have been prepared in accordance with United States of America ("U.S.") generally accepted accounting principles ("GAAP") for interim financial information using the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The equity method of accounting is used for all investments in which we have less than a majority interest and do not exercise control. Minority interest has been recorded to reflect outside ownership attributable to consolidated subsidiaries that are less than 100% owned. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. Balance sheet information as of December 31, 2002 was derived from the 2002 annual audited consolidated financial statements. These financial statements should be read in conjunction with the financial statements and the summary of significant accounting policies and notes thereto included in our Form 10-K for the year ended December 31, 2002.
Stock-Based Compensation
SFAS 123, "Accounting for Stock-Based Compensation", encourages, but does not require, companies to record compensation cost for employee stock-based compensation plans at fair value as determined by generally recognized option pricing models such as the Black-Scholes or the Binomial model. We have adopted the disclosure-only provisions of SFAS 123. We apply APB Opinion 25, "Accounting for Stock Issued to Employees", which does not require compensation costs to be recorded on options which have exercise prices at least equal to the market value of the stock on the date of grant. Accordingly, we have not recognized compensation cost for our stock-based plans. We have, however, included option shares in the fully diluted shares outstanding calculation that is used to determine fully diluted earnings per share.
If we had accounted for our stock-based compensation plans using the fair value recognition provision of SFAS 123 and SFAS 148, our net income and diluted earnings per share would have been reduced to the pro forma amounts as follows (in thousands except per share data):
Three Months Ended
March 31,
--------------------------
2003 2002
---------- ----------
(Unaudited)
Net income (loss):
As reported............................ $ 1,157 $ (16,458)
Less: stock-based compensation
expense determined under fair
value method, net of tax........... (632) (1,022)
---------- ----------
Pro forma.............................. $ 525 $ (17,480)
========== ==========
Basic earnings (loss) per share:
As reported............................ $ 0.04 $ (0.49)
Pro forma.............................. $ 0.02 $ (0.53)
Diluted earnings (loss) per share:
As reported............................ $ 0.04 $ (0.49)
Pro forma.............................. $ 0.02 $ (0.53)
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Recent Pronouncements
In November 2002 the FASB issued Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements, Including Guarantees of Indebtedness of Others." FIN 45 requires that upon issuance of certain types of guarantees, a guarantor recognize and account for the fair value of the guarantee as a liability. FIN 45 contains exclusions to this requirement, including the exclusion of a parent's guarantee of its subsidiaries' debt to a third party. The initial recognition and measurement provisions of FIN 45 should be applied on a prospective basis for guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for financial statements of both interim and annual periods ending after December 31, 2002. The adoption of FIN 45 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation -- Transition and Disclosure". This Statement amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative methods of transition to SFAS No. 123's fair value method of accounting for stock-based employee compensation. This statement also amends the disclosure provision of SFAS No. 123 and APB No. 28, "Interim Financial Reporting", to require disclosure in the summary of significant accounting policies of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements, which we have adopted as of December 31, 2002. We do not expect the remaining provisions of SFAS 148 to have a material adverse effect upon our financial position or results of operations.
In January 2003 the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities," which addresses the consolidation of variable interest entities ("VIEs") by business enterprises that are the primary beneficiaries. A
VIE is an entity that does not have sufficient equity investment at risk to permit it to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest. The primary beneficiary of a VIE is the enterprise that has the majority of the risks or rewards associated with the VIE. The consolidation requirements of FIN 46 apply immediately to VIEs created after January 31, 2003. For VIEs created at an earlier date, the consolidation requirements apply in the first fiscal year or interim period beginning after June 15, 2003. Certain disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the VIE was established. Based on current information, we believe we have no material interests in VIEs that will require disclosure or consolidation under FIN 46.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS 149 amends Statement 133 for decisions made (1) as part of the Derivatives Implementation Group process that effectively required amendments to Statement 133, (2) in connection with other Board projects dealing with financial instruments, and (3) in connection with implementation issues raised in relation to the application of the definition of a derivative, in particular, the meaning of an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors, the meaning of underlying, and the characteristics of a derivative that contains financing components. SFAS 149 is not effective for contracts entered into or modified after June 30. 2003. The adoption of SFAS 149 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.
2. INVENTORIES
Inventories consist of manufactured goods, materials and supplies used for sales or services provided to customers. Inventories are stated at the lower of average cost or estimated net realizable value, and are reflected net of valuation reserves. The components of inventories are as follows (in thousands):
March 31, December 31,
2003 2002
---------- ----------
(Unaudited)
Finished goods.............................. $ 28,034 $ 25,954
Parts and materials......................... 4,212 5,486
Work in progress............................ 2,486 3,428
---------- ----------
Total inventories.................. 34,732 34,868
Less-- valuation reserves.............. 780 336
---------- ----------
Inventories, net............... $ 33,952 $ 34,532
========== ==========
6
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3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt is summarized in the following table (in thousands):
March 31, December 31,
2003 2002
---------- ----------
(Unaudited)
Credit Facility $100,000 revolving debt facilities............... $ 17,000 $ 13,000
Senior notes..................................................... 75,000 75,000
Capital lease obligations........................................ 79 80
Other indebtedness............................................... 1,128 1,100
---------- ----------
Total debt and capital leases obligations................ 93,207 89,180
Less-- current maturities........................................ 1,185 1,145
---------- ----------
Long-term debt and capital lease obligations, net of
current maturities................................ $ 92,022 $ 88,035
========== ==========
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In July 1999, we entered into a $100 million Credit Facility that provides for (i) a committed revolving debt facility of $95 million and (ii) a Euro denominated revolving debt facility with U.S. dollar equivalency of $5 million. At March 31, 2003, approximately $83.0 million was available for borrowing under the revolving Credit Facility. The Credit Facility bears interest from LIBOR plus 1.25% to a maximum of LIBOR plus 1.75% per annum. At March 31, 2003 the weighted average interest rate was 3.11% and the average interest rate in effect was 2.55%. For the year ended December 31, 2002 the weighted average interest rate was 3.18% and the average interest rate in effect was 2.95%. The revolving Credit Facility requires interest payments only, until maturity in June 2004.
In July 1999, we issued $75 million in Senior Notes that bear an average fixed interest rate of 8.16% and require annual principal payments beginning in July 2005 and continuing through July 2011.
The terms of the Credit Facility and Senior Notes require us to meet certain financial covenants, including, but not limited to, certain operational and minimum equity and cash flow ratios. We believe that we are in compliance with all such covenants contained in our credit agreements. All of our material wholly owned subsidiaries are guarantors or co-borrowers under both credit agreements.
4. SEGMENT REPORTING
Our business units have been aggregated into three complementary segments, which provide products and services for improving reservoir performance and increasing oil and gas recovery from new and existing fields.
o Reservoir Description: Encompasses the characterization of petroleum
reservoir rock, fluid and gas samples. We provide analytical and field
services to characterize properties of crude oil and petroleum products
to the oil and gas industry.
o Production Enhancement: Includes products and services relating to
reservoir well completions, perforations, stimulations and production.
We provide integrated services to evaluate the effectiveness of well
completions and to develop solutions aimed at increasing the
effectiveness of enhanced oil recovery projects.
o Reservoir Management: Combines and integrates information from reservoir description and production enhancement services to increase production and improve recovery of oil and gas from our clients' reservoirs.
Segment Analysis
We manage our business segments separately due to the different services and technologies each segment provides and requires. Results of these segments are presented below using the same accounting policies as used to prepare the Consolidated Balance Sheets and Statements of Operations. We evaluate performance based on income or loss from operations before income tax, interest and other operating income (expense). Summarized financial information concerning our segments is shown in the following tables (in thousands):
Three Months Ended March 31,
-----------------------------------------
2003 2002
--------------- ----------------
Revenues (Unaudited)
Reservoir Description.......$ 68,378 $ 60,656
Production Enhancement...... 26,630 23,733
Reservoir Management........ 14,699 12,757
Intersegment Eliminations... (16,745) (12,863)
--------------- ----------------
Consolidated..............$ 92,960 $ 84,283
=============== ================
Three Months Ended March 31,
-----------------------------------------
2003 2002
--------------- ----------------
Income (loss) before interest
and taxes
(Unaudited)
Reservoir Description....... $ 3,284 $ 3,714
Production Enhancement...... 1,605 554
Reservoir Management........ (1,450) (1,452)
Corporate and Other (1)..... (211) (437)
--------------- ----------------
Consolidated.............. $ 3,228 $ 2,379
=============== ================
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1) "Corporate and Other" represents those items that are not directly related to a particular segment.
5. EARNINGS PER SHARE
Basic earnings per common share amounts were computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the net additional shares, based on the treasury stock method, which would be issued if all dilutive stock options outstanding were exercised. The following table summarizes the calculation of weighted average common shares outstanding used in the computation of earnings per share (in thousands):
Three Months
Ended March 31,
2003 2002
--------------------------
Weighted average basic common shares outstanding. 32,085 33,210
Effect of dilutive stock options (1)............. 435 -
---------- ----------
Weighted average diluted common shares outstanding 32,520 33,210
========== ==========
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1) Options totaling 2,572,938 and 2,847,321 equivalent common shares were not included in the computation of weighted average diluted common shares for the three months ended March 31, 2003, and 2002, respectively, because the impact of these options was anti-dilutive.
6. SUBSEQUENT EVENT
On April 30, 2003 the Company acquired the assets of GOEX from Ensign-Bickford Company for approximately $10.0 million in cash consideration. Core Laboratories purchased substantially all the operating assets of GOEX, a privately held perforating charge manufacturer located in Fort Worth, Texas. The operating assets consisted of certain machinery, inventory and guaranteed receivables and included exclusive oilfield rights to market and sell detonation cord manufactured by the parent company of GOEX.
CORE LABORATORIES N.V.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Core Laboratories was established in 1936 and is one of the world's leading providers of proprietary and patented reservoir description, production enhancement and reservoir management services to the oil and gas industry. These services are directed toward enabling our clients to improve reservoir performance and increase oil and gas recovery from their producing fields. We have over 70 offices in more than 50 countries and have approximately 4,400 employees.
Risk Factors
This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, concerning among other things, our expected revenues, expenses and profit, our prospects, and business strategies and development, all of which are subject to certain risks, uncertainties and assumptions. When used in this document, words such as "anticipate" "believe", "expect", "plan", "intend", "estimate", "project", "budget", "forecast", "will", "should", "could", "may", "predict" and similar expressions are intended to identify forward-looking statements. We based our statements on our current expectations, estimates, historical trends, current conditions and other factors we believe are appropriate under the circumstances. Such statements are subject to various risks and uncertainties related to the oil and gas industry, business conditions, international markets, international political climates and other factors that are beyond our control. We caution you that these statements are not guarantees of future performance. Accordingly, our actual outcomes and results may differ materially from what we express or forecast in the forward-looking statements. Should one or more of these risks or uncertainties materialize, or should our underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected.
Industry risks
The oil and gas industry is highly cyclical and there are numerous factors affecting the supply of and demand for oil and natural gas, which include:
o market prices of oil and gas and expectations about future prices;
o cost of producing oil and natural gas;
o the level of drilling and production activity;
o mergers, consolidations and downsizing among our clients;
o coordination by OPEC;
o the impact of commodity prices on the expenditure levels of our
customers;
o financial condition of our client base and their ability to fund
capital expenditures;
o adverse weather conditions;
o civil unrest in oil producing countries; and
o level of consumption of oil, gas, and petrochemicals by consumers.
Business risks
Our results of operations could be adversely affected by risks and uncertainties in the business environment in which we operate, including:
o competition in our markets;
o the realization of anticipated synergies from acquired businesses and
future acquisitions;
o our ability to continue to develop or acquire new and useful
technology; and
o interest rates and the cost of capital.
International risks
We conduct our business in over 50 countries and are subject to political and economic instability and the laws and regulations in the countries in which we operate. These include:
o global economic conditions;
o political actions and requirements of national governments including
trade restrictions, and embargos and expropriations of assets;
o potential income tax liabilities in multiple jurisdictions;
o civil unrest;
o acts of terrorism;
o fluctuations and changes in currency exchange rates;
o the impact of inflation; and
o current conditions in Venezuela and Iraq.
Economic downturn and political events that continue to unfold have resulted in lower demand for our products and services. The war in Iraq and the anticipated repercussions from terrorist groups that the U.S. government has cautioned against have further heightened our exposure to international risks. Our global economy is highly influenced by public confidence in the geopolitical environment and the situation in the Middle East continues to be highly fluid; therefore, we will continue to experience heightened international risks.
Other risks
Our client base could be impacted by events we cannot predict or we could be impacted by a change in the conduct of business, transportation and security measures. In addition we are subject to other risk factors such as the impact of environmental regulations, litigation risks, as well as the dependence on the oil and gas industry. Many of these risks are beyond our control. In addition, future trends for pricing, margins, revenues and profitability remain difficult to predict in the industries we serve and under current economic and political conditions.
Off-Balance Sheet Arrangements
We hold investments in unconsolidated subsidiaries whose operations are in-line with those of our core businesses. Our investment and operating percentages in these entities are included in our consolidated financial statements. These entities are not considered special purpose entities nor do we have special off-balance sheet arrangements through these entities. They are not consolidated due to the limited influence we have in making management decisions. We do not expect our investments to have a material adverse effect on our financial position or results of operations.
Results of Operations
The discussion of operating results at the consolidated level is followed by a more detailed discussion of operating results by segment.
Our revenues are derived from services and product sales. Service revenues in the first quarter of 2003 were $74.9 million as compared to $69.2 million for the same period last year. The increase was primarily due to increased North American oilfield activities.
Cost of services expressed as a percentage of service revenue was consistent at 83% in the first quarter of 2003 as compared to the corresponding period in 2002. Cost of services in the first quarter of 2003 includes $1.2 million of expenses relating to the closure of our London based Reservoir Management facility.
Sales revenues increased to $18.1 million in the first quarter of 2003 from $15.1 million in the first quarter of 2002, a 20% increase. This increase was caused, in most part, to the increased drilling activity for natural gas in the North American markets. This increase in activity levels has caused higher demand for our well completion products.
Cost of sales in the first quarter of 2003 was 89% of sales revenue indicating an improvement as compared to 92% in the corresponding period in 2002 due primarily to cost reduction efforts we have made.
General and administrative expenses are comprised of corporate management and centralized administrative services that benefit our operating subsidiaries. We experienced an increase of $0.8 million in the first quarter of 2003 as compared to the corresponding period in 2002. General and administrative expenses remained unchanged at 6% of revenues in the first quarter of 2003 as compared to the corresponding period in 2002.
Depreciation and amortization expense in the first quarter of 2003 increased $0.3 million as compared to the corresponding period in 2002. This increase was due to additional capital investments that occurred in 2002.
Other expense in the first quarter of 2003 was $0.6 million compared to other expense of $1.3 million in the corresponding period in 2002. Other expense in 2003 consists primarily of foreign exchange losses of approximately $1.1 million offset by other income of approximately $0.5 million.
As a result of adoption of SFAS 142, in the first quarter of 2002, we reflected impairment of goodwill of $16.7 million related to our Reservoir Management segment. This impairment is reflected in the statement of operations as a cumulative effect of a change in accounting principle.
The 2003 effective income tax rate decreased to 27% of income before
cumulative effect of change in accounting principle from the 2002 rate of 42%.
This decrease reflects an increase in international earnings taxed at rates
lower than the Netherlands statutory rate and a decrease in expenses that are
not deductible for income tax purposes.
Segment Analysis
(in Thousands)
Our operations are managed primarily in three complementary segments - Reservoir Description, Production Enhancement and Reservoir Management.
Segment Information
Three Months Ended March 31,
-----------------------------------------
2003 2002
--------------- ----------------
Revenues (Unaudited)
Reservoir Description.......$ 54,541 $ 49,479
Production Enhancement...... 26,529 23,402
Reservoir Management........ 11,890 11,402
--------------- ----------------
Consolidated..............$ 92,960 $ 84,283
=============== ================
Three Months Ended March 31,
-----------------------------------------
2003 2002
--------------- ----------------
Income (loss) before interest
and taxes
(Unaudited)
Reservoir Description....... $ 3,284 $ 3,714
Production Enhancement...... 1,605 554
Reservoir Management........ (1,450) (1,452)
Corporate and Other (1)..... (211) (437)
--------------- ----------------
Consolidated.............. $ 3,228 $ 2,379
=============== ================
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1) "Corporate and Other" represents those items that are not directly related to a particular segment.
Reservoir Description
Revenues from the Reservoir Description segment increased $5.1 million in the first quarter of 2003. Increased international demand for our existing services and deepwater services, as well as improvements in North American oilfield activity levels, bolstered revenue in this segment. Income before interest and taxes decreased by $0.4 million creating operating margins of 6.0% compared to 7.5% in the same period last year.
Production Enhancement
Revenues from the Production Enhancement segment were $26.5 million in
the first quarter of 2003 compared to $23.4 million in the same period in the
prior year, an increase of 13%, due to increased demand for our well completion
and stimulation technologies, primarily in North American markets. Income before
interest and taxes increased $1.1 million to $1.6 million. Operating margins
improved to 6.0% in the first quarter of 2003 compared to 2.4% in the same
period in the prior year.
Reservoir Management
Revenues from the Reservoir Management segment in the first quarter of 2003 were $11.9 million, an increase of $0.5 million compared to the same period in the prior year. Included in the results of this segment was $1.2 million in expenses relating to the closure of the London based facility. Excluding this loss, the results of this segment improved as a result of our cost containment objectives.
Liquidity and Capital Resources
General
We have historically financed our activities through cash on hand, cash flows from operations, bank credit facilities, equity financing and the issuance of debt.
Cash Flows
During the first quarter of 2003, cash flows from operating activities were unchanged at $5.3 million from the same period in 2002. At March 31, 2003, we had working capital of $122.2 million and a current ratio of 3.6 to 1.0, compared to working capital of $125.6 million and a current ratio of 3.5 to 1.0 at December 31, 2002. We are a Netherlands holding company and we conduct substantially all of our operations through subsidiaries. Consequently, our cash flow is dependent upon the ability of our subsidiaries to pay cash dividends or otherwise distribute or advance funds to us.
Our investing activities used $4.7 million in the first quarter of 2003 compared to using $3.7 million in the same period in 2002. We had $0.7 million in additional capital expenditures in the first quarter of 2003 compared to the same period in the prior year.
Our significant financing activities included repurchasing approximately 791,000 shares for an aggregate purchase price of $8.9 million. Our total borrowings were $5.0 million, while repayments were approximately $1.0 million.
We maintain financial flexibility through our $100 million Credit Facility of which $83.0 million was available at March 31, 2003. In addition, we have Senior Notes, which bear interest at an average interest rate of 8.16%. The Senior Notes require semi-annual interest payments; interest payments on the Credit Facility are made based on the interest period selected. The terms of the Credit Facility and Senior Notes require us to meet certain financial and operational covenants. We believe that we are in compliance with all such covenants contained in our credit agreements at March 31, 2003. All of our material wholly owned subsidiaries are guarantors or co-borrowers under both credit agreements.
Our ability to maintain and grow our operating income and cash flows is dependent upon continued investing activities. We believe our future cash flows from operations, supplemented by our borrowing capacity and issuances of additional equity should be sufficient to fund debt requirements, capital expenditures, working capital and future acquisitions.
Outlook
We have established internal earnings targets that are based on current market conditions. Based on industry surveys, we anticipate North American spending by our clients to increase slightly from 2002 levels in response to increasing oilfield activity. However, we believe that the activity levels outside of North America will remain constant compared to 2002 levels. We expect to meet ongoing working capital and capital expenditure requirements from a combination of cash on hand, cash flow from operations and available borrowings under our revolving Credit Facility.
Recent Pronouncements
In November 2002 the FASB issued Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements, Including Guarantees of Indebtedness of Others." FIN 45 requires that upon issuance of certain types of guarantees, a guarantor recognize and account for the fair value of the guarantee as a liability. FIN 45 contains exclusions to this requirement, including the exclusion of a parent's guarantee of its subsidiaries' debt to a third party. The initial recognition and measurement provisions of FIN 45 should be applied on a prospective basis for guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for financial statements of both interim and annual periods ending after December 31, 2002. The adoption of FIN 45 is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation -- Transition and Disclosure". This Statement amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative methods of transition to SFAS No. 123's fair value method of accounting for stock-based employee compensation. This statement also amends the disclosure provision of SFAS No. 123 and APB No. 28, "Interim Financial Reporting", to require disclosure in the summary of significant accounting policies of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements, which we have adopted as of December 31, 2002. We do not expect the remaining provisions of SFAS 148 to have a material adverse effect upon our financial position or results of operations.
In January 2003 the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities," which addresses the consolidation of variable interest entities ("VIEs") by business enterprises that are the primary beneficiaries. A VIE is an entity that does not have sufficient equity investment at risk to permit it to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest. The primary beneficiary of a VIE is the enterprise that has the majority of the risks or rewards associated with the VIE. The consolidation requirements of FIN 46 apply immediately to VIEs created after January 31, 2003. For VIEs created at an earlier date, the consolidation requirements apply in the first fiscal year or interim period beginning after June 15, 2003. Certain disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the VIE was established. Based on current information, we believe we have no material interests in VIEs that will require disclosure or consolidation under FIN 46.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." SFAS 149 amends Statement
133 for decisions made (1) as part of the Derivatives Implementation Group
process that effectively required amendments to Statement 133, (2) in connection
with other Board projects dealing with financial instruments, and (3) in
connection with implementation issues raised in relation to the application of
the definition of a derivative, in particular, the meaning of an initial net
investment that is smaller than would be required for other types of contracts
that would be expected to have a similar response to changes in market factors,
the meaning of underlying, and the characteristics of a derivative that contains
financing components. SFAS 149 is not effective for contracts entered into or
modified after June 30. 2003. The adoption of SFAS 149 is not expected to have a
material impact on our consolidated financial position, results of operations or
cash flows.
CORE LABORATORIES N.V.
QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
Market Risk
We are exposed to market risk, which is the potential loss arising from
adverse changes in market prices and rates. We do not enter, or intend to enter,
into derivative financial instruments for trading or speculative purposes. We do
not believe that our exposure to market risks, which are primarily related to
(i) interest rate changes and (ii) fluctuations in foreign currency exchange
rates, (although we have experienced losses from time-to-time) are material.
During 1999, we issued fixed rate Senior Notes denominated in U.S. dollars. The proceeds were used to pay off variable rate term loans that significantly reduced our exposure to upward interest rate changes.
Interest Rate Risk
We are exposed to interest rate risk on our Credit Facility debt, which carries a variable interest rate. At March 31, 2003, our variable rate debt outstanding of $17.0 million approximated its fair value. A one percent change in the interest rate would result in a change of approximately $170,000 in interest expense on an annual basis. We attempt to balance the benefit of variable rate debt that has inherent increased risk with fixed rate debt that has less market risk.
Foreign Currency Risk
We operate in a number of international areas, which exposes us to foreign currency exchange rate risk. We do not hold or issue forward exchange contracts or other derivative instruments for speculative purposes. (A foreign exchange contract is a foreign currency transaction, defined as an agreement to exchange different currencies at a given date and at a specified rate.)
Credit Risk
Our financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Major banks or investment firms hold cash and cash equivalents such as deposits and temporary cash investments. Our trade receivables are with a variety of domestic, international and national oil and gas companies. Management considers this credit risk to be limited due to the creditworthiness and financial resources of these financial institutions and companies.
CONTROLS AND PROCEDURES
Quarterly Evaluation of the Company's Disclosure Controls and Internal Controls
Within the 90 days prior to the date of this quarterly report on Form 10-Q, we evaluated the effectiveness of the design and operation of our "disclosure controls and procedures" ("Disclosure Controls"), and our "internal controls and procedures for financial reporting" ("Internal Controls"). This evaluation (the "Controls Evaluation") was performed under the supervision and with the participation of management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO").
CEO and CFO Certifications
Immediately following the Signatures section of this Quarterly Report
are the CEO and CFO certifications (the Rule 302 Certifications) required by
Section 302 of the Sarbanes-Oxley Act of 2002. This Controls and Procedures
section of the Quarterly Report includes the information concerning the Controls
Evaluation referred to in the Rule 302 Certifications and it should be read in
conjunction with the Rule 302 Certifications for a more complete understanding
of the topics presented.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002 are included as exhibits filed with this form 10-Q.
Disclosure Controls and Internal Controls
Disclosure Controls are procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act, such as
this Quarterly Report, is recorded, processed, summarized and reported within
the time periods specified in the U.S. Securities and Exchange Commission's (the
SEC) rules and forms. Disclosure Controls are also designed to ensure that such
information is accumulated and communicated to our management, including the CEO
and CFO, as appropriate to allow timely decisions regarding required disclosure.
Internal Controls are procedures designed to provide reasonable assurance that
(1) our transactions are properly authorized; (2) our assets are safeguarded
against unauthorized or improper use; and (3) our transactions are properly
recorded and reported, all to permit the preparation of our financial statements
in conformity with generally accepted accounting principles.
Limitations on the Effectiveness of Controls
Our management, including the CEO and CFO, does not expect that our Disclosure Controls or our Internal Controls will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Scope of the Controls Evaluation
The evaluation of our Disclosure Controls and our Internal Controls included a review of the controls' objectives and design, the Company's implementation of the controls and the effect of the controls on the information generated for use in this Quarterly Report. In the course of the Controls Evaluation, we sought to identify data errors, controls problems or acts of fraud and confirm that appropriate corrective actions, including process improvements, were being undertaken. This type of evaluation is performed on a quarterly basis so that the conclusions of management, including the CEO and CFO, concerning controls effectiveness can be reported in our Quarterly Reports on Form 10-Q and Annual Report on Form 10-K. Our Internal Controls are also evaluated by other personnel in our finance organization, as well as our independent auditors who evaluate them in connection with determining their auditing procedures related to their report on our annual financial statements and not to provide assurance on our Internal Controls. The overall goals of these various evaluation activities are to monitor our Disclosure Controls and our Internal Controls, and to modify them as necessary. Our intent is to maintain the Disclosure Controls and the Internal Controls as dynamic systems that change as conditions warrant.
Among other matters, we sought in our evaluation to determine whether there were any "significant deficiencies" or "material weaknesses" in our Internal Controls, and whether we had identified any acts of fraud involving personnel with a significant role in the our Internal Controls. In professional auditing literature, "significant deficiencies" are referred to as "reportable conditions," which are control issues that could have a significant adverse effect on the ability to record, process, summarize and report financial data in the financial statements. Auditing literature defines "material weakness" as a particularly serious reportable condition where the internal control does not reduce to a relatively low level the risk that misstatements caused by error or fraud may occur in amounts that would be material in relation to the financial statements and the risk that such misstatements would not be detected within a timely period by employees in the normal course of performing their assigned functions. We also sought to deal with other controls matters in the Controls Evaluation, and in each case if a problem was identified, we considered what revision, improvement and/or correction to make in accordance with our ongoing procedures.
As described below under "Changes in Disclosure Controls and Internal Controls", we have identified certain deficiencies in our controls and procedures. However, we believe the corrective actions we have taken and the additional procedures we have performed, as described below in more detail, provide us with reasonable assurance that the identified control weaknesses have not limited the effectiveness of our controls and procedures.
Changes in Disclosure Controls and Internal Controls
Management and the Audit Committee are aware of conditions relating primarily to our operations primarily in Mexico and Venezuela that are considered to be a "material weakness" and "reportable conditions" which were identified in our Disclosure Controls and our Internal Controls review for the
year ended December 31, 2002. This review was performed under standards
established by the American Institute of Certified Public Accountants. In
particular, the aforementioned weaknesses in both our Disclosure Controls and
Internal Controls pertain to the following areas, (i) revenue cycle process,
including revenue recognition, calculation of deferred revenue and monitoring of
past due accounts, (ii) the process surrounding accurate reconciliation of
account balances and (iii) regular reconciliation of general ledger accounts to
supporting documentation. Management and the Audit Committee have taken actions
with respect to the material weaknesses and significant deficiencies, including
(1) the replacement of the head of an operating unit, the country manager, the
authorization to replace the country controller and the authorization to hire
five additional accounting personnel, (2) the expansion of our financial review
and internal control function by the authorization to hire two additional
professional internal auditors, (3) additional training (or re-training where
necessary) of our personnel worldwide, and (4) the acceleration of the
installation effort of our company-wide financial accounting system.
As part of our effort to have a common system of Internal Controls applicable to our operations world-wide, in 2001, we began an implementation of an enterprise-wide general ledger software system that included an Enterprise Resource Planning (ERP) System for our manufacturing operations and budget and planning modules, as well as new business processes and procedures to support the software designed to provide us with a common set of Internal Controls in those locations where the new system is implemented. These changes are the result of our normal business process to evaluate and upgrade or replace our systems software and related business processes to support our evolving operational needs. At the end of 2001, approximately 52% of our business activity (as expressed in terms of consolidated revenues) was on this software system utilizing common business process and controls, primarily in the United States. In 2002, we installed this software and common set of Internal Controls for our operations in Canada, the United Kingdom, and Mexico. In April 2003, we installed this software and common set of Internal Controls for our operations in The Netherlands. Currently, including the new locations on our common system, we have approximately 79% of our business activity on this software system utilizing common business process and controls. Further, we expect to install this same software system and related new business processes and procedures into additional locations during 2003. We expect to install this software and common set of Internal Controls for our operations in Venezuela, Australia, Thailand and certain other locations in Europe. We expect to have, by the end of 2003, approximately 84% of our business activity on this software system utilizing common business process and controls. As this system is installed into these locations in 2003, we will implement a common set of Internal Controls through the new business processes and procedures.
Further, Management believes that the corrective actions, when taken, will provide us with reasonable assurance that the identified issues will not limit the effectiveness of our Disclosure Controls or Internal Controls. Management believes that we have successfully implemented procedures addressing the "material weakness" and "reportable conditions" in our controls.
Conclusions
Based upon the Controls Evaluation, our CEO and CFO have concluded that, subject to the limitations and changes noted above, our Disclosure Controls are effective to ensure that material information relating to Core Laboratories and its consolidated subsidiaries is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared, and that our Internal Controls are effective to provide reasonable assurance that our financial statements are fairly presented in conformity with generally accepted accounting principles.
CORE LABORATORIES N.V.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
We are from time to time subject to legal proceedings and claims that arise in the ordinary course of business. Since April 2003, several putative class action lawsuits have been filed against us and certain of our officers in the United States District Court for the Southern District of New York, alleging, among other things, that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. While none of the defendants have been served yet with any of the lawsuits, we understand that the complaints generally allege that the defendants overstated the company's revenues and net income in 2002. The complaints seek unspecified monetary damages. We intend to vigorously defend these suits
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a)
Incorporated by
Exhibit reference from the
No. Exhibit Title following documents
---------------------------------------------------------------------------------------------------------------------------
10.1 - Amendment to Core Laboratories N.V. 1995 Long-Term Incentive Plan (As Amended and Filed herewith
Restated Effective as of May 29, 1997)
10.2 - Amendment to Core Laboratories Supplement Executive Retirement Plan Filed herewith
10.3 - Amendment to Core Laboratories Supplement Executive Retirement Plan Filed herewith
10.4 - Amendment to Form of Restated Employment Agreement dated December Filed herewith
31, 2001 between Core Laboratories N.V. and David Demshur
10.5 - Amendment to Form of Restated Employment Agreement dated December Filed herewith
31, 2001 between Core Laboratories N.V. and Richard L. Bergmark
10.6 - Amendment to Form of Restated Employment Agreement dated December Filed herewith
31, 2001 between Core Laboratories N.V. and Monty L. Davis
10.7 - Amendment to Form of Restated Employment Agreement dated December Filed herewith
31, 2001 between Core Laboratories N.V. and John D. Denson
99(a) - Certification of CEO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Filed herewith
Section 906 of the Sarbanes-Oxley Act of 2002
99(b) - Certification of CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Filed herewith
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
|
During the quarter ended March 31, 2003, we filed Form 8-K, reporting under Item 5 "Other Events". The report disclosed the press release announcing the restatement of previously issued financial information for 2002 and the expected results of the fourth quarter of 2002.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant, Core Laboratories N.V., has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CORE LABORATORIES N.V.
by: Core Laboratories International B.V.
Dated: May 15, 2003 By: /s/ Richard L. Bergmark
-----------------------
Richard L. Bergmark
Chief Financial Officer
|
Certification
I, David M. Demshur, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Core Laboratories N.V.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and c) presented in this
quarterly report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
By: /s/ David M. Demshur
-----------------------
David M. Demshur
Chief Executive Officer
|
Certification
I, Richard L. Bergmark, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Core Laboratories N.V.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and c) presented in this
quarterly report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
By: /s/ Richard L. Bergmark
-----------------------
Richard L. Bergmark
Chief Financial Officer
|
Exhibit 10.1
AMENDMENT TO
CORE LABORATORIES N.V.
1995 LONG-TERM INCENTIVE PLAN
(As Amended and Restated Effective as of May 29, 1997)
WHEREAS, Core Laboratories N.V. (the "Company") has heretofore adopted the Core Laboratories N.V. 1995 Long-Term Incentive Plan (As Amended and Restated Effective as of May 29, 1997) (the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan is amended hereby as follows:
1. Effective as of May 29, 1997, the definition of the term "Committee" shall be deleted from Section 2 and the following shall be substituted therefor:
"`Committee' means a committee or subcommittee appointed by the Board to administer the Plan, which committee or subcommittee shall be comprised solely of two or more individuals who qualify as "Non-Employee Directors" within the meaning of Rule 16b-3."
2. Effective as of February 28, 2003, the text of Section 7(c) is deleted and replaced with the following:
"A stock option shall become fully exercisable and restrictions on Restricted Shares shall lapse upon a Change in Control (as hereinafter defined) of the Company. Change in Control shall mean (i) a merger of the Company with another entity, a consolidation involving the Company, or the sale of all or substantially all of the assets of the Company to another entity if, in any such case, (A) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of
the resulting entity immediately after such transaction or
event, (ii) shareholder approval of a plan of dissolution or
liquidation of the Company, (iii) when any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the
Exchange Act, (other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
any affiliate of the Company), acquires or gains ownership or
control (including, without limitation, power to vote) of more
than 30% of the combined voting power of the outstanding
securities of, (A) if the Company has not engaged in a merger
or consolidation, the Company, or (B) if the Company has
engaged in a merger or consolidation, the resulting entity, or
(iv) a change in the composition of the Board, as a result of
which fewer than a majority of the supervisory directors are
Incumbent Directors. For purposes of the preceding sentence,
(1) "resulting entity" in the context of a transaction or
event that is a merger, consolidation or sale of all or
substantially all assets shall mean the surviving entity (or
acquiring entity in the case of an asset sale) unless the
surviving entity (or acquiring entity in the case of an asset
sale) is a subsidiary of another entity and the holders of
common equity of the Company receive capital stock of such
other entity in such transaction or event, in which event the
resulting entity shall be such other entity, (2) subsequent to
the consummation of a merger or consolidation that does not
constitute a Change in Control, the term "Company" shall refer
to the resulting entity and the term "Board" shall refer to
the board of directors (or comparable governing body) of the
resulting entity, and (3) "Incumbent Directors" shall mean
directors who either (A) are directors of the Company as of
February 28, 2003, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least
two-thirds of the Incumbent Directors at the time of such
election or nomination, but Incumbent Director shall not
include an individual whose election or nomination occurs as a
result of either (A) an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or (B) an actual or
threatened solicitation of proxies or consents by or on behalf
of a person other than the Board."
3. Effective as of February 28, 2003, Section 17 is deleted in its entirety; provided, however, this deletion of Section 17 shall not apply to a Participant's Awards outstanding on the effective date of this Amendment unless the Participant consents to the application of this Amendment to such Awards.
4. As amended hereby, the Plan is specifically ratified and reaffirmed.
CORE LABORATORIES N.V.
By Core Laboratories International B.V.,
its sole managing director
Exhibit 10.2
AMENDMENT
TO CORE LABORATORIES
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Core Laboratories N.V. (the "Company") and ("Executive") have entered into that certain Core Laboratories Supplemental Executive Retirement Plan, as amended (the "SERP"); and
WHEREAS, the Company and Executive desire to amend the SERP in certain respects;
NOW, THEREFORE, the SERP is amended hereby effective as of February 28, 2003, as follows:
1. The text of Section 1.1(4) is amended in its entirety to read as follows:
"Change in Control: Any of the following: (i) a merger of the Company with another entity, a consolidation involving the Company, or the sale of all or substantially all of the assets of the Company to another entity if, in any such case, (A) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event, (ii) shareholder approval of a plan of dissolution or liquidation of the Company, (iii) when any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any affiliate of the Company), acquires or gains ownership or control (including, without limitation, power to vote) of more than 30% of the combined voting power of the outstanding securities of, (A) if the Company has not engaged in a merger or consolidation, the Company, or (B) if the Company has engaged in a merger or consolidation, the resulting entity, or
(iv) a change in the composition of the Board, as a result of
which fewer than a majority of the supervisory directors are
Incumbent Directors. For purposes of the preceding sentence,
(1) "resulting entity" in the context of a transaction or
event that is a merger, consolidation or sale of all or
substantially all assets shall mean the surviving entity (or
acquiring entity in the case of an asset sale) unless the
surviving entity (or acquiring entity in the case of an asset
sale) is a subsidiary of another entity and the holders of
common equity of the Company receive capital stock of such
other entity in such transaction or event, in which event the
resulting entity shall be such other entity, (2) subsequent to
the consummation of a merger or consolidation that does not
constitute a Change in Control, the term "Company" shall refer
to the resulting entity and the term "Board" shall refer to
the board of directors (or comparable governing body) of the
resulting entity, and (3) "Incumbent Directors" shall mean
directors who either (A) are directors of the Company as of
February 28, 2003, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least
two-thirds of the Incumbent Directors at the time of such
election or nomination, but Incumbent Director shall not
include an individual whose election or nomination occurs as a
result of either (A) an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or (B) an actual or
threatened solicitation of proxies or consents by or on behalf
of a person other than the Board."
2. Section 1.1 is amended by adding thereto a new paragraph (27) to read as follows:
"(27) Actuarial Equivalent or Actuarial Equivalence: A lump
sum payment that, as of the lump sum payment date, is
actuarially equal in value to the aggregate amounts of
Executive's vested accrued benefit expected to be received
under the annual installment form of payment based upon
(i) the Applicable Mortality Table (as defined in section
417(e)(3)(A)(ii)(I) of the Code) and (ii) using an interest
rate that is 80% of the applicable federal rate (determined
under section 1274(d) of the Code and the regulations
thereunder) compounded annually, for the month in which the
lump sum is paid."
3. Article II is amended by adding thereto a new Section 2.6 to read as follows:
"2.6 Change in Control Lump Sum Elections. In lieu of the annual installment payments provided by Section 2.3, Executive may irrevocably elect (in such manner as proscribed by the Committee) to receive his accrued benefit paid in a single lump sum payment on or as soon as administratively feasible following a Change in Control. Such lump sum shall be an amount that is the Actuarial Equivalent of the installment payments that would otherwise be payable to Executive beginning on his Retirement Date (or if such installments have already commenced prior to the Change in Control, the Actuarial Equivalent of the remaining installments due Executive (or his Designated Beneficiary if he has died prior to the Change in Control)). Except as provided in the following paragraph, to be effective, the election must be made while the Executive is an employee or a director of the Company and at least one year prior to both the date of Executive's 65th birthday and the date of the Change in Control.
If Executive has not timely made the election provided in the preceding paragraph, or is not eligible to make such election as provided in the last sentence of such paragraph, then Executive (or, if deceased at the time of the Change in Control, his Designated Beneficiary) may irrevocably elect (in such manner as proscribed by the Committee) to receive a lump sum payment on or as soon as administratively feasible after the Change in Control (or, if the election is made following the Change in Control, as soon as administratively feasible after the election). The lump sum shall be an amount equal to 90% of the Actuarial Equivalence of his then accrued benefit (or, if it is already in pay status, the accrued benefit remaining to be paid). Upon such lump sum payment, the remaining portion of Executive's accrued benefit automatically shall be forfeited."
4. Section 7.1 is amended in its entirety to read as follows:
"7.1 Amendment. The Board may, in its discretion, amend the Plan, in whole or in part, at any time; provided, however, that no amendment shall be made that would reduce the accrued benefit of Executive or, without Executive's written consent, adversely affect any of Executive's rights (vested or contingent) hereunder with respect to his accrued benefit, including, without limitation, the timing and the form of payment of such benefit and the definition of Actuarial Equivalent used to determine the lump sum present value of his accrued benefit."
5. Section 7.2 is amended in its entirety to read as follows:
"7.2 Termination. The Board may, in its discretion, terminate the Plan in whole or in part at any time; provided, however, if Executive is then employed by the Company Group or any affiliate of the Company Group, he automatically shall acquire a 100% Vested Interest in his accrued benefit. In the
event the Plan is terminated, notwithstanding any other provision of the Plan, the Board, it its discretion, may pay Executive his payable but unpaid vested accrued Retirement Benefit (or, in the case of Executive's death, Executive's Designated Beneficiary any payable but unpaid Death Benefit or Retirement Benefit) either in accordance with Article II or III, as applicable, or in any other manner the Board deems appropriate, including, without limitation, a lump sum payment that is the Actuarial Equivalent of such unpaid Retirement Benefit or Death Benefit."
6. As amended hereby, the SERP is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective for all purposes as of February 28, 2003.
CORE LABORATORIES N.V.
By Core Laboratories International B.V.,
its sole managing director
Exhibit 10.3
AMENDMENT TO
CORE LABORATORIES
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, CORE LABORATORIES N.V. and its participating affiliates (the "Company") have heretofore adopted the CORE LABORATORIES SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (the "Plan") for the benefit of certain employees and independent directors of the Company; and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of February 28, 2003:
1. Section 1.1 is amended by adding thereto new paragraphs (17) and
(18) to read as follows:
"(17)Actuarial Equivalent or Actuarial Equivalence: A lump sum
payment with respect to a Participant that, as of the lump sum
payment date, is actuarially equal in value to the aggregate
amounts of the Participant's vested accrued benefit expected to be
received under the annual installment form of payment based upon
(i) the Applicable Mortality Table (as defined in section 417(e)
(3)(A)(ii)(I) of the Internal Revenue Code) and (ii) using an
interest rate that is 80% of the applicable federal rate
(determined under section 1274(d) of the Internal Revenue Code and
the regulations thereunder) compounded annually, for the month in
which the lump sum is paid.
(18) Change in Control: Any of the following: (i) a merger of the Company with another entity, a consolidation involving the Company, or the sale of all or substantially all of the assets of the Company to another entity if, in any such case, (A) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board immediately prior to such transaction or event shall not
constitute at least a majority of the board of directors of
the resulting entity immediately after such transaction or
event, (ii) shareholder approval of a plan of dissolution or
liquidation of the Company, (iii) when any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
any affiliate of the Company), acquires or gains ownership or
control (including, without limitation, power to vote) of more
than 30% of the combined voting power of the outstanding
securities of, (A) if the Company has not engaged in a merger
or consolidation, the Company, or (B) if the Company has
engaged in a merger or consolidation, the resulting entity, or
(iv) a change in the composition of the Board, as a result of
which fewer than a majority of the supervisory directors are
Incumbent Directors. For purposes of the preceding sentence,
(1) "resulting entity" in the context of a transaction or
event that is a merger, consolidation or sale of all or
substantially all assets shall mean the surviving entity (or
acquiring entity in the case of an asset sale) unless the
surviving entity (or acquiring entity in the case of an asset
sale) is a subsidiary of another entity and the holders of
common equity of the Company receive capital stock of such
other entity in such transaction or event, in which event the
resulting entity shall be such other entity, (2) subsequent to
the consummation of a merger or consolidation that does not
constitute a Change in Control, the term "Company" shall refer
to the resulting entity and the term "Board" shall refer to
the board of directors (or comparable governing body) of the
resulting entity, and (3) "Incumbent Directors" shall mean
directors who either (A) are directors of the Company as of
February 28, 2003, or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least
two-thirds of the Incumbent Directors at the time of such
election or nomination, but Incumbent Director shall not
include an individual whose election or nomination occurs as a
result of either (A) an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or (B) an actual or
threatened solicitation of proxies or consents by or on behalf
of a person other than the Board. For purposes of this Section
1.1(18), all references to the "Company" shall refer solely to
Core Laboratories N.V. except as expressly provided in clause
(2) of the preceding sentence."
2. Article IV is amended by adding thereto a new Section 4.4 to read as follows:
"4.4 In lieu of the annual installment payments provided by
Section 4.1, a Participant may irrevocably elect (in such manner as
proscribed by the Committee) to receive his accrued benefit paid in a
single lump sum payment on or as soon as administratively feasible
following a Change in Control. Such lump sum shall be an amount that is
the Actuarial Equivalent of the installment payments that would
otherwise be payable to the Participant beginning on his Retirement
Date (or if such installments have already commenced prior to the
Change in Control, the Actuarial Equivalent of the remaining installments due the Participant (or his Designated Beneficiary if he has died prior to the Change in Control)). Except as provided in the following paragraph, to be effective, the election must be made while the Participant is an employee or a director of the Company and at least one year prior to both the date of the Participant's 65th birthday and the date of the Change in Control.
If the Participant has not timely made the election provided in the preceding paragraph, or is not eligible to make such election as provided in the last sentence of such paragraph, then the Participant (or, if deceased at the time of the Change in Control, his Designated Beneficiary) may irrevocably elect (in such manner as proscribed by the Committee) to receive a lump sum payment on or as soon as administratively feasible after the Change in Control (or, if the election is made following the Change in Control, as soon as administratively feasible after the election). The lump sum shall be an amount equal to 90% of the Actuarial Equivalence of his then accrued benefit (or, if it is already in pay status, the accrued benefit remaining to be paid). Upon such lump sum payment, the remaining portion of the Participant's accrued benefit automatically shall be forfeited."
3. Section 9.1 is amended in its entirety to read as follows:
"9.1 The Board may, in its discretion, amend the Plan, in whole or in part, at any time; provided, however, that no amendment shall be made that would reduce the accrued benefit of any Participant or, without the Participant's written consent, adversely affect any of the Participant's rights (vested or contingent) hereunder with respect to his accrued benefit, including, without limitation, the timing and the form of payment of such benefit and the definition of Actuarial Equivalent used to determine the lump sum present value of his accrued benefit."
4. Section 9.2 is amended in its entirety to read as follows:
"9.2 The Board may, in its discretion, terminate the Plan in whole or in part at any time. In the event the Plan is terminated, notwithstanding any other provision of the Plan, the Board, it its discretion, may pay each Participant his payable but unpaid vested accrued Retirement Benefit (or, in the case of a deceased Participant, such Participant's Designated Beneficiary any payable but unpaid Death Benefit or Retirement Benefit) either in accordance with Articles IV and V, as applicable, or in any other manner the Board deems appropriate, including, without limitation, a lump sum payment that is the Actuarial Equivalent of such unpaid Retirement Benefit or Death Benefit."
5. As amended hereby, the Plan is specifically ratified and reaffirmed.
EXECUTED on this 28th day of February, 2003.
CORE LABORATORIES N.V.
By Core Laboratories International B.V.,
its sole managing director
Exhibit 10.4
AMENDMENT TO
EMPLOYMENT AGREEMENT
(Restated as of December 31, 2001)
WHEREAS, Core Laboratories N.V. and David M. Demshur have heretofore entered into that certain Employment Agreement (Restated as of December 31, 2001) (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as provided herein;
NOW, THEREFORE, the Agreement is amended hereby effective as of February 28, 2003 (the "Effective Date"), as follows:
1. Section 4.5 is amended by deleting the second sentence thereof and adding the following new sentences to the end of such Section:
"All determinations required to be made under this Section 4.5, including, without limitation, whether and when a Gross-up Payment is required and the amount of such Gross-up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the independent public accounting firm used by Company immediately prior to the Change in Control for purposes of preparing Company's audited financial statements. However, in the event such accounting firm is also serving as an accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder."
2. Section 6.1 is amended by deleting the last sentence thereof and adding the following new sentences to the end of such Section:
"The restrictions placed on Executive by this Section 6.1 shall apply during the period that Executive is employed by Company and for the two-year period thereafter if Executive's employment with Company is terminated for any reason other than (i) by Executive for a Good Reason or (ii) by Company without Cause. Notwithstanding the foregoing, from and after the date upon which a Change in Control occurs, such restrictions shall cease to apply to Executive except for any period during which he is employed by Company."
3. Section 8.1(4) is amended in its entirety to read as follows:
`"Change in Control' shall mean (i) a merger of Company with another entity, a consolidation involving Company, or the sale of all or substantially all of the assets of Company to another entity if, in any such case, (A) the holders of equity securities of Company immediately prior to such transaction or
event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board of Directors immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event, (ii) shareholder approval of a plan of dissolution or liquidation of Company, (iii) when any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than a trustee or other fiduciary holding securities under an employee benefit plan of Company or any affiliate of Company), acquires or gains ownership or control (including, without limitation, power to vote) of more than 30% of the combined voting power of the outstanding securities of, (A) if Company has not engaged in a merger or consolidation, Company, or (B) if Company has engaged in a merger or consolidation, the resulting entity, or (iv) a change in the composition of the Board of Directors, as a result of which fewer than a majority of the supervisory directors are Incumbent Directors. For purposes of the preceding sentence, (1) "resulting entity" in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common equity of Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, (2) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term "Company" shall refer to the resulting entity and the term "Board of Directors" shall refer to the board of directors (or comparable governing body) of the resulting entity, and (3) "Incumbent Directors" shall mean directors who either (A) are directors of Company as of February 28, 2003, or (B) are elected, or nominated for election, to the Board of Directors with the affirmative votes of at least two-thirds of
the Incumbent Directors at the time of such election or
nomination, but Incumbent Director shall not include an
individual whose election or nomination occurs as a result of
either (A) an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or (B) an actual or threatened
solicitation of proxies or consents by or on behalf of a
person other than the Board of Directors. For purposes of this
Section 8.1(4), all references to "Company" shall refer solely
to Core Laboratories N.V. except as expressly provided in
clause (2) of the preceding sentence."
4. Section 8.1(5)(iii) is amended in its entirety to read as follows:
"All of the outstanding stock options granted by Company to Executive shall become fully vested and immediately exercisable in full upon Executive's termination of employment and shall remain exercisable for a period of 12 months thereafter (three months thereafter in the case of Grandfathered Options) or for such greater period as may be provided in the plan or plans pursuant to which any such stock options were granted (but in no event shall any such stock option be exercisable after the expiration of the original term of such stock option). For purposes of the preceding sentence, the term "Grandfathered Options" means (1) each stock option granted by Company to Executive on or before February 28, 2003, with respect to which the purchase price per share under such stock option is less than the Fair Market Value (as such term is defined in the Core Laboratories N.V. 1995 Long-Term Incentive Plan, as amended) per share as of the date of execution of the amendment to this Agreement implementing this provision and (2) each other stock option granted by Company to Executive on or before February 28, 2003, that qualifies as an incentive stock option (within the meaning of Section 422 of the Code) and which would cease to qualify as such an incentive stock option if the period during which such stock option could be exercised after termination of employment was extended from three months to 12 months as provided in the preceding sentence."
5. Section 8.1(5)(v) is amended by adding thereto a new sentence to read as follows:
"If the receipt of any benefit or payment under this clause
(v) ("Benefit") is taxable to Executive, then Company shall
pay to Executive an additional amount in cash ("Additional
Payment") equal to all taxes (including any interest or
penalties imposed with respect to such taxes) Executive incurs
with respect to such Benefit and the Additional Payment."
6. Section 8.1(6) is amended in its entirety to read as follows:
"`Change in Control Payment' shall mean a lump sum payment in
an amount equal to three times the sum of (i) Executive's
annual base salary as in effect pursuant to Section 2.1
immediately prior to Executive's termination of employment
with Company and (ii) the greater of (x) the highest annual
bonus earned by Executive during any of the last three fiscal
years of Company ending prior to the Change in Control, and
(y) 45% of the maximum annual incentive bonus amount pursuant
to Section 2.2 that Executive could have earned for the year
during which Executive's employment with Company terminates."
7. Section VII is amended by adding thereto a new Section 7.12 to read as follows:
"7.12 Legal Fees and Expenses: It is the intent of Company that Executive not be required to bear any legal fees or related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement (by litigation or otherwise) with respect to any termination of his employment on or after a Change in Control. Accordingly, if it should appear to Executive that Company has failed to comply with any of its obligations under this Agreement or in the event that Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Executive any benefit provided or intended to be provided to Executive hereunder, in each case with respect to his rights or obligations upon or following a termination of his employment on or after a Change in Control, then Company irrevocably authorizes the Executive from time to time to retain counsel of Executive's choice, at the expense of Company, to advise and represent Executive in connection with any such interpretation, enforcement or defense, including, without limitation, the initiation or defense of any litigation or other legal action, whether by or against Company or any director, officer, stockholder or other person affiliated with Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between Company and such counsel, Company irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and in that connection Company and Executive agree that a confidential relationship will exist between Executive and such counsel. Without regard to whether Executive prevails, in whole or in part, in connection with any of the foregoing, Company will pay and be solely financially responsible for any and all attorneys' fees and related expenses incurred by Executive in connection with any of the foregoing, except to the extent that a final judgment
no longer subject to appeal finds that a claim or defense asserted by Executive was frivolous. In such a case, the portion of such fees and expenses incurred by Executive attributable to such frivolous claim or defense shall become Executive's sole responsibility and any funds advanced by Company with respect to the same shall be promptly returned to Company by Executive without interest."
8. As amended hereby, the Agreement is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the 28th day of February, 2003, effective for all purposes as of the Effective Date.
CORE LABORATORIES N.V.
By Core Laboratories International B.V.,
its sole managing director
Exhibit 10.5
AMENDMENT TO
EMPLOYMENT AGREEMENT
(Restated as of December 31, 2001)
WHEREAS, Core Laboratories N.V. and Richard L. Bergmark have heretofore entered into that certain Employment Agreement (Restated as of December 31, 2001) (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as provided herein;
NOW, THEREFORE, the Agreement is amended hereby effective as of February 28, 2003 (the "Effective Date"), as follows:
1. Section 4.5 is amended by deleting the second sentence thereof and adding the following new sentences to the end of such Section:
"All determinations required to be made under this Section 4.5, including, without limitation, whether and when a Gross-up Payment is required and the amount of such Gross-up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the independent public accounting firm used by Company immediately prior to the Change in Control for purposes of preparing Company's audited financial statements. However, in the event such accounting firm is also serving as an accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder."
2. Section 6.1 is amended by deleting the last sentence thereof and adding the following new sentences to the end of such Section:
"The restrictions placed on Executive by this Section 6.1 shall apply during the period that Executive is employed by Company and for the two-year period thereafter if Executive's employment with Company is terminated for any reason other than (i) by Executive for a Good Reason or (ii) by Company without Cause. Notwithstanding the foregoing, from and after the date upon which a Change in Control occurs, such restrictions shall cease to apply to Executive except for any period during which he is employed by Company."
3. Section 8.1(4) is amended in its entirety to read as follows:
`"Change in Control' shall mean (i) a merger of Company with another entity, a consolidation involving Company, or the sale of all or substantially all of the assets of Company to another entity if, in any such case, (A) the holders of equity
securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board of Directors immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event, (ii) shareholder approval of a plan of dissolution or liquidation of Company, (iii) when any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than a trustee or other fiduciary holding securities under an employee benefit plan of Company or any affiliate of Company), acquires or gains ownership or control (including, without limitation, power to vote) of more than 30% of the combined voting power of the outstanding securities of, (A) if Company has not engaged in a merger or consolidation, Company, or (B) if Company has engaged in a merger or consolidation, the resulting entity, or (iv) a change in the composition of the Board of Directors, as a result of which fewer than a majority of the supervisory directors are Incumbent Directors. For purposes of the preceding sentence, (1) "resulting entity" in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common equity of Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, (2) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term "Company" shall refer to the resulting entity and the term "Board of Directors" shall refer to the board of directors (or comparable governing body) of the resulting entity, and (3) "Incumbent Directors" shall mean directors who either (A) are directors of Company as of February 28, 2003, or (B) are elected, or nominated for election, to the Board of Directors with the affirmative votes of at least two-thirds of
the Incumbent Directors at the time of such election or
nomination, but Incumbent Director shall not include an
individual whose election or nomination occurs as a result of
either (A) an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or (B) an actual or threatened
solicitation of proxies or consents by or on behalf of a
person other than the Board of Directors. For purposes of this
Section 8.1(4), all references to "Company" shall refer solely
to Core Laboratories N.V. except as expressly provided in
clause (2) of the preceding sentence."
4. Section 8.1(5)(iii) is amended in its entirety to read as follows:
"All of the outstanding stock options granted by Company to Executive shall become fully vested and immediately exercisable in full upon Executive's termination of employment and shall remain exercisable for a period of 12 months thereafter (three months thereafter in the case of Grandfathered Options) or for such greater period as may be provided in the plan or plans pursuant to which any such stock options were granted (but in no event shall any such stock option be exercisable after the expiration of the original term of such stock option). For purposes of the preceding sentence, the term "Grandfathered Options" means (1) each stock option granted by Company to Executive on or before February 28, 2003, with respect to which the purchase price per share under such stock option is less than the Fair Market Value (as such term is defined in the Core Laboratories N.V. 1995 Long-Term Incentive Plan, as amended) per share as of the date of execution of the amendment to this Agreement implementing this provision and (2) each other stock option granted by Company to Executive on or before February 28, 2003, that qualifies as an incentive stock option (within the meaning of Section 422 of the Code) and which would cease to qualify as such an incentive stock option if the period during which such stock option could be exercised after termination of employment was extended from three months to 12 months as provided in the preceding sentence."
5. Section 8.1(5)(v) is amended by adding thereto a new sentence to read as follows:
"If the receipt of any benefit or payment under this clause
(v) ("Benefit") is taxable to Executive, then Company shall
pay to Executive an additional amount in cash ("Additional
Payment") equal to all taxes (including any interest or
penalties imposed with respect to such taxes) Executive incurs
with respect to such Benefit and the Additional Payment."
6. Section 8.1(6) is amended in its entirety to read as follows:
"`Change in Control Payment' shall mean a lump sum payment in
an amount equal to three times the sum of (i) Executive's
annual base salary as in effect pursuant to Section 2.1
immediately prior to Executive's termination of employment
with Company and (ii) the greater of (x) the highest annual
bonus earned by Executive during any of the last three fiscal
years of Company ending prior to the Change in Control, and
(y) 45% of the maximum annual incentive bonus amount pursuant
to Section 2.2 that Executive could have earned for the year
during which Executive's employment with Company terminates."
7. Section VII is amended by adding thereto a new Section 7.12 to read as follows:
"7.12 Legal Fees and Expenses: It is the intent of Company that Executive not be required to bear any legal fees or related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement (by litigation or otherwise) with respect to any termination of his employment on or after a Change in Control. Accordingly, if it should appear to Executive that Company has failed to comply with any of its obligations under this Agreement or in the event that Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Executive any benefit provided or intended to be provided to Executive hereunder, in each case with respect to his rights or obligations upon or following a termination of his employment on or after a Change in Control, then Company irrevocably authorizes the Executive from time to time to retain counsel of Executive's choice, at the expense of Company, to advise and represent Executive in connection with any such interpretation, enforcement or defense, including, without limitation, the initiation or defense of any litigation or other legal action, whether by or against Company or any director, officer, stockholder or other person affiliated with Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between Company and such counsel, Company irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and in that connection Company and Executive agree that a confidential relationship will exist between Executive and such counsel. Without regard to whether Executive prevails, in whole or in part, in connection with any of the foregoing, Company will pay and be solely financially responsible for any and all attorneys' fees and related expenses incurred by Executive in connection with any of the foregoing, except to the extent that a final judgment
no longer subject to appeal finds that a claim or defense asserted by Executive was frivolous. In such a case, the portion of such fees and expenses incurred by Executive attributable to such frivolous claim or defense shall become Executive's sole responsibility and any funds advanced by Company with respect to the same shall be promptly returned to Company by Executive without interest."
8. As amended hereby, the Agreement is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the 28th day of February, 2003, effective for all purposes as of the Effective Date.
CORE LABORATORIES N.V.
By Core Laboratories International B.V.,
its sole managing director
Exhibit 10.6
AMENDMENT TO
EMPLOYMENT AGREEMENT
(Restated as of December 31, 2001)
WHEREAS, Core Laboratories N.V. and Monty L. Davis have heretofore entered into that certain Employment Agreement (Restated as of December 31, 2001) (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as provided herein;
NOW, THEREFORE, the Agreement is amended hereby effective as of February 28, 2003 (the "Effective Date"), as follows:
1. Section 4.5 is amended by deleting the second sentence thereof and adding the following new sentences to the end of such Section:
"All determinations required to be made under this Section 4.5, including, without limitation, whether and when a Gross-up Payment is required and the amount of such Gross-up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the independent public accounting firm used by Company immediately prior to the Change in Control for purposes of preparing Company's audited financial statements. However, in the event such accounting firm is also serving as an accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder."
2. Section 6.1 is amended by deleting the last sentence thereof and adding the following new sentences to the end of such Section:
"The restrictions placed on Executive by this Section 6.1 shall apply during the period that Executive is employed by Company and for the two-year period thereafter if Executive's employment with Company is terminated for any reason other than (i) by Executive for a Good Reason or (ii) by Company without Cause. Notwithstanding the foregoing, from and after the date upon which a Change in Control occurs, such restrictions shall cease to apply to Executive except for any period during which he is employed by Company."
3. Section 8.1(4) is amended in its entirety to read as follows:
`"Change in Control' shall mean (i) a merger of Company with another entity, a consolidation involving Company, or the sale of all or substantially all of the assets of Company to another entity if, in any such case, (A) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such
transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board of Directors immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event, (ii) shareholder approval of a plan of dissolution or liquidation of Company, (iii) when any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than a trustee or other fiduciary holding securities under an employee benefit plan of Company or any affiliate of Company), acquires or gains ownership or control (including, without limitation, power to vote) of more than 30% of the combined voting power of the outstanding securities of, (A) if Company has not engaged in a merger or consolidation, Company, or (B) if Company has engaged in a merger or consolidation, the resulting entity, or (iv) a change in the composition of the Board of Directors, as a result of which fewer than a majority of the supervisory directors are Incumbent Directors. For purposes of the preceding sentence, (1) "resulting entity" in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common equity of Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, (2) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term "Company" shall refer to the resulting entity and the term "Board of Directors" shall refer to the board of directors (or comparable governing body) of the resulting entity, and (3) "Incumbent Directors" shall mean directors who either (A) are directors of Company as of February 28, 2003, or (B) are elected, or nominated for election, to the Board of Directors with the affirmative votes of at least two-thirds of the Incumbent Directors at the time of such election or
nomination, but Incumbent Director shall not include an
individual whose election or nomination occurs as a result of
either (A) an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or (B) an actual or threatened
solicitation of proxies or consents by or on behalf of a
person other than the Board of Directors. For purposes of this
Section 8.1(4), all references to "Company" shall refer solely
to Core Laboratories N.V. except as expressly provided in
clause (2) of the preceding sentence."
4. Section 8.1(5)(iii) is amended in its entirety to read as follows:
"All of the outstanding stock options granted by Company to Executive shall become fully vested and immediately exercisable in full upon Executive's termination of employment and shall remain exercisable for a period of 12 months thereafter (three months thereafter in the case of Grandfathered Options) or for such greater period as may be provided in the plan or plans pursuant to which any such stock options were granted (but in no event shall any such stock option be exercisable after the expiration of the original term of such stock option). For purposes of the preceding sentence, the term "Grandfathered Options" means (1) each stock option granted by Company to Executive on or before February 28, 2003, with respect to which the purchase price per share under such stock option is less than the Fair Market Value (as such term is defined in the Core Laboratories N.V. 1995 Long-Term Incentive Plan, as amended) per share as of the date of execution of the amendment to this Agreement implementing this provision and (2) each other stock option granted by Company to Executive on or before February 28, 2003, that qualifies as an incentive stock option (within the meaning of Section 422 of the Code) and which would cease to qualify as such an incentive stock option if the period during which such stock option could be exercised after termination of employment was extended from three months to 12 months as provided in the preceding sentence."
5. Section 8.1(5)(v) is amended by adding thereto a new sentence to read as follows:
"If the receipt of any benefit or payment under this clause
(v) ("Benefit") is taxable to Executive, then Company shall
pay to Executive an additional amount in cash ("Additional
Payment") equal to all taxes (including any interest or
penalties imposed with respect to such taxes) Executive incurs
with respect to such Benefit and the Additional Payment."
6. Section 8.1(6) is amended in its entirety to read as follows:
"`Change in Control Payment' shall mean a lump sum payment in
an amount equal to three times the sum of (i) Executive's
annual base salary as in effect pursuant to Section 2.1
immediately prior to Executive's termination of employment
with Company and (ii) the greater of (x) the highest annual
bonus earned by Executive during any of the last three fiscal
years of Company ending prior to the Change in Control, and
(y) 45% of the maximum annual incentive bonus amount pursuant
to Section 2.2 that Executive could have earned for the year
during which Executive's employment with Company terminates."
7. Section VII is amended by adding thereto a new Section 7.12 to read as follows:
"7.12 Legal Fees and Expenses: It is the intent of Company that Executive not be required to bear any legal fees or related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement (by litigation or otherwise) with respect to any termination of his employment on or after a Change in Control. Accordingly, if it should appear to Executive that Company has failed to comply with any of its obligations under this Agreement or in the event that Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Executive any benefit provided or intended to be provided to Executive hereunder, in each case with respect to his rights or obligations upon or following a termination of his employment on or after a Change in Control, then Company irrevocably authorizes the Executive from time to time to retain counsel of Executive's choice, at the expense of Company, to advise and represent Executive in connection with any such interpretation, enforcement or defense, including, without limitation, the initiation or defense of any litigation or other legal action, whether by or against Company or any director, officer, stockholder or other person affiliated with Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between Company and such counsel, Company irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and in that connection Company and Executive agree that a confidential relationship will exist between Executive and such counsel. Without regard to whether Executive prevails, in whole or in part, in connection with any of the foregoing, Company will pay and be solely financially responsible for any and all attorneys' fees and related expenses incurred by Executive in connection with any of the foregoing, except to the extent that a final judgment
no longer subject to appeal finds that a claim or defense asserted by Executive was frivolous. In such a case, the portion of such fees and expenses incurred by Executive attributable to such frivolous claim or defense shall become Executive's sole responsibility and any funds advanced by Company with respect to the same shall be promptly returned to Company by Executive without interest."
8. As amended hereby, the Agreement is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the 28th day of February, 2003, effective for all purposes as of the Effective Date.
CORE LABORATORIES N.V.
By Core Laboratories International B.V.,
its sole managing director
Exhibit 10.7
AMENDMENT TO
EMPLOYMENT AGREEMENT
(Restated as of December 31, 2001)
WHEREAS, Core Laboratories N.V. and John D. Denson have heretofore entered into that certain Employment Agreement (Restated as of December 31, 2001) (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as provided herein;
NOW, THEREFORE, the Agreement is amended hereby effective as of February 28, 2003 (the "Effective Date"), as follows:
1. Section 4.5 is amended by deleting the second sentence thereof and adding the following new sentences to the end of such Section:
"All determinations required to be made under this Section 4.5, including, without limitation, whether and when a Gross-up Payment is required and the amount of such Gross-up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the independent public accounting firm used by Company immediately prior to the Change in Control for purposes of preparing Company's audited financial statements. However, in the event such accounting firm is also serving as an accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder."
2. Section 6.1 is amended by deleting the last sentence thereof and adding the following new sentences to the end of such Section:
"The restrictions placed on Executive by this Section 6.1 shall apply during the period that Executive is employed by Company and for the two-year period thereafter if Executive's employment with Company is terminated for any reason other than (i) by Executive for a Good Reason or (ii) by Company without Cause. Notwithstanding the foregoing, from and after the date upon which a Change in Control occurs, such restrictions shall cease to apply to Executive except for any period during which he is employed by Company."
3. Section 8.1(4) is amended in its entirety to read as follows:
`"Change in Control' shall mean (i) a merger of Company with another entity, a consolidation involving Company, or the sale of all or substantially all of the assets of Company to another entity if, in any such case, (A) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such
transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board of Directors immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event, (ii) shareholder approval of a plan of dissolution or liquidation of Company, (iii) when any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than a trustee or other fiduciary holding securities under an employee benefit plan of Company or any affiliate of Company), acquires or gains ownership or control (including, without limitation, power to vote) of more than 30% of the combined voting power of the outstanding securities of, (A) if Company has not engaged in a merger or consolidation, Company, or (B) if Company has engaged in a merger or consolidation, the resulting entity, or (iv) a change in the composition of the Board of Directors, as a result of which fewer than a majority of the supervisory directors are Incumbent Directors. For purposes of the preceding sentence, (1) "resulting entity" in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common equity of Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, (2) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term "Company" shall refer to the resulting entity and the term "Board of Directors" shall refer to the board of directors (or comparable governing body) of the resulting entity, and (3) "Incumbent Directors" shall mean directors who either (A) are directors of Company as of February 28, 2003, or (B) are elected, or nominated for election, to the Board of Directors with the affirmative votes of at least two-thirds of the Incumbent Directors at the time of such election or
nomination, but Incumbent Director shall not include an
individual whose election or nomination occurs as a result of
either (A) an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or (B) an actual or threatened
solicitation of proxies or consents by or on behalf of a
person other than the Board of Directors. For purposes of this
Section 8.1(4), all references to "Company" shall refer solely
to Core Laboratories N.V. except as expressly provided in
clause (2) of the preceding sentence."
4. Section 8.1(5)(iii) is amended in its entirety to read as follows:
"All of the outstanding stock options granted by Company to Executive shall become fully vested and immediately exercisable in full upon Executive's termination of employment and shall remain exercisable for a period of 12 months thereafter (three months thereafter in the case of Grandfathered Options) or for such greater period as may be provided in the plan or plans pursuant to which any such stock options were granted (but in no event shall any such stock option be exercisable after the expiration of the original term of such stock option). For purposes of the preceding sentence, the term "Grandfathered Options" means (1) each stock option granted by Company to Executive on or before February 28, 2003, with respect to which the purchase price per share under such stock option is less than the Fair Market Value (as such term is defined in the Core Laboratories N.V. 1995 Long-Term Incentive Plan, as amended) per share as of the date of execution of the amendment to this Agreement implementing this provision and (2) each other stock option granted by Company to Executive on or before February 28, 2003, that qualifies as an incentive stock option (within the meaning of Section 422 of the Code) and which would cease to qualify as such an incentive stock option if the period during which such stock option could be exercised after termination of employment was extended from three months to 12 months as provided in the preceding sentence."
5. Section 8.1(5)(v) is amended by adding thereto a new sentence to read as follows:
"If the receipt of any benefit or payment under this clause
(v) ("Benefit") is taxable to Executive, then Company shall
pay to Executive an additional amount in cash ("Additional
Payment") equal to all taxes (including any interest or
penalties imposed with respect to such taxes) Executive incurs
with respect to such Benefit and the Additional Payment."
6. Section 8.1(6) is amended in its entirety to read as follows:
"`Change in Control Payment' shall mean a lump sum payment in
an amount equal to three times the sum of (i) Executive's
annual base salary as in effect pursuant to Section 2.1
immediately prior to Executive's termination of employment
with Company and (ii) the greater of (x) the highest annual
bonus earned by Executive during any of the last three fiscal
years of Company ending prior to the Change in Control, and
(y) 45% of the maximum annual incentive bonus amount pursuant
to Section 2.2 that Executive could have earned for the year
during which Executive's employment with Company terminates."
7. Section VII is amended by adding thereto a new Section 7.12 to read as follows:
"7.12 Legal Fees and Expenses: It is the intent of Company that Executive not be required to bear any legal fees or related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement (by litigation or otherwise) with respect to any termination of his employment on or after a Change in Control. Accordingly, if it should appear to Executive that Company has failed to comply with any of its obligations under this Agreement or in the event that Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Executive any benefit provided or intended to be provided to Executive hereunder, in each case with respect to his rights or obligations upon or following a termination of his employment on or after a Change in Control, then Company irrevocably authorizes the Executive from time to time to retain counsel of Executive's choice, at the expense of Company, to advise and represent Executive in connection with any such interpretation, enforcement or defense, including, without limitation, the initiation or defense of any litigation or other legal action, whether by or against Company or any director, officer, stockholder or other person affiliated with Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between Company and such counsel, Company irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and in that connection Company and Executive agree that a confidential relationship will exist between Executive and such counsel. Without regard to whether Executive prevails, in whole or in part, in connection with any of the foregoing, Company will pay and be solely financially responsible for any and all attorneys' fees and related expenses incurred by Executive in connection with any of the foregoing, except to the extent that a final judgment
no longer subject to appeal finds that a claim or defense asserted by Executive was frivolous. In such a case, the portion of such fees and expenses incurred by Executive attributable to such frivolous claim or defense shall become Executive's sole responsibility and any funds advanced by Company with respect to the same shall be promptly returned to Company by Executive without interest."
8. As amended hereby, the Agreement is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the 28th day of February, 2003, effective for all purposes as of the Effective Date.
CORE LABORATORIES N.V.
By Core Laboratories International B.V.,
its sole managing director
Exhibit 99(a)
Certification By
David M. Demshur, Chief Executive Officer
of Core Laboratories N.V.
Pursuant to 18 U.S.C. ss. 1350
I, David M. Demshur, Chief Executive Officer of Core Laboratories N.V. (the "Company"), hereby certify that the accompanying report on Form 10-Q for the quarter ended March 31, 2003, filed by the Company with the Securities and Exchange Commission on the date hereof pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the "Report") fully complies with the requirements of that section.
I further certify that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ David M. Demshur
--------------------------
Name: David M. Demshur
Title: Chief Executive Officer
Date: May 15, 2003
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Exhibit 99(b)
Certification By Richard L. Bergmark, Chief Financial Officer of Core Laboratories N.V.
Pursuant to 18 U.S.C.ss.1350
I, Richard L. Bergmark, Chief Financial Officer of Core Laboratories N.V. (the "Company"), hereby certify that the accompanying report on Form 10-Q for the quarter ended March 31, 2003, filed by the Company with the Securities and Exchange Commission on the date hereof pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the "Report") fully complies with the requirements of that section.
I further certify that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Richard L. Bergmark
---------------------------
Name: Richard L. Bergmark
Title: Chief Financial Officer
Date: May 15, 2003
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