AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 2000

REGISTRATION NUMBER 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

GRANT PRIDECO, INC. DELAWARE 76-0312499
GP EXPATRIATE SERVICES, INC. DELAWARE 76-0632330
GRANT PRIDECO HOLDING, LLC DELAWARE 76-0635560
GRANT PRIDECO, L.P. DELAWARE 76-0635557
GRANT PRIDECO USA, LLC DELAWARE 51-0397748
STAR OPERATING COMPANY DELAWARE 76-0655528
TA INDUSTRIES, INC. DELAWARE 76-0497435
TEXAS ARAI, INC. DELAWARE 74-2150314
TUBE-ALLOY CAPITAL CORPORATION TEXAS 76-0012315
TUBE-ALLOY CORPORATION LOUISIANA 72-0714357
XL SYSTEMS INTERNATIONAL, INC. DELAWARE 76-0602808
XL SYSTEMS, L.P. TEXAS 76-0324868
(Exact name of registrants as (States or other jurisdictions (I.R.S. Employer
specified in their charters) of incorporation or Identification Nos.)
organization)

1450 LAKE ROBBINS DRIVE, SUITE 600
THE WOODLANDS, TEXAS 77380
(281) 297-8500
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)

MR. PHILIP A. CHOYCE
VICE PRESIDENT AND ASSOCIATE GENERAL COUNSEL
GRANT PRIDECO, INC.
1450 LAKE ROBBINS DRIVE, SUITE 600
THE WOODLANDS, TEXAS 77380
(281) 297-8500
(Name, address, including zip code, and telephone number including area code, of
agent for service)

Copy to:

CHARLES H. STILL
FULBRIGHT & JAWORSKI L.L.P.
1301 MCKINNEY, SUITE 5100
HOUSTON, TEXAS 77010-3095
(713) 651-5151

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE
PUBLIC: Approximately 30 days after this registration statement becomes
effective or as soon as practicable thereafter.

If any of the Securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If this Form is filed to register additional Securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF SECURITIES TO PROPOSED MAXIMUM AGGREGATE AMOUNT OF
BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
- --------------------------------------------------------------------------------------------------------------------

9 5/8% Senior Notes due 2007, Series B...................... $206,000,000.00 $51,500
Subsidiary Guarantees....................................... $206,000,000.00 --
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------

(1) Estimated for purposes of calculating the registration fee pursuant to Rule
457(c) and (f)(1).

(2) Calculated Pursuant to Rule 457(f)(1). Pursuant to Rule 457(n), no
additional registration fee is required for the registration of the
subsidiary guarantees.

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2

PROSPECTUS

[GRANT PRIDECO LOGO]

OFFER TO EXCHANGE

9 5/8% SENIOR NOTES DUE 2007, SERIES B
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR
ANY AND ALL OUTSTANDING
9 5/8% SENIOR NOTES DUE 2007, SERIES A
($200,000,000 IN PRINCIPAL AMOUNT OUTSTANDING)

THE EXCHANGE OFFER

The exchange offer expires at 5:00 p.m., New York City time, on
, 2001, unless extended.

The exchange offer is not conditioned upon a minimum aggregate principal
amount of outstanding notes being tendered.

All outstanding notes tendered according to the procedures in this
prospectus and not withdrawn will be exchanged for an equal principal amount of
exchange notes.

The exchange offer is not subject to any condition other than that it not
violate applicable laws or any applicable interpretation of the staff of the
Securities and Exchange Commission.

THE EXCHANGE NOTES

The terms of the exchange notes to be issued in the exchange offer are
identical to the outstanding notes, except that we have registered the exchange
notes with the Securities and Exchange Commission. In addition, the exchange
notes will not be subject to the transfer restrictions applicable to the
outstanding notes. We will not apply for listing any of the exchange notes on
any securities exchange or to arrange for them to be quoted on any quotation
system.

The exchange notes will be senior unsecured obligations of Grant Prideco,
Inc. and will be guaranteed by Grant Prideco's present and future U.S.
restricted subsidiaries on a senior unsecured basis. The exchange notes and
guarantees will rank equally with any other unsecured indebtedness of Grant
Prideco and the subsidiary guarantors but will be effectively junior to any
secured indebtedness of Grant Prideco and the subsidiary guarantors to the
extent of the value of the security for that indebtedness. In addition, the
exchange notes will be effectively junior to any indebtedness of our non-U.S. or
unrestricted subsidiaries, none of which will guarantee the exchange notes.

Interest on the exchange notes will accrue from December 4, 2000 or, if
later, from the most recent date of payment of interest on the outstanding
notes, at the rate of 9 5/8% per year, payable semi-annually in arrears on each
June 1 and December 1.

YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 11 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The date of this Prospectus is January , 2001.
3

TABLE OF CONTENTS

PAGE
----

Forward-Looking Statements.................................. i
Summary..................................................... 1
Risk Factors................................................ 11
The Exchange Offer.......................................... 19
Use of Proceeds............................................. 28
Selected Historical Financial Data.......................... 29
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 31
Business.................................................... 47
Management.................................................. 55
Certain Relationships and Related Transactions.............. 57
Description of Other Indebtedness........................... 59
Description of Exchange Notes............................... 62
Book-Entry, Delivery and Form............................... 92
Certain United States Federal Income Tax Considerations..... 95
Plan of Distribution........................................ 95
Legal Matters............................................... 99
Experts..................................................... 99
Where You Can Find More Information......................... 100

---------------------

You should rely only on the information provided or incorporated by
reference in this prospectus. We have not authorized anyone else to provide you
with different information. We are not making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information included or incorporated by reference in this prospectus or any
documents incorporated by reference herein is accurate as of any date other than
the date on the front of such documents.

FORWARD-LOOKING STATEMENTS

In this prospectus, we make forward-looking statements. We cannot assure
you that the plans, intentions or expectations upon which our forward-looking
statements are based will occur. Our forward-looking statements are subject to
risks, uncertainties and assumptions, including those discussed elsewhere in
this prospectus and the documents that are incorporated by reference into this
prospectus. Some of the risks which could affect our future results and could
cause results to differ materially from those expressed in our forward-looking
statements include:

- the impact of oil and natural gas prices and worldwide economic
conditions on drilling activity,

- the impact of drilling activity on demand for and pricing of our
products,

- our ability to remain on the leading edge of technology in our products
and

- the availability of qualified operating and manufacturing personnel and
manufacturing capacity and our assumptions relating thereto.

Should one or more of these risks or uncertainties materialize, or should
the assumptions prove incorrect, actual results may vary in material respects
from those currently anticipated and reflected in our forward-looking
statements. The information contained in this prospectus, including the
information set forth under the heading "Risk Factors," describes these and
other factors that could affect our operating results and performance. We urge
you to carefully consider those factors.

Our forward-looking statements are expressly qualified in their entirety by
this cautionary statement.

i
4

SUMMARY

This summary highlights some basic information from this prospectus to help
you understand our business, the exchange notes and the exchange offer. You
should read this prospectus carefully to understand fully the terms of the
exchange notes and the other considerations that may be important to you.

GRANT PRIDECO

We are the world's largest manufacturer and supplier of drill pipe and
other drill stem products, and we are a leading North American provider of
high-performance engineered connections and premium tubing and casing. Drill
stem products are used in drilling oil and gas wells while engineered
connections and premium tubing and casing are used to complete successful oil
and gas wells and to facilitate production. Our customers include major,
independent and state-owned oil companies, drilling contractors, oilfield
service companies, rental tool companies and North American oil country tubular
goods (OCTG) distributors. We operate 22 manufacturing facilities located in the
United States, Mexico, Canada, Europe, and Asia and 30 sales, service and repair
locations globally. For the nine months ended September 30, 2000, our revenues
were $350.9 million, and our EBITDA totaled $46.1 million -- in each case a
significant increase compared to the same period last year.

Our products are highly regarded throughout the oil and gas industry for
their quality engineering and performance. We have earned our global leadership
position by developing and introducing proprietary, technologically advanced
products that enable our customers to drill oil and gas wells under the harshest
conditions and in environmentally sensitive locations. These harsh conditions
include high temperatures, high pressures, corrosive elements and wells
involving extended-reach, directional, horizontal, deepwater and ultra-deepwater
drilling. We believe products for these "critical-well" applications, from which
we derive our highest margins, constitute the largest growth area in the oil and
gas industry.

We operate through two business segments:

- Drill Stem Products. Our drill stem products segment designs,
manufactures and sells our H-Series(R) and eXtreme(TM) product lines,
which include all components of the drill stem from the rig floor to the
drill bit. We currently are the world's only manufacturer of 5 7/8-inch
eXtreme(TM) drill pipe, which we innovated particularly for use in
ultra-deep wells, and landing strings used to lower heavy casing in
ultra-deepwater applications. Drill stem products are consumable and wear
out through a combination of friction and metal fatigue. In recent years,
we have seen increasing intensity of use in drill stem products causing
these drill stem products to wear out faster. This increased intensity of
use results from

- more wells being drilled either directionally or horizontally, which
results in far higher abrasion and bending loads than in vertical
wells,

- more gas wells being drilled today, which typically are drilled to
greater depths than oil wells and

- the increasing prevalence of top drive rigs, which place more
torsional stress on drill pipe than traditional rotary table rigs.

Our eXtreme product line, a line of advanced drill stem products with
enhanced performance characteristics, is specifically designed to enable
our customers to operate in the most challenging drilling environments.

gas-tight seal and "premium" tubulars are seamless tubulars (as opposed
to rolled welded tubulars) with high-alloy chemistry and highly
engineered connections having superior burst- and collapse-resistance
characteristics under conditions of torque, tension and torsion as
compared to our competitors' more commodity-like products. This segment
also designs, manufactures and sells large-diameter offshore tubulars,
vacuum-insulated tubing, tubular accessories and couplings.

COMPETITIVE STRENGTHS

We believe the following strengths are our competitive advantages:

- Market Leadership and Industry Reputation. Each of our product lines is a
quality leader in its category and holds a leading or strong market
position. Our industry reputation contributes significantly to the
strength of our product marketing and distribution, as product quality is
a major factor in our customers' purchasing decisions. Our industry
reputation for product excellence and technological expertise attracts
strategic industry partners for the development of new and improved
products for today's increasingly harsh drilling environments and results
in stronger demand for our new products.

- Superior Cost Structure and Product Quality Through Vertical
Integration. We believe our vertically integrated structure provides
substantial cost savings compared to our competitors and increases the
quality and deliverability of our products, particularly in periods of
increasing demand, by focusing our supply source directly on our needs
and the needs of our customers. Through acquisitions in late 1998 and
1999, we positioned ourselves as the only integrated manufacturer and
provider of drill pipe in the world. Through our acquisition of T.F. de
Mexico in June 1998, a manufacturer of tool joints, which are a critical
component of any joint of drill pipe, we secured a high-quality supply of
tool joints for our drill stem product line. Through our joint venture in
1999 with Voest-Alpine, a seamless tubular steel mill located in Austria,
we secured a ready supply of high-quality raw materials for our drill
stem and premium tubular and casing needs.

- Technological Leadership. We believe we have established a position of
global technological leadership by developing innovative products that
provide solutions to the drilling and production challenges of the
world's harshest well conditions. We hold over 130 technology patents,
issued or pending, for technologies that speed the drilling and
completion process and reduce mechanical risk, allowing for the
development of reservoirs once thought impossible to exploit. Our
position as an industry leader in each of our product lines enables us to
establish joint technology arrangements and other product enhancement
opportunities with other industry participants. Recent introductions of
new products by us or in conjunction with industry partners include our
eXtreme drill stem products, titanium drill pipe, Thermocase(TM) vacuum
insulated tubing, Advanced NJO(TM) engineered connections and expandable
connections.

- Comprehensive Product Offering. We are the only worldwide provider of a
complete line of drill stem products and the only North American provider
of a complete line of engineered connections and premium tubular
products, including premium tubing and casing, as well as processing and
threading services. By positioning ourselves as a comprehensive supplier
of drill stem and engineered connections and premium tubular products and
services, we offer our customers a single source, which saves them time
and money when planning and sourcing their drill stem and tubular
requirements.

- Experienced Management Team with Core Focus. Our management team has
extensive experience within our specific businesses as well as with
successful integration of strategic acquisitions. Our senior management
team has been with us or our predecessors on average for over ten years.
We are the only stand-alone company in our business focused exclusively
on drill pipe and engineered connections and premium tubulars, while many
of our major competitors are subsidiaries of companies with other core
businesses. As a result, we believe our management has a stronger focus

2
6

on our drill stem and premium tubular and connections businesses than our
competitors, and our resources are committed to pursue growth solely in
these segments.

BUSINESS STRATEGIES

Our objective is to maximize cash flow by maintaining and enhancing our
position as a leading provider of drill stem products and engineered connections
and premium tubular products, which we intend to achieve by pursuing the
following business strategies:

- Improve Our Low Cost Structure. We are committed to having the lowest
cost structure in the industry by continually analyzing operating costs,
reducing raw material costs through acquisitions and vertical
integration, and improving efficiency through automation, process
refinement and consolidation of operations. We will focus on maintaining
or increasing our production capacity, assuring an orderly supply of raw
materials and increasing our quality assurance processes while reducing
our fixed cost structure.

- Grow through Selective Acquisitions. We will continue to seek strategic
growth opportunities through selective acquisitions while maintaining a
conservative capital structure. Since 1990, we have completed and
successfully integrated into our operations over 30 acquisitions. Our
future acquisitions will focus on consolidation, strategic fit and
vertical integration.

- Focus on Quality Products and Technologies that Address Modern Drilling
Challenges. Products designed for gas and critical-well applications are
the largest growth area in our industry today and provide our highest
margins. To maintain our position as a product-quality and technological
leader in the industry, our strategy is to focus, independently and
through strategic partnerships with other industry leaders, on improving
our products and services and developing new products and services for
exceptional performance under the most difficult drilling conditions.

THE SPINOFF

Until April 14, 2000, we were a wholly owned subsidiary of Weatherford
International, Inc. We were spun off from Weatherford on April 14, 2000, through
a distribution by Weatherford to its stockholders of all of our common stock.

We were spun off from Weatherford to allow us to develop our own strategy
for growth and to fund that growth through our own capital resources. We believe
that although many opportunities existed for us to pursue new opportunities and
acquisitions in the tubular and drilling industry before the spinoff, we were
unable to take full advantage of those opportunities as part of Weatherford. As
a business segment of Weatherford, we competed with Weatherford's other
businesses for capital, and additional material investments in our businesses
were considered to be inconsistent with the strategic direction and focus of
Weatherford's other businesses.
---------------------

Our principal executive offices are located at 1450 Lake Robbins Drive,
Suite 600, The Woodlands, Texas 77380, and our telephone number is (281)
297-8500. Our common stock is traded on the New York Stock Exchange under the
symbol "GRP."

3
7

THE EXCHANGE OFFER

BACKGROUND OF THE
OUTSTANDING NOTES.......... We issued $200,000,000 aggregate principal amount
of our 9 5/8% Senior Notes due 2007 (the
"outstanding notes") to Lehman Brothers Inc.,
Deutsche Bank Securities Inc., UBS Warburg LLC and
Simmons & Company International (the "initial
purchasers") on December 4, 2000 in transactions
not registered under the Securities Act of 1933 in
reliance on exemptions from registration under that
act. The initial purchasers then sold the
outstanding notes to qualified institutional buyers
in reliance on Rule 144A under the Securities Act.
Because they have been sold pursuant to exemptions
from registration, the outstanding notes are
subject to transfer restrictions.

In connection with the issuance of the outstanding
notes, we entered into an exchange and registration
rights agreement in which we agreed to deliver to
you this prospectus and to use our best efforts to
complete the exchange offer or to file and cause to
become effective a registration statement covering
the resale of the outstanding notes.

THE EXCHANGE OFFER......... We are offering to exchange up to $200,000,000
principal amount of exchange notes for an identical
principal amount of outstanding notes. Outstanding
notes may be exchanged only in $1,000 increments.
The terms of the exchange notes are identical in
all material respects to the outstanding notes
except that the exchange notes have been registered
under the Securities Act. Because we have
registered the exchange notes, the exchange notes
will not be subject to transfer restrictions and
holders of exchange notes will have no registration
rights.

RESALE OF EXCHANGE NOTES... We believe you may offer, sell or otherwise
transfer the exchange notes you receive in the
exchange offer without compliance with the
registration and prospectus delivery provisions of
the Securities Act provided that:

- you acquire the exchange notes you receive in the
exchange offer in the ordinary course of your
business;

- you are not participating and have no
understanding with any person to participate in
the distribution of the exchange notes issued to
you in the exchange offer; and

- you are not an affiliate of ours.

Each broker-dealer issued exchange notes in the
exchange offer for its own account in exchange for
outstanding notes acquired by the broker-dealer as
a result of market-making or other trading
activities must acknowledge that it will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resale of the
exchange notes issued in the exchange offer. A
broker-dealer may use this prospectus for an offer
to resell, resale or other retransfer of the
exchange notes issued to it in the exchange offer.

EXPIRATION DATE............ 5:00 p.m., New York City time, on , 2001,
unless we extend the exchange offer. It is possible
that we will extend the exchange offer until all
outstanding notes are tendered. You may withdraw
outstanding notes you tendered at any time before
5:00 p.m.,

4
8

New York City time, on the expiration date. See
"The Exchange Offer -- Expiration Date; Extensions;
Amendments."

WITHDRAWAL RIGHTS.......... You may withdraw outstanding notes you tendered by
furnishing a notice of withdrawal to the exchange
agent or by complying with applicable ATOP
procedures at any time before 5:00 p.m. New York
City time on the expiration date. See "The Exchange
Offer -- Withdrawal of Tenders."

ACCRUED INTEREST ON THE
EXCHANGE NOTES AND THE
OUTSTANDING NOTES........ The exchange notes will bear interest from December
4, 2000 or, if later from the most recent date of
payment of interest on the outstanding notes.

CONDITIONS TO THE EXCHANGE
OFFER.................... The exchange offer is subject only to the following
conditions:

- the compliance of the exchange offer with
securities laws;

- the proper tender of the outstanding notes;

- the representation by the holders of the
outstanding notes that they are not our
affiliate, that the exchange notes they will
receive are being acquired by them in the
ordinary course of their business and that at the
time the exchange offer is completed the holder
had no plan to participate in the distribution of
the exchange notes; and

- no judicial or administrative proceeding shall
have been threatened that would limit us from
proceeding with the exchange offer.

REPRESENTATIONS AND
WARRANTIES............... By participating in the exchange offer, you
represent to us that, among other things:

- you will acquire the exchange notes you receive
in the exchange offer in the ordinary course of
your business;

- you are not participating and have no
understanding with any person to participate in
the distribution of the exchange notes issued to
you in the exchange offer; and

- you are not an affiliate of ours or, if you are
an affiliate, you will comply with the
registration and prospectus delivery requirements
of the Securities Act to the extent applicable.

PROCEDURES FOR TENDERING
OUTSTANDING NOTES........ To accept the exchange offer, you must send the
exchange agent either

- a properly completed and executed letter of
transmittal; or

- a computer-generated message transmitted by means
of DTC's Automated Tender Offer Program (ATOP)
system that, when received by the exchange agent
will form a part of a confirmation of book-entry
transfer in which you acknowledge and agree to be
bound by the terms of the letter of transmittal;

5
9

and either

- a timely confirmation of book-entry transfer of
your outstanding notes into the exchange agent's
account at DTC; or

- the documents necessary for compliance with the
guaranteed delivery procedures described below.

Other procedures may apply to holders of
certificated notes. For mor information, see "The
Exchange Offer -- Procedures for Tendering."

TENDERS BY BENEFICIAL
OWNERS..................... If you are a beneficial owner whose outstanding
notes are registered in the name of a broker,
dealer, commercial bank, trust company or other
nominee and wish to tender those outstanding notes
in the exchange offer, please contact the
registered holder as soon as possible and instruct
them to tender on your behalf and comply with the
instructions in this prospectus.

GUARANTEED DELIVERY
PROCEDURES............... If you are unable to comply with the procedures for
tendering, you may tender your outstanding notes
according to the guaranteed delivery procedures
described in this prospectus under the heading "The
Exchange Offer -- Guaranteed Delivery Procedures."

ACCEPTANCE OF OUTSTANDING
NOTES AND DELIVERY OF
EXCHANGE NOTES........... If the conditions described under "The Exchange
Offer -- Conditions" are satisfied, we will accept
for exchange any and all outstanding notes that are
properly tendered before the expiration date. If we
close the exchange offer, the exchange notes will
be delivered promptly following the expiration
date. Otherwise, we will promptly return any
outstanding notes tendered.

CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS........... See "Certain Federal Income Tax Considerations" for
a discussion of U.S. federal income tax
considerations you should consider before tendering
outstanding notes in the exchange offer.

EXCHANGE AGENT............. United States Trust Company of New York is serving
as exchange agent for the exchange offer. The
address for the exchange agent is listed under "The
Exchange Offer -- Exchange Agent."

6
10

THE EXCHANGE NOTES

The form and terms of the exchange notes to be issued in the exchange offer
are the same as the form and terms of the outstanding notes except that the
exchange notes will be registered under the Securities Act and, accordingly,
will not bear legends restricting their transfer. The notes issued in the
exchange offer will evidence the same debt as the outstanding notes, and both
the outstanding notes and the exchange notes are governed by the same indenture.
The following terms are applicable to both the outstanding notes and the
exchange notes. In this document, the term "notes" refers to both the
outstanding notes and the exchange notes. We define capitalized terms used in
this summary in the "Description of Exchange Notes -- Certain Definitions"
section of this prospectus.

SECURITIES OFFERED......... $200.0 million of 9 5/8% Senior Notes due 2007,
Series B.

ISSUER..................... Grant Prideco, Inc., a Delaware corporation.

GUARANTEES................. All payments with respect to the notes (including
principal and interest) will be fully,
unconditionally and irrevocably guaranteed on a
senior basis, jointly and severally, by all our
present and future U.S. restricted subsidiaries.
The guarantees are general unsecured obligations of
the subsidiary guarantors and rank equally with
their existing and future senior unsecured
indebtedness, but are effectively junior to all the
secured indebtedness of the subsidiary guarantors
to the extent of the value of the security for that
indebtedness.

MATURITY DATE.............. December 1, 2007.

INTEREST PAYMENT DATES..... June 1 and December 1, commencing on June 1, 2001.

OPTIONAL REDEMPTION........ We may redeem the notes, in whole or in part, at
any time at a price equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if
any, to the date of redemption plus a make-whole
premium as described under "Description of Exchange
Notes -- Optional Redemption."

CHANGE OF CONTROL.......... If a change of control occurs, as described under
"Description of Exchange Notes -- Mandatory
Redemption; Offers to Purchase; Open Market
Purchases -- Change of Control," each holder of
notes will have the right to require us to purchase
all or a portion of his or her notes at 101% of the
principal amount, plus accrued and unpaid interest
to the date of repurchase.

RANKING.................... The outstanding notes are, and the exchange notes
will be, senior unsecured obligations of Grant
Prideco, Inc., ranking equally with the existing
and future senior unsecured indebtedness of Grant
Prideco, Inc. However, the outstanding notes are,
and the exchange notes will be, effectively junior
to all our secured indebtedness to the extent of
the value of the security for that indebtedness. At
September 30, 2000, assuming the offering of the
outstanding notes had been completed at the time
and giving effect to the application of the
proceeds thereof, we would have had approximately
$222.8 million of indebtedness outstanding on a
consolidated basis (including the notes), none of
which would have been secured indebtedness, but
$1.0 million of which would have been debt of our
non-U.S. subsidiaries and effectively senior to the
notes. However, the indenture permits certain of
our subsidiaries to borrow additional debt under
one or more credit facilities, all of which could
be secured and could therefore be effectively
senior to the notes. Further, the outstanding

7
11

notes are, and the exchange notes will be,
effectively junior to all indebtedness of our
existing and future non-U.S. subsidiaries and any
subsidiaries we designate as unrestricted
subsidiaries, because they will not guarantee the
notes.

COVENANTS.................. The indenture limits our ability and the ability of
our restricted subsidiaries to

- sell assets,

- make restricted payments,

- incur additional indebtedness,

- issue or sell preferred stock of restricted
subsidiaries,

- create or incur liens,

- place restrictions on distributions and other
payments from restricted subsidiaries,

- merge or consolidate with or transfer substantial
assets to another entity,

- engage in transactions with related persons,

- engage in sale and leaseback transactions or

- engage in any business other than permitted
businesses.

These covenants are subject to exceptions, and some
of these covenants will be suspended before the
notes mature if the notes attain an
investment-grade rating in the future and no event
of default exists under the indenture. See
"Description of Exchange Notes -- Certain
Covenants."

8
12

SUMMARY HISTORICAL FINANCIAL DATA

The following table sets forth certain of our historical combined financial
data. Until we were spun off on April 14, 2000, we were a wholly owned
subsidiary of Weatherford International, Inc. This information has been prepared
as if we had been a stand-alone company for the periods presented. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our Combined
Financial Statements and the Notes thereto (the "Financial Statements"). The
following information may not be indicative of our future operating results.

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ ----------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- -----------
(IN THOUSANDS, EXCEPT AS INDICATED)

OPERATING DATA:
Revenues.............................. $630,021 $646,454 $286,370 $196,776 $350,912
Selling, General and Administrative
Expense............................. 41,886 46,393 45,742 33,860 40,246
Interest Expense(a)................... 12,976 12,008 11,343 8,332 11,572
Operating Income (Loss)(b)............ 115,436 112,884 (33,014) (15,761) 22,734
Net Income (Loss)(b).................. 61,514 65,720 (33,511) (17,400) 6,303
OTHER DATA:
EBITDA(c)............................. $142,487 $179,007 $ 6,954 $ 6,401 $ 46,127
Cash (Used) Provided By Operating
Activities.......................... 9,872 10,727 65,240 52,656 (38,340)
Cash Used by Investing Activities..... (85,660) (49,479) (34,118) (25,498) (15,978)
Cash Provided (Used) by Financing
Activities.......................... 82,688 36,619 (30,988) (31,485) 51,013
Capital Expenditures(d)............... 34,813 38,102 19,046 14,795 15,111
Ratio of EBITDA to Interest
Expense(a).......................... 11.0 14.9 0.6 0.8 4.0
Ratio of Earnings to Fixed
Charges(e).......................... 8.4 8.8 -- -- 1.5(f)
Drill Pipe Sold (in thousands of
feet)............................... 9,336 11,076 2,639 1,863 3,430
Average Price per Foot (in dollars)... $ 25.90 $ 30.90 $ 30.10 $ 31.40 $ 32.20
Backlog at period end (in millions)... 359.8 88.9 60.4 65.1 130.0

AT DECEMBER 31, AT SEPTEMBER 30, 2000
------------------------------ ---------------------------
1997 1998 1999 HISTORICAL AS ADJUSTED(G)
-------- -------- -------- ---------- --------------

BALANCE SHEET DATA:
Total Assets......................... $662,598 $738,314 $734,575 $777,974 $828,893
Current Assets....................... 351,245 350,296 272,038 327,877 372,496
Current Liabilities.................. 156,199 144,268 107,401 150,166 102,327
Long-Term Debt(h).................... 127,387 109,265 124,276 119,018 217,776
Stockholders' Equity................. 332,722 445,211 453,856 455,221 455,221

- ---------------

(a) Interest expense includes interest attributed to $100.0 million in debt
owed to Weatherford for each period presented based, through April 14,
2000, on Weatherford's long-term debt rates for the applicable periods and
thereafter at 10% per annum, the interest rate on our note issued to
Weatherford. This does not necessarily represent what our actual cost of
capital would have been had we been a stand-alone entity in each of the
periods presented. See note 6 to our Financial Statements.

9
13

the fourth quarter of 1999 to terminate our manufacturing arrangement in
India, of which $7.8 million involved a purchase deposit that we will not
be able to use and $1.7 million represented equipment in India that we do
not believe we will be able to recover.

(c) We calculate EBITDA by taking operating income (loss) and adding back
depreciation and amortization, excluding the impact of the non-recurring
charges discussed in (b) above for the respective periods of those charges.
We have included an EBITDA calculation here because, when we look at the
performance of our businesses, we give consideration to their EBITDA.
Calculations of EBITDA should not be viewed as a substitute for
calculations under generally accepted accounting principles (GAAP), in
particular cash flows from operations, operating income (loss) and net
income (loss). In addition, EBITDA calculations by our company may not be
comparable to those of another company.

(d) Capital expenditures for property, plant and equipment. Excludes the costs
related to acquisitions of businesses.

(e) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of pretax income from continuing operations plus fixed
charges (excluding capitalized interest). "Fixed charges" represent
interest incurred (whether expensed or capitalized), amortization of debt
expense, and that portion of rental expense on operating leases deemed to
be the equivalent of interest. For the nine month period ended September
30, 1999, and for the year ended December 31, 1999, earnings were
insufficient to cover fixed charges by $23.7 million and $44.9 million,
respectively. We were a wholly owned subsidiary of Weatherford until April
14, 2000. The ratios for periods before that date are based on earnings
and fixed charges attributable to us during the periods presented, and
reflect allocations of certain expenses to us. Although we believe these
allocations are reasonable, they are not necessarily indicative of the
costs we would have incurred had we not been owned by Weatherford during
the periods presented. See Note 1 to our Financial Statements. In
particular, our cost of capital, and therefore our fixed charges, may have
been higher than those reflected in these ratios had we not been owned by
Weatherford during the periods presented.

(f) Giving effect to the offering of the outstanding notes and the repayment
in full of the Weatherford note and the credit facility as of January 1,
2000, our Ratio of Earnings to Fixed Charges for the nine months ended
September 30, 2000 would have been 1 to 1.

(g) As adjusted to reflect the offering of the outstanding notes, which
occurred December 4, 2000, and the application of the proceeds therefrom.
See "Use of Proceeds."

(h) Includes $100.0 million indebtedness to Weatherford at December 31, 1997,
1998 and 1999 and at September 30, 2000.

10
14

RISK FACTORS

Your investment in the exchange notes will involve risk. You should
carefully consider the following risk factors and the other information set
forth or incorporated by reference in this prospectus.

RISKS RELATING TO OUR BUSINESS

A MATERIAL DECLINE IN WORLDWIDE DRILLING ACTIVITY WOULD ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS.

Our business is materially dependent on the level of drilling activity
worldwide, which in turn depends primarily on prices for oil and gas. Lower
drilling activity not only decreases demand for our products, but following
rapid declines in drilling such as occurred in late 1998, the resulting
oversupply of used drill pipe of reasonable quality further impairs our
revenues. In general, we believe that our drill stem business trails changes in
the rig count by six to nine months due in part to the time required for the
industry to consume excess inventory of stockpiled used drill pipe. When
drilling activity declined in the second half of 1998 and 1999, our revenues and
profitability declined significantly. Our drill stem business may not recover
completely unless rig counts continue to rise. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Prices for oil and gas have been and continue to be very volatile, which
decreases the demand for our products and services. Due to substantial recent
swings in the Organization of Petroleum Exporting Countries' (OPEC) production
quotas, oil prices have been particularly volatile over the past 18 to 24
months. This volatility generally results in a decreased confidence by oil
companies in the sustainability of higher prices. Even when oil and gas prices
increase for short periods, oil and gas companies generally do not increase
drilling activity unless they are confident that prices will remain at a level
that is profitable to them. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

AN ECONOMIC DOWNTURN COULD ADVERSELY AFFECT DEMAND FOR OUR PRODUCTS AND
SERVICES.

The economic downturn that began in Asia in 1997 affected the economies in
other regions of the world, including South America and the former Soviet Union,
and contributed to the decline in the price of oil and the level of drilling
activity. If the United States or European economies were to begin to decline or
if the economies of South America or Asia were to experience further material
problems, the demand and price for oil and gas and our products and services
could again adversely affect our results of operations.

LABOR SHORTAGES COULD LIMIT OUR MANUFACTURING CAPACITY AND INCREASE OUR LABOR
COSTS, WHICH WOULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

Our manufacturing operations are substantially dependent upon our ability
to recruit and retain qualified machinists, factory workers and other laborers.
As demand for our products and services has improved during 2000, we have
increased our headcount and are continuing to recruit qualified workers. This
has become increasingly difficult due to the strong labor market in the United
States in general, as well as the improving conditions in the oil and gas
industry in particular. Labor shortages could limit our manufacturing capacity.
If we are not able to increase our manufacturing capacity rapidly enough to take
advantage of increased demand, we could lose market share and our results of
operations could be adversely impacted. Additionally, if we are forced to
significantly increase wages and other benefits to attract additional workers,
our future operating margins may decrease.

OUR ABILITY TO COMPETE SUCCESSFULLY IS DEPENDENT ON TECHNOLOGICAL ADVANCES IN
OUR PRODUCTS, AND OUR FAILURE TO TIMELY OR ADEQUATELY RESPOND TO TECHNOLOGICAL
ADVANCES IN OUR INDUSTRY MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

Our ability to succeed with our long-term growth strategy is dependent on
the technological competitiveness of our products. If we are unable to innovate
and implement advanced technology in our

11
15

products, other competitors may be able to compete more effectively with us and
our business and results of operations may be adversely affected.

OUR RECENT MANUFACTURING CONSOLIDATION COULD CAUSE INCREASED DOWNTIME AND LOST
REVENUE.

During 1999 and 2000, we consolidated various manufacturing operations to
reduce costs and improve efficiencies. We incurred significant charges in
connection with these consolidations. This consolidation is ongoing and involves
the relocation and refurbishment of machines, equipment and buildings used in
our operations. This relocation and refurbishment can result in unexpected
downtime or delays in bringing machines and equipment online, which would result
in lost revenue. Further, we may not realize expected cost savings from these
recent consolidations.

OUR ACQUISITION STRATEGY COULD FAIL OR PRESENT UNANTICIPATED PROBLEMS FOR OUR
BUSINESS IN THE FUTURE, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO MAKE
ACQUIRED BUSINESSES PROFITABLE OR REALIZE ANTICIPATED BENEFITS OF THOSE
ACQUISITIONS.

Our growth strategy includes acquiring complementary businesses. We cannot
assure you that we will be able to successfully identify suitable acquisition
opportunities or finance and complete any particular acquisition. Furthermore,
acquisitions, including recent acquisitions and any acquisitions we may make in
the future, involve a number of risks and challenges, including

- diversion of management's attention,

- the need to integrate acquired operations,

- potential loss of key employees and customers of the acquired companies,

- potential lack of experience operating in a geographic market of the
acquired business and

- an increase in our expenses and working capital requirements.

Any of these factors could adversely affect our ability to achieve
anticipated levels of cash flows from our recent or future acquired businesses
or realize other anticipated benefits of those acquisitions.

OUR INTERNATIONAL OPERATIONS MAY EXPERIENCE SEVERE INTERRUPTIONS DUE TO
POLITICAL, ECONOMIC OR OTHER RISKS, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.

For the nine months ended September 30, 2000, we derived approximately 9%
of our total revenues from our facilities outside the United States. We expect
this percentage to increase substantially as demand for our drill stem products
improves. In addition, many of our key manufacturing operations are outside the
United States. Our operations in certain international locations, including
Mexico, Austria, China and Indonesia, are subject to various political and
economic conditions existing in those countries that could disrupt operations.
These risks include

- currency fluctuations and potential devaluations in most countries, in
particular those in South America and Asia,

- currency restrictions and limitations on repatriation of profits in
various countries and

- political instability.

Our foreign operations may suffer disruptions, and we may incur losses that
will not be covered by insurance. Any material currency fluctuations or
devaluations or political disruptions that disrupt oil and gas exploration and
production or the movement of funds and assets could adversely affect our
results of operations and financial position.

12
16

A FURTHER WRITE-OFF OF OUR INVESTMENT IN INDIA COULD ADVERSELY AFFECT OUR
RESULTS OF OPERATIONS.

Oil Country Tubular Limited (OCTL), a manufacturing company located in
India, has manufactured drill pipe and other products for us under a long-term
exclusive manufacturing arrangement. Over the years, we have provided OCTL with
a substantial amount of raw materials, inventory and working capital for the
products it manufactures for us. Our business in India through our relationship
with OCTL has been adversely affected by the downturn of the economies in the
eastern hemisphere and is subject to various political and economic risks as
well as financial and operational risks with respect to OCTL.

In 1999, we decided to terminate our manufacturing arrangement with OCTL in
India. We made this decision in light of the existing market and difficulties
arising from the political situation between India and countries where OCTL's
principal customers reside. This decision resulted in our need to write off a
$7.8 million deposit previously paid to OCTL for future products and $1.7
million of our equipment located in India in the fourth quarter of 1999. We are
currently seeking to collect approximately $17.6 million in receivables and
advances provided by us to OCTL. We are in discussions with OCTL regarding this
matter and are unable to predict the outcome of these discussions. There can be
no assurance that we will be able to realize any amounts owed to us by OCTL or
that additional charges relating to our investments in India will not be
required in the near term as the negotiation and collection process continues.
If we are required to take additional charges relating to the further write-off
of these investments, it would adversely affect our results of operations.

OUR LONG-TERM SUPPLY CONTRACT MAY OBLIGATE US TO PURCHASE UNNEEDED MATERIALS,
AND AN INCREASE IN THE COST OF EUROS WOULD MAKE THOSE MATERIALS MORE EXPENSIVE
TO US.

We have entered into an agreement with Voest-Alpine Stahlrohr Kindberg GmbH
& Co. KG, an entity of which we own 50.01%, to purchase 60,000 metric tons of
raw materials per year for the next three years. Our future results could be
adversely affected if we are unable to use or resell these tubulars. In
addition, we have agreed to be responsible for paying any "anti-dumping" duties
in the United States on the resale of these tubulars, which could affect our
ability to resell the tubulars in the United States.

Further, our long-term supply contract with Voest-Alpine is denominated in
Euros. We have no offsetting revenues in Euros, and we cannot currently hedge
against this contract for its entire term. Thus, a material long-term
strengthening of the Euro versus the U.S. dollar could adversely affect our
results of operations.

WE COULD BE SUBJECT TO SUBSTANTIAL LIABILITY CLAIMS, WHICH WOULD ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS.

Many of our products are used in hazardous drilling and production
applications where an accident or a failure of a product can cause personal
injury, loss of life, damage to property, equipment or the environment, as well
as the suspension of the end-user's operations. If our products were to be
involved in any of these difficulties, we could face litigation and may be held
liable for those losses. Our insurance coverage may not be adequate in risk
coverage or policy limits to cover all losses or liabilities that we may incur.
Moreover, we may not be able in the future to maintain insurance at levels of
risk coverage or policy limits that we deem adequate. Any claims made under our
policies likely will cause our premiums to increase. Any future damages deemed
to be caused by our products or services that are not covered by insurance, or
that are in excess of policy limits or subject to substantial deductibles, could
have a material adverse effect on our business, results of operations and
financial condition.

WE ARE SUBJECT TO ENVIRONMENTAL, HEALTH AND SAFETY LAWS AND REGULATIONS THAT
EXPOSE US TO POTENTIAL FINANCIAL LIABILITY.

Our operations are regulated under a number of federal, state, local and
foreign environmental laws and regulations, which govern, among other things,
the discharge of hazardous materials into the air and water as well as the
handling, storage and disposal of hazardous materials. Compliance with these
environmental laws are a major consideration in the manufacturing of our
products, as we use and generate hazardous substances and wastes in our
manufacturing operations, and we may be subject to material
13
17

financial liability for any investigation and clean-up of such hazardous
materials. In addition, many of our current and former properties are or have
been used for industrial purposes. Accordingly, we also may be subject to
financial liabilities relating to the investigation and remediation of hazardous
materials resulting from the action of previous owners or operators of
industrial facilities on those sites. Liability in many instances may be imposed
on us regardless of the legality of the original actions relating to the
hazardous or toxic substances or whether or not we knew of, or were responsible
for, the presence of those substances.

We are also subject to various federal, state, local and foreign laws and
regulations relating to safety and health conditions in our manufacturing
facilities. Those laws and regulations may also subject us to material financial
penalties or liabilities for any noncompliance, as well as potential business
disruption if any of our facilities or a portion of any facility is required to
be temporarily closed as a result of any violation of those laws and
regulations. Any such financial liability or business disruption could have a
material adverse effect on our financial condition and results of operations.

THE IRS MAY TREAT OUR RECENT SPINOFF AS TAXABLE IF REPRESENTATIONS MADE TO THE
IRS WERE INACCURATE OR IF WE AND WEATHERFORD DO NOT COMPLY WITH THE UNDERTAKINGS
MADE TO THE IRS; TAXABLE TREATMENT OF OUR SPINOFF WOULD RESULT IN SIGNIFICANT
INDEMNIFICATION LIABILITIES TO US.

In connection with our spinoff from Weatherford International, Inc. in
April 2000, Weatherford sought and received a favorable ruling from the Internal
Revenue Service to the effect that, for United States federal income tax
purposes, the spinoff generally would be tax-free to Weatherford and its
stockholders. It is possible that Weatherford and its stockholders could be
subject to a material amount of taxes as a result of the spinoff if the
representations and undertakings we and Weatherford made to the IRS in
connection with obtaining the tax ruling are determined to be inaccurate. In
addition, under the Internal Revenue Code of 1986, as amended, and Treasury
regulations promulgated thereunder (including proposed regulations), the spinoff
could be determined to be taxable if within two years following the spinoff
there were to be a change of control of either Weatherford or Grant Prideco and
Weatherford and Grant Prideco were not able to rebut the presumption that the
change in control was contemplated at the time of the spinoff.

Under the terms of an agreement we entered into with Weatherford in
contemplation of the spinoff, we will be responsible and liable to Weatherford
for any and all corporate-level taxes or liabilities incurred by Weatherford
relating to the spinoff except to the extent the spinoff is determined to be
taxable solely as a result of a change of control of Weatherford following the
spinoff. Our obligation and liability will apply under all other circumstances,
regardless of the reason for the spinoff being determined to be taxable. This
liability would extend to circumstances within the control of Weatherford as
well as circumstances under which it is alleged or determined that there was a
breach or misrepresentation, negligent or otherwise, by Weatherford in
connection with the expected tax ruling. We also are restricted under another
agreement with Weatherford from engaging in certain transactions without the
consent of Weatherford that could affect the taxability of the spinoff unless
Weatherford receives a supplemental tax ruling or an acceptable tax opinion.

WE HAVE A CONTINUING BUSINESS RELATIONSHIP WITH WEATHERFORD, OUR FORMER PARENT
COMPANY, AND CONFLICTS MAY ARISE THAT WE ARE UNABLE TO RESOLVE IN A MANNER AS
FAVORABLE TO US AS THEY MIGHT HAVE BEEN WITH AN UNRELATED THIRD PARTY.

The terms of the agreements we entered into with Weatherford in
contemplation of the spinoff were not negotiated on an arm's-length basis and
were proposed by Weatherford as our sole stockholder at the time we entered into
those agreements. As a result, the terms of those agreements may not reflect the
terms that an unrelated third party would have provided to us. Weatherford, as
our then sole stockholder, ratified the terms of these agreements before the
spinoff, and we have acknowledged that the agreements constitute our valid
obligations.

14
18

Persons associated with Weatherford also have a continuing relationship
with us. Five current directors of Weatherford, Messrs. Bernard J. Duroc-Danner,
Sheldon B. Lubar, William E. Macaulay, Robert K. Moses, Jr. and Robert A. Rayne,
represent a majority of our board of directors. In addition, Mr. Duroc-Danner,
President, Chief Executive Officer and Chairman of the Board of Directors of
Weatherford, serves as our Chairman of the Board, and Curtis W. Huff, Executive
Vice President, Chief Financial Officer and General Counsel of Weatherford,
serves as our Vice President and Interim General Counsel.

As a result of these relationships with Weatherford, conflicts of interest
between us and Weatherford may arise and we cannot assure you that those
conflicts will be resolved in a manner as favorable to us as they might have
been with an unrelated third party. See "Certain Relationships and Related
Transactions."

RISKS RELATING TO THE NOTES

WE MAY NOT BE ABLE TO GENERATE SUFFICIENT CASH FLOW TO MEET OUR DEBT SERVICE
OBLIGATIONS.

Because our earnings and cash flows have varied significantly from year to
year following trends in our industry, an amount of debt that we can manage in
some periods may not be appropriate for us in other periods. Our future cash
flow may be insufficient to meet our debt obligations and commitments, and any
insufficiency could negatively impact our business. Our ability to generate cash
flow from operations to pay our debt will depend on our future financial
performance, which will be affected by a range of economic, competitive and
business factors. We cannot control many of these factors, such as general
economic and financial conditions in the oil and gas industry and the economy at
large or competitive initiatives of our competitors.

If we do not generate sufficient cash flow from operations to satisfy our
debt obligations, we may have to undertake alternative financing plans, such as
refinancing or restructuring our debt, selling assets, reducing or delaying
capital investments or seeking to raise additional capital. We cannot assure you
that any refinancing would be possible, that any assets could be sold, or, if
sold, of the timing of the sales and the amount of proceeds realized from those
sales, or that additional financing could be obtained on acceptable terms, if at
all. Our inability to generate sufficient cash flow to satisfy our debt
obligations, or to refinance our indebtedness on commercially reasonable terms,
would materially adversely affect our business, financial condition, results of
operations and prospects and our ability to satisfy our obligations under the
notes.

WE COULD INCUR A SUBSTANTIAL AMOUNT OF DEBT, WHICH COULD MATERIALLY ADVERSELY
AFFECT OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS PROSPECTS AND
PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.

On a pro forma basis adjusted for the completion of the offering of the
outstanding notes and the application of the proceeds thereof, we would have had
$222.8 million of indebtedness outstanding at September 30, 2000. However, we
are permitted under our revolving credit facility and the indenture governing
the notes to incur additional debt, subject to certain limitations. If we incur
additional debt, our increased leverage could, for example

- make it more difficult for us to satisfy our obligations under the notes
or other indebtedness and, if we fail to comply with the requirements of
the indebtedness, could result in an event of default,

- require us to dedicate a substantial portion of our cash flow from
operations to required payments on indebtedness, thereby reducing the
availability of cash flow for working capital, capital expenditures and
other general business activities,

- limit our ability to obtain additional financing in the future for
working capital, capital expenditures and other general corporate
activities,

15
19

- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate,

- detract from our ability to successfully withstand a downturn in our
business or the economy generally and

- place us at a competitive disadvantage against other less leveraged
competitors.

The occurrence of any one of these events could have a material adverse
effect on our business, financial condition, results of operations, prospects
and ability to satisfy our obligations under the notes.

WE ARE A HOLDING COMPANY, AND WE ARE DEPENDENT ON THE ABILITY OF OUR
SUBSIDIARIES TO DISTRIBUTE FUNDS TO US.

We are a holding company, and our subsidiaries conduct all of our
operations and own all of our operating assets. We have no significant assets
other than the equity interests of our subsidiaries. As a result, our ability to
make required payments on the notes depends on the performance of our
subsidiaries and their ability to distribute funds to us. The ability of our
subsidiaries to make distributions to us may be restricted by, among other
things, applicable state corporate and partnership laws and other laws and
regulations. If we are unable to obtain funds from our subsidiaries as a result
of restrictions under our other debt instruments, state law or otherwise, we may
not be able to pay interest or principal on the notes when due, or to redeem the
notes upon a change of control, and we cannot assure you that we will be able to
obtain the necessary funds from other sources.

IN THE EVENT OF OUR BANKRUPTCY OR LIQUIDATION, HOLDERS OF THE NOTES WILL BE PAID
FROM ANY ASSETS REMAINING AFTER PAYMENTS TO ANY HOLDERS OF SECURED DEBT AND DEBT
OF OUR NON-GUARANTOR SUBSIDIARIES.

The notes will be general unsecured senior obligations of us and our
subsidiary guarantors, effectively junior to any secured debt that we may have
in the future to the extent of the value of the assets securing that debt. In
addition, not all of our subsidiaries will guarantee the notes, which will be
effectively junior to the liabilities of any of these non-guarantor
subsidiaries. Specifically, none of our present or future non-U.S. subsidiaries
and none of our future unrestricted subsidiaries will guarantee the notes. For
more information regarding our guarantor and non-guarantor subsidiaries, see
Note 18 to our Financial Statements and Note 17 to our unaudited financial
statements.

If we are declared bankrupt or insolvent, or are liquidated, the holders of
our secured debt, and any debt of our non-guarantor subsidiaries, will be
entitled to be paid from our assets before any payment may be made with respect
to the notes. If any of the foregoing events occurs, we cannot assure you that
we will have sufficient assets to pay amounts due on our secured debt, the debt
of our non-guarantor subsidiaries and the notes. As a result, holders of the
notes may receive less, ratably, than the holders of secured debt of the debt of
our non-guarantor subsidiaries in the event of our bankruptcy or liquidation.

OUR DEBT INSTRUMENTS IMPOSE RESTRICTIONS ON US THAT MAY AFFECT OUR ABILITY TO
SUCCESSFULLY OPERATE THE BUSINESS.

Our revolving credit facility restricts us, and the terms of the indenture
will restrict us, from taking various actions, such as incurring additional
indebtedness, paying dividends, repurchasing junior indebtedness, making
investments, entering into transactions with affiliates, merging or
consolidating with other entities and selling all or substantially all of our
assets. In addition, our revolving credit facility requires us to maintain
certain financial ratios and satisfy certain financial condition tests, a number
of which will become more restrictive over time and may require us to take
action to reduce our debt or take some other action in order to comply with
them. These restrictions could also limit our ability to obtain future
financings, make needed capital expenditures, withstand a future downturn in our
business or the economy in general, or otherwise conduct necessary corporate
activities. We may also be prevented from taking advantage of business
opportunities that arise because of the limitations imposed on us by the
restrictive covenants under the revolving credit facility and the indenture. A
breach of any of these provisions will likely result in a default under the
indenture governing the notes and under our revolving
16
20

credit facility that would allow those lenders to declare that indebtedness
immediately due and payable. If we were unable to pay those amounts because we
do not have sufficient cash on hand or are unable to obtain alternative
financing on acceptable terms, the lenders could initiate a bankruptcy or
liquidation proceeding or proceed against any assets that serve as collateral to
secure that indebtedness. Our assets may not be sufficient to repay that amount
and the amounts due under the notes in full.

WE MAY NOT BE ABLE TO REPURCHASE THE NOTES UPON A CHANGE OF CONTROL.

If a change of control under the indenture occurs in the future, we will be
required to make an offer to purchase all the outstanding notes at a premium,
plus any accrued and unpaid interest to the date of purchase. In such a
situation, we cannot assure you that we will have enough funds to pay for all of
the notes that are tendered under the offer to purchase. If a significant amount
of notes are tendered, we will almost certainly have to obtain financing to pay
for the tendered notes; however, we cannot be sure we will be able to obtain
such financing on acceptable terms, if at all. A change of control may also
result in an event of default under our credit facility and agreements governing
our future indebtedness and may result in the acceleration of that indebtedness,
in which case we will be required to pay that indebtedness. If that indebtedness
is secured debt, we will be required to pay that debt to the extent of the value
of the assets securing the debt before repurchasing the notes. We urge you to
read the information under "Description of Notes -- Mandatory Redemption; Offers
to Purchase; Open Market Purchases -- Change of Control" for more information
regarding the treatment of a change of control under the indenture.

THE SUBSIDIARY GUARANTEES COULD BE DEEMED FRAUDULENT CONVEYANCES UNDER CERTAIN
CIRCUMSTANCES, AND A COURT MAY TRY TO SUBORDINATE OR AVOID THE SUBSIDIARY
GUARANTEES.

Under various fraudulent conveyance or fraudulent transfer laws, a court
could subordinate or avoid the subsidiary guarantees. Generally, to the extent
that a United States court were to find that at the time one of our subsidiaries
entered into a subsidiary guarantee either (x) the subsidiary incurred the
guarantee with the intent to hinder, delay or defraud any present or future
creditor or contemplated insolvency with a design to favor one or more creditors
to the exclusion of others or (y) the subsidiary did not receive fair
consideration or reasonably equivalent value for issuing the subsidiary
guarantee and, at the time it issued the subsidiary guarantee, the subsidiary
(i) was insolvent or became insolvent as a result of issuing of the subsidiary
guarantee, (ii) was engaged or about to engage in a business or transaction for
which the remaining assets of the subsidiary constituted unreasonably small
capital, or (iii) intended to incur, or believed that it would incur, debts
beyond its ability to pay those debts as they matured, the court could avoid or
subordinate the subsidiary guarantee in favor of the subsidiary's other
obligations. Among other things, a legal challenge of a subsidiary guarantee on
fraudulent conveyance grounds may focus on the benefits, if any, realized by the
subsidiary as a result of the issuance of the notes by us. To the extent a
subsidiary guarantee is voided as a fraudulent conveyance or held unenforceable
for any other reason, the holders of the notes would not have any claim against
that subsidiary and would be creditors solely of us and any other subsidiary
guarantors whose guarantees are not held unenforceable.

YOU MAY SUFFER ADVERSE CONSEQUENCES IF YOU DO NOT EXCHANGE OUTSTANDING NOTES.

The outstanding notes that are not exchanged for exchange notes have not
been registered with the SEC or in any state. Unless the outstanding notes are
registered, they may only be offered and sold pursuant to an exemption from, or
in a transaction that is not subject to, the registration requirements of the
Securities Act. Depending upon the percentage of outstanding notes exchanged for
exchange notes, the liquidity of the outstanding notes may be adversely
affected.

THERE MAY NOT BE A LIQUID MARKET FOR RESALE OF THE EXCHANGE NOTES.

The exchange notes are new securities for which there currently is no
market. Although the initial purchasers have informed us that they intend to
make a market in the exchange notes, they are not obligated to do so and any
such market making may be discontinued at any time without notice. In addition,
the market making activity may be limited during the pendency of the exchange
offer.
17
21

Accordingly, there can be no assurance as to the development or liquidity of any
market for the exchange notes. We do not intend to apply for listing of the
exchange notes on any securities exchange or for quotation through the Nasdaq
National Market.

The liquidity of, and trading market for the exchange notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of our financial performance and prospects.

18
22

THE EXCHANGE OFFER

PURPOSE AND EFFECT OF THE EXCHANGE OFFER

We issued $200,000,000 aggregate principal amount of outstanding notes to
the initial purchasers on December 4, 2000 in transactions not registered under
the Securities Act of 1933 in reliance on exemptions from registration under
that act. The initial purchasers then sold the outstanding notes to qualified
institutional buyers in reliance on Rule 144A under the Securities Act. Because
they have been sold pursuant to exemptions from registration, the outstanding
notes are subject to transfer restrictions.

In connection with the issuance of the outstanding notes, we agreed with
the initial purchasers that promptly following the issuance of the outstanding
notes, we would:

- file with the SEC a registration statement related to the exchange notes;

- use our reasonable best efforts to cause the registration statement to
become effective under the Securities Act; and

- offer to the holders of the outstanding notes the opportunity to exchange
their outstanding notes for a like principal amount of exchange notes
upon the effectiveness of the registration statement.

Our failure to comply with these agreements within certain time periods
would result in additional interest being due on the outstanding notes. A copy
of the agreements with the initial purchasers have been filed as exhibits to the
registration statement of which this prospectus is a part.

Based on existing interpretations of the Securities Act by the staff of the
SEC described in several no-action letters to third parties, and subject to the
following sentence, we believe that the exchange notes issued in the exchange
offer may be offered for resale, resold and otherwise transferred by their
holders, other than broker-dealers or our "affiliates," without further
compliance with the registration and prospectus delivery provisions of the
Securities Act. However, any holder of outstanding notes who is an affiliate of
ours, who is not acquiring the exchange notes in the ordinary course of such
holder's business or who intends to participate in the exchange offer for the
purpose of distributing the exchange notes:

- will not be able to rely on the interpretations by the staff of the SEC
described in the above-mentioned no-action letters;

- will not be able to tender outstanding notes in the exchange offer; and

- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the
outstanding notes unless the sale or transfer is made under an exemption
from these requirements.

We do not intend to seek our own no-action letter, and there is no
assurance that the staff of the SEC would make a similar determination regarding
the exchange notes as it has in these no-action letters to third parties.

As a result of the filing and effectiveness of the registration statement
of which this prospectus is a part, we will not be required to pay an increased
interest rate on the outstanding notes. Following the closing of the exchange
offer, holders of outstanding notes not tendered will not have any further
registration rights except in limited circumstances requiring the filing of a
shelf registration statement, and the outstanding notes will continue to be
subject to restrictions on transfer. Accordingly, the liquidity of the market
for the outstanding notes will be adversely affected.

TERMS OF THE EXCHANGE OFFER

Upon the terms and subject to the conditions stated in this prospectus and
in the letter of transmittal, we will accept all outstanding notes properly
tendered and not withdrawn before 5:00 p.m. New York City time, on the
expiration date. After authentication of the exchange notes by the trustee or an
authenticating

19
23

agent, we will issue $1,000 principal amount of exchange notes in exchange for
each $1,000 principal amount of outstanding notes accepted in the exchange
offer.

By tendering your outstanding notes for exchange notes in the exchange
offer and signing or agreeing to be bound by the letter of transmittal, you will
represent to us that:

- you will acquire the exchange notes you receive in the exchange offer in
the ordinary course of your business;

- you are not participating and have no understanding with any person to
participate in the distribution of the exchange notes issued to you in
the exchange offer;

- you are not an affiliate of ours or, if you are an affiliate, you will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable;

- if you are not a broker-dealer, that you are not engaged in and do not
intend to engage in the distribution of the exchange notes; and

- if you are a broker-dealer that will receive exchange notes for your own
account in exchange for outstanding notes that were acquired as a result
of market-making or other trading activities, that you will deliver a
prospectus, as required by law, in connection with any resale of those
exchange notes.

Broker-dealers that are receiving exchange notes for their own account must
have acquired the outstanding notes as a result of market-making or other
trading activities in order to participate in the exchange offer. Each
broker-dealer that receives exchange notes for its own account under the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of the exchange notes. The letter of transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
admitting that it is an "underwriter" within the meaning of the Securities Act.
We will be required to allow broker-dealers to use this prospectus following the
exchange offer in connection with the resale of exchange notes received in
exchange for outstanding notes acquired by broker-dealers for their own account
as a result of market-making or other trading activities. If required by
applicable securities laws, we will, upon written request, make this prospectus
available to any broker-dealer for use in connection with a resale of exchange
notes for a period of 90 days after the consummation of the exchange offer. See
"Plan of Distribution."

The exchange notes will evidence the same debt as the outstanding notes and
will be issued under and entitled to the benefits of the same indenture. The
form and terms of the exchange notes are identical in all material respects to
the form and terms of the outstanding notes except that:

- the exchange notes will be issued in a transaction registered under the
Securities Act;

- the exchange notes will not be subject to transfer restrictions; and

- provisions providing for an increase in the stated interest rate on the
outstanding notes will be eliminated.

As of the date of this prospectus, $200,000,000 aggregate principal amount
of the outstanding notes was outstanding. In connection with the issuance of the
outstanding notes, we arranged for the outstanding notes to be issued and
transferable in book-entry form through the facilities of DTC, acting as
depositary. The exchange notes will also be issuable and transferable in
book-entry form through DTC.

This prospectus, together with the accompanying letter of transmittal, is
initially being sent to all registered holders as of the close of business on
, 2001. We intend to conduct the exchange offer as required by the
Exchange Act, and the rules and regulations of the SEC under the Exchange Act,
including Rule 14e-1, to the extent applicable.

20
24

Rule 14e-1 describes unlawful tender practices under the Exchange Act. This
section requires us, among other things:

- to hold our exchange offer open for twenty business days;

- to give ten days notice of any change in the terms of this offer; and

- to issue a press release in the event of an extension of the exchange
offer.

The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered, and holders of the outstanding notes
do not have any appraisal or dissenters' rights under the General Corporation
Law of the State of Delaware or under the indenture in connection with the
exchange offer. We shall be considered to have accepted outstanding notes
tendered according to the procedures in this prospectus when, as and if we have
given oral or written notice of acceptance to the exchange agent. See
"-- Exchange Agent." The exchange agent will act as agent for the tendering
holders for the purpose of receiving exchange notes from us and delivering
exchange notes to those holders.

If any tendered outstanding notes are not accepted for exchange because of
an invalid tender or the occurrence of other events described in this
prospectus, certificates for these unaccepted outstanding notes will be
returned, at our cost, to the tendering holder of the outstanding notes or, in
the case of outstanding notes tendered by book-entry transfer, into the holder's
account at DTC according to the procedures described below, as promptly as
practicable after the expiration date.

Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes related to the exchange of outstanding
notes in the exchange offer. We will pay all charges and expenses, other than
applicable taxes, in connection with the exchange offer. See "-- Solicitation of
Tenders; Fees and Expenses."

NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO HOLDERS
OF OUTSTANDING NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR
ANY PORTION OF THEIR OUTSTANDING NOTES TO THE EXCHANGE OFFER. MOREOVER, NO ONE
HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OUTSTANDING
NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER IN THE EXCHANGE OFFER AND,
IF SO, THE AMOUNT OF OUTSTANDING NOTES TO TENDER AFTER READING THIS PROSPECTUS
AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISORS, IF ANY, BASED
ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.

EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The term "expiration date" shall mean 5:00 p.m., New York City time, on
, 2001, unless we, in our sole discretion, extend the exchange
offer, in which case the term "expiration date" shall mean the latest date to
which the exchange offer is extended.

We expressly reserve the right, in our sole discretion:

- to delay acceptance of any outstanding notes or to terminate the exchange
offer and to refuse to accept outstanding notes not previously accepted,
if any of the conditions described under "-- Conditions" shall have
occurred and shall not have been waived by us;

- to extend the expiration date of the exchange offer;

- to amend the terms of the exchange offer in any manner;

- to purchase or make offers for any outstanding notes that remain
outstanding subsequent to the expiration date;

- to the extent permitted by applicable law, to purchase outstanding notes
in the open market, in privately negotiated transactions or otherwise.

21
25

The terms of the purchases or offers described in the fourth and fifth
clauses above may differ from the terms of the exchange offer.

Any delay in acceptance, termination, extension, or amendment will be
followed as promptly as practicable by oral or written notice to the exchange
agent and by making a public announcement. If the exchange offer is amended in a
manner determined by us to constitute a material change, we will promptly
disclose the amendment in a manner reasonably calculated to inform the holders
of the amendment.

Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, termination, extension, or amendment
of the exchange offer, we shall have no obligation to publish, advise, or
otherwise communicate any public announcement, other than by making a timely
release to the Dow Jones News Service.

You are advised that we may extend the exchange offer because some of the
holders of the outstanding notes do not tender on a timely basis. In order to
give these noteholders the ability to participate in the exchange and to avoid
the significant reduction in liquidity associated with holding an unexchanged
note, we may elect to extend the exchange offer.

INTEREST ON THE EXCHANGE NOTES

The exchange notes will bear interest from December 4, 2000 or the most
recent date on which interest was paid or provided for on the outstanding notes
surrendered for the exchange notes. Accordingly, holders of outstanding notes
that are accepted for exchange will not receive interest that is accrued but
unpaid on the outstanding notes at the time of tender. Interest on the exchange
notes will be payable semi-annually on each June 1 and December 1, commencing on
June 1, 2001.

PROCEDURES FOR TENDERING

Only a holder may tender its outstanding notes in the exchange offer. Any
beneficial owner whose outstanding notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee or are held in
book-entry form and who wishes to tender should contact the registered holder
promptly and instruct the registered holder to tender on his behalf. If the
beneficial owner wishes to tender on his own behalf, the beneficial owner must,
before completing and executing the letter of transmittal and delivering his
outstanding notes, either make appropriate arrangements to register ownership of
the outstanding notes in the owner's name or obtain a properly completed bond
power from the registered holder. The transfer of record ownership may take
considerable time.

The tender by a holder will constitute an agreement between the holder, us
and the exchange agent according to the terms and subject to the conditions
described in this prospectus and in the letter of transmittal.

A holder who desires to tender outstanding notes and who cannot comply with
the procedures set forth herein for tender on a timely basis or whose
outstanding notes are not immediately available must comply with the procedures
for guaranteed delivery set forth below.

THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
RISK OF THE HOLDERS. DELIVERY OF SUCH DOCUMENTS WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT OR DEEMED RECEIVED UNDER THE ATOP
PROCEDURES DESCRIBED BELOW. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF
TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO US. HOLDERS MAY ALSO REQUEST
THAT THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES EFFECT THE TENDER FOR HOLDERS IN EACH CASE AS DESCRIBED IN THIS
PROSPECTUS AND IN THE LETTER OF TRANSMITTAL.

22
26

Outstanding notes Held in Certificated Form

For a holder to validly tender outstanding notes held in physical form, the
exchange agent must receive, before 5:00 p.m. New York city time on the
expiration date, at its address set forth in this prospectus:

- a properly completed and validly executed letter of transmittal, or a
manually signed facsimile thereof, together with any signature guarantees
and any other documents required by the instructions to the letter of
transmittal, and

- certificates for tendered outstanding notes.

Outstanding notes Held in Book-Entry Form

We understand that the exchange agent will make a request promptly after
the date of the prospectus to establish accounts for the outstanding notes at
DTC for the purpose of facilitating the exchange offer, and subject to their
establishment, any financial institution that is a participant in DTC may make
book-entry delivery of outstanding notes by causing DTC to transfer the
outstanding notes into the exchange agent's account for the outstanding notes
using DTC's procedures for transfer.

If you desire to transfer outstanding notes held in book-entry form with
DTC, the exchange agent must receive, before 5:00 p.m. New York City time on the
expiration date, at its address set forth in this prospectus, a confirmation of
book-entry transfer of the outstanding notes into the exchange agent's account
at DTC, which is referred to in this prospectus as a "book-entry confirmation,"
and:

- a properly completed and validly executed letter of transmittal, or
manually signed facsimile thereof, together with any signature guarantees
and other documents required by the instructions in the letter of
transmittal; or

- an agent's message transmitted pursuant to DTC's Automated Tender Offer
Program.

Tender of Outstanding notes Using DTC's Automated Tender Offer Program (ATOP)

The exchange agent and DTC have confirmed that the exchange offer is
eligible for DTC's Automated Tender Offer Program. Accordingly, DTC participants
may electronically transmit their acceptance of the exchange offer by causing
DTC to transfer outstanding notes held in book-entry form to the exchange agent
in accordance with DTC's ATOP procedures for transfer. DTC will then send a
book-entry confirmation, including an agent's message to the exchange agent.

The term "agent's message" means a message transmitted by DTC, received by
the exchange agent and forming part of the book-entry confirmation, which states
that DTC has received an express acknowledgment from the participant in DTC
tendering outstanding notes that are the subject of that book-entry confirmation
that the participant has received and agrees to be bound by the terms of the
letter of transmittal, and that we may enforce such agreement against such
participant. If you use ATOP procedures to tender outstanding notes you will not
be required to deliver a letter of transmittal to the exchange agent, but you
will be bound by its terms just as if you had signed it.

SIGNATURES

Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act, unless the outstanding notes tendered with the
letter of transmittal are tendered:

- by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" in the
letter of transmittal; or

- for the account of an institution eligible to guarantee signatures.
23
27

If the letter of transmittal is signed by a person other than the
registered holder or DTC participant who is listed as the owner, the outstanding
notes must be endorsed or accompanied by appropriate bond powers which authorize
the person to tender the outstanding notes on behalf of the registered holder or
DTC participant who is listed as the owner, in either case signed as the name of
the registered holder(s) who appears on the outstanding notes or the DTC
participant who is listed as the owner. If the letter of transmittal or any
outstanding notes or bond powers are signed or endorsed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, those persons should so
indicate when signing, and unless waived by us, evidence satisfactory to us of
their authority to so act must be submitted with the letter of transmittal.

If you tender your notes through ATOP, signatures and signature guarantees
are not required.

DETERMINATIONS OF VALIDITY

All questions as to the validity, form, eligibility, including time of
receipt, acceptance and withdrawal of the tendered outstanding notes will be
determined by us in our sole discretion. This determination will be final and
binding. We reserve the absolute right to reject any and all outstanding notes
not properly tendered or any outstanding notes our acceptance of which would, in
the opinion of our counsel, be unlawful. We also reserve the absolute right to
waive any irregularities or conditions of tender as to particular outstanding
notes. Our interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of outstanding notes must be cured within the time we
shall determine. Although we intend to notify holders of defects or
irregularities related to tenders of outstanding notes, neither we, the exchange
agent nor any other person shall be under any duty to give notification of
defects or irregularities related to tenders of outstanding notes nor shall any
of them incur liability for failure to give notification. Tenders of outstanding
notes will not be considered to have been made until the irregularities have
been cured or waived. Any outstanding notes received by the exchange agent that
we determine are not properly tendered or the tender of which is otherwise
rejected by us and as to which the defects or irregularities have not been cured
or waived by us will be returned by the exchange agent to the tendering holder
unless otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.

GUARANTEED DELIVERY PROCEDURES

Holders who wish to tender their outstanding notes and:

- whose outstanding notes are not immediately available;

- who cannot complete the procedure for book-entry transfer on a timely
basis;

- who cannot deliver their outstanding notes, the letter of transmittal or
any other required documents to the exchange agent before the expiration
date; or

- who cannot complete a tender of outstanding notes held in book-entry form
using DTC's ATOP procedures on a timely basis;

may effect a tender if they tender through an eligible institution described
under "-- Procedures for Tendering -- Signatures," or, if they tender using
ATOP's guaranteed delivery procedures.

A tender of outstanding notes made by or through an eligible institution
will be accepted if:

- before 5:00 p.m., New York City time, on the expiration date, the
exchange agent receives from an eligible institution a properly completed
and duly executed notice of guaranteed delivery, by facsimile
transmittal, mail or hand delivery, that: (1) sets forth the name and
address of the holder, the certificate number or numbers of the holder's
outstanding notes and the principal amount of the outstanding notes
tendered, (2) states that the tender is being made, and (3) guarantees
that, within five business days after the expiration date, a properly
completed and validly executed letter

24
28

of transmittal or facsimile, together with a certificate(s) representing
the outstanding notes to be tendered in proper form for transfer, or a
confirmation of book-entry transfer into the exchange agent's account at
DTC of outstanding notes delivered electronically, and any other
documents required by the letter of transmittal will be deposited by the
eligible institution with the exchange agent; and

- the properly completed and executed letter of transmittal or a facsimile,
together with the certificate(s) representing all tendered outstanding
notes in proper form for transfer, or a book-entry confirmation, and all
other documents required by the letter of transmittal are received by the
exchange agent within five business days after the expiration date.

A tender made through DTC's Automated Tender Offer Program will be accepted
if:

- before 5:00 p.m., New York City time, on the expiration date, the
exchange agent receives an agent's message from DTC stating that DTC has
received an express acknowledgment from the participant in DTC tendering
the outstanding notes that they have received and agree to be bound by
the notice of guaranteed delivery; and

- the exchange agent receives, within five business days after the
expiration date, either: (1) a book-entry conformation, including an
agent's message, transmitted via DTC's ATOP procedures; or (2) a properly
completed and executed letter of transmittal or a facsimile, together
with the certificate(s) representing all tendered outstanding notes in
proper form for transfer, or a book-entry confirmation, and all other
documents required by the letter of transmittal.

Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures described above.

WITHDRAWAL OF TENDERS

Except as otherwise provided in this prospectus, tenders of outstanding
notes may be withdrawn at any time before 5:00 p.m., New York City time, on the
expiration date. To withdraw a tender of outstanding notes in the exchange
offer:

- a written or facsimile transmission of a notice of withdrawal must be
received by the exchange agent at its address listed below before 5:00
p.m., New York City time, on the expiration date; or

- you must comply with the appropriate procedures of DTC's Automated Tender
Offer Program.

Any notice of withdrawal must:

- specify the name of the person having deposited the outstanding notes to
be withdrawn;

- identify the outstanding notes to be withdrawn, including the certificate
number or numbers and principal amount of the outstanding notes or, in
the case of outstanding notes transferred by book-entry transfer, the
name and number of the account at the depositary to be credited;

- be signed by the same person and in the same manner as the original
signature on the letter of transmittal by which the outstanding notes
were tendered, including any required signature guarantee, or be
accompanied by documents of transfer sufficient to permit the trustee for
the outstanding notes to register the transfer of the outstanding notes
into the name of the person withdrawing the tender; and

- specify the name in which any of these outstanding notes are to be
registered, if different from that of the person who deposited the
outstanding notes to be withdrawn.

All questions as to the validity, form and eligibility, including time of
receipt, of the withdrawal notices will be determined by us, whose determination
shall be final and binding on all parties. Any outstanding notes so withdrawn
will be judged not to have been tendered according to the procedures in
25
29

this prospectus for purposes of the exchange offer, and no exchange notes will
be issued in exchange for those outstanding notes unless the outstanding notes
so withdrawn are validly retendered. Any outstanding notes that have been
tendered but are not accepted for exchange will be returned to the holder of the
outstanding notes without cost to the holder or, in the case of outstanding
notes tendered by book-entry transfer into the holder's account at DTC according
to the procedures described above. This return or crediting will take place as
soon as practicable after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn outstanding notes may be retendered by
following one of the procedures described above under "-- Procedures for
Tendering" at any time before the Expiration Date.

CONDITIONS

The exchange offer is subject only to the following conditions:

- the compliance of the exchange offer with securities laws;

- the tender of the outstanding notes;

- the representation by the holders of the outstanding notes that they are
not our affiliate, that the exchange notes they will receive are being
acquired by them in the ordinary course of their business and that at the
time the exchange offer is completed the holder had no plan to
participate in the distribution of the exchange notes; and

- no judicial or administrative proceeding is pending or shall have been
threatened that would limit us from proceeding with the exchange offer.

EXCHANGE AGENT

United States Trust Company of New York, the trustee under the indenture,
has been appointed as exchange agent for the exchange offer. In this capacity,
the exchange agent has no fiduciary duties and will be acting solely on the
basis of our directions. Requests for assistance and requests for additional
copies of this prospectus or of the letter of transmittal should be directed to
the exchange agent. You should send certificates for outstanding notes, letters
of transmittal and any other required documents to the exchange agent addressed
as follows:

By Registered or
By Hand Delivery: By Overnight Courier: Certified Mail:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
111 Broadway 770 Broadway Box 843
Lower Level 13th Floor Peter Cooper Station
New York, NY 10005 New York, NY 10003 New York, NY 10276
Attn: Corporate Trust Attn: Corporate Trust Service Attn: Corporate Trust
Window

By Facsimile Transmission
(For Eligible Institutions Only):

United States Trust Company of New York
(212) 420-6152
Confirm: (800) 548-6565
For Information:
(800) 548-6565

DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS LISTED
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS DESCRIBED
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL.

26
30

SOLICITATION OF TENDERS; FEES AND EXPENSES

We will bear the expenses of requesting that holders of outstanding notes
tender those notes for exchange notes. The principal solicitation under the
exchange offer is being made by mail. Additional solicitations may be made by
our officers and regular employees and our affiliates in person, by telegraph,
telephone or telecopier.

We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. We, however, will pay the exchange
agent reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket costs and expenses in connection
with the exchange offer and will indemnify the exchange agent for all losses and
claims incurred by it as a result of the exchange offer. We may also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this prospectus,
letters of transmittal and related documents to the beneficial owners of the
outstanding notes and in handling or forwarding tenders for exchange.

We will pay the expenses to be incurred in connection with the exchange
offer, including fees and expenses of the exchange agent and trustee and
accounting and legal fees and printing costs.

You will not be obligated to pay any transfer tax in connection with the
exchange, except if you instruct us to register exchange notes in the name of,
or request that notes not tendered or not accepted in the exchange offer be
returned to, a person other than you, you will be responsible for the payment of
any applicable transfer tax.

ACCOUNTING TREATMENT

The exchange notes will be recorded at the same carrying value as the
outstanding notes, as reflected in our accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by us upon the closing of the exchange offer. We will amortize the
expenses of the exchange offer over the term of the exchange notes.

PARTICIPATION IN THE EXCHANGE OFFER; UNTENDERED NOTES

Participation in the exchange offer is voluntary. Holders of the
outstanding notes are urged to consult their financial and tax advisors in
making their own decisions on what action to take.

As a result of the making of, and upon acceptance for exchange of all
outstanding notes tendered under the terms of, this exchange offer, we will have
fulfilled a covenant contained in the terms of the registration agreement.
Holders of the outstanding notes who do not tender in the exchange offer will
continue to hold their outstanding notes and will be entitled to all the rights,
and subject to the limitations, applicable to the outstanding notes under the
indenture. Holders of outstanding notes will no longer be entitled to any rights
under the registration agreement that by their term terminate or cease to have
further effect as a result of the making of this exchange offer. See
"Description of the Exchange Notes." All untendered outstanding notes will
continue to be subject to the restrictions on transfer described in the
indenture. To the extent that outstanding notes are tendered and accepted in the
exchange offer, the trading market for untendered outstanding notes could be
adversely affected. This is because there will probably be many fewer remaining
outstanding notes outstanding following the exchange, significantly reducing the
liquidity of the untendered notes.

We may in the future seek to acquire untendered outstanding notes in the
open market or through privately negotiated transactions, through subsequent
exchange offers or otherwise. We intend to make any acquisitions of outstanding
notes following the applicable requirements of the Exchange Act, and the rules
and regulations of the SEC under the Exchange Act, including Rule 14e-1, to the
extent applicable. We have no present plan to acquire any outstanding notes that
are not tendered in the exchange offer or to file a registration statement to
permit resales of any outstanding notes that are not tendered in the exchange
offer.
27
31

USE OF PROCEEDS

We will not receive any cash proceeds from the exchange offer. We used the
proceeds from the issuance of the outstanding notes

- to repay the Weatherford note and

- to repay outstanding indebtedness under our revolving credit agreement,
some of which was incurred to finance recent acquisitions.

SOURCES AND USES FOR THE OFFERING OF THE OUTSTANDING NOTES

(in millions)

SOURCE OF FUNDS AMOUNT
- --------------- ------

Proceeds of the offering............ $198.8
------
Total............................... $198.8
======

USES OF FUNDS AMOUNT
- ------------- ------

Weatherford note.................... $100.0
Credit facility..................... 92.5
Fees and expenses................... 6.3
------
Total............................... $198.8
======

Our $100.0 million note to Weatherford was unsecured, subordinated debt
bearing interest at 10% per annum and maturing March 31, 2002. We executed that
note in contemplation of our spinoff to represent a portion of historical
intercompany indebtedness we owed to Weatherford. At that time, we owed
Weatherford approximately $494.7 million, which we incurred for various purposes
including (a) the funding of approximately $275.0 million for our acquisitions
with cash and stock provided by Weatherford, (b) $129.6 million for purchases of
capital equipment for manufacturing and (c) $90.1 million for funding of working
capital and third party debt requirements. After we issued the note, but before
the spinoff, Weatherford contributed to us substantially all remaining
intercompany indebtedness that we owed to Weatherford. The note to Weatherford
required that we use a portion of the net proceeds from any debt or equity
financing to repay that note, together with any accrued and unpaid interest, in
full.

At December 4, 2000, we had outstanding borrowings of $92.5 million under
our revolving credit facility, with an average interest rate of 9.1%. We
incurred this debt primarily in connection with increasing our working capital
and increasing our manufacturing capacity over the past six months and also to
fund acquisitions. During October 2000, we purchased a tubular accessories
producer for approximately $2.5 million in cash and $1.9 million in deferred and
contingent payments and the assets of a manufacturer of drilling tools for the
water well, construction and utility boring industries, for approximately $12.3
million in cash, all of which we funded under our credit facility. We also
funded a $26.5 million investment in a European metalworking operation, which we
funded under our credit facility.

Although we repaid our credit facility in connection with the issuance of
the outstanding notes, that facility did not terminate. We may use future
borrowings under our credit facility to make additional acquisitions in the
drill stem and engineered connections and premium tubing industries or related
businesses. Companies that we acquire outside the U.S. will not guarantee the
notes.

28
32

SELECTED HISTORICAL FINANCIAL DATA

The following table sets forth certain of our historical combined financial
data. This information has been prepared as if we had been a stand-alone company
for the periods presented. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements. The following information may not be
indicative of our future operating results.

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT RATIOS AND PER SHARE DATA)

OPERATING DATA:
Revenues..................... $167,616 $367,336 $630,021 $646,454 $286,370 $196,776 $350,912
Selling, General and
Administrative Expense..... 12,943 24,417 41,886 46,393 45,742 33,860 40,246
Interest Expense(a).......... 7,578 7,371 12,976 12,008 11,343 8,332 11,572
Operating Income (Loss)(b)... 15,238 46,322 115,436 112,884 (33,014) (15,761) 22,734
Net Income (Loss)(b)......... 3,059 23,588 61,514 65,720 (33,511) (17,400) 6,303
Earnings (Loss) Per Share(c):
Basic...................... 0.04 0.26 0.64 0.68 (0.33) (0.18) 0.06
Diluted.................... 0.04 0.26 0.63 0.67 (0.33) (0.18) 0.06
OTHER DATA:
Ratio of Earnings to Fixed
Charges(d)................. 1.9 5.5 8.4 8.8 -- -- 1.5(e)

AT DECEMBER 31,
---------------------------------------------------- AT SEPTEMBER 30,
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- ----------------

BALANCE SHEET DATA:
Total Assets...................... $237,854 $396,693 $662,598 $738,314 $734,575 $777,974
Current Assets.................... 144,310 209,527 351,245 350,296 272,038 327,877
Current Liabilities............... 61,525 106,969 156,199 144,268 107,401 150,166
Long-Term Debt.................... 54,016 103,432 127,387 109,265 124,276 119,018
Stockholders' Equity.............. 104,094 164,220 332,722 445,211 453,856 455,221

- ---------------

(a) Interest expense includes interest attributed to $51.4 million in debt
owed to Weatherford for the year ended December 31, 1995 and $100.0
million in debt owed to Weatherford for each period presented based,
through April 14, 2000, on Weatherford's long-term debt rates for the
applicable periods and thereafter at 10% per annum, the interest rate on
our note to Weatherford. This does not necessarily represent what our
actual cost of capital would have been had we been a stand-alone entity in
each of the periods presented. See Note 6 to our Financial Statements.

(b) The year ended December 31, 1998, includes charges of $35.0 million ($22.8
million net of tax benefit) comprised of $5.1 million for facility
closures and exit costs, $0.2 million of severance and related costs,
$28.5 million for the write-off of inventory and $1.2 million for the
write-down of equipment. The write-off of inventory is classified as cost
of sales. The year ended December 31, 1999, includes a charge of $9.5
million ($6.1 million net of tax benefit) relating to the decision in the
fourth quarter of 1999 to terminate our manufacturing arrangement in
India, of which $7.8 million involved a purchase deposit that we will not
be able to use and $1.7 million represented equipment in India that we do
not believe we will be able to recover.

(c) We have calculated pro forma earnings per share before April 14, 2000, the
effective date of our spinoff, using our pro forma basic and diluted
weighted average shares outstanding for each of the periods presented. In
calculating our pro forma basic weighted average shares, we have adjusted
Weatherford's historical basic weighted average shares outstanding for the
applicable period to reflect the number of shares that would have been
outstanding at the time assuming a distribution of one share of our common
stock for each share of Weatherford common stock. Our pro forma diluted
weighted average shares reflect an estimate of the potential dilutive
effect of common stock equivalents. This estimate is calculated based on
Weatherford's dilutive effect of stock options and

29
33

restricted stock. The effect of stock options and restricted stock is not
included in the diluted weighted average shares computation for periods in
which a loss occurs because to do so would have been anti-dilutive.

(d) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consist of pretax income from continuing operations plus fixed
charges (excluding capitalized interest). "Fixed charges" represent
interest incurred (whether expensed or capitalized), amortization of debt
expense, and that portion of rental expense on operating leases deemed to
be the equivalent of interest. For the nine month period ended September
30, 1999, and for the year ended December 31, 1999, earnings were
insufficient to cover fixed charges by $23.7 million and $44.9 million,
respectively. We were a wholly owned subsidiary of Weatherford until April
14, 2000. The ratios for periods before that date are based on earnings
and fixed charges attributable to us during the periods presented, and
reflect allocations of certain expenses to us. Although we believe these
allocations are reasonable, they are not necessarily indicative of the
costs we would have incurred had we not been owned by Weatherford during
the periods presented. See Note 1 to our Financial Statements. In
particular, our cost of capital, and therefore our fixed charges, may have
been higher than those reflected in these ratios had we not been owned by
Weatherford during the periods presented.

(e) Giving effect to the offering of the outstanding notes and the repayment
in full of the Weatherford note and the credit facility as of January 1,
2000, our Ratio of Earnings to Fixed Charges for the nine months ended
September 30, 2000 would have been 1 to 1.

30
34

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following is a discussion of our results of operations and current
financial position. This discussion should be read in conjunction with the
Financial Statements. Our discussion of our results of operations and financial
condition includes various forward-looking statements about our markets, the
demand for our products and services and our future results. These statements
are based on certain assumptions that we consider reasonable. For information
about these assumptions and other risks and exposures relating to our businesses
and our company, you should refer to our section entitled "Risk Factors."

We are the world's largest manufacturer and supplier of drill pipe and
other drill stem products and are a leading North American provider of
high-performance engineered connections and premium tubing and casing used in
challenging onshore and offshore applications. Drill stem products are used in
drilling oil and gas wells while engineered connections and premium tubing and
casing are used to complete successful oil and gas wells and to facilitate
production. Our customers include major, independent and state-owned oil
companies, drilling contractors, oilfield service companies, rental tool
companies and North American oil country tubular goods (OCTG) distributors. We
operate through 22 manufacturing facilities located in the United States,
Mexico, Canada, Europe, and Asia and 30 sales, service and repair locations
globally.

We operate through two business segments: (1) drill stem products and (2)
engineered connections and premium tubulars.

Our drill stem products segment generates revenues through manufacturing
and selling drill pipe and other drill stem products and through licensing our
technology to third party repair and maintenance shops around the world.

Our engineered connections and premium tubulars segment generates revenues
by

- manufacturing and selling high-performance engineered connections and
premium tubing and casing and other products,

- developing customer-specified premium engineered connections and tubular
solutions for planned wells,

- providing field service personnel who assist rig operators at the rig
site in utilizing our connection technologies and other products and

- licensing our technologies.

For the nine months ended September 30, 2000, we derived 54% of our
revenues from our engineered connections and premium tubulars segment and 46% of
our revenues from our drill stem segment. For the same time period, 97% of our
revenues resulted from U.S. and Canadian sales and 3% of our revenues resulted
from sales outside the U.S. and Canada. As conditions in the oil and gas
industry continue to improve, we expect our drill stem revenues and
international revenues to represent a larger percentage of our revenue base.

MARKET FUNDAMENTALS

Our business is materially dependent on drilling and production activity
and the associated demand for our drill stem products and engineered connections
and premium tubulars. Generally, demand for our drill stem products and
engineered connections and premium tubulars closely follows the domestic and
international rig count, which closely follows the prices of oil and gas.

31
35

The following table sets forth certain information with respect to oil and
gas prices at the dates indicated and the monthly North American (U.S. and
Canadian) and international rig counts for the months reflected:

HENRY HUB NORTH AMERICAN INTERNATIONAL
WTI OIL(A) GAS(B) RIG COUNT(C) RIG COUNT(C)
---------- --------- -------------- -------------

September 30, 2000.................. $30.87 $5.15 1,325 714
June 30, 2000....................... 32.44 4.34 1,169 657
March 31, 2000...................... 26.86 2.95 1,167 606
December 31, 1999................... 24.79 2.29 1,183 574
September 30, 1999.................. 24.51 2.35 971 557
June 30, 1999....................... 17.89 2.39 745 602
March 31, 1999...................... 16.16 2.00 724 613
December 31, 1998................... 12.14 1.88 895 671
December 31, 1997................... 17.41 2.21 1,499 819
December 31, 1996................... 25.55 2.49 1,195 810

- ---------------

(a) Price per barrel of West Texas Intermediate crude as of the dates presented
above. Source: U.S. Energy Information Administration.

(b) Price per MMBtu as of the dates presented above. Source: U.S. Energy
Information Administration.

In addition to changes in prices of oil and gas and the domestic and
international rig count, demand for our products and services is affected by
increasingly harsh well conditions. Drill stem products are consumable and wear
out through a combination of friction and metal fatigue. In recent years, we
have seen increasing intensity of use in drill stem products. With this
increasing intensity of use, drill stem products wear out increasingly faster.
This increased intensity of use results from more wells being drilled either
directionally or horizontally, which results in far higher abrasion and bending
loads than in vertical wells, more gas wells being drilled today, which
typically are drilled to greater depths than oil wells, and the increasing
prevalence of top drive rigs, which place more torsional stress on drill pipe
than traditional rotary table rigs. We believe this trend will favorably impact
demand for our drill stem products.

We believe that, absent substantial declines in oil and gas prices and rig
count, demand for our engineered connections and premium tubulars should
continue to increase. The average working drilling rig uses more drill pipe per
month than the average rig ten years ago. Factors influencing this pattern
include increases in the average depths of wells and in the percentage of gas
wells being drilled. Generally, as well depths increase it is more likely that
engineered connections and premium tubulars, such as those we manufacture, will
be used as opposed to American Petroleum Institute (API) standard products. In
addition, gas wells encounter higher reservoir pressures and require larger
diameter tubulars with thicker walls and higher strength steel grades, and thus
usually require engineered connections and premium tubulars as opposed to
API-standard products.

FUTURE TRENDS AND EXPECTATIONS

Demand for our products has improved significantly over 1999 levels due to
improvements in the prices of oil and gas. We currently expect continued
improvements in demand for our drill pipe and other drill stem products during
the fourth quarter of 2000, with further improvements occurring in 2001. We
expect this trend to occur as excess drill pipe inventories that accumulated
following the decline in drilling in 1998 will continue to deplete. However, the
level of excess drill pipe inventory is difficult to estimate, and we cannot be
certain that those inventories will deplete in line with our expectations. We
expect demand for our engineered connections and premium tubular products to
remain strong during these periods as well. Nevertheless, demand for all of our
products continues to be highly dependent upon drilling activity and the price
of oil and gas, and any material decline in the price of oil and gas or drilling
activity could result in a further delay in, or lack of, a complete recovery in
our industry. In addition,

32
36

international demand for our products and services has not recovered as quickly
as domestic demand for our products and services. We do not expect a full market
recovery until international rig counts and drilling activity fully recover to
peak 1997 levels and excess inventory levels are depleted.

We expect our profitability will be favorably impacted by various strategic
actions that we took while market conditions remained depressed during 1998 and
1999. These actions included the following:

- In June 1998, we acquired T.F. de Mexico S.A. de C.V. for approximately
$59.0 million, a manufacturer of tool joints for our drill stem
operations, and in July 1999, we acquired a 50.01% interest in
Voest-Alpine Stahlrohr Kindberg GmbH & Co. KG for approximately $32.6
million, which owns a tubular mill in Austria with a capacity of
approximately 300,000 metric tons that is capable of supplying a large
portion of our green tube requirements. With the combination of the T.F.
de Mexico and Voest-Alpine acquisitions, we became the only
fully-integrated manufacturer of drill pipe in the world, which we
believe provides us with substantial cost savings as compared to our
competitors.

- During 1999, we consummated six other strategic acquisitions for $11.2
million in cash, $6.6 million in notes payable and assumed debt and 0.45
million shares of Weatherford common stock.

- During 1998, we acquired an additional manufacturer of drill pipe and
other drill stem products, for $29.0 million.

- During 1999, we instituted a manufacturing consolidation that we expect
to complete by early 2001.

We believe these strategic actions have the potential to significantly
reduce our costs through lower tubular purchase costs from Voest-Alpine, lower
tool joint costs from T.F. de Mexico and plant consolidations. Although we
already have realized some of the benefit of these strategic actions, we do not
expect to realize this full benefit unless and until we see a full recovery of
demand for our products.

Our expectations for future increased product demand and costs savings as
described above are forward-looking statements. While we believe these
expectations are reasonable, we encourage you to review the section entitled
"Risk Factors" for a discussion of possible reasons we may not experience this
increased demand or why, even if we do, we may not realize the full benefit in
our revenues or profitability or from our expected cost savings described above.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999

General

For the nine months ended September 30, 2000, net income was $6.3 million,
or $0.06 per diluted share, and EBITDA was $46.1 million (net of corporate
selling, general and administrative expenses, less corporate depreciation and
amortization expenses, of $14.9 million) on operating revenues of $350.9
million, as compared to a net loss of $17.4 million, or $0.18 per diluted share,
and EBITDA of $6.4 million (net of corporate selling, general and administrative
expenses, less corporate depreciation and amortization expenses, of $10.9
million) on operating revenues of $196.8 million for the nine months ended
September 30, 1999.

Significant 2000 Events

During the last half of 1999 and first half of 2000, oil prices increased
due to members of OPEC reducing production in compliance with established
production quotas. However, the average OPEC oil price began to exceed the
targeted price range of $22 to $28 per barrel established in their March 2000
meeting. As a result, in June 2000 OPEC agreed to increase their production
quotas by 708,000 barrels per day. Oil prices fell to their lowest level in
nearly three months in July 2000 on rumors that Saudi Arabia increased
production despite a consensus from other OPEC members. Oil prices surged again
in mid-September 2000 amid concerns over tensions between Iraq and Kuwait and
the threat of a hurricane

33
37

in the Gulf of Mexico that could limit production. However prices decreased at
September 30, 2000, following the Department of Energy's announcement of a 30
million barrel release from the Strategic Petroleum Reserve. Oil prices have
been and continue to be extremely volatile, and we cannot predict when or if
future declines will occur.

U.S. gas prices have also increased in 2000 as compared to 1999 on the
strength of increased demand, which relates primarily to the sharp increase in
requirements from the electric power sector. New supply in North America has not
kept pace with incremental demand, resulting in year-to-year declines in gas
storage volumes dating back to July 1999. Gas prices surged in September 2000,
as temperatures rose in the Western states and there were unscheduled outages at
nuclear plants in Ohio, Maryland and Florida. Consecutive tropical storm threats
in the Atlantic and Gulf of Mexico also contributed to rising gas prices. Gas
prices have been and continue to be extremely volatile, and we cannot predict
when or if future declines will occur.

The increase in oil and gas prices resulted in a significant increase in
exploration and completion drilling activity from the low levels experienced in
the first half of 1999. The North American rig count has increased 78% from 745
as of June 30, 1999 to 1,325 as of September 30, 2000, while the international
rig count has increased 19% from 602 as of June 30, 1999 to 714 as of September
30, 2000. The increased rig count has led to a significant improvement in our
2000 operating results as compared to 1999 as our customers' spending has
increased and demand for our drill stem and engineered connections and premium
tubular products has been strong.

Significant 1999 Events

In July 1999, we acquired a 50.01% ownership interest in Voest-Alpine in
Austria for approximately $32.6 million, of which we paid approximately $8.0
million in cash, with the remainder payable over a period of up to 7 1/2 years.
Our investment in Voest-Alpine is reported on the equity method of accounting.
Voest-Alpine owns a tubular mill in Austria with a capacity of approximately
300,000 metric tons that is capable of supplying a large portion of our green
tube requirements in the United States. In addition, we entered into a long-term
green tube supply contract with Voest-Alpine. The impact of this investment and
supply contract has benefited us as the market recovers by providing us with a
reliable source of raw materials and provide us a 50% profit participation in
Voest-Alpine's business.

On October 27, 1999, we acquired an additional 27% interest in P.T. H-Tech
Oilfield Equipment, an Indonesia-based drill pipe manufacturer with facilities
located on Batam Island. We previously held a 27% interest in H-Tech and with
this purchase we own a controlling 54% interest in H-Tech. The purchase price
for the acquisition of this additional interest was $6.0 million.

We began to consolidate four of our U.S. manufacturing plants into two
manufacturing facilities and also two of our foreign manufacturing plants into
one foreign manufacturing plant. The consolidation has reduced operating costs
through the creation of greater efficiencies and reduced selling, general and
administrative expenses by reducing administrative personnel. The consolidation
has benefited both the drill stem products and engineered connections and
premium tubulars segments through an increase of manufacturing capacity
utilization and lower plant operating costs.

34
38

Drill Stem Products

The following table sets forth additional data regarding the results of our
drill stem products segment for the nine months ended September 30, 2000 and
1999:

NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1999 2000
--------- ----------
(IN THOUSANDS, EXCEPT
PERCENTAGES)

Revenues.................................................... $88,900 $162,353
Gross Profit................................................ 14,468 22,106
Gross Profit %.............................................. 16.3% 13.6%
Selling, General and Administrative......................... $10,434 $ 11,820
Operating Income............................................ 4,034 14,177
EBITDA...................................................... 14,765 25,839

Revenues. Revenues increased $73.5 million, or 83%, for the nine months
ended September 30, 2000 as compared to the same period in 1999 due primarily to
significant increases in oil and gas drilling and completion activity. The
average North American and International rig counts increased by 34% and 5%,
respectively, during the nine months ended September 30, 2000 as compared to the
same period in 1999.

Gross Profit. Gross profit increased $7.6 million, or 53%, for the nine
months ended September 30, 2000 as compared to the same period in 1999. The
increase was due to increased sales primarily reflecting the strengthening
demand for our products as oil and gas production activity continues to recover
from the low levels in 1999. Results for 2000 were also favorably affected by
reduced raw material costs as a result of our investment in Voest-Alpine.
However, gross profit as a percentage of revenue decreased 2.7% in 2000 as
compared to 1999. Results for 1999 benefited from favorable manufacturing
absorption related to significant production for an affiliated company coupled
with reduced staffing levels. During 2000, we have significantly increased
staffing levels to meet customers' growing demand for our products and have
incurred some inefficiencies and operational ramp up costs as these new
employees are hired and undergo training.

Selling, General and Administrative. Selling, general and administrative
expenses decreased as a percentage of revenues from 12% in the first nine months
of 1999 to 7% for the same period in 2000. The decrease was due primarily to a
higher revenue base related to increased oil and gas drilling activity,
partially offset by increased staffing levels.

Operating Income. Operating income increased $10.1 million for the nine
months ended September 30, 2000 as compared to the same period in 1999. The
increase was due primarily to increased sales reflecting the strengthening
demand for our products as oil and gas production activity continued to recover
from the low levels in 1999, coupled with reduced raw material costs and equity
earnings related to our investment in Voest-Alpine. This increase was partially
offset by our increased staffing levels in order to meet customers' growing
demand for our products.

35
39

Engineered Connections and Premium Tubulars

The following table sets forth additional data regarding the results of our
engineered connections and premium tubulars segment for the nine months ended
September 30, 2000 and 1999:

NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1999 2000
--------- ---------
(IN THOUSANDS, EXCEPT
PERCENTAGES)

Revenues.................................................... $107,876 $188,559
Gross Profit................................................ 4,631 37,483
Gross Profit %.............................................. 4.3% 19.9%
Selling, General and Administrative......................... $ 12,747 $ 13,730
Operating Income (Loss)..................................... (8,116) 23,753
EBITDA...................................................... 2,494 35,166

Revenues. Revenues increased $80.7 million, or 75%, for the nine months
ended September 30, 2000 as compared to the same period in 1999 due primarily to
significant increases in oil and gas drilling and completion activity. The
average North American and International rig counts increased by 34% and 5%,
respectively, during the nine months ended September 30, 2000 as compared to the
same period in 1999. The growth in revenues reflects the continued demand for
our highly engineered tubing and casing products for critical deep gas and
offshore drilling and completion applications as well as improved demand for our
newly developed premium thread technology.

Gross Profit. Gross profit increased $32.9 million for the nine months
ended September 30, 2000 as compared to the same period in 1999. The increase
relates primarily to growth in demand for our highly engineered tubing and
casing products and price increases we initiated in 2000. Additionally,
production volume increased, which provided increased utilization of
manufacturing facilities and higher fixed cost absorption.

Selling, General and Administrative. Selling, general and administrative
expenses decreased as a percentage of revenues from 12% for the nine months
ended September 30, 1999 to 7% for the same period in 2000. The decrease was due
primarily to cost reduction efforts implemented in 1999 coupled with a higher
revenue base in 2000.

Operating Income (Loss). Operating income increased $31.9 million for the
nine months ended September 30, 2000 as compared to the same period in 1999. The
significant improvement in operating income primarily reflects the increase in
demand for our premium tubular products driven by the increased oil and gas
drilling and completion activity.

Other Items

Corporate General and Administrative. Corporate general and administrative
expenses increased $3.5 million for the nine months ended September 30, 2000 as
compared to the same period in 1999. The increase was primarily due to overhead
costs for additional financial, accounting, legal, marketing and other
administrative expenses required by Grant Prideco as a separate public entity
following our spinoff from Weatherford in April 2000.

Interest Expense. Interest expense increased $3.2 million for the nine
months ended September 30, 2000 as compared to the same period in 1999. The
increase was due to the change in the Weatherford subordinated note rate from
7.25% in 1999 to 10% in 2000 coupled with interest related to the revolving
credit and letter of credit facility agreement which we entered into in April
2000.

Tax Provision (Benefit). The effective tax rate for the nine months ended
September 30, 2000 was 40%, as compared to 27% for the same period in 1999. The
lower effective tax rate for 1999 reflects the unfavorable impact of certain
nondeductible expenses.

36
40

YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998

General

In 1999, net loss was $33.5 million, or $0.33 per diluted share, and EBITDA
was $7.0 million (excluding other charges of $9.5 million and net of corporate
selling, general and administrative expenses, less corporate depreciation and
amortization expenses, of $15.0 million) on operating revenues of $286.4
million, as compared to net income of $65.7 million, or $0.67 per diluted share,
and EBITDA of $179.0 million (excluding other charges of $35.0 million and net
of corporate selling, general and administrative expenses, less corporate
depreciation and amortization expenses, of $14.3 million) on operating revenues
of $646.5 million for the same period ended 1998.

Our business was severely impacted during 1999 by the decline in worldwide
drilling activity that began in 1998. Our revenues for 1999 were down by
approximately 56% from the relatively high levels recorded in 1998. Our product
backlog declined during 1999 due to lower drilling activity. This backlog fell
to as low as $34.8 million during the third quarter of 1999. At December 31,
1999, our product backlog was $60.4 million compared to backlog of $88.9 million
at December 31, 1998.

Significant 1999 Events

In July 1999, we acquired a 50.01% ownership interest in Voest-Alpine in
Austria. Voest-Alpine owns a tubular mill in Austria with a capacity of
approximately 300,000 metric tons that is capable of supplying a large portion
of our green tube requirements in the United States.

On October 27, 1999, we acquired an additional 27% interest in H-Tech, an
Indonesia-based drill pipe manufacturer with facilities located on Batam Island,
bringing our total interest in this company to 54%.

In 1999 we decided to terminate our manufacturing arrangement with Oil
Country Tubular Limited ("OCTL") in India. This decision was made in light of
the existing market and difficulties arising from the political situation
between India and countries where OCTL's principal customers reside. This
decision required us to write-off a $7.8 million deposit previously paid to OCTL
for future products and $1.7 million of our equipment located in India in the
fourth quarter of 1999 for a total write off of $9.5 million.

Significant 1998 Events

On February 12, 1998, we acquired Drill Tube International, Inc., a
manufacturer of drill pipe and other drill stem products, for $29.0 million. The
consideration we paid in the acquisition consisted of $9.0 million in cash and a
contractual purchase credit obligation to manufacture and deliver products to
the seller over a two-year period.

In December 1998, we acquired from an affiliate of Tubos de Acero de
Mexico, S.A. (TAMSA) 93% of the outstanding shares of T.F. de Mexico, which
owned the manufacturing facility in Veracruz, Mexico that we were operating
under a capital lease arrangement. As part of the consideration we paid in the
acquisition, we sold the international rights, excluding the United States and
Canada, to our Atlas Bradford tubular connection line for carbon grade tubulars
to the TAMSA affiliate through a license arrangement. The total consideration
was $59.0 million comprised of $48.5 million in debt (which was repaid in March
1999), cash of $1.5 million and a $9.0 million license of the international
rights of our Atlas Bradford thread line. The rights we sold through this
license arrangement had a fair value of $9.0 million. As a result, in December
1998, we recorded $9.0 million in revenues to recognize the sale of our
international rights to the Atlas Bradford connection line.

Other Charges

In 1998, our drill stem segment incurred $35.0 million in charges (as set
forth below) relating to the reorganization and rationalization of our
businesses in light of declining industry conditions and the merger between EVI,
Inc. ("EVI") and Weatherford Enterra, Inc. ("WII"). In the second quarter of
1998, we

37
41

incurred $7.0 million of these charges in accordance with our formalized plan,
which reflected costs associated with the merger between EVI and WII and the
effects of the beginning of the downturn in the industry. Following a further
deterioration in the markets that we serve, we incurred an additional $28.0
million charge in the fourth quarter of 1998. These charges reflected additional
reductions in operations and an attempt to align our cost structure with current
demand.

The following chart summarizes our other charges in 1998:

CHARGE
AMOUNT
--------------
(IN THOUSANDS)

Facility Closures and Exit Costs(a)......................... $ 5,100
Severance and Related Costs(b).............................. 200
Inventory Write-off(c)...................................... 28,500
Asset Write-down(d)......................................... 1,150
-------
Total....................................................... $34,950
=======

- ---------------

(a) The facility and exit costs were $5.1 million, all of which were expended by
December 31, 1998. The $4.3 million of costs accrued in the second quarter
related primarily to the elimination of duplicative manufacturing facilities
as a result of the reorganization and rationalization of our businesses
following the merger of WII and EVI and the downturn in the industry. In the
fourth quarter an additional $0.8 million was accrued to further align our
costs in response to the significant decline in market conditions.

(b) The severance and related costs included in our second quarter charge were
$0.2 million for approximately 60 employees specifically identified, with
terminations completed in the second half of 1998.

(c) We reported the inventory write-off of $28.5 million as cost of sales. The
second quarter inventory write-off of $2.5 million resulted from the
elimination of certain products at the time of the merger of WII and EVI and
due to the declining industry conditions. The fourth quarter inventory
write-off of $26.0 million related to the significant decline in market
conditions.

(d) The write-down of assets was $1.2 million in the fourth quarter of 1998. The
charge related to the write-down of equipment as a result of the
rationalization of product lines and the specific identification of assets
held for sale. The identified equipment had a net book value of $0.6 million
as of December 31, 1998. The effect of suspending depreciation is $0.2
million annually.

Drill Stem Products

The following table sets forth additional data regarding the results of our
drill stem products segment for the years ended December 31, 1999 and 1998:

YEAR ENDED DECEMBER 31,
------------------------
1998 1999
--------- ---------
(IN THOUSANDS, EXCEPT
PERCENTAGES)

Revenues.................................................... $410,840 $142,732
Gross Profit................................................ 115,196(a) 15,187
Gross Profit %.............................................. 28.0% 10.6%
Selling, General and Administrative......................... $ 12,169 $ 13,248
Operating Income (Loss)..................................... 96,844(a) (7,934)(b)
EBITDA...................................................... 148,565(c) 16,639(c)

- ---------------

(a) Includes merger and other charges of $35.0 million, comprised of $5.1
million for facility closures and exit costs, $0.2 million of severance and
related costs and $28.5 million for the write-off of inventory. The
write-off of inventory is classified as cost of sales.

38
42

(b) Includes a charge of $9.5 million, $6.1 million net of tax, relating to the
decision to terminate our manufacturing arrangement in India, of which $7.8
million involved a purchase deposit that we will not be able to use and
$1.7 million in equipment in India that we do not believe we will be able
to recover.

(c) We calculate EBITDA by taking operating income (loss) and adding back
depreciation and amortization, excluding the impact of the non-recurring
charges discussed in (a) and (b) above for the respective periods of those
charges.

Revenues. Revenues decreased $268.1 million, or 65%, in 1999 as compared to
1998 due primarily to the overall decline in drilling activity and the
consumption of excess drill pipe from idle rigs. For 1998, revenues benefited
from sales from backlog notwithstanding a general decline in market conditions
that began in early 1998.

Gross Profit. Gross profit decreased $100.0 million in 1999 as compared to
1998 due primarily to the continued weak demand for our products and resulting
unabsorbed fixed costs associated with the manufacturing facilities operating at
extremely low utilization levels. The unabsorbed manufacturing costs for 1999
were somewhat reduced by an affiliated company purchases of drill pipe. Gross
profit in 1998 benefited from sales from backlog.

Selling, General and Administrative. Selling, general and administrative
expenses increased as a percentage of revenues from 3% in 1998 to 9% for 1999.
The increase was primarily due to a lower revenue base related to the decreased
oil and gas drilling activity coupled with increased goodwill amortization
associated with the acquisition of T.F. de Mexico in December 1998.

Operating Income (Loss). Operating loss was $7.9 million in 1999 as
compared to operating income of $96.8 million in 1998. The decrease primarily
reflected the continued weak demand for our products and resulting unabsorbed
fixed costs associated with the manufacturing facilities operating at extremely
low utilization levels, coupled with a $9.5 million write-down associated with
the decision to terminate our manufacturing arrangement in India.

Engineered Connections and Premium Tubulars

The following table sets forth additional data regarding the results of our
engineered connections and premium tubulars segment for the years ended December
31, 1999 and 1998:

YEAR ENDED DECEMBER 31,
-----------------------
1998 1999
---------- ----------
(IN THOUSANDS, EXCEPT
PERCENTAGES)

Revenues.................................................... $235,614 $143,638
Gross Profit................................................ 51,224 8,914
Gross Profit %.............................................. 21.7% 6.2%
Selling, General and Administrative......................... $ 19,817 $ 17,856
Operating Income (Loss)..................................... 31,407 (8,942)
EBITDA...................................................... 44,716 5,359

Revenues. Revenues decreased $92.0 million, or 39%, in 1999 as compared to
1998 primarily due to a large reduction in distributor and direct sales as of a
result of a deterioration of market conditions. The decrease was further
impacted by unfavorable product mix due to higher sales of lower margin casing
and tubular sales in 1999 as compared to 1998. Revenue declines also reflected a
substantial drop in riser and conductor sales due to a decline in offshore
activity. Our 1998 revenue includes the benefit from the license granted by us
to an affiliate of TAMSA having a fair value of $9.0 million.

Gross Profit. Gross profit decreased $42.3 million, or 83%, in 1999 as
compared to 1998. Gross profit declined due primarily to lower sales volume and
higher unabsorbed fixed costs associated with decreased

39
43

manufacturing utilization levels coupled with higher sales of lower margin
products in 1999 as compared to 1998.

Selling, General and Administrative. Selling, general and administrative
expenses increased as a percentage of revenues from 8% in 1998 to 12% in 1999.
The increase was due primarily to a lower revenue base in 1999 partially offset
by cost reductions implemented during the first half of 1999 in response to
market conditions.

Operating Income (Loss). Operating loss was $8.9 million in 1999 as
compared to operating income of $31.4 million in 1998. The decrease was due
primarily to the downturn in market conditions resulting in lower sales volume
and higher unabsorbed fixed costs associated with decreased manufacturing
utilization levels. Our 1999 results were further impacted by unfavorable
product mix due to higher sales of lower margin casing and tubular sales in 1999
as compared to 1998. Our 1998 results include the benefit from the license
granted by us to an affiliate of TAMSA having a fair value of $9.0 million
discussed above.

Other Items

Corporate General and Administrative. Corporate general and administrative
expenses increased $0.2 million in 1999 as compared to 1998 primarily due to a
lower revenue base coupled with increased corporate overhead charges from
Weatherford and higher corporate and overhead costs relating to the addition of
staff in anticipation of the spinoff.

Interest Expense. Interest expense decreased $0.7 million in 1999 as
compared to 1998 primarily due to the payment of the notes payable related to
the acquisition of T.F. de Mexico in March 1999.

Tax Provision (Benefit). The effective tax rate in 1999 was 25%, as
compared to 38% in 1998. The lower effective tax rate for 1999 reflects the
unfavorable impact of nondeductible goodwill expense related to historical
acquisitions.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

General

In 1998, net income was $65.7 million, or $0.67 per diluted share, and
EBITDA was $179.0 million (excluding other charges of $35.0 million and net of
corporate selling, general and administrative expenses, less corporate
depreciation and amortization expenses, of $14.3 million) on revenues of $646.5
million, as compared to net income of $61.5 million, or $0.63 per diluted share,
and EBITDA of $142.5 million (net of corporate selling, general and
administrative expenses, less corporate depreciation and amortization expenses,
of $12.1 million) on revenues of $630.0 million for the same period ended 1997.

Our results for 1998 compared to 1997 reflected improved market conditions
during the first half of 1998. During the first half of 1998, our operations
benefited from strong demand and pricing as well as a large backlog going into
the second half of 1998. As the year progressed, demand declined and prices
began to soften. This decline in demand and prices, however, did not materially
affect operating results in 1998 due to the backlog that existed during the
year.

Our results for 1998 also included a $35.0 million charge associated with
the reorganization and rationalization of our businesses due to market changes
that occurred during 1998. Excluding these charges, our results for 1998 were
significantly higher due to the higher margins and prices we received on our
sales during 1998 compared to 1997. The higher margins and prices reflected
improved demand during the first half of 1998. Additionally, our facilities were
operating at near capacity, which resulted in higher absorption of fixed
manufacturing costs.

Significant 1998 Events

On February 12, 1998, we acquired Drill Tube International, Inc., a
manufacturer of drill pipe and other drill stem products.

40
44

In 1998, our drill stem segment incurred $35.0 million in charges relating
to the reorganization and rationalization of our businesses due to market
changes and the merger between EVI and WII.

In December 1998, we acquired from an affiliate of TAMSA 93% of the
outstanding shares of T.F. de Mexico. As a result, in December 1998 we recorded
$9.0 million in revenues to recognize the sale of our international rights to
the Atlas Bradford connection line. The income associated with this sale
benefited 1998 by $9.0 million compared to 1997 results.

Significant 1997 Events

On August 25, 1997, we acquired XLS Holding, Inc., a provider of premium
connections for conductors, risers and other offshore structure components. We
accounted for the acquisition as a pooling of interests. The consideration we
paid consisted of approximately 0.9 million shares of Weatherford common stock.

On April 14, 1997, we acquired TA Industries, Inc. for approximately $44.1
million in cash and $19.7 million of assumed debt. TA designs, manufactures and
markets premium and API couplings and accessories under the brand names Texas
Arai and Tube-Alloy.

Drill Stem Products

The following table sets forth additional data regarding the results of our
drill stem products segment for years ended December 31, 1998 and 1997:

YEAR ENDED DECEMBER 31,
-----------------------
1997 1998
---------- ----------
(IN THOUSANDS, EXCEPT
PERCENTAGES)

Revenues.................................................... $333,716 $410,840
Gross Profit................................................ 102,618 115,196(a)
Gross Profit %.............................................. 30.8% 28.0%
Selling, General and Administrative......................... $ 10,699 $ 12,169
Operating Income............................................ 91,919 96,844(a)
EBITDA...................................................... 105,604 148,565(b)

- ---------------

(a) Includes merger and other charges of $35.0 million, comprised of $5.1
million for facility closures and exit costs, $0.2 million of severance and
related costs, $28.5 million for the write-off of inventory and $1.2 million
for the write-down of equipment. The write-off of inventory is classified as
cost of sales.

(b) We calculate EBITDA by taking operating income (loss) and adding back
depreciation and amortization, excluding the impact of the non-recurring
charges discussed in (a) above.

Revenues. Revenues increased $77.1 million, or 23%, in 1998 as compared to
1997. The increase in revenues for 1998 reflects the benefit of sales from
backlog from 1997 and the first half of 1998. Backlog as of December 31, 1997
was $319.8 million. Sales in the second half of 1998 decreased by 12.4% as
compared to the first half of 1998.

Gross Profit. Gross profit increased $12.6 million in 1998 as compared to
1997. Improved gross profit, before charges of $28.5 million, significantly
benefited from lower average costs associated with higher production volumes
during the first half of 1998. The second half of 1998 reflected a shift in the
sales mix from higher to lower margin product sales in the second half of 1998
as drilling activity decreased and demand for our premium products decreased.

Selling, General and Administrative. Selling, general and administrative
expenses slightly decreased as a percentage of revenues in 1998 as compared to
1997, reflecting primarily a higher revenue base.

Operating Income. Operating income increased $4.9 million in 1998 as
compared to 1997. The increase in operating income in 1998 reflects the benefit
of revenues from backlog generated in 1997 and the first half of 1998 coupled
with lower average costs associated with higher production volumes in the

41
45

first half of 1998. This increase was offset by a shift in sales mix from higher
to lower margin product sales.

Engineered Connections and Premium Tubulars

The following table sets forth additional data regarding the results of our
engineered connections and premium tubulars segment for the years ended December
31, 1998 and 1997:

YEAR ENDED DECEMBER 31,
-----------------------
1997 1998
---------- ----------
(IN THOUSANDS, EXCEPT
PERCENTAGES)

Revenues.................................................... $296,305 $235,614
Gross Profit................................................ 55,624 51,224
Gross Profit %.............................................. 18.8% 21.7%
Selling, General and Administrative......................... $ 19,204 $ 19,817
Operating Income............................................ 36,420 31,407
EBITDA...................................................... 48,938 44,716

Revenues. Revenues decreased $60.7 million, or 20%, in 1998 as compared to
1997. Revenues declined 34.7% in the second half of 1998 as compared to the
first half of 1998, due primarily to a decrease in demand as distributors'
inventories fell in light of prevailing market conditions. This was partially
offset by the sale of our international rights to the Atlas Bradford connection
lines to TAMSA where we recognized $9.0 million in revenues in 1998.

Gross Profit. Gross profit decreased $4.4 million, or 8%, in 1998 as
compared to 1997 due primarily to the sharp decline in demand during the second
half of 1998, which was partially offset by lower average costs associated with
higher production volumes during the first quarter of 1998.

Selling, General and Administrative. Selling, general and administrative
expenses increased as a percentage of revenues from 6% in 1997 to 8% in 1998
primarily due primarily to a lower revenue base in 1998. Selling, general and
administrative expenses increased by $1.2 million primarily as a result of a
full year of expenses associated with TA Industries, Inc.

Operating Income. Operating income decreased $5.0 million, or 14%, in 1998
as compared to 1997 primarily due to lower revenues as distributors' decreased
their inventories in light of prevailing market conditions and unabsorbed fixed
costs associated with our manufacturing facilities operating at lower
utilization levels. Our results for 1998 include the sale of our international
rights to the Atlas Bradford connection lines to TAMSA where we recognized $9.0
million.

Other Items

Corporate General and Administrative. Corporate general and administrative
expenses increased $2.4 million, or 20%, in 1998 as compared to 1997. The
increase was primarily due to increased information systems costs in 1998 as a
result of an increase in staff, as well as costs associated with system
conversions, including those related to Year 2000 compliance.

Interest Expense. Interest expense decreased $1.0 million in 1998 as
compared to 1997. The decrease in interest expense was due to the pay down of
notes payable during 1998.

Tax Provision (Benefit). The effective tax rate for year ended December 31,
1998 was 38%, as compared to 40%, for the same period in 1997. The higher
effective tax rate for 1997 reflects the unfavorable impact of certain
nondeductible expenses in 1997.

LIQUIDITY AND CAPITAL RESOURCES

As a wholly owned subsidiary of Weatherford prior to our spinoff in April
2000, our liquidity and capital resources historically were provided from cash
flow from operations and cash provided to us by

42
46

Weatherford. As an independent entity following the spinoff, our liquidity and
capital resources now depend on our cash flow from operations and our ability to
raise capital from third parties.

The following table summarizes our cash flows provided (used) by operating
activities, net cash used by investing activities and net cash provided (used)
by financing activities for the periods presented (in thousands):

NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)

Net Cash Provided (Used) by Operating
Activities............................ $ 9,872 $ 10,727 $ 65,240 $ 52,656 $(38,340)
Net Cash Used by Investing Activities... (85,660) (49,479) (34,118) (25,498) (15,978)
Net Cash Provided (Used) by Financing
Activities............................ 82,688 36,619 (30,988) (31,485) 51,013

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999

Net cash flow provided by operating activities decreased by $91.0 million
in 2000 due to increased working capital requirements to support the significant
increase in demand for our products. Net cash used by investing activities
decreased by $9.5 million in 2000 due primarily to reduced business acquisitions
activity. Net cash provided by financing activities increased by $82.5 million
due primarily to borrowings of $47.5 million on our revolving credit facility,
which we entered into on April 14, 2000, and lower principal payments on debt.
In March 1999, we repaid $48.5 million in debt related to our December 1998
acquisition of T.F. de Mexico.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998

Net cash flow provided by operating activities increased by $54.5 million
in 1999 due primarily to net decreases in working capital requirements as demand
for our products declined significantly after the first quarter of 1998. Net
cash used by investing activities decreased by $15.4 million in 1999 due
primarily to decreased capital expenditures for property, plant and equipment
due to depressed market conditions. Net cash used by financing activities
increased by $67.6 million in 1999 due primarily to a $48.5 million debt
repayment related to the acquisition of T.F. de Mexico. Additionally, net
advances from Weatherford decreased by $20.4 million in 1999.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997

Net cash flow provided by operating activities increased by $0.9 million in
1998. Generally, 1997 was characterized by substantial increases in accounts
receivable and inventories resulting from high demand and production rates,
while 1998 was characterized by decreases in accounts receivable and accounts
payable as demand for our products rapidly declined after the first quarter of
1998. Net cash used by investing activities decreased by $36.2 million in 1998
due primarily to reduced business acquisitions activity. In April 1997, we
acquired TA Industries, Inc. for approximately $44.1 million in cash and $19.7
million of assumed debt. Net cash provided by financing activities decreased by
$46.1 million due primarily to decreased net advances from Weatherford of $61.9
million, partially offset by reduced repayments on debt of $15.8 million.

CAPITAL EXPENDITURES

Capital expenditures for property, plant and equipment totaled $15.1
million and $14.8 million for the nine months ended September 30, 2000 and 1999,
respectively. We currently expect to expend approximately $6.0 million for
capital expenditures for property, plant and equipment during the remainder of
2000 related to our manufacturing consolidation projects, maintaining the
existing equipment base and

43
47

for improvements to our various facilities. We also estimate that our required
principal and interest payments for our outstanding debt to be approximately
$4.1 million for the remainder of 2000. We currently expect to satisfy all
required capital expenditures and debt service requirements during the remainder
of 2000 from operating cash flows, existing cash balances and our revolving
credit facility. Acquisitions and expansions will be financed from cash flow
from operations, borrowings under our credit facility, the proceeds of the
offering or through a combination of the issuance of additional equity and debt
financing. We expect that we would issue debt only to the extent that it is
consistent with our objective of maintaining a conservative capital structure.

CREDIT FACILITY AND LONG-TERM DEBT

On April 14, 2000, we entered into a $100.0 million revolving credit and
letter of credit facility with a syndicate of U.S. banks. The credit facility is
secured by our U.S. and Canadian inventories, equipment and receivables and is
guaranteed by our domestic subsidiaries. Borrowings under the credit facility
are based on the lender's determination of the collateral value of the
inventories and receivables securing the credit facility. The credit facility
also provides us with availability for stand-by letters of credit and bid and
performance bonds. We are required to comply with various affirmative and
negative covenants as well as maintenance covenants relating to fixed charge
coverage and net worth. These covenants also place limits on our ability to
incur new debt, engage in certain acquisitions and investments, grant liens, pay
dividends and make distributions to our stockholders. As of September 30, 2000,
we had borrowed $47.5 million under the credit facility, $6.3 million had been
used to support outstanding letters of credit, and $46.2 million were available
for borrowing under the credit facility. Additionally, at September 30, 2000,
$0.8 million of outstanding letters of credit had been supported under various
available letter of credit facilities that are not related to the revolving
credit and letter of credit facility. See "Description of Other Indebtedness."

In connection with the spinoff, we issued a $100.0 million unsecured
subordinated note to Weatherford with an annual interest rate of 10%. Interest
payments were due quarterly and principal and all unpaid interest was due March
31, 2002. Under the terms of the note, we were required to use the proceeds from
any equity or debt financing to repay the note in full.

In connection with our July 1999 investment in Voest-Alpine, we incurred
debt denominated in Austrian schillings for 319.8 million Austrian schillings.
As of September 30, 2000, principal of $5.0 million (based on September 30, 2000
exchange rates) was payable over two years in four equal installments in each
January and July until July 2002. Additionally, remaining principal of $12.4
million (based on September 30, 2000 exchange rates) was payable over the next
6 1/2 years out of the annual dividend payable to us as a shareholder of
Voest-Alpine. Any remaining principal balance that has not been repaid by July
2004, is payable in five equal semi-annual installments beginning on December 1,
2004. Beginning May 2000, Voest-Alpine changed their functional currency from
Austrian schillings to Euros; therefore, our debt to Voest-Alpine is now payable
in Euros. Voest-Alpine's change in functional currency to Euros had no material
effect on our financial condition or results of operations. Interest on the
Voest-Alpine debt is payable every six months beginning January 2000. The
interest rate as of September 30, 2000 was 4.9% per annum.
44
48

As part of our arrangement to invest in Voest-Alpine, we entered into a
four-year supply contract with Voest-Alpine. Under this agreement, we agreed to
purchase a minimum of 45,000 metric tons of tubulars for the first twelve months
of the agreement and 60,000 metric tons per year for the next three years at a
negotiated third party price that we believe to be beneficial. The volume
requirements fixed in the supply agreement were based on our anticipated needs
for tubulars of the type manufactured by Voest-Alpine and represented less than
half of our normal worldwide requirements for this type of tubular. Because this
agreement requires us to purchase tubulars regardless of our needs, our
purchases under this agreement may be made for inventory during periods of low
demand. These types of purchases will require us to use our working capital and
expose us to risks of excess inventory during those periods. Although these
purchases could require us to expend a material amount of money, we expect that
we will be able to use or sell all of the tubular products we are required to
purchase from Voest-Alpine.

FINANCIAL INSTRUMENTS

We currently are exposed to certain market risks arising from transactions
that we enter into in the normal course of business. These risks relate to
fluctuations in foreign currency exchange rates and changes in interest rates.
We do not believe these risks are material.

FOREIGN CURRENCY RISK

The functional currency for most of our international operations is the
applicable local currency. Results of operations for foreign subsidiaries with
functional currencies other than the U.S. dollar are translated using average
exchange rates during the period. Assets and liabilities of these foreign
subsidiaries are translated into U.S. dollars using the exchange rates in effect
at the balance sheet date, and the resulting translation adjustments are
included in stockholders' equity. However, foreign currency transaction gains
and losses are reflected in income for the period. We hedge our exposure to
changes in foreign exchange principally with forward contracts.

Forward contracts designated as hedges of foreign currency transactions are
marked to spot with the resulting gains and losses recognized in earnings,
offsetting losses and gains on the transactions hedged. We enter into foreign
exchange contracts only as a hedge against existing economic exposures and not
for speculative or trading purposes. The counterparties to our foreign exchange
contracts are creditworthy multinational commercial banks. We believe that the
risk of counterparty nonperformance is immaterial.

At September 30, 2000, we had open forward contracts to exchange U.S.
dollars for Euros and Austrian schillings totaling $31.1 million. If a 10%
devaluation in the Austrian schilling and the Euro compared to the U.S. dollar
were to occur subsequent to September 30, 2000, the fair value of the open
forward contracts would be $28.0 million.

INTEREST RATES

We are and will be subject to interest rate risk on our long-term fixed
interest rate debt. We believe that significant interest rate changes will not
have a material near-term impact on our future earnings or cash flows. Excluding
the notes, most of our borrowings are at variable rates and therefore the fair
value of these borrowings approximates book value.

TAX MATTERS

As a result of our spinoff from Weatherford, subsequent to April 14, 2000
we are no longer able to combine the results of our operations with those of
Weatherford in reporting income for United States federal income tax purposes
and for income tax purposes in some states and foreign countries. We believe
this will not have a material adverse effect on our earnings. Under the terms of
a tax allocation agreement with Weatherford, we will not have the future benefit
of any prior tax losses or benefits incurred as part of a consolidated return
with Weatherford. Moreover, we will be liable to Weatherford for any corporate
level taxes incurred by Weatherford as a result of the spinoff, except to the
extent the taxes arise solely as a result of a change of control of Weatherford.
45
49

RECENT ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 summarized the SEC's view in applying generally accepted
accounting principles to selected revenue recognition issues. We are required to
apply SAB 101 in the fourth quarter of 2000, retroactive to the first quarter of
2000. We are analyzing the effects of SAB 101, but we have not yet quantified
the impact on our financial statements.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS No. 133 has been amended by SFAS No. 137, which delays
the effective date to fiscal years beginning after June 15, 2000. In May 2000,
the Financial Accounting Standards Board issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities." SFAS No. 138
amends the accounting and reporting standards of SFAS No. 133 for certain
derivative instruments and certain hedging activities. We are currently
completing an assessment of our derivative instruments as well as a plan for
implementation. We do not believe that the adoption of SFAS No. 133 and SFAS No.
138 will have a material impact on our financial position or results of
operations.

46
50

BUSINESS

We operate through two business segments:

- Drill Stem Products. Our drill stem products segment designs,
manufactures and sells our H-Series(R) and eXtreme(TM) product lines,
which include all components of the drill stem from the rig floor to the
drill bit. We currently are the world's only manufacturer of 5 7/8-inch
eXtreme drill pipe, which we innovated particularly for use in ultra-deep
wells, and landing strings used to lower heavy casing in ultra-deepwater
applications. Drill stem products are consumable and wear out through a
combination of friction and metal fatigue. In recent years, we have seen
increasing intensity of use in drill stem products causing these drill
stem products to wear out faster. This increased intensity of use results
from

- more wells being drilled either directionally or horizontally, which
results in far higher abrasion and bending loads than in vertical
wells

- more gas wells being drilled today, which typically are drilled to
greater depths than oil wells and

- the increasing prevalence of top drive rigs, which place more
torsional stress on drill pipe than traditional rotary table rigs.

- Engineered Connections and Premium Tubulars. Our engineered connections
and premium tubulars segment designs, manufactures and sells engineered
connections and premium tubing and casing through our Atlas Bradford(R)
connection product line and our TCA(TM) critical-service casing product
line. Casing is large-diameter piping inserted into a well during the
drilling process to maintain the shape and integrity of the well wall
while tubing is inserted inside the casing to create a pathway to bring
hydrocarbons to the wellhead. "Engineered" connections are connections
with a gas-tight seal and "premium" tubulars are seamless tubulars (as
opposed to rolled welded tubulars) with high-alloy chemistry and highly
engineered connections having superior burst- and collapse-resistance
characteristics under conditions of torque, tension and torsion. This
segment also designs, manufactures and sells large-diameter offshore
tubulars, vacuum-insulated tubing, tubular accessories and couplings.

47
51

COMPETITIVE STRENGTHS

We believe the following strengths are our competitive advantages:

- Superior Cost Structure and Product Quality Through Vertical
Integration. We believe our vertically integrated structure provides
substantial cost savings compared to our competitors and increases the
quality and deliverability of our products, particularly in periods of
increasing demand, by focusing our supply source directly on our needs
and the needs of our customers. Through acquisitions in late 1998 and
1999, we positioned ourselves as the only integrated manufacturer and
provider of drill pipe in the world. Through our acquisition of T.F. de
Mexico in June 1998, a manufacturer of tool joints which are a critical
component of any joint of drill pipe, we secured a high-quality supply of
tool joints for our drill stem product line. Through our joint venture in
1999 with Voest-Alpine, a seamless tubular steel mill located in Austria,
we secured a ready supply of high-quality raw materials for our drill
stem and premium tubular and casing needs.

48
52

BUSINESS STRATEGIES

Our objective is to maximize cash flow by maintaining and enhancing our
position as a leading provider of drill stem products and premium engineered
connections and premium tubular products, which we intend to achieve by pursuing
the following business strategies:

- Focus on Quality Products and Technologies that Address Modern Drilling
Challenges. Products designed for gas and critical-well applications are
the largest growth area in our industry today and provide our highest
margins. To maintain our position as a product-quality and technological
leader in the industry, our strategy is to focus, independently and
through strategic partnerships with other industry leaders, on improving
our products and services and developing new products and services for
performance under the most difficult drilling conditions.

DRILL STEM PRODUCTS

We sell our drill stem products to a variety of customers including
drilling contractors, oilfield equipment rental companies, major, independent
and state-owned oil companies and oil and gas operators. We also sell drill pipe
to construction, water well and utility companies as well as distributors to
those companies. Drill stem purchasing decisions are based on quality, price,
delivery and operational requirements.

A description of our principal drill stem products follows:

DRILL PIPE

Drill pipe is the principal mechanical tool used in drilling for oil and
gas. Drill pipe is a seamless, hollow steel pipe with threaded tool joints
welded on each end. Sections of drill pipe are threaded together to make a
string (referred to as the drill string) and a drill bit is attached to the
bottom. When a drilling rig is operating, motors mounted on the rig rotate the
drill string and drill bit. In addition to connecting the drilling rig to the
drill bit, drill pipe provides a mechanism to steer the drill bit. Once a well
is completed, the drill stem may be used again in drilling another well until
the drill stem becomes damaged or wears out.

We design and manufacture our drill pipe to operate in highly corrosive and
harsh environments. We engineer our drill pipe to withstand extreme operating
conditions such as those that exist offshore and in deep wells. We are
continually working internally and with strategic partners in this regard. We
recently introduced our eXtreme Drill Pipe -- a line of drill pipe designed for
extreme drilling conditions -- as well as the first drill pipe manufactured
using titanium for short radius drilling. Our eXtreme Drill Pipe has been tested
in several severe-environment applications in the Gulf of Mexico, the South
China Sea and Colombia. It was recently used in setting the record for fastest
drilling of a 14 3/4-inch diameter hole in the deepwater Gulf of Mexico.

Our principal competitors in drill pipe are Omsco (a subsidiary of Shaw
Industries), IDPA (a subsidiary of Vallourec Mannessman), and various local
manufacturers in the United States and in foreign

49
53

countries. Sales of drill pipe represented approximately 39%, 56% and 26% of our
total sales during 1997, 1998 and 1999, respectively.

DRILL COLLARS

Drill collars provide weight on a drill bit to assist in the drilling
process. A drill collar is generally located directly above the drill bit and is
manufactured from a solid steel bar to provide necessary weight. Our principal
competitors for drill collars are Omsco, SMFI (a privately owned company in
France) and Drilco (a subsidiary of Smith International, Inc.).

HEAVYWEIGHT DRILL PIPE AND OTHER DRILL STEM PRODUCTS

Our heavyweight drill pipe is a thick-walled seamless tubular product that
is less rigid than a drill collar. Heavyweight drill pipe provides a gradual
transition zone between the heavier drill collar and the relatively light drill
pipe. Heavyweight drill pipe also adds weight to a drill bit, and because it
bends easily, it simplifies directional control and minimizes connection fatigue
problems common to high-angle directional or horizontal wells.

We also provide kellys, subs and pupjoints (short and odd-sized tubular
products). Our principal competitors for heavyweight drill pipe and other drill
stem products are Smith International, Inc., SMFI and Omsco.

ENGINEERED CONNECTIONS AND PREMIUM TUBULARS

Our engineered connections and premium tubulars segment primarily focuses
on products used in producing oil and gas as opposed to drilling of oil and gas
wells. Our premium engineered connections are designed with metal-to-metal seals
and are used to connect joints of premium tubing and casing. Casing is hollow
pipe inserted into a well as part of the drilling and completion process. As
drilling reaches specified depths, the operator removes the drill string and
inserts a string of casing into the well, cementing the casing in place to
prevent the well from collapsing. Following insertion of the casing, the
operator resumes drilling until the next specified depth is reached and
additional casing is inserted. When the well is drilled to the desired depth,
the operator inserts a string of tubing into the well inside the casing to
provide a pathway for oil and gas production to reach the top of the well.

A description of our principal premium engineered connections and premium
tubulars products follows:

ENGINEERED CONNECTIONS AND PREMIUM TUBING

We market our premium engineered connections and premium tubing through our
Atlas Bradford product line. We offer a line of proprietary premium engineered
connections designed for all types and sizes of premium tubing and casing. We
thread these connections on tubing and casing provided by third parties as well
as tubing and casing we manufacture. Our customers use premium engineered
connections where they need a connection that maintains a seal while subjected
to extreme tension and compression forces, which is generally the case in gas
wells and wells drilled in harsh conditions or near environmentally sensitive
areas. The failure of a premium connection can be a catastrophic event, leading
to the loss of a well or a blowout. Therefore, operators and oil and gas
companies generally purchase the best available connection, with price as a
secondary factor. Our line of premium engineered connections has been recognized
as industry leading for more than 20 years and is the most comprehensive product
line offering in the industry.

We are continually developing new connections and improvements to existing
connections to meet the requirements of today's harsh drilling environments. We
recently introduced our Advanced NJO connection, an integral joint connection
with enhanced compression and bending strength, torsion capability and external
pressure sealing. We also recently developed in conjunction with Enventure, a
joint

50
54

venture between Shell Oil Company and Halliburton, a premium connection for
expandable tubular applications.

We market and sell Atlas Bradford premium tubing with Atlas Bradford
premium engineered connections or without threaded connections. We generally
sell our premium engineered connections and premium tubing through major
distributors in the United States and Canada. We also sell premium tubing
directly to operators of oil and gas wells. Our principal competitors for
premium engineered connectors are Hydril, Vallourec Mannessman, Sumitomo,
Kawasaki, Nippon, Hunting Interlock, DST and numerous other smaller competitors
domestically and internationally. Our primary competitors for premium tubing are
Koppell Steel, Bentler Steel and Steel Services, Inc. In December 1998, we
licensed the international rights outside of North America to our Atlas Bradford
connections for certain sizes of carbon-based tubulars; therefore, our market
for premium engineered connections currently is limited primarily to North
America.

PREMIUM CASING

We manufacture and sell premium casing through our TCA product line, which
includes high-performance, proprietary, and custom designed seamless OCTG from 5
to 17 inches as well as API casing. We provide critical-service casing for
offshore and extreme applications and offer services to assist end users in
selecting the optimal downhole tubular solution. Our TCA products are sold with
or without our proprietary Atlas Bradford connections. We also provide tubular
processing services for major tubular steel mills.

We will produce custom-designed casing to customer specifications. The
process begins with a thorough review and evaluation by our technical staff.
Support services include computerized casing string performance evaluations,
computer-generated performance property tables, tailored technical seminars,
evaluation of field applications and analysis and solutions to a wide range of
tubular goods operational problems. We maintain common and high-alloy green
tubular inventories to provide quick delivery of custom-finished casing and
coupling stock. To further meet specific customer specifications and delivery
requirements, we recently introduced our Premium Pipe Pak(TM) product, a joint
offering of our TCA and Atlas Bradford product lines and ICO, an independent
third party inspection company. Premium Pipe Pak is an innovative bundling of
proprietary premium casing, premium engineered connections and inspection
services that offers the industry the option of having threaded, inspected
critical-service casing shipped "rig-ready" directly to the customer's wellsite,
which reduces costs and delivery times.

COUPLINGS

We manufacture and sell couplings through our Texas Arai product line.
Couplings are used to connect premium and API casing and tubing. Texas Arai is
one of the world's largest providers of couplings for oilfield applications.
Texas Arai's couplings are provided to mills, distributors of tubular products
and end users. Our primary competitors for couplings are Amtex, Western Canada,
Wheeling Machine and Hunting Interlock as well as numerous other smaller
manufacturers.

INSULATED TUBING AND TUBULAR ACCESSORIES

We manufacture and sell Thermocase vacuum-insulated tubing and tubular
accessories through our Tube-Alloy product line. Vacuum-insulated tubing is an
advanced flow control solution that maintains design flow rates for use in
deepwater and extreme temperature applications where hydrates and paraffin
accumulate.

Tubular accessories manufactured and sold by our Tube-Alloy product line
include flow control equipment, pup joints, and landing nipples. Our Tube-Alloy
product line also threads third party tubulars with our Atlas Bradford
connections as well as with third party connections licensed to us. The tubular
accessories market is highly fragmented, and our Tube-Alloy product line
competes with numerous smaller companies in each geographic market, as well as
larger companies such as Hydril, Hunting Interlock,

51
55

Benoit, Inc. and Steel Tubulars, Inc. and major service companies such as Baker
Hughes and Weatherford.

CONDUCTORS AND RISERS FOR SUBSEA STRUCTURES

Our XL Systems(TM)/Petro-Drive(TM) product lines provide connections and
installation services for offshore conductors and subsea structures. Offshore
connections are used to join sections of conductors, or drive pipe, which is the
large diameter casing that is driven into the ocean floor forming the base
structure for well heads and casing hangers for subsequent casing strings. Drive
pipe is typically 20 inches or more in diameter and comes in 45-foot lengths.
Conductors are typically hammered in place at the beginning of the drilling
process. We use a proprietary wedge-thread technology to connect the conductors.
Our primary competitors for conductors and subsea conductors are ABB, DrilQuip
and various smaller companies.

MANUFACTURING PROCESSES AND RAW MATERIALS

We use the following principal raw materials:

PRODUCT RAW MATERIAL
- ------- ------------

Drill pipe.............................. Steel billets and seamless green tubing
Drill collars........................... Solid steel bars
Heavyweight drill pipe.................. Heavy walled tubes
Premium tubing and casing............... Seamless green tubing

DRILL STEM

Manufacturing our drill stem products involves several highly complex
processes. Ultimately, each joint of pipe must be able to withstand extremely
rigorous operating environments, especially as well profiles continue to become
more complex, involving extended reach or deep offshore locations. There are
about 20 steps required to manufacture and process the seamless tubular
component of a joint of drill pipe. The tool joints, which are threaded devices
welded to each end of a section of seamless pipe to create a joint of finished
drill pipe, add further requirements.

Each seamless tube must be upset (the tube end is reshaped), heat treated
(including austenitizing, quenching and tempering) and inspected and
straightened. We then weld finished tool joints onto the finished tube with an
inertia or friction welder and inspect the finished product to complete a joint
of finished drill pipe. We conduct this manufacturing generally at our primary
drill pipe manufacturing facility in Navasota, Texas as well as our other
manufacturing locations in Bryan, Texas, Edmonton, Canada, Veracruz, Mexico and
in Indonesia. The principal raw materials required to manufacture drill pipe are
seamless green tubing and steel billets. We have entered into a four-year supply
contract with Voest-Alpine under which we are obligated to purchase a minimum of
60,000 metric tons of seamless green tubing at a negotiated price. Generally,
Voest-Alpine is able to supply virtually all of our seamless tubular
requirements for drill pipe; however, we occasionally purchase seamless tubulars
from other suppliers, including TAMSA and U.S. Steel, for use in our drill stem
manufacturing operations.

We manufacture tool joints from steel billets. We pre-heat the steel
billets and forge them into tool joint blanks. We then heat treat, inspect,
thread and coat the tool joint blanks. Once completed and welded onto the
finished seamless tubular to create a joint of finished drill pipe, tool joints
typically represent approximately 40% of the cost of manufacturing a joint of
drill pipe. Virtually all of our tool joints are manufactured in Veracruz,
Mexico. Currently, all of our steel billets are supplied to us by either Duferco
or Ferrostall, distributors for several manufacturers.

PREMIUM TUBING AND CASING

Our manufacturing processes for premium tubing and casing are very similar
to the processes used to prepare a seamless tubular for welding to a finished
tool joint. Voest-Alpine typically supplies a large portion of our seamless
tubular requirements for tubing as well as casing having outside diameters of

52
56

7 inches or less. Our seamless tubular requirements for premium casing with
outside diameters greater than 7 inches are currently supplied by U.S. Steel.

PATENTS

Many areas of our business rely on patents and proprietary technology. We
currently have numerous patents issued or pending. Many of our patents provide
us with competitive advantages in our markets. Although we consider our patents
and our patent protection to be an important part of our business, we do not
believe that the loss of one or more of our patents would have a material
adverse effect on our business.

BACKLOG

We had a product backlog as of September 30, 2000, of $130.0 million,
representing 37% of our total revenues for the first nine months of 2000. We had
a product backlog as of December 31, 1997, 1998 and 1999 of $359.8 million,
$88.9 million and $60.4 million, respectively. These year-end backlogs
represented 57%, 14% and 21% of our total revenues for those years. The sharp
decline in product backlog from 1997 through 1999 reflects market conditions.
Our recent backlog increase resulted from moderate recovery of drilling activity
in the later part of 1999 and the nine months ended September 30, 2000.

INSURANCE

We believe that we maintain insurance coverage that is adequate for the
risks involved. However, there is always a risk that our insurance may not be
sufficient to cover any particular loss or that our insurance may not cover all
losses. For example, while we maintain product liability insurance, this type of
insurance is limited in coverage and it is possible that an adverse claim could
arise that exceeds our coverage. Further, insurance rates have in the past been
subject to wide fluctuation and changes in coverage could result in increases in
our cost or higher deductibles and retentions.

We do not maintain political risk insurance (generally designed to cover
expropriation and nationalization exposures), but do maintain an all-risk
property insurance that covers losses from insurrection, civil commotion and
uprising. This insurance does not cover losses resulting from a declared state
of war.

FEDERAL REGULATION AND ENVIRONMENTAL MATTERS

Our operations are subject to federal, state and local laws and regulations
relating to the energy industry in general and the environment in particular.
Environmental laws have over the years become more stringent and compliance with
such laws increases our overall cost of operations. In addition to affecting our
ongoing operations, applicable environmental laws can require us to remediate
contamination at our properties, at properties formerly owned or operated by us,
and at facilities to which we sent waste materials for treatment or disposal.
While we are not currently aware of any situation involving an environmental
claim that would likely have a material adverse effect on our business, it is
always possible that an environmental claim with respect to one or more of our
current businesses or a business or property that one of our predecessors owned
or used could arise that could have a material adverse effect.

Our expenditures during 1999 to comply with environmental laws and
regulations were not material. We also believe that our costs for compliance
with environmental laws and regulations are generally within the same range with
those of our competitors. However, we can offer no assurance that our costs to
comply with environmental laws in the future will not be material.

EMPLOYEES

As of September 30, 2000, we had 3,369 employees. Certain of our operations
are subject to union contracts. These contracts, however, cover only
approximately 8% of our total employees. We believe that our relationship with
our employees is good.

53
57

LITIGATION

From time to time, we may be involved in litigation relating to claims
arising out of the ordinary course of our business. We believe that there are no
claims or actions pending or threatened against us, the ultimate disposition of
which would materially adversely affect us.

54
58

MANAGEMENT

The following are our board of directors and executive and other officers.
Each director holds office until our annual meeting of stockholders to be held
in 2001.

NAME AGE POSITION
- ---- --- --------

Bernard J. Duroc-Danner................... 47 Chairman of the Board
John C. Coble............................. 58 Chief Executive Officer, President and Director
William G. Chunn.......................... 67 Executive Vice President of Operations
Frances R. Powell......................... 46 Vice President, Chief Financial Officer and
Treasurer
Warren S. Avery........................... 55 Vice President Human Resources
Philip A. Choyce.......................... 34 Vice President and Associate General Counsel
Dan M. Latham............................. 51 Vice President Sales and Marketing
Curtis W. Huff............................ 43 Vice President and Interim General Counsel
Eliot M. Fried............................ 66 Director
Sheldon B. Lubar.......................... 70 Director
William E. Macaulay....................... 54 Director
Robert K. Moses, Jr....................... 60 Director
Robert A. Rayne........................... 51 Director

Bernard J. Duroc-Danner is the President, Chief Executive Officer and
Chairman of the Board of Directors of Weatherford. Mr. Duroc-Danner has served
as President and CEO of EVI, Inc. and Weatherford since May 1990. In June 1998,
EVI, Inc. acquired Weatherford Enterra, Inc. and subsequently changed its name
to Weatherford International, Inc. Mr. Duroc-Danner holds a Ph.D. in economics
from Wharton (University of Pennsylvania). In prior years, Mr. Duroc-Danner held
positions with Arthur D. Little and Mobil Oil Inc. Mr. Duroc-Danner is a
director of Parker Drilling Company (an oil and gas drilling company) and Cal
Dive International, Inc. (a company engaged in subsea services in the Gulf of
Mexico).

John C. Coble serves as Chief Executive Officer, President and Director.
Mr. Coble was appointed President of Grant Prideco in 1995. From 1989 to 1995,
Mr. Coble held senior executive positions at EVI, Inc. and held senior executive
positions at Grant Prideco from 1981 to 1989. Prior to 1981, Mr. Coble spent 12
years with Shell Oil Company in both marketing and financial areas. Mr. Coble
graduated with a Bachelors degree from the University of Missouri and a Masters
degree from Kellogg School of Business (Northwestern University).

William G. Chunn was appointed Executive Vice President, Operations in 1995
after the merger of Grant TFW, Inc. and Prideco, Inc. Mr. Chunn served as
President, Chief Executive Officer and Director of Prideco from 1985 to 1995.
Mr. Chunn has held senior executive positions in the drill stem industry for
over 30 years.

Frances R. Powell serves as Vice President, Chief Financial Officer and
Treasurer. Before the spinoff, Ms. Powell was Vice President of Accounting and
Controller for Weatherford, where she served in that position for EVI, Inc. and
Weatherford since 1991. From 1986 to 1990, Ms. Powell served as Controller for
and held other executive positions with GulfMark Offshore, Inc.

Warren S. Avery has served as Vice President Human Resources since
September 1999. Prior to joining us, Mr. Avery served as Vice President of Human
Resources for Dailey International in 1999. Prior to joining Dailey
International, Mr. Avery held senior human resource positions at Baker Hughes,
Global Marine and Dresser Industries.

Philip A. Choyce became Vice President and Associate General Counsel in
December 1999. Prior to joining us, Mr. Choyce was an attorney with Fulbright &
Jaworski L.L.P.'s corporate law practice in Houston, Texas. Prior to joining
Fulbright & Jaworski L.L.P., Mr. Choyce worked as a certified public accountant
with Ernst & Young LLP in Houston, Texas.

55
59

Dan M. Latham has served as Vice President Sales and Marketing since 1990.
Prior to joining us, Mr. Latham held a number of progressively responsible
management positions at Shell Oil Company and Baker Hughes.

Curtis W. Huff serves as Vice President and Interim General Counsel. He is
also Executive Vice President, Chief Financial Officer, General Counsel and
Secretary of Weatherford. Prior to February 2000, Mr. Huff served as Senior Vice
President, General Counsel and Secretary of Weatherford, positions he held since
June 1998. Prior to that time, Mr. Huff was a partner with the law firm of
Fulbright & Jaworski L.L.P., our counsel, and held that position for more than
five years.

Eliot M. Fried joined Abner, Herrman & Brock Asset Management, an
independent investment management firm as of February 1, 2000. Prior to such
time, Mr. Fried was a Managing Director of Lehman Brothers, and a member of
Lehman Brothers' Investment and Capital Commitment Committees, as well as Senior
Trustee of Lehman Brothers Holdings Inc. Retirement Plan. Mr. Fried is a
director of Axsys Technologies Inc., L-3 Communications Corporation and Blount
International Inc.

Sheldon B. Lubar has been the Chairman of Lubar & Co., a private investment
company, for more than the past five years. Until February 8, 1999, Mr. Lubar
served as Chairman and Chief Executive Officer of Christiana Companies, Inc., a
diversified holding company that owned a company that was engaged in
refrigerated and dry warehousing, transportation and logistic services. Mr.
Lubar is a director of C2, Inc., Ameritech Corporation, Massachusetts Mutual
Life Insurance Company, Firstar Corporation, MGIC Investment Corporation and
Jefferies & Company, Inc. He also serves on the board of Weatherford.

William E. Macaulay has been the Chief Executive Officer of First Reserve
Corporation, a Connecticut-based-corporation that manages various investment
company funds, for more than the past five years and has served as Chairman of
First Reserve Corporation since June 1998. He is a director of Maverick Tube
Corporation (a manufacturer of oilfield tubulars, line pipe and structural
steel) and National-Oilwell, Inc. (a company engaged in the design, manufacture
and sale of machinery and equipment and the distribution of products used in oil
and gas drilling production). He also serves on the board of Weatherford.

Robert K. Moses, Jr. has been a private investor, principally in the oil
and gas exploration and oilfield services business in Houston, Texas, for more
than the past five years. He served as Chairman of the Board of Weatherford
Enterra, a predecessor to Weatherford, from May 1989 to December 1992. He also
serves on the board of Weatherford.

Robert A. Rayne has been an Executive Director of London Merchant
Securities plc (property investment and development with major investments in
leisure enterprises), a United Kingdom-listed public limited company, for more
than the past five years. He also serves on the board of Weatherford.

56
60

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

WEATHERFORD NOTE

At the time of the spinoff, we owed Weatherford $494.7 million in
intercompany debt. Immediately before the spinoff, we issued Weatherford a
$100.0 million note representing a portion of this debt, and Weatherford
contributed the remainder of the intercompany debt to us.

TAX ALLOCATION AGREEMENT

We entered into a tax allocation agreement allocating certain contingent
tax liabilities between us and Weatherford. Under the tax allocation agreement,
we generally will make payments to Weatherford such that, with respect to tax
returns for any taxable period in which we or any of our subsidiaries are
included in the consolidated group or any combined group, the amount of taxes to
be paid by us will be determined, subject to adjustments, as if we and each of
our subsidiaries included in the consolidated group or combined group filed our
own consolidated, combined or unitary tax return. Weatherford, however, will
have the future benefit of any tax losses incurred by us prior, as a part of a
consolidated return with Weatherford, to the spinoff date, and we will be
required to pay Weatherford an amount of cash equal to any such tax benefit
utilized by us or which expires unused by us to the extent those benefits are
not utilized by Weatherford. We generally will be responsible for any taxes
related to tax returns that include only us and our subsidiaries.

The tax allocation agreement allocates responsibility between Weatherford
and us for preparing and filing tax returns and controlling and contesting
audits and tax proceedings. Weatherford will be primarily responsible for
preparing and filing any tax return with respect to the consolidated group or
any combined group. We will be primarily responsible for preparing the portion
of any such tax return that relates exclusively to us or any of our
subsidiaries. We generally will be responsible for preparing and filing any tax
returns that include only us and our subsidiaries. Weatherford will be primarily
responsible for controlling and contesting any audit or other tax proceeding
relating to the consolidated group or any combined group. We have the right to
participate in any audit or tax proceeding. We may not, however, enter into any
settlement or compromise or make any decision in connection with any audit or
tax proceeding without the approval of Weatherford and its subsidiaries.
Disputes arising between Weatherford and us relating to matters covered by the
tax allocation agreement are subject to resolution through specific dispute
resolution provisions.

We were included in the consolidated group for periods in which Weatherford
beneficially owned at least 80% of the total voting power and value of our
outstanding stock. We ceased to be included in the consolidated group at the
time of the spinoff. Each member of a consolidated group for United States
federal income tax purposes is jointly and severally liable for the United
States federal income tax liability of each other member of the consolidated
group. Accordingly, although the tax allocation agreement allocates tax
liabilities between Weatherford and us, for any period that we were included in
the consolidated group, we could be liable if any United States federal income
tax liability was incurred, but not discharged, by any other member of the
consolidated group.

We have agreed with Weatherford that we will not take any action
inconsistent with any information, covenant or representation provided to the
IRS in connection with obtaining the tax ruling and have further agreed to be
liable for any taxes arising from a breach of that agreement. In addition, we
have agreed that, during the three-year period following the spinoff, we will
not engage in transactions that could adversely affect the tax treatment of the
spinoff, unless we obtain a supplemental tax ruling from the IRS or a tax
opinion acceptable to Weatherford of nationally recognized tax counsel to the
effect that the proposed transaction would not adversely affect the tax
treatment of the spinoff. Moreover, we will be
57
61

liable to Weatherford for any corporate level taxes incurred by Weatherford as a
result of the spinoff, except to the extent the taxes arise as a result of a
change of control of Weatherford. Our indemnity obligation would include
indemnification where the taxes are attributable to specified actions or
failures to act by us, or to specified transactions involving us following the
spinoff, including the acquisition of our common stock by any person or persons.

TRANSITION SERVICES AGREEMENT

We entered into a transition services agreement with Weatherford pursuant
to which Weatherford provided us certain services for a transition period after
the spinoff. The fee for these services was cost plus 10%. The transition
services provided under this agreement included accounting, tax, treasury
services, insurance and risk management, and management information systems. We
no longer rely on Weatherford to provide us with any of these services.

PREFERRED SUPPLIER AGREEMENT

We entered into a preferred supplier agreement with Weatherford in which
Weatherford agreed for three years to purchase at least 70% of its requirements
of drill stem products from us, subject to certain exceptions. In return, we
agreed to sell those products at prices not greater than that at which we sell
to similarly situated customers, and we provided Weatherford a $30.0 million
credit towards the purchase of those products.

OVERLAPPING DIRECTORSHIPS

A majority of our board of directors also constitutes a majority of
Weatherford's board of directors, and the chairman of our board is also the
Chairman of the Board of Weatherford.

58
62

DESCRIPTION OF OTHER INDEBTEDNESS

In this description, "we," "us," and "our" refer only to Grant Prideco,
Inc. and not to any of its subsidiaries.

CREDIT FACILITY

GENERAL

Our material domestic subsidiaries and one of our Canadian subsidiaries, as
co-borrowers, have entered into a $100.0 million revolving line of credit
facility with a syndicate of lenders. We are a guarantor, but not a borrower,
under the revolving credit facility. Funds are available to us under the
revolving credit facility only by means of inter-company loans to us from our
subsidiaries following a borrowing under the revolving credit facility. The
revolving credit facility matures on April 14, 2003, with automatic one-year
renewals thereafter, unless the agreement is terminated by the lenders or the
borrowers.

INTEREST RATES AND FEES

Interest under the credit facility is payable monthly. Dollar-denominated
advances bear interest either (a) at a base rate, defined as the higher of (i)
prime rate of Citibank and (ii) a referenced commercial-paper rate published in
the Wall Street Journal, in either case plus between 0% and 0.75% (depending
upon our consolidated leverage) or (b) at LIBOR plus between 1.5% and 2.5%
(depending upon our consolidated leverage). Canadian-dollar-denominated advances
bear interest at the greater of (x) the reference rate of the Royal Bank of
Canada and (y) 0.75% above CDOR for 30-day Canadian bankers acceptances, in
either case plus between 0% and 0.75% (depending upon our consolidated
leverage). In addition, the borrowers paid a closing fee of $0.5 million to
establish the credit facility, and they pay a monthly commitment fee of 0.375%
on the unused portion of the credit facility.

GUARANTEES AND SECURITY

Repayment of the revolving credit facility is secured by substantially all
of the U.S. and Canadian assets (including accounts receivable, inventory,
equipment and proceeds thereof) of the borrowers, other than real estate and
certain intellectual property, as well as by all of the capital stock of our
material domestic subsidiaries and approximately 65% of the capital stock of our
first-tier foreign subsidiaries. The cash proceeds of the accounts receivable of
our subsidiaries' are collected through blocked bank accounts, and we and our
subsidiaries could lose control of those cash proceeds upon the occurrence of an
event of default under our revolving credit facility.

Letters of credit and loans are available under the revolving credit
facility. Aggregate letters of credit outstanding may not exceed $18.0 million
for U.S.-dollar denominated letters of credit, and US$2.0 million for
Canadian-dollar denominated letters of credit.

The availability of funding under the revolving credit facility, whether in
U.S. or Canadian dollars, is determined by a borrowing base formula. That
formula is a function of eligible accounts receivable plus eligible inventory
for the applicable U.S. or Canadian subsidiary borrowers. Canadian dollar
denominated loans and letters of credit may not exceed US$7.0 million in
aggregate. The revolving credit facility is subject to the establishment of
reserves by the agent under the revolving credit facility, as well as to changes
in advance rates on eligible inventory and receivables. The establishment of
reserves and changes in advance rates (a) are subject to the discretion of the
lenders under the revolving credit facility, (b) would reduce the amount of
credit available to our subsidiaries (and therefore to us) under the revolving
credit facility, and (c) could materially and adversely affect our liquidity
position.

59
63

CERTAIN COVENANTS

The revolving credit facility contains financial covenants that require our
consolidated subsidiaries to maintain the following:

- Fixed charge coverage ratios increasing from 0.7 to 1 as of the date
hereof to 1.50 to 1 after June 30, 2001 and

- Consolidated net worth of $400 million through December 31, 2000, and
thereafter $400 million plus 50% of our consolidated net earnings for
each fiscal year thereafter.

The revolving credit facility subjects us and our material subsidiaries to
other restrictions, including restrictions upon the ability of us and our
material subsidiaries

- to incur additional debt, liens and guarantee obligations,

- to merge or consolidate with other persons,

- to sell assets,

- to declare or pay dividends,

- to purchase our stock,

- to prepay indebtedness,

- to make capital expenditures in excess of $45 million per fiscal year,

- to cancel indebtedness,

- to change the location of tangible collateral,

- to engage in unrelated lines of business,

- to open certain bank accounts,

- to incur certain sale and leaseback obligations and

- to make investments, loans and advances or changes to debt instruments
and material contracts.

We and our material subsidiaries will not be permitted to make acquisitions
(other than acquisitions funded solely with our common stock, but subject under
certain circumstances to certain additional limitations on indebtedness assumed
pursuant to such acquisition) unless the aggregate cash purchase price plus debt
assumed in connection with such acquisition and previous acquisitions is less
than $45.0 million.

EVENTS OF DEFAULT

The revolving credit facility contains events of default, customarily found
in senior credit facilities, including without limitation

- non-payment of principal, interest or fees,

- violation of covenants,

- inaccuracy of representations and warranties in any material respect,

- cross default to certain other indebtedness and agreements,

- bankruptcy and insolvency events,

- material judgments and liabilities,

- change of control and

- material adverse changes.
60
64

The revolving credit facility also contains as an event of default a change
in trade credit terms for the borrowers that results in materially less
favorable terms available to such borrowers compared to the borrowers'
competitors. The occurrence of any of such events of default could result in
acceleration of the obligations of us and the borrowers under the revolving
credit facility and foreclosure on any collateral securing such obligations,
which would materially and adversely affect our ability to repay the notes.

VOEST-ALPINE DEBT

61
65

DESCRIPTION OF EXCHANGE NOTES

We issued the outstanding notes and will issue the exchange notes under an
indenture (the "indenture") by and among us, the Subsidiary Guarantors and
United States Trust Company of New York, as trustee. The terms of the notes
include those stated in the indenture and those made part of the indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act").

The following description is a summary of those provisions of the indenture
that we consider material. It does not restate that agreement in its entirety.
The indenture has been filed as an exhibit to the registration statement of
which this prospectus forms a part. We urge you to read the indenture because
it, and not this description, define your rights as holders of the notes. Copies
of the indenture are available as set forth below under "Where You Can Find More
Information." You can find the definitions of capitalized terms used in this
description under the subheading "Certain Definitions." In this description,
"the issuer," "we," "us" and "our" refer only to Grant Prideco, Inc. and not to
any of its subsidiaries.

BRIEF DESCRIPTION OF THE SECURITIES

The exchange notes will have identical terms as the outstanding notes,
except that they will not be subject to the same restrictions on transfer as the
outstanding notes. Any outstanding notes remaining after the exchange offer will
be treated as a single issuance of notes with the exchange notes for all
practical purposes.

The outstanding notes are and the exchange notes will be:

- our senior unsecured obligations;

- senior in right of payment to any of our future subordinated
Indebtedness;

- pari passu in right of payment to our existing and future unsecured
Indebtedness that is not by its terms expressly subordinated to the
notes;

- effectively junior in right of payment to our existing and future secured
Indebtedness to the extent of the value of the collateral securing that
Indebtedness; and

- guaranteed by all of our existing and future domestic restricted
subsidiaries.

Each guarantee of the notes is:

- a senior unsecured obligation of the Guarantor;

- senior in right of payment to any future subordinated Indebtedness of
that Guarantor;

- pari passu in right of payment to any future Indebtedness of that
Guarantor that is not by its terms expressly subordinated to the
guarantee of the notes; and

- effectively junior in right of payment to the existing and future secured
Indebtedness of that Guarantor to the extent of the value of the
collateral securing that Indebtedness.

All of our existing subsidiaries are "Restricted Subsidiaries" and bound by
the covenants contained in the indenture. However, under the circumstances
described below under the subheading "-- Certain Covenants -- Designation of
Restricted and Unrestricted Subsidiaries," we are permitted to designate our
Subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will
not be subject to the restrictive covenants in the indenture, and will not
guarantee the notes. Moreover, only our U.S. Restricted Subsidiaries guarantee
the notes. See "Subsidiary Guarantees."

At September 30, 2000, assuming the offering of the outstanding notes had
been completed at the time and giving effect to the application of the proceeds
thereof, we would have had approximately $222.8 million of Indebtedness
outstanding on a consolidated basis (including the notes), none of which would
have been secured. However, under the Revolving Credit Facility, the indenture
permits certain of our subsidiaries to borrow an aggregate of up to $100.0
million of Indebtedness, all of which would be

62
66

secured and would therefore be effectively senior to the notes. In addition, the
outstanding notes are and the exchange notes will be effectively junior to all
Indebtedness of our existing and future non-U.S. Subsidiaries, as they will not
guarantee the notes.

PRINCIPAL, MATURITY AND INTEREST

The outstanding notes and exchange notes combined have a maximum aggregate
principal amount of $200.0 million. The notes will mature on December 1, 2007.
We will issue the exchange notes in denominations of $1,000 and integral
multiples of $1,000.

Interest on the notes will accrue at the rate of 9 5/8% per annum and will
be payable semi-annually in arrears on each June 1 and December 1, commencing on
June 1, 2001, to holders of record on the immediately preceding May 15 and
November 15. The registered holder of a note will be treated as the owner of the
note for all purposes. Only registered holders will have rights under the
indenture.

Interest on the notes will accrue from December 4, 2000 or, if interest has
been paid, from the date it was most recently paid. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months. Accrued interest
on outstanding notes exchanged for exchange notes pursuant to the exchange offer
will be applied to the exchange notes, and will not be paid at the time of
exchange.

On one or more occasions, we may issue under the indenture up to $200.0
million aggregate principal amount of additional notes having substantially
identical terms to the outstanding notes and exchange notes. Any issuance of
additional notes will be subject to the "Incurrence of Indebtedness and Issuance
of Preferred Stock" covenant described below. The notes and any additional notes
would be treated as a single class for all purposes under the indenture,
including, without limitation, waivers, amendments, redemptions and offers to
purchase. Unless the context requires otherwise, for purposes of the indenture
and this Description of Exchange Notes, references to the notes include any
additional notes actually issued.

METHODS OF RECEIVING PAYMENTS ON THE NOTES

If a holder has given wire transfer instructions to us, we will pay all
principal, interest and premium, if any, on that holder's notes in accordance
with those instructions. All other payments on notes will be made at the office
or agency of the paying agent and registrar within the City and State of New
York unless we elect to make interest payments by check mailed to the holders at
their address set forth in the register of holders.

PAYING AGENT AND REGISTRAR FOR THE NOTES

The trustee will initially act as paying agent and registrar. We may change
the paying agent or registrar without prior notice to the holders of the notes,
and we or any of our Subsidiaries may act as paying agent or registrar.

TRANSFER AND EXCHANGE

A holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a holder to furnish appropriate
endorsements and transfer documents in connection with a transfer of notes.
Holders will be required to pay all taxes due on transfer. We are not required
to transfer or exchange any note selected for redemption. Also, we are not
required to transfer or exchange any note for a period of 15 days before a
selection of notes to be redeemed.

SUBSIDIARY GUARANTEES

Each of our existing and future Domestic Subsidiaries, except future
Domestic Subsidiaries that we designate as Unrestricted Subsidiaries at the time
we create them, will jointly and severally guarantee, on a senior unsecured
basis, our obligations under the notes. The obligations of each Guarantor under
its Subsidiary Guarantee will be limited as necessary to prevent that Subsidiary
Guarantee from constituting a
63
67

fraudulent conveyance under applicable law. See "Risk Factors -- Risks Relating
to the Notes -- The subsidiary guarantees could be deemed fraudulent conveyances
under certain circumstances, and a court may try to subordinate or avoid the
subsidiary guarantees."

In the event of a bankruptcy, liquidation or reorganization of any of our
Subsidiaries that are not Guarantors, the non-guarantor Subsidiaries will pay
the holders of their Indebtedness, their trade creditors and their preferred
stockholders, if any, before they will be able to distribute any of their assets
to us. In the event of a bankruptcy, liquidation or reorganization of any of our
Guarantor Subsidiaries, our Guarantor Subsidiaries will pay the holders of their
secured Indebtedness, if any, to the extent of the value of the assets securing
that Indebtedness before they will be able to distribute any of their assets to
us. The Guarantor Subsidiaries generated 91% of our consolidated revenues in the
nine-month period ended September 30, 2000 and held 73% of our consolidated
total assets as of September 30, 2000. See Note 18 to our audited financial
statements and Note 17 to our unaudited financial statements included in this
offering memorandum for more detail about the division of our revenues and
assets between our Guarantor and non-guarantor Subsidiaries.

A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving person), another person, other than us or another
Guarantor, unless:

1. immediately after giving effect to that transaction, no Default or
Event of Default exists; and

2. either:

(a) the person acquiring the property in any such sale or
disposition or the person formed by or surviving any such consolidation
or merger assumes all the obligations of that Guarantor under the
indenture and its Subsidiary Guarantee pursuant to a supplemental
indenture satisfactory to the trustee; or

(b) the Net Proceeds of such sale or other disposition are applied
in accordance with the applicable provisions of the indenture.

The Subsidiary Guarantee of a Guarantor will be released:

1. upon the sale or other disposition of all or substantially all of
the assets of that Guarantor (including by way of merger or consolidation)
to a person that is not (either before or after giving effect to such
transaction) our Subsidiary, if the sale or other disposition complies with
the "Asset Sales" provisions of the indenture;

2. upon the sale or disposition of all of the Capital Stock of a
Guarantor to a person that is not (either before or after giving effect to
such transaction) our Subsidiary, if the sale complies with the "Asset
Sales" provisions of the indenture; or

3. if we designate any Restricted Subsidiary that is a Guarantor as an
Unrestricted Subsidiary in accordance with the applicable provisions of the
indenture.

See "-- Mandatory Redemption; Offers to Purchase; Open Market Purchases -- Asset
Sales" and "Designation of Restricted and Unrestricted Subsidiaries."

OPTIONAL REDEMPTION

We may redeem notes on any one or more occasions prior to their maturity at
a redemption price equal to the sum of 100% of the principal amount thereof,
plus accrued and unpaid interest to the redemption date, plus a make-whole
premium, if any, described below. In no event will a redemption price be less
than 100% of the principal amount of the notes plus accrued and unpaid interest,
if any, to the date of redemption.

64
68

The amount of the make-whole premium with respect to any note, or portion
thereof, to be redeemed will be equal to the excess, if any, of:

1. the sum of the present values, calculated as of the date of
redemption, of:

a. each interest payment that, but for such redemption, would have
been payable on the note (or portion thereof) being redeemed on each
payment date occurring after the redemption date; and

b. the principal amount that, but for such redemption, would have
been payable at the final maturity of the note (or portion thereof)
being redeemed; over

2. the principal amount of the note (or portion thereof) being
redeemed.

The present values of the interest and principal payments referred to in
clause (1) above will be determined in accordance with generally accepted
principles of financial analysis. These present values will be calculated by
discounting the amount of each payment of interest or principal from the date
that each such payment would have been payable, but for the redemption, to the
date of redemption at a discount rate equal to the treasury yield described
below plus 50 basis points.

The make-whole premium will be calculated by an independent investment
banking institution of national standing appointed by us; provided, however,
that if we fail to make the appointment at least 30 days prior to the date of
redemption, or if the institution so appointed is unwilling or unable to make
the calculation, the calculation will be made by an independent investment
banking institution of national standing appointed by the trustee.

For purposes of determining the make-whole premium, the treasury yield
shall be a rate of interest per annum equal to the weekly average yield to
maturity of United States Treasury Notes that have a constant maturity that
corresponds to the remaining term to maturity of the notes, calculated to the
nearest 1/12th of a year. The treasury yield will be determined as of the third
business day immediately preceding the applicable date of redemption.

The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release published by the
Federal Reserve Bank of New York and designated "H.15 (519) Selected Interest
Rates" or any successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States Treasury
Notes having a constant maturity that is the same as the remaining term of the
notes, then the treasury yield will be equal to such weekly average yield. In
all other cases, the treasury yield will be calculated by interpolation, on a
straightline basis, between the weekly average yields on the United States
Treasury Notes that have a constant maturity closest to and greater than the
remaining term of the notes and the United States Treasury notes that have a
constant maturity closest to and less than the remaining term of the notes (in
each case as set forth in the H.15 Statistical Release). Any weekly average
yields so calculated by interpolation will be rounded to the nearest 1/100th of
1%, with any figure of 1/200th of 1% or above being rounded upward. If weekly
average yields for United States Treasury Notes are not available in the H.15
Statistical Release or otherwise, then the treasury yield will be calculated by
interpolation of comparable rates selected by the independent investment banking
institution.

SELECTION AND NOTICE

If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:

1. if the notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the notes are listed; or

2. if the notes are not listed on any national securities exchange, on
a pro rata basis, by lot or by such method as the trustee deems fair and
appropriate.

65
69

No notes of $1,000 or less can be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of notes to be redeemed at its registered
address. Notices of redemption may not be conditional.

If any note is to be redeemed in part only, the notice of redemption that
relates to that note will state the portion of the principal amount of that note
that is to be redeemed. A new note in principal amount equal to the unredeemed
portion of the original note will be issued in the name of the holder of notes
upon cancellation of the original note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on notes or portions of them called for redemption unless we
default in our obligation to redeem the notes.

SUSPENDED COVENANTS

During any period of time that the notes have an Investment Grade Rating
from either of the Rating Agencies and no Default has occurred and is continuing
under the indenture, we and our Restricted Subsidiaries will not be subject to
the provisions of the indenture described below under the following headings
under "-- Certain Covenants:

- "-- Mandatory Redemption; Offers to Purchase; Open Market
Purchases -- Asset Sales,"

- "-- Restricted Payments,"

- "-- Incurrence of Indebtedness and Issuance of Preferred Stock,"

- "-- Sale and Leaseback Transactions" (except as set forth in that
covenant),

- "-- Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries,"

- "-- Merger, Consolidation or Sale of Assets" (except as set forth in that
covenant),

- "-- Transactions with Affiliates" and

- "-- Business Activities"

(collectively, the "Suspended Covenants"); provided, however, that the
provisions of the indenture described below under the following headings under
"-- Certain Covenants":

- "-- Mandatory Redemption; Offers to Purchase; Open Market Purchases --
Change of Control,"

- "-- Additional Subsidiary Guarantees,"

- "-- Liens,"

- "-- Designation of Restricted and Unrestricted Subsidiaries,"

- "-- Payments for Consent" and

- "-- Reports" and

will not be so suspended; and provided further, that if we and our Restricted
Subsidiaries are not subject to the Suspended Covenants for any period of time
as a result of the preceding sentence and, subsequently, either of the Rating
Agencies withdraws its ratings or downgrades the ratings assigned to the notes
below the Investment Grade Ratings so that the notes do not have an Investment
Grade Rating from either Rating Agency, or a Default (other than with respect to
the Suspended Covenants) occurs and is continuing, we and our Restricted
Subsidiaries will thereafter again be subject to the Suspended Covenants,
subject to the terms, conditions and obligations set forth in the indenture
(each such date of reinstatement being the "Reinstatement Date"), including the
preceding sentence. Compliance with the Suspended Covenants with respect to
Restricted Payments made after the Reinstatement Date will be calculated in
accordance with the terms of the covenant described under "-- Limitation on
Restricted Payments" as though such covenant had been in effect during the
entire period of time from which the notes are issued. As a result, during any
period in which we and our Restricted Subsidiaries are not
66
70

subject to the Suspended Covenants, the notes will be entitled to substantially
reduced covenant protection.

MANDATORY REDEMPTION; OFFERS TO PURCHASE; OPEN MARKET PURCHASES

We are not required to make any mandatory redemption or sinking fund
payments with respect to the notes. However, under certain circumstances, we may
be required to offer to purchase the notes as described in the sections entitled
"-- Mandatory Redemption; Offers to Purchase; Open Market Purchases -- Change of
Control" and "-- Asset Sales." We may at any time and from time to time purchase
notes in the open market or otherwise.

CHANGE OF CONTROL

Upon the occurrence of a Change of Control Triggering Event, each holder of
notes will have the right to require us to repurchase all or any part, equal to
$1,000 or an integral multiple of $1,000, of that holder's notes pursuant to the
offer described below (a "Change of Control Offer") at a price in cash
(the"Change of Control Payment") equal to 101% of the aggregate principal amount
of notes repurchased plus accrued and unpaid interest on the notes repurchased,
to the date of purchase. Within 15 business days following any Change of Control
Triggering Event, we will mail a notice to each holder describing the
transaction or transactions that constitute the Change of Control Triggering
Event and offering to repurchase notes on the date specified in the notice,
which date will be no earlier than 30 days and no later than 60 days from the
date such notice is mailed (a "Change of Control Payment Date"), pursuant to the
procedures required by the indenture and described in such notice.

We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent those
laws and regulations are applicable in connection with the repurchase of the
notes as a result of a Change of Control Triggering Event. To the extent that
the provisions of any securities laws or regulations conflict with the Change of
Control provisions of the indenture, we will comply with the applicable
securities laws and regulations and will not be deemed to have breached our
obligations under the Change of Control provisions of the indenture by virtue of
such conflict.

On the Change of Control Payment Date, we will, to the extent lawful:

1. accept for payment all notes or portions of notes properly tendered
pursuant to the Change of Control Offer;

2. deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all notes or portions of notes properly
tendered; and

3. deliver or cause to be delivered to the trustee the notes properly
accepted together with an officers' certificate stating the aggregate
principal amount of notes or portions of notes being purchased.

The paying agent will promptly deliver to each holder of notes properly
tendered the Change of Control Payment for such notes, and the trustee will
promptly authenticate and deliver (or cause to be transferred by book entry) to
each holder a new note equal in principal amount to any unpurchased portion of
the notes surrendered, if any; provided that each new note will be in a
principal amount of $1,000 or an integral multiple of $1,000.

The Change of Control provisions described above that require us to make a
Change of Control Offer will be applicable whether or not any other provisions
of the indenture are applicable. Except as described above with respect to a
Change of Control Triggering Event, the indenture does not contain provisions
that permit the holders of the notes to require that we repurchase or redeem the
notes in the event of a takeover, recapitalization or similar transaction.

67
71

The Revolving Credit Facility provides that certain events that would
constitute a Change of Control Triggering Event with respect to us would
constitute a default under the credit facility. Any future Credit Facilities or
other agreements relating to Indebtedness to which we become a party may contain
similar restrictions. If a Change of Control Triggering Event occurs, and our
lenders under our secured debt are entitled to demand the repayment of that
debt, we may be unable to repay that debt and repurchase notes from holders
entitled to require us to do so. However, our failure to comply with the
foregoing requirement, after appropriate notice and lapse of time, would
constitute an Event of Default under each of the indenture and the Revolving
Credit Facility. See "Risk Factors -- Risks Relating to the Notes -- We may not
be able to repurchase the notes upon a change of control."

We will not be required to make a Change of Control Offer upon a Change of
Control Triggering Event if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in the indenture applicable to a Change of Control Offer made by us and
purchases all notes properly tendered and not withdrawn under the Change of
Control Offer.

The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of us and our
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of notes to require us to repurchase its notes as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of us and our Subsidiaries taken as a whole to another person or group may be
uncertain.

ASSET SALES

We will not, and will not permit any of our Restricted Subsidiaries to,
consummate an Asset Sale unless:

1. we, or the Restricted Subsidiary, as the case may be, receives
consideration at the time of the Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or otherwise
disposed of;

2. in the case of Asset Sales for consideration exceeding $5.0
million, the fair market value is determined by our Board of Directors and
evidenced by a resolution of our Board of Directors set forth in an
officer's certificate delivered to the trustee; and

3. at least 75% of the consideration received in the Asset Sale by us
or such Subsidiary is in the form of cash. For purposes of this provision,
each of the following will be deemed to be cash:

(a) any of our or a Guarantor's secured Indebtedness and any
Indebtedness of a Restricted Subsidiary that is not a Guarantor that are
assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases us or such Restricted Subsidiary from
further liability; and

(b) any securities, notes or other obligations received by us or
any such Restricted Subsidiary from such transferee that we or our
Restricted Subsidiaries contemporaneously, subject to ordinary
settlement periods, convert into cash, to the extent of the cash
received, in that conversion.

Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
we may apply those Net Proceeds at our option:

1. to permanently repay any of our or a Guarantor's secured
Indebtedness, or any Indebtedness of a Restricted Subsidiary that is not a
Guarantor and, if any Indebtedness repaid under this clause (1) is
revolving credit Indebtedness, to correspondingly reduce commitments with
respect thereto; provided, however, that for purposes of this clause (1)
only, Indebtedness includes accrued but unpaid interest thereon;

68
72

2. to acquire all or substantially all of the assets of, or a majority
of the Voting Stock of, another Permitted Business;

3. to make a capital expenditure; or

4. to acquire other long-term assets that are used or useful in a
Permitted Business.

Pending the final application of any Net Proceeds, we may temporarily reduce
revolving credit borrowings or otherwise invest the Net Proceeds in any manner
that is not prohibited by the indenture.

Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, we will make a pro
rata offer to purchase (an "Asset Sale Offer") to all holders of notes and all
holders of other Indebtedness that is pari passu with the notes containing
provisions similar to those set forth in the indenture with respect to offers to
purchase or redeem with the proceeds of sales of assets to purchase the maximum
principal amount of notes and such other pari passu Indebtedness that may be
purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer
will be equal to 100% of principal amount plus accrued and unpaid interest to
the date of purchase, and will be payable in cash. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, we may use those Excess Proceeds for
any purpose not otherwise prohibited by the indenture. If the aggregate
principal amount of notes and other pari passu Indebtedness tendered into such
Asset Sale Offer exceeds the amount of Excess Proceeds, the trustee will select
the notes and such other pari passu Indebtedness to be purchased on a pro rata
basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds
will be deemed to have been reset at zero.

We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent those
laws and regulations are applicable in connection with repurchases of notes
pursuant to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the Asset Sale provisions of the
indenture, we will comply with the applicable securities laws and regulations
and will not be deemed to have breached our obligations under the Asset Sale
provisions of the indenture by virtue of that conflict.

The Revolving Credit Facility currently prohibits us from purchasing any
notes. Any future Credit Facilities or other agreements relating to Indebtedness
to which we become a party may contain similar restrictions and provisions.

CERTAIN COVENANTS

RESTRICTED PAYMENTS

We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly:

1. declare or pay any dividend or make any other payment or
distribution on account of our or any of our Restricted Subsidiaries'
Equity Interests, including, without limitation, any payment in connection
with any merger or consolidation involving us or any of our Restricted
Subsidiaries, or to the direct or indirect holders of our or any of our
Restricted Subsidiaries' Equity Interests in their capacity as such, except
for dividends or distributions that are payable in our Equity Interests
(other than Disqualified Stock) or payable to us or any of our Restricted
Subsidiaries;

2. purchase, redeem or otherwise acquire or retire for value,
including, without limitation, in connection with any merger or
consolidation involving us, any of our Equity Interests;

3. make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the notes or the Subsidiary Guarantees, except a payment of
interest or principal at the Stated Maturity thereof; or

4. make any Restricted Investment;

69
73

all such payments and other actions set forth in these clauses (1) through (4)
above being collectively referred to as "Restricted Payments," unless, at the
time of and after giving effect to such Restricted Payment:

1. no Default or Event of Default has occurred and is continuing or
would occur as a consequence of such Restricted Payment; and

2. we would, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock;" and

3. the aggregate amount of that Restricted Payment and all other
Restricted Payments made by us and our Restricted Subsidiaries after the
date we first issue the notes, excluding Restricted Payments permitted by
clauses (2), (3), (4), (6) and (7) of the next succeeding paragraph, is
less than or equal to the sum, without duplication, of:

(a) 50% of our Consolidated Net Income for the period (taken as one
accounting period) from the beginning of our fiscal quarter commenced
immediately prior to the date we first issue the notes to the end of our
most recently ended fiscal quarter for which we have filed financial
statements with the Commission (or, if such Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus

(b) 100% of the aggregate net cash proceeds received by us since
the date we first issue the notes as a contribution to our common equity
capital or from the issue or sale (other than to a Subsidiary) of our or
any of our Restricted Subsidiaries' Equity Interests (other than
Disqualified Stock) or from the issue or sale (other than to a
Subsidiary) of our convertible or exchangeable Disqualified Stock or our
convertible or exchangeable debt securities that have been converted
into or exchanged for Equity Interests (other than Disqualified Stock),
plus

(c) to the extent that any Restricted Investment that we or any of
our Restricted Subsidiaries makes after the date we first issue the
notes is sold for cash or otherwise liquidated or repaid for cash, an
amount equal to the lesser of (i) the cash return of capital with
respect to any such Restricted Investment (less the cost of disposition,
if any) and (ii) the initial amount of such Restricted Investment, plus

(d) if we redesignate any Unrestricted Subsidiary as a Restricted
Subsidiary after the date we first issue the notes, an amount equal to
the lesser of (i) the net book value of our Investment in the
Unrestricted Subsidiary at the time the Unrestricted Subsidiary was
designated as such and (ii) the fair market value of our Investment in
the Unrestricted Subsidiary at the time of the redesignation.

The preceding provisions will not prohibit:

1. the payment of any dividend within 60 days after the date of
declaration of the dividend, if at the date of declaration the dividend
payment would have complied with the provisions of the indenture;

2. the redemption, repurchase, retirement, defeasance or other
acquisition of any of (a) our Indebtedness or any Indebtedness of any
Guarantor that is subordinated to the notes or the guarantees, or (b) our
Equity Interests or any Equity Interests of any of our Restricted
Subsidiaries, in either case in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to one of our
Subsidiaries) of, our Equity Interests (other than Disqualified Stock);
provided, however, that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition will be excluded from clause (3)(b) of the preceding
paragraph;

70
74

3. the defeasance, redemption, repurchase or other acquisition of our
Indebtedness or Indebtedness of any Guarantor that is subordinated to the
notes or the guarantees with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;

4. the payment of any dividend by one of our Restricted Subsidiaries
to the holders of that Restricted Subsidiary's common Equity Interests on a
pro rata basis, so long as we or one of our Restricted Subsidiaries
receives at least a pro rata share (and in like form) of the dividend or
distribution in accordance with its common Equity Interests;

5. the repurchase, redemption or other acquisition or retirement for
value of any of our or any of our Restricted Subsidiaries' Equity Interests
held by any member of our or any of our Restricted Subsidiaries' management
pursuant to any management equity subscription agreement, stock option
agreement or similar agreement, provided, however, that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity
Interests may not exceed $1.0 million in any twelve-month period;

6. in connection with an acquisition by us or any of our Restricted
Subsidiaries, the return to us or any of our Restricted Subsidiaries of
Equity Interests of us or our Restricted Subsidiary constituting a portion
of the purchase consideration in settlement of indemnification claims;

7. the purchase by us of fractional shares arising out of stock
dividends, splits or combinations or business combinations;

8. the acquisition in open-market purchases of our common Equity
Interests for matching contributions to our employee stock purchase and
deferred compensation plans in the ordinary course of business and
consistent with past practices; or

9. other Restricted Payments in an aggregate amount since the date we
first issue the notes not to exceed $10.0 million.

provided that, with respect to clauses (2), (3), (5), (8) and (9) above, no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction.

The amount of all Restricted Payments (other than cash) will be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by us or such Restricted Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
assets or securities that are required to be valued by this covenant will be
determined by our Board of Directors whose resolution with respect thereto will
be delivered to the trustee. The Board of Directors' determination must be based
upon an opinion or appraisal issued by an accounting, appraisal or investment
banking firm of national standing if the fair market value exceeds $10.0
million. Not later than the date of making any Restricted Payment, we will
deliver to the trustee an officers' certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this "Restricted Payments" covenant were computed, together with a
copy of any fairness opinion or appraisal required by the indenture.

INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK

We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), and we will
not issue any Disqualified Stock and will not permit any of our Restricted
Subsidiaries to issue any shares of preferred stock; provided, however, that (a)
we and any Guarantor may incur Indebtedness (including Acquired Debt) and (b) we
may issue Disqualified Stock, if, in each case, our Fixed Charge Coverage Ratio
for our most recently ended four full fiscal quarters for which we have filed
financial statements with the Commission preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.25 to 1, determined on a pro forma basis (including a pro
forma

71
75

application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred or the Disqualified Stock had been issued, as the case may be,
at the beginning of such four-quarter period.

The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of Indebtedness (collectively, "Permitted Debt"):

1. the incurrence by us or any Guarantor of additional Indebtedness
and letters of credit under one or more Credit Facilities and guarantees
thereof by the Guarantors; provided, however, that the aggregate principal
amount of all Indebtedness incurred by us and the Guarantors pursuant to
this clause (1) (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of us and our Restricted
Subsidiaries thereunder) outstanding at any one time does not exceed $125.0
million;

2. the incurrence by us and our Restricted Subsidiaries of the
Existing Indebtedness;

3. the incurrence by us of Indebtedness represented by the notes
issued and sold in this offering and the incurrence by the Guarantors of
the Subsidiary Guarantees of those notes;

4. the incurrence by us of, or by any of our Restricted Subsidiaries
that is a Guarantor, of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations, in each
case incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in our business or the business of that Restricted
Subsidiary, in an aggregate principal amount not to exceed $10.0 million at
any time outstanding;

5. the incurrence by us or any of our Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was incurred under the first paragraph of
this covenant or clauses (2), (3) or (4) of this paragraph; provided,
however, that none of our Restricted Subsidiaries that is not a Guarantor
may refund, refinance or replace Indebtedness previously incurred by us or
by any of our Restricted Subsidiaries that is a Guarantor;

6. the incurrence by us or any of our Restricted Subsidiaries of
intercompany Indebtedness between or among us and any of our Restricted
Subsidiaries; provided, however, that:

(a) if we or a Guarantor is the obligor on such intercompany
Indebtedness, such intercompany Indebtedness must be expressly
subordinated to the prior payment in full in cash of all Obligations
with respect to, in our case, the notes, and, in the case of a
Guarantor, the guarantees; and

(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a person other than
us or one of our Restricted Subsidiaries that is a Guarantor and (ii)
any sale or other transfer of any such Indebtedness to a person that is
not either us or one of our Restricted Subsidiaries that is a Guarantor
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by us or such Restricted Subsidiary, as the case may be,
that was not permitted by this clause (6);

7. the incurrence by us or any of our Restricted Subsidiaries of
Hedging Obligations;

8. the guarantee by us or any of the Guarantors of Indebtedness of us
or of any of the Guarantors that was permitted to be incurred by another
provision of this "-- Incurrence of Indebtedness and Issuance of Preferred
Stock" covenant; and

9. the incurrence by us or any of our Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (9), not to exceed $35.0
million.

72
76

The maximum amount of Indebtedness that we or one of our Restricted
Subsidiaries may incur pursuant to this "-- Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant shall not be deemed to be exceeded, with
respect to any outstanding Indebtedness, due solely to fluctuations in the
exchange rates of currencies.

For purposes of determining compliance with this covenant, in the event
that an item of proposed Indebtedness, including Acquired Debt, meets the
criteria of more than one of the categories of Permitted Debt described in
clauses (1) through (9) above as of the date of incurrence thereof, or is
entitled to be incurred pursuant to the first paragraph of this covenant as of
the date of incurrence thereof or pursuant to any combination of the foregoing
as of the date of incurrence thereof, we shall, in our sole discretion, classify
(or later classify or reclassify) in whole or in part, in our sole discretion,
such item of Indebtedness in any manner that complies with this covenant.
Accrual of interest or dividends, the accretion of accreted value or liquidation
preference and the payment of interest or dividends in the form of additional
Indebtedness or Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this covenant.

LIENS

We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, create, incur, or assume any Lien of any kind securing
Indebtedness, Attributable Debt or trade payables on any asset now owned or
hereafter acquired, except Permitted Liens, unless all payments due under the
indenture and the notes, or the Subsidiary Guarantees, as applicable, are
secured on an equal and ratable basis (or prior to any subordinated
Indebtedness) with the obligations so secured until such time as such
obligations are no longer secured by a Lien. Under the Revolving Credit
Facility, we are not permitted to grant Liens to secure the notes.

DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES

We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:

1. pay dividends or make any other distributions on its Capital Stock
to us or any of our Restricted Subsidiaries, or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to us or any of our Restricted Subsidiaries;

2. make loans or advances to us or any of our Restricted Subsidiaries;
or

3. transfer any of its properties or assets to us or any of our
Restricted Subsidiaries.

However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:

1. agreements governing Existing Indebtedness, or any Credit
Facilities, as in effect on the date we first issue the notes and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of those agreements, provided that
the amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings of any of the
foregoing are no more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in those
agreements on the date of the indenture;

2. the indenture, the notes and the Subsidiary Guarantees, or any
other indenture governing debt securities that are no more restrictive,
taken as a whole, with respect to dividend and other payment restrictions
than those contained in the indenture and the notes;

3. applicable law or any applicable rule, regulation or order;

73
77

4. any instrument governing Indebtedness or Capital Stock of a person
acquired by us or any of our Restricted Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness or Capital
Stock was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
person, or the properties or assets of any person, other than the person,
or the property or assets of the person, so acquired, provided that, in the
case of Indebtedness, such Indebtedness was permitted by the terms of the
indenture to be incurred;

5. customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;

6. purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on that property of the nature
described in clause (3) of the preceding paragraph;

7. any agreement (A) for the sale or other disposition of all of the
Equity Interests in or all or substantially all of the assets of one of our
Restricted Subsidiaries that restricts distributions or asset transfers by
that Restricted Subsidiary pending that sale or other disposition or (B)
for the sale of a particular asset or line of business of a Restricted
Subsidiary that imposes restrictions on the property subject to an
agreement of the nature described in clause (3) of the preceding paragraph;
or

8. Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are not materially more restrictive, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced and that such Permitted Refinancing Indebtedness was permitted
to be incurred under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock";

9. Liens securing Indebtedness otherwise permitted to be incurred
under the provisions of the covenant described above under the caption
"-- Liens" that limit the right of the debtor to dispose of the assets
subject to such Liens; and

10. provisions with respect to the disposition of specific assets or
property in asset sale agreements entered into in the ordinary course of
business.

MERGER, CONSOLIDATION OR SALE OF ASSETS

We will not, directly or indirectly: (1) consolidate or merge with or into
another person (whether or not we are the surviving corporation) or (2) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of us and our Restricted Subsidiaries taken as a whole, in
one or more related transactions, to another person; unless:

a. either: (i) we are the surviving corporation or (ii) the person
formed by or surviving any such consolidation or merger (if other than us)
or to which such sale, assignment, transfer, conveyance or other
disposition has been made is a corporation organized or existing under the
laws of the United States, any state of the United States or the District
of Columbia;

b. the person formed by or surviving any such consolidation or merger
(if other than us) or the person to which such sale, assignment, transfer,
conveyance or other disposition has been made assumes all of our
obligations under the notes and the indenture pursuant to agreements
reasonably satisfactory to the trustee;

c. immediately before and after such transaction no Default or Event
of Default exists; and

d. we or the person formed by or surviving any such consolidation or
merger (if other than us), or to which such sale, assignment, transfer,
conveyance or other disposition has been made will, on the date of such
transaction after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described above under the caption

74
78

"-- Incurrence of Indebtedness and Issuance of Preferred Stock;" provided,
however, that this clause (d) shall be suspended during any period in which
we and our Restricted Subsidiaries are not subject to the Suspended
Covenants.

In addition, we may not, directly or indirectly, lease all or substantially
all of our properties or assets, in one or more related transactions, to any
other person.

The entity or person formed by or surviving any consolidation or merger (if
other than us), or the person to which such sale, assignment, transfer,
conveyance or other disposition, as the case may be, has been made, will succeed
to, and be substituted for, and may exercise our every right and power under the
indenture, but, in the case of a lease of all or substantially all its assets,
we will not be released from the obligation to pay the principal of and interest
on the notes.

DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES

The Board of Directors may designate any Restricted Subsidiary (or any
person that upon its acquisition otherwise would become a Restricted Subsidiary)
to be an Unrestricted Subsidiary if that designation would not cause a Default.
If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the
aggregate fair market value of all outstanding Investments owned by us and our
Restricted Subsidiaries in the Subsidiary properly designated will be deemed to
be an Investment made as of the time of the designation and will reduce the
amount available for Restricted Payments under the first paragraph of the
covenant described above under the caption "-- Restricted Payments" or Permitted
Investments, as determined by us. That designation will only be permitted if the
Investment would be permitted at that time and if the Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary. The Board of
Directors may redesignate any Unrestricted Subsidiary to be a Restricted
Subsidiary if the redesignation would not cause a Default.

TRANSACTIONS WITH AFFILIATES

We will not, and will not permit any of our Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each, an
"Affiliate Transaction"), unless:

1. the Affiliate Transaction is on terms that are no less favorable to
us or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by us or such Restricted Subsidiary
with an unrelated person; and

2. we deliver to the trustee:

a. with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of our Board of Directors set forth in an
officers' certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has been
approved by a majority of the disinterested members of our Board of
Directors; and

b. with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.

The following items will not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:

1. any employment agreement entered into by us or any of our
Restricted Subsidiaries in the ordinary course of business and consistent
with our past practice or the past practice of the relevant Restricted
Subsidiary;
75
79

2. transactions between or among us and/or our Restricted
Subsidiaries;

3. transactions with a person that is an Affiliate of ours solely
because we own an Equity Interest in such person;

4. payment of reasonable directors fees and reasonable indemnitees to
persons who are not otherwise Affiliates of ours;

5. sales of Equity Interests (other than Disqualified Stock) to
Affiliates of ours;

6. transactions with Weatherford (a) to repay $100.0 million of
outstanding Indebtedness, plus accrued and unpaid interest, to Weatherford
with the proceeds of this offering, (b) pursuant to agreements as in effect
on the date we first issue the notes, and (c) in commercial transactions in
the ordinary course of business on terms no less favorable to us or the
relevant Restricted Subsidiary than we could obtain in an arm's length
transaction with an unrelated person;

7. Restricted Payments or Permitted Investments that are permitted by
the provisions of the indenture described above under the caption
"-- Restricted Payments."

ADDITIONAL SUBSIDIARY GUARANTEES

If we or any of our Restricted Subsidiaries acquires or creates another
Domestic Subsidiary after the date of the indenture, then that newly acquired or
created Domestic Subsidiary will become a Guarantor and execute a supplemental
indenture and deliver an opinion of counsel satisfactory to the trustee within
ten Business Days of the date on which it was acquired or created; provided,
however, that the foregoing shall not apply to Subsidiaries that have properly
been designated as Unrestricted Subsidiaries in accordance with the indenture
for so long as they continue to constitute Unrestricted Subsidiaries; provided
further, however, that if one of our Subsidiaries that is not a Guarantor
guarantees any of our or a Guarantor's Indebtedness, that Subsidiary will be
required to provide us with a guarantee that ranks pari passu with (or, if that
Indebtedness is subordinated Indebtedness, prior to) that Indebtedness.

SALE AND LEASEBACK TRANSACTIONS

We will not, and will not permit any of our Restricted Subsidiaries to,
enter into any sale and leaseback transaction; provided, however, that we or any
of our Restricted Subsidiaries may enter into a sale and leaseback transaction
if:

1. we or that Restricted Subsidiary, as the case may be, could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction under the Fixed Charge
Coverage Ratio test in the first paragraph of the covenant described above
under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described under the caption "-- Liens;" provided, however, that
clause (a) of this clause (1) shall be suspended during any period in which
we and our Restricted Subsidiaries are not subject to the Suspended
Covenants;

2. the gross cash proceeds of that sale and leaseback transaction are
at least equal to the fair market value, as determined in good faith by us
and set forth in an officers' certificate delivered to the trustee of the
property that is the subject of that sale and leaseback transaction;
provided, however, that in the case of any sale and leaseback transaction
for consideration exceeding $5.0 million, the fair market value shall be
determined by our Board of Directors and set forth in an officers'
certificate delivered to the trustee; and

3. the transfer of assets in that sale and leaseback transaction is
permitted by, and we apply or the Restricted Subsidiary applies, as the
case may be, the proceeds of such transaction in compliance with, the
covenant described above under the caption "-- Mandatory Redemption; Offers
to Purchase; Open Market Purchases -- Asset Sales"; provided, however,
that, in the event that we or any of our Restricted Subsidiaries
consummates a sale and leaseback transaction during a period in which we
are not subject to the Suspended Covenants, within twelve months of that
sale and leaseback transaction,
76
80

we will apply the Net Cash Proceeds thereof to permanently repay secured
Indebtedness of us or a Guarantor, or any Indebtedness of any of our
Restricted Subsidiaries that is not a Guarantor, and if any Indebtedness
repaid under this clause (3) is revolving credit Indebtedness, to
correspondingly reduce commitments with respect thereto.

BUSINESS ACTIVITIES

We will not, and will not permit any Restricted Subsidiary to, engage in
any business other than Permitted Businesses, except to such extent as would not
be material to us and our Restricted Subsidiaries taken as a whole.

PAYMENTS FOR CONSENT

We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any holder of notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the indenture or the notes unless
such consideration is offered to be paid and is paid to all holders of the notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.

REPORTS

Whether or not required by the Commission, so long as any notes are
outstanding, we will file with the Commission (unless it will not accept the
same for filing), within the times periods specified in the Commission's rules
and regulations, all reports, statements and other information required to be
filed by a company subject to Section 13(a) of the Exchange Act. In the event
that the Commission will not accept those reports for filing, we will
nonetheless furnish to the holders of the notes within the same time period:

1. all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if we were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by our certified independent accountants; and

2. all current reports that would be required to be filed with the
Commission on Form 8-K is we were required to file such reports.

If we have designated any of our Subsidiaries as Unrestricted Subsidiaries,
then the quarterly and annual financial information required by the preceding
paragraph will include a reasonably detailed presentation, either on the face of
the financial statements or in the footnotes thereto, and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, of the
financial condition and results of operation of us and our Restricted
Subsidiaries separate from the financial condition and results of operations of
our Unrestricted Subsidiaries, if materially different.

EVENTS OF DEFAULT AND REMEDIES

Each of the following is an Event of Default:

1. default for 30 days in the payment when due of interest on the
notes;

2. default in payment when due of the principal of or premium, if any,
on the notes;

3. failure by us or any of our Restricted Subsidiaries to comply with
the provisions described under the captions "-- Restricted Payments,"
"-- Incurrence of Indebtedness and Issuance of Preferred Stock" or
"-- Merger, Consolidation or Sale of Assets";

4. failure by us or any of our Restricted Subsidiaries for 30 days
after notice to comply with the provisions described under the captions
"Mandatory Redemption; Offers to Purchase; Open Market
77
81

Purchases -- Asset Sales," "Mandatory Redemption; Offers to Purchase; Open
Market Purchases -- Change of Control";

5. failure by us or any of our Restricted Subsidiaries for 60 days
after notice to comply with any of its other agreements in the indenture or
the notes;

6. default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by us or any of our Restricted Subsidiaries
(or the payment of which is guaranteed by us or any of our Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the indenture, if that default:

a. is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default
(a "Payment Default"); or

b. results in the acceleration of such Indebtedness prior to its
express maturity,

and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;

7. failure by us or any of our Subsidiaries to pay final judgments
aggregating in excess of $10.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days; and

8. except as permitted by the indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any Guarantor,
or any person acting on behalf of any Guarantor, shall deny or disaffirm
its obligations under its Subsidiary Guarantee; and

9. certain events of bankruptcy or insolvency described in the
indenture with respect to us or any of our Restricted Subsidiaries.

In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to us, any Restricted Subsidiary that is
a Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding notes will
become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the trustee or the holders of
at least 25% in principal amount of the then outstanding notes may declare all
the notes to be due and payable immediately.

Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, holders of a majority
in principal amount of the then outstanding notes may direct the trustee in its
exercise of any trust or power. The trustee may withhold from holders of the
notes notice of any continuing Default or Event of Default if it determines that
withholding notice is in their interest, except a Default or Event of Default
relating to the payment of principal, premium, if any, or interest.

The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indenture except a continuing Default or Event of Default in the payment of
interest, or the principal and premium, if any, on, the notes.

In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on our behalf with the intention of
avoiding payment of the premium that we would have had to pay if we then had
elected to redeem the notes pursuant to the optional redemption provisions of
the indenture, an equivalent premium will also become and be immediately due and
payable to the extent permitted by law upon the acceleration of the notes.

78
82

We are required to deliver to the trustee annually a statement regarding
compliance with the indenture. Upon becoming aware of any Default or Event of
Default, we are required to deliver to the trustee a statement specifying such
Default or Event of Default.

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS

No director, officer, employee, incorporator or stockholder of us or any
Guarantor, as such, will have any liability for any of our or our Guarantors'
obligations under the notes, the indenture, the Subsidiary Guarantees, or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of notes by accepting a note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the notes. The waiver may not be effective to waive liabilities under the
federal securities laws.

AMENDMENT, SUPPLEMENT AND WAIVER

Except as provided in the next two succeeding paragraphs, the indenture or
the notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes).

Without the consent of each holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting holder):

1. reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;

2. reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes (other
than provisions relating to the covenants described above under the caption
"-- Mandatory Redemption; Offers to Purchase; Open Market Purchases");

3. reduce the rate of or change the time for payment of interest on
any note;

4. waive a Default or Event of Default in the payment of principal of,
or interest or premium, if any, on the notes (except a rescission of
acceleration of the notes by the holders of at least a majority in
aggregate principal amount of the notes and a waiver of the payment default
that resulted from such acceleration);

5. make any note payable in money other than that stated in the notes;

6. make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of notes to receive
payments of principal of, or interest or premium, if any, on the notes;

7. waive a redemption payment with respect to any note (other than a
payment required by one of the covenants described above under the caption
"-- Mandatory Redemption; Offers to Purchase; Open Market Purchases");

8. release any Guarantor from any of its obligations under its
Subsidiary Guarantee or the indenture, except in accordance with the terms
of the indenture; or

9. make any change in the preceding amendment and waiver provisions.

79
83

Notwithstanding the preceding, without the consent of any holder of notes,
we, the Guarantors and the trustee may amend or supplement the indenture or the
notes:

1. to cure any ambiguity, defect or inconsistency;

2. to provide for uncertificated notes in addition to or in place of
certificated notes;

3. to provide for the assumption of our obligations to holders of
notes in the case of a merger or consolidation or sale of all or
substantially all of our assets;

4. to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the
legal rights under the indenture of any such holder; or

5. to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture under the Trust Indenture Act.

CONCERNING THE TRUSTEE

If the trustee becomes a creditor of us or any Guarantor, the indenture
limits its right to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or otherwise.
The trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest, it must (i) eliminate such conflict within 90
days, (ii) apply to the Commission for permission to continue or (iii) resign.

The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
occurs and is continuing, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of notes, unless such holder has offered to the trustee indemnity
satisfactory to it against any loss, liability or expense.

CERTAIN DEFINITIONS

Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for the full text of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.

"Acquired Debt" means, with respect to any specified person:

1. Indebtedness of any other person existing at the time such other
person is merged with or into or became a Subsidiary of such specified
person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other person merging with or into, or becoming a
Subsidiary of, such specified person; and

2. Indebtedness secured by a Lien encumbering any asset acquired by
such specified person.

"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control,"
as used with respect to any person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a person will be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" have correlative meanings.

80
84

"Asset Sale" means:

1. the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory or equipment in the ordinary course
of business consistent with past practices; provided that the sale,
conveyance or other disposition of all or substantially all of our assets
and our Restricted Subsidiaries taken as a whole will be governed by the
provisions of the indenture described above under the caption "-- Mandatory
Redemption; Offers to Purchase; Open Market Purchases -- Change of Control"
and/or the provisions described above under the caption "-- Certain
Covenants -- Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant; and

2. the issuance of Equity Interests in any of our Restricted
Subsidiaries or the sale of Equity Interests in any of our Restricted
Subsidiaries.

Notwithstanding the preceding, the following items will not be deemed to be
Asset Sales:

1. any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million;

2. a transfer of assets between or among us and our Restricted
Subsidiaries,

3. an issuance of Equity Interests by a Restricted Subsidiary to us or
to another Restricted Subsidiary; and

4. a Restricted Payment or Permitted Investment that is permitted by
the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments."

"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.

"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" will be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.

"Board of Directors" means:

1. with respect to a corporation, the board of directors or a duly
authorized committee of the board of directors of the corporation;

2. with respect to a partnership, the board of directors or a duly
authorized committee of the board of directors of the general partner of
the partnership; and

3. with respect to any other person, the board or committee of such
person serving a similar function.

"Board Resolution" means, with respect to any entity, a copy of a
resolution certified by the Secretary or Assistant Secretary of that entity to
have been duly adopted by the Board of Directors of that entity and to be in
full force and effect on the date of certification, and delivered to the
trustee.

"Capital Lease Obligation" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.
81
85

"Capital Stock" means:

1. in the case of a corporation, corporate stock;

2. in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;

3. in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and

4. any other interest or participation that confers on a person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing person.

"Cash Equivalents" means:

1. United States dollars;

2. securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality of the United
States government (provided that the full faith and credit of the United
States is pledged in support of those securities) having maturities of not
more than six months from the date of acquisition;

3. certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any lender party to a Credit Facility or with
any domestic commercial bank having capital and surplus in excess of $500.0
million and a Thomson Bank Watch Rating of "B" or better;

4. repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;

5. commercial paper having the highest rating obtainable from Moody's
or S&P and in each case maturing within six months after the date of
acquisition; and

6. money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.

"Change of Control" means the occurrence of any of the following:

1. the direct or indirect sale, transfer, conveyance or other
disposition, other than by way of merger or consolidation, in one or a
series of related transactions, of all or substantially all of the
properties or assets of us and our Restricted Subsidiaries, taken as a
whole, to any "person," as that term is used in Section 13(d)(3) of the
Exchange Act;

2. the adoption of a plan relating to our liquidation or dissolution;

3. the consummation of any transaction, including, without limitation,
any merger or consolidation, the result of which is that any "person," as
defined in clause (1) above becomes the ultimate Beneficial Owner, directly
or indirectly, of more than 50% of our Voting Stock, measured by voting
power rather than number of shares;

4. the first day on which a majority of the members of our entire
Board of Directors are not Continuing Directors; or

5. our consolidation or merger with or into, any person, or the
consolidation or merger of any person with or into, us, in any such event
pursuant to a transaction in which any of our outstanding Voting Stock or
such other person is converted into or exchanged for cash, securities or
other property, other than any such transaction where our Voting Stock
outstanding immediately prior to such transaction is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of

82
86

the surviving or transferee person, or the direct parent company of the
surviving or transferee person, which, immediately after giving effect to
such issuance, constitutes a majority of the outstanding shares of such
Voting Stock of such surviving or transferee person, or the direct parent
company of the surviving or transferee person.

For the purposes of this definition of "Change of Control," any transfer of
any equity of an entity that was formed for the purpose of acquiring our Voting
Stock will be deemed to be a transfer of an Equity Interest in us.

"Change of Control Triggering Event" means, the occurrence of a Change of
Control, or if we are not subject to the Suspended Covenants, there occurs both
a Change of Control and a Rating Decline.

"Commission" means the Securities and Exchange Commission.

"Consolidated Cash Flow" means, with respect to any specified person for
any period, the Consolidated Net Income of such person for such period:

1. plus an amount equal to any extraordinary loss plus any net loss
realized by such person or any of its Subsidiaries in connection with an
Asset Sale or in connection with a future write-down of our or our
Restricted Subsidiaries' investment in Oil Country Tubular Limited in an
amount not to exceed $17.6 million, in either case to the extent such
losses were deducted in computing such Consolidated Net Income;

2. plus provision for taxes based on income or profits of such person
and its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;

3. plus consolidated interest expense of such person and its
Restricted Subsidiaries for such period, whether paid or accrued and
whether or not capitalized (including, without limitation, amortization of
debt issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net of the effect
of all payments made or received pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated
Net Income;

4. plus depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash expenses (excluding
any such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period) of such person and its
Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income;

5. minus non-cash items increasing such Consolidated Net Income for
such period, other than the accrual of revenue in the ordinary course of
business,

in each case, on a consolidated basis and determined in accordance with GAAP.

"Consolidated Net Income" means, with respect to any specified person for
any period, the aggregate of the Net Income of such person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that:

1. the Net Income (but not loss) of any person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting will be included only to the extent of the amount of dividends
or distributions paid in cash to the specified person or a Restricted
Subsidiary of the person;

83
87

2. the Net Income of any Restricted Subsidiary will be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument (other than those
permitted under the "Dividend and Other Payment Restrictions Affecting
Subsidiaries" covenant), judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders;

3. the Net Income of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition will be
excluded; and

4. the cumulative effect of a change in accounting principles will be
excluded.

"Continuing Directors" means, as of any date of determination, any member
of our Board of Directors who:

1. was a member of such Board of Directors on the date of the
indenture; or

2. was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.

"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Revolving Credit Facility) or commercial paper facilities, in
each case with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.

"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.

"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock), or
upon the happening of any event (other than upon an optional redemption by us),
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder of the Capital Stock, in
whole or in part, on or prior to the date that is 91 days after the date on
which the notes mature. Notwithstanding the preceding sentence, any Capital
Stock that would constitute Disqualified Stock solely because the holders of the
Capital Stock have the right to require us to repurchase such Capital Stock upon
the occurrence of a change of control or an asset sale will not constitute
Disqualified Stock if the terms of such Capital Stock provide that we may not
repurchase or redeem any such Capital Stock pursuant to such provisions unless
such repurchase or redemption complies with the covenant described above under
the caption "-- Certain Covenants -- Restricted Payments."

"Domestic Subsidiary" means any one of our Subsidiaries that was formed
under the laws of the United States or any state of the United States or the
District of Columbia.

"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

"Existing Indebtedness" means the Indebtedness of us and our Subsidiaries
(other than Indebtedness under the Revolving Credit Facility) in existence on
the date we first issue the notes, until such amounts are repaid.

84
88

"Fixed Charges" means, with respect to any specified person for any period,
the sum, without duplication, of:

1. the consolidated interest expense of such person and its Restricted
Subsidiaries for such period, whether paid or accrued, including, without
limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net of the effect of all payments made or received pursuant to Hedging
Obligations; plus

2. the consolidated interest of such person and its Restricted
Subsidiaries that was capitalized during such period; plus

3. any interest expense on Indebtedness of another person that is
guaranteed by such person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such person or one of its Restricted Subsidiaries,
whether or not such guarantee or Lien is called upon; plus

4. the product of (a) all dividends, whether paid or accrued and
whether or not in cash, on any series of preferred stock of such person or
any of its Restricted Subsidiaries, other than dividends on Equity
Interests payable solely in our Equity Interests (other than Disqualified
Stock) or to us or one of our Restricted Subsidiaries, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate
of such person, expressed as a decimal,

in each case, on a consolidated basis and in accordance with GAAP.

"Fixed Charge Coverage Ratio" means with respect to any specified person
for any period, the ratio of the Consolidated Cash Flow of such person and its
Restricted Subsidiaries for such period to the Fixed Charges of such person and
its Restricted Subsidiaries for such period. In the event that the specified
person or any of its Restricted Subsidiaries incurs, assumes, guarantees,
repays, repurchases or redeems any Indebtedness (other than ordinary working
capital borrowings) or issues, repurchases or redeems preferred stock subsequent
to the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated and on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the"Calculation Date"),
then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect
to such incurrence, assumption, guarantee, repayment, repurchase or redemption
of Indebtedness, or such issuance, repurchase or redemption of preferred stock,
and the use of the proceeds therefrom as if the same had occurred at the
beginning of the applicable four-quarter reference period.

In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

1. acquisitions that have been made by the specified person or any of
its Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date will be given pro forma effect (calculated in
accordance with Regulation S-X) as if they had occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for such
reference period will be calculated without giving effect to clause (3) of
the proviso set forth in the definition of Consolidated Net Income;

2. the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, will be excluded; and

3. the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, will be excluded, but

85
89

only to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the specified person or any of its Restricted
Subsidiaries following the Calculation Date.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture.

"Government Securities" means direct obligations of, or obligations fully
and unconditionally guaranteed or insured by, the United States of America or
any agency or instrumentality thereof for the payment of which obligations or
guarantee the full faith and credit of the United States is pledged and which
are not callable or redeemable at the issuer's option (unless, for purposes of
"Cash Equivalents" only, the obligations are redeemable or callable at a price
not less than the purchase price paid by us or any of our Restricted
Subsidiaries, together with all accrued and unpaid interest, if any, on such
Government Securities).

"guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.

"Guarantors" means each of:

1. the Domestic Subsidiaries; and

2. any other Subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the indenture;

and their respective successors and assigns.

"Hedging Obligations" means, with respect to any specified person, the
obligations of such person incurred in the normal course of business and
consistent with past practices and not for speculative purposes under:

1. interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;

2. foreign exchange contracts and currency protection agreements
entered into with one of more financial institutions is designed to protect
the person or entity entering into the agreement against fluctuations in
interest rates or currency exchange rates with respect to Indebtedness
incurred and not for purposes of speculation;

3. any commodity futures contract, commodity option or other similar
agreement or arrangement designed to protect against fluctuations in the
price of commodities used by that entity at the time; and

4. other agreements or arrangements designed to protect such person
against fluctuations in interest rates or currency exchange rates.

"Indebtedness" means, with respect to any specified person, any
indebtedness of such person, whether or not contingent:

1. in respect of borrowed money;

2. evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);

3. in respect of banker's acceptances;

4. representing Capital Lease Obligations;
86
90

5. representing the balance deferred and unpaid of the purchase price
of any property, except any such balance that constitutes an accrued
expense or trade payable; or

6. representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified person (whether or not such Indebtedness is assumed by
the specified person) and, to the extent not otherwise included, the guarantee
by the specified person of any indebtedness of any other person.

The amount of any Indebtedness outstanding as of any date will be:

1. the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount; and

2. the principal amount of the Indebtedness, together with any
interest on the Indebtedness that is more than 30 days past due, in the
case of any other Indebtedness.

"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's or BBB- (or the equivalent) by S&P.

"Investments" means, with respect to any person, all direct or indirect
investments by such person in other persons (including Affiliates) in the forms
of loans (including guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If we or any of
our Restricted Subsidiaries sells or otherwise disposes of any Equity Interests
of any of our direct or indirect Subsidiaries such that, after giving effect to
any such sale or disposition, such person is no longer our Subsidiary, we will
be deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Restricted
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described above under the caption"-- Certain
Covenants -- Restricted Payments." The acquisition by us or any of our
Restricted Subsidiaries of a person that holds an Investment in a third person
will be deemed to be an Investment by us or such Restricted Subsidiary in such
third person in an amount equal to the fair market value of the Investment held
by the acquired person in such third person in an amount determined as provided
in the final paragraph of the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments."

"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.

"Net Income" means, with respect to any specified person, the net income
(loss) of such person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:

(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with: (a) any
Asset Sale; or (b) the disposition of any securities by such

87
91

person or any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such person or any of its Restricted Subsidiaries; and

(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss).

"Net Proceeds" means the aggregate cash proceeds received by us or any of
our Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale, including, without limitation, legal, accounting and investment
banking fees, and sales or brokerage commissions, and any relocation expenses
incurred as a result of the Asset Sale, taxes paid or payable as a result of the
Asset Sale, in each case, after taking into account any available tax credits or
deductions and any tax sharing arrangements, and amounts required to be applied
to the repayment of Indebtedness secured by a Lien on the asset or assets that
were the subject of such Asset Sale, and any reserve for adjustment in respect
of the sale price of such asset or assets established in accordance with GAAP.

"Non-Recourse Debt" means Indebtedness:

(1) as to which neither we nor any of our Restricted Subsidiaries (a)
provides credit support of any kind (including any undertaking, agreement
or instrument that would constitute Indebtedness), (b) is directly or
indirectly liable as a guarantor or otherwise, or (c) constitutes the
lender;

(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice,lapse of time of both any holder of
any other Indebtedness (other than the notes) of us or any of our
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and

(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of us or any of our
Restricted Subsidiaries.

"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

"Permitted Business" means the lines of business conducted by us and our
Restricted Subsidiaries on the date hereof and any business incidental or
reasonably related thereto or which is a reasonable extension thereof as
determined in good faith by our Board of Directors and set forth in an officers'
certificate delivered to the trustee.

"Permitted Investments" means:

(1) any Investment in us or in any of our Restricted Subsidiaries;

(2) any Investment in Cash Equivalents;

(3) any Investment by us or any of our Restricted Subsidiaries in a
person engaged in a Permitted Business, if as a result of such Investment:

(a) such person becomes one of our Restricted Subsidiaries; or

(b) such person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, us or any of our Restricted Subsidiaries;

(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"-- Mandatory Redemption; Offers to Purchase; Open Market
Purchases -- Asset Sales";

88
92

(5) any acquisition of assets solely in exchange for the issuance of
our Equity Interests (other than Disqualified Stock);

(6) any Investments received in compromise of obligations of such
persons incurred in the ordinary course of trade creditors or customers
that were incurred in the ordinary course of business, including pursuant
to any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of any trade creditor or customer;

(7) Hedging Obligations permitted to be incurred under the "Incurrence
of Indebtedness and Issuance of Preferred Stock" covenant; and

(8) other Investments in any person having an aggregate fair market
value (measured on the date each such investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (8) that are at the time
outstanding, not to exceed $15.0 million.

"Permitted Liens" means:

(1) Liens on assets of us and any Guarantor securing Credit
Facilities;

(2) Liens in favor of us or the Guarantors;

(3) Liens on property of a person existing at the time such person is
merged with or into or consolidated with us or any of our Subsidiaries;
provided, however, that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the person merged into or consolidated with us
or the Subsidiary;

(4) Liens on property existing at the time of acquisition of the
property by us or any of our Subsidiaries; provided, however, that such
Liens were in existence prior to the contemplation of such acquisition;

(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;

(6) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant entitled
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets acquired with such Indebtedness;

(7) Liens existing on the date of the indenture;

(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as is required in
conformity with GAAP has been made therefor; and

(9) Liens incurred by us or any of our Restricted Subsidiaries in the
ordinary course of business with respect to obligations that do not exceed
$5.0 million at any one time outstanding.

"Permitted Refinancing Indebtedness" means any Indebtedness of us or any of
our Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of us or any of our Restricted Subsidiaries (other than
intercompany Indebtedness); provided that:

(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness extended, refinanced,
renewed, replaced, defeased or refunded (plus all accrued interest on the
Indebtedness and the amount of all expenses and premiums incurred in
connection therewith);

89
93

(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;

(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
notes on terms at least as favorable to the holders of notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and

(4) such Indebtedness is incurred either by us or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.

"person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.

"Rating Agency" means each of S&P and Moody's, or if S&P or Moody's or both
shall not make a rating on the notes publicly available, a nationally recognized
statistical rating agency or agencies, as the case may be, selected by us (as
certified by a resolution of our Board of Directors) which shall be substituted
for S&P or Moody's, or both, as the case may be.

"Rating Category" means (i) with respect to S&P, any of the following
categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor
categories); (ii) with respect to Moody's any of the following categories: Aaa,
Aa, A, Baa, Ba, B, Caa, Ca and C (or equivalent successor categories) and (iii)
the equivalent of any such category of S&P and Moody's used by another Rating
Agency. In determining whether the rating of the notes has decreased by one or
more gradations, gradations within Rating Categories (+ and -- for S&P: 1, 2 and
3 for Moody's; or the equivalent gradations for another Rating Agency) shall be
taken into account (e.g., with respect to S&P, a decline in a rating from BB+ to
BB, as well from BB- to B, will constitute a decrease of one gradation).

"Rating Decline" means (i) a decrease of two or more gradations (including
gradations within Rating Categories as well as between Rating Categories) in the
rating of the notes by either Rating Agency or (ii) a withdrawal of the rating
of the notes by either Rating Agency, provided, however, that such decrease or
withdrawal occurs on, or within 90 days following, the date of public notice of
the occurrence of a Change of Control or of the intention by us to effect a
Change of Control, which period shall be extended so long as the rating of the
notes is under publicly announced consideration for downgrade by either Rating
Agency.

"Restricted Investment" means an Investment other than a Permitted
Investment.

"Restricted Subsidiary" of a person means any Subsidiary of such person
that is not an Unrestricted Subsidiary.

"Revolving Credit Facility" means that certain Revolving Credit and Letter
of Credit Agreement, dated as of April 14, 2000, by and among us and a syndicate
of United States and Canadian banks, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case as amended, modified, renewed, refunded, replaced or
refinanced from time to time.

"S&P" means Standard & Poor's Ratings Group, Inc., or any successor to the
rating agency business thereof.

"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.

90
94

"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.

"Subsidiary" means, with respect to any specified person:

(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees of the corporation, association
or other business entity is at the time owned or controlled, directly or
indirectly, by that person or one or more of the other Subsidiaries of that
person (or a combination thereof); and

(2) any partnership (a) the sole general partner or the managing
general partner of which is such person or a Subsidiary of such person or
(b) the only general partners of which are that person or one or more
Subsidiaries of that person (or any combination thereof).

"Subsidiary Guarantee" means the guarantee of the notes by each of the
Guarantors pursuant to the indenture and in the form of the guarantee endorsed
on the form of note attached as Exhibit A to the indenture and any additional
guarantee of the notes to be executed by any of our Subsidiaries pursuant to the
covenant described above under the caption "-- Additional Subsidiary
Guarantees."

"Unrestricted Subsidiary" means any one of our Subsidiaries (or any
successor to any of them) that is designated by our Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent
that such Subsidiary:

(1) has no Indebtedness other than Non-Recourse Debt;

(2) is not party to any agreement, contract, arrangement or
understanding with us or any of our Restricted Subsidiaries unless the
terms of any such agreement, contract, arrangement or understanding are no
less favorable to us or such Restricted Subsidiary than those that might be
obtained at the time from persons who are not our Affiliates;

(3) is a person with respect to which neither we nor any of our
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such person's financial condition or to cause such person to achieve any
specified levels of operating results;

(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of us or any of our Restricted
Subsidiaries; and

(5) has at least one director on its Board of Directors that is not a
director or executive officer of us or any of our Restricted Subsidiaries
and has at least one executive officer that is not a director or executive
officer of us or any of our Restricted Subsidiaries.

Any designation of any of our Subsidiaries as an Unrestricted Subsidiary
will be evidenced to the trustee by filing with the trustee a certified copy of
the Board Resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for
purposes of the indenture and any Indebtedness of such Subsidiary will be deemed
to be incurred by one of our Restricted Subsidiaries as of such date and, if
such Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," we will be in default of such
covenant. Our Board of Directors may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation

91
95

will be deemed to be an incurrence of Indebtedness by one of our Restricted
Subsidiaries of any outstanding Indebtedness of such Unrestricted Subsidiary and
such designation will only be permitted if (1) such Indebtedness is permitted
under the covenant described under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (2) no Default or Event of
Default would be in existence following such designation.

"Voting Stock" of any person as of any date means the Capital Stock of such
person that is at the time entitled to vote in the election of the Board of
Directors of such person.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:

(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect of the Indebtedness, by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of
such payment; by

(2) the then outstanding principal amount of such Indebtedness.

BOOK-ENTRY, DELIVERY AND FORM

Except as set forth below, exchange notes will be issued in registered,
global form in minimum denominations of $1,000 and integral multiples of $1,000
in excess thereof.

The exchange notes initially will be represented by one or more notes in
registered, global form without interest coupons (the "Global Notes"). Upon
issuance, the Global Notes will be deposited with the trustee as custodian for
the Depository Trust Company ("DTC"), in New York, New York, and registered in
the name of DTC or its nominee.

Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Global Notes for Certificated Notes."

DEPOSITORY PROCEDURES

The following description of the operations and procedures of DTC,
Euroclear and Cedel are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them. We take no responsibility
for these operations and procedures and urge investors to contact the system or
their participants directly to discuss these matters.

DTC has advised us that it is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers and
dealers (including the initial purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or the Indirect Participants. The
ownership interests in, and transfers of ownership interests in, each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.

92
96

DTC has also advised us that, pursuant to procedures established by it:

(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the initial purchasers with portions of the
principal amount of the Global Notes; and

(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Notes).

Investors in the Global Notes who are Participants in DTC's system may hold
their interests therein directly through DTC. Investors in the Global Notes who
are not Participants may hold their interests in the Global Notes indirectly
through organizations which are Participants in that system. All interests in a
Global Note may be subject to the procedures and requirements of DTC. The laws
of some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer
beneficial interests in a Global Note to those persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants, the ability of a person having beneficial
interests in a Global Note to pledge those interests to persons that do not
participate in DTC's system, or otherwise take actions in respect of those
interests, may be affected by the lack of a physical certificate evidencing
those interests.

EXCEPT AS DESCRIBED BELOW UNDER THE CAPTION "-- EXCHANGE OF GLOBAL NOTES
FOR CERTIFICATED NOTES," OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT HAVE
NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN
CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR "HOLDERS"
THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.

Payments in respect of the principal of, and interest and premium and
liquidated damages, if any, on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered holder
under the indenture. Under the terms of the indenture, DTC, the trustee and us
will treat the persons in whose names the notes, including the Global Notes, are
registered as the owners of the notes for the purpose of receiving payments and
for all other purposes. Consequently, neither we, the trustee nor any agent of
us or the trustee has or will have any responsibility or liability for:

(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes: or

(2) any other matter relating to the actions and practices of DTC or
any of its Participants or Indirect Participants.

DTC has advised us that its current practice, upon receipt of any payment
in respect of securities such as the notes (including principal and interest),
is to credit the accounts of the relevant Participants with the payment on the
payment date unless DTC has reason to believe it will not receive payment on
that payment date. Each relevant Participant is credited with an amount
proportionate to its beneficial ownership of an interest in the principal amount
of the relevant security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the trustee or us. Neither we nor the trustee will
be liable for any delay by DTC or any of its Participants in identifying the
beneficial owners of the notes, and we and the trustee may conclusively rely on
and will be protected in relying on instructions from DTC or its nominee for all
purposes.

Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds, and transfers between
participants in Euroclear and Cedel will be effected in accordance with their
respective rules and operating procedures.

93
97

DTC has advised us that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the Global Notes and only in respect
of the portion of the aggregate principal amount of the notes as to which the
Participant or Participants has or have given direction. However, if there is an
Event of Default under the notes, DTC reserves the right to exchange the Global
Notes for legended notes in certificated form, and to distribute those notes to
its Participants.

Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among participants in DTC, they are under no
obligation to perform or to continue to perform these procedures, and may
discontinue these procedures at any time. Neither we nor the trustee nor any of
our or their respective agents will have any responsibility for the performance
by DTC or their participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.

EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES

A Global Note is exchangeable for definitive notes in registered
certificated form ("Certificated Notes") if:

(1) DTC (a) notifies us that it is unwilling or unable to continue as
depositary for the Global Notes and we fail to appoint a successor
depositary or (b) has ceased to be a clearing agency registered under the
Exchange Act;

(2) we, at our option, notify the trustee in writing that we elect to
cause the issuance of the Certificated Notes; or

(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the notes.

In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated Notes
delivered in exchange for any Global Note or beneficial interests in a Global
Note will be registered in the names, and issued in any approved denominations,
requested by or on behalf of DTC (in accordance with its customary procedures)
and will bear the applicable restrictive legend referred to in "Notice to
Investors," unless that legend is not required by applicable law.

SAME DAY SETTLEMENT AND PAYMENT

We will make payments in respect of the notes represented by the Global
Notes (including principal, premium, if any, interest and liquidated damages, if
any) by wire transfer of immediately available funds to the accounts specified
by the Global Note holder. We will make all payments of principal, interest and
premium and liquidated damages, if any, with respect to Certificated Notes by
wire transfer of immediately available funds to the accounts specified by the
holders of those notes. If no account is specified by a holder, we will mail a
check to that holder's registered address. The notes represented by the Global
Notes are expected to trade in DTC's Same-Day Funds Settlement System, and any
permitted secondary market trading activity in the notes will, therefore, be
required by DTC to be settled in immediately available funds. We expect that
secondary trading in any Certificated Notes will also be settled in immediately
available funds.

94
98

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the principal United States federal income
tax consequences of the purchase, ownership and disposition of the notes to
purchasers and beneficial owners of notes who are United States Holders (as
defined below) and the principal United States federal income and estate tax
consequences of the purchase, ownership and disposition of the notes to
purchasers and beneficial owners of notes who are Foreign Holders (as defined
below). This discussion is based on currently existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
promulgated thereunder, and administrative and judicial interpretations thereof,
all as in effect on the date hereof and all of which are subject to change,
possibly with retroactive effect, or different interpretations. This discussion
is limited to purchasers of notes who hold the notes as capital assets, within
the meaning of section 1221 of the Code. This discussion does not address the
tax consequences to Foreign Holders that are subject to United States federal
income tax on a net basis on income realized with respect to a note because such
income is effectively connected with the conduct of a U.S. trade or business.
Such Foreign Holders are generally taxed in a similar manner to United States
Holders, but certain special rules apply. This discussion does not address the
tax consequences to persons who hold the notes through a partnership or similar
pass-through entity. Moreover, this discussion is for general information only
and does not address all of the tax consequences that may be relevant to
particular purchasers of notes in light of their personal circumstances or to
certain types of purchasers (such as certain financial institutions, insurance
companies, tax-exempt entities, dealers in securities, former U.S. citizens and
long-term residents or persons who have hedged the risk of owning a note) or the
effect of any applicable state, local or foreign tax laws.

YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE APPLICABILITY OF ANY FEDERAL TAX LAWS OR ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND ANY CHANGES (OR PROPOSED CHANGES) IN APPLICABLE TAX LAWS
OR INTERPRETATIONS THEREOF.

EXCHANGE OF OUTSTANDING NOTES PURSUANT TO THE EXCHANGE OFFER

The exchange of outstanding notes for exchange notes pursuant to the
exchange offer will not be a taxable event for United States federal income tax
purposes. You will not recognize gain or loss upon the receipt of exchange
notes. If you are not exempt from United States federal income tax, you will be
subject to such tax on the same amount, in the same manner and at the same time
as you would have been as a result of holding the outstanding notes. If you are
a cash-basis holder who is exchanging outstanding notes for exchange notes, you
will not recognize in income any accrued and unpaid interest on the outstanding
notes by reason of the exchange. The basis and holding period of the exchange
notes will be the same as the basis and holding period of the corresponding
outstanding notes.

UNITED STATES FEDERAL INCOME TAXATION OF UNITED STATES HOLDERS

As used herein, the term "United States Holder" means a holder of a note
that is, for United States federal income tax purposes, (a) a citizen or
resident of the United States, (b) a corporation or other entity (other than a
partnership) created or organized in or under the laws of the United States or
any political subdivision thereof, (c) an estate the income of which is subject
to United States federal income taxation regardless of source or (d) a trust if
(i) a U.S. court is able to exercise primary supervision over the administration
of the trust and one or more U.S. persons have authority to control all
substantial decisions of the trust or (ii) the trust has elected to be treated
as a United States Holder pursuant to applicable Treasury regulations.

95
99

Payment of Interest

A United States Holder will be required to include in gross income interest
on a note at the time that such interest accrues or is received, in accordance
with the United States Holder's regular method of accounting for United States
federal income tax purposes.

Market Discount

Under the market discount rules, if a United States Holder of a note (other
than a Holder who purchased the note upon original issuance) purchases the note
at a market discount (i.e., at a price below its stated principal amount) in
excess of a statutorily-defined de minimis amount and thereafter recognizes gain
upon a disposition or retirement of the note, then the lesser of the gain
recognized or the portion of the market discount that accrued on a ratable basis
(or, if elected, on a constant interest rate basis) generally will be treated as
ordinary income at the time of the disposition. Moreover, any market discount in
a note may be taxable to a United States Holder to the extent of appreciation in
the value of the note at the time of certain otherwise nontaxable transactions
(e.g., gifts). Absent an election to include market discount in income as it
accrues, a United States Holder of a market discount note may be required to
defer a portion of any interest expense that otherwise may be deductible on any
indebtedness incurred or maintained to purchase or carry such note until the
United States Holder disposes of the note in a taxable transaction.

Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the note, unless the United
States Holder elects to accrue on a constant interest method. A United States
Holder may elect to include market discount in income currently as it accrues
(on either a ratable or constant interest method), in which case the rule
described above regarding deferral of interest deductions will not apply. This
election to include market discount in income currently, once made, applies to
all market discount obligations acquired after the first taxable year to which
the election applies and may not be revoked without the consent of the Internal
Revenue Service ("IRS").

Amortizable Bond Premium

A United States Holder that purchases a note for an amount in excess of the
principal amount will be considered to have purchased the note at a "premium,"
equal to such excess, and may elect to amortize the premium over the remaining
term of the note on a constant yield method. However, if the note is purchased
at a time when the note may be optionally redeemed by the Company for an amount
that is in excess of its principal amount, special rules may apply that could
result in a deferral of the amortization of bond premium until later in the term
of the note. The amount amortized in any year will be treated as a reduction of
the United States Holder's interest income from the note. A United States Holder
that elects to amortize bond premium must reduce its tax basis in the note by
the premium amortized. Bond premium on a note held by a United States Holder
that does not make such election will decrease the gain or increase the loss
otherwise recognized on disposition of the note. The election to amortize
premium on a constant yield method, once made, applies to all debt obligations
held or subsequently acquired by the electing United States Holder on or after
the first day of the first taxable year to which the election applies and may
not be revoked without the consent of the IRS.

Sale, Exchange or Retirement of the Notes

Upon the sale, exchange, redemption, retirement at maturity or other
disposition of a note, a United States Holder generally will recognize taxable
gain or loss equal to the difference between the sum of cash plus the fair
market value of all other property received on such disposition (except to the
extent such cash or property is attributable to accrued interest not previously
included in income, which amount will be taxable as ordinary income) and such
United States Holder's adjusted tax basis in the note. A United States Holder's
adjusted tax basis in a note generally will equal the cost of the note to such
United States Holder, decreased by the amount of any payments (other than
interest) received by such United States Holder.

96
100

Gain or loss recognized on the disposition of a note generally will be
capital gain or loss and will be long-term capital gain or loss if, at the time
of such disposition, the United States Holder's holding period for the note is
more than one year. The deduction of capital losses is subject to certain
limitations. United States Holders of notes should consult tax advisors
regarding the treatment of capital gains and losses.

Backup Withholding and Information Reporting

Backup withholding and information reporting requirements may apply to
certain payments ("reportable payments") of principal and interest on a note,
and to proceeds of the sale or redemption of a note before maturity. We, our
agent, a broker, the Trustee or any paying agent, as the case may be, will be
required to withhold from any reportable payment that is subject to backup
withholding a tax equal to 31% of such payment if, among other things, a United
States Holder fails to furnish his taxpayer identification number (social
security or employer identification number), certify that such number is
correct, certify that such holder is not subject to backup withholding or
otherwise comply with the applicable requirements of the backup withholding
rules. Certain United States Holders, including all corporations, are not
subject to backup withholding and information reporting requirements for
payments made in respect of the notes. Any amounts withheld under the backup
withholding rules from a reportable payment to a United States Holder will be
allowed as a credit against such United States Holder's United States federal
income tax and may entitle the holder to a refund, provided that the required
information is furnished to the IRS.

The amount of any reportable payments, including interest, made to the
record United States Holders of notes (other than to holders which are exempt
recipients) and the amount of tax withheld, if any, with respect to such
payments will be reported to such United States Holders and to the IRS for each
calendar year.

UNITED STATES FEDERAL INCOME TAXATION OF FOREIGN HOLDERS

As used herein, the term "Foreign Holder" means a holder of a note that is,
for United States federal income tax purposes, neither a United States Holder,
as defined above nor a former U.S. citizen or long-term resident, as defined in
section 877 of the Code.

Payment of Interest on Notes

In general, payments of interest received by a Foreign Holder will not be
subject to a United States federal withholding tax, provided that (a)(i) the
Foreign Holder does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Grant Prideco entitled to vote,
(ii) the Foreign Holder is not a controlled foreign corporation that is related
to Grant Prideco actually or constructively through stock ownership, (iii) the
Foreign Holder is not a bank receiving interest described in section
881(c)(3)(A) of the Code, and (iv) either (A) the beneficial owner of the note,
under penalties of perjury, provides us or our agent with such beneficial
owner's name and address and certifies on IRS Form W-8BEN (or a suitable
substitute form) that it is not a United States Holder or (B) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") holds the note and provides a statement to us or our agent under
penalties of perjury in which it certifies that such an IRS Form W-8BEN (or a
suitable substitute) has been received by it from the beneficial owner of the
note or qualifying intermediary and furnishes us or our agent a copy thereof or
(b) the Foreign Holder is entitled to the benefits of an income tax treaty under
which interest on the notes is exempt from United States withholding tax and the
Foreign Holder or such Foreign Holder's agent provides a properly executed IRS
Form W-8BEN claiming the exemption. Payments of interest not exempt from United
States federal withholding tax as described above will be subject to such
withholding tax at the rate of 30% (subject to reduction under an applicable
income tax treaty). Certain Foreign Holders who claim benefits of a treaty may
be required in certain circumstances to obtain a taxpayer identification number
and to provide certain

97
101

documentary evidence issued by foreign governmental authorities to establish
residence in a foreign country. Special procedures apply to payments through
intermediaries.

Sale, Exchange or Retirement of the Notes

A Foreign Holder generally will not be subject to United States federal
income tax (and generally no tax will be withheld) with respect to gain realized
on the sale, exchange, redemption, retirement at maturity or other disposition
of a note (including any gain representing accrued market discount) unless (a)
the Foreign Holder is an individual who is present in the United States for a
period or periods aggregating 183 or more days in the taxable year of the
disposition and, generally, either has a "tax home" or an "office or other fixed
place of business" in the United States or (b) the Foreign Holder is not exempt
from United States federal withholding tax on payments of interest on the note,
in which case the interest may be subject to withholding tax at the rate of 30%
(subject to reduction under an applicable income tax treaty).

Backup Withholding and Information Reporting

Backup withholding and information reporting requirements do not apply to
payments of interest made by us or a paying agent to Foreign Holders if the
certification described above under "-- United States Federal Income Taxation of
Foreign Holders -- Payment of Interest on Notes" is received, provided that the
payor does not have actual knowledge that the holder is a United States Holder.
If any payments of principal and interest are made to the beneficial owner of a
note by or through the foreign office of a foreign custodian, foreign nominee or
other foreign agent of such beneficial owner, or if the foreign office of a
foreign "broker" (as defined in applicable Treasury regulations) pays the
proceeds of the sale of a note to the seller thereof, backup withholding and
information reporting will not apply. Information reporting requirements (but
not backup withholding) will apply, however, to a payment by a foreign office of
a broker that is (a) a United States person, (b) a foreign person that derives
50% or more of its gross income for certain periods from the conduct of a trade
or business in the United States, (c) a "controlled foreign corporation"
(generally, a foreign corporation controlled by certain United States
shareholders) with respect to the United States, or, (d) a foreign partnership
with certain connections to the United States, unless the broker has documentary
evidence in its records that the holder is a Foreign Holder and certain other
conditions are met or the holder otherwise establishes an exemption. Payment by
a United States office of a broker is subject to both backup withholding at a
rate of 31% and information reporting unless the holder certifies under
penalties of perjury that it is a Foreign Holder or otherwise establishes an
exemption.

Federal Estate Taxes

Subject to applicable estate tax treaty provisions, notes held at the time
of death (or notes transferred before death but subject to certain retained
rights or powers) by an individual who at the time of death is a Foreign Holder
will not be included in such Foreign Holder's gross estate for United States
federal estate tax purposes provided that the individual does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of Grant Prideco entitled to vote or hold the notes in connection with
a U.S. trade or business.

98
102

PLAN OF DISTRIBUTION

Each broker-dealer that receives exchange notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of the exchange notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for outstanding notes where
the outstanding notes were acquired as a result of market-making activities or
other trading activities. We have agreed that, for a period of 90 days after the
consummation of the exchange offer, we will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale, if required under applicable securities laws and upon prior written
request.

We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
in the exchange offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the writing
of options on the exchange notes or a combination of these methods of resale, at
market prices prevailing at the time of resale, at prices related to those
prevailing market prices or at negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer or
the purchasers of any exchange notes. Any broker-dealer that resells exchange
notes that were received by it for its own account in the exchange offer and any
broker or dealer that participates in a distribution of the exchange notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any resale of exchange notes and any commission or concessions
received by such person may be considered underwriting compensation under the
Securities Act. The letter of transmittal states that, by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
regarded as admitting that it is an "underwriter," within the meaning of the
Securities Act.

For a period of 90 days after the consummation of the exchange offer, we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer, including the expenses of one counsel for the holders of the
outstanding notes, other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the outstanding notes, including any
broker-dealers, against certain liabilities, including liabilities under the
Securities Act.

LEGAL MATTERS

The validity of the issuance of the exchange notes will be passed upon by
our attorneys, Fulbright & Jaworski L.L.P.

EXPERTS

The audited financial statements and schedules included in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.

99
103

WHERE YOU CAN FIND MORE INFORMATION

This prospectus contains information about certain contracts or other
documents that is not necessarily complete. When we make such statements, we
refer you to the actual copies of the contracts or documents (that we will make
available upon request), because the information is qualified in all respects by
reference to those documents. While any of the notes are outstanding, we will
make available to any holders or prospective purchasers the information required
by Rule 144A(d)(4) under the Securities Act during any period we are not subject
to Section 13 or 15(d) of the Exchange Act.

We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the Securities and Exchange Commission's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the Securities and Exchange Commission at (800) SEC-0330 for further
information on the public reference rooms. Our Securities and Exchange
Commission filings are also available to the public at the Securities and
Exchange Commission's web site at http://www.sec.gov. In addition, documents we
file can be inspected at the offices of the New York Stock Exchange, Inc., New
York, New York.

The sections entitled "Management" and "Security Ownership of Certain
Beneficial Owners and Management" included in the Information Statement filed
with the SEC as part of our Form 10 Registration Statement are hereby
incorporated into this document by reference. We hereby incorporate by reference
into this prospectus any filings we make with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus until the expiration of the exchange offer.

We will provide without charge to each person to whom this prospectus is
delivered, upon written or oral request, copies of the documents to which we
refer you in this prospectus or which we expressly incorporate herein. Requests
for such documents should be directed to Philip A. Choyce, Corporate Secretary,
Grant Prideco Inc., 1450 Lake Robbins Drive, Suite 600, The Woodlands, Texas
77380; telephone number: (281) 297-8500. TO OBTAIN TIMELY DELIVERY OF ANY COPIES
OF FILINGS REQUESTED, PLEASE WRITE OR TELEPHONE NO LATER THAN FIVE DAYS BEFORE
THE EXPIRATION DATE.

100
104

FINANCIAL STATEMENTS

PAGE
----

Combined Financial Statements of Grant Prideco
Report of Independent Public Accountants.................. F-2
Combined Balance Sheets as of December 31, 1998 and
1999................................................... F-3
Combined Statements of Operations for the years ended
December 31, 1997, 1998, and 1999...................... F-4
Combined Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999....................... F-5
Combined Statements of Stockholder's Equity for the years
ended December 31, 1997, 1998 and 1999................. F-6
Notes to Combined Financial Statements.................... F-7

Condensed Consolidated Financial Statements of Grant
Prideco, Inc.
Condensed Consolidated Balance Sheets as of December 31,
1999 and September 30, 2000............................ F-33
Condensed Consolidated Statements of Operations for the
nine month periods ended September 30, 1999 and 2000... F-34
Condensed Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 1999 and 2000... F-35
Notes to Condensed Consolidated Financial Statements...... F-36

F-1
105

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Grant Prideco, Inc.:

We have audited the accompanying combined balance sheets of the drilling
product businesses of Weatherford International, Inc. (a Delaware corporation)
(Grant Prideco), as of December 31, 1998 and 1999, and the related combined
statements of operations, stockholder's equity and cash flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Grant Prideco as of
December 31, 1998 and 1999, and the combined results of its operations and its
cash flows for each of the three years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Houston, Texas
January 28, 2000 (except with respect
to the matter discussed in Note 18,
as to which the date is October 26, 2000)

F-2
106

GRANT PRIDECO

COMBINED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

DECEMBER 31,
---------------------
1998 1999
-------- --------

CURRENT ASSETS:
Cash and Cash Equivalents................................. $ 6,070 $ 6,204
Restricted Cash........................................... -- 3,658
Account Receivable, Net of Allowance for Uncollectible
Accounts of $366 and $500 at December 31, 1998 and
1999................................................... 129,019 77,650
Inventories............................................... 186,267 173,904
Current Deferred Tax Asset................................ 10,785 6,197
Other Current Assets...................................... 18,155 4,425
-------- --------
350,296 272,038
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Machinery and Equipment................................... 197,552 224,225
Land, Buildings and Other Property........................ 86,350 81,390
-------- --------
283,902 305,615
Less: Accumulated Depreciation............................ 74,908 98,906
-------- --------
208,994 206,709
-------- --------
GOODWILL, NET............................................... 162,464 187,765
INVESTMENT IN UNCONSOLIDATED AFFILIATES..................... 6,848 37,453
OTHER ASSETS................................................ 9,712 30,610
-------- --------
$738,314 $734,575
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Short-Term Borrowings and Current Portion of Long-Term
Debt................................................... $ 52,881 $ 14,710
Accounts Payable.......................................... 41,377 47,459
Accrued Wages and Benefits................................ 4,427 6,277
Current Deferred Tax Liability............................ 8,231 7,144
Customer Advances......................................... 5,248 18,503
Purchase Credit........................................... 8,000 --
Other Accrued Liabilities................................. 24,104 13,308
-------- --------
144,268 107,401
-------- --------
SUBORDINATED NOTE TO WEATHERFORD............................ 100,000 100,000
LONG-TERM DEBT.............................................. 9,265 24,276
DEFERRED INCOME TAXES....................................... 24,838 44,533
MINORITY INTEREST........................................... -- 886
OTHER LONG-TERM LIABILITIES................................. 14,732 3,623
COMMITMENTS AND CONTINGENCIES
TOTAL STOCKHOLDER'S EQUITY.................................. 445,211 453,856
-------- --------
$738,314 $734,575
======== ========

The accompanying notes are an integral part of these combined financial
statements.

F-3
107

GRANT PRIDECO

COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

1997 1998 1999
-------- -------- --------

REVENUES.................................................... $630,021 $646,454 $286,370
-------- -------- --------
COSTS AND EXPENSES:
Cost of Sales............................................. 471,779 480,034 262,269
Selling, General and Administrative Attributable to
Segments............................................... 29,903 31,986 31,104
Corporate General and Administrative...................... 11,983 14,407 14,638
Equity (Income) Loss in Unconsolidated Affiliates......... -- (267) 419
Weatherford Charges....................................... 920 960 1,500
Nonrecurring Charges...................................... -- 6,450 9,454
-------- -------- --------
514,585 533,570 319,384
-------- -------- --------
OPERATING INCOME (LOSS)..................................... 115,436 112,884 (33,014)
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest Expense.......................................... (5,726) (4,758) (4,093)
Weatherford Interest Expense.............................. (7,250) (7,250) (7,250)
Other, Net................................................ (396) 4,692 (138)
-------- -------- --------
(13,372) (7,316) (11,481)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES........................... 102,064 105,568 (44,495)
PROVISION (BENEFIT) FOR INCOME TAXES........................ 40,550 39,848 (11,199)
-------- -------- --------
NET INCOME (LOSS) BEFORE MINORITY INTEREST.................. 61,514 65,720 (33,296)
MINORITY INTEREST........................................... -- -- (215)
-------- -------- --------
NET INCOME (LOSS)........................................... $ 61,514 $ 65,720 $(33,511)
======== ======== ========
Pro Forma Earnings (Loss) Per Share:
Basic..................................................... $ 0.64 $ 0.68 $ (0.33)
======== ======== ========
Diluted................................................... $ 0.63 $ 0.67 $ (0.33)
======== ======== ========
Pro Forma Weighted Average Shares:
Basic..................................................... 96,052 97,065 101,245
======== ======== ========
Diluted................................................... 97,562 97,757 101,245
======== ======== ========

The accompanying notes are an integral part of these combined financial
statements.

F-4
108

GRANT PRIDECO

COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

YEAR ENDED
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)......................................... $ 61,514 $ 65,720 $(33,511)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided By Operating Activities:
Non-Cash Portion of Other Nonrecurring Charges............ -- 30,500 9,454
Depreciation and Amortization............................. 27,051 31,173 30,514
Deferred Income Tax Provision (Benefit)................... 14,944 (4,513) 9,531
Equity (Income) Loss in Unconsolidated Affiliates, Net of
Dividends............................................... -- (267) 419
Gain on Asset Disposal.................................... -- (1,226) --
Sale of Technology License................................ -- (9,000) --
Change in Assets and Liabilities, Net of Effects of
Businesses Acquired:
Accounts Receivable..................................... (40,922) 13,308 41,072
Inventories............................................. (52,686) (22,878) 10,944
Other Current Assets.................................... (1,375) (13,812) 8,919
Other Assets............................................ (1,456) (1,215) (703)
Accounts Payable........................................ 11,964 (57,091) 18,927
Other Accrued Liabilities............................... (12,871) (10,730) (32,291)
Customer Advances....................................... 2,904 2,344 13,255
Purchase Credit......................................... -- (8,000) (8,000)
Other, Net.............................................. 805 (3,586) (3,290)
-------- -------- --------
Net Cash Provided by Operating Activities............... 9,872 10,727 65,240
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Businesses, Net of Cash Acquired........... (50,847) (17,400) (15,072)
Capital Expenditures for Property, Plant and Equipment.... (34,813) (38,102) (19,046)
Proceeds on Sale of Assets................................ -- 6,023 --
-------- -------- --------
Net Cash Used by Investing Activities................... (85,660) (49,479) (34,118)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on Debt, Net................................... (22,778) (6,990) (54,225)
Predecessor Stockholder's Investment...................... 105,466 43,609 23,237
-------- -------- --------
Net Cash Provided (Used) by Financing Activities........ 82,688 36,619 (30,988)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 6,900 (2,133) 134
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 1,303 8,203 6,070
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 8,203 $ 6,070 $ 6,204
======== ======== ========

The accompanying notes are an integral part of these combined financial
statements.

F-5
109

GRANT PRIDECO

COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)

ACCUMULATED
FOREIGN
CURRENCY TOTAL
STOCKHOLDER'S RETAINED TRANSLATION STOCKHOLDER'S
INVESTMENT EARNINGS ADJUSTMENT EQUITY
------------- -------- ----------- -------------

Balance at December 31, 1996................... $150,168 $ 19,122 $ (5,070) $164,220
Total Comprehensive Income (Loss)............ -- 61,514 (2,360) 59,154
Stockholder's Contribution................... 109,348 -- -- 109,348
-------- -------- -------- --------
Balance of December 31, 1997................... 259,516 80,636 (7,430) 332,722
Total Comprehensive Income (Loss)............ -- 65,720 (5,908) 59,812
Stockholder's Contribution................... 51,928 749 -- 52,677
-------- -------- -------- --------
Balance at December 31, 1998................... 311,444 147,105 (13,338) 445,211
Total Comprehensive Loss..................... -- (33,511) (17) (33,528)
Stockholder's Contribution................... 42,173 -- -- 42,173
-------- -------- -------- --------
Balance at December 31, 1999................... $353,617 $113,594 $(13,355) $453,856
======== ======== ======== ========

The accompanying notes are an integral part of these combined financial
statements.

F-6
110

GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS

1. WEATHERFORD INTERNATIONAL INC.'S PROPOSED SPINOFF OF ITS DRILLING PRODUCTS
DIVISION

On October 22, 1999, the Board of Directors of Weatherford International,
Inc. ("Weatherford" or "Stockholder") authorized the spinoff of its drilling
products businesses (the "Company" or "Grant Prideco") to its shareholders as an
independent, publicly-traded company (the "Distribution"). The drilling products
businesses will be transferred to Grant Prideco, Inc. from Weatherford. The
Distribution is subject to the effectiveness of a tax ruling by the Internal
Revenue Service that would allow it to be tax-free to shareholders subject to
U.S. Federal income taxes and appropriate stock market conditions. Immediately
following the Distribution, Weatherford will no longer have an equity investment
in Grant Prideco, however, Grant Prideco will have a $100.0 million unsecured
subordinated note to Weatherford due no later than March 31, 2002 and a $30
million drill stem credit obligation to Weatherford. Weatherford will also
remain liable on certain existing contingent liabilities relating to Grant
Prideco which were not able to be released, terminated or replaced prior to the
Distribution date ("unreleased contingent liabilities"). Grant Prideco will
fully indemnify Weatherford for any payments made under the unreleased
contingent liabilities.

Basis of Presentation

The combined financial statements reflect the results of operations of
Weatherford's drilling products businesses that will be transferred to Grant
Prideco, Inc. from Weatherford. The combined financial statements have been
prepared using the historical bases in the assets and liabilities and historical
results of operations related to Grant Prideco, except as noted herein. The
combined financial statements include allocations ("carve-outs") of general and
administrative corporate overhead costs of Weatherford to Grant Prideco and
direct costs of services provided by Weatherford for the benefit of Grant
Prideco (See Note 15). Management believes such allocations are reasonable;
however, the costs of these services charged to Grant Prideco are not
necessarily indicative of the costs that would have been incurred if Grant
Prideco had performed these functions as a stand-alone entity. Subsequent to the
Distribution, Grant Prideco will perform these functions using its own resources
or purchased services and will be responsible for the costs and expenses
associated with the management of a public corporation.

The financial information included herein may not necessarily reflect the
combined results of operations, financial position, changes in stockholder's
equity and cash flows of Grant Prideco in the future or what they would have
been had it been a separate, stand-alone entity during the periods presented.
The combined financial statements included herein do not reflect any changes
that may occur in the financing of Grant Prideco as a result of the
Distribution.

Nature of Operations

The Company manufactures and supplies drill pipe and drilling tools,
premium connectors and associated high grade tubular and marine connectors used
in the exploration and production of oil and natural gas.

Principles of Combination

Intercompany transactions and balances between Grant Prideco's businesses
have been eliminated. The Company accounts for its 50% or less-owned affiliates
using the equity method. The minority's interest in H-Tech (46%) is included in
the balance sheets and statements of operations.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and

F-7
111
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Inventories

Inventories are valued using the first-in, first-out ("FIFO") method and
are stated at the lower of cost or market.

Property, Plant and Equipment

Property, plant and equipment is carried at cost. Maintenance and repairs
are expensed as incurred. The costs of renewals, replacements and betterments
are capitalized. Depreciation on fixed assets is computed using the
straight-line method over the estimated useful lives for the respective
categories. The Company evaluates potential impairment of property, plant and
equipment and other long-lived assets on an ongoing basis and reduces the
carrying value whenever events or circumstances effecting the carrying amounts
indicate that amounts may not be fully recoverable. The useful lives of the
major classes of property, plant and equipment are as follows:

LIFE
------------

Machinery and equipment................................ 3 - 20 years
Buildings and other property........................... 5 - 40 years

Intangible Assets and Amortization

The Company's intangible assets are comprised primarily of goodwill and
identifiable intangible assets, principally patents and technology licenses. The
Company periodically evaluates goodwill and other intangible assets, net of
accumulated amortization, for impairment based on the undiscounted cash flows
associated with the asset compared to the carrying amount of that asset.
Management believes that there have been no events or circumstances which
warrant revision to the remaining useful life or which affect the recoverability
of any intangible assets. Goodwill is being amortized on a straight-line basis
over the lesser of the estimated useful life or 40 years. Other identifiable
intangible assets, included as a component of other assets, are amortized on a
straight-line basis over the years expected to be benefited, ranging from 5 to
15 years.

Amortization expense for goodwill and other intangible assets was
approximately $3.4 million, $5.8 million and $6.1 million for the years ended
December 31, 1997, 1998, and 1999, respectively. Accumulated amortization for
goodwill at December 31, 1998 and 1999 was $7.1 million and $11.7 million,
respectively.

Foreign Currency Translation

The functional currency for most of the Company's international operations
is the applicable local currency. Results of operations for foreign subsidiaries
with functional currencies other than the U.S. dollar are translated using
average exchange rates during the period. Assets and liabilities of these
foreign subsidiaries are translated into U.S. dollars using the exchange rates
in effect at the balance sheet date, and the resulting translation adjustments
are included in stockholder's equity. Currency transaction gains and losses are
reflected in income for the period.

Foreign Exchange Contracts

The Company enters into foreign exchange contracts only as a hedge against
existing economic exposures, and not for speculative or trading purposes. These
contracts reduce exposure to currency

F-8
112
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

movements affecting specific existing assets and liabilities denominated in
foreign currencies. The future value of these contracts and related currency
positions are subject to offsetting market risks resulting from foreign currency
exchange rate volatility. The counterparties to the Company's foreign exchange
contracts are creditworthy multinational commercial banks. Management believes
that the risk of counterparty nonperformance is immaterial. At December 31,
1999, Weatherford had a contract maturing on January 31, 2000 to purchase
Austrian schillings equivalent to $23.9 million. Gains and losses on the change
in market value of the contract are recognized currently in earnings. Although
we are exposed to exchange rate fluctuations in the Austrian schilling
subsequent to January 31, 2000, we are reviewing longer-term hedge arrangements
to mitigate this risk.

Accounting for Income Taxes

The accompanying financial statements have been prepared under Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes
assuming Grant Prideco was a separate entity. Under SFAS 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.

In connection with the Distribution, Grant Prideco and Weatherford will
enter into a tax allocation agreement (the "Tax Allocation Agreement"). Under
the terms of the Tax Allocation Agreement, Grant Prideco, will be responsible
for all taxes and associated liabilities relating to the historical businesses
of Grant Prideco. The Tax Allocation Agreement will also provide that any tax
liabilities associated with the spinoff shall be assumed and paid by Grant
Prideco subject to certain exceptions relating to changes in control of
Weatherford. The Tax Allocation Agreement will further provide that in the event
there is a tax liability associated with the historical operations of the
Company that is offset by a tax benefit of Weatherford, Weatherford will apply
the tax benefit against such tax liability and will be reimbursed for the value
of such tax benefit when and as Weatherford would have been able to otherwise
utilize that tax benefit for its own businesses. Also, the Tax Allocation
Agreement will provide that Weatherford will have the future benefit of any tax
losses incurred by Grant Prideco prior, as a part of a consolidated return with
Weatherford, to the spinoff, and Grant Prideco will be required to pay
Weatherford an amount of cash equal to any such benefit utilized by Grant
Prideco or which expires unused by Grant Prideco to the extent those benefits
are not utilized by Weatherford.

As Weatherford manages its tax position on a consolidated basis, which
takes into account the results of all of its businesses, the Company's effective
tax rate in the future could vary from its historical effective rates. Grant
Prideco's future effective tax rate will largely depend on its structure and tax
strategies as a separate, independent company.

Revenue Recognition

The Company recognizes revenue as products are shipped or accepted by the
customer. Customer advances or deposits are deferred and recognized as revenue
when the Company has met all of its performance obligations related to the sale.

Pro Forma Earnings Per Share

Pro forma earnings per share has been calculated using Grant Prideco's pro
forma basic and diluted weighted average shares outstanding for each of the
periods presented. Grant Prideco's pro forma basic weighted average shares have
been calculated by adjusting Weatherford's historical basic weighted average
shares outstanding for the applicable period to reflect the number of Grant
Prideco shares that would have been outstanding at the time assuming the
distribution of one share of Grant Prideco common stock for each share of
Weatherford common stock. Grant Prideco's pro forma diluted weighted average
shares reflect an estimate of the potential dilutive effect of common stock
equivalents. Such estimate is calculated

F-9
113
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

based on Weatherford's dilutive effect of stock options and restricted stock.
The effect of stock options and restricted stock is not included in the diluted
computation for periods in which a loss occurs because to do so would have been
anti-dilutive.

Recent Accounting Requirements

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS No. 133 has been amended by SFAS No. 137, which delays
the effective date to fiscal years beginning after June 15, 2000. We are
currently evaluating the impact of SFAS No. 133 on the Company's combined
financial statements.

2. INVENTORIES

Inventories by category are as follows (in thousands):

DECEMBER 31,
-------------------
1998 1999
-------- --------

Raw materials, components and supplies...................... $126,559 $ 93,980
Work in process............................................. 17,060 15,720
Finished goods.............................................. 42,648 64,204
-------- --------
$186,267 $173,904
======== ========

Work in process and finished goods inventories include the cost of
materials, labor and plant overhead.

3. ACQUISITIONS

On October 27, 1999, the Company acquired an additional 27% interest in
H-Tech, an Indonesia-based drill pipe manufacturer with facilities located on
Batam Island, for $6.0 million in cash. The Company previously held a 27%
interest in H-Tech and with this purchase owns a controlling 54% interest in
H-Tech. The results of operations of H-Tech have been consolidated in our
results of operations from November 1, 1999. Prior to November 1, 1999, our
investment in H-Tech was accounted for under the equity method. The results of
operations of H-Tech prior to November 1, 1999 were not material to the
Company's results of operations; therefore, pro forma financial information is
not presented.

On October 1, 1999, the Company acquired Drill Pipe Industries, Inc., a
manufacturer of drill stem products, for $1.4 million in cash and a $1.4 million
non-interest bearing note which was repaid in January 2000.

On August 25, 1999, the Company acquired Louisiana-based Petro-Drive, Inc.,
for 0.3 million shares of Weatherford common stock and assumed debt of
approximately $3.5 million. Petro-Drive's offerings include conductors,
connections and installation services and equipment. If any of the former
Petro-Drive shareholders sell any shares of Weatherford common stock and the
corresponding shares of Grant Prideco common stock between August 2000 and
August 2001 at a combined price of less than $36.50, the Company will be
obligated to pay cash to these persons equal to the amount of such deficit. In
January 2000, we exercised our option to acquire the facility leased by
Petro-Drive for approximately $1.6 million.

On July 23, 1999, the Company acquired a 50.01% interest in the
Voest-Alpine Stahlrohr Kindberg GmbH & Co. KG ("VA") for approximately $32.6
million, of which approximately $8.0 million was paid in cash and the remainder
is to be paid over a period of up to 7.5 years. VA produces high quality

F-10
114
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

seamless tubulars in Austria. The Company's investment in Voest-Alpine is
reported on the equity method of accounting.

On July 7, 1999, the Company acquired Texas Pup, Inc., a manufacturer of
premium and API pup joints (odd-sized tubular products) and utility boring drill
pipe, for 0.1 million shares of common stock of Weatherford and assumed debt of
approximately $1.7 million.

On May 31, 1999, the Company acquired Texas Pipe Works, Inc., a
manufacturer of API couplings, for approximately $1.7 million in cash and 50,000
shares of Weatherford common stock.

On May 31, 1999, the Company acquired InterOffshore Services, Pte., a
manufacturer of drilling tool accessories, for approximately $2.1 million in
cash.

In December 1998, the Company acquired from an affiliate of Tubos de Acero
de Mexico, S.A. ("TAMSA") 93% of the outstanding shares of T.F. de Mexico, which
owned the manufacturing facility in Veracruz, Mexico that the Company was
operating under a capital lease arrangement. The total consideration given was
$59.0 million comprised of $48.5 million in debt (which was repaid in March
1999), cash of $1.5 million and a $9.0 million license to the international
rights of the Company's Atlas Bradford thread line. The Company sold the
international rights, excluding Canada, to its Atlas Bradford tubular connection
line to TAMSA through a license arrangement that resulted in a sale of all of
the Company's rights which became effective upon the closing of this
transaction. The Company retained no obligations with respect to the
development, maintenance or improvement of the Atlas Bradford connection line
for carbon grade tubular for the international market and TAMSA has no
obligation to give any additional consideration for this license. Any future
support by Grant Prideco is provided on a fee basis. The rights sold through
this license arrangement had a fair value of $9.0 million. As a result, in
December 1998 the Company recorded $9.0 million in revenues to recognize the
sale of the international rights to the Atlas Bradford connection line.

On February 12, 1998, the Company acquired Drill Tube International, Inc.,
a manufacturer of drill pipe and other drill stem products, for $29 million. The
consideration paid in the acquisition consisted of $9 million in cash and a
contractual purchase credit obligation to manufacture and deliver products to
the seller over a two year period. Under the Company's contract with the
Sellers, the Company was required to provide product to the Sellers at a
notional price of $16 million. The fair value of the products to be delivered to
the Sellers was $20 million. Accordingly, a liability of $20 million was
recorded as of the date of the acquisition. As products are delivered under this
commitment the liability is reduced. As of December 31, 1999 and 1998, the
contractual purchase credit balance was $0 and $8 million, respectively.

On August 25, 1997, the Company acquired XLS Holding, Inc. ("XL"), a
provider of premium connections for conductors, risers and other offshore
structure components. The acquisition was accounted for as a pooling of
interests and the consideration paid consisted of approximately 0.9 million
shares of Weatherford common stock. The accompanying financial statements
include the results of XL for all periods presented.

F-11
115
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The separate results of Grant Prideco, XL and the combined company were as
follows:

JANUARY 1 TO
AUGUST 25,
1997
---------------
(IN THOUSANDS)

Revenues:
Grant Prideco............................................. $376,030
XL........................................................ 18,306
--------
Combined.................................................. $394,336
========
Net Income (Loss):
Grant Prideco............................................. $ 40,924
XL........................................................ (5,514)
--------
Combined.................................................. $ 35,410
========

On July 23, 1997, the Company acquired Rotary Drilling Tools, a
manufacturer of drill collars and accessories, for $3.3 million in cash.

On July 18, 1997, the Company acquired Coastal Tubular Inc., a manufacturer
of API threads and thread connections, for approximately $3.3 million in cash.

On April 14, 1997, the Company acquired TA Industries, Inc. ("TA") for
approximately $44.1 million in cash and $19.7 million of assumed debt. TA
designs, manufactures and markets premium and API couplings and accessories
under the brand names Texas Arai and Tube-Alloy.

The acquisitions discussed above, with the exception of XL, were accounted
for using the purchase method of accounting. The results of operations of all
acquisitions, excluding XL, are included in the Combined Statements of
Operations from their respective dates of acquisition. The 1997, 1998 and 1999
acquisitions are not material to the Company individually or in the aggregate
for each applicable year.

4. SHORT-TERM BORROWINGS

In connection with the October 1, 1999 acquisition of Drill Pipe
Industries, Inc., the Company issued a non-interest bearing note payable of $1.4
million due in January 2000. This note was subsequently paid in January 2000.

The Company has an uncommitted credit facility which provides for
short-term loans for periods up to 12 months. At December 31, 1999, the Company
had an outstanding balance of $3.9 million under the facility. The average
interest rate for borrowings under the facility was 3.50% per annum at December
31, 1999. The Company also has $0.3 million of short-term notes payable with
interest rates ranging up to 8.6%.

The Company, through Weatherford, also has various credit facilities
available only for stand-by letters of credit and bid and performance bonds,
pursuant to which funds are available to the Company to secure performance
obligations. The Company had a total of $3.7 million of such letters of credit
and bid and performance bonds outstanding as of December 31, 1999.

In December 1998, the Company acquired 93% of the stock of the company that
owned the Veracruz, Mexico facility. As part of the consideration for the
acquisition the Company issued a note payable of $48.5 million due in March of
1999 with an effective interest rate of 7.0%. This note was subsequently paid in
March 1999.

F-12
116
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. LONG-TERM DEBT

DECEMBER 31,
-----------------
1998 1999
------- -------
(IN THOUSANDS)

Long-term loan, interest at prime less .025%, due March
2001...................................................... $ 6,750 $ 3,750
Long-term loan, interest at 6 month EURIBOR, due 2002....... -- 8,757
Long-term loan, interest at 6 month EURIBOR, due 2007....... -- 14,595
Capital lease obligations under various agreements.......... 5,114 4,459
Other....................................................... 1,832 1,825
------- -------
13,696 33,386
Less: amounts due in one year............................... 4,431 9,110
------- -------
$ 9,265 $24,276
======= =======

The following is a summary of scheduled long-term debt maturities by year
(in thousands):

2000....................................................... $ 9,110
2001....................................................... 6,664
2002....................................................... 5,924
2003....................................................... 2,884
2004....................................................... 3,225
Thereafter................................................. 5,579
-------
$33,386
=======

In connection with the July 1999 acquisition of a 50.01% interest in VA,
the Company incurred debt in the amount of $24.6 million (the "VA Debt"). The VA
Debt bears interest at a rate equal to the six month EURIBOR rate. Principal of
$9.2 million is payable over three years in six equal installments beginning in
January 2000 and in each July and January thereafter until July 2002. The
remaining principal balance of $15.4 million shall be paid over a 7.5 year
period out of the annual dividend payable to the Company as a shareholder in VA.
If the total principal balance has not been repaid by the fifth anniversary of
the closing date of the acquisition, the remaining unpaid principal shall be
paid in five equal semi-annual installments beginning on December 1, 2004.
Interest on the VA Debt is payable every six months beginning January 2000. The
interest rate as of December 31, 1999 was 3.52% per annum.

The Company is expected to have a capital structure different from the
capital structure in the combined financial statements and accordingly, interest
expense is not necessarily indicative of the interest expense that the Company
would have incurred as a separate, independent company or will incur in future
periods.

Capital Lease

In 1997, the Company effected a major expansion of its Veracruz, Mexico
tool joint manufacturing facility. As a result of this expansion, the Company
recorded a capital lease obligation of approximately $16.3 million. In December
1998, this Veracruz facility was purchased through the acquisition of 93% of the
outstanding shares of the company that owned the Veracruz, Mexico facility,
which extinguished the capital lease.

F-13
117
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

6. SUBORDINATED NOTE TO WEATHERFORD

In connection with the Distribution, the Company will issue an unsecured
subordinated note in the amount of $100.0 million. The Weatherford note will
bear interest at an annual rate of 10%. Interest payments will be due quarterly,
and principal and all unpaid interest will be due no later than March 31, 2002.
If the Company completes a debt or equity financing (whether public or private,
but excluding working capital borrowings under the credit facility and any
equity issued in connection with a business combination) while the Weatherford
note is outstanding, the Company generally will be required to use a portion of
the net proceeds of that financing to repay any amount outstanding under the
Weatherford note as of the time the Company completes that financing. The
Weatherford note will be subordinated to the credit facility. The Company
expects to refinance the Weatherford note as soon as practicable when market
conditions permit.

Weatherford interest expense shown in the combined financial statements
reflects the interest expense associated with the $100.0 million indebtedness
for each period presented based on Weatherford's average long-term debt rates
for the applicable periods. As of December 31, 1999, the effective interest rate
was 7.25%. It is not practical to estimate the fair market value of the
subordinated note payable to Weatherford as borrowing rates available to the
Company have not been determined.

7. STOCKHOLDER'S EQUITY

Changes in stockholder's equity represent net income and comprehensive net
income of the Company plus net transfers between the Company and Weatherford.

8. OTHER CHARGES

Drill pipe and other products are manufactured for the Company by Oil
Country Tubular Limited ("OCTL") in India under a long-term exclusive
manufacturing arrangement. Although the Company has sought to minimize the risks
of this operation through a manufacturing agreement rather than owning a local
manufacturing operation, it has provided OCTL with a substantial amount of raw
materials, inventory and working capital for the products OCTL manufactures for
the Company. The Company's business in India through its relationship with OCTL
has been adversely affected by the downturn of the economies in the eastern
hemisphere and is subject to various political and economic risks as well as
financial and operational risks with respect to OCTL.

As of December 31, 1999, OCTL owed us approximately $25.1 million for prior
advances made by the Company to it and the Company had assets in India with a
book value of approximately $1.7 million. In 1999, the Company substantially
curtailed our purchases from OCTL, and in December of 1999, the Company decided
to terminate our existing manufacturing relationship with OCTL and seek an
alternative arrangement for the recovery of our prior advances. The Company is
currently discussing with OCTL a restructuring of our relationship that would
allow OCTL to repay our prior advances in cash, equity in OCTL or product from
OCTL.

The decision to terminate the Company's existing arrangement with OCTL and
seek an alternative structure resulted in our writing off a $7.8 million product
deposit previously paid to OCTL and approximately $1.7 million in property and
equipment currently located at the OCTL facility. The write off was due to the
anticipated inability to utilize the deposit and recover the equipment following
the termination of the arrangement. The Company's remaining exposure in India is
approximately $17.6 million consisting of unpaid receivables and advances made
to assist OCTL in its working capital needs as part of the Company's
manufacturing arrangement with it. Based on financial information of OCTL known
to the Company and the Company's general knowledge of the business and assets of
OCTL, OCTL would appear to have a sufficient asset and equity value to allow for
a restructuring of its

F-14
118
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

$17.6 million in debt to us through a combination of cash, equity or product.
There is, however, uncertainty as to how much, if any, of the amounts owed to us
by OCTL will ultimately be collected. Accordingly, there can be no assurance
that the Company will be able to fully realize on the amounts owed to the
Company by OCTL or that additional charges relating to India will not be
required in the near term as the negotiation and collection process continues.
The $17.6 million in unpaid receivables and advances owed to us is classified as
"Other Assets" in the accompanying Combined Balance Sheet as of December 31,
1999.

In 1998, the Company's drill stem segment incurred $35.0 million in charges
relating to the reorganization and rationalization of Grant Prideco's businesses
in light of declining industry conditions and the merger between EVI, Inc.
("EVI") and Weatherford Enterra, Inc. ("WII"). Of these charges, $7.0 million
was incurred in the second quarter of 1998 in accordance with the Company's
formalized plan, and reflected costs associated with the merger between EVI and
WII and the effects of the beginning of a downturn in the industry. Following a
further deterioration in the markets which the Company serves, an additional
$28.0 million charge was incurred in the fourth quarter of 1998. These charges
reflected additional reductions in operations and an attempt to align the cost
structure of the Company with its then current demand. All such costs had been
fully expended as of December 31, 1998, accordingly no accruals remained on the
Combined Balance Sheet as of December 31, 1998. No adjustments to the initial
estimates were required. The net after-tax effect of these charges was $22.8
million.

SECOND FOURTH
QUARTER QUARTER REMAINING
1998 1998 UTILIZED BALANCES AT
CHARGE CHARGE IN 1998 DECEMBER 31, 1998
------- ------- -------- -----------------
(IN THOUSANDS)

Facility Closures and Exit Costs(1)...... $4,250 $ 850 $ 5,100 $ --
Severance and Related Costs(2)........... 200 -- 200 --
Inventory Write-off(3)................... 2,500 26,000 28,500 --
Asset Write-down(4)...................... -- 1,150 1,150 --
------ ------- ------- -------
Total.......................... $6,950 $28,000 $34,950 $ --
====== ======= ======= =======

- ---------------

(1) The facility and exit costs were $5.1 million, all of which have been
expended by December 31, 1998. The $4.3 million of costs accrued in the
second quarter related primarily to the elimination of duplicative
manufacturing facilities as a result of the reorganization and
rationalization of the Company's businesses following the merger of EVI and
WII and the downturn in the industry. In the fourth quarter an additional
$0.8 million was accrued to further align the Company's costs in response to
the significant decline in market conditions. The costs related primarily to
the (i) closure of the Channelview, Texas facility, (ii) closure of the
sales location in the U.K. and a Houston, Texas administrative location and
(iii) exit costs for certain operations at the Edmonton, Canada, Pearland,
Texas and Bryan, Texas facilities. The Pearland, Texas facility was a
location of WII prior to the merger. The Bryan, Texas, the Channelview,
Texas and the Edmonton, Canada manufacturing facilities, the U.K. sales
location and the Houston, Texas administrative location were EVI locations
prior to the merger.

(2) The severance and related costs included in the Company's second quarter
charge were $0.2 million for approximately 60 employees specifically
identified, with terminations completed in the second half of 1998.

(3) The inventory write-off of $28.5 million was reported as cost of sales. The
second quarter inventory write-off of $2.5 million resulted from the
elimination of certain products at the time of the merger

F-15
119
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

between EVI and WII and due to the declining industry conditions. The fourth
quarter inventory write-off of $26.0 million related to the significant
decline in market conditions.

(4) The write-down of assets was $1.2 million in the fourth quarter of 1998. The
charge relates to the write-down of equipment as a result of the
rationalization of product lines and the specific identification of assets
held for sale. The identified equipment had a net book value of $0.6 million
as of December 31, 1998. The effect of suspending depreciation is $0.2
million annually. The equipment was originally projected to be sold in 1999,
but because of market conditions the Company has not been able to dispose of
the equipment to date. The Company currently expects to dispose of these
assets in 2000.

9. SUPPLEMENTAL CASH FLOW INFORMATION

The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. At December 31, 1999,
$3.7 million of cash was restricted.

Cash paid for interest and income taxes (net of refunds) was as follows (in
thousands):

YEAR ENDED DECEMBER 31,
------------------------
1997 1998 1999
------ ------ ------

Interest paid.............................................. $5,349 $4,768 $4,565
Income taxes paid, net of refunds.......................... 474 1,779 2,294

For the year ended December 31, 1997, there were noncash investing
activities of $28.3 million relating to capital leases (See Note 5).

The following summarizes investing activities relating to acquisitions (in
thousands):

YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------

Fair value of assets, net of cash acquired........... $ 63,213 $ 12,133 $ 46,539
Goodwill............................................. 56,198.. 58,644 29,073
Total liabilities.................................... (68,564) (53,377) (42,892)
Weatherford common stock issued...................... -- -- (17,648)
-------- -------- --------
Cash consideration, net of cash acquired............. $ 50,847 $ 17,400 $ 15,072
======== ======== ========

10. STOCK-BASED COMPENSATION

Stock Option Plans

Various employees of the Company were granted stock options under
Weatherford's 1998 Employee Stock Option Plan (the "1998 Plan"). The total
number of options granted to the Grant Prideco employees under the 1998 Plan was
951,000 at December 31, 1999. Under the terms of the 1998 Plan, the options
granted to the Grant Prideco employees are to be converted into options to
solely acquire Grant Prideco's common stock (the "Grant Prideco Common Stock").
As a result, the Company has adopted the Grant Prideco Employee Stock Option
Plan under which options would be granted to the employees of Grant Prideco in
substitution of the Weatherford options granted under the 1998 Plan. Under the
terms of the 1998 Plan, the options to be granted to the Grant Prideco employees
will be determined based on the relative market price of Grant Prideco Common
Stock to the stock of Weatherford prior to the Distribution. The exercise price
for the options to be granted to the Grant Prideco employees will be the
historical option price multiplied by a percentage equal to the percentage that
the value of the Grant Prideco Common Stock represents to the value of the
Weatherford stock prior to the spinoff. The number of shares that will be
subject to the options will also be adjusted so that each option holder will be
entitled

F-16
120
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

to purchase a number of shares of Grant Prideco Common Stock having the same
aggregate exercise price of the prior 1998 Plan options held by the option
holder.

Employees, as well as the directors of Weatherford, also hold various
options to purchase shares of Weatherford that were granted prior to September
1998. It is anticipated that these options will be divided into options to
purchase Weatherford common stock and Grant Prideco Common Stock, with the
exercise price allocated between the Weatherford common stock and the Grant
Prideco Common Stock based on the relative market value of the shares following
the spinoff. All other terms will remain the same. In connection with the
Distribution, the Company will agree to issue to the holders of those options
the number of shares of Grant Prideco Common Stock issuable upon the exercise of
those options. Similarly, Weatherford will agree to issue to the employees of
Grant Prideco who hold options to purchase Weatherford common stock the number
of shares of Weatherford common stock subject to the options held by those
employees. At December 31, 1999, there were 1,353,323 options granted under
these various plans. The Company cannot currently determine the number of shares
its common stock that will be subject to substitute awards after the
Distribution.

Executive Deferred Compensation Plan

Weatherford and the Company each have maintained an Executive Deferred
Compensation Stock Ownership Plan ("EDC Plan"). Prior to the Distribution,
participants in the EDC Plan had a right to receive shares of Weatherford common
stock upon termination of their employment based on the deferred amounts placed
in an account for them. Under the EDC Plan, in the event of a dividend or
special distribution to the shareholders of Weatherford, the accounts of the
employees are to represent a right to receive the consideration provided through
the spinoff or dividend. As a result, upon the spinoff, participants in the EDC
Plan will be entitled to receive shares of both Weatherford common stock and
Grant Prideco Common Stock in respect of amounts deferred by the participants
prior to the Distribution. Participants will only be entitled to receive shares
in respect of amounts deferred subsequent to the Distribution of Weatherford or
the Company, depending upon which company they are employed with.

In order to satisfy the obligations of Weatherford and Grant Prideco under
the EDC Plan, Weatherford and Grant Prideco have established a Grantor Trust to
fund the benefits under the EDC Plan. The funds provided to the trust are
invested by a trustee independent of Weatherford and Grant Prideco primarily in
shares of common stock of Weatherford, which is purchased by the trustee in the
open market. The trustee of the EDC Plan will agree to waive the trust's receipt
of any shares of Grant Prideco common stock to be issued to the trust in respect
of the shares of Weatherford common stock held by the trust in consideration of
the Company's agreement to issue directly to the participants in the EDC Plan
any shares of Grant Prideco common stock that may be required to be issued to
them upon distribution of amounts under the plan. Shares of stock are held by
the trustee as part of the Trust to satisfy the obligations of Weatherford and
Grant Prideco to the employees of Weatherford and Grant Prideco. A separate
trust will be established by Grant Prideco following the Distribution in which
only shares of the Company will be purchased for satisfaction of future
obligations under a new Executive Deferred Compensation Stock Ownership Plan to
be adopted by Grant Prideco. The assets of these trusts are available to satisfy
the claims of all general creditors of Weatherford and Grant Prideco in the
event of a bankruptcy or insolvency.

11. RETIREMENT AND EMPLOYEE BENEFIT PLANS

Weatherford has defined contribution plans covering certain of the
Company's employees. The Company's expenses related to these plans totaled $0.8
million, $0.6 million and $0.7 million in 1997, 1998 and 1999, respectively.
Grant Prideco plans to adopt similar plans.

F-17
121
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

12. INCOME TAXES

The domestic and foreign components of earnings (loss) before income taxes
consist of the following:

YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)

Domestic............................................. $ 66,021 $ 93,767 $(40,690)
Foreign.............................................. 36,043 11,801 (3,805)
-------- -------- --------
Total earnings (loss) before income
taxes.................................... $102,064 $105,568 $(44,495)
======== ======== ========

The components of the provision (benefit) for income taxes are as follows:

YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
-------- ------- --------
(IN THOUSANDS)

Current
U.S. federal and state income taxes................. $ 22,638 $37,249 $(14,030)
Foreign............................................. 2,968 7,112 (6,700)
-------- ------- --------
25,606 44,361 (20,730)
-------- ------- --------
Deferred..............................................
U.S. federal........................................ 4,105 (1,170) 4,099
Foreign............................................. 10,839 (3,343) 5,432
-------- ------- --------
14,944 (4,513) 9,531
-------- ------- --------
Total income tax provision (benefit)........ $ 40,550 $39,848 $(11,199)
======== ======= ========

The following is a reconciliation of income taxes at the U.S. Federal
income tax rate of 35% to the effective provision for income taxes reflected in
the Combined Statements of Operations:

YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
-------- ------- --------
(IN THOUSANDS)

Provision for income taxes at statutory rates......... $ 35,721 $36,949 $(15,573)
Effect of foreign income tax, net..................... 1,191 (361) 65
Foreign Sales Corporation benefit..................... (308) (308) --
Foreign loss not benefited............................ -- -- 1,014
Non-deductible expense................................ 3,099 1,014 1,934
State and local income taxes net of U.S. Federal
income tax benefit.................................. 847 2,554 1,214
Other................................................. -- -- 147
-------- ------- --------
Provision (benefit) for income taxes.................. $ 40,550 $39,848 $(11,199)
======== ======= ========

Deferred tax assets and liabilities are recognized for the estimated future
tax effects of temporary differences between the tax basis of an asset or
liability and its reported amount in the financial statements. The measurement
of deferred tax assets and liabilities is based on enacted tax laws and rates
currently in effect in each of the jurisdictions which the Company has
operations.

At December 31, 1999, the Company had net operating loss carryforwards
("NOL's") for tax purposes of approximately $7.7 million, which were not
incurred as part of a consolidated return with Weatherford. These NOL's expire
in the years 2007 through 2010. Under the terms of a tax allocation
F-18
122
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

agreement to be entered into between the Company and Weatherford, the Company
will not have the future benefits of any prior tax losses, incurred as part of a
consolidated return with Weatherford, associated with the Company's business
that occur prior to the spinoff.

Deferred tax assets and liabilities are classified as current or noncurrent
according to the classification of the related asset or liability for financial
reporting. The components of the net deferred tax asset (liability) were as
follows:

YEAR ENDED DECEMBER 31,
------------------------
1998 1999
---------- ----------
(IN THOUSANDS)

Deferred tax assets:
Domestic and foreign operating losses..................... $ 1,204 $ 2,708
Accrued liabilities and reserves.......................... 9,537 407
Inventory basis differences............................... 754 --
Goodwill and other intangibles............................ -- 573
-------- --------
Total deferred tax asset.......................... 11,495 3,688
-------- --------
Deferred tax liabilities:
Property and equipment and other.......................... (31,403) (44,533)
Inventory basis differences............................... -- (1,928)
Goodwill.................................................. (2,376) --
-------- --------
Total deferred tax liability...................... (33,779) (46,461)
-------- --------
Net deferred tax liability................................ $(22,284) $(42,773)
======== ========

13. DISPUTES, LITIGATION AND CONTINGENCIES

Litigation and Other Disputes

The Company is aware of various disputes and potential claims and is a
party in various litigation involving claims against the Company, some of which
are covered by insurance. Based on facts currently known, the Company believes
that the ultimate liability, if any, which may result from known claims,
disputes and pending litigation, would not have a material adverse effect on the
Company's combined financial position or its results of operations with or
without consideration of insurance coverage.

Insurance

The Company is self-insured through participation in Weatherford's
insurance policy for employee health insurance claims and is self-insured for
workers' compensation claims for certain of its employees. The amounts in excess
of the self-insured levels are fully insured. Self-insurance accruals are based
on claims filed and an estimate for significant claims incurred but not
reported. Although the Company believes that adequate reserves have been
provided for expected liabilities arising from its self-insured obligations, it
is reasonably possible that management's estimates of these liabilities will
change over the near term as circumstances develop.

Weatherford will remain liable on certain existing contingent liabilities
relating to Grant Prideco's businesses which were not able to be released,
terminated or replaced prior to the Distribution Date. Grant Prideco will also
fully indemnify Weatherford for any payments made under the unreleased
contingent liabilities.

F-19
123
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

14. COMMITMENTS

Operating Leases

The Company is committed under various noncancelable operating leases which
primarily relate to office space and equipment. Total lease expense incurred
under noncancelable operating leases was approximately $1.9 million, $3.8
million and $7.2 million for the years ended December 31, 1997, 1998 and 1999,
respectively.

Future minimum rental commitments under these noncancelable operating
leases are as follows (in thousands):

2000...................................................... $ 3,389
2001...................................................... 2,892
2002...................................................... 2,702
2003...................................................... 2,465
2004...................................................... 2,405
Thereafter................................................ 12,887
-------
$26,740
=======

Other Commitments

At the time of the December 1998 acquisition by the Company of 93% of T.F.
de Mexico, the Company entered into a 30-year supply contract with TAMSA. Under
the supply contract, TAMSA has been given the right to supply certain of the
Company's operations as long as the prices are on a competitive basis. This
supply agreement does not obligate the Company to make purchases from TAMSA for
any location other than Mexico and India nor restrict the Company's right to
make purchases without offering a right to purchase the materials from TAMSA to
the extent those purchases are made from affiliates of the Company such as
Voest-Alpine.

As part of the arrangement to invest in Voest-Alpine Stahlrohr Kindberg
GmbH & Co. KG, the Company entered into a four-year supply contract with
Voest-Alpine. Under this agreement, the Company agreed to purchase a minimum of
45,000 metric tons of tubulars for the first twelve months of the agreement at a
negotiated third party price that the Company believed to be attractive. The
Company also agreed to purchase 60,000 metric tons per year for the next three
years at the negotiated price.

Grant Prideco maintains consignment purchase arrangements with various
suppliers whereby suppliers' inventory is held on site at the Company's
manufacturing facilities. Under the terms of these arrangements, the Company
pays to the supplier an inventory stocking fee on the consignment inventory and
has an obligation to purchase the inventory under certain circumstances. As of
December 31, 1999, the Company had closed-ended purchase commitments maturing
within the next six months of approximately $3.0 million and open-ended purchase
commitments of approximately $22.1 million.

15. RELATED PARTY TRANSACTIONS

Sales

Weatherford purchases drill pipe and other related products from Grant
Prideco. The amounts purchased by Weatherford for the years ended December 31,
1997, 1998 and 1999 were $7.7 million, $9.6 million and $28.6 million,
respectively. Such sales represent Grant Prideco's cost. The sales to
Weatherford have been eliminated from the accompanying combined financial
statements.

F-20
124
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Weatherford Overhead Charges

Weatherford overhead charges represent corporate overhead costs incurred by
Weatherford in providing services to the Company based on the time devoted to
Grant Prideco. These services include accounting, tax, treasury and risk
management services. Such allocation is included in the accompanying Combined
Statements of Operations as Weatherford Charges.

Weatherford Direct Services

Grant Prideco was allocated $3.5 million, $5.6 million and $5.6 million of
costs related to Weatherford's information systems function for the years ended
December 31, 1997, 1998 and 1999, respectively. Information systems allocation
charges were allocated based on direct support provided, equipment usage and
number of system users and are included in corporate general and administrative
expense in the accompanying Combined Statements of Operations.

Tax Allocation Agreement

The Company and Weatherford intend to enter into a Tax Allocation Agreement
in connection with the spinoff (see Note 1).

Transition Services Agreement

The Company intends to enter into a transition services agreement with
Weatherford for a period of one year from the Distribution date. Under the
agreement, Weatherford will provide certain services requested by the Company.
The fee for these services will be based on a cost-plus 10% basis. The
transition services to be provided under this agreement may include accounting,
tax, finance and legal services, employee benefit services, information
services, management information systems and may include any other similar
services.

Preferred Supplier Agreement

The Company intends to enter into a preferred supplier agreement with
Weatherford pursuant to which Weatherford will agree for at least a three-year
period to purchase at least 70% of its requirements of drill stem products from
Grant Prideco. The price for those products will be at a price not greater than
that which the Company sells to its best similarly situated customers.
Weatherford will be entitled to apply against its purchases a drill stem credit
granted to it in the amount of $30 million, subject to a limitation of the
application of the credit to no more than 20% of any purchase.

16. SEGMENT INFORMATION

Business Segments

The Company operates through two business segments: Drill Stem Products and
Engineered Connections and Premium Tubulars. The drill stem products segment
manufactures drill pipe, drill collars and heavyweight drill pipe and the
engineered connections and premium tubulars segment manufactures premium
production tubulars, liners, casing and connections for marine conductors and
subsea structures. The Company's products are used in the exploration and
production of oil and natural gas.

F-21
125
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Financial information by industry segment is summarized below (in
thousands):

YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------

REVENUES FROM UNAFFILIATED CUSTOMERS:
Drill Stem......................................... $333,716 $410,840 $142,732
Engineered Connections and Premium Tubulars........ 296,305 235,614 143,638
-------- -------- --------
$630,021 $646,454 $286,370
======== ======== ========
EBITDA, BEFORE OTHER CHARGES(a):
Drill Stem(b)...................................... $105,604 $148,565 $ 16,639
Engineered Connections and Premium Tubulars........ 48,938 44,716 5,359
Corporate.......................................... (12,055) (14,274) (15,044)
-------- -------- --------
$142,487 $179,007 $ 6,954
======== ======== ========
OTHER NONRECURRING CHARGES:
Drill Stem(c)...................................... $ -- $ 34,950 $ 9,454
======== ======== ========
DEPRECIATION AND AMORTIZATION:
Drill Stem......................................... $ 13,685 $ 16,771 $ 15,119
Engineered Connections and Premium Tubulars........ 12,518 13,309 14,301
Corporate.......................................... 848 1,093 1,094
-------- -------- --------
$ 27,051 $ 31,173 $ 30,514
======== ======== ========
EQUITY INCOME (LOSS) IN UNCONSOLIDATED AFFILIATES:
Drill Stem......................................... $ -- $ 267 $ (419)
======== ======== ========
OPERATING INCOME (LOSS):
Drill Stem(c)...................................... $ 91,919 $ 96,844 $ (7,934)
Engineered Connections and Premium Tubulars........ 36,420 31,407 (8,942)
Corporate.......................................... (12,903) (15,367) (16,138)
-------- -------- --------
$115,436 $112,884 $(33,014)
======== ======== ========
CAPITAL EXPENDITURES FOR PROPERTY, PLANT AND
EQUIPMENT:
Drill Stem......................................... $ 19,956 $ 16,670 $ 12,127
Engineered Connections and Premium Tubulars........ 14,468 20,698 6,716
Corporate.......................................... 389 734 203
-------- -------- --------
$ 34,813 $ 38,102 $ 19,046
======== ======== ========
NON-CASH PORTION OF OTHER NONRECURRING CHARGES:
Drill Stem......................................... $ -- $ 30,500 $ 9,454
======== ======== ========

DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------

TOTAL ASSETS(d)
Drill Stem......................................... $374,923 $457,709 $437,281
Engineered Connections and Premium Tubulars........ 286,418 279,706 294,591
Corporate.......................................... 1,257 899 2,703
-------- -------- --------
$662,598 $738,314 $734,575
======== ======== ========

F-22
126
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

- ---------------

(a) The Company evaluates performance and allocates resources based on EBITDA,
which is calculated as operating income (loss) adding back depreciation and
amortization, excluding the impact of the other charges discussed in notes
(b) and (c) below. Calculations of EBITDA should not be viewed as a
substitute to calculations under GAAP, in particular operating income and
net income. In addition, EBITDA calculations by one company may not be
comparable to another company.

(b) Includes inventory write-downs of $28.5 million for the year ended December
31, 1998, which have been classified as cost of sales in the accompanying
Combined Statements of Operations.

(c) Includes a charge of $9.5 million relating to the decision to terminate our
manufacturing arrangement in India for the year ended December 31, 1999.
Includes $35.0 million of other charges relating to the reorganization and
rationalization of our business in light of our industry conditions for the
year ended December 31, 1998.

(d) Certain assets that are not directly attributable to a segment have been
allocated to the segments primarily based upon revenues generated.

Foreign Operations and Export Sales

Financial information by geographic segment for each of the three years
ended December 31, 1999 is summarized below. Revenues are attributable to
countries based on the location of the entity selling products. Long-lived
assets are long term assets excluding deferred tax assets.

UNITED LATIN
STATES CANADA AMERICA OTHER TOTAL
-------- ------- ------- ------- --------
(IN THOUSANDS)

1997
Revenues................................. $509,451 $45,080 $15,716 $59,774 $630,021
Long-lived assets........................ 228,754 19,713 44,399 18,487 311,353
1998
Revenues................................. $552,375 $31,925 $ 9,327 $52,827 $646,454
Long-lived assets........................ 276,374 18,399 76,559 16,686 388,018
1999
Revenues................................. $247,428 $15,610 $ 6,091 $17,241 $286,370
Long-lived assets........................ 331,813 17,663 83,269 27,085 459,830

Major Customers and Credit Risk

Substantially all of the Company's customers are engaged in the exploration
and development of oil and gas reserves. The Company's drill pipe and related
products are sold primarily to rig contractors, operators and rental companies.
The Company's premium tubulars and connections are sold primarily to operators
and distributors. This concentration of customers may impact the Company's
overall exposure to credit risk, either positively or negatively, in that
customers may be similarly affected by changes in economic and industry
conditions. The Company performs ongoing credit evaluations of its customers and
does not generally require collateral in support of its trade receivables. The
Company maintains reserves for potential credit losses, and actual losses have
historically been within the Company's expectations. Foreign sales also present
various risks, including risks of war, civil disturbances and governmental
activities that may limit or disrupt markets, restrict the movement of funds or
result in the deprivation of contract rights or the taking of property without
fair consideration. Most of the Company's foreign sales, however, are to large
international companies or are secured by letter of credit or similar
arrangements.

In 1997, 1998 and 1999, there was no individual customer who accounted for
10% of combined revenues.

F-23
127
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

17. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tabulation sets forth unaudited quarterly financial data for
1998 and 1999.

1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
-------- -------- -------- ------------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

1998
Revenues............................ $189,713 $172,002 $160,117 $124,622 $646,454
Gross Profit........................ 55,487 54,264(a) 47,893 8,776(a) 166,420
Selling, General and
Administrative(b)................ 11,292 11,039 12,174 12,848 47,353
Nonrecurring Charges................ -- 4,450(a) -- 2,000(a) 6,450
Operating Income (Loss)............. 44,195 38,775(a) 35,742 (5,828)(a) 112,884
Net Income (Loss)................... 25,496 23,832(a) 20,515 (4,123)(a) 65,720
Pro Forma Earnings (Loss) Per
Share(c)
Basic............................ 0.26 0.25 0.21 (0.04) 0.68
Diluted.......................... 0.26 0.24 0.21 (0.04) 0.67
1999
Revenues............................ $ 81,303 $ 56,622 $ 58,851 $ 89,594 $286,370
Gross Profit........................ 11,359 7,284 456 5,002 24,101
Nonrecurring Charges................ -- -- -- 9,454(a) 9,454
Selling, General and
Administrative(b)................ 11,512 11,208 12,140 12,382 47,242
Operating (Loss).................... (153) (3,924) (11,684) (17,253)(a) (33,014)
Net (Loss).......................... (2,230) (4,727) (10,443) (16,111)(a) (33,511)
Pro Forma (Loss) Per Share(c)
Basic............................ (0.02) (0.05) (0.10) (0.15) (0.33)
Diluted.......................... (0.02) (0.05) (0.10) (0.15) (0.33)

- ---------------

(a) The Company incurred $9.5 million of pre-tax nonrecurring charges, $6.1
million net of tax, in the fourth quarter of 1999 relating to the decision
to terminate our manufacturing arrangement in India. The Company incurred
$7.0 million and $28.0 million of pre-tax nonrecurring charges in the
second and fourth quarters of 1998, respectively. The effect of these
charges, net of tax, in the second and fourth quarters was $4.5 million and
$18.3 million, respectively. Of these charges, $2.5 million and $26.0
million related to the write-off of inventory in the second and fourth
quarters, respectively, and have been classified as cost of sales in the
accompanying Combined Statements of Operations.

(b) Includes Weatherford overhead charges of $250,000 in each of the quarters
ended March 31, 1999 and June 30, 1999, $500,000 in each of the quarters
ended September 30, 1999 and December 31, 1999 and $240,000 per quarter for
the year ended December 31, 1998, respectively.

(c) Pro forma earnings per share has been calculated using Grant Prideco's pro
forma basic and diluted weighted average shares outstanding for each of the
periods presented. Grant Prideco's pro forma basic weighted average shares
have been calculated by adjusting Weatherford's historical basic weighted
average shares outstanding for the applicable period to reflect the number
of Grant Prideco shares that would have been outstanding at the time
assuming the distribution of one share of Grant Prideco common stock for
each share of Weatherford common stock. Grant Prideco's pro forma diluted
weighted average shares reflect an estimate of the potential dilutive
effect of common stock equivalents. Such estimate is calculated based on
Weatherford's dilutive effect of stock options and restricted stock. The
effect of stock options and restricted stock is not included in the diluted
weighted average shares computation for periods in which a loss occurs
because to do so would have been anti-dilutive.

F-24
128
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

18. SUBSIDIARY GUARANTOR FINANCIAL INFORMATION

The following condensed combining balance sheets as of December 31, 1998
and 1999, and the related condensed combining statements of operations and cash
flows for each of the three years in the period ended December 31, 1999 are
provided for the Company's domestic subsidiaries that we expect will be
guarantors of debt securities issued by the Company in the future.

CONDENSED COMBINING BALANCE SHEET
AS OF DECEMBER 31, 1998
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS COMBINED
-------- ---------- ---------- ------------ --------

ASSETS

CURRENT ASSETS:
Cash and Cash Equivalents............... $ -- $ 4,113 $ 1,957 $ -- $ 6,070
Accounts Receivable, Net................ -- 85,299 43,720 -- 129,019
Inventories............................. -- 149,302 36,965 -- 186,267
Current Deferred Tax Asset.............. -- 9,157 1,628 -- 10,785
Other Current Assets.................... -- 10,594 7,561 -- 18,155
-------- -------- -------- --------- --------
-- 258,465 91,831 -- 350,296
-------- -------- -------- --------- --------
PROPERTY, PLANT AND EQUIPMENT............. -- 209,990 73,912 -- 283,902
Less: Accumulated Depreciation.......... -- 63,037 11,871 -- 74,908
-------- -------- -------- --------- --------
-- 146,953 62,041 -- 208,994
-------- -------- -------- --------- --------
GOODWILL, NET............................. -- 118,853 43,611 -- 162,464
INVESTMENT IN AND ADVANCES TO
SUBSIDIARIES............................ 541,721 -- -- (541,721) --
INVESTMENT IN UNCONSOLIDATED AFFILIATES... 6,848 -- -- -- 6,848
OTHER ASSETS.............................. -- 1,553 8,159 -- 9,712
-------- -------- -------- --------- --------
$548,569 $525,824 $205,642 $(541,721) $738,314
======== ======== ======== ========= ========

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Short-Term Borrowings and Current
Portion of Long-Term Debt Term Debt... $ -- $ 4,281 $ 48,600 $ -- $ 52,881
Accounts Payable........................ -- 37,821 3,556 -- 41,377
Current Deferred Tax Liability.......... -- -- 8,231 -- 8,231
Customer Advances....................... -- 5,248 -- -- 5,248
Purchase Credit......................... -- 8,000 -- -- 8,000
Other Accrued Liabilities............... -- 16,998 11,533 -- 28,531
-------- -------- -------- --------- --------
-- 72,348 71,920 -- 144,268
-------- -------- -------- --------- --------
SUBORDINATED NOTE TO WEATHERFORD.......... 100,000 -- -- -- 100,000
LONG-TERM DEBT............................ -- 9,187 78 -- 9,265
DEFERRED INCOME TAXES..................... -- 24,147 691 -- 24,838
OTHER LONG-TERM LIABILITIES............... 3,358 6,351 5,023 -- 14,732
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY...................... 445,211 413,791 127,930 (541,721) 445,211
-------- -------- -------- --------- --------
$548,569 $525,824 $205,642 $(541,721) $738,314
======== ======== ======== ========= ========

F-25
129
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED COMBINING BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS COMBINED
-------- ---------- ---------- ------------ --------

ASSETS

CURRENT ASSETS:
Cash and Cash Equivalents................ $ -- $ 4,998 $ 1,206 $ -- $ 6,204
Restricted Cash.......................... -- -- 3,658 -- 3,658
Accounts Receivable, Net................. -- 63,500 14,150 -- 77,650
Inventories.............................. -- 140,257 33,647 -- 173,904
Current Deferred Tax Asset............... -- 5,258 939 -- 6,197
Other Current Assets..................... -- 2,671 1,754 -- 4,425
-------- -------- -------- --------- --------
-- 216,684 55,354 -- 272,038
-------- -------- -------- --------- --------
PROPERTY PLANT AND EQUIPMENT............... -- 225,208 80,407 -- 305,615
Less: Accumulated Depreciation........... -- 82,013 16,893 -- 98,906
-------- -------- -------- --------- --------
-- 143,195 63,514 -- 206,709
-------- -------- -------- --------- --------
GOODWILL, NET.............................. -- 122,738 65,027 -- 187,765
INVESTMENT IN AND ADVANCES TO
SUBSIDIARIES............................. 540,107 -- 3,892 (543,999) --
INVESTMENT IN UNCONSOLIDATED AFFILIATES.... 37,453 -- -- -- 37,453
OTHER ASSETS............................... -- 12,413 18,197 -- 30,610
-------- -------- -------- --------- --------
$577,560 $495,030 $205,984 $(543,999) $734,575
======== ======== ======== ========= ========

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
Short-Term Borrowings and Current Portion
of Long-Term Debt..................... $ 2,919 $ 7,899 $ 3,892 $ -- $ 14,710
Accounts Payable......................... -- 42,107 5,352 -- 47,459
Current Deferred Tax Liability........... -- 717 6,427 -- 7,144
Customer Advances........................ -- 18,503 -- -- 18,503
Other Accrued Liabilities................ 352 16,383 2,850 -- 19,585
-------- -------- -------- --------- --------
3,271 85,609 18,521 -- 107,401
-------- -------- -------- --------- --------
SUBORDINATED NOTE TO WEATHERFORD........... 100,000 -- -- -- 100,000
LONG-TERM DEBT............................. 20,433 3,843 -- -- 24,276
DEFERRED INCOME TAXES...................... -- 22,471 22,062 -- 44,533
MINORITY INTEREST.......................... -- -- 886 -- 886
OTHER LONG-TERM LIABILITIES................ -- 3,622 1 -- 3,623
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY....................... 453,856 379,485 164,514 (543,999) 453,856
-------- -------- -------- --------- --------
$577,560 $495,030 $205,984 $(543,999) $734,575
======== ======== ======== ========= ========

F-26
130
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS COMBINED
------- ---------- ---------- ------------ --------

REVENUES................................ $ -- $510,306 $119,715 $ -- $630,021
------- -------- -------- -------- --------
COSTS AND EXPENSES:
Cost of Sales......................... -- 396,737 75,042 -- 471,779
Selling, General and Administrative... -- 34,263 7,623 -- 41,886
Weatherford Charges................... 920 -- -- -- 920
------- -------- -------- -------- --------
920 431,000 82,665 -- 514,585
------- -------- -------- -------- --------
OPERATING INCOME (LOSS)................. (920) 79,306 37,050 -- 115,436
------- -------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest Expense...................... -- (3,066) (2,660) -- (5,726)
Weatherford Interest Expense.......... (7,250) -- -- -- (7,250)
Equity in Subsidiaries, Net of
Taxes.............................. 66,824 -- -- (66,824) --
Other, Net............................ -- (102) (294) -- (396)
------- -------- -------- -------- --------
59,574 (3,168) (2,954) (66,824) (13,372)
------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES....... 58,654 76,138 34,096 (66,824) 102,064
INCOME TAX PROVISION (BENEFIT).......... (2,860) 30,285 13,125 -- 40,550
------- -------- -------- -------- --------
NET INCOME (LOSS)....................... $61,514 $ 45,853 $ 20,971 $(66,824) $ 61,514
======= ======== ======== ======== ========

F-27
131
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS COMBINED
------- ---------- ---------- ------------ --------

REVENUES................................ $ -- $552,869 $93,585 $ -- $646,454
------- -------- ------- -------- --------
COSTS AND EXPENSES:
Cost of Sales......................... -- 411,237 68,797 -- 480,034
Selling, General and Administrative... -- 38,782 7,611 -- 46,393
Equity Income in Unconsolidated
Affiliates......................... (267) -- -- -- (267)
Weatherford Charges................... 960 -- -- -- 960
Nonrecurring Charges.................. -- 6,450 -- -- 6,450
------- -------- ------- -------- --------
693 456,469 76,408 -- 533,570
------- -------- ------- -------- --------
OPERATING INCOME (LOSS)................. (693) 96,400 17,177 -- 112,884
------- -------- ------- -------- --------
OTHER INCOME (EXPENSE):
Interest Expense........................ -- (2,795) (1,963) -- (4,758)
Weatherford Interest Expense.......... (7,250) -- -- -- (7,250)
Equity in Subsidiaries, Net of
Taxes.............................. 70,789 -- -- (70,789) --
Other, Net............................ -- 3,732 960 -- 4,692
------- -------- ------- -------- --------
63,539 937 (1,003) (70,789) (7,316)
------- -------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES....... 62,846 97,337 16,174 (70,789) 105,568
INCOME TAX PROVISION (BENEFIT).......... (2,874) 37,182 5,540 -- 39,848
------- -------- ------- -------- --------
NET INCOME (LOSS)....................... $65,720 $ 60,155 $10,634 $(70,789) $ 65,720
======= ======== ======= ======== ========

F-28
132
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS COMBINED
-------- ---------- ---------- ------------ --------

REVENUES............................... $ -- $239,076 $ 47,294 $ -- $286,370
-------- -------- -------- ------- --------
COSTS AND EXPENSES:
Cost of Sales........................ -- 217,858 44,411 -- 262,269
Selling, General and
Administrative.................... -- 38,305 7,437 -- 45,742
Equity Loss in Unconsolidated
Affiliates........................ 419 -- -- -- 419
Weatherford Charges.................. 1,500 -- -- -- 1,500
Nonrecurring Charges................. -- -- 9,454 -- 9,454
-------- -------- -------- ------- --------
1,919 256,163 61,302 -- 319,384
-------- -------- -------- ------- --------
OPERATING LOSS......................... (1,919) (17,087) (14,008) -- (33,014)
-------- -------- -------- ------- --------
OTHER INCOME (EXPENSE):
Interest Expense..................... (338) (3,441) (314) -- (4,093)
Weatherford Interest Expense......... (7,250) -- -- -- (7,250)
Equity in Subsidiaries, Net of
Taxes............................. (27,185) -- -- 27,185 --
Other, Net........................... -- (172) 34 -- (138)
-------- -------- -------- ------- --------
(34,773) (3,613) (280) 27,185 (11,481)
-------- -------- -------- ------- --------
INCOME (LOSS) BEFORE INCOME TAXES...... (36,692) (20,700) (14,288) 27,185 (44,495)
INCOME TAX BENEFIT..................... (3,181) (2,125) (5,893) -- (11,199)
-------- -------- -------- ------- --------
NET INCOME (LOSS) BEFORE MINORITY
INTEREST............................. (33,511) (18,575) (8,395) 27,185 (33,296)
MINORITY INTEREST...................... -- -- (215) -- (215)
-------- -------- -------- ------- --------
NET INCOME (LOSS)...................... $(33,511) $(18,575) $ (8,610) $27,185 $(33,511)
======== ======== ======== ======= ========

F-29
133
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED COMBINING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS COMBINED
------- ---------- ---------- ------------ --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Cash (Used) Provided by Operating
Activities......................... $(5,310) $ 7,630 $ 7,552 $-- $ 9,872
------- -------- -------- --- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Businesses, Net of Cash
Acquired........................... -- (47,685) (3,162) -- (50,847)
Capital Expenditures for Property,
Plant & Equipment.................. -- (24,089) (10,724) -- (34,813)
------- -------- -------- --- --------
Net Cash Used by Investing
Activities.................. -- (71,774) (13,886) -- (85,660)
------- -------- -------- --- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on Debt, Net............... -- (12,395) (10,383) -- (22,778)
Stockholder's Investment.............. 5,310 79,899 20,257 -- 105,466
------- -------- -------- --- --------
Net Cash Provided by Financing
Activities.................. 5,310 67,504 9,874 -- 82,688
------- -------- -------- --- --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................... -- 3,360 3,540 -- 6,900
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR............................... -- 792 511 -- 1,303
------- -------- -------- --- --------
CASH AND CASH EQUIVALENTS AT END OF
YEAR.................................. $ -- $ 4,152 $ 4,051 $-- $ 8,203
======= ======== ======== === ========

F-30
134
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED COMBINING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS COMBINED
------- ---------- ---------- ------------ --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Cash (Used) Provided by Operating
Activities......................... $(5,069) $ 7,185 $ 8,611 $-- $ 10,727
------- -------- -------- --- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Businesses, Net of Cash
Acquired........................... -- (9,002) (8,398) -- (17,400)
Capital Expenditures for Property,
Plant & Equipment.................. -- (33,548) (4,554) -- (38,102)
Proceeds on Sale of Assets............ -- 6,023 -- -- 6,023
------- -------- -------- --- --------
Net Cash Used by Investing
Activities.................. -- (36,527) (12,952) -- (49,479)
------- -------- -------- --- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on Debt, Net............... -- (5,137) (1,853) -- (6,990)
Stockholder's Investment.............. 5,069 34,440 4,100 -- 43,609
------- -------- -------- --- --------
Net Cash Provided by Financing
Activities.................. 5,069 29,303 2,247 -- 36,619
------- -------- -------- --- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS........................... -- (39) (2,094) -- (2,133)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR............................... -- 4,152 4,051 -- 8,203
------- -------- -------- --- --------
CASH AND CASH EQUIVALENTS AT END OF
YEAR.................................. $ -- $ 4,113 $ 1,957 $-- $ 6,070
======= ======== ======== === ========

F-31
135
GRANT PRIDECO

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED COMBINING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS COMBINED
------- ---------- ---------- ------------ --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Cash (Used) Provided by
Operating Activities............. $(6,326) $ 24,364 $ 47,202 $ -- $ 65,240
------- -------- -------- ------ --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Businesses, Net of Cash
Acquired........................... (7,999) (3,123) (3,950) -- (15,072)
Capital Expenditures for Property,
Plant & Equipment.................. -- (13,038) (6,008) -- (19,046)
------- -------- -------- ------ --------
Net Cash Used by Investing
Activities.................. (7,999) (16,161) (9,958) -- (34,118)
------- -------- -------- ------ --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on Debt, Net............... -- (7,318) (46,907) -- (54,225)
Stockholder's Investment.............. 14,325 -- 8,912 -- 23,237
------- -------- -------- ------ --------
Net Cash Provided (Used) by
Financing Activities........ 14,325 (7,318) (37,995) -- (30,988)
------- -------- -------- ------ --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... -- 885 (751) -- 134
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR............................... -- 4,113 1,957 -- 6,070
------- -------- -------- ------ --------
CASH AND CASH EQUIVALENTS AT END OF
YEAR.................................. $ -- $ 4,998 $ 1,206 $ -- $ 6,204
======= ======== ======== ====== ========

F-32
136

GRANT PRIDECO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

DECEMBER 31, SEPTEMBER 30,
------------ -------------
1999 2000
------------ -------------
(UNAUDITED)

CURRENT ASSETS:
Cash and Cash Equivalents................................. $ 6,204 $ 2,899
Restricted Cash........................................... 3,658 4,917
Account Receivable, Net of Allowance for Uncollectible
Accounts of $500 and $286 at December 31, 1999 and
September 30, 2000, respectively....................... 77,650 113,617
Inventories............................................... 173,904 192,478
Current Deferred Tax Asset................................ 6,197 6,136
Other Current Assets...................................... 4,425 7,830
-------- --------
272,038 327,877
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Machinery and Equipment................................... 224,225 229,300
Land, Buildings and Other Property........................ 81,390 84,182
-------- --------
305,615 313,482
Less: Accumulated Depreciation............................ 98,906 111,982
-------- --------
206,709 201,500
-------- --------
GOODWILL, NET............................................... 187,765 182,541
INVESTMENT IN UNCONSOLIDATED AFFILIATES..................... 37,453 35,863
OTHER ASSETS................................................ 30,610 30,193
-------- --------
$734,575 $777,974
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Short-Term Borrowings and Current Portion of Long-Term
Debt................................................... $ 14,710 $ 52,507
Accounts Payable.......................................... 47,459 55,459
Accrued Wages and Benefits................................ 6,277 8,109
Current Deferred Tax Liability............................ 7,144 7,144
Customer Advances......................................... 18,503 1,633
Other Accrued Liabilities................................. 13,308 25,314
-------- --------
107,401 150,166
-------- --------
SUBORDINATED NOTE TO WEATHERFORD............................ 100,000 100,000
LONG-TERM DEBT.............................................. 24,276 19,018
DEFERRED INCOME TAXES....................................... 44,533 30,056
MINORITY INTEREST........................................... 886 1,024
OTHER LONG-TERM LIABILITIES................................. 3,623 22,489
COMMITMENTS AND CONTINGENCIES
TOTAL STOCKHOLDERS' EQUITY.................................. 453,856 455,221
-------- --------
$734,575 $777,974
======== ========

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-33
137

GRANT PRIDECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

NINE MONTHS
ENDED SEPTEMBER 30,
---------------------
1999 2000
-------- --------

REVENUES.................................................... $196,776 $350,912
-------- --------
COSTS AND EXPENSES:
Cost of Sales............................................. 177,677 291,323
Selling, General and Administrative Attributable to
Segments............................................... 23,181 25,550
Corporate General and Administrative...................... 10,679 14,696
Equity Income in Unconsolidated Affiliates................ -- (3,891)
Weatherford Charges....................................... 1,000 500
-------- --------
212,537 328,178
-------- --------
OPERATING INCOME (LOSS)..................................... (15,761) 22,734
-------- --------
OTHER INCOME (EXPENSE):
Interest Expense.......................................... (2,894) (9,072)
Weatherford Interest Expense.............................. (5,438) (2,500)
Other, Net................................................ 400 (347)
-------- --------
(7,932) (11,919)
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES........................... (23,693) 10,815
PROVISION (BENEFIT) FOR INCOME TAXES........................ (6,293) 4,374
-------- --------
NET INCOME (LOSS) BEFORE MINORITY INTEREST.................. (17,400) 6,441
MINORITY INTEREST........................................... -- (138)
-------- --------
NET INCOME (LOSS)........................................... $(17,400) $ 6,303
======== ========
INCOME (LOSS) PER SHARE
(Pro forma prior to effective date of spinoff)
Basic..................................................... $ (0.18) $ 0.06
======== ========
Diluted................................................... $ (0.18) $ 0.06
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING
(Pro forma prior to effective date of spinoff)
Basic..................................................... 98,770 108,450
======== ========
Diluted................................................... 98,770 110,335
======== ========

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-34
138

GRANT PRIDECO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

NINE MONTHS
ENDED SEPTEMBER 30,
------------------------
1999 2000
-------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)......................................... $(17,400) $ 6,303
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided (Used) By Operating Activities:
Depreciation and Amortization............................. 22,162 23,393
Deferred Income Tax Provision............................. 182 2,409
Equity Income in Unconsolidated Affiliates, Net of
Dividends............................................... -- (3,465)
Other..................................................... -- 411
Change in Operating Assets and Liabilities, Net of Effects
of Businesses Acquired:
Accounts Receivable..................................... 59,090 (37,440)
Inventories............................................. 10,680 (19,119)
Other Current Assets.................................... 10,416 (4,551)
Other Assets............................................ (1,701) (834)
Accounts Payable........................................ (14,208) 6,690
Other Accrued Liabilities............................... (19,338) 3,643
Customer Advances....................................... 12,952 (16,870)
Purchase Credit......................................... (7,002) --
Other, Net.............................................. (3,177) 1,090
-------- --------
Net Cash Provided (Used) by Operating Activities........ 52,656 (38,340)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Businesses, Net of Cash Acquired........... (10,703) (867)
Capital Expenditures for Property, Plant and Equipment.... (14,795) (15,111)
-------- --------
Net Cash Used by Investing Activities................... (25,498) (15,978)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on Revolving Credit Facility................... -- 47,459
Repayments on Debt, Net................................... (53,608) (14,543)
Proceeds from Stock Option Exercises...................... -- 1,036
Purchases of Treasury Stock............................... -- (671)
Predecessor Stockholder's Investment...................... 22,123 17,732
-------- --------
Net Cash Provided (Used) by Financing Activities........ (31,485) 51,013
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (4,327) (3,305)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 6,070 6,204
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 1,743 $ 2,899
======== ========

The accompanying notes are an integral part of these condensed consolidated
financial statements.

F-35
139

GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. GENERAL

On October 22, 1999, the Board of Directors of Weatherford International,
Inc. ("Weatherford") authorized the spinoff of its drilling products businesses
(the "Company" or "Grant Prideco") to its stockholders as an independent,
publicly traded company (the "Distribution"). The Internal Revenue Service
issued a favorable tax ruling stating that the Distribution should be tax-free
to the shareholders of Weatherford for U.S. federal income tax purposes.
Weatherford consummated the spinoff through a distribution to its stockholders
of one share of Grant Prideco common stock for each share of Weatherford common
stock held by the Weatherford stockholders on March 23, 2000, the record date
for the Distribution. The Distribution was completed on April 14, 2000.

The condensed combined balance sheet as of December 31, 1999 and the
condensed combined statements of operations and cash flows for the time period
prior to April 14, 2000 reflect Weatherford's drilling products businesses that
were transferred to Grant Prideco from Weatherford in the Distribution. All
activity subsequent to April 14, 2000 reflects Grant Prideco as distributed. The
condensed consolidated financial statements have been prepared using the
historical bases in the assets and liabilities and historical results of
operations related to Grant Prideco. The condensed consolidated financial
statements include allocations ("carve-outs") of general and administrative
corporate overhead costs of Weatherford to Grant Prideco and direct costs of
services provided by Weatherford for the benefit of Grant Prideco prior to the
Distribution. Management believes such allocations are reasonable; however, the
costs of these services charged to Grant Prideco are not necessarily indicative
of the costs that would have been incurred if Grant Prideco had performed these
functions as a stand-alone entity. Subsequent to the Distribution, Grant Prideco
has performed these functions using its own resources or purchased services and
is responsible for the costs and expenses associated with the management of a
public corporation. The condensed consolidated financial statements included
herein may not necessarily reflect the consolidated results of operations,
financial position and cash flows of Grant Prideco in the future or what they
would have been had it been a separate, stand-alone entity during the periods
presented.

The condensed consolidated financial statements as of September 30, 2000
and for the nine months then ended have not been audited but have been prepared
in conformity with the accounting principles applied in the audited combined
financial statements for the fiscal year ended December 31, 1999 contained in
the Grant Prideco Registration Statement on Form 10, as amended. In the opinion
of management, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the condensed consolidated financial
statements have been included. Results of operations for interim periods are not
necessarily indicative of the results of operations that may be expected for the
entire year. This Form 10-Q should be read in conjunction with the audited
combined financial statements and notes included in the Form 10, as amended.

Certain reclassifications of prior year balances have been made to conform
such amounts to corresponding 2000 classifications. These reclassifications have
no impact on net income.

F-36
140
GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes changes in stockholders' equity during
the periods that do not result from transactions with stockholders. The
Company's total comprehensive income (loss) is as follows:

NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1999 2000
-------- ------
(IN THOUSANDS)

Net Income (Loss)........................................... $(17,400) $6,303
Foreign Currency Translation Adjustments.................... 25 (588)
-------- ------
Total Comprehensive Income (Loss)........................... $(17,375) $5,715
======== ======

3. INVENTORIES

Inventories by category are as follows:

DECEMBER 31, SEPTEMBER 30,
1999 2000
------------ -------------
(IN THOUSANDS)

Raw materials, components and supplies...................... $ 93,980 $144,673
Work in process............................................. 15,720 25,473
Finished goods.............................................. 64,204 22,332
-------- --------
$173,904 $192,478
======== ========

4. ACQUISITIONS

In April 2000, the Company acquired a facility leased by Petro-Drive, Inc.
for $1.3 million to effect the completion of the acquisition that occurred
August 1999. Additionally, there was a final working capital adjustment to the
purchase price of Petro-Drive, Inc., which resulted in the Company receiving
approximately $0.4 million in cash.

In 1999, the Company completed seven acquisitions, including two
investments accounted for under the equity method, for $19.2 million in cash,
$31.2 million in notes payable and assumed debt and 0.45 million shares of
Weatherford common stock.

The acquisitions discussed above were accounted for using the purchase
method of accounting. The results of operations of all acquisitions are included
in the Condensed Consolidated Statements of Operations from their respective
dates of acquisition. The acquisitions are not material to the Company
individually or in the aggregate; therefore, pro forma information is not
provided.

5. CREDIT FACILITY

On April 14, 2000, the Company entered into a $100 million revolving credit
and letter of credit facility with a syndicate of U.S. banks (the "Credit
Facility"), through April 14, 2003, with automatic one-year renewals thereafter,
unless the agreement is terminated by either party. The Credit Facility is
secured by the Company's U.S. and Canadian inventories, equipment and
receivables and is guaranteed by Grant Prideco's domestic subsidiaries.
Borrowings under the Credit Facility are based on the lender's determination of
the collateral value of the inventories and receivables securing the Credit
Facility. The Credit Facility also provides the Company with availability for
stand-by letters of credit and bid and performance bonds. The Company is
required to comply with various affirmative and negative covenants as well as
maintenance covenants relating to fixed charge coverage and net worth. These
covenants also place limits on the Company's ability to incur new debt, engage
in certain acquisitions and investments, grant liens, pay dividends and make
distributions to its stockholders. As of September 30, 2000, the Company

F-37
141
GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

had outstanding borrowings of $47.5 million under the revolving credit facility
and $6.3 million had been used to support outstanding letters of credit. The
average interest rate for the outstanding borrowings under the Credit Facility
was 9.3% at September 30, 2000. Additionally, at September 30, 2000, $0.8
million of outstanding letters of credit had been supported under various
available letter of credit facilities that are not related to the revolving
credit and letter of credit facility.

6. DEBT

In connection with the October 1, 1999 acquisition of Drill Pipe
Industries, Inc., the Company issued a non-interest bearing note payable of $1.4
million that was paid in January 2000.

In connection with the July 1999 acquisition of a 50.01% interest in
Voest-Alpine Stahlrohr Kindberg GmbH & Co. KG ("Voest-Alpine"), the Company
incurred debt in the amount of $24.6 million (the "Voest-Alpine Debt"). As of
September 30, 2000, principal of $5.0 million (based on September 30, 2000
exchange rates) was payable over two years in four equal installments in each
January and July until July 2002. Additionally, $12.4 million, (based on
September 30, 2000 exchange rates) was payable over the remaining 6.5-year
period out of the annual dividend payable to the Company as a shareholder of
Voest-Alpine. Any remaining principal balance that has not been repaid by July
2004, is payable in five equal semi-annual installments beginning on December 1,
2004. In June 2000, a dividend from Voest-Alpine of approximately $0.4 million
was applied as a principal payment on the Voest-Alpine Debt. In May 2000,
Voest-Alpine changed their functional currency from Austrian schillings to
Euros; therefore the Company's debt to Voest-Alpine is now payable in Euros.
Voest-Alpine's change in functional currency to Euros had no material effect on
the Company's financial condition or results of operations. Interest on the
Voest-Alpine debt is payable every six months beginning January 2000. The
interest rate as of September 30, 2000 was 4.9% per annum.

7. SUBORDINATED NOTE TO WEATHERFORD

In connection with the Distribution, the Company issued to Weatherford an
unsecured subordinated note in the amount of $100 million. The Weatherford note
bears interest at an annual rate of 10%. Interest payments are due quarterly,
and principal and all unpaid interest is due no later than March 31, 2002. If
the Company completes a debt or equity financing (whether public or private, but
excluding working capital borrowings under the Credit Facility and any equity
issued in connection with a business combination) while the Weatherford note is
outstanding, the Company generally will be required to use a portion of the net
proceeds of that financing to repay any amount outstanding under the Weatherford
note as of the time the Company completes that financing. The terms of the
Weatherford note restrict Grant Prideco's ability to declare and make dividends
and other distributions to Grant Prideco's stockholders.

Interest expense on the Weatherford note prior to January 1, 2000 shown in
the condensed combined financial statements includes the interest expense
associated with the $100 million indebtedness based on Weatherford's average
long-term debt rates, or 7.25%. Beginning January 1, 2000, interest expense on
the Weatherford note is based on the stated annual rate of 10%.

8. FINANCIAL INSTRUMENTS

The functional currency for most of the Company's international operations
is the applicable local currency. Results of operations for foreign subsidiaries
with functional currencies other than the U.S. dollar are translated using
average exchange rates during the period. Assets and liabilities of these
foreign subsidiaries are translated into U.S. dollars using the exchange rates
in effect at the balance sheet date, and the resulting translation adjustments
are included in stockholders' equity. However, foreign currency transaction
gains and losses are reflected in income for the period. The Company hedges its
exposure to changes in foreign exchange principally with forward contracts.

F-38
142
GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Forward contracts designated as hedges of foreign currency denominated
monetary assets and liabilities are also marked to spot with the resulting gains
and losses similarly recognized in earnings, offsetting losses and gains on the
net monetary assets and liabilities hedged. The Company enters into foreign
exchange contracts only as a hedge against existing economic exposures and not
for speculative or trading purposes. The counterparties to the Company's foreign
exchange contracts are creditworthy multinational commercial banks. Management
believes that the risk of counterparty nonperformance is immaterial. At
September 30, 2000, the Company had open forward contracts to exchange U.S.
dollars for Austrian schillings and Euros totaling $31.1 million.

Gains and losses attributable to the translation of the Voest-Alpine Debt
are included as a separate component of Stockholders' Equity since the
Voest-Alpine Debt, is designated as, and is effective as, a partial economic
hedge of the net investment in Voest-Alpine.

Gains and losses on forward contracts designated as hedges of identifiable
foreign currency firm commitments are not recognized until the underlying
transaction is recorded.

9. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income or loss by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution from the exercise or
conversion of securities into common stock. Common stock equivalent shares are
excluded from the computation if their effect is anti-dilutive. The effect of
stock options is not included in the diluted computation for periods in which a
loss occurs because to do so would have been anti-dilutive. For the nine month
period ended September 30, 2000, the Company had potentially dilutive common
stock equivalents of approximately 1.9 million, comprised of stock options.

The Company did not have a separate capital structure prior to the
Distribution from Weatherford. Accordingly, pro forma basic and weighted average
shares have been calculated by adjusting Weatherford's historical basic weighted
average shares outstanding for the applicable period to reflect the number of
Grant Prideco shares that would have been outstanding at the time assuming the
distribution of one share of Grant Prideco common stock for each share of
Weatherford common stock.

10. SUPPLEMENTAL CASH FLOW INFORMATION

The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. At September 30,
2000, the Company had $4.9 million of restricted cash related to its 54%
interest in H-Tech that is subject to dividend and distribution restrictions.

11. COMMITMENTS

As part of the arrangement to invest in Voest-Alpine, the Company entered
into a four-year supply contract with Voest-Alpine commencing July 1999. Under
this agreement, the Company agreed to purchase a minimum of 60,000 metric tons
of tubulars per year for the next three years at a negotiated third party price.

12. TRANSACTIONS WITH WEATHERFORD

Sales

Weatherford purchases drill pipe and other related products from Grant
Prideco. Prior to the Distribution, amounts purchased by Weatherford were
recorded at Grant Prideco's cost. The sales to Weatherford prior to the
Distribution have been eliminated from the accompanying condensed combined
financial statements.

F-39
143
GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with the Distribution, the Company entered into a preferred
supplier agreement with Weatherford pursuant to which Weatherford agreed for at
least a three-year period to purchase a minimum of 70% of its requirements of
drill stem products from Grant Prideco. The price for those products will be at
a price not greater than that which the Company sells to its best rental tool
customers for similar products. Weatherford will be entitled to apply against
its purchases a drill stem credit granted to it in the aggregate amount of $30
million, subject to a limitation of the application of the credit to no more
than 20% of any purchase. At September 30, 2000, the current portion of the
drill stem credit, $10.0 million, is included in "Other Accrued Liabilities,"
with the remaining $19.6 million included in "Other Long-Term Liabilities," in
the accompanying Condensed Consolidated Balance Sheets.

Weatherford Overhead Charges

Weatherford overhead charges represent corporate overhead costs incurred by
Weatherford in providing services to the Company based on the time devoted to
Grant Prideco prior to the Distribution. These services include accounting,
legal, tax, treasury and risk management services. Such allocation is included
in the accompanying Condensed Consolidated Statements of Operations as
Weatherford Charges.

Weatherford Direct Services

Grant Prideco was allocated $4.3 million of costs related to Weatherford's
information systems function for the nine months ended September 30, 1999. As of
January 1, 2000, Grant Prideco had completed the formation of a separate
information systems department. Information systems charges were allocated based
on direct support provided, equipment usage and number of system users and are
included in "Corporate General and Administrative" expense in the accompanying
Condensed Consolidated Statements of Operations.

13. SEGMENT INFORMATION

The Company operates through two business segments: Drill Stem Products and
Engineered Connections and Premium Tubulars. The Drill Stem Products segment
manufactures drill pipe, drill collars and heavyweight drill pipe and the
Engineered Connections and Premium Tubulars segment manufactures and provides
engineered threads for premium production tubulars, liners, casing and marine
conductors. The Company's products are used primarily in the exploration and
production of oil and natural gas.

F-40
144
GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Financial information by industry segment for the nine month period ended
September 30, 1999 and 2000, is summarized below:

NINE MONTHS
ENDED SEPTEMBER 30,
---------------------
1999 2000
-------- --------
(IN THOUSANDS)

Revenues:
Drill Stem................................................ $ 88,900 $162,353
Engineered Connections and Premium Tubulars............... 107,876 188,559
-------- --------
$196,776 $350,912
======== ========
EBITDA(a):
Drill Stem................................................ $ 14,765 $ 25,839
Engineered Connections and Premium Tubulars............... 2,494 35,166
Corporate................................................. (10,858) (14,878)
-------- --------
$ 6,401 $ 46,127
======== ========
Depreciation and amortization:
Drill Stem................................................ $ 10,731 $ 11,662
Engineered Connections and Premium Tubulars............... 10,610 11,413
Corporate................................................. 821 318
-------- --------
$ 22,162 $ 23,393
======== ========
Operating income (loss):
Drill Stem................................................ $ 4,034 $ 14,177
Engineered Connections and Premium Tubulars............... (8,116) 23,753
Corporate................................................. (11,679) (15,196)
-------- --------
$(15,761) $ 22,734
======== ========
Capital Expenditures for Property, Plant and Equipment:
Drill Stem................................................ $ 8,682 $ 9,989
Engineered Connections and Premium Tubulars............... 6,012 5,040
Corporate................................................. 101 82
-------- --------
$ 14,795 $ 15,111
======== ========

- ---------------

(a) The Company evaluates performance and allocates resources based on EBITDA,
which is calculated as operating income (loss) adding back depreciation and
amortization. Calculations of EBITDA should not be viewed as a substitute to
calculations under generally accepted accounting principles (GAAP) in
particular operating income (loss) and net income (loss). In addition,
EBITDA calculations by one company may not be comparable to another company.

14. RECENT ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 summarized the SEC's view in applying generally accepted
accounting principles to selected revenue recognition issues. The Company is
required to apply SAB 101 in the fourth quarter of 2000, retroactive to the
first quarter of 2000. The Company is analyzing the effects of SAB 101, but has
not yet quantified the impact on its financial statements.

F-41
145
GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS No. 133 was amended by SFAS No. 137, which delays the
effective date to fiscal years beginning after June 15, 2000. In May 2000, the
Financial Accounting Standards Board issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities." SFAS No. 138
amends the accounting and reporting standards of SFAS No. 133 for certain
derivative instruments and certain hedging activities. The Company is currently
completing an assessment of its derivative instruments as well as a plan for
implementation. The Company does not believe that the adoption of SFAS No. 133
and SFAS No. 138 will have a material impact on its financial position or
results of operations.

15. STOCKHOLDERS' EQUITY

At September 30, 2000, the authorized capital structure of Grant Prideco
was composed of 300 million shares of common stock, $0.01 par value (the "Common
Stock") and 10 million shares of preferred stock, $0.01 par value. In connection
with the Distribution, on April 14, 2000, the Company issued approximately 108.4
million shares of Common Stock for each share of Weatherford common stock held
by the Weatherford stockholders on March 23, 2000, the record date of the
Distribution. At September 30, 2000, there were approximately 108.5 million
shares of Common Stock outstanding.

Stock Option Plans

Various employees of the Company were granted stock options under
Weatherford's 1998 Employee Stock Option Plan (the "1998 Plan"). Under the terms
of the Distribution, the options granted to the Grant Prideco employees were
converted into options to acquire solely Common Stock. A total of 2,647,793
stock options were granted to the employees of Grant Prideco in connection with
the Distribution. Such options were granted pursuant to Grant Prideco's 2000
Employee Stock Option and Restricted Stock Plan.

Employees and directors of Weatherford also held various options to
purchase shares of Weatherford that were granted prior to September 1998. Under
the terms of the Distribution, these employees and directors were granted an
equal number of options to purchase Common Stock. The Company granted a total of
1,247,255 stock options related to the Weatherford grants prior to September
1998.

There was no compensation expense recognized in connection with the
substitution of Grant Prideco stock options for Weatherford stock options. There
were no accounting consequences for changes made to the exercise price and
number of shares of the outstanding stock options as the aggregate intrinsic
value of the stock options immediately after the substitution was not greater
than the aggregate intrinsic value of the stock options immediately before the
substitution and the ratio of the exercise price per share to the market value
per share was not reduced.

Executive Deferred Compensation Plans

Weatherford maintains various Executive Deferred Compensation Stock
Ownership Plans (the "Weatherford EDC Plans"). Prior to the Distribution,
participants in the Weatherford EDC Plans had a right to receive shares of
Weatherford common stock upon termination of their employment based on the
deferred amounts placed in their individual accounts. Under the Weatherford EDC
Plans, in the event of a dividend or special distribution to the shareholders of
Weatherford, the accounts of the employees are to represent a right to receive
the consideration provided through the dividend or special distribution. As a
result, upon the Distribution, participants in the Weatherford EDC Plans were
entitled to receive shares of both Weatherford common stock and Common Stock in
respect of amounts deferred by the participants

F-42
146
GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

prior to the Distribution. Accordingly, in connection with the Distribution, a
portion of the deferred compensation liability recorded by Weatherford was
allocated to Grant Prideco based on the relative market value of the Common
Stock to the relative market value of the Weatherford common stock on the date
of Distribution. The liability transferred to Grant Prideco was approximately
$4.2 million and is included in the Condensed Consolidated Balance Sheets within
"Total Stockholders' Equity." Settlements under the Weatherford EDC Plans will
be in Weatherford common stock and Common Stock.

At the time of the Distribution, Grant Prideco established separate
Executive Deferred Compensation Stock Ownership Plans (the "Grant EDC Plans") in
which certain Grant Prideco employees and directors participate. The terms of
the Grant EDC Plans are substantially similar to the Weatherford EDC Plans. A
separate trust (the "New Trust") has been established by Grant Prideco following
the Distribution to fund the benefits under the Grant EDC Plans. The funds
provided to the New Trust are invested in Common Stock through open market
purchases by a trustee independent of the Company. The assets of the New Trust
are available to satisfy the claims of all general creditors of Grant Prideco in
the event of a bankruptcy or insolvency. Settlements under the Grant EDC Plans
will be in Common Stock.

16. SUBSEQUENT EVENTS

On October 1, 2000, the Company acquired a tubular accessories producer,
for approximately $2.5 million in cash and $1.9 million in deferred and
contingent payments.

On October 19, 2000, the Company acquired the assets of a manufacturer of
drilling tools for the water well, construction and utility boring industries,
for approximately $12.3 million in cash.

On November 17, 2000, the Company acquired the assets of a manufacturer of
small diameter macaroni tubing and specialty tubing for OCTG and non-OCTG
markets for approximately $20 million in cash.

On November 28, 2000, the Company funded a $26.5 million investment in a
European metalworking operation.

F-43
147
GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. SUBSIDIARY GUARANTOR FINANCIAL INFORMATION

The following unaudited condensed consolidating balance sheet as of
September 30, 2000, condensed combining statements of operations for the nine
month period ended September 30, 1999, condensed consolidating statements of
operations for the nine month period ended September 30, 2000, condensed
combining statement of cash flows for the nine month period ended September 30,
1999 and condensed consolidating statement of cash flows for the nine month
period ended September 30, 2000 are provided for the Company's domestic
subsidiaries that we expect would be guarantors of debt securities issued by the
Company in the future.

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(UNAUDITED)
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------

ASSETS

CURRENT ASSETS:
Cash and Cash Equivalents................. $ -- $ 1,212 $ 1,687 $ -- $ 2,899
Restricted Cash........................... -- -- 4,917 -- 4,917
Accounts Receivable, Net.................. -- 100,385 13,232 -- 113,617
Inventories............................... -- 165,229 27,249 -- 192,478
Current Deferred Tax Asset................ -- 5,258 878 -- 6,136
Other Current Assets...................... -- 4,685 3,145 -- 7,830
-------- -------- -------- --------- --------
-- 276,769 51,108 -- 327,877
-------- -------- -------- --------- --------
PROPERTY, PLANT AND EQUIPMENT............... -- 232,687 80,795 -- 313,482
Less: Accumulated Depreciation............ -- 92,589 19,393 -- 111,982
-------- -------- -------- --------- --------
-- 140,098 61,402 -- 201,500
-------- -------- -------- --------- --------
GOODWILL, NET............................... -- 121,131 61,410 -- 182,541
INVESTMENT IN AND ADVANCES TO
SUBSIDIARIES.............................. 562,644 -- -- (562,644) --
INVESTMENT IN UNCONSOLIDATED AFFILIATES..... 35,863 -- -- -- 35,863
OTHER ASSETS................................ -- 27,132 3,061 -- 30,193
-------- -------- -------- --------- --------
$598,507 $565,130 $176,981 $(562,644) $777,974
======== ======== ======== ========= ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Short-Term Borrowings and Current Portion
of Long-Term Debt....................... $ 2,697 $ 46,449 $ 3,361 $ -- $ 52,507
Accounts Payable.......................... -- 47,179 8,280 -- 55,459
Current Deferred Tax Liability............ -- 717 6,427 -- 7,144
Customer Advances......................... -- 1,633 -- -- 1,633
Other Accrued Liabilities................. 6,307 19,984 7,132 -- 33,423
-------- -------- -------- --------- --------
9,004 115,962 25,200 -- 150,166
-------- -------- -------- --------- --------
SUBORDINATED NOTE TO WEATHERFORD............ 100,000 -- -- -- 100,000
LONG-TERM DEBT.............................. 14,701 4,317 -- -- 19,018
DEFERRED INCOME TAXES....................... -- 22,641 7,415 -- 30,056
MINORITY INTEREST........................... -- -- 1,024 -- 1,024
OTHER LONG-TERM LIABILITIES................. 19,581 2,907 1 -- 22,489
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY........................ 455,221 419,303 143,341 (562,644) 455,221
-------- -------- -------- --------- --------
$598,507 $565,130 $176,981 $(562,644) $777,974
======== ======== ======== ========= ========

F-44
148
GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED COMBINING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS COMBINED
-------- ---------- ---------- ------------ --------

REVENUES............................... $ -- $168,318 $28,458 $ -- $196,776
-------- -------- ------- ------- --------
COSTS AND EXPENSES:
Cost of Sales........................ -- 152,258 25,419 -- 177,677
Selling, General and
Administrative.................... -- 27,908 5,952 -- 33,860
Weatherford Charges.................. 1,000 -- -- -- 1,000
-------- -------- ------- ------- --------
1,000 180,166 31,371 -- 212,537
-------- -------- ------- ------- --------
OPERATING LOSS......................... (1,000) (11,848) (2,913) -- (15,761)
-------- -------- ------- ------- --------
OTHER INCOME (EXPENSE):
Interest Expense..................... (5,594) (2,570) (168) -- (8,332)
Equity in Subsidiaries, Net of
Taxes............................. (13,114) -- -- 13,114 --
Other, Net........................... -- 331 69 -- 400
-------- -------- ------- ------- --------
(18,708) (2,239) (99) 13,114 (7,932)
-------- -------- ------- ------- --------
INCOME (LOSS) BEFORE INCOME TAXES...... (19,708) (14,087) (3,012) 13,114 (23,693)
INCOME TAX PROVISION (BENEFIT)......... (2,308) (1,532) (2,453) -- (6,293)
-------- -------- ------- ------- --------
NET INCOME (LOSS)...................... $(17,400) $(12,555) $ (559) $13,114 $(17,400)
======== ======== ======= ======= ========

F-45
149
GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------

REVENUES.............................. $ -- $318,536 $32,376 $ -- $350,912
------- -------- ------- ------- --------
COSTS AND EXPENSES:
Cost of Sales....................... -- 269,414 21,909 -- 291,323
Selling, General and
Administrative................... -- 34,717 5,529 -- 40,246
Equity Income in Unconsolidated
Affiliates....................... (3,891) -- -- -- (3,891)
Weatherford Charges................. 500 -- -- -- 500
------- -------- ------- ------- --------
(3,391) 304,131 27,438 -- 328,178
======= ======== ======= ======= ========
OPERATING INCOME...................... 3,391 14,405 4,938 -- 22,734
------- -------- ------- ------- --------
OTHER INCOME (EXPENSE):
Interest Expense.................... (8,156) (3,066) (350) -- (11,572)
Equity in Subsidiaries, Net of
Taxes............................ 7,206 -- -- (7,206) --
Other, Net.......................... -- (780) 433 -- (347)
------- -------- ------- ------- --------
(950) (3,846) 83 (7,206) (11,919)
======= ======== ======= ======= ========
INCOME (LOSS) BEFORE INCOME TAXES..... 2,441 10,559 5,021 (7,206) 10,815
INCOME TAX PROVISION (BENEFIT)........ (3,862) 6,042 2,194 -- 4,374
------- -------- ------- ------- --------
NET INCOME (LOSS) BEFORE MINORITY
INTEREST............................ 6,303 4,517 2,827 (7,206) 6,441
MINORITY INTEREST..................... -- -- (138) -- (138)
------- -------- ------- ------- --------
NET INCOME (LOSS)..................... $ 6,303 $ 4,517 $ 2,689 $(7,206) $ 6,303
======= ======== ======= ======= ========

F-46
150
GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED COMBINING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS COMBINED
------- ---------- ---------- ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Cash (Used) Provided by
Operating Activities............. $(4,286) $ 14,295 $ 42,647 $-- $ 52,656
------- -------- -------- --- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Businesses, Net of
Cash Acquired.................... (6,913) (1,723) (2,067) -- (10,703)
Capital Expenditures for Property,
Plant & Equipment................ -- (9,620) (5,175) -- (14,795)
------- -------- -------- --- --------
Net Cash Used by Investing
Activities................ (6,913) (11,343) (7,242) -- (25,498)
------- -------- -------- --- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on Debt, Net............. -- (6,207) (47,401) -- (53,608)
Predecessor Stockholder's
Investment....................... 11,199 -- 10,924 -- 22,123
------- -------- -------- --- --------
Net Cash Provided (Used) by
Financing Activities...... 11,199 (6,207) (36,477) -- (31,485)
------- -------- -------- --- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS......................... -- (3,255) (1,072) -- (4,327)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR............................. -- 4,113 1,957 -- 6,070
------- -------- -------- --- --------
CASH AND CASH EQUIVALENTS AT END OF
YEAR................................ $ -- $ 858 $ 885 $-- $ 1,743
======= ======== ======== === ========

F-47
151
GRANT PRIDECO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Cash (Used) Provided by Operating
Activities........................ $ (903) $(48,999) $ 11,562 $-- $(38,340)
------- -------- -------- --- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Businesses, Net of
Cash Acquired..................... -- (867) -- -- (867)
Capital Expenditures for Property,
Plant & Equipment................. -- (13,358) (1,753) -- (15,111)
------- -------- -------- --- --------
Net Cash Used by Investing
Activities................. -- (14,225) (1,753) -- (15,978)
------- -------- -------- --- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on Revolving Credit
Facility.......................... -- 45,100 2,359 -- 47,459
Repayments on Debt, Net.............. (3,548) (7,245) (3,750) -- (14,543)
Proceeds from Stock Option
Exercises......................... 1,036 -- -- -- 1,036
Purchases of Treasury Stock.......... (671) -- -- -- (671)
Predecessor Stockholder's
Investment........................ 4,086 21,583 (7,937) -- 17,732
------- -------- -------- --- --------
Net Cash Provided (Used) by
Financing Activities....... 903 59,438 (9,328) -- 51,013
------- -------- -------- --- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS..................... -- (3,786) 481 -- (3,305)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR.............................. -- 4,998 1,206 -- 6,204
------- -------- -------- --- --------
CASH AND CASH EQUIVALENTS AT END OF
YEAR................................. $ -- $ 1,212 $ 1,687 $-- $ 2,899
======= ======== ======== === ========

F-48
152

PART II INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

State corporate laws and our charter documents include provisions designed
to limit the liability of our officers and directors and, in certain
circumstances, to indemnify our officers and directors against certain
liabilities. These provisions are designed to encourage qualified individuals to
serve as our officers and directors.

Exculpation Of Monetary Liability

Under Delaware law, a corporation may include provisions in its certificate
of incorporation that relieve its directors of monetary liability for breaches
of their fiduciary duty to the corporation, except under certain circumstances,
including

- a breach of the director's duty of loyalty,

- acts or omissions of the director not in good faith or which involve
intentional misconduct or a knowing violation of law,

- the approval of an improper payment of a dividend or an improper purchase
by the corporation of the corporation's stock or

- any transaction from which the director derived an improper personal
benefit.

Under Texas law, a corporation may provide similar exculpation provisions
except in cases of: liability for breach of the director's duty of loyalty, acts
or omissions not in good faith or involving intentional misconduct, knowing
violations of law, actions leading to improper personal benefit to the director,
and payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Texas law.

Our certificates of incorporation provide that our directors are not liable
to us or our stockholders for monetary damages for breach of their fiduciary
duty, subject to the restrictions above. The limited partnership agreements of
Grant Prideco, L.P. and XL Systems, L.P. and the limited liability company
agreements of Grant Prideco USA, LLC and Grant Prideco Holding, LLC contain
provisions for similar indemnification of their officers and managers, as
applicable. These limitations of liability may not affect claims arising under
the federal securities laws.

Indemnification

Under Section 145 of the Delaware General Corporation Law and our charter
documents, we are obligated to indemnify our present and former directors and
officers and may indemnify other employees and individuals against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with specified actions, suits or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation, a "derivative action"), if the person to whom
indemnity is granted acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to our best interests, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. A similar standard of care is applicable in the case of
derivative actions, except that indemnification extends only to expenses
(including attorneys' fees) incurred in connection with defense or settlement of
such an action, and the Delaware General Corporation Law requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to us. Texas laws, and the charter documents of our Texas
entities, contain similar provisions.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors and officers and controlling persons pursuant to
the foregoing provisions, we have been advised that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

II-1
153

ITEM 21. EXHIBITS.

2.1 (b) -- Distribution Agreement, dated as of March 22, 2000,
between Weatherford and Grant
3.1 (b) -- Restated Certificate of Incorporation of Grant Prideco,
Inc.
3.2 (a) -- Restated Bylaws of Grant Prideco, Inc.
3.3 (c) -- Certificate of Incorporation of GP Expatriate Services,
Inc.
3.4 (c) -- By-laws of GP Expatriate Services, Inc.
3.5 (c) -- Limited Liability Company Agreement of Grant Prideco
Holding, LLC
3.6 (c) -- Agreement of Limited Partnership of Grant Prideco, LP
3.7 (c) -- Limited Liability Company Agreement of Grant Prideco USA,
LLC
3.8 (c) -- Certificate of Incorporation of Star Operating Company
3.9 (c) -- By-laws of Star Operating Company
3.10(c) -- Certificate of Incorporation of TA Industries, Inc.
3.11(c) -- By-laws of TA Industries, Inc.
3.12(c) -- Certificate of Incorporation of Texas Arai, Inc.
3.13(c) -- By-laws of Texas Arai, Inc.
3.14(c) -- Restated Articles of Incorporation of Tube-Alloy Capital
Corporation
3.15(c) -- Amended and Restated By-laws of Tube-Alloy Capital
Corporation
3.16(c) -- Articles of Incorporation of Tube-Alloy Corporation and
Amendment thereto
3.17(c) -- Amended and Restated By-laws of Tube-Alloy Corporation
3.18(c) -- Certificate of Incorporation of XL Systems International,
Inc.
3.19(c) -- Amended and Restated By-laws of XL Systems International,
Inc.
3.20(c) -- Agreement of Limited Partnership of XL Systems, L.P.
4.1 (b) -- Subordinated Promissory Note to Weatherford, dated April
14, 2000
4.2 (b) -- Subordination Agreement, dated April 14, 2000, among
Grant Prideco, Inc., Weatherford and Transamerica
Business Credit Corporation, as agent
4.3 (b) -- Loan and Security Agreement, dated April 14, 2000, among
Grant Prideco, Inc. and certain of its subsidiaries, the
Lenders identified therein and Transamerica Business
Credit Corporation, as agent
4.4 (b) -- Guaranty, dated April 14, 2000, by Grant Prideco, Inc.'s
subsidiaries in favor of Transamerica Business Credit
Corporation, as agent
4.5 (b) -- Pledge Agreement, dated April 14, 2000, by Grant Prideco,
Inc.'s subsidiaries in favor of Transamerica Business
Credit Corporation, as agent
4.6* -- Indenture for 9 5/8% Senior Notes due 2007
4.7* -- Form of 9 5/8% Senior Notes due 2007
5.1* -- Opinion of Philip A. Choyce, Vice President and Associate
General Counsel of Grant Prideco, regarding legality
10.1 -- See exhibits 2.1 and 4.1 through 4.7 for certain items
constituting material contracts.
10.2 (a) -- Grant Prideco, Inc. 2000 Non-Employee Director Stock
Option Plan
10.3 (a) -- Grant Prideco, Inc. 2000 Employee Stock Option and
Restricted Stock Plan
10.4 (a) -- Grant Prideco, Inc. Executive Deferred Compensation Plan
10.5 (a) -- Grant Prideco, Inc. Foreign Executive Deferred
Compensation Plan
10.6 (a) -- Grant Prideco, Inc. Deferred Compensation Plan for
Non-Employee Directors
10.7 (d) -- Employment Agreement dated April 14, 2000 with Bernard J.
Duroc-Danner
10.8 (d) -- Employment Agreement dated April 14, 2000 with John C.
Coble
10.9 (d) -- Employment Agreement dated April 14, 2000 with Frances R.
Powell
10.10(d) -- Employment Agreement dated April 14, 2000 with Curtis W.
Huff
10.11(d) -- Change of Control Agreement dated April 14, 2000 with
William Chunn
10.12(e) -- Preferred Supplier Agreement dated April 14, 2000,
between Grant Prideco, Inc. and Weatherford
International, Inc.

II-2
154

10.13(e) -- Tax Allocation Agreement dated April 14, 2000 between
Grant Prideco and Weatherford
10.14* -- Exchange and Registration Rights Agreement dated as of
December 4, 2000, among the registrants and Lehman
Brothers Inc.
10.20(a) -- Grant Prideco, Inc. 401(k) Savings Plan
10.21(a) -- Investment Agreement, dated as of April 29, 1999, by and
between Grant Prideco, Inc. and Voest-Alpine Schienen
GmbH & Co KG
10.22(a) -- Operating Agreement, dated as of July 23, 1999, by and
between Grant Prideco, Inc. and Voest-Alpine Schienen
GmbH & Co KG
+10.23(a) -- Supply Agreement, dated as of July 23, 1999, by and
between Voest-Alpine Stahlrohr Kindberg GmbH & Co KG and
Grant Prideco, Inc.
10.24(a) -- Manufacturing and Sales Agreement, dated as of January 1,
1996, by and between Grant Prideco, S.A. and Oil Country
Tubular Limited
10.25(a) -- Stock Purchase Agreement, dated as of June 19, 1998, by
and among Weatherford, Pridecomex Holding, S.A. de C.V.,
Tubos de Acero de Mexico S.A. and Tamsider S.A. de C.V.
+10.26(a) -- Master Technology License Agreement, dated as of June 19,
1998, by and between Grant Prideco, Inc. and DST
Distributors of Steel Tubes Limited
10.27(a) -- Agreement, dated as of November 12, 1998, by and between
Tubos de Acero de Mexico, Tamsider S.A. de C.V., DST
Distributors of Steel Tubes Limited, Techint Engineering
Company, Weatherford, Grand Prideco, Pridecomex Hold-
ing, S.A. de C.V. and Grant Prideco, S.A. de C.V.
10.28(a) -- Agreement, dated as of December 1, 1998, by and between
Tubos de Acero de Mexico, Tamsider S.A. de C.V.,
Weatherford and Pridecomex Holdings, S.A. de C.V.
12.1* -- Statements re Computation of Ratios
21.1* -- Subsidiaries of Registrant
23.1 -- Consent of Arthur Andersen LLP
23.2* -- Consent of Philip A. Choyce (included in exhibit 5.1)
24.1 -- Powers of Attorney (included on page II-5)
25.1* -- Statement of Eligibility of Trustee
99.1* -- Letter of Transmittal and Notice of Guaranteed Delivery

- ---------------

* To be filed by amendment.

+ Certain portions of these exhibits were intentionally excluded pursuant to
a request for confidential treatment pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934.

(a) Incorporated by reference to Grant Prideco, Inc.'s Registration Statement
on Form 10 (file No. 00115423).

(b) Incorporated by reference to Grant Prideco, Inc.'s Registration Statement
on Form S-3 (Registration No. 333-35272).

(d) Incorporated by reference to Grant Prideco Inc.'s Quarterly Report on Form
10-Q for the quarter ended March 31, 2000.

(e) Incorporated by reference from Weatherford International, Inc.'s Quarterly
Report on Form 10-Q for the three months ended March 31, 2000.

ITEM 22. UNDERTAKINGS.

The registrants hereby undertake that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual

II-3
155

report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the Securities offered therein, and the
offering of such Securities at that time shall be deemed to be the initial bona
fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the Securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of responding to the request.

Each of the undersigned registrants hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction that was not
the subject of and included in the registration statement when it became
effective.

II-4
156

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrants
have duly caused this registration statement to be signed on their behalf by the
undersigned, thereunto duly authorized, on December 20, 2000.

in the City of The Woodlands, State of Texas:
GRANT PRIDECO, INC.
GP EXPATRIATE SERVICES, INC.
GRANT PRIDECO HOLDING, LLC
GRANT PRIDECO, L.P.
STAR OPERATING COMPANY
TA INDUSTRIES, INC.
TEXAS ARAI, INC.
TUBE-ALLOY CAPITAL CORPORATION
TUBE-ALLOY CORPORATION
XL SYSTEMS INTERNATIONAL, INC.
XL SYSTEMS, L.P.

By: /s/ JOHN C. COBLE
------------------------------------
John C. Coble
President and Chief Executive
Officer
or President of each

in the City of Wilmington, State of Delaware:
GRANT PRIDECO USA, LLC

By: /s/ SAL SEGRETO
------------------------------------
Sal Segreto,
President

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on December 20, 2000.

With respect to Grant Prideco, Inc.:

/s/ JOHN C. COBLE Chief Executive Officer, President and
- --------------------------------------------- Director (principal executive officer)
John C. Coble

/s/ FRANCES R. POWELL Chief Financial Officer, Vice President and
- --------------------------------------------- Treasurer (principal financial and accounting
Frances R. Powell officer)

Chairman of the Board, Director
- ---------------------------------------------
Bernard J. Duroc-Danner

Director
- ---------------------------------------------
Eliot M. Fried

/s/ SHELDON B. LUBAR Director
- ---------------------------------------------
Sheldon B. Lubar

II-5
157

/s/ WILLIAM E. MACAULAY Director
- ---------------------------------------------
William E. Macaulay

/s/ ROBERT K. MOSES, JR. Director
- ---------------------------------------------
Robert K. Moses, Jr.

/s/ ROBERT A. RAYNE Director
- ---------------------------------------------
Robert A. Rayne

With respect to GP Expatriate Services, Inc., Grant Prideco Holding, LLC,
Grant Prideco, L.P. Star Operating Company, TA Industries, Inc., Texas Arai,
Inc., Tube-Alloy Capital Corporation, Tube-Alloy Corporation, XL Systems
International, Inc. and XL Systems, L.P.:

/s/ JOHN C. COBLE President (principal executive officer) of
- --------------------------------------------- each and Director of each corporation and
John C. Coble manager of Grant Prideco Holding, LLC

/s/ FRANCES R. POWELL Treasurer (principal financial officer) of
- --------------------------------------------- each and Director of each corporation and
Frances R. Powell manager of Grant Prideco Holding, LLC

/s/ PHILIP A. CHOYCE Director of each corporation and manager of
- --------------------------------------------- Grant Prideco Holding, LLC
Philip A. Choyce

With respect to Grant Prideco USA, LLC:

/s/ SAL SEGRETO President (principal executive officer) and
- --------------------------------------------- manager
Sal Segreto

/s/ LINDA BUBACZ Treasurer (principal financial officer) and
- --------------------------------------------- manager
Linda Bubacz

/s/ DAVE WEIGEL Manager
- ---------------------------------------------
Dave Weigel

II-6
158

INDEX TO EXHIBITS

159

10.12(e) -- Preferred Supplier Agreement dated April 14, 2000,
between Grant Prideco, Inc. and Weatherford
International, Inc.
10.13(e) -- Tax Allocation Agreement dated April 14, 2000 between
Grant Prideco and Weatherford
10.14* -- Exchange and Registration Rights Agreement dated as of
December 4, 2000, among the registrants and Lehman
Brothers Inc.
10.20(a) -- Grant Prideco, Inc. 401(k) Savings Plan
10.21(a) -- Investment Agreement, dated as of April 29, 1999, by and
between Grant Prideco, Inc. and Voest-Alpine Schienen
GmbH & Co KG
10.22(a) -- Operating Agreement, dated as of July 23, 1999, by and
between Grant Prideco, Inc. and Voest-Alpine Schienen
GmbH & Co KG
+10.23(a) -- Supply Agreement, dated as of July 23, 1999, by and
between Voest-Alpine Stahlrohr Kindberg GmbH & Co KG and
Grant Prideco, Inc.
10.24(a) -- Manufacturing and Sales Agreement, dated as of January 1,
1996, by and between Grant Prideco, S.A. and Oil Country
Tubular Limited
10.25(a) -- Stock Purchase Agreement, dated as of June 19, 1998, by
and among Weatherford, Pridecomex Holding, S.A. de C.V.,
Tubos de Acero de Mexico S.A. and Tamsider S.A. de C.V.
+10.26(a) -- Master Technology License Agreement, dated as of June 19,
1998, by and between Grant Prideco, Inc. and DST
Distributors of Steel Tubes Limited
10.27(a) -- Agreement, dated as of November 12, 1998, by and between
Tubos de Acero de Mexico, Tamsider S.A. de C.V., DST
Distributors of Steel Tubes Limited, Techint Engineering
Company, Weatherford, Grand Prideco, Pridecomex Hold-
ing, S.A. de C.V. and Grant Prideco, S.A. de C.V.
10.28(a) -- Agreement, dated as of December 1, 1998, by and between
Tubos de Acero de Mexico, Tamsider S.A. de C.V.,
Weatherford and Pridecomex Holdings, S.A. de C.V.
12.1* -- Statements re Computation of Ratios
21.1* -- Subsidiaries of Registrant
23.1 -- Consent of Arthur Andersen LLP
23.2* -- Consent of Philip A. Choyce (included in exhibit 5.1)
24.1 -- Powers of Attorney (included on page II-5)
25.1* -- Statement of Eligibility of Trustee
99.1* -- Letter of Transmittal and Notice of Guaranteed Delivery

- ---------------

* To be filed by amendment.

+ Certain portions of these exhibits were intentionally excluded pursuant to
a request for confidential treatment pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934.

(a) Incorporated by reference to Grant Prideco, Inc.'s Registration Statement
on Form 10 (file No. 00115423).

(b) Incorporated by reference to Grant Prideco, Inc.'s Registration Statement
on Form S-3 (Registration No. 333-35272).

(d) Incorporated by reference to Grant Prideco Inc.'s Quarterly Report on Form
10-Q for the quarter ended March 31, 2000.

(e) Incorporated by reference from Weatherford International, Inc.'s Quarterly
Report on Form 10-Q for the three months ended March 31, 2000.